Earnings call transcript Q2 2023

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Operator

Good morning, everyone, and welcome to the Kinetic Second Quarter 2023 Results. My name is Chach, and I'll be coordinating your call today. [Operator Instructions].

I'd like to hand you over to Maddie Wagner to begin. Maddie, please go ahead.

Maddie Wagner

you. Thank welcome Quarter and Call. Earnings Kinetics to morning, XXXX Second Conference Good

Operating our Commercial. with and Anne our as of our as Chief President is Psencik, Milam, Matt and Tyler Finance; Steve Executive our Here Officer; our VP Welch, our Chief Chief me Trevor Administrative Accounting Chief and Officer, Strategy Jamie Wall, and of Officer; Officer; Kendrick Stellato, Howard, VP well Chris

for and The call press yesterday, issued at to are today's release webcast www.kinetics.com. the slide available access the presentation we

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

I over call With turn to Jamie. will that, the

Jamie Welch

our and quarter. line quarter Good further first off call Maddie. for consensus The budget than our estimates. our our Thank you, the of today. results and build reported thank internal XXXX you we morning, with everyone, Yesterday, momentum in joining second results, slightly better

record activity and typically to X.XX the XX% combined and cubic results. volumes This encouraging day third in the for processing producer occurs feet processed gas growth continue company throughout quarterly of experience a strength Following we billion elevated new setting quarter-over-quarter quarter, and record represents to second volumes. volume an is approximately average process April, well during with per quarters the attributed that development gas

alike as volumes utilities During The they equipment Texas. times mechanical production. high providers by maintain to affected and extreme experienced producers, heat May tirelessly processed June, record impacted their our in service and run were overall gas temperatures West and work

past over degrees Texas this half with in in fact, West XXX the exceeding temperatures month. the was hottest for June years In XX consistently

operations our beyond Therefore, we ensure the battling while service and quarter, and to for contractual heat remain despite a contracts the endeavoring step-ups exceed smooth We exit base, Our of customers. guidance operations record or track day. still later our X.X meet new per reliable weather-related on to feet gone occurring rate on billion year. has commencement our the volume our thanks of had constantly this and summer customer in XXXX This is team above summer team. challenges, this cubic commitments growing to predicated

by and be driven in $XXX enter volume As year, the By the in-service growth XXXX towards quarter. We should to growth over second and midstream EBITDA range the quarter-over-quarter, we primarily of year-end, PHP end guidance expansion the the million. of $XXX trend annualized EBITDA logistics million our sustained continues adjusted of commercial our million. Link forecast high of $XXX Delaware the adjusted half to well fourth

decline and expected budget. remainder example, our a by lead are as unit to continued has team operating below throughout year operations the expenses to in come Our result, and of the

as indicate the pricing the second of an outlook compared in half improved forecast Additionally, commodity the year first. current to

It guidance. of midstream our the driven top on by our PHP. of incremental is expenditures noting low end worth logistics Our and Link Delaware spend capital is to spend our range, at are XXXX end guidance the tracking capital be capital expected at largely

million. robust flow expenditures Our XXXX free outlook cash capital we significant $XXX coupled adjusted anticipate as EBITDA year-over-year, with remains growth below

connect Once is is our flow September Link X. our reliability mechanical will in-service, we and commercial on processing our to system completion ahead Moving providing to enhanced progressing directly and of customers. and Construction in-service Waha, Delaware in targeting October facilities of schedule. well, are assurance X Delaware to growth Link projects. now

the PHP project track the expansion an for on continues remained Progress of expected on and December in XXXX. service

gathering schedule is the mechanically that January now be gathering to New of the on County processing beginning underpinning and and system into April. commencing in complete is Lea expected Our Mexico agreement with expansion at project

early a executed the following The supported customer volume gathering During to commence Lea is pipeline second with we in quarter, commitment. the and of a processing the County contract agreement gas a expected new XXXX. minimum into by in-service multiyear

in commercial We business discussions Mexico to relationships several continue to excited and Northern grow the with And opportunities several constructive producers, new Delaware. both about New to Kinetics. the have our existing we're

gathering Delaware to and highly wellhead Gulf for PHP of in-service able Coast producers be will the Mexico Link, expansion, expansion to the liquids. New gas to competitive and solution gas integrated Mexico Following we a the natural New residue provide

processing plans Moving have to side private gas Delaware with on agreements incremental we customers new opportunities, particularly the Basin, production development year producers. quarter, we of Texas commercial a year. and and to the next later executed several of that the with identified handful second this bring gathering In additional

job new done relationships. Our customers commercial meanwhile growing with team terrific building a partnerships existing and has our

our We over last our XX% year, have base following merger customer midstream stands over our and by at grown XX. count logistics today, customer

and midstream on within working segment. Chevron a as our its We to closely also logistics of want them forward closing more acquisition, to look the with customer major congratulate PDC

our week. Finally, sustainability we last report XXXX released

Our to look over to so. yet XXXX if I improvement not made and that progress at has you highly have report proud continued look company the the am I take made our of progress achievements. encourage a forward our done in you advancing and past meaningful initiatives the year. we sustainability

to like hand I'd over Howard, now our Finance. Trevor the to call VP that, of With

Trevor Howard

of of XXXX. EBITDA million in the adjusted quarter reported second We $XXX Jamie. Thanks,

$XXX attributed our Looking growth XX% adjusted was gas in our strong an at process generated segment segment Midstream volume in quarter-over-quarter. results, the quarter, the This up largely Logistics to EBITDA million quarter. of

second versus revenue segment's XX% quarter fee-based of XXXX XXXX. the the of Regarding up second quarter growth, the was

tremendous despite difficult earlier, costs of the mentioned Jamie operating team done rest a inflationary and managing conditions have operations As and pressures. job Kinetic the

per The in end fourth through the costs midstream X% these below of By budget, XXXX, and second by we the quarter anticipate unit we logistics continue MCF OpEx effectively unit Together, lower as expect we and came to to third the to is quarter increase. decrease carry OpEx in from decreased volumes and X% second realized approximately cost flat estimate cost $X.XX quarters. year-over-year.

was Pipeline X% margin volumes Transportation to approximately generated Oak of our expansion by this EBITDA Crude and at driven $XX and up the Shifting segment. Growth an adjusted We year-over-year. segment pipelines. within Shin million, Epic

on potential earnings derisking future remain our balance focused We and sheet. our highly

profit will continue our to and XXXX we the opportunistically During remaining to X% XXXX exposure. reduced second hedge remaining quarter, gross we our commodity-linked

expect we this commodity-linked as XXXX, which as a commodity-linked We profit selling in by have volume place and percent XX% profit worth that next. primarily XX% exposure, took gross date, year we growth we It noting July of which strength. beyond. carry focus to into the Kinetic's our have profit much minimum projects, X% our of shifted also were into to and total is decrease new over commitments gross our as market and XXXX later service XXXX hedged early placed approximately of in derisking rallied gross to To are

fixed fixed we rates, either have or interest of to at of at capital swapped rates total floating approximately our debt June XXXX. On least XX%

While currently mix. fixed to are balance floating comfortable with we rate our continue to we opportunistically derisk sheet, our

the were our capital million, million was million expenditures a midstream investment and capital from the standpoint, $XXX was logistics Next, quarter $XXX $XX at for segment. transportation total segment within pipeline

on cost which We increases some logistics midstream have our non-operated cost segment, control capital of offsets seen tremendous the in pipeline side. the

turning And with the $XXX For we Kinetic the a quarter, the sheet, ratio. adjusted distributable an generated million. exited to leverage flow cash balance X.Xx of quarter

on we XX. be per $X.XX a quarterly On July dividend XX, to declared share August paid

$XX repurchased the announced quarter, million, million $XXX offset approximately quarter under for Class drip or issuances shares under share repurchase August. $X.X XXX,XXX shares repurchase. approximately repurchase capacity we million Year-to-date, for previously opportunistically we million of $X.X XXX,XXX authorized have The A in second the remaining shares KNTK share partially During program. leaving repurchased the

I open lines And would Q&A. with to that, for like the

Operator

Instructions]. [Operator

from comes question first Dounis from Our Spiro Citi.

Spiro Dounis

start to going of and growth available lot sounds capacity with some It like maybe question, momentum. your First a of commercial just forward.

the sounds processing away. past, the I you've to alluded on potential It expand in that further to So was side. like know the

get all this facilitate stands from when you And now? think do further Just now you momentum? right update want there, downstream that to an capacity commercial on where have to enough downstream

Jamie Welch

the Spiro, as stack you processing -- thank far point think side, our of world would depending logistics that So at end upon maybe prudent of at most decision end, decision for is half the at and very at still I new be XXXX second would a the else look, for put point then as in look that beginning the a facility everything latest, as in going the forward, service processing 'XX, on the processing it it time in of in towards the chain, the supply obviously, or earliest at that the XXXX. likely we

enough have capacity latitude and have. to that flexibility and it NGLs as We the relates we

PHP. As well on as, capacity on -- with capacity our obviously, with

not box. the at to see, a things. that the comfortable now we can that far pace and customer we as going level. would And X on I of possible deposit And everything a for So we'll even is think change It's made what right think it the I for as existing both least far or we million, how accelerate, of year obviously We'll to think CapEx still that we obviously the next -- revisit. that feel payment see And have to keep that the within I get of because at continues our under change X going confident we've probably and under rate try as $XXX to $XXX footprint. not think side we of million if forward. about us growth going look, milestone out as assumption

by at And Cryo as we were successful expanding Diamond know, you XXX.

that to the tremendous and Matt service. of So still his of team out they're get recoveries high will everything try Toya, and will Bend possible to I maintain levels think and Pecos obviously, do customer guys able --

Spiro Dounis

Helpful it. Got color.

there, sort exploring is think to deal I sort expected is of of pipeline, that maybe close much in of just now, which I maybe to that of one, an are of sales the impacting like KMI you how a by since and sounds expansion process Curious lot Second a us that exploring suppose. not I was going now? like I GCX. the the potential plan, know Looks still last but now guess originally sale discussion,

Jamie Welch

it a really -- as Spiro, to it's good good GCX. So question, relates

second So we're the in yes, round.

they right, We of on conference have process. call, topic their recent you're evidenced as Kinder most expansion that the moving a where number GCX. by are And of of through parties resumed Morgan's the discussion an

to going comes to part LNG. in almost Agua a the get realization a you're day successful and to of following X.X FID XX.X I certain Bcf think think day only with going or decade absolute And capacity a there. Bcf of Dulce, got that have day I the you've that Bcf next X

I think, pretty the need I quite So high. high. this incremental The also is, is gets think, likelihood done,

and our likely job in it's As the owner the an responsible to to try price, like for the near as that owner of we highest fairly value shareholders, much responsible including and believe is the a expansion term. to get eventuate our because Kinder-Morgan GCX it to

Operator

of next the Neel Mitra Bank is question America. The from on line from

Indraneel Mitra

the I to wanted off turn grade to investment goal capital know as I allocation forward. get well ultimately is on DRIP. to the as touch going

the to of kind So order of understand wanted events just here.

likely turn to investment much off very to that's going the look I'm off turning sounds that, we or DRIP DRIP issuances? first? expansion which it is still look up grade So just Then the priority understand is the off keep on one to then some after There's things. be the holding of the get getting to to do the and to some we do GCX equity turn trying probably Or DRIP. first table. sort to grade like investment

Jamie Welch

lot And Neel, discuss it's something internally. a it's and really question, we good a

if DRIP particular the likelihood which reduce So intend for not year. and be least its obviously, level, terminate of element, of X the fourth at remainder pipeline. that to term, the of obviously, quarter existing with the particularly the the expansion at to We quarters, value, quarter of third maximizing would GCX the minimum this

outcome. viewpoint continue reinvestment from X credit controllable we -- our a somewhat target, dividend which standpoint. have is need see our are remains business leverage more the robust think about because think to of achieve we not we determinations worrying the expected. on out is order control Investment credit And to And our in a do I reliant other to even than we X.Xx -- to X overall plan obviously X grade parties a that make our on to or is

be know think for EBITDA what control, we change end 'XX we stronger -- it is within I step the is to and think anticipated, now, high do. business And than that as our being we significant about it as of will concerned. guidance we need right at being So we both XXXX, as a far --

So be we of required. dividend a that longer reinvestment think no get conviction plan will I lot the

And through this not we positive mistaken, get third out. the there on I we're think, Trevor, way I'm through flow if cash from quarter, all

Trevor Howard

Yes, that's exactly right.

So mix target. a And as it quarter the of this the and and fourth thereafter, reducing to year free off intend until third turning flow dividend hit or plan. fourth the meaningfully will leverage that And off growth. dividend we repurchase it we turning XXXX and quarter in excess be mentioned, X.Xx then payments beginning delever Jamie of the cash DRIP the for or DRIP is with

Indraneel Mitra

midstream you we underlying assuming your because there's Texas. the of half of spike And here the that such commentary we've sounds or Did were even year, and during here that processing growth a third quarter constraints because heat just Great. heat second in to the macro some some that completions oil a your relief of any that delayed you've like side shut then constraints some basin-wide the producers with And due had that maybe in wells crude some second Okay. of the the It question. the get broader in heard some in producers quarter? see or the there heat. on

Jamie Welch

Trev, do you want take that? to

Trevor Howard

absolutely. Yes,

our saw say were what last is definitely then business But think we the temperatures and -- we as May, about higher think we not to about the I second we in when earnings our that So we with full changes our quarter in experienced that in was of immune press where reiterate we June we spoke of excess year. that July. half would volumes as first our it be overall year, are to included -- a the for this while would I volumes we towards Bcf don't excess in in gas to slides, or anticipate really process wasn't any gas tracking still XXXX. And day process release to expecting X.X like also

change to no see point the at that So business we this in time.

Operator

from is Mizuho. Our from next Mosca question Robert

Robert Mosca

or piece that included for any estimate isn't to And what's wanted that I and Oak, I'm currently ask estimate a next expansion guess budgeted. but just how around expectation Shin of you can your I more that level like is year. Oak step prospective I CapEx down barebones trying understand Shin out in that to without growth projects? to

Jamie Welch

Robert, So it's Jamie.

question. good So

that The right? logistics, top be think midstream of it what break to obviously, to for we $XXX you I was lion's share this So consider to our regular go overall on guidance, year, million, in $XXX million. if $XXX growth. million $XXX million down, of

maybe treating small very, 'XX. amount our happen there's to the the of with CapEx, integration PB balance us, to that's be very, the growth in going of of for a done So very obviously, beginning with, maintenance will most very

$XXX related another But have a as That guidance, We New $XXX a have our that is to on the be I concerned, link don't of $XXX million, million game board. of itself done which a -- We as on million to it or that would PHP to another far our Mexico. on would $XXX chart, lot will right it don't XX% was say be was of now done. Delaware million. expansion capital

expansion PHP Lea not us anticipate one-off, the just into it's a not it, at we when expansion that lot year. way -- the Delaware look one-off are one-off we Link, taking had They was very up every New all a interior we items. County. barebones we of of Robert, Mexico So things large say, that

treating online. I we identified in as the we CapEx on don't of when overall right we've And part remainder, East next That's right, very that have than obviously the obviously step-up of the coming that's the think beginning PB about of We Toya what merger. at other we already have that year. got integration our got the now. We've forecast, anything, think,

this Apache it so And related and million, of literally as be that there's a line. million has second incremental $XXX growth. sized in -- in some There's we to actually decent of Alpine I there. expect one June the and the sort mentioned, Obviously, onwards, $XXX that component High, basically will when turned capital

in We of Cryo. also a new the can context sort a afford a milestone payment deposit of

think, we enough than $XXX has growth. context So more room in our the million, of continued the

Robert Mosca

that also helpful, really a maybe outlook. return capital And follow-up on That's Jamie.

before kind about think DRIP. that early will you the right like more of can used majority is growth. of GCX expect we way dividend sounds precondition buybacks X.Xx how the Is the I it? leverage like think happen? a sounding to it's It that that proceeds to should the introduce to and And be address

Jamie Welch

I we the some So X.Xx sort that from it's in our to months think XX target will whether certainly or viewpoint leverage -- is during year-end our year, whether the of the meet at now. point XXXX, at it's expectation is

continue forecast a on to, But fact, great for gets year. done I in count by has the stronger. Anne the overall side. job the day forecast Psencik just we at the precincts Let's hedging as the day as said, look

of that, hedged exposures So we've you and out over XX% tried our get really as see, 'XX. could through we've to ahead of total got

you it's that going XXXX, the actually with to think that hit can't, to what's just we're in I exactly be So precision, tell going exact date milestone.

Operator

Our Scotiabank. Richardson next question Tristan from from is

Tristan Richardson

happen to then a at that bit you your PHP $X achieve the like it some of additional -- maybe that a about? target talk today to can slides, you billion, your been you've And about Just target? EBITDA asset looking New need in little talking is things or the processing presume Mexico? that with infrastructure have plan And on Delaware Link of base does

Jamie Welch

Tristan, Short same-store it answer assumes is, sales.

context existing and profile of So asset actually harvest can we footprint it's be to and actually maximize that overall the that you the have footprint. able in flow our taking cash that of what obviously, seeing

incremental doesn't processing that an be involve above train. So it obviously would That target. just over and

$XXX sort to million, mean I where sort we is context out the XXXX, that we've million see are think But got obviously, in about million, it this the want And realize there of in for sort things. is I consensus some $XXX of there is of that we at we $XXX the EBITDA. there of as think, or target

I the have think Matt done and great job. operations team a

there said, great are we I really targets. good There's prospect As can achieve fundamentals solid commercial -- job. doing a our the teams that with a some

our we it. goal. that's about So And that's think how

doesn't it So necessarily involve anything further.

Tristan Richardson

standpoint And you be some that are large there contracting it. discussions New noted -- you're bit Mexico. Maybe in with into Mexico? had, what of Eddy early can You new just Appreciate little the and from just or maybe still then seeing a packages the talk up buttoned being environment maybe landscape there's just Lea about the potential relationships. to

Jamie Welch

do Tyler, Chris, you on to in. jump guys Sure. want

Chris Kendrick

Yes, question. the for Thanks Tristan, Chris this Kendrick. is

let chime -- in. then and Tyler So I'll

So constraints. reason opportunity growth with got of us circa there XX-inch ago. reminds in there there and surprisingly. New We've are It see X Texas. the growth a we Rig customers. what up Texas seeing some out see it There's line first lot there, X existing the up and of the we Mexico the both still filling or of kind And as successful in some count a Delaware years we're new place, great opportunity. exceeds been

opportunities. side? to growth, about we'll And feel add your anything optimistic the those on so continue continued Tyler, we pursue to and

Tyler Milam

with for on even announced are The the where their evidenced well. success. and are isn't Yes, Tyler. just need kind being pipeline quarter add is in we those. through -- we to additional the service putting execute seeing is I'd and as for customers of this yet, only mouth some in the thing their this We what Tristan, thanks question Yes, is able

area excited the We're sure. about for tuned. stay So

Operator

Our next Stanley Research. question from Wolfe is Keith from

Keith Stanley

the you When the DRIP quick a or just DRIP you'd you the for follow-up. minimum turn the the say level First, go to what of QX sale, to remind and minimum is? Can off level us QX. look GCX just

Jamie Welch

XX% Keith.

Keith Stanley

pipeline that XX% Okay. sense you way follow-up on Mexico. or And from much volume at second contracted or of you've incremental give then disclosure think there year line sense and a the a can any any on either how you any New through way this coming system expect how XXXX? Mexico on volume then much rough point? a on Or on New that Is to next about

Jamie Welch

question. good Really

we million a this it we've to think might about just given disclosures. talked our you not me $XX in talked was our Keith, recall, -- I like Xx how -- within if to We've up Let million, do -- interactions, have about $XX build. about, think some of less previous Xx than that and

So was that gave original you that the underwrite. a sense

has it one better. MVC obviously anchor. that of the is size obviously, about And got we new The of that XX% now the have the with underpinned

better that still because we our and about was standpoint, how do guys get so disclosure get know sure make the we we understand sense that's that effectively. we're -- think our can And that excited -- there decent want communicate to So it's that that to it. We'll from it expansion. pretty out a I critical but you anchor a to about size

Operator

Tonet Jeremy from is question next from JPMorgan. The

Jeremy Tonet

there. how I The Is to thinking sure Just growth we just the $XXX slight XXXX wanted for December it you consensus and as in be over come over sense? Or referenced just about trajectory want stairsteps should makes that? to run there of million I I understood $XXX there. Street $XXX rate talked the like million million And kind that then consensus make correctly guess, into wanted I there's million, EBITDA Street back, about to XXXX, $XXX think here. see 'XX. you've to outlook And Again, for

Jamie Welch

consensus to suppose, to consensus, say over And think, I the let's yes, easiest trouble -- Well, us. way is, I start it million, doesn't think right? it's it's $XXX So and with $XXX that. million, what million over $XXX the we where well have said is I is just then I well referenced

Trevor Howard

Jeremy, just to in there cadence. with jumping respect then, And

-- XQ the we run to pretty where a XXXX, you we trough as about XXXX, I'd get then had unlike it's we to from flattish cadence, quarter say Regarding there. saw we it's that quarter, and stairstep time where was fourth rate. think By

curves puts there whatnot, the and takes when so and you what And where quarter-over-quarter it's but at in by and large, you price not say, are sequentially. I'd stairstep look some commodity we the XXXX, had saw like

Jeremy Tonet

those start to expire? Got here. third-party and the that when for it. That's your and just some the you helpful. to And frac turn And second discuss other -- commitments would pipeline NGL then expire, to a build to wanted you once And look could if to business value of larger some long own seek of might position? ways NGL your or for of they maximize frac

Jamie Welch

sure. Yes,

shorter-term They on Bend. are side let's plant have, and say, we in They NGL Lone East Star. XXXX. Toya arrangements dedications the So for off with roll for Pecos

frame, think, the into Targa, contract they're XXXXs. And out we the a longer-dated sort I Shin similar I think time it it's about that on Oak. have to for relates a of early As relationship enterprise

off then makes and work we'll the about term, Anne But it's what keyed sort end obviously the to the thing is the how producers that of And -- attractiveness off several we'll then will Star customers. of our netback our because roll sense. for on work me out for the so do near of clear that what to play in at years be will it's all the in to to value next of our the day, the Lone maximize business for out. sort only think

a -- will investment We wait Shin as both I worry on is we now. about as not comfortable to are on We've and what plate we've that makes Oak. that or through as what capacity exactly further Oak from an it happen what for now point. standpoint, got got forward. far enough our on going got As -- NGL we Obviously, Shin opportunities, far with enough our we viewpoint can think look, at get that on is, we've updates later moving

it's I outcomes. If attractive to then plan So about particularly comes for compelling, happens, we'll see think are open see now, We'll what into at base built way. we our But think our what it's it. and not all.

Operator

have question questions We on no further queue. the

Thank So will all conclude joining. today's we now you conference. for

your of disconnect lines, rest your now the enjoy day. may You and

Kinetik (KNTK) 8 Aug 232023 Q2 Earnings call transcript