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The call conveyed a confident and constructive tone: management reported record Q1 adjusted EBITDA, strong cash generation, meaningful commercial contract amendments, regulatory approvals and tangible progress on capital projects (King’s Landing AGI/sour conversion, ECCC pipeline, power interconnections). These positives are balanced against significant short‑term headwinds from extreme Waha price dislocation and materially higher-than-expected gas curtailments that reduced near‑term volume growth assumptions. Management has offset much of the near-term revenue impact through marketing spreads, hedges, and additional Gulf Coast exposure, affirmed full‑year adjusted EBITDA guidance, and emphasized structural long‑term tailwinds (new egress capacity, LNG contract, commercial momentum). Given the record results, balance‑sheet strength, project and contract progress and management’s articulated plans to mitigate Waha risk — despite meaningful short‑term volume and price challenges — the overall tone is constructive and resilient.
Kinetik affirmed 2026 adjusted EBITDA guidance of $950 million–$1.05 billion after reporting a record Q1 adjusted EBITDA of $251 million, distributable cash flow of $181 million and free cash flow of $101 million; Q1 Midstream Logistics adj. EBITDA was $179 million (+12% YoY) and Pipeline Transportation was $78 million. Management now expects processed gas volumes to grow only low- to mid-single-digit % year‑over‑year (versus prior high‑single‑digit guidance), reflecting roughly 220 MMcf/d of average 2026 curtailments (up about 120 MMcf/d from prior assumptions) on a current processed gas base of ~1.8 Bcf/d — a temporary deferral that increases PDP entering 2027 — while roughly 75% of legacy Durango volumes have been amended. Offsets include wider Waha-to-Houston spreads (≈50% of transport spread exposure hedged for 2026), commodity hedges of ~75% for propane/butane and ~85% for crude/C5+, and an estimated ~$20 million uplift to 2026 adjusted EBITDA at current forwards (ex‑Gulf Coast marketing spread). They reiterated the expected quarterly cadence (Q1–Q2 ~$230–$240M; Q3–Q4 ~$260–$270M), kept 2026 CapEx at $450M–$510M (Q1 CapEx $91M) with spend evenly weighted thereafter, finished the quarter at 3.9x leverage with ample revolver capacity, and pointed to operational milestones and capacity adds (ECCC in‑service later this quarter; King’s Landing TAG operational capacity 26.5 MMcf/d with >31 MMcf/d permitted and AGI/TAG 20 MMcf/d; sour conversion on track for year‑end 2026) plus >5 Bcf/d new takeaway by early 2027 and ~6 Bcf/d more in 2028–29.
Q1 adjusted EBITDA was a quarterly record of $251 million (above the high end of prior range). Distributable cash flow was $181 million and free cash flow was $101 million, demonstrating strong cash generation and liquidity.
Midstream Logistics delivered record adjusted EBITDA of $179 million, up 12% year-over-year on essentially flat volumes, driven by Gulf Coast takeaway capacity, stronger-than-expected system operating performance, higher condensate/NGL recoveries and slightly lower unit operating costs.
Completed a significant New Mexico contract amendment expanding dedicated acreage by ~25%, consolidating agreements and extending terms through 2039. ~75% of legacy Durango gas processing volumes have been amended in the last four months, increasing fee-based mix and long-term visibility; management estimates a modest 2026 EBITDA uplift (~1%–2% of base business) and a higher fee percentage versus the pre-acquisition ~60% fee / 40% commodity mix.
Received all required BLM and NMOCD approvals to proceed with AGI and sour gas conversion for full 20 MMcf/d TAG capacity; long‑lead materials ordered, construction underway, first AGI well to be spud this summer. Project will provide total operational TAG capacity of 26.5 MMcf/d and permitted capacity >31 MMcf/d; phase one remains on track for in‑service by year‑end 2026.
Near-completion of ECCC pipeline (in‑service later this quarter) and progress on 40 MW behind‑the‑meter power at Diamond Cryer. Signed zero CapEx interconnection with Pecos Power and earlier CPV Basin Ranch interconnection — demonstrating a fee-based template to monetize residue gas as Permian power demand grows.
Management reports ~50% of transport spread exposure hedged in 2026; equity volume hedges ~75% for propane/butane and ~85% for crude and C5+. Mark-to-market estimate: ~+$20 million uplift to full‑year 2026 adjusted EBITDA at current forward commodity pricing (excluding Gulf Coast marketing spread).
Operating and G&A expenses tracking in line with budget; piloted Palantir in February to drive data-driven execution. Management progressing on operating cost reduction initiatives and insourcing opportunities to optimize cost structure for 2027+. 2026 CapEx guidance affirmed at $450M–$510M with Q1 CapEx of $91M.
Leverage at 3.9x (within target) with ample revolver capacity. Company secured additional Gulf Coast transport exposure (beginning 2028) and an INEOS European LNG contract starting early 2027; management highlights >5 Bcf/d new Permian egress by early 2027 and an additional ~6 Bcf/d across 2028–29 as structural tailwinds for long‑term growth.
Hello, everyone. Thank you for joining us, and welcome to the Kinetik Holdings Inc. First Quarter 2026 Results. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Alex Durkee, Head of Investor Relations. Please go ahead.
Good morning, and welcome to the Kinetik Holdings Inc. first quarter 2026 earnings conference call. Our speakers today are Jamie W. Welch, President and Chief Executive Officer, and Trevor Howard, Senior Vice President and Chief Financial Officer. Other members of our senior management team are also in attendance for this morning's call. As a reminder, today's discussion will include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of these factors, please refer to our SEC filings. We will also reference certain non-GAAP financial measures.
Reconciliations to the most comparable GAAP measures can be found in our earnings materials and on our website. With that, I will turn the call over to Jamie.
Thank you, Alex. Good morning, everyone. Kinetik Holdings Inc. delivered record earnings in the first quarter. This reflects key execution across our three core pillars: commercial, operations, and financial. Before walking through each in more detail, I wanted to briefly touch on recent geopolitical developments. The global macroeconomic landscape has shifted meaningfully since reporting fou...