Kinetik signals revised $985M adjusted EBITDA midpoint for 2025 while advancing Kings Landing and ECCC projects

Earnings Call Insights: Kinetik Holdings (KNTK) Q3 2025

MANAGEMENT VIEW

* Jamie Welch, President and CEO, stated that "Kinetiks' third quarter results reflect a combination of strong execution across key strategic initiatives and the realities of a challenging commodity price environment, particularly in September." Welch highlighted the start-up of the Kings Landing processing plant in New Mexico and noted, "We now have a well-constructed plant at a site that will allow for processing capacity expansions with much fewer challenges to contend with."
* Welch reported that Kings Landing is "consistently flowing over 100 million cubic feet per day, which is in line with our original expectations." He outlined further gathering system modifications to direct sweet gas to Kings Landing and keep sour gas flowing to Dagger Draw and Maljamar.
* Welch announced Kinetik’s finalized agreement with Competitive Power Ventures to connect its residue gas pipeline network to the 1,350-megawatt CPV Basin Ranch Energy Center in Texas, with no capital cost to Kinetik, providing "another highly efficient and accretive pipeline outlet for our residue gas."
* Welch detailed a 5-year European LNG pricing agreement with INEOS at Port Arthur LNG beginning in early 2027, providing "diversified exposure to international pricing."
* Welch addressed recent challenges, stating, "Over the past 4 quarters, we have stumbled, and we recognize that we need to do better...Our reputations and credibility are in question, and we will respond with relentless grit, purpose, and resolve to address and rectify the situation."
* Trevor Howard, Senior VP & CFO, stated, "In the third quarter, we reported adjusted EBITDA of $243 million. We generated a distributable cash flow of $158 million, and free cash flow was $51 million."
* Howard noted capital expenditures of $154 million and explained the revised full-year adjusted EBITDA guidance range to $965 million to $1.005 billion, citing volume-related headwinds, commodity price volatility, and the timing of the Kings Landing start-up.

OUTLOOK

* Howard confirmed, "We are tightening our full-year [capital] range to $485 million to $515 million, given our heightened visibility with 2 months of the year remaining and the FID of our Kings Landing acid gas injection project."
* He stated, "We have revised 2025 adjusted EBITDA guidance to $985 million at the midpoint versus our previous guidance in August."
* Welch expressed confidence in the long-term strategy: "Looking ahead, we're executing on a robust multiyear organic investment strategy that positions Kinetik for long-term success."

FINANCIAL RESULTS

* Howard reported, "In the third quarter, we reported adjusted EBITDA of $243 million. We generated a distributable cash flow of $158 million, and free cash flow was $51 million."
* He detailed that the Midstream Logistics segment generated adjusted EBITDA of $151 million, and Pipeline Transportation segment generated $95 million.
* Howard cited, "Total capital expenditures for the quarter were $154 million."
* He explained negative impacts to full-year earnings from delays in Kings Landing's start-up ($20 million), commodity price declines (nearly $30 million), and curtailments (approximately $20 million).
* Kinetik received over $500 million in cash proceeds from the EPIC crude sale and used them to pay down debt, reducing its leverage ratio.

Q&A

* Brandon Bingham, Scotiabank: Asked about producer delays and their impact on 2026. Welch responded, "So we've probably seen maybe one move into early 2026, but not really that significant...it's more about moving things within the quarter, which obviously has a knock-on impact."
* Gabriel Moreen, Mizuho: Inquired about 2026 growth and LNG strategy. Welch said, "'26 is, for us, we are trying to discern exactly the level of activity...Most importantly, the framework that we obviously had historically articulated, Kings Landing, is now online."
* Jacqueline Koletas, Goldman Sachs: Asked about hedging strategy and Kings Landing ramp. Howard responded, "For 2025, we're relatively well hedged...across most products between C1 through C5 and WTI."
* Jeremy Tonet, JPMorgan: Questioned the $1.2 billion EBITDA run rate. Kris Kindrick, SVP Commercial, replied, "If you're going to think about it in just easy terms between the shut-ins and the delayed and turn-in-line activity and Epic, you're well over 60% of your difference."
* Keith Stanley, Wolfe Research: Asked about Q4 EBITDA and King's Landing volumes. Howard said, "That assumes our gas-focused shut-in volume as well as our oil-focused producers shut-in volume, as well as timing delays...there is an element of pricing."
* Michael Blum, Wells Fargo: Sought clarity on Waha exposure management. Kindrick replied, "We have our existing capacity today. We have more capacity next year. And then we have this new tranche of capacity, which comes on for 2028."
* Unknown Analyst, UBS: Asked about data center-related infrastructure and private vs. public producer activity. Howard noted, "The private producers that we've seen have been, I'd say, a little bit more price sensitive, particularly in this current environment, than some of the publics."

SENTIMENT ANALYSIS

* Analysts maintained a neutral to slightly negative tone, focusing on delays, commodity price volatility, and the timing of growth projects. There was persistent questioning about future growth rates, hedging, and the impact of shut-ins on guidance.
* Management’s tone shifted from confident in prepared remarks to defensive and candid regarding recent underperformance. Welch stated, "Our reputations and credibility are in question, and we will respond with relentless grit, purpose, and resolve to address and rectify the situation."
* Compared to last quarter, management’s tone was more apologetic and focused on corrective actions, while analysts were more probing on the sustainability of guidance and project execution.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter featured a guidance reduction to $985 million at the midpoint, compared to $1.06 billion midpoint guidance in Q2.
* Management acknowledged shortfalls in meeting financial expectations, referencing delays in Kings Landing and greater commodity volatility, in contrast to last quarter’s emphasis on resilience and growth outlook.
* Analyst focus shifted from optimism about project ramps and capital allocation to concern over execution risk, shut-ins, and commodity price headwinds.
* Management’s tone evolved from confident and forward-looking to more defensive and determined to restore credibility.

RISKS AND CONCERNS

* Management highlighted challenges integrating Delaware North, delays at Kings Landing, and persistent commodity price and inflationary headwinds.
* Howard cited negative impacts from Waha natural gas price declines, curtailments, and producer-directed delays.
* Analysts expressed concern about timing of volume ramp, ongoing price volatility, and exposure to shut-ins.
* Welch addressed these risks by stating Kinetik will "aggressively reduce our controllable costs in all segments" and improve forecasting by evaluating the use of AI tools and machine learning.

FINAL TAKEAWAY

Management acknowledged the recent underperformance and revised guidance, but emphasized ongoing execution of strategic projects and long-term value creation through disciplined investment, cost controls, and strengthened commercial relationships in the Permian Basin. The focus remains on restoring credibility, capturing new market opportunities, and delivering sustainable shareholder returns.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/kntk/earnings/transcripts]

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