KNTK: An Energy Midstream Play Profiting in the Texas Delaware Basin
MoneyShow | Apr 24, 2024 13:37
The Delaware is one of the more prolific production regions in the larger Permian Basin. The newly combined company has tremendous prospects for growth.
KNTK divides its business into two segments. Midstream Logistics operates water takeaway pipelines, natural gas pipelines, natural gas processing, crude oil gathering, and storage in the Delaware Basin. Pipeline Transportation operates natural gas, natural gas liquid (NGL), and crude oil pipelines to bring energy commodities out of the basin. This graphic provides an overview.
In Q4 2023, the midstream logistics of gathering water, gas, and oil from the wells generated 63% of EBITDA (earnings before interest, taxes, depreciation, and amortization). Pipeline transport chipped in the other 37%. For the 2023 fourth quarter, the company processed 1.54 billion cubic feet per day (cfpd) of natural gas, up from 1.2 billion processed in October 2022.
Q4 EBITDA was $228 million. The firm’s investor presentation stated it will generate 2024 EBITDA of $950 million to $980 million, up from $840 million last year.
The Delaware Basin is at capacity for natural gas and NGL processing. Bringing on new projects will take years. This is where KNTK stands out from the midstream crowd. Crude oil producers will see growing residual natural gas from their wells.
KNTK’s in-basin natural gas processing plant, the Diamond Cryo facility, is being upgraded to handle two billion cubic feet per day. As noted above, they processed 1.5 billion cfd in the fourth quarter. The company is also expanding capacity on two Basin-to-Gulf Coast pipelines.
KNTK has paid a $0.75 per share dividend for the last eight quarters. With capital expenditures down this year and EBITDA up, 2024 could be the year that KNTK announces its first dividend increase.
Recommended Action: Buy KNTK.
Original Content
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.