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    KNTK
    Earnings call· Jun 2026(Q2 FY26)

    Kinetik Holdings Q2 FY26 earnings call KNTK

    Aug 6, 2026 Source

    Executive summary

    Kinetik Q2 FY26 — Record Financials and Upgraded FY26 Adjusted EBITDA Guidance

    Kinetik achieved record financial results in Q2 FY26, driven by strong operational execution and improved market conditions, leading to a significant upward revision of full-year adjusted EBITDA guidance. The company is proactively expanding processing capacity and infrastructure to meet accelerating customer demand in the Permian Basin, while maintaining a commitment to a growing and well-covered dividend.

    Highlights

    5

    • Achieved record adjusted EBITDA of $281 million in Q2 FY26.

    • Full-year 2026 adjusted EBITDA guidance raised by $70 million at midpoint (7%) to $1.04 billion-$1.1 billion.

    • Processed natural gas volumes expected to reach 2.2 Bcf/d by Q4 2026, up from 1.74 Bcf/d in Q2.

    • Leverage declined to 3.8x, within target range of 3.5x-4x, with liquidity exceeding $1 billion.

    • Kings Landing II processing capacity increased by 50% to 300 MMcf/d, with completion accelerated to mid-2028.

    Concerns

    3

    • Waha pricing remained well below original assumptions for H1 2026, though offset by Gulf Coast marketing gains.

    • Pipeline Transportation segment adjusted EBITDA was down year-over-year due to the divestiture of EPIC Crude.

    • Elevated capital program of approximately $560 million for FY26 driven by growth initiatives and long-lead equipment procurement.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year 2026 Adjusted EBITDA
    $1.04 billion to $1.1 billion
    high materiality
    High
    Full-year 2026 Processed Natural Gas Volume Growth
    mid- to high single-digit growth
    medium materiality
    High
    Q4 2026 Processed Natural Gas Volume Exit Rate
    approaching 2.2 Bcf/d
    high materiality
    High
    H2 2026 Average Curtailments
    approximately 25 MMcf/d
    medium materiality
    High
    Q3 2026 Adjusted EBITDA
    $260 million to $270 million
    medium materiality
    High
    Q4 2026 Adjusted EBITDA
    $270 million to $280 million
    medium materiality
    High
    Full-year 2026 Capital Expenditures
    approximately $560 million
    high materiality
    High
    Kings Landing II Completion
    mid-2028
    medium materiality
    High
    Dividend Coverage
    continue to strengthen
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Midstream Logistics
    Adjusted EBITDA increased 35% year-over-year. Processed natural gas volumes were flat year-over-year despite an estimated 250 MMcf/d of Waha price-related curtailments. Results benefited from strong system operating performance, improved NGL recoveries and condensate yields, optimization opportunities, and favorable commodity prices and spreads.
    Processed natural gas volumes: 1.74 Bcf/dNGL recoveries: improvedCondensate yields: improved
    		—35%—$205 million
    Pipeline Transportation
    Adjusted EBITDA was down year-over-year, primarily due to the divestiture of the equity interest in EPIC Crude. This was partially offset by year-over-year outperformance at Permian Highway Pipeline (supported by lower fuel costs and higher gross margin) and better-than-expected throughput volumes at Shin Oak.
    		—down year-over-year—$83 million

    Operational metrics

    17
    Adjusted EBITDA
    $281 million
    Q2 FY26

    Record financial results for the quarter.

    Distributable cash flow
    $195 million
    Q2 FY26

    Reflecting strong execution across the business.

    Processed natural gas volumes
    1.74 Bcf/dflat year-over-year
    Q2 FY26

    Despite an estimated 250 MMcf/d of Waha price-related curtailments.

    Processed natural gas volumes (curtailments)
    250 MMcf/d
    Q2 FY26

    Estimated Waha price-related curtailments.

    Processed natural gas volumes (curtailments)
    25 MMcf/d
    H2 FY26

    Expected average curtailments for the balance of 2026.

    Leverage (net debt/EBITDA)
    3.8x
    Q2 FY26

    Expected to decline further by year-end, even with elevated capital program.

    Liquidity
    $1 billion
    Q2 FY26

    Exceeded at quarter end, maintaining substantial flexibility to fund growth and return capital.

    Dividend per share
    $0.81
    Q2 FY26

    Paid in late July.

    Dividend coverage
    1.5xup from 1.2x for full year 2025
    Q2 FY26

    Expected to continue to strengthen through H2 2026 and into 2027.

    WTI pricing increase
    nearly 30%vs. original guidance commodity assumptions
    FY26

    Contributes to the revised outlook.

    Liquids pricing increase
    nearly 20%vs. original guidance commodity assumptions
    FY26

    Contributes to the revised outlook.

    Hedge protection
    40% to 80%
    FY26

    Substantially hedged through year-end at the top end of the targeted range, with incremental hedge protection added in Q2.

    System performance contribution
    $40 million to $50 million
    FY26

    Part of the green wedge contributing to the revised outlook, with a substantial portion realized year-to-date.

    Permian rig count increase
    8%
    since February

    Reflects accelerating activity and growing producer demand.

    Delaware North sour gas processing capacity
    Exceed 700 MMcf/d
    on completion

    Upon completion of Kings Landing II, which has a capacity of 300 MMcf/d.

    Total system-wide gas processing capacity
    Surpass 2.7 Bcf/d
    on completion

    Upon completion of Kings Landing II.

    Permian new basin egress capacity
    >11 Bcf/d
    through 2029

    Reflects the Permian's critical role in meeting future U.S. natural gas demand growth.

    Industry KPIs

    1
    MetricValueDetails
    FCF shareholder distributions$105 million FCF; $0.81/share dividend; 1.5x dividend coverageUSD; USD/share; x

    Deals & partnerships

    3
    nullDivestiture of equity interest in EPIC Crude

    Divestiture of Kinetik's equity interest in EPIC Crude.

    nullSecured incremental firm residue gas access to Gulf Coast markets

    Agreement for incremental firm residue gas access to Gulf Coast markets beginning in 2027.

    nullSigned new residue gas and NGL transportation agreements

    Agreements supporting Delaware North processing complexes, increasing operational flexibility and securing critical downstream capacity as activity and volumes grow.

    Capital programs

    4
    Kings Landing II processing plantunderway
    Period spend: Included in FY26 CapEx increase
    Start: May (FID)

    Benefit: 300 MMcf/d processing capacity (50% increase)

    FID reached in May. Capacity increased due to customer demand for sour gas treating and processing. Cryo processing, amine, and residue compression equipment already purchased. Completion accelerated from previous communication.

    ECCC capacity expansionunderway
    Period spend: Included in FY26 CapEx increase (right-of-way procurement)
    Start: Sanctioned commencement of work

    Benefit: Expanded capacity

    Reflects conviction in the long-term growth outlook for the Permian Basin.

    Diamond Volt power generation projectunderway
    Start: Construction progress

    Benefit: 40-megawatt behind-the-meter power generation

    Located at Diamond Cryo in Delaware South.

    Next Cryo Expansion (beyond Kings Landing II)planning
    Period spend: Included in FY26 CapEx increase (long-lead equipment procurement)
    Start: Procurement of long lead equipment authorized

    Benefit: Future processing capacity

    Proactively aligns supply chain with accelerating customer demand, manages equipment lead times, and preserves development flexibility. Location (New Mexico or Texas) is TBD.

    Risks & headwinds

    2
    Waha pricing volatilityH1 2026, potential for return during maintenance season (Oct/Nov)

    Waha pricing has recovered from the extreme dislocations experienced for the first 5-plus months of this year.

    Mitigation: Expanding access to premium end markets (Gulf Coast egress) and maintaining substantial hedge protection (40%-80% targeted range).

    Supply chain lead times for equipmentCurrent and ongoing

    Elongating lead times and an increasingly stretched supply chain.

    Mitigation: Proactive procurement of long-lead equipment for future cryo expansions (beyond Kings Landing II) to manage risk and preserve timing flexibility.

    What to watch in Q3 FY26

    5

    Processed Gas Volumes Exit Rate

    Q4 2026
    Current~1.96 Bcf/d (Q3 2026 estimate)
    TargetApproaching 2.2 Bcf/d

    Why it matters

    Verifies the company's ability to ramp volumes significantly by year-end, which is crucial for 2027 growth and future earnings power.

    we expect to exit the year approaching 2.2 billion cubic feet per day of processed gas volumes with no curtailments assumed in the fourth quarter.

    Q&A highlights

    6

    With the Q4 2026 exit rate approaching capacity, how will Kinetik manage potential capacity constraints in 2027 before Kings Landing II comes online, and are offloads being considered?

    Management is actively analyzing options, including maximizing existing system capacity through upgrades (e.g., rebuilding cryo center blocks to increase capacity to 220-230 MMcf/d per cryo) and considering interim offloads for 2027. Kings Landing II is now expected earlier (mid-2028), and long-lead equipment for the next cryo expansion is being procured to manage supply chain lead times.

    “What offloads on an interim basis could we start to consider as we get further and further into 2026 and into 2027, that would basically bridge us. So both dynamics are in play and both dynamics are being analyzed.”

    asked by Spiro Dounis · answered by Jamie Welch

    2 min read6 chapters

    Detailed Narrative

    01

    Record Performance & Guidance Update

    Kinetik reported its strongest financial results ever in Q2 FY26, with adjusted EBITDA of $281 million, distributable cash flow of $195 million, and free cash flow of $105 million. This strong performance, coupled with improved market conditions and accelerating customer activity, led to a significant upward revision of full-year 2026 adjusted EBITDA guidance by $70 million at the midpoint, now ranging from $1.04 billion to $1.1 billion.

    02

    Permian Basin Dynamics & Customer Activity

    The Permian Basin continues to see improving conditions, with Waha pricing recovering from extreme dislocations and the crude oil environment supporting attractive development economics. Permian rig count increased 8% since February, with over 60% of that growth in the Delaware Basin. Customer development activity is building, with some benefits pulled forward📎 into H2 2026 and early 2027, particularly from large-cap independent E&Ps in Delaware South.

    03

    Processing Capacity Expansion

    Kinetik is proactively expanding its processing capacity to meet accelerating customer demand. Kings Landing II (KLII) capacity was increased by 50% to 300 MMcf/d, with completion accelerated to mid-2028. The company has also authorized procurement of long-lead equipment for the next cryo expansion beyond KLII and sanctioned work on expanding ECCC capacity, aiming to manage supply chain risks and preserve flexibility for future growth.

    04

    Integrated Platform & Commercial Strategy

    Kinetik's integrated gathering, processing, and downstream platform is proving increasingly valuable to customers. The company secured incremental firm residue gas access to Gulf Coast markets starting in 2027 and signed new residue gas and NGL transportation agreements for Delaware North complexes. This strategy aims to reduce customer exposure to in-basin pricing volatility by expanding access to premium end markets.

    05

    Operational Excellence

    Sustained system-wide performance was a significant driver of record results, reflecting strong operations and optimization efforts. The ECCC pipeline has been placed into service, establishing a north-to-south connection, with rich gas volumes expected to increase. The Kings Landing acid gas injection and sour conversion project is on schedule for in-service by year-end, and the Diamond Volt power generation project is anticipated in Q2 2027.

    06

    Capital Allocation & Shareholder Returns

    Kinetik maintains a growth-oriented capital allocation philosophy, prioritizing high-return organic growth opportunities. The increased FY26 capital expenditures guidance to approximately $560 million reflects the quality of investment opportunities. The company remains committed to a growing and well-covered dividend, with coverage improving to 1.5x in Q2 FY26 and expected to strengthen further, supporting sustained dividend growth.

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