The Daley Note

Gulf Coast Express Stake Still on the Block

Written by East Daley Analytics | Nov 30, 2023 10:57:18 PM

The Daley Note: December 1, 2023

Kinetik (KNTK) continues to explore the sale of its stake in Gulf Coast Express Pipeline (GCX).

KNTK announced its intention to sell the 16% stake in GCX back in May, as part of its 1Q23 earnings. At the time, the company said it hoped the process would take three months. Management did not give a timeline in its latest 3Q23 earnings update, but the transaction “is something that we are actively trying to get across the finish line,” CEO Jamie Welch told investors.

Operated by Kinder Morgan (KMI), Gulf Coast Express can deliver up to 2 Bcf/d of natural gas from the Permian Basin to South Texas. The GCX stake contributed ~$50MM in Adj. EBITDA to KNTK in 2022, according to the Kinetik Financial Blueprint. East Daley Analytics forecasts 2023 EBITDA of just over $53MM from the asset in the KNTK Blueprint (see figure).

Proceeds from the GCX sale would accelerate the timing for Kinetik to reach its 3.5x leverage goal, as well as moderate dilution from the company’s dividend reinvestment plan for shareholders.

In May 2022, Targa Resources (TRGP) sold its 25% interest in GCX for $857MM to ArcLight Capital Partners. The price represented an ~10X EBITDA multiple based on 2022 earnings, setting a benchmark for the value KNTK could potentially receive in a sale. EDA previously estimated the pipeline stake could be worth $550MM to Kinetik.

Selling the GCX stake would make Kinetik more reliant on revenue and growth from its Gathering and Processing business, which has associated volume risk. As detailed in the company Financial Blueprint, KNTK should see some uplift on the G&P side from new minimum volume contracts (MVCs) and a planned gathering expansion into New Mexico. The upcoming expansion of Permian Highway Pipeline, set to come online in December 2023, would also help offset lower revenues from the GCX sale. – James Taylor Tickers: KMI, KNTK, TRGP.

 

 

East Daley, Hart Bring NEW Gas & Midstream Weekly

East Daley is teaming up with Hart Energy on the NEW Gas & Midstream Weekly newsletter. This new report combines the strengths of Hart Energy's journalistic reporting and analysis on natural gas, LNG, midstream energy and deal-making with EDA's deep research and intelligence of hydrocarbons, storage and transportation. 
  
Published every Thursday morning, this new
powerhouse newsletter is an interactive and enlightening read highlighting breaking news, exclusive interviews, videos, charts, maps and more. The newsletter utilizes East Daley's Energy Data Studio tools for natural gas predictive analytics with Hart Energy's Rextag mapping tools to present a holistic view of pricing triggers, infrastructure growth, pipeline and processing bottlenecks, regulatory and legal hurdles, and the inevitable solutions. 

 

Energy Data Studio

East Daley Analytics has launched Energy Data Studio, a platform for our industry-leading midstream data and commodity production forecasts. All clients have access to the new client portal. If you have not yet logged in, please fill out the form to request a registration email be resent.

Energy Data Studio leverages our G&P data set for insights into midstream assets across every major oil and gas basin in North America. Users can navigate detailed visual dashboards by region, pipeline, or individual asset to understand crude oil, natural gas and NGL supply at the most granular level.

Energy Data Studio is available through data downloads from the visual interface, in Excel files, or as a direct feed delivered into subscribers’ workflow via secure file transfer. To learn more about Energy Data Studio, please contact insight@eastdaley.com.

The Daley Note

Subscribe to The Daley Note (TDN) for midstream insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices and EDA research likely to affect markets in the short term.