Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kinetik Holdings Inc (KNTK, Financial) reported its best quarter as a public company in terms of adjusted EBITDA, with a 23% year-over-year increase.
- The company processed gas volumes of 1.71 billion cubic feet per day, marking a 15% growth year-over-year.
- Kinetik Holdings Inc (KNTK) acquired an additional equity interest in EPIC Crude, increasing its ownership to 27.5%, which led to a credit rating upgrade for EPIC Crude.
- The company received MRV plan approval from the EPA for its acid gas injection wells, enabling economic benefits from CO2 sequestration through 45Q credits.
- Kinetik Holdings Inc (KNTK) raised its quarterly cash dividend to $3.12 on an annualized basis, reflecting strong performance and confidence in future growth.
Negative Points
- Negative gas prices persisted at the Waha Hub, with the gas daily price averaging negative $1 per Mcf for the quarter.
- There were 170 million cubic feet per day of wellhead gas volume curtailed on Kinetik's system due to pricing issues.
- The company faces challenges with connecting its North and South systems, which is a strategic objective yet to be fully realized.
- Kinetik Holdings Inc (KNTK) anticipates a higher capital expenditure in 2025, which may impact dividend growth.
- The company operates in a competitive environment with ongoing industry consolidation, which could affect its strategic positioning.
Q & A Highlights
Q: How does sour gas treating and CO2 sequestration impact your G&P fees and competitive positioning for acreage dedications?
A: Jamie Welch, President and CEO, explained that sour gas treating and CO2 sequestration significantly enhance margins. The average gross fee for Delaware South is around $1 to $1.10, while Delaware North, with sour gas, averages $1.80. The stair-step approach in treating more complex gas increases the overall rate structure, providing a competitive edge for upcoming acreage dedications.
Q: What progress has been made with Epic Crude, and what are the plans for expansion?
A: Jamie Welch noted that Epic Crude has secured long-term contracts, including a significant one from Diamondback Energy. Expansion decisions will depend on replacing short-term contracts with medium to long-term ones. The pipeline is well-positioned for expansion, contingent on market conditions and contract portfolio adjustments.
Q: What factors contributed to the outperformance this quarter, and how sustainable is it into 2025?
A: Jamie Welch attributed the outperformance to exceptional operational efficiencies, including maintenance capital investments and optimization of PHP space due to negative Waha spreads. These factors, along with diversified business operations, are expected to continue contributing to performance, though the degree may vary.
Q: Can you elaborate on the new pipeline connector and its impact on commercial operations?
A: Jamie Welch and Chris Kendrick highlighted that the new pipeline connector will initially increase capacity by 150 million cubic feet per day, with potential expansion. This strategic move enhances system connectivity, offering significant commercial upside and flexibility for future growth.
Q: What is your outlook on the commodity price environment for the fourth quarter and 2025, and when do you expect Alpine High volumes to return?
A: Jamie Welch indicated that Waha prices are expected to remain volatile, with potential positive pricing in December sufficient to bring back Alpine High volumes. The basin remains tight, and additional pipeline capacity will be needed to accommodate growth. The company remains optimistic about future opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
