Kinetik Holdings Inc

Good morning everyone and welcome to the Kinetic second quarter 2023 results. My name is Chach and I'll be coordinating your call today. During the presentation you can register to ask your question by pressing star 1 on your telephone keypad and if you change your mind please press star 4 by 2 to remove your question. I'd now like to hand you over to Maddy Wagner to begin. Maddy, please go ahead.

Thank you. Good morning and welcome to Kinetic's second quarter 2023 earnings conference call. Here with me is our President and Chief Executive Officer, Jamie Welch, as well as Matt Wall, our Chief Operating Officer, Steve Stilato, our Chief Accounting and Administrative Officer, Annie Pincic, our Chief Strategy Officer, Trevor Howard, our VP of Finance, and Chris Kendrick and Tyler Milam, our VPs of Commercial. The press release we issued yesterday, the slide presentation, and access to the webcast for today's call are available at www.kinetics.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 with 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 to Q&A. With that, I will turn the call over to Jamie.

Thank you, Maddie. Good morning, everyone, and thank you for joining our call today. Yesterday, we reported our second quarter 2023 results. in line with our internal budget and slightly better than consensus estimates. The results further build off the momentum of our first quarter. Following record process gas volumes in April, we continue to experience volume strength during the quarter, processing an average of 1.48 billion cubic feet per day and setting a new company record for quarterly process gas volumes. This represents approximately 10% growth quarter over quarter and is attributed to the elevated development activity that typically occurs throughout the second and third quarters combined with encouraging producer well results. During May and June, our process gas volumes were impacted by record high temperatures experienced in West Texas. The extreme heat affected producers, utilities, and service providers alike as they work tirelessly to maintain their mechanical equipment run times and overall production. In fact, this past June in West Texas was the hottest in over 10 years with temperatures consistently exceeding 100 degrees for half the month. Our operations team has gone above and beyond battling the summer heat while endeavoring to ensure smooth and reliable service for our customers. Therefore, despite the weather-related challenges, we still had a record quarter thanks to our operations team. We remain on track to meet or exceed our 2023 exit rate guidance of 1.6 billion cubic feet per day. This is predicated on our constantly growing customer base, step-ups in contractual volume commitments occurring this summer, and the commencement of new contracts later this year. As we enter the second half of the year, 2023 adjusted EBITDA continues to trend towards the high end of our guidance range of $800 million to $860 million. We forecast sustained growth quarter over quarter, primarily driven by midstream logistics volume growth and the commercial in-service of Delaware Link and the PHP expansion in the fourth quarter. By year end, our annualized adjusted EBITDA should be well over $900 million. Our operations team has continued to lead by example, and as a result, our unit operating expenses are expected to decline throughout the remainder of the year and come in below budget. Additionally, current commodity pricing forecasts indicate an improved outlook in the second half of the year as compared to the first. Our 2023 capital expenditures are expected to be at the top end of our guidance range, largely driven by incremental capital spend on PHP. It is worth noting our midstream logistics and Delaware link capital spend is tracking at the low end of our guidance. Our 2024 free cash flow outlook remains robust as we anticipate significant adjusted EBITDA growth year over year, coupled with capital expenditures below $150 million. Moving to our growth projects, Delaware LINK is ahead of schedule. Construction is progressing well, and we are now targeting mechanical completion in September and commercial in service on October 1st. Once in service, Delaware LINK will directly connect three of our processing facilities to Waha, providing enhanced system reliability and flow assurance to our customers. Progress continues on the PHP expansion, and the project remains on track for an expected in-service of December 2023. Our New Mexico gathering system expansion into Lee County is on schedule and is expected to be mechanically complete in January, with the gathering and processing agreement now underpinning that project, commencing at the beginning of April. During the second quarter, we executed a gas gathering and processing agreement with a new customer in Lee County, supported by a multi-year minimum volume commitment. The contract is expected to commence following the in-service of the pipeline in early 2024. We continue to have constructive commercial discussions with several New Mexico producers, both existing relationships and several new to Kinetic, and we're excited about the opportunities to grow our business in the Northern Delaware. Following the In-Service of Delaware link, the PHP expansion, and the New Mexico Gathering expansion, we will be able to provide a highly competitive integrated wellhead to Gulf Coast solution to New Mexico producers for residue gas and natural gas liquids. Moving to the Texas side of the Delaware basin, we identified a handful of commercial opportunities, particularly with private producers. In the second quarter, we executed several gas gathering and processing agreements with new customers that have plans to bring on incremental production later this year and additional development next year. Our commercial team has done a terrific job building partnerships with new customers and meanwhile growing our existing relationships. We have grown our customer base by over 25% following our merger last year, and today our midstream logistics customer count stands at over 35. We also want to congratulate Chevron on the closing of its PDC acquisition and look forward to working more closely with them as a major customer within our midstream logistics segment. Finally, we released our 2022 sustainability report last week. Our company has made meaningful progress advancing our sustainability initiatives over the past year. I highly encourage you to take a look at the report if you've not yet done so. I'm proud of the progress that we made in 2022 and look forward to our continued improvement and achievements. With that, I'd like to now hand the call over to Trevor Howard, our VP of Finance.