Kinetik Reports Fourth Quarter and Record Full Year 2024 Financial and Operating Results and Provides 2025 Guidance

Business Wire 26-Feb-2025 4:47 PM

• Generated fourth quarter 2024 net income of $16.2 million and Adjusted EBITDA¹ of $237.5 million
• Reported full year 2024 net income of $244.2 million, Adjusted EBITDA¹ of $971.1 million, and Capital Expenditures² of $264.5 million
• Announced bolt-on acquisition of natural gas and crude oil gathering systems primarily located in Reeves County, Texas, which closed in January 2025 ("Barilla Draw")
• Issuing full year 2025 Guidance ("2025 Guidance"):
  • Adjusted EBITDA¹ guidance of $1.09 billion to $1.15 billion
  • Capital guidance of $450 million to $540 million, including growth and maintenance Capital Expenditures² and the previously communicated $75 million of contingent consideration tied to the final cost of the Kings Landing Complex ("Kings Landing")

Kinetik Holdings Inc. (NYSE:KNTK) ("Kinetik" or the "Company") today reported financial results for the quarter and year ended December 31, 2024.

2024 Results and Commentary

For the three and twelve months ended December 31, 2024, Kinetik reported net income including non-controlling interest of $16.2 million and $244.2 million, respectively.

Kinetik generated Adjusted EBITDA¹ of $237.5 million and $971.1 million, Distributable Cash Flow¹ of $155.4 million and $657.0 million, and Free Cash Flow¹ of $32.5 million and $410.1 million for the three and twelve months ended December 31, 2024, respectively. For the three and twelve months ended December 31, 2024, Kinetik processed natural gas volumes of 1.74 Bcf/d and 1.64 Bcf/d, respectively.

"2024 was another transformational year for Kinetik," said Jamie Welch, President & Chief Executive Officer.

"We substantially expanded our footprint and capabilities across the Delaware Basin and enhanced our growth profile through highly strategic and accretive transactions and commercial agreements. This included our acquisition of Durango Permian, LLC ("Durango Permian"), a 15-year gas gathering and processing agreement in Eddy County, and the strategic connector pipeline ("ECCC pipeline") between Kinetik's Delaware North and Delaware South positions which all support significant future growth in New Mexico. We also acquired the compelling bolt-on Barilla Draw assets from Permian Resources and increased our equity interest in EPIC Crude Holdings, LP ("EPIC Crude") to 27.5% ownership in a series of transactions that would support its continued growth and strengthen its financial profile."

"We achieved significant milestones across our finance-related objectives. Apache exited its remaining ownership stake in the Company, nearly doubling Kinetik's public float. And, we divested our 16% stake in the Gulf Coast Express pipeline to primarily fund the previously announced $1 billion of transactions that furthered our expansion into New Mexico. Upon closing, we reduced Leverage^1,3 below our Leverage Target to 3.4x. With the backdrop of strength and visibility in our business in 2025 and beyond, we increased our cash dividend by 4%, accelerating our return of capital to shareholders for the first time as a company."

"We reported record full year 2024 Adjusted EBITDA¹ growth of 16% year-over-year to $971.1 million, while continuing our cost discipline with 2024 Capital Expenditures² of $264.5 million, below the low end of the full year guidance range. In the fourth quarter, results were temporarily impacted by unexpected events in November that resulted in a $15 million headwind. In November, the average gas daily price at Waha was negative $1.40/Mmbtu for the first 15 days due to scheduled maintenance on several intrastate gas pipelines, including Permian Highway Pipeline. Negative prices led Apache to curtail Alpine High existing volumes in November before fully reinstating those volumes in the beginning of December. Unlike prior months in 2024, Kinetik was fully exposed to lost Gross Margin from production curtailments since we did not have marketing gains from our now balanced Gulf Coast transport capacity position which was previously a net long position. Additionally, several of our Texas processing plants were operating in ethane rejection for maintenance work and commissioning activities. This created equity residue gas exposure at Waha, further negatively impacting Gross Margin. We have since implemented additional new processes and measures to manage this risk going forward."

Welch continued, "I am incredibly proud of what our team has accomplished. Since closing the merger in February 2022, we have a demonstrated track record of compound annual double-digit Adjusted EBITDA¹ growth and expect to continue such growth levels in 2025."

2025 Guidance

Kinetik estimates full year 2025 Adjusted EBITDA¹ between $1.09 billion and $1.15 billion. The midpoint of the 2025 Guidance implies Adjusted EBITDA¹ growth of 15% year-over-year.

Adjusted EBITDA¹ Guidance assumptions include:

• Approximately 20% growth year-over-year in gas processed volumes across the system and the start-up of Kings Landing at the end of June 2025;
• Approximately 83% of gross profit from fixed-fee contracts;
• 2025 average annual commodity prices of approximately $71 per barrel for WTI, $3.77 per Mmbtu for Houston Ship Channel natural gas, and $0.65 per gallon for natural gas liquids (market forward prices as of February 20, 2025); and
• Gross profit directly sourced from unhedged commodity prices represents approximately 4% of total gross profit.

The Company also expects that its fourth quarter 2025 annualized Adjusted EBITDA^1,4 will exceed $1.2 billion. That expected financial performance will position the Company well in 2026.

Kinetik estimates aggregate 2025 Capital to be between $450 million and $540 million, including up to $75 million of contingent consideration to Morgan Stanley Energy Partners, the previous owner of Durango Permian.

Capital guidance assumptions include:

• Remaining Capital Expenditures² to complete Kings Landing, construction of the ECCC pipeline, continued build out of the low- and high-pressure gathering system in Eddy County, New Mexico, integration of the Barilla Draw assets, pre-FID work for Kings Landing Cryo II, and all other planned growth and maintenance capital across the existing Texas and New Mexico systems; and
• Reflects current market steel prices.

Financial

Selected Key 2024 Metrics:

Operational and Construction

New Developments

Governance

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.ir.kinetik.com.

Conference Call and Webcast

Kinetik will host its fourth quarter 2024 results conference call on Thursday, February 27, 2025 at 8:00 am Central Standard Time (9:00 am Eastern Standard Time) to discuss fourth quarter results. To access a live webcast of the conference call, please visit the Investor Relations section of Kinetik's website at www.ir.kinetik.com. A replay of the conference call will also 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 business strategy and other plans, expectations, and objectives for the Company's operations, including statements about strategy, synergies, sustainability goals and initiatives, portfolio monetization opportunities, expansion projects and future operations, and financial guidance; estimates of future operational and financial results; the Company's return of capital program; projected dividend amounts and the timing thereof and the Company's leverage and financial profile. 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 I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2024 to be filed with the SEC. 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 accordance 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. This news release also includes certain forward-looking non-GAAP financial information. Reconciliations of these forward-looking non-GAAP measures to their most directly comparable GAAP measure are not available without unreasonable efforts. This is due to the inherent difficulty of forecasting the timing or amount of various reconciling items that would impact the most directly comparable forward-looking GAAP financial measure, that have not yet occurred, are out of Kinetik's control and/or cannot be reasonably predicted. Accordingly, such reconciliation is excluded from this new release. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

KINETIK HOLDINGS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

KINETIK HOLDINGS INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES

KINETIK HOLDINGS INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued)

KINETIK HOLDINGS INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (Continued)

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Kinetik Investors: Alex Durkee (713) 574-4743 investors@kinetik.com