KNTK - Earnings call 3 2023 | Kinetik Holdings Inc.

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Operator

Good morning, everyone, and welcome to the Kinetik Third Quarter 2023 Results Call. My name is Carla, and I will be your operator for today's call. [Operator Instructions] I will now hand the call over to your host, Maddie Wagner, Head of Investor Relations, to begin. Maddie, please go ahead when you're ready.

Maddie Wagner

Thank you. to Quarter welcome Call. Earnings and morning, Kinetik's XXXX Third Conference Good

Financial our with and our our as Strategy as Chief President The is Chief and Trevor Officer; Matt at Carpenter, Executive slide call our we Here Officer; our Chief our Welch; Accounting Chief SVP and me Milam Anne Steve Commercial; Operating and Chief our Tyler release Officer; to access Officer, Administrative Jamie General Howard, Todd Counsel; Officer; Stellato, Wall, and Psencik, are press Crude, presentation Chris New Water, the Kendrick, issued today's Ventures. The our yesterday. www.kinetik.com. SVP of for Energy of webcast well available

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

Jamie Welch

year-over-year. Good and processing reported approximately you billion thank gas growth back. everyone, feet X.XX for call morning, achieved welcome quarter third day, our we cubic and XXXX today. of representing our Maddie, Yesterday, you, results. XX% Thank volumes per average joining We

feet capacity. Interestingly, our this faced despite achieved X.XX processed and feet the average our that volumes quarter, or exceeded day billion door billion volumes for We we on Adjusted with past in the meet this unscheduled is cubic basin year-end. our forecast with exit records hot processed on to continue rate by operational each knocking quarter-over-quarter, with X% guidance. for takeaway over to now We are successive disruptions cubic street new increased summer some past we of per expectations. unfortunately, that and weather exceed company per and quarter, the target industry difficulties set day, September X.X remain consistently to EBITDA line in month which track of

to service midstream growth expect year, of logistics ahead the Looking the the the Link expect Pipeline we on Delaware on the adjusted remainder expansion and our X, Transportation Within at October quarter X. we PHP commercial sequential start-up December segment, in our segment. commenced EBITDA fourth in of

adjusted million. XXXX $XXX EBITDA implies midpoint range guidance to a the $XXX over our updating quarter million. guidance million rate are EBITDA $XXX this of to annualized We revised fourth exit At range, the

at the of to The forecast range expenditures our $XXX news program. In passed EBITDA with adjusted cash capital flow free meaningful anticipate coupled of growth, past year-over-year and peak a top that million. we XXXX, million. the significant have this was quarter capital is in we is Our capital $XXX than $XXX increase end less from XXXX our current XXXX expenditures million cash of of free good positive, flow growth

well across access on our will September, agreements offering Lea good the expected have construction The XXXX. Once which customers of Coast with and see of projects in growth along complete approval represents and to by Land of of gathering progress egress have XXXX Management serve a service supported the projects. remains the by Link, expansion, early our a County. flow highly line on Coast. Processing our Delaware pricing stable company's County, per as multiyear the expansion gas useful with our remains Construction gas New in see day wholly We line volume quarter, downstream to Mexico, significant ahead in-basin on Texas XXXX, infrastructure. and In on with with chain progress which offer which XX growing to constraints in cubic we being commitments all as future the who value the markets. Construction within annual began largely of made opportunity permits into state be Kinetik very the program. for competitive biggest made the or will today, received the to in in-service the projects right-of-way of schedule great billion for Gulf service, Mexico. processing solution growth capacity in New flowing to majority-owned Bureau organic We late is capital X the Permian a Mexico. premium and assurance such, X% rate we the tight, inclusive we State value natural portion as minimum production able feet from New in as first Lea treating Gulf a owned is Delaware are challenges the in customers continued and

commercial in and customers, processing Mexico Our potential Texas. is a number both New existing new actively of team and and with gathering pursuing opportunities

as We develop. provide commercial in expect updates to the these near future opportunities

their glad over also Permian. a us. bullish stance potential expansion are past now the of agree Enterprise We Oak with is that towards Products uncertainty We Shin on the

said we me have before. repeat let However, what

growth. arrangements flexible that our adequate comfortable Shin They Oak. we and have are with the lease are We continued for capacity on

We Pipeline compelling reason additional NGL Transportation our significant in segment. see no for investment

to our a On in process through stake. have continued at remain We the topic of GCX, such confident time, additional the report we'll conclusion of and monetizing positive work we details.

regarding hand fourth I year of vision plan expanding the Delaware company. Trevor. footprint XXXX to in gathering XXXX The growth our long-term of in like our sharing would Basin. plans forward completion with is that, look and more We to accelerate February. shareholder guidance full issuing capital call our financial strategic year important our now earnings over to underscores to our the And with our an returns for pending quarter

Trevor Howard

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

gross increase generated margin segment and strong resulted results, improvement segment growth prices, realized This elevated sequentially. modest in quarter flat sequential second attributed volumes processed of Logistics commodity our gas an hedge quarter, million gas X% Despite Looking $XXX adjusted to EBITDA Midstream sequential our gains the margins largely in up a was X%. basis. in an in on in of the fee-based a at

the Regarding recognized incurred quarter. earnings. total in that half the in in repeatable revenue a our the driven continued positive logistics representing quarter, slightly the quarter expectations adjustment year-over-year, prior we third OpEx XX% our first OpEx by trajectory was fee-based of growth, for highly period higher growth was growing than actually sustainable attractive XXXX internal Midstream in of third

new and us, we Pipeline We unit quarter behind segment, a in focused as approximately XX% an line date, growth second are to per to in return and we and are adjusted margins largely linked commodity lower up on at XXXX year. Shifting profit service. the Kinetik's million, to Crude decrease total percentage beyond. To XXXX derisking at costs exposure our with this in the profit to as placed of Epic expect in of commitments, XXXX realized fourth generated PHP, to X% exposure, more our costs Sequential that linked gross we extra EBITDA the volume gross quarter-over-quarter. carry gross commodity of in minimum growth projects, we X% Transportation expect within $XX lower quarter. higher by day XXXX With segment our the quarter profit driven are an was which have primarily hedged of

at million, million. to million For continues capital for Total track Pipeline Midstream the the million $XX the quarter, were $XXX and quarter distributable was expenditures to CapEx we was of of midpoint cash $XXX of Midstream range an segment our flow towards adjusted generated the Logistics segment. $XXX the logistics million Transportation million. $XXX $XX within

year. Switching with is that at were disclosed project Delaware the range above segments, CapEx driven increases below under to completed we budgeted $XXX cost by PHP previously million, tracking to budget, disciplined estimates together our control pipeline Taken CapEx translation related million earlier guidance $XXX where is cost Link, year. tracking XX% of operating approximately this the this

flow mentioned, $XX third As cash quarter Jamie free million. was

point free forward flow, for inflection is XXXX fourth carried an XXXX. cash the quarter marked quarter into which third of and then The into

issuance Apache and Kinetik the declared million, Blackstone, of I on have November $X.X XX. management's XXX%. Year-to-date, we quarterly DRIP. related sheet. Directors On paid balance November made exited at line quarter $XX like leaving authorized level the offset ratio. third a we be leverage capacity the quarter open applicable the remaining shares XXX,XXX $X.XX share dividends to Squared, the to With of dividend I Board share Xx reinvestment to would Kinetik's to to repurchased per X, a repurchase the for Turning of for decision Q&A. with for opportunistic maintain million to that, approximately

Operator

Michael Blum from our [Operator Instructions] will Wells now We first question take from Fargo.

Michael Blum

anything -- I you GCX? ask it And on that this I terms timing? feels Where any like on stand? question, Maybe made can in to say the updates of so So does need progress being will.

Jamie Welch

So we value a that because the Michael, the their to that -- able have transaction, our tip from the as be in tongue well. given phone be to expansion. questions probably full asking prognosis nothing is everyone there for you which vantage and stake I a GCX Look, of you're the announce applauding for better, on it's represents fair creates think on the the we point, would think

conclusion. we will that We are confident positive have a

repeatedly. have We wrong got timing

would something that tongue just think the to bite happen, line. disappoint. that something having is I And actively But am our promising finish when to to as X vantage point, we're has as I track. So trying it get across my far from

everyone's grow is the they're beyond is be prospects the in the doing, to for business. context And to organization. shoring far XXXX and time up literally doing The then everything the else, of monopolizing which not and it's continuing supposed as within obviously of rest the what as organization

can the to to all you as unfortunately, you -- soon all So we've something will this got I at be as will point, know really communicate. say that's be but first

Michael Blum

you're that Very for that. you're -- I appreciate giving then know I rate EBITDA 'XX QX you'll run for did million guidance, note be well. you not $XXX but the And at.

any is to should just second, So a, takes about think seasonality And just we into there and wondering, as 'XX? puts we any high-level move that?

Jamie Welch

this you And like, because Michael, of the our the company you are at that point stock, it's -- has on press follow that that said, for $XXX XXXX that the that would a rate the -- raised nuance be as in as million the end those and -- to glad, other we that release. brethren of investors now very had changed. point, research well and exit I'm a in your such excess

with up the only have do service. We have Delaware will PHP give October, really of $XXX in are EBITDA quarter the in is excess saying nuance that of likely Link fourth million. The but by service it PHP. in month steps you We times in we X X started

And so November obviously modest it's is concerned, online. change a relatively far as and function but expansion has once as the October, moderate step comes

as think consensus. We concerns strength. the So aware there, don't consensus people well I when -- is think look have from said where to are far at have we we is. XXXX, strength I to we that any of going have We as where think business as

at look Just our volumes.

I time you I've some we for September. for in back the exit we we think full the and February. X.X gave the month now X.XX of -- remarks, had prepared that right And our as a assumption is right door said of knocking day, now at which on Bcf in have rate been

commodity variances be and according And And world the given see seems geopolitics in. prices everything and live to so of to going the the vagaries plan. we we

So the business of remain that incredibly robust. the fundamentals think I

Operator

We from Tristan question Richardson Scotia Bank. will take our now next from

Tristan Richardson

considering plant. door then year, and the talked added this about year thinking online of organic the knocking the in customers thinking 'XX just I the about additional on know the with mentioned you past in about your growth coming projects. volumes X.X you've Jamie, you've throughout early an

to $X in curious what we of being look that point start made, we particularly just at about step decision see down scarce. get capacity see billion in a your significant as 'XX, Just CapEx you as

Jamie Welch

you like I'm it's summer great a feel of answer giving 'XX. the a movie Look, upcoming sort release. question. tagline of for an is short Tristan, I

We we would the state move been closer sort Northern County think of we to need to makes in that, the of expect very that what's our should train. some New the Mexico, now new and discussion we that saying at basin. Loving real we've FID see. right plant sense and look most consistent towards for our We amount investors in You I around on with particular, think will have given in-depth say, going an of sort the you the probably up decision a future in line. that

And with thing deposit so on that I would likelihood would would with are be we we needs in milestone we we one cryo that to or fit context expectation the think that one and have the phone may -- mindful potential to that very the that's that less, you. the payment think everyone be the and FID-ed we timing. within new have of bucket $XXX say that is appreciate million I that that and And when the say a paid the maybe give a

So I original out $XXX which at been basically think thesis selling in of the capital of really year. flow space. uplift broken to basis show last roots conversion. over context original and million to managing million $XXX the the is of cash this this years want back we're we now of that now the going we've to the the X for merger, this that We've of back on this our And

conversion, So we million, -- open million. we're than space. everyone $XXX for knew lot most is our to to see space relates capital $XXX so we want allocation going XXXX. And start talk cash as that probably the front which targets foot of to a million now is and of $XXX inherited more to and it about less That why on basically objectives flow

Tristan Richardson

you happy Jamie. real on Appreciate -- compelling that under with mean you further mentioned very see -- and today, it, for that over solutions years expansion. look the next in or you in to capacity construction several I invest great. either capacity excess do outpaces arrangements at And lease basin That's as announced potential couple of the production been NGL reason also curious, either then growth? downstream no have your

Jamie Welch

term And I and believe Trevor T&F in view. more And knows we that supply. I at think probably, will transportation -- the that, will how -- my are all rates. have we have house who that think, a looking will That's -- than near I'm capacity going we pressure that's, long Annie. probably to

Operator

We will go ahead. from Neel America. Mitra now from Please take our question next of Bank

Indraneel Mitra

are I are Brandywine, contracts invested the you guys wanted available. couple and various T&F you have that to well touch of takeaway on that in I above a options believe now NGL market.

and to well as about able the the choose of you're how you So off that that? have set you And and can to talk have you options transport that the among up kind lines pick to do your be barrels timing optionality. of to

Jamie Welch

Sure.

the X have So outlets Star, dedications. Neel, Star Oak. Lone that Prix has it and Shin Grand way today, we The works Lone is plant that

literally, Star. time -- many those contract, very So to similar that things were contracts go Lone done that XXXX, volume runs frame. that to plants legacy other XXXX in a through the It's

that one Grand Prix. Apache the which then to of And more you because much And you have customers given Diamond originally the pipeline, one have was specific obviously then obviously that's Oak, to see. Cryo, one outlet, was Shin expected can the -- anchor be of

and contracts the letter picking way of and We have to we the case far have of flow. context a that as choosing. obviously, what following, we contracts the in the the that's intent those not as the and it's volumes So basically of follow

far flexibility, the As off. going forward a we as in years, Star arrangements Lone and few have the rolling

may We do. as about where that that's as what what have we next new -- far our think located have and we we flexibility obviously, plant and as do

of look, So and in and that manage have. I just rights responsibilities the think the contracts of it bundle context we we the

Indraneel Mitra

even next how in question Can specifically frame. Okay. we decade, fact and is Christi you that XXXX as how And you And the just needing the talk with but see on Corpus Just see short expansion? market a Great. that takeaway market the to GCX that about second whether then you that on view gas transaction, the has pipe, have where wanted solution changed? market the going. time

Trevor Howard

and going Bcf about pipeline capacity the today X.X and for LNG area NGL continued announcements Neel. that Rio in then Bcf Cheniere to so see market about export and question, from the growth. the also Yes, with a Christi a market This X.X to Trevor. Thanks We day is Grande day. XX down X Corpus is over expansion with

have Phase have Bs growth Ford But Cheniere's the last we [ a into [ between completed anywhere online that relief then also from includes talking has quarter. lines are X of do complex the expansions ] do come Eagle This B Bcf You plus X. to ] some then expansion no Whistler coming of you're projects those from further a X and proposed for and that at over and a expansions day growth. assumes area

more road and for market grabbing market. that expansions interesting and gas we share the dynamic market see South then a Ship further Texas-Louisiana will see Houston there's short markets along state continued So do and Channel Katy there's the line, structurally that Texas you isolate more being as the down

So market further see the investment. think continued pipeline down push supply corridor we about pulled when on warrant does matched the the in the brownfield with coming we the that do long demand Agua see preferred side. premium Permian, out And that being of expansions greenfield you for the then side term that on or being Dulce,

Operator

JPMorgan. from take Tonet question We will now our from next Jeremy

Jeremy Tonet

you're a could, this February. the and is and of trajectory as volumes able lot Just I what at Just until at been to questions at want kind coming we get has But in to that the asked. appreciate there's materialize not of focus a growth to color just look point to I'm how volumes is see Or guide far more as able flatter off, nature? But less on you're as have I if parsing XXXX in producer -- already XXXX realize a going this XXXX see share of any kind start that visibility and you might your those been trying waiting I forward in materialize EBITDA it might in XXXX, here, into trajectory out in you point. the budgets?

Jamie Welch

Thanks, Jeremy, for the question.

I think, as much is we short producer have. updated be look, and long can as The frequent that we from turn-in-line every pretty every the the get activity month. frequency

it's It all depends. in it's different Sometimes sometimes really shapes It year. sizes. every quarter, and twice a comes

things you of have want stone see they as can before sometimes part that. approval, plans as if then change. far decide typically out, these And we -- need do what and we, therefore, plans, being going these We obviously, to this, in budget. Board oftentimes capital that require take we As gospel the set them we -- to

just good we better to we've and obviously, be we're think have clarity. report, so you absolute then going safe best February be going hard sight on to to to we available And fully in Once today, than probably we you know learned Things where to so make clarity. give boards. it's it's think line company line X prudency sorry like. from for whenever our by approved that we period available based PDP in got change. it November a is the right, pretty XX, have a the all going We what know budgets And oftentimes matter, balance. looks that lesson We on between what's on you've better or XX information I absolute capital that. And of early the decisions stack intervening information. give We turn and

in with base the see importance step-up our we start far just of New So what have we pretty Mexico. decent is all sort you the growth New April trajectory County -- see. X. with business. particular contracts Reeves-Loving Mexico We concerned, to as to continue Of the We see obviously as

be and New will service we we in into quality front-end gas start only the The in as go amine they because because reason mid-January X treating need our Mexico. changes the probably pipeline April is yet

of be and the getting much will to by large, see -- contract said gas, you tied is front-end pretty really when to you've ever before more every So the that continue see we've done opposed anything Basins date as you lots really to look, continue activity. amine to I service got think, everything provider. treating else. But other and

sections. We privates see pop lots continue single of up, to buying

We to of backdrop see the activity this of against a continue price environment. lot commodity

Jeremy Tonet

very a how Got helpful of a backdrop? touch kind to then consolidation of That's wondering role space. whole. And it. seen amidst just going there. you view wanted string I'm We've just industry this the forward the as Kinetik's measures base, across here midstream

Jamie Welch

size publics, the answer Against short at us peers the surround Jeremy, versus the that us. look is larger the of

I we're, whales, a So suppose, so to speak. minnow amongst

there are more which to was from align the On the sun, stars the They're private, can like are we a that the value And or thought the moon sure, bolt-on some on there and privates, proposition, additive. extent companies out it small. a that acquisitions. tuck-in -- private if

are creators. value We

be the multiple think definition, it oftentimes value associated is our resources all I about that's struggle value which acquisitions, -- point. with creation, a we to I transaction, the water/gas like or think Permian done gas we we've context where it's because higher think acquirers going what from a really of we've have by organically done vantage in. In incentive

is, role think, can consolidation's what and I when continue side how -- anyone's and is don't to do on how what have it we subjective how look, side affects to to the speculation. future. going we We just control can upstream and the midstream be both look, obviously the that to happen our we and what in So we us subject do. And we role that subject play to -- look, --

Operator

Our comes Burke Sansiviero next from question Research. Wolf from

Burke Sansiviero

don't GCX are process. In sell about you for First, the QX And the we pipeline, end expect just dividend when the DRIP on with to Should payment? the the thinking XXXX? the would event decision DRIP you still made? be that sale how

Jamie Welch

good Really question.

possible something any make go decision will regardless, about dividend done. to late February dividend to want reinvestment need We a don't make DRIP, to And So could no finished. we the than -- as trying want be longer. It's we of get done. sure unequivocal. payment, XX to yes, might further just as The the I in talk context

of that's quickly overall to -- underlying a phenomenal it. to nothing want is create But did. We proactively we the The try of objectives of allocation the reason to want as it obviously, the GCX it, to nothing because of to priorities. now resolution plenty allocation We've can. flow and foot maybe for obviously of dividend what the didn't about -- as right on get time free to is front to positive -- really thing push a at GCXL we would sell. To little as play conclusion ] interesting we and deployment It's we So and got that's the acceleration is more, forward. The on focus this us, we even of look sell get thinking increase. want business is the the capital by accelerates. cash strength go just context think end the we we be That's [ far look, less. if the an story on also of we deleveraging our and regardless our this really and capital north year, that of the X.Xx next -- as in

Burke Sansiviero

committed uncommitted the helpful. to has flow elect very Shin to that other firm on And that Oak, is to the That's much move today on volume pipelines? in how volumes could pipe just versus

Jamie Welch

Enterprise dedications is know. Oak. leases Oak. mean, is our Shin really Enterprise Shin I full transparency we There know of that full Shin they and Because asked far a think I from they what go picture. -- on on lease. capacity contractual to have has don't flexibility Enterprise insight have, look, don't what is I or as into Oak. as some better plant don't I the have. the Apache capacity question I -- on

Matthew Wall

contracts and then Yes, acre here, are underlying dedications combination volumes leases. capacity of committed Oak on volumes support the I'm Shin plant happy Look, too. in jump the to the that syndications, under a

view quite And the today we pipeline so forward sticky. volumes and is the across going

Operator

next Sachs. comes question Goldman John from MacKay from Our

John Mackay

Just of in kind back volume trajectory the the to go wanted to quarter.

weather issues seen everyone like called better held than think, else, up, You elsewhere. guys but out volumes I we've

sitting we to to Have of have right caught comment wait we of up? see you for in, to in the we're did the X.X kind -- do curious kind can Just Mexico this now? expect push in of that Or kick New kind of activity? on up you Do to completion stepping to keep a April? with you contracts need if close those at kind fully

Jamie Welch

what think I the right. context And in a dealing our to issue our second it with and of said, heat. lot more necessarily it said field obviously, think push the was heat was as don't peers just conditions in of I a we just quarter, the on of I think It it's -- mechanical running was between utilities, given everything down. and multifaceted. service running It's is the equipment, it It impacted just providers. impacted to you're and Anytime producers. the breaking prone degrees consistently when are impacted things to dealing just XXX you're tough XXX with. keep Fahrenheit,

any shifts. changes in line really. We see far of context in didn't as So from the activity, turn as pushing to really a not the right

development concerned. far As as activity is

extended might did have the us have -- in when We workovers. context where period down and have catch-up is changes you the that got you literally, think you have you the bring outage I be may when wells. you have an you for to might an up electrical time, of of some wells some for

and some they PDC acquired make I think to recently to the the design PDC came Chevron, they intent. in, their overarching consistent upgrades -- some them when more wanted pads do with overall of on

to So John. I line. look, The the there. That's bottom we see think, continue growth still is growth, good

intervening you're in at the I to the You the contracts the period. for year. will really continue -- of have and of Mexico with think -- to that in incremental going decent end New quarter when first nice then, growth start growth see And we when next solid obviously between now

John Mackay

I anything is that looking there Maybe all thinking ]? potentially Yes. portfolio That makes sense conversation open docket a back-and-forth. that quick on Is on about in capital just else the the [ the GCX recycling. hand more could a sense. But appreciate ton the broadly, an one. just last make of from

Jamie Welch

we Look, -- -- that they what think assets, anything. of we're at at value for we're us If we always where someone look nothing if not and aware value But and I think our to else, and think working nothing represent we're creates the we look -- we then actively on. it at there's it. think about look that our value somebody to it stakeholders, to greater -- inclined

Operator

further have We no Instructions] registered. [Operator questions

can today's for we your that, with participation. conclude you call. Thank So

disconnect may now lines. You your

Kinetik (KNTK) 9 Nov 232023 Q3 Earnings call transcript