Kinetik (KNTK) Q3 2024 earnings summary

Executive summary

• Achieved record Q3 2024 results with net income of $83.7 million, up 94% year-over-year, and Adjusted EBITDA of $265.7 million, up 23% year-over-year, despite persistent negative Waha gas prices and significant wellhead curtailments.

• Processed gas volumes grew 15% year-over-year to 1.71 Bcf/d, with strong contributions from New Mexico and Texas assets and the Durango acquisition expanding the Northern Delaware Basin footprint.

• Increased equity interest in EPIC Crude to 27.5% and announced a new large-diameter, high-pressure pipeline connecting Delaware North and South systems, with in-service expected Q1 2026.

• Received EPA approval for MRV plan, enabling economic benefit from 45Q credits for CO2 sequestration, with recognition expected in 2025.

• Construction of Kings Landing Cryo I in Eddy County, NM, is progressing, with expected operation in Q2 2025.

Financial highlights

• Q3 2024 Adjusted EBITDA was $265.7 million, net income was $83.7 million, distributable cash flow was $184.2 million, and free cash flow was $164.7 million.

• Operating revenues for Q3 2024 were $396.4 million, up 20% year-over-year, with product revenue up 31%.

• Midstream Logistics segment Adjusted EBITDA was $173.6 million (+24% YoY); Pipeline Transportation segment Adjusted EBITDA was $96.1 million (+22% YoY).

• Quarterly dividend increased to $0.78 per share, annualized to $3.12, up 4% from the prior quarter.

• Leverage ratio at 3.2x, below the 3.5x target; net debt as of September 30, 2024, was $3.44 billion.

Outlook and guidance

• Raised full-year 2024 Adjusted EBITDA guidance to $970 million–$1 billion, a 3% increase at midpoint and nearly 20% year-over-year growth.

• Capital expenditures guidance tightened to $270 million–$290 million for 2024.

• Anticipates strong Q4 performance with return of curtailed volumes and new customer agreements, and expects continued high-teen year-over-year process gas volume growth in Midstream Logistics.

• Kings Landing Cryo I expected online in Q2 2025; new pipeline project in-service expected Q1 2026.

• 2025 CapEx expected at the upper end of $250–$400 million range, with 10–12%+ annual EBITDA growth projected through 2027.