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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Kinetik Holdings Inc | NYSE:KNTK | NYSE | Common Stock |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| 1.54 | 2.73% | 57.96 | 57.975 | 55.95 | 56.35 | 742,940 | 01:00:00 |
From May 2024 to Nov 2024
Kinetik Holdings Inc. (NYSE: KNTK) (“Kinetik” or the “Company”) today reported financial results for the quarter ended June 30, 2024.
Second Quarter 2024 Results and Commentary
For the three and six months ended June 30, 2024, Kinetik reported net income including noncontrolling interest of $108.9 million and $144.4 million, respectively.
Kinetik generated Adjusted EBITDA1 of $234.4 million and $468.0 million, Distributable Cash Flow1 of $162.9 million and $317.4 million, and Free Cash Flow1 of $105.4 million and $213.0 million for the three and six months ended June 30, 2024, respectively.
For the three months ended June 30, 2024, Kinetik processed natural gas volumes of 1.58 Bcf/d.
“The second quarter was a major step towards our ultimate vision for Kinetik,” said Jamie Welch, Kinetik’s President & Chief Executive Officer. “In June, we closed our two largest transactions since the merger in 2022, expanding our system footprint into Northern Eddy and Lea Counties, New Mexico. This quickly followed the in-service of our organic gathering expansion into Lea County at the beginning of 2024, and most recently, Kinetik expanded gathering, treating, and processing services with one of our largest customers in Lea County, New Mexico. This new amendment increases the existing MVC while also expanding overall margin. A year ago, we had zero operations in the New Mexico Delaware Basin, and today, nearly 20% of our volumes are sourced from New Mexico.”
“The Durango acquisition, a Lea County gas gathering and processing amendment, and the previously announced long-term gas gathering and processing agreement in Eddy County represent approximately $1 billion of strategic investment at a mid-single digit Adjusted EBITDA1 multiple and significantly enhance our position across the entire Delaware Basin.”
“We are in the middle of our 100-day plan to integrate Durango’s assets, processes, and personnel, all while expanding Durango’s geographic scope and system scale. We are pleased with the overall performance of the business, and we have already identified a number of process and system improvements that will create immediate economic value. The Operations team’s project plan includes preventative maintenance, facility upgrades and capacity expansions to existing infrastructure at the Dagger Draw and Maljamar processing complexes. Back-office integration and the implementation of Kinetik’s Environmental, Health and Safety program are now complete. Additionally, we have welcomed over 70 talented employees to the Kinetik team.”
He went on to add, “The Commercial team has been very active with current and prospective customers in New Mexico. We remain highly focused on completing construction of Kings Landing I on time with expected in-service in April 2025, and we have now sanctioned the pre-FID work scope and long-lead critical path items for a second train at the Kings Landing Processing Complex. Growing producer demand in the region and attractive opportunities to connect our Texas System with the Durango system in the Northern Delaware Basin has accelerated the sanctioning of Kings Landing II.”
“Our base business continues to perform well versus our internal expectations outlined in February. Processed natural gas volumes in the quarter were 1.58 Bcf/d, representing a 7% increase year-over-year, despite continued wellhead volume curtailments in response to Waha Hub pricing, which were approximately 140 Mmcf/d.”
Welch continued, “Adjusted EBITDA1 increased 13% year-over-year, reflecting new volumes from the MVC-backed Lea County agreements and improved commodity margins, as well as contributions from the Permian Highway Pipeline Expansion and Delaware Link, which were partially offset by price-related gas volume curtailments and only two months of contributions from GCX. If we closed Durango contemporaneously with the sale of GCX, Kinetik’s second quarter Adjusted EBITDA1 would have increased to nearly $238 million. With the successful completion of the Durango and GCX transactions, we are revising upwards our 2024 Guidance.”
“I am incredibly proud of our team’s execution, focus and dedication to closing two transactions in the month of June and the completion of the integration process. These actions represent a significant step on our corporate journey and achievement of our financial targets.”
Revised 2024 Guidance and Outlook
On February 28, 2024, Kinetik provided 2024 Guidance, including full year Adjusted EBITDA1 of $905 million to $960 million and Capital Expenditures2 of $125 million to $165 million.
Following (i) earnings outperformance to budget in the first half of 2024, (ii) the successful completion of the Durango acquisition, and (iii) the divestiture of the Company’s equity interest in GCX, Kinetik is revising its 2024 Guidance upwards.
Kinetik now estimates full year 2024 Adjusted EBITDA1 between $940 million and $980 million, a 3% increase at the midpoint versus the previous guidance range and implies over 14% Adjusted EBITDA1 growth year-over-year.
Adjusted EBITDA1 Guidance assumptions include:
For Capital Expenditures2 including maintenance capital, Kinetik now estimates guidance to be $260 million to $300 million. This increase reflects capital for (i) the construction of Kings Landing I and pre-FID spend for Kings Landing II, (ii) the new and amended long-term gathering and processing agreements in Eddy and Lea Counties, New Mexico, and (iii) capital for integration, growth and maintenance costs associated with the existing Durango business.
As previously stated, the acquisition and capital projects carry an attractive mid-single digit build-cost multiple and are expected to be over 10% accretive to free cash flow per share starting the second half of 2025.
Capital Allocation Priorities
The Company remains focused on its disciplined capital allocation priorities that maximize shareholder value. The achievement of its leverage target of 3.5x represents one of its core financial priorities and now provides Kinetik with broader capital allocation flexibility going forward.
Financial
Selected Key Metrics:
Three Months Ended June 30,
Six Months Ended June 30,
2024
2024
(In thousands, except ratios)
Net income including noncontrolling interest5
$
108,948
$
144,355
Adjusted EBITDA1
$
234,403
$
467,962
Distributable Cash Flow1
$
162,892
$
317,418
Dividend Coverage Ratio1,6
1.4x
1.4x
Capital Expenditures2
$
38,046
$
98,818
Free Cash Flow1
$
105,449
$
212,960
Leverage Ratio1,3
3.4x
Net Debt to Adjusted EBITDA Ratio1,4
3.8x
Common stock issued and outstanding7
157,519
June 30, 2024
March 31, 2024
(In thousands)
Net Debt1,8
$
3,423,251
$
3,537,244
Operational
Governance and Sustainability
Upcoming Tour Dates
Kinetik plans to participate at the following upcoming conferences and events:
Investor Presentation
An updated investor presentation will be available under Events and Presentations in the Investors section of the Company’s website at ir.kinetik.com.
Conference Call and Webcast
Kinetik will host its second quarter 2024 results conference call on Thursday, August 8, 2024 at 8:00 am Central Daylight Time (9:00 am Eastern Daylight Time) to discuss second quarter results. To access a live webcast of the conference call, please visit the Investors section of Kinetik’s website at ir.kinetik.com. A replay of the conference call also will be available on the website following the call.
About Kinetik Holdings Inc.
Kinetik is a fully integrated, pure-play, Permian-to-Gulf Coast midstream C-corporation operating in the Delaware Basin. Kinetik is headquartered in Midland, Texas and has a significant presence in Houston, Texas. Kinetik provides comprehensive gathering, transportation, compression, processing and treating services for companies that produce natural gas, natural gas liquids, crude oil and water. Kinetik posts announcements, operational updates, investor information and press releases on its website, www.kinetik.com.
Forward-looking statements
This news release includes certain statements that may constitute “forward-looking statements” for purposes of the federal securities laws. Forward-looking statements include, but are not limited to, statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “seeks,” “possible,” “potential,” “predict,” “project,” “prospects,” “guidance,” “outlook,” “should,” “would,” “will,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements include, but are not limited to, statements about the Company’s future business strategy and plans, expectations, and objectives for the Company’s operations, including statements about strategy, synergies, sustainability goals and initiatives, portfolio monetization opportunities, expansion projects and future operations, and financial guidance; the Company’s projected dividend amounts and the timing thereof; and the Company’s leverage and financial profile. While forward-looking statements are based on assumptions and analyses made by us that we believe to be reasonable under the circumstances, whether actual results and developments will meet our expectations and predictions depend on a number of risks and uncertainties which could cause our actual results, performance, and financial condition to differ materially from our expectations. See Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023. Any forward-looking statement made by us in this news release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement whether as a result of new information, future development, or otherwise, except as may be required by law.
Additional information
Additional information follows, including a reconciliation of Adjusted EBITDA, Distributable Cash Flow, Free Cash Flow, and Net Debt (non-GAAP financial measures) to the GAAP measures.
Non-GAAP financial measures
Kinetik’s financial information includes information prepared in conformity with generally accepted accounting principles (GAAP) as well as non-GAAP financial information. It is management’s intent to provide non-GAAP financial information to enhance understanding of our consolidated financial information as prepared in accordance with GAAP. Adjusted EBITDA, Distributable Cash Flow, Free Cash Flow, Dividend Coverage Ratio, Net Debt and Leverage Ratio are non-GAAP measures. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated. See “Reconciliation of GAAP to Non-GAAP Measures” elsewhere in this news release.
1. A non-GAAP financial measure. See “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Measures” for further details.
2. Net of contributions in aid of construction and returns of invested capital from unconsolidated affiliates.
3. Leverage Ratio is total debt less cash and cash equivalents divided by last twelve months Adjusted EBITDA, calculated in the Company’s credit agreement. The calculation includes EBITDA Adjustments for Qualified Projects, Acquisitions and Divestitures.
4. Net Debt to Adjusted EBITDA Ratio is defined as Net Debt divided by last twelve months Adjusted EBITDA.
5. Net income including noncontrolling interest for the three and six months ended June 30, 2023 was $71.7 million and $76.0 million, respectively.
6. Dividend Coverage Ratio is Distributable Cash Flow divided by total declared dividends.
7. Issued and outstanding shares of 157,518,898 is the sum of 59,735,864 shares of Class A common stock and 97,783,034 shares of Class C common stock. Excludes 7,680,492 shares of Class C common stock to be issued on July 1, 2025 in connection with the Durango Permian acquisition.
8. Net Debt is defined as total current and long-term debt, excluding deferred financing costs, less cash and cash equivalents.
KINETIK HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2024
2023
2024
2023
(In thousands, except per share data)
Operating revenues:
Service revenue
$
96,415
$
102,551
$
198,610
$
205,976
Product revenue
260,102
191,430
496,669
365,254
Other revenue
2,940
2,222
5,572
6,013
Total operating revenues
359,457
296,203
700,851
577,243
Operating costs and expenses:
Costs of sales (exclusive of depreciation and amortization shown separately below) (1)
146,513
110,467
300,200
226,344
Operating expenses
44,068
39,906
87,474
75,879
Ad valorem taxes
6,212
3,889
12,504
9,347
General and administrative expenses
31,091
22,869
65,227
50,380
Depreciation and amortization expenses
75,061
69,482
148,667
138,336
(Gain) loss on disposal of assets
(76
)
12,137
4,090
12,239
Total operating costs and expenses
302,869
258,750
618,162
512,525
Operating income
56,588
37,453
82,689
64,718
Other income (expense):
Interest and other income
309
1,042
400
1,336
Loss on debt extinguishment
(525
)
—
(525
)
—
Gain on sale of equity method investment
59,884
—
59,884
—
Interest expense
(54,049
)
(16,126
)
(101,516
)
(85,434
)
Equity in earnings of unconsolidated affiliates
55,955
49,610
116,424
96,074
Total other income, net
61,574
34,526
74,667
11,976
Income before income taxes
118,162
71,979
157,356
76,694
Income tax expense
9,214
311
13,001
727
Net income including noncontrolling interest
108,948
71,668
144,355
75,967
Net income attributable to Common Unit limited partners
71,756
46,654
95,613
49,517
Net income attributable to Class A Common Stock Shareholders
$
37,192
$
25,014
$
48,742
$
26,450
Net income attributable to Class A Common Shareholders, per share
Basic
$
0.54
$
0.41
$
0.68
$
0.36
Diluted
$
0.54
$
0.41
$
0.67
$
0.36
Weighted-average shares
Basic
59,792
50,553
58,840
48,980
Diluted
60,279
50,625
59,503
49,220
(1) Cost of sales (exclusive of depreciation and amortization) is net of gas service revenues totaling $54.7 million and $38.1 million for the three months ended June 30, 2024 and 2023, respectively, and $99.2 million and $68.5 million for the six months ended June 30, 2024 and 2023, respectively, for certain volumes, where we act as principal.
KINETIK HOLDINGS INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
Three Months Ended
June 30,
Six Months Ended
June 30,
2024
2023
2024
2023(1)
(In thousands)
Net Income Including Noncontrolling Interests to Adjusted EBITDA
Net income including noncontrolling interests (GAAP)
$
108,948
$
71,668
$
144,355
$
75,967
Add back:
Interest expense
54,049
16,126
101,516
85,434
Income tax expense
9,214
311
13,001
727
Depreciation and amortization
75,061
69,482
148,667
138,336
Amortization of contract costs
1,655
1,655
3,310
3,310
Proportionate EBITDA from unconsolidated affiliates
85,922
74,481
174,324
146,348
Share-based compensation
15,136
13,299
37,697
30,839
(Gain) loss on disposal of assets
(76
)
12,137
4,090
12,239
Loss on debt extinguishment
525
—
525
—
Unrealized hedging loss
—
—
6,883
—
Integration costs
2,510
41
2,551
953
Acquisition transaction costs
3,232
2
3,232
270
Other one-time costs or amortization
2,581
1,104
5,006
4,864
Deduct:
Interest income
310
—
887
—
Warrant valuation adjustment
—
33
—
77
Gain on sale of equity method investment
59,884
—
59,884
—
Unrealized hedging gain
8,205
2,678
—
7,643
Equity income from unconsolidated affiliates
55,955
49,610
116,424
96,074
Adjusted EBITDA(1) (non-GAAP)
$
234,403
$
207,985
$
467,962
$
395,493
Distributable Cash Flow(2)
Adjusted EBITDA (non-GAAP)
$
234,403
$
207,985
$
467,962
$
395,493
Proportionate EBITDA from unconsolidated affiliates
(85,922
)
(74,481
)
(174,324
)
(146,348
)
Returns on invested capital from unconsolidated affiliates
75,429
68,466
152,642
136,230
Interest expense
(54,049
)
(16,126
)
(101,516
)
(85,434
)
Unrealized gain on interest rate derivatives
(189
)
(36,835
)
(9,566
)
(19,646
)
Maintenance capital expenditures
(6,780
)
(5,002
)
(17,780
)
(9,562
)
Distributable cash flow (non-GAAP)
$
162,892
$
144,007
$
317,418
$
270,733
Free Cash Flow(3)
Distributable cash flow (non-GAAP)
$
162,892
$
144,007
$
317,418
$
270,733
Cash interest adjustment
(29,144
)
(35,705
)
(29,395
)
(20,331
)
Realized gain on interest rate swaps
3,953
2,417
7,905
2,417
Growth capital expenditures
(32,160
)
(98,644
)
(80,413
)
(161,908
)
Capitalized interest
(986
)
(4,811
)
(1,930
)
(7,044
)
Investments in unconsolidated affiliates
—
(93,112
)
(3,273
)
(150,331
)
Returns of invested capital from unconsolidated affiliates
—
—
1,240
5,793
Contributions in aid of construction
894
6,203
1,408
6,872
Free cash flow (non-GAAP)
$
105,449
$
(79,645
)
$
212,960
$
(53,799
)
KINETIK HOLDINGS INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (CONTINUED)
Six Months Ended June 30,
2024
2023
(In thousands)
Reconciliation of net cash provided by operating activities to Adjusted EBITDA
Net cash provided by operating activities
$
279,222
$
231,047
Net changes in operating assets and liabilities
49,046
47,040
Interest expense
101,516
85,434
Amortization of deferred financing costs
(3,582
)
(3,055
)
Current income tax expense
610
124
Returns on invested capital from unconsolidated affiliates
(152,642
)
(136,230
)
Proportionate EBITDA from unconsolidated affiliates
174,324
146,348
Derivative fair value adjustment and settlement
2,683
26,341
Unrealized hedging loss (gain)
6,883
(7,643
)
Interest income
(887
)
—
Integration costs
2,551
953
Transaction costs
3,232
270
Other one-time cost or amortization
5,006
4,864
Adjusted EBITDA(1) (non-GAAP)
$
467,962
$
395,493
Distributable Cash Flow(2)
Adjusted EBITDA (non-GAAP)
$
467,962
$
395,493
Proportionate EBITDA from unconsolidated affiliates
(174,324
)
(146,348
)
Returns on invested capital from unconsolidated affiliates
152,642
136,230
Interest expense
(101,516
)
(85,434
)
Unrealized gain on interest rate derivatives
(9,566
)
(19,646
)
Maintenance capital expenditures
(17,780
)
(9,562
)
Distributable cash flow (non-GAAP)
$
317,418
$
270,733
Free Cash Flow(3)
Distributable cash flow (non-GAAP)
$
317,418
$
270,733
Cash interest adjustment
(29,395
)
(20,331
)
Realized gain on interest rate swaps
7,905
2,417
Growth capital expenditures
(80,413
)
(161,908
)
Capitalized interest
(1,930
)
(7,044
)
Investments in unconsolidated affiliates
(3,273
)
(150,331
)
Returns of invested capital from unconsolidated affiliates
1,240
5,793
Contributions in aid of construction
1,408
6,872
Free cash flow (non-GAAP)
$
212,960
$
(53,799
)
KINETIK HOLDINGS INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (CONTINUED)
June 30,
March 31,
2024
2024
(In thousands)
Net Debt(4)
Short-term debt
$
148,800
$
—
Long-term debt, net
3,258,403
3,517,115
Plus: Debt issuance costs, net
28,597
29,885
Total debt
3,435,800
3,547,000
Less: Cash and cash equivalents
12,549
9,756
Net debt (non-GAAP)
$
3,423,251
$
3,537,244
(1) Adjusted EBITDA is defined as net income including non-controlling interests adjusted for interest, taxes, depreciation and amortization, impairment charges, asset write-offs, the proportionate EBITDA from unconsolidated affiliates, equity in earnings from unconsolidated affiliates, share-based compensation expense, non-cash increases and decreases related to trading and hedging agreements, extraordinary losses and unusual or non-recurring charges. Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance. Adjusted EBITDA should not be considered as an alternative to the GAAP measure of net income including non-controlling interests or any other measure of financial performance presented in accordance with GAAP.
(2) Distributable Cash Flow is defined as Adjusted EBITDA, adjusted for the proportionate EBITDA from unconsolidated affiliates, returns on invested capital from unconsolidated affiliates, interest expense, net of amounts capitalized, unrealized gains or losses on interest rate derivatives and maintenance capital expenditures. Distributable Cash Flow should not be considered as an alternative to the GAAP measure of net income including non-controlling interests or any other measure of financial performance presented in accordance with GAAP. We believe that Distributable Cash Flow is a useful measure to compare cash generation performance from period to period and to compare the cash generation performance for specific periods to the amount of cash dividends we make.
(3) Free Cash Flow is defined as Distributable Cash Flow adjusted for growth capital expenditures, investments in unconsolidated affiliates, returns of invested capital from unconsolidated affiliates, cash interest, capitalized interest, realized gains or losses on interest rate derivatives and contributions in aid of construction. Free Cash flow should not be considered as an alternative to the GAAP measure of net income including non-controlling interests or any other measure of financial performance presented in accordance with GAAP. We believe that Free Cash Flow is a useful performance measure to compare cash generation performance from period to period and to compare the cash generation performance for specific periods to the amount of cash dividends that we make.
(4) Net Debt is defined as total current and long-term debt, excluding deferred financing costs, premiums and discounts, less cash and cash equivalents. Net Debt illustrates our total debt position less cash on hand that could be utilized to pay down debt at the balance sheet date. Net Debt should not be considered as an alternative to the GAAP measure of total long-term debt, or any other measure of financial performance presented in accordance with GAAP.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240807347254/en/
Kinetik Investors: (713) 487-4832 Maddie Wagner (713) 574-4743 Alex Durkee Website: www.kinetik.com
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