What are the returns for the Pecos Power deal, and are there similar opportunities in the basin?

The Pecos Power deal is zero CapEx, so returns are infinite. Kinetik sees many opportunities to provide residue gas to new power generation plants in West Texas, creating incremental in-basin demand for gas and generating fee revenue. “As far as the returns, there's no capital. So it's infinite in the context.”

How close is the company to a Final Investment Decision (FID) for Kings Landing 2, given new dedications and growth expectations?

The company is getting close to FID for Kings Landing 2, with incremental steps achieved. ECCC pipeline coming into service soon will provide interim processing capacity. The overall activity in New Mexico remains robust, reinforcing the need for future expansion. “So I think we are getting close. And I think the overall level of activity that we continue to see reinforces our belief in just the prospects and opportunity that we find that presented in New Mexico.”

What drives the expected EBITDA ramp in the second half of 2026, and when will marketing gains transition to volume-driven growth?

The H2 ramp is driven by a summer-heavy development program with new gas packages coming online in New Mexico (Q3) and Texas (Q4), not a return of shut-in volumes. Shut-ins are expected to persist through the year, with a resumption of curtailed volumes and declining marketing margins in December. The strategy of using Gulf Coast marketing as an offset to curtailments has been effective. “Really, to answer your question, what is driving this, we have a very summer-heavy development program. And we have a handful of big packages of gas that are coming online across the system and particularly in New Mexico.”

KNTK

Kinetik (KNTK) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Energy· May 7, 2026

Source: earnings call transcript

Executive summary

Kinetik Q1 FY26 — Record Earnings Driven by Marketing Gains Amidst Waha Headwinds

Kinetik delivered record Q1 FY26 earnings, primarily driven by strong marketing gains and operational execution, which offset significant Waha price-related production shut-ins. The company is actively managing the challenging near-term gas price environment through strategic Gulf Coast takeaway capacity and contract amendments, while maintaining its full-year adjusted EBITDA guidance. Management remains confident in its multiyear plan, with a focus on disciplined commercial conversion, reliable operational execution, and conservative financial stewardship.

Highlights

Adjusted EBITDA reached a record $251 million in Q1 FY26, exceeding the high end of expectations.
Midstream Logistics segment delivered a record $179 million of adjusted EBITDA, up 12% year-over-year on flat volumes.
Significant contract amendment with a large existing customer in New Mexico expands dedicated acreage by ~25% and extends terms through 2039.
Secured zero CapEx interconnection with Pecos Power, demonstrating a fee-based template for monetizing existing footprint.
Operating and G&A expenses are tracking in line with budget estimates, with additional efficiencies identified for 2027 and beyond.

Concerns

Processed natural gas volumes forecast reduced to low to mid-single-digit percentage growth year-over-year, reflecting ~220 million cubic feet per day of curtailments on average for 2026.
Actual production shut-ins to date have been materially higher than the original expectation of 100 million cubic feet per day.
Waha Hub gas daily average price was negative $4.81 in March and April, indicating a significantly challenged local market.
Waha is expected to remain in negative pricing territory until October, posing continued volatility.

Guidance & targets

Category	Target	Timeline	Confidence
Adjusted EBITDA	$950M-$1.05B high materiality	FY26	High
Processed natural gas volumes growth	low to mid-single-digit percentage growth year-over-year high materiality	FY26	High
Capital expenditures	$450M-$510M high materiality	FY26	High
Adjusted EBITDA cadence	$230M-$240M medium materiality	Q2 · FY26	High
Adjusted EBITDA cadence	$260M-$270M medium materiality	Q3 · FY26	High
Adjusted EBITDA cadence	$260M-$270M medium materiality	Q4 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Midstream Logistics Delivered record adjusted EBITDA, primarily due to Gulf Coast takeaway capacity and spread-based marketing gains offsetting production shut-ins. Adjusted EBITDA: $179MVolume growth: flat year-over-year	—	12%	—	$179M
Pipeline Transportation Adjusted EBITDA was down year-over-year reflecting the EPIC Crude divestiture and lower throughput volumes on Shin Oak. Adjusted EBITDA: $78M	—	down year-over-year	—	$78M

KNTK operating KPIs by quarter

KNTK operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Curtailed gas volumes	~170M cf/d Spread-based marketing gains have more than offset approximately 170 million cubic feet per day of Waha price-related production shut-ins in the quarter, converting what would have been a volume headwind into a margin tailwind. Source: earnings call transcript	250M cf/d Processed natural gas volumes were 1.74 billion cubic feet per day, flat year-over-year despite an estimated 250 million cubic feet per day of Waha price-related curtailments. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

existing customer Contract amendment for legacy Durango gas processing volumes through 2039

Approximately 75% of legacy Durango gas processing volumes have now been amended over the past four months.

Pecos Power Zero CapEx interconnection for residue gas pipeline

Connecting Delaware Link residue gas pipeline to the Pecos Power plant in Reeves County.

INEOS European LNG price contract

Starts in early 2027, providing Gulf Coast pricing exposure.

Capital programs

ECCC pipeline nearing completion

Will be in service later this quarter, enabling incremental sweet New Mexico volumes for processing.

Kings Landing sour gas conversion project underway

Benefit:handle elevated H2S and CO2 levels; total operational TAG capacity of 26.5 MMcf/d; permitted capacity in excess of 31 MMcf/d

Received all required approvals from BLM and NMOCD. All long lead materials ordered, construction underway, first acid gas injection well to spud this summer. Phase 1 on track for in-service by year-end 2026.

Diamond Cryo 40-megawatt behind-the-meter power generation solution underway

Benefit:40 megawatts

Turbine equipment has started to arrive on site, and engineering, procurement, and permitting work is well underway.

Risks & headwinds

Waha Hub negative pricing Q2-Q4 FY26

negative $4.81 daily average in March and April; expected to persist until October

Mitigation:Gulf Coast takeaway capacity and marketing gains; strategic hedging; securing additional Gulf Coast pricing exposure and LNG opportunities; creating in-basin demand through power generation deals.

Higher-than-expected production shut-ins FY26

220 million cubic feet per day of curtailments on average for 2026 (up from 100 MMcf/d original expectation)

Mitigation:Offset by wider natural gas hub price differentials and stronger-than-expected marketing gains; strategic hedging of transport spread exposure.

Unprecedented volatility in Waha gas market FY26

Waha in positive territory only 13 days (7 excluding Winter Storm Fern) in the first 5 months of the year

Mitigation:Proactive management of exposure through diversified transport arrangements and hedging; focus on long-term strategy of migrating portfolio to Gulf Coast sales.

What to watch in Q2 FY26

ECCC pipeline in-service

Q2 FY26

Current nearing completion

Target in service

Why it matters

The ECCC pipeline will provide incremental processing capacity for sweet New Mexico volumes, which is crucial for managing regional supply and demand dynamics.

We are nearing completion now of the ECCC pipeline within service later this quarter.

Find out whether KNTK delivers this. Inve re-checks your case every morning.

Q&A highlights

How do the amended Durango agreements impact 2026 EBITDA and the contract mix (fee vs. POP)?

The amendments provide a modest uplift of 1-2% to the base business in 2026, setting the stage for future investment. They also increase the fee-based percentage of the Durango system, closing the gap with the company's Delaware South business.

“In terms of 2026, I would call it -- I think we've characterized it in the past as modest uplift, so 1% to 2% of the overall base business.”

asked by Michael Blum · answered by Trevor Howard

2 min read 6 chapters

Detailed narrative

Commercial Momentum and Contract Amendments

Kinetik achieved strong commercial conversion, securing new and amended agreements across gas, crude, and water services. A significant contract amendment in New Mexico expanded dedicated acreage by approximately 25% and extended terms through 2039. This means approximately 75% of legacy Durango gas processing volumes have now been amended, reinforcing long-term visibility and increasing margin across the New Mexico system.

Operational Progress on Key Projects

Field operations delivered reliable performance. The ECCC pipeline is nearing completion and will be in service later in Q2 FY26. At Kings Landing, all approvals for the AGI and sour gas conversion project have been received, with construction underway and the first acid gas injection well planned for spudding this summer.

Phase 1 of the sour conversion is on track for in-service by year-end 2026, enhancing operational capacity to 26.5 million cubic feet per day of total asset gas.

Strategic Power Generation Opportunities

The company continues to pursue capital-efficient power generation opportunities. A zero CapEx interconnection was signed with Pecos Power, connecting the Delaware Link residue gas pipeline to the Pecos Power plant. This strategy monetizes existing infrastructure and creates incremental in-basin demand for natural gas, helping to mitigate Waha pricing challenges and providing incremental fee revenue.

Financial Performance and Cost Management

Kinetik reported record Q1 adjusted EBITDA of $251 million and free cash flow of $101 million. Operating and G&A expenses are tracking to budget, and teams have identified additional efficiencies for 2027 and beyond. The company is also leveraging data and technology, including a pilot program with Palantir, to drive further efficiency and optimize its cost structure.

Managing Waha Volatility and Gulf Coast Exposure

The Waha Hub has experienced unprecedented negative pricing, with March and April averages at negative $4.81. Kinetik is managing this through Gulf Coast takeaway capacity, which generated stronger-than-expected marketing gains, offsetting higher production shut-ins. The company has secured additional Gulf Coast pricing exposure starting in 2028 and has an INEOS LNG price contract beginning in early 2027, aiming to secure premium pricing for customers.

Outlook for 2027 and Beyond

Despite near-term Waha challenges, the company has a constructive long-term view. Increased egress capacity coming online in 2027-2029 (over 11 Bcf/d) and accelerated customer activity for early 2027 are expected to drive significant growth. The higher PDP base from deferred volumes and NGL contract resets are anticipated to make 2027 a very strong year, with the sun, moon, and stars aligning for positive performance.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.