Q1 2025 Kinetik Holdings Inc Earnings Call
Unknown Executive: Welch, President and Chief Executive Officer, and Trevor Howard, Senior Vice President and Chief Financial Officer. Other members of our senior management team are also in attendance for this morning's call.
And Trevor Howard Senior Vice President and Chief Financial Officer.
Thank you. Thank you. Thank you.
Speaker Change: Other members of our senior management team are also in attendance for this morning's call.
Unknown Executive: The press release we issued yesterday, the slide presentation, and access to the webcast for today's call are available at www.kinetic.com.
Speaker Change: The press release we issued yesterday, the slide presentation, and access to the webcast for today's call are available at www.kinetik.com Before we begin, I would like to remind all listeners that our remarks, including the question and answer section, will provide forward-looking statements. An actual result could differ from what is described in these statements. These statements are not guaranteed the future performance and involve a number of risks and assumptions.
Unknown Executive: Before we begin, I would like to remind all listeners that our remarks, including the question and answer section, will provide forward-looking statements. An actual result could differ from what is described in these statements. These statements are not guaranteed to be the future performance and involve a number of risks and assumptions.
Unknown Executive: We may also provide certain performance measures that do not conform to U.S. GAAP. We've provided schedules that reconcile these non-GAAP measures as part of our earnings press release.
Speaker Change: We may also provide certain performance measures that do not conform to U.S. gap. We've provided schedules that reconcile these non-GAAP measures as part of our earnings press release. After our prepared remarks, we will open the call to Q&A. With that, I will turn the call over to Jamie.
Unknown Executive: After our prepared remarks, we will open the call to Q&A.
Jamie Welch: With that, I will turn the call over to Jamie. Thank you, Alex. Good morning, everyone. Thank you for joining our call. 2025 is off to an eventful start. Kinetik reported solid first quarter results that exceeded internal expectations. We made strong progress on the strategic projects in our short cycle backlog, and we're excited to increase capital returns to shareholders via our $500 million share repurchase program announced yesterday. These accomplishments are despite the elevated volatility and macroeconomic uncertainty that have prevailed since the beginning of the year. First quarter adjusted EBITDA of $250 million grew 7% year over year, driven by process gas volume growth and margin expansion in our midstream logistics segment, which Trevor will cover in more detail shortly.
Jamie: Thank you, Alex. Good morning, everyone. Thank you for joining our call. 2025 is off to an eventful start. Kinetik reported solid first quarter results that exceeded internal expectations.
Jamie: We made strong progress on the strategic projects in our short cycle backlog and we're excited to increase capital returns to shareholders by our $500 million share repurchase program announced yesterday.
Jamie: These accomplishments, despite the elevated volatility and macroeconomic uncertainty that have prevailed since the beginning of the year
Jamie: First quarter, Ejazadi Bada, of $250 million, grew 7% year over year, driven by process gas volume growth and margin expansion in our midstream logistic segment, which Trevor will cover in more detail shortly.
Jamie Welch: In the quarter, we made substantial progress across our strategic projects. We completed connections of the inlet and sales pipelines at King's Landing, and we remain on track to start commissioning activities in six weeks. As part of the inlet pipeline connections at King's Landing, the northern stretch of the ECCC pipeline that connects our Eddy County project to the King's Landing complex is almost complete, which is critical as this will allow us to begin flowing volumes from the Carlsbad area to King's Landing for processing upon startup. Also, we have much of the integration of the BrulaDraw assets behind us since closing the transaction in mid-January.
Trevor Howard: In the quarter, we made substantial progress across our strategic projects. We completed connections of the inlet and sales pipelines at King's Landing and we remain on track to start commissioning activities in six weeks.
Trevor Howard: As part of the inlet pipeline connections at King's Landing, the northern stretch of the E-Triple C pipeline that connects our Eddie County project to the King's Landing complex is almost complete.
Trevor Howard: which is critical as this will allow us to begin flowing volumes from the Cullsbad area to King's Landing for processing upon stutter. Also, we have much of the integration of the Brillard draw asset behind us since closing the transaction in mid-genre.
Jamie Welch: Starting in April, one of the existing processing dedications expired and rolled to Kinetik. And we began processing a portion of the gathered gas from that point. We've been really excited about this acquisition, and so far we're seeing very positive results. Kinetik is levered to one of the most prolific oil producing basins in the world. Innovation and R&D over the past 10 years has only driven producers' breakeven costs lower. Now while the Permian is not insulated from macroeconomic and commodity price headwinds, in our view it is the best location to weather challenging times. And so we remain bullish on the Permian's resilience.
Trevor Howard: Starting in April , one of the existing processing dedication expired and rolled to Kinetik. And we began processing a portion of the gathered gas from that point. We've been really excited about this acquisition and so far we're seeing very positive results.
Trevor Howard: Kinetik is levied to one of the most prolific oil producing basins in the world. Innovation and R&D over the past 10 years has only driven producers break even costs lower.
Trevor Howard: Now while the Permian is not insulated from macroeconomic and commodity price headwinds, in our view it is the best location to weather challenging times and so we remain bullish on the Permian's resiliency.
Jamie Welch: Even in down cycles, we saw associated gas growth due to rising gas-to-oil ratios. For example, permean gas grew over 2 billion cubic feet per day for 1 million barrels per day of crude oil growth in 2018. Whereas today, Permian Crude is expected to grow only 200,000 to 300,000 barrels per day, a quarter of 2018 levels at the... while associated gas growth is expected to remain above 2 billion cubic feet per day. Even if permeant crude production were to stay flat, we still anticipate over 1 billion cubic feet per day or low to mid-single digits of gas growth per year.
Trevor Howard: Even in down cycles, we saw associated gas growth due to rising gas to oil ratios. For example, termine gas grew over 2 billion cubic feet per day for 1 million barrels per day of crude oil growth in 2018.
Whereas today...
Trevor Howard: Permian crew is expected to grow only 200 to 300,000 barrels per day, a quarter of 2018 levels at the midpoint.
Trevor Howard: While Associated Gas Growth is expected to remain above 2 billion cubic feet per day. Even if Perming Crew Production were to stay flat, we still anticipate over 1 billion cubic feet per day, or low to mid-single digits of gas growth per year.
Jamie Welch: As a pure play Permian midstream company with a focus on natural gas, we are poised to capitalise on this opportunity. First and foremost, our top priority is to provide flow assurance and operational reliability to our producer customers. We have a proven track record of scaling our growth and asset footprint based on our customers' evidenced by our organic and inorganic expansion into New Mexico last year. Our acquisition of Barilla Draw in the first quarter of this year and our previously announced new large-scale infrastructure projects that will increase resource extraction and drive material cost savings. Importantly, we will take a measured approach to future spend.
Trevor Howard: As a pure play, Permian midstream company with a focus on natural gas, we are poised to capitalise on this opportunity.
Trevor Howard: First and foremost, a top priority is to provide flow assurance and operational reliability to our producer customers.
Trevor Howard: We have a proven track record of scaling our growth and asset footprint based on our customers' needs.
Trevor Howard: Evidence by our organic and inorganic expansion into New Mexico last year.
Trevor Howard: Our acquisition of Barulodrol in the first quarter of this year and our previously announced new, large-scale infrastructure projects that will increase resource extraction and drive material cost savings.
Importantly, we will take a measured approach to future spend.
Jamie Welch: why we still have the utmost conviction in an expansion at King's Landing and the behind the meter power generation opportunity in Reeves County, Texas. We have the flexibility to be prudent and patient on the timing for final investment decisions.
Trevor Howard: While we still have the utmost conviction in an expansion at King's Landing, and the behind-the-meter power generation opportunity in Reeves County, Texas, we have the flexibility to be prudent and patient on the timing for final investment decisions.
Jamie Welch: Now before I turn the call over to Trevor, I want to reiterate the steps we've taken over the past few years that have positioned Kinetik with a multi-year, industry-leading earnings growth outlook, strong free cash flow profile, and substantial financial flexibility. We have grown our asset footprint alongside some of the best producers in the Delaware Basin, enabling their significant multi-year development. We maintain a limited short cycle project backlog with very high underwriting standards. In fact, we have less than $50 million of committed growth capital in 2020. Everything else is discretionary and flexible in the event that the macro economy deteriorates significantly.
Trevor Howard: Now, before I turn the call over to Trevor, I want to reiterate the steps we've taken over the past few years that are positioned kinetic with a multi-year industry leading earnings growth outlook, strong free cash flow profile and substantial financial flexibility.
Trevor Howard: We have grown our asset footprint alongside some of the best producers in the Delaware Basin, enabling their significant multi-year development plans.
Trevor Howard: We maintain a limited short cycle project backlog with very high underwriting standards.
Trevor Howard: In fact, we have less than $50 million of committed growth capital in 2026.
Trevor Howard: Everything else is discretionary and flexible in the event that the macro economy deteriorates significantly.
Jamie Welch: We high-graded our contracts with fee-based and or take-or-pay structures, providing strong visibility to our growth outlook. We prioritize deleveraging, achieving a leverage ratio under a 3.5 times target. And we remain focused on what is within our control, applying a high level of scrutiny across all spend categories.
Trevor Howard: We high-graded our contracts with fee-based and-or-take-all-pay structures providing strong visibility to our growth outlook.
Trevor Howard: We prioritize deleveraging, achieving a leverage ratio under a 3.5 times target. And we remain focused on what is within our control, applying a high level of scrutiny across all spend categories.
Jamie Welch: This positioning gave our board and management the conviction that now was the right time to increase our share repurchase program up to $500 million. Further underpinning our team's belief in Kinetik's value proposition, senior management will receive a material percentage of this year's remaining salary in Kinetik common stock, including myself, at 100%. While we're taking a bit of a wait-and-see approach, our goal is to be as transparent as possible with our expectations today and over the coming months.
Trevor Howard: This positioning gave our board and management the conviction that now was the right time to increase our share repurchase program up to $500 million.
Trevor Howard: Further, underpinning our team's belief in Kinetik's value proposition, senior management will receive a material percentage of this year's remaining salary in Kinetik common stock, including myself at 100%.
Trevor Howard: While we're taking a bit of a wait and see approach, our goal is to be as transparent as possible with our expectations today and over the coming months.
Trevor Howard: With that, I'll turn the call over to Trevor to discuss first quarter results. 2025 expectations and more. Thanks, Jamie. In the first quarter, we reported a justity of $250 million. We generated distributable cash flow of $157 million, and free cash flow was $120 million. Looking at our segment results, our midstream logistics segment generated an adjusted EBITDA of $159 million in the quarter, up 11% year-over-year on increased process gas volumes and margin expansion from our northern Delaware assets. Processed gas volumes were up sequentially, largely driven by the return to production at Alpine. There were fleeting curtailments at Alpine High in late March, which coincided with several days of depressed natural gas prices at the Wahaha.
Trevor Howard: With that, I'll turn the call over to Trevor to discuss first quarter results and 2025 expectations in more detail.
Trevor Howard: Thanks, Jamie. In the first quarter, we reported a justity of $250 million. We generated a distributable cash flow of $157 million and free cash flow was $120 million.
Trevor Howard: Looking at our segment results, our mid-stream logistics segment generated an adjusted EBITDA of $159 million in the quarter, up 11% year-over-year on increased process gas volumes and margin expansion from our Northern Delaware assets.
Trevor Howard: There were fleeting curtailments at Alpine High in late March, which coincided with several days of depressed natural gas prices at the Wauha Hum. Those volumes have returned, and Wauha natural gas prices have been surprisingly positive so far through this typical maintenance period of April and May.
Trevor Howard: Those volumes have returned and Waha National Gas prices have been surprisingly positive so far through this typical maintenance period of April. Also recall that we are now insulated from the lost gross margin impacts experienced in the fourth quarter of last year with additional transportation capacity to the Gulf Coast that started in March. Now shifting to our pipeline transportation segment, we generated adjusted EBITDA of $94 million, down 2% year over year, driven by no contributions from Gulf Coast Express following a sale of our equity interest in the second quarter of 2024. This is mostly offset by an increased contribution in Epicrude year-over-year from our additional 12.5% ownership of the...
Trevor Howard: Also recall that we are now insulated from the Lost Gross Mars and impacts experience in the fourth quarter of last year with additional transportation capacity to the Gulf Coast that started in March.
Trevor Howard: Now, shifting to our pipeline transportation segment, we generated adjusted EBIDA of $94 million, down 2% year of a year, through my no contributions from Gulf Coast Express, following the sale of our equity interest in the second quarter of 2024.
Trevor Howard: This is mostly offset by an increased contribution in Epicrude year-to-year from our additional 12.5% ownership of the pipe.
Trevor Howard: Total capital expenditures for the quarter were $78 million. And in March, we issued an additional $250 million of our existing sustainability link senior notes due 2020. And last month, we renewed our accounts receivable securitization facility for another year and increased the facility size to $250 million. Our leverage ratio for our credit agreement stands at 3.4 times.
Trevor Howard: Total Capitol expenditures for the quarter were $78 million and in March we issued an additional $250 million of our existing sustainability links in your notes due to 2028.
Trevor Howard: And last month we renewed our accounts receivable securitization facility for another year an increased facility size to $250 million dollars.
Trevor Howard: Our levered ratio for our credit agreement stands at 3.4 times.
Trevor Howard: On a full year basis, we are affirming adjusted EBITDA guidance of $1.09 billion to $1.15 billion in capital guidance of $450 million to $540 million that were issued at the end of February. We expect a meaningful acceleration in adjusted EBITDA growth during the second half of the year. We expect to reach annualized adjusted EBITDA of approximately $1.2 billion in the fourth quarter, inclusive of the commissioning of King's Landing and the subsequent unlocking of over 100 million cubic feet per day of currently curtailed volumes, as well as our customer's current development. Additionally, we expect increasing contributions from BereaDraw, the Eddy County Project, and our Lee County Agreement as the year progresses.
Trevor Howard: On a full-year basis, we are affirming a justice EBITDA guidance of 1.09 billion to 1.15 billion in capital guidance of $450 million to $540 million that were issued at the end of February .
Trevor Howard: We expect a meaningful acceleration and adjusted EBIT on a growth during the second half of the year.
Trevor Howard: We expect to reach annualized adjusted EBITDA of approximately 1.2 billion dollars in the fourth quarter inclusive of the commissioning of King's Landing and the subsequent unlocking of over 100 million cubic feet per day of currently curtailed volumes as well as our customers current development plans.
Trevor Howard: Additionally, we expect increasing contributions from Berea Draw, the Eddie County Project, and our Lee County Agreement as the year progresses.
Trevor Howard: Since Liberation Day, we have seen energy commodity futures decline and are lower than our guidance price tag. Approximately 83% of our 2025 expected gross profit is sourced from fixed fee agreements. And as of today, we have only 3% of total gross profit that is unhedged and directly tied to commodity. price deck used to set the 2025 adjusted EBITDA guidance assumes market forward pricing as of February Marking to market the current strip pricing, we estimate an approximately $20 million headwind to adjusted EBITDA for the full year. We are also beginning to see the indirect impacts of a lower commodity price environment.
Trevor Howard: Since Liberation Day, we have seen energy commodity futures decline and are lower than our guidance price deck. Approximately 83% of our 2025 expected gross profit is sourced from fixed fee agreements.
Trevor Howard: The price deck used to set the 2025 Adjusted EBITDA guidance assumes market-forward pricing as of February 20th.
Trevor Howard: Marking to market the current strip pricing, we estimate an approximately $20 million headwind to adjust it a bit out for the full year. We are also beginning to see the indirect impacts of a lower commodity price environment.
Trevor Howard: As we receive updated development schedules from some of our customers, several well pads that were scheduled to turn in line in the fourth quarter are being pushed into 2026, indicating a possible slowdown in activity toward This led us to adjust our full year gas process volume growth assumption from approximately 20% to high teens growth. Turning to capital guidance, our team has made substantial progress on the King's Landing construction and remains on track to start commissioning in the next With that in mind, our CapEx this year is first half-weighted and represents approximately 65% of 2025 capital.
Trevor Howard: As we receive updated development schedules from some of our customers, several well pads that were scheduled to turn in line in the first quarter are being pushed into 2026, indicating a possible slowdown in activity towards the end of the year.
Trevor Howard: This led us to adjust our full-year gas process volume growth assumption from approximately 20% to high teens growth.
Trevor Howard: Turning to Capitol Guidance, our team has made substantial progress on the team's landing construction and remains on track to start commissioning in the next six weeks.
Trevor Howard: With that in mind, our CAPEX this year is first half-weighted and represents approximately 65% of 2025 capital.
Trevor Howard: As we look to the second half of the year, we have some carryover spend into July for King's Landing and construction commences at ECCC in the third quarter, with total spend tapering off in the fourth quarter. Our major announced capital projects, including the King's Landing complex, the Eddy County project, and ECCC pipeline are largely insulated from any changes to tariff. Despite all of these impacts, we expect to be within our 2025 adjusted EBITDA and our capital guidance.
Trevor Howard: As we look to the second half of the year, we have some carry-over spend into July for King's Landing and construction commences at E-Triple C in the third quarter with total spend tapering off in the fourth quarter.
Trevor Howard: Our major announced capital projects, including the King's Landing Complex, the Eddie County Project, and E-Triple C-Pifeline are largely insulated from any changes to tariff rates.
Trevor Howard: Despite all of the impacts, we expect to be within our 2025 Adjusted EBITDA and our Capitol Guidance Ranges.
Trevor Howard: The first four months of this year have been quite dynamic. Kinetik has delivered solid first quarter results, demonstrated strong execution across our strategic project backlog, and taken significant steps to advance our finance-related objectives. I am proud of how our teams have remained incredibly focused despite the noise in the As we look ahead, Kinetik is well positioned to navigate this. We have done it before.
Trevor Howard: The first four months of this year have been quite dynamic. Kinetik has delivered solid, first quarter results, demonstrated strong execution across our strategic project backlog, and taken significant steps to advance our finance-related objectives. I am proud of how our teams have remained incredibly focused despite the noise in the market.
Trevor Howard: As we look ahead, Kendrick is well positioned to navigate this uncertainty.
Trevor Howard: We have done it before. Since the merger in early 2022, we have continued to strengthen our business and enhance our financial flexibility, laying the foundation for a robust, multi-year growth outlook and providing our board with the confidence.
Trevor Howard: Since the merger in early 2022, we have continued to strengthen our business and enhance our financial flexibility, laying the foundation for a robust multi-year growth outlook and providing our board with the confidence to authorize our $500 million share repurchase program that we announced yesterday. We have strong conviction in Kinetik's value proposition and are excited to accelerate capital returns to our shareholders in a more meaningful way.
Trevor Howard: To authorize our 500 million share repurchase program that we announced yesterday. We have strong conviction in Kinetik's value proposition and are excited to accelerate capital returns to our shareholders in a more meaningful way. And with that, we can open up the line for Q&A.
Unknown Executive: And with that, we can open up the line. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason at all, you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question.
Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one.
Trevor Howard: As a reminder, if you're using a speaker phone, please remember to pick up your handset before asking your question. Also, please limit yourself to only one question and one follow-up.
Spiro Dounis: Also, please limit yourself to only one question and one follow The first comes from Spiro Dounis with City. You may proceed. Thanks, operator. Good morning, team. First question, wanted to go to the long term growth, if we could. Jamie, you've had a lot thrown at you early in the year like everybody else. So surprised you were able to sort of maintain that 10% growth CAGR through 2030, or sorry, 2029. So just want to level set there and make sure I understand what are the drivers behind that? Sounds like gas growth is still something you see even in a flat crude environment.
Trevor Howard: The first comes from Spiro Dounis with Sidian, you may proceed. Thank you very much.
Speaker Change: through 2030, or sorry, 2029. So just want the level set there and make sure understand what are the drivers behind that? Sounds like gas growth is still something you see even a fluctuate environment. You want to make sure I understand all the pieces there.
Spiro Dounis: I want to make sure I understand all the pieces there.
Jamie Welch: Sure, good morning Spiro. So as far as the overall sequential growth and you know the base business supporting a 10% compound annual growth over the next five years. So much of it is driven, let's start immediately, relative to 971 actual last year, 1120 obviously to the midpoint this year. As everyone knows, going forward, I think consensus around 1.25 I think for next year. We still have in the immediate term. Yeah, 13-15% growth year-on-year. Going out, as we think about this, what drives so much of this is we've got some fundamental contractual resets that provide tremendous inherent intrinsic value for this company without any capital.
Speaker Change: Sure, good morning Spiro. So as far as the overall sequential growth and you know the base business supporting a 10% compound annual growth over the next five years.
Speaker Change: So much of it is driven, let's start immediately, relative to the 971 actual last year, 1120 obviously to the midpoint this year.
Speaker Change: As everyone knows, going forward, I think, you know, consensus around 1.25, I think, for next year. We still have in the immediate term.
Yes, 13 to 10% growth year-on-year [inaudible]
Speaker Change: Going out, as we think about this, what drives so much of this is, you know, we've got some fundamental contractual reset that provide tremendous inherent intrinsic value for this company without any capital.
Jamie Welch: You have step ups under existing base contracts. We have Barilla draw that we will get all of the processing starting in the beginning of 2028. And we probably have, I think, the, you know, one of the most exciting acreage positions for the folks at Permian Resources, where obviously there's a lot of growth in New Mexico. And so we look at that and we just we look at our overall base business, you know, same store sales relatively, you know, I would say. modest growth on the Texas side and then New Mexico will continue to see pretty attractive growth.
Speaker Change: You have step-ups on the existing based contracts. We have BRULA Draw that we will get all of the processing starting in beginning of 2028.
and we probably have, I think, the-
Speaker Change: One of the most exciting acreage positions for the folks at Permian Resources, where obviously there is a lot of growth.
Speaker Change: in New Mexico. And so we look at that and we just, we look at our overall base business, same store sales, relatively, I would say.
Speaker Change: modest growth on the Texas side, and then New Mexico will continue to see pretty attractive growth. What we told you all is we're looking at obviously either we're going to do a power generation project.
Jamie Welch: What we told you all is we're looking at obviously either we're going to do a power generation project or we potentially will in fact procure compression and then reduce the amount of lease compression that we have. That has a direct immediate opex benefit, not something you leg into but something you see immediately. So it's those factors collectively that really set you up for that growth. And obviously, part of that, as we said with New Mexico, is the prospect and likelihood that we will FID King's Landing too, which I think, as we've said, we have very, I think, strong conviction on.
Speaker Change: Or we potentially will, in fact, procure compression and then reduce the amount of least compression that we have. That has a direct immediate RPEX benefit, not something you leg into, but something you see immediately.
Speaker Change: So, it's those factors collectively that really set you up for um...
Speaker Change: You know, that growth. And obviously part of that, you know, as we said in New Mexico, is the prospect and likelihood that we will FID kings leaning to, which I think, you know, as we've said, we have very, you know, I think, strong conviction on.
Michael Blum, David
Spiro Dounis: Got it, helpful.
Thank you.
I've got an helpful second question.
Spiro Dounis: Second question, just going to capital allocation. I don't think any big decisions have been made yet. You know, it sounds like you're being flexible here, but certainly noticing a pretty big pivot now, obviously maybe a little bit away from organic growth towards buybacks. And I think you mentioned opportunities, but I mean, that sounds like M&A. So I guess one is you're thinking about the buyback and how you deploy that, maybe walk us through the mechanism for how much you sort of buy back in any given quarter. And am I right in reading through on the opportunity side that maybe some assets drop loose here in this environment and you'd be ready to pick those up?
Speaker Change: But certainly noticing a pretty big pivot now, obviously, maybe a little bit away from organic growth towards buybacks, and I think you mentioned opportunities, but maybe that sounds like M&A, so...
Speaker Change: I guess one is you're thinking about the buyback and how you deploy that. Maybe walk us through the mechanism for how much you sort of buyback in any given quarter. Am I right in reading through on the opportunity side that maybe some assets drop loose here in this environment and you'd be ready to pick those up?
Trevor Howard: Yes, Spiro, this is Trevor. Thanks for the question. I think you characterized it correctly there at the very end, which is we're going to be flexible, we're going to be opportunistic. And to the extent that we see value on the bolt-on and the M&A side, then we will deploy the balance sheet and allocate capital there. But as it stands today, and where we're at, we see and the board sees tremendous value in our share price. We've worked really hard to get the position or to get the business in the position that we're at today. I point you to page nine of our investor relations slides.
Trevor Howard: Yes, Spiro, this is Trevor. Thanks for the question. I think you characterized it correctly there at the very end, which is we're going to be flexible, we're going to be opportunistic into the extent that we see value on the bolt-on in the M&A side, then we will deploy the balance sheet and allocate capital there. But as it stands today and where we're at, we see in the board sees tremendous value in our share price. We've worked really hard to get the position, or to get the business in the position that we're at today. I point you to page 9 of our investor relations.
Trevor Howard: There's no changes to our finance-related objectives. We're very cognizant of our leverage target. Like I had mentioned earlier, we worked really hard over the last three years to get the balance sheet to where we are today. We're still focused on investment-grade ratings. And we're still looking to deploy capital both inorganically, organically. But again, we're going to be opportunistic here, and we see great value with where our current share price is. And that gave the conviction to increase the share repurchase program from $100 to $500 in order to maintain flexibility as we navigate what are currently choppy markets and a choppy environment.
Trevor Howard: We're very cognizant of our leverage target. Like I had mentioned earlier, we worked really hard over the last three years to get the balance sheet to where we are today. We're still focused on investment grade ratings.
Trevor Howard: and we're still looking to deploy capital, both inorganically, organically, but again, we're going to be opportunistic here and we see great value with where our current share prices and that gave the conviction.
Trevor Howard: to increase the Share References Program from 100 to 500 in order to maintain flexibility as we navigate what are currently choppy markets and a choppy environment. Hey Spiro, maybe I'll just jump on that. Yeah, Trevor describes this as great value. I describe it as incredible frustration.
Jamie Welch: Hey, Spiro, maybe I'll just jump on that. Trevor describes it as great value. I describe it as incredible frustration. The stock price, I mean, think of it this way. Annualized first quarter is a billion dollars of EBITDA. Fourth quarter, two quarters away, annualized EBITDA will be 1.2. Last time I checked with a calculator, that is 20% growth in less than six months. go show me somewhere else that you can see that on top of almost an 8% yield and 3 to 5% guaranteed growth in the dividend going forward with a 3.4 times, I think on a credit agreement basis right now, unadjusted just under 3.8.
Speaker Change: The stock price, I mean, think of it this way. Analyze first quarters of billion dollars of EBITDA. Fourth quarter, two quarters away. Analyzed EBITDA will be 1.2.
Speaker Change: Go show me somewhere else that you can see that on top of almost an 8% yield and 3% to 5% guaranteed growth in the dividend.
Speaker Change: Going forward with a 3.4 times I think on a credit agreement basis right now, unadjusted just under 3.8.
Jamie Welch: This is, I mean, this was a unanimous view from the board, which was, there is no way this stock sits with a four in front of it. And why, if it does, then you just go for it. Understood, Jamie.
Speaker Change: This was a unanimous view from the board, which was, there is no way this dock sits with a floor in front of it. And why, if it does, then you just go for it.
Michael Blum.
Thank you.
Understood, Jamie. Appreciate the color, guys. Thank you
Spiro Dounis: Appreciate it, guys. Thank you.
Speaker Change: Thank you. The next question comes from Jeremy Tonet with JP Morgan. You may proceed.
Jeremy Tonet: The next question comes from Jeremy Tonet with J.P. Morgan. You may proceed. Hi, good morning. Good morning, Jeremy. Appreciate the vigor in the last response there. Just wanted to follow up a little bit more on the buybacks as it relates to how the pace could unfold here. Do you need to wait for a kind of free cash flow generation to develop more or just the leverage is kind of low as what you were saying? Just wondering, is this something that you guys can affect in the very, you know, in the near term, given where the share price is, as you note that the four-handle?
Hi, good morning.
Thank you.
Good morning Jeremy.
Michael Blum, David
Speaker Change: Appreciate the bigger in the last response there. Just want to follow up a little bit more on the buybacks as it relates to how the pace could unfold here. Do you need to wait for kind of free cash flow generation to develop more or just the leverage is kind of low as what you were saying. Just wondering, is this something that you guys can affect in the very, you know, in the near term given where the share price is as you note that the forehandle? Yeah.
Jamie Welch: Yeah, so, and I appreciate the commentary on the VIGA, although, to be honest, I would tell you I'm just warming up, if you wanted to really get my viewpoint in the context of how I sort of feel about where the stock is. I think from our vantage point, there's probably the most salient point to think about cash flow. You're seven weeks away from being 65% completed on your capital program for this year. You're literally on the backside, and you've only got $50 million committed in 2026. And you've got this massive inflection between 1Q and 2Q, as I just pointed out in the context of just looking at that annualized first quarter versus fourth quarter EBITDA.
Speaker Change: Yeah, so and I appreciate the commentary on the vegan, although to me honest I would tell you I'm just warming up if you wanted to really get my view point of the context of how I sort of feel about where the stock is.
Speaker Change: I think from our vantage point, there's probably the most salient point to think about cash flow. You have seven weeks away from being 65% completed on your capital program for this year.
Speaker Change: And you've got this massive inflection between one cue and two cue, as I just pointed out the context of just looking at that annualized first quarter versus fourth quarter, EBITDA.
Jamie Welch: So the short answer is, yes, I think we are well-equipped and able to actively engage in the program, and we will be opportunistic, and we will look to obviously maximize value for all of our shareholders. I think as we sort of think about it, we traded in sort of the toothpick for the torpedo bat, all right, just in the context of the size of the program and how we're going to think about it. So I think we're going to be much more on the front foot, not the back foot. Got it. That's very helpful. Thank you for that torpedo incoming.
Speaker Change: So the short answer is yes, we can, I think we are well equipped and able to actively engage in the program.
and we will be opportunistic.
Speaker Change: and we will look to obviously maximize value for all of our shareholders.
Speaker Change: You know, I think is we sort of think about it, we trade it in, you know, sort of the toothpick for the torpedo bat, alright? Just the context of the size of the program and how we're going to think about it. So, I think we're going to be much more on the front foot, not the back foot.
Thank you.
Jamie Welch: And just rounding out, I guess, the capital allocation side, how you think about, you know, hurdles in this environment, you look at KL2, and, you know, just, you know, what other growth opportunities might have in front of you at this point and wondering if you could just give us a little bit more thought. Look, I think, as Trevor pointed out, there's lots of opportunities, you know, in a sort of uncertain world, there is always, you know, never pass up the opportunity to find. really valuable opportunities when you've got uncertainty in front of you. And I think our viewpoint is everything is, you know, we already had a pretty high underwriting standard for pretty much every transaction that we've done.
Speaker Change: You know, hurdles in this environment, you look at KL2, and you know, just, you know, what are the growth opportunities, might have in front of you at this point in wondering if you could just give us a little bit more thoughts there.
Speaker Change: Look, I think, as Trevor pointed out, there's lots of opportunities, you know, in a sort of uncertain world, there is always, you know, never pass up the opportunity to find.
Really valuable opportunities.
when you've got uncertainty in front of you. [inaudible]
Speaker Change: And I think our viewpoint is, everything is, we already had a pretty high underwriting standard for pretty much every transaction that we've done. You can just go back to our track record. I think we would say we stand very proud of everything we've done, including most recently, Baruladroa, which has been a really exceptional start for that asset.
Trevor Howard: You can just go back to our track record. I think, you know, we would say we stand very proud of everything we've done, including most recently Barilla Draw, which has been a really exceptional start for that asset. We've now just put an even higher threshold and hurdle on it because we want to be ironclad certain in the context of the conviction we have and the underwriting commercial support for any transaction that we do. So we are going to really probe deeply on our level of conviction and then talk about it with the board. So we're very much open for business, but we're really, really going to pull apart every opportunity to make sure that we feel with absolute conviction that this is the right thing to do.
we've now just put an even higher. Yeah.
Speaker Change: Threshold and hurdle on it because we want to be eye and clad certain in the context of the conviction we have and the underwriting commercial support for any transaction that we do.
Speaker Change: So we are going to really probe deeply on our level of conviction.
Speaker Change: and then talk about it with the board. So, we are very much open to business but we are really, really going to pull apart every opportunity to make sure that we feel with absolute conviction that this is the right thing to do.
Trevor Howard: Jeremy, this is Trevor. One other thing that I would say is I don't want you to read into the share repurchase program increasing as a means or as a read through that the organic opportunity set is drying up. That is not the case at all. As we as we plan for five years out, there are assets that are on the board that could make sense for them to be owned by Kinetic to the extent that we can get their own value. But with where we trade right now, this is, you know, inside of where we've seen Permian assets trade over the last 12 months.
Speaker Change: The organic opportunity set is drying up. That is not the case at all, as we...
Speaker Change: Plan for five years out. There are assets that are on the board that could make sense for them to be owned by Kinetik.
Speaker Change: to the extent that we can get there on value. But with where we trade right now, this is, you know, inside of where we've seen Permian assets trade over the last 12 months. And so as we think about allocating capital and how we think about the repurchase, the repurchase very much is an acquisition and of itself, it's an acquisition of ourselves. Thank you.
Jeremy Tonet: And so as we think about allocating capital and how we think about the repurchase, the repurchase very much is an acquisition in and of itself. It's an acquisition of ourselves. And so we see a very deep bench of opportunities all around our entire system, both in Delaware South and Delaware North going forward. Got it. Very helpful. Thank you. Thanks, Jeremy. Thank you.
Speaker Change: and so we see a very deep bench of opportunities all around our entire system, both in Delaware, South, and Delaware, North going forward.
Got it. Very helpful. Thank you.
Thanks, Jeremy. Thank you.
John Mackay: The following comes from John Mackay with Golden Sacks. You may proceed. Nathan, thanks for the time. Just you touched on this a lot, but I'd be curious to hear a little bit more just on your overall read on the on the macro view. We've obviously seen some activity cuts, I guess I'd just be curious, you know, to hear your view. Do you think we're going to see more from here?
Speaker Change: The violin coach and John McKay with Golden Facts, he may proceed. [inaudible]
Speaker Change: Nathan, thanks for the time. You touched on this a lot, but I'd be curious to hear a little bit more just on your overall read on the on the macro of you we've obviously seen.
Speaker Change: Some activity cuts, I guess, I'd just be curious to hear your review. Do you think we're going to see more from here? And when we're thinking about your ability to pair down the CapEx, I guess what would you be looking for on the macro front to say, you know what, we really do need to go to that $50 million next year?
Jamie Welch: And when we're thinking about your, you know, your ability to pare down the CapEx, I guess, what would you be looking for on the macro front to say, you know what, we really do need to go to that, you know, $50 million next year? John, it's Jamie. So, thanks for the question. I think, look, right now there's just so much uncertainty in this world. You know, personally, I like the reference to the traffic light that I heard one of our large customers, Diamondback, talk about in the context of yellow, of red, yellow, green. I think if we start to see further declines, right, you can probably, as everyone's starting to see, you can see some actual either turn in line cuts where production remains pretty much within guidance because you've had outperformance.
Speaker Change: John , it's Jamie. So, thanks for the question. I think him, look, right now...
Speaker Change: There's just so much uncertainty in this world. Personally, I like the reference to the traffic light that I heard one of our large customers dining back talk about.
Speaker Change: where production remains pretty much within guidance because you've had our performance. You might see some rig slowdown, but you know, you're going to start seeing that manifest itself if we continue at this pace, going into 2026. What does that mean for us? It's going to be very much...
Jamie Welch: You might see some rigs slow down but, you know, you're going to start seeing that manifest itself if we continue at this pace going into 2026. What does that mean for us? It's going to be very much customer specific. It's hard to give a largest PR. They've not put down any rigs. They put out their earnings. They're effectively, they're slightly trimming their turn in line forecast but their guidance on the crude side is hitting the mark because they've had great outperformance. And look, we should know because obviously we deal with them on both the crude and the oil side.
Speaker Change: But their guidance on the crude side is hitting them out because they've had great outperformance. And look we should know because obviously we deal with them on both the crude and the oil side. Sorry the crude and the gas side.
Trevor Howard: Sorry, the crude and gas side. So, I do think it's going to be, you know, it won't be one-size-fits-all. I think it will be very much customer specific and area and location specific.
Speaker Change: So I do think it's going to be, you know, it won't be one-size-fits-all.
Speaker Change: I think it will be very much customer specific and area in location specific.
Trevor Howard: And I think we are just going to have to navigate our way through whatever that looks like at the time as to whether it's a $50 million program or it's slightly more. You know, obviously the important part of the $50 million, particularly as I've referenced PR, ECCC and that Eddy County acreage, they are synonymous. They literally are, they are synergistic to one another. And therefore the evacuation over and above the volume we can take at King's Landing is all about getting it down to ECCC and allowing us to bring it down south. So that's a very important piece of the overall system profile and how we think about continuing to grow our top line.
Speaker Change: and I think we're just going to have to navigate our way through whatever that that looks like at the time as to whether it's a $50 million program or it's slightly more. Obviously the important part of the $50 million, particularly as I reference PR.
E-triple C, and that Eddie County acreage? No.
Speaker Change: They are synonymous. They literally are synergistic to one another. And therefore, the evacuation over and above the volume we can take at King's Landing is all about getting it down at E-Triple C and allowing us to bring it down south.
Speaker Change: So that's a very important piece of the overall system profile and how we think about, you know, Matt continuing to grow our top line.
Trevor Howard: Trevor or Kris, I don't know if you guys have anything else to add. Yeah, look, we're a midstream service provider and we're going to be responsive to our customers' needs. We're going to be very mindful of the environment that we're in right now, as Jamie described it. We're seeing yellow lights, not red lights by any means. So we are proceeding with caution with the two large infrastructure projects that we've talked about in the past with an expansion of processing capacity across our system with a new cryo and a behind-the-meter power generation project. As we look at our updated five-year forecast from recently provided drill schedules from our customers, we still see a strong need for both.
Speaker Change: Trevor, or Chris, I don't know if you guys have anything else to add. Yeah, I, look.
Speaker Change: We are a midstream service provider and we're going to be responsive to our customers needs. We're going to be very mindful of...
Speaker Change: We're very mindful of the environment that we're in right now as Jamie described it. We're seeing yellow lights, not red lights by any means.
So we are proceeding with caution with...
Speaker Change: The two large infrastructure projects that we've talked about in the past with an expansion of processing capacity across our system with the new cryo.
and a behind-the-meter power generation project.
Speaker Change: as we look at our updated and five-year forecast from recently provided drill schedules from our customers.
Speaker Change: We still see a strong need for both, but that said as we stand today we are proceeding with caution with respect to large multi-year projects that are several hundred millions of dollars. But we are going to be responsive to our customer's needs, a substantial portion of
Trevor Howard: But that said, as we stand today, we are proceeding with caution with respect to large multi-year projects that are several hundred millions of dollars. But we're going to be responsive to our customers' needs. A substantial portion of 2026 capital involves new compressor stations, new well connects and pipeline lines and looping. That's very short cycle capital. And so as we navigate through 2025 and plan for 2026, again, we're going to be responsive to what our customers are telling us.
Speaker Change: 2026 Capital involves new compressor stations, new well-connected and pipeline lies and looping. That's a very short cycle capital and so as we navigate through 2025 and plan for 2026, again we're going to be responsive to our customers are telling us.
Chris Kendrick: And John, this is Chris. As Trevor pointed out a few moments ago, there really hasn't been a slowdown in the organic opportunities with our customers either this year. We announced a new deal in Reese County with a private customer, and in New Mexico right now we're chasing a number of opportunities. So from that standpoint, we still see growth opportunities even in this environment. So again, great opportunities ahead of us. And Chris, that's a great point. I'm sure someone's probably going to ask us about the new GMP contract we did. that hits the trifecta. Reputable producer, very active in New Mexico.
Chris: And John , this is Chris, Trevor pointed out a few moments ago.
Chris: They really had them in a slow down, they were organic opportunities with their customers either this year.
Chris: We announced a new deal in Reese County with a private customer in New Mexico right now we're chasing a number of opportunities. So from that standpoint, we still see growth opportunities even in this environment. So again.
Chris: That hits the trifecta, reputable produce of very active in New Mexico, but the trifecta where it hits is, gassy part of the basin.
Jamie Welch: But the trifecta it hits is, gassy part of the basin, on us there is, it's short cycle capital. meaning that in the next several months, we'll be getting production. and Minimal Capital. That's like a dream come true when you're a midstream company. So that sort of opportunity, which is out there, is really exciting. And I think we should, you know, the commercial team is continuing to do a really good job of finding those types of opportunities and leveraging what we've built over the past 12 years. That's really good color. Appreciate all that.
On us, there is. It's short cycle capital.
Chris: Meaning that in the next several months, we'll be getting production.
and Minimal Capital. [inaudible]
Chris: That's like a dream come true when you're a midstream company.
Chris: So that sort of opportunity, which is out there, is really exciting and I think we should, you know, the commercial team is continuing to do a really good job of finding those types of opportunities and leveraging
What we've built over the past 12 years.
Speaker Change: What's really good color? I appreciate all that. Second one for me, you guys have done a great job of kind of hedging out the commodity exposure this year. You just talk about looking forward. There's a ton of growth in the business that's already really baked in. Should that 83% fee-based?
Trevor Howard: Second one for me, you guys have done a great job of kind of hedging out the commodity exposure. This year, you just talk about looking forward, there's a ton of growth in the business that's already really baked in. Should that 83% fee based? Should that kind of hold going forward? Is that going to increase, decrease, maybe just frame up the kind of longer term view on that side? Yeah, there's some puts and takes to it. We have a pretty strong growth from the customers that we acquired in the Durango acquisition, which had a little bit more of a commodity weight to it relative to just the The Legacy Delaware South system.
Chris: Should that kind of hold going forward? Is that an increase? Decrease? Maybe just frame up the kind of longer-term view on that said?
Speaker Change: Yeah, there are some puts and takes to it. We have a pretty strong growth from the customers that we acquired in the Durango acquisition, which had a little bit more of a commodity weight to it relative to just the
Speaker Change: The Legacy Delaware South System, but we do see strong growth across Delaware South as well and then also the new Eddie County Project.
John Mackay: But we do see strong growth across Delaware South as well. And then also the new Eddy County project, which are largely fee based contracts. And so as we think about going forward, I would say mid, mid 80s is the appropriate way to think about Kinetik's fixed fee composition. And about 15% is directly sourced from commodity prices. Agreed, so maybe just a little bit. Yeah. All right, thanks for that. Appreciate it. Have a good one, guys. Thanks, John. Thank you.
which are largely fee-based contracts and so... [inaudible]
Speaker Change: As we think about going forward, I would say mid-80s is the appropriate way to think about Kinetik's fixed fee composition.
A little bit. Yeah. Yes.
Speaker Change: All right, thanks for that. Appreciate it. Let me go on, guys. Thanks, John .
Michael Blum: The next question comes from Michael Blum with Wells Fargo. You may proceed. Thanks, good morning, everyone. So given the comments on on the producer activity in the back half of the year. all the all the conversation you've had so far. Would you say at this point you're trending towards the lower end of guidance or is that?
Speaker Change: Thank you. The next question comes from Michael Blum with Wells Fargo. You may proceed.
Michael Blunn: Thanks, everybody, everyone. So, given the comments on the producer activity in the back half of the year and just all the conversation we've had so far, would you say at this point you're trending towards the lower end of guidance? Or is that not the right way to look at it?
Jamie Welch: Michael, I'm really, really glad you asked, somebody asked this question. We gave you all this detail. Obviously, we talked about the 20 million of commodity headwinds if you just basically mark to market. So, very directly, it would be below the midpoint. We're in the range, but we are below the midpoint. But we wanted to give more detail because we just realized with every passing day, with the amount of announcements, that it would be tone deaf to just to put yourself in a bubble and say, oh, everything's fine. We moved stuff off from the fourth quarter.
Michael Blunn: Michael, I'm really, really glad you asked somebody asked this question. We gave you all this detail. Obviously, we talked about the 20 million of commodity headwinds if you just basically marked a market. So very directly, he would be below the midpoint.
Thank you. Thank you.
We're in the range, but we are below the midpoint.
Michael Blunn: But we wanted to give more detail because we just realized with every passing day with the amount of announcements that it would be tone deaf to just put yourself in a bubble and say, oh, everything's fine.
Michael Blunn: We moved stuff off from the fourth quarter, we looked at it with wrist things, we've really, really spent a long time refreshing our overall forecast from February to today, engaged in lots of conversations with our customers.
Jamie Welch: We looked at it. We've risked things. We've really, really spent a long time refreshing our overall forecast from February to today, engaged in lots of conversations with our customers. Because for us, it's about capital spending. It's about setting compression. It goes into so many facets of our business that we need to know and our stakeholders need to be aware.
Michael Blunn: Because for us it's about capital spending, it's about upsetting compression, it goes into so many facets of our business that we have a we need to know and our stakeholders need to be aware.
Unknown Executive: All right. Thank you.
Michael Blunn: All right, I'm going to turn it over to Jeff. Jeff, I want to ask a couple of questions. I'm going to ask a couple of questions. I'm going to ask a couple of questions.
Speaker Change: I think it's right now. But he's just kind of a travel public client for the recognition of 8.2 dollars, and there's plenty of possibilities. And that's all for the love of the community.
Unknown Executive: Unknown Speaker 0 Michael, if I can stop you there and you can hear me, it sounds like you've gone on to, you've become automated, and it's very hard to understand. So maybe it's... Um You want to try again, because we did not pick up that last question. Not really. Operator, can you hear? No, she's coming through a bit choppy. Michael, could you please just press star two will allow you to recue and then we'll see if your line is coming through a bit clearer.
Thank you.
Speaker Change: Michael, if I can stop you there and you can hear me, it sounds like you've gone on to, you've become automated and it's very hard to understand. So maybe it's...
Speaker Change: You want to try again? Because we did not pick up that last question.
Thank you, everyone. Thank you.
Not really. Operator, can you hear me now? Okay.
Speaker Change: Yes, he's coming through a bit, choppy. Michael, could you please just press star two, we'll allow you to recue, and then we'll see if your line is coming through a bit clearer.
Unknown Executive: The next question. Okay, so why don't we take the next question? Absolutely.
Speaker Change: The next question. Okay, so why don't we take the next question?
Brandon Bingham: The next question comes from Brandon Bingham with Deutsche Bank. You may proceed. All right, thank you for taking the questions.
Speaker Change: Absolutely. The next question comes from Brandon Bingham with Deutsche Bank. You may proceed.
Hi, thank you for having me in the questions.
Jamie Welch: Just want to quickly go back and ask for the umpteenth time here about the multi-year outlook, but maybe just coming at it from a different angle. If you could help us better understand maybe some of the sensitivity within that multi-year growth outlook to basin-level growth, or maybe ask in a different way, to what extent is the growth outlined for the multi-year outlook dependent upon basin-level growth? You did a good job explaining a lot of the... The insulating factors that you have, the low hanging fruit, but if you could kind of maybe just speak more to the the broader volumes trajectory as well, that'd be helpful.
Speaker Change: I just want to quickly go back and ask for the hunting time here about the multi-year outlook, but maybe just coming at it from a different angle.
Speaker Change: If you could help us better understand maybe some of the sensitivity within that multi-year growth outlook.
Speaker Change: to Basin level growth, or maybe ask in a different way to what extent is the growth outlined for the multi-year outlook dependent upon Basin level growth and just you did a good job explaining a lot of the
Speaker Change: The insulating factors that you have, the low hanging fruit, but if you could maybe just speak more to the broader volume trajectory as well, that would be helpful.
Trevor Howard: Sure. Trevor, I think, yeah, is probably the expert on this, but I do want to just make sure that we frame it for everybody. We look at this on what we'll call the base contract list that we have today, and therefore the activity on the acreage that we have today. The only addition becomes King's Landing, and how that then feeds into that from an overall production growth standpoint. Yeah, absolutely. The way that I would think about it is, as Jamie had pointed out earlier in his comments, that our five-year forecast, and the, or excuse me, the 10% compound annual adjusted EBITDA CAGR only contemplates one cryo expansion over the next several years.
Trevor Howard: Sure, Trevor, I think that yeah, is probably the expert on this, but I do want to just make sure that we frame it for everybody.
Trevor Howard: We look at this on what we'll call the base contract list that we have today and therefore the activity on the acreage that we have today.
Trevor Howard: The only addition becomes King's Landing and how that then thinks feeds into that from an overall you know production growth standpoint. Let's try Björner.
Trevor Howard: Yeah, absolutely. The way that I would think about it is as Jamie had pointed out earlier in his comments that our five-year forecast
Trevor Howard: and the 10% compound annual adjusted EBITDA Kager only contemplates one cryo expansion over the next several years as we think about
Trevor Howard: As we think about what we're seeing with our customers that are contracted today and their long-term development plans, as well as the organic opportunity set up there, we have very strong conviction that we're going to hit that target and we're going to exceed that target. We are a pro-forma King's Landing coming online. We are a 2.4 BCF a day system. And so really the way to think about it is we're going from 2.4 to 2.6 BCF a day by 2029. That is what's comprised in the 10% annual EBITDA CAGR.
out.
Trevor Howard: What we're seeing with our customers that are contracted today and their long-term development plans, as well as the organic opportunity set up there, we have very strong conviction that we're going to hit that target, and we're going to exceed that target. We are a pro format King's Landing coming online. We are a 2.4 BC FAD system, and so really the way to think about it is we're going from 2.4 to 2.6 BC FAD by 2029.
Trevor Howard: That is what's comprised in the 10% annual EBITDA Cager.
Tristan Richardson.
Brandon Bingham: Awesome, very helpful.
Trevor Howard: Awesome, very wonderful. And then maybe just quickly going over to the epic side.
Brandon Bingham: And then maybe just quickly going over to the epic side. you know, your partner kind of had. Commentary that some might have found a little shocking in its letter to shareholders. I know that there hasn't been a lot of discussion around the expansion, but if you have any just broader updates on Epic, Crood, and potential expansions in light of the commentary. Look, I think on Epic crude, the business continues to perform and execute very well. We are very mindful and remain very mindful of the compelling nature of a potential expansion. As you may know, with obviously the pro forma double legal acquisition, Diamondback has an option for up to a third of any expansion that gets done.
Trevor Howard: You know, your partner kind of had some commentary that some might have found a little shocking and it's letter to shareholders. Just I know that there hasn't been a lot of discussion around the expansion, but if you have any just broader updates on ethnic crude and potential expansions in light of the commentary. Thank you very much.
Trevor Howard: Look, I think on Epic Crude, the business continues to perform and execute very well.
Trevor Howard: We are very mindful and remain very mindful of the compelling nature of a potential expansion.
Trevor Howard: as you may know, with obviously the pro-former Double Eagle Acquisition.
Trevor Howard: Diamondback has an option for up to a third of any expansion that gets done so that's obviously with that amount of volume they control, obviously that obviously hopefully significantly helps.
Jamie Welch: So that's obviously with that amount of volume they control. Obviously, that that obviously hopefully significantly helps contribute to getting it done. It's a question of when and not if. And I think obviously right now... Just given the prudency that we see out there, the timing is not ideal to be thinking about that particular expansion. And we will see over the passage of the remaining several months and to the balance of this year when and if that changes. The other thing that I would add is that we still, we view the Delaware as earlier in its maturation phase than the Midland.
Trevor Howard: Contribute to getting it done. It's a question of when and not if.
and I think obviously right now
Trevor Howard: Just given the prudency and that we see out there it's the timing is not ideal to be thinking about that potential particular expansion and we will see over the passage of the remaining several months and to the balance of this year, when and if that changes.
Trevor Howard: The other thing that I would add is is that we still…
Jamie Welch: And so as we think about Delaware crude volumes over the next five years and 10 years relative to the Midland, we skew bullish to the Delaware and those incremental barrels, the preferred market for those barrels is Corpus. And that has not changed in light of everything that has happened in the last two months. Corpus has remained sold out for a fair amount of time now that is still, again, the preferred route. And so we still see strong merits to an expansion. I would say, Brandon, I'm probably remiss in not saying it, that, you know, May will be the first month that we start getting distributions for shareholders.
Trevor Howard: We skew bullish to the Delaware and those incremental barrels, the preferred market for those barrels is corpus and that has not changed in light of everything that has happened in the last two months.
Trevor Howard: Corpus has remained sold out for a fair amount of time now that is still again the preferred route and so we still see strong merit soon expansion.
Speaker Change: I would say, Brandon, I'm probably remiss in not saying it, that May will be the first month that we start getting distributions for shareholders, so that's actually from a financial standpoint. The business has really done a good job, turned the corner, and it's on really strong footing.
Jamie Welch: So that's actually from a financial standpoint. The business has really done a good job, turned the corner, and it's on really strong footing.
Unknown Executive: Very helpful. Thanks, guys. Thank you. As a quick reminder, if you'd like to ask a question, please press star one.
Very helpful. Thanks, guys.
Speaker Change: Thank you. As a quick reminder, if you'd like to ask a question, please press star one. The following comes from Theresa Chen with Barclays. You may proceed.
Theresa Chen: The following comes from Theresa Chen with Barclays. You may proceed.
Chris Kendrick: Good morning, Jamie, I will take the bait on that new GMP agreement with the private producer in Greece County. Can you talk about what kind of voting metric or EBITDA step up that's going to I'm looking at Chris and Trevor. They're closer to it than I am.
Teresa Chin: Good morning, Jamie. I will take the bait on that new GMP agreement with the private producer in Greece County. Can you talk about what kind of vulgar metric or epitaph step up that's going to bring? Thank you very much.
Speaker Change: I'm looking at Chris and Trevor, they're close to two with an eye. Theresa...
Chris Kendrick: Theresa, this is Chris. You know, we added this producer down in Texas. We do business with him today in New Mexico. As Jamie said, initial development's going to commence this year with a few wells, with opportunities for more in the future. So I think, as Jamie alluded to, it's a gassy area. We hesitate on, you know, how much we're going to get out on EBITDA, but it's not a lot of capital. It's sub $5 million, kind of on a run rate basis. But to Jamie's point, when you look at the capital needed to build and pursue that project, it was quite minimal.
Teresa Chin: This is Chris, you know, we added this producer down in Texas, we could business with him today in New Mexico as Jamie said initial development is going to commence this year
Teresa Chin: with a few wells with opportunities for more in the future. [inaudible]
Teresa Chin: So I think, as Jamie alluded to, it's a gaffy area.
Um...
Speaker Change: We hesitate on how much we want to go ahead on EBITDA, but it's not a lot of capital, it's some $5 million kind of on a run rate basis, but to Jamie's point when you look at the capital needed to...
Thank you.
Speaker Change: Billed and pursued that project, it was quite minimal, but we see a lot of growth with the acreage that we are getting down there and so we are excited about adding that project.
Chris Kendrick: But we see a lot of growth with the acreage that we are getting down there. And so we are excited about adding that project. Got it.
Trevor Howard: And on the direct commodity exposure front, appreciate the $20 million mark to market illustrative data point for 2025. Looking to 2026, how hedged or insulated are you from commodity exposure at that We have, as you know, Theresa, and we've said this, we've had a literally multi-year program, heavily weighted in the front, and literally it is more tailored as you get further out you go from a timeline standpoint. So we've got good hedges in place through the first half into next year, and then obviously it starts to decline more. So I think we still feel pretty good about what we've got and our ability to continue to add where we see opportunities.
Speaker Change: We have, we have, as you know, Theresa and we've said this, you know, we've had a multi, literally multi-year program heavily waited in the front and literally it's more, it is more tailored as you get out further out you go from a timeline standpoint.
Speaker Change: So we've got good edges in place through the first half of into next year and then obviously it starts to decline more. So I think we still feel pretty good about.
Speaker Change: What we've got and our ability to continue to add where we see opportunities. Now the curve has become very flat.
Trevor Howard: The curve has become very flat. So that's kind of where we wanted just to look at it because there was so much noise in the marketplace. So we'll go look out and we're looking to continue to add to our overall hedging profile as we get out into that back end of 26. Thank you.
Speaker Change: So that's kind of where we wanted just to look at it because it was so much noise.
Speaker Change: in the marketplace. So we'll go look out and we're looking to continue to add to our overall hedging profile as we get out into the back end of 26.
Thank you.
Robert Mosca: Thank you. The next question goes from Robert Moska with Mizuhau Securities. You may proceed.
Robert Mosca: The next question comes from Robert Mosca with Mizuho Securities. You may proceed. Hi, good morning, everyone. Thanks for taking my question. So first one for me circling back to the buyback authorization. Just wondering how you approach that being mindful of the float. I think you have a lockup expiration approaching here in the next few months. So just wondering how you plan to navigate that.
Robert Mosca: Hi, good morning, everyone. Thanks for taking my question. So first of all, for me, circling back to the by-back authorization, just wondering how you approach that being mindful of the float. I think you have a lot of expert exploration approaching here in the next few months. So just wondering how you plan to navigate that.
Michael Blum, Michael
Trevor Howard: Yeah, thanks for the question, Rob. First and foremost, I just wanted to point out that we are not speculating on what our sponsors are going to do. Really, the share repurchase program is just driven by our conviction and our earnings and strong free cash flow potential, and the opportunity we see to create value for our shareholders, given where the stock is traded today. Since being public, we have increased the float by over five times, so there's sufficient amount of float today to execute on the existing program. But to the extent that down the road, if we are able to participate in a more bilateral trade, then that's something that if we see value, we're willing to entertain.
Robert Mosca: Yeah, thanks for the question, Rob. First and foremost, I just wanted to point out that up.
Robert Mosca: We are not speculating on what our sponsors are going to do.
Robert Mosca: Really, the share reported program is just driven by our conviction and our earnings and strong free cash flow potential.
Robert Mosca: Today to execute on the existing program but to the extent that down the road if we are able to participate in a more bilateral trade then that's something that if we see value we're willing to entertain but that said the Repurchase program. .
Robert Mosca: But that said, the repurchase program, how we think about it is just what's within our control, and what's within our control is open market purchases. Got it. Thanks for that color, Trevor.
Robert Mosca: How we think about it is just what's within our control and what's within our control is open market purchases.
Speaker Change: Got a thing for that color, Trevor, and maybe for my follow-up.
Trevor Howard: And maybe for my follow up, I think there's an expectation that Kinect should realize some cost savings on the NGL pipeline side. Does that outlook maybe provide even more of an offset if you do enter a lower growth environment when it comes to signing new NGL contracts? Just wondering how we should think about that. Yeah, look, I think the short answer is it absolutely does. As you know, we have a number of contracts that roll off. We have a couple that roll off next year. We have a contract that rolls off in 27. We have a contract that rolls off in 28.
Robert Mosca: I think there's an expectation that connects realize some cost savings on the NGL pipeline side. Does that outlook maybe provide even more of an offset if you do enter a lower growth environment when it comes to signing new NGL contracts just wondering how we should think about that? Thank you very much.
Robert Mosca: Yeah, look, I think of the, I mean, the short answer is that absolutely does. As you know, we have a number of contracts that roll off. We have a couple that roll off next year.
Robert Mosca: I have a contract that rolls off in 27. We have a contract that rolls off in 28. And when I say a contract, these are all NGO contracts. They are all well above market price.
Trevor Howard: And when I say a contract, these are all NGL contracts. They are all well above market price today. And obviously, they provide a lot of overall economic benefit to the company going forward. So yes, even in a world that is more tempered as far as growth and production profile going forward, there's still a significant embedded value with respect to those contracts and those roll offs. Rob, the other thing I would add is that if you go back to the comments that I made earlier about how we think about our processing capacity step ups over, you know, the 2024 to 2029 period, and then you triangulate that with, you know, the finance related objectives of a 10% compound annual adjusted EBITDA CAGR through that period of time, it's pretty clear that earnings are growing more quickly than processing capacity expansions.
Robert Mosca: today and obviously they provide a lot of overall economic benefit to the company going forward. So yes, in even...
Robert Mosca: and even in a world that is more tempered, as far as growth and production profile going forward, there's still a significant embedded value with respect to those contracts and those roll offs.
They're all the other thing I don't know what to add, this is that [inaudible]
Robert Mosca: If you go back to the comments that I made earlier about how we think about our processing capacity step-ups
Robert Mosca: Over, you know, the 2024 to 2029 period, and then you try and you light that with...
Robert Mosca: You know, the finance-related objectives of a 10% compound annual adjusted EBITDA Kager through that period of time, it's pretty clear that earnings are growing more quickly than processing capacity expansions.
Robert Mosca: All right, really helpful.
Alright, really helpful. Thanks for the time today.
Unknown Executive: Thanks for the time today. Thanks, Rob. Thank you.
Thank you, Rob.
Unknown Executive: As a quick reminder, if you'd like to ask a question, please press star one.
Speaker Change: Thank you. As a quick reminder, if you'd like to ask a question, please press star one. The next question comes from Keith Stanley with Wolf Research. You may proceed.
Keith Stanley: The next question comes from Keith Stanley with Wolf Research. You may proceed. Hi, good morning. Maybe I could start on. second quarter. Release says a billion dollars. on the first half. One could read that as. Is that the right read and growth is really kind of entirely? for the Affair. Keith, I think that your analysis on the point is, I think, pretty much the case, right? It's pretty flat until you get King's Landing starting online. You have a little bit on Barilla draw, but again, you know, it's puts and takes, again, swings and roundabouts, but you are right in the context of the real step change happens when King's Landing comes on, and you take, you know, that 110, whatever it is, plus of curtailed volume and constrained volume, and basically start processing it.
Keith Stanley: Hi, good morning. Maybe I could start on the second quarter if I could be more specific. The release says a billion dollars rounded.
Keith Stanley: of EBITDA in the first half of the year, and one could read that as EBITDA is pretty flat in Q2 at 250 again. Is that the right read and growth is really kind of entirely in the second half of the year, or is it fair to assume some growth out of winter for this quarter?
Keith, I think that's your analysis on the point is…
I think pretty much [inaudible]
Keith Stanley: The case, right? It's pretty flat until you get King's Landing starting online.
Keith Stanley: You have a little bit on Berulla Draw, but again, yeah, what's put some takes, again, swings around about, but you are right, in context of the real step change happens when Kings Landing comes on, and you take, you know, that...
Keith Stanley: 110, whatever it is, plus of, of cataloged volume and, and constrained volume, and basically stop processing it.
Jamie Welch: So that obviously is where you really start to see a significant increase in your overall economic profile. With King's Landing coming online, too, you also have the margins step up on the currently gathered Eddy County project volume. Yeah, exactly. Because they are right now, they're just gathered, right? They're not processed. Got it.
Keith Stanley: So that obviously is where you really start to see a significant increase in your overall economic profile. With King's Landing coming online too, you also have the margins stepped up on the currently gathered Eddie County Project Volumes.
Keith Stanley: Yes, exactly, because they are right now, they're just gathered, right? They're not processed.
Jamie Welch: I second question. So you talked earlier about having the ability to do it all pursue growth and M&A if it's out there. Steve I. J. Ratings, and now... five acts as well. How do you think about some of the non-operated pipeline assets as part of that equation? sell assets like GCX. Source of Funds. Is that an option that's on the table? you're looking to kind of do all the pieces. Um, I would say yes. We're always open for business if we see compelling value. There are some of the three EMIs that I would say are less strategic, maybe, in the context than others, but I definitely think we are open to maximizing value and redeploying proceeds into highly constructive, compelling Value Opportunity.
Keith Stanley: How do you think about some of the non-operated pipeline assets as part of that equation? Because in the past the company has been willing to sell assets like GCX as a source of funds. Is that an option that's on the table as you're looking to kind of do all the pieces of the puzzle? [inaudible]
I would say...
Yes.
Yeah, I would say less strategic. [inaudible]
maybe in the context then others.
Veil Opportunities.
Michael Blum, David
Jamie Welch: That includes buying back our stock. Got it. Thank No problem. Thank you.
That includes buying back our stock.
Thank you. Thank you.
You got it. Thank you.
Speaker Change: That's a problem. The following comes from Mona Gupta with UBS, he may proceed.
Mana Gupta: The following comes from Mana Gupta with UBS, you may proceed. Good morning. I want to understand, it's been about like almost four or five months since you acquired those assets from Permian Resources. So, are the Brillo assets actually meeting your expectations, exceeding expectations? If you could help us understand that a little better.
Mana Gupta: Good morning. I want to understand it's been about like almost four or five months since you acquired those assets from from your resources. So are the brilliant assets actually meeting your expectations, exceeding expectations, if you could help us understand that will be better.
Jamie Welch: Sure, Manav, thanks for the question. The BarillaDraw acquisition has been a fantastic acquisition. It has exceeded our expectations. Lots of activity coming on. Again, We've just started processing some of the volume, but we really start, we see a step change in the amount of process of what happens on that particular asset position at the beginning of 2028 when another existing processing dedication terminates. But it is, there's been a lot of activity. It's a really exciting acreage position for Permian Resources, one that they're putting a lot of capital behind. There's a lot of turn in line activity that remains.
Mana Gupta: Sure, Monar, thanks for the question. The Brawler Drawer Acquisition has been a fantastic acquisition. It has exceeded our expectations. Lots of activity coming on, again.
Mana Gupta: We've just started processing some of the volume, but we really start, we see a step change in the amount of process, of what happens on that particular asset position at the beginning of 2028 when another existing processing dedication terminates.
Mana Gupta: putting a lot of capital behind. There's a lot of turn-in line activity that remains.
Jamie Welch: Already we've seen a large well pad. We've got another very large well pad slated for the second half of this year.
Already We've Seen A Large
Mana Gupta: Well-pad, we've got another very large well-pad slated for the second half of this year, so I think we're really, really excited by what we've seen.
Unknown Executive: So I think we're really, really excited by what we've seen. Perfect.
Jamie Welch: My quick follow-up here is, and I understand you haven't FID'd the behind-the-meter power solutions yet, but in terms of the discussions and demand out there, what are you seeing in terms of, you know, companies coming in or customers coming in with need for behind-the-meter power solutions, and how can that play in the hands of Kinetik? Thank you. Sure. So, just to frame the power generation opportunity, we have a couple of partners that we've been talking to. It's not more expensive than that. They all have relatively concentrated needs for electric power from a geographical low position standpoint, which maps very nicely to our needs.
Speaker Change: Perfect, my quick follow-up here is an understanding you haven't FID behind the meter power solution yet, but in terms of the discussions and demand out there, what are you seeing in terms of companies coming in or customers coming in with need for behind the meter power solutions, and how can they play in the hands of Kinetik? Thank you.
Michael Blum, David
Speaker Change: Sure. So just to frame the power generation opportunity, we have a couple of partners that we've been talking to. It's not more expensive than that. They all have relatively concentrated needs for electric power from a geographical low position standpoint which maps very nicely to our needs. [inaudible]
Jamie Welch: So, there's a lot of synergies by pooling our resources together, co-owning an asset, and taking our proportionate level of electricity. So we continue to see, we think this is really, I would say, this is the beta test for this project and how we think about power going forward. And if this works as we anticipate it will, there is certainly opportunity with at least one of these potential joint venture partners to do this again in New Mexico. So that's definitely, you know, I think we're really excited by what we can do here. And we just think it is, again, it is very, it's just smart business, right?
Speaker Change: So there's a lot of synergies by pooling our resources together, co-owning an asset and taking out proportionate level of electricity.
Speaker Change: So we continue to see, we think this is really, I would say, this is the beta test.
Speaker Change: for this project and how we think about power going forward. And if this works as we anticipate it will, there is certainly opportunity with at least one of these potential joint venture partners to do this again in New Mexico.
Speaker Change: So, that's definitely, you know, I think we're really excited by what we, what we can do here and we just think it is, again, it is very, it's just my business, right? This is optimizing your cost of goods.
Unknown Executive: This is optimizing your cost of goods. Thank you.
Thank you. Thank you.
Thank you so much.
Jamie Welch: There are currently no more questions queued, so I'll pass it back over to Jamie for a closing remark.
Speaker Change: Thank you. They're currently no more questions, queues I'll pass you back over to Jamie for closing remarks.
Unknown Executive: Thank you very much, everybody. We'll see probably many of you at EIC in the next few weeks. And until then, signing off.
Speaker Change: Thank you very much everybody. We'll see I probably many of you at EIC in the next few weeks and until then signing off.
Michael Blum.
Unknown Executive: This concludes today's conference call. Thank you for your participation. You may now disconnect your line.
Speaker Change: This concludes today's conference call. Thank you for your participation. You may now disconnect your line.