Kinetik (KNTK)2023-11-09 17:29Financial Data and Key Metrics - Average gas processing volumes reached 1.49 billion cubic feet per day, representing a 23% year-over-year growth [6] - Adjusted EBITDA increased by 4% quarter-over-quarter, in line with forecasts and street expectations [9] - The company updated its 2023 adjusted EBITDA guidance range to $820 million to $860 million, with a midpoint implying a fourth-quarter annualized EBITDA exit rate over $900 million [10] - Free cash flow was positive in the past quarter, and the company expects a significant increase in free cash flow in 2024, driven by adjusted EBITDA growth and capital expenditures of less than $150 million [11] Business Line Data and Key Metrics - Midstream Logistics segment generated $140 million in adjusted EBITDA, up 2% sequentially [16] - Pipeline Transportation segment generated $79 million in adjusted EBITDA, up 5% quarter-over-quarter, driven by lower realized costs at PHP and higher margins at Epic Crude [24] - Midstream Logistics CapEx is tracking towards the midpoint of the range of $235 million to $265 million, while Pipeline Transportation CapEx is tracking above the guidance range of $255 million to $275 million due to cost increases related to PHP [26][27] Market Data and Key Metrics - Permian production is expected to grow to 30 billion cubic feet per day by 2030, representing a 4% annual growth rate from today [20] - The Corpus Christi market is expected to grow from 6.5 to 10 billion cubic feet per day, driven by NGL capacity expansions and pipeline export growth [40] - The company sees a structurally short gas market in Corpus Christi, with potential for further pipeline expansions along the Texas-Louisiana state line [42] Company Strategy and Industry Competition - The company is focused on expanding its gathering footprint in the Delaware Basin, with significant progress on projects like Delaware Link and PHP expansion [19][22] - The company is actively pursuing gathering and processing opportunities in New Mexico and Texas, with updates expected as these opportunities develop [14] - The company sees no compelling reason for significant additional NGL investment in its Pipeline Transportation segment and is working on monetizing its stake in GCX [15] Management Commentary on Operating Environment and Future Outlook - The company remains confident in achieving its exit rate guidance of 1.6 billion cubic feet per day by year-end [8] - Management expects sequential adjusted EBITDA growth in the fourth quarter, driven by the Midstream Logistics segment [9] - The company anticipates a significant increase in free cash flow in 2024, supported by adjusted EBITDA growth and reduced capital expenditures [11] Other Important Information - The company declared a $0.75 per share quarterly dividend, with the Board maintaining the reinvestment level of Blackstone, I Squared, Apache, and management’s applicable third-quarter dividends at 100% [29] - Year-to-date, the company has repurchased approximately 194,000 shares for $5.8 million, leaving $94 million of remaining authorized capacity for opportunistic share repurchases [30] Q&A Session Summary Question: Progress on GCX monetization - The company is actively working on monetizing its stake in GCX and remains confident in a positive conclusion, though timing remains uncertain [32][33] Question: NGL takeaway options and flexibility - The company has multiple NGL takeaway options, including Brandywine and TNF contracts, with flexibility to choose among lines based on market conditions [37] Question: Corpus Christi market outlook - The Corpus Christi market is expected to grow significantly, with the company viewing it as structurally short gas, warranting further investment [40][42] Question: Volume trajectory and growth in 2024 - The company expects continued growth in volumes, with a significant step-up expected when New Mexico contracts kick in April 2024 [74][102] Question: Industry consolidation and Kinetik’s role - The company views itself as a smaller player in the midstream industry, focusing on organic growth and value creation rather than large-scale acquisitions [75][76] Question: GCX sale process and dividend reinvestment plan (DRIP) - The DRIP will end with the February 2024 dividend payment, regardless of the GCX sale outcome [96] Question: Capital recycling and portfolio review - The company is not actively working on any other capital recycling initiatives beyond GCX but remains open to opportunities that create value for stakeholders [103]