Kinetik (US:KNTK)2025-08-07 14:02Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $243 million for the second quarter, with distributable cash flow of $153 million and free cash flow of $8 million [15] - Adjusted EBITDA guidance for 2025 has been revised to a range of $1,030 million to $1,090 million, reflecting a 5% decrease from previous estimates [16][20] - The company expects to achieve an annualized adjusted EBITDA of approximately $1,200 million in the fourth quarter of 2025, representing a 24% year-over-year growth [14] Business Line Data and Key Metrics Changes - The Midstream Logistics segment generated adjusted EBITDA of $151 million, up 3% year-over-year, primarily due to increased processed gas volumes from Northern Delaware assets [15] - The Pipeline Transportation segment also saw adjusted EBITDA of $97 million, up 3% year-over-year, benefiting from increased ownership in EPIC and modest outperformance at PHP [15] Market Data and Key Metrics Changes - The company has revised its full-year processed gas volume growth assumption from 20% to mid-teens due to delays in the commissioning of Kings Landing and producer development activities [16] - The company anticipates exiting 2025 with processed gas volumes at approximately 2 billion cubic feet per day [17] Company Strategy and Development Direction - The company is focused on expanding its footprint and volumes in Northern Delaware, with significant progress on capital growth projects [6][11] - The construction of the ECCC pipeline is expected to enhance the movement of sweet rich gas from New Mexico to Texas, with in-service anticipated in 2026 [10] - The company is pursuing both organic and inorganic growth opportunities, with a preference for organic growth at this time due to current market valuations [100] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational performance despite macroeconomic uncertainties and geopolitical pressures [6] - The company is optimistic about the potential for significant earnings growth and free cash flow generation through the end of the decade [14] - Management noted that while commodity price volatility has created headwinds, they expect to see a meaningful ramp in processed gas volumes as Kings Landing comes online [17][19] Other Important Information - The company has repurchased $173 million of its Class A common stock since May, representing nearly 2.5% of outstanding shares [21] - The company is experiencing significant cost inflation, particularly in electricity and leased compression, but expects unit costs to decrease as volumes ramp up [19] Q&A Session Summary Question: Can you walk through the building blocks to reach the $1,200 million run rate for Q4 2025? - Management explained that the building blocks include expected contributions from Kings Landing and other projects, with confidence in achieving the target despite some delays [28][30] Question: What is the expected cadence for share buybacks moving forward? - Management indicated that buybacks will depend on stock price and market conditions, with a focus on capital allocation based on fundamental value [34] Question: Can you provide insights on NGL recontracting and its potential timing? - Management noted that recontracting could occur earlier than expected due to increased interest from NGL pipeline operators [38][40] Question: What is the current status of Kings Landing 2 and its timeline for FID? - Management stated that they are midway through the process, with key components like acid gas injection and electricity being critical for progress [44] Question: How does the company view the macroeconomic environment and its impact on operations? - Management highlighted that while there are shifts in timing for producer activity, the overall quality of rock remains strong, and they expect to catch up with development plans [56][60] Question: How has the hedging strategy evolved in light of commodity price volatility? - Management indicated that they are more active in hedging and expect the impact of pricing to be relatively flat moving into 2026 [82] Question: What are the expectations for capital expenditures in the coming years? - Management emphasized the need to prioritize capital allocation carefully, focusing on high-return projects while managing overall spending [88][90]