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 negative Waha prices and wellhead curtailments.

• Processed gas volumes reached 1.71 Bcf/d, a 15% increase year-over-year, supported by the Durango acquisition and robust Permian Basin activity.

• Expanded 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 tax credits for CO2 sequestration, with recognition expected in 2025.

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

Financial highlights

• Q3 2024 net income was $83.7 million, Adjusted EBITDA was $265.7 million, distributable cash flow was $184 million, and free cash flow was $165 million, more than tripling year-over-year.

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

• Midstream Logistics segment Adjusted EBITDA rose 24% to $174 million; Pipeline Transportation segment Adjusted EBITDA increased 22% to $96 million.

• Total capital expenditures for the quarter were $59 million; for the nine months ended September 30, 2024, $155.8 million.

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

Outlook and guidance

• Raised full-year 2024 Adjusted EBITDA guidance to $970 million–$1 billion, a 3% increase at the 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, new customer agreements, and continued high-teen percentage growth in processed gas volumes.

• 75% of remaining 2024 expected gross profit hedged; 65% hedged for 2025.

• Management expects existing capital resources to be sufficient for planned capital expenditures and dividends over the next 12 months.