Kinetik: Increasing Our Fair Value Estimate Off 2023 Results and Outlook

After updating our model to reflect the 2023 results and refreshing commodity prices, we are increasing our Kinetik fair value estimate to $39 from $36. Our no-moat rating is unchanged. The fair value estimate increase is due to improving margins on delivered products in the midstream business and stronger-than-expected utilization. We see the cash being generated by the significant investments made over the last few years flowing into the business in 2024, driving down debt/EBITDA to 2.6 times in 2025 from 5.4 times in 2023. The EBITDA/interest expense is also improving to 6.3 times from 3.2 times over the same timeframe.