KNTK - Earnings call transcript Q1 2022

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Operator

Hello everyone and welcome to the Kinetik First Quarter 2022 Earnings Call. My name is Sam and I will be operator for the call today. [Operator Instructions] I would now like to hand the floor over to Maddie to begin. Please go ahead.

Maddie Wagner

Thank you. welcome first and conference XXXX everyone, call. morning to quarter Kinetik's earnings Good

are is CEO Psencik, President well with Howard, CAO; our Here me GC; our and Officer; Stellato, Wall Trevor COO, Todd Carpenter, we website and the slide the presentation access Strategy to Kris VP as our of our of Jamie yesterday, and Chief Finance Kindrick and our Commercial. issued VPs for Annie available today's our call our Steve webcast Milam, our www.kinetik.com. Matt Tyler The as at press release and Welch

measures begin, like and results These assumptions. We've performance not guarantees With earnings to U.S. may that we provide I will reconcile forward-looking Before risks also conform prepared Q&A. our described the differ all and we not provide will will non-GAAP call including the turn to statements are I part Jamie. involve actual and is would statements. do remarks, certain could open listeners measures remarks call schedules that, provided these future our release. that After as of statements section, We of to of from remind that, number question-and-answer GAAP. performance a the these what to over press our in

Jamie Welch

successful segments, increase few We of volumes anticipate midstream highlights. as logistics start storm quarter. year-over-year well pipeline Processed for $XXX quarter. pro first winter In normalized both the year, increased X.XX Open a EBITDA Gulf across driven announcement excited expansion will the to similar Both commodity transportation Uri, takeaway with Express. the XX% near-term We're we expansions solution quarter of work address Morgan partners capital Basin. Coast our constraints upcoming are allocation in February. help gas our We the an a executing behalf Permian pipeline of highly customers. be other facing our Season, million per and volumes higher forma and Kinder E&P back year capacity reported part on as the efficient, this gas with This this represents to capital had outlined for for our quarter averaging to prices. priorities first results February. BCP for Mattie. traded pleased in We following inaugural our full as a to highlighting are and I'm our This them business forma believe publicly you results January is with actual important Kinetik. combination effective pleased be today us. We combination closed Slide information the company, assuming quarter It reconcile investors our is let's you, On today first Kinetik that results will and morning. this continued worth everyone. many guidance. Thank important is and afternoon, of on Altus a and meaningful year. figures our of to to us XXXX and achievements. and Thanks XXXX reported pro others reported with as marks milestone that review Good basis, on in it year yesterday interest more this an support the call provides joining to combined business the more be this a announced over and and Bcf April, Thank morning, PHP you on a increased of day of for X, by your XXXX Xst morning here helps natural and share X%

XXXX. cleaning step and XX% of ratings investment track A is by During balance the remain of grade Altus redeemed capital up outstanding and preferred, redeem key we to towards Series year-end. a approximately structure legacy the we the achieving first quarter, This on in the

financials take inefficient improve million. On Page let's first of earnings at a transparency. this which structure quarter. our EBITDA X will refinancing forma reported adjusted financial our $XXX to look current our pro undertake of materially will We the capital We quarter, for closer slides, comprehensive look and our

As This mentioned, million XX, an the basis. used being year-over-year, generated redeemed units times, XX% of in and forma February flow immediately storm for addition preferred of of $XXX Series free That annualized period cash normalized we of On $X the pro was to cash per XX,XXX represents business A a XXXX. quarterly Uri $XXX on of We million. pro cash was combination. ratio represented winter dividend to quarter effects the the forma of declared redeem a flow which the increase at April free to share of X.X is coverage cash distributable XX% per $X.XX share end. prior flow closing preferred this in during dividend, generated adjusted

four And Our target times. our at remain exited leverage leverage the achieving on focused of we X.X quarter times. ratio

shares. in In goals achieve X We are Apache to achieve our to grade our in XXXX. March, capital and confident closed ratings Kinetik priorities ability financial investment on the of allocation million sale successfully

Kinetik's of gathering single rig equity DXL doubled summer in activity now total Kinetik its proceeds daily gas Apache of by is beginning the trading in After processing High has has and of November public levels Alpine the pressure XX the In also the public to of our long-term Xst, pre-offering completion to The shares. than and with next average connection commencing development the received services. from well. months. sale, program The over guided million more XX% $XXX as secondary float which earmarked Apache XXXX. offering doubled outstanding for high Kinetik for the is operations dedicated High owns volume Alpine area, drilling in a first

driven volumes were and began grew EBITDA five largely winter million, by several X%, Logistics volume volumes to Crude storm January EBITDA was which contributions volumes up Midstream growth dedications, gas increased year-over-year new water dedication specific grew exceeded three March of a volume normalized and in gathered fold This the Xst. X% oil water. volumes Looking Uri. were driven XXXX. across year-over-year by primarily tranche at gas; by up XX% $XXX Gas for top was earnings slides, on process page commodities: due modestly on produced beginning segment and

first in more front back quarter – were the February. XX of to approximately end the the turned early third quarter, Importantly, on meaning the than January, new sales towards wells end

and -- new XX provide services. wells we midstream those So

Our the was largely year-over-year. This to growth record past $XX XX% Shin up quarter, volumes pipeline million, Oak’s volumes was shy transportation EBITDA record EPIC of pipeline. PHP. in XXX,XXX as both just due quarter this winter storm throughput at Crude were a Uri and as the Oak well the quarter XXXX reversal first related per expenses barrels day, of for Shin in on

high improve operator volume shipping optimize increase expect our guidance by growth. to barrels barrels growth the shipper pipeline to strong record the allowing per exceed enterprise Based forecast, Oak performance also access pipeline continues range future of for in to capacity further look the as hydraulics markets. our during Given day on seek a its Crude may over Christi XXXX the we customers XXX,XXX to provided the day, its to premium EPIC on XXX,XXX end to Shin Corpus per February.

$XXX As growth a including range reminder, maintenance EBITDA $XXX our and million XXXX $XXX to guidance included and million million. to million of of an CapEx $XXX

before guidance We at provide to our quarter update this call. our will revise and second or look quarter results upwards an

budget continue on projects to Moving capital and on be operations, time. to our on

XXXX the widely economy. higher capital seen inflation in our locked operating costs and of levels for largely capital have We the across insulating majority from year, costs this

with that in our cost absorb experience. gathering inflation allow also to We have pressures customers may us and escalators future our processing we agreements

Turning and integration Altus to efforts. Slide to EagleClaw X, update provide would an like I on our

on legacy assets in integrating and closing have track both gas significant day connects directionally use feet systems, which and Diamond BCP XXX latent interconnect This allow us pipeline project million be budget. is at personnel. Cryo provide Altus with ahead rich progress complex. us by to will made by and ability since legacy service of We the capacity schedule on surface system late to move of June. This is the cubic The a to the and

year legacy We replacing year. alone. rental of begin this with units the wide representing identified owned for throughout have will XX,XXX compressor number horsepower A look locations Altus been to compression system

gas design and detailed offerings number This of Altus savings. with us a as well gas locked aiming quality related receive maintenance savings. the as to range agreement integration closing, install engineering gas million a of to respect in service the our of annual to to Since wider expand Additionally, specifications. cost we're units Apache treating stages in of Pecos. already have front and the the end at was The resulted treating we operations allows $X East Bend and Pecos cost at and the closing, owned in legacy terminated construction Toya, Altus

we this system, harvest completed across and IT, Apache operational process practices best additional terminated HR month, at efficiencies. We back And the cost accounting agreement finally, the April broader earlier are transition, in our office implementing and will on and that gathering including Diamond Cryo] our and transition services XXth. of

our of efforts, part to the best our implement are EagleClaw As integration practices looking assets. at Altus ESG we

Altus We renewable moved in realized XXX% exactly April, have did complexes energy reduction that. X will We processing Scope and we electricity and XXXX, emissions. source legacy In renewable the green from sources. energy a to facilities EagleClaw's sources large

to ESG, Altus electricity Report publishing sourced year. XXXX achieve And summer. Sustainability later we similar look to the be agreement topic assets a when will we the transition of results energy new We on renewable will this our over this

released Altus was full data not XXXX XXXX its readily results. available Our at year emissions time that greenhouse the gas

So, the moment take Slide last a we of like to share year success earnings from on presentation. XX would to our

reducing XXXX X renewably in made reduction have driven we reduced Scope Scope will our emissions. Scope optimization. X Altus XXXX, We greenhouse gas and are was great progress by a facilities compression X emissions. migrated be once significantly and have energy. seen XX% sourced Future absolute to This Between emissions largely in

cap We share reflected stewards cubic agreements The and agreements financial gas commitments. and counterparties. a minimum of are day industry. and feet segment, high operate I supported the we XXXX, day approximately pivot be on updates are XXX the These volume signed two few logistics investment to of new commercial committed these our Slide full good presentation. on environment, we Starting XXXX. recent of by feet of our contribute impact of by like pressure with X to will net zero million a will million the a strive and with in communities be earnings would grade contracts volume cubic in emissions tremendous our gathering processing $XXX large midstream successes and now which to achieving

XXXX. provide feet of nice exit the available new capacity However, upswing of XX% processing the fourth cubic our value had we the clearly a as quarter day processing million a intrinsic in they capacity of latent we environment. and in demonstrates Expected volumes that $XXX from highlighted, extrinsic will represent and agreements, today's

be Having to may capacity Labor meant equivalent than plans and capacity latent is Delaware capacity adding feet today. This We have that processing surprised in processing expansion capacity by Cryo's XXX appears longer accelerated which is less lead we significantly even expected for to revenue normal capacity cost to basin tightness, represents day expand and additional now be us, is That tighter cost million. by our than much a than Diamond approximately said sold risk, compression. making the times that more our exacerbate cubic it capacity valuable. appreciated latent have of the million processing market. processing greenfield adding XX% of $XX by months, consistently capacity that XX% our only two out processing much new processing equipment constraints low

leverage. ask, work first will day. This the our completion and expansion before refill to what to certainly over of of capacity efficient Bcf people a get is operating additional And a X other engineering XXXX, yes, highly we've us Cryo Following started will from the in project train on allow every to Diamond capacity expansion already we our the increase analyze processing capital quarter can system. our processing

Therefore, support and So know a future XXX to needs continued we existing at growth. million that customer's will cubic remain meet have forma day and remaining least today, processing new a pro we feet we capacity. positioned uniquely

dedicated with agreement X Apache of related high Apache XX-year acreage begins to processing November a following brought will successful World] gathering drilling to this well six to rig our DXL Turning basin, fourth Apache's Mohican moving be in for and DXL new activity sales County half pressure summer State quarter. third to the first Alpine of in this Delaware will the from in their Apache year. Central be Reeves turning pad High XXXX. new the activity, online resume to [Willow the and

Apache it expect upside commodity Given prices, realistic is to more related from activity.

million Permian Turning pipeline along our nearly for segment, to cubic incremental binding expansion, capacity. the XXX the providing Season transportation announced a feet Open Highway of with we pipeline Kinder, day

likely Bcf pipeline. to will the Gulf of Season Gulf from provide Coast. to involve limited takeaway Express second expect the an XXXX. cost the of These the in the will incremental quickest in these and pipelines to announce pipeline Open compression as gas most of online constraints We brownfield day capacity effective expansion over Coast expansions the we basin. solutions capacity which GCX X.X natural and add expansions Additionally, and PHP half the a two come similar Permian combined view address for additional a new Both construction

Given world we need uniquely additional see as the in positioned. Permian U.S. events, energy, current troubling and results the sourced for

upside Shin future What address expansions with and excited our As solution XX%. transportation is be the pipeline capacity. PHP potential segment such, Oak’s our astounding significant the from EBITDA to increase volume a to the will alone expected the to from to contributions critical quite by a is EBITDA we're DCX of over additional allies. projects European part Those call support impact together

As transportation XX% would a then result, represent our the total of segment pipeline EBITDA.

I As proud a delivering and now of all future turn the This and forward can In results thank Mattie. strong by accomplish extremely has work dedication for Kinetik long-term able I'm is success the what look operations. we And quarter I'll in you. future. hit this to of Kinetik the the back because had quarter. sharing commend running, reliable and up been success. really I call to results, setting continued also want all for you effort to ground over see, hard closing, have employees. to to you their our and to with commitment more of want I them safe

Maddie Wagner

you please the Q&A? Sam, Thank open for you, would lines Jamie.

Operator

Instructions] comes [Operator from from question first Spiro Credit Dounis Our Suisse.

Spiro Dounis

the expansion, could. Jamie, if start Cryo to I want we with

by latent a And were the guys to surprised that X, just there, given just still if capacity so we Slide all capacity there’s of it left you So they're and looks I at are you all have. even acceleration look fill. lot

curious So reading quickly, decision the team remaining curious how what should from we about your so here. you telling commercial be expand what's to is

Jamie Welch

me So let explain.

Diamond fleet. knew expansion processing It’s largest we think across that modest single our expansion the Cryo potential I the relatively entire was cost.

months the additional you is lot of be all others the tells you I months the following here your a what on more in got respect see going with closing activity, level and think of it from up the conversations When we have filled surprised much capacity originally three to We with commercial years. which it that could to customers activity latent half out. We Because out we of us sell almost XX be ourselves. processing merger, and capacity have number take processing in you five will hand. timeframe, of two to a better could this could sold sitting now thought accelerated on we've and fully capacity, we XX

to we lead extenuate times, XX think ready. from It's want to be timeframes we have the incremental -- compression. know items at be The looking think lead really disruptions long on continued the supply we chain gone that get today, just XX year --sales you're important to weeks makes about weeks that a already ready. I increases So that revenue, to long

by success our million our I so safe fact have current all And others the the don’t. are excess to $XX and for be conversations it’s we is than think in sorry environment. that fact just we this Because better capacity, thought that the driven

going value stakeholders. we our think so want all And for to that to we tremendous that. create capitalize that's And on of

Spiro Dounis

about Cryo very lot project million achievable $XX of of it forward, a Switching and sounds growth thinking on bit this new a this cost. sort like coming gears funding a just

goes guess So that's gas you the two maybe processing. sort that of also along associated fine. potentially But Permian with any have and then this I pipelines coming gathering

of So obviously this middle curious, some refinancing the as look growth? about are forward, you in funding you're thinking you how of now,

Jamie Welch

transportation obviously pipeline the to Gathering the relates different it's it little Processing side. a and as think I on segment, than

spend PHP around will obviously to particular be be pipeline So Those the that got blended to that a side, our multiple -- I related to the at. transportation we of of is sort what X.Xx projects there think XX on months have it's fair and looking you weekly FID, period investment. GCX, XX say,

only about forecast, our you it two our that have multiple to we So, when think you against got range are talking points long now relative leverage threshold overall about.

get program an money think think there are into that to XXXX, this to And continue as in step of suited the so, think that the I to keep I and spending lockstep modest means that that's the at want we equity about before, whether those with I spend. about it's ideally incremental be with be And have overtime obviously for out, drip it's ratable approaches I form to thinking and some thinking in amount, can to -- because equity obvious going whether something discussed the multiple you profile.

of As I to are side, in we think incremental the we evaluating construction. midst the whether Gathering in aid relates some are, amounts have what the it

aid customers, give benefit have which basically capital. from construct some some in We us

We capital of overall some growth & that have interchangeable. other Processing elements Gathering our is

emphasis for can have of capital will defer on capital actually the new that this the to other resolving particular another area And particular we these opposed some we So, from will connection one the as contracts. be planned, of because focus area. on the we

thing the business and see on a we spend. And always think increase have that So, G&P we most spend it's to overall The got our I the in going processing. for audience, important biggest is don't significant dynamic in are spades. the

don't capital amount amount really short to incremental of So these be deployed. connects, connections to a and well laterals significant

Operator

Please comes question Gabe Mizuho. from go ahead. next from Our Moreen

Gabe Moreen

so raise. as Jamie, maybe guidance determine what now, you factors of talk the officially guidance? can the XQ some to raise, everyone. sort raise and start just do items if the off guidance about you in such, only do give you terms adjusting I if are are of visibility guidance sort I that. morning, right for before looking takes about I after can and are, with of guess Just you Without maybe hesitant Good

Jamie Welch

Sure.

at Gabe, is and want pretty multitude the given done, off, to we FIDs that factors. XXX GCX, of They total $XXX be day, are with right? of -- of million size I particularly to significant, going probably majority close is PHP. its something first million, a feet $XXX control That that it's It million PHP get cubic So you dealing think, a to -- spend. are own we of

put the thing with the that's and a important. timeframe where are The So, where price side. to overall refinancing in to at that's far big the down refinancing, the as and like and fall pricing we overall also And curve. us within spent sure of that we GCX commodity a making see things the as one. exactly actually looks category. locked commodity we that is context right? we that in look planning the thing next be like shape Next how we program going what of And of opportunities got that to is would hedging place in we've the front on over spending, picture is done, get as the want

quarter -- no possibly we all We but on. okay, of everything like what can the will to now reported, dealing second the that of the things going we're We there into have be this will know be commercial precincts have things have other. still all some and know with is magnitude other say, take that wanted we been side on this worked on,

that we FIDed then we've able thoughtfully. on basis we'll of way, because some sure So to and the we we'll to to the be then we “oh, wanted it be by things PHP, quarter, back do the we here's We the do And second just we'll working rather coming by be there's other and than do will it know, have, think to saying, effectively everything quarter well, able guy it, GCX raise, able on”. we make been and next communicate will market. saying, and the to and a it

Gabe Moreen

to maybe talk these you takeaway that And on kind your context residue customers capacity, of broader confidence I just your the in could if Can processing, PHP. all making then have additional follow-up guess itself, Kinetik just capacity need within contracts that of basin? PHP sure of facilitate that GCX, the then will your any egress? customers I be customers getting I have on either do or And to out guess taking

Jamie Welch

And yes, already start anchor-shipper me with you PHP know, we, we're let first. So on your an today. last as question

up to a the shipper but our are not will make expansion. capacity the intention we that will We take GCX, we sure a forma with we continue additional On shipper pro expansion. be that today, is

incredibly into capacity So customers magnitude diff diff working I we we going makes of It that what that. our others. egress. we that think we have for than do that through look the and we as we think say is are XXXX, It important, And egress differentiates the we provide categorically going that can particularly versus out the at unique more have competitors. service offering out our

we've think it multiple have we'll and that of and GCX I to forward So PHP. continue going more players, with got

Gabe Moreen

if one just squeeze And could one. last I in

growth this order Prix point, in of whether kind last months? better I'm fits your than of the in where it priorities guess, couple wondering the all I Grand of at that's potential expected going just dropdown you on, changed Given

Jamie Welch

don't it's think all. changed No, I at

is think right as a I think been It time investment. have is a with that ongoing a when with has standpoint, obviously Blackstone, we're a that the from that our they to conversation dealing things it's And harvest to they now. know they right lot topic of decision to potentially make great investment.

of the half conversation So the suited I year. think, it's ideally to a that's back

Operator

Neal question of from Bank comes next America. Our Mitra from

Neal Mitra

of versus such to And 'XX team Where for full starting legacy you you're Shin do are understand would agreement. XXX? Oak the from from give getting for that, expect follow the then as a and a the million the to what cadence as Diamond a expansion wanted XXX feet what interconnection at late other the just in we FPs EU interconnects systems? there cubic better you growth are to ramp cross I fully day point other from that reasons on to

Jamie Welch

good morning, you for the Neil, So, thank question.

the answer grade Starts actual then about say the counterparties, actually this cap the contracts that new quarter hits year, year. they mid is of the and announced, XX% immediately short large start XXX. almost at new XXX the would it the So, end XXXX two we of investment shape I of by next fourth

higher. So it just starts and high goes

concerned, have now, As look, far we move Oak of -- the it And, have Oak Shin we as a got which obviously Shin Lonestar, the we attractive we have volumes ability to obviously, is Oak. Shin ramp. we is Diamond. own connected have Grand third Prix, Shin we to we've is given Oak, on

So option, for everything another the to customers and alternative I -- an is us think another just versus that outlet else.

Neal Mitra

switch And I wanted to to pipeline the section. then

the every of hold know on kind the You the and years game, that marketing plan detail anchor because more seems capacity then percentage to PHP, you're Permian around are to to kind blowouts an And we Do shipper or that you that. and it understand little of sleeved customers? bit what have you of holding? wanted two to play pipe plan the a

Jamie Welch

customers, assignment and outright each an our XXX to on a have you'd sleeved/assigned/syndicated, pipeline we of -- day, -- you'd allocated some on of like basket word to them our either capacity. had customers. we million back in the of or So to use, however so -- cubic we been the And like actually a feet original to had various reached whatever

and ourselves that too some early EOG, and Season. said, system as that's of still this for capacity since egress to customer available our the access on is customers whether all volume expansion keep whether But now Diamondback, of and binding them we're it [Caetera], find sure that it Coast them. downstream, need more So have all particularly we're where available we take expansion I whether more our up whether fact, for talk to we and intending make more it the to available is It's to is to And it's continue is and more Open we have of Gulf the about markets. today. desire in as Colgate, on

Neal Mitra

it. Got

So you the some you just yourself do customers, widen? I understand, equity some hold of so Gulf from Midwest you to it sleeve to capacity barrels Coast want the want but when to so can typically push to spreads to

Jamie Welch

we standpoint, sales of not customer average or as we capitalize pricing weighted marketing are our to the not ourselves price same being gas with contracts, their associated of part that revenue, other of business our for customers gas, as make from gas, It's of We equity equity, with all basket Coast same on small exact looking component We this is people treat we the way. our the a yes. that PHP. don't PHP the ourselves treat segment business. -- this. treat a Gulf want our Those equity the in directed With of way our

Neal Mitra

Got Greenfield on it. any band-aid need update I in, will if expansion projects will projects is soon. PX? one more these and squeeze there It just And be like can pretty a seems

all place. on timing the update first project So, that participate and will you whether at FID in of in

Jamie Welch

PX day a get that is, by of PHP expansions, GCX to through think X.X the second capacity got Bcf have the to and bring on answer you half the Short Permian of I XXXX. will

to it Because I it any think talking in year end commercialization enterprises, handle. these money of need for think will need of cost that rate then energy is be for any to to announced. see relates some which inch it and saw relative which to other need of pipeline suppose the see not there you get between. as large I I better back Whistler a today, and from room there, one, projects XXXX, all announced be when get obviously transfers, we far than it commercialized. you next when need or time obviously build just then was to about of or the customers XXXX just towards PHP anchor personally greater I opposed to And out PX potential we As people standpoint several, a is get value number in to done, or and get think pipeline XX relates whether -- saw projects to GCX we need we to

Operator

no on the have call, further will floor We Instructions] [Operator to back questions Maddie. hand so I the

Maddie Wagner

everyone Thanks joining our call. conclude morning. you. That this for Thank us will

Operator

Thank earnings first call. Kinetik’s quarter you the all for XXXX joining

You may your now disconnect lines.

Maddie Wagner	Director, Investor Relations
Jamie Welch	President & Chief Executive Officer
Matt Wall	Chief Operating Officer
Annie Psencik	Chief Strategy Officer
Steve Stellato	Chief Administrative Officer
Todd Carpenter	General Counsel
Trevor Howard	VP, Finance
Kris Kindrick	VP, Commercial
Tyler Milam	VP, Commercial
Spiro Dounis	Credit Suisse
Gabe Moreen	Mizuho
Neal Mitra	Bank of America

Kinetik (KNTK) 11 May 222022 Q1 Earnings call transcript