Kinetik ((KNTK)) has held its Q4 earnings call. Read on for the main highlights of the call.
Kinetik Holdings’ recent earnings call painted a picture of robust growth and strategic advancements, despite some operational hurdles in the fourth quarter. The company showcased substantial growth in gas processing volumes and adjusted EBITDA, bolstered by strategic mergers and acquisitions and operational expansions. While the fourth quarter presented challenges due to negative gas prices and maintenance activities, Kinetik Holdings has implemented new risk measures to address these issues. The outlook for 2025 remains optimistic, with expectations of significant EBITDA growth.
Record Volume Growth
Kinetik Holdings reported a record increase in gas processing volumes, reaching an average of 1.64 billion cubic feet per day, marking a 13% increase year over year. This growth underscores the company’s successful expansion efforts and its ability to capitalize on increased demand in the gas market.
Increased Adjusted EBITDA
The company’s adjusted EBITDA saw a notable rise to $971 million, reflecting a 16% increase year over year. When normalizing for November impacts, this figure represents an 18% increase, highlighting the company’s strong financial performance and operational efficiency.
Successful M&A and Expansion
Kinetik Holdings completed $1 billion in strategic and accretive transactions, including the acquisition of Durango Permian and a gas gathering and processing agreement in Eddy County. These moves are set to enhance the company’s market position and drive future growth.
Leverage Reduction
The company successfully reduced its leverage by nearly half a turn to 3.4 times, falling below its target. This reduction reflects Kinetik’s commitment to maintaining a strong financial position and enhancing shareholder value.
Dividend Increase
In a move to accelerate the return of capital to shareholders, Kinetik Holdings increased its cash dividend by 4%. This decision underscores the company’s confidence in its financial health and future prospects.
Positive Outlook by S&P
Kinetik Holdings was placed on a positive outlook by S&P, reflecting the company’s strong performance and growth potential. This positive outlook is expected to bolster investor confidence and support future capital raising efforts.
2025 Growth Expectations
Looking ahead, Kinetik Holdings expects a 15% growth in adjusted EBITDA for 2025, with projections ranging between $1.09 billion and $1.15 billion. The company anticipates a 20% increase in gas processed volumes, driven by the startup of the King’s Landing complex and recently acquired assets.
Fourth Quarter Operational Challenges
The fourth quarter presented challenges with unexpected events, including negative Waha gas prices and plant operation restrictions, resulting in a $15 million headwind. Kinetik Holdings has implemented new risk measures to stabilize operations and mitigate future impacts.
Negative Gas Prices Impact
Negative gas prices at Waha, primarily due to scheduled maintenance on several intrastate gas pipelines, led to volume curtailments and gross margin losses. Kinetik Holdings is actively addressing these challenges to minimize future exposure to gas market volatility.
Exposure to Gas Market Volatility
The company’s exposure to negative Waha gas prices resulted in gross margin losses, highlighting the challenges of operating in ethane rejection. Kinetik Holdings is exploring strategies to manage this volatility and protect its financial performance.
Forward-Looking Guidance
Kinetik Holdings provided a detailed outlook for 2025, projecting a 15% growth in adjusted EBITDA and a significant 20% increase in gas processed volumes. The company plans capital expenditures between $450 million and $540 million, with up to $75 million contingent on the cost of the King’s Landing complex. Additionally, Kinetik is exploring a large-scale gas-fired power generation facility to manage electricity operational expenses, aiming for a final investment decision by year-end. The company targets a 10% annual EBITDA compound growth rate through 2030, maintaining financial flexibility for organic and inorganic opportunities.
In summary, Kinetik Holdings’ earnings call highlighted a strong financial performance, driven by strategic growth initiatives and operational efficiencies. Despite facing some challenges in the fourth quarter, the company remains optimistic about its future, with significant growth expectations for 2025 and beyond. Investors can take confidence in Kinetik’s strategic direction and commitment to enhancing shareholder value.