Kinetik (KNTK) 2026年第三季度业绩电话会：EBITDA达2.78亿美元

核心要点

• Kinetik公布2026年第三季度调整后EBITDA为2.78亿美元，可供分配现金流为2.14亿美元，自由现金流为8800万美元。
• 中游物流业务调整后EBITDA同比增长34%至2.04亿美元，主要得益于创纪录的天然气处理量、系统优异表现以及有利的大宗商品利润率兑现。
• 管理层预计2026年全年调整后EBITDA将处于指引区间上限。第四季度天然气处理量目标仍保持在约2.2 Bcf/d。
• Kings Landing II项目处理能力从300 MMcf/d扩建至380 MMcf/d，且未增加其约2.6亿美元的预期成本。该项目仍计划于2028年年中投产。
• Kinetik预计其一体化管网系统将在2027年底前实现满负荷运转。管理层表示，2027年的增长将同时体现于处理量的提升和单位利润率的改善。
• 截至季度末，杠杆率改善至3.7倍。管理层预计2026年年末杠杆率将处于3.5倍至4.0倍目标区间的低端，并预计建议第四季度股息增幅达到3%至5%年度目标区间的上限。

关键财务数据

业务与运营表现

中游物流业务受益于天然气处理量增加、强劲的运营表现以及有利的大宗商品利润率兑现。随着Waha天然气价格重回正值区间，墨西哥湾沿岸营销利润率如预期般出现回落。

管道运输业务调整后EBITDA同比下降18%。管理层将此下滑主要归因于2025年底出售了Kinetik持有的EPIC Crude股权、二叠纪公路管道（Permian Highway Pipeline）燃料成本上升以及Shin Oak液化天然气管道输送量下降。尽管如此，Shin Oak的输送量仍高于公司最初的预算预期。

Kinetik签署了新的及修订后的集输与处理协议，涉及新墨西哥州和得克萨斯州超过30,000总专有英亩土地。初期输送预计将于2027年第二和第三季度开始。部分区块针对富气层的Woodford地层。

管理层重点强调了Woodford、Avalon、First Bone Spring以及Penn Shale等区块开发活动的增长。这些地层的气油比较高，正推升对Kinetik在特拉华盆地（Delaware Basin）业务覆盖范围内集输、处理和脱硫净化能力的增长需求。

Kings Landing II的规划处理能力从300 MMcf/d提升至380 MMcf/d，而预期成本仍保持在约2.6亿美元。管理层表示，有利的设备采购条件促成了这一更大规模的设计。此外，Kinetik还在推进通过设备改造和增压重压缩，在未来六个多月内增加约50 MMcf/d的额外产能。

ECCC一期扩建项目将提供约225 MMcf/d的双向输送能力。该项目旨在促进北部与南部资产之间的天然气调配，提高处理产能利用率，并在Kings Landing II投产前弥补产能需求缺口。

管理层业绩指引

Kinetik目前预计2026年全年调整后EBITDA将处于指引区间上限。管理层指出大宗商品利润率和服务费兑现情况好于预期，同时指出公司的业务模式仍主要以收费型业务为主，且截至年底各类产品均已完成套期保值。

第四季度天然气处理量仍预计达到约2.2 Bcf/d。10月平均处理量为2.14 Bcf/d（第三季度为1.94 Bcf/d），同时伴有约25 MMcf/d的额外最低用量承诺缺额。

包括维护性资本在内的2026年全年资本支出预计将比此前约5.6亿美元的指引低约5%。这一降幅反映了良好的项目执行、运营效率、成本管控以及部分款项延期至2027年支付的影响。

管理层预计2027年的增长在全年内将相对平稳均衡。管理层表示，预期处理量增长的大部分应来自利润率较高的低压开发项目，从而支撑更高的单位费率利润空间。

即将到期的原Lone Star NGL合同预计将在2027年带来高于此前预期的毛利贡献。管理层表示，此前的测算框架预计2027年至2030年累计贡献约1.5亿美元毛利（即每年约4000万美元），但目前预计2027年所带来的效益将比此前预期高出50%以上。

随着Kinetik推进受长期商业协议支持的项目，公司预计增长性资本支出将保持在较高水平。公司已订购长交期残余气体压缩设备，并正在为Kings Landing II之后的一处潜在处理设施采购前端胺法设备及一套400 MMcf/d深冷分离装置。

风险与关注事项

• 第三季度期间，Kinetik因Waha气价原因导致的平均关井量约为25 MMcf/d，不过管理层表示区域外输瓶颈已开始缓解。
• 尽管公司采取基于费率的业务模式并实施了套期保值计划，但大宗商品价格仍是带来上行空间或下行风险的因素。
• 生产商的钻井进度、项目工期以及2028年的开发活动仍受大宗商品价格、地缘政治和客户决策的影响。
• 即使杠杆率和股息覆盖率有所改善，居高不下的增长性资本支出仍可能限制股息加速增长的步伐。
• 未来的天然气处理项目取决于商业承诺、设备采购、电力供应可用性、选址以及建设周期。
• 管理层认为并购市场竞争激烈，当前的资产估值水平使得内生性投资相较于外延式收购更具吸引力。

分析师问答要点

管理层表示，其预期的处理产能扩建节奏已从每18至24个月增加200 MMcf/d提升至约400 MMcf/d，实际上将其此前的处理量增长框架翻了一倍。

对于下一座400 MMcf/d深冷处理厂，管理层估计成本在2亿至2.5亿美元之间，具体取决于该项目是改扩建（棕地）还是新建（绿地）项目，以及电力供应是否具备。在落实主要设备后，改扩建项目可能需要12至15个月，而新建项目则需要18至24个月。

一期酸性气体回注及含硫天然气转化项目投资额约为1亿美元。Kinetik对内生性投资项目的评估通常基于5至6倍的投资回报倍数，管理层预计2027年初期仅使用获批井产能的约20%，从而为后续增长保留运营杠杆空间。

管理层重申，2027年预计将是实现跨越式增长的一年。管理层表示，Kinetik的长期业务基石与此前讨论的截至2030年末实现10%复合年增长率的框架保持一致，同时明确指出该展望属于管理层预期而非业绩指引。

在资本回报方面，管理层表示计划在未来数个季度将股息覆盖率维持在至少1.6倍，然后再使股息增长与盈利增长更紧密挂钩。公司还保留了一项5亿美元回购计划的授权（其中约40%已使用），但预计不会按匀速节奏进行回购。

业绩电话会完整实录

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完整财报电话会议逐字稿

管理层陈述

Operator

Hello, everyone. My name is Janine, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Kinetik Third Quarter 2026 Results Conference Call. [Operator Instructions]

And with that, I would now like to turn the call over to Alex Durkee to begin the conference. Please go ahead.

Alex Durkee

Good morning, and welcome to Kinetik's Third Quarter 2026 Earnings Conference Call. Our speakers today are Jamie Welch, President and Chief Executive Officer; and Trevor Howard, Senior Vice President and Chief Financial Officer.

As a reminder, today's discussion will include forward-looking statements. Please refer to our SEC filings for a discussion of the risks that could cause actual results to differ materially. We will also reference certain non-GAAP financial measures. Reconciliations can be found in our earnings materials and on our website.

With that, I will turn the call over to Jamie.

Jamie Welch

Thank you, Alex. Good morning, everyone. The third quarter was another strong step forward for Kinetik. Record processed gas volumes, strong system performance and improving producer activity supported our results as the impact of price-related curtailments diminished.

Our outlook has strengthened and producer development plans give us greater confidence in our growth trajectory. That confidence supports our expectation that 2026 adjusted EBITDA will be at the high end of our guidance range.

We are strong believers that the Permian's best days are still ahead. Producer activity is increasingly extending beyond the traditional core oil benches into gassier formations with higher gas-to-oil ratios, including the Woodford, Avalon, First Bone Spring and Penn Shale. These development trends are significantly increasing demand for gathering, processing and treating capacity and play directly to the strengths of our integrated footprint.

At the same time, localized Waha egress constraints have begun to ease. In just the last 3 months, over 7 billion cubic feet per day of new Permian pipeline egress capacity has been announced, and we now expect more than 13 billion cubic feet per day of incremental residue gas takeaway capacity to come online from 2028 through 2030, providing the downstream infrastructure necessary to support the next phase of Permian Basin growth.

Against that backdrop and based on our own systems current utilization, it is increasingly clear that additional processing infrastructure is needed to keep pace with expected producer activity. KL1 and our other New Mexico processing complexes operated at full capacity for much of the third quarter. And so ECCC flowed surplus volumes south.

In September, we elected to upsize KLII from the originally planned 300 million cubic feet per day to 380 million cubic feet per day of processing capacity with no increase to the approximately $260 million expected project cost.

Our operations team successfully procured key equipment at a low expected cost, allowing us to acquire the additional residue compression required to support the larger design while maintaining project economics.

KLII remains on track for mid-2028 in service. We are also investing in targeted projects that add incremental system capacity and operating flexibility across the system. For example, at Pecos Bend, we're undertaking treating upgrades that will support higher inlet CO2 concentrations and additional volumes moving into Delaware South.

And we're also procuring additional compression equipment to be deployed across our gathering system to further support growing producer volumes and proactively manage our supply chain.

Our commercial results provide compelling evidence. We built on a successful first half of the year with another quarter of solid commercial execution. Since August, we have executed new and amended gathering and processing agreements across New Mexico and Texas, adding more than 30,000 gross dedicated acres across our footprint, with first flow expected in the second and third quarters of 2027.

A portion of this acreage is prospective for the Woodford formation, an emerging gas-weighted play that we believe has the potential to drive meaningful long-term volume growth across our system. These agreements further validate the competitive advantages of our business, including our extensive Delaware Basin footprint, robust treating capabilities, operational reliability and differentiated premium netback offering.

As these new volumes layer in alongside ongoing customer development, we will continue to utilize all available means to cost effectively expand our operating processing capacity, be it with plant modifications and/or boost recompression.

Now, even with these initiatives, we expect to reach full utilization across our integrated system by the end of 2027. And to that end, the Phase I expansion of ECCC will be an important bridge. That expansion will allow us to move incremental volumes south to Texas to optimize our processing capacity utilization until KLII enters service and will give us flexibility on managing third-party offloads.

I want to be clear, the opportunity we see in 2027 is not simply a volume story. The vast majority of our expected growth next year is anticipated to come from higher-margin, low-pressure developments, which support an increase in our unit fee margins.

In addition, our legacy Lone Star NGL contracts in Texas and New Mexico begin expiring this quarter with the first expiration on October 31 and further expirations at the end of this year and September 2027. These expirations will drive greater gross margin growth in 2027 than we had previously intimated.

Importantly, these are all business-specific drivers, largely independent of commodity prices, and we expect them to meaningfully improve unit gross margins and our 2027 EBITDA and cash flow growth.

Looking further out, the recent commercial commitments and robust producer development activity improve our visibility beyond KLII. To keep pace with our customers' long-term development plans, we ordered long lead residue compression equipment, and we are now procuring front-end amine and the actual 400 million cubic feet per day cryo itself for our next gas processing facility.

Continued commercial success and execution will accelerate the timing of that subsequent processing expansion. Taken together, we see a clear path to continued volume growth, improving margins, robust financial health and high conviction in our near-term and medium-term outlook.

Favorable basin dynamics, accelerating commercial momentum and the strategic advantages of our integrated platform continue to reinforce one another, expanding both the scale of our opportunity set and the duration of our growth runway. We remain highly confident in our outlook and our ability to create meaningful value for shareholders.

And with that, I will turn the call over to Trevor.

Trevor Howard

Thank you, Jamie. For the third quarter, Kinetik reported adjusted EBITDA of $278 million. Distributable cash flow was $214 million. Capital expenditures were $131 million and free cash flow was $88 million.

Within Midstream Logistics, adjusted EBITDA increased 34% year-over-year to $204 million. Processed natural gas volumes were 1.94 billion cubic feet per day with an estimated 25 million cubic feet per day of Waha price-related shut-ins on average during the quarter.

Sequentially, results benefited from higher processed gas volumes, continued strength in system operating performance and favorable commodity margin realization. Meanwhile, Gulf Coast marketing margin declined as expected with Waha natural gas prices improving to positive territory.

Our Pipeline Transportation segment generated adjusted EBITDA of $79 million, down 18% year-over-year. The decline primarily reflects the late 2025 divestiture of our equity interest in EPIC Crude and higher fuel costs at Permian Highway Pipeline and lower throughput volumes at the Shin Oak NGL pipeline. However, volumes on Shin Oak continue to outperform original budget expectations.

At quarter end, net debt was approximately $3.9 billion, liquidity was $1.1 billion, and our leverage improved to 3.7x.

Turning to the outlook. We now expect full year 2026 adjusted EBITDA to be at the high end of our EBITDA guidance range. Third quarter results exceeded our internal expectations, driven primarily by commodity margin and fee realization. While our business remains predominantly fee-based and we are well hedged across products through year-end, commodity prices have remained above our August guidance assumptions and continue to provide incremental upside.

We expect higher gas fee gross margin and operating performance to continue to support into the fourth quarter. Processed gas volumes continue to track toward our target of approximately 2.2 billion cubic feet per day in the fourth quarter. Additionally, crude and water fee gross margin as well as operating expenses remained largely in line with our expectations.

We now expect full year 2026 capital expenditures, including maintenance capital, to come in approximately 5% below our guidance of approximately $560 million. The lower expected spending reflects favorable project execution, operational efficiencies, disciplined cost management, the timing of certain project payments now expected to occur in 2027 and also includes the purchase of incremental compression equipment that Jamie discussed earlier.

Looking to 2027, beyond the volume and margin drivers Jamie described, we expect a constructive commodity environment to support gross margin, partially offset by lower residue gas marketing contributions.

Earnings and distributable cash flow have grown significantly throughout the year, and we have made material progress in achieving our financial framework milestones. Dividend coverage improved to 1.6x in the third quarter, up from 1.5x in the second quarter.

Consistent with our framework, we plan to sustain coverage of 1.6x or greater for several quarters before growing the dividend more closely in line with our earnings outlook. In the meantime, we currently anticipate a recommendation at the high end of our targeted annual 3% to 5% increase for the fourth quarter dividend that we expect to declare on our regular cadence in January 2027.

Leverage is following a similar path. We ended the quarter at 3.7x and based on our current outlook, expect to exit the year at the low end of our 3.5 to 4.0x target range on an annualized quarterly EBITDA basis. That progress positions us well as we continue to execute our growth-oriented framework -- when we introduced it earlier this year, we said we expected elevated growth capital driven by high-return projects backed by long-term commercial agreements.

With customer activity already pointing to processing needs beyond KLII, we continue to expect growth capital to likely remain elevated as we advance strategic projects across our system. Our capital allocation priorities remain unchanged: fund attractive high-return organic growth projects, maintain a resilient balance sheet and return capital to shareholders through a growing well-covered dividend.

What has changed is the pace. Progress across these objectives is really exceeding our prior expectations, giving us greater capacity to fund growth and return capital while maintaining balance sheet discipline.

Operator, we can now open the line for questions.

Operator

Thank you. We will now begin the question and answer session. [Operator Instructions] Our first question comes from the line of Theresa Chen from Barclays.

分析师问答

Theresa Chen

I wanted to go back to the margin outlook, Jamie. With the AGI and sour gas conversion project expected online around year-end, can you help us frame more quantitatively the potential margin uplift in 2027? And as increasingly sour volumes come on to your system, how should we think about the benefit from treating economics and your ability to optimize between Delaware North and South?

Trevor Howard

Thanks for the question, Theresa. This is Trevor. We've never explicitly stated how much that project is, but a fair way to think about the Phase I for the project is approximately $100 million. Typically, we underwrite the organic investment at a mid-single-digit investment multiple, so 5 to 6x. I think that's a fair assumption as you think about gross margin contribution beginning at the end of this year and for a full year in 2027.

I would remind you that, that's a -- that's a 20-day permitted total asset gas injection well, and we expect to utilize initially in 2027, only about 20% of that well. And so there's tremendous operating leverage, and that has the potential to be a really attractive interesting project as volumes come on of the system beyond 2027. But we are really pleased when we originally underwrote this back in 2025 with the setup only utilizing about 20% of the permitted capacity.

Theresa Chen

Great. And with your progress to exit the year around 2.2 Bcf per day of inlet volumes with the system approaching full utilization second half of next year, how should we think about the cadence of volume growth through 2027 and beyond really taking into account the new G&P agreements announced?

Jamie Welch

Theresa, it's Jamie. As far as the overall level of growth, I think it will be best manifested by the cadence you see with the announcements on processing capacity. And I think what we had originally expected and anticipated and communicated to folks was every 18 to 24 months, we would add an additional cryo.

There was a time we would focus on 200 a day. We obviously now have migrated to 400 a day. So said another way, our growth -- our volume growth expectations have doubled relative to where we were. That should give you a perspective and insight as to what we are seeing both as it relates to New Mexico, but also in Texas.

So that's 400 a day every 18 to 24 months is a big step-up from where we originally were.

Operator

Our next question comes from the line of Spiro Dounis from Citigroup.

Spiro Dounis

I want to add on to that question a little bit. Maybe just stick with processing capacity here. So trajectory strong into next year, ECCC expansion helps deal with some of this expanded volume. But you also talked about those expansions across your legacy processing plants that it sounds like are still going to end up filling up by the end of the year. So curious, can you remind us how much processing expansion upside there is on that current system and how you think about maybe the CapEx and timing to extract all that extra capacity?

Jamie Welch

CapEx is relatively small. The overall -- we've already undertaken some small projects. I would say sort of what remains to go is somewhere in the order of probably 50 a day of incremental. If our guys can basically push any more out, they'll obviously look at it. But we look at it on a value engineering basis, meaning what's the value of the upside of the capacity upside and how much does it cost to get it? And how quickly can we get it?

All of this is stuff that we actually anticipate over the course of the next 6 months should be done. So it's not a long lead time. It's things we've been building up. Honestly, it's been on the draw board -- on the drawing board for quite some time. So now we're basically -- as we undertake any maintenance events, we're obviously looking to basically swap out equipment and whether it's rebuilding center blocks or whether it's adding a boost recompression, -- all of that is basically contemplated over the course of the next 6-plus months.

Spiro Dounis

Got it. Got it. Great. Second question, just going to the dividend. Trevor, you said achieved your 1.6x coverage ratio, which allows you to accelerate the growth there. I appreciate that it's a Board decision and probably a few quarters away. But is there a maybe sort of secondary framework you can help expand on to help us understand how much you'd be willing to accelerate to? And then just what you're watching before you sort of make that decision?

Trevor Howard

Thanks for the question. What I would say is that typically, we recommend a dividend increase at the beginning of each year. And so that's announced in January, paid in February. So that would be the fourth quarter of this year dividend.

Look, we just hit 1.6x. If you were to add a pretty significant dividend increase, that would put you below 1.6x. And so the way that we're thinking about it is that historically, we've said 3% to 5% of annual dividend growth given the performance of this year, where we're trending, balance sheet health and also dividend coverage trajectory, management is more comfortable with being at the high end of that 3% to 5% range for the increase in January, and then we will reevaluate with each quarter thereafter.

Jamie Welch

I think, Spiro, one of the things that we're grappling with right now is we are going to remain with an elevated capital program going into 2027. And I think our viewpoint is, look, you can put $0.04 on the Board and put it back into a shareholders' pocket. No problem, right? $0.81 can become $0.85.

I think the difference for us, though, is we continue to see this step change going to 2027. And therefore, it is important for us to continue to focus on that execution for 2027 since it is such a significant step-up relative to what everyone has experienced to date that let us get through 2027 and then we can obviously think about what our dividend protocol and process and dividend rate needs to be going forward.

Spiro Dounis

Got it. Helpful color.

Operator

Our next question comes from the line of Brandon Bingham from Scotiabank.

Brandon Bingham

You mentioned the increased prospectivity of secondary benches. Would just be curious to hear what sort of early results you're seeing and maybe how much of '27 volumes that you're expecting internally could be driven by a higher weighting of these benches and development plans?

Jamie Welch

Yes, sure. Brandon, I think, look, what is interesting to us, and we said it in our prepared remarks as well as in the press release itself, Avalon, First Bone, Woodford, Woodford is obviously, as it relates to Texas, Woodford obviously has quite the buzz related to -- we heard it with Diamondback. We've seen their aggregation of acreage more in the Midland, but very much premised or predicated on a Woodford formation and that development potential.

We have a number of our large customers that have some pretty interesting and exciting developments planned for the Woodford. That from a gas gatherer and processor is like Christmas came up all at once because it is just so much gas. It still has good GPMs to it. It's probably around 4 GPM. So it's a little leaner than some of the other gas we have on the system. but it is such volume.

It is literally -- it's raining gas, gas core. I think as far as some of the other secondary benches and what we're seeing, Penn Shale is a really exciting area when we migrate up to New Mexico, and that's probably where we start to see some really interesting opportunities. And the beauty of our system is we're sort of perfectly positioned in both. And that makes for -- literally, it's a great commercial opportunity.

It's a great opportunity for us to obviously capitalize on a lot of our producers' execution and their overall potential.

Trevor Howard

One other thing, Brandon, that I would just add, I like kind of -- I like going back to where the basin was and then where we are today. So in 2018, crude production in the basin grew by 1 million barrels a day, and that drove roughly 2.3 Bcf a day of gas growth.

In 2027, the EIA forecasts about 2.5 Bcf a day of gas growth, so equivalent with 2018 levels and crude growth of only 330,000 barrels a day. And so what we have seen recently is that we have -- the GORs have compounded at about 5% to 6% per year, and we expect that to not just to continue, but actually the potential to accelerate as these deeper benches start to get unlocked given it is a step change in GORs.

Brandon Bingham

Okay. Very helpful. And then maybe just thinking about development activity, this might be more of a thought exercise than anything, but producer development activity has been relatively stable in light of $100 oil, give or take, with the Permian seems to be more dictated by Waha at least this year. Could you share your thoughts or maybe any customer sentiment or discussions that you've had around what development could do if crude moves lower quickly next year?

Jamie Welch

Yes. Look, I think when we look out across the board, obviously, there's an opportunity just given where the overall strip is that you can hedge a lot of potential production. I think in New Mexico, in particular, it is -- Trevor likes to call it a baked cake. So we sort of do know what 2027 looks like because you've got a lot more protocols in place that need to be complied with and abate in the context of overall development cadence and timing.

So I think for us, the way we look at it is even at $88, which obviously is a lucky number in Chinese culture, I think it's still a very, very good outcome. And even if we start to see a trend down, the question, I don't really see much change in behavior certainly going into 2027, 2028, obviously, TBD, but I really do think 2027 for now is looking very much like it's baked.

And what we saw during the course of this year because we've been very consistent -- our big customers said, yes, we see prompt month, we see where it is. We can try to basically bring on development pads 30 days, 60 days earlier than anticipated, but don't expect significant changes. The changes that we saw on timing are end of 2027 into mid-2027, mid-2027 to the beginning of 2027. It's '27 that is very much, I would say, certainly for us, don't know about our other peers, but this is where we're seeing our producers really it's going to be the game changer, right?

That's where you're going to see the volume growth that to this point, you've seen it a little bit around the edges, but not so much. 2027 is where you're going to see a pronounced differential.

Brandon Bingham

Yeah, now that makes sense.

Operator

Our next question comes from the line of Gabe Daoud from Truist.

Gabe Daoud

I was hoping we could maybe similar to Brandon's question, just talk a little bit about the Permian gas outlook. Diamondback said on their call, they expect the 2030s, the Permian to be the largest gas play in the country, and no one has really targeted gas formations yet.

Obviously, Waha improves and the Woodford makes a lot of gas, as you said, but still driven the Permian in general by oil economics, obviously. So Jamie, I guess I'm just curious, are you hearing anyone talk about the improvement in Waha driving maybe more of a focal point on gas zones even beyond what you've highlighted and really increasing gas-directed drilling in the Permian?

Jamie Welch

Well, I think the fact that we have -- Solitude gets announced as a Twin 48 and then within a space of 6 weeks, we have Kinder announced Permian Link. The fact you're continuing to see Permian egress pipes should, in fact, give a pretty clear path to any interested observers and pundits on the Permian. There's a lot of gas growth.

And I think we saw Case's stockholder letter for the third quarter. I actually agree with it. We've been saying this for some time. We said come the 2030s, the single largest gas basin in this country will be the Permian. No one believes us or believes us. I still think people question it.

But the fact that we've got 13 Bcf a day of pipelines that literally are basically coming into service over the passage of the next handful of years. I think, hopefully, at some point, people realize that this is real. And if you can get cost down, controllable costs on a drilled lateral footage basis and make it cost competitive, I really do think this is where you're going to see a significant amount of incremental gas production and continue to see as evidenced by how quickly these pipelines get announced.

Unlike when you're in the Marcellus Utica or anywhere else that you've got to do an interstate, you've got a lot more activity and long duration. So I do think our viewpoint is we're just -- right now, we are just testing the surface of the real gas formations. The Woodford obviously seems to have captured a lot of attention in Texas, Penn Shale in New Mexico. This is where it's going.

The -- those 2 bench formations will become common vernacular for everyone inside 12 months. Everyone will think about it and not even look at this as being something new and different. It will just become part of just overall expectation.

Trevor Howard

Gabe, the other thing that I would just jump in here is that I'd say historically, people have looked at the economics of them in the Permian Basin as being gas or oil. And I think our belief is that it's really -- it's co-products. There are parts of the Woodford that are 1,000 barrels a day of oil, 1,500 barrels a day of oil, but also have a 15- to 20 a day rich gas stream. And so that 15- to 20-day rich gas stream is pretty dang significant and just helps the economics that much further.

And then the same is true on more gassier windows of the Woodford. You might have 1.5 million EUR NGL barrel, but 20 to 25 a day of rich gas production. So pretty significant dry gas volumes as well as pretty significant NGL yields. So there are dry gas windows and that ultimately may be the case happen. But the way that we think about this is just you've had over 5 Bcf a day of demand pull pipes get FID between DSW and Permian Link.

That potentially is going to elicit a price response, which then elicits supply response, not just within the Permian, but also across the Lower 48, which brings you back to your cost curve. And if you have comparable Haynesville sized wells at comparable costs, but also have a liquid stream or even a crude stream. These are just more economic wells.

And so at the end of the day, in the commodities business, the low-cost operator wins, the lower breakeven wins. And so we really like where we sit just from a perspective of how is this capacity going to get filled over time and into the 2030s.

Gabe Daoud

Awesome. That's really good color, guys. And as a follow-up, just higher-level question. There's been a lot of G&P M&A in the Permian in the last several months. Just would love to get, Jamie, I guess, your updated perspective on inorganic opportunities and just the amount of activity that we've seen?

Jamie Welch

Sure. We continue to see lots of activity, right? We look at everything. Our viewpoint is at the multiples and values being ascribed to existing assets, our focus and attention needs to continue on our organic growth program, where you can deploy capital at mid-single digits, 4 to 6x, 5x on a setup basis, then that's where you should be investing and that's going to create the most amount of value for shareholders. And so we really like the abundance of opportunities we have.

We've got now Kings Landing II out there. So that's going to increase our capacity stack by 15%. If we do the next -- we announce the next cryo, that will raise that to over 30% of our installed capacity being built. So the leaps and bounds on the underlying growth that we see is pretty significant.

Gabe Daoud

Got it. Thanks, Jamie. Very helpful.

Operator

Our next question comes from the line of Gabriel Moreen from Mizuho.

Gabriel Moreen

I just wondered if you can maybe talk a little bit more about the new NGL agreements. And I think the language on doing better than expected. Just curious on your approach on contracting. Does that mean you kind of lock stuff in medium to long term since I think given all the gas talk here stands to reason and there's a lot of NGLs coming as well.

Jamie Welch

Yes, sure. Thanks, Gabe. What we had said and we said to anticipate and an illustration we gave is between '27 and 2030, we'd see about $150 million of margin, basically aggregate cumulative margin. If you're looking at breaking it down on a ratable basis, think about it as $40 million a year. The easiest way to think about it and the reason we put the statement in the press release is because we're probably looking at over 50% increase relative to that '27.

So that was -- that's why we said, listen, we've got a pull forward on volumes. We've got recontracting rates, which were better than we anticipated, some total of which is obviously accelerating the benefit, particularly as it gets into 2027.

Then as far as duration of the contracts, we've got flexibility. We've got a lot of flexibility both in the North and in the South on the term structure. And these are obviously highly cost-effective rates. So I think we haven't given exact term date for it, if you will. But I think, look, we've got flexibility with all of these contracts, and they give us the right runway to capitalize on what we're seeing around us.

Gabriel Moreen

Maybe if I could just follow up. I think last year around this time when you announced the deal with ENEOS, you didn't probably contemplate $30 an MMBtu LNG pricing. But can you maybe talk about whether that has any impact for you guys with that deal? And just also within the broader picture of creative solutions for producers, whether it's in-basin or out-of-basin LNG, can you talk about any other things you may be working on that front?

Jamie Welch

Sure. So Gabe, as far as ENEOS, I'm glad you raised it. Obviously, yes, we didn't anticipate it would be where it is. It obviously will have a -- it will be a contributor to 2027 and the growth that we have. Obviously, the question is what's the timing for Port Arthur to reach in service.

We have been saying for some time that what we saw from just a macro price standpoint, Waha was a bottleneck and therefore, there was value destruction. With all of the egress pipes to Houston Ship and Agua Dulce, obviously, that provided the relief valve for gas and obviously helped a lot. We continue to think outside the box and say, look, TTF, JKM, what are the opportunities there for our customers and how can we capitalize on this abundance of gas supply that we control, right residue gas that we control.

And so I think we continue to look at multiple deals, and I think more to come, but we are big proponents. I think we see a lot on the gas side, very similar to what Case does with Diamondback in the context of thinking about how do you maximize the value of gas and the gas molecule coming out of West Texas.

Gabriel Moreen

Can I squeeze one more in just in terms of '27 being big. Does that mean you've done a lot of hedging on the commodity side with the curve having moved up here of late?

Trevor Howard

Yes, Gabe, thanks for the question. It's Trevor. Look, we had communicated previously that we have a ratable hedging program that looks out up to 24 months. What I would say is that we've continued with that ratable program, but we do have some flexibility to flex between the mins and the maxes. And as we've been approaching 2027, we've been pretty active on the hedging front as we look out into '27 and '28.

Gabriel Moreen

Appreciate it.

Operator

Our next question comes from the line of John Mackay from Goldman Sachs.

John Mackay

I want to go back to the 2.2 Bcf a day volume guide for next quarter -- for fourth quarter. Just any color you can give us on kind of the implied step-up over third quarter? It's pretty material. So maybe just give us some of the kind of building blocks to get from the 1.94. And then any kind of view on how that can progress into '27 would be great.

Jamie Welch

John, thank you for asking this question. We saw -- I saw it in your note last night and I'm like, I hope you asked this question. All right. So maybe for all these listeners since everyone seems so obsessed with this, our average for October was 2.14 Bcf a day. 200 million cubic feet a day higher than your third quarter average. And we had some MVC deficiencies on top, about 25. Now they got the rest of the quarter to catch up.

So you are proverbially, as Rich Kinder would once say, on the lip of the cup. And my hope is that this -- I've seen it, whether it's you, whether it's obviously Keith, all the other analysts obviously focused on this, and we get it. But I think, look, the volume is there, and that is an actual average number for the month of October. There we go.

John Mackay

Jamie, that's crystal clear. We appreciate it. Second one...

Jamie Welch

I mean I understood Yes, exactly. We understood the 194 and how do you bridge it. So we were just hoping that someone would ask us and there's your answer. So hey, hopefully, that alleviates a lot of concern.

John Mackay

Absolutely clear. We appreciate it. Just a quick last one for me. And you touched on the next trial a little bit, but maybe just again, like walk us through kind of milestones ahead of that, that you want us to watch.

Jamie Welch

Look, I think it's -- I think from our vantage point, it continues to be -- we've got a pretty good, as I said, baked cake as it relates to 2027 right now. I think the commercial team with Ross with Trevor and Ross and Nick are very much focused on what is 2028 and how does that change? And a lot of that's going to be geopolitics, macro, we get it.

And then we've got -- there's a number of other commercial opportunities if we're able to -- if we were fortunate to basically harvest and secure those. All of that is the dynamic that literally then creates the impetus to say, times come. We got to get this online. This needs -- is the date we need to hit it. We didn't -- we know that from our experiences with KLII, residue recompression, finer naming and the cryo long lead items.

Civil construction, not a problem. Securing the site is a decision. We have several different opportunities that we could actually go and capitalize on. And so to us, it's all going to be dependent upon how -- what is that -- how quickly do we need something and what's the location best suited to the gas sources that we're looking to basically gather and process.

Operator

Our next question comes from the line of Julien Dumoulin-Smith from Jefferies.

Jan Overmeer

It's Alex Overmeer on for Julien. Maybe just going back to gross margins and growth that you guys are expecting in 2027. Is the growth that you're expecting in 2027, could we say that's relative to the third quarter, which is maybe more normalized gross margins now the Waha curtailments are effectively resolved?

Jamie Welch

Not so much, Alex, because you're going to have -- obviously, embedded in the gross margin will obviously be the NGL uplift. You'll have the first phase of Kings Landing the South conversion of Kings Landing. You'll continue -- it's really the mix of gas.

Most of our gas is low pressure, right? We have more limited high-pressure outlets. And low pressure is where we see incremental treating fees, compression, gathering. So you've got a bundle of services that you provide to the customer. So I don't think just taking the third quarter and saying, well, this is the new watermark is necessarily reflective of how you think about '27.

I think what Trevor's commentary was that unit margin will continue to go up into 2027. And 2027 will be as much about a unit margin increase as it is about volume increases.

Jan Overmeer

Got you. That's super helpful. And then just really quickly on OpEx. Is it fair to assume that kind of $78 million to $80 million run rate per quarter into 2027 as well?

Trevor Howard

Look, there will be some step-ups at the beginning of the year and then also throughout the year, just in regular way cost escalations. We also...

Jan Overmeer

And things like that, right?

Trevor Howard

Yes. Just cost of living adjustments, merit adjustments that happen at the beginning of the year. We do have some term contracts that have baked in escalators on some of our rental equipment. That will step up middle of the year. That's offset with what we expect to be some benefits on the electricity side.

So net-net, I'd say it's directionally up, but just I'd say in general, just with escalation and then also in terms of just volume growth, that's also going to increase your overall just total OpEx.

Operator

Next question comes from the line of Elvira Scotto from RBC Capital Markets.

Elvira Scotto

So KLII was upsized by over 25% to 380 million cubic feet a day, but CapEx stayed at $260 million. You attributed the savings to equipment components coming under budget. Should we kind of think of this as a permanent step down in per MMcf per day build cost? Were there some onetime procurement wins? And then can you frame the expected CapEx cost range on new cryo relative to sort of the KLII $260 million?

Jamie Welch

Yes, sure. Elvira, it's Jamie. So I think as far as KLII, you're right in everything you just stated as far as procurement of some of the major pieces of equipment were lower than the AFE. And therefore, we were able to get additional residue compression as well as slightly changed the configuration for the plant to achieve the 380 million cubic feet a day.

As far as your question on how do we think about going forward, I think, look, it is very much going to be dependent upon where you're locating a plant. So I think your range is as you get to a brownfield versus a greenfield, and let's just make the assumption that there's available power, which I think is one of the big questions, in the range of $200 million to $250 -- that's how you think about it. So -- and that's for $400 million. And what Matt and the ops teams would tell you is the brownfield, if you get after it and you can secure the amine and the cryo and the compression, you could be done in 12, 15 months. So it's really -- that's speed to execution, right? But that's predicated on securing those big component pieces where I think you're then looking for a greenfield more in the 18 to 24.

Elvira Scotto

Got it. Got it. My next question is kind of higher level, and you touched on this a little bit. It seems like you have a lot of visibility into 2027, and it looks like that could be a pretty significant growth year for Kinetik. And I understand there's a lot of moving pieces when you think about 2028 and beyond. But if we assume geopolitical, right, I mean, say, Iran gets figured out.

And let's just say oil settles at sort of $70 to $80. I mean, would you have -- when we think about visibility into growth beyond 2027, how should we think about that? I mean, on the volume side, would you -- would your volume growth be trending above where sort of Permian gas volume growth expectations are? Just any way to frame growth beyond 2027?

Jamie Welch

Sure. Look, I think as far as volume growth, we have -- literally, we have increased at a higher rate of growth than the underlying base. And I don't think that picture changes going forward. I got into more hot water back in 2025 when I talked about the 10% CAGR through the end of the decade. And everyone remembers that, including my CFO, who's literally just -- he's just carrying now.

But I think the short answer is the building blocks that we said there were there. And obviously, 2025, I recognize was literally, we had to look our wounds and we had some bumps along the away. And we sold EPIC, which obviously changed things. But interestingly enough, the $988 million is what we ultimately reported. If we end up at $1.1 billion, that's an 11% growth rate.

And my expectation is, look, 2027, I think, is a step change relative to what anyone expects. And I think going forward, that 10% CAGR growth, all those building blocks to that foundation for that CAGR are still in place, if not actually more pronounced today than they were back then. So I think we feel really good about what we are seeing in front of us.

And I think the opportunity set presenting, as I said, New Mexico, abundant number of opportunities. Texas, there's a lot of opportunities. And what we really like, Trevor and commercial team are working on it is Woodford, there's some really good, really, really exciting development potential down there.

And I think we're seeing the ability to harvest both -- and that pretty much is reflective of the fact we have such a unique system. We're in the south, we're in the north. And we've got an area -- a capture area that is more expansive than most, and we're able to obviously capture that and obviously provide, we think, a premium service and a premium netback on the way that we structure our contracts.

Operator

Our next question comes from the line of Jeremy Tonet from JPMorgan Securities.

Jeremy Tonet

Go into 2027, if we could a little bit here. Appreciating there's a lot of variables and not providing guidance at this point. But given, I guess, the pieces you laid out there, should we expect growth to be kind of ratable across the year? Or is it more front-end or back-end loaded? Just trying to get a sense.

Jamie Welch

I think ratable. As I said, think about the earlier comments. You've got a big pull forward into the very beginning of the year, you got to pull forward into the middle of the year. That's where you're going to start to see. So I think ratable is a good way to frame it at this point. You and I don't control the drill bit, but I think that's certainly based on drilling plans and turn-in-line forecast, that's how we're -- that's what's being shown and presented to us.

Jeremy Tonet

Got it. That's helpful. And then I just wanted to dial in, I guess, on the balance sheet and capital allocation as you laid out there. It seems like leverage could be trending lower and especially going into next year as this growth materializes. And just wondering, I guess, how that impacts your thought process for overall?

Trevor Howard

Thanks, Jeremy. It's Trevor. It's a good question. So we exited the third quarter at 3.7x leverage, which is below the midpoint of our 3.5 to 4x target range. We still have a target of 3.5x or lower. If you take the implied fourth quarter EBITDA guide and you were to annualize it off of expected net debt, you're below our target of 3.5x at the end of this year.

And so we're really, really pleased with where leverage has trended throughout the year and its trajectory into 2027. It definitely does open up the playbook for how you think about capital allocation and the potential, I'd say, to be more offensive with how you think about capital allocation.

The counter to that is we are in an environment right now where things are quite competitive, specifically speaking about the inorganic side. We've been evaluating all of these deals, trying to find ways to make them work, but we've come up short -- that doesn't mean that I don't think that we're not going to be successful on a go-forward basis. But what I would just say is that we're in a different environment in 2026 than we were back in 2024, we were quite active.

We made 3 acquisitions in 2024, just a different time period than where we are today. So -- but you're right. I mean, with leverage improving materially, it definitely increases our flexibility, but just TBD as to what we do with that flexibility.

Jeremy Tonet

That's helpful. And I might have missed it, but I guess, how would you think about rank ordering repurchases?

Trevor Howard

Look, repurchases have always been part of the mix. We have a $500 million program where we have utilized about 40% of it. We were, again, quite active back in the middle of 2025 and very similar to how we think about capital deployment and allocation.

We make a move, we move swiftly. We built a position back in 2025. We're quite pleased with that position. And it definitely could come back into the fold, but I would say that it's going to be not necessarily ratable, like you can't necessarily plug in into your model x million dollars of repurchase, but it's certainly part of how we think about accelerating capital returns to shareholders and also how we just generally think about it, right, in lieu of acquiring new assets, one way is to acquire ourselves.

That's how we thought about it in 2025, and there's been no changes there. So we still have that program that we can utilize.

Operator

Our last question comes from the line of Saumya Jain from UBS.

Saumya Jain

So Phase I expands ECCC's capacity to roughly 225 and you also upsized Kings Landing II to 380. So how will ECCC's expansion profile in the coming year shift to support this additional North to South volume when Kings Landing II comes online? And what specific volume or pricing threshold in Waha would trigger an FID potentially for a Phase II expansion of the pipeline?

Trevor Howard

Thanks for the question. It's Trevor. So interestingly, with what we've seen down south, ECCC was originally contemplated to provide more processing connectivity to the north, especially while we knew that we were going to be in a period of about 24 months between FID and in service of the next cryo at the Kings Landing complex. That certainly is true today. We are flowing on ECCC north to south.

However, as Kings Landing II comes online, that's a 380 a day cryo. That will increase -- effectively double the processing capacity that we have of north. And so there's going to be a period of time where actually we're going to be moving volumes from the south up to the north because that system is getting quite filled. And so that's one of the also added benefits of ECCC is it provides a lot of flexibility with how we think about these large processing expansions -- and our peers are FIDing 250 to 400 a day cryo. So it's an industry standard.

But for us, let's not miss the fact that that's a 15% increase in total processing capacity across our system. That's a big expansion for us. And so with ECCC, it will -- again, we're really pleased with that 225 of north to south or south to north volumes. And again, that will help us balance out the system as we're building cryos up north and then potential to build a cryo down in Texas as our next cryo.

Jamie Welch

It's Jamie. What I think is most interesting with this is a lot of our Eddy County volume is sweet and obviously, we have a lot of sweet in the South. So that sweet gas has the ability to go to a sour plant, which obviously Kings Landing will be entirely sour.

We can have sweet gas at a sour plant. We can't take sour gas and take it to a sweet plant. And so what we have on the western side of our footprint allows us this potential to move gas up, move gas down. And that, I think, is hydraulically and from an engineering standpoint, that is truly something that allows us to optimize and fully utilize our full processing capacity stack for the entire business.

I think we -- operator, I think we're done or any more questions?

Operator

Next Yes. There are no further questions at this time. I will now hand the call back over to Jamie Welch for closing remarks.

Jamie Welch

Thank you, everyone, for your time this morning. I know there was a lot to get through, so we appreciate it on a busy day, and we look forward to seeing you all soon. Thank you very much.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.