Kinetik Holdings Inc (NASDAQ:KNTK) is strong growth and free cash flow story, given its ownership in the Permian natural gas takeaway and latent processing capacity, according to BofA Securities.
The Kinetik Holdings Analyst: Neel Mitra initiated coverage of Kinetik Holdings with a Buy rating and a price target of $80.
The Kinetik Holdings Thesis: Following the merger between EagleClaw and Altus Midstream, which created Kinetik Holdings earlier this year, the company now owns 800 million cubic feet per day (MMcf/d) of latent processing capacity, Mitra said in the initiation note.
“When fully utilized, the excess processing capacity should generate $150-$225mm of incremental EBITDA annually with no material capex,” the analyst wrote.
“We recognize that competition among midstream service providers is high, but believe that KNTK has a leg up vs. competitors, as it can offer a bundled G&P and gas takeaway solution out of the Permian,” he added.
By 2024, the company’s pipeline is expected to contribute almost 40% of EBITDA “with the majority of this growth coming from take-or-pay, long-haul natural gas pipelines,” Mitra further mentioned.
KNTK Price Action: Shares of Kinetik Holdings are up 1.87% to $70.71 at the time of publication Thursday morning.
Photo: Courtesy Kinetik
