Skip to content
    KNTK
    Earnings call· Mar 2026(Q1 FY26)

    Kinetik Holdings Q1 FY26 earnings call KNTK

    May 7, 2026 Source

    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

    5

    • 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

    4

    • 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

    6
    CategoryTargetConfidence
    Adjusted EBITDA
    $950M-$1.05B
    high materiality
    High
    Processed natural gas volumes growth
    low to mid-single-digit percentage growth year-over-year
    high materiality
    High
    Capital expenditures
    $450M-$510M
    high materiality
    High
    Adjusted EBITDA cadence
    $230M-$240M
    medium materiality
    High
    Adjusted EBITDA cadence
    $260M-$270M
    medium materiality
    High
    Adjusted EBITDA cadence
    $260M-$270M
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    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

    Operational metrics

    22
    Adjusted EBITDA
    $251Mrecord
    Q1 FY26

    Record quarterly earnings, above the high end of the expected range.

    Distributable cash flow
    $181M
    Q1 FY26

    Total distributable cash flow for the quarter.

    Waha price-related production shut-ins
    170 million cubic feet per day
    Q1 FY26

    Offset by spread-based marketing gains.

    Waha price-related production shut-ins
    100 million cubic feet per dayoriginal expectation
    FY26

    Original expectation for curtailments in 2026.

    Incremental curtailments
    120 million cubic feet per dayincremental
    FY26

    Represents a decline of more than 6 percentage points relative to original growth expectations.

    Processed gas volumes
    1.8 Bcf per day
    current

    Current processed gas volumes.

    Capital expenditures
    $91M
    Q1 FY26

    CapEx spent in the first quarter.

    Midstream Logistics fee-based percentage
    85% to 90%
    current

    Fee margin business in the Delaware South region, used as a comparison for Durango improvements.

    Growth capital
    $400M-$425M
    FY25-FY26

    Growth capital spent last year and this year, excluding maintenance.

    Leverage
    3.9x
    Q1 FY26

    Within the targeted range.

    Transport spread exposure hedged
    50%
    FY26

    Spread hedging tends to be lower during spring and fall maintenance seasons and higher during summer and winter months.

    Equity volume exposure hedged (propane and butane)
    75%
    FY26

    Estimated hedge coverage for propane and butane volumes.

    Equity volume exposure hedged (crude and C5+)
    85%
    FY26

    Estimated hedge coverage for crude and C5+ volumes.

    Adjusted EBITDA uplift from commodity prices
    $20M
    FY26

    Estimated uplift at current forward pricing, excluding Gulf Coast marketing spread.

    New residue gas takeaway capacity
    5 billion cubic feet per day
    by early 2027

    Expected to be in service by early 2027.

    Additional residue gas takeaway capacity
    6 billion cubic feet per day
    2028-2029

    Anticipated across 2028 and 2029.

    Durango gas processing volumes amended
    75%
    past four months

    Collectively, these new and amended contracts extend terms into the mid- and late 2030s.

    Dedicated acreage expansion
    25%
    Q1 FY26

    Expansion of original dedicated acreage with a large existing customer.

    Total operational TAG capacity
    26.5 million cubic feet per day
    post-project

    Enabled by the sour conversion project across all three Delaware North processing complexes.

    Permitted TAG capacity
    31 million cubic feet per day
    post-project

    Permitted capacity in excess of 31 MMcf/d after sour conversion project.

    Waha gas daily average price
    negative $4.81
    March and April

    Significantly challenged price environment.

    New Mexico budget allocation
    70%
    current

    70% of the company's budget is allocated to New Mexico versus Texas.

    Industry KPIs

    1
    MetricValueDetails
    FCF shareholder distributions$101MUSD

    Deals & partnerships

    3
    existing customerContract amendment for legacy Durango gas processing volumesthrough 2039

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

    Pecos PowerZero CapEx interconnection for residue gas pipeline

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

    INEOSEuropean LNG price contract

    Starts in early 2027, providing Gulf Coast pricing exposure.

    Capital programs

    3
    ECCC pipelinenearing completion

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

    Kings Landing sour gas conversion projectunderway

    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 solutionunderway

    Benefit: 40 megawatts

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

    Risks & headwinds

    3
    Waha Hub negative pricingQ2-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-insFY26

    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 marketFY26

    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

    5

    ECCC pipeline in-service

    Q2 FY26
    Currentnearing completion
    Targetin 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.

    Q&A highlights

    6

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.