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Item 1. Financial Statements

2022-05-10 compared with 2021-11-05 · 779 added, 608 removed, 94 unchanged (94% of the section changed)

FINANCIAL STATEMENTS

ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED OPERATIONS

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 (1)

FINANCIAL STATEMENTS (UNAUDITED)

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,*

(In thousands, except per share data)

Midstream services revenue — affiliate (Note 2) $ 34,548 $ 38,869 $ 98,544 $ 111,252

Product sales — third parties

— 1,303 5,743 1,900

Total revenues 34,548 40,172 104,287 113,152

COSTS AND EXPENSES:

Costs of product sales — 1,177 5,344 1,693

Operations and maintenance (2)

9,642 8,960 24,384 29,059

General and administrative (3)

3,420 2,936 10,350 10,102

Depreciation and accretion 4,085 4,008 12,094 11,984

Impairments — — 441 —

Taxes other than income 2,811 4,143 10,431 10,933

Total costs and expenses 19,958 21,224 63,044 63,771

Operating revenues:

Service revenue

Product revenue

Other revenue

Total operating revenues

Operating costs and expenses:

Costs of sales (exclusive of depreciation and amortization shown separately below)

Operating expenses

Ad valorem taxes

General and administrative expenses

Depreciation and amortization

Loss on disposal of assets

Total operating costs and expenses

Operating income

Unrealized derivative instrument gain (loss) 4,010 ( 3,533 ) 18,487 ( 76,102 )

Income from equity method interests, net 32,479 15,987 82,633 47,541

Warrants valuation adjustment 664 209 222 1,668

Other 620 — 11,321 ( 346 )

Total other income (loss) 37,773 12,663 112,663 ( 27,239 )

Financing costs, net of capitalized interest 2,674 413 7,887 978

NET INCOME BEFORE INCOME TAXES 49,689 31,198 146,019 21,164

Current income tax benefit — — — ( 696 )

NET INCOME INCLUDING NONCONTROLLING INTERESTS 49,689 31,198 146,019 21,860

Other income (expense):

Interest and other income

Gain on redemption of mandatorily redeemable Preferred Units

Unrealized loss on embedded derivative

Interest expense

Equity in earnings of unconsolidated affiliates

Total other income (expense), net

Income before income taxes

Income tax expense

Net income including noncontrolling interest

Net income attributable to Preferred Unit limited partners

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS 20,523 11,866 73,357 ( 34,498 )

Net income (loss) attributable to Apache limited partner 15,279 8,970 56,270 ( 28,361 )

NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS $ 5,244 $ 2,896 $ 17,087 $ ( 6,137 )

NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS, PER SHARE

Basic $ 1.40 $ 0.77 $ 4.56 $ ( 1.64 )

Diluted $ 1.26 $ 0.32 $ 3.83 $ ( 2.12 )

Net Income attributable to common shareholders

Net income attributable to Common Unit limited partners

Net income attributable to Class A Common Shareholders

Net income attributable to Class A Common Shareholders, per share

Weighted average shares

Basic 3,746 3,746 3,746 3,746

Diluted 16,246 109,855 33,322 16,246

(1) This period presented has been revised to reflect the Company’s fair value change of its underlying warrants.

Refer to Note 1—Summary of Significant Accounting Policies , see the section titled Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment for further information.

(2) Includes amounts of $ 1.5 million and $ 1.2 million associated with related parties for the three months ended September 30, 2021 and 2020, respectively, and $ 3.8 million and $ 4.0 million for the nine months ended September 30, 2021 and 2020, respectively.

Refer to Note 2—Transactions with Affiliates .

(3) Includes amounts of $ 2.2 million and $ 1.6 million associated with related parties for the three months ended September 30, 2021 and 2020, respectively, and $ 6.8 million and $ 5.1 million associated with related parties for the nine months ended September 30, 2021 and 2020, respectively.

Refer to Note 2—Transactions with Affiliates .

The accompanying notes to consolidated financial statements are an integral part of this statement.

ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 (1)

(In thousands)

NET INCOME INCLUDING NONCONTROLLING INTERESTS $ 49,689 $ 31,198 $ 146,019 $ 21,860

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

Share of equity method interests other comprehensive income (loss) — 681 630 ( 113 )

COMPREHENSIVE INCOME INCLUDING NONCONTROLLING INTERESTS 49,689 31,879 146,649 21,747

Comprehensive income attributable to Preferred Unit limited partners 29,166 19,332 72,662 56,358

Comprehensive income (loss) attributable to Apache limited partner 15,279 9,494 56,755 ( 28,448 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS $ 5,244 $ 3,053 $ 17,232 $ ( 6,163 )

(1) This period presented has been revised to reflect the Company’s fair value change of its underlying warrants.

The accompanying notes to consolidated financial statements are an integral part of this statement.

ALTUS MIDSTREAM COMPANY

CONSOLIDATED BALANCE SHEET

September 30, December 31,

2021 2020 (1)

* The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022.

Refer to the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies, for further information on the Company’s basis of presentation.

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements

Table of Con ten ts

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

1 unchanged sentence

Cash and cash equivalents

Accounts receivable — 1,033

Accounts receivable from Apache Corporation (Note 1) 1,018 446

Revenue receivables (Note 3) 10,981 11,378

Inventories 3,286 3,597

Prepaid assets and other 6,030 2,127

130,303 42,769

PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment 211,231 208,870

Accumulated depreciation and accretion ( 21,848 ) ( 13,034 )

189,383 195,836

OTHER ASSETS:

Equity method interests 1,537,907 1,555,182

Deferred charges and other 8,341 5,843

1,546,248 1,561,025

Total assets $ 1,865,934 $ 1,799,630

Accounts receivable, net of allowance for credit losses of $ 1,000 in 2022 and 2021

Derivative assets

Prepaid and other current assets

NONCURRENT ASSETS:

Property, plant and equipment, net

Intangible assets, net

Derivative assets

Operating lease right-of-use assets

Deferred charges and other assets

Investment in unconsolidated affiliates

LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY

CURRENT LIABILITIES:

Distributions payable to Preferred Unit limited partners $ 11,562 $ —

Dividends payable — 5,620

Distributions payable to Apache Corporation — 18,750

Other current liabilities (Note 6) 15,907 5,613

27,469 29,983

LONG-TERM DEBT 657,000 624,000

DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:

Asset retirement obligation 67,234 64,062

Embedded derivative 120,522 139,009

Other noncurrent liabilities 5,896 6,424

193,652 209,495

Accounts payable

Accrued expenses

Distribution payable to Preferred Unit limited partners

Derivative liabilities

Mandatorily redeemable Preferred Units

Current portion of operating lease liabilities

Current portion of long-term debt, net

Other current liabilities

NONCURRENT LIABILITIES:

Long-term debt, net

Contingent liabilities

Operating lease liabilities

Contract liabilities

Mandatorily redeemable Preferred Units

Embedded derivative liabilities

Derivative liabilities

Deferred tax liabilities

Other liabilities

Total liabilities

COMMITMENTS AND CONTINGENCIES (Note 8)

Redeemable noncontrolling interest — Apache limited partner 837,158 575,125

Redeemable noncontrolling interest — Common Unit limited partners

Redeemable noncontrolling interest — Preferred Unit limited partners

Class A Common Stock:

$ 0.0001 par, 1,500,000,000 shares authorized, 3,746,460 shares issued and outstanding at September 30, 2021 and December 31, 2020

$ 0.0001 par, 1,500,000,000 shares authorized, 18,986,460 and nil shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Class C Common Stock:

$ 0.0001 par, 1,500,000,000 shares authorized, 12,500,000 shares issued and outstanding at September 30, 2021 and December 31, 2020

Additional paid-in capital — 122,222

$ 0.0001 par, 1,500,000,000 shares authorized, 47,260,000 and 50,000,000 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Accumulated deficit

Accumulated other comprehensive loss — ( 145 )

( 1,137,867 )

Total liabilities, noncontrolling interests, and equity $ 1,865,934 $ 1,799,630

(1) The Consolidated Balance Sheet as of December 31, 2020 has been derived from the audited consolidated financial statements, revised to reflect the Company’s fair value change of its underlying warrants.

The accompanying notes to consolidated financial statements are an integral part of this statement.

ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED CASH FLOWS

Nine Months Ended September 30,

( 1,137,860 )

Total liabilities, noncontrolling interests, and equity

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements

Table of Con ten ts

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

(In thousands)

2 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities:

Unrealized derivative instrument (gain) loss ( 18,487 ) 76,102

Depreciation and accretion 12,094 11,984

Income from equity method interests, net ( 82,633 ) ( 47,541 )

Distributions from equity method interests 97,757 60,435

Impairments 441 —

Power credit, net ( 7,047 ) —

Warrants valuation adjustment ( 222 ) ( 1,668 )

Other 406 781

Changes in operating assets and liabilities:

Decrease in inventories 256 366

(Increase) decrease in prepaid assets and other ( 47 ) 72

(Increase) decrease in accounts receivable 1,033 ( 556 )

Decrease in revenue receivables (Note 2) 397 3,486

Decrease in account receivables from/payable to affiliate 580 917

Increase in accrued expenses 9,425 11,145

Increase (decrease) in deferred charges and other noncurrent liabilities ( 1,577 ) 64

Depreciation and amortization expense

Amortization of deferred financing costs

Amortization of contract costs

Distributions from unconsolidated affiliates

Derivatives settlement

Derivatives fair value adjustment

Gain on redemption of mandatorily redeemable Preferred Units

Loss on disposal of assets

Equity in (earnings) losses from unconsolidated affiliate

Loss (gain) on debt extinguishment

Share-based compensation

Deferred income taxes

Change in operating assets and liabilities:

Accounts receivable

Operating lease right-of-use assets

Accounts payable

Accrued liabilities

Operating lease liabilities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures ( 3,268 ) ( 29,540 )

Proceeds from sale of assets 1,687 7,629

Contributions to equity method interests ( 27,270 ) ( 286,227 )

Distributions from equity method interests 30,051 14,235

Capitalized interest paid — ( 7,377 )

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,200 ( 301,280 )

Property, plant and equipment expenditures

Intangible assets expenditures

Investment in unconsolidated affiliates

Net cash acquired in acquisition

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Distributions paid to Preferred Unit limited partners ( 34,686 ) ( 11,562 )

Distributions paid to Apache limited partner ( 56,250 ) —

Dividends paid ( 16,859 ) —

Proceeds from revolving credit facility 33,000 184,000

Finance lease — ( 11,789 )

Deferred facility fees — ( 816 )

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ( 74,795 ) 159,833

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 84,800 ( 4,000 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 24,188 5,983

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 108,988 $ 1,983

SUPPLEMENTAL CASH FLOW DATA:

Accrued capital expenditures (2)

Interest paid, net of capitalized interest 7,042 94

Cash received for income tax refunds — 696

(1) This period presented has been revised to reflect the Company’s fair value change of its underlying warrants.

(2) Includes $ 0.8 million and $ 0.3 million due from Apache for the nine months ended September 30, 2021 and 2020, respectively, pursuant to the terms of the COMA (as defined herein).

Refer to Note 2—Transactions with Affiliates for more information.

The accompanying notes to consolidated financial statements are an integral part of this statement.

ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

Proceeds from issuance of long-term debt

Principal payments on long-term debt

Proceeds from revolver

Redemption of mandatorily redeemable Preferred Units

Payments of deferred financing costs

Equity contributions

Equity distributions

Net cash (used in) provided by financing activities

Net change in cash

CASH, BEGINNING OF PERIOD

CASH, END OF PERIOD

SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES

Cash paid for interest, net of amounts capitalized

Property and equipment and intangible accruals in accounts payable and accrued liabilities

Fair value of ALTM assets acquired

Class A Common Stock issued in exchange

ALTM liabilities and mezzanine equity assumed

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners (1)

Redeemable Noncontrolling Interest — Apache Limited Partner Class A Common Stock Class C Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total Equity

Amount Shares (3)

(In thousands) (In thousands)

For the Quarter Ended September 30, 2020 (1)

Balance at June 30, 2020 (Revised) $ 592,625 $ 229,348 3,746 $ 1 12,500 $ 1 $ 451,037 $ ( 381,257 ) $ ( 449 ) $ 69,333

Distributions paid to Preferred Unit limited partners ( 11,562 ) — — — — — — — — —

Net income 19,332 8,970 — — — — — 2,896 — 2,896

Accumulated other comprehensive income — 524 — — — — — — 157 157

Balance at September 30, 2020 (Revised) $ 600,395 $ 238,842 3,746 $ 1 12,500 $ 1 $ 451,037 $ ( 378,361 ) $ ( 292 ) $ 72,386

For the Quarter Ended September 30, 2021

Balance at June 30, 2021 $ 617,191 $ 863,063 3,746 $ 1 12,500 $ 1 $ — $ ( 506,200 ) $ — $ ( 506,198 )

Redeemable Noncontrolling Interest — Common Unit Limited Partners

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Deficit

(In thousands)

For the Quarter Ended March 31, 2021

Balance at December 31, 2020

Distribution paid to Common Unit limited partners

Balance at March 31, 2021

For the Quarter Ended March 31, 2022

Balance at December 31, 2021

ALTM acquisition

Distributions payable to Preferred Unit limited partners

Distributions to Apache limited partner — ( 18,750 ) — — — — — — — —

Common Dividends ($ 1.50 per share)

— — — — — — ( 5,620 ) — — ( 5,620 )

Net income 29,166 15,279 — — — — — 5,244 — 5,244

Change in redemption value of noncontrolling interests — ( 22,434 ) — — — — 5,620 16,814 — 22,434

Balance at September 30, 2021 $ 634,795 $ 837,158 3,746 $ 1 12,500 $ 1 $ — $ ( 484,142 ) $ — $ ( 484,140 )

(1) This period presented has been revised to reflect the Company’s fair value change of its underlying warrants.

(2) Certain redemption features embedded within the Preferred Units require bifurcation and measurement at fair value.

For further detail, refer to Note 10—Series A Cumulative Redeemable Preferred Units .

(3) Share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020.

Refer to Note 9—Equity for further information.

The accompanying notes to consolidated financial statements are an integral part of this statement.

ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS — (Continued)

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners (2)

Amount Shares (3)

(In thousands) (In thousands)

For the Nine Months Ended September 30, 2020 (1)

Balance at December 31, 2019 (Revised) $ 555,599 $ 701,000 3,746 $ 1 12,500 $ 1 $ 17,327 $ ( 372,224 ) $ ( 266 ) $ ( 355,161 )

Distributions paid to Preferred Unit limited partners ( 11,562 ) — — — — — — — — —

Net income (loss) 56,358 ( 28,361 ) — — — — — ( 6,137 ) — ( 6,137 )

Redemption of Common Units

Share-based compensation

Remeasurement of contingent consideration

Change in redemption value of noncontrolling interests

Accumulated other comprehensive loss — ( 87 ) — — — — — — ( 26 ) ( 26 )

Balance at September 30, 2020 (Revised) $ 600,395 $ 238,842 3,746 $ 1 12,500 $ 1 $ 451,037 $ ( 378,361 ) $ ( 292 ) $ 72,386

For the Nine Months Ended September 30, 2021

Balance at December 31, 2020 (Revised) $ 608,381 $ 575,125 3,746 $ 1 12,500 $ 1 $ 122,222 $ ( 369,433 ) $ ( 145 ) $ ( 247,354 )

Distributions paid to Preferred Unit limited partners ( 34,686 ) — — — — — — — — —

Distributions payable to Preferred Unit limited partners ( 11,562 ) — — — — — — — — —

Distributions to Apache limited partner — ( 37,500 ) — — — — — — — —

Common Dividends ($ 1.50 per share)

( 1,194,385 )

Net income 72,662 56,270 — — — — — 17,087 — 17,087

Change in redemption value of noncontrolling interests — 242,778 — — — — ( 110,982 ) ( 131,796 ) — ( 242,778 )

Accumulated other comprehensive income — 485 — — — — — — 145 145

Balance at September 30, 2021 $ 634,795 $ 837,158 3,746 $ 1 12,500 $ 1 $ — $ ( 484,142 ) $ — $ ( 484,140 )

(1) This period presented has been revised to reflect the Company’s fair value change of its underlying warrants.

( 1,141,732 )

( 2,336,117 )

Balance at March 31, 2022

( 1,137,867 )

( 1,137,860 )

(1) Certain redemption features embedded within the Preferred Units require bifurcation and measurement at fair value.

For further detail, refer to Note 10—Series A Cumulative Redeemable Preferred Units .

(3) Share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020.

Refer to Note 9—Equity for further information.

The accompanying notes to consolidated financial statements are an integral part of this statement.

ALTUS MIDSTREAM COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

These consolidated financial statements have been prepared by Altus Midstream Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

For further detail, refer to Note 11—Series A Cumulative Redeemable Preferred Units in the Notes to the Condensed Consolidated Financial Statements.

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

KINETIK HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

These condensed consolidated financial statements have been prepared by Kinetik Holdings Inc.

(formerly known as Altus Midstream Company) (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods, on a basis consistent with the annual audited financial statements, with the exception of recently adopted accounting pronouncements.

1 unchanged sentence

Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

This Quarterly Report on Form 10-Q should be read along with Altus Midstream Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (Form 10-K), which contains a summary of the Company’s significant accounting policies and other disclosures.

Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Form 10-K.

Unless the context otherwise requires, the “Company,” “ALTM” and “Altus” refers to Altus Midstream Company and its consolidated subsidiaries.

“Altus Midstream” refers to Altus Midstream LP and its consolidated subsidiaries.

“Apache” refers to Apache Corporation and its consolidated subsidiaries.

All references to the Company’s Class A common stock, $ 0.0001 par value (Class A Common Stock), and Class C common stock, $ 0.0001 par value (Class C Common Stock), reflect such share amounts as retrospectively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020.

Refer to Note—9 Equity for further information.

Nature of Operations

Through its consolidated subsidiaries, the Company owns gas gathering, processing, and transmission assets in the Permian Basin of West Texas.

Construction on the assets began in the fourth quarter of 2016, and operations commenced in the second quarter of 2017.

Additionally, the Company owns equity interests in four separate Permian Basin pipeline entities that have access to various points along the Texas Gulf Coast.

The Company’s operations consist of one reportable segment.

The Company originally incorporated on December 12, 2016 in Delaware under the name Kayne Anderson Acquisition Corp.

This Quarterly Report on Form 10-Q should be read along with Kinetik Holdings Inc.’s audited financial statements and related notes thereto for the year ended December 31, 2021 filed as Exhibit 99.4 to the Company’s Current Report on Form 8-K filed on February 28, 2022.

Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the audited financial statements for the year ended December 31, 2021 filed as Exhibit 99.4 to the Company’s Current Report on Form 8-K filed on February 28, 2022

DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Transaction

On February 22, 2022 (the “Closing Date”), Kinetik Holdings Inc., a Delaware corporation (formerly known as Altus Midstream Company), consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021 (the “Contribution Agreement”), by and among the Company, Altus Midstream LP (now known as Kinetik Holdings LP), a Delaware limited partnership and subsidiary of Altus Midstream Company (the “Partnership”), New BCP Raptor Holdco, LLC, a Delaware limited liability company (“Contributor”), and BCP Raptor Holdco, LP, a Delaware limited partnership (“BCP”).

The transactions are referred to herein as the “Transaction.”

Pursuant to the Contribution Agreement, in connection with the closing of the Transaction (the “Closing”), (i) Contributor contributed all of the equity interests of BCP and BCP Raptor Holdco GP, LLC, a Delaware limited liability company and the general partner of BCP (“BCP GP” and, together with BCP, the “Contributed Entities”), to the Partnership;

and (ii) in exchange for such contribution, the Partnership issued 50,000,000 common units representing limited partner interests in the Partnership (“Common Units”) and the Company issued 50,000,000 shares of the Company’s Class C common stock, par value $ 0.0001 per share (“Class C Common Stock”), to Contributor.

The Company’s stockholders immediately prior to the Closing continued to hold their shares of the Company’s Class A Common Stock, par value $ 0.0001 per share (“Class A Common Stock,” and together with the Company’s Class C Common Stock, “Common Stock”).

As a result of the Transaction, immediately following the Closing (i) Contributor held approximately 75 % of the issued and outstanding Common Stock, (ii) Apache Midstream LLC, a Delaware limited liability company (“Apache Midstream”), held approximately 20 % of the issued and outstanding Common Stock, and (iii) the Company’s remaining stockholders held approximately 5 % of the issued and outstanding Common Stock.

Following the Closing, there were approximately 66.2 million total shares of Common Stock outstanding.

In connection with the Closing, the Company changed its name from “Altus Midstream Company” (ALTM) to “Kinetik Holdings Inc.” Unless the context otherwise requires, “ALTM” refers to the registrant prior to the Closing and “we,” “us,” “our,” and the “Company” refer to Kinetik Holdings Inc., the registrant and its subsidiaries following the Closing.

BCP was formed on April 25, 2017 as a Delaware limited partnership to acquire and develop midstream oil and gas assets.

BCP’s primary operating subsidiaries are EagleClaw and CR Permian Holdings, LLC (“CR Permian”).

Both subsidiaries were formed to design, engineer, install, own and operate facilities and provide services for produced natural gas gathering, compression, processing, treating and dehydration, and condensate separation, stabilization, and storage, crude oil gathering and storage, water gathering and disposal assets.

ALTM was originally incorporated on December 12, 2016 in Delaware under the name Kayne Anderson Acquisition Corp.

(“KAAC”) for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

KAAC completed its initial public offering in the second quarter of 2017.

On August 3, 2018, Altus Midstream LP was formed in Delaware as a limited partnership and wholly-owned subsidiary of KAAC.

On August 8, 2018, KAAC and Altus Midstream LP entered into a contribution agreement (the Contribution Agreement) with certain wholly-owned subsidiaries of Apache, including four Delaware limited partnerships (collectively, Altus Midstream Operating) and their general partner (Altus Midstream Subsidiary GP LLC, a Delaware limited liability company, and together with Altus Midstream Operating, the Altus Midstream Entities).

The Altus Midstream Entities were formed by Apache between May 2016 and January 2017 for the purpose of acquiring, developing, and operating midstream oil and gas assets in the Alpine High resource play and surrounding areas (Alpine High).

On November 9, 2018 (the Closing Date) and pursuant to the terms of the Contribution Agreement, KAAC acquired from Apache the entire equity interests of the Altus Midstream Entities and options to acquire equity interests in five separate third-party pipeline projects (the Pipeline Options).

The acquisition of the entities and the Pipeline Options is referred to herein as the Business Combination.

In exchange, the consideration provided to Apache included economic voting and non-economic voting shares in KAAC and common partnership units representing limited partner interests in Altus Midstream LP (Common Units).

Following the Closing Date and in connection with the completion of the Business Combination, KAAC changed its name to Altus Midstream Company.

Ownership of Altus Midstream LP

As of and following the Closing Date and in connection with the completion of the Business Combination, the Company’s wholly-owned subsidiary, Altus Midstream GP LLC, a Delaware limited liability company (Altus Midstream GP), is the sole general partner of Altus Midstream LP.

The Company operates its business through Altus Midstream LP and its subsidiaries, which include Altus Midstream Operating.

The Company holds approximately 23.1 percent of the outstanding Common Units, and a controlling interest, in Altus Midstream, while Apache holds the remaining 76.9 percent.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

KAAC completed its initial public offering in the second quarter

On August 3, 2018, Altus Midstream LP was formed in Delaware as a limited partnership and wholly-owned subsidiary of KAAC and entered into a contribution agreement with certain affiliates of Apache Corporation (“Apache” and such affiliates the “Altus Midstream Entities”), formed by Apache between May 2016 and January 2017, for the purpose of acquiring, developing, and operating midstream oil and gas assets in the Alpine High resource play and surrounding areas (“Alpine High”).

On November 9, 2018, KAAC acquired all equity interests of the Altus Midstream Entities and changed its name to Altus Midstream Company.

On February 22, 2022, upon the Closing, legacy BCP and its subsidiaries became wholly-owned subsidiaries of the legacy Altus Midstream Company.

The Transaction was accounted for as a reverse merger pursuant to ASC 805 Business Combination (“ASC 805”) , refer to Note 2—Business Combination in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for an additional discussion.

Nature of Operations

Through its consolidated subsidiaries, the Company provides comprehensive gathering, water disposal, transportation, compression, processing and treating services necessary to bring natural gas, NGLs and crude oil to market.

Additionally, the Company owns equity interests in four separate Permian Basin egress pipeline entities that have access to various markets along the Texas Gulf Coast.

Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).

The consolidated financial results of Altus Midstream are included in the Company’s consolidated financial statements due to the Company’s 100 percent ownership interest in Altus Midstream GP, and Altus Midstream GP’s control of Altus Midstream.

The Company has no independent operations or material assets other than its partnership interests in Altus Midstream, which constitutes all of its business.

Additionally, the Company’s balance sheet reflects the presentation of noncontrolling interest ownership attributable to the limited partner interests in Altus Midstream held by Apache and the holders of Series A Cumulative Redeemable Preferred Units (the Preferred Units).

Refer to Note 9—Equity and Note 10—Series A Cumulative Redeemable Preferred Units for further information.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with GAAP.

Certain reclassifications of prior year balances have been made to conform such amounts to current year presentation.

These reclassifications have no impact on net income.

All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.

The results of operations for such interim periods are not necessarily indicative of results of operations for a full year.

All intercompany balances and transactions have been eliminated in consolidation.

Prior to the Closing, the Company’s financial statements that were filed with the SEC were derived from ALTM’s accounting records.

As the Transaction was determined to be a reverse merger, BCP was considered as the accounting acquirer and ALTM was the legal acquirer.

The accompanying Condensed Consolidated Financial Statements herein include (1) BCP’s net assets carried at historical value, (2) BCP’s historical results of operations prior to the Transaction, (3) the ALTM’s net assets carried at fair value as of the Closing Date and (4) the combined results of operations with the Company’s results presented within the Condensed Consolidated Financial Statements from February 22, 2022 going forward.

Refer to Note 2 — Business Combination to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion.

Variable Interest Entity

Altus Midstream is a variable interest entity (VIE) because the partners in Altus Midstream with equity at risk lack the power, through voting or similar rights, to direct the activities that most significantly impact Altus Midstream’s economic performance.

A reporting entity that concludes it has a variable interest in a VIE must evaluate whether it has a controlling financial interest in the VIE, such that it is the VIE’s primary beneficiary and should consolidate.

The Company is the primary beneficiary of Altus Midstream, and therefore should consolidate Altus Midstream because (i) the Company has the ability to direct the activities of Altus Midstream that most significantly affect its economic performance, and (ii) the Company has the right to receive benefits or the obligation to absorb losses that could be potentially significant to Altus Midstream.

Redeemable Noncontrolling Interest — Apache Limited Partner

The Company’s redeemable noncontrolling interest presented in the consolidated financial statements consists of Common Units representing limited partner interests in Altus Midstream held by Apache.

Pursuant to certain provisions of the partnership agreement of Altus Midstream (as amended in connection with the Business Combination, and subsequent issuance of Preferred Units, the Amended LPA), the limited partner interests held by Apache are equal to the number of shares of the Company’s Class C Common Stock, held by Apache.

The Company initially recorded the redeemable noncontrolling interest upon the issuance of the Common Units to Apache as part of the Business Combination and based on the recapitalization value ascribed at the Closing Date to the limited partner interest.

All or a portion of these Common Units may be redeemed at Apache’s option.

The Company has the ability to settle the redemption option either (i) in shares of Class A Common Stock, on a one -for-one basis, or (ii) in cash (based on the fair market value of the Class A Common Stock as determined pursuant to the Contribution Agreement), subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications.

Upon the future redemption or exchange of Common Units held by Apache, a corresponding number of shares of Class C Common Stock will be cancelled.

The Company’s policy is to record the redeemable noncontrolling interest represented by the Common Units held by Apache at the higher of (i) its initial fair value plus accumulated earnings/losses associated with the noncontrolling interest or (ii) the redemption value as of the balance sheet date.

See discussion and additional detail further discussed in Note 9—Equity .

The Company uses a qualitative approach in assessing the consolidation requirement for variable interest entities.

The approach focuses on identifying which enterprise has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity.

In the event that the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity would be consolidated in our financial statements.

The Company has determined that it has significant influence over the operating and financial policies of the four pipeline entities in which it is invested, but does not exercise control over them;

and hence, it accounts for these investments using the equity method.

Refer to Note 9—Equity Method Investments in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.

Redeemable Noncontrolling Interest — Common Units Limited Partners

Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of the Contributed Entities to the Partnership;

and (ii) in exchange for such contribution, the Partnership issued 50,000,000 common units representing limited partner interests in the Partnership and the Company issued 50,000,000 shares of the Company’s Class C common stock, par value $ 0.0001 per share, to Contributor.

Please refer to the Transaction discussed above.

The Common Units are redeemable at the option of unit holders and accounted for on the Company’s Condensed Consolidated Balance Sheet as a redeemable noncontrolling interest classified as temporary equity.

The Company records the redeemable noncontrolling interest at the higher of (i) its initial value plus accumulated earnings/losses associated with the noncontrolling interest or (ii) the maximum redemption value as of the balance sheet date.

The redemption value was

determined based on a 5-day volume weighted average closing price of the Class A Common Stock.

See discussion and additional details in Note 10—Equity and Warrant s.

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners

On June 12, 2019, Altus Midstream issued and sold the Preferred Units in a private offering, and the purchasers of the Preferred Units were admitted as limited partners of Altus Midstream.

The Preferred Units will be exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders after the seventh anniversary of the closing of the Preferred Unit offering or upon the occurrence of specified events, unless otherwise redeemed by Altus Midstream.

The Preferred Units are accounted for on the Company’s consolidated balance sheet as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units.

Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value and are accounted for on the Company’s consolidated balance sheet as a long-term liability embedded derivative.

See discussion and additional detail further discussed in Note 10—Series A Cumulative Redeemable Preferred Units .

Equity Method Interests

The Partnership issued Series A Cumulative Redeemable Preferred Units (“Preferred Units”) on June 12, 2019.

As the Transaction was accounted for as a reverse merger, the Company assumed certain Preferred Units that were issued and outstanding were assumed at Closing for accounting purposes.

The Preferred Units are exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company.

The Preferred Units are accounted for on the Company’s Condensed Consolidated Balance Sheet as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units.

Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value and are accounted for on the Company’s Condensed Consolidated Balance Sheet as a long-term liability embedded derivative.

See discussion and additional detail in Note 11—Series A Cumulative Redeemable Preferred Units .

Equity Method Investments

The Company follows the equity method of accounting when it does not exercise control over its equity interests, but can exercise significant influence over the operating and financial policies of the entity.

Under this method, the equity interests are carried originally at acquisition cost, increased by Altus’ proportionate share of the equity interest’s net income and contributions made by Altus, and decreased by Altus’ proportionate share of the equity interest’s net losses and distributions received by Altus.

Please refer to Note 8—Equity Method Interests , for further details of the Company’s equity method interests.

Under this method, the equity investments are carried originally at acquisition cost, increased by the Company’s proportionate share of the equity interest’s net income and contributions made, and decreased by the Company’s proportionate share of the equity interest’s net losses and distributions received.

Please refer to Note 9—Equity Method Investments , for further details of the Company’s equity method investments.

Equity method investments acquired in the Transaction were recorded at fair value upon Closing.

See discussion and additional detail in Note 2—Business Combination for purchase price allocation of the Transaction.

Use of Estimates

Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period.

The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

The Company evaluates its estimates and assumptions on a regular basis.

Actual results may differ from these estimates and assumptions used in preparation of its financial statements, and changes in these estimates are recorded when known.

Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment

On April 12, 2021, the SEC Staff issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (SPACs) (the SEC Staff Statement).

The SEC Staff Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to the Company’s public and private warrants outstanding at the time of the Business Combination.

The SEC determined that certain features of warrants issued in SPAC transactions common across many entities, such as those outstanding for the Company, should be recorded as a derivative liability under ASC 815 “Derivatives and Hedges” with any changes in fair value being recorded as a gain or loss in the Company’s Statement of Consolidated Operations.

The Company has historically accounted for its warrants as equity, with no change in fair value being recorded in the applicable period.

The Company has concluded that the previous accounting policy to account for its warrants as equity rather than as a liability was an immaterial error.

The Company has corrected this immaterial error by revising its consolidated financial statements as of and for the year ended December 31, 2020 and as of and for the three and nine months ended September 30, 2020 and the related notes included herein to include the effect of accounting for the warrants as a liability from the date of the Business Combination.

Note 12—Net Income (Loss) Per Share and Note 13—Fair Value Measurements have also been updated to reflect this revision.

In addition, management has corrected previously identified immaterial errors related to income from its equity method interests, net unrelated to the SEC Staff Statement.

The impacts of this adjustment in fiscal year 2020, as presented in the accompanying financial statements, are as follows:

Statement of Consolidated Operations:

Three Months Ended September 30, 2020

As Reported Change (1)

(In thousands)

Income from equity method interests, net $ 14,320 $ 1,667 $ 15,987

Warrants valuation adjustment — 209 209

Total other income (loss) 10,787 1,876 12,663

Net income (loss) before income taxes 29,322 1,876 31,198

Net income (loss) including noncontrolling interests 29,322 1,876 31,198

Net income (loss) attributable to common shareholders 9,990 1,876 11,866

Net income (loss) attributable to Apache limited partner 7,687 1,283 8,970

Net income (loss) attributable to Class A common shareholders 2,303 593 2,896

Net Income (Loss) Attributable To Class A Common Shareholders, Per Share

Basic $ 0.61 $ 0.16 $ 0.77

Diluted $ 0.30 $ 0.02 $ 0.32

(1) All changes related to Income from equity method interests, net above relate to an immaterial prior period adjustment unrelated to the SEC Staff Statement.

Nine Months Ended September 30, 2020

As Reported Change As Revised

(In thousands)

Warrants valuation adjustment $ — $ 1,668 $ 1,668

Total other income (loss) ( 28,907 ) 1,668 ( 27,239 )

Net income (loss) before income taxes 19,496 1,668 21,164

Net income (loss) including noncontrolling interests 20,192 1,668 21,860

Net income (loss) attributable to common shareholders ( 36,166 ) 1,668 ( 34,498 )

Net income (loss) attributable to Class A common shareholders ( 7,805 ) 1,668 ( 6,137 )

Net Income (Loss) Attributable To Class A Common Shareholders, Per Share

Basic $ ( 2.08 ) $ 0.44 $ ( 1.64 )

Diluted $ ( 2.23 ) $ 0.11 $ ( 2.12 )

Statement of Consolidated Comprehensive Income (Loss):

Three Months Ended September 30, 2020

As Reported Change (1)

(In thousands)

Net income (loss) including noncontrolling interests $ 29,322 $ 1,876 $ 31,198

Comprehensive income (loss) including noncontrolling interests 30,003 1,876 31,879

Comprehensive income (loss) attributable to Apache limited partner 8,211 1,283 9,494

Comprehensive income (loss) attributable to Class A Common Shareholders 2,460 593 3,053

(1) All changes related to Income from equity method interests, net relate to an immaterial prior period adjustment unrelated to the SEC Staff Statement.

Nine Months Ended September 30, 2020

As Reported Change As Revised

(In thousands)

Net income (loss) including noncontrolling interests $ 20,192 $ 1,668 $ 21,860

Comprehensive income (loss) including noncontrolling interests 20,079 1,668 21,747

Comprehensive income (loss) attributable to Class A Common Shareholders ( 7,831 ) 1,668 ( 6,163 )

Consolidated Balance Sheet:

December 31, 2020

As Reported Change As Revised

Actual results may differ from these estimates and assumptions used in preparation of its condensed financial statements, and changes in these estimates are recorded when known.

Significant items subject to such estimates and assumptions include the valuation of derivatives, the valuation of tangible and intangible assets, the valuation of share-based compensation, the valuation of contingent liabilities, the valuation of mandatorily redeemable Preferred Units, and the valuation of noncontrolling interests.

Other current assets include inventory that consists of condensate, and NGLs that are valued at the lower of cost or market.

At the end of each reporting period, the Partnership assesses the carrying value of inventory and makes any adjustments necessary to reduce the carrying value to the applicable net realizable value.

Inventory was valued at $ 4.8 million and $ 2.1 million as of March 31, 2022 and December 31, 2021, respectively.

Impairment of Long-Lived Assets

In accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 360, Property, Plant and Equipment, long-lived assets, excluding goodwill, to be held and used by the Company are reviewed for impairment annually or on an interim basis if events or circumstances indicate that the fair value of the assets have decreased below their carrying value.

For long-lived assets to be held and used, the Company bases their evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present.

The Company’s management assesses whether there has been an impairment trigger, and if a trigger is identified, then the Company would perform an undiscounted cash flow test at the lowest level for which identifiable cash flows are independent of cash flows from other assets.

If the sum of the undiscounted future net cash flows is less than the net book value of the property, an impairment loss is recognized for the excess, if any, of the property’s net book value over its estimated fair value.

The Company did no t recognize impairment losses for long-lived assets during the three months ended March 31, 2022 and 2021.

Transactions with Affiliates

The accounts receivable from or payable to affiliate represent the net result of the Company’s monthly revenue, capital and operating expenditures, and other miscellaneous transactions to be settled with Apache and its subsidiaries, who held equity shares that represented approximately 13.6 % of the Company’s voting power as of April 22, 2022.

Accounts receivable from affiliate was $ 24.7 million as of March 31, 2022.

For the three months ended March 31, 2022, revenue from affiliate was $ 15.6 million.

Accrued expense due to affiliate was $ 4.2 million as of March 31, 2022 and operating expenses for the three months ended March 31, 2022 were immaterial.

Net Income Per Share

Basic net income per share is calculated by dividing net income attributable to Class A common shareholders by the weighted average number of shares of Class A Common Stock outstanding during the period.

Class C Common Stock is excluded from the weighted average shares outstanding for the calculation of basic net income per share, as holders of Class C Common Stock are not entitled to any dividends or liquidating distributions.

The Company uses the “if-converted method” to determine the potential dilutive effect of (i) an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) for shares of Class A Common Stock, (ii) an assumed exercise of the outstanding public and private warrants for shares of Class A Common Stock and (iii) an assumed exchange of the outstanding Preferred Units for shares of Class A Common Stock.

The dilutive effect of any earn-out consideration payable in shares is only included in periods for which the underlying conditions for the issuance are met.

Recently Adopted Accounting Pronouncement

Effective January 1, 2022, the Company adopted ASU 2021-08 , Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers .

Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.

Historically, such amounts were recognized by the acquirer at fair value.

With adoption of ASU 2021-08, the Company assumed contract liabilities at carrying value of $ 9.1 million upon Closing.

Recent Accounting Pronouncement Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”) .

ASU 2020-04 was issued to ease the potential accounting burden expected when global capital markets move away from the London Interbank Offered Rate (“LIBOR”), the benchmark interest rate banks use to make short-term loans to each other.

The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationship, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the effect that ASU 2020-04 will have on its Consolidated Financial Statements.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815):

Fair Value Hedging - Portfolio Layer Method (“ASU 2022-01”) .

Current GAAP permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio.

The amendments in ASU 2022-01 allow nonprepayable financial assets also to be included in a closed portfolio hedged using the portfolio layer method.

That expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets, thereby allowing consistent accounting for similar hedges.

The amendments in ASU 2022-01 also clarify the accounting for and promote consistency in the reporting of hedge basis adjustments applicable to both a single hedged layer and multiple hedged layers as follows:

(1) an entity is required to maintain basis adjustments in an existing hedge on a closed portfolio basis (that is, not allocated to individual assets), (2) an entity is required to immediately recognize and present the basis adjustment associated with the amount of the designated layer that was breached in interest income.

In addition, an entity is required to disclose that amount and the circumstances that led to the breach, (3) an entity is required to disclose the total amount of the basis adjustments in existing hedges as a reconciling amount if other areas of GAAP require the disaggregated disclosure of the amortized cost basis of assets included in the closed portfolio, and (4) an entity is prohibited from considering basis adjustments in an existing hedge when determining credit losses.

The guidance is effective for public business entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

Early adoption is permitted on any date on or after the issuance of ASU 2022-01 for any entity that has adopted the amendments in

ASU 2017-02 for the corresponding period.

The Company is currently evaluating the effect that ASU 2022-01 will have on its Consolidated Financial Statements.

BUSINESS COMBINATION

On February 22, 2022, the Company consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021.

Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of the Contributed Entities to the Partnership;

Please refer to the “Transaction” discussed above.

The Transaction was accounted for as a business combination in accordance with ASC 805, among other things, requires assets acquired and liabilities assumed to be measured at their acquisition date fair value.

The Company also adopted ASU 2021-08, effective as of January 1, 2022, to record contract liabilities at their carrying value as of the acquisition date.

Although the Company was the legal acquirer, BCP and BCP GP were determined to be the accounting acquirer and legal acquiree.

As a result, BCP and its subsidiaries’ net assets were carried at historical value, acquired net assets were measured at fair value except contract liabilities being recorded at carrying value at the acquisition date, and results of operations of ALTM and its subsidiaries were included in the Company’s Condensed Consolidated Financial Statements from the Closing Date going forward.

The preliminary purchase price allocation is based on an assessment of the fair value of the assets acquired and liabilities assumed in the acquisition using inputs that are not observable in the market and thus level 3 inputs.

The fair value of the processing plant, gathering system and related facilities and equipment are based on market and cost approaches.

The goodwill of $ 3.9 million relates to operational synergies.

The value of the Preferred Units and assumed contingent liability was determined through a probability-weighted analysis of the expected future cash flows and other applicable valuation techniques.

See additional details for Preferred Units in Note 11—Series A Cumulative Redeemable Preferred Units and contingent liabilities in Note 8 —Commitments and Contingencies in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.

Certain data necessary to complete the purchase price allocation is not yet available, including, but not limited to, valuation of the underlying assets of the equity method investments and liabilities assumed.

However, the Company is continuing its review of these matters during the measurement period, and if new information obtained about facts and circumstances that existed at the acquisition date identifies adjustments to the liabilities initially recognized, as well as any additional liabilities that existed at the acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to the provisional amounts initially recognized.

The Company will finalize the purchase price allocation during the 12-month period following the acquisition date.

The following table summarizes the preliminary estimated fair value of assets acquired and liabilities assumed in the Transaction in accordance with ASC 805:

(In thousands)

Other non-current liabilities $ 5,539 $ 885 $ 6,424

Total liabilities 862,593 885 863,478

Additional paid-in capital 144,716 ( 22,494 ) 122,222

Accumulated equity (deficit) ( 391,042 ) 21,609 ( 369,433 )

Statement of Consolidated Cash Flows:

Nine Months Ended September 30, 2020

As Reported Change As Revised

Cash and cash equivalent

Accounts receivable

Accounts receivable - affiliates

Property, plant, and equipment, net

Intangible assets, net

Investments in unconsolidated affiliates

Prepaid expense and other assets

Total assets acquired

Accrued expenses and other accrued liabilities

Long-term debt

Embedded derivative liabilities

Contract liabilities

Mandatory redeemable Preferred Units

Deferred tax liabilities

Contingent liabilities

Total liabilities assumed

Redeemable noncontrolling interest - Preferred Unit limited partners

Total consideration transferred

The Company incurred acquisition-related costs of $ 5.7 million for the three months ended March 31, 2022.

During the quarter ended March 31, 2022, the Company assumed additional revolver liabilities through the Transaction.

There was no significant modification to the Company’s debt structure.

Supplemental Pro Forma Information

The unaudited supplemental pro forma financial for informational purposes only and is not indicative of future results.

The results below for the three months ended March 31, 2022 and 2021 combine the results of the Company and the Partnership, giving effect to the Transaction as if it had been completed on January 1, 2021.

Three Months Ended March 31,

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) including noncontrolling interests $ 20,192 $ 1,668 $ 21,860

Warrants valuation adjustment — ( 1,668 ) ( 1,668 )

Net Cash Provided by Operating Activities 137,447 — 137,447

Fair Value Measurements

Accounting Standards Codification (ASC) 820-10-35, “Fair Value Measurement” (ASC 820), provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value.

The fair value hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in active markets.

Level 2 inputs consist of quoted prices for similar instruments.

Level 3 valuations are derived from inputs that are significant and unobservable;

hence, these valuations have the lowest priority.

The valuation techniques that may be used to measure fair value include a market approach, an income approach and a cost approach.

A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models, and the excess earnings method.

The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

Embedded features identified within the Company’s agreements are bifurcated and measured at fair value at the end of each period on the Company’s consolidated balance sheet.

Such recurring fair value measurements are presented in further detail in Note 13—Fair Value Measurements .

When required the Company also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment.

Accounts Receivable From/Payable To Apache

The accounts receivable from or payable to Apache represent the net result of Altus Midstream’s monthly revenue, capital and operating expenditures, and other miscellaneous transactions to be settled with Apache as provided under the Construction, Operations and Maintenance Agreement (COMA) between the two entities.

Generally, cash in this amount will be transferred to Apache in the month after the Company’s transactions are processed and the net results of operations are determined.

However, from time to time, the Company may estimate and transfer the cash settlement amount in the month the transactions are processed, in order to minimize related-party working capital balances.

See discussion and additional detail in Note 2—Transactions with Affiliates .

In 2020, the Company entered into a contract with a provider to supply the Company with electrical power.

If the Company does not utilize all of its fixed purchase volumes under this contract, then it will receive a credit based on a market rate for the related underutilization.

In conjunction with increased power pricing due to the Texas freeze event and underutilization of contractual electricity volumes, the Company recognized an estimated total credit of approximately $ 9.7 million for the six months ended June 30, 2021.

The Company did not recognize any additional credit during the three months ended September 30, 2021.

These amounts are recorded on the statement of consolidated operations in “Other income.” The related power credit will offset the Company’s future monthly power payments and is recorded in “Prepaid assets and other” for the current portion and “Deferred charges and other” for the long-term portion on the consolidated balance sheet.

No credits were recorded for the three and nine months ended September 30, 2020.

The Company has no remaining performance obligations related to these credits as of September 30, 2021.

TRANSACTIONS WITH AFFILIATES

The Company has contracted to provide services including gas gathering, compression, processing, transmission, and NGL transmission, pursuant to acreage dedications provided by Apache, comprising the entire Alpine High acreage.

In accordance with the terms of these agreements, the Company receives prescribed fees based on the type and volume of product for which the services are provided.

Additionally, beginning in 2020, Altus Midstream entered into three agreements to provide operating and maintenance services for Apache’s compressors in exchange for a fixed monthly fee per compressor serviced.

Revenues generated under these agreements are presented on the Company’s statement of consolidated operations as “Midstream services revenue — affiliate.” Revenues earned that have not yet been invoiced to Apache are presented on the Company’s consolidated balance sheet as “Revenue receivables.” Refer to Note 3—Revenue Recognition for further discussion.

Cost and Expenses

The Company has no employees and receives certain operational, maintenance, and management services from Apache under the COMA.

Under the COMA, the Company incurred operations and maintenance expenses of $ 1.5 million and $ 1.2 million for the three months ended September 30, 2021 and 2020, respectively, and $ 3.8 million and $ 4.0 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company incurred general and administrative expenses from affiliates of $ 2.2 million and $ 1.6 million for the three months ended September 30, 2021 and 2020, respectively, and $ 6.8 million and $ 5.1 million for the nine months ended September 30, 2021 and 2020, respectively.

These costs were primarily related to expenses associated with the COMA.

Additional information regarding the COMA is provided below.

Construction, Operations and Maintenance Agreement

At the closing of the Business Combination, the Company entered into the COMA with Apache.

Under the terms of the COMA, Apache provides certain services related to the design, development, construction, operation, management, and maintenance of certain gathering, processing and other midstream assets, on behalf of the Company.

In return, the Company paid or will pay fees to Apache of (i) $ 5.0 million for the period of January 1, 2020 through December 31, 2020, (ii) $ 7.0 million for the period of January 1, 2021 through December 31, 2021 and (iii) $ 9.0 million annually thereafter, adjusted based on actual internal overhead and general and administrative costs incurred, until terminated.

The annual fee was negotiated as part of the Business Combination to reimburse Apache for indirect costs of performing administrative corporate functions for the Company, including services for information technology, risk management, corporate planning, accounting, cash management, and others.

In addition, Apache may be reimbursed for certain internal costs and third-party costs incurred in connection with its role as service provider under the COMA.

Costs incurred by Apache directly associated with midstream activity, where substantially all the services are rendered for Altus Midstream, are charged to Altus Midstream on a monthly basis.

The COMA stipulates that the Company shall provide reimbursement of amounts owing to Apache attributable to a particular month by no later than the last day of the immediately following month.

Unpaid amounts accrue interest until settled.

The COMA will continue to be effective until terminated (i) upon the mutual consent of Altus and Apache, (ii) by either of Altus and Apache, at its option, upon 30 days’ prior written notice in the event Apache or an affiliate no longer owns a direct or indirect interest in at least 50 percent of the voting or other equity securities of Altus, or (iii) by Altus if Apache fails to perform any of its covenants or obligations due to willful misconduct of certain key personnel and such failure has a material adverse financial impact on Altus.

Distributions to Apache

In December 2020, May 2021, and August 2021, the Company’s Board of Directors declared a cash dividend of $ 1.50 per share on the Company’s Class A Common Stock, with each dividend declared totaling $ 5.6 million.

The dividends were paid to stockholders during the first, second and third quarters of 2021.

Each dividend included payment of approximately $ 0.5 million to Apache due to its 9.8 percent ownership of the Company’s Class A Common Stock.

The Class A Common Stock dividends were funded by distributions from Altus Midstream to its common unitholders of $ 1.50 per Common Unit, totaling $ 24.4 million for each of the first, second and third quarters of 2021.

For each distribution, $ 5.6 million, as noted above, was paid to the Company to fund the cash dividend payments to Class A Common stockholders, and the balance of $ 18.8 million was paid to Apache due to its 76.9 percent ownership of outstanding Common Units.

Please refer to Note 9—Equity for further information.

Net income including noncontrolling interest

Given the assumed pro forma transaction date of January 1, 2021, we removed $ 18.7 million of acquisition-related expenses for the three months ended March 31, 2022 and recognized $ 29.0 million of total acquisition-related expenses for the three months ended March 31, 2021.

REVENUE RECOGNITION

Disaggregation of Revenue

The following table presents a disaggregation of the Company’s revenue.

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

(In thousands)

Gas gathering and compression $ 4,797 $ 5,352 $ 13,645 $ 15,466

Gas processing 25,422 28,533 72,361 81,613

Transmission 3,229 3,861 9,513 11,262

NGL transmission 671 708 1,793 2,121

Other 429 415 1,232 790

Midstream services revenue — affiliate 34,548 38,869 98,544 111,252

Product sales — third parties

— 1,303 5,743 1,900

Total revenues $ 34,548 $ 40,172 $ 104,287 $ 113,152

There were no significant changes to the Company’s contracts with customers during the three and nine months ended September 30, 2020, except that the Company entered into a new Gas Processing Agreement with Apache in October 2021, which superseded the prior agreement.

Payments under all contracts with customers are typically due one month after physical delivery of the product or service has been rendered.

Revenue receivables from the Company’s contracts with Apache totaled $ 11.0 million and $ 11.4 million as of September 30, 2021 and December 31, 2020, respectively, as presented on the Company’s consolidated balance sheet.

Accounts receivable from the Company’s contracts with third parties totaled nil and $ 1.0 million as of September 30, 2021 and December 31, 2020, respectively, as presented on the Company’s consolidated balance sheet.

In accordance with the provisions of ASC Topic 606, “Revenue from Contracts with Customers,” variable market prices for each short-term sale are allocated entirely to each performance obligation as the terms of payment relate specifically to the Company’s efforts to satisfy its obligations.

As such, the Company has elected the practical expedients available under the standard to not disclose the aggregate transaction price allocated to unsatisfied, or partially unsatisfied, performance obligations as of the end of the reporting period.

Gathering and processing services

Natural gas, NGLs and condensate sales

Other revenue

Total revenues and other

There have been no significant changes to the Company’s contracts with customers during the three months ended March 31, 2022 and 2021.

Contracts with customers acquired through the Transaction had similar structure as the Company’s existing contracts with customers.

The Company recognized revenues from MVC deficiency payments of nil and $ 2.5 million for the three months ended March 31, 2022 and 2021, respectively.

Remaining Performance Obligations

The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenues as of March 31, 2022:

(In thousands)

Remaining of 2022

Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to customer contracts that have fixed pricing and fixed volume terms and conditions, generally including contracts with payment obligations associated with MVCs.

Contract Liabilities

The following table provides information about contract liabilities from contracts with customers as of March 31, 2022:

(In thousands)

Balance as of January 1, 2022

Reclassification of beginning contract liabilities to revenue as a result of performance obligation being satisfied

Cash received and not recognized as revenue

Balance as of March 31, 2022

Current portion

Non-current portion

Contract liabilities relate to payments received in advance of satisfying performance obligations under a contract, which result from contribution in aid of construction payments.

Current and noncurrent contract liabilities are included in “Other Current Liabilities” and “Contract Liabilities”, respectively, of the Condensed Consolidated Balance Sheets.

Contract Cost Assets

The Company has capitalized certain costs incurred to obtain a contract that would not have been incurred if the contract had not been obtained.

These costs are recovered through the net cash flows of the associated contract.

As of March 31, 2022 and December 31, 2021, the Company had contract acquisition cost assets of $ 17.9 million and $ 18.4 million, respectively.

Current and noncurrent contract cost assets are included in “Prepaid and Other Current Assets” and “Deferred Charges and Other Assets”, respectively, of the Condensed Consolidated Balance Sheets.

The Company amortizes these assets as cost of sales on a straight-line basis over the life of the associated long-term customer contract.

For the three months ended March 31, 2022 and 2021, the Company recognized cost of sales associated with these assets of $ 0.4 million and $ 0.4 million, respectively.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost or fair market value at the date of acquisition less accumulated depreciation.

The cost basis of constructed assets includes materials, labor, and other direct costs.

Major improvements or betterment are capitalized, while repairs that do not improve the life of the respective assets are expensed as incurred.

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets as follows:

Estimated Useful Life

Gathering, processing and transmission systems and facilities

Furniture and fixtures

Computer hardware and software

Property, plant and equipment, at carrying value, is as follows:

September 30, December 31,

(In thousands)

Gathering, processing and transmission systems and facilities

$ 207,481 $ 204,643

Computers and equipment

accumulated depreciation

Total depreciable assets, net

Construction in progress

Other property and equipment 3,213 3,323

Total property, plant and equipment 211,231 208,870

accumulated depreciation and amortization ( 21,848 ) ( 13,034 )

Total property, plant and equipment, net

(1) Included in Gathering, processing, and transmissions systems and facilities are compressors under lease to Apache totaling $ 10.1 million and $ 6.2 million, net as of September 30, 2021 and December 31, 2020, respectively.

The cost of property classified as “Construction in progress” is excluded from capitalized costs being depreciated.

These amounts represent property that is not yet available to be placed into productive service as of the respective balance sheet date.

These amounts represent property that is not yet available to be placed into productive service as of the respective reporting date.

The Company recorded $ 30.8 million and $ 25.6 million of depreciation expense for the three months ended March 31, 2022 and 2021, respectively.

GOODWILL AND INTANGIBLE ASSETS, NET

The Company closed a business combination transaction on February 22, 2022, refer to the Transaction in Note 2—Business Combination in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.

The Transaction was accounted for as business combination pursuant to ASC 805 Business Combination (“ASC 805”) .

In connection with the Transaction, the Company recorded excess of the purchase price over net assets acquired as goodwill.

The Company recorded goodwill of $ 3.9 million upon Closing and as of March 31, 2022.

Goodwill is tested at least annually as of December 31 of each year, or more frequently as events occur or circumstances change that would more-likely-than-not reduce fair value of a reporting unit below its carrying value.

Company’s management assesses whether there has been event or circumstance that triggers the fair value of the reporting unit to be lower than its net carrying value since consummation of the Transaction, and concluded that goodwill was not impaired as of March 31, 2022.

Intangible Assets

Intangible assets, net are comprised of the following:

(In thousands)

Customer contracts

Right of way assets

Less accumulated amortization

Total amortizable intangible assets, net

The fair value of acquired customer contracts was capitalized as a result of acquiring favorable customer contracts as of the closing dates of certain past acquisitions and is being amortized using a straight-line method over the remaining term of the customer contracts, which range from one to 20 years.

Right of way assets relate primarily to underground pipeline easements and have a useful life of ten years and are amortized using the straight-line method.

The right of way agreements are generally for an initial term of ten years with an option to renew for an additional ten years at agreed upon renewal rates based on certain indices or up to 130 % of the original consideration paid.

The Company recorded $ 30.2 million and $ 30.4 million of amortization expense for the three months ended March 31, 2022 and 2021, respectively.

There was no impairment recognized on intangible assets for the three months ended March 31, 2022 and 2021.

DEBT AND FINANCING COSTS

In November 2018, Altus Midstream entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream’s two , one year extension options).

The agreement for this revolving credit facility, as amended (the Amended Credit Agreement), provides aggregate commitments from a syndicate of banks of $ 800.0 million.

During the quarter ended March 31, 2022, the Company assumed additional revolver liabilities through the Transaction closed in February 2022.

There was no significant modification to the Company’s debt structure.

2017 Credit Facility - BCP 1

On June 22, 2017, BCP Raptor, LLC (“BCP I”), a wholly owned subsidiary of BCP and the parent of EagleClaw Midstream Ventures, LLC (“EagleClaw”), entered into a credit agreement with its lenders and with Jefferies Finance LLC, as administrative agent, for a term loan in and initial aggregate principal amount of $ 1.25 billion with a tenor of seven years , maturing on June 22, 2024.

Fixed principal payments equal to 0.25 % of the initial principal amount are required to be paid quarterly.

Interest is paid on the term loan periodically at a rate equal to 4.25 % plus LIBOR subject to a floor of 1.0 %.

The Company paid scheduled principal payments on this term loan of $ 3.1 million for the three months ended March 31, 2022 and 2021.

BCP I repurchased $ 2.9 million of the outstanding term loan during the first quarter of 2021.

No repurchase was made for this term loan during the first quarter of 2022.

In addition, contemporaneously with the credit agreement described above, BCP I entered into a super-priority revolving credit agreement with its lenders and with Jefferies Finance LLC, as administrative agent, in an initial aggregate principal amount of $ 100.0 million with a tenor of five years , maturing on June 22, 2022.

On January 16, 2020, BCP I entered into an amendment to the revolving credit agreement that increased the revolving commitment in an aggregate principal amount of $ 25.0 million, thereby increasing the aggregate revolving credit commitments of all lenders to $ 125 million.

On January 4, 2021, BCP I entered into an amendment to extend the maturity date from June 22, 2022 to November 3, 2023.

Interest is paid on the revolver periodically at a rate equal to LIBOR ( 0 % floor) plus 4.00 %, which decreases to LIBOR ( 0 % floor) plus 3.75 % when BCP I’s consolidated net leverage ratio is no greater than 4.50 to 1.00.

BCP I must pay commitment fees quarterly in an amount equal to 0.50 % per annum, which decreases to 0.375 % per annum when BCP I’s consolidated net leverage is no greater than 4.50 to 1.00, in each case on the unused portion of the commitment.

As of March 31, 2022 and December 31, 2021, there were $ 59.0 million and $ 52.0 million in outstanding borrowings under the revolving credit facility, respectively.

2018 Credit Facilities - BCP II and Partnership

In November 2018, the Partnership entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to two , one year extension options) (“Corporate Facility”).

The agreement for this revolving credit facility provides aggregate commitments from a syndicate of banks of $ 800.0 million.

The aggregate commitments include a letter of credit subfacility of up to $ 100.0 million and a swingline loan subfacility of up to $ 100.0 million.

Altus Midstream may increase commitments up to an aggregate $ 1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders.

As of September 30, 2021, there were $ 657.0 million of borrowings and a $ 2.0 million of letter of credit outstanding under this facility.

As of December 31, 2020, there were $ 624.0 million of borrowings and no letters of credit were outstanding under this facility.

Altus Midstream’s revolving credit facility is unsecured and is not guaranteed by the Company, Apache, APA Corporation or any of their respective subsidiaries.

At Altus Midstream’s option, the interest rate per annum for borrowings under this facility is either a base rate, as defined, plus a margin, or the London Interbank Offered Rate (LIBOR), plus a margin.

Altus Midstream also pays quarterly a facility fee at a rate per annum on total commitments.

The margins and the facility fee vary based upon (i) the Leverage Ratio (as defined below) until Altus Midstream has a senior long-term debt rating and (ii) such senior long-term debt rating once it exists.

The Leverage Ratio is the ratio of (1) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries to (2) EBITDA (as defined in the Amended Credit Agreement) of Altus Midstream and its restricted subsidiaries for the 12-month period ending immediately before the determination date.

At September 30, 2021, the base rate margin was 0.05 percent, the LIBOR margin was 1.05 percent, and the facility fee was 0.20 percent.

The Partnership may increase commitments up to an aggregate $ 1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders.

As of March 31, 2022, there were $ 657.0 million of borrowings and $ 2.0 million of letters of credit outstanding under this facility.

At the Partnership’s option, the interest rate per annum for borrowings under this facility is either a base rate, as defined, plus a margin, or LIBOR, plus a margin.

The Partnership also pays quarterly a facility fee at a rate per annum on total commitments.

At March 31, 2022, the base rate margin was 0.05 %, the LIBOR margin was 1.05 %, and the facility fee was 0.20 %.

In addition, a commission is payable quarterly to the lenders on the face amount of each outstanding letter of credit at a per annum rate equal to the LIBOR margin then in effect.

Customary letter of credit fronting fees and other charges are payable to issuing banks.

The Amended Credit Agreement contains restrictive covenants that may limit the ability of Altus Midstream and its restricted subsidiaries to, among other things, incur additional indebtedness or guaranty indebtedness, sell assets, make investments in unrestricted subsidiaries, enter into mergers, make certain payments and distributions, incur liens on certain property securing indebtedness, and engage in certain other transactions without the prior consent of the lenders.

Altus Midstream also is subject to a financial covenant under the Amended Credit Agreement, which requires it to maintain a Leverage Ratio not exceeding 5.00 :1.00 at the end of any fiscal quarter, starting with the quarter ended December 31, 2019, except that during the period of up to one year following a qualified acquisition, the Leverage Ratio cannot exceed 5.50 :1.00 at the end of any fiscal quarter.

Unless the Leverage Ratio is less than or equal to 4.00 :1.00, the Amended Credit Agreement limits distributions in respect of Altus Midstream LP’s capital to $ 30 million per calendar year until either (i) the consolidated net income of Altus Midstream LP and its restricted subsidiaries, as adjusted pursuant to the Amended Credit Agreement, for three consecutive calendar months equals or exceeds $ 350.0 million on an annualized basis or (ii) Altus Midstream LP has a specified senior long-term debt rating;

in addition, before the occurrence of one of those events, the Leverage Ratio must be less than or equal to 5.00 :1.00.

In no event can any distribution be made that would, after giving effect

to it on a pro forma basis, result in a Leverage Ratio greater than (i) 5.00 :1.00 or (ii) for a specified period after a qualifying acquisition, 5.50 :1.00.

The Leverage Ratio as of September 30, 2021 was less than 4.00 :1.00.

The terms of Altus Midstream’s Preferred Units also contain certain restrictions on distributions on Altus Midstream LP’s Common Units, including the Common Units held by the Company, and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation.

Refer to Note 10—Series A Cumulative Redeemable Preferred Units for further information.

In addition, the amount of any cash distributions to Altus Midstream LP by any entity in which it has an interest accounted for by the equity method is subject to such entity’s compliance with the terms of any debt or other agreements by which it may be bound, which in turn may impact the amount of funds available for distribution by Altus Midstream LP to its partners.

There are no clauses in the Amended Credit Agreement that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes.

The Amended Credit Agreement has no drawdown restrictions or prepayment obligations in the event of a decline in credit ratings.

However, the agreement allows the lenders to accelerate payment maturity and terminate lending and issuance commitments for nonpayment and other breaches, and if Altus Midstream or any of its restricted subsidiaries defaults on other indebtedness in excess of the stated threshold, is insolvent, or has any unpaid, non-appealable judgment against it for payment of money in excess of the stated threshold.

Lenders may also accelerate payment maturity and terminate lending and issuance commitments if Altus Midstream undergoes a specified change in control or has specified pension plan liabilities in excess of the stated threshold.

Altus Midstream was in compliance with the terms of the Amended Credit Agreement as of September 30, 2021.

Financing Costs, Net of Capitalized Interest

The following table presents the components of Altus Midstream’s financing costs, net of capitalized interest:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Contemporaneous with the close of the CR Permian acquisition on November 1, 2018, BCP Raptor II, LLC (“BCP II”), a wholly owned subsidiary of BCP and the parent of CR Permian, entered into a credit agreement with its lenders and with Barclays Bank PLC, as administrative agent, for a term loan in an initial aggregate principal amount of $ 690.0 million with a tenor of seven years , maturing on November 3, 2025.

Fixed principal payments equal to 0.25 % of the initial principal amount are required to be paid quarterly.

Interest is paid on the term loan periodically at a rate equal to 4.75 % plus LIBOR ( 0 % floor).

BCP II paid scheduled principal payments on this term loan of $ 1.7 million for the three months ended March 31, 2022 and 2021.

Additionally, during the three months ended March 31, 2022, BCP II voluntarily repurchased $ 9.9 million of the outstanding term on the open market.

Similar open market repurchases totaling $ 4.7 million were made during the three months ended March 31, 2021.

In addition, BCP II entered into a revolving credit facility in an initial aggregate principal amount of $ 50.0 million with a tenor of five years , maturing on November 3, 2023.

On January 16, 2020, BCP II entered into an amendment to the revolving credit agreement that increased the revolving commitment in an aggregate principal amount of $ 10.0 million, thereby increasing the aggregate revolving credit commitments of all lenders to $ 60.0 million.

Interest is paid on the revolver periodically at a rate equal to LIBOR plus the applicable margin of 4.50 % subject to change based on our consolidated total leverage ratio.

Any unpaid interest and principal are due at maturity.

BCP II also pays quarterly commitment fees of 0.50 % on the unused portion of the commitment.

As of March 31, 2022 and December 31, 2021, there were no outstanding letters of credit under the revolving credit facility.

2019 Credit Facility - BCP PHP

On September 18, 2019, BCP PHP, LLC (“BCP PHP”), a wholly owned subsidiary of BCP and the owner of a 26.67 % interest in the Permian Highway Pipeline (“PHP”), entered into a credit agreement with its lenders for a term facility with an initial term commitment of $ 483.0 million and a conversion date term commitment of $ 30.2 million and a letter of credit facility up to $ 32.4 million.

The maturity of the associated debt is due March 3, 2025 in accordance with the credit agreement.

During the three months ended March 31, 2022 and 2021, BCP PHP paid its principal payments on this term loan totaling $ 11.6 million and nil , respectively.

Fixed principal payments are required to be paid quarterly commencing with the first full quarter ending after the term conversion date, which was June 30, 2021.

Interest is paid on the outstanding borrowings monthly at a rate equal to 1.625 % plus adjusted LIBOR (subject to a 1 % floor) for four years after the closing date and at a rate equal to 1.875 % plus adjusted LIBOR (subject to a 1 % floor) thereafter.

BCP PHP must also pay quarterly commitment fees of 35 % of the applicable margin then in effect on the undrawn portion of the available commitments.

As of March 31, 2022 and 2021, there were no outstanding letters of credit.

Our debt agreements contain various covenants or restriction provisions that, amongst other things limit or restrict the applicable subsidiary’s ability to incur certain liens on assets, property or revenue, engage in certain mergers, dissolutions, investments or acquisitions, incur indebtedness or guarantee debt, make certain dispositions, and enter into certain transactions with subsidiaries or affiliates that exceed a specified threshold.

These agreements also contain defined financial covenants, including a debt service coverage ratio.

As of March 31, 2022 and December 31, 2021, each applicable subsidiary was in compliance with all loan covenants.

The fair value of the Company and its subsidiaries’ consolidated debt as of March 31, 2022 and December 31, 2021 was $ 2.98 billion and $ 2.34 billion, respectively.

The carrying value of that debt was $ 2.98 billion and $ 2.35 billion, as of March 31, 2022 and December 31, 2021, respectively.

All of the debt, except the Corporate Facility, is non-recourse to the Company and its assets, except its respective obligor (and associated subsidiaries) BCP I, BCP II and BCP PHP, as the case may be.

The following table summarizes the Company’s debt obligations as of March 31, 2022 and December 31, 2021:

(In thousands)

Interest expense $ 2,382 $ 2,133 $ 7,012 $ 7,498

Amortization of deferred facility fees 292 292 875 857

$ 1.25 billion term loan (BCP I)

$ 690 million term loan (BCP II)

$ 513 million term loan (BCP PHP)

$ 800 million revolving line of credit (Partnership)

$ 125 million revolving line of credit (BCP I)

Total Long-term debt

Deferred financing costs, net

Current portion, net

Long-term portion of debt and finance lease obligations, net

The table below presents the components of the Company’s financing costs, net of capitalized interest:

Three Months Ended March 31,

(In thousands)

Capitalized interest

Financing costs, net of capitalized interest $ 2,674 $ 413 $ 7,887 $ 978

OTHER CURRENT LIABILITIES

The following table provides detail of the Company’s other current liabilities at September 30, 2021 and December 31, 2020:

September 30, December 31,

Deferred financing costs

Interest expense

Total financing costs, net of capitalized interest

As of March 31, 2022 and December 31, 2021, deferred financing costs associated with the three term loans were $ 35.4 million and $ 38.5 million, respectively.

Deferred financing costs associated with the revolvers were $ 1.9 million as of March 31, 2022 and $ 2.2 million as of December 31, 2021.

The amortization of the deferred financing costs was charged to interest expense for the periods presented.

The amount of deferred financing costs included in interest expense for the three months ended March 31, 2022 and 2021 was $ 3.4 million and $ 3.3 million, respectively.

ACCRUED EXPENSES

The following table provides detail of the Company’s accrued expenses at March 31, 2022 and December 31, 2021:

(In thousands)

Accrued taxes other than income $ 10,263 $ 165

Accrued operations and maintenance expense 1,558 926

Accrued incentive compensation 1,102 1,466

Accrued capital costs 1,093 360

Other 1,891 2,696

Total other current liabilities $ 15,907 $ 5,613

Accrued product purchases

Accrued taxes

Accrued salaries, vacation, and related benefits

Accrued capital expenditures

Accrued interest expenses

Accrued expense due to related party

Accrued other expenses

Total accrued expenses

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

These accruals are adjusted as additional information becomes available or circumstances change.

As of September 30, 2021 and December 31, 2020, there were no accruals for loss contingencies.

The Company is subject to governmental and regulatory controls arising in the ordinary course of business.

The Company is not aware of any pending or threatened legal proceedings against it at the time of the filing of this Quarterly Report on Form 10-Q that would have a material impact on its financial position, results of operations, or liquidity.

As of March 31, 2022 and December 31, 2021, there were no accruals for loss contingencies.

The Company is a party to various legal actions arising in the ordinary course of its businesses.

In accordance with ASC 450, Contingencies , the Company accrues reserves for outstanding lawsuits, claims, and proceedings when a loss contingency is probable and can be reasonably estimated.

The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel and available insurance coverage.

Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question.

Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more, than the amounts accrued.

The Company has entered into litigation with two third parties to collect outstanding receivables totaling $ 19.7 million that remain outstanding from the Winter Storm Uri during February of 2021.

Given the counterparties’ sufficient creditworthiness and the valid claims that we hold, no allowance has currently been established for these items as we have legally enforceable agreements with these parties.

Contingent Liabilities

As part of the acquisition of Permian Gas on June 11, 2019, consideration included a contingent liability arrangement with PDC.

The arrangement requires additional monies to be paid by the Company to PDC on a per Mcf basis if the actual annual Mcf volume amounts exceed forecasted annual Mcf volume amounts starting in 2020 and continuing through 2029.

The arrangement defines the incentive rate per Mcf for each qualifying year and the total monies paid under this arrangement are capped at $ 60.5 million.

Amounts are payable on an annual basis over the earn-out period.

The fair value of the contingent liability recognized on the acquisition date of $ 3.9 million was estimated utilizing the following key assumptions:

(1) present value factors based on the Company’s weighted-average cost of capital, 2) a probability weighted payout based on an estimate of future volumes and (3) a discount period consistent with the arrangement’s life and the respective due dates of the potential future payments.

Based on current forecasts and discussions with PDC, management revalued this contingent liability with updated assumptions at each reporting period.

As of March 31, 2022 and December 31, 2021, the estimated fair value of the contingent consideration liability was $ 0.8 million and $ 0.8 million, respectively.

As part of the Transaction, the Company assumed contingent liabilities of $ 4.5 million related to earn-out consideration of up to 1,250,000 shares of Class A Common Stock as follows:

• 625,000 shares if the per share closing price of the Class A Common Stock as reported by Nasdaq during any 30 -trading-day period ending prior to November 9, 2023 is equal to or greater than $ 280.00 for any 20 trading days within such 30 -trading-day period.

• 625,000 shares if the per share closing price of the Class A Common Stock as reported by Nasdaq during any 30 -trading-day period ending prior to November 9, 2023 is equal to or greater than $ 320.00 for any 20 trading days within such 30 -trading-day period.

Pursuant to ASC 805, this earn-out consideration was a pre-existing contingency and accounted for as an assumed liability to the acquirer on acquisition date .

Immediately subsequent to the Closing, the Company evaluated the earn-out consideration classification in accordance with ASC 480—Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815—Derivatives and Hedging (“ASC 815”).

The Company determined the earn-out consideration to be classified as an equity based on the settlement provision.

Environmental Matters

As an owner of infrastructure assets and with rights to surface lands, the Company is subject to various local and federal laws and regulations relating to discharge of materials into, and protection of, the environment, including the potential impacts of climate change.

These laws and regulations may, among other things, impose liability on the Company for the cost of pollution clean-up resulting from operations and subject the Company to liability for pollution damages.

In some instances, Altus Midstream may be directed to suspend or cease operations.

The Company maintains insurance coverage, which management believes is customary in the industry, although insurance does not fully cover against all environmental risks.

Additionally, there can be no assurance that current regulatory requirements will not change or past non-compliance with environmental laws will not be discovered.

The Company is not aware of any environmental claims existing as of September 30, 2021, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.

Contractual Obligations

Altus Midstream’s existing fee-based midstream services agreements, which have no minimum volume commitments or firm transportation commitments, are underpinned by acreage dedications covering Alpine High.

Pursuant to these agreements, Altus Midstream is obligated to perform low and high pressure gathering, processing, dehydration, compression, treating, conditioning, and transportation on all volumes produced from the dedicated acreage, so long as Apache has the right to market such gas.

At the closing of the Business Combination, the Company entered into the COMA with Apache, which includes contractual obligations for the Company to pay certain management fees to Apache over the term of the agreement.

Refer to Note 2—Transactions with Affiliates for further discussion of the COMA.

In the second quarter of 2019, Altus Midstream issued and sold the Preferred Units.

Under the terms of the Amended LPA, the Preferred Unit holders are entitled to receive quarterly distributions until such time as the Preferred Units are redeemed or exchanged.

Refer to Note 10—Series A Cumulative Redeemable Preferred Units for further discussion regarding the terms of the Preferred Units and the rights of the holders thereof.

Additionally, the Company is required to fund its pro-rata portion of any future capital expenditures for the development of the pipeline projects as referenced in Note 8—Equity Method Interests .

At September 30, 2021 and December 31, 2020, there were no other material contractual obligations related to the entities included in the consolidated financial statements other than the performance of asset retirement obligations and required credit facility fees discussed in Note 5—Debt and Financing Costs .

EQUITY METHOD INTERESTS

As of September 30, 2021, the Company owned the following equity method interests in Permian Basin long-haul pipeline entities.

For each of the equity method interests, the Company has the ability to exercise significant influence based on certain governance provisions and its participation in the significant activities and decisions that impact the management and economic performance of the equity method interests.

The table below presents the ownership percentage held by the Company for each entity:

September 30, 2021 December 31, 2020

Ownership Amount Amount

The Company is not aware of any environmental claims existing as of March 31, 2022, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.

EQUITY METHOD INVESTMENTS

As of March 31, 2022, the Company owned investments in the following long-haul pipeline entities in the Permian Basin.

These investments were accounted for using the equity method of accounting.

For each equity method investment (“EMIs” or “EMI”) pipeline entity, the Company has the ability to exercise significant influence based on certain governance provisions and its participation in the significant activities and decisions that impact the management and economic performance of the EMI pipeline.

The table below presents the ownership percentages and investment balances held by the Company for each entity:

(In thousands)

Gulf Coast Express Pipeline LLC

EPIC Crude Holdings, LP 15.0 % 164,497 176,640

Permian Highway Pipeline LLC (1)

Breviloba, LLC 33.0 % 464,597 479,826

$ 1,537,907 $ 1,555,182

As of September 30, 2021 and December 31, 2020, unamortized basis differences included in the equity method interest balances were $ 36.8 million and $ 37.7 million, respectively.

Breviloba, LLC (Shin Oak)

(1) Ownership for Permian Highway Pipeline LLC was 53.3 % and 26.7 % as of March 31, 2022 and December 31, 2021, respectively.

Additionally, as of March 31, 2022, the Company owned 15.0 % of Epic Crude Holdings, LP (“EPIC”).

However, no dollar value was assigned through the purchase price allocation as adjustment was made to eliminate equity in losses of EPIC.

No additional contribution was made to EPIC and no distribution or equity income was received from EPIC during the three months ended March 31, 2022.

As of March 31, 2022, the unamortized basis differences included in the EMI pipelines balances were $ 418.3 million.

There was no unamortized basis difference as of December 31, 2021.

These amounts represent differences in the Company’s contributions to date and the Company’s underlying equity in the separate net assets within the financial statements of the respective entities.

Unamortized basis differences will be amortized into net income over the useful lives of the underlying pipeline assets.

The following table presents the activity in the Company’s equity method interests for the nine months ended September 30, 2021:

Gulf Coast Express Pipeline LLC EPIC Crude Holdings, LP Permian Highway Pipeline LLC Breviloba, LLC

Unamortized basis differences will be amortized into equity income over the useful lives of the underlying pipeline assets.

There was capitalized interest of $ 12.3 million and $ 12.8 million as of March 31, 2022 and December 31, 2021, respectively.

Capitalized interest is amortized on a straight-line basis into equity income.

The following table presents the activity in the Company’s EMIs for the three months ended March 31, 2022:

Gulf Coast Express Pipeline LLC

Permian Highway Pipeline LLC

Breviloba, LLC

(In thousands)

Balance at December 31, 2021

Contributions 314 1,500 25,456 — 27,270

Distributions

Equity income (loss), net 29,526 ( 14,273 ) 44,028 23,352 82,633

Accumulated other comprehensive income — 630 — — 630

Balance at September 30, 2021 $ 276,093 $ 164,497 $ 632,720 $ 464,597 $ 1,537,907

Equity income, net (1)

Balance at March 31, 2022

(1) Net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $ 0.8 million from Gulf Cost Express, $ 1.3 million from Permian Highway Pipeline LLC and $ 0.1 million from Breviloba.

(2) The EMIs acquired in the Transaction are included in the results from February 22, 2022 to March 31, 2022, and this is also the case for the additional 26.67 % of PHP that was acquired in the Transaction.

The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022.

Summarized Financial Information

The following table represents aggregated selected income statement data for the Company’s equity method interests (on a 100 percent basis):

Nine Months Ended September 30,

Gulf Coast Express Pipeline LLC EPIC Crude Holdings, LP Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC EPIC Crude Holdings, LP Permian Highway Pipeline LLC Breviloba, LLC

The following table represents selected income statement data for the Company’s EMI pipelines (on a 100 percent basis) for the three months ended March 31, 2022.

Three Months Ended March 31,

Gulf Coast Express Pipeline LLC

Permian Highway Pipeline LLC

Breviloba, LLC

Gulf Coast Express Pipeline LLC (1)

Permian Highway Pipeline LLC (1)

Breviloba, LLC (1)

(In thousands)

Revenues $ 270,526 $ 117,107 $ 297,132 $ 127,030 $ 273,760 $ 128,837 $ — $ 128,727

Operating income (loss) 186,356 ( 24,232 ) 167,011 72,098 196,154 ( 10,108 ) ( 69 ) 80,747

Net income (loss) 185,464 ( 83,940 ) 166,662 71,621 195,460 ( 53,048 ) 587 74,188

Other comprehensive income (loss) — 4,197 — — — ( 752 ) — —

Reverse Stock Split

On June 30, 2020, the Company effected a reverse stock split of the Company’s Class A Common Stock and Class C Common Stock by a ratio of one-for-twenty.

The par value and number of authorized shares of common stock and preferred stock were not affected by the reverse stock split.

A corresponding number of Altus Midstream Common Units were also restated as part of the reverse stock split.

All corresponding per-share and share amounts for periods prior to June 30, 2020 have been retroactively restated in this Quarterly Report on Form 10-Q to reflect the reverse stock split.

Redeemable Noncontrolling Interest — Apache Limited Partner

In conjunction with its ownership of the Class C Common Stock, Apache owns 12,500,000 Altus Midstream Common Units, representing approximately 76.9 percent of the total Common Units issued and outstanding.

The financial results of Altus Midstream and its subsidiaries are included in the Company’s consolidated financial statements as detailed in Note 1—Summary of Significant Accounting Policies , under the section titled “Principles of Consolidation.”

Apache has the right, at any time, to cause Altus Midstream to redeem all or a portion of the Common Units issued to Apache, in exchange for shares of the Company’s Class A Common Stock on a one -for-one basis or, at Altus Midstream’s option, an equivalent amount of cash;

provided that the Company may, at its option, effect a direct exchange of cash or Class A Common Stock for such Common Units in lieu of such a redemption by Altus Midstream.

Upon the future redemption or exchange of Common Units held by Apache, a corresponding number of shares of Class C Common Stock held by Apache will be cancelled.

Apache’s limited partner interest associated with the Common Units issued with the Class C Common Stock is reflected as a redeemable noncontrolling interest in the Company.

The redeemable noncontrolling interest is recognized at the higher of (i) its initial fair value plus accumulated earnings/losses associated with the noncontrolling interest and (ii) the maximum redemption value as of the balance sheet date.

The redemption value is determined based on a 5-day volume weighted average closing price of the Class A Common Stock ( 5-day VWAP) as defined in the Amended LPA, a Level 1 non-recurring fair value measurement.

At September 30, 2021 and December 31, 2020, the redeemable noncontrolling interest was recorded based on the redemption value as of the balance sheet date of $ 837.2 million and $ 575.1 million, respectively.

For further discussion of Apache’s right to receive additional shares of Class A Common Stock, and other outstanding equity instruments that may impact ownership interests and the limited partner interests of Altus Midstream in future periods, see Note 12—Net Income (Loss) Per Share .

Operating income

(1) For the three months ended March 31, 2021, the Company only had equity interest in Permian Highway Pipeline LLC.

EQUITY AND WARRANTS

Redeemable Noncontrolling Interest — Common Unit Limited Partners

On February 22, 2022, the Company consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021.

Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of the Contributed Entities to the Partnership;

Please refer to the “Transaction” discussed above.

The redemption option of the Common Unit is not legally detachable or separately exercisable from the instrument and is non-transferable, and the Common Unit is redeemable at the option of the holder.

Therefore, the Common Unit is accounted for as redeemable noncontrolling interest and classified as temporary equity on the Company’s Condensed Consolidated Balance Sheet.

During the three months ended March 31, 2022, 2,740,000 common units were redeemed on a one -for-one basis for shares of Class A Common Stock and a corresponding number of shares of Class C Common Stock were cancelled.

There were 47,260,000 Common Units and an equal number of Class C Common Stock issued and outstanding as of March 31, 2022.

The Common Units fair value was approximately $ 3.19 billion as of March 31, 2022.

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners

On June 12, 2019, Altus Midstream issued and sold the Preferred Units in a private offering, and the purchasers of the Preferred Units were admitted as limited partners of Altus Midstream.

The Preferred Units will be exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders after the seventh anniversary of Closing (as defined below) or upon the occurrence of specified events, unless otherwise redeemed by Altus Midstream.

Upon Closing, the Company assumed certain Preferred Units that were issued and outstanding on acquisition date.

The Preferred Units will be exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company.

Refer to Note 11—Series A Cumulative Redeemable Preferred Units for further discussion.

Common Stock Dividend

The dividends were paid to stockholders during the first, second and third quarters of 2021.

Each dividend included payment of approximately $ 0.5 million to Apache due to its 9.8 percent ownership of the Company’s Class A Common Stock.

Public Warrants

As of March 31, 2022 there were 12,577,350 Public Warrants (as defined below) outstanding.

Each whole public warrant entitles the holder to purchase one twentieth of a share of Class A Common Stock at a price of $ 230.00 per share (the “Public Warrants”).

The Public Warrants will expire on November 9, 2023 or upon redemption or liquidation.

The Company may call the Public Warrants for redemption, in whole and not in part, at a price of $ 0.01 per warrant with not less than 30 days’ notice provided to the Public Warrant holders.

However, this redemption right can only be exercised if the reported last sale price of the Class A Common Stock equals or exceeds $ 360.00 per share for any 20 -trading days within a 30 -trading day period ending three business days prior to sending the notice of redemption to the Public Warrant holders.

Private Placement Warrants

As of March 31, 2022, there were 6,364,281 Private Placement Warrants (as defined below) outstanding, of which Apache holds 3,182,140 .

The private placement warrants will expire on November 9, 2023 and are identical to the Public Warrants discussed above, except (i) they will not be redeemable by the Company so long as they are held by the initial holders or their respective permitted transferees and (ii) they may be exercised by the holders on a cashless basis (the “Private Placement Warrants” and, together with the Public Warrants, the “Warrants”).

The Company recorded a fair value of $ 0.1 million for the Public Warrants and a fair value of $ 0.1 million for the Private Warrants as of March 31, 2022 on the Condensed Consolidated Balance Sheet in other non-current liabilities.

Refer to Note 15—Fair Value Measurement in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding valuation of the Warrants.

On February 22, 2022, the Company entered into a Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”) with selected parties including Blackstone, I Squared Capital, Management and Apache (“Reinvestment Holder”).

The Reinvestment Agreement obligates each Reinvestment Holder to reinvest in shares of Class A Common Stock at least 20 % of all distributions on Common Units or dividends on shares of Class A Common Stock held by such Reinvestment Holder.

On February 22, 2022, the Audit Committee and subsequently the Board approved that for the calendar year 2022, 100 % of all distributions or dividends received by the Reinvestment Holders would be reinvested in newly issued Class A shares.

On April 4, 2022, the Company filed a Registration Statement on Form S-3 related to the Reinvestment Agreement and the establishment of the Dividend and Distribution Reinvestment Plan (the “Plan”) for all other holders.

Refer to Note 18—Subsequent Events in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional details.

On April 20, 2022, the Company’s Board of Directors (the “Board”) declared a cash dividend of $ 1.50 per share on the Company’s Class A Common Stock, which will be payable to stockholders on May 17, 2022.

The Company, through its ownership of the general partner of the Partnership, also declared a distribution of $ 1.50 per Common Unit from the Partnership to the holders of Common Units.

As described in these Condensed Consolidated Financial Statements, as the context requires, dividends paid to holders of Class A Common Stock and distributions paid to holders of Common Units may be referred to collectively as “dividends.” The Company anticipates 7.8 million of the Class A and Class C shares will receive a cash dividend with the balance receiving additional Class A shares under the Reinvestment Agreement (defined above).

SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS

On June 12, 2019, Altus Midstream issued and sold the Preferred Units in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended (the Closing).

The Closing occurred pursuant to a Preferred Unit Purchase Agreement among Altus Midstream, the Company, and the purchasers party thereto, dated as of May 8, 2019.

A total of 625,000 Preferred Units were sold at a price of $ 1,000 per Preferred Unit, for an aggregate issue price of $ 625.0 million.

Altus Midstream received approximately $ 611.2 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers.

Accounting for the Preferred Units

Classification

The Preferred Units are accounted for on the Company’s consolidated balance sheet as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units, including the redemption rights with respect thereto.

The Company applies a two-step approach to measure the redeemable noncontrolling interest related to the Preferred Units, by first allocating a portion of the net income of Altus Midstream.

Prior to the merger close date, the Partnership had 625,000 Preferred Units issued and outstanding.

Immediately prior to the Closing, on February 22, 2022, the Partnership redeemed for cash, 100,000 Preferred Units in an amount equal to approximately $ 120.1 million.

The Company assumed the remaining 525,000 Preferred Units as well as 29,983 paid-in-kind (“PIK”) Preferred Units that were issued and outstanding at the close of the acquisition.

150,000 of these Preferred Units and a pro rata amount of the PIK units contain a mandatory redemption feature as further discussed below.

Mandatorily Redeemable Preferred Units

At the close of the Transaction, the Company effectuated the Third Amended and Restated Agreement of Limited Partnership of the Partnership (“Partnership LPA”), which among other things, provides for mandatory pro-rata redemptions by the Partnership of 50,000 Preferred Units at or prior to each of the six-, twelve- and eighteen-month anniversaries of the effectiveness of the Partnership LPA, for an aggregate of 150,000 Preferred Units over the eighteen-month period.

Given this mandatory redemption feature and pursuant to ASC 480 , liability classification is required for these 150,000 Preferred Units and the pro rata PIK units.

The Company values the liability as of each reporting date and records the change in valuation in the “Other income (expenses)” in the Condensed Consolidated Statements of Operations.

The Partnership consummated the first of such redemptions redeeming 50,000 units along with 2,856 PIK units on March 28, 2022 for an aggregate amount equal to $ 60.7 million.

For the remaining 100,000 Preferred Units that contain the mandatory redemption feature, the Company recorded $ 67.2 million and $ 68.9 million in current and noncurrent liabilities, respectively, as of March 31, 2022.

These 100,000 Preferred Units must be redeemed in 50,000 unit increments by February 22, 2023 and August 22, 2023, respectively.

The Partnership LPA also provides the Partnership with an option to redeem Preferred Units early so long as at least 25,000 Preferred Units are redeemed in each redemption, without any dollar-value threshold.

Redeemable Noncontrolling Interest Preferred Units

The remaining 375,000 Preferred Units assumed on the Closing Date do not contain a mandatory redemption feature, and are accounted for on the Company’s Condensed Consolidated Balance Sheets as a redeemable noncontrolling interest classified as temporary equity in accordance with the terms of the Preferred Units, including the redemption rights with respect thereto.

The Company applies a two-step approach to measure the redeemable noncontrolling interest related to the Preferred Units, by first allocating a portion of the Company’s net income in accordance with the terms of the Partnership LPA.

After consideration of the foregoing, the Company records an additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end, if applicable.

The amount of such adjustment is determined based upon the accreted value method to reflect the passage of time until the Preferred Units are exchangeable at the option of the holder.

Pursuant to this method, the net transaction price is accreted using the effective interest method, to the Redemption Price calculated at the seventh anniversary of Closing.

Pursuant to this method, the net transaction price is accreted using the effective interest method, to the Series A Redemption Price (as defined in the Partnership LPA) calculated at the seventh anniversary of the closing of the Preferred Unit Offering.

The total adjustment is limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end is equal to the greater of (a) the sum of (i) the carrying amount of the Preferred Units determined in accordance with ASC 810, plus (ii) the fair value of the embedded derivative liability and (b) the accreted value of the net transaction price.

Activity related to the Preferred Units for the year ended December 31, 2020 and nine months ended September 30, 2021 is as follows:

Units Outstanding Financial Position (2)

Activities related to Preferred Units for the three months ended March 31, 2022 are as follows:

Units Outstanding

(In thousands, except for unit data)

Redeemable noncontrolling interest — Preferred Units:

at December 31, 2019 638,163 $ 555,599

Distribution of in-kind additional Preferred Units 22,531 —

Cash distributions paid to Preferred Unit limited partners — ( 23,124 )

Allocation of Altus Midstream net income N/A 75,906

Redeemable noncontrolling interest — Preferred Units:

at December 31, 2020 660,694 608,381

Cash distributions paid to Preferred Unit limited partners — ( 34,686 )

Distributions payable to Preferred Unit limited partners — ( 11,562 )

Allocation of Altus Midstream net income N/A 59,475

Accreted redemption value adjustment N/A 13,187

Redeemable noncontrolling interest — Preferred Units:

at September 30, 2021 660,694 $ 634,795

Redeemable noncontrolling interest — Preferred Units, immediately upon Closing Date of Transaction (1)

Distribution payable to Preferred Unit limited partners

Allocation of net income

Redeemable noncontrolling interest — Preferred Units, as of March 31, 2022

Embedded derivative liability (2)

(1) Included 21,417 PIK units on a pro rata basis.

(2) Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value.

See Note 13—Fair Value Measurements for discussion of the fair value changes in the embedded derivative liability during the period.

(2) The Preferred Units are redeemable at Altus Midstream’s option at a redemption price (the Redemption Price), which as of September 30, 2021 is calculated as the greater of (i) an 11.5 percent internal rate of return and (ii) a 1.3 times multiple of invested capital.

As of September 30, 2021, the Redemption Price would have been based on a 1.3 times multiple of invested capital, which was $ 812.5 million, less certain cash distributions.

This was greater than using an 11.5 percent internal rate of return, which would equate to a redemption value of $ 729.8 million.

N/A - not applicable.

Refer to Note 15—Fair Value Measurements for discussion of the fair value changes in the embedded derivative liability during the period.

(3) As of March 31, 2022, the Redemption Price would have been based on an 11.1 % percent internal rate of return, which would equate to a redemption value of $ 700.0 million.

SHARE-BASED COMPENSATION

The Company previously issued incentive units, which included performance and service conditions, to certain employees and board members.

The units consisted of Class A-1, Class A-2, and Class A-3 units.

These units derived value from the Company’s certain wholly owned subsidiaries.

Class A-1 and A-2 units would have vested upon either (i) the date of consummation of a change in control or (ii) the date that is 1-year following the consummation of the initial public offering (“IPO”) of the Company (or its successor) (collectively “Exit Events”).

Class A-3 units would have vested upon a change in control, if the participants were employed at the time of the event, or upon termination of the participant by the Company.

Immediately upon Closing, all outstanding Class A-1 and Class A-2 units were cancelled and exchanged for 2,650,000 shares (the “Class A Shares”) of the Company’s Class A Common Stock.

These Class A Shares are issued and outstanding as they were distributed pro rata to all holders of Class A-1 and Class A-2 units by the Common Unit limited partners from the 50,000,000 common units they received upon the Closing.

Before distributing these Common Units, the Common Unit limited partners redeemed them for Class A Common Stock.

The Class A Shares are held in escrow and will vest over three to four years.

Similarly, the Class A-3 units were exchanged for approximately 163,000 Class C Common Stock and Common Units (the “Class C Shares”) and will vest over four years.

The Company also issued approximately 38,000 replacement restricted share awards (“Replacement Awards”) to new employees that transitioned from ALTM as part of the merger.

These changes for all three share types established a new measurement date.

The Class A Shares, Class C Shares and Replacement Awards were valued based on the Company’s publicly quoted price on the measurement date, which was the Closing Date of the Transaction.

With respect to these shares, the Company recorded compensation expenses of $ 6.1 million for the three months ended March 31, 2022, based on a straight line amortization of the associated awards’ fair value over the respective vesting life of the shares.

With respect to the incentive units, no compensation expenses were recorded for the three months ended March 31, 2021, as the incentive units were considered non-vested prior to their cancellation and exchange for Class A or Class C Common Stock.

The Company is subject to U.S.

federal income tax and the Texas margin tax.

Altus Midstream LP is a partnership for federal income tax purposes and passes through its taxable income to its partners, the Company, Apache, and the Preferred Unit holders.

Thus, Altus Midstream LP does not record a federal income tax provision.

Altus Midstream LP is subject to the Texas margin tax and as such, records a state income tax provision.

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief and Economic Security Act (CARES Act) in response to the COVID-19 pandemic.

Under the CARES Act, 100 percent of net operating losses arising in tax years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five preceding tax years of such loss.

In the first quarter of 2020, the Company recorded a current income tax benefit of $ 0.7 million associated with a net operating loss carryback claim.

During the three and nine months ended September 30, 2021, the Company’s effective income tax rate was primarily impacted by a decrease in valuation allowance.

During the three and nine months ended September 30, 2020, the Company’s effective income tax rate was primarily impacted by the net operating loss carryback claim under the CARES Act and an increase in valuation allowance.

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes,” which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements.

Each quarter, the Company assesses the recognition amount and, as a result, may increase (expense) or reduce (benefit) the amount of interest and penalties.

Interest and penalties are recorded as a component of income tax expense.

The contributor of Altus Midstream’s operating assets, Apache, is currently under IRS audit for the 2014-2017 tax years as part of its normal course of business.

NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is calculated by dividing net income (loss) attributable to Class A common shareholders by the weighted average number of shares of Class A Common Stock outstanding during the period.

Class C Common Stock is excluded from the weighted average shares outstanding for the calculation of basic net income (loss) per share, as holders of Class C Common Stock are not entitled to any dividends or liquidating distributions.

The Company uses the “if-converted method” to determine the potential dilutive effect of (i) an assumed exchange of outstanding Common Units of Altus Midstream (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) for shares of Class A Common Stock, (ii) an assumed exercise of the outstanding public and private warrants for shares of Class A Common Stock and (iii) an assumed exchange of the outstanding Preferred Units of Altus Midstream for shares of Class A Common Stock.

The dilutive effect of any earn-out consideration payable in shares is only included in periods for which the underlying conditions for the issuance of shares are met.

The computation of basic and diluted net income (loss) per share for the periods presented in the consolidated financial statements is shown in the table below.

Three Months Ended September 30,

2021 2020 (1)

Income Shares Per Share Income Shares Per Share

The Company’s income tax provision for the three months ended March 31, 2022 consists of following:

Three Months Ended March 31,

(In thousands)

Current tax expense:

State and local

Total current tax expense

Deferred tax expense:

State and Local

Total deferred tax expense

Total income tax expense

The Company records income taxes using an estimated annual effective tax rate and recognizes specific events discretely as they occur.

The following table presents reconciliation of the U.S.

statutory income tax rate to the estimated annual effective tax rate:

Three Months Ended

March 31, 2022

statutory rate (1)

Tax attributable to Noncontrolling interest - Common Units limited partners

Tax attributable to Noncontrolling interest - Preferred Units limited partners

State tax rate

Valuation allowance

Effective rate

(1) Prior to the Closing on February 22, 2022, the Company was organized as limited partnership and was not subject to the U.S.

federal income tax for the three months ended March 31, 2021.

For state purposes, the Company records deferred tax assets and liabilities based on the differences between the carrying value and tax basis of assets and liabilities recorded on the consolidated balance sheets.

The deferred tax liabilities recorded as of March 31, 2022 and December 31, 2021 relate to these differences.

For federal purposes, the Company has a deferred tax asset related to our investment in the Partnership and net operating losses.

The Company recorded a full allowance valuation on its deferred tax assets, as it has determined that more-likely-than-not that the benefit of the deferred tax assets will not be realized.

Upon Closing, the Company assumed certain uncertain tax positions from ALTM.

The Company accounts for income taxes in accordance with ASC 740—Income Taxes , which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements.

Tax positions generally refer to a position taken in a previously filed income tax return or expected to be included in a tax return to be filed in the future that is reflected in the measurement of current and deferred income tax assets and liabilities.

Reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:

(In thousands)

Balance as of January 1, 2022

Increase related to ALTM acquisition

Reduction related to current year activities

Balance as of March 31, 2022

NET INCOME PER SHARE

The computation of basic and diluted net income (loss) per share for the periods presented in the Condensed Consolidated Financial Statements is shown in the table below.

Three Months Ended March 31,

Weighted-average shares

(In thousands, except per share data)

1 unchanged sentence

Effect of dilutive securities:

Redeemable noncontrolling interest — Apache limited partner $ 15,279 12,500 $ 3,928 12,500

Redeemable noncontrolling interest — Preferred Unit limited partners $ — — $ 27,906 93,609

Replacement Awards

Diluted (1)(2) :

Net income attributable to Class A common shareholders

Nine Months Ended September 30,

2021 2020 (1)

Income Shares Per Share Loss Shares Per Share

(In thousands, except per share data)

Net income (loss) attributable to Class A common shareholders $ 17,087 3,746 $ 4.56 $ ( 6,137 ) 3,746 $ ( 1.64 )

Effect of dilutive securities:

Redeemable noncontrolling interest — Apache limited partner $ 47,757 12,500 $ ( 28,361 ) 12,500

Redeemable noncontrolling interest — Preferred Unit limited partners $ 62,688 17,076 $ — —

Diluted (2)(3) :

Net income (loss) attributable to Class A common shareholders $ 127,532 33,322 $ 3.83 $ ( 34,498 ) 16,246 $ ( 2.12 )

(1) This period presented has been revised to reflect the Company’s fair value change of its underlying warrants.

(2) The effect of an assumed exchange of the outstanding Preferred Units of Altus Midstream for shares of Class A Common Stock would have been anti-dilutive for the three months ended September 30, 2021 and the nine months ended September 30, 2020.

(3) The effect of an assumed exchange of the outstanding public and private warrants for shares of Class A Common Stock would have been anti-dilutive for all periods presented.

Further discussion of the Preferred Units and associated embedded features can be found in Note 10—Series A Cumulative Redeemable Preferred Units and Note 13—Fair Value Measurements , respectively.

Earn-out consideration granting Apache the right to receive additional shares of Class A Common Stock is not included in the earnings per share calculation above, as the conditions for issuance were not satisfied for any of the periods presented.

(1) The effect of an assumed exchange of the outstanding Preferred Units and outstanding public and private warrants for shares of Class A Common Stock would have been anti-dilutive for all periods presented in which the Preferred Units and public and private warrants were outstanding.

(2) The effect of an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) would have been anti-dilutive for all periods presented in which the Common Units were outstanding.

FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities measured at fair value on a recurring basis consist of:

cash and cash equivalents;

revenue receivables;

accounts receivable;

accounts receivable from/payable to Apache;

dividends and distributions payable;

the Company’s private and public warrants and an embedded derivative liability related to the issuance of Preferred Units.

The Company bifurcated and recognized an embedded derivative associated with the Preferred Units related to the exchange option provided to the Preferred Unit holders under the terms of the Amended LPA.

The valuation of the embedded derivative (using an income approach) is based on a range of factors, including expected future interest rates using the Black-Karasinski model, the Company’s imputed interest rate, interest rate volatility, the expected timing of periodic cash distributions, the estimated timing for the potential exercise of the exchange option, and anticipated dividend yields of the Preferred Units.

The Company recorded an unrealized gain of $ 4.0 million and an unrealized loss of $ 3.5 million for the three months ended September 30, 2021 and 2020, respectively, and an unrealized gain of $ 18.5 million and an unrealized loss of $ 76.1 million for the nine months ended September 30, 2021 and 2020, respectively, which are recorded in “Unrealized derivative instrument gain (loss)” in the statement of consolidated operations.

Altus has classified these recurring fair value measurements as Level 3 in the fair value hierarchy.

As of the September 30, 2021 valuation date, the Company used the forward B-rated Energy Bond Yield curve to develop the following key unobservable inputs used to value this embedded derivative:

Quantitative Information About Level 3 Fair Value Measurements

Fair Value at September 30, 2021 Valuation Technique Significant Unobservable Inputs Range/Value

The Company’s financial assets and liabilities measured at fair value on a recurring basis include cash and cash equivalents, accrued receivables, accounts receivable, accounts receivable from affiliates, dividends and distributions payable, interest rate and commodity swap derivatives, and Company’s private and public warrants and an embedded derivative liability related to the issuance of Preferred Units.

Topic 820 establishes a framework for measuring fair value in U.S.

GAAP, clarifies the definition of fair value within that framework, and requires disclosures about the use of fair value measurements.

Topic 820 defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

Topic 820 provides a framework for measuring fair value, establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and requires consideration of the counterparty’s creditworthiness when valuing certain assets.

Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1 inputs).

The three levels of the fair value hierarchy under Topic 820 are described below:

Level 1 inputs :

Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 inputs :

Inputs, other than quoted prices in active markets, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 inputs :

Prices or valuations that require unobservable inputs that are both significant to the fair value measurement and unobservable.

Valuation under Level 3 generally involves a significant degree of judgment from management.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Where available, fair value is based on observable market prices or inventory parameters or derived from such prices or parameters.

Where observable prices or inputs are not available, valuation models are applied.

These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instrument’s complexity.

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021:

March 31, 2022

(In thousands)

Preferred Units Embedded Derivative $ 120,522 Option Model Altus Midstream Company’s Imputed Interest Rate 5.53 - 11.54 %

Interest Rate Volatility 38.03 %

A one percent increase in the imputed interest rate assumption would significantly increase the value of the embedded derivative liability at September 30, 2021, while a one percent decrease would lead to a similar decrease in value as of September 30, 2021.

The assumed expected timing until exercise of the exchange option at September 30, 2021 was 4.70 years.

The Company has additional embedded derivatives in the Preferred Units related to the exchange option and redemption features that are accounted for separately from the Preferred Units.

Level 3 valuations of the embedded derivatives are based on a range of factors, including the likelihood of the event occurring, and these factors are assessed quarterly.

There was no value associated with these additional identified embedded derivatives for any applicable period presented.

Interest rate derivatives

Mandatorily redeemable Preferred Units

Embedded derivative

Public warrants

Private warrants

Interest rate derivatives

Total liabilities

December 31, 2021

(In thousands)

Commodity swaps

Interest rate derivatives

Total liabilities

The Company is exposed to certain risks arising from both its business operations and economic conditions, and the Company enters into certain derivative contracts to manage the exposures.

Refer to Note 16—Derivatives and Hedging Activities in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further discussion related to commodity swaps and interest rate derivatives.

The Company bifurcated and recognized the embedded derivative associated with the Preferred Units related to the exchange option provided to the Preferred Unit holders under the terms of the Amended LPA.

The valuation of the embedded derivative, (using an income approach), was based on expected future interest rates using the Black-Karasinski model, the Company’s imputed interest rate ranged from 7.32 % to 11.58 %, interest rate volatility of 39.79 %, the expected timing of periodic cash distributions, the estimated timing for the potential exercise of the exchange option of 4.2 years and anticipated dividend yields of the Preferred Units.

The Company recorded an unrealized loss of $ 2.9 million for the three months ended March 31, 2022, which was recorded as an “Unrealized loss on embedded derivative” in the Condensed Consolidated Statement of Operations.

The Company has classified these recurring fair value measurements as Level 3 in the fair value hierarchy.

The carrying value of the Company’s Public Warrants are recorded at fair value based on quoted market prices, a Level 1 fair value measurement.

The carrying value of the Company’s private warrants are recorded at fair value determined using an option pricing model, a Level 3 fair value measurement, which is calculated based on key assumptions related to expected volatility of the Company’s common stock, an expected dividend yield, the remaining term of the warrants outstanding and the risk-free rate based on the U.S.

The carrying value of the Company’s Private Placement Warrants are recorded at fair value determined using an option pricing model, a Level 3 fair value measurement, which is calculated based on key assumptions related to expected volatility of the Company’s common stock, an expected dividend yield, the remaining term of the warrants outstanding and the risk-free rate based on the U.S.

Treasury yield curve in effect at the time of the valuation.

These assumptions are estimated utilizing historical trends of the Company’s common stock, Public Warrants and other factors.

The Company has recorded a liability of $ 0.7 million and $ 0.9 million as of September 30, 2021 and December 31, 2020, respectively, in “Other noncurrent liabilities” included in its consolidated balance sheet and approximately $ 0.7 million and $ 0.2 million of income for the three months ended September 30, 2021 and 2020, respectively, and $ 0.2 million and $ 1.7 million of income for the nine months ended September 30, 2021 and 2020, respectively, reflected as “Total other income (loss)” in its statement of consolidated operations related to the fair value changes of the underlying warrants.

The carrying amounts reported on the consolidated balance sheet for the Company’s remaining financial assets and liabilities approximate fair value due to their short-term nature.

The carrying amount of Altus Midstream’s revolving credit facility approximates fair value because the interest rate is variable and reflective of market rates.

There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the nine months ended September 30, 2021 or year ended December 31, 2020.

The Company has recorded a liability of $ 0.2 million as of March 31, 2022.

There was no change in fair value of the warrants since closing of the Transaction through reporting date.

The carrying amounts reported on the Condensed Consolidated Balance Sheet for the Company’s remaining financial assets and liabilities approximate fair value due to their short-term nature.

The carrying amount of the revolving credit facility approximates fair value because the interest rate is variable and reflective of market rates.

There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three months ended March 31, 2022.

DERIVATIVES AND HEDGING ACTIVITIES

The Company is exposed to certain risks arising from both its business operations and economic conditions, and it enters into certain derivative contracts to manage exposure to these risks.

The Company did not elect to apply hedge accounting to these derivative contracts and recorded fair value of the derivatives on the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021.

Interest Rate Risk

The Company manages market risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and by using derivative financial instruments.

Specifically, the Company enters into derivative financial instruments to manage exposures that arise from activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high credit-rating counterparties.

The Company’s objectives in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements.

To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract.

In September of 2019, BCP PHP entered into two interest rate swaps on 75.0 % of the outstanding $ 513.0 million term loan.

These instruments were effective September 30, 2019 and have a mandatory termination date on November 19, 2024.

The notional amounts of these swaps float monthly such that 75.0 % of the total outstanding term loan is covered by the notional of the two swaps over the life of the associated term facility.

These swaps result in fixed LIBOR rates ranging from 1.76 % to 1.78 % for the respective notional amounts of our debt for the LIBOR component of our interest rate and are paid in monthly installments.

The fair value or settlement value of the consolidated interest rate swaps outstanding are presented on a gross basis on the Condensed Consolidated Balance Sheets.

Interest rate swap derivative liabilities were $ 7 thousand and $ 2.7 million as of March 31, 2022 and December 31, 2021, respectively.

Interest rate swap derivative assets were $ 9.7 million as of March 31, 2022.

BCP PHP recorded cash settlements on interest rate swap derivatives of $ 0.9 million and $ 0.6 million for the three months ended March 31, 2022 and 2021, respectively, in the “Interest Expense” of the Condensed Consolidated Statements of Operations.

In addition, BCP PHP recorded unrealized gain of $ 11.6 million and unrealized loss of $ 10.6 million for the change in fair value of the interest rate swap derivatives for the three months ended March 31, 2022 and 2021, respectively, in the “Interest Expense” of the Condensed Consolidated Statements of Operations.

Commodity Price Risk

Similarly, in 2020 and 2021 the Company entered into WTI crude hedges at a specific notional that provides for a fixed price for crude in the Permian Basin.

All of the Company’s commodity swaps had reached maturity as of December 31, 2021.

The fair value or settlement value of the swaps outstanding are presented on a gross basis on the Condensed Consolidated Balance Sheet.

Commodity swap derivative liability was nil and $ 0.2 million as of March 31, 2022 and December 31, 2021, respectively.

Our two operating segments represent the Company’s segments for which discrete financial information is available and is utilized on a regular basis by our chief operating decision maker (“CODM”) to make key operating decisions, assess performance and allocate resources.

Our Chief Executive Officer is the CODM.

These segments are strategic business units with differing products and services.

No operating segments have been aggregated to form the reportable segments.

Therefore, our two operating segments represent our reportable segments.

The activities of each of our reportable segments from which the Company earns revenues and incurs expenses are described below:

• Midstream Logistics:

The Midstream Logistics segment operates under three streams, 1) gas gathering and processing, 2) crude oil gathering, stabilization and storage services, and 3) water gathering and disposal.

• Pipeline Transportation:

The Pipeline Transportation segment consists of equity investment interests in four Permian Basin pipelines that access to various points along the Texas Gulf Coast, and our Delaware Link Pipeline that is under construction.

The current operating pipelines transport crude oil, natural gas and NGLs to the Texas Gulf Coast.

Upon Closing, our CODM reviewed the Company and ALTM’s reporting segment activities.

The Company then renamed its Gathering and Processing segment to Midstream Logistics and its Transmission segment to Pipeline Transportation.

These name changes were made to better align segment activities with the name of respective segment.

There was no change in segment composition or structure for the three months ended March 31, 2022.

The following tables present the operating results and other key financial measures for the individual operating segment as of and for the three months ended March 31, 2022 and 2021:

Midstream Logistics

Pipeline Transportation

Corporate and Other (1)

Consolidated (2)

For the three months ended 3/31/2022

(In thousands)

Segment net income (loss) including noncontrolling interests

Interest expense (income)

(Gain) on redemption of mandatorily redeemable Preferred units

Income tax expense (benefit)

Depreciation and amortization

Contract assets amortization

Proportionate EMI EBITDA

Share-based compensation

Loss on disposal of assets

Loss on debt extinguishment

Unrealized loss on derivatives

Integration costs

Acquisition transaction costs

Other one-time costs or amortization

Equity (income) from unconsolidated affiliates

Segment adjusted EBITDA

Midstream Logistics

Pipeline Transportation

Corporate and Other (1)

Consolidated (2)

For the three months ended 3/31/2021

(In thousands)

Segment net income (loss) including noncontrolling interests

Interest expense (income)

Depreciation and amortization

Contract assets amortization

Proportionate EMI EBITDA

Loss on disposal of assets

Gain on debt extinguishment

Derivatives loss due to Winter Storm Uri

Other one-time costs or amortization

Interest and other income

Equity (income) from unconsolidated affiliates

Segment adjusted EBITDA

(1) Corporate and Other represents those results that:

(i) are not specifically attributable to a reportable segment;

(ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items.

(2) Results do not include legacy ALTM prior to February 22, 2022.

The following tables present the revenue for individual operating segment for the three months ended March 31, 2022 and 2021:

Midstream Logistics

Pipeline Transportation

Corporate and Other (1)

For the three months ended 3/31/2022

(In thousands)

Other revenue

Total segment operating revenue

Midstream Logistics

Pipeline Transportation

Corporate and Other (1)

For the three months ended 3/31/2021

(In thousands)

Other revenue

Total segment operating revenue

(1) Corporate and Other represents those results that:

(i) are not specifically attributable to a reportable segment;

The following table present total assets for individual operation segment as of March 31, 2022 and December 31, 2021:

(In thousands)

Midstream Logistics

Pipeline Transportation

Segment total assets

Corporate and other

SUBSEQUENT EVENTS

Common Stock Dividend

On November 2, 2021, the Company’s Board of Directors declared a cash dividend of $ 1.50 per share on the Company’s Class A Common Stock, totaling $ 5.6 million, to be paid on December 30, 2021, to stockholders of record as of the close of business on November 30, 2021.

The common stock dividend will be funded by a distribution from Altus Midstream to its common unitholders of $ 1.50 per Common Unit, totaling $ 24.4 million, of which $ 5.6 million is payable to the Company and the balance is payable to Apache.

Altus Midstream Company and BCP Raptor Holdco LP Business Combination

On October 21, 2021, the Company announced that it will combine with privately-owned BCP Raptor Holdco LP (BCP) in an all-stock transaction, pursuant to the Contribution Agreement dated as of that same date and entered into by and among ALTM, Altus Midstream, New BCP Raptor Holdco, LLC (the Contributor), and BCP (the Contribution Agreement).

BCP is the parent company of EagleClaw Midstream, which includes EagleClaw Midstream Ventures, the Caprock Midstream and Pinnacle Midstream businesses, and a 26.7 % interest in the Permian Highway Pipeline.

As consideration for the transaction, the Company will issue 50 million Class C common shares (and Altus Midstream will issue corresponding Common Units) to BCP’s unitholders, which are principally funds affiliated with Blackstone and I Squared Capital.

The transaction is expected to close during the first quarter 2022 following completion of customary closing conditions, including approval by the Company’s shareholders and regulatory reviews.

On April 4, 2022, the Company filed a registration statement on Form S-3 with the SEC to reserve 15,000,000 shares of Class A Common Stock for issuance under the Plan, refer to Note—10 Equity and Warrants for additional information.

On April 20, 2022, the Company’s Board of Directors declared a cash dividend of $ 1.50 per share on the Company’s Class A Common Stock which will be payable to stockholders on May 17, 2022.

The Company, through its ownership of the general partner of the Partnership, declared a distribution of $ 1.50 per Common Unit from the Partnership to the holders of Common Units.

Please refer to Note 10—Equity and Warrants for additional information.

On May 10, 2022, the Company’s Board of Directors amended the Company’s 2019 Omnibus Compensation Plan (as amended from time to time, the “2019 Plan”), in order to reflect the Company’s name change and certain other non-material updates.

Under the 2019 Plan, the Company is authorized to grant equity-based awards to its employees and directors.

The foregoing description of the 2019 Plan is qualified in its entirety by reference to the 2019 Plan, a copy of which is attached as Exhibit 10.5 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements