Kinetik Q3 2026: Record Volumes, an EPS Miss, and What Comes Next

Kinetik's third-quarter headline earnings number looked ugly at first glance, with GAAP diluted EPS of $0.26 missing expectations against the $0.56 analyst estimate. The gap came from items outside operations: a $27.8 million unrealized commodity hedging loss hit the GAAP figure, along with litigation costs and other one-time items, none of which reflected the underlying business.

Revenue came in strong: Kinetik reported $569.4 million for the quarter, up roughly 22.7% year over year and beating the $544.0 million consensus. That top-line beat was driven by record processed gas volumes of 1.94 Bcf/d in the Delaware Basin, which pushed Midstream Logistics Adjusted EBITDA up 34% year over year.

CEO Jamie Welch pointed to the volume record as evidence of the business scaling durably. He noted that producer activity remained strong into the fourth quarter, with processed gas volumes tracking toward roughly 2.2 Bcf/d for Q4 2026, a figure Kinetik set as its target. Margins and costs were also running ahead of internal budget expectations heading into the final stretch of the year.

With that momentum behind it, management raised its full-year 2026 Adjusted EBITDA outlook to the high end of the $1.04 billion to $1.1 billion guidance range, citing stronger well results and commodity prices above the assumptions Kinetik used in August. Capital expenditures for the full year are expected to come in roughly 5% below the $560 million guidance, reflecting disciplined execution and project timing.

Several infrastructure projects add additional context for investors watching Kinetik beyond this quarter. Phase 1 of the ECCC Pipeline expansion and the Diamond Volt behind-the-meter power generation project are both anticipated to reach in-service around mid-2027. Kings Landing II, upsized by more than 25% to 380 MMcf/d at an unchanged roughly $260 million cost, is targeted for mid-2028. Welch also highlighted that more than 13 Bcf/d of incremental Permian takeaway capacity is expected online between 2028 and 2030, which he said should reduce Waha price volatility and unlock the next wave of producer activity. That pipeline of capacity is a key reason management's tone on the long-term Permian outlook was notably bullish.

The unrealized hedging loss that distorted the GAAP EPS number is exactly that: unrealized. As that paper position resolves, the gap between GAAP earnings and the operational picture should narrow, making the next few quarters worth watching closely for how the underlying Adjusted EBITDA trajectory translates down to the per-share line.