Kinetik (KNTK) Q2 FY26 earnings call: guidance and Q&A

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

What specific initiatives are driving the operational outperformance, and is this level of performance sustainable going forward?

The outperformance is a result of a multi-year, concerted effort since the Durango acquisition to invest remedial capital, replace/repair infrastructure, upgrade facilities, and improve measurement. This led to significant reductions in fuel lost and unaccounted for (FLNU) and improved NGL recoveries. While large gains from Delaware North maintenance projects may plateau, performance is expected to hold, with continued refinement on the lighter end of the NGL barrel.

“We have spent millions and millions on a concerted effort where we have replaced pipe, we have repaired pipe. We have repaired facilities. We have upgraded facilities. We have improved measurement. We have, therefore, improved reliability and run times.”

asked by Spiro Dounis · answered by Jamie Welch

Can you clarify the current processed gas volumes and the confidence level in achieving the projected ramp to 2.2 Bcf/d by Q4 2026?

Q2 processed gas volumes were 1.74 Bcf/d. Adjusting for 250 MMcf/d of curtailments in Q2 and an expected 25 MMcf/d in H2, current volumes are around 1.96 Bcf/d. Management has high confidence in reaching 2.2 Bcf/d by Q4 due to extensive planning (12-18 months) for large packages in New Mexico that are now starting to flow.

“we have a ton of visibility into that. We've been planning for several large packages in New Mexico for the better part of 12 to 18 months now that are starting to flow back. So we feel quite confident in being able to achieve that run rate in the fourth quarter of this year.”

asked by Jeremy Tonet · answered by Trevor Howard

What are the observed producer behaviors, particularly regarding accelerated CapEx for customer developments, and what is the directional outlook for customer activity in 2027?

Constructive commodity prices ($75 crude) are supporting accelerated activity, especially from smaller producers. Several large developments were pulled forward from mid-2027 to early 2027 or late 2026, driving the need for additional well connects and associated infrastructure. The incremental 2026 CapEx is primarily for Delaware South due to faster well planning and connection times, with planning for New Mexico's H2 2027 program already underway.

“there were a lot of fairly large developments which were on the schedule and on the turn-in-line plans from our various producers that were pulled forward from mid-2027 or later in 2027 to early 2027 or in a couple of cases into late 2026.”

asked by Theresa Chen · answered by Jamie Welch

What factors could lead Kinetik to the upper end of its new guidance range, and where is the company being most conservative in its outlook?

Upside could come from macro factors (e.g., Waha pricing), further outperformance from customer wells accelerating timing or exceeding expectations, and continued operational system outperformance. Management's forecast does not assume the same rate of outperformance seen in H1 to continue through H2, indicating some conservatism.

“To the extent that our customers accelerate timing relative to our expectations and wells outperform, that is a source of outperformance that we've seen this year. I'd say another big one is the operational and system outperformance year-to-date so far. To the extent that continues, that is a source of upside risk to the forecast.”

asked by Jacqueline Koletas · answered by Trevor Howard

Will the dividend policy (1.6x coverage target for accelerated growth) change given the elevated CapEx? Is the current elevated CapEx program expected to last for two years or longer?

There is no change to the dividend policy; the company remains committed to 3-5% growth, with accelerated growth above 1.6x coverage. Leverage is comfortable at 3.8x and expected to decrease. The elevated CapEx ($500M-$600M range) is expected to continue longer-term, with planning already underway for 2027, 2028, and 2029, assuming approximately one cryo build per year.

“we're just -- we're looking at '27, we're looking at 2028, and we're already looking at 2029. And to the extent that the macro holds and producer customers continue to keep showing us these volume forecasts that require additional processing capacity, you should expect CapEx to remain in and around these levels so long as we're building one cryo at a time.”

asked by Unknown Analyst · answered by Trevor Howard