In short: A new special situation, explicitly on the work list rather than in the book. "Bloomberg reported that Kinetik, which is KNTK, is going to sell itself. So that's on the watch list. We haven't added it yet. We don't know enough about the situation." The ownership map he pulled live: "Blackstone owns about 14.8% of it and BlackRock owns 11%… Goldman Sachs owns 10%… collectively about 34%… Jamie Welch… the CEO… owns about 4%," with Class A at 54.75 (the deck adds that Blackstone also holds 70% of the Class C, "close to half of the shareholder voting power," and that ET, TRGP and PSX have been mentioned as suitors). The open question is the earnings base: "the company trades at about 13 times forward EBITDA, about 25 times trailing EBITDA… their EBITDA… more than doubled from the first quarter to the second quarter [100M to 250M]. So I need to understand what drove that before I can determine… the takeout potential" — because it owns "a large network of gas gathering and processing infrastructure in the Permian" and "takes a percentage of the price exposure." Next step named: "I do have a call with Jefferies and one of the Goldman analysts next week to figure out what would be an appropriate takeout bid."
Kinetik owns pipelines and processing plants that gather natural gas from wells in the Permian Basin of New Mexico and Texas and prepare it for sale. Blackstone is its largest shareholder, and Bloomberg reports the company is exploring a sale.
A company putting itself up for sale is exactly the kind of situation Singh trades — but he has not bought, and he explains why. The shares trade at about 13 times next year's expected earnings before interest, tax and depreciation, but about 25 times last year's, because earnings more than doubled in a single quarter. A buyer will pay based on what it believes normal earnings are. If the jump came from gas prices rising after the wars in Ukraine and Iran — and Kinetik does take a cut of commodity prices, not just a fixed fee — a buyer may not pay for it.
So the name goes on the watch list, with a named next step: calls with analysts at Jefferies and Goldman Sachs to work out what a realistic takeover price would be. Until he knows the price, he does not know whether there is a trade.
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