- Generated first quarter net income of $35.4 million,
representing a 724% increase year-over-year, and Adjusted EBITDA1
of $233.6 million, representing a 25% increase year-over-year
- Achieved quarterly gas processed volumes of 1.53 Bcf/d, up 13%
year-over-year and down less than 1% sequentially from impacts of
planned maintenance, winter weather, and lower Alpine High volumes
due to natural gas prices at Waha hub
- Completed Kinetik’s system-wide front-end amine treating
projects, allowing Kinetik to handle natural gas containing
elevated levels of carbon dioxide (“CO2”), hydrogen sulfide,
and other impurities
- Entered into a long-term agreement with Infinium to partially
dedicate the sale of CO2 produced at one of its processing
complexes to be reused for the production of ultra-low carbon
electrofuels at Infinium’s Project Roadrunner
Kinetik Holdings Inc. (NYSE: KNTK) (“Kinetik” or the
“Company”) today reported financial results for the quarter
ended March 31, 2024.
First Quarter 2024 Results and
Commentary
For the three months ended March 31, 2024, Kinetik processed
natural gas volumes of 1.53 Bcf/d and reported net income of $35.4
million.
Kinetik generated Adjusted EBITDA1 of $233.6 million,
Distributable Cash Flow1 of $154.5 million, and Free Cash Flow1 of
$107.5 million for the three months ended March 31, 2024.
“Kinetik has had a strong start to 2024,” said Jamie Welch,
Kinetik’s President & Chief Executive Officer. “In particular,
our first quarter results exceeded our internal forecast used to
set our full year guidance in February. Adjusted EBITDA1 increased
25% year-over-year reflecting underlying volume growth and
contributions from the New Mexico Expansion, Permian Highway
Pipeline Expansion, and Delaware Link. With all three of our 2023
major growth capital projects completed and in-service, we can
offer producers an integrated wellhead-to-Gulf Coast solution that
provides them with reliability and access to premium pricing
markets and generates enhanced marketing opportunities for Kinetik,
especially in the current commodity price environment where Waha
gas daily prices averaged negative $0.72 per MMBtu for the months
of March and April. Many of our customers benefited significantly
by having their March and April natural gas volumes sold at Gulf
Coast pricing.”
“Kinetik has one of the best operational run times in the
Permian Basin, and we continue to invest in our assets to maintain
this reliability and enhance our efficiencies. The operations team
did a great job in the quarter completing the planned molecular
sieve bed change outs at several processing facilities, minimizing
the amount of downtime required while maintaining flow assurance to
our customers. In April, we completed our system-wide amine
treating project with the installation at Pecos Bend. With these
treating capabilities, we can now offer enhanced blending and
treating services to our customers which enables us to accept a
broader range of gas quality, resulting in increased revenue.”
“We remain focused on generating value for shareholders. In the
first quarter, we facilitated a secondary offering for Apache’s
remaining ownership stake in Kinetik. That transaction
substantially increased the public float to almost $1.5 billion and
our average daily trading volume has increased significantly since
the transaction closed. We were pleased to see such high investor
demand and interest in the Kinetik story.”
Financial
- Achieved quarterly net income of $35.4 million and Adjusted
EBITDA1 of $233.6 million.
- Executed agreement for a $150 million accounts receivable
securitization facility which matures April 2025 with an ongoing
renewal mechanism. The net proceeds were used to repay a portion of
the outstanding borrowings under Kinetik’s existing Term Loan
Credit Facility, and the maturity date of the Term Loan credit
facility was extended to December 2026.
- Declared a cash dividend of $0.75 per share for the quarter
ended March 31, 2024, or $3.00 per share on an annualized basis.
This is the first quarter in which all shareholders are eligible to
receive a cash dividend following the completion of the core
shareholder dividend reinvestment obligation.
- Exited the quarter with a Leverage Ratio1,2 per the Company’s
Revolving Credit Agreement of 3.8x and a Net Debt to Adjusted
EBITDA1,3 Ratio of 4.0x.
- Kinetik’s remaining 2024 commodity exposure is less than 5% of
gross profit and continues to be actively reduced with the
Company’s systematic hedging program.
Selected Key Metrics:
Three Months Ended March
31,
2024
(In thousands, except
ratios)
Net income including noncontrolling
interest4
$
35,407
Adjusted EBITDA1
$
233,559
Distributable Cash Flow1
$
154,526
Dividend Coverage Ratio1,5
1.3x
Capital Expenditures6
$
60,772
Free Cash Flow1
$
107,511
Leverage Ratio1,2
3.8x
Net Debt to Adjusted EBITDA Ratio1,3
4.0x
Common stock issued and outstanding7
153,655
March 31, 2024
December 31, 2023
(In thousands)
Net Debt1,8
$
3,537,244
$
3,589,490
Operational
- Placed in-service front-end amine treating at Pecos Bend in
April, completing Kinetik’s system-wide treating projects and
further expanding the Company’s service offerings to include gas
blending and treating.
- Placed in-service Kinetik’s gathering system expansion into Lea
County, New Mexico on January 18, 2024 followed by commercial
in-service of the original underwriting gathering and processing
agreement on April 1, 2024.
- Completed maintenance projects at several processing facilities
enhancing system operational efficiencies and recoveries.
Governance and
Sustainability
- Entered into a long-term agreement with Infinium for the sale
of CO2 captured at one of Kinetik’s processing complexes for use as
a feedstock in the production of ultra-low carbon electrofuels at
Infinium’s announced Project Roadrunner. The project creates
another revenue stream from Kinetik’s CO2 treating infrastructure,
without any capital burden or operating expense exposure to
Kinetik. This unique agreement supports Kinetik’s broader
decarbonization efforts.
- In 2023, Kinetik reduced Scope 1 and Scope 2 greenhouse gas and
Scope 1 and Scope 2 methane emissions intensities by 12% and 34%,
respectively, as compared to its 2021 baseline. This has resulted
in the early satisfaction of its 2030 methane emissions intensity
reduction target of 30% pursuant to its Sustainability-Linked
Financing Framework.
- Appointed Bill Ordemann, a retired senior executive from
Enterprise Products, to Kinetik’s Board of Directors, replacing Ben
Rogers following Mr. Rogers’ resignation in connection with
Apache’s exit from its shareholding position.
Upcoming Tour Dates
Kinetik plans to participate at the following upcoming
conferences and events:
- Citi Energy & Climate Technology Conference in Boston on
May 14th - 15th
- 20th Annual Energy Infrastructure CEO & Investor Conference
in Miami on May 22nd - 23rd
- RBC Capital Markets Global Energy, Power & Infrastructure
Conference in New York on June 4th
- Wolfe Research Small and Mid-Cap Conference in New York on June
5th
- JP Morgan Energy, Power & Renewables Conference in New York
on June 17th - June 18th
Investor Presentation
An updated investor presentation will be available under Events
and Presentations in the Investors section of the Company’s website
at www.ir.kinetik.com.
Conference Call and
Webcast
Kinetik will host its first quarter 2024 results conference call
on Thursday, May 9, 2024 at 8:00 am Central Daylight Time (9:00 am
Eastern Daylight Time) to discuss first quarter results. To access
a live webcast of the conference call, please visit the Investors
section of Kinetik’s website at www.ir.kinetik.com. A replay of the
conference call also will be available on the website following the
call.
About Kinetik Holdings
Inc.
Kinetik is a fully integrated, pure-play, Permian-to-Gulf Coast
midstream C-corporation operating in the Delaware Basin. Kinetik is
headquartered in Midland, Texas and has a significant presence in
Houston, Texas. Kinetik provides comprehensive gathering,
transportation, compression, processing and treating services for
companies that produce natural gas, natural gas liquids, crude oil
and water. Kinetik posts announcements, operational updates,
investor information and press releases on its website,
www.kinetik.com.
- A non-GAAP financial measure. See “Non-GAAP Financial Measures”
and “Reconciliation of GAAP to Non-GAAP Measures” for further
details.
- Leverage Ratio is total debt less cash and cash equivalents
divided by last twelve months Adjusted EBITDA, calculated in the
Company’s credit agreement. The calculation includes Qualified
Project and Acquisition EBITDA Adjustments that pertain to the
funding of the Permian Highway Pipeline expansion project, Delaware
Link project, first quarter 2023 midstream infrastructure asset
acquisition, and other qualified growth capital projects at the
Midstream Logistics segment.
- Net Debt to Adjusted EBITDA Ratio is defined as Net Debt
divided by last twelve months Adjusted EBITDA.
- Net income including noncontrolling interest for the three
months ended March 31, 2023 was $4.3 million.
- Dividend Coverage Ratio is Distributable Cash Flow divided by
total declared dividends.
- Net of contributions in aid of construction and returns of
invested capital from unconsolidated affiliates.
- Issued and outstanding shares of 153,655,275 is the sum of
59,712,487 shares of Class A common stock and 93,942,788 shares of
Class C common stock as of March 31, 2024.
- Net Debt is defined as total long-term debt, excluding deferred
financing costs, less cash and cash equivalents.
Forward-looking
statements
This news release includes certain statements that may
constitute “forward-looking statements” for purposes of the federal
securities laws. Forward-looking statements include, but are not
limited to, statements that refer to projections, forecasts or
other characterizations of future events or circumstances,
including any underlying assumptions. The words “anticipate,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intends,”
“may,” “might,” “plan,” “seeks,” “possible,” “potential,”
“predict,” “project,” “prospects,” “guidance,” “outlook,” “should,”
“would,” “will,” and similar expressions may identify
forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking. These statements
include, but are not limited to, statements about the Company’s
future business strategy and other plans, expectations, and
objectives for the Company’s operations, including statements about
strategy, synergies, sustainability goals and initiatives,
portfolio monetization opportunities, expansion projects and future
operations, and financial guidance; the Company’s projected
dividend amounts and the timing thereof; and the Company’s leverage
and financial profile. While forward-looking statements are based
on assumptions and analyses made by us that we believe to be
reasonable under the circumstances, whether actual results and
developments will meet our expectations and predictions depend on a
number of risks and uncertainties which could cause our actual
results, performance, and financial condition to differ materially
from our expectations. See Part I, Item 1A. Risk Factors in our
Annual Report on Form 10-K for the year ended December 31, 2023.
Any forward-looking statement made by us in this news release
speaks only as of the date on which it is made. Factors or events
that could cause our actual results to differ may emerge from time
to time, and it is not possible for us to predict all of them. We
undertake no obligation to publicly update any forward-looking
statement whether as a result of new information, future
development, or otherwise, except as may be required by law.
Additional information
Additional information follows, including a reconciliation of
Adjusted EBITDA, Distributable Cash Flow, Free Cash Flow, and Net
Debt (non-GAAP financial measures) to the GAAP measures.
Non-GAAP financial
measures
Kinetik’s financial information includes information prepared in
conformity with generally accepted accounting principles (GAAP) as
well as non-GAAP financial information. It is management’s intent
to provide non-GAAP financial information to enhance understanding
of our consolidated financial information as prepared in accordance
with GAAP. Adjusted EBITDA, Distributable Cash Flow, Free Cash
Flow, Dividend Coverage Ratio, Net Debt and Leverage Ratio are
non-GAAP measures. This non-GAAP information should be considered
by the reader in addition to, but not instead of, the financial
statements prepared in accordance with GAAP and reconciliations
from these results should be carefully evaluated. See
“Reconciliation of GAAP to Non-GAAP Measures” elsewhere in this
news release.
KINETIK HOLDINGS INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Ended
March 31,
2024
2023
(In thousands, except per
share data)
Operating revenues:
Service revenue
$
102,195
$
103,425
Product revenue
236,567
173,824
Other revenue
2,632
3,791
Total operating revenues
341,394
281,040
Operating costs and expenses:
Costs of sales (exclusive of depreciation
and amortization shown separately below) (1)
153,687
115,877
Operating expenses
43,406
35,973
Ad valorem taxes
6,292
5,458
General and administrative expenses
34,136
27,511
Depreciation and amortization expenses
73,606
68,854
Loss on disposal of assets
4,166
102
Total operating costs and expenses
315,293
253,775
Operating income
26,101
27,265
Other income (expense):
Interest and other income
91
294
Interest expense
(47,467
)
(69,308
)
Equity in earnings of unconsolidated
affiliates
60,469
46,464
Total other income (expense), net
13,093
(22,550
)
Income before income taxes
39,194
4,715
Income tax expense
3,787
416
Net income including noncontrolling
interest
35,407
4,299
Net income attributable to Common Unit
limited partners
23,857
2,863
Net income attributable to Class A Common
Stock Shareholders
$
11,550
$
1,436
Net income attributable to Class A Common
Shareholders, per share
Basic
$
0.12
$
(0.06
)
Diluted
$
0.12
$
(0.06
)
Weighted-average shares(2)
Basic
57,869
47,612
Diluted
58,392
47,825
(1) Cost of sales (exclusive of
depreciation and amortization) is net of gas service revenues
totaling $44.5 million and $30.5 million for the three months ended
March 31, 2024 and 2023, respectively, for certain volumes where we
act as principal.
(2) Weighted average Class A common shares
have been retrospectively restated due to bonus effect of Class A
common shares issued under the Reinvestment Agreement for all
periods presented in which the Class A common shares were
outstanding.
KINETIK HOLDINGS INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
Three Months Ended
March 31,
2024
2023
(In thousands)
Net Income Including Noncontrolling
Interest to Adjusted EBITDA
Net income including noncontrolling
interest (GAAP)
$
35,407
$
4,299
Add back:
Interest expense
47,467
69,308
Income tax expense
3,787
416
Depreciation and amortization
73,606
68,854
Amortization of contract costs
1,655
1,655
Proportionate EBITDA from unconsolidated
affiliates
88,402
71,867
Share-based compensation
22,561
17,540
Loss on disposal of assets
4,166
102
Hedging activities loss (gain)
15,088
(4,987
)
Integration costs
41
925
Acquisition transaction costs
—
268
Other one-time costs or amortization
2,425
3,748
Deduct:
Interest income
577
—
Warrant valuation adjustment
—
44
Equity income from unconsolidated
affiliates
60,469
46,464
Adjusted EBITDA(1) (non-GAAP)
$
233,559
$
187,487
Distributable Cash Flow(2)
Adjusted EBITDA (non-GAAP)
$
233,559
$
187,487
Proportionate EBITDA from unconsolidated
affiliates
(88,402
)
(71,867
)
Returns on invested capital from
unconsolidated affiliates
77,213
67,764
Interest expense
(47,467
)
(69,308
)
Unrealized (gain) loss on interest rate
derivatives
(9,377
)
17,189
Maintenance capital expenditures
(11,000
)
(4,560
)
Distributable cash flow
(non-GAAP)
$
154,526
$
126,705
Free Cash Flow(3)
Distributable cash flow (non-GAAP)
$
154,526
$
126,705
Cash interest adjustment
(251
)
15,374
Realized gain on interest rate swaps
3,952
—
Growth capital expenditures
(48,253
)
(64,057
)
Capitalized interest
(944
)
—
Investments in unconsolidated
affiliates
(3,273
)
(58,658
)
Returns of invested capital from
unconsolidated affiliates
1,240
5,793
Contributions in aid of construction
514
669
Free cash flow (non-GAAP)
$
107,511
$
25,826
KINETIK HOLDINGS INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES (CONTINUED)
Three Months Ended
March 31,
2024
2023
(In thousands)
Reconciliation of net cash provided by
operating activities to Adjusted EBITDA
Net cash provided by operating
activities
$
153,705
$
119,591
Net changes in operating assets and
liabilities
11,504
8,743
Interest expense
47,467
69,308
Amortization of deferred financing
costs
(1,699
)
(1,521
)
Current income tax expense
127
53
Returns on invested capital from
unconsolidated affiliates
(77,213
)
(67,764
)
Proportionate EBITDA from unconsolidated
affiliates
88,402
71,867
Derivative fair value adjustment and
settlement
(5,711
)
(12,744
)
Hedging activities loss (gain)
15,088
(4,987
)
Interest income
(577
)
—
Integration costs
41
925
Transaction costs
—
268
Other one-time cost or amortization
2,425
3,748
Adjusted EBITDA(1) (non-GAAP)
$
233,559
$
187,487
Distributable Cash Flow(2)
Adjusted EBITDA (non-GAAP)
$
233,559
$
187,487
Proportionate EBITDA from unconsolidated
affiliates
(88,402
)
(71,867
)
Returns on invested capital from
unconsolidated affiliates
77,213
67,764
Interest expense
(47,467
)
(69,308
)
Unrealized (gain) loss on interest rate
derivatives
(9,377
)
17,189
Maintenance capital expenditures
(11,000
)
(4,560
)
Distributable cash flow
(non-GAAP)
$
154,526
$
126,705
Free Cash Flow(3)
Distributable cash flow (non-GAAP)
$
154,526
$
126,705
Cash interest adjustment
(251
)
15,374
Realized gain on interest rate swaps
3,952
—
Growth capital expenditures
(48,253
)
(64,057
)
Capitalized interest
(944
)
—
Investments in unconsolidated
affiliates
(3,273
)
(58,658
)
Returns of invested capital from
unconsolidated affiliates
1,240
5,793
Contributions in aid of construction
514
669
Free cash flow (non-GAAP)
$
107,511
$
25,826
KINETIK HOLDINGS INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES (CONTINUED)
March 31,
December 31,
2024
2023
(In thousands)
Net Debt(4)
Long-term debt, net
$
3,517,115
$
3,562,809
Plus: Debt issuance costs, net
29,885
31,191
Total long-term debt
3,547,000
3,594,000
Less: Cash and cash equivalents
9,756
4,510
Net debt (non-GAAP)
$
3,537,244
$
3,589,490
(1) Adjusted EBITDA is defined as net
income including non-controlling interests adjusted for interest,
taxes, depreciation and amortization, impairment charges, asset
write-offs, the proportionate EBITDA from unconsolidated
affiliates, equity in earnings from unconsolidated affiliates,
share-based compensation expense, non-cash increases and decreases
related to trading and hedging agreements, extraordinary losses and
unusual or non-recurring charges. Adjusted EBITDA provides a basis
for comparison of our business operations between current, past and
future periods by excluding items that we do not believe are
indicative of our core operating performance. Adjusted EBITDA
should not be considered as an alternative to the GAAP measure of
net income including non-controlling interests or any other measure
of financial performance presented in accordance with GAAP.
(2) Distributable Cash Flow is defined as
Adjusted EBITDA, adjusted for the proportionate EBITDA from
unconsolidated affiliates, returns on invested capital from
unconsolidated affiliates, interest expense, net of amounts
capitalized, unrealized gains or losses on interest rate
derivatives and maintenance capital expenditures. Distributable
Cash Flow should not be considered as an alternative to the GAAP
measure of net income including non-controlling interests or any
other measure of financial performance presented in accordance with
GAAP. We believe that Distributable Cash Flow is a useful measure
to compare cash generation performance from period to period and to
compare the cash generation performance for specific periods to the
amount of cash dividends we make.
(3) Free Cash Flow is defined as
Distributable Cash Flow adjusted for growth capital expenditures,
investments in unconsolidated affiliates, returns of invested
capital from unconsolidated affiliates, cash interest, capitalized
interest, realized gains or losses on interest rate derivatives and
contributions in aid of construction. Free Cash flow should not be
considered as an alternative to the GAAP measure of net income
including non-controlling interests or any other measure of
financial performance presented in accordance with GAAP. We believe
that Free Cash Flow is a useful performance measure to compare cash
generation performance from period to period and to compare the
cash generation performance for specific periods to the amount of
cash dividends that we make.
(4) Net Debt is defined as total long-term
debt, excluding deferred financing costs, less cash and cash
equivalents. Net Debt illustrates our total debt position less cash
on hand that could be utilized to pay down debt at the balance
sheet date. Net Debt should not be considered as an alternative to
the GAAP measure of total long-term debt, or any other measure of
financial performance presented in accordance with GAAP.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240508708012/en/
Kinetik Investors: (713) 487-4832 Maddie Wagner (713) 574-4743
Alex Durkee Website: www.kinetik.com
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