Kinetik Raises Outlook as Midstream Earnings Accelerate
Operating revenue rose 36.3% to $581.4 million as product sales expanded.
Kinetik Holdings (KNTK), the Permian Basin midstream operator, posted record adjusted EBITDA in the second quarter as its logistics business accelerated after two nearly flat quarters. Adjusted EBITDA reached $280.8 million, up 11.8% sequentially and 15.6% from a year earlier.
Net income including noncontrolling interest was $123.1 million, reversing a $5.1 million first-quarter loss and rising 65% from a year earlier. Operating income increased 73% to $134.0 million, lifting operating margin to about 23.0% from 18.1%.
Product revenue climbed 57.5% to $490.8 million, offsetting a 22.9% decline in service revenue. The mix supported the quarter’s broader earnings improvement even as processed natural-gas volume slipped 3.9% sequentially to 1.74 billion cubic feet a day amid an estimated 250 million cubic feet a day of Waha-price-related shut-ins.
Midstream Logistics adjusted EBITDA rose 14.4% from the first quarter to $204.8 million and increased 35% from a year earlier, accelerating from 12% year-over-year growth in the preceding quarter. Pipeline Transportation adjusted EBITDA increased 6.4% sequentially to $83.0 million but fell 14% from a year earlier following Kinetik’s late-2025 sale of its EPIC Crude interest.
The stronger earnings translated into $194.9 million of distributable cash flow, up 7.8% sequentially, while dividend coverage improved to 1.47 times from 1.4 times. Free cash flow rose to $105.2 million, extending its recovery from negative $12.0 million in the fourth quarter of 2025.
Kinetik raised its 2026 adjusted EBITDA guidance to $1.04 billion to $1.10 billion from $950 million to $1.05 billion. The company expects adjusted EBITDA of $260 million to $270 million in the third quarter and $270 million to $280 million in the fourth, putting both midpoint forecasts below the second-quarter record.
The company also lifted its capital-spending forecast to about $560 million as it committed roughly $260 million to the Kings Landing II expansion and accelerated other development work. Net debt rose to $3.94 billion at June 30, while leverage held near 3.9 times; the additional investment is set to raise system processing capacity to 2.7 billion cubic feet a day in 2028, with the board authorizing long-lead equipment purchases for another expansion beyond Kings Landing II.