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01/11 07:59
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed outlook. Financial performance shows slight improvements in EBITDA and revenues, but net income decreased slightly. The Q&A section reveals uncertainties about future rig activity and flat EBITDA in 2026 despite higher gas volumes, which tempers optimism. Positive aspects include strong operating leverage, cash flow, and shareholder returns. However, the lack of detailed guidance and potential rig reductions introduce caution. Given the company's market cap, the stock is likely to remain stable, with a neutral prediction for stock price movement over the next two weeks.
Net Income $176 million for Q3 2025, compared to $180 million in Q2 2025. The slight decrease is due to higher seasonal maintenance and employee costs.
Adjusted EBITDA $321 million for Q3 2025, compared to $316 million in Q2 2025. The increase is driven by higher third-party gas gathering and processing throughput volumes.
Revenues (excluding pass-through revenues) Increased by approximately $7 million in Q3 2025, driven by higher third-party gas gathering and processing throughput volumes.
Gathering Revenues Increased by approximately $4 million in Q3 2025, driven by higher third-party gas gathering and processing throughput volumes.
Processing Revenues Increased by approximately $3 million in Q3 2025, driven by higher third-party gas gathering and processing throughput volumes.
Gross Adjusted EBITDA Margin Maintained at approximately 80% in Q3 2025, above the 75% target, highlighting strong operating leverage.
Capital Expenditures Approximately $80 million in Q3 2025. Full-year 2025 capital expenditures are expected to total approximately $270 million, reflecting the suspension of the Capa gas plant project.
Adjusted Free Cash Flow Approximately $187 million in Q3 2025. Full-year adjusted free cash flow is expected to be $760 million to $770 million, with excess adjusted free cash flow of approximately $140 million after distributions.
Revolving Credit Facility Balance $356 million drawn balance at the end of Q3 2025.
New Compressor Stations: The first of two new compressor stations for the year was safely completed and brought online in Q3. The second station is expected to be completed in Q4.
Third-Party Volumes: Increase in third-party gas gathering and processing throughput volumes provided upside to results, highlighting the strategic nature of midstream assets in the Bakken.
Gas Throughput: Gas throughput increased by 3% compared to Q2, averaging 462 million cubic feet per day.
Capital Expenditures: Full-year 2025 capital expenditures are expected to total approximately $270 million, reduced due to the suspension of the Capa gas plant project.
Adjusted EBITDA Margin: Maintained at approximately 80%, above the 75% target, showcasing strong operating leverage.
Capa Gas Plant Suspension: Activities on the Capa gas plant have been suspended and removed from forward plans, resulting in significantly lower capital expenditures and additional free cash flow.
Return of Capital Strategy: Prioritizes return of capital to shareholders through excess free cash flow and leverage capacity, with targeted annual distribution per Class A share growth of at least 5% through 2027.
Localized flooding impact: Localized flooding in August affected gas throughputs, though the company managed to increase volumes from the second quarter.
Northern Border pipeline maintenance: Third-party volumes increased due to customers navigating pipeline maintenance, but this is not a consistent or guaranteed source of upside.
Winter weather contingency: Lower expected third-party volumes in the fourth quarter due to winter weather contingency and planned maintenance at the Little Missouri 4 gas plant.
Suspension of Capa gas plant project: The suspension of the Capa gas plant project has led to a reduction in forward capital plans, which could impact long-term growth opportunities.
Seasonal maintenance and employee costs: Higher seasonal maintenance and employee costs increased total expenses, impacting adjusted EBITDA.
Revolving credit facility balance: A drawn balance of $356 million on the revolving credit facility could pose financial risks if not managed effectively.
Fourth Quarter 2025 Volumes: Expected to be relatively flat compared to the third quarter due to lower expected third-party volumes, winter weather contingencies, and planned maintenance at the Little Missouri 4 gas plant.
Capital Expenditures for 2025: Expected to total approximately $270 million, reflecting the suspension of the Capa gas plant project.
Free Cash Flow: With the removal of the Capa gas plant from forward plans, significantly lower capital expenditures are expected to provide additional free cash flow to support the return on capital framework.
2026 and 2028 Guidance: Guidance for 2026 and 2028 MVCs will be released after the budget process concludes in December 2025.
Fourth Quarter 2025 Financial Guidance: Net income expected to be approximately $170 million to $180 million, and adjusted EBITDA expected to be approximately $315 million to $325 million, reflecting scheduled maintenance and lower third-party volumes.
Full Year 2025 Financial Guidance: Net income expected to be $685 million to $695 million, and adjusted EBITDA expected to be $1.245 billion to $1.255 billion, implying approximately 10% year-on-year EBITDA growth at the midpoint of the guidance range.
Distribution Growth: Targeting annual distribution per Class A share growth of at least 5% through 2027, supported by existing MVCs and excess adjusted free cash flow.
Adjusted Free Cash Flow Growth: Expected to grow through 2027, supporting targeted annual distribution growth and providing financial flexibility for incremental return of capital, including potential share repurchases.
Distribution Increase: Increased distribution by 2.4% in the third quarter, approximately 10% on an annualized basis for Class A shares. This includes a targeted 5% annual increase for Class A shares and an additional increase following share repurchase.
Annual Distribution Growth Target: Targeting annual distribution per Class A share growth of at least 5% through 2027.
Share Repurchase: Executed a $100 million share and unit repurchase in the third quarter.
Future Share Repurchase Potential: Financial flexibility for incremental return of capital, including potential share repurchases, supported by adjusted free cash flow growth through 2027.
The earnings call presents a mixed outlook. Financial performance shows slight improvements in EBITDA and revenues, but net income decreased slightly. The Q&A section reveals uncertainties about future rig activity and flat EBITDA in 2026 despite higher gas volumes, which tempers optimism. Positive aspects include strong operating leverage, cash flow, and shareholder returns. However, the lack of detailed guidance and potential rig reductions introduce caution. Given the company's market cap, the stock is likely to remain stable, with a neutral prediction for stock price movement over the next two weeks.
The earnings call reveals strong financial performance with increased net income and EBITDA, alongside positive guidance for future growth. The Q&A session confirmed continued growth in gas processing volumes and a robust buyback program, reinforcing positive sentiment. The company's strategic plans and financial flexibility support further shareholder returns, enhancing the outlook. Despite some uncertainties in management responses, the overall sentiment is positive, with expected stock price movement in the 2% to 8% range over the next two weeks.
The earnings call presents mixed signals: while the company has strong financial flexibility and shareholder return plans, recent financial metrics show a decline in net income and revenues due to weather-related issues. The Q&A session indicates stability in operations but also highlights management's cautious stance on market volatility. The market cap suggests a moderate reaction to these mixed signals, leading to a neutral stock price movement prediction.
The earnings call highlights several concerns: decreased financial metrics due to weather, increased capital expenditures, and competitive and regulatory risks. Although there is a positive shareholder return plan, the Q&A section reveals management's vague responses on critical issues like oil rig activity and pipeline implications. The market might react negatively to the decreased financial performance and management's lack of clarity, despite optimistic future guidance and distribution growth targets.
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