Kinetik ((KNTK)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Kinetik’s recent earnings call painted a picture of both strategic progress and notable challenges. The company celebrated achievements like the successful launch of the Kings Landing project and new partnerships, yet also faced hurdles such as project delays, commodity price fluctuations, and production curtailments. Despite acknowledging past errors, Kinetik expressed a strong commitment to enhancing forecasting and cost management.
Kings Landing Project Success
The Kings Landing project has reached full commercial service as of September, adding over 100 million cubic feet per day of processing capacity in New Mexico. This milestone aligns with Kinetik’s original expectations and marks a significant achievement in their strategic goals.
ECCC Pipeline Progress
Kinetik reported substantial construction progress on the ECCC pipeline, which is expected to be operational by the second quarter of 2026. This pipeline will connect the Delaware North to Delaware South systems, enhancing the company’s infrastructure capabilities.
Strategic Partnership with CPV
The company finalized an agreement with Competitive Power Ventures to connect its pipeline network to the 1,350-megawatt CPV Basin Ranch Energy Center in Texas. Notably, this partnership was achieved at no capital cost to Kinetik, highlighting strategic collaboration.
European LNG Pricing Agreement
Kinetik has executed a 5-year LNG pricing agreement with INEOS at Port Arthur LNG, set to begin in early 2027. This deal provides customers with exposure to European TTF index pricing, diversifying Kinetik’s market reach.
Asset Sale Proceeds
The company successfully received over $500 million from the sale of EPIC Crude, which significantly reduced its leverage ratio by a quarter of a ton, strengthening its financial position.
Delayed King’s Landing Start-Up
Despite its eventual success, the King’s Landing project experienced a slower-than-anticipated start-up, which reduced full-year earnings by approximately $20 million.
Commodity Price Volatility
Kinetik faced sustained volatility in commodity prices, leading to a 12% decline from original February assumptions and impacting full-year EBITDA by nearly $30 million.
Production Curtailments
The company reported that approximately 20% of volumes were curtailed in October, affecting full-year earnings by about $20 million.
Decreased EBITDA Guidance
Kinetik revised its full-year adjusted EBITDA guidance to a range of $965 million to $1.005 billion, down from previous expectations, due to several operational challenges.
Midstream Logistics Segment Decline
The Midstream Logistics segment saw a 13% year-over-year decline in adjusted EBITDA, attributed to lower commodity prices and increased operating expenses.
Forward-Looking Guidance
Looking ahead, Kinetik has provided updated guidance and outlined strategic initiatives. The company revised its full-year adjusted EBITDA guidance, citing challenges such as the delayed start-up of Kings Landing and commodity price volatility. However, it emphasized the full operation of Kings Landing and strategic projects like the ECCC pipeline and LNG agreements, positioning itself for long-term growth in the Permian Basin.
In summary, Kinetik’s earnings call highlighted a balance of strategic achievements and operational challenges. The company’s commitment to improving forecasting and cost control, alongside its strategic initiatives, positions it for future growth despite current hurdles.