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Kinetik NYSE: KNTK reported what President and Chief Executive Officer Jamie Welch described as the strongest financial results in the company’s history for the second quarter of 2026, citing operating execution, system performance and a supportive commodity-price environment. The company raised its full-year Adjusted EBITDA guidance by $70 million at the midpoint and increased its capital spending outlook as it prepares for continued customer activity across the Permian Basin.
The company reported second-quarter Adjusted EBITDA of $281 million, distributable cash flow of $195 million and free cash flow of $105 million. Senior Vice President and Chief Financial Officer Trevor Howard said Midstream Logistics Adjusted EBITDA rose 35% from a year earlier to $205 million, while Pipeline Transportation Adjusted EBITDA was $83 million.
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Processed natural gas volumes were 1.74 billion cubic feet per day during the quarter, flat from a year earlier despite an estimated 250 million cubic feet per day of Waha-price-related production curtailments. Howard said results benefited from operating performance, improved NGL recoveries and condensate yields, optimization efforts, and favorable commodity prices and spreads.
Guidance Raised on Volume, Commodity and Operating Expectations Kinetik increased its full-year 2026 Adjusted EBITDA forecast to $1.04 billion to $1.1 billion. At the midpoint, the revised outlook is 7% above the company’s original February forecast and represents approximately 15% year-over-year pro forma growth after accounting for the divestiture of its EPIC Crude interest, according to Howard.
Management identified four drivers for the revised outlook:
Improved volume expectations as Waha pricing normalized and curtailed production returned faster than anticipated. More favorable commodity-price assumptions, including nearly 30% higher WTI pricing and nearly 20% higher liquids pricing versus assumptions used in February guidance. Continued system operating improvements, including plant and compression runtimes, NGL recoveries and condensate yields. Outperformance in Pipeline Transportation, supported by basin activity, higher throughput and healthy pipeline margins. Kinetik now expects mid- to high-single-digit year-over-year volume growth in 2026, compared with its previous expectation for low- to mid-single-digit growth. The company anticipates average curtailments of roughly 25 million cubic feet per day during the second half, compared with the estimated 250 million cubic feet per day curtailed during the second quarter.
Howard said Kinetik expects to exit 2026 with processed gas volumes approaching 2.2 billion cubic feet per day, with no fourth-quarter curtailments assumed. He clarified during the question-and-answer session that the 2.2 Bcf/d figure represents a fourth-quarter average. Kinetik expects third-quarter Adjusted EBITDA of $260 million to $270 million and fourth-quarter Adjusted EBITDA of $270 million to $280 million.
Capacity Expansion and Downstream Market Access Welch said customer activity has continued to build across the company’s footprint, with more than 60% of the Permian rig-count growth since February occurring in the Delaware Basin. He said the recovery in Waha pricing from earlier dislocations reduced producer curtailments beginning in mid-June, while a more constructive crude-price environment supported producer development economics.
The company reached a final investment decision in May on Kings Landing 2, or KL2, and subsequently increased its planned processing capacity by 50% to 300 million cubic feet per day. Kinetik has purchased cryogenic processing, amine and residue compression equipment for the project and now expects it to enter service in mid-2028, earlier than previously communicated.
Once completed, KL2 is expected to lift Delaware North sour-gas processing capacity above 700 million cubic feet per day and take Kinetik’s systemwide processing capacity above 2.7 Bcf/d. The company also received board authorization to procure long-lead equipment for its next processing-capacity expansion and sanctioned work to expand the ECCC pipeline.
Management said it is evaluating interim offload options and optimization projects as volumes build ahead of KL2’s startup. Welch said the company is examining center-block rebuilds and other plant upgrades, while Chief Operating Officer Matt Wall said residue-compression upgrades and expander-center-section changes could add roughly 10% to 15% above nameplate capacity at cryogenic plants in Delaware South.
Kinetik also entered agreements for additional firm residue-gas access to Gulf Coast markets beginning in 2027, along with residue-gas and NGL transportation agreements supporting its Delaware North processing complexes. Welch said the agreements are intended to reduce customers’ exposure to volatile in-basin pricing and offer greater access to premium end markets.
Higher Capital Program Supports Customer Development Kinetik raised its 2026 capital expenditure guidance, including maintenance capital, to approximately $560 million. The increase includes spending on KL2, optimization initiatives, compression equipment, ECCC expansion right-of-way, long-lead equipment for a future cryogenic plant, and accelerated growth projects associated with customer development plans in late 2026 and early 2027.
Howard said much of the incremental 2026 development-related spending is tied to Delaware South, where new wells can be planned and connected more quickly than in New Mexico. He added that Kinetik is already planning for producer activity extending through 2028 and beyond.
Welch said Kinetik sees a “prudent paradigm” for capital investment given the returns available from infrastructure projects. Howard said capital expenditures could remain around current levels as long as customer forecasts support construction of roughly one cryogenic plant at a time.
Leverage, Dividend Coverage and Operations At the end of the quarter, Kinetik reported leverage of 3.8 times and liquidity exceeding $1 billion. Howard said the company expects leverage to decline by year-end despite its elevated capital program and remains within its target leverage range of 3.5 times to 4 times.
The company paid a second-quarter dividend of $0.81 per share in late July. Dividend coverage improved to approximately 1.5 times from 1.2 times for full-year 2025. Management reaffirmed its framework for annual dividend growth of 3% to 5% on a base-case basis, with the potential for growth in line with cash flow once coverage reaches 1.6 times or more.
Welch attributed operational outperformance partly to multiyear work on the acquired Durango system, including pipe and facility repairs, measurement improvements, reliability work and efforts to reduce fuel, loss and unaccounted-for volumes. Wall said the company expects system performance to plateau at improved levels rather than continue making large gains, though management does not expect performance to move backward.
Separately, Kinetik said the ECCC Pipeline has entered service, creating a north-to-south connection across the western part of its system between Eddy and Culberson counties. The company expects rich-gas volumes on the pipeline to rise through the rest of the year as Kings Landing reaches full utilization. Its Kings Landing acid-gas injection and sour-conversion project remains on track for first-phase service by year-end, while the 40-megawatt Diamond Volt behind-the-meter power project is expected to enter service in the second quarter of 2027.
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.
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