Kinetik Holdings Inc

digit adjusted EBITDA multiple and significantly enhances our position across the entire Delaware Basin. In May, we developed a 100-day plan to close and integrate Durango's assets and personnel. I am very pleased to report that the transition has been seamless. We have already identified several process and system improvements that have begun generating value. And we have developed a robust integration plan that includes preventative maintenance, facility upgrades, and capacity expansions to existing infrastructure at the Dagger Draw Processing Complex. Following closing, we immediately took over project management responsibilities for all growth and maintenance capital projects. Construction is progressing well on the 200 million cubic feet per day King's Landing I, and that remains on schedule with an expected in-service date in April of next year. We are also mid construction on a 20 inch pipeline running across the Durango system that will provide connectivity to King's Landing upon in service and greatly improve system hydraulics. Additionally, we began deferred maintenance projects to elevate operations to Kinetic's safety and environmental standards. We have also welcomed over 70 talented employees to the Kinetic team. The feedback we have received from new employees has been positive, and they are enjoying the function-based structure and management of our operations team. Turning to our results, in the second quarter, we processed gas volumes of 1.58 billion cubic feet per day, representing 7% growth year-over-year, despite wellhead volume curtailments in response to Waha hub pricing, which averaged approximately 140 million cubic feet per day. Second quarter adjusted EBITDA was over $234 million, a 13% increase year over year, reflecting new volumes from the MVC-backed agreements in Lee County and improved commodity margins, as well as contributions from the expansion of PHP and Delaware Link. This was partially offset by price-related gas volume curtailments and only two months of contribution from GCX. So for context, If we'd closed Durango contemporaneously with the sale of GCX, Kinetic's second quarter adjusted EBITDA would have increased to almost $238 million. With the successful completion of the Durango and GCX transactions, we are revising upwards our prior 2024 guidance to reflect the underlying strength of our business as well as the impacts of the transactions. Trevor will discuss this in more detail momentarily. I'm incredibly impressed by our team's focus and execution over the past few months. Their dedication and attention to detail allowed for both transactions to close on time and has resulted in a swift integration process.

And now with that, I'd like to hand the call over to Trevor. Thanks, Jamie. In the second quarter, we reported adjusted EBITDA of $234 million. For the quarter, we generated distributable cash flow of $163 million and free cash flow was $105 million. Looking at our segment results, our midstream logistics segment generated an adjusted EBITDA of $148 million in the quarter, up 7% year over year, largely driven by improved commodity margin, increased process gas volume, and continued marketing benefits on our PHB capacity, despite the wellhead volume curtailment that persisted throughout the quarter. Shifting to our pipeline transportation segment, We generated an adjusted EBITDA of $94 million, up 25% year-over-year. This increase was driven by contributions from the PHP expansion and Delaware LINK, and was only two months of contributions from TCX. Total capital expenditures for the quarter were $38 million. Our leverage ratio for our credit agreement stands at 3.4 times below our leverage target of 3.5 times. As Jamie mentioned earlier, We are revising upwards both our 2024 adjusted EBITDA and capital expenditures guidance to reflect earnings outperformance throughout the first half of the year and the successful completion of the Durango acquisition and GCX divestiture. We now estimate full year 2024 adjusted EBITDA in the range of $940 million to $980 million, a 3% increase at the midpoint versus the previous guidance range midpoint and implies over 14% growth year over year at the midpoint. Specifically, within the midstream logistics segment, we now expect process gas volume growth in the high teens. Our new growth expectations are inclusive of six months of Durango's existing business, which includes approximately 200 million cubic feet per day of process gas volume from the Maljamar and Dagger Draw facilities. We expect the existing Durango volume to nearly double with the in-service of the 200 million cubic feet per day King's Landing cryo in April of next year. Additionally, the Lee County MVC increase in margin expansion for gathering, treating, and processing will contractually begin in November. Our pipeline transportation segment will no longer reflect contributions from GCX following the divestiture. However, we expect the segment will continue to experience strong year-over-year growth throughout the remainder of the year with the full-year benefits from Delaware LINC and the PHP expansion. We have modestly updated our commodity outlook for the remainder of the year. Our revised guidance assumes approximately $77 per barrel for WCI, $2 per MNBCU for natural gas at the Houston Ship Channel Hub, and $0.60 per gallon for natural gas liquids. Today, approximately 13% of our remaining 2024 expected gross profits is directly influenced by commodity prices, which is primarily associated with kinetic equity volumes. Currently, our direct commodity link exposure is sourced from the following components, approximately 30% natural gas or ethane, 30% propane and butane, and 40% crude. As we mentioned during our Durango acquisition announcement call, with certain provisions of some of the Durango contracts, we retain ownership of the condensate, Therefore, WCI will represent a greater contribution of our direct commodity link growth profit going forward. Turning to our capital expenditures guidance, we now expect capital expenditures to be between $260 million to $300 million for the full year. This increase reflects capital for the construction of King's Landing 1, pre-FID work for King's Landing 2, and an associated acid gas injection well. the new and amended long-term gathering and processing agreements in Eddy and Lee counties, and capital for integration, and growth and maintenance costs associated with the existing Durango business. For context, roughly $100 million of the guidance increase is capital associated with Durango. The remainder of the increase is driven by new projects in New Mexico that have been announced since issuing our full-year 2024 CapEx guidance in February. The projects included in our initial 2024 CapEx guidance are trending approximately 5% below budgeted costs. Our operations and commercial teams have done a tremendous job so far by optimizing scope and reducing construction costs where possible. We remain highly focused on our disciplined capital allocation approach. Our priorities are aligned with our strategy, which enables us to allocate capital to the highest return opportunities to maximize shareholder value. And with that, I would like to open up the line for Q&A.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If your question has been answered or you wish to remove your question, please press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you are using a speakerphone, please pick up your handset before asking your question. In the interest of time, questions will be limited to one question and one follow-up per person. We will pause here briefly as questions are registered. Our first question comes from the line of Michael Bloom with Wells Fargo. Michael, your line is now open.