Kinetik Reports Second Quarter 2023 Financial and Operating Results

Kinetik Holdings Inc. (NYSE: KNTK) (“Kinetik” or the “Company”) today reported financial results for the quarter ended June 30, 2023.

Second Quarter 2023 Results and Commentary

For the three and six months ended June 30, 2023, Kinetik processed natural gas volumes of 1.48 Bcf/d and 1.42 Bcf/d, respectively, and reported net income including noncontrolling interest of $71.7 million and $76.0 million, respectively. Kinetik generated Adjusted EBITDA¹ of $208.0 million and $395.5 million for the three and six months ended June 30, 2023, respectively, Distributable Cash Flow (“DCF”)¹ of $144.0 million and $270.7 million for the three and six months ended June 30, 2023, respectively, and Free Cash Flow (“FCF”)¹ of $(82.1) million and $(56.2) million for the three and six months ended June 30, 2023, respectively. The results were primarily driven by increased volumes across both the Midstream Logistics and Pipeline Transportation segments.

“Building off the momentum of a strong first quarter and our announced entry into New Mexico, we are pleased to report our second quarter 2023 results,” said Jamie Welch, Kinetik’s Chief Executive Officer and President. “Within our Midstream Logistics segment, processed gas volumes increased 10% quarter-over-quarter attributable to elevated producer turn-in-line activity and encouraging well results. This was despite the heat-related weather challenges faced across the Permian basin in May and June where record temperatures affected the ability of producers, utilities and service providers to maintain equipment run times and production.

“During the second quarter, we successfully executed several new gas gathering and processing agreements. Notably, one of these new commercial agreements is with a Lea County, New Mexico customer supported by a minimum volume commitment. This new multi-year agreement is expected to commence in the first quarter of 2024 following the in-service of our New Mexico system expansion. We continue to have constructive commercial discussions with several New Mexico producers and are excited for the opportunities to further expand our business. These recent commercial successes further reinforce the highly strategic value of the projects in our 2023 capital program. Following the completion of the New Mexico expansion, Delaware Link, and PHP expansion, we can offer New Mexico producers a ‘wellhead to Gulf Coast market’ solution on wholly- or partially-owned Kinetik infrastructure for both natural gas and natural gas liquids.

“As we enter the second half of the year, we forecast quarter-over-quarter Adjusted EBITDA¹ growth at our Midstream Logistics segment attributable to expected higher gas processed volumes and improved commodity prices as compared to the first half of 2023. Within our Pipeline Transportation segment, we are excited about the previously announced projects which are expected to be placed in-service in the fourth quarter of 2023. Taken together, our outlook is tracking towards the high end of our 2023 Adjusted EBITDA¹ Guidance Range and at the top end of our 2023 Capital Expenditures range. In addition, the Free Cash Flow¹ outlook for 2024 remains robust as significant year-on-year Adjusted EBITDA¹ growth is coupled with less than $150 million of expected Capital Expenditures. The future is certainly looking bright at Kinetik as we expand our system footprint, grow our volume base, and have continued commercial success.”

Kinetik remains highly focused on its capital allocation priorities and maximizing shareholder value. In the second quarter, the Company opportunistically repurchased $3.3 million of shares of Class A common stock under the previously announced $100 million Repurchase Program. Year to date, Kinetik has repurchased $5.8 million of shares, leaving $94.2 million of remaining authorized capacity for additional share repurchases that the Company may opportunistically execute at any time. The approximately 194,000 repurchased shares will partially offset issuances pursuant to the Company’s Dividend and Distribution Reinvestment Plan.

Financial

Selected Key Metrics:

Strategic

Operational

Upcoming Tour Dates

Kinetik plans to participate at the following upcoming conferences and events:

Investor Presentation

An updated investor presentation will be available under Events and Presentations in the Investors section of the Company’s website at www.kinetik.com.

Conference Call and Webcast

Kinetik will host its second quarter 2023 results conference call on Tuesday, August 8, 2023 at 8:00 am Central Daylight Time (9:00 am Eastern Daylight Time) to discuss second quarter results. To access a live webcast of the conference call, please visit the Investor Relations section of Kinetik’s website at ir.kinetik.com. A replay of the conference call also will be available on the website following the call.

About Kinetik Holdings Inc.

Kinetik is a fully integrated, pure-play, Permian-to-Gulf Coast midstream C-corporation operating in the Delaware Basin. Kinetik is headquartered in Midland, Texas and has a significant presence in Houston, Texas. Kinetik provides comprehensive gathering, transportation, compression, processing and treating services for companies that produce natural gas, natural gas liquids, crude oil and water. Kinetik posts announcements, operational updates, investor information and press releases on its website, www.kinetik.com.

Forward-looking statements

This news release includes certain statements that may constitute “forward-looking statements” for purposes of the federal securities laws. Forward-looking statements include, but are not limited to, statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “seeks,” “possible,” “potential,” “predict,” “project,” “prospects,” “guidance,” “outlook,” “should,” “would,” “will,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements include, but are not limited to, statements about the Company’s future plans, expectations, and objectives for the Company’s operations, including statements about strategy, synergies, sustainability initiatives, portfolio monetization opportunities, expansion projects and future operations, and financial guidance; the Company’s share repurchase program and the projected timing, purchase price and number of shares purchased under such program, if at all; projected dividend amounts and the timing thereof; the Company’s leverage and financial profile and its ability to improve its credit ratings. While forward-looking statements are based on assumptions and analyses made by us that we believe to be reasonable under the circumstances, whether actual results and developments will meet our expectations and predictions depend on a number of risks and uncertainties which could cause our actual results, performance, and financial condition to differ materially from our expectations. See Part II, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022. Any forward-looking statement made by us in this news release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement whether as a result of new information, future development, or otherwise, except as may be required by law.

Additional information

Additional information follows, including a reconciliation of Adjusted EBITDA, Distributable Cash Flow, Free Cash Flow, and Net Debt (non-GAAP financial measures) to the GAAP measures.

Non-GAAP financial measures

Kinetik’s financial information includes information prepared in conformity with generally accepted accounting principles (GAAP) as well as non-GAAP financial information. It is management’s intent to provide non-GAAP financial information to enhance understanding of our consolidated financial information as prepared in according with GAAP. Adjusted EBITDA, Distributable Cash Flow, Free Cash Flow, Dividend Coverage Ratio, Net Debt and Leverage Ratio are non-GAAP measures. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated. See “Reconciliation of GAAP to Non-GAAP Measures” elsewhere in this news release.

Notes Regarding Presentation of Financial Information

The following addresses the results of our operations for the three and six months ended June 30, 2023, as compared to our results of operations for the three and six months ended June 30, 2022. As the business combination between BCP Raptor Holdco, LP, Kinetik’s predecessor for accounting purposes (“BCP”) and Altus Midstream LP (“Altus”) (the “Transaction”) was determined to be a reverse merger, BCP was considered the accounting acquirer and Altus was considered the legal acquirer. Therefore, BCP’s net assets, carrying at historical value, were presented as the predecessor to the Company’s historical financial statements and the comparable period presented herein reflects the results of operations of BCP for the three and six months ended June 30, 2022 and Altus’ results of operations from February 22, 2022, the closing date of the Transaction, through June 30, 2022. Kinetik’s financial results on and after February 22, 2022 reflect the results of the combined company.

Unless otherwise noted or the context requires otherwise, references herein to Kinetik Holdings Inc. or “the Company” with respect to time periods prior to February 22, 2022 include BCP and its consolidated subsidiaries and do not include Altus and its consolidated subsidiaries, while references herein to Kinetik Holdings Inc. with respect to time periods from and after February 22, 2022 include Altus and its consolidated subsidiaries.

The Company completed a two-for-one Stock Split on June 8, 2022. All corresponding per-share and share amounts for periods prior to June 8, 2022 have been retroactively restated to reflect the two-for-one Stock Split.