What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-08 · 136 added, 193 removed, 167 unchanged (66% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis addresses the results of our operations for the three and nine month period ended September 30, 2024, as compared to our results of operations for the same periods in 2023 .

The following discussion and analysis addresses the results of our operations for the three month period ended March 31, 2025, as compared to our results of operations for the same period in 2024 .

Please read the following discussion of our financial condition and results of operations in conjunction with the financial statements and notes thereto included elsewhere in this report.

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Gas Gathering and Processing.

The Midstream Logistics segment provides gas gathering and processing services with over 3,900 miles of low and high-pressure steel pipeline located throughout the Delaware Basin, including over 2,300 miles of gas pipeline acquired through the Durango Acquisition, and over 570,000 horsepower of compression capacity.

Gas processing assets are centralized at seven processing complexes with system-wide front-end amine treating capability, 6.5 Mmcfpd AGI capacity and total cryogenic processing capacity of approximately 2.2 Bcf/d as of today and over 2.4 BCF/d once the Kings Landing Project is complete in early 2025.

The Midstream Logistics segment provides gas gathering and processing services with over 4,200 miles of low and high-pressure steel pipeline located throughout the Delaware Basin, including over 2,300 miles of gas pipeline acquired through the Durango Acquisition, over 200 miles of gas pipeline acquired through the Barilla Draw Acquisition, and over 630,000 horsepower of compression capacity.

Gas processing assets are centralized at seven processing complexes with total cryogenic processing capacity of approximately 2.2 Bcf/d as of today and over 2.4 Bcf/d once the Kings Landing Project is complete in mid-2025.

Crude Oil Gathering, Stabilization and Storage Services.

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The system includes approximately 280 miles of gathering pipeline and 90,000 barrels of crude storage.

The crude facilities have connections for takeaway transportation into certain facilities operated by Plains All American Pipeline, L.P.

Water Gathering and Disposal.

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The Delaware Link Pipeline consists of approximately 40 miles of 30-inch diameter pipeline with an initial capacity of approximately 1.0 Bcf/d that provides additional transportation capacity to Waha.

The project reached commercial in-service in October 2023.

Recent Developments

EPIC Equity Interest

During the third quarter, the Company consummated the Equity Sale and Purchase Agreement with Dos Rios Crude Intermediate LLC (“Seller”) to purchase a 12.5% of equity interest in EPIC.

The acquisition of additional interest is accounted for as a business acquisition pursuant to ASC 805.

After completion of the transaction, the Company owned a 27.5% equity interest in EPIC as of September 30, 2024.

EPIC has over 800 miles of pipeline connecting the Delaware and Midland Basins and has a capacity of 625 MBbl/d.

Durango Acquisition

On June 24, 2024, the Company consummated the previously announced Durango Acquisition for an adjusted purchase price of approximately $845.2 million, consisting of (i) $358.0 million of cash consideration paid at closing, (ii) approximately 3.8 million shares of Class C Common Stock and an equivalent number of OpCo Units, issued at closing and (iii) approximately 7.7 million shares of Class C Common Stock and an equivalent number of OpCo Units to be issued on July 1, 2025.

Durango Seller is also entitled to an earn out of up to $75.0 million in cash contingent upon the completion and placing into service of the Kings Landing Project in Eddy County, New Mexico, which is currently under construction.

This earn out is subject to reduction based on actual capital costs associated with the Kings Landing Project.

This transaction was accounted for as a business combination pursuant to ASC 805.

Refer to Note 2—Business Combinations in the Notes to our Condensed Consolidated Financial Statements for further information.

The Durango Acquisition significantly expands Kinetik’s footprint into New Mexico and the Northern Delaware Basin, expanding Kinetik’s processing capacity by over 200 MMcf/d and doubling its existing gathering pipeline mileage.

An additional 200 MMcf/d of processing capacity will be added upon completion of the Kings Landing Project.

GCX Divestiture

On June 4, 2024, the Company consummated the previously announced transaction contemplated by the GCX Purchase Agreement to sell its 16% equity interest in GCX for an adjusted purchase price of $524.4 million (the "GCX Sale"), including an additional $30.0 million earn out in cash upon the approval by the GCX Board of Directors of one or more capital projects that achieve certain capacity expansion criteria.

Net cash proceeds of $494.4 million were received from the GCX Buyer on June 4, 2024 and the cash earn out was received in September 2024.

The Company recognized a gain of $89.8 million upon closing of the GCX Sale.

Amendment to A/R Facility

On April 1, 2025, the Company entered into Amendment No.

1 to the A/R Facility to, among other things, increase the facility limit to $250 million and to extend the scheduled termination date to March 31, 2026.

This Amendment No.

1 to the Receivables Purchase Agreement also eliminated certain of the Sustainability Performance Targets applicable to the Partnership and the Company under the Receivables Purchase Agreement.

See Liquidity and Capital Resources —A/R Facility , Item 2.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations for additional i nf ormation .

December 2028 Sustainability-Linked Senior Notes

On March 14, 2025, the Company completed an additional private placement of $250.0 million aggregate principal amount of 6.625% Sustainability-Linked Senior Notes due 2028 (the “New 2028 Notes”) at 101.25% of par, plus accrued and unpaid interest from December 15, 2024.

The New 2028 Notes were issued as additional notes under the indenture dated as of December 6, 2023, as may be supplemented from time to time (the “Indenture”), pursuant to which the Partnership has previously issued $800.0 million aggregate principal amount of 6.625% Sustainability-Linked Senior Notes due 2028 (the “Existing Notes” and together with the New 2028 Notes, the “2028 Notes”).

The New 2028 Notes and the Existing Notes are treated as a single series of securities under the Indenture, vote together as a single class and have substantially identical terms.

Barilla Draw Assets Acquisition

On January 14, 2025, the Company completed the previously announced Barilla Draw Acquisition.

Assets acquired consisted of natural gas and crude gathering pipelines and compression of $167.8 million, intangible right-of-way assets of $10.6 million and operating lease right of use assets of $15.7 million.

The Barilla Draw Acquisition provides a multi-stream opportunity for natural gas gathering and compression, as well as crude gathering services for the Company.

Factors Affecting Our Business

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There has been, and we believe there will continue to be, volatility in commodity prices and in the relationships among NGLs, crude oil and natural gas prices.

As a result of uncertainty around global commodity supply and demand, the current conflict in Israel and the Gaza Strip and elsewhere in the Middle East, as well as the ongoing armed conflict in Ukraine, global oil and natural gas commodity prices continue to remain volatile.

As a result of uncertainty around global commodity supply and demand, global geopolitical conflicts, foreign and domestic trade policies implemented by the Trump Administration, and recent action by OPEC+, global oil and natural gas commodity prices continue to remain volatile.

The volatility and uncertainty of natural gas, crude oil and NGL prices impact drilling, completion and other investment decisions by producers, and ultimately supply to our systems.

Although ongoing armed conflicts might generate commodity price upward pressure, and our operations could benefit in an environment of higher natural gas, NGLs and condensate prices, the instability of the international political environment and human and economic hardship resulting from the conflicts would have a highly uncertain impact on the U.S.

economy, which in turn, might affect our business and operations adv ersely.

economy, which in turn, might affect our business and operations adversely.

Moreover, the impact of new and proposed tariffs by the Trump Administration and foreign governments is highly uncertain, and could lead to depressed commodity prices if such tariffs result in a recession.

Our product sales revenue is exposed to commodity price fluctuations.

Therefore, commodity price decline and sustained periods of low natural gas and NGL prices could have an adverse effect on our product revenue stream.

Therefore, commodity price decline and sustained periods of low natural gas, NGL and condensate prices could have an adverse effect on our product revenue stream.

The Company continues to monitor commodity prices closely and may enter into commodity price hedges from time to time as necessary to mitigate the volatility risk.

In addition, the Company, when economically appropriate, enters into fee-based arrangements that insulate the Company from commodity price volatility.

In addition, the Company, when economically appropriate, enters into fee-based and NGL arbitrage arrangements that insulate the Company from commodity price volatility.

In addition, our business requires access to steel and other materials to construct and maintain our pipelines and other midstream assets.

Any imposition of or increase in tariffs on imports of steel or other materials, as well as corresponding price increases for such materials available domestically, could increase our construction costs and our costs to maintain our assets.

The Company continues to monitor costs of materials used for capital expenditure and consider budget-to-actual and forecast-to-actual variances on a monthly basis to mitigate volatility risk.

See Part II, Item 1A.

Risk Factors for additional discussion.

Inflation and Interest Rates

The annual rate of inflation in the United States was 2.4% in September 2024 as measured by the Consumer Price Index.

In light of the recent economic activity, unemployment level and progress on lowering inflation, the Federal Open Market Committee (“FOMC”) decided to lower the target range for the federal funds rate by 0.50% to 4.75% - 5.00% during its meeting in September 2024.

During the meeting, the FOMC noted that the economic outlook is uncertain and the Committee is attentive to the risks to both sides of its dual mandate.

If interest rates elevated beyond the term of our hedges, our financing cost will increase and could have a negative impact on the Company’s ability to meet its contractual debt obligations and to fund its operating expenses and capital expenditures.

The annual rate of inflation in the United States was 2.4% in March 2025 as measured by the Consumer Price Index.

In light of the recent economic activity, unemployment levels and tariffs proposed and implemented by the Trump Administration, the Federal Open Market Committee (the “ FOMC”) decided to maintain the target range for the federal funds rate at 4.25 % - 4.50% during its meeting in March 2025.

During the meeting, the FOMC noted that the uncertainty around the economic outlook has increased, and inflation remains somewhat elevated.

The Committee is attentive to the risks to both sides of its dual mandate and is strongly committed to supporting maximum employment and returning inflation to its 2.00% objective.

If interest rates remain elevated beyond the term of our hedges, our financing cost will increase and could have a negative impact on the Company’s ability to meet its contractual debt obligations and to fund its operating expenses and capital expenditures.

The Company will continue to monitor the FOMC’s monetary policy and interest rate movement.

Refer to Note 11—Derivatives and Hedging Activities in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional discussion regarding our hedging strategies and objectives for interest rate risk.

Refer to Note 11—Derivatives and Hedging Activities in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for additional discussion regarding our hedging strategies and objectives for interest rate risk.

Results of Operations

The following table presents the Company’s results of operations for the periods presented:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

2025 2024 % Change

(In thousands, except percentages)

Operating revenues:

Service revenue $ 127,926 $ 102,195 25 %

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Other revenue 2,832 2,632 8 %

Total revenues 396,362 330,301 20 % 1,097,213 907,544 21 %

Total operating revenues 443,263 341,394 30 %

Operating costs and expenses:

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Ad valorem taxes 6,791 6,292 8 %

General and administrative 29,619 22,751 30 % 94,846 73,131 30 %

Depreciation and amortization expense

87,583 69,935 25 % 236,250 208,271 13 %

Loss on disposal of assets

General and administrative expenses 37,592 34,136 10 %

Depreciation and amortization expenses 92,673 73,606 26 %

(Gain) loss on disposal of assets, net

(40) 4,166 (101 %)

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Interest and other income 785 91 NM

Loss on debt extinguishment — — — % (525) — 100 %

Gain on sale of equity method investments

29,953 — 100 % 89,837 — 100 %

Interest expense (55,714) (47,467) 17 %

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Total other income, net

19,040 6,034 NM 93,707 18,010 NM

2,549 13,093 (81 %)

Income before income taxes 21,829 39,194 (44 %)

Income tax expense 8,260 1,303 NM 21,261 2,030 NM

Income tax expense 2,567 3,787 (32 %)

Net income including noncontrolling interest $ 19,262 $ 35,407 (46 %)

(1) Cost of sales (exclusive of depreciation and amortization) is net of gas service revenues totaling $60.2 million and $38.6 million for the three months ended September 30, 2024 and 2023, respectively, and $159.4 million and $107.1 million for the nine months ended September 30, 2024 and 2023, respectively, for certain volumes, where we act as principal.

(1) Costs of sales (exclusive of depreciation and amortization) is net of gas service fees totaling $62.2 million and $44.5 million for the three months ended March 31, 2025 and 2024, respectively, for certain volumes, where we act as principal.

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Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

For the three months ended September 30, 2024, revenue increased $66.1 million, or 20%, to $396.4 million, compared to $330.3 million for the same period in 2023.

The increase was primarily driven by higher product revenue related to increased natural gas residue volumes sold and increased gathered and processed gas volumes.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

For the three months ended March 31, 2025, revenue increased $101.9 million, or 30%, to $443.3 million, compared to $341.4 million for the same period in 2024.

The increase was primarily driven by higher service and product revenue from the Durango Acquisition completed in June 2024 and higher service revenue from the Barilla Draw Acquisition completed in January 2025.

Service revenue

Service revenue consists of service fees paid to us by our customers for providing comprehensive gathering, treating, processing and produced water disposal services necessary to bring natural gas, NGLs and crude oil to market.

Service revenue for the three months ended September 30, 2024, decreased by $1.2 million, or 1%, to $103.1 million, compared to $104.3 million for the same period in 2023.

This decrease was driven by lower period-over-period gas gathering fees of $1.7 million.

Period-over-period gathered and processed gas volumes increased by 212.3 Mcf per day, or 12% and by 238.7 Mcf per day, or 16%, respectively.

Of the increase, Durango’s operation accounted for 207.2 Mcf per day and 195.8 Mcf per day of gathered and processed gas volume, respectively.

However, the total gathered and processed gas volumes where we function as the agent decreased period over period causing the change in net gas gathering fees presented as revenues to be down 2%.

Over 91% of service revenues are included in the Midstream Logistics segment.

Product revenue

Product revenue consists of commodity sales (including condensate, natural gas residue and NGLs).

Product revenue for the three months ended September 30, 2024, increased by $69.1 million, or 31%, to $290.4 million, compared to $221.3 million for the same period in 2023, primarily due to increased residue gas volumes sold and higher commodity prices.

Period over period natural gas residue volumes sold increased 36.1 million MMBtu, of which, Durango’s operations accounted for 14.2 million MMBtu.

Partially offsetting this increase, NGL and condensate volumes sold decreased 2.0 million barrels, or 24%.

Product revenues are included entirely in the Midstream Logistics segment.

Operating Costs and Expenses

Operating expenses

Operating expenses increased by $12.9 million, or 30%, to $55.8 million for the three months ended September 30, 2024, compared to $42.9 million for the same period in 2023.

Of the total increase, $11.7 million was driven by Durango’s operations that were acquired during June 2024.

Over 99% of operating expenses are included in the Midstream Logistics segment.

General and administrative expenses

General and administrative expenses increased by $6.9 million, or 30% to $29.6 million for the three months ended September 30, 2024, compared to $22.8 million for the same period in 2023.

The increase was mainly driven by increases in share-based compensation of $2.7 million due to new RSUs and PSUs granted during 2024 and Durango integration costs of $2.2 million.

The remaining $2.0 million increase primarily relates to higher internal labor and insurance expenses that have resulted from the overall growth of the organization.

Depreciation and amortization expense

Depreciation and amortization expense increased by $17.6 million, or 25% to $87.6 million for the three months ended September 30, 2024, compared to $69.9 million for the same period in 2023.

Of the total increase, $12.8 million was driven by the Durango Acquisition that was completed during June of 2024.

The remaining increase was driven by assets placed in service since third quarter of 2023, primarily related to the Delaware Link Pipeline that was placed in service in October 2023.

Other Income (Expense)

Gain on sale of equity method investment

Gain on sale of equity method investment increased by $30.0 million, or 100%, for the three months ended September 30, 2024.

The increase was related to the cash earn out received in September 2024 related to the GCX Sale.

Interest expense

Interest expense increased by $21.0 million, or 47%, to $66.0 million for the three months ended September 30, 2024.

The increase was primarily driven by an unrealized loss on interest rate swaps of $12.3 million during the three months ended September 30, 2024 versus an unrealized gain on interest rate swaps of $7.8 million during the same period in 2023.

Refer to Note—11 Derivatives and Hedging Activities in the Notes to Condensed Consolidated Financial Statements regarding the Company’s strategy in managing interest rate risk.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

For the nine months ended September 30, 2024, revenue increased $189.7 million, or 21%, to $1,097.2 million, compared to $907.5 million for the same period in 2023.

The increase was primarily driven by higher period-over-period product revenue due to increased natural gas residue volumes sold and increased gathered and processed gas volumes.

Service revenue

Service revenue consists of service fees paid to us by our customers for providing comprehensive gathering, treating, processing and water disposal services necessary to bring natural gas, NGLs and crude oil to market.

Service revenue for the nine months ended September 30, 2024, decreased by $8.6 million, or 3%, to $301.7 million, compared to $310.3 million for the same period in 2023.

The decrease was primarily driven by lower period-over-period gas gathering fees of $8.2 million.

Total gathered and processed gas volumes increased 171.1 Mcf per day, or 10% and 188.0 Mcf per day, or 13%, respectively.

Of the increase, Durango’s operations accounted for 74.8 Mcf per day and 70.6 Mcf per day of gathered and processed gas volume, respectively.

However, the total gathered and processed gas volumes where we function as the agent decreased period over period causing the change in net gas gathering fees presented as revenues to be down 3%.

Service revenue for the three months ended March 31, 2025, increased by $25.7 million, or 25%, to $127.9 million, compared to $102.2 million for the same period in 2024.

This increase was driven by higher period-over-period gas gathering fees of $23.1 million.

Period-over-period gathered and processed gas volumes increased by 428.6 MMcf per day, or 23% and 262.1 MMcf per day, or 17%, respectively.

Of the increase, Durango’s operation accounted for 234.3 MMcf per day and 197.4 MMcf per day of gathered and processed gas volume, respectively.

Barilla Draw operations accounted for 141.9 MMcf per day of gathered gas volume.

Over 98% of service revenues are included in the Midstream Logistics segment.

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Product revenue consists of commodity sales (including condensate, natural gas residue and NGLs).

Product revenue for the nine months ended September 30, 2024, increased by $200.6 million, or 34%, to $787.1 million, compared to $586.5 million for the same period in 2023, primarily due to a period-over-period increase in residue gas volumes sold.

Natural gas residue sales volumes increased 59.6 million MMBtu, of which Durango’s operations accounted for 14.6 million MMBtu.

The increase was also driven by a period over period increase in NGL prices of $8.46 per barrel, or 39%.

The overall increase was partially offset by decreases in NGL and condensate volumes sold of 4.3 million barrels, or 19% and a decrease in natural gas prices of $0.42 per MMBtu, or 25%.

Product revenue for the three months ended March 31, 2025, increased by $75.9 million, or 32%, to $312.5 million, compared to $236.6 million for the same period in 2024, primarily due to increased NGL and condensate volumes sold and increased natural gas residue prices.

Period-over-period NGL and condensate volumes sold increased 6.2 million barrels, or 99%, of which, Durango’s operations accounted for 1.5 million barrels.

Increased period-over-period natural gas prices of $0.90 per MMBtu, or 50%, also contributed to the increase in product revenue.

These increases were partially offset by a decrease in condensate prices of $7.12 per barrel, or 9%, and a decrease in natural gas residue volume sold of 7.5 million MMBtu, or 42.1%.

Product revenues are included entirely in the Midstream Logistics segment.

Operating Costs and Expenses

Costs of sales (exclusive of depreciation and amortization)

Costs of sales (excluding of depreciation and amortization)

Cost of sales (exclusive of depreciation and amortization) primarily consists of purchases of NGLs and natural gas from our producers at contracted market prices to support product sales to other third parties.

For the nine months ended September 30, 2024, cost of sales increased $70.7 million, or 19%, to $444.8 million, compared to $374.1 million for the same period in 2023.

As discussed above, the increase was primarily driven by period to period increases in natural gas residue volumes sold, slightly offset by a decrease in NGL and condensate volumes sold as well as lower natural gas prices.

Over 99% of cost of sales (exclusive of depreciation and amortization) is included entirely in the Midstream Logistics segment.

Operating Expense

Operating expenses increased by $24.5 million, or 21%, to $143.3 million for the nine months ended September 30, 2024, compared to $118.8 million for the same period in 2023.

Of the total increase, $12.7 million was driven by Durango’s operations that were acquired during June of 2024.

The remaining increase was primarily driven by increases in internal labor, repairs and maintenance and lubricants and chemicals totaling $9.8 million, which was related to the increased gathered and processed volumes during 2024.

For the three months ended March 31, 2025, cost of sales increased $69.7 million, or 45%, to $223.4 million, compared to $153.7 million for the same period in 2024.

The increase was primarily driven by the aforementioned period-over-period increases in NGL and condensate volumes sold and higher natural gas residue prices, partially offset by decreases in condensate prices and natural gas residue sales volumes.

Over 99% of costs of sales (exclusive of depreciation and amortization) is included in the Midstream Logistics segment.

Operating expenses

Operating expenses increased by $20.2 million, or 47%, to $63.6 million for the three months ended March 31, 2025, compared to $43.4 million for the same period in 2024.

Of the total increase, $14.2 million was driven by Durango’s operations that were acquired during June 2024 and $2.6 million was driven by the Barilla Draw operations acquired.

The remaining increase was mainly driven by increases in labor costs of $1.3 million and utilities of $2.1 million.

Over 99% of operating expenses are included in the Midstream Logistics segment.

General and administrative expenses

General and administrative expenses increased by $21.7 million, or 30% to $94.8 million for the nine months ended September 30, 2024, compared to $73.1 million for the same period in 2023.

The increase was mainly driven by higher share-based compensation of $9.5 million due to new RSUs and PSUs granted during 2024 and $7.9 million of integration and transaction costs associated with the 2024 Durango and Epic transactions.

The remaining $4.3 million increase primarily relates to higher internal labor and insurance expenses that have resulted from the overall growth of the organization.

Depreciation and amortization expense

Depreciation and amortization expense increased by $28.0 million, or 13% to $236.3 million for the nine months ended September 30, 2024, compared to $208.3 million for the same period in 2023.

Of the total increase, $13.6 million was driven by Durango Acquisition that was completed during June of 2024.

The remaining increase was driven by assets placed in service since third quarter of 2023, primarily related to the Delaware Link Pipeline that was placed in service in October 2023 and the rich gas lateral into Lea County, New Mexico.

Loss on disposal of assets

Loss on disposal of asset decreased by $11.1 million, or 73% to $4.1 million for the nine months ended September 30, 2024, compared to $15.2 million for the same period in 2023.

The decrease was mainly due to the write off of obsolete gathering and processing systems and facilities of $11.8 million in 2023, but no similar write off took place in 2024.

Depreciation and amortization expense increased by $19.1 million, or 26%, to $92.7 million for the three months ended March 31, 2025, compared to $73.6 million for the same period in 2024.

Of the total increase, $12.5 million was driven by the Durango Acquisition that was completed during June 2024 and $2.5 million from the Barilla Draw Acquisition.

The remaining increase was driven by assets placed in service since the second quarter of 2024.

Other Income (Expense)

Gain on sale of equity method investment

Gain on sale of equity method investment increased by $89.8 million, or 100%, for the nine months ended September 30, 2024, compared to the same period in 2023.

The increase was related to the GCX Sale consummated in the second quarter of 2024.

Interest expense

Interest expense increased by $37.1 million, or 28%, to $167.5 million for the nine months ended September 30, 2024, compared to $130.4 million for the same period in 2023.

The increase was driven by a decrease in capitalized interest expense of $8.9 million given the completion of the PHP expansion in December of 2023, and an unrealized loss on interest rate swaps of $2.8 million during the nine months ended September 30, 2024 versus an unrealized gain on interest swaps of $27.5 million during the same period in 2023.

Interest expense increased by $8.2 million, or 17%, to $55.7 million for the three months ended March 31, 2025.

The increase was primarily driven by a decrease in realized and unrealized gains on interest rate swaps totaling $13.0 million during the three months ended March 31, 2025 compared to the same period in 2024.

Refer to Note—11 Derivatives and Hedging Activities in the Notes to Condensed Consolidated Financial Statements regarding the Company’s strategy in managing interest rate risk.

Equity in earnings of unconsolidated affiliates

Income from EMI pipelines increased by $22.8 million, or 16%, to $169.7 million for the nine months ended September 30, 2024, compared to $146.8 million for the same period in 2023.

An increase of $35.9 million was driven by higher profitability from the Company’s investment in PHP due to its expanded capacity that was placed into service in December 2023.

This increase was partially offset by the decrease in equity in earnings of unconsolidated affiliates from GCX due to the GCX sale consummated in the second quarter of 2024.

Income Tax Expense

Income tax expense increased by $19.2 million for the nine months ended September 30, 2024 compared to the same period in 2023.

The increase was primarily due to the release of the valuation allowance against deferred tax assets in December 2023 and the recognition of deferred federal income tax of $18.4 million for nine months ended September 30, 2024 compared to nil for the same period in 2023.

The increase in interest expense was partially offset by a decrease in debt interest expense of $2.7 million due to a decrease in effective interest rate and an increase in capitalized interest of $2.4 million.

Key Performance Metrics

Adjusted EBITDA

Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for interest, taxes, depreciation and amortization, gain or loss on disposal of assets and debt extinguishment, the proportionate EBITDA from our EMI pipelines, equity income and gain from sale of investments recorded using the equity method, share-based compensation expense, noncash increases and decreases related to hedging activities, fair value adjustments for contingent liabilities, integration and transaction costs and extraordinary losses and unusual or non-recurring charges.

Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for interest, taxes, depreciation and amortization, gain or loss on disposal of assets, 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.

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The following table presents a reconciliation of the GAAP financial measure of net income including noncontrolling interest to the non-GAAP financial measure of Adjusted EBITDA.

Three Months Ended September 30,

Nine Months Ended September 30,

2024 2023 % Change 2024 2023 % Change

Three Months Ended March 31, 2025

2025 2024 % Change

(In thousands, except percentages)

2 unchanged sentences

Interest expense 55,714 47,467 17 %

Income tax expense 8,260 1,303 NM 21,261 2,030 NM

Income tax expense 2,567 3,787 (32 %)

Depreciation and amortization expenses

3 unchanged sentences

Share-based compensation 20,653 22,561 (8 %)

Loss on disposal of assets

(Gain) loss on disposal of assets

(40) 4,166 (101 %)

Loss on debt extinguishment — — — % 525 — 100 %

Commodity hedging unrealized loss

18,127 15,088 20 %

Contingent liability fair value adjustment

1,400 — 100 % 1,400 — 100 %

Integration costs

2,540 21 NM 5,091 985 NM

Acquisition transaction costs

31 378 (92 %) 3,538 648 NM

Other one-time cost or amortization 6,605 2,425 172 %

Warrant valuation adjustment — 4 (100 %) — — — %

Interest income 572 293 95 % 1,459 314 NM

Warrant valuation adjustment — — — % — 73 (100 %)

Commodity hedging unrealized gain 8,817 — 100 % 1,935 — 100 %

Gain on sale of equity method investment

29,953 — 100 % 89,837 — 100 %

Interest income 790 577 37 %

Equity income from EMI's 57,478 60,469 (5 %)

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NM - not meaningful

Adjusted EBITDA increased by $50.4 million, or 23%, to $265.7 million for the three months ended September 30, 2024, compared to $215.3 million for the same period in 2023.

Adjusted EBITDA increased by $16.5 million, or 7%, to $250.0 million for the three months ended March 31, 2025, compared to $233.6 million for the same period in 2024.

As discussed in the Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations to this Quarterly Report on Form 10-Q, $8.1 million of the increase was due to increased total operating revenue of $101.9 million, partially offset by increased cost of sales (exclusive of depreciation and amortization), operating expenses, ad valorem taxes and general and administrative expense of $93.8 million.

The remaining increases were primarily driven by higher proportionate EMI EBITDA of $9.6 million and higher non-cash amortizations or other one-time costs of $8.6 million.

These increases were partially offset by a decrease of $17.1 million related to unrealized commodity hedging activities.

Adjusted EBITDA increased by $122.8 million, or 20%, to $733.6 million for the nine months ended September 30, 2024, compared to $610.8 million for the same period in 2023.

As discussed in the Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations to this Quarterly Report on Form 10-Q, $69.3 million of the increase was due to increased total operating revenue of $189.7 million, partially offset by increased cost of sales (exclusive of depreciation and amortization), operating expenses, ad valorem taxes and general and administrative expenses of $120.3 million.

The increase was also driven by (i) higher proportionate EMI EBITDA of $37.6 million primarily related to the expanded capacity at PHP that was placed into service during December 2023 and (ii) increases related to stock based compensation of $9.5 million and integration, transaction and other one-time costs of $7.9 million, which was mainly related to the Durango Acquisition completed in June 2024.

The remaining increases were primarily driven by higher integration and other one-time costs or amortization of $7.7 million and an increase in commodity hedging unrealized loss of $3.0 million.

These increases were partially offset by a decrease in stock based compensation of $1.9 million.

Segment Adjusted EBITDA

Segment Adjusted EBITDA is defined as segment net earnings adjusted to exclude interest expense, income tax expense, depreciation and amortization, the proportionate effect of these same items for our equity method investments and other non-recurring items.

The following table presents Segment Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023.

Segment Adjusted EBITDA is defined as segment net earnings adjusted for interest, taxes, depreciation and amortization, gain or loss on disposal of assets, the proportionate EBITDA from our EMI pipelines, share-based compensation expense, noncash increases and decreases related to hedging activities, integration and transaction costs and extraordinary losses and unusual or non-recurring charges.

The following table presents Segment Adjusted EBITDA for the three months ended March 31, 2025 and 2024.

Also refer to Note 16—Segments in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for a reconciliation of Segment Adjusted EBITDA to net income before income taxes.

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 % Change 2024 2023 % Change

Three Months Ended March 31,

2025 2024 % Change

(In thousands, except percentages)

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(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.

Midstream Logistics Segment Adjusted EBITDA increased by $33.2 million to $173.6 million for the three months ended September 30, 2024, compared to $140.4 million for the same period in 2023.

The increase was primarily due to the increased total operating revenue of $57.9 million, partially offset by increased operating expense and ad valorem taxes of $12.7 million and a decrease of $17.1 million related to unrealized commodity hedging activities.

The reasons for the fluctuations are discussed in Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations to this Quarterly Report on Form 10-Q.

Midstream Logistics Segment Adjusted EBITDA increased by $67.4 million to $464.2 million for the nine months ended September 30, 2024, compared to $396.8 million for the same period in 2023.

The increase was primarily due to the increased total operating revenue of $165.7 million, partially offset by increases in cost of sales (exclusive of depreciation and amortization) of $70.7 million and operating expense and ad valorem taxes of $26.2 million.

The reasons for the fluctuations are discussed in Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations to this Quarterly Report on Form 10-Q.

Pipeline Transportation Segment Adjusted EBITDA increased by $17.2 million to $96.1 million for the three months ended September 30, 2024, compared to $78.9 million for the same period in 2023.

The increase was primarily driven by higher proportionate EMI EBITDA of $9.6 million due to increased profitability at PHP related to expanded capacity that was placed into service starting in December 2023.

The increase was also driven by the increase in operating revenue of $8.2 million primarily related to the Delaware Link Pipeline going into service during October 2023.

Midstream Logistics Segment Adjusted EBITDA increased by $17.2 million, or 12%, to $160.2 million for the three months ended March 31, 2025, compared to $143.0 million for the same period in 2024.

The increase was primarily due to the increased total operating revenue of $101.5 million, partially offset by increased cost of sales (exclusive of depreciation and amortization) of $69.7 million and operating expense and ad valorem taxes of $20.9 million.

The increase was also driven by increases in integration and other one-time costs or amortization of $4.2 million and an increase of $3.0 million related to unrealized losses on commodity hedging.

The reasons for the fluctuations are discussed in Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations to this Quarterly Report on Form 10-Q.

Pipeline Transportation Segment Adjusted EBITDA increased by $59.2 million to $285.2 million for the nine months ended September 30, 2024, compared to $226.0 million for the same period in 2023.

The increase was primarily driven by higher proportionate EMI EBITDA of $37.6 million due to increased profitability at PHP related to expanded capacity that was placed into service starting in December 2023.

The remaining increase was driven by increased operating revenue of $23.9 million primarily related to the Delaware Link Pipeline going into service during October 2023.

Pipeline Transportation Segment Adjusted EBITDA decreased by $1.6 million, or 2%, to $93.9 million for the three months ended March 31, 2025, compared to $95.5 million for the same period in 2024.

The decrease was primarily driven by lower operating revenue of $1.1 million and lower proportionate EMI EBITDA of $0.9 million due to the sale of the Company’s equity interest in Gulf Coast Express Pipeline LLC in May 2024.

The decrease was partially offset by decreases in operating costs and expenses of $0.3 million.

The reasons for the fluctuations are discussed in Item 2.

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Under certain clauses of our transportation services agreements with third party pipelines to transport natural gas and NGLs, if we fail to ship a minimum throughput volume, then we will pay certain deficiency payments for transportation based on the volume shortfall up to the MVC amount.

Capital Resources and Liquidity

Liquidity and Capital Resources

The Company’s primary use of capital since inception has been for the initial construction of gathering and processing assets, as well as the acquisitions of businesses and EMI pipelines and associated subsequent construction costs.

For 2024, the Company’s primary spending requirements are related to the business acquisitions and other budgeted capital expenditures for construction and maintenance of gathering and processing assets, the Company’s contractual debt obligations and quarterly cash dividends.

For 2025, the Company’s primary spending requirements are related to the business acquisitions and other budgeted capital expenditures for the construction and maintenance of gathering and processing assets, the Company’s contractual debt obligations and quarterly cash dividends.

In addition, the Company may repurchase its Class A Common Stock pursuant to the Share Repurchase Program from time to time.

During the nine months ended September 30, 2024, the Company’s primary sources of cash were distributions from the EMI pipelines, borrowings under the Revolving Credit Facility and A/R Facility, proceeds from the GCX Sale and cash generated from operations.

During the three months ended March 31, 2025, the Company’s primary sources of cash were distributions from the EMI pipelines, borrowings under the Revolving Credit Facility and A/R Facility, and cash generated from operations.

Based on the Company’s current financial plan, the Company believes that cash from operations and distributions from the EMI pipelines, and remaining borrowing capacity on our credit facilities will generate cash flows in excess of capital expenditures and the amount required to fund the Company’s planned quarterly dividend over the next 12 months.

Pursuant to the A/R Facility, the Company and certain of its subsidiaries continuously transfer receivables to Kinetik Receivables and Kinetik Receivables transfers receivables that meet certain qualifying conditions to third-party purchasers in exchange for cash.

These receivables are held by Kinetik Receivables and are pledged to secure the collectability of the sold receivables and are accounted for as secured borrowings.

The amount available for borrowing at any one time under the A/R Facility is limited to an amount calculated based on the outstanding balance of eligible receivables sold to the purchasers, subject to certain reserves, concentration limits, and other limitations.

As of September 30, 2024, eligible accounts receivable of $150.0 million was pledged to the A/R Facility as collateral.

The net proceeds of the A/R Facility were used, together with cash on hand, to repay a portion of the outstanding borrowings under the Term Loan Credit Facility during the second quarter 2024, lowering the remaining balance to $1.00 billion.

As a result, the maturity of the Term Loan Credit Facility extended to December 8, 2026.

Long-term Financing

From time to time, we issue long-term debt.

Our senior unsecured notes are fixed rate borrowings;

however, we have some exposure to the risk of changes in interest rates, primarily as a result of the variable rate borrowings under the Revolving Credit Facility, the Term Loan Credit Facility and the A/R Facility.

We use interest rate swaps to mitigate the impact of changes in interest rates on cash flows.

See Note 11—Derivatives and Hedging Activities in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report for detailed discussion.

As of March 31, 2025, we had $1.05 billion of our 6.625% senior unsecured notes due 2028 and $1.00 billion of our 5.875% senior unsecured notes due 2030 outstanding.

The Term Loan Credit Facility and the Revolving Credit Facility, both with variable rates and maturing in 2026 and 2027, had outstanding borrowings of $1.00 billion and $545.0 million as of March 31, 2025, respectively.

As of March 31, 2025, we had outstanding borrowing of $148.8 million under the A/R Facility and $1.2 million of remaining borrowing capacity.

On April 1, 2025, Kinetik LP, which is a subsidiary of the Company.

entered into Amendment No.

1 to the A/R Facility to, among other things.

increase the facility limit and extend the scheduled termination date.

The documentation for the Amended A/R Facility includes (i) a Receivables Purchase Agreement dated as of April 2, 2024 (the “Receivables Purchase Agreement”) by and among Kinetik Receivables LLC, a wholly-owned, consolidated, bankruptcy-remote subsidiary of Kinetik LP, as the seller (the “Seller”), Kinetik LP, as the servicer (the “Servicer”), the persons from time to time party thereto as purchasers (the “Purchasers”), PNC Bank, National Association, as administrative agent (“PNC” or “Administrative Agent”), and PNC Capital Markets LLC, as structuring agent and sustainability agent, as amended by Amendment No.

1 to Receivables Purchase Agreement dated as of April 1, 2025 (“Amendment No.

1 to Receivables Purchase Agreement”) by and among Seller, Servicer, Administrative Agent and the purchasers party thereto and (ii) a Sale and Contribution Agreement, dated as of April 2, 2024 (the “Sale and Contribution Agreement”), as supplemented by that Joinder Agreement dated as of April 1, 2025 (the “Joinder Agreement”), by and among Frontier Field Services, LLC, a Delaware limited liability company (“FFS”), Kinetik LP and Administrative Agent.

Pursuant to Amendment No.

1 to Receivables Purchase Agreement, the facility limit of the A/R Facility was increased to $250 million and the scheduled termination date was extended to March 31, 2026.

In addition, Amendment No.

1 to Receivables Purchase Agreement eliminated certain of the Sustainability Performance Targets applicable to Kinetik LP and the Company under the Receivables Purchase Agreement.

Pursuant to the Joinder Agreement, as of April 1, 2025, FFS is a party to the Sale and Contribution Agreement as an Originator and has assumed all interests, obligations, rights, duties and liabilities of an Originator under the Sale and Contribution Agreement.

Capital Requirements and Expenditures

Our operations can be capital intensive, requiring investments to expand, upgrade, maintain or enhance existing operations and to meet environmental and operational regulations.

During the nine months ended September 30, 2024 and 2023, capital spending for property, plant and equipment totaled $155.8 million and $245.8 million, respectively, intangible asset purchases totaled $7.7 million and $15.1 million, respectively, and contributions to EMI totaled $3.3 million and $202.7 million, respectively.

The decrease in capital spending was mainly due to completion of the Delaware Link Pipeline and PHP expansion projects in the second half of 2023.

During the three months ended March 31, 2025 and 2024, capital spending for property, plant and equipment totaled $74.5 million and $58.0 million, respectively, intangible asset purchases totaled $6.9 million and $2.2 million, respectively, and contributions to EMI totaled $0.9 million and $3.3 million, respectively.

The increase in capital spending was mainly related to the Kings Landing Project, which is expected to be completed in mid-2025.

Management believes its existing gathering, processing and transmission infrastructure capacity and future planned projects are capable of fulfilling its midstream contracts to service its customers.

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The following tables present cash flows from operating, investing and financing activities during the periods presented:

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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$ (260,138) $ (61,980)

Cash (used in) provided by financing activities

Cash provided by (used in) financing activities

$ 88,547 $ (86,479)

Operating activities .

Net cash provided by operating activities increased by $87.8 million for the nine months ended September 30, 2024 compared with the same period in 2023.

The change in the operating cash flows reflected (i) an increase in net income including noncontrolling interests of $108.9 million;

(ii) a decrease in adjustments related to non-cash items of $20.8 million, which was mainly driven by a gain of $89.8 million recognized on the GCX Sale and an increase in equity in earnings from EMI of $22.8 million, partially offset by increases in distribution from EMIs of $17.8 million, deferred income taxes of $18.1 million, depreciation and amortization expense of $28.0 million and a decrease in favorable derivative activities adjustments of $26.8 million and (iii) a decrease in working capital of $0.4 million.

Net cash provided by operating activities increased by $23.1 million for the three months ended March 31, 2025 compared with the same period in 2024.

The change in the operating cash flows reflected (i) a decrease in net income including noncontrolling interest of $16.1 million;

(ii) an increase in adjustments related to non-cash items of $12.9 million, which was mainly driven by increases in unfavorable derivative fair value adjustments of $20.2 million and depreciation and amortization expense of $19.1 million, partially offset by decreases in distribution from unconsolidated affiliates of $13.9 million, derivatives settlements of $8.5 million and loss on disposal of assets of $4.2 million;

and (iii) an increase in working capital of $26.4 million.

Investing activities .

Net cash used in investing activities decreased by $516.7 million for the nine months ended September 30, 2024 compared with the same period in 2023.

The decrease was primarily driven by cash proceeds from the GCX Sale of $524.4 million, lower capital expenditures of $97.3 million and a reduction of investments in EMIs of $199.5 million as the PHP expansion project was completed and put into service in December 2023, partially offset by net cash used in the Durango Acquisition and net cash used in the acquisition of additional equity interests in EPIC.

Net cash used in investing activities increased by $198.2 million for the three months ended March 31, 2025 compared with the same period in 2024.

The increase was primarily driven by net cash used in the Barilla Draw Acquisition of $178.4 million and higher capital spending for property, plant and equipment of $16.6 million and intangible assets of $4.7 million.

The increase was partially offset by a decrease in investments in unconsolidated affiliates of $2.4 million.

Financing activities .

Net cash used in financing activities was $411.5 million for the nine months ended September 30, 2024, which was primarily comprised of net payments on the Partnership’s Term Loan, Revolving Credit Facility and A/R Facility of $138.6 million and cash dividend of $272.9 million paid to the holders of Class A Common Stock and Common Units, compared with net cash provided by financing activities of $170.7 million for the nine months ended September 30, 2023, which was primarily comprised of net proceeds from the Partnership’s Revolving Credit Facility of $235.0 million and cash dividend of $58.6 million paid to the holders of Class A Common Stock and Common Units.

Significant increase in cash dividend paid in the first nine months of 2024 compared to the same period in 2023 was mainly due to the expiration of the Reinvestment Agreement on March 8, 2024, as such Reinvestment Holders are not obligated to reinvest a specified percent of all distributions on Common Units or dividends on shares of Class A Common Stock in the Company’s Class A Common Stock.

During the nine months ended September 30, 2024, the Company made cash dividend payments of $272.9 million to holders of Class A Common Stock and Common Units and $75.2 million was reinvested in shares of Class A Common Stock by the Reinvestment Holders.

On October 17, 2024, the Board declared a cash dividend of $0.78 per share on the Company’s Class A Common Stock which will be payable to stockholders on October 28, 2024.

The Company, through its ownership of the general partner of the Partnership, declared a distribution of $0.78 per Common Unit from the Partnership to the holders of Common Units, which will be payable on November 7, 2024.

Net cash provided by financing activities was $88.5 million for the three months ended March 31, 2025, which was primarily comprised of net proceeds from the long-term debt, Revolving Credit Facility and A/R Facility of $211.7 million, partially offset by cash dividends of $123.2 million paid to the holders of Class A Common Stock and Common Units, compared with net cash used in financing activities of $86.5 million for the three months ended March 31, 2024, which was primarily comprised of net payments to the Company’s Revolving Credit Facility of $47.0 million and cash dividends of $39.5 million paid to the holders of Class A Common Stock and Common Units.

During the three months ended March 31, 2025, the Company made cash dividend payments of $123.2 million to holders of Class A Common Stock and Common Units and $0.4 million was reinvested in shares of Class A Common Stock by the Reinvestment Holders.

On April 17, 2025, the Board declared a cash dividend of $0.78 per share on the Company’s Class A Common Stock which will be payable to stockholders on April 25, 2025.

As described in these Condensed Consolidated Financial Statements, as the context requires, dividends paid to holders of Class A Common Stock and distributions paid to holders of Common Units may be referred to collectively as “dividends.”

Share Repurchase Program

For nine months ended September 30, 2024, the Company did not repurchase any of its outstanding shares.

For more information regarding the 1% U.S.

federal excise tax imposed on certain repurchases of stock by publicly traded U.S.

corporations, please refer to Part I, Item 1A.—”Risk Factors— Risks Related to Ownership of our Common Stock” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed on March 5, 2024.

In February 2023, the Board approved a share repurchase program (“Repurchase Program”), authorizing discretionary purchases of the Company’s Class A Common Stock up to $100 million in the aggregate.

In May 2025, the Board approved a $400 million increase to the previously announced Repurchase Program, pursuant to which we are authorized to repurchase the Company’s Class A Common Stock for an aggregate purchase price of up to $500 million.

Repurchases may be made at management’s discretion from time to time, in accordance with applicable securities laws, on the open market or through privately negotiated transactions and may be made pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act.

Privately negotiated repurchases from affiliates are also authorized under the Repurchase Program, subject to such affiliates’ interest and other limitations.

The repurchases will depend on market conditions and may be discontinued at any time without prior notice.

For three months ended March 31, 2025, the Company did not repurchase any of its outstanding shares.

The following table presents a summary of the Company’s key liquidity indicators at the dates presented:

September 30, December 31,

March 31, December 31,

(In thousands)

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Off-Balance Sheet Arrangements

As of September 30, 2024, there were no off-balance sheet arrangements.

As of March 31, 2025, there were no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis