KNTK - NASDAQ

Good morning. Thank you for attending today's Kinetik First Quarter 2025 Results Conference Call. My name is Tamia and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. [Operator Instructions] I would now like to pass the conference over to your host, Alex Durkee with Kinetik. You may proceed.

Thank you. Good morning and welcome to Kinetik’s first quarter 2025 earnings conference call. Our speakers today are Jamie Welch, President and Chief Executive Officer; and Trevor Howard, Senior Vice President and Chief Financial Officer. Other members of our senior management team are also in attendance for this morning's call. The press release we issued yesterday, the slide presentation and access to the webcast for today's call are available at www.kinetik.com. Before we begin, I would like to remind all listeners that our remarks, including the question-and-answer section, will provide forward-looking statements and actual results could differ from what is described in these statements. These statements are not guaranteed the future performance and involve a number of risks and assumptions. We may also provide certain performance measures that do not conform to U.S. GAAP. We've provided schedules that reconcile these non-GAAP measures as part of our earnings press release. After our prepared remarks, we will open the call for Q&A. With that, I will turn the call over to Jamie.

Thank you, Alex. Good morning, everyone. Thank you for joining our call. 2025 is off to an eventful start. Kinetik reported solid first quarter results that exceeded internal expectations. We made strong progress on the strategic projects in our short cycle backlog and we're excited to increase capital returns to shareholders via our $500 million share repurchase program announced yesterday. These accomplishments, despite the elevated volatility and macroeconomic uncertainty that have prevailed since the beginning of the year. First quarter adjusted EBITDA of $250 million, grew 7% year-over-year, driven by process gas volume growth and margin expansion in our Midstream Logistics segment, which Trevor will cover in more detail shortly. In the quarter, we made substantial progress across our strategic projects. We completed connections of the inlet and sales pipelines at Kings Landing, and we remain on track to start commissioning activities in six weeks. As part of the inlet pipeline connections at Kings Landing, the northern stretch of the ECCC pipeline that connects our Eddy County project to the Kings Landing Complex is almost complete, which is critical as this will allow us to begin flowing volumes from the Carlsbad area to Kings Landing for processing upon startup. Also, we have much of the integration of the Barilla Draw assets behind us since closing the transaction in mid-January. Starting in April, one of the existing processing dedications expired and rolled to Kinetik and we began processing a portion of the gathered gas from that point. We've been really excited about this acquisition and so far we're seeing very positive results. Kinetik is levered to one of the most prolific oil producing basins in the world. Innovation and R&D over the past 10 years has only driven producers breakeven costs lower. Now while the Permian is not insulated from macroeconomic and commodity price headwinds, in our view, it is the best location to weather challenging times and so we remain bullish on the Permian's resiliency. Even in down cycles, we saw associated gas growth due to rising gas to oil ratios. For example, Permian gas grew over 2 billion cubic feet per day for 1 million barrels per day of crude oil growth in 2018. Whereas today, Permian crude is expected to grow only 200,000 to 300,000 barrels per day a quarter of 2018 levels at the midpoint, while associated gas growth is expected to remain above 2 billion cubic feet per day. Even if Permian crude production were to stay flat, we still anticipate over 1 billion cubic feet per day or low to mid-single digits of gas growth per year. As a pure play Permian midstream company with a focus on natural gas, we are poised to capitalize on this opportunity. First and foremost, our top priority is to provide flow assurance and operational reliability to our producer customers. We have a proven track record of scaling our growth and asset footprint based on our customer’s needs evidenced by our organic and inorganic expansion into New Mexico last year. Our acquisition of Barilla Draw in the first quarter of this year and our previously announced new large scale infrastructure projects that will increase resource extraction and drive material cost savings. Importantly, we will take a measured approach to future spend. While we still have the utmost conviction in an expansion at Kings Landing and the behind-the-meter power generation opportunity in Reeves County, Texas. We have the flexibility to be prudent and patient on the timing for final investment decisions. Now before I turn the call over to Trevor, I want to reiterate the steps we've taken over the past few years that have positioned Kinetik with a multi-year industry leading earnings growth outlook, strong free cash flow profile and substantial financial flexibility. We have grown our asset footprint alongside some of the best producers in the Delaware Basin, enabling their significant multi-year development plans. We maintain a limited short cycle project backlog with very high underwriting standards. In fact, we have less than $50 million of committed growth capital in 2026. Everything else is discretionary and flexible in the event that the macro economy deteriorates significantly. We high graded our contracts with fee based and or take or pay structures, providing strong visibility to our growth outlook. We prioritize deleveraging, achieving a leverage ratio under our 3.5 times target. And we remain focused on what is within our control, applying a high level of scrutiny across all spend categories. This positioning gave our Board and management the conviction that now was the right time to increase our share repurchase program up to $500 million. Further underpinning our team's belief in Kinetik's value proposition, senior management will receive a material percentage of this year's remaining salary in Kinetik common stock, including myself at 100%. While we're taking a bit of a wait and see approach, our goal is to be as transparent as possible with our expectations today and over the coming months. With that, I'll turn the call over to Trevor to discuss first quarter results and 2025 expectations in more detail.

Thanks Jamie. In the first quarter, we reported adjusted EBITDA of $250 million. We generated distributable cash flow of $157 million and free cash flow was $120 million. Looking at our segment results, our Midstream Logistics segment generated an adjusted EBITDA of $159 million in the quarter, up 11% year-over-year on increased process gas volumes and margin expansion from our Northern Delaware assets. Processed gas volumes were up sequentially, largely driven by the return to production at Alpine High. There were fleeting curtailments at Alpine High in late March, which coincided with several days of depressed natural gas prices at the Waha Hub. Those volumes have returned and Waha natural gas prices have been surprisingly positive so far through this typical maintenance period of April and May. Also recall that we are now insulated from the lost gross margin impacts experienced in the fourth quarter of last year with additional transportation capacity to the Gulf Coast that started in March. Now shifting to our Pipeline Transportation segment, we generated adjusted EBITDA of $94 million, down 2% year-over-year driven by no contributions from Gulf Coast Express following the sale of our equity interest in the second quarter of 2024. This was mostly offset by an increased contribution in EPIC Crude year-over-year from our additional 12.5% ownership of the pipe. Total capital expenditures for the quarter were $78 million. And in March, we issued an additional $250 million of our existing sustainability linked senior notes due 2028. And last month, we renewed our accounts receivable securitization facility for another year and increased the facility size to $250 million. Our leverage ratio for our credit agreement stands at 3.4 times. On a full year basis, we are affirming adjusted EBITDA guidance of $1.090 billion to $1.150 billion and capital guidance of $450 million to $540 million that were issued at the end of February. We expect a meaningful acceleration in adjusted EBITDA growth during the second half of the year. We expect to reach annualized adjusted EBITDA of approximately $1.2 billion in the fourth quarter, inclusive of the commissioning of Kings Landing and the subsequent unlocking of over 100 million cubic feet per day of currently curtailed volumes as well as our customers' current development plans. Additionally, we expect increasing contributions from Barilla Draw, the Eddy County project and our Lea County agreement as the year progresses. Since Liberation Day, we have seen energy commodity futures decline and are lower than our guidance price deck. Approximately 83% of our 2025 expected gross profit is sourced from fixed fee agreements. And as of today, we have only 3% of total gross profit that is unhedged and directly tied to commodity prices. The price deck used to set the 2025 adjusted EBITDA guidance assumes market forward pricing as of February 20th. Marking to market the current strip pricing, we estimate an approximately $20 million headwind to adjusted EBITDA for the full year. We are also beginning to see the indirect impacts of a lower commodity price environment. As we receive updated development schedules from some of our customers, several well pads that were scheduled to turn in line in the fourth quarter are being pushed into 2026 indicating a possible slowdown in activity towards the end of the year. This led us to adjust our full year gas process volume growth assumption from approximately 20% to high teens growth. Turning to capital guidance, our team has made substantial progress on the Kings Landing construction and remains on track to start commissioning in the next six weeks. With that in mind, our CapEx this year is first half weighted and represents approximately 65% of 2025 capital. As we look to the second half of the year, we have some carryover spend into July for Kings Landing and construction commences at ECCC in the third quarter with total spend tapering off in the fourth quarter. Our major announced capital projects including the Kings Landing Complex, the Eddy County project and ECCC pipeline are largely insulated from any changes to tariff rates. Despite all of these impacts, we expect to be within our 2025 adjusted EBITDA and our capital guidance ranges. The first four months of this year have been quite dynamic. Kinetik has delivered solid first quarter results, demonstrated strong execution across our strategic project backlog and taken significant steps to advance our finance related objectives. I am proud of how our teams have remained incredibly focused despite the noise in the market. As we look ahead, Kinetik is well positioned to navigate this uncertainty. We have done it before. Since the merger in early 2022, we have continued to strengthen our business and enhance our financial flexibility, laying the foundation for a robust multiyear growth outlook and providing our Board with the confidence to authorize our 500 million share repurchase program that we announced yesterday. We have strong conviction in Kinetik's value proposition and are excited to accelerate capital returns to our shareholders in a more meaningful way. And with that, we can open up the line for Q&A.

Thank you. [Operator Instructions] The first comes from Spiro Dounis with Citi. You may proceed.

Thanks operator. Good morning, team. First question, I wanted to go to the long-term growth, if we could. Jamie, you've had a lot thrown at you early in the year like everybody else. So I was surprised you were able to sort of maintain that 10% growth CAGR through 2030 or sorry, 2029. So I just want to level set there and make sure I understand what are the drivers behind that? It sounds like gas growth is still something you see even a flat crude environment. I want to make sure I understand all the pieces there?

Sure. Good morning, Spiro. So as far as the overall sequential growth and the base business supporting a 10% compound annual growth over the next five years. So much of it is driven let's start immediately, relative to September actual last year, 11/20 obviously to the midpoint this year. As everyone knows going forward I think consensus around 1.25 I think for next year. We still have in the immediate term 13%, 15% growth year-on-year. Going out as we think about this what drives so much of this is we've got some fundamental contractual resets that provide tremendous inherent intrinsic value for this company without any capital. You have step-ups on the existing base contracts. We have Barilla Draw that we will get all of the processing starting in beginning of 2028. And we probably have I think one of the most exciting acreage positions for the folks at Permian Resources where obviously there's a lot of growth in New Mexico. And so we look at that and we just we look at our overall base business same store sales relatively I would say modest growth on the Texas side. And then New Mexico will continue to see pretty attractive growth. What we told you all is we're looking at obviously either we're going to do a power generation project or we potentially will in fact procure compression and then reduce the amount of lease compression that we have. That has a direct immediate OpEx benefit, not something you leg into but something you see immediately. So it's those factors collectively that really set you up for that growth. And obviously, part of that, as we said in with New Mexico is the prospect and likelihood that we will FID Kings Landing too which I think as we've said we have very, I think strong conviction on.

Got it. Helpful. Second question just going to capital allocation. I don't think any big decisions have been made yet. It sounds like you're being flexible here. But certainly noticing a pretty big pivot now, obviously, maybe a little bit away from organic growth towards buybacks. I think you mentioned opportunities, but I mean, that sounds like M&A. So I guess, one, as you're thinking about the buyback and how you deploy that, maybe walk us through the mechanism for how much you sort of buyback in any given quarter. And am I right in reading through on the opportunity side that maybe some assets dropped loose here in this environment and you'd ready to pick those up?

Yes Spiro, this is Trevor. Thanks for the question. I think you characterized it correctly there at the very end which is we're going to be flexible, we're going be opportunistic and to the extent that we see value on the bolt on and the M&A side then we will deploy the balance sheet and allocate capital there. But as it stands today and where we're at we see and the Board sees tremendous value in our share price. We've worked really hard to get the position or to get the business in the position that we're at today. I point you to Page 9 of our Investor Relations slides. There's no changes to our finance related objectives. We're very cognizant of our leverage target. Like I had mentioned earlier, we worked really hard over the last three years to get the balance sheet to where we are today. We're still focused on investment grade ratings and we're still looking to deploy capital both inorganically, organically. But again, we're going to be opportunistic here and we see great value with where our current share price is and that was – that gave the conviction to increase the share repurchase program from 100 to 500 in order to maintain flexibility as we navigate what are currently choppy markets in a choppy environment.

Hey Spiro, maybe I'll just jump on that. Trevor describes it as great value. I describe it as incredible frustration. The stock price, I mean think of it this way, annualized first quarter is $1 billion of EBITDA. Fourth quarter, two quarters away, annualized EBITDA will be 1.2. Last time I checked with a calculator that is 20% growth in less than six months. Go show me somewhere else that you can see that on top of almost an 8% yield and 3% to 5% guaranteed growth in the dividend going forward with a 3.4 times I think on a credit agreement basis right now unadjusted just under 3.8. I mean this was a unanimous view from the Board, which was there is no way this stock sits with a 4 in front of it, and why if it does then you just go for it.

Understood Jamie. Appreciate the color guys. Thank you.

Thank you. The next question comes from Jeremy Tonet with JPMorgan. You may proceed.

Hi, good morning.

Good morning, Jeremy.

Appreciate the vigor in the last response there. Just wanted to follow-up a little bit more on the buybacks as it relates to how the pace could unfold here. Do you need to wait for kind of free cash flow generation to develop more or just the leverage is kind of low as what you were saying? Just wondering is this something that you guys can affect in the very in the near-term given where the share price is as you note the four handle?

Yes. So and I appreciate the commentary on the vigor, although to be honest I would tell you I'm just warming up if you wanted to really get my viewpoint in the context of how I sort of feel about where the stock is. I think from our vantage point, there's probably the most salient point to think about cash flow. You're seven weeks away from being 65% completed on your capital program for this year. You're literally on the backside, and you've only got 50 million committed in 2026. And you've got this massive inflection between 1Q and 2Q as I just pointed out in the context of just looking at that annualized first quarter versus fourth quarter EBITDA. So the short answer is yes. We can – I think we are well equipped and able to actively engage in the program, and we will be opportunistic? And we will look to obviously maximize value for all of our shareholders. I think as we sort of think about it, we traded in, sort of the toothpick for the torpedo bat. All right, just in the context of the size of the program and how we're going to think about it. So I think we're going to be much more on the front foot, not the back foot.

Got it. That's very helpful. Thank you for that torpedo incoming. And just rounding out, I guess, the capital allocation side, how you think about hurdles in this environment? You look at KL2 and just what other growth opportunities might have in front of you at this point? I'm wondering if you could just give us a little bit more thoughts there?

Look, I think as Trevor pointed out, there's lots of opportunities. In a sort of uncertain world, there is always never pass up the opportunity to find really valuable opportunities when you've got uncertainty in front of you. And I think our viewpoint is everything is – we already had a pretty high underwriting standard for pretty much every transaction that we've done. You can just go back to our track record. I think we would say we stand very proud of everything we've done including most recently Barilla Draw, which has been a really exceptional start for that asset. We've now just put an even higher threshold than hurdle on it because we want to be ironclad certain in the context of the conviction we have and the underwriting commercial support for any transaction that we do. So we are going to really probe deeply on our level of conviction and then talk about it with the Board. So we're very much open to business, but we're really, really going to pull apart every opportunity to make sure that we feel with absolute conviction that this is the right thing to do.

Yes, Jeremy, this is Trevor. One other thing that I would say is I don't want you to read into the share repurchase program increasing as a means or as a read through that the organic opportunity set is drying up. That is not the case at all. As we plan for five years out, there are assets that are on the board that could make sense for them to be owned by Kinetik, to the extent that we can get their own value. But with where we trade right now, this is inside of where we've Permian assets trade over the last 12 months. And so as we think about allocating capital and how we think about the repurchase, the repurchase very much is an acquisition in and of itself. It's an acquisition of ourselves. And so we see a very deep bench of opportunities all around our entire system, in Delaware South and Delaware North going forward.

Got it. Very helpful. Thank you.

Thanks Jeremy.

Thank you. The following comes from John Mackay with Goldman Sachs. You may proceed.

Hey, team. Thanks for the time. Just you touched on this a lot, I'd be curious to hear a little bit more just on your overall read on the macro view. We've obviously seen some activity cuts. I guess I'd just be curious to hear your view. Do you think we're going to see more from here? And when we're thinking about your ability to pare down the CapEx, I guess what would you be looking for on the macro front to say, you know what, we really do need to go to that $50 million next year?

John, it's Jamie. So thanks for the question. I think look right now there's just so much uncertainty in this world. Personally, I like the reference to the traffic light that I heard one of our large customers Diamondback talk about in the context of yellow of red, yellow, green. I think if we start to see further declines, right, you can as everyone's starting to see, you can see some actual either turn in line cuts where production remains pretty much within guidance because you've had outperformance. You might see some rigs slow down, but you're going to start seeing that manifest itself if we continue at this pace going into 2026. What does that mean for us? It's going to be very much customer specific. It's hard to give a broad brush. There may be certain customers like one of our largest PR, they've not put down any rigs. They put out their earnings effectively they're slightly trimming their turn in line for forecast, but their guidance on the crude side is hitting the mark because they've had great outperformance. And look, we should know because obviously we deal with them on both the crude and the oil side, sorry, the crude and gas side. So I do think it's going to be – it won't be one size fits all. I think it will be very much customer specific and area and location specific. And I think we're just going to have to navigate our way through whatever that looks like at the time as to whether it's a $50 million program or it's slightly more. Obviously, the important part of the $50 million, particularly as I referenced PR, ECCC and that Eddy County acreage, they are synonymous. They literally are synergistic to one another. And therefore, the evacuation over and above the volume we can take at Kings Landing is all about getting it down ECCC and allowing us to bring it down south. So that's a very important piece of the overall system profile and how we think about Matt continuing to grow our top line. Trevor or Kris, I don't know if you guys have anything else to add.

Yes. Look, we're a midstream service provider and we're going to be responsive to our customers' needs. We're going to be very mindful of the environment that we're in right now, as Jamie described it. We're seeing yellow lights, not red lights by any means. So we are proceeding with caution with the two large infrastructure projects that we've talked about in the past with an expansion of processing capacity across our system with the new cryo and a behind the meter power generation project. As we look at our updated and five year forecast from recently provided drill schedules from our customers, we still see a strong need for both. But that said, as we stand today, we are proceeding with caution with respect to large multiyear projects that are several hundred millions of dollars. So but we're going to be responsive to our customers' needs. Substantial portion of 2026 capital involves new compressor stations, new well connects and pipeline lies and looping, that's very short cycle capital. And so as we navigate through 2025 and plan for 2026, again, we're going to be responsive to what our customers are telling us.

And John, this is Kris. As Trevor pointed out a few moments ago, there really hasn't been a slowdown in their organic opportunities with our customers either this year. We announced a new deal in Reeves County with a private customer. In New Mexico right now, we're chasing a number of opportunities. So from that standpoint, we still see growth opportunities even in this environment. So again, great opportunities ahead of us.

And Kris, that's a great point. I'm sure someone's probably going to ask us about the new GMP contract we did. I mean to me – from my lens that hits the trifecta. Reputable producer, very active in New Mexico, but the trifecta it hits is gassy part of the basin. On us there is its short cycle capital, meaning that in the next several months we'll be getting production and minimal capital. That's like a dream come true when you're a midstream company. So that sort of opportunity which is out there is really exciting. And I think we should – the commercial team is continuing to do a really good job of finding those types of opportunities and leveraging what we've built over the past 12 years.

That's really good color. Appreciate all that. Second one for me. You guys have done a great job of kind of hedging out the commodity exposure this year. Can you just talk about looking forward, there's a ton of growth in the business that's already really baked in? Should that 83% fee-based – should that kind of hold going forward? Is that going to increase, decrease? Maybe just frame up the kind of longer term view on that side.

Yes. There are some puts and takes to it. We have a pretty strong growth from the customers that we acquired in the Durango acquisition, which had a little bit more of a commodity weight to it relative to just the legacy Delaware South system. But we do see strong growth across Delaware South as well and then also the new Eddy County project, which are largely fee based contracts. And so as we think about going forward, I would say mid-80s is the appropriate way to think about Kinetik's fixed fee composition, and about 15% is directly sourced from commodity prices.

That would increase up maybe just a little bit.

Yes.

All right. Thanks for that. Appreciate it. Have a good one, guys.

Thanks John.

Thank you. The next question comes from Michael Blum with Wells Fargo. You may proceed.

Thanks. Good morning, everyone. So given the comments on the producer activity in the back half of the year and just all the conversation you've had so far, would you say at this point you're trending towards the lower end of guidance? Or is that not the right way to look at it?

Michael, I'm really, really glad you asked – somebody asked this question. We gave you all this detail. Obviously, we talked about the 20 million of commodity headwinds if you just basically mark to market. So very directly, it would be below the midpoint. We're in the range, but we are below the midpoint. But we wanted to give more detail because we just realized with every passing day with the amount of announcements that it would be tone deaf to just to put yourself in a bubble and say, oh, everything's fine. We move stuff off from the fourth quarter. We looked at it. We've risked things. We've really, really spent a long time refreshing our overall forecast from February to today, engaged in lots of conversations with our customers. Because for us it's about capital spending, it's about setting compression, it goes into so many facets of our business that we have a – we need to know and our stakeholders need to be aware.

All right. [Technical Difficulty]

Michael if I can stop you there and you can hear me. It sounds like you've gone on to – you've become automated and it's very hard to understand. So maybe it's – you want to try again because we did not pick up that last question.

Can you hear me now?

Not really. Operator can – do you hear?

[Technical Difficulty]

No?

It’s coming through a bit choppy. Michael, could you please just press star two. We'll allow you to re-queue and then we'll see if your line is coming through a bit clearer. The next question comes from Brandon Bingham…

Okay. So why don't we take the next question? Yes.

Absolutely. The next question comes from Brandon Bingham with Deutsche Bank [ph]. You may proceed.

Hi, Brandon.

Thank you for taking the questions. Just want to quickly go back and ask for the umpteenth time here about the multi-year outlook. But maybe just coming at it from a different angle, if you could help us better understand maybe some of the sensitivity within that multi-year growth outlook to basin level growth or maybe asked in a different way to what extent is the growth outlined for the multi-year outlook dependent upon basin level growth? And just you did a good job explaining a lot of the insulating factors that you have, the low hanging fruit. But if you could kind of maybe just speak more to the broader volume trajectory as well, that'd be helpful.

Sure. Trevor, I think is probably the expert on this, but I do want to just make sure that we frame it for everybody. We look at this on what we'll call the base contract list that we have today and therefore the activity on the acreage that we have today. The only addition becomes Kings Landing and how that then things feeds into that from an overall production growth standpoint. Trevor, you want to?

Yes, absolutely. The way that I would think about it is as Jamie had pointed out earlier in his comments, that our five-year forecast and the – excuse me, the 10% compound annual adjusted EBITDA CAGR only contemplates one cryo expansion over the next several years. As we think about what we're seeing with our customers that are contracted today and their long-term development plans as well as the organic opportunity set up there, we have very strong conviction that we're going to hit that target and we're going to exceed that target. We are a pro forma Kings Landing coming online. We are a 2.4 Bcf a day system. And so really the way to think about it is we're going from 2.4 Bcf to 2.6 Bcf a day by 2029. That is what's comprised in the 10% annual EBITDA CAGR.

Awesome. Very helpful. And then maybe just quickly going over to the EPIC side. Your partner kind of had some commentary that some might have found a little shocking in its letter to shareholders. Just I know that there hasn't been a lot of discussion around the expansion, but if you have any just broader updates on Epic Crude and potential expansions in light of the commentary?

Look, I think on Epic Crude the business continues to perform and execute very well. We are very mindful and remain very mindful of the compelling nature of a potential expansion. As you may know with obviously the pro forma Double Eagle acquisition, Diamondback has an option for up to a third of any expansion that gets done. So that's obviously with that amount of volume they control, obviously – that obviously hopefully significantly helps contribute to getting it done. It's a question of when and not if. And I think obviously right now, just given the prudency and that we see out there, it’s – the timing is not ideal to be thinking about that particular expansion. And we will see over the passage of the remaining several months and to the balance of this year when and if that changes.

The other thing that I would add is that we still but we view the Delaware as earlier in its maturation phase than the Midland. And so as we think about Delaware crude volumes over the next five years and 10 years relative to the Midland. We skew bullish to the Delaware and those incremental barrels. The preferred market for those barrels is Corpus. And that has not changed in light of everything that has happened in the last two months. Corpus has remained sold out for a fair amount of time now that is still again the preferred route. And so we still see strong merits to an expansion.

I would say, Brandon, I'm probably remiss in not saying it that may will be the first month that the – we start getting distributions for shareholders. So that's actually from a financial standpoint. The business has really done a good job, turned the corner and it's on really strong footing.

Very helpful. Thanks, guys.

Thank you. [Operator Instructions] The following comes from Theresa Chen with Barclays. You may proceed.

Good morning. Jamie, I will take the bait on that new GMP agreement with the private producer in Greece County. Can you talk about what kind of volume metric or EBITDA step up that's going to bring?

I'm looking at Kris and Trevor. They're closer to it than I am.

Theresa, this is Kris. We added this producer down in Texas. We do business with them today in New Mexico. As Jamie said, initial development is going to commence this year with a few wells with opportunities for more in the future. So I think as Jamie alluded to, it's a gassy area. We hesitate on how much we want to guide on EBITDA, but it's not a lot of capital. It's sub $5 million kind of on a run rate basis. But to Jamie's point, when you look at the capital needed to build and pursue that project, it was quite minimal. But we see a lot of growth with the acreage that we are getting down there. And so we are excited about adding that project.

Got it. And on the direct commodity exposure front, appreciate the $20 million mark-to-market illustrative data point for 2025. Looking to 2026, how hedged or insulated are you from commodity exposure at that point?

We have, as you know Theresa, and we've said this, we've had a literally multi-year program, heavily weighted in the front and literally it's more – it is more tailored as you get out – the further out you go from a timeline standpoint. So we've got good hedges in place for through the first half of into next year and then obviously it starts to decline more. So I think we still feel pretty good about what we've got and our ability to continue to add where we see opportunities. Now the curve has become very flat. So that's kind of where we wanted just to look at it because there was so much noise in the marketplace. So we'll go look out and we're looking to continue to add to our overall hedging profile as we get out into that back end of 2026.

Thank you.

Thank you. The next question comes from Robert Mosca with Mizuho Securities. You may proceed.

Hi, good morning, everyone. Thanks for taking my question. So first one for me, circling back to the buyback authorization. Just wondering how you approach that being mindful of the float, I think you have a lockup expiration approaching here in the next few months. So just wondering how you plan to navigate that?

Yes. Thanks for the question, Rob. First and foremost, I just wanted to point out that we are not speculating on what our sponsors are going to do. Really the share repurchase program is just driven by our conviction in our earnings and strong free cash flow potential and the opportunity we see to create value for our shareholders given where the stock is traded today. Since being public, we have increased the float by over five times. So there's sufficient amount of float today to execute on the existing program. But to the extent that down the road if we are able to participate in a more bilateral trade, then that's something that if we see value, we're willing to entertain. But that said, the repurchase program, how we think about it is just what's within our control and what's within our control is open market purchases.

Got it. Thanks for that color, Trevor. And maybe for my follow-up, I think there's an expectation that Kinetik realized some cost savings on the NGL pipeline side. Does that outlook maybe provide even more of an offset if you do enter a lower growth environment when it comes to signing new NGL contracts? Just wondering how we should think about that.

Yes, look, I think the – I mean the short answer is it absolutely does. As you know, we have a number of contracts that roll off. We have a couple that roll off next year. We have a contract that roll off in 2027, we have a contract that rolls off at 2028. And when I say a contract, these are all NGL contracts. They are all well above market price today and obviously they provide a lot of overall economic benefit to the company going forward. So yes, even in a world that is more tempered as far as growth and production profile going forward, there's still a significant embedded value with respect to those contracts and those roll offs.

The other thing that I would add is that if you go back to the comments that I made earlier about how we think about our processing capacity step ups over the 2024 to 2029 period and then you triangulate that with the finance related objectives of a 10% compound annual adjusted EBITDA CAGR through that period of time, it's pretty clear that earnings are growing more quickly than processing capacity expansions.

Yes. Exactly.

All right. Really helpful. Thanks for the time today.

Thanks, Rob.

Thank you. [Operator Instructions] The next question comes from Keith Stanley with Wolfe Research. You may proceed.

Hi, good morning. Maybe I could start on the second quarter if I could be more specific. The release says $1 billion rounded of EBITDA in the first half of the year. And one could read that as EBITDA is pretty flat in Q2 at $250 million again. Is that the right read and growth is really kind of entirely in the second half of the year? Or is it fair to assume some growth out of winter for this quarter?

Keith, I think that your analysis on the point is I think pretty much the case, right? It's pretty flat until you get Kings Landing starting online. You have a little bit on Barilla Draw, but again, it's puts and takes again, swings and roundabouts. But you are right in the context of the real step change happens when Kings Landing comes on and you take that 110, whatever it is, plus of curtailed volume and constrained volume and basically start processing it. So that obviously is where you really start to see a significant increase in your overall economic profile.

With Kings Landing coming online too, you also have the margins step up on the currently gathered Eddy County project volumes?

Yes, exactly. Because they are right now they're just gathered, right? They're not processed.

Got it. That's helpful. Second question, so you talked earlier about having the ability to do it all, pursue growth and M&A. If it's out there and makes sense, achieve IG ratings and now potentially meaningful buybacks as well. How do you think about some of the non-operated pipeline assets as part of that equation? Because in the past the company's been willing to sell assets like GCX as a source of funds. Is that an option that's on the table as you're looking to kind of do all the pieces of the puzzle?

I would say yes, we're always open for business if we see compelling value. There are some within the three – of the three EMIs that I would say are less strategic, maybe in the context than others. But I definitely think we are open to maximizing value and redeploying proceeds into highly constructive, compelling value opportunities.

That includes buying back our stock.

Got it. Thank you.

No problem.

Thank you. The following comes from Manav Gupta with UBS. You may proceed.

Good morning. I wanted to understand it's been about like almost four or five months since you acquired those assets from Permian Resources. So are the Barilla Draw assets actually meeting your expectations, exceeding expectations? If you could help us understand that a little better?

Sure. Manav, thanks for the question. The Barilla Draw acquisition has been a fantastic acquisition. It has exceeded our expectations. Lots of activity coming on again. We've just started processing some of the volume but we really start – we see a step change in the amount of what happens on that particular asset position at the beginning of 2028 when another existing processing dedication terminates. But there's been a lot of activity. It's a really exciting acreage position for Permian Resources, one that they're putting a lot of capital behind. There's a lot of turn in line activity that remains. Already we've seen a large well pad. We've got another very large well pad slated for the second half of this year. So I think we're really, really excited by what we've seen.

Perfect. Quick follow-up here is and I understand you [indiscernible] the behind the meter power solution yet, but in terms of the discussions and demand out there, what are you seeing in terms of companies coming in or customers coming in with the need for behind the meter power solutions and how can that play in the hands of Kinetik? Thank you.

Sure. So just to frame the power generation opportunity, we have a couple of partners that we've been talking to. It's not more expensive than that. They all have relatively concentrated needs for electric power on from a geographical low position standpoint, which maps very nicely to our needs. So there's a lot of synergies by pooling our resources together, co-owning an asset and taking our proportionate level of electricity. So we continue to see – we think this is really, I would say this is the beta test for this project and how we think about power going forward. And if this works as we anticipate it will, there is certainly opportunity with at least one of these potential joint venture partners to do this again in New Mexico. So that's a definitely I think we're really excited by what we can do here. And we just think it is again, it is very – it's just smart business, right? This is optimizing your cost of goods.

Thank you so much.

Thank you. There are currently no more questions queued. So I'll pass it back over to Jamie for closing remarks.

Thank you very much everybody. We'll see probably many of you at EIC in the next few weeks. And until then, signing off.