Overview

Kinetik is an integrated midstream energy company in the Permian Basin, providing a variety of services including natural gas gathering, transportation, compression and processing; NGL stabilization and transportation; produced water gathering and disposal; and crude oil gathering, stabilization, storage and transportation. The company has two main business segments - Midstream Logistics and Pipeline Transportation.

Financial Highlights

For the three months ended March 31, 2025, Kinetik reported the following key financial results:

• Total operating revenues of $443.3 million, up 30% from $341.4 million in the same period in 2024. This was driven by higher service and product revenue from recent acquisitions.

• Net income including noncontrolling interest of $19.3 million, down 46% from $35.4 million in Q1 2024. The decrease was primarily due to higher operating costs and expenses.

• Adjusted EBITDA of $250.0 million, up 7% from $233.6 million in Q1 2024. The increase was mainly due to higher total operating revenue, partially offset by higher costs.

• Midstream Logistics segment Adjusted EBITDA of $160.2 million, up 12% year-over-year. Pipeline Transportation segment Adjusted EBITDA was $93.9 million, down 2%.

Segment Performance

The Midstream Logistics segment, which accounts for over 98% of Kinetik’s operating revenues, saw a 12% increase in Adjusted EBITDA compared to Q1 2024. This was driven by higher service and product revenues, partially offset by increased costs. The segment’s gas gathering and processing, crude oil gathering/stabilization, and produced water gathering/disposal operations all contributed to the revenue growth.

The Pipeline Transportation segment, which includes Kinetik’s equity investments in major Permian Basin pipelines, saw a 2% decrease in Adjusted EBITDA. This was primarily due to lower operating revenue and proportionate EBITDA from the pipeline investments, partially offset by lower operating costs.

Acquisitions and Capital Expenditures

In January 2025, Kinetik completed the $193.1 million Barilla Draw Acquisition, which added natural gas and crude gathering pipelines and compression assets. This expanded the company’s midstream footprint in the Permian.

For the first quarter of 2025, Kinetik reported capital expenditures of $81.5 million, up from $60.2 million in Q1 2024. The increase was mainly due to the Barilla Draw acquisition and ongoing construction projects, including the $167.8 million Kings Landing gas processing plant expected to be completed in mid-2025.

Liquidity and Financing

Kinetik’s primary sources of liquidity are cash flow from operations, distributions from its pipeline joint ventures, and borrowings under its credit facilities. As of March 31, 2025, the company had $1.05 billion in 6.625% senior notes due 2028 and $1.0 billion in 5.875% senior notes due 2030 outstanding.

In April 2025, Kinetik amended its $200 million accounts receivable securitization facility, increasing the limit to $250 million and extending the maturity to March 2026. The company also declared a $0.78 per share dividend in April 2025.

Additionally, in May 2025 the board approved a $400 million increase to the company’s existing $100 million share repurchase program, for a total authorization of up to $500 million.

Outlook and Risks

Kinetik’s business faces several key risks and uncertainties, including:

Commodity Price Volatility: The company’s product sales revenue is exposed to fluctuations in natural gas, NGL and crude oil prices. Prolonged periods of low prices could adversely impact Kinetik’s financial performance.

Inflation and Interest Rates: Rising inflation and interest rates could increase Kinetik’s financing costs and operating expenses, potentially straining its ability to meet debt obligations and fund capital projects.

Regulatory and Environmental Matters: The company recorded a $24 million liability related to alleged excess emission violations at certain acquired gas plants and compressor stations. Further environmental regulatory issues could result in additional costs.

Despite these risks, Kinetik’s diversified midstream asset base, strategic Permian Basin footprint, and stable cash flows from fee-based services and pipeline equity investments position the company well for the future. The recent acquisitions and ongoing capital projects should support continued growth in the Midstream Logistics segment.

Overall, Kinetik delivered a solid first quarter performance, with revenue and Adjusted EBITDA growth offsetting higher costs. The company’s financial position remains strong, providing flexibility to fund future expansion and return capital to shareholders. However, commodity price volatility, inflation, and regulatory risks will require close monitoring going forward.