Kinetik Targets High End of 2026 EBITDA Guidance After Record Q3 Gas Volumes

Kinetik (NYSE: KNTK) said it expects 2026 adjusted EBITDA to finish at the high end of its $1.04 billion to $1.1 billion guidance range after record gas-processing volumes supported third-quarter earnings. The midstream company also anticipates capital expenditures will be about 5% below its roughly $560 million guidance, citing project execution, payment timing and cost management.

For the quarter ended Sept. 30, 2026, adjusted EBITDA increased 15% to $278.1 million from $242.6 million a year earlier. GAAP net income including noncontrolling interests rose to $50.9 million from $15.5 million, while consolidated segment operating revenue increased to $569.4 million from $464.0 million.

Non-GAAP distributable cash flow reached $213.7 million, up from $158.5 million a year earlier. Free cash flow rose to $87.5 million from $13.9 million, and the dividend coverage ratio was 1.6 times. Kinetik reported $131 million of capital expenditures for the quarter and a leverage ratio of 3.7 times, within its target range of 3.5 to 4.0 times.

Record volumes lift Midstream Logistics

Processed gas volumes reached a record 1.94 billion cubic feet per day during the quarter. Kinetik said Midstream Logistics adjusted EBITDA increased 34% year over year to approximately $204 million, reflecting higher processed gas volumes, system operating performance and favorable commodity margins. Results were broadly stable sequentially despite lower gas-and-commodity marketing gains.

Pipeline Transportation adjusted EBITDA declined 18% from a year earlier to about $79 million, largely because of the EPIC Crude divestiture. The segment also decreased sequentially due to higher fuel costs at the Permian Highway Pipeline and lower volumes at Shin Oak.

Midstream Logistics represented 73% of third-quarter adjusted EBITDA before corporate and other items, with Pipeline Transportation accounting for 27%.

Expansion projects support processing capacity

Kinetik increased the planned capacity of its KLII processing project by more than 25% to 380 million cubic feet per day. The facility is expected to enter service in mid-2028 and would lift Delaware North’s pro forma sour-gas processing capacity to approximately 800 million cubic feet per day.

The company is also evaluating the timing and location of another potential 400 million-cubic-feet-per-day processing expansion beyond KLII. It has ordered long-lead residue compression equipment and begun procurement for front-end amine and cryogenic equipment.

Kinetik reached a final investment decision on the first phase of the ECCC Pipeline expansion, which is designed to increase throughput capacity by roughly 50% to approximately 225 million cubic feet per day. Its acid-gas injection and sour-gas conversion project remains scheduled for completion by the end of 2026.

Commercial activity included new and amended gathering and processing agreements in New Mexico and Texas covering more than 30,000 gross acres. Separately, the 40-megawatt Diamond Volt behind-the-meter power generation project is expected to begin service in mid-2027, while Kinetik is pursuing pipeline connections to supply residue gas to new gas-fired power generation.

2026 outlook and capital allocation

Management said stronger-than-expected well results are benefiting gathering and processing fees, while operating performance is generating higher equity volumes. The company is tracking toward its fourth-quarter target of approximately 2.2 billion cubic feet per day of processed gas.

Kinetik expects mid- to high-single-digit growth in its 2026 natural-gas volumes and low- to mid-teens growth in crude-oil volumes. Produced-water volumes are expected to decline by a low-single-digit percentage. About 80% of projected 2026 gross profit is expected to come from fixed fees and roughly 20% from commodity exposure.

The company plans to reinvest approximately 50% of 2026 adjusted EBITDA in organic growth projects. Its capital-allocation framework calls for annual dividend increases of 3% to 5% until dividend coverage reaches 1.6 times, followed by increases aligned with earnings growth, subject to board approval and other constraints. Kinetik said it has used about 36% of its share-repurchase authorization.

The outlook remains subject to commodity-price movements, operating performance, project timing and execution. Kinetik estimated that a 25% change in WTI and C3+ prices could affect adjusted EBITDA by approximately $10 million, while changes in natural-gas and ethane prices could have a similar impact. Changes in the Waha-to-Houston Ship Channel basis spread could affect adjusted EBITDA by about $5 million. The company also noted that its projections are unaudited and that actual results may differ materially from current expectations.