What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-08 · 202 added, 184 removed, 675 unchanged (36% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022 (1)

39 unchanged sentences

Refer to the basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies in the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for further information.

(2) Includes amounts associated with related parties of $ 13.3 million and $ 19.9 million for the three months ended September 30, 2023 and 2022, respectively, and $ 34.5 million and $ 59.4 million for the nine months ended September 30, 2023 and 2022, respectively.

(3) Includes amounts associated with related parties of $ 8.7 million and $ 3.1 million for the three months ended September 30, 2023 and 2022, respectively, and $ 14.2 million and $ 16.3 million for the nine months ended September 30, 2023 and 2022, respectively .

(4) Cost of sales (exclusive of depreciation and amortization) is net of gas service revenues totaling $ 38.6 million and $ 17.1 million for the three months ended September 30, 2023 and 2022, respectively, and $ 107.1 million and $ 51.1 million for the nine months ended September 30, 2023 and 2022, respectively, for certain volumes where we act as principal .

(5) Class A share and per share amounts have been retrospectively restated to reflect the Company’s reverse stock split, which was effected June 8, 2022.

(3) Includes amounts associated with related parties of $ 24.8 million and $ 30.5 million for the three months ended June 30, 2023 and 2022, respectively, and $ 50.1 million and $ 46.2 million for the six months ended June 30, 2023 and 2022, respectively.

(4) Includes amounts associated with related parties of $ 10.8 million and $ 3.4 million for the three months ended June 30, 2023 and 2022, respectively, and $ 25.4 million and $ 7.1 million for the six months ended June 30, 2023 and 2022, respectively.

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

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, December 31,

September 30, December 31,

(In thousands, except per share data)

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Intangible assets, net 620,790 695,389

Derivative asset, non-current 2,444 —

Operating lease right-of-use assets 48,102 28,551

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Class A Common Stock:

$ 0.0001 par, 1,500,000,000 shares authorized, 52,085,784 shares issued 51,973,472 shares outstanding at June 30, 2023 and 45,679,447 shares issued and outstanding and December 31, 2022, respectively (1)

$ 0.0001 par, 1,500,000,000 shares authorized, 54,519,658 and 45,679,447 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively (2)

Class C Common Stock:

$ 0.0001 par, 1,500,000,000 shares authorized, 94,089,038 and 94,270,000 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively (1)

$ 0.0001 par, 1,500,000,000 shares authorized, 94,089,038 and 94,270,000 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively (2)

Additional paid-in capital 91,747 118,840

Accumulated deficit ( 929,778 ) ( 958,629 )

Treasury stock, at cost ( 112,312 and nil shares as of June 30, 2023 and December 31, 2022, respectively)

Total equity ( 838,016 ) ( 839,775 )

Total liabilities, noncontrolling interest, and equity $ 6,286,016 $ 5,919,711

(1) Includes amounts of $ 15.0 million and $ 17.6 million associated with related parties as of September 30, 2023 and December 31, 2022, respectively.

(2) Share amounts have been retrospectively restated to reflect the Company’s stock split, which was effected June 8, 2022.

(2) Includes amounts of $ 16.9 million and $ 17.6 million associated with related parties as of June 30, 2023 and December 31, 2022, respectively.

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

39 unchanged sentences

Redemption of mandatorily redeemable Preferred Units — ( 183,297 )

Redemption of redeemable noncontrolling interest Preferred Units — ( 461,460 )

Distributions paid to mandatorily redeemable Preferred Unit holders — ( 1,850 )

1 unchanged sentence

Cash dividends paid to Class A Common Stock shareholders ( 58,030 ) ( 24,351 )

Distribution paid to Class C Common Unit limited partners ( 348 ) ( 491 )

Distributions paid to Class C Common Unit limited partners ( 524 ) ( 929 )

Repurchase of Class A Common Stock ( 5,757 ) —

19 unchanged sentences

(In thousands) (In thousands)

For the Quarter Ended June 30, 2022

Balance at March 31, 2022 $ 460,773 $ 3,185,431 37,973 $ 4 94,520 $ 9 $ — $ ( 1,137,873 ) $ — $ ( 1,137,860 )

Distributions payable to Preferred Unit limited partners ( 6,937 ) — — — — — — — — —

For the Quarter Ended September 30, 2022

Balance at June 30, 2022

$ 563,338 $ 3,251,290 40,551 $ 4 94,450 $ 9 $ — $ ( 1,181,343 ) $ — $ ( 1,181,330 )

Redemption of Common Units — ( 6,765 ) 180 — ( 180 ) — 6,765 — — 6,765

Redemption of Preferred Units ( 461,460 ) — — — — — — — — —

Excess of carrying amount over Preferred Units redemption price ( 102,586 ) 76,623.00 — — — — — 32,900 — 32,900

Issuance of Class A Common Stock through dividend and distribution reinvestment plan — — 2,351 — — — 87,756 — — 87,756

5 unchanged sentences

— — — — — — — ( 30,467 ) — ( 30,467 )

Balance at September 30, 2022 $ — $ 3,061,861 43,082 $ 4 94,270 $ 9 $ 107,182 $ ( 941,747 ) $ — $ ( 834,552 )

For the Quarter Ended September 30, 2023

Balance at June 30, 2023

For the Quarter Ended June 30, 2023

Balance at March 31, 2023 $ — $ 2,910,861 49,054 $ 5 94,089 $ 9 $ 229,672 $ ( 863,452 ) $ ( 2,432 ) $ ( 636,198 )

$ — $ 3,242,619 51,973 $ 5 94,089 $ 9 $ — $ ( 902,446 ) $ ( 3,325 ) $ ( 905,757 )

Issuance of common stock through dividend and distribution reinvestment plan — — 2,546 1 — — 88,144 — 88,145

Retirement of treasury stock — — — — — — — ( 3,325 ) 3,325 —

Repurchase of Class A Common Stock — — ( 112 ) — — — — — ( 3,325 ) ( 3,325 )

Share-based compensation — — 1 — — — 12,502 — — 12,502

1 unchanged sentence

Change in redemption value of noncontrolling interests — 8,899 — — — — ( 8,899 ) — — ( 8,899 )

Distribution paid to Common Units limited partners — ( 70,392 ) — — — — — — — —

Distribution paid to Common Unit limited partners — ( 70,568 ) — — — — — — — —

Cash dividends on Class A Common Stock ($ 0.75 per share)

— — — — — — — ( 39,587 ) — ( 39,587 )

Balance at June 30, 2023 $ — $ 3,242,619 51,973 $ 5 94,089 $ 9 $ — $ ( 902,446 ) $ ( 3,325 ) $ ( 905,757 )

Balance at September 30, 2023 $ — $ 3,208,501 54,520 $ 6 94,089 $ 9 $ 91,747 $ ( 929,778 ) $ — $ ( 838,016 )

KINETIK HOLDINGS INC.

6 unchanged sentences

(In thousands) (In thousands)

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Balance at December 31, 2021 $ — $ 1,006,838 — $ — 100,000 $ 10 $ — $ — $ — $ 10

1 unchanged sentence

Distributions paid to Preferred Unit limited partners ( 6,937 ) — — — — — — — — —

Distributions payable to Preferred Unit limited partners ( 6,937 ) — — — — — — — — —

Redemption of Common Units — ( 179,323 ) 5,730 1 ( 5,730 ) ( 1 ) 179,323 — — 179,323

Redemption of Preferred Units ( 461,460 ) — — — — — — — — —

Excess of carrying amount over Preferred Units redemption price ( 109,523 ) 76,623 — — — — — 32,900 — 32,900

Issuance of common stock through dividend and distribution reinvestment plan — — 4,855 — — — 175,453 — — 175,453

3 unchanged sentences

Change in redemption value of noncontrolling interests — 2,237,635 — — — — ( 1,296,753 ) ( 940,882 ) — ( 2,237,635 )

Distribution paid to Common Units limited partners — ( 70,891 ) — — — — — — — —

Distribution paid to Common Unit limited partners — ( 141,729 ) — — — — — — — —

Cash dividends on Class A Common Stock ($ 1.50 per share)

— — — — — — — ( 59,004 ) — ( 59,004 )

Balance at June 30, 2022 $ 563,338 $ 3,251,290 40,551 $ 4 94,450 $ 9 $ — $ ( 1,181,343 ) $ — $ ( 1,181,330 )

For the Six Months Ended June 30, 2023

Balance at December 31, 2022 $ — $ 3,112,409 45,679 $ 5 94,270 $ 9 $ 118,840 $ ( 958,629 ) $ — $ ( 839,775 )

Redemption of Common Units — ( 5,634 ) 181 — ( 181 ) — 5,634 — — 5,634

Issuance of common stock through dividend and distribution reinvestment plan — — 6,095 — — — 175,626 — — 175,626

Retirement of treasury stock — — — — — — — ( 2,432 ) 2,432 —

Repurchase of Class A Common Stock — — ( 194 ) — — — — — ( 5,757 ) ( 5,757 )

Share-based compensation — — 212 — — — 30,839 — — 30,839

Net income — 49,517 — — — — — 26,450 — 26,450

Change in redemption value of noncontrolling interests — 227,459 — — — — ( 330,939 ) 103,480 — ( 227,459 )

Distribution paid to Common Units limited partners — ( 141,132 ) — — — — — — — —

Balance at September 30, 2022 $ — $ 3,061,861 43,082 $ 4 94,270 $ 9 $ 107,182 $ ( 941,747 ) $ — $ ( 834,552 )

KINETIK HOLDINGS INC.

6 unchanged sentences

(In thousands) (In thousands)

For the Nine Months Ended September 30, 2023

Balance at December 31, 2022 $ — $ 3,112,409 45,679 $ 5 94,270 $ 9 $ 118,840 $ ( 958,629 ) $ — $ ( 839,775 )

Redemption of Common Units — ( 5,634 ) 181 — ( 181 ) — 5,634 — — 5,634

Issuance of common stock through dividend and distribution reinvestment plan — — 8,641 1 — — 263,771 — — 263,772

Retirement of treasury stock — — — — — — — ( 5,757 ) 5,757 —

Repurchase of Class A Common Stock — — ( 194 ) — — — — — ( 5,757 ) ( 5,757 )

Share-based compensation — — 213 — — — 43,340 — — 43,340

Net income — 77,068 — — — — — 42,030 — 42,030

Change in redemption value of noncontrolling interests — 236,358 — — — — ( 339,838 ) 103,480 — ( 236,358 )

Distribution paid to Common Unit limited partners — ( 211,700 ) — — — — — — — —

Cash dividends on Class A Common Stock ($ 2.25 per share)

— — — — — — — ( 110,902 ) — ( 110,902 )

Balance at June 30, 2023 $ — $ 3,242,619 51,973 $ 5 94,089 $ 9 $ — $ ( 902,446 ) $ ( 3,325 ) $ ( 905,757 )

Balance at September 30, 2023 $ — $ 3,208,501 54,520 $ 6 94,089 $ 9 $ 91,747 $ ( 929,778 ) $ — $ ( 838,016 )

(1) Share amounts have been retrospectively restated to reflect the Company’s Stock Split, which was effected on June 8, 2022.

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For further detail, refer to Note 12—Series A Cumulative Redeemable Preferred Units in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Commission on March 7, 2023.

All outstanding Preferred Units were redeemed in 2022.

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

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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 (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.

On February 22, 2022 (the “Closing Date”), Kinetik Holdings Inc., a Delaware corporation (formerly known as Altus Midstream Company), consummated the business combination transactions contemplated by that certain 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.

The transactions contemplated by the Contribution Agreement are referred to herein as the “Transaction.” In connection with the closing of the Transaction (the “Closing”), the Company changed its name from “Altus Midstream Company” 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.

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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

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

accordingly, you should read these Condensed Consolidated Financial Statements in conjunction with our consolidated financial statements and related notes included in our 2022 Form 10-K.

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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.

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

Refer to Note 2—Business Combination to our condensed consolidated financial statements in this Form 10-Q for additional discussion.

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

Refer to Note 2—Business Combination s to our Condensed Consolidated Financial Statements herein for additional discussion.

The Company completed a two -for-one Stock Split on June 8, 2022.

All corresponding per-share and share amounts for periods prior to June 8, 2022 have been retrospectively restated in this Form 10-Q to reflect the two -for-one Stock Split, except for the number of Common Units and shares of Class C Common Stock described above in relation to the Transaction, which are presented at pre-Stock-Split amounts.

All corresponding per-share and share amounts for periods prior to June 8, 2022 have been retrospectively restated in this Form 10-Q to reflect the two -for-one Stock Split, except for the number of Common Units and shares of Class C Common Stock described above and herein in relation to the Transaction, which are presented at pre-Stock-Split amounts.

This presentation is consistent with our previous public filings and the terms of the Contribution Agreement.

1 unchanged sentence

The accounting policies that we follow are set forth in Note 2 – Summary of Significant Accounting Policies of the Notes to consolidated financial statements in our Annual Report.

There were no significant updates or revisions to our accounting policies during the six months ended June 30, 2023.

Other current assets include condensate, residue gas and NGLs inventories that are valued at the lower of cost or market.

Inventory was valued at $ 7.3 million and $ 4.8 million as of June 30, 2023 and December 31, 2022, respectively.

There were no significant updates or revisions to our accounting policies during the nine months ended September 30, 2023.

Other current assets include condensate, residue gas and NGLs inventories that are valued at the lower cost or net realizable value.

Inventory was valued at $ 9.1 million and $ 4.8 million as of September 30, 2023 and December 31, 2022, respectively.

Transactions with Affiliates

The accounts receivable from or payable to affiliates 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 controlled the Company prior to the Transaction.

Accounts receivable from affiliates was $ 16.9 million and $ 17.6 million as of June 30, 2023 and December 31, 2022, respectively.

Revenue from affiliates was $ 24.8 million and $ 30.5 million for the three months ended June 30, 2023 and 2022, respectively, and $ 50.1 million and $ 46.2 million for the six months ended June 30, 2023 and 2022, respectively.

Accrued expense due to affiliates was immaterial as of June 30, 2023 and December 31, 2022.

The Company incurred operating expenses with affiliates of $ 0.2 million and $ 0.1 million for the three months ended June 30, 2023 and 2022, respectively, and $ 0.4 million and $ 0.2 million for the six months ended June 30, 2023 and 2022, respectively.

The Company recorded cost of sales with an affiliate of $ 10.8 million and $ 3.4 million for the three months ended June 30, 2023 and 2022, respectively, and $ 25.4 million and $ 7.1 million, for the six months ended June 30, 2023 and 2022, respectively .

The Company has revenue contracts and incurs cost of sales and operating expenses with Apache, which is considered the Company’s affiliate as it owns more than 10 % of the Company’s common stock.

Accounts receivable from this affiliate was $ 15.0 million and $ 17.6 million as of September 30, 2023 and December 31, 2022, respectively.

Revenue from Apache was $ 13.3 million and $ 19.9 million for the three months ended September 30, 2023 and 2022, respectively, and $ 34.5 million and $ 59.4 million for the nine months ended September 30, 2023 and 2022, respectively.

Accounts payable and accrued expense due to this affiliate was immaterial as of September 30, 2023 and December 31, 2022.

The Company incurred immaterial operating expenses with Apache for the three and nine months ended September 30, 2023.

In addition, the Company incurs cost of sales with two of its equity method investment (“EMI”) pipeline entities, Permian Highway Pipeline LLC (“PHP”) and Breviloba, LLC (“Breviloba”).

The Company pays a demand fee to PHP and pays a capacity fee to Breviloba for certain volumes moving on the Shin Oak NGL Pipeline.

For the three months ended September 30, 2023 and 2022, the Company recorded cost of sales of $ 2.4 million and $ 3.7 million, respectively, and $ 6.4 million and $ 10.8 million, for the nine months ended September 30, 2023 and 2022, respectively, with these affiliates.

BUSINESS COMBINATIONS

As of June 30, 2023, our allocation of purchase price for acquisitions made during 2023 and 2022 are detailed below:

As of September 30, 2023, our allocation of purchase price for acquisitions made during 2023 and 2022 are detailed below:

Acquisition Date Acquisition Considerations Transferred Current Assets Property Plant & Equipment Intangible Assets Other Long Term Assets Goodwill Liabilities Noncontrolling Interest

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In the first quarter of 2023, the Partnership closed on a purchase and sale agreement for certain midstream assets for $ 65.0 million together with a new 20-year midstream service agreement.

Midstream assets acquired consisted of water gathering and disposal assets and intangible right-of-way assets.

As the net book value of the acquired assets were approximate to their fair market value, consideration was allocated to property, plant and equipment and intangibles based on the ratio of historical long-lived assets and intangible assets acquired.

In addition, the Partnership entered into an incentive and acceleration agreement related to near term supplemental development activities on acreage dedicated for midstream services to affiliates of the Partnership.

Such development activities will begin in 2023 and are subject to semi-annual performance milestones and subject to refund with consequential monetary penalty if not satisfied.

Such development activities began in October 2023 and are subject to semi-annual performance milestones and subject to refund with consequential monetary penalty if not satisfied.

Consideration for the incentive and acceleration agreement of $ 60.0 million was capitalized as a contract asset in accordance with ASC 606, of which $ 4.7 million was included in “Prepaid and Other Current Assets” and $ 55.3 million was included in “Deferred Charges and Other Assets” in the Condensed Consolidated Balance Sheet as of the date of acquisition.

These transactions were accounted for as a business combination in accordance with ASC 805.

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

The Company is continuing its review of these matters during the measurement period.

Acquisition-related costs were immaterial for this transaction.

Acquired net assets from this business combination were included in the Midstream Logistic segment.

Altus Midstream Company

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The Company recorded goodwill of $ 5.1 million as of December 31, 2022 related to operational synergies.

The Company incurred acquisition-related costs of nil and $ 0.7 million for the three months ended June 30, 2023 and 2022, respectively, and nil and $ 6.4 million for the six months ended June 30, 2023 and 2022, respectively, related to the Transaction.

Goodwill was included in the Midstream Logistics segment.

The Company incurred acquisition-related costs of nil and $ 0.1 million for the three months ended September 30, 2023 and 2022, respectively, and nil and $ 6.4 million for the nine months ended September 30, 2023 and 2022, respectively, related to the Transaction.

REVENUE RECOGNITION

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

Three Months Ended June 30, Six Months Ended June 30,

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

2023 2022 2023 2022

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Total revenues and other $ 330,301 $ 325,176 $ 907,544 $ 917,997

There have been no significant changes to the Company’s contracts with customers during the three and six months ended June 30, 2023.

The Company recognized revenues from minimum volume commitment (“MVC”) deficiency payments of $ 0.1 million and $ 0.3 million for the three months ended June 30, 2023 and 2022, respectively, and $ 1.2 million and $ 0.3 million for the six months ended June 30, 2023 and 2022, respectively.

There have been no significant changes to the Company’s contracts with customers during the three and nine months ended September 30, 2023.

The Company recognized revenues from minimum volume commitment (“MVC”) deficiency payments of $ 0.4 million and $ 0.7 million for the three months ended September 30, 2023 and 2022, respectively, and $ 1.6 million and $ 1.0 million for the nine months ended September 30, 2023 and 2022, 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 June 30, 2023:

Fiscal Year (In thousands)

1 unchanged sentence

Thereafter 249,826

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.

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

Contract Liabilities

The following table provides information about contract liabilities from contracts with customers as of June 30, 2023:

The following table provides information about contract liabilities from contracts with customers as of September 30, 2023:

(In thousands)

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Cash received in advance and not recognized as revenue 7,826

Balance at June 30, 2023 31,841

Balance at September 30, 2023 31,307

Current portion 5,807

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

As of June 30, 2023 and December 31, 2022, the Company had contract acquisition cost assets of $ 74.5 million and $ 17.8 million, respectively.

As of September 30, 2023 and December 31, 2022, the Company had contract acquisition cost assets of $ 72.8 million and $ 17.8 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 contracts.

The Company recognized cost of sales associated with these assets of $ 1.7 million and $ 0.4 million for the three months ended June 30, 2023 and 2022, respectively, and $ 3.3 million and $ 0.9 million for the six months ended June 30, 2023 and 2022, respectively.

The Company recognized cost of sales associated with these assets of $ 1.7 million and $ 0.4 million for the three months ended September 30, 2023 and 2022, respectively, and $ 5.0 million and $ 1.3 million for the nine months ended September 30, 2023 and 2022, respectively.

PROPERTY, PLANT AND EQUIPMENT

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

June 30, December 31,

September 30, December 31,

(In thousands)

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

The Company recorded $ 38.9 million and $ 36.6 million of depreciation expense for the three months ended June 30, 2023 and 2022, respectively, and $ 77.3 million and $ 67.5 million of depreciation expense for the six months ended June 30, 2023 and 2022, respectively.

There were no triggering events for property, plant and equipment during the three and six months ended June 30, 2023 and 2022.

The Company recorded $ 39.4 million and $ 34.9 million of depreciation expense for the three months ended September 30, 2023 and 2022, respectively, and $ 116.6 million and $ 102.4 million of depreciation expense for the nine months ended September 30, 2023 and 2022, respectively.

There were no triggering events for property, plant and equipment during the three and nine months ended September 30, 2023 and 2022.

GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill totaled $ 5.1 million as of June 30, 2023 and December 31, 2022.

The goodwill of $ 5.1 million is within the Midstream Logistics segment, and pertains to excess of the purchase price over net assets acquired in connection with the Transaction.

Goodwill is tested at least annually as of November 30 of each year, or more frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value.

Company’s management assesses whether there have been events or circumstances that trigger 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 June 30, 2023.

Intangible Assets

Intangible assets, net, are comprised of the following:

June 30, December 31,

September 30, December 31,

(In thousands)

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Right-of-way assets relate primarily to underground pipeline easements, 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.

On June 30, 2023, remaining weighted average amortization periods for customer contracts and right of way assets were approximately 7.20 years and 6.90 years, respectively.

Overall remaining weighted average amortization period for the intangible assets as of June 30, 2023 was approximately 7.16 years.

The Company recorded $ 30.6 million and $ 30.0 million of amortization expense for the three months ended June 30, 2023 and 2022, respectively, and $ 61.1 million and $ 60.1 million of amortization expense for the six months ended June 30, 2023 and 2022, respectively.

There was no impairment recognized on intangible assets for the three and six months ended June 30, 2023 and 2022.

The right of way agreements are typically 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.

On September 30, 2023, the remaining weighted average amortization periods for customer contracts and right of way assets were approximately 7.08 years and 6.86 years, respectively.

The overall remaining weighted average amortization period for the intangible assets as of September 30, 2023 was approximately 7.05 years.

The Company recorded $ 30.6 million and $ 30.1 million of amortization expense for the three months ended September 30, 2023 and 2022, respectively, and $ 91.6 million and $ 90.2 million of amortization expense for the nine months ended September 30, 2023 and 2022, respectively.

There was no impairment recognized on intangible assets for the three and nine months ended September 30, 2023 and 2022.

EQUITY METHOD INVESTMENTS

As of June 30, 2023, the Company owned investments in the following long-haul pipeline entities in the Permian Basin.

As of September 30, 2023, 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.

1 unchanged sentence

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

June 30, December 31,

September 30, December 31,

Ownership 2023 2022

(In thousands)

Permian Highway Pipeline LLC ("PHP") 53.3 % $ 1,603,140 $ 1,474,800

Breviloba, LLC ("Breviloba") 33.0 % 448,816 455,057

Gulf Coast Express Pipeline LLC ("GCX") 16.0 % 438,156 451,483

53.3 % $ 1,638,319 $ 1,474,800

Additionally, as of June 30, 2023, the Company owned 15.0 % of Epic Crude Holdings, LP (“EPIC”).

33.0 % 446,314 455,057

16.0 % 434,580 451,483

$ 2,519,213 $ 2,381,340

Additionally, as of September 30, 2023, the Company owned 15.0 % of Epic Crude Holdings, LP (“EPIC”).

However, no dollar value was assigned through the Transaction’s purchase price allocation as an 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 and six months ended June 30, 2023.

The unamortized basis differences included in the EMI pipeline balances were $ 356.1 million and $ 363.2 million as of June 30, 2023 and December 31, 2022, respectively.

No additional contribution was made to EPIC and no distribution or equity income was received from EPIC during the three and nine months ended September 30, 2023.

The unamortized basis differences included in the EMI pipeline balances were $ 352.8 million and $ 363.2 million as of September 30, 2023 and December 31, 2022, respectively.

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 equity income over the useful lives of the underlying pipeline assets.

There was capitalized interest of $ 17.5 million and $ 13.4 million as of June 30, 2023 and December 31, 2022, respectively.

There was capitalized interest of $ 21.6 million and $ 13.4 million as of September 30, 2023 and December 31, 2022, 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 six months ended June 30, 2023:

The following table presents the activity in the Company’s EMIs for the nine months ended September 30, 2023:

Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC Total

1 unchanged sentence

Balance at December 31, 2022 $ 1,474,800 $ 455,057 $ 451,483 $ 2,381,340

Acquisitions — — —

Contributions 194,124 — — 194,124

Distributions (1)

( 134,095 ) ( 32,515 ) ( 45,074 ) ( 211,684 )

Capitalized interest 8,605 — — 8,605

1 unchanged sentence

94,885 23,772 28,171 146,828

Balance at June 30, 2023 $ 1,603,140 $ 448,816 $ 438,156 $ 2,490,112

(1) For the six months ended June 30, 2023, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $ 3.7 million from PHP, $ 0.3 million from Breviloba, LLC and $ 3.1 million from GCX.

Balance at September 30, 2023 $ 1,638,319 $ 446,314 $ 434,580 $ 2,519,213

(1) Distributions consisted of distributions from a return on investment of $ 205.9 million, which was included in cash flow from operating activities and distribution from a return of investment of $ 5.8 million, which was included in cash flow from investing activities.

(2) For the nine months ended September 30, 2023, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $ 5.6 million from PHP, $ 0.5 million from Breviloba, LLC and $ 4.7 million from GCX.

Summarized Financial Information

The following tables represent selected data for the Company’s EMI pipelines (on a 100 percent basis) for the three and six months ended June 30, 2023 and 2022.

Three Months Ended June 30,

The following tables represent selected data for the Company’s EMI pipelines (on a 100 percent basis) for the three and nine months ended September 30, 2023 and 2022.

Three Months Ended September 30,

Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC

3 unchanged sentences

Net income 66,630 25,223 68,327 69,926 22,060 70,742

Six Months Ended June 30,

Nine Months Ended September 30,

Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC

4 unchanged sentences

DEBT AND FINANCING COSTS

The following table summarizes the Company’s debt obligations as of June 30, 2023 and December 31, 2022:

June 30, December 31,

The following table summarizes the Company’s debt obligations as of September 30, 2023 and December 31, 2022:

September 30, December 31,

(In thousands)

9 unchanged sentences

Total long-term debt, net $ 3,606,962 $ 3,368,510

Current portion, net — —

Long-term portion of debt, net $ 3,625,799 $ 3,368,510

(1) Excluded unamortized debt issuance cost related to the revolving line of credit.

Unamortized debt issuance cost associated with the revolving line of credit was $ 6.1 million and $ 6.9 million as of June 30, 2023 and December 31, 2022, respectively.

Unamortized debt issuance cost associated with the revolving line of credit was $ 5.7 million and $ 6.9 million as of September 30, 2023 and December 31, 2022, respectively.

The current and non-current portion of the unamortized debt issuance costs related to the revolving credit facilities were included in the “Prepaid and other current assets” and the “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets.

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

4 unchanged sentences

Total financing costs, net of capitalized interest $ 45,009 $ 40,464 $ 130,443 $ 92,585

As of June 30, 2023 and December 31, 2022, unamortized debt issuance costs associated with the senior unsecured notes and the term loan were $ 24.2 million and $ 26.5 million, respectively.

As of September 30, 2023 and December 31, 2022, unamortized debt issuance costs associated with the senior unsecured notes and the term loan were $ 23.0 million and $ 26.5 million, respectively.

Compliance with our Covenants

2 unchanged sentences

The 5.875 % Senior Notes due 2030 also contain covenants and restrictive provisions, which may, among other things, limit the Partnership’s and its subsidiaries’ ability to create liens to secure indebtedness and the Partnership’s ability to consolidate or combine with or merge into any other person.

As of June 30, 2023, the Partnership was in compliance with all customary and financial covenants.

As of September 30, 2023, the Partnership was in compliance with all customary and financial covenants.

Fair Value of Financial Instruments

The fair value of the Company and its subsidiaries’ consolidated debt as of June 30, 2023 and December 31, 2022 was $ 3.63 billion and $ 3.34 billion, respectively.

On June 30, 2023, the senior unsecured notes’ fair value was based on Level 1 inputs and the term loan and revolving line of credit’s fair value was based on Level 3 inputs.

The fair value of the Company and its subsidiaries’ consolidated debt as of September 30, 2023 and December 31, 2022 was $ 3.54 billion and $ 3.34 billion, respectively.

On September 30, 2023, the senior unsecured notes’ fair value was based on Level 1 inputs and the term loan and revolving line of credit’s fair value was based on Level 3 inputs.

ACCRUED EXPENSES

The following table provides detail of the Company’s current accrued expenses on June 30, 2023 and December 31, 2022:

June 30, December 31,

The following table provides detail of the Company’s current accrued expenses on September 30, 2023 and December 31, 2022:

September 30, December 31,

(In thousands)

6 unchanged sentences

Total current accrued expenses $ 188,062 $ 173,914

Accrued product purchases mainly accrue the liabilities related to producer payments and any additional business-related miscellaneous fees we owe to third parties, such as transport or capacity fees as of June 30, 2023.

Components of lease costs are included in the Condensed Consolidated Statements of Operations as general and administrative expense for real-estate leases and operating expense for non-real estate leases.

Total operating lease costs were $ 11.8 million and $ 9.1 million for the three months ended June 30, 2023 and 2022, respectively, and $ 22.6 million and $ 18.3 million for the six months ended June 30, 2023 and 2022, respectively.

Short-term lease costs were $ 1.0 million and $ 1.5 million for the three months ended June 30, 2023 and 2022, respectively, and $ 1.0 million and $ 4.0 million for the six months ended June 30, 2023 and 2022, respectively.

Variable lease cost was immaterial for the three and six months ended June 30, 2023 and 2022.

Total operating lease costs were $ 11.7 million and $ 9.9 million for the three months ended September 30, 2023 and 2022, respectively, and $ 34.3 million and $ 28.2 million for the nine months ended September 30, 2023 and 2022, respectively.

Short-term lease costs were $ 1.0 million and $ 1.0 million for the three months ended September 30, 2023 and 2022, respectively, and $ 2.0 million and $ 5.1 million for the nine months ended September 30, 2023 and 2022, respectively.

Variable lease cost was immaterial for the three and nine months ended September 30, 2023 and 2022.

The following table presents other supplemental lease information:

Three Months Ended June 30, Six Months Ended June 30,

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

2023 2022 2023 2022

8 unchanged sentences

On February 22, 2022, the Company consummated a business combination with Altus 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;

In connection with the closing, (i) Contributor contributed all the equity interests of the Contributed Entities to the Partnership;

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

1 unchanged sentence

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 Sheets.

During the first three and six months of 2023, 180,962 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 94,089,038 Common Units and an equal number of Class C Common Stock issued and outstanding as of June 30, 2023.

The Common Units fair value was approximately $ 3.24 billion as of June 30, 2023.

As of June 30, 2023, there were 51,973,472 and 94,089,038 shares, respectively, of Class A Common Stock and Class C Common Stock issued and outstanding (collectively, “Common Stock”).

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

During the first nine months of 2023, 180,962 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 94,089,038 Common Units and an equal number of Class C Common Stock issued and outstanding as of September 30, 2023.

The Common Units fair value was approximately $ 3.21 billion as of September 30, 2023.

As of September 30, 2023, there were 54,519,658 and 94,089,038 shares, respectively, of Class A Common Stock and Class C Common Stock issued and outstanding (collectively, “Common Stock”).

Public Warrants

As of June 30, 2023, there were 12,577,350 Public Warrants (as defined below) outstanding.

As of September 30, 2023, there were 12,577,350 Public Warrants (as defined below) outstanding.

Each whole public warrant entitles the holder to purchase one tenth of a share of Class A Common Stock at a price of $ 115.00 per share (the “Public Warrants”).

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

The Public Warrants 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.

1 unchanged sentence

Private Placement Warrants

As of June 30, 2023, 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 $ 6 thousand for the Public Warrants and a fair value of $ 4 thousand for the Private Warrants as of June 30, 2023 on the Condensed Consolidated Balance Sheets in other non-current liabilities.

As of September 30, 2023, there were 6,364,281 Private Placement Warrants (as defined below) outstanding, of which Apache holds 3,182,140 .

The private placement warrants 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 $ 9 thousand for the Public Warrants and a fair value of $ 6 thousand for the Private Warrants as of September 30, 2023 on the Condensed Consolidated Balance Sheets in “Other Current Liabilities”.

Refer to Note 11—Fair Value Measurement in the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding valuation of the Warrants.

4 unchanged sentences

The repurchases will depend on market conditions and may be discontinued at any time without prior notice.

For the three and six months ended June 30, 2023, the Company repurchased 112,312 shares at a total cost of $ 3.3 million and 194,174 shares at a total cost of $ 5.8 million, respectively.

During the three and six months ended June 30, 2023, the Company retired 81,861 shares of treasury stock.

During the quarter ended September 30, 2023, the Company did not repurchase any of its Class A Common Stock under the Repurchase Program.

During the first half of 2023, the Company repurchased 194,174 of its Class A Common Stock at a total cost of $ 5.8 million.

The Company retired all treasury stock as of September 30, 2023.

For more information regarding the 1% U.S.

2 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Share Repurchase Program,” included in this Quarterly Report on Form 10-Q.

On May 17, 2023 the Company made cash dividend payments of $ 19.4 million to holders of Class A Common Stock and Class C Common Units and $ 88.0 million was reinvested in shares of Class A Common Stock by Reinvestment Holders.

Cash dividend payments to holders of Class A Common Stock and Class C Common Units totaled $ 36.5 million for the six months ended June 30, 2023, of which $ 175.6 million was reinvested in shares of Class A Common Stock by Reinvestment Holders.

On August 16, 2023, the Company made cash dividend payments of $ 22.0 million to holders of Class A Common Stock and Class C Common Units and $ 88.1 million was reinvested in shares of Class A Common Stock by Reinvestment Holders.

Cash dividend payments to holders of Class A Common Stock and Class C Common Units totaled $ 58.6 million and $ 263.8 million was reinvested in shares of Class A Common Stock by Reinvestment Holders for the nine months ended September 30, 2023.

FAIR VALUE MEASUREMENTS

13 unchanged sentences

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.

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

Level 2 inputs :

7 unchanged sentences

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 June 30, 2023 and December 31, 2022:

June 30, 2023

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:

September 30, 2023

Level 1 Level 2 Level 3 Total

4 unchanged sentences

Commodity swaps $ — $ 5,245 $ — $ 5,245

Interest rate derivatives — 3,761 — 3,761

Public warrants 9 — — 9

13 unchanged sentences

Our derivative contracts consist of interest rate swaps and commodity swaps.

Valuation of these derivative contracts involved both observable publicly quoted prices and certain inputs to the credit valuation that may not be readily observable in the marketplace.

Valuation of these derivative contracts involves both observable publicly quoted prices and certain inputs to the credit valuation that may not be readily observable in the marketplace.

As such our derivative contracts are classified as Level 2 in the hierarchy.

5 unchanged sentences

Change in fair value of the warrants since closing of the Transaction through reporting date was recorded in “Interest and other income” of the Condensed Consolidated Statements of Operations.

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

There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the six months ended June 30, 2023 and 2022.

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

There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the nine months ended September 30, 2023 and 2022.

DERIVATIVES AND HEDGING ACTIVITIES

1 unchanged sentence

To minimize counterparty credit risk in derivative instruments, the Company enters into transactions with high credit-rating counterparties.

The Company did not elect to apply hedge accounting to these derivative contracts and recorded the fair value of the derivatives on the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022.

Interest Rate Risk

4 unchanged sentences

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.

During November 2022 and March 2023, the Company entered into three interest rate swaps with total notional amounts of $ 2.25 billion that are effective on May 1, 2023 and mature on May 31, 2025.

In November 2022 and March 2023, the Company entered into three interest rate swaps with total notional amounts of $ 2.25 billion that are effective on May 1, 2023 and mature on May 31, 2025.

Under these swaps, the Company pays a fixed rate ranging from 4.38 % to 4.49 % for the respective notional amounts.

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 assets were $ 17.8 million and $ 2.7 million as of June 30, 2023 and December 31, 2022, respectively.

Interest rate swap derivative liabilities were $ 3.8 million and $ 8.3 million as of June 30, 2023 and December 31, 2022, respectively.

The Company recorded cash settlements on interest rate swap derivatives of $ 2.4 million and $ 12.0 million for the three months ended June 30, 2023 and 2022, respectively, and $ 2.4 million and $ 11.3 million for the six months ended June 30, 2023 and 2022, respectively.

In addition, the Company recorded fair value adjustments of $ 39.3 million and $ 2.4 million for the change in fair value of the interest rate swap derivatives for the three months ended June 30, 2023 and 2022, respectively, and $ 22.1 million and $ 14.0 million for the six months ended June 30, 2023 and 2022, respectively, in “Interest expense” of the Condensed Consolidated Statements of Operations.

Interest rate swap derivative assets were $ 21.8 million and $ 2.7 million as of September 30, 2023 and December 31, 2022, respectively.

Interest rate swap derivative liabilities were nil and $ 8.3 million as of September 30, 2023 and December 31, 2022, respectively.

The Company recorded cash settlements on interest rate swap derivatives of $ 4.7 million and nil for the three months ended September 30, 2023 and 2022, respectively, and $ 7.1 million and $ 11.3 million for the nine months ended September 30, 2023 and 2022, respectively, in “Interest expense” of the Condensed Consolidated Statements of Operations.

In addition, the Company recorded fair value adjustments of $ 12.5 million and nil for the change in fair value of the interest rate swap derivatives for the three months ended September 30, 2023 and 2022, respectively, and $ 34.6 million and $ 14.0 million for the nine months ended September 30, 2023 and 2022, respectively, in “Interest expense” of the Condensed Consolidated Statements of Operations.

Commodity Price Risk

3 unchanged sentences

Management regularly reviews the Company’s potential exposure to commodity price risk and manages exposure of such risk through commodity hedge contracts.

During the past two quarters, the Company has entered into numerous commodity swap contracts based on the OPIS NGL Mont Belvieu prices for ethane, propane and butane, the Waha Basis index and the NYMEX WTI index.

During the past twelve months, the Company entered into multiple commodity swap contracts based on the OPIS NGL Mont Belvieu prices for ethane, propane and butane, the Waha Basis index and the NYMEX WTI index.

These contracts are on various notional quantities of NGLs, natural gas and crude.

1 unchanged sentence

These index swaps are effective over the next 1 to 17 months and are used to hedge against location price risk of the respective commodity resulting from supply and demand volatility and protect cash flows against price fluctuations.

The table below presents detailed information of commodity swaps outstanding as of June 30, 2023 (in thousands, except volumes):

June 30, 2023

The table below presents detailed information of commodity swaps outstanding as of September 30, 2023 (in thousands, except volumes):

September 30, 2023

Commodity Instruments Unit Volume Net Fair Value

2 unchanged sentences

Crude Commodity Swap Bbl 171,900 ( 1,341 )

Commodity Swap Bbl 109,600 ( 537 )

Natural Gas Basis Spread Swaps Commodity Swap MMBtus 203,200 138

1 unchanged sentence

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

Commodity swap derivative assets were $ 9.9 million and $ 4.3 million as of June 30, 2023 and December 31, 2022, respectively.

Commodity swap derivative liabilities were $ 4.6 million and $ 5.7 million as of June 30, 2023 and December 31, 2022, respectively.

The Company recorded cash settlements on commodity swap derivatives of $ 6.9 million and nil for the three months ended June 30, 2023 and 2022, respectively, and $ 7.9 million and $ 0.2 million for the six months ended June 30, 2023 and 2022, respectively.

In addition, the Company recorded fair value adjustments of $ 9.1 million and nil for the three months ended June 30, 2023 and 2022, respectively, and $ 14.5 million and nil for the change in fair value of commodity swap derivatives for the six months ended June 30, 2023 and 2022, respectively, in “Product revenue” of the Condensed Consolidated Statements of Operations.

Commodity swap derivative assets were $ 2.3 million and $ 4.3 million as of September 30, 2023 and December 31, 2022, respectively.

Commodity swap derivative liabilities were $ 5.2 million and $ 5.7 million as of September 30, 2023 and December 31, 2022, respectively.

The Company recorded cash settlements on commodity swap derivatives of $ 0.2 million and nil for the three months ended September 30, 2023 and 2022, respectively, and $ 8.0 million and $ 0.2 million for the nine months ended September 30, 2023 and 2022, respectively, in “Product revenue” of the Condensed Consolidated Statements of Operations.

In addition, the Company recorded fair value adjustments of $ 8.1 million and nil for the three months ended September 30, 2023 and 2022, respectively, and $ 6.5 million and nil for the change in fair value of commodity swap derivatives for the nine months ended September 30, 2023 and 2022, respectively, in “Product revenue” of the Condensed Consolidated Statements of Operations.

SHARE-BASED COMPENSATION

14 unchanged sentences

The 181,000 RSUs that vested immediately were granted to employees who received their bonus in Company stock in lieu of cash bonus awards.

With respect to the above shares, the Company recorded compensation expenses of $ 13.3 million and $ 12.2 million for the three months ended June 30, 2023 and 2022, respectively, and $ 30.8 million and $ 18.3 million for the six months ended June 30, 2023 and 2022, respectively, based on a straight-line amortization of the associated awards’ fair value over the respective vesting life of the shares.

During the second quarter of 2023, the Company granted approximately 16,000 RSUs to certain members of the Board and vested immediately on grant date.

With respect to the above grants, the Company recorded compensation expenses of $ 12.5 million and $ 12.7 million for the three months ended September 30, 2023 and 2022, respectively, and $ 43.3 million and $ 31.0 million for the nine months ended September 30, 2023 and 2022, respectively, based on a straight-line amortization of the associated awards’ fair value over the respective vesting life of the shares.

The Company is subject to U.S.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

3 unchanged sentences

Effective tax rate 2.93 % 2.77 % 1.68 % 1.10 %

The effective tax rate for the three and six months ended June 30, 2023 was lower than the statutory rate mainly due to the impact of tax attributable to noncontrolling interests related to the Common Units limited partners and valuation allowance.

The effective tax rate for the three and nine months ended September 30, 2023 was lower than the statutory rate mainly due to the impact of tax attributable to noncontrolling interests related to the Common Unit limited partners and valuation allowance.

NET INCOME PER SHARE

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

3 unchanged sentences

( 4,414 ) ( 4,174 ) ( 12,996 ) ( 8,358 )

Excess preferred carrying amount over consideration paid (2)

— 32,900 — 32,900

Total net income attributable to Class A common shareholders $ 11,166 $ 43,662 $ 29,034 $ 49,781

2 unchanged sentences

Dilutive effect of unvested Class A common shares (4)(5)

123 39 255 33

Weighted average shares outstanding - diluted 53,463 41,855 50,719 40,075

Net income (loss) available per common share - basic $ 0.41 $ 0.06 $ 0.36 $ 0.16

Net income (loss) available per common share - diluted $ 0.41 $ 0.06 $ 0.36 $ 0.16

Net income available per common share - basic

$ 0.21 $ 1.04 $ 0.58 $ 1.24

Net income available per common share - diluted

$ 0.21 $ 1.04 $ 0.57 $ 1.24

(1) Represents dividends paid to unvested restricted Class A common shareholders.

(2) Represented excess of carrying value of redeemable noncontrolling interest Preferred Units over redemption price at redemption.

(3) Share and per share amounts have been retrospectively restated to reflect the Company’s reverse stock split, which was effected June 8, 2022.

4 unchanged sentences

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

As of June 30, 2023 and December 31, 2022, there were no accruals for loss contingencies.

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

As of September 30, 2023 and December 31, 2022, there were no accruals for loss contingencies.

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

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.

5 unchanged sentences

Environmental Matters

As an owner of infrastructure assets 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.

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

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.

The Company is not aware of any environmental claims existing as of June 30,

2023, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.

The Company is not aware of any environmental claims existing as of September 30, 2023, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.

Contingent Liabilities

5 unchanged sentences

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

PDC’s actual annual Mcf volume did not exceed the incentive rate during the past three years, and the Company did not expect PDC’s actual annual Mcf volume amounts to exceed forecasted amounts as of June 30, 2023;

therefore, the estimated fair value of the contingent consideration liability was nil as of June 30, 2023 and December 31, 2022.

therefore, the estimated fair value of the contingent consideration liability was nil as of September 30, 2023 and December 31, 2022.

Original Altus Transaction

7 unchanged sentences

Our $ 1.25 billion senior unsecured Revolving Credit Facility maturing on June 8, 2027 can be used for letters of credit.

Our obligations with respect to related letters of credit totaled $ 12.6 million and nil as of June 30, 2023 and December 31, 2022, respectively.

Our obligations with respect to related letters of credit totaled $ 12.6 million and nil as of September 30, 2023 and December 31, 2022, 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.

7 unchanged sentences

• Pipeline Transportation:

The Pipeline Transportation segment consists of equity investment interests in four Permian Basin pipelines that access various points along the Texas Gulf Coast, Kinetik NGL Pipeline and Delaware Link Pipeline that is under construction.

The current operating pipelines transport crude oil, natural gas and NGLs.

The Midstream Logistics segment accounts for more than 99 % of the Company’s operating revenues, cost of sales (excluding depreciation and amortization), operating expenses and ad valorem expenses.

The Pipeline Transportation segment

contains all of the Company’s equity method investments, which contribute more than 99 % of the segment’s EBITDA.

The Pipeline Transportation segment contains all of the Company’s equity method investments, which contribute more than 99 % of the segment’s EBITDA.

Corporate and Other contains the Company’s executive and administrative functions, including 81 % of the Company’s general and administrative expenses and all of the Company’s debt service costs.

The following tables present the reconciliation of the segment profit measure as of and for the three and six months periods ended June 30, 2023 and 2022:

The following tables present the reconciliation of the segment profit measure as of and for the three and nine months periods ended September 30, 2023 and 2022:

Midstream Logistics Pipeline Transportation Corporate and Other (1)

(In thousands)

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

Segment net income (loss) including noncontrolling interests $ 56,583 $ 50,598 $ ( 64,050 ) $ 43,131

6 unchanged sentences

Loss on disposal of assets 2,927 — — 2,927

Acquisition transaction costs 2 — — 2

Unrealized loss on derivatives

8,259 — — 8,259

Integration costs 21 — — 21

Acquisition transaction costs — — 378 378

Other one-time costs or amortization 1,529 — 1,133 2,662

Warrant valuation adjustment — — 4 4

Gain on redemption of mandatorily redeemable Preferred units — — — —

Unrealized gain on derivatives 2,678 — — 2,678

Interest income

Equity income from unconsolidated affiliates — 50,754 — 50,754

3 unchanged sentences

(In thousands)

For the Three Months Ended June 30, 2022

Segment net income including noncontrolling interests $ 14,563 $ 46,277 $ 70,608 $ 131,448

For the Three Months Ended September 30, 2022

Segment net income (loss) including noncontrolling interests $ 65,525 $ 44,750 $ ( 60,853 ) $ 49,422

Interest expense 7 — 40,457 40,464

5 unchanged sentences

Loss on disposal of assets 3,946 — — 3,946

Loss on debt extinguishment 27,983 ( 8 ) — 27,975

Integration costs 14 81 2,243 2,338

1 unchanged sentence

Other one-time costs or amortization 2,945 162 645 3,752

Gain on redemption of mandatorily redeemable Preferred units — — 5,087 5,087

Gain on embedded derivative — — 488 488

4 unchanged sentences

(In thousands)

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Segment net income (loss) including noncontrolling interests $ 163,794 $ 146,524 $ ( 191,220 ) $ 119,098

6 unchanged sentences

Loss on disposal of assets 15,166 — — 15,166

Loss (gain) on debt extinguishment — — — —

Unrealized loss on derivatives 616 — — 616

Integration costs 29 — 956 985

1 unchanged sentence

Other one-time costs or amortization 5,310 — 2,235 7,545

Interest income

Warrant valuation adjustment — — 73 73

Unrealized gain on derivatives 7,643 — — 7,643

Gain on embedded derivative — — — —

Equity income from unconsolidated affiliates — 146,828 — 146,828

4 unchanged sentences

(In thousands)

For the Six Months Ended June 30, 2022

Segment net income including noncontrolling interests $ 23,749 $ 75,412 $ 53,676 $ 152,837

For the Nine Months Ended September 30, 2022

Segment net income (loss) including noncontrolling interests $ 89,274 $ 120,162 $ ( 7,177 ) $ 202,259

Interest expense (income) 47,411 ( 664 ) 45,838 92,585

22 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q, for a definition and reconciliation to the most directly comparable GAAP measure.

The following tables present the revenue for individual operating segment for the three and six month periods ended June 30, 2023 and 2022:

The following tables present the revenue for the individual operating segments for the three and nine month periods ended September 30, 2023 and 2022:

Midstream Logistics Pipeline Transportation Consolidated

(In thousands)

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

Revenue $ 324,863 $ 766 $ 325,629

3 unchanged sentences

(In thousands)

For the Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Revenue $ 320,667 $ 733 $ 321,400

3 unchanged sentences

(In thousands)

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Revenue $ 894,669 $ 2,190 $ 896,859

3 unchanged sentences

(In thousands)

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Revenue $ 907,771 $ 733 $ 908,504

1 unchanged sentence

Total segment operating revenue $ 917,258 $ 739 $ 917,997

The following table presents total assets for each operating segment as of June 30, 2023 and December 31, 2022:

June 30, December 31,

The following table presents total assets for each operating segment as of September 30, 2023 and December 31, 2022:

September 30, December 31,

(In thousands)

5 unchanged sentences

Total assets $ 6,286,016 $ 5,919,711

(1) Includes investment in unconsolidated affiliates of $ 2.49 billion and $ 2.38 billion as of June 30, 2023 and December 31, 2022, respectively .

(1) Includes investment in unconsolidated affiliates of $ 2.52 billion and $ 2.38 billion as of September 30, 2023 and December 31, 2022, respectively .

SUBSEQUENT EVENTS

On July 20, 2023, the Board declared a cash dividend of $ 0.75 per share on the Company’s Class A Common Stock which will be payable to stockholders of record as of August 4, 2023 on August 16, 2023.

The Company, through its ownership of the general partner of the Partnership, declared a distribution of $ 0.75 per Common Unit from the Partnership to the holders of Common Units, which will be payable on August 16, 2023..

On November 1, 2023, the Board declared a cash dividend of $ 0.75 per share on the Company’s Class A Common Stock which will be payable to stockholders of record as of November 13, 2023 on November 22, 2023.

Core Shareholders will reinvest 100% of dividends received on Class C Common Units based on the Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”).

On November 9, 2023, all of the Company’s 12,577,350 Public Warrants and 6,364,281 Private Placement Warrants expired.

No warrant was exercised prior to expiration.

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