Kinetik Holdings Inc - Ordinary Shares (KNTK) 8 Aug 24 2024 Q2 Earnings call transcript

Kinetik, a leading energy infrastructure company, recently held its second-quarter earnings call, showcasing a remarkable period of growth and strategic expansion. The call, led by President and CEO Jamie Welch, was marked by significant developments, including the acquisition of Durango and the divestiture of GCX, along with updates on operational performance and financial results.

Expansion in New Mexico and the Northern Delaware Basin

Kinetik's strategic move into the Northern Delaware Basin, as announced in May, has proven to be a game-changer. The acquisition of Durango, combined with the expansion of existing operations, has significantly increased the company's footprint in the region. This expansion has been met with a positive response from producers, who are excited about Kinetik's investment in treating and processing infrastructure. This has led to the sanctioning of pre-final investment decision (FID) work for Kings Landing II, which will double the processing capacity at the Kings Landing processing complex. Additionally, the company has initiated work on an acid gas injection well, which will enable an important treating solution for natural gas containing high levels of H2S and CO2 at Kings Landing.

Financial Performance and EBITDA Guidance

Kinetik reported an impressive second-quarter adjusted EBITDA of over $234 million, a 13% increase year-over-year. This growth is attributed to new volumes from the NVC-backed agreements in Lea County and improved commodity margins, as well as contributions from the expansion of PHP and Delaware Link. Despite the impact of price-related gas volume curtailments and only two months of contribution from GCX, the company's financial performance is a testament to its strategic initiatives and operational excellence.

In light of these strong results, Kinetik has revised its 2024 guidance, reflecting the underlying strength of its business and the impact of the Durango and GCX transactions. The company now expects full-year 2024 adjusted EBITDA in the range of $940 million to $980 million, representing a 3% increase at the midpoint and implying over 14% growth year-over-year.

Integration of Durango and Strategic Investments

The integration of Durango's assets and personnel has been seamless, with several process and system improvements already generating value. The company has taken over project management responsibilities for all growth and maintenance capital projects, with construction progressing well on the 200 million cubic feet per day Kings Landing I and the 20-inch pipeline running across the Durango system. Additionally, deferred maintenance projects are underway to elevate operations to Kinetik's safety and environmental standards.

Outlook and Future Growth Opportunities

Looking ahead, Kinetik's focus on strategic investments, operational excellence, and customer relationships positions the company well for future growth. The company's expansion in New Mexico, particularly the Northern Delaware Basin, is expected to yield significant benefits, with plans to increase processing capacity and serve a growing customer base. Kinetik's strategic investments in new projects and acquisitions, such as the Durango acquisition, are expected to enhance the company's position across the entire Delaware Basin.

In conclusion, Kinetik's second-quarter earnings call underscored the company's strategic expansion, operational excellence, and financial strength. With a focus on growth opportunities in the Northern Delaware Basin and strategic investments in infrastructure and customer relationships, Kinetik is poised for continued success in the energy infrastructure sector.