Kinetik (NYSE: KNTK) reported Q2 2026 revenue of $581.4 million, up approximately 36% from $426.7 million a year earlier, while diluted EPS rose to $0.64 from $0.33. For the quarter ended June 30, 2026, net income including noncontrolling interests reached $123.1 million and adjusted EBITDA increased to $280.8 million, supported primarily by Midstream Logistics.

Core Earnings Data

Product revenue increased to $490.8 million from $311.6 million and drove the majority of the top-line gain, while service revenue declined to $86.9 million from $112.7 million. Total operating costs rose more slowly than revenue, allowing operating income and operating margin to improve.

Cash-oriented non-GAAP measures also increased. Distributable cash flow rose approximately 27%, while free cash flow more than tripled as higher distributable cash flow combined with lower growth capital expenditures.

Adjusted EBITDA, distributable cash flow, and free cash flow are non-GAAP measures. Net income, operating income, and diluted EPS are GAAP results.

Business and Segment Performance

Kinetik’s two operating segments moved in opposite directions. Midstream Logistics delivered the quarter’s growth, while Pipeline Transportation remained below the prior-year period because Kinetik divested its EPIC Crude interest in late 2025.

Processed natural gas volume was 1.74 Bcf/d, unchanged from a year earlier despite an estimated 250 MMcf/d of Waha price-related shut-ins. Permian Highway Pipeline benefited from lower fuel costs and higher gross margin, while Shin Oak recorded stronger throughput volumes.

Kinetik also reached a final investment decision on Kings Landing II. The project is expected to cost approximately $260 million, bring total system processing capacity to 2.7 Bcf/d in 2028, and be completed in mid-2028. The ECCC Pipeline entered service during the quarter, and the company began right-of-way procurement for a potential 2027 expansion.

Other projects include an acid gas injection and sour conversion project expected to enter service by year-end 2026 and the 40 MW Diamond Volt power project scheduled for Q2 2027. Kinetik’s board also authorized long-lead equipment purchases for processing capacity beyond Kings Landing II.

Profitability, Cash Flow and Balance Sheet

Costs of sales increased to $237.6 million from $156.7 million alongside the expansion in product revenue. Nevertheless, total operating expenses grew by approximately 28%, below the 36% revenue increase, lifting operating margin to 23.0%.

Quarterly growth capital expenditures declined to $91.1 million from $123.5 million, helping free cash flow rise to $105.2 million. Maintenance capital expenditures increased to $16.3 million from $7.9 million. For the first six months of 2026, a separate year-to-date measure, operating cash flow was $341.5 million compared with $305.9 million in the prior-year period.

Net debt was $3.94 billion at June 30, 2026, up from $3.85 billion at March 31 and $3.81 billion at the end of 2025. Kinetik reported $1.07 billion of liquidity, consisting of $7.8 million in cash and $1.06 billion of revolver availability. Its leverage ratio was 3.85 times, and the net debt-to-adjusted EBITDA ratio was 3.84 times. The quarterly dividend was $0.81 per share, with a dividend coverage ratio of 1.47 times.

Flat Throughput Still Produced 35% Midstream EBITDA Growth

The main operating feature of the quarter was the divergence between volumes and earnings. Processed gas volume was flat, yet Midstream Logistics adjusted EBITDA increased 35%, indicating that the segment’s improvement was not driven by throughput growth alone.

Kinetik attributed the increase to operating performance, improved NGL recovery and condensate yields, optimization opportunities, and favorable commodity prices and spreads. The easing of curtailments is also central to the second-half outlook: full-year guidance assumes average curtailments of approximately 25 MMcf/d in the second half, well below the estimated Q2 shut-in level, and a processed gas exit rate of nearly 2.2 Bcf/d.

2026 Guidance

Kinetik raised its full-year adjusted EBITDA guidance after its first-half performance and a higher outlook for the remainder of 2026. The new midpoint is $1.07 billion, which management said is 7% above the midpoint of the original guidance issued in February.

Capital expenditure guidance also increased as Kinetik approved Kings Landing II, accelerated work tied to customer development, and advanced ECCC Pipeline and future processing projects.

The outlook assumes a fourth-quarter processed gas average of nearly 2.2 Bcf/d, approximately 20% exit-to-exit growth. Commodity assumptions include WTI at $78.65 per barrel, Houston Ship Channel natural gas at $2.83 per MMBtu, Waha natural gas at negative $0.26 per MMBtu, and composite NGLs at $0.62 per gallon.

Recent Insider Transactions

The supplied six-month summary shows 7.20 million shares purchased across 19 transactions and 5.08 million shares sold across eight transactions, resulting in net purchases of approximately 2.11 million shares. Separately, the latest detailed records include several director stock awards and three indirect sales by ISQ Global Fund II GP LLC with a combined reported value of approximately $53.2 million.

The director awards were grants rather than open-market purchases. The disclosed transactions alone do not establish insiders’ views about Kinetik’s future performance.

Risks Investors Need to Watch

• Waha pricing and curtailments: Q2 processed volumes included an estimated 250 MMcf/d of price-related shut-ins. Guidance assumes substantially lower curtailments during the second half, so a different outcome could affect volumes and adjusted EBITDA.
• Commodity margin exposure: Favorable commodity prices and spreads supported Q2 results, while the guidance incorporates specific oil, natural gas, and NGL price assumptions. Changes in those conditions could reduce the benefit seen this quarter.
• Higher capital requirements: Capital expenditure guidance rose to approximately $560 million as Kinetik advances multiple projects. Spending requirements, project timing, and execution will influence future free cash flow.
• Leverage and liquidity composition: Net debt increased to $3.94 billion, and most of the reported $1.07 billion of liquidity was revolver availability rather than cash.
• Expansion execution: The outlook depends on Kings Landing II, the ECCC expansion, the acid gas injection project, Diamond Volt, and customer development progressing on the disclosed schedules.

Summary

Kinetik’s Q2 2026 results combined higher revenue, wider operating margins, and substantially stronger free cash flow. Midstream Logistics was the primary earnings driver even though processed gas volumes remained flat, while the EPIC Crude divestiture weighed on Pipeline Transportation comparisons. The next areas to monitor are the expected decline in curtailments, progress toward the 2.2 Bcf/d exit rate, execution of the expanded capital program, and the effect of that spending on leverage and free cash flow.

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