What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-08 · 185 added, 122 removed, 181 unchanged (63% 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 month period ended March 31, 2025, as compared to our results of operations for the same period in 2024 .

The following discussion and analysis addresses the results of our operations for the three and six months ended June 30, 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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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.

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

Crude Oil Gathering, Stabilization and Storage Services.

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Water Gathering and Disposal.

The system includes over 370 miles of gathering pipeline and approximately 580,000 barrels per day of permitted disposal capacity.

The system includes approximately 370 miles of gathering pipeline and approximately 580,000 barrels per day of permitted disposal capacity.

Pipeline Transportation

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Recent Developments

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.

Term Loan Credit Agreement

On May 30, 2025, the Partnership entered into a term loan credit agreement, which provides a $1.15 billion senior unsecured credit facility maturing on May 30, 2028 (the “Term Loan Credit Agreement”).

Revolving Credit Agreement

On May 30, 2025, the Partnership entered into a revolving credit agreement that provides a $1.60 billion senior unsecured revolving credit facility, which includes a $200 million sublimit for the issuance of letters of credit, and a $300 million sublimit for swingline loans (the “Revolving Credit Agreement”).

All borrowing under this revolving credit facility will mature on May 30, 2030, unless such maturity date is adjusted in accordance with the Revolving Credit Agreement.

Repayment of Existing Credit Facilities

On May 30, 2025, in connection with entry into the Term Loan Credit Agreement and Revolving Credit Agreement, the Company repaid all outstanding borrowings and extinguished (1) the term loan credit agreement, dated June 8, 2022, by and among the Partnership and PNC Bank, National Association, as administrative agent, and the banks and other financial institutions party thereto, as lenders (the “2022 Term Loan Credit Agreement”) and (2) the revolving credit agreement, dated June 8, 2022, by and among the Partnership and Bank of America, N.A., as administrative agent, and the banks and other financial institutions party thereto, as lenders (the “2022 Revolving Credit Agreement”).

The Company recorded a loss on debt extinguishment of $0.6 million for the extinguishment of the 2022 Term Loan Credit Agreement and 2022 Revolving Credit Agreement.

Accounts Receivable Securitization Facility

On April 1, 2025, the Partnership entered into an amendment to its accounts receivable securitization facility dated April 2, 2024 (as amended, the “Amended A/R Facility”) to, among other things, increase the facility limit to $250.0 million and extend the scheduled termination date to March 31, 2026.

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, 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.

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 response thereto, 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.

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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.

Moreover, the impact of new and proposed tariffs by the Trump Administration and foreign governments is highly uncertain.

Our product sales revenue is exposed to commodity price fluctuations.

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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.

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 considers budget-to-actual and forecast-to-actual variances on a monthly basis to mitigate volatility risk.

See Part II, Item 1A.

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Inflation and Interest Rates

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 annual rate of inflation in the United States was 2.7% in June 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 July 2025.

During the meeting, the FOMC noted although recent economic indicators suggest that growth of economic activity moderated in the first half of the year and labor market conditions remain solid, uncertainty about the economic outlook remains elevated and inflation remains somewhat elevated.

The FOMC also noted that it is attentive to the risks to both sides of its dual mandate and is committed achieve maximum employment and inflation of 2.00% over the long run.

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

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

Three Months Ended March 31,

2025 2024 % Change

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 % Change 2025 2024 % Change

(In thousands, except percentages)

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(Gain) loss on disposal of assets, net (25) (76) (67 %) (65) 4,090 (102 %)

(40) 4,166 (101 %)

Total operating costs and expenses 349,283 302,869 15 % 773,266 618,162 25 %

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Other income (expense):

Interest and other income 785 91 NM

Interest and other income 2,732 309 NM 3,517 400 NM

Loss on debt extinguishment (635) (525) 21 % (635) (525) 21 %

Gain on sale of equity method investments — 59,884 (100 %) — 59,884 (100 %)

Interest expense (56,514) (54,049) 5 % (112,228) (101,516) 11 %

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Total other income, net 4,288 61,574 (93 %) 6,837 74,667 (91 %)

2,549 13,093 (81 %)

Income before income taxes 81,743 118,162 (31 %) 103,572 157,356 (34 %)

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Net income including noncontrolling interest $ 74,416 $ 108,948 (32 %) $ 93,678 $ 144,355 (35 %)

(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.

(1) Costs of sales (excluding depreciation and amortization) is net of gas service fees totaling $73.6 million and $54.7 million for the three months ended June 30, 2025 and 2024, respectively, and $135.8 million and $99.2 million for the six months ended June 30, 2025 and 2024, respectively, for certain volumes, where we act as principal.

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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.

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

For the three months ended June 30, 2025, revenue increased $67.3 million, or 19%, to $426.7 million, compared to $359.5 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 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 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.

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

Service revenue for the three months ended June 30, 2025, increased by $16.2 million, or 17%, to $112.7 million, compared to $96.4 million for the same period in 2024.

This increase was driven by higher period-over-period gas gathering fees of $14.0 million.

Period-over-period gathered and processed gas volumes increased by 377.8 MMcf per day, or 20% and 181.2 MMcf per day, or 12%, 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.

Of the increase, Durango’s operations accounted for 215.0 MMcf per day and 182.7 MMcf per day of gathered and processed gas volume, respectively.

Over 97% of service revenues are included in the Midstream Logistics segment for the three months ended June 30, 2025.

Product revenue

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

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.

Product revenue for the three months ended June 30, 2025, increased by $51.5 million, or 20%, to $311.6 million, compared to $260.1 million for the same period in 2024, primarily due to increased NGL, condensate and natural gas residue volumes sold and increased natural gas residue prices.

Period-over-period NGL and condensate volumes sold increased 3.8 million barrels, or 39%, 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%.

Period-over-period natural gas residue volumes sold increased 2.3 million MMBtu, or 23%, of which Durango’s operations accounted for most of the increase.

Period-over-period natural gas prices increased $0.75 per MMBtu, or 70%, which also contributed to the increase in product revenue.

These increases were partially offset by decreases in NGL and condensate prices of $8.45 per barrel, or 11%, and $2.81 per barrel, or 12%, respectively.

Product revenues are included entirely in the Midstream Logistics segment.

Operating Costs and Expenses

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 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.

Costs of sales (excluding depreciation and amortization)

Cost of sales (excluding 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 three months ended June 30, 2025, cost of sales increased $10.2 million, or 7%, to $156.7 million, compared to $146.5 million for the same period in 2024.

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

Over 99% of costs of sales (excluding 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.

Operating expenses increased by $24.0 million, or 54%, to $68.0 million for the three months ended June 30, 2025, compared to $44.1 million for the same period in 2024.

Of the total increase, $13.5 million was driven by Durango’s operations that were acquired in June 2024, which had a full quarter of operations in 2025 compared to one week of operations in the same period of 2024, and $7.1 million was driven by the Barilla Draw operations acquired in January 2025.

The remaining increase was primarily driven by increases in utility costs of $3.7 million.

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

General and administrative expenses

General and administrative expenses decreased by $6.8 million, or 22% to $24.2 million for the three months ended June 30, 2025, compared to $31.1 million for the same period in 2024.

The decrease was mainly driven by lower share-based compensation of $5.4 million related to certain equity awards that were modified upon the retirement of a former employee and the vesting of certain RSUs in the first quarter of 2024.

The remaining decrease is related to lower professional fees associated with the prior year Durango Acquisition.

Depreciation and amortization expense

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)

Depreciation and amortization expense increased by $18.7 million, or 25% to $93.8 million for the three months ended June 30, 2025, compared to $75.1 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 of 2024 and $2.4 million is from the Barilla Draw Acquisition completed in January 2025.

The remaining increase of $3.8 million was driven by assets placed into service since the second quarter of 2024.

Other Income (Expenses)

Gain on sale of equity method investments

The gain on a sale of equity method investment decreased by $59.9 million, or 100%, for the three months ended June 30, 2025, compared to the same period in 2024.

The decrease was related to the GCX divestiture consummated in the second quarter of 2024.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

For the six months ended June 30, 2025, revenue increased $169.2 million, or 24%, to $870.0 million, compared to $700.9 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 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 water disposal services necessary to bring natural gas, NGLs and crude oil to market.

Service revenue for the six months ended June 30, 2025, increased by $42.0 million, or 21%, to $240.6 million, compared to $198.6 million for the same period in 2024.

The increase was primarily driven by higher period-over-period gas gathering fees of $37.2 million.

Total gathered and processed gas volumes increased 404.1 MMcf per day, or 22% and 217.0 MMcf per day, or 14%, respectively.

Of the increase, Durango’s operations accounted for 225.6 MMcf per day and 185.6 MMcf per day of gathered and processed gas volume, respectively.

Over 97% of service revenues are included in the Midstream Logistics segment for the six months ended June 30, 2025.

Product revenue

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

Product revenue for the six months ended June 30, 2025, increased by $127.4 million, or 26%, to $624.1 million, compared to $496.7 million for the same period in 2024, primarily due to increased NGL, condensate and natural gas residue volumes sold and increased natural gas residue prices.

Period-over-period NGL and condensate volumes sold increased 7.1 million barrels, or 37%, of which, Durango’s operations accounted for 2.9 million barrels.

Period-over-period natural gas residues volumes sold increased 0.9 million MMBtu, or 4%, of which Durango’s operations accounted for 4.1 million MMBtu.

Period-over-period natural gas prices increased $0.77 per MMBtu, or 51%, which also contributed to the increase in product revenue.

These increases were partially offset by decreases in NGL and condensate prices of $6.11 per barrel, or 8%, and $1.29 per barrel, or 6%, respectively.

Product revenues are included entirely in the Midstream Logistics segment.

Operating Costs and Expenses

Costs of sales (excluding depreciation and amortization)

For the six months ended June 30, 2025, cost of sales increased $79.9 million, or 27%, to $380.1 million, compared to $300.2 million for the same period in 2024.

As discussed above, the increase was primarily driven by period to period increases in NGL, condensate and natural gas residue volumes sold and higher natural gas residue prices, partially offset by decreases in NGL and condensate prices.

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

Operating expenses

Operating expenses increased by $44.2 million, or 50%, to $131.6 million for the six months ended June 30, 2025, compared to $87.5 million for the same period in 2024.

Of the total increase, $27.7 million was driven by Durango’s operations that were acquired in June of 2024, which had a full six months of operations in 2025 compared to one week of operations in the same period in 2024, and $9.7 million was driven by the Barilla Draw operations acquired in January 2025.

The remaining increase was primarily driven by increases in utility costs of $5.8 million.

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

Depreciation and amortization expense

Depreciation and amortization expense increased by $37.8 million, or 25% to $186.4 million for the six months ended June 30, 2025, compared to $148.7 million for the same period in 2024.

Of the total increase, $25.8 million was driven by the Durango Acquisition that was completed in June of 2024 and $4.8 million is from the Barilla Draw Acquisition completed in January 2025.

The remaining increase of $7.2 million was driven by assets placed in service since the second quarter of 2024.

Gain on sale of equity method investments

Gain on sale of equity method investments decreased by $59.9 million, or 100%, for the six months ended June 30, 2025, compared to the same period in 2024.

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

Interest expense

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.

Interest expense increased by $10.7 million, or 11%, to $112.2 million for the six months ended June 30, 2025, compared to $101.5 million for the same period in 2024.

The increase in interest expense was primarily driven by a decrease in realized and unrealized gains on interest rate swaps totaling $16.4 million.

The increase was partially offset by an increase in capitalized interest of $5.9 million related to the ongoing Kings Landing Project.

Refer to Note—12 Derivatives and Hedging Activities in the Notes to Condensed Consolidated Financial Statements regarding the Company’s strategy in managing interest rate risk.

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, 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 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 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 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 March 31, 2025

2025 2024 % Change

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 % Change 2025 2024 % Change

(In thousands, except percentages)

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Share-based compensation 9,695 15,136 (36 %) 30,348 37,697 (19 %)

(Gain) loss on disposal of assets

(Gain) loss on disposal of assets, net

(25) (76) (67 %) (65) 4,090 (102 %)

Loss on debt extinguishment 635 525 21 % 635 525 21 %

Commodity hedging unrealized loss

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Integration costs

2,433 2,510 (3 %) 5,971 2,551 134 %

Acquisition transaction costs

— 3,232 (100 %) — 3,232 (100 %)

Other one-time cost or amortization 5,186 2,581 101 % 11,792 5,006 136 %

Interest income 318 310 3 % 1,108 887 25 %

Commodity hedging unrealized gain 37,743 8,205 NM 19,616 — 100 %

Gain on sale of equity method investment

— 59,884 (100 %) — 59,884 (100 %)

Equity income from EMI's 58,705 55,955 5 % 116,183 116,424 — %

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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 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.

Adjusted EBITDA increased by $8.5 million, or 4%, to $242.9 million for the three months ended June 30, 2025, compared to $234.4 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, $39.6 million of the increase was due to increased total operating revenue of $67.3 million, offset by increased cost of sales (excluding depreciation and amortization), operating expenses, ad valorem taxes and general and administrative expense totaling $27.7 million.

The increase was also driven by an increase in other income of $2.4 million and higher proportionate EBITDA from our EMI pipelines of $2.2 million.

These increases were partially offset by an increase in unrealized gain in commodity hedging activities of $29.5 million, a decrease in stock based compensation of $5.4 million and decreases in integration, transaction and other one-time costs or amortization of $0.7 million.

Adjusted EBITDA increased by $25.0 million, or 5%, to $492.9 million for the six months ended June 30, 2025, compared to $468.0 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 Form 10-Q, $47.7 million of the increase was due to increased total operating revenue of $169.2 million, offset by increased cost of sales (exclusive of depreciation and amortization), operating expenses, ad valorem taxes and general and administrative expenses totaling $121.5 million.

The increase in Adjusted EBITDA was also driven by increases in integration, transaction and other one-time costs or amortization of $7.0 million, other income of $2.9 million and proportionate EBITDA from our EMI pipelines of $1.3 million.

These increases were partially offset by an increase in unrealized gain in commodity hedging activities of $26.5 million and a decrease in stock based compensation of $7.3 million.

Segment Adjusted EBITDA

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.

Segment Adjusted EBITDA is defined as segment 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, equity income and gain from sale of investments recorded using the equity method, 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.

The following table presents Segment Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024.

Also refer to Note 17—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 March 31,

2025 2024 % Change

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 % Change 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 $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.

Midstream Logistics Segment Adjusted EBITDA increased by $3.6 million, or 2%, to $151.2 million for the three months ended June 30, 2025, compared to $147.6 million for the same period in 2024.

The increase was primarily due to the increased total operating revenue of $73.8 million, offset by increased cost of sales (exclusive of depreciation and amortization) of $16.2 million and higher operating expense, ad valorem taxes and general and administrative expenses of $26.5 million.

The increase was also driven by increases in other income of $2.4 million and integration, transaction and other one-time costs or amortization of $1.0 million.

These increases were partially offset by an increase in unrealized gain on commodity hedging of $29.5 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 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.

Midstream Logistics Segment Adjusted EBITDA increased by $20.9 million, or 7%, to $311.4 million for the six months ended June 30, 2025, compared to $290.5 million for the same period in 2024.

The increase was primarily due to the increased total operating revenue of $181.5 million, offset by increased cost of sales (exclusive of depreciation and amortization) of $92.0 million, and higher operating expense, ad valorem taxes and general and administrative expenses of $50.2 million.

The increase was also driven by increases in other income of $2.9 million and integration, transaction and other one-time costs or amortization of $5.2 million.

These increases were partially offset by an increase in unrealized gain on commodity hedging of $26.5 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 $3.2 million, or 3%, to $96.8 million for the three months ended June 30, 2025, compared to $93.5 million for the same period in 2024.

The increase was primarily driven by higher operating revenue of $1.2 million and higher proportionate EMI EBITDA of $2.2 million.

The increase was partially offset by increased cost of sales (exclusive of depreciation and amortization) of $0.3 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 $1.6 million, or 1%, to $190.7 million for the six months ended June 30, 2025, compared to $189.1 million for the same period in 2024.

The increase was primarily driven by higher proportionate EMI EBITDA of $1.3 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.

Contractual Obligations

We have contractual obligations for principal and interest payments on our 2028 Notes, 2030 Notes, and under the Term Loan Credit Facility, Revolving Credit Facility and A/R Facility.

We have contractual obligations for principal and interest payments on our 2028 Notes, 2030 Notes, and under the Term Loan Credit Agreement, Revolving Credit Agreement and the Amended A/R Facility.

See Note 7 —Debt and Financing Costs in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

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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 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 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.

During the six months ended June 30, 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.

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

June 30, 2025

(In thousands)

Total Capacity Outstanding Borrowings Available Borrowing Capacity

A/R Facility $ 250,000 $ 189,300 $ 60,700

Revolving Line of Credit 1,600,000 565,000 1,035,000

Letter of Credit (12,600) — (12,600)

Total $ 1,837,400 $ 754,300 $ 1,083,100

Cash and cash equivalents 10,733

Total liquidity $ 1,093,833

December 31, 2024

(In thousands)

Total Capacity Outstanding Borrowings Available Borrowing Capacity

A/R Facility $ 150,000 $ 140,200 $ 9,800

Revolving Line of Credit 1,250,000 590,000 660,000

Letter of Credit (12,600) — (12,600)

Total $ 1,387,400 $ 730,200 $ 657,200

Cash and cash equivalents 3,606

Total liquidity $ 660,806

Long-term Financing

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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.

however, we have some exposure to the risk of changes in interest rates, primarily as a result of the variable rate borrowings under the term loan and revolving credit facilities and the A/R Facility.

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

See Note 12—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.

As of June 30, 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.

On May 30, 2025, the Partnership entered into the Term Loan Credit Agreement.

The proceeds were used to repay and terminate the 2022 Term Loan Credit Agreement.

As of June 30, 2025, we had an outstanding borrowing of $1.15 billion under the Term Loan Credit Agreement.

Revolving Credit Agreement

On May 30, 2025, the Partnership entered into the Revolving Credit Agreement.

The Revolving Credit Agreement provides for a $1.60 billion senior unsecured revolving credit facility, which includes a $200.0 million sublimit for the issuance of letters of credit, and a $300.0 million sublimit for swingline loans.

All borrowings under the Revolving Credit Agreement mature on May 30, 2030, unless such maturity date is adjusted in accordance with the Revolving Credit Agreement.

As of June 30, 2025, we had an outstanding borrowing of $565.0 million and remaining borrowing capacity of $1.02 billion.

On April 1, 2025, the Partnership entered into an amendment to its A/R Facility to, among other things, increase the facility limit to $250.0 million and extend the scheduled termination date to March 31, 2026.

As of June 30, 2025, we had an outstanding borrowing of $189.3 million and remaining borrowing capacity of $60.7 million.

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 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.

During the six months ended June 30, 2025 and 2024, capital spending for property, plant and equipment totaled $201.8 million and $97.4 million, respectively, intangible asset purchases totaled $15.6 million and $2.8 million, respectively, and contributions to EMI totaled $1.0 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 the third quarter of 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:

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

Cash provided by operating activities $ 305,907 $ 279,222

Cash used in investing activities

Cash (used in) provided by investing activities

$ (391,604) $ 43,302

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Operating activities .

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.

Net cash provided by operating activities increased by $26.7 million for the six months ended June 30, 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 $50.7 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;

(ii) an increase in adjustments related to non-cash items of $39.9 million, which was mainly driven by a decrease in gain related to sale of equity method investment of $59.9 million and an increase in depreciation and amortization expense of $37.8 million, partially offset by a decrease in distribution from unconsolidated affiliates of $25.7 million, and a favorable derivative fair value adjustment of $15.4 million compared to an unfavorable derivative fair value adjustment of $6.6 million in the same period in 2024;

and (iii) an increase in working capital of $37.5 million.

Investing activities .

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.

Net cash used in investing activities was $391.6 million for the six months ended June 30, 2025 compared to net cash provided by investing activities of $43.3 million in the same period in 2024.

The change was primarily driven by net cash used in the Barilla Draw Acquisition of $176.2 million and higher capital spending for property, plant and equipment of $104.5 million and intangible assets of $12.8 million.

Cash provided by investing activities for the six months ended June 30, 2024 was primarily driven by proceeds from sale of equity method investment of $494.4 million, partially offset by net cash paid for the Durango acquisition of $349.3 million and capital spending for property, plant and equipment and intangible assets of $100.1 million.

Financing activities .

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.

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 May 2, 2025.

Net cash provided by financing activities was $92.8 million for the six months ended June 30, 2025, which was primarily comprised of net proceeds from the long-term debt, revolving credit facility and A/R Facility of $412.2 million, partially offset by cash dividends of $246.8 million paid to the holders of Class A Common Stock and Common Units and share repurchases of $72.6 million, compared with net cash used in financing activities of $314.5 million for the six months ended June 30, 2024, which was primarily comprised of net payments on the Company’s long-term debt, revolving credit facility and A/R Facility of $159.8 million and cash dividends of $154.7 million paid to the holders of Class A Common Stock and Common Units.

During the six months ended June 30, 2025, the Company made cash dividend payments of $246.8 million to holders of Class A Common Stock and Common Units and $0.7 million was reinvested in shares of Class A Common Stock by the Reinvestment Holders.

On July 15, 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 August 1, 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.”

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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:

March 31, December 31,

(In thousands)

Cash and cash equivalents $ 8,845 $ 3,606

Total debt, net of unamortized deferred financing cost $ 3,717,257 $ 3,504,196

Available committed borrowing capacity $ 693,600 $ 657,200

Total debt and available credit facilities

There is no assurance that the financial condition of banks with lending commitments to the Company and its subsidiaries will not deteriorate.

The Company closely monitors the ratings of the banks in the Company’s bank group.

Having a large bank group allows the Company to mitigate the potential impact of any bank’s failure to honor its lending commitment.

For six months ended June 30, 2025, the Company repurchased 1.7 million shares of its outstanding Class A Common Stock at a total cost of $72.6 million.

Off-Balance Sheet Arrangements

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

As of June 30, 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