KNTK - Kinetik Holdings: M&A Deals And A 7.2% Yield Spells Profits

2024-05-22 11:53:53 ET

Summary

• Kinetik's recent acquisition of Durango Midstream is a lucrative EBITDA boosting transaction.
• The deal also opens several expansion opportunities for Kinetik.
• The dividend has an ample safety margin and the company is taxed as a C-Corp.
• I expect over 20% share appreciation as the full value of the acquisition is realized by the broader market.

Thesis

Kinetik Holdings ( KNTK ) is a natural gas focused midstream company that operates in the Delaware basin of the Permian. The company recently announced Q1 earnings results, as well as a strategic acquisition of Durango Midstream to bolster its footprint in the Delaware Basin .

Q1 earnings were reported at a 12% increase over Q4 2023 as a result of two new pipeline assets entering service. This earnings momentum is positioned to continue through 2026 through the roll up of Durango, the completion of the Kings Landing processing plant, as well as continued expansion in the company's Eddy County gathering system....

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