Kinetik Holdings Trades Near Lows Despite Solid Fundamentals—Is This Institutional Buying Opportunity a Signal of Undervaluation?

Investment Context: Big Money Moves In

Brave Warrior Advisors, the New York-based investment firm, recently built a noteworthy position in midstream energy infrastructure. According to SEC filings released on November 14, the fund acquired 1.6 million shares of Kinetik Holdings Inc. (NYSE: KNTK) during the third quarter, deploying approximately $68.8 million of capital as of September 30. This new stake represents 1.6% of the firm’s 13F reportable assets under management—a meaningful allocation signaling institutional conviction.

The Market’s Bearish Tilt vs. The Business Reality

Here’s where things get interesting. Despite this insider accumulation, Kinetik shares have retreated 34% over the past 12 months, currently trading at $37.14—a stark underperformance against the S&P 500’s 13% gain in the same window. Yet the underlying business tells a different story.

The midstream energy operator, headquartered in Midland, TX, generated $1.7 billion in trailing twelve-month (TTM) revenue with net income of $125.5 million. In Q3 specifically, the company posted adjusted EBITDA of $242.6 million and distributable cash flow of $158.5 million—metrics that underpin the company’s 8.5% dividend yield, among the sector’s most attractive.

Balance Sheet Strengthening and Cash Generation

What may have caught Brave Warrior’s attention: Kinetik monetized its EPIC Crude stake for over $500 million, deploying those proceeds to de-leverage its revolving credit facility. Free cash flow reached $50.9 million in Q3 despite elevated capital expenditures tied to the Kings Landing expansion ramp-up—demonstrating the business’s resilience even amid infrastructure investments.

Management guides to approximately $1 billion in full-year EBITDA, supported by stable, fee-based cash flows from a diversified producer customer base across the Delaware Basin. The company provides gathering, compression, processing, and treating services for natural gas, liquids, crude oil, and water—essential midstream infrastructure linking producers to end markets.

The Case for Rebound Potential

Market headwinds are real: Permian gas volatility, negative pricing dynamics, and reduced producer activity have weighed on near-term results. Share price weakness from January peaks (though recovered from spring lows) may explain the institutional accumulation timing.

For patient capital, the thesis hinges on three factors: strengthening balance sheet metrics, durable full-year guidance approaching $1 billion adjusted EBITDA, and commercial agreement wins that could drive multi-year volume expansion. Kinetik’s position in the high-return Delaware Basin—a cornerstone of the Permian—provides structural tailwinds if market conditions normalize.

Portfolio Context

Within Brave Warrior’s broader holdings, this represents a meaningful but diversified bet alongside positions in Elevance Health ($592.6 million), Synnex ($536.3 million), and other blue-chip equities. The firm’s 1.6% AUM commitment to Kinetik reflects conviction without concentration risk.

Bottom Line

Kinetik Holdings embodies a classic market disconnect: solid operational cash generation and balance sheet improvement eclipsed by macro sector headwinds and investor sentiment. Institutional buying at depressed valuations suggests some believe current prices overweight near-term challenges and underweight the midstream operator’s cash-return and growth potential.