What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-09 compared with 2022-08-09 · 236 added, 249 removed, 757 unchanged (39% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three Months Ended

September 30,* Nine Months Ended

September 30,*

2022 2021 2022 2021

11 unchanged sentences

Depreciation and amortization 65,005 57,154 192,609 170,291

Loss on disposal of assets 8,546 422 8,656 454

Loss (gain) on disposal of assets 3,946 ( 37 ) 12,602 417

Total operating costs and expenses 279,375 150,546 812,520 402,217

4 unchanged sentences

Gain (loss) on debt extinguishment — ( 56 ) ( 27,975 ) 4

Unrealized gain on embedded derivative 91,448 — 88,562 —

Gain on embedded derivative 488 — 89,050 —

Interest expense ( 40,464 ) ( 30,541 ) ( 92,585 ) ( 88,458 )

1 unchanged sentence

Total other income (expense), net 5,027 ( 10,193 ) 99,026 ( 39,621 )

Income (loss) before income taxes 131,610 ( 15,366 ) 153,675 2,770

Income before income taxes 50,828 5,847 204,503 8,617

Income tax expense 1,406 1,207 2,244 1,207

Net income (loss) including noncontrolling interest 131,448 ( 15,366 ) 152,837 2,770

Net income including noncontrolling interest 49,422 4,640 202,259 7,410

Net income attributable to Preferred Unit limited partners 708 — 115,203 —

Net Income (loss) attributable to common shareholders 21,946 ( 15,366 ) 38,342 2,770

Net income (loss) attributable to Common Unit limited partners 15,508 ( 15,366 ) 28,039 2,770

Net Income attributable to common shareholders 48,714 4,640 87,056 7,410

Net income attributable to Common Unit limited partners 33,778 4,640 61,817 7,410

Net income attributable to Class A Common Shareholders $ 14,936 $ — $ 25,239 $ —

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* 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 in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.

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

** Share amounts have been retroactively restated to reflect the Company’s Stock Split (as defined in Note 10 — Equity and Warrants ), which was effected on June 8, 2022.

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, December 31,

September 30, December 31,

(In thousands, except share amounts)

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Accrued expenses 235,160 135,643

Distribution payable to Preferred Unit limited partners 6,937 —

Derivative liabilities — 2,667

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Operating lease liabilities 9,033 29,889

Embedded derivative liabilities 488 —

Derivative liabilities — 200

2 unchanged sentences

Deferred tax liabilities 13,082 7,190

Mandatorily redeemable Preferred Units 30,717 —

3,495,202 2,305,433

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Redeemable noncontrolling interest — Common Unit limited partners 3,061,861 1,006,838

Redeemable noncontrolling interest — Preferred Unit limited partners 563,338 —

Class A Common Stock:

$ 0.0001 par, 1,500,000,000 shares authorized, 40,550,555 and nil shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively *

$ 0.0001 par, 1,500,000,000 shares authorized, 43,082,157 and nil shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively *

Class C Common Stock:

$ 0.0001 par, 1,500,000,000 shares authorized, 94,450,000 and 100,000,000 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively *

$ 0.0001 par, 1,500,000,000 shares authorized, 94,270,000 and 100,000,000 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively *

Additional paid-in capital 107,182 —

Accumulated deficit ( 941,747 ) —

1 unchanged sentence

Total liabilities, noncontrolling interests, and equity $ 6,007,178 $ 3,553,206

* Share amounts have been retroactively restated to reflect the Company’s Stock Split.

* Share amounts have been retroactively restated to reflect the Company’s Stock Split (as defined in Note 10—Equity and Warrants ), which was effected on June 8, 2022.

Refer to Note 10—Equity and Warrants in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

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Depreciation and amortization expense 192,609 170,291

Amortization of deferred financing costs 6,538 6,637

Amortization of debt issuance costs 8,053 9,991

Amortization of contract costs 1,344 1,815

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

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

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

Distributions paid to redeemable noncontrolling interests Preferred Units limited partners ( 6,937 ) —

Distributions paid to redeemable noncontrolling interest Preferred Units limited partners ( 6,937 ) —

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

1 unchanged sentence

Equity contributions — 14,890

Net cash (used in) provided by financing activities ( 213,269 ) ( 32,242 )

Net cash used in financing activities ( 243,827 ) ( 62,439 )

Net change in cash $ ( 7,001 ) $ 15,588

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(In thousands) (In thousands)

For the Quarter Ended June 30, 2021

Balance at March 31, 2021 $ — $ 1,044,492 — $ — 100,694 $ 10 $ — $ — $ 10

Net loss — ( 15,366 ) — — — — — — —

For the Quarter Ended September 30, 2021

Balance at June 30, 2021 $ — $ 1,029,126 — $ — 100,694 $ 10 $ — $ — $ 10

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 ) — — — — — — — —

Net income — 4,640 — — — — — — —

Balance at September 30, 2021 $ — $ 1,033,766 — $ — 100,694 $ 10 $ — $ — $ 10

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 — — — — — 32,900 32,900

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

3 unchanged sentences

Distributions paid to Common Unit limited partners — ( 70,838 ) — — — — — — —

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

Dividends on Class A Common Stock ($ 0.75 per share)

— — — — — — — ( 30,467 ) ( 30,467 )

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

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

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

For further detail, refer to Note 11—Series A Cumulative Redeemable Preferred Units in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.

** Share amounts have been retroactively restated to reflect the Company’s S tock Split.

** Share amounts have been retroactively restated to reflect the Company’s S tock Split (as defined in Note 10 — Equity and Warrants ), which was effected on June 8, 2022.

Refer to Note 10—Equity and Warrants in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.

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(In thousands) (In thousands)

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Balance at December 31, 2020 $ — $ 1,041,655 — $ — 101,198 $ 10 $ — $ — $ 10

2 unchanged sentences

Net income — 7,410 — — — — — — —

Balance at June 30, 2021 $ — $ 1,029,126 — $ — 100,694 $ 10 $ — $ — $ 10

For the Six Months Ended June 30, 2022

Balance at September 30, 2021 $ — $ 1,033,766 — $ — 100,694 $ 10 $ — $ — $ 10

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

4 unchanged sentences

Distributions paid to Common Units limited partners — ( 141,729 ) — — — — — — —

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

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 )

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

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

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

** Share amounts have been retroactively restated to reflect the Company’s Stock Split.

For further detail, refer to Note 11—Series A Cumulative Redeemable Preferred Units in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.

** Share amounts have been retroactively restated to reflect the Company’s Stock Split (as defined in Note 10 — Equity and Warrants ), which was effected on June 8, 2022.

Refer to Note 10—Equity and Warrants in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.

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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 Kinetik Holdings Inc.’s audited financial statements and related notes thereto for the year ended December 31, 2021 filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on July 5, 2022 and the Company’s Quarterly Report on Form 10-Q for the first quarter of 2022 filed on May 10, 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 99.1 to the Company’s Current Report on Form 8-K filed on July 5, 2022 and the Company’s Quarterly Report on Form 10-Q filed on May 10, 2022.

DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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.

and (ii) in exchange for such contribution, the Partnership transferred to Contributor 50,000,000 common units representing limited partner interests in the Partnership (“Common Units”) and t 50,000,000 shares of the Company’s Class C Common Stock, par value $ 0.0001 per share (“Class C Common Stock”).

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”).

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However, the number of Common Units and shares of Class C Common Stock described in this Form 10-Q in relation to the Transaction are presented at pre-Stock-Split amounts to be consistent with our previous public filings and the terms of the Contribution Agreement.

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.

In connection with the Closing, the Company changed its name from “Altus Midstream Company” (“ALTM”) to “Kinetik Holdings Inc.” Unless otherwise noted or the context requires otherwise, references herein to Kinetik Holdings Inc.

“the Company”, “us”, “our”, “we” or similar terms, with respect to time periods prior to February 22, 2022, include BCP and its consolidated subsidiaries and do not include ALTM and its consolidated subsidiaries, while references herein to Kinetik Holdings Inc.

with respect to time periods from and after February 22, 2022, include ALTM and its consolidated subsidiaries.

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 Midstream Ventures, LLC (“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.

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.

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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 for additional details.

Refer to Note 2—Business Combination in the Notes to our Condensed Consolidated Financial Statements for further information.

Nature of Operations

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

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

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

Variable Interest Entity

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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.

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.

Please refer to “The Transaction” above.

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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.

In July 2022, the Company redeemed all outstanding redeemable noncontrolling interest Preferred Units.

See Note 18—Subsequent Events in the Notes to our Condensed Consolidated Financial Statements for additional information.

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

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.

Certain redemption features embedded within the terms of the Preferred Units required 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.

During the nine months ended September 30, 2022, the Company redeemed all outstanding Preferred Units.

See discussion and additional detail in Note 11—Series A Cumulative Redeemable Preferred Units in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.

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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 in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q, for further details of the Company’s equity method investments.

The Company determines whether distributions are a return on or a return of the investment based on the nature of the distribution approach, under which the Company classifies distributions from an investee by evaluating the facts, circumstances and nature of each distribution.

As distributions from the Company’s equity method investment (“EMI”) pipeline entities are generated from their respective normal course of business, the Company classifies the distributions as return on investments and as cash flow from operating activities.

Please refer to Note 9—Equity Method Investments in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q, for further information of the Company’s equity method investments.

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

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Other current assets include condensate, residue gas and NGLs inventories 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 $ 13.0 million and $ 2.1 million as of June 30, 2022 and December 31, 2021, respectively.

At the end of each reporting period, the Company 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 $ 13.1 million and $ 2.1 million as of September 30, 2022 and December 31, 2021, respectively.

Impairment of Long-Lived Assets

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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 any excess 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 and six months ended June 30, 2022 and 2021.

The Company did no t recognize impairment losses for long-lived assets during the three and nine months ended September 30, 2022 and 2021.

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 $ 20.2 million as of June 30, 2022.

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

Accrued expense due to affiliates was $ 0.2 million as of June 30, 2022, and operating expenses for the three and six months ended June 30, 2022 were immaterial.

Accounts receivable from affiliates was $ 24.1 million as of September 30, 2022.

Revenue from affiliates was $ 35.2 million and $ 81.4 million for the three and nine months ended September 30, 2022, respectively.

Accrued expense due to affiliates was immaterial as of September 30, 2022, and operating expenses were $ 0.2 million and $ 0.5 million for the three and nine months ended September 30, 2022, respectively.

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

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

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

Net Income Per Share

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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.

No net income per share was computed for the three and six months ended June 30, 2021, as no Class A Common Stock was outstanding with respect to BCP as the accounting acquirer as of June 30, 2021.

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.

No net income per share was computed for the three and nine months ended September 30, 2021, as no Class A Common Stock was outstanding with respect to BCP as the accounting acquirer as of September 30, 2021.

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 and (ii) an assumed exercise of the outstanding public and private warrants 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.

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ASU 2020-04 was issued to ease the potential accounting burden expected when global capital markets move away from 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.

Interest rate applied to the Company’s new debt resulting from the comprehensive refinance is based on Secured Overnight Financing Rate (“SOFR”), which is a broad measure of the cost of borrowing cash overnight collateralized by treasury securities.

Refer to Note 6 —Debt and Financing Cos ts in the Notes to our Condensed Consolidated Financial Statements of this Form 10-Q for discussion of SOFR applicable to the Company’s debt structures.

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.

Interest rate applied to the Company’s new Term Loan and Revolver borrowings resulting from the comprehensive refinance is based on Secured Overnight Financing Rate (“SOFR”), which is a broad measure of the cost of borrowing cash overnight collateralized by treasury securities.

Refer to Note 6—Debt and Financing Costs in the Notes to our Condensed Consolidated Financial Statements of this Form 10-Q for discussion of SOFR applicable to the Company’s debt structures.

Recent Accounting Pronouncement Not Yet Adopted

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BUSINESS COMBINATION

Altus 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, which, among other things, requires assets acquired and liabilities assumed to be measured at their acquisition date fair value.

The Transaction was accounted as a reverse merger in accordance with ASC 805, which, 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.

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

The goodwill of $ 4.1 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.

The goodwill of $ 4.6 million relates to operational synergies and is included in the Midstream Logistics segment.

The value of the Preferred Units and assumed contingent liability is 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.

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Total consideration transferred $ 1,013,745

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

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

Supplemental Pro Forma Information

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

The results below for the three and six months ended June 30, 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 June 30, Six Months Ended June 30,

The results below for the three and nine months ended September 30, 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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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Net income including noncontrolling interest $ 46,968 $ 28,518 $ 193,083 $ 64,165

Given the assumed pro forma transaction date of January 1, 2021, we removed $ 0.7 million and $ 19.5 million of acquisition-related expenses for the three and six months ended June 30, 2022, respectively, and recognized $ 2.2 million and $ 31.1 million of total acquisition-related expenses for the three and six months ended June 30, 2021, respectively.

Given the assumed pro forma transaction date of January 1, 2021, we removed $ 1.5 million and $ 21.0 million of acquisition-related expenses for the three and nine months ended September 30, 2022, respectively, and recognized $ 0.1 million and $ 31.2 million of total acquisition-related expenses for the three and nine months ended September 30, 2021, respectively.

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,

2022 2021 2022 2021

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Total revenues and other $ 325,176 $ 166,586 $ 917,997 $ 450,455

There have been no significant changes to the Company’s contracts with customers during the three and six months ended June 30, 2022.

There have been no significant changes to the Company’s contracts with customers during the three and nine months ended September 30, 2022.

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

The Company recognized revenues from MVC deficiency payments of $ 0.3 million and nil for the three months ended June 30, 2022 and 2021, respectively, and $ 0.3 million and $ 2.5 million for the six months ended June 30, 2022 and 2021, respectively.

The Company recognized revenues from minimum volume commitment (“MVC”) deficiency payments of $ 0.7 million and nil for the three months ended September 30, 2022 and 2021, respectively, and $ 1.0 million and $ 2.5 million for the nine months ended September 30, 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 June 30, 2022:

Fiscal Year (In thousands)

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Contract Liabilities

The following table provides information about contract liabilities from contracts with customers as of June 30, 2022:

The following table provides information about contract liabilities from contracts with customers as of September 30, 2022:

(In thousands)

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Cash received and not recognized as revenue 20,268

Balance at June 30, 2022 29,049

Balance at September 30, 2022 29,865

Current portion 7,158

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

As of June 30, 2022 and December 31, 2021, the Company had contract acquisition cost assets of $ 17.5 million and $ 18.4 million, respectively.

As of September 30, 2022 and December 31, 2021, the Company had contract acquisition cost assets of $ 15.3 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.

The Company recognized cost of sales associated with these assets of $ 0.4 million and $ 0.4 million for the three months ended June 30, 2022 and 2021, respectively, and $ 0.9 million and $ 0.9 million for the six months ended June 30, 2022 and 2021, respectively.

The Company recognized cost of sales associated with these assets of $ 0.4 million and $ 0.4 million for the three months ended September 30, 2022 and 2021, respectively, and $ 1.3 million and $ 1.8 million for the nine months ended September 30, 2022 and 2021, respectively.

PROPERTY, PLANT AND EQUIPMENT

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(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 $ 36.6 million and $ 26.6 million of depreciation expense for the three months ended June 30, 2022 and 2021, respectively, and $ 67.5 million and $ 52.2 million of depreciation expense for the six months ended June 30, 2022 and 2021, respectively.

The Company recorded $ 34.9 million and $ 26.8 million of depreciation expense for the three months ended September 30, 2022 and 2021, respectively, and $ 102.4 million and $ 79.0 million of depreciation expense for the nine months ended September 30, 2022 and 2021, respectively.

GOODWILL AND INTANGIBLE ASSETS, NET

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

The Company recorded goodwill of $ 4.1 million as of June 30, 2022.

The Company recorded goodwill of $ 4.6 million as of September 30, 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 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, 2022.

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 September 30, 2022.

Intangible Assets

Intangible assets, net are comprised of the following:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(In thousands)

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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 $ 30.0 million and $ 30.5 million of amortization expense for the three months ended June 30, 2022 and 2021, respectively, and $ 60.1 million and $ 60.9 million of amortization expense for the six months ended June 30, 2022 and 2021, respectively.

There was no impairment recognized on intangible assets for the three and six months ended June 30, 2022 and 2021.

The Company recorded $ 30.1 million and $ 30.4 million of amortization expense for the three months ended September 30, 2022 and 2021, respectively, and $ 90.2 million and $ 91.3 million of amortization expense for the nine months ended September 30, 2022 and 2021, respectively.

There was no impairment recognized on intangible assets for the three and nine months ended September 30, 2022 and 2021.

DEBT AND FINANCING COSTS

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The aggregate fees, expenses, and original issue discount paid to obtain the Notes totaled $ 21.5 million and were capitalized as debt issuance cost and included in the Condensed Consolidated Balance Sheets as a direct deduction to the Notes as the Notes were transferred to third-party investors that pay the stated principal amount without deduction for the initial purchasers’ discount.

On or after June 15, 2027, the interest rate accruing on the Notes will be increased by an additional 0.250 % per annum unless the Partnership satisfies, and an independent external verifier confirms satisfaction of the Sustainability Performance Targets (“SPT”) for the three key performance indicators outlined in the Sustainability-Linked Financing Framework published by the Company on May 16, 2022:

On or after June 15, 2027, the interest rate accruing on the Notes will be increased by an additional 0.250 % per annum unless the Partnership satisfies, and an independent external verifier confirms satisfaction of the Sustainability Performance Targets (“SPT”) as defined in the indenture governing the Notes related to the three key performance indicators outlined in the Sustainability-Linked Financing Framework published by the Company on May 16, 2022:

1) Scope 1 and Scope 2 greenhouse gas emissions intensity, 2) Scope 1 and Scope 2 methane gas emissions intensity and 3) female representation in corporate officer positions.

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The Partnership may redeem some or all of the Notes at any time or from time to time prior to maturity based on terms prescribed in the Notes.

As of June 30, 2022, unamortized debt issuance costs associated with the Notes were $ 19.3 million.

Revolving Credit Facility

On June 8, 2022, the Partnership entered into a revolving credit agreement (the “Revolving Credit Agreement”) among Bank of America, N.A., as administrative agent (“Bank of America”), and the banks and other financial institutions party thereto, as lenders.

The Revolving Credit Agreement provides for a $ 1.25 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”).

On June 8, 2022, the Partnership entered into a revolving credit agreement (the “RCA”) among Bank of America, N.A., as administrative agent (“Bank of America”), and the banks and other financial institutions party thereto, as lenders.

The RCA provides for a $ 1.25 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”).

The Partnership may prepay borrowings under the Revolving Credit Facility at any time without premium or penalty (other than customary SOFR breakage costs), subject to certain notice requirements.

All borrowings under the Revolving Credit Facility mature on June 8, 2027.

The obligations under the Revolving Credit Agreement are fully and unconditionally guaranteed by the Company.

The Revolving Credit Agreement provides for borrowings of either, at the Partnership’s option, base rate loans or term SOFR loans.

The obligations under the RCA are fully and unconditionally guaranteed by the Company.

The RCA provides for borrowings of either, at the Partnership’s option, base rate loans or term SOFR loans.

Base rate loans bear interest at a rate per annum equal to the greatest of (a) the prime rate as announced from time to time by Bank of America, (b) the greater of (i) the federal funds effective rate and (ii) the overnight bank funding rate, plus 1/2 of 1.00% and (c) the adjusted term SOFR rate for an interest period of one month plus 1.00 %, plus a margin that ranges between 0.25 % and 1.00 %, depending on the credit rating of the Partnership.

SOFR loans bear interest at a rate per annum equal to the term SOFR rate for such interest periods plus 0.10 %, plus a margin that ranges between 1.25 % and 2.00 %, depending on the credit rating of the Partnership.

In obtaining the Revolving Credit Agreement, the Partnership incurred fees and expenses totaling $ 7.8 million, which was capitalized and included in the Condensed Consolidated Balance Sheets as “Prepaid and other current assets” and “Deferred charges and other assets.

In obtaining the RCA, the Partnership incurred fees and expenses totaling $ 7.8 million, which was capitalized and included in the Condensed Consolidated Balance Sheets as “Deferred charges and other assets.

In addition, the Partnership is required to pay to each lender a commitment fee on the daily unfunded amount of such lender’s revolving commitment, which accrues at a rate that ranges between 0.15 % and 0.35 % depending on the credit rating of the Partnership.

There were no outstanding borrowings under the Revolving Credit Facility as of June 30, 2022.

Term Loan Credit Facility

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SOFR loans bear interest at a rate per annum equal to the term SOFR rate for such interest periods plus 0.10 %, that if the plus a margin that ranges between 1.25 % and 2.0 %, depending on the credit rating of the Partnership.

In obtaining the TLA, the Partnership incurred fee and expenses totaled $ 7.6 million, which was capitalized as debt issuance cost and included in the Condensed Consolidated Balance Sheets as direct deduction to the Term Loan Credit Facility .

Both the Revolving Credit Agreement and the TLA contain a “Sustainability Adjustments” feature that could result in a 0.05 % increase or reduction to the effective interest rate if the Company fails to meet certain sustainability targets after 2022.

“Sustainability Rate Adjustment” means, with respect to any KPI Metrics Report, for any period between Sustainability Pricing Adjustment Dates, (a) positive 0.05 %, if neither of the Sustainability Performance Targets as set forth in the KPI Metrics Report have been satisfied for the relevant calendar year, (b) 0.00 % if only one of the Sustainability Performance Targets as set forth in the KPI Metrics Report has been satisfied for the relevant calendar year and (c) negative 0.05 % if both of the Sustainability Performance Targets as set forth in the KPI Metrics Report have been satisfied for the relevant calendar year.

“Sustainability Performance Targets” in the Revolving Credit Agreement and TLA mean, for any calendar year, with respect to (a) the Female Representation KPI, the target percentage of female representation in corporate officer positions for such calendar year and (b) the Methane Emissions KPI, the percentage reduction in methane gas emissions intensity relative to the baseline year for such calendar year;

In obtaining the TLA, the Partnership incurred fee and expenses totaled $ 7.6 million, which was capitalized as debt issuance cost and included in the Condensed Consolidated Balance Sheets as a direct deduction to the Term Loan Credit Facility .

Both the RCA and the TLA contain a “Sustainability Adjustments” feature that could result in a 0.05 % increase or reduction to the effective interest rate, dependent upon the Company’s meeting certain sustainability targets after 2022.

“Sustainability Rate Adjustment” means, with respect to any KPI Metrics Report, for any period between Sustainability Pricing Adjustment Dates, (a) positive 0.05 %, if neither of the Sustainability Performance Targets (as defined in the RCA and TLA) as set forth in the KPI Metrics Report have been satisfied for the relevant calendar year, (b) 0.00 % if only one of the Sustainability Performance Targets as set forth in the KPI Metrics Report has been satisfied for the relevant calendar year and (c) negative 0.05 % if both of the Sustainability Performance Targets as set forth in the KPI Metrics Report have been satisfied for the relevant calendar year;

provided that, in each case, if the Partnership subsequently issues a sustainability-linked debt instrument linked to the same KPI Metric and with an observation date for such calendar year, but with a higher percentage of representation or reduction, as the case may be, the relevant Sustainability Performance Target shall be automatically adjusted upward to equal the percentage of representation or reduction, as applicable, required by such subsequent sustainability-linked debt instrument.

Both the Revolving Credit Agreement and the TLA contain customary covenants and restrictive provisions which may, among other things, limit Partnership’s ability to create liens, incur additional indebtedness, make restricted payments, or liquidate, dissolve, consolidate with, or merge into or with any other person.

As of June 30, 2022, the Partnership is in compliance with all customary and financial covenants.

“Sustainability Performance Targets” in the RCA and TLA mean, for any calendar year, with respect to (a) the Female Representation KPI, the target percentage of female representation in corporate officer positions for such calendar year and (b)

the Methane Emissions KPI, the percentage reduction in methane gas emissions intensity relative to the baseline year for such calendar year.

Both the RCA and the TLA contain customary covenants and restrictive provisions which may, among other things, limit Partnership’s ability to create liens, incur additional indebtedness, make restricted payments, or liquidate, dissolve, consolidate with, or merge into or with any other person.

As of September 30, 2022, the Partnership was in compliance with all customary and financial covenants.

Repayment of Existing Credit Facilities

In June 2022, the Company used the net proceeds from the Notes, together with cash on hand and proceeds from the term loan credit facility, to repay all outstanding borrowings under its existing credit facilities and to pay certain related fees and

In June 2022, the Company used the net proceeds from the Notes, together with cash on hand and proceeds from the Term Loan Credit Facility, to repay all outstanding borrowings under its existing credit facilities and to pay certain related fees and expenses.

In conjunction with the extinguishment of existing outstanding borrowings, the Company recognized a loss on extinguishment of debt of approximately $ 28.0 million.

In addition, the unamortized debt issuance costs related to the existing outstanding borrowings were fully amortized and included in the loss on debt extinguishment calculation for the three and six months ended June 30, 2022.

The fair value of the term loan credit facility approximates fair value and is not publicly traded.

The fair value of the Company and its subsidiaries’ consolidated debt as of June 30, 2022 and December 31, 2021 was $ 2.95 billion and $ 2.34 billion, respectively.

The following table summarizes the Company’s debt obligations as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

The fair value of the Company and its subsidiaries’ consolidated debt as of September 30, 2022 and December 31, 2021 was $ 3.02 billion and $ 2.34 billion, respectively.

At September 30, 2022, the Notes’ fair value was based on Level 1 inputs and the Term Loan Credit Facility and Revolver Credit Facility’s fair value was based on Level 3 inputs.

The following table summarizes the Company’s debt obligations as of September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

(In thousands)

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$ 1.0 billion 2030 senior unsecured Notes

$ 1.25 billion revolving credit facility

$ 1.25 billion term loan

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(1) Excluded unamortized debt issuance cost related to the Revolving Credit Facility.

Unamortized debt issuance cost associated with the Revolving Credit Facility was $ 7.7 million and $ 2.2 million as of June 30, 2022 and December 31, 2021, respectively, and were included in the “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets.

Unamortized debt issuance cost associated with the Revolving Credit Facility was $ 7.3 million and $ 2.2 million as of September 30, 2022 and December 31, 2021, respectively, and were included in the “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets.

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

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

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

2022 2021 2022 2021

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Total financing costs, net of capitalized interest $ 40,464 $ 30,541 $ 92,585 $ 88,458

As of June 30, 2022 and December 31, 2021, unamortized debt issuance costs associated with the Notes and the Term Loan Credit Facility were $ 28.7 million and $ 38.5 million, respectively.

Debt issuance costs associated with the new and existing revolving credit facilities were $ 7.7 million and $ 2.2 million as of June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022, the unamortized debt issuance costs associated with the new and existing revolving credit facilities were included in the “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets as there were no borrowings on the new or existing revolving credit facilities.

As of September 30, 2022 and December 31, 2021, unamortized debt issuance costs associated with the Notes and the Term Loan Credit Facility were $ 27.5 million and $ 38.5 million, respectively.

As of September 30, 2022 and December 31, 2021, unamortized debt issuance costs associated with the new and existing revolving credit facilities were $ 7.3 million and $ 2.2 million, respectively.

As of September 30, 2022, the unamortized debt issuance costs associated with the new revolving credit facilities were included in the “Deferred charges and other assets” of the

Condensed Consolidated Balance Sheets .

As of December 31, 2021, the current and non-current portion of the unamortized debt issuance costs were included in the “Other non-current assets” and “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets.

The amortization of the debt issuance costs was charged to interest expense for the periods presented.

The amount of debt issuance costs included in interest expense was $ 3.1 million and $ 3.3 million for the three months ended June 30, 2022 and 2021, respectively, and $ 6.5 million and $ 6.6 million for the six months ended June 30, 2022 and 2021, respectively.

The amount of debt issuance costs included in interest expense was $ 1.5 million and $ 3.4 million for the three months ended September 30, 2022 and 2021, respectively, and $ 8.1 million and $ 10.0 million for the nine months ended September 30, 2022 and 2021, respectively.

ACCRUED EXPENSES

The following table provides detail of the Company’s accrued expenses at June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

The following table provides detail of the Company’s accrued expenses at September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

(In thousands)

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Total accrued expenses $ 235,160 $ 135,643

Accrued product purchases mainly consisted of accrued gas estimates as of September 30, 2022.

COMMITMENTS AND CONTINGENCIES

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

As of June 30, 2022 and December 31, 2021, there were no accruals for loss contingencies.

As of September 30, 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.

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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, 2022, 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, 2022, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.

Contingent Liabilities

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

(“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 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.

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

The Company did not expect PDC’s actual annual Mcf volume amounts to exceed forecasted amounts as of June 30, 2022;

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

The Company did not expect PDC’s actual annual Mcf volume amounts to exceed forecasted amounts as of September 30, 2022;

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

The estimated fair value of the contingent consideration liability related to this acquisition was $ 0.8 million as of December 31, 2021.

The Transaction

As part of the Transaction, the Company assumed contingent liabilities of $ 4.5 million related to earn-out a consideration of up to 2,500,000 shares of Class A Common Stock as follows:

• 1,250,000 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 $ 140.00 for any 20 trading days within such 30 -trading-day period.

• 1,250,000 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 $ 160.00 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 .

Original Altus Transaction

As part of the Transaction, the Company assumed contingent liabilities of $ 4.5 million related to earn-out consideration of up to 2,500,000 shares of Class A Common Stock, which was part of the original Altus transaction, as follows:

• 1,250,000 shares if the per share closing price of the Class A Common Stock as reported by the New York Stock Exchange (“NYSE”) during any 30 -trading-day period ending prior to November 9, 2023 is equal to or greater than $ 140.00 for any 20 trading days within such 30 -trading-day period.

• 1,250,000 shares if the per share closing price of the Class A Common Stock as reported by the NYSE during any 30 -trading-day period ending prior to November 9, 2023 is equal to or greater than $ 160.00 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 the 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” ).

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EQUITY METHOD INVESTMENTS

As of June 30, 2022, the Company owned investments in the following long-haul pipeline entities in the Permian Basin.

As of September 30, 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 (“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.

For each 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:

Ownership June 30, 2022 December 31, 2021

Ownership September 30, 2022 December 31, 2021

(In thousands)

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$ 2,372,596 $ 626,477

(1) Ownership for Permian Highway Pipeline LLC (“PHP”) was 53.3 % and 26.7 % as of June 30, 2022 and December 31, 2021, respectively.

Additionally, as of June 30, 2022, the Company owned 15.0 % of Epic Crude Holdings, LP (“EPIC”).

(1) Ownership for PHP was 53.3 % and 26.7 % as of September 30, 2022 and December 31, 2021, respectively.

Additionally, as of September 30, 2022, the Company also 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 and six months ended June 30, 2022.

As of June 30, 2022, the unamortized basis differences included in the EMI pipelines balances were $ 414.3 million.

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, 2022.

As of September 30, 2022, the unamortized basis differences included in the EMI pipelines balances were $ 349.8 million.

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

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

There was capitalized interest of $ 12.2 million and $ 12.8 million as of June 30, 2022 and December 31, 2021, respectively.

There was capitalized interest of $ 12.5 million and $ 12.8 million as of September 30, 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 six months ended June 30, 2022:

The following table presents the activity in the Company’s EMIs for the nine months ended September 30, 2022:

Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC Total (2)

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86,946 18,501 15,259 120,706

Balance at June 30, 2022 $ 1,416,318 $ 465,444 $ 460,549 $ 2,342,311

(1) For the six months ended June 30, 2022, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $ 3.3 million from Permian Highway Pipeline LLC, $ 0.3 million from Breviloba, LLC and $ 2.7 million from Gulf Coast Express Pipeline, LLC.

(2) The EMIs acquired in the Transaction are included in the results from February 22, 2022 to June 30, 2022, and this is also the case for the additional 26.67 % of PHP that was acquired in the Transaction.

Balance at September 30, 2022 $ 1,459,096 $ 462,691 $ 450,809 $ 2,372,596

(1) For the nine months ended September 30, 2022, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $ 5.3 million from Permian Highway Pipeline LLC, $ 0.5 million from Breviloba, LLC and $ 10.4 million from Gulf Coast Express Pipeline, LLC.

(2) The EMIs acquired in the Transaction are included in the results from February 22, 2022 to September 30, 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.

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Summarized Financial Information

The following tables represent selected statement of operations data for the Company’s EMI pipelines (on a 100 percent basis) for the three and six months ended June 30, 2022 and 2021.

Three Months Ended June 30,

The following tables represent selected statement of operations data for the Company’s EMI pipelines (on a 100 percent basis) for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended September 30,

Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC Permian Highway Pipeline LLC (1)

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Net income 69,926 22,060 70,742 61,753 26,617 65,145

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 (1)

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Net income 190,446 73,711 198,732 166,662 71,621 185,464

(1) For the three and six months ended June 30, 2021, the Company only had equity interest in Permian Highway Pipeline LLC.

(1) For the three and nine months ended September 30, 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.

On February 22, 2022, the Company consummated the Transaction.

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” above.

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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 first half of 2022, 5,550,000 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 94,450,000 Common Units and an equal number of Class C Common Stock issued and outstanding as of June 30, 2022.

The Common Units fair value was approximately $ 3.25 billion as of June 30, 2022.

During the first nine months of 2022, 5,730,000 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 94,270,000 Common Units and an equal number of Class C Common Stock issued and outstanding as of September 30, 2022.

The Common Units fair value was approximately $ 3.06 billion as of September 30, 2022.

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners

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.

The Company has redeemed all assumed Preferred Units since the Closing.

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

In July 2022, the Company redeemed all outstanding redeemable noncontrolling interest Preferred Units.

See Note 18—Subsequent Events in the Notes to our Condensed Consolidated Financial Statements for additional information.

Public Warrants

As of June 30, 2022, there were 12,577,350 Public Warrants (as defined below) outstanding.

As of September 30, 2022, 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”).

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Private Placement Warrants

As of June 30, 2022, there were 6,364,281 Private Placement Warrants (as defined below) outstanding, of which Apache holds 3,182,140 .

As of September 30, 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 June 30, 2022 on the Condensed Consolidated Balance Sheet in other non-current liabilities.

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 September 30, 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.

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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.”

On May 17, 2022, the Company made cash dividend payments of $ 11.7 million to holders of Class A Common Stock and Common Units and $ 87.7 million was reinvested in shares of Class A Common Stock by each Reinvestment Holder.

On July 20, 2022, the Board declared a cash dividend of $ 0.75 per share on the Company’s Class A Common Stock and a distribution of $ 0.75 per Common Unit from the Partnership to the holders of Common Units.

Dividends are payable on August 17, 2022.

During the nine months ended September 30, 2022, the Company made cash dividend payments of $ 25.3 million to holders of Class A Common Stock and Common Units and $ 175.5 million was reinvested in shares of Class A Common Stock by Reinvestment Holders.

On October 19, 2022, the Board declared a cash dividend of $ 0.75 per share on the Company’s Class A Common Stock and a distribution of $ 0.75 per Common Unit from the Partnership to the holders of Common Units.

Dividends are payable on November 17, 2022.

Certain holders of Class A Common Stock and Class C Common Stock will receive a cash dividend with the balance receiving additional shares of Class A Common Stock under the Reinvestment Agreement.

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The additional shares of Common Stock were issued on June 8, 2022 to holders of record at the close of business on May 31, 2022.

All corresponding per-share and share amounts for periods prior to June 8, 2022 have been retroactively restated in this Form 10-Q to reflect the Stock Split.

All corresponding per-share and share amounts, excluding the Transaction, for periods prior to June 8, 2022 have been retroactively restated in this Form 10-Q to reflect the Stock Split.

SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS

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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.

During the first half of 2022, the Partnership declared and paid mandatorily redeemable Preferred Units holders distribution of $ 1.9 million and the Partnership redeemed 125,000 units along with 7,138 PIK units for an aggregate amount totaling $ 152.6 million.

Gains of $ 5.1 million and $ 9.6 million were recorded for the redemption for the three and six months ended June 30, 2022, respectively.

For the remaining 25,000 Preferred Units that contain the mandatory redemption feature, the Company recorded $ 30.7 million as liability in “Other Liabilities” of the Condensed Consolidated Balance Sheet as of June 30, 2022.

These remaining units were subsequently redeemed in July 2022.

See Note 18—Subsequent Events in the Notes to our Condensed Consolidated Financial Statements for additional information.

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 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.

Activities related to Preferred Units for the six months ended June 30, 2022 are as follows:

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 closing of the Transaction.

At the close, 150,000 preferred units and 8,567 associated PIK units became mandatorily redeemable and liability classified with the balance of preferred units remaining unchanged and classified as redeemable noncontrolling interest.

The Company redeemed 125,000 mandatorily redeemable preferred units during the first two quarters of 2022 with the balance of mandatorily redeemable preferred units being redeemed during July for $ 30.7 million.

In July 2022, the Company redeemed all outstanding redeemable noncontrolling interest Preferred Units for an aggregate $ 461.5 million.

The excess of the carrying amount of the redeemable noncontrolling interest Preferred units immediately prior to redemption over redemption price was included in “Retained Earnings” in the Condensed Consolidated Balance Sheets.

Activities related to Preferred Units for the nine months ended September 30, 2022 are as follows:

Units Outstanding Amount

(In thousands, except for unit data)

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

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

396,417 $ 462,717

Redemption, including PIK units ( 396,417 ) ( 461,460 )

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

Distribution payable to Preferred Unit limited partners ( 6,937 )

Allocation of net income — 18,128

Accreted redemption value adjustment — 97,075

Redeemable noncontrolling interest — Preferred Units, as of June 30, 2022 396,417 563,338

Embedded derivative liability (2)

Excess of carrying amount over redemption price — ( 109,523 )

Redeemable noncontrolling interest — Preferred Units, as of September 30, 2022 — $ —

(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.

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 June 30, 2022, the Redemption Price would have been based on an 11.08 % internal rate of return, which would equate to a redemption value of $ 700.0 million.

On July 8, 2022, the Company redeemed all outstanding redeemable noncontrolling interest Preferred Units.

See Note 18 —Subsequent Events in the Notes to our Condensed Consolidated Financial Statements for additional information.

SHARE-BASED COMPENSATION

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

Prior to the Closing, the Company 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.

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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 5,300,000 shares (the “Class A Shares”), post two -for-one stock split, 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, pre-stock-split, they received upon the Closing.

Immediately upon Closing, all outstanding Class A-1 and Class A-2 units were cancelled and exchanged for 5,300,000 shares (the “Class A Shares”), post-Stock Split, of the Company’s Class A Common Stock.

The Common Unit limited partners redeemed Common Units needed for the Class A shares distribution upon the Closing.

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 326,000 , post two-for-one stock split, Class C Common Stock and Common Units (the “Class C Shares”) and will vest over four years .

The Company also issued approximately 76,000 , post two -for-one stock split, replacement restricted share awards (“Replacement Awards”) to new employees that transitioned from ALTM as part of the merger.

Similarly, the Class A-3 units were exchanged for approximately 326,000 , post Stock Split, Class C Common Stock and Common Units (the “Class C Shares”) and will vest over four years .

The Company also issued approximately 76,000 , post Stock Split, replacement restricted share awards (“Replacement Awards”) to new employees that transitioned from ALTM as part of the Transaction.

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 stock price on the measurement date, which was the Closing Date of the Transaction.

With respect to these shares, the Company recorded compensation expenses of $ 12.2 million and $ 18.3 million for the three and six months ended June 30, 2022, respectively, 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 and six months ended June 30, 2021, as the incentive units were considered non-vested prior to their cancellation and exchange for Class A or Class C Common Stock.

During 2022, pursuant to the Company’s 2019 Omnibus Compensation Plan, as amended from time to time (the “Plan”) , the Company granted a total of 13,941 restricted stock units (“RSUs”) to certain members of the Board, which were vested immediately on grant date, and granted a total of 14,144 RSUs to new employees, which are subject to a vesting period between one and three years .

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

With respect to the above incentive units, no compensation expenses were recorded for the three and nine months ended September 30, 2021, as the incentive units were considered non-vested prior to their cancellation and exchange for Class A or Class C Common Stock, and no RSUs were granted during 2021.

The Company is subject to U.S.

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Income tax expense included in the Condensed Consolidated Financial Statements in this Form 10-Q is as follows:

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

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

(In thousands)

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

federal income tax for the three and six months ended June 30, 2021.

The effective tax rate for the three and six months ended June 30, 2022 was lower than the statutory rate mainly due to the impact of tax attributable to noncontrolling interests related to the Common Units and Preferred Units limited partners and valuation allowance.

federal income tax for the three and nine months ended September 30, 2021.

The effective tax rate for the three and nine months ended September 30, 2022 was lower than the statutory rate mainly due to the impact of tax attributable to noncontrolling interests related to the Common Units and Preferred Units limited partners and valuation allowance.

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

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Reduction related to current year activities ( 5,238 )

Balance at June 30, 2022 $ 2,783

Balance at September 30, 2022 $ —

NET INCOME PER SHARE

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

Three Months Ended June 30,

Three Months Ended September 30,

Income Weighted-average shares (3)

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( 4,174 ) — $ — — — $ —

Excess preferred carrying amount over consideration paid (5)

32,900 — $ — — — $ —

Total net income attributable to Class A common shareholders $ 43,662 41,816 $ 1.04 $ — — $ —

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Net income attributable to Class A common shareholders $ 43,662 41,855 $ 1.04 $ — — $ —

Six Months Ended June 30,

Nine Months Ended September 30,

Income Weighted-average shares (3)

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( 8,358 ) — $ — — — $ —

Excess preferred carrying amount over consideration paid (5)

32,900 — $ — — — $ —

Total net income attributable to Class A common shareholders $ 49,781 40,042 $ 1.24 $ — — $ —

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Net income attributable to Class A common shareholders $ 49,781 40,075 $ 1.24 $ — — $ —

(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.

(1) 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 in which the 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.

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

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

FAIR VALUE MEASUREMENTS

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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, 2022 and December 31, 2021:

June 30, 2022

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021:

September 30, 2022

Level 1 Level 2 Level 3 Total

(In thousands)

Mandatorily redeemable Preferred Units $ — $ — $ 30,717 $ 30,717

Embedded derivative — — 488 488

Public warrants $ 126 $ — $ — $ 126

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Interest rate derivatives — 2,662 — 2,662

Contingent liabilities — — 839 839

Total liabilities $ — $ 2,867 $ 839 $ 3,706

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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 Partnership 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 of 5.88 %, interest rate volatility of 39.51 %, the expected timing of periodic cash distributions, the estimated timing for the potential exercise of the exchange option of 4.0 years and anticipated dividend yields of the Preferred Units.

The Company recorded unrealized gains of $ 91.4 million and $ 88.6 million for the three and six months ended June 30, 2022, which was recorded as an “Unrealized gain 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 Company redeemed all outstanding Preferred Units in July 2022 and wrote off related embedded derivative liabilities as of September 30, 2022.

The Company recorded gains of $ 0.5 million and $ 89.1 million for the three and nine months ended September 30, 2022, which was recorded as a “Gain on embedded derivative” in the Condensed Consolidated Statement of Operations.

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.

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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 $ 0.2 million as of June 30, 2022.

The Company has recorded a liability of $ 0.2 million as of September 30, 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 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 three and six months ended June 30, 2022 and 2021.

There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three and nine months ended September 30, 2022 and 2021.

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 June 30, 2022 and December 31, 2021.

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 September 30, 2022 and December 31, 2021.

Interest Rate Risk

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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.

To accomplish this objective, the Company primarily uses interest rate swaps and Term SOFR elections, (able to fix up to six months forward SOFR), granted under the company’s debt agreements 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.

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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 nil and $ 2.7 million as of June 30, 2022 and December 31, 2021, respectively.

The Company recorded cash settlements on interest rate swap derivatives of $ 12.0 million and $ 0.7 million for the three months ended June 30, 2022 and 2021, respectively, and $ 11.3 and $ 1.5 million for the six months ended June 30, 2022 and 2021, respectively, in “Interest Expense” of the Condensed Consolidated Statements of Operations.

In addition, the Company recorded fair value adjustments of $ 2.4 million and $ 1.9 million for the change in fair value of the interest rate swap derivatives for the three months ended June 30, 2022 and 2021, respectively, and $ 14.0 million and $ 3.1 million for the six months ended June 30, 2022 and 2021, respectively, in “Interest Expense” of the Condensed Consolidated Statements of Operations.

Interest rate swap derivative liabilities were nil and $ 2.7 million as of September 30, 2022 and December 31, 2021, respectively.

The Company recorded cash settlements on interest rate swap derivatives of nil and $ 0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $ 11.3 and $ 2.2 million for the nine months ended September 30, 2022 and 2021, respectively, in “Interest Expense” of the Condensed Consolidated Statements of Operations.

In addition, the Company recorded fair value adjustments of nil and $ 26 thousand for the change in fair value of the interest rate swap derivatives for the three months ended September 30, 2022 and 2021, respectively, and $ 14.0 million and $ 3.1 million for the nine months ended September 30, 2022 and 2021, respectively, in “Interest Expense” of the Condensed Consolidated Statements of Operations.

Commodity Price Risk

Similarly, in 2020 and 2021 BCP Raptor, LLC (“BCP I”) and BCP Raptor II, LLC (“BCP II”) had WTI crude hedges at a specific notional that provides for a fixed price for crude in the Permian Basin and Waha basis hub hedges on various notional quantities of gas that either provided for a fixed price differential of natural gas in the Permian Basin relative to the NYMEX natural gas contract or provided for a fixed price for natural gas in the Permian Basin.

Similarly, in 2020 and 2021 BCP Raptor, LLC (“BCP I”) and BCP Raptor II, LLC (“BCP II”) had WTI crude hedges at a specific notional amount that provides for a fixed price for crude in the Permian Basin and Waha basis hub hedges on various notional quantities of gas that either provided for a fixed price differential of natural gas in the Permian Basin relative to the NYMEX natural gas contract or provided for a fixed price for natural gas 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 June 30, 2022 and December 31, 2021, respectively.

The Company recorded cash settlements on commodity swap derivatives of nil and $ 14.1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 0.2 million and $ 14.8 million for the six months ended June 30, 2022 and 2021, respectively, in “Interest Expense” of the Condensed Consolidated Statements of Operations.

In addition, the Company recorded fair value adjustments of $ 1.0 million and $ 16.5 million for the change in fair value of commodity swap derivatives for the three and six months ended June 30, 2021, respectively, in “Interest Expense” of the Condensed Consolidated Statements of Operations.

No fair value adjustment recognized for the three and six months ended June 30, 2022.

Commodity swap derivative liability was nil and $ 0.2 million as of September 30, 2022 and December 31, 2021, respectively.

The Company recorded cash settlements on commodity swap derivatives of nil and $ 0.9 million for the three months ended September 30, 2022 and 2021, respectively, and $ 0.2 million and $ 15.8 million for the nine months ended September 30, 2022 and 2021, respectively, in “Other Revenue” of the Condensed Consolidated Statements of Operations.

In addition, the Company recorded fair value adjustments of $ 0.6 million and $ 17.1 million for the change in fair value of commodity swap derivatives for the three and nine months ended September 30, 2021, respectively, in “Other Revenue” of the Condensed Consolidated Statements of Operations.

No fair value adjustment recognized for the three and nine months ended September 30, 2022 as no commodity swaps were outstanding.

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.

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• 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, and our Delaware Link Pipeline that is under development.

The current operating pipelines transport crude oil, natural gas and NGLs to the Texas Gulf Coast.

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

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

Upon Closing, our CODM reviewed the Company and ALTM’s reporting segment activities.

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These name changes were made to better align segment activities with the name of the respective segment.

There was no change in segment composition or structure for the three and six months ended June 30, 2022.

The following tables present the reconciliation of the segment profit measure as of and for the three and six months ended June 30, 2022 and 2021:

There was no change in segment composition or structure for the three and nine months ended September 30, 2022.

The following tables present the reconciliation of the segment profit measure as of and for the three and nine months ended September 30, 2022 and 2021:

Midstream Logistics Pipeline Transportation Corporate and Other (1)

Consolidated (2)

For the three months ended June 30, 2022 (In thousands)

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

For the three months ended September 30, 2022 (In thousands)

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

Interest expense 7 — 40,457 40,464

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Share-based compensation — — 12,661 12,661

Loss (gain) on disposal of assets 8,580 — ( 34 ) 8,546

(Gain) loss on debt extinguishment 27,983 ( 8 ) — 27,975

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

Integration costs 14 81 2,243 2,338

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

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

Unrealized gain on embedded derivatives — — 91,448 91,448

Gain on embedded derivative — — 488 488

Equity income from unconsolidated affiliates — 45,003 — 45,003

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Consolidated (2)

For the three months ended June 30, 2021 (In thousands)

For the three months ended September 30, 2021 (In thousands)

Segment net income (loss) including noncontrolling interests $ ( 6,210 ) $ 13,333 $ ( 2,483 ) $ 4,640

Interest expense 27,682 2,859 — 30,541

Income tax expense 1,207 — — 1,207

Depreciation and amortization 57,026 128 — 57,154

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Proportionate EMI EBITDA — 21,704 — 21,704

Loss on disposal of assets 422 — — 422

Gain on debt extinguishment ( 60 ) — — ( 60 )

Loss (gain) on disposal of assets ( 60 ) 23 — ( 37 )

Loss on debt extinguishment 56 — — 56

Other one-time costs or amortization 802 160 205 1,167

Producer settlement 6,827 — — 6,827

Interest and other income 74 — — 74

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Consolidated (2)

For the six months ended June 30, 2022 (In thousands)

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

For the nine months ended September 30, 2022 (In thousands)

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

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

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Loss (gain) on disposal of assets 12,636 — ( 34 ) 12,602

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

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

Integration costs 933 81 8,998 10,012

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Other one-time costs or amortization 8,865 162 1,942 10,969

Interest and other income — — — —

Gain on redemption of mandatorily redeemable Preferred units — — 9,580 9,580

Unrealized gain on embedded derivatives — — 88,562 88,562

Gain on embedded derivative — — 89,050 89,050

Equity income from unconsolidated affiliates — 120,706 — 120,706

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Consolidated (2)

For the six months ended June 30, 2021 (In thousands)

For the nine months ended September 30, 2021 (In thousands)

Segment net income (loss) including noncontrolling interests $ ( 22,238 ) $ 37,072 $ ( 7,424 ) $ 7,410

Interest expense 82,967 5,491 — 88,458

Income tax expense 1,207 — — 1,207

Depreciation and amortization 169,906 385 — 170,291

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

The following tables present the revenue for individual operating segment for the three and six months ended June 30, 2022 and 2021:

The following tables present the revenue for individual operating segment for the three and nine months ended September 30, 2022 and 2021:

Midstream Logistics Pipeline Transportation Consolidated

For the three months ended June 30, 2022 (In thousands)

For the three months ended September 30, 2022 (In thousands)

Revenue $ 320,667 $ 733 $ 321,400

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Midstream Logistics Pipeline Transportation Consolidated

For the three months ended June 30, 2021 (In thousands)

For the three months ended September 30, 2021 (In thousands)

Revenue $ 165,844 $ — $ 165,844

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Midstream Logistics Pipeline Transportation Consolidated

For the six months ended June 30, 2022 (In thousands)

For the nine months ended September 30, 2022 (In thousands)

Revenue $ 907,771 $ 733 $ 908,504

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Midstream Logistics Pipeline Transportation Consolidated

For the six months ended June 30, 2021 (In thousands)

For the nine months ended September 30, 2021 (In thousands)

Revenue $ 446,840 $ — $ 446,840

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Total segment operating revenue $ 450,449 $ 6 $ 450,455

The following table presents total assets for each operating segment as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

The following table presents total assets for each operating segment as of September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

(In thousands)

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SUBSEQUENT EVENTS

In July 2022, the Company redeemed the remaining 400,000 Preferred Units along with 22,845 PIK units for an aggregate redemption price of $ 492.2 million.

Following the July redemptions, there were no outstanding Preferred Units or PIK units.

On July 12, 2022, the Company filed a registration statement on Form S-3 with the SEC to register up to a maximum offering price of $ 400,000,000 of shares of Class A Common Stock, shares of preferred stock, depositary shares and warrants of the Company and debt securities of the Partnership and to register 107,580,912 shares of Class A Common Stock that may be offered and sold by the selling stockholders named in the registration statement Form S-3 filed from time to time on any exchange on which the shares of Class A Common Stock are listed.

On July 20, 2022, 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 on August 17, 2022.

On October 10, 2022, the Company announced the transfer of its Class A Common Stock to the New York Stock Exchange (“NYSE”) from the Nasdaq Global Select Market (“Nasdaq”).

The Company’s Class A Common Stock began trading on the NYSE under its current ticker symbol, “KNTK”, at the open of trading on Monday, October 24, 2022.

On October 19, 2022, 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 on November 17, 2022.

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.

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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