HOUSTON & MIDLAND, Texas--(BUSINESS WIRE)--
Kinetik Holdings Inc. (NYSE: KNTK) (“Kinetik” or the “Company”) today reported financial and operating results for the quarter ended September 30, 2026.
Kinetik reported net income including noncontrolling interest of $50.9 million and $168.9 million for the three and nine months ended September 30, 2026, respectively. Kinetik generated Adjusted EBITDA1 of $278.1 million and $810.1 million, Distributable Cash Flow1 of $213.7 million and $589.5 million, and Free Cash Flow1 of $87.5 million and $294.1 million for the three and nine months ended September 30, 2026, respectively.
Highlights
- Record processed gas volumes of 1.94 Bcf/d
- Upsized Kings Landing II processing capacity by more than 25% to 380 MMcf/d
- Reached final investment decision on phase 1 of the ECCC Pipeline expansion, which is expected to increase throughput capacity by roughly 50% to approximately 225 MMcf/d
- Ordered long-lead equipment for the Company's next processing expansion beyond Kings Landing II
- Executed new and amended gathering and processing agreements in New Mexico and Texas
- Full year 2026 Adjusted EBITDA 1 expected to be at the high end of the $1.04 billion to $1.1 billion guidance range
- Anticipate full year 2026 Capital Expenditures 2 to be approximately 5% below guidance of $560 million
CEO Commentary
“Kinetik delivered another strong quarter with record processed gas volumes underscoring the strength and increasing scale of our business,” said Jamie Welch, Kinetik’s President & Chief Executive Officer. “As our strategic growth projects come online and processed gas volumes continue to increase, our financial performance is increasingly driven by durable, repeatable earnings.”
“The momentum we have built throughout the year has continued into the fourth quarter. Producer activity remains strong, processed gas volumes are tracking toward our approximately 2.2 Bcf/d fourth quarter 2026 target, and margins and costs continue to outperform our internal budget expectations.”
Welch added, “Our confidence in the long-term outlook for the Permian Basin has never been stronger. Producers are demonstrating success delineating new benches — which tend to have higher gas-to-oil ratios — making plays like the Woodford, Avalon, First Bone Spring, and Penn Shale more expansive throughout the Delaware Basin, a trend directly playing to Kinetik's strengths. Demand for gathering, processing, and treating capacity is outpacing existing infrastructure in many areas, reinforcing the strategic value of integrated systems. At the same time, more than 13 Bcf/d of incremental takeaway capacity is expected to come online between 2028 and 2030, which we believe will unlock the next wave of producer activity, substantially improve residue gas egress, and reduce Waha price volatility.”
Financial Highlights
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2026 | | | | 2026 | |
| | | | |
| | (In thousands, except ratios) |
Net income including noncontrolling interest | | $ | 50,922 | | | $ | 168,910 | |
Adjusted EBITDA1 | | $ | 278,144 | | | $ | 810,128 | |
Midstream Logistics Adjusted EBITDA1 | | $ | 203,571 | | | $ | 587,259 | |
Pipeline Transportation Adjusted EBITDA1 | | $ | 78,511 | | | $ | 239,487 | |
Corporate and Other Adjusted EBITDA1 | | $ | (3,938 | ) | | $ | (16,618 | ) |
Distributable Cash Flow1 | | $ | 213,732 | | | $ | 589,487 | |
Dividend Coverage Ratio1,3 | | 1.61x | | 1.48x |
Capital Expenditures2 | | $ | 130,596 | | | $ | 327,948 | |
Free Cash Flow1 | | $ | 87,531 | | | $ | 294,115 | |
Net Debt1,4 | | | | $ | 3,942,976 | |
Liquidity (Cash and Revolver Availability)5 | | | | $ | 1,069,424 | |
Leverage Ratio1,6 | | | | 3.70x |
Net Debt to Adjusted EBITDA Ratio1,7 | | | | 3.71x |
Common stock issued and outstanding8 | | | | | 162,396 | |
Quarterly dividend per share | | | | $ | 0.81 | |
Segment Insights
The Midstream Logistics segment generated Adjusted EBITDA1 of $203.6 million, a 34% increase year-over-year for the three months ended September 30, 2026. Kinetik’s processed natural gas volumes increased to 1.94 Bcf/d in the third quarter of 2026, with an additional estimated 25 MMcf/d of Waha price-related gas volume that was shut-in. Third quarter 2026 results also benefited from continued strength in system operating performance and favorable commodity margins realized, which were partially offset by a reduction in residue gas marketing contributions. With all Delaware North processing facilities, including Kings Landing (“KL”), operating at full capacity for much of the third quarter of 2026, the ECCC Pipeline performed as designed, transporting surplus volumes to the Delaware South system.
The Pipeline Transportation segment generated Adjusted EBITDA1 of $78.5 million, an 18% decrease year-over-year for the three months ended September 30, 2026, primarily due to the Company’s EPIC Crude Holdings, LP divestiture, and to a lesser extent, higher fuel costs at Permian Highway Pipeline and lower throughput volumes at Shin Oak.
2026 Guidance & Outlook
Kinetik now expects its 2026 Adjusted EBITDA1 to be at the high end of its $1.04 billion to $1.1 billion guidance range, reflecting (i) gas gathering and processing fee benefiting from stronger-than-expected well results; (ii) robust operating performance that has yielded stronger-than-expected equity volumes; and (iii) commodity prices outperforming the Company’s guidance assumptions set forth in August 2026.
Kinetik anticipates 2026 Capital Expenditures2 (including maintenance) to be approximately 5% below its August 2026 guidance of $560 million. The capital reduction is largely driven by disciplined execution of the Company’s growth capital program and timing of project spend.
Strategic Projects & Commercial Activity
The Company advanced its portfolio of strategic growth projects, supporting increasing producer activity and long-term volume growth across its footprint.
In September, Kinetik increased the planned processing capacity of KLII by more than 25% to 380 MMcf/d. The expected capital cost remains unchanged at approximately $260 million, as several critical equipment components were under budget, and the project is on track for a mid-2028 in-service date.
Construction activities on the acid gas injection (“AGI”) and sour gas conversion project at KL progressed during the quarter, with the AGI well reaching total depth and acid gas compression equipment delivered on site. This project is expected to be completed by year-end.
The Company reached final investment decision (“FID”) on phase 1 of the ECCC Pipeline expansion, which should increase throughput capacity by roughly 50% to approximately 225 MMcf/d and unlock additional Delaware South processing access for Delaware North customers. Right-of-way acquisition activities were underway during the third quarter of 2026. Pipeline procurement and construction activities on the partial looping of the pipeline should commence in early 2027, with in-service anticipated mid-2027.
Commercial activity remained strong as Kinetik executed new and amended low-pressure gathering and processing agreements with customers across both New Mexico and Texas. Collectively, over 30,000 gross acres were dedicated to Kinetik since the beginning of August. Notably, certain of the dedicated acreage and committed volumes are prospective for the Woodford formation, an emerging play in the Delaware Basin that Kinetik believes will support additional long-term volume growth across its system. First flow for these agreements is anticipated in the second and third quarters of 2027. Importantly, one of these agreements includes a firm, minimum volume commitment from the customer, which provides enhanced cash flow visibility and further de-risks Kinetik’s pipeline and processing investments. The Company is procuring additional compression equipment to accommodate the expected producer volume growth.
The new agreements also provide support toward an FID of the Company’s next processing expansion beyond KLII. Long-lead residue compression equipment has been ordered, and procurement of front-end amine treating and the 400 MMcf/d cryogenic unit is in process. The exact location, in either Texas or New Mexico, has not yet been finalized, and Kinetik will provide further details in the future.
With the Company’s increased volume outlook and rising CO2 concentrations from Loving and Lea Counties, Kinetik is undertaking an expansion of its front-end amine treating capacity and overall processing capability at its Pecos Bend facility. The Company is also making cost-effective plant modifications to further boost processing capacity and recoveries at the East Toyah, Pecos, and Diamond Cryo processing complexes.
Kinetik also further strengthened its downstream commercial position with two new agreements. First, the Company committed to additional transport capacity on a new long-haul residue gas pipeline connecting the Waha Hub to the Gulf Coast, with the agreement expected to commence in 2029. Second, the Company secured firm access to additional Gulf Coast residue gas pricing, commencing in 2027. Kinetik believes incremental residue gas takeaway capacity will be required to support long-term Permian production growth, and these agreements represent a continuation of its long-term commercial strategy to expand Gulf Coast market access for the residue natural gas of its producer customers.
The Company reached an important milestone in the evolution of its natural gas liquids (“NGL”) transportation and fractionation agreements portfolio as the first of the Lone Star NGL contracts in Texas expired on October 31, 2026, and the remaining contract with Lone Star NGL in Texas will expire at year-end. As these agreements roll off, Kinetik now forecasts more meaningful margin contributions from system optimization in 2027 than previously expected.
Construction-related activities continued at Diamond Volt, the behind-the-meter power generation project at Diamond Cryo, which is expected to be in-service by mid-2027.
Conference Call & Webcast
Kinetik will host its third quarter 2026 results conference call on Thursday, November 5, 2026 at 8:00 am Central Time (9:00 am Eastern Time). To access a live webcast of the conference call, please visit the Investors section of Kinetik’s website at www.ir.kinetik.com. A replay of the conference call will be available on the website following the call.
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. Information on the Company’s website does not constitute a portion of, and is not incorporated by reference into, this press release.
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 Houston and Midland, 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, outlooks, guidance 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 plans, expectations, and objectives for the Company’s operations, including statements about strategy, synergies, technology adoption, portfolio monetization opportunities, growth, expansion, cost reduction and other capital projects and the timing and cost thereof, future operations, financial guidance, anticipated processed gas volumes, producer activity, expected industry takeaway capacity, growth opportunities, the amount and timing of future shareholder returns, the Company’s projected dividend amounts and the timing thereof, and the Company’s targeted 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, 2025 filed with the SEC on February 26, 2026. 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 most directly comparable GAAP financial 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, Net Debt to Adjusted EBITDA Ratio, 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 news 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.
1. | A non-GAAP financial measure. See “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Measures” for further details. |
2. | Net of contributions in aid of construction, asset disposal proceeds, and returns of invested capital from unconsolidated affiliates. |
3. | Dividend Coverage Ratio is Distributable Cash Flow divided by total declared dividends. |
4. | Net Debt is defined as total short-term and long-term debt, excluding deferred financing costs, premiums and discounts, less cash and cash equivalents. |
5. | Liquidity is calculated as cash and cash equivalents of $7.0 million plus Revolving Credit Facility availability of $1,062.4 million as of September 30, 2026. |
6. | Leverage Ratio is total debt less cash and cash equivalents divided by last twelve months Adjusted EBITDA, calculated per the Company’s credit agreement. The calculation includes EBITDA Adjustments for Qualified Projects, Acquisitions and Divestitures. |
7. | Net Debt to Adjusted EBITDA Ratio is defined as Net Debt divided by last twelve months Adjusted EBITDA. |
8. | 162.4 million shares, issued and outstanding shares as of September 30, 2026, is the sum of 80.5 million shares of Class A common stock and 81.9 million shares of Class C common stock. |
|
KINETIK HOLDINGS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
| | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2026 | | | | 2025 | | | | 2026 | | | | 2025 | |
| | | | | | | | |
| | (In thousands, except per share data) |
Operating revenues: | | | | | | | | |
Service revenue | | $ | 116,576 | | | $ | 103,338 | | | $ | 297,239 | | | $ | 343,918 | |
Product revenue | | | 447,923 | | | | 357,608 | | | | 1,250,956 | | | | 981,703 | |
Other revenue | | | 4,902 | | | | 3,023 | | | | 12,622 | | | | 8,349 | |
Total operating revenues | | | 569,401 | | | | 463,969 | | | | 1,560,817 | | | | 1,333,970 | |
Operating costs and expenses: | | | | | | | | |
Cost of sales (excluding depreciation and amortization)(1) | | | 300,330 | | | | 235,391 | | | | 726,646 | | | | 615,452 | |
Operating expenses | | | 71,634 | | | | 76,137 | | | | 213,857 | | | | 207,785 | |
Ad valorem taxes | | | 7,524 | | | | 7,099 | | | | 24,692 | | | | 20,449 | |
General and administrative expenses | | | 22,379 | | | | 30,096 | | | | 92,840 | | | | 91,932 | |
Depreciation and amortization expenses | | | 103,803 | | | | 95,409 | | | | 308,967 | | | | 281,845 | |
(Gain) loss on disposal of assets, net | | | (7 | ) | | | 50 | | | | (62 | ) | | | (15 | ) |
Total operating costs and expenses | | | 505,663 | | | | 444,182 | | | | 1,366,940 | | | | 1,217,448 | |
Operating income | | | 63,738 | | | | 19,787 | | | | 193,877 | | | | 116,522 | |
Other income (expense): | | | | | | | | |
Interest and other income | | | 195 | | | | 303 | | | | 659 | | | | 3,820 | |
Loss on debt extinguishment | | | — | | | | — | | | | — | | | | (635 | ) |
Interest expense | | | (54,709 | ) | | | (61,721 | ) | | | (162,250 | ) | | | (173,949 | ) |
Equity in earnings of unconsolidated affiliates | | | 47,225 | | | | 58,289 | | | | 155,796 | | | | 174,472 | |
Total other income (expense), net | | | (7,289 | ) | | | (3,129 | ) | | | (5,795 | ) | | | 3,708 | |
Income before income taxes | | | 56,449 | | | | 16,658 | | | | 188,082 | | | | 120,230 | |
Income tax expense | | | 5,527 | | | | 1,109 | | | | 19,172 | | | | 11,003 | |
Net income including noncontrolling interest | | | 50,922 | | | | 15,549 | | | | 168,910 | | | | 109,227 | |
Net income attributable to Common Unit limited partners | | | 28,834 | | | | 10,284 | | | | 98,950 | | | | 74,187 | |
Net income attributable to holders of Class A Common Stock | | $ | 22,088 | | | $ | 5,265 | | | $ | 69,960 | | | $ | 35,040 | |
| | | | | | | | |
Net income attributable to holders of Class A Common Stock, per share | | | | | | | | |
Basic | | $ | 0.26 | | | $ | 0.03 | | | $ | 0.88 | | | $ | 0.41 | |
Diluted | | $ | 0.26 | | | $ | 0.03 | | | $ | 0.87 | | | $ | 0.41 | |
| | | | | | | | |
Weighted-average shares | | | | | | | | |
Basic | | | 79,947 | | | | 61,866 | | | | 73,717 | | | | 61,256 | |
Diluted | | | 81,008 | | | | 62,428 | | | | 74,896 | | | | 62,120 | |
| (1) | | Cost of sales (exclusive of depreciation and amortization) is net of gas service revenues totaling $101.1 million and $88.3 million for the three months ended September 30, 2026 and 2025, respectively, and $314.0 million and $224.1 million for the nine months ended September 30, 2026 and 2025, respectively, for certain volumes where we act as principal. |
KINETIK HOLDINGS INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES |
| | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2026 | | | | 2025 | | | | 2026 | | | | 2025 | |
| | | | | | | | |
| | (In thousands) |
Net Income Including Noncontrolling Interests to Adjusted EBITDA | | | | | | |
Net income including noncontrolling interest (GAAP) | | $ | 50,922 | | | $ | 15,549 | | | $ | 168,910 | | | $ | 109,227 | |
Add back: | | | | | | | | |
Interest expense | | | 54,709 | | | | 61,721 | | | | 162,250 | | | | 173,949 | |
Income tax expense | | | 5,527 | | | | 1,109 | | | | 19,172 | | | | 11,003 | |
Depreciation and amortization expenses | | | 103,803 | | | | 95,409 | | | | 308,967 | | | | 281,845 | |
Amortization of contract cost assets | | | 2,054 | | | | 1,744 | | | | 6,058 | | | | 5,054 | |
Proportionate EBITDA from unconsolidated affiliates | | | 67,623 | | | | 87,715 | | | | 212,530 | | | | 263,345 | |
Share-based compensation | | | 9,346 | | | | 14,229 | | | | 39,074 | | | | 44,577 | |
Loss on disposal of assets, net | | | — | | | | 50 | | | | — | | | | — | |
Loss on debt extinguishment | | | — | | | | — | | | | — | | | | 635 | |
Commodity hedging unrealized loss | | | 27,800 | | | | 6,485 | | | | 25,189 | | | | — | |
Contingent liability fair value adjustment | | | — | | | | 5,700 | | | | — | | | | 5,700 | |
Integration costs | | | — | | | | 6,650 | | | | 368 | | | | 12,621 | |
Acquisition/divestiture transaction costs | | | — | | | | 812 | | | | — | | | | 812 | |
Litigation costs | | | 2,959 | | | | 3,746 | | | | 19,947 | | | | 9,142 | |
Other one-time costs or amortization | | | 828 | | | | 170 | | | | 4,180 | | | | 6,566 | |
Deduct: | | | | | | | | |
Interest income | | | 195 | | | | 166 | | | | 659 | | | | 1,274 | |
Gain on disposal of assets, net | | | 7 | | | | — | | | | 62 | | | | 15 | |
Commodity hedging unrealized gain | | | — | | | | — | | | | — | | | | 13,131 | |
Equity in earnings of unconsolidated affiliates | | | 47,225 | | | | 58,289 | | | | 155,796 | | | | 174,472 | |
Adjusted EBITDA(1) (non-GAAP) | | $ | 278,144 | | | $ | 242,634 | | | $ | 810,128 | | | $ | 735,584 | |
| | | | | | | | |
Distributable Cash Flow(2) | | | | | | | | |
Adjusted EBITDA (non-GAAP) | | $ | 278,144 | | | $ | 242,634 | | | $ | 810,128 | | | $ | 735,584 | |
Proportionate EBITDA from unconsolidated affiliates | | | (67,623 | ) | | | (87,715 | ) | | | (212,530 | ) | | | (263,345 | ) |
Returns on invested capital from unconsolidated affiliates | | | 73,204 | | | | 78,263 | | | | 203,426 | | | | 205,204 | |
Interest expense | | | (54,709 | ) | | | (61,721 | ) | | | (162,250 | ) | | | (173,949 | ) |
Unrealized (gain) loss on interest rate swaps | | | (2,790 | ) | | | 779 | | | | (8,612 | ) | | | (632 | ) |
Maintenance capital expenditures | | | (12,494 | ) | | | (13,752 | ) | | | (40,675 | ) | | | (34,090 | ) |
Distributable cash flow (non-GAAP) | | $ | 213,732 | | | $ | 158,488 | | | $ | 589,487 | | | $ | 468,772 | |
| | | | | | | | |
Free Cash Flow(3) | | | | | | | | |
Distributable cash flow (non-GAAP) | | $ | 213,732 | | | $ | 158,488 | | | $ | 589,487 | | | $ | 468,772 | |
Growth capital expenditures | | | (127,556 | ) | | | (153,625 | ) | | | (298,871 | ) | | | (342,835 | ) |
Capitalized interest | | | (8,099 | ) | | | (4,449 | ) | | | (8,099 | ) | | | (12,308 | ) |
Investments in unconsolidated affiliates | | | (431 | ) | | | (221 | ) | | | (431 | ) | | | (1,206 | ) |
Returns of invested capital from unconsolidated affiliates | | | — | | | | — | | | | — | | | | 2,853 | |
Contributions in aid of construction | | | 9,885 | | | | 13,710 | | | | 12,029 | | | | 17,049 | |
Free cash flow (non-GAAP) | | $ | 87,531 | | | $ | 13,903 | | | $ | 294,115 | | | $ | 132,325 | |
KINETIK HOLDINGS INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (CONTINUED) |
| | |
| | Nine Months Ended September 30, |
| | | 2026 | | | | 2025 | |
| | | | |
| | (In thousands) |
Reconciliation of net cash provided by operating activities to Adjusted EBITDA | | | | |
Net cash provided by operating activities | | $ | 614,387 | | | $ | 494,030 | |
Net changes in operating assets and liabilities | | | (2,174 | ) | | | (13,652 | ) |
Interest expense | | | 162,250 | | | | 173,949 | |
Amortization of deferred financing costs | | | (5,889 | ) | | | (5,892 | ) |
Current income tax expense | | | 2 | | | | 509 | |
Returns on invested capital from unconsolidated affiliates | | | (203,426 | ) | | | (205,204 | ) |
Proportionate EBITDA from unconsolidated affiliates | | | 212,530 | | | | 263,345 | |
Derivative fair value adjustment and settlement | | | (16,577 | ) | | | 13,763 | |
Commodity hedging unrealized loss (gain) | | | 25,189 | | | | (13,131 | ) |
Interest income | | | (659 | ) | | | (1,274 | ) |
Integration costs | | | 368 | | | | 12,621 | |
Acquisition/divestiture transaction costs | | | — | | | | 812 | |
Litigation costs | | | 19,947 | | | | 9,142 | |
Other one-time cost or amortization | | | 4,180 | | | | 6,566 | |
Adjusted EBITDA(1) (non-GAAP) | | $ | 810,128 | | | $ | 735,584 | |
| | | | |
| | | | |
| | September 30, | | June 30, | | March 31, | | December 31, |
| | | 2026 | | | 2026 | | | 2026 | | | 2025 |
| | | | | | | | |
| | (In thousands) |
Net Debt(4) | | | | | | | | |
Short-term debt | | $ | 225,000 | | $ | 225,000 | | $ | 187,100 | | $ | 165,200 |
Long-term debt, net | | | 3,704,022 | | | 3,700,562 | | | 3,644,128 | | | 3,627,720 |
Plus: Debt issuance costs, net | | | 20,978 | | | 22,438 | | | 23,872 | | | 25,280 |
Total debt | | | 3,950,000 | | | 3,948,000 | | | 3,855,100 | | | 3,818,200 |
Less: Cash and cash equivalents | | | 7,024 | | | 7,830 | | | 720 | | | 3,951 |
Net debt (non-GAAP) | | $ | 3,942,976 | | $ | 3,940,170 | | $ | 3,854,380 | | $ | 3,814,249 |
| | | | | | | | | | | | |
(1) Adjusted EBITDA is defined as net income including noncontrolling interest adjusted for interest, taxes, depreciation and amortization, gain or loss on disposal of assets and debt extinguishment, the proportionate EBITDA from our equity method investment (“EMI”) pipelines, share-based compensation expense, noncash increases and decreases related to commodity hedging activities, integration and transaction costs and extraordinary losses and unusual or non-recurring charges. Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance. Adjusted EBITDA should not be considered as an alternative to the GAAP measure of net income including non-controlling interest or any other measure of financial performance presented in accordance with GAAP. (2) Distributable Cash Flow is defined as Adjusted EBITDA, adjusted for the proportionate EBITDA from unconsolidated affiliates, returns on invested capital from unconsolidated affiliates, interest expense, net of amounts capitalized, unrealized gains or losses on interest rate swaps and maintenance capital expenditures. Distributable Cash Flow should not be considered as an alternative to the GAAP measure of net income including non-controlling interest or any other measure of financial performance presented in accordance with GAAP. We believe that Distributable Cash Flow is a useful measure to compare cash generation performance from period to period and to compare the cash generation performance for specific periods to the amount of cash dividends we make. (3) Free Cash Flow is defined as Distributable Cash Flow adjusted for growth capital expenditures, investments in unconsolidated affiliates, returns of invested capital from unconsolidated affiliates, capitalized interest and contributions in aid of construction. Free Cash Flow should not be considered as an alternative to the GAAP measure of net income including non-controlling interest or any other measure of financial performance presented in accordance with GAAP. We believe that Free Cash Flow is a useful performance measure to compare cash generation performance from period to period and to compare the cash generation performance for specific periods to the amount of cash dividends that we make. (4) Net Debt is defined as total short-term and long-term debt, excluding deferred financing costs, premiums and discounts, less cash and cash equivalents. Net Debt illustrates our total debt position less cash on hand that could be utilized to pay down debt at the balance sheet date. Net Debt should not be considered as an alternative to the GAAP measure of total long-term debt, or any other measure of financial performance presented in accordance with GAAP. |
KINETIK HOLDINGS INC. RESULTS OF OPERATIONS BY SEGMENT The following tables present the Segment Adjusted EBITDA of the Company’s reportable segments and reconciliations of the segment profits to consolidated income before income tax expenses for the three and nine months ended September 30, 2026 and 2025: |
| | | | | | | | | | |
| | Midstream Logistics | | Pipeline Transportation | | Corporate
and Other(1) | | Elimination | | Consolidated |
| | | | | | | | | | |
For the Three Months Ended September 30, 2026 | | (In thousands) |
Revenue | | $ | 561,866 | | | $ | 2,633 | | | $ | — | | | $ | — | | | $ | 564,499 | |
Other revenue | | | 2,643 | | | | 2,259 | | | | — | | | | — | | | | 4,902 | |
Intersegment revenue(2) | | | — | | | | 6,706 | | | | — | | | | (6,706 | ) | | | — | |
Total segment operating revenue | | | 564,509 | | | | 11,598 | | | | — | | | | (6,706 | ) | | | 569,401 | |
Cost of sales (excluding depreciation and amortization expenses) | | | (300,536 | ) | | | 206 | | | | — | | | | — | | | | (300,330 | ) |
Intersegment cost of sales | | | (6,706 | ) | | | — | | | | — | | | | 6,706 | | | | — | |
Operating expenses(3) | | | (78,443 | ) | | | (715 | ) | | | — | | | | — | | | | (79,158 | ) |
General and administrative expenses | | | (5,847 | ) | | | (201 | ) | | | (16,331 | ) | | | — | | | | (22,379 | ) |
Proportionate EMI EBITDA | | | — | | | | 67,623 | | | | — | | | | — | | | | 67,623 | |
Other segment items(4) | | | 30,594 | | | | — | | | | 12,393 | | | | — | | | | 42,987 | |
Segment Adjusted EBITDA(5) | | $ | 203,571 | | | $ | 78,511 | | | $ | (3,938 | ) | | $ | — | | | $ | 278,144 | |
| | | | | | | | | | |
Reconciliation of Segment Adjusted EBITDA to income before income taxes | | | | | | | | | | |
Segment Adjusted EBITDA(5) | | $ | 203,571 | | | $ | 78,511 | | | $ | (3,938 | ) | | $ | — | | | $ | 278,144 | |
Add back: | | | | | | | | | | |
Other interest income | | | — | | | | — | | | | 195 | | | | — | | | | 195 | |
Gain on disposal of assets, net | | | 7 | | | | — | | | | — | | | | — | | | | 7 | |
Equity in earnings of unconsolidated affiliates | | | — | | | | 47,225 | | | | — | | | | — | | | | 47,225 | |
Deduct: | | | | | | | | | | |
Interest expense | | | — | | | | — | | | | 54,709 | | | | — | | | | 54,709 | |
Depreciation and amortization expenses | | | 101,460 | | | | 2,337 | | | | 6 | | | | — | | | | 103,803 | |
Amortization of contract cost assets | | | 2,054 | | | | — | | | | — | | | | — | | | | 2,054 | |
Proportionate EMI EBITDA | | | — | | | | 67,623 | | | | — | | | | — | | | | 67,623 | |
Share-based compensation | | | — | | | | — | | | | 9,346 | | | | — | | | | 9,346 | |
Commodity hedging unrealized loss | | | 27,800 | | | | — | | | | — | | | | — | | | | 27,800 | |
Litigation costs | | | — | | | | — | | | | 2,959 | | | | — | | | | 2,959 | |
Other one-time costs or amortization | | | 740 | | | | — | | | | 88 | | | | — | | | | 828 | |
Income (loss) before income taxes | | $ | 71,524 | | | $ | 55,776 | | | $ | (70,851 | ) | | $ | — | | | $ | 56,449 | |
| | Midstream Logistics | | Pipeline Transportation | | Corporate
and Other(1) | | Elimination | | Consolidated |
| | | | | | | | | | |
For the Three Months Ended September 30, 2025 | | (In thousands) |
Revenue | | $ | 458,621 | | | $ | 2,325 | | | $ | — | | | $ | — | | | $ | 460,946 | |
Other Revenue | | | 3,021 | | | | 2 | | | | — | | | | — | | | | 3,023 | |
Intersegment revenue(2) | | | — | | | | 5,793 | | | | — | | | | (5,793 | ) | | | — | |
Total segment operating revenue | | | 461,642 | | | | 8,120 | | | | — | | | | (5,793 | ) | | | 463,969 | |
Cost of sales (excluding depreciation and amortization expenses) | | | (236,001 | ) | | | 610 | | | | — | | | | — | | | | (235,391 | ) |
Intersegment cost of sales | | | (5,793 | ) | | | — | | | | — | | | | 5,793 | | | | — | |
Operating expenses(3) | | | (82,486 | ) | | | (750 | ) | | | — | | | | — | | | | (83,236 | ) |
General and administrative expenses | | | (6,610 | ) | | | (241 | ) | | | (23,245 | ) | | | — | | | | (30,096 | ) |
Proportionate EMI EBITDA | | | — | | | | 87,715 | | | | — | | | | — | | | | 87,715 | |
Other segment items(4) | | | 20,606 | | | | — | | | | 19,067 | | | | — | | | | 39,673 | |
Segment Adjusted EBITDA(5) | | $ | 151,358 | | | $ | 95,454 | | | $ | (4,178 | ) | | $ | — | | | $ | 242,634 | |
| | | | | | | | | | |
Reconciliation of Segment Adjusted EBITDA to income before income taxes | | | | | | | | | | |
Segment adjusted EBITDA(5) | | $ | 151,358 | | | $ | 95,454 | | | $ | (4,178 | ) | | $ | — | | | $ | 242,634 | |
Add back: | | | | | | | | | | |
Other interest income | | | — | | | | — | | | | 166 | | | | — | | | | 166 | |
Equity in earnings of unconsolidated affiliates | | | — | | | | 58,289 | | | | — | | | | — | | | | 58,289 | |
Deduct: | | | | | | | | | | |
Interest expense | | | 37 | | | | — | | | | 61,684 | | | | — | | | | 61,721 | |
Depreciation and amortization expenses | | | 93,095 | | | | 2,308 | | | | 6 | | | | — | | | | 95,409 | |
Amortization of contract cost assets | | | 1,744 | | | | — | | | | — | | | | — | | | | 1,744 | |
Proportionate EMI EBITDA | | | — | | | | 87,715 | | | | — | | | | — | | | | 87,715 | |
Share-based compensation | | | — | | | | — | | | | 14,229 | | | | — | | | | 14,229 | |
Loss on disposal of assets, net | | | 50 | | | | — | | | | — | | | | — | | | | 50 | |
Commodity hedging unrealized loss | | | 6,485 | | | | — | | | | — | | | | — | | | | 6,485 | |
Contingent liability fair value adjustment | | | 5,700 | | | | — | | | | — | | | | — | | | | 5,700 | |
Integration costs | | | 6,552 | | | | — | | | | 98 | | | | — | | | | 6,650 | |
Acquisition/divestiture transaction costs | | | — | | | | — | | | | 812 | | | | — | | | | 812 | |
Litigation costs | | | — | | | | — | | | | 3,746 | | | | — | | | | 3,746 | |
Other one-time costs or amortization | | | (12 | ) | | | — | | | | 182 | | | | — | | | | 170 | |
Income (loss) before income taxes | | $ | 37,707 | | | $ | 63,720 | | | $ | (84,769 | ) | | $ | — | | | $ | 16,658 | |
| | Midstream Logistics | | Pipeline Transportation | | Corporate
and Other(1) | | Elimination | | Consolidated |
| | | | | | | | | | |
For the Nine Months Ended September 30, 2026 | | (In thousands) |
Revenue | | $ | 1,541,185 | | | $ | 7,010 | | | $ | — | | | $ | — | | | $ | 1,548,195 | |
Other revenue | | | 10,342 | | | | 2,280 | | | | — | | | | — | | | | 12,622 | |
Intersegment revenue(2) | | | — | | | | 20,086 | | | | — | | | | (20,086 | ) | | | — | |
Total segment operating revenue | | | 1,551,527 | | | | 29,376 | | | | — | | | | (20,086 | ) | | | 1,560,817 | |
Cost of sales (excluding depreciation and amortization expenses) | | | (727,210 | ) | | | 564 | | | | — | | | | — | | | | (726,646 | ) |
Intersegment cost of sales | | | (20,086 | ) | | | — | | | | — | | | | 20,086 | | | | — | |
Operating expenses(3) | | | (236,257 | ) | | | (2,292 | ) | | | — | | | | — | | | | (238,549 | ) |
General and administrative expenses | | | (15,865 | ) | | | (691 | ) | | | (76,284 | ) | | | — | | | | (92,840 | ) |
Proportionate EMI EBITDA | | | — | | | | 212,530 | | | | — | | | | — | | | | 212,530 | |
Other segment items(4) | | | 35,150 | | | | — | | | | 59,666 | | | | — | | | | 94,816 | |
Segment Adjusted EBITDA(5) | | $ | 587,259 | | | $ | 239,487 | | | $ | (16,618 | ) | | $ | — | | | $ | 810,128 | |
| | | | | | | | | | |
Reconciliation of Segment Adjusted EBITDA to income before income taxes | | | | | | | | | | |
Segment adjusted EBITDA(5) | | $ | 587,259 | | | $ | 239,487 | | | $ | (16,618 | ) | | $ | — | | | $ | 810,128 | |
Add back: | | | | | | | | | | |
Other interest income | | | — | | | | — | | | | 659 | | | | — | | | | 659 | |
Gain on disposal of assets | | | 62 | | | | — | | | | — | | | | — | | | | 62 | |
Equity income from unconsolidated affiliates | | | — | | | | 155,796 | | | | — | | | | — | | | | 155,796 | |
Deduct: | | | | | | | | | | |
Interest expense | | | 103 | | | | — | | | | 162,147 | | | | — | | | | 162,250 | |
Depreciation and amortization expenses | | | 301,953 | | | | 6,997 | | | | 17 | | | | — | | | | 308,967 | |
Amortization of contract cost assets | | | 6,058 | | | | — | | | | — | | | | — | | | | 6,058 | |
Proportionate EMI EBITDA | | | — | | | | 212,530 | | | | — | | | | — | | | | 212,530 | |
Share-based compensation | | | — | | | | — | | | | 39,074 | | | | — | | | | 39,074 | |
Commodity hedging unrealized loss | | | 25,189 | | | | — | | | | — | | | | — | | | | 25,189 | |
Integration costs | | | — | | | | — | | | | 368 | | | | — | | | | 368 | |
Litigation costs | | | — | | | | — | | | | 19,947 | | | | — | | | | 19,947 | |
Other one-time costs or amortization | | | 3,903 | | | | — | | | | 277 | | | | — | | | | 4,180 | |
Income (loss) before income taxes | | $ | 250,115 | | | $ | 175,756 | | | $ | (237,789 | ) | | $ | — | | | $ | 188,082 | |
| | Midstream Logistics | | Pipeline Transportation | | Corporate
and Other(1) | | Elimination | | Consolidated |
| | | | | | | | | | |
For the Nine Months Ended September 30, 2025 | | (In thousands) |
Revenue | | $ | 1,318,459 | | | $ | 7,162 | | | $ | — | | | $ | — | | | $ | 1,325,621 | |
Other revenue | | | 8,343 | | | | 6 | | | | — | | | | — | | | | 8,349 | |
Intersegment revenue(2) | | | — | | | | 18,271 | | | | — | | | | (18,271 | ) | | | — | |
Total segment operating revenue | | | 1,326,802 | | | | 25,439 | | | | — | | | | (18,271 | ) | | | 1,333,970 | |
Cost of sales (excluding depreciation and amortization expenses) | | | (615,624 | ) | | | 172 | | | | — | | | | — | | | | (615,452 | ) |
Intersegment cost of sales | | | (18,271 | ) | | | — | | | | — | | | | 18,271 | | | | — | |
Operating expenses(3) | | | (226,283 | ) | | | (1,951 | ) | | | — | | | | — | | | | (228,234 | ) |
General and administrative expenses | | | (18,731 | ) | | | (901 | ) | | | (72,300 | ) | | | — | | | | (91,932 | ) |
Proportionate EMI EBITDA | | | — | | | | 263,345 | | | | — | | | | — | | | | 263,345 | |
Other segment items(4) | | | 14,870 | | | | — | | | | 59,017 | | | | — | | | | 73,887 | |
Segment Adjusted EBITDA(5) | | $ | 462,763 | | | $ | 286,104 | | | $ | (13,283 | ) | | $ | — | | | $ | 735,584 | |
| | | | | | | | | | |
Reconciliation of Segment Adjusted EBITDA to income before income taxes | | | | | | | | | | |
Segment adjusted EBITDA(5) | | $ | 462,763 | | | $ | 286,104 | | | $ | (13,283 | ) | | $ | — | | | $ | 735,584 | |
Add back: | | | | | | | | | | |
Other interest income | | | — | | | | — | | | | 1,274 | | | | — | | | | 1,274 | |
Gain on disposal of assets, net | | | 15 | | | | — | | | | — | | | | — | | | | 15 | |
Equity income from unconsolidated affiliates | | | — | | | | 174,472 | | | | — | | | | — | | | | 174,472 | |
Commodity hedging unrealized gain | | | 13,131 | | | | — | | | | — | | | | — | | | | 13,131 | |
Deduct: | | | | | | | | | | |
Interest expense | | | 97 | | | | — | | | | 173,852 | | | | — | | | | 173,949 | |
Depreciation and amortization expenses | | | 274,903 | | | | 6,924 | | | | 18 | | | | — | | | | 281,845 | |
Amortization of contract cost assets | | | 5,054 | | | | — | | | | — | | | | — | | | | 5,054 | |
Proportionate EMI EBITDA | | | — | | | | 263,345 | | | | — | | | | — | | | | 263,345 | |
Share-based compensation | | | — | | | | — | | | | 44,577 | | | | — | | | | 44,577 | |
Loss on debt extinguishment | | | — | | | | — | | | | 635 | | | | — | | | | 635 | |
Contingent liability fair value adjustment | | | 5,700 | | | | — | | | | — | | | | — | | | | 5,700 | |
Integration costs | | | 10,999 | | | | — | | | | 1,622 | | | | — | | | | 12,621 | |
Acquisition/divestiture transaction costs | | | — | | | | — | | | | 812 | | | | — | | | | 812 | |
Litigation costs | | | — | | | | — | | | | 9,142 | | | | — | | | | 9,142 | |
Other one-time costs or amortization | | | 3,702 | | | | — | | | | 2,864 | | | | — | | | | 6,566 | |
Income (loss) before income taxes | | $ | 175,454 | | | $ | 190,307 | | | $ | (245,531 | ) | | $ | — | | | $ | 120,230 | |
| (1) | | Corporate and Other represents those results that: (i) are not specifically attributable to an operating segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items. Items are included here to reconcile the operating segments’ profit and loss with the Company’s consolidated results. |
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| (2) | | The Company accounts for intersegment sales at market prices, while it accounts for asset transfers at book value. Intersegment revenue is eliminated at consolidation. |
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| (3) | | Operating expenses includes ad valorem taxes. |
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| (4) | | Other segment items include certain other income items, share-based compensation, adjustments related to amortization of contract costs, commodity hedging unrealized gain or loss, integration costs, litigation costs and other one-time costs or amortization. |
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| (5) | | Adjusted EBITDA is defined as net income or loss including noncontrolling interest adjusted for interest, taxes, depreciation and amortization, gain or loss on disposal of assets and debt extinguishment, the proportionate EBITDA from our EMI pipelines, share-based compensation expense, noncash increases and decreases related to commodity hedging activities, integration and transaction costs and extraordinary losses and unusual or non-recurring charges. Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance. Adjusted EBITDA should not be considered as an alternative to the GAAP measure of net income including non-controlling interest or any other measure of financial performance presented in accordance with GAAP. |
Source: Kinetik Holdings Inc.