Kinetik (NYSE:KNTK) executives struck a reset tone on the company’s fourth-quarter and full-year 2025 earnings call, describing 2025 as a difficult operating year but emphasizing a “rebuilding” mandate for 2026 focused on execution, cost discipline, and project delivery. Management acknowledged results fell short of expectations in 2025, citing commodity price volatility, macroeconomic uncertainty, tempered customer development activity, and inflationary pressures.
Strategic and operational updates
President and CEO Jamie Welch highlighted several strategic milestones the company completed despite the challenging backdrop. Kinetik closed a bolt-on acquisition of the Barilla Draw gathering assets to expand its Delaware South footprint. The company also achieved full commercial in-service at its Kings Landing processing facility in Delaware North, which Welch said doubled processing capacity in that area.
Kinetik also reached final investment decision (FID) on the Kings Landing sour gas conversion project, which management expects to be in service by year-end 2026. Welch said the project will increase total permitted acid gas injection capacity across its Delaware North processing complexes to over 31 million cubic feet per day.
In addition, the company said the ECCC pipeline remains on schedule and is expected to enter service next quarter. Management described ECCC as a key connection between Eddy and Culberson counties that will give Delaware North access to processing capacity in Delaware South.
Commercial progress and Waha exposure
Welch outlined multiple contract amendments and commercial initiatives intended to strengthen cash flow visibility and manage exposure to Waha price volatility. Kinetik amended gas gathering and processing agreements with its two largest legacy Durango Midstream customers, extending terms into the mid-2030s and adding fixed-fee structures, treating fees, and control of residue gas and NGLs. Management said these amendments are expected to increase EBITDA beginning in 2026 and better align the company with producers as development shifts toward sour gas benches.
Kinetik also amended a Delaware South gathering and processing agreement to shift the residue gas pricing point from Waha to premium Gulf Coast markets, which management said improves customer realizations and reduces indirect exposure to in-basin volatility driven by price-related curtailments.
Management referenced additional long-term agreements with CPV and INEOS, and said it is finalizing a new gathering and processing agreement in Lea County with an existing customer.
On the call, executives repeatedly framed Gulf Coast connectivity as both a commercial tool and a financial offset to Permian curtailments when Waha prices weaken. Senior leaders said customers are increasingly seeking exposure away from Waha, and Kinetik believes its transportation capacity positions it well in that environment.
Fourth-quarter and full-year financial results
Senior Vice President and CFO Trevor Howard reported fourth-quarter adjusted EBITDA of $252 million. Distributable cash flow was $152 million and free cash flow was -$12 million.
- Midstream logistics delivered $173 million of adjusted EBITDA, up 15% year-over-year, driven by gas volume growth, Gulf Coast marketing gains, and a one-time operating expense benefit, partially offset by Waha price-related production shut-ins.
- Pipeline transportation generated $84 million of adjusted EBITDA, down year-over-year due to the EPIC Crude divestiture that closed Oct. 31.
Howard said approximately $500 million of proceeds from the EPIC Crude sale were used to pay down the revolving credit facility to improve liquidity and reduce leverage.
For the full year, Kinetik reported adjusted EBITDA of $988 million, which Howard said was slightly above the midpoint of revised guidance. Capital expenditures were $497 million, in line with revised guidance. The company repurchased $176 million of Class A common stock and ended 2025 at 3.8x leverage.
2026 guidance, capital spending, and capital allocation
Kinetik issued 2026 adjusted EBITDA guidance of $950 million to $1.05 billion. Howard said the $1.0 billion midpoint represents more than 7% year-over-year growth when adjusting for the EPIC Crude divestiture.
Within guidance assumptions, management cited:
- High single-digit growth in processed gas volumes across the system, outpacing broader Permian production growth.
- About 100 MMcf/d of expected Waha price-related production shut-ins, concentrated during spring and fall maintenance seasons.
- Gas process volumes exceeding 2 Bcf/d in the second half of 2026 supported by ECCC entering service and Kings Landing ramping utilization.
- Approximately 84% of fixed-fee gross profit and operating expenses expected to be flat to slightly down versus the third-quarter 2025 run rate.
Howard said the company has about 40% of its transport spread exposure hedged, and that marketing contributions are expected to help offset the financial impact of curtailments given the Waha-to-Gulf Coast differential.
Kinetik guided 2026 capital expenditures of $450 million to $510 million, with about 70% of spending in New Mexico. The company cited ECCC, gathering investments in Eddy and Lea counties, and the Kings Landing sour gas conversion project as major components.
Howard also described an updated capital allocation framework that shifts the company toward growth-oriented reinvestment supported by long-term commercial agreements and higher-return opportunities, while still planning “modest” increases in shareholder returns. Key elements include a leverage target of 3.5x to 4.0x, annual dividend increases of 3% to 5% until dividend coverage reaches 1.6x, and opportunistic share repurchases.
Power generation project and cost focus
Welch said Kinetik reached FID on its first behind-the-meter gas-fired power generation project at the Diamond Cryo facility. The company has purchased a 40 MW gas turbine expected to arrive in West Texas in the second quarter. Management said the project requires less than $25 million of capital and is expected to be in service in late 2026. Welch framed the initiative as a potential template for other Delaware South facilities, aimed at reliability and lowering key operating costs such as electricity.
During Q&A, management said the initial 40 MW project is intended for self-consumption at Diamond Cryo, with optionality to expand capacity and potentially sell power to the grid if economics warrant, though executives said such upside is not included in current financial expectations.
In closing comments, Welch said the company would not address market rumors regarding M&A speculation, but added that Kinetik would evaluate opportunities that maximize shareholder value consistent with its fiduciary responsibilities.
About Kinetik (NYSE:KNTK)
Kinetik (NYSE: KNTK) is a publicly listed midstream energy company focused on the development, operation and management of natural gas infrastructure across the United States. The company’s core business activities include the gathering, compression, processing, storage and transportation of natural gas, serving producers, utilities and industrial consumers. By integrating a suite of midstream services under a single platform, Kinetik aims to provide efficient, cost-effective and reliable solutions across the natural gas value chain.
The company was established in 2021 when assets were acquired from Talen Energy by a subsidiary of ArcLight Capital Partners, forming a comprehensive portfolio of pipelines, compression facilities and underground storage assets.
