Kinetik (US:KNTK)2024-02-29 20:11Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $228 million for Q4 2023 and $839 million for the full year, achieving the middle of the revised guidance provided in November [45][63] - Full year 2023 capital expenditures were $531 million, within the guidance range [46][65] - Processed gas volumes reached 1.56 billion cubic feet per day in December, with a Q4 average of 1.54 billion cubic feet per day, representing a more than 22% increase compared to Q4 2022 [47][48] Business Line Data and Key Metrics Changes - The Midstream Logistics segment generated adjusted EBITDA of $146 million in Q4, up 10% year-over-year, attributed to increased processed gas volumes [63] - The Pipeline Transportation segment generated adjusted EBITDA of $85 million, up nearly 7% quarter-over-quarter, driven by contributions from Delaware Link and the PHP expansion [64] Market Data and Key Metrics Changes - The company noted that treating is becoming increasingly important as producers develop shallower benches, with gas quality issues associated with CO2 and H2S emerging as capacity constraints [49][50] - The Permian Basin is expected to see a growth of approximately 1.5 to 2 billion cubic feet per day in 2024, which is mid- to high-single-digit percentage growth [59] Company Strategy and Development Direction - The company aims to expand its footprint in New Mexico, leveraging available processing capacity and treating capabilities to gain a competitive advantage [52][53] - The company is focused on de-risking its balance sheet, with over 90% of gross profit sourced from fixed-fee contracts and approximately 50% of commodity-linked gross profit hedged [57] Management's Comments on Operating Environment and Future Outlook - The management highlighted the significance of natural gas as a cleaner energy source, projecting that the U.S. will continue to meet the growing global demand for natural gas [55][60] - The company expects to see a step-up in volumes beginning in Q2 2024, with customer development activity more heavily weighted in the second and third quarters [73] Other Important Information - The company declared a quarterly dividend of $0.75 per share, maintaining the reinvestment level for certain stakeholders until March 8, 2024 [68] - The company repurchased approximately 194,000 shares for $5.8 million in total, with $94 million remaining under the share buyback program [69] Q&A Session Summary Question: What is the strategic rationale for selling GCX? - Management indicated that a compelling offer would be necessary to consider selling GCX, as current debt repayment does not provide value enhancement [12][14] Question: How does the company see growth beyond 2024? - Management expects growth to come from existing acreage and opportunities in New Mexico, with a focus on volume growth [15][17] Question: What are the expectations for EBITDA trajectory into 2024? - Management anticipates a ramp-up in EBITDA growth in Q2 and Q3, with Q4 being influenced by producer performance [21][22] Question: How is the company addressing elevated CO2 levels? - Management noted that elevated CO2 levels were unexpected and are being addressed through system-wide treating projects [28][48] Question: What are the capital allocation priorities? - Management emphasized that free cash flow will primarily be used for debt repayment until leverage targets are met, with dividends remaining flat for now [91][94]