8-K: Kinetik Secures $150 Million Securitization Facility and Appoints New Board Member

Kinetik Holdings Inc. has entered into a $150 million accounts receivable securitization facility and appointed William Ordemann to its Board of Directors, while also announcing the resignation of Ben Rodgers.

Summary

• Kinetik Holdings Inc. has secured a $150 million accounts receivable securitization facility with PNC Bank, maturing in April 2025, with a borrowing base that fluctuates with the company's accounts receivable balance.
• The interest rate on the facility is the one-month term SOFR rate plus 90 basis points.
• Kinetik plans to use the proceeds to reduce its outstanding Term Loan balance to $1.0 billion, extending the maturity of the Term Loan to December 8, 2026.
• William Ordemann has been appointed to Kinetik's Board of Directors, effective April 3, 2024, and will serve on the Audit and Governance & Sustainability Committees.
• Ordemann brings 38 years of energy industry experience, including 25 years focused on natural gas, natural gas liquids, crude oil, refined products, and petrochemicals.
• Ben Rodgers has resigned from the Board of Directors, effective April 3, 2024, coinciding with Apache's full exit from its shareholding position in Kinetik.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the new financing facility and the appointment of an experienced board member. The company is taking steps to improve its financial position and strategic direction.

Positives

• The new A/R facility provides additional liquidity and funding for Kinetik's ongoing business needs.
• The reduction of the Term Loan balance and extension of its maturity provides financial flexibility.
• William Ordemann's extensive experience in the energy industry is expected to strengthen the Board of Directors.
• The company has a strong relationship with Apache, one of its largest customers.

Negatives

• The A/R facility's borrowing base is variable and dependent on the company's accounts receivable balance.
• The company is losing a board member with a strong connection to a key customer.

Risks

• The A/R facility's borrowing base is variable and dependent on the company's accounts receivable balance, which could impact available funding.
• The company is losing a board member with a strong connection to a key customer.

Future Outlook

Kinetik intends to use the new A/R facility to reduce its Term Loan balance and extend its maturity, providing financial flexibility. The company expects William Ordemann's experience to strengthen the Board and guide the company's strategy.

Management Comments

• Jamie Welch, President and CEO, stated that Bill Ordemann will be a tremendous asset and further strengthen the Board.
• Bill Ordemann commented that he is familiar with Kinetik's business model and can provide value and guidance to the Company.
• Jamie Welch thanked Ben Rodgers for his contributions to Kinetik and noted that he will be missed in the boardroom.
• Ben Rodgers stated that he enjoyed the opportunity to serve on the Board of Directors and looks forward to watching the company's continued growth and success.

Industry Context

The announcement reflects a trend in the midstream energy sector where companies are utilizing securitization facilities to manage liquidity and optimize their capital structure. The appointment of an experienced industry executive to the board is also a common practice to enhance strategic guidance and governance.

Comparison to Industry Standards

• The use of accounts receivable securitization facilities is a common practice among midstream companies to enhance liquidity and manage working capital, similar to peers such as Energy Transfer and Kinder Morgan.
• The interest rate of one-month term SOFR plus 90 basis points is within the typical range for such facilities, reflecting current market conditions.
• The extension of the Term Loan maturity is a strategic move to align debt obligations with long-term cash flow projections, a practice also seen in other midstream companies.
• The appointment of William Ordemann, with his extensive experience at Enterprise Products Partners, is comparable to other midstream companies bringing in seasoned executives to their boards for strategic guidance.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: The new A/R facility and reduced Term Loan balance are expected to improve the company's financial stability.
• Employees: The appointment of an experienced board member may enhance the company's strategic direction and long-term prospects.
• Customers: The company's continued relationship with Apache as a key customer is a positive sign for business continuity.
• Creditors: The reduced Term Loan balance and extended maturity may improve the company's creditworthiness.

Next Steps

• Kinetik will use the proceeds from the A/R Facility to repay a portion of its Term Loan.
• William Ordemann will begin his service on the Audit and Governance & Sustainability Committees.

Key Dates

Keywords

securitization facility, accounts receivable, midstream, board of directors, term loan, energy industry, PNC Bank, William Ordemann, Ben Rodgers, liquidity