−Removed: The Company’s business activities and the value of its securities are subject to significant hazards and risks, including those described below.
−Removed: If any of such events should occur, Altus’ business, financial condition, liquidity, and/or results of operations could be materially harmed, and holders and purchasers of Altus’ securities could lose part or all of their investments.
−Removed: Additional risks relating to Altus’ securities may be included in the prospectuses for securities the Company may issue in the future.
−Removed: RISKS RELATED TO THE BCP BUSINESS COMBINATION
−Removed: Failure to complete, or significant delays in completing, the BCP Business Combination could negatively affect the trading price of the Class A Common Stock and Altus’ future business and financial results.
−Removed: Completion of the BCP Business Combination is not assured and is subject to risks, including the risks that approval of the issuance of the equity consideration by Altus’ stockholders or approval of the transaction by governmental agencies is not obtained or that other closing conditions are not satisfied.
−Removed: If the transaction is not completed, or if there are significant delays in completing the transaction, the trading price of the Class A Common Stock and Altus’ future business and financial results could be negatively affected, and the Company will be subject to several risks, including the following:
−Removed: • Altus may be liable for damages to Contributor under the terms of the BCP Contribution Agreement;
−Removed: • negative reactions from the financial markets, including a decline in the trading price of the Class A Common Stock due to the fact that current prices may reflect a market assumption that the transaction will be completed;
−Removed: • having to pay certain significant costs relating to the transaction, including, in certain circumstances, a termination fee to Contributor;
−Removed: • the attention of Altus’ management will have been diverted to the transaction rather than Altus’ own operations and pursuit of other opportunities that could have been beneficial to it.
−Removed: The pendency of the BCP Business Combination could materially adversely affect the Company’s future business and operations or result in a loss of personnel.
−Removed: Uncertainty about the effect of the BCP Business Combination on personnel, customers, and suppliers may have an adverse effect on the Company’s business.
−Removed: These uncertainties may impair the ability to attract, retain, and motivate key personnel of Apache providing services to Altus pursuant to the COMA until the transactions are consummated and for a period of time thereafter, and could cause customers, suppliers, and others who deal with the Company to change their existing business relationships, which could negatively affect the Company’s revenues, earnings, and cash flows, as well as the market price of the Company’s Class A Common Stock, regardless of whether the transactions are completed.
−Removed: Retention of personnel may be particularly challenging during the pendency of the transactions because personnel may experience uncertainty about their future roles with the combined company.
−Removed: If, despite retention efforts, key personnel depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with or join the combined company, the Company’s business could be seriously harmed.
−Removed: Similar risks could affect BCP and, therefore, the combined company if the transactions are completed.
−Removed: The BCP Contribution Agreement includes restrictions relating to the conduct of the Company’s business while the transactions are pending, which could adversely affect the Company’s business and operations.
−Removed: Under the terms of the BCP Contribution Agreement, the Company is subject to certain restrictions on the conduct of its business prior to completing the transactions, which may adversely affect its ability to execute certain of its business strategies, including, subject to certain exceptions, restrictions on the acquisition or disposition of assets, the incurrence of capital expenditures, the entry into contracts, the incurrence of indebtedness, or the settlement of claims and lawsuits, unless the Company obtains the prior written consent of Contributor.
−Removed: Such limitations could negatively affect the Company’s business and operations prior to the completion of the transactions.
−Removed: The failure to successfully integrate the business and operations of the Contributed Entities in the expected time frame may adversely affect Altus’ future results.
−Removed: Altus believes that the acquisition of the Contributed Entities will result in certain benefits, including certain cost synergies and operational efficiencies.
−Removed: However, to realize these anticipated benefits, the businesses of Altus and the Contributed Entities must be successfully combined.
−Removed: The success of the BCP Business Combination will depend on Altus’
−Removed: ability to realize these anticipated benefits from combining the businesses of Altus and the Contributed Entities.
−Removed: Due to legal restrictions, Altus and Contributor have conducted, and until the completion of the transactions will conduct, only limited planning regarding the integration of the businesses following the transactions and will not determine the exact nature in which the businesses will be combined until after the transactions have been completed.
−Removed: The actual integration may result in additional and unforeseen expenses or delays.
−Removed: If the post-BCP Business Combination company is not able to successfully integrate the Contributed Entities’ businesses and operations, or if there are delays in combining the businesses, the anticipated benefits of the transaction may not be realized fully or at all or may take longer to realize than expected.
−Removed: Additional risks related to the BCP Business Combination are described in the Company’s definitive proxy statement filed with the SEC on January 12, 2022.
−Removed: RISKS RELATED TO THE COMPANY’S PRIMARY CUSTOMER AND MAJORITY OWNER
−Removed: Altus derives a substantial portion of its revenue from Apache, and if Apache changes its business strategy, alters its current drilling and development plan on acreage dedicated to Altus, or otherwise significantly reduces the volumes of natural gas or NGLs with respect to which Altus performs midstream services, Altus’ revenue would decline and its business, financial condition, results of operations, and cash flows would be materially and adversely affected.
−Removed: Substantially all of the Company’s current commercial agreements are with Apache, and as a result, Altus derives substantially all of its midstream services revenue from Apache.
−Removed: Accordingly, Altus will be subject to the operational and business risks of Apache, the most significant of which include the following:
−Removed: • a failure to recommence or any further or subsequent reduction in or slowing of Apache’s drilling and development plans for or deferrals of production from the acreage dedicated to the Company, including as a result of volatility in the price of crude oil, natural gas, and NGLs or the availability of capital to fund Apache’s activities, which would directly and adversely impact demand for Altus’ midstream services;
−Removed: • drilling and operating risks, including potential environmental liabilities, associated with Apache’s operations on the acreage dedicated to the Company;
−Removed: • downstream processing and transportation capacity constraints and interruptions, including the failure of Apache to have sufficient contracted transportation capacity;
−Removed: • adverse effects of increased or changed governmental and environmental regulation or enforcement of existing regulation, including legislative, regulatory, policy changes, or initiatives addressing the impact of global climate change, hydraulic fracturing, methane emissions, flaring, or water disposal;
−Removed: • Apache’s financial condition, credit ratings, leverage, market reputation, responses to ESG initiatives, liquidity, and cash flows.
−Removed: Further, Altus does not have control over Apache’s business decisions and operations, and Apache is under no obligation to adopt a business strategy that is favorable to the Company.
−Removed: Thus, Altus will be subject to the risk of cancellation of planned development, nonperformance of commitments with respect to future dedications, and other nonpayment or nonperformance by Apache, including with respect to its commercial agreements, which do not contain minimum volume commitments.
−Removed: Furthermore, there is no guarantee that Apache will extend any agreements with the Company beyond their initial terms or that Altus will be able to renew or replace these agreements on equal or better terms, or at all, upon their expiration.
−Removed: Any material nonpayment or nonperformance by Apache under its commercial agreements with the Company would have a significant adverse impact on Altus’ business, financial condition, results of operations, and cash flows.
−Removed: Altus does not have any employees and relies entirely on services provided by Apache’s employees.
−Removed: The Company does not have any employees.
−Removed: Instead, Altus relies entirely on Apache’s employees to conduct the Company’s business and activities pursuant to the COMA.
−Removed: There could be material competition for the time and effort of the Apache officers and employees who provide services to both Altus and Apache.
−Removed: If Apache’s employees who provide services to the Company do not devote sufficient attention to the management and operation of Altus’ business and activities, Altus’ business, financial condition, results of operations, and cash flows could be materially and adversely affected.
−Removed: Although the COMA provides for certain fixed annual limits on the support services fee payable to Apache through 2022, there is no limit on such fees thereafter.
−Removed: As a result, after 2022, Altus may be required to pay Apache higher fees than would be available from third parties.
−Removed: The COMA is subject to termination by Altus or Apache under certain circumstances, including if Apache and its affiliates no longer own a direct or indirect interest in at least 50 percent of the voting or other equity securities of the Company.
−Removed: Should the COMA be terminated by Altus or Apache, Altus will be required to attract and hire employees to
−Removed: perform the services currently performed by Apache’s employees under the COMA or otherwise contract with third parties for the provision of such services, which, in either case, could subject Altus to substantial additional costs, could cause significant disruptions to Altus’ business, may be on terms less favorable than the terms of the COMA, and as a result, Altus’ financial condition, results of operations, and cash flows could be adversely affected.
−Removed: Altus’ executive officers and directors may face potential conflicts of interest in managing the Company’s business.
−Removed: Altus’ executive officers and certain directors are also officers or employees of Apache.
−Removed: These relationships may create conflicts of interest regarding corporate opportunities and other matters.
−Removed: The resolution of any such conflicts may not always be in the Company’s or its stockholders’ best interests.
−Removed: In addition, these overlapping executive officers and directors allocate their time among Altus and Apache.
−Removed: These officers and directors face potential conflicts regarding the allocation of their time, which may adversely affect the Company’s business, results of operations, and financial condition.
−Removed: Substantially all of Altus’ gathering and processing operations are located within the Southern Delaware Basin of West Texas, making it vulnerable to risks associated with having revenue-producing operations concentrated in one geographic area.
−Removed: Altus’ revenue-producing operations are geographically concentrated primarily within the Southern Delaware Basin of West Texas, which disproportionately exposes the Company to risks associated with regional factors and increases its exposure to unexpected events that may occur in this region, such as natural disasters or localized pandemic outbreaks.
−Removed: Furthermore, the Company may be exposed to increases in costs as a result of regional economic conditions and the availability of goods and services, such as a skilled labor force, which could become more expensive (or at certain times, unavailable) if the labor market in the Permian Basin were to tighten.
−Removed: Any of these risks could adversely affect the Company’s financial condition, results of operations, or cash flows.
−Removed: Apache may suspend, reduce, or terminate its obligations under its commercial agreements with Altus in certain circumstances, which could have a material adverse effect on Altus’ financial condition, results of operations, and cash flow.
−Removed: Altus is party to certain commercial agreements with Apache that permit Apache to suspend, reduce, or terminate its obligations under the agreement if certain events occur.
−Removed: These events include force majeure events that would prevent the Company from performing some or all of the required services under the applicable agreement.
−Removed: Apache, as the counterparty under these commercial agreements, has the discretion to make such decisions, which may significantly and adversely affect the Company.
−Removed: Any such reduction, suspension, or termination of Apache’s obligations under these agreements would have a material adverse effect on the Company’s financial condition, results of operations, and cash flow.
−Removed: While Apache has granted Altus a right of first offer to provide additional midstream services and acquire Apache’s retained midstream assets in Alpine High, Apache does not have to accept the Company’s offer.
−Removed: Apache has granted Altus a right of first offer to provide additional midstream services and acquire Apache’s retained midstream assets in Alpine High.
−Removed: Although Apache granted Altus this right of first offer, the Company can make no assurances that the economic terms that it offers Apache will be acceptable to Apache, and another midstream services provider or a third party may be willing to make an offer to Apache on economic terms that Altus is unwilling or unable to offer.
−Removed: Altus’ inability to take advantage of the opportunities with respect to the right of first offer could adversely affect its growth strategy.
−Removed: A significant amount of the revenue currently generated by Altus is from contracts with Apache that contain most favored nations rights and other consent rights, limiting flexibility to offer certain rates or capacity to new shippers.
−Removed: Certain of the Company’s commercial agreements with Apache contain most favored nations rights (MFNs), which require that certain terms (including the rates charged thereunder) are no less favorable to Apache than those provided to any similarly situated counterparty.
−Removed: Without Apache’s consent, the MFNs effectively limit the Company’s flexibility in negotiating rates for some of Altus’ services with other shippers, because triggering the MFNs would lead to a reduction in the rates that the Company charges to Apache, which would adversely affect Altus’ financial condition, results of operations, or cash flows.
−Removed: Additionally, certain of the commercial agreements may require Apache’s consent to offer third-party customers priority of service in the Company’s facilities that is at least equal to Apache’s priority of service.
−Removed: If Apache refuses to grant such consent, the Company’s ability to attract third-party customers to its midstream facilities could be negatively impacted.
−Removed: If Apache elects to sell acreage that is dedicated to Altus to a third party, then the third party’s financial condition could be materially worse than Apache’s, and Altus could be subject to the nonpayment or nonperformance by the third party.
−Removed: If Apache elects to sell acreage that is dedicated to the Company to a third party, then the third party’s financial condition could be materially worse than Apache’s.
−Removed: In such a case, the Company may be subject to risks of loss resulting from nonpayment or nonperformance by the third party, which risks may increase during periods of economic uncertainty.
−Removed: Furthermore, the third party may be subject to their own operating and regulatory risks, which increases the risk that they may default on their obligations to the Company.
−Removed: Any material nonpayment or nonperformance by the third party could adversely impact the business, financial condition, results of operations, and cash flows of the Company.
−Removed: Apache owns a majority of Altus’ outstanding voting shares and thus strongly influences all of Altus’ corporate actions.
−Removed: Apache and its affiliates beneficially own approximately 79 percent of Altus’ outstanding voting common stock.
−Removed: Under the Stockholders Agreement, Apache is entitled to nominate up to seven directors to Altus’ board of directors depending on its and its affiliates’ ownership of Altus’ outstanding voting common stock.
−Removed: As long as Apache and its affiliates own or control a significant percentage of Altus’ outstanding voting power, it will have the ability to strongly influence all corporate actions, including those requiring stockholder approval, the election and removal of directors, the size of Altus’ board of directors, any amendment of Altus’ charter or bylaws, any action impacting the Equity Method Interest Pipelines or the ownership of such interests, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of Altus’ assets, and will be able to cause or prevent a change in the composition of Altus’ board of directors or a change in control of the Company that could deprive stockholders of an opportunity to receive a premium for their common stock as part of a sale of the Company.
−Removed: The interests of Apache may not align with the interests of Altus’ other stockholders.
−Removed: RISKS RELATED TO CONSTRUCTING OR MAINTAINING ASSETS AND OPERATING THE BUSINESS
−Removed: The COVID-19 pandemic has and may continue to adversely impact the Company’s business, financial condition, and results of operations, the global economy, and the demand for and prices of oil, natural gas, and NGLs.
−Removed: The unprecedented nature of the current situation makes it impossible for the Company to identify all potential risks related to the pandemic or estimate the ultimate adverse impact that the pandemic may have on its business.
−Removed: The COVID-19 pandemic and the actions taken by third parties, including, but not limited to, governmental authorities, businesses, and consumers, in response to the pandemic have adversely impacted the global economy and created significant volatility in the global financial markets.
−Removed: Business closures, restrictions on travel, “stay-at-home” or “shelter-in-place” orders, and other restrictions on movement within and among communities have significantly reduced demand for and the prices of oil, natural gas, and NGLs.
−Removed: As of the date of this report, efforts to contain COVID-19 have not been successful in many regions, vaccination distribution programs have encountered delays, new variants have emerged, and the global pandemic remains ongoing.
−Removed: While some geographic regions have lifted, relaxed, or otherwise modified their pandemic response measures to lessen the impact of such measures on business operations and commerce, these regions may reinstitute restrictions as circumstances change.
−Removed: A continued, prolonged period or a renewed period of reduced demand, the failure to timely distribute or the ineffectiveness of or reluctance or refusal of individuals to take any vaccines, the failure to develop adequate treatments, and other adverse impacts from the pandemic may materially adversely affect the Company’s business, financial condition, cash flows, and results of operations.
−Removed: The Company’s operations rely on Apache and its workforce being able to access the Company’s various facilities.
−Removed: Additionally, because Apache has previously implemented, and may elect to or be required in the future to reimplement, remote working procedures for a significant portion of its workforce for health and safety reasons and/or to comply with applicable national, state, and/or local government requirements, the Company relies on such persons having sufficient access to applicable information technology systems, including through telecommunication hardware, software, and networks.
−Removed: If a significant portion of Apache’s workforce cannot effectively perform their responsibilities, whether resulting from a lack of physical or virtual access, quarantines, illnesses, governmental actions or restrictions, including vaccine mandates and the reactions thereto, information technology or telecommunication failures, or other restrictions or adverse impacts resulting from the pandemic, the Company’s business, financial condition, cash flows, and results of operations may be materially adversely affected.
−Removed: The unprecedented nature of the current situation resulting from the COVID-19 pandemic makes it impossible for the Company to identify all potential risks related to the pandemic or estimate the ultimate adverse impact that the pandemic may have on its business, financial condition, cash flows, or results of operations.
−Removed: Such results will depend on future events, which the Company cannot predict, including the scope, duration, and potential reoccurrence of the COVID-19 pandemic, the emergence and impact of additional variants, or any other localized epidemic or global pandemic, the distribution and effectiveness of vaccines, therapeutics and treatments, the demand for and the prices of oil, natural gas, and NGLs, and the
−Removed: actions taken by third parties, including, but not limited to, governmental authorities, customers, contractors, and suppliers, in response to the COVID-19 pandemic or any other epidemics or pandemics.
−Removed: The COVID-19 pandemic and its unprecedented consequences have amplified, and may continue to amplify, the other risks identified in this report.
−Removed: Construction and maintenance of Altus’ assets (including the Equity Method Interest Pipelines) subjects the Company to risks of construction delays, cost over-runs, and negative effects on its financial condition, results of operations, or cash flows.
−Removed: The construction and maintenance of Altus’ assets (including the Equity Method Interest Pipelines) and any additions or modifications to any such assets are complex projects that are subject to a number of factors beyond the Company’s control, including numerous regulatory, environmental, political, and legal uncertainties, delays from third-party landowners or their refusal to provide necessary consents, the permitting process, complying with laws, unavailability or increased cost of or tariffs on materials, labor disruptions, labor availability, environmental hazards, protests, third-party legal actions, financing, accidents, weather, and other factors.
−Removed: If the Company undertakes these projects, it may not be able to complete them on schedule, at the budgeted cost, or at all.
−Removed: Any delay in the completion or continued maintenance of such assets or any increase in or change in the timing of capital expenditures necessary to fund such construction or maintenance may require the expenditure of significant amounts of capital and could adversely affect the Company’s financial condition, results of operations, liquidity, or cash flows.
−Removed: If the Company seeks to acquire assets or businesses but is unable to do so on economically acceptable terms or is unable to successfully integrate any acquired assets or operations, its future growth will be limited.
−Removed: From time to time, the Company may evaluate and seek to acquire assets or businesses that it believes complement its existing business and related assets.
−Removed: The Company may acquire assets or businesses that it plans to use in a manner materially different from their prior owners’ uses.
−Removed: Any acquisition involves potential risks, including the inability to integrate the operations of recently acquired businesses or assets, especially if the assets acquired are in a new business segment or geographic area, the failure to realize expected volumes, revenues, profitability, or growth, the failure to realize any expected synergies and cost savings, the assumption of unknown liabilities, the loss of customers or key employees from the acquired businesses, and potential environmental or regulatory liabilities and title problems.
−Removed: Any assessment of these risks will be inexact and may not reveal or resolve all existing or potential problems associated with an acquisition.
−Removed: Realization of any of these risks could adversely affect the Company’s financial condition, results of operations, and cash flows.
−Removed: If Altus consummates any future acquisition, its capitalization and results of operations may change significantly.
−Removed: If third-party pipelines or other midstream facilities interconnected to the Company’s gathering, processing, or transmission systems become partially or fully unavailable or if the volumes Altus gathers, processes, or transmits do not meet the quality requirements of the pipelines or facilities to which Altus connects, its cash flows could be adversely affected.
−Removed: The Company’s gathering, processing, and transmission assets connect to other pipelines or facilities owned and operated by unaffiliated third parties, and continuing access to such third-party pipelines, processing facilities, and other midstream facilities are not within the Company’s control.
−Removed: These pipelines, plants, and other midstream facilities may become unavailable because of testing, turnarounds, maintenance, reduced capacity, regulatory requirements, and other curtailments of receipt or deliveries.
−Removed: If the Company’s costs to access and transmit on these third-party pipelines significantly increase, if any of these pipelines or other facilities become unable to receive, transmit, or process product, or if the volumes the Company gathers or transmits do not meet the product quality requirements, then Altus’ cash flows could be adversely affected.
−Removed: Increased competitive pressure could adversely affect Altus’ financial condition, results of operations, or cash flows.
−Removed: Altus competes with similar enterprises in its industry, including large midstream companies that have greater financial resources and access to supplies than the Company.
−Removed: The principal elements of competition are rates, terms of service, and flexibility and reliability of service.
−Removed: Expansion or construction of competing gathering, processing, transmission, and storage systems and excess pipeline capacity would create additional competition for the services the Company provides to its customers.
−Removed: Further, natural gas utilized as a fuel competes with other forms of energy available to end-users.
−Removed: Increased demand for such other forms of energy at the expense of natural gas could lead to a reduction in demand for Altus’ midstream services and could intensify the negative impact of factors that decrease demand for natural gas in the markets served by the Company’s systems, such as adverse economic conditions, weather, higher fuel costs, and taxes or other governmental or regulatory actions.
−Removed: All of these competitive pressures could adversely affect the Company’s financial condition, results of operations, or cash flows.
−Removed: Altus may not be able to retain or acquire new customers, which would reduce Altus’ revenues and limit its future profitability.
−Removed: The renewal or replacement of the Company’s existing contracts with its customers at rates sufficient to maintain or increase current revenues and cash flows depends on a number of factors, some of which are beyond the Company’s control, including competition and the price of, and demand for, commodities in the markets Altus serves.
−Removed: The inability of the Company to renew or replace its current or future contracts as they expire could have a negative effect on its profitability.
−Removed: Altus does not own in fee the land on which its assets are located, which could result in disruptions to its operations.
−Removed: The Company does not own in fee any of the land on which its midstream assets have been constructed.
−Removed: Altus’ only interests in these properties are rights granted under surface use agreements, rights-of-way, surface leases, or other easement rights (collectively, Rights-of-Way), of which Apache and certain of its affiliates are a party, and such Rights-of-Way may limit or restrict Altus’ access to or use of the surface estates, which may adversely affect Altus’ operations.
−Removed: The Company is also subject to the possibility of more onerous terms or increased costs to retain necessary land use if Altus does not have valid Rights-of-Way or if such usage rights lapse or terminate.
−Removed: The loss of these rights could have a material adverse effect on the business, financial condition, results of operations, and cash flows of the Company.
−Removed: A failure in Altus’ computer systems or a terrorist or cyberattack on Altus or third parties with whom Altus does business may adversely affect the Company’s ability to operate its business.
−Removed: The Company is reliant on technology to conduct its business.
−Removed: The Company depends upon its operational and financial computer systems to process the data necessary to conduct almost all aspects of its business, including operating its pipelines and gathering and processing facilities, recording and reporting commercial and financial transactions, and receiving and making payments.
−Removed: Any failure of the Company’s computer systems or those of its customers, suppliers, or others with whom it does business, including Apache, could materially disrupt the Company’s ability to operate its business.
−Removed: Cyberattacks against the Company may disrupt computer systems and operations and result in the theft of funds or data.
−Removed: In addition, the Company’s pipeline systems may be targets of terrorist attacks or environmental activist group activities that could disrupt Altus’ ability to conduct its business.
−Removed: Protecting against such threats may require the Company to expend significant additional resources, and any such attack or disruption could have a material adverse effect on Altus’ business and results of operations.
−Removed: Altus’ business involves many hazards and operational risks, some of which may not be fully covered by insurance.
−Removed: The occurrence of a significant event that is not fully insured could adversely affect Altus’ operations and financial condition.
−Removed: The Company’s operations are subject to the many hazards inherent in the gathering, compressing, processing, and transmission of natural gas and NGLs, including damage to pipelines, related equipment, and surrounding properties caused by hurricanes, floods, fires, explosions, freezes, other natural or anthropogenic disasters, acts of terrorism, and cyberattacks, leaks of natural gas, NGLs, and other hydrocarbons, and induced seismicity.
−Removed: These risks could result in substantial losses due to personal injury and/or loss of life, severe damage to and destruction of property and equipment, including information technology systems, and pollution or other environmental damage and may result in curtailment or suspension of the Company’s related operations.
−Removed: In accordance with typical industry practice, Altus has appropriate levels of business interruption, property, and other insurance, but the Company is not fully insured against all risks incident to its business.
−Removed: If a significant accident or event occurs that is not fully insured, it could adversely affect Altus’ financial condition, results of operations, or cash flows.
−Removed: RISKS RELATED TO THE EQUITY METHOD INTEREST PIPELINES AND OTHER NON-OPERATED ASSETS
−Removed: Altus owns or operates a portion of its business with one or more equity interest partners or in circumstances where Altus is not the operator, including the Equity Method Interest Pipelines, which may restrict its operational and corporate flexibility;
−Removed: actions taken by other partners or third-party operators may materially impact the Company’s financial position and results of operations, and Altus may not realize the benefits it expects to realize from an equity interest.
−Removed: As is common in the midstream industry, Altus owns or operates one or more of its properties with one or more equity interest partners, including the Equity Method Interest Pipelines, or contracts with a third-party to control operations.
−Removed: These relationships require the Company to share operational and other control or to defer to another party’s control, such that it does not have the flexibility to control the development of these properties.
−Removed: If Altus does not timely meet its financial commitments in such circumstances, its rights to participate may be adversely affected.
−Removed: If an equity interest partner is unable or fails to pay its portion of development costs or if a third-party operator does not operate in accordance with the Company’s expectations, the Company’s costs of operations could be increased.
−Removed: Altus could also incur liability or not realize expected benefits as a result of actions taken by an equity interest partner or third-party operator.
−Removed: Actions taken by Apache may also negatively impact Altus’ ownership in or the expected benefits from such assets.
−Removed: Disputes between Altus and the other party or parties in an equity interest may result in litigation or arbitration that would increase the Company’s expenses, delay or terminate projects, and distract the Company’s officers and directors from focusing their time and effort on Altus’ business.
−Removed: If any of the Equity Method Interest Pipelines experience cost overruns or do not generate the cash flows Altus expects, the Company’s plans for growth and dividends will be impaired.
−Removed: The Company’s strategy to grow its business depends in part on the Equity Method Interest Pipelines.
−Removed: Altus can offer no assurance that the Equity Method Interest Pipelines will perform as expected.
−Removed: If applicable pipelines do not perform as expected, Altus may experience losses in relation to its equity interests.
−Removed: In addition, each of the Equity Method Interest Pipelines is subject to risks associated with cost over-runs, operational hazards, environmental matters, regulatory matters, creditworthiness of counterparties, and legal matters, as well as other risks and uncertainties, many of which are beyond the control of the operator of the pipeline.
−Removed: If any of these risks were to materialize, Altus’ financial condition, results of operations, and cash flows could be adversely affected.
−Removed: RISKS RELATED TO THE VOLUME AND PROCESSING OF PRODUCTS THE COMPANY SERVICES
−Removed: Altus is dependent on the supply of commodities to its system, and any decrease in such supply or the volumes that Altus gathers, processes, or transmits or any decrease in Altus’ processing efficiency would adversely affect its financial condition, results of operations, or cash flows.
−Removed: The Company’s financial performance depends to a large extent on the volumes of natural gas and NGLs gathered, processed, and transmitted on its assets, and decreases in such volumes would directly and adversely affect its financial condition, results of operations, or cash flows.
−Removed: These volumes can be influenced by factors beyond Altus’ control, including regulations, weather, storage levels, increased use of alternative energy sources, decreased demand, and changes in production.
−Removed: The Company’s financial condition, results of operations, or cash flows may also be adversely affected if the reserves or estimates thereof reported by the Company’s customers, for which the Company does not obtain independent evaluations, is less than anticipated or if the infrastructure to gather and process supply into and out of the Company’s systems are unavailable or inadequate.
−Removed: If the Company is unable to maintain or increase the volumes on its system or if its processing efficiency falls below contractually required levels, the Company’s business, financial conditions, results of operations, or cash flows could be adversely affected.
−Removed: The Company’s exposure to commodity price risk may change over time.
−Removed: The Company currently generates substantially all of its midstream services revenue pursuant to fee-based contracts under which the Company is paid based on the volumes that it gathers, processes, and transmits, rather than the underlying value of the commodity, and only has an immaterial portion of its revenues that are based on the underlying value of a commodity.
−Removed: However, Altus may enter into contracts or may acquire or develop additional midstream assets in a manner that increases its exposure to commodity price risk, which could adversely affect Altus’ financial condition, results of operations, or cash flows.
−Removed: RISKS RELATED TO CAPITAL EXPENDITURES
−Removed: To maintain and grow its business, Altus is, and will be, required to make substantial capital expenditures.
−Removed: To maintain and grow its business, Altus will need to make substantial capital expenditures to fund growth capital expenditures as well as its share of capital expenditures associated with the Equity Method Interest Pipelines.
−Removed: If the Company does not make sufficient or effective capital expenditures, it will be unable to maintain and grow its business, and, as a result, it may be unable to increase its cash flow over the long term.
−Removed: To fund Altus’ capital expenditures, it will be required to use cash from its operations, incur debt, engage in structured financial transactions, or sell additional shares of Class A Common Stock or other equity securities.
−Removed: Additionally, the Company’s ability to obtain bank financing or its ability to access the capital markets for future equity or debt offerings may be limited by its then-current financial condition and the covenants in its then-current debt agreements, as well as by general economic conditions and uncertainties that are beyond its control.
−Removed: Also, due to Altus’ relationship with Apache, material adverse changes affecting Apache could negatively impact the Company’s ability to access the capital markets, including the pricing or other terms of any capital markets transactions, or engage in certain transactions that might otherwise be considered beneficial to the Company.
−Removed: The capital and global credit markets have experienced volatility and disruption in the past, and further volatility and disruption may have an adverse effect on Altus’s ability to access the credit markets to finance its operations or expansions.
−Removed: The capital and global credit markets have experienced volatility and disruption in the past.
−Removed: In many cases during these periods, the capital markets have exerted downward pressure on equity values and reduced the credit capacity for certain companies.
−Removed: Similar or more severe levels of global market disruption and volatility may have an adverse effect on Altus resulting from, but not limited to, disruption of Altus’ access to capital and credit markets, difficulty in obtaining financing necessary to expand facilities or acquire assets, increased financing costs, and increasingly restrictive covenants.
−Removed: If Altus is unable to access capital at competitive rates, the Company’s strategy of enhancing the earnings potential of its existing assets, including through capital-growth projects and acquisitions of complementary assets or businesses, may be affected adversely.
−Removed: RISKS RELATED TO THE COMPANY’S FINANCIAL CONDITION AND OBLIGATIONS
−Removed: Debt Altus incurs may limit its flexibility to obtain financing and to pursue other business opportunities.
−Removed: The Company’s current and future level of debt could have important consequences to it, and the Company’s ability to obtain additional financing, if necessary, for working capital, capital expenditures, or other purposes may be impaired or such financing may not be available on favorable terms.
−Removed: The funds available for operations, future business opportunities, and the payment of dividends, if any, to the Company’s stockholders will be reduced by that portion of its cash flows required to make interest payments on its debt, and the Company may be more vulnerable to competitive pressures or a downturn in its business or the economy generally.
−Removed: Altus’ ability to service any debt will depend upon, among other things, its future financial and operating performance, which will be affected by prevailing economic conditions and other factors, some of which are beyond its control.
−Removed: If the Company’s operating results are not sufficient to service any future indebtedness, it will be forced to take actions such as reducing or eliminating dividends, reducing or delaying its business activities, investments, or capital expenditures, selling assets, or issuing equity.
−Removed: Altus may not be able to effect any of these actions on satisfactory terms or at all.
−Removed: The discontinuation and uncertain cessation date of LIBOR, and the adoption of an alternative reference rate, may have a material adverse impact on Altus Midstream’s floating rate indebtedness and financing costs.
−Removed: Pursuant to the terms of Altus Midstream’s revolving credit facility, Altus Midstream may elect to use the London Interbank Offering Rate (LIBOR) as a benchmark for establishing the interest rate on floating interest rate borrowings under its revolving credit facility.
−Removed: On November 30, 2020, the ICE Benchmark Administration (IBA) announced that it intends to continue publishing LIBOR until the end of June 2023, beyond the previously announced 2021 cessation date.
−Removed: The IBA announcement was supported by announcements from the United Kingdom’s Financial Conduct Authority (FCA), which regulates LIBOR, and the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency (U.S.
−Removed: However, both the FCA and U.S.
−Removed: Regulators in their announcements also advised banks to cease entering into new contracts referencing LIBOR after December 2021.
−Removed: These announcements indicate that the continuation of LIBOR in existing contracts may not be assured after 2021 and will not be assured beyond 2023.
−Removed: In light of these recent announcements, the future of LIBOR at this time is uncertain, and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phase-out could cause LIBOR to perform differently than in the past or cease to exist.
−Removed: In the United States, the Alternative Reference Rates Committee (the working group formed to recommend an alternative rate to LIBOR) has identified the Secured Overnight Financing Rate (SOFR) as its preferred alternative rate for LIBOR.
−Removed: There can be no guarantee that SOFR will become a widely-accepted benchmark in place of LIBOR.
−Removed: Although the full impact of the transition away from LIBOR, including the discontinuance of LIBOR publication and the adoption of SOFR as the replacement rate for LIBOR, remains unclear, these changes may have an adverse impact on Altus Midstream’s floating rate indebtedness and financing costs under its revolving credit facility.
−Removed: Altus is exposed to the credit risk of its customers and counterparties, including Apache, and their nonpayment or nonperformance could have an adverse effect on the Company’s financial condition, results of operations, or cash flows.
−Removed: The Company is subject to risks of loss resulting from nonpayment or nonperformance by its customers or other counterparties, including Apache.
−Removed: Any increase in the nonpayment or nonperformance by such parties could adversely affect Altus’ financial condition, results of operations, or cash flows.
−Removed: Additionally, the combination of a reduction of cash flow resulting from lower commodity prices, a reduction in borrowing bases under reserve-based credit facilities, and the lack of availability of debt or equity financing may result in a significant reduction in the liquidity of such parties and their ability to make payment or perform on their obligations to the Company.
−Removed: Furthermore, some of the Company’s customers or other counterparties may be leveraged and subject to their own operating and regulatory risks, which increases the risk that they may default.
−Removed: Altus may be required to take write-downs, write-offs, or restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations, and stock price.
−Removed: Altus cannot assure its stockholders that its due diligence will reveal all material issues that may be present in the businesses that it may acquire, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of its control will not later arise.
−Removed: As a result, Altus may be forced to later write down or write off assets, restructure its operations, or incur impairment or other charges that could result in losses.
−Removed: Even though these charges may be non-cash items and may not have an immediate impact on the Company’s liquidity, the fact that it reports charges of this nature could contribute to negative market perceptions about the Company or its securities.
−Removed: The Company’s ability to utilize net operating losses and other tax attributes to reduce future taxable income may be limited if the Company experiences an ownership change.
−Removed: As described in Note 12—Income Taxes within Part II, Item 8 of this Annual Report on Form 10-K, the Company has substantial net operating loss carryforwards (NOLs) and other tax attributes available to potentially offset future taxable income.
−Removed: If the Company were to experience an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended, which is generally defined as a greater than 50 percentage point change, by value, in the Company’s equity ownership by five-percent shareholders over a three-year period, the Company’s ability to utilize its pre-change NOLs and other pre-change tax attributes to potentially offset its post-change income or taxes may be limited.
−Removed: Such a limitation could materially adversely affect the Company’s operating results or cash flows by effectively increasing its future tax obligations.
−Removed: Altus’ ability to pay dividends depends on its ability to generate sufficient cash flow, which it may not be able to accomplish.
−Removed: The Company’s ability to pay dividends principally depends upon the amount of cash it generates from its operations, which will fluctuate from quarter to quarter based on, among other things, income from the Equity Method Interest Pipelines, the volumes of natural gas and NGLs it gathers and processes, commodity prices, and other factors impacting Altus’ financial condition, some of which are beyond its control.
−Removed: In addition, under Delaware law, dividends on Altus’ capital stock may only be paid from “surplus,” which is the amount by which the fair value of Altus’ total assets exceeds the sum of its total liabilities, including contingent liabilities, and the amount of its capital;
−Removed: if there is no surplus, cash dividends on capital stock may only be paid from Altus’ net profits for the then-current and/or the preceding fiscal year.
−Removed: Altus’ only significant assets are ownership of the non-economic general partner interest and an approximate 23.1 percent limited partner interest in Altus Midstream LP, and such ownership may not be sufficient for Altus Midstream LP to make distributions or loans to Altus to enable it to pay any dividends or satisfy its other financial obligations.
−Removed: Altus has no direct operations and no significant assets other than the ownership of the non-economic general partner interest and an approximate 23.1 percent limited partner interest in Altus Midstream LP.
−Removed: The Company depends on Altus Midstream LP for distributions, loans, and other payments to generate the funds necessary to meet its financial obligations and to pay dividends with respect to its Class A Common Stock.
−Removed: Subject to certain restrictions, Altus Midstream LP generally will be required to (i) make pro rata distributions to its partners, including the Company, on a quarterly basis in an amount at least sufficient to allow the Company to pay the Company’s taxes and make tax advances to Altus Midstream LP’s limited partners, other than the Company, in certain circumstances, and (ii) reimburse the Company for certain corporate and other overhead expenses.
−Removed: However, legal and contractual restrictions in agreements governing existing and future indebtedness of Altus Midstream LP, as well as the financial condition and operating requirements of Altus Midstream LP, may limit the Company’s ability to obtain cash from Altus Midstream LP.
−Removed: In addition, Altus Midstream LP is required to pay specified quarterly distributions on its Series A Cumulative Redeemable Preferred Units before paying distributions on Common Units.
−Removed: The earnings from, or other available assets of, Altus Midstream LP may not be sufficient to make distributions or loans to the Company, to enable it to pay dividends on its Class A Common Stock, or to satisfy its other financial obligations.
−Removed: Revised Uniform Limited Partnership Act generally restricts distributions to the extent that the liabilities of the limited partnership exceed the fair value of its assets.
−Removed: Holders of Altus Midstream’s Series A Cumulative Redeemable Preferred Units have rights, preferences, and privileges that are not held by, and are preferential to the rights of, holders of Common Units, and could dilute or otherwise adversely affect the holders of Common Units.
−Removed: Altus Midstream is required to pay specified quarterly distributions on the Series A Cumulative Redeemable Preferred Units (the Preferred Units) before paying distributions on its Common Units.
−Removed: If Altus Midstream fails to pay the Preferred Unit distribution in respect of any quarter in full in cash, then Altus Midstream will not be permitted to declare or make any distributions on its Common Units until all accrued and accumulated but unpaid Preferred Unit distributions have been paid in full.
−Removed: In addition, Altus Midstream’s cash payment of distributions on, and for redemption of, its Common Units is limited in amount and subject to satisfaction of leverage ratios.
−Removed: The Preferred Units are redeemable at any time at the option of Altus Midstream and under certain circumstances, the Preferred Units are redeemable at the holders’ option, in each case, at a price which incorporates an agreed return on the holders’ investment.
−Removed: The Preferred Units also rank senior to the Common Units in distribution and liquidation rights, and holders of Preferred Units will be entitled to receive a liquidation preference that incorporates an agreed return on the holders’ investment.
−Removed: The Company depends on Altus Midstream for distributions, loans, and other payments to generate the funds necessary to meet the Company’s financial obligations or to pay any dividends with respect to its Class A Common Stock.
−Removed: Obligations of Altus Midstream in respect of the Preferred Units may restrict, reduce, or render unavailable funds that otherwise may be available to be distributed, loaned, or paid to the Company by Altus Midstream or loaned to, or invested in, Altus Midstream by third parties.
−Removed: For additional information regarding the Preferred Units, refer to Note 11—Series A Cumulative Redeemable Preferred Units within Part IV, Item 15 of this Annual Report on Form 10-K.
−Removed: RISKS RELATED TO PERMITTING, REGULATIONS, AND OTHER LEGAL CHANGES
−Removed: Altus may be unable to obtain or renew permits necessary for its operations, which could inhibit its ability to do business.
−Removed: Performance of the Company’s operations require that it obtain and maintain a number of federal, state, and local permits, licenses, and approvals, which is an expensive and lengthy process, with terms and conditions containing a significant number of prescriptive limits and performance standards in order to operate.
−Removed: All of these permits, licenses, approvals, limits, and standards require a significant amount of monitoring, record keeping, and reporting.
−Removed: Noncompliance or incomplete documentation may result in the imposition of fines, penalties, and injunctive relief.
−Removed: Moreover, the public may engage in the permitting process, including through intervention in the courts.
−Removed: Negative public perception could cause the permits Altus requires to conduct its operations to be withheld, delayed, or burdened by restrictive requirements.
−Removed: A decision by a government agency to deny or delay the issuance of a new or existing material permit or other approval or to revoke or substantially modify an existing permit or other approval could adversely affect the Company’s financial condition, results of operations, or cash flows.
−Removed: Altus is subject to regulation by multiple governmental agencies, which could adversely impact its business, results of operations, and financial condition.
−Removed: The Company is subject to regulation by multiple federal, state, and local governmental agencies, including those related to pipeline and environmental safety, and regulation by the stock exchange on which its common stock is listed.
−Removed: Proposals and proceedings that could affect the Company or its industry are regularly considered by Congress, as well as by state legislatures and federal and state regulatory commissions, agencies, and courts and stock exchanges.
−Removed: The Company cannot predict when or whether any such proposals or proceedings may become effective or the magnitude of the impact changes in or interpretations of laws, regulations, and exemptions may have on its business.
−Removed: However, additions to the regulatory burden on the Company and the midstream industry can increase the Company’s cost of doing business and affect its profitability.
−Removed: Altus may become subject to the requirements of the Investment Company Act of 1940, which would limit its business operations and require it to spend significant resources to comply with such act.
−Removed: The Investment Company Act of 1940 (the Investment Company Act) defines an “investment company” as an issuer that is engaged in the business of investing, reinvesting, owning, holding, or trading in securities and owns investment securities having a value exceeding 40 percent of the issuer’s unconsolidated assets, excluding cash items and securities issued by the federal government.
−Removed: It is possible that some or all of the interests in the Equity Method Interest Pipelines may be investment securities and that the value of those interests that are investment securities over time may exceed 40 percent of the applicable subsidiaries’ unconsolidated assets, excluding cash and government securities, in which case such subsidiaries may meet this threshold definition of an investment company.
−Removed: However, the Investment Company Act provides certain exclusions from this definition and other alternative relief from the application of the Investment Company Act.
−Removed: The ramifications of becoming an investment company, both in terms of the restrictions it would have on such subsidiary and the cost of compliance, would be significant.
−Removed: For example, in addition to expenses related to initially registering as an investment company, the Investment Company Act also would impose various restrictions with regard to the subsidiary’s ability to enter into affiliated transactions, the diversification of its assets, and its ability to borrow money.
−Removed: If any of Altus’ subsidiaries became subject to the Investment Company Act at some point in the future, then the subsidiary’s ability to continue pursuing its business plan would be severely limited.
−Removed: Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of Altus’ income or other tax returns could adversely affect its financial condition and results of operations.
−Removed: Altus is subject to income taxes in the United States, and its domestic tax liabilities may be subject to the allocation of expenses in differing jurisdictions.
−Removed: Altus’ future effective tax rates could be subject to volatility or adversely affected by a number of factors, including changes in the valuation of Altus’ deferred tax assets and liabilities, expected timing and amount of the release of any tax valuation allowances, tax effects of stock-based compensation, costs related to intercompany restructurings, changes in tax laws, regulations, or interpretations thereof, or lower than anticipated future earnings in jurisdictions where Altus has lower statutory tax rates and higher than anticipated future earnings in jurisdictions where Altus has higher statutory tax rates.
−Removed: In addition, Altus may be subject to audits of its income, franchise, sales, and other transaction taxes by U.S.
−Removed: federal and state authorities.
−Removed: Outcomes from these audits could have an adverse effect on the Company’s financial condition and results of operations.
−Removed: RISKS RELATED TO CLIMATE CHANGE
−Removed: Climate change legislation, and regulatory initiatives could result in increased operating costs and reduced demand for the natural gas and NGLs services the Company provides.
−Removed: Legislative bodies and governmental agencies have from time to time considered or adopted legislation or regulations to reduce emissions of GHGs.
−Removed: Wide-ranging policy debates regarding the impact of these gases and possible means for their regulation, along with efforts toward the adoption of international treaties or protocols that would address global climate change issues, are ongoing.
−Removed: Numerous proposals have been made and could continue to be made at the national, regional, and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate such future emissions.
−Removed: Moreover, on January 27, 2021, the President issued an executive order that commits to substantial action on climate change, calling for, among other things, the increased use of zero-emissions vehicles by the federal government, the elimination of subsidies provided to the fossil fuel industry, and increased emphasis on climate-related risk across governmental agencies and economic sectors.
−Removed: Any such legislation or regulation, if enacted, could either tax or assess some form of GHG-related fees on the Company’s operations and could lead to increased operating expenses or result in the Company making significant capital investments for infrastructure modifications.
−Removed: Additionally, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as GHG cap-and-trade programs, carbon taxes, reporting and tracking programs, restriction of emissions, electric vehicle mandates, and combustion engine phaseouts.
−Removed: Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, oil, natural gas, and NGLs.
−Removed: Additionally, political, litigation, and financial risks related to climate change may result in curtailed refinery activity, increased regulation, or other adverse direct and indirect effects on the Company’s business, financial condition and results of operations.
−Removed: For example, there is a risk that financial institutions will be required to adopt policies that have the effect of reducing the funding provided to the fossil fuel sector.
−Removed: Recently, the Federal Reserve announced that it has joined the Network for Greening the Financial System, a consortium of financial regulators focused on addressing climate-related risks in the financial sector.
−Removed: Although it is not possible at this time to predict whether legislation or regulations may be adopted to address GHG emissions or how such measures would impact the Company’s business, the imposition of reporting or permitting obligations on, or limiting emissions of GHGs from, Altus’ equipment and operations could require the Company to incur additional costs, adversely affect its performance of operations, or adversely affect demand for the Company’s services.
−Removed: Altus’ customers, including Apache, and suppliers are subject to the risk of increased federal, state, and local legislation and regulatory initiatives, which could adversely affect Altus’ financial condition, results of operations, or cash flows.
−Removed: The production of crude oil, natural gas, and NGLs by the Company’s customers, including Apache, and the Company’s suppliers are subject to regulation by multiple federal, state, and local governmental agencies, which may enact additional or more restrictive or onerous regulations, including those that may further regulate, restrict, or prohibit certain drilling methods, including hydraulic fracturing, or impose additional permit requirements and operational restrictions, such as a reduction or prohibition of venting or flaring, in certain jurisdictions or in environmentally sensitive areas.
−Removed: If additional levels of regulation and permits are required, that could lead to delays, increased operating costs, and process prohibitions for the Company’s suppliers and customers that could reduce the volumes of natural gas and NGLs that move through the Company’s systems, which could materially adversely affect its revenue and results of operations.
−Removed: RISKS RELATED TO THE COMPANY’S OWNERSHIP AND FILING STATUS
−Removed: Altus is a “controlled company” within the meaning of the Nasdaq listing rules and, as a result, qualifies for, and intends to rely on, exemptions from certain corporate governance requirements.
−Removed: Because Apache and its affiliates control a majority of Altus’ outstanding voting common stock, Altus is a controlled company within the meaning of the Nasdaq corporate governance standards.
−Removed: Under the Nasdaq listing rules, a controlled company may elect not to comply with certain Nasdaq corporate governance requirements, including the requirements that a majority of the board of directors consist of independent directors, the nominating and governance committee be composed entirely of independent directors, and the compensation committee be composed entirely of independent directors.
−Removed: These requirements will not apply to Altus as long as it remains a controlled company, and Altus currently utilizes and intends to continue to utilize some, if not all, of these exemptions.
−Removed: Accordingly, Altus’ stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq listing rules.
−Removed: The JOBS Act permits “emerging growth companies” like Altus to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.
−Removed: Altus qualifies as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the JOBS Act).
−Removed: As such, Altus is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies and of extended transition periods for as long as Altus continues to be an emerging growth company, including:
−Removed: • the exemption from the independent registered public accounting firm attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act;
−Removed: • the exemptions from say-on-pay, say-on-frequency, and say-on-golden parachute voting requirements;
−Removed: • an extended transition period for complying with new or revised accounting standards;
−Removed: • reduced disclosure obligations regarding executive compensation in Altus’ periodic reports and proxy statements.
−Removed: As a result, Altus’ stockholders may not have access to certain information they deem important and may not be able to directly compare the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period, because of the potential differences in accounting standards used.
−Removed: Altus cannot predict if investors will find its Class A Common Stock less attractive if it relies on these exemptions.
−Removed: If some investors find Altus’ Class A Common Stock less attractive as a result, there may be a less active trading market for its Class A Common Stock, and its stock price may be more volatile.
−Removed: RISKS RELATED TO THE COMPANY’S WARRANTS
−Removed: Although Altus has registered the shares of Class A Common Stock issuable upon exercise of the warrants under the Securities Act, such registration may not be in place when an investor desires to exercise warrants, thus precluding such
−Removed: investor from being able to exercise its warrants except on a cashless basis and potentially causing such warrants to expire worthless.
−Removed: Although Altus has registered the shares of Class A Common Stock issuable upon exercise of the warrants under the Securities Act, it may not be able to maintain a current prospectus relating to the Class A Common Stock issuable upon exercise of the warrants until the expiration of the warrants in accordance with the provisions of the warrant agreement.
−Removed: Altus cannot assure holders that it will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in such registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct, or the SEC issues a stop order.
−Removed: If the shares issuable upon exercise of the warrants are not registered under the Securities Act, Altus will be required to permit holders to exercise their warrants on a cashless basis.
−Removed: However, no warrant will be exercisable for cash or on a cashless basis, and Altus will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption is available.
−Removed: Notwithstanding the above, if Altus’ Class A Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, Altus may, at its option, require holders of warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act, and, in the event Altus so elects, it will not be required to file or maintain in effect a registration statement, but it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
−Removed: In no event will Altus be required to net cash settle any warrant or issue securities or other compensation in exchange for the warrants in the event that it is unable to register or qualify the shares underlying the warrants under applicable state securities laws.
−Removed: If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant, and such warrant may have no value and expire worthless.
−Removed: If and when the warrants become redeemable by Altus, it may exercise its redemption right even if it is unable to register or qualify the underlying shares of Class A Common Stock for sale under all applicable state securities laws.
−Removed: Altus may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 50 percent of the then-outstanding public warrants.
−Removed: As a result, the exercise price of your public warrants could be increased, the exercise period could be shortened, and the number of shares of Altus’ Class A Common Stock purchasable upon exercise of a public warrant could be decreased, all without your approval.
−Removed: Altus’ public warrants were issued in connection with its initial public offering in registered form under a warrant agreement between American Stock Transfer & Trust Company, as warrant agent, and Altus.
−Removed: The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50 percent of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders.
−Removed: Accordingly, Altus may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50 percent of the then-outstanding public warrants approve of such amendment.
−Removed: Although Altus’ ability to amend the terms of the public warrants with the consent of at least 50 percent of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the public warrants, shorten the exercise period, or decrease the number of shares of Altus’ Class A Common Stock purchasable upon exercise of a public warrant.
−Removed: There is no guarantee that Altus’s warrants will ever be in the money prior to their expiration, and Altus may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making the warrants worthless.
−Removed: The exercise price for Altus’ warrants is $230.00 per share of Class A Common Stock.
−Removed: There is no guarantee that the public warrants will ever be in the money prior to their expiration, and, as such, the warrants may expire worthless.
−Removed: Additionally, Altus has the ability to redeem outstanding warrants at any time prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of its Class A Common Stock equals or exceeds $360.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date Altus sends the notice of redemption to the warrant holders.
−Removed: If and when the warrants become redeemable by Altus, it may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
−Removed: Redemption of the outstanding warrants could force the warrant holders to exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so, sell their warrants at the then-current market price
−Removed: when they might otherwise wish to hold their warrants, or accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of their warrants.
−Removed: RISKS RELATED TO STOCK OWNERSHIP DILUTION
−Removed: The warrants are exercisable for Altus’ Class A Common Stock, which will, upon exercise, increase the number of shares eligible for future resale in the public market and result in dilution to Altus’ stockholders.
−Removed: Altus has outstanding public and private placement warrants to purchase shares of Class A Common Stock.
−Removed: To the extent such warrants are exercised, additional shares of Class A Common Stock will be issued, which will result in dilution to the then-existing holders of Altus’ Class A Common Stock and increase the number of shares eligible for resale in the public market, which could adversely affect the market price of Altus’ Class A Common Stock.
−Removed: In the future, Apache may receive earn-out consideration in the form of shares of Class A Common Stock upon the achievement of certain stock price and operational goals, which would increase the number of shares eligible for future resale in the public market and result in dilution to Altus’ stockholders.
−Removed: Pursuant to the Altus Contribution Agreement, Apache will have the right to receive earn-out consideration in the form of additional shares of Class A Common Stock if certain stock price and operational goals are achieved.
−Removed: To the extent such stock price or operational goals are achieved and Apache becomes entitled to receive a portion or all of the earn-out consideration, additional shares of Class A Common Stock will be issued, which will result in dilution to the then-existing holders of Class A Common Stock and increase the number of shares eligible for resale in the public market.
−Removed: The shares of Class A Common Stock issuable to Apache as earn-out consideration have been registered for resale with the SEC.
−Removed: Sales of substantial numbers of such shares by Apache in the public market could adversely affect the market price of Class A Common Stock.
−Removed: The Preferred Units may be exchanged for shares of Altus’ Class A Common Stock at a discount under certain circumstances, which could be dilutive to existing holders of its Class A Common Stock.
−Removed: The Preferred Units may be exchanged for shares of Altus’ Class A Common Stock at a discount under certain circumstances, which could be dilutive to existing holders of its Class A Common Stock.
−Removed: The number of shares of Class A Common Stock issued in any exchange would be based on its then-current trading price.
−Removed: Accordingly, the lower the trading price of Altus’ Class A Common Stock at the time of any exchange, the greater the number of shares of Class A Common Stock that would be issued upon exchange of the Preferred Units, increasing potential dilution to existing holders of Altus’ Class A Common Stock.
−Removed: Further, if the former holders of Preferred Units dispose of a substantial portion of their newly-exchanged Class A Common Stock in the public market, particularly over a short time period, it could adversely affect the market price for Altus’ Class A Common Stock and possibly make it more difficult for Altus to issue additional Class A Common Stock in the future at an attractive price.
−Removed: A significant portion of Altus’ total outstanding shares may be sold into the market in the near future.
−Removed: This could cause the market price of its Class A Common Stock to drop significantly, even if its business is doing well.
−Removed: Sales of a substantial number of shares of Class A Common Stock in the public market could occur at any time.
−Removed: These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of Altus’ Class A Common Stock.
−Removed: Additionally, Apache’s Common Units have been exchanged for shares of Class A Common Stock on a one-for-one basis.
−Removed: The shares of Class A Common Stock issued to Apache upon such exchange have been registered for resale with the SEC.
−Removed: Sales of substantial numbers of such shares by Apache in the public market could adversely affect the market price of Altus’ Class A Common Stock.
−Removed: RISKS RELATED TO RESTRICTIONS ON STOCKHOLDER ACTIONS
−Removed: Altus’ charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with Altus or its directors, officers, employees, or agents.
−Removed: The charter provides that, unless Altus consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (Court of Chancery) will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for any derivative action or proceeding brought on the Company’s behalf;
+Added: Risks Related to Our Business
+Added: The Company’s operating assets are currently located exclusively in the Permian Basin, making it vulnerable to risks associated with operating in a single geographic area.
+Added: The Company’s wholly owned midstream assets are currently located exclusively in the Delaware Basin which is part of the broader Permian Basin.
+Added: As a result of this concentration, the Company will be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, obtaining rights-of-way, market limitations, water shortages or restrictions, drought related conditions, or other weather-related conditions or interruption of the processing or transportation of crude oil, natural gas and water.
+Added: If any of these factors were to impact the Permian Basin more than other producing regions, the Company’s business, financial condition and results of operations could be adversely affected relative to other midstream companies that have a more geographically diversified asset portfolio.
+Added: Because of the natural decline in hydrocarbon production from existing wells, the Company’s success depends, in part, on its ability to maintain or increase hydrocarbon throughput volumes on its midstream systems, which depends on its customers’ levels of development and completion activity on its dedicated acreage.
+Added: The level of crude oil and natural gas volumes handled by the Company’s midstream systems depends on the level of production from crude oil and natural gas wells dedicated to its midstream systems, which may be less than expected and which will naturally decline over time.
+Added: To maintain or increase throughput levels on its midstream systems, the Company must obtain production from wells completed by customers on acreage dedicated to its midstream systems or execute agreements with other third parties in its areas of operation.
+Added: The Company has no control over producers’ levels of development and completion activity in its areas of operation, the amount of reserves associated with wells connected to its systems, or the rate at which production from a well declines.
+Added: In addition, the Company has no control over producers or their exploration and development decisions, which may be affected by, among other things:
+Added: • the availability and cost of capital;
+Added: • demand for and the prevailing and projected prices of crude oil, natural gas and NGLs;
+Added: • political and economic conditions and events in foreign oil, natural gas and NGL producing countries, including embargoes, disrupted global supply chains, continued hostilities in the Middle East and other sustained military campaigns, the armed conflict in Ukraine and associated economic sanctions on Russia;
+Added: • increase in interest rates and rising or sustained inflation;
+Added: • levels of reserves;
+Added: • geologic considerations;
+Added: • changes in the strategic importance customers assign to development in the Delaware Basin as opposed to other potential future operations they may acquire, which could adversely affect the financial and operational resources such customers are willing to devote to development of their acreage in the Permian Basin;
+Added: • increased levels of taxation related to the exploration and production of crude oil, natural gas and NGLs;
+Added: • environmental or other governmental regulations, including those related to the prorationing of oil and gas production, the availability of permits, the regulation of hydraulic fracturing, and a governmental determination that multiple facilities are to be treated as a single source for air permitting purposes;
+Added: • the costs of producing and ability to produce crude oil, natural gas and NGLs and the availability and costs of drilling rigs, pipeline transportation facilities and other equipment.
+Added: Due to these and other factors, even if reserves are known to exist in areas served by the Company’s midstream assets, producers may choose not to develop those reserves.
+Added: If producers choose not to develop their reserves or they choose to slow their development rate in the Company’s areas of operation, utilization of its midstream systems will be below anticipated levels.
+Added: Reductions in development activity, coupled with the natural decline in production from its current dedicated acreage, would result in the Company’s inability to maintain the then-current levels of utilization of its midstream assets, which could materially and adversely affect its business, financial condition, results of operations, and cash flow.
+Added: The acquisition of additional businesses and assets is part of our growth strategy.
+Added: We may experience difficulties completing acquisitions or integrating new businesses and properties, and we may be unable to achieve the benefits we expect from any future acquisitions.
+Added: Part of the Company’s business strategy includes acquiring additional businesses and assets.
+Added: We cannot provide any assurance that we will be able to find complementary acquisition targets or complete such acquisitions or achieve the desired results from any acquisitions we do complete.
+Added: Any acquired businesses or assets will be subject to many of the same risks as our existing businesses and may not achieve the levels of performance that we anticipate.
+Added: We may not realize anticipated operating advantages and cost savings.
+Added: Integration of acquired businesses or assets involves a number of risks, including (i) the loss of key customers of the acquired business;
+Added: (ii) demands on management related to the increase in our size;
+Added: (iii) the diversion of management’s attention from the management of daily operations;
+Added: (iv) difficulties in implementing or unanticipated costs of accounting, budgeting, reporting, internal controls and other systems;
+Added: and (v) difficulties in the retention and assimilation of necessary employees.
+Added: Difficulties in integration may be magnified if we make multiple acquisitions over a relatively short period of time.
+Added: Because of difficulties in combining and expanding operations, we may not be able to achieve the cost savings and other size-related benefits that we hoped to achieve after these acquisitions, which could materially and adversely affect our financial condition and results of operations.
+Added: The Company owns interests in certain pipeline projects and other joint ventures, and it may in the future enter into additional joint ventures, and the Company’s control of such entities is limited by provisions of the limited partnership and limited liability company agreements of such entities and by the Company’s percentage ownership in such entities.
+Added: The Company has ownership interests in several joint ventures, including the PHP, GCX, Breviloba and EPIC joint ventures, and it may enter into other joint venture arrangements in the future.
+Added: While the Company owns equity interests and has certain voting rights with respect to its joint ventures, it does not act as operator of or control the joint ventures, each of which is operated by another joint venture partner.
+Added: The Company has limited ability to influence the business decisions of these entities, and it may therefore be difficult or impossible for the Company to cause the joint venture to take actions that the Company believes would be in its or the relevant joint venture’s best interests.
+Added: Moreover, joint venture arrangements involve various risks and uncertainties, such as committing the Company to fund operating and/or capital expenditures, the timing and amount of which the Company may not control, and which could materially and adversely affect its cash flow.
+Added: The Company also may be unable to control the amount of cash it will receive from the operation of these entities, which could further adversely affect its cash flow.
+Added: Joint venture arrangements may also restrict the Company’s operational and organizational flexibility and its ability to manage risk, which could have a material and adverse effect on its business, cash flow and results of operations.
+Added: If the third-party pipelines interconnected, or at some future point expected to be interconnected, to the Company’s pipelines become unavailable to transport or store crude oil, NGLs or natural gas, the Company’s revenue and available cash could be adversely affected.
+Added: The Company depends upon third-party downstream pipelines and associated operations to provide delivery options from its processing system.
+Added: Because the Company does not control these pipelines and associated operations, their continuing operation is not within its control.
+Added: If any downstream pipeline were to become unavailable for current or future volumes due to repairs, damage to the facility, force majeure, lack of capacity, shut in by regulators, failure to meet quality requirements or any other reason, the Company’s ability to operate efficiently and continue shipping crude oil, natural gas and refined products to major demand centers could be restricted, thereby reducing revenue.
+Added: Any temporary or permanent interruption at these pipelines could materially and adversely affect the Company’s business, results of operations, financial condition or cash flow.
+Added: The Company’s customers may suspend, reduce or terminate their obligations under the Company’s commercial agreements with them in certain circumstances, which could have a material adverse effect on the Company’s financial condition, results of operations and cash flow.
+Added: The Company has entered into gas gathering, compression and processing agreements, crude oil gathering agreements, and produced water gathering and disposal agreements with its customers, which include provisions that permit the customer to suspend, reduce or terminate its obligations under each agreement if certain events occur.
+Added: These events include non-performance by the Company and force majeure events which are out of the Company’s control.
+Added: The customers have the discretion to make such decisions notwithstanding the fact that they may significantly and adversely affect the Company.
+Added: Any such reduction, suspension or termination of these customers’ obligations under their commercial agreements could materially and adversely affect the Company’s financial condition, results of operations and cash flow.
+Added: Increased competition from other companies that provide midstream services, or from alternative fuel sources, could have a negative impact on the demand for the Company’s services, which could materially and adversely affect its financial results.
+Added: The Company will compete for third-party customers primarily with other crude oil and natural gas gathering and transportation systems and produced water service providers.
+Added: Some of its competitors may now, or in the future, have access to greater supplies of crude oil, natural gas and produced water than the Company does.
+Added: Some of these competitors may expand or construct gathering systems or other pipeline transportation facilities that would create additional competition for the services the Company would provide to third party customers.
+Added: In addition, potential third-party customers may develop their own gathering systems or pipeline transportation facilities instead of using the Company’s systems.
+Added: Further, hydrocarbon fuels compete with other forms of energy available to end-users, including renewable electricity and coal.
+Added: Increased demand for such other forms of energy at the expense of hydrocarbons could lead to a reduction in demand for the Company’s services.
+Added: All these competitive pressures could make it more difficult for the Company to attract new customers as it seeks to expand its business, which could materially and adversely affect its business, financial condition and results of operations.
+Added: In addition, competition could intensify the negative impact of factors that decrease demand for crude oil, natural gas and produced water services in the markets served by its systems, such as adverse economic conditions, weather, higher fuel costs and taxes or other governmental or regulatory actions that directly or indirectly increase the cost or reduce demand for its services.
+Added: The Company’s exposure to commodity price risk may change over time and the Company cannot guarantee the terms of any existing or future agreements for its midstream services with its customers.
+Added: The Company currently generates revenues pursuant to a variety of different contractual arrangements, including fee-based agreements based on volumetric fees, keep-whole arrangements used for processing services, percent-of-proceeds arrangements based on a percent of the proceeds from the sale of gathering and processing outputs on behalf of a producer and percent-of-products arrangements in which the Company is assigned a portion of the natural gas it gathers and processes as partial compensation.
+Added: Consequently, the Company’s existing operations and cash flow have limited direct exposure to commodity price risk.
+Added: However, the Company’s customers are exposed to commodity price risk, and extended reduction in commodity prices could reduce the production volumes available for the Company’s midstream services in the future below expected levels.
+Added: In addition, in the past, excess capacity has created a highly competitive environment that has decreased commodity price differentials between the Permian Basin and end markets, which has reduced the demand for the Company's services resulting in decreases in volumes transported and lower rates the Company is able to charge to its customers.
+Added: Although the Company intends to maintain these pricing terms on both new contracts and existing contracts for which prices have not yet been set, its efforts to negotiate such terms may not be successful, which could materially and adversely affect its business.
+Added: The use of derivative financial instruments could result in material financial losses by us.
+Added: From time to time, the Company has sought to reduce its exposure to fluctuations in commodity prices and interest rates by using derivative instruments.
+Added: To the extent that we hedge our commodity price and interest rate exposures, we will forego the benefits we would otherwise experience if commodity prices or interest rates were to change in our favor.
+Added: In addition, hedging activities can result in losses that might be material to our financial condition, results of operations and cash flows.
+Added: Such losses could occur under various circumstances, including those situations where a counterparty does not perform its obligations under a hedge arrangement, the hedge is not effective in mitigating the underlying risk, or our risk management policies and procedures are not followed.
+Added: Adverse economic conditions (e.g., a significant decline in energy commodity prices that negatively impacts the cash flows of oil and gas producers) increase the risk of nonpayment or performance by our hedging counterparties.
+Added: The Company’s construction of new midstream assets may be subject to new or additional regulatory, environmental, political, contractual, legal and economic risks, which could materially and adversely affect its cash flow, results of operations and financial condition.
+Added: The construction of additions or modifications to the Company’s existing systems and the expansion into new production areas to service its customers involve numerous regulatory, environmental, political and legal uncertainties beyond the Company’s control and may require the expenditure of significant amounts of capital, and the Company may not be able to construct in certain locations due to setback requirements or expand certain facilities that are deemed to be part of a single source.
+Added: Regulations clarifying how crude oil and natural gas production facility emissions must be aggregated under the federal Clean Air Act permitting program were finalized in June 2016.
+Added: This action clarified certain permitting requirements yet could still impact permitting and compliance costs.
+Added: As the Company builds infrastructure to meet its customers’ needs, it may not be able to complete such projects on schedule, at the budgeted cost, or at all.
+Added: The Company’s revenues may not increase immediately (or at all) upon the expenditure of funds on a particular project.
+Added: For instance, if the Company builds additional gathering assets, the construction may occur over an extended period of time and it may not receive any material increases in revenues until the project is completed or at all.
+Added: The Company may construct facilities to capture anticipated future production growth from its customers in an area where such growth does not materialize.
+Added: As a result, new midstream assets may not be able to attract enough throughput to achieve their expected investment return, which could materially and adversely affect the Company’s business, financial condition, results of operations and cash flow.
+Added: The construction of additions to the Company’s existing assets may require it to obtain new rights-of-way, surface use agreements or other real estate agreements prior to constructing new pipelines or facilities.
+Added: The Company may be unable to timely obtain such rights-of-way to connect new crude oil, natural gas and water sources to its existing infrastructure or capitalize on other attractive expansion opportunities.
+Added: Additionally, it may become more expensive for the Company to obtain new rights-of-way or to expand or renew existing rights-of-way, leases or other agreements.
+Added: If the cost of renewing or obtaining new agreements increases, the Company’s cash flow could be materially and adversely affected.
+Added: The Company’s business involves many hazards and operational risks, some of which may not be fully covered by insurance.
+Added: The occurrence of a significant accident or other event that is not fully insured could curtail its operations and materially and adversely affect its cash flow.
+Added: The Company’s operations are subject to all the hazards inherent in the gathering and transportation of crude oil, natural gas and produced water, including:
+Added: • damage to pipelines, compressor stations, centralized gathering facilities, pump stations, storage terminals, related equipment, and surrounding properties caused by design, installation, construction materials or operational flaws, natural disasters, acts of terrorism, acts of third parties or other unforeseen circumstances.
+Added: • leaks of crude oil, natural gas or NGLs or losses of crude oil, natural gas or NGLs as a result of the malfunction of, or other disruptions associated with, equipment, facilities or pipelines;
+Added: • fires, ruptures and explosions;
+Added: • other hazards that could also result in personal injury and loss of life, pollution and suspension of operations.
+Added: The Company may elect to not obtain insurance, maintain a self-insured retention or increase deductibles for any or all of these risks if it believes that the cost of available insurance is excessive relative to the risks presented.
+Added: In addition, pollution and environmental risks generally are not fully insurable.
+Added: The occurrence of an event that is not fully covered by insurance could materially and adversely affect the Company’s business, financial condition, results of operations and cash flow.
+Added: A shortage of equipment and skilled labor could reduce equipment availability and labor productivity and increase labor and equipment costs, which could materially and adversely affect the Company’s business and results of operations.
+Added: The Company’s gathering and other midstream services require special equipment and laborers who are skilled in multiple disciplines, such as equipment operators, mechanics and engineers, among others.
+Added: If the Company experiences shortages of necessary equipment or skilled labor in the future, its labor and equipment costs and overall productivity could be materially and adversely affected.
+Added: If the Company’s equipment or labor prices increase or if the Company experiences materially increased health and benefit costs for employees, its business and results of operations could be materially and adversely affected.
+Added: Environmental and Regulatory Risk Factors Related to the Company
+Added: The Company operates in a highly regulated environment and its business and profitability could be adversely affected by actions by governmental entities, changes to current laws or regulations, or a failure to comply with laws or regulations.
+Added: The Company’s business is highly regulated and subject to numerous governmental laws, rules, regulations and requires permits, authorizations and various governmental and agency approvals, in the various jurisdictions in which the Company operates, that impose various restrictions and obligations that may have material effects on the Company’s business and results of operations.
+Added: Each of the applicable laws or regulatory requirements and limitations is subject to change, either through new laws or regulations enacted on the federal, state or local level, or by new or modified regulations that may be implemented under existing law.
+Added: The nature and extent of any changes in these laws, rules, regulations and permits may be unpredictable, have retroactive effects and may have material effects on the Company’s business and profitability.
+Added: Future legislation and regulations or changes in existing legislation and regulations, or interpretations thereof, could cause additional expenditures, tax liabilities, restrictions and delays in connection with the Company’s current business as well as future projects, the extent of which cannot be predicted and which may require the Company to limit substantially, delay or cease operations in some circumstances.
+Added: The Company’s sales of oil, natural gas, and NGLs are subject to market manipulation requirements promulgated by FERC pursuant to the authority delegated to it by the Energy Policy Act of 2005 (“EPAct 2005”).
+Added: The EPAct 2005 amended the NGA and NGPA to give FERC authority to impose civil penalties for violations of these statutes and regulations.
+Added: The Commodity Futures Trading Commission (“CFTC”) also holds authority to monitor certain segments of the physical and futures energy commodities market pursuant to the Commodity Exchange Act.
+Added: The Company believes, however, that neither the EPAct 2005, nor the regulations promulgated by FERC as a result of the EPAct 2005, nor the regulations promulgated by the CFTC will affect it in a way that materially differs from the way they affect other sellers of oil, natural gas, or NGLs with which the Company competes.
+Added: For a general overview of federal, state and local regulation applicable to the Company’s assets, see the “Regulation” section included within Part I, Items 1 and 2 of this annual report.
+Added: This regulatory oversight can affect certain aspects of the Company’s business and the market for its products and could materially and adversely affect the Company’s financial position, results of operations and cash flows.
+Added: Rate regulation, challenges by shippers to the rates the Company charges on its pipelines or changes in the jurisdictional characterization of some of the Company’s assets by federal, state or local regulatory agencies or a change in policy by those agencies may result in increased regulation of its assets, which may cause its operating expenses to increase, limit the rates it charges for certain services and decrease the amount of cash flow.
+Added: Natural gas and crude oil gathering may receive greater regulatory scrutiny at the federal and state level.
+Added: Therefore, the Company’s natural gas and crude oil gathering operations could be adversely affected should they become subject to the application of federal or state regulation of rates and services.
+Added: The Company’s gathering operations could also be subject to safety and operational regulations relating to the design, construction, testing, operation, replacement and maintenance of gathering facilities.
+Added: Intrastate transportation of NGLs and crude oil may also receive greater regulatory scrutiny at the federal and state level.
+Added: The Company’s intrastate NGL transportation services are subject to the TRRC regulations and must be provided in a manner that is just, reasonable and non-discriminatory.
+Added: Such operations could be subject to additional regulation if the NGLs and crude oil are transported in interstate or foreign commerce, whether by the Company’s pipelines or other means of transportation.
+Added: The Company cannot predict what effect, if any, such changes might have on its operations, but it could be required to incur additional capital expenditures and increased operating costs depending on future legislative and regulatory changes.
+Added: The Company’s midstream and intrastate transportation and storage services that are regulated are generally subject to rate regulation and the regulation of the terms and conditions of service.
+Added: If we do not comply with this regulation, we may be subject to claims for refunds of amounts charged, the modification, cancellation or suspension of a permit or other authorization, civil penalties and other relief.
+Added: Additional rules and legislation pertaining to these matters are considered or adopted from time to time.
+Added: The Company cannot predict what effect, if any, such changes might have on its operations, but the industry could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes.
+Added: Federal and state legislative and regulatory initiatives relating to pipeline safety, which are often subject to change, may result in more stringent regulations or enforcement and could subject the Company to increased operational costs, increased capital costs and potential operational delays.
+Added: Some of the Company’s pipelines are subject to regulation by the PHMSA pursuant to the Natural Gas Pipeline Safety Act of 1968 (“NGPSA”), with respect to natural gas, and the HLPSA, with respect to crude oil and NGLs.
+Added: Both the NGPSA and the HLPSA were amended by the Pipeline Safety Act of 1992, the Accountable Pipeline Safety and Partnership Act of 1996, the PSIA, as reauthorized and amended by the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006, and the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011.
+Added: The NGPSA and HLPSA regulate safety requirements in the design, construction, operation, and maintenance of natural gas, crude oil and NGL pipeline facilities, while the PSIA establishes mandatory inspections for all U.S.
+Added: crude oil, NGL and natural gas transmission pipelines in HCAs.
+Added: PHMSA has developed regulations that require pipeline operators to implement integrity management programs, including more frequent inspections and other measures to ensure pipeline safety in HCAs.
+Added: The regulations require operators, including the Company, to:
+Added: • perform ongoing assessments of pipeline integrity;
+Added: • identify and characterize applicable threats to pipeline segments that could impact an HCA;
+Added: • improve data collection, integration and analysis;
+Added: • repair and remediate pipelines as necessary;
+Added: • implement preventive and mitigating actions.
+Added: PHMSA may revise these standards from time-to-time.
+Added: For example, in October 2019, PHMSA published three final rules that create or expand reporting, inspection, maintenance and other pipeline safety obligations.
+Added: Additional future regulatory action expanding PHMSA’s jurisdiction and imposing stricter integrity management requirements is possible.
+Added: For instance, following the passage of Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2020, operators of jurisdictional pipelines were required to update their inspection and maintenance plans to identify procedures to prevent and mitigate both vented and fugitive pipeline methane emission by the end of 2021.
+Added: Separately, the U.S.
+Added: Congress reauthorized PHMSA through 2023 as part of the Consolidated Appropriations Act of 2021 and directed the agency to move forward with several regulatory actions.
+Added: In November 2021, PHMSA released a final rule expanding the definition of regulated gathering pipelines and imposing safety measures on certain previously unrelated gathering pipelines, to include criteria for inspection and repair of fugitive emissions.
+Added: The final rule also imposes reporting requirements on all gathering pipelines, and specifically requires operators to report safety information to PHMSA.
+Added: More recently, in August 2022, PHMSA published a final rule expanding the Management of Change process, extending corrosion requirements for gas transmission pipelines, adding requirements that operators ensure no conditions exist following an extreme weather event that could adversely affect the safe operation of the pipeline and adopting repair criteria for non-HCAs similar to those applicable to HCAs.
+Added: The adoption of laws or regulations that apply more comprehensive or stringent safety standards could require the Company to install new or modified safety controls, pursue new capital projects or conduct maintenance programs on an accelerated basis, all of which could require the Company to incur increasing operating costs that may be significant.
+Added: Further, should the Company fail to comply with PHMSA or comparable state regulations, it could be subject to substantial fines and penalties.
+Added: Increased regulation of hydraulic fracturing could result in reductions or delays in crude oil and natural gas production by the Company’s customers, which could reduce the throughput on its gathering and other midstream systems, which could adversely impact its revenues.
+Added: The Company does not conduct hydraulic fracturing operations, but substantially all the saltwater, crude oil and natural gas production of its customers is developed from unconventional sources that require hydraulic fracturing as part of the completion process.
+Added: Hydraulic fracturing is a well stimulation process that utilizes large volumes of water and sand combined with fracturing chemical additives that are pumped at high pressure to crack open previously impenetrable rock to release hydrocarbons.
+Added: There has been increasing public controversy regarding hydraulic fracturing with regard to the use of fracturing fluids, induced seismic activity, impacts on drinking water supplies, use of water and the potential for impacts to surface water, groundwater and the environment generally.
+Added: Hydraulic fracturing is typically regulated by state oil and gas commissions and similar agencies.
+Added: Some states and local governments, including those in which the Company operates, have adopted, and other states are considering adopting, regulations that could impose more stringent disclosure or well construction requirements on hydraulic fracturing operations.
+Added: In addition, several states and local governments have banned or significantly restricted hydraulic fracturing and, over the past several years, federal agencies such as the U.S.
+Added: Environmental Protection Agency (“EPA”) have sought to assert jurisdiction over the process.
+Added: While the EPA has previously sought to relax environmental regulation and reduce enforcement efforts, including with respect to energy developed from unconventional sources, environmental groups and states have filed lawsuits challenging the EPA’s recent actions.
+Added: The Company cannot predict the results of these or future lawsuits, or how such lawsuits will affect the regulation of hydraulic fracturing operations.
+Added: Certain environmental groups have also suggested that additional laws at the federal, state and local levels of government may be needed to more closely and uniformly regulate the hydraulic fracturing process.
+Added: The Company cannot predict whether any such legislation will be enacted and if so, what its provisions would be.
+Added: Governmental actions such as these could impact the oil and gas industry and the Company’s future potential growth in such areas.
+Added: Additional levels of regulation and permits required through the adoption of new laws and regulations at the federal, state or local level could lead to delays, increased operating costs and process prohibitions that could reduce the volumes of crude oil and natural gas that move through the Company’s gathering systems and decrease demand for its water services, which in turn could materially and adversely impact its revenues.
+Added: In recent history, public concern surrounding increased seismicity has heightened focus on the oil and gas industry’s use of water in operations, which may cause increased costs, regulations or environmental initiatives impacting the use or disposal of water.
+Added: The adoption of federal, state and local legislation and regulations intended to address induced seismicity in the areas in which the Company operates could restrict drilling and production activities, as well as the Company's ability to dispose of produced water gathered from such activities and could result in increased costs and additional operating restrictions or delays, that could, in turn, materially and adversely impact the Company's business and results of operations.
+Added: Adoption of new or more stringent legal standards relating to induced seismic activity associated with produced-water disposal could affect the Company’s operations.
+Added: The Company disposes of produced water generated from oil and natural-gas production operations.
+Added: The legal requirements related to the disposal of produced water into a non-producing geologic formation by means of underground injection wells are subject to change based on concerns of the public or governmental authorities, including concerns relating to recent seismic events near injection wells used for the disposal of produced water.
+Added: In response to such concerns, regulators in some states (including Texas, where the Company’s produced water gathering and disposal assets are) have imposed, or are considering imposing, additional requirements in the permitting and operating of produced-water disposal wells or are otherwise investigating the existence of a relationship between seismicity and the use of such wells.
+Added: These developments could result in additional regulation and restrictions on the Company’s use of injection wells to dispose of produced water, including a possible shut down of wells, which could materially and adversely affect its business, financial condition, and results of operations.
+Added: The Company currently operates produced water injection wells injecting into shallow formations in Texas, where the Texas Railroad Commission has recently addressed seismic activity by establishing Seismic Response Areas, curtailing injected volumes and/or suspending certain permits for disposal wells injecting into deep strata.
+Added: Should the Texas Railroad Commission take additional action within the existing Seismic Response Areas or establish new Seismic Response Areas near the Company’s operations, it could have a significant adverse effect on its business.
+Added: Furthermore, additional regulations and restrictions on the use of injection wells could indirectly result in reduced gas gathering and processing volumes and / or crude gathering volumes from the Company’s customers, which could materially and adversely affect its business, financial condition, and results of operations.
+Added: The Company may incur significant liability under, or costs and expenditures to comply with, health, safety and environmental laws and regulations, which are complex and subject to frequent change.
+Added: The Company is subject to various stringent and complex federal, state and local laws and regulations governing health and safety aspects of its operations, the discharge of materials into the environment and the protection of the environment and natural resources (including endangered or threatened species).
+Added: These laws and regulations may impose on the Company’s operations numerous requirements, including the acquisition of permits, approvals and certificates before conducting regulated activities;
+Added: restrictions on the types, quantities and concentration of materials that may be released into the environment;
+Added: the application of specific health and safety criteria to protect the public or workers;
+Added: and the responsibility for cleaning up pollution resulting from operations.
+Added: Moreover, many of the permits required for the construction and operation of the Company’s assets may be subject to challenge by third parties, resulting in project delays or the imposition of stringent environmental controls as a precondition to issuing such permits.
+Added: The Company may incur substantial costs to maintain compliance with these existing laws and regulations and the permits and other approvals thereunder.
+Added: Additionally, the Company’s costs of compliance may increase or operational delays may occur if existing laws and regulations are revised or reinterpreted, or if new laws and regulations apply to its operations.
+Added: Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued thereunder, oftentimes requiring difficult and costly response actions.
+Added: Failure to comply with these laws and regulations may result in the assessment of sanctions,
+Added: including administrative, civil and criminal penalties;
+Added: the imposition of investigatory, remedial or corrective action obligations;
+Added: the incurrence of capital expenditures, the occurrence of delays in the permitting, development or expansion of projects, and enjoining some or all of the Company’s future operations in a particular area.
+Added: Compliance with more stringent standards and other environmental regulations could prohibit the Company’s ability to obtain permits for operations or require it to install additional equipment, the costs of which could be significant.
+Added: The risk of incurring environmental costs and liabilities in connection with the Company’s operations is significant because of its handling of natural gas, crude and other petroleum products, its air emissions and product-related discharges arising out of its operations and as a result of historical industry practices and waste disposal practices.
+Added: For example, an accidental release from one of the Company’s facilities could subject it to substantial liabilities arising from environmental cleanup and restoration costs, claims made by neighboring landowners and other third parties for personal injury, natural resources and property damages and fines and penalties for related violations of environmental laws or regulations.
+Added: Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly requirements could require the Company to make significant expenditures to attain and maintain compliance or may otherwise have a material adverse effect on its operations, competitive position or financial condition.
+Added: Public interest in the protection of the environment has increased dramatically in recent years.
+Added: The trend of more expansive and stringent environmental legislation and regulations applied to the oil and natural gas industry could continue, resulting in increased costs of doing business and, consequently, affecting profitability.
+Added: Additionally, fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas and technological advances in fuel economy and energy generation devices, could all reduce demand for oil and natural gas and consequently reduce demand for the midstream services the Company provides.
+Added: The impact of this changing demand could materially and adversely affect the Company’s business, operations and cash flows.
+Added: Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the crude oil and natural gas the Company gathers, while potential physical effects of climate change could disrupt the Company’s operations, cause damage to its pipelines and other facilities and cause it to incur significant costs in preparing for or responding to those effects.
+Added: Climate change continues to attract considerable public and scientific attention.
+Added: There is a broad consensus of scientific opinion that human-caused emissions of GHGs are linked to climate change.
+Added: Climate change and the costs that may be associated with its impacts and the regulation of GHGs have the potential to materially affect the Company’s business in many ways, to include negatively impacting the costs the Company incurs in providing its products and the demand for and consumption of its products.
+Added: The EPA adopted regulations requiring the reporting of GHG emissions from specific categories of higher GHG emitting sources in the United States, including certain oil and natural gas facilities, which include certain of the Company’s operations.
+Added: Information in such reporting may form the basis for further GHG regulation.
+Added: The EPA has also continued with its comprehensive strategy for further reducing methane and volatile organic compound (“VOC”) emissions from oil and gas operations.
+Added: In May 2016, a final rule established specific new requirements regarding emissions from production-related wet seal and reciprocating compressors, and from pneumatic controllers and storage vessels.
+Added: Additionally, the regulations placed new requirements to detect and repair VOC and methane leaks at certain well sites and compressor stations.
+Added: However, in September 2020, the EPA finalized a rule removing transportation and storage activities from the purview of the rules.
+Added: On January 20, 2021, President Biden signed an executive order calling for the suspension, revision, or rescission of the September 2020 rule, and the reinstatement or issuance of methane emissions standards for new, modified, and existing oil and gas facilities, including transmission and storage facilities.
+Added: Following approval by Congress, the resolution was signed into law in June 2021 and effectively vacated the September 2020 rule, reinstating the prior standards under the May 2016 rule.
+Added: In November 2021, as required by the President’s executive order, the EPA proposed new regulations to establish comprehensive standards of performance and emission guidelines for methane and VOC emissions from new and existing operations in the oil and gas sector, including the exploration and production, transmission, processing and storage segments.
+Added: On November 11, 2022, the EPA released its supplemental methane proposal.
+Added: The proposal includes the tightening of proposed requirements under the CAA for methane and VOC emissions from sources that commenced construction, modification, or reconstruction after November 15, 2021, to include proposed standards for previously unregulated emission sources for this category.
+Added: Additionally, the proposal sets forth specific revisions strengthening the first nationwide emission guidelines for states to limit methane emissions from existing crude oil and natural gas facilities.
+Added: The proposal also revises requirements for fugitive emissions monitoring and repair as well as equipment leaks and the frequency of monitoring surveys, establishes a “super-emitter” response program to timely mitigate emissions events, and provides additional options for the use of advanced monitoring to encourage the deployment of innovative technologies to detect and reduce methane emissions.
+Added: The EPA’s supplemental methane rule will likely work alongside the Inflation Reduction Act of 2022 (“IRA”), which was signed into law in August 2022, and appropriates significant federal funding for renewable energy initiatives, alongside amending the CAA to
+Added: impose a first-time fee on the emission of methane from sources required to report their GHG emissions to the EPA.
+Added: The methane emissions charge imposes a fee on excess methane emissions from certain oil facilities starting at $900 per metric ton of leaked methane in 2024 and rising to $1,200 in 2025 and $1,500 in 2026 and thereafter.
+Added: Compliance with the EPA’s proposed new regulations and the IRA’s methane emissions fee could increase the Company’s operating costs and accelerate the transition away from fossil fuels, which could in turn reduce the demand for its services, thereby adversely affecting its operations and potentially restricting or delaying the Company’s ability to obtain applicable permits, approvals, or certificates for new or modified facilities.
+Added: Climate change remains a priority for the current administration, which could lead to additional regulations or restrictions on oil and gas development.
+Added: In February 2021, the administration recommitted the United States to the Paris Agreement, a framework for parties to the agreement to cooperate and report actions to reduce GHG emissions.
+Added: The Paris Agreement calls for parties to undertake “ambitious efforts” to limit the average global temperature, and to conserve and enhance sinks and reservoirs of GHGs.
+Added: The current administration, in April 2021, announced a target for the United States to achieve a 50% – 52% reduction from 2005 levels in economy-wide net GHG pollution in 2030.
+Added: This target builds upon the President’s goals to create a carbon pollution-free power sector by 2035 and a net zero emissions economy by 2050.
+Added: In November 2021, the international community gathered again in Glasgow at the 26th Conference to the Parties on the UN Framework Convention on Climate Change (“COP26”), during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-carbon dioxide GHGs.
+Added: Relatedly, the United States and European Union jointly announced the launch of the “Global Methane Pledge,” which aims to cut global methane pollution at least 30% by 2030 relative to 2020 levels, including “all feasible reductions” in the energy sector.
+Added: At COP27 in Sharm El-Sheik in November 2022, countries reiterated the agreements from COP26 and were called upon to accelerate efforts toward the phase out of inefficient fossil fuel subsidies.
+Added: The United States also announced, in conjunction with the European Union and other partner countries, that it would develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity gas.
+Added: Although no firm commitment or timeline to phase out or phase down all fossil fuels was made at COP27, there can be no guarantees that countries will not seek to implement such a phase out in the future.
+Added: At COP27 in Sharm El-Sheik in November 2022, countries reiterated the agreements from COP26 and were called upon to accelerate efforts toward the phase out of inefficient fossil fuel subsidies.
+Added: The United States also announced, in conjunction with the European Union and other partner countries, that it would develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity gas.
+Added: Although no firm commitment or timeline to phase out or phase down all fossil fuels was made at COP27, there can be no guarantees that countries will not seek to implement such a phase out in the future.
+Added: Meeting these goals may require further regulations that could adversely impact the Company’s operations and financial performance or otherwise reduce demand for the products it stores, processes, and transports.
+Added: The adoption of legislation or regulatory programs to reduce emissions of GHGs could require the Company to incur increased operating costs, such as costs to purchase and operate emissions and vapor control systems or to comply with new regulatory or reporting requirements.
+Added: If the Company is unable to recover or pass through a significant level of its costs related to complying with climate change regulatory requirements imposed on it, it could have a material adverse effect on the Company’s results of operations and financial condition.
+Added: Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the natural gas the Company stores, processes and transports.
+Added: Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on the Company’s business, financial condition, and results of operations.
+Added: Moreover, incentives to conserve energy or use alternative energy sources as a means of addressing climate change could reduce demand for the Company’s products.
+Added: In addition, parties concerned about the potential effects of climate change have directed their attention at sources of funding for energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in oil and natural gas activities.
+Added: Financial institutions may adopt policies that have the effect of reducing the funding provided to the fossil fuel sector.
+Added: For example, in late 2020, the Federal Reserve announced that it had joined the Network for Greening the Financial System (“NGFS”), a consortium of financial regulators focused on addressing climate-related risks in the financial sector, and, in September 2022, announced that six of the U.S.’ largest banks will participate in a pilot climate scenario analysis exercise, launched in early 2023, to enhance the ability of firms and supervisors to measure and manage climate-related financial risk.
+Added: While the Company cannot predict what policies may result from this, a material reduction in the capital available to the fossil fuel industry could make it more difficult to secure funding for exploration, development, production, transportation and processing activities, which could result in decreased demand for the Company’s midstream services.
+Added: Additionally, in March 2022, the Securities and Exchange Commission released a proposed rule that would establish a framework for the reporting of climate risks, targets, and metrics.
+Added: If a final rule is released, the Company cannot predict what any such rule may require.
+Added: To the extent the rule imposes additional reporting obligations, the Company could face increased costs.
+Added: Separately, the SEC has also announced that it is scrutinizing existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege an issuer’s climate disclosures are misleading or deficient.
+Added: Finally, it should be noted that there are increasing risks to the Company’s operations resulting from the potential physical impacts of climate change, such as drought, wildfires, damage to infrastructure and resources from flooding, storms and other natural disasters, chronic shifts in temperature and precipitation patterns and other physical disruptions.
+Added: One or more of these developments could materially and adversely affect the Company’s business, financial condition and results of operation.
+Added: Increasing attention to ESG matters and conservation measures may adversely impact the Company’s business.
+Added: Increasing attention to climate change, societal expectations on companies to address climate change, investor and societal expectations regarding voluntary ESG disclosures and consumer demand for alternative forms of energy may result in increased costs, reduced demand for the Company’s products, reduced profits, increased investigations and litigation and negative impacts on the Company’s access to capital markets.
+Added: Increasing attention to climate change and environmental conservation, for example, may result in demand shifts for oil and natural gas products and additional governmental investigations and private litigation against the Company or its customers.
+Added: To the extent that societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to the Company’s causation of or contribution to the asserted damage, or to other mitigating factors.
+Added: While the Company may participate in various voluntary frameworks and certification programs to improve the ESG profile of its operations and services, the Company cannot guarantee that such participation or certification will have the intended results on its ESG profile.
+Added: Moreover, while the Company may create and publish voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures will be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.
+Added: Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring, and reporting on many ESG matters.
+Added: Additionally, while the Company may also announce various voluntary ESG targets, such targets are aspirational.
+Added: The Company may not be able to meet such targets in the manner or on such a timeline as initially contemplated including, but not limited to, as a result of unforeseen or increased costs associated therewith.
+Added: To the extent that the Company does meet such targets, it may be achieved through various contractual arrangements, including the purchase of various credits or offsets that may be deemed to mitigate the Company’s ESG impact instead of actual changes in its ESG performance.
+Added: Also, despite these goals, the Company may receive pressure from investors, lenders, or other groups to adopt more aggressive climate or other ESG-related goals, but it cannot guarantee that it will be able to implement such goals because of potential costs or technical or operational obstacles.
+Added: In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters.
+Added: Such ratings are used by some investors to inform their investment and voting decisions.
+Added: Unfavorable ESG ratings and recent activism directed at shifting funding away from companies with energy-related assets could lead to increased negative investor sentiment toward the Company, its customers, and its industry and to the diversion of investment to other industries, which could have a negative impact on business and the Company’s access to and costs of capital.
+Added: Also, institutional lenders may decide not to provide funding for fossil fuel energy companies or the corresponding infrastructure projects based on climate change related concerns, which could affect the Company’s access to capital for potential growth projects.
+Added: Furthermore, public statements with respect to ESG matters, such as emissions reduction goals, other environmental targets or other commitments addressing certain social issues, are becoming increasingly subject to heightened scrutiny from public and governmental authorities related to the risk of potential “greenwashing,” i.e., misleading information or false claims overstating potential ESG benefits.
+Added: For example, in March 2021, the SEC established the Climate and ESG Task Force in the Division of Enforcement to identify and address potential ESG-related misconduct, including greenwashing.
+Added: Certain non-governmental organizations and other private actors have also filed lawsuits under various securities and consumer protection laws alleging that certain ESG-statements, goals or standards were misleading, false or otherwise deceptive.
+Added: Moreover, the Federal Trade Commission in August 2022 indicated its intent to issue revised “Green Guides” which will likely address greenwashing risks arising from ESG-related matters.
+Added: As a result, the Company may face increased litigation risks from private parties and governmental authorities related to its ESG efforts.
+Added: Additionally, the Company could face increasing costs as it attempts to comply with and navigate further regulatory focus and scrutiny.
+Added: Risks Related to Ownership of Our Common Stock
+Added: Entities controlled by Blackstone, I Squared Capital and Apache Midstream own a majority of the Company’s outstanding voting shares and thus strongly influence all the Company’s corporate actions.
+Added: As long as Blackstone, I Squared Capital, Apache Midstream and their respective affiliates own or control a significant percentage of the Company’s outstanding voting power, they will have the ability to strongly influence all corporate actions, including stockholder approval of the election of and removal of directors.
+Added: The interests of Blackstone, I Squared Capital or Apache Midstream may not align with the interests of the Company’s other stockholders.
+Added: Although we currently are not considered to be a “controlled company” under the NYSE corporate governance rules, we may in the future become a controlled company due to the concentration of voting power among entities controlled by Blackstone.
+Added: Although we currently are not considered to be a “controlled company” under the NYSE corporate governance rules, we may in the future become a controlled company.
+Added: As of December 31, 2022, entities controlled by Blackstone own approximately 49.8% of our outstanding Common Stock and, pursuant to the Reinvestment Agreement, will be obligated to reinvest all 2023 dividends and distributions in shares of Class A Common Stock.
+Added: Consequently, entities controlled by Blackstone may own more than 50% of our Common Stock at some point in 2023.
+Added: A “controlled company” pursuant to the NYSE corporate governance rules is a company of which more than 50% of the voting power is held by an individual, group, or another company.
+Added: In the event that Blackstone and its affiliates or other stockholders own more than 50% of the voting power of the Company, we may in the future be able to rely on the “controlled company” exemptions under the NYSE corporate governance rules due to this concentration of voting power.
+Added: If we were a controlled company, we would be eligible, and could elect, not to comply with certain of the NYSE corporate governance standards.
+Added: Such standards include the requirement that a majority of directors on our Board are independent directors, subject to certain phase-in periods, and the requirement that our compensation, nominating and governance committee consist entirely of independent directors.
+Added: In such a case, if the interests of our stockholders differ from the group of stockholders holding a majority of the voting power, our stockholders would not have the same protection afforded to stockholders of companies that are subject to all of the NYSE corporate governance standards, and the ability of our independent directors to influence our business policies and corporate matters may be reduced.
+Added: Potential future sales pursuant to registration rights granted by the Company and under Rule 144 may depress the market price for our shares of Class A Common Stock.
+Added: The Company has granted a number of its stockholders, including Blackstone, I Squared Capital and Apache Midstream, registration rights with respect to their shares of Class A Common Stock, including shares of Class A Common Stock issuable upon redemption of OpCo Units.
+Added: In addition, under Rule 144 under the Securities Act, a person who has satisfied a minimum holding period of between six months and one-year and any other applicable requirements of Rule 144, may thereafter sell such shares in transactions exempt from registration.
+Added: A significant number of our currently issued and outstanding shares of Class A Common Stock held by existing stockholders, including officers and directors and other principal stockholders are currently eligible for resale pursuant to and in accordance with the provisions of Rule 144.
+Added: The possible future sale of our shares by our existing stockholders, pursuant to and in accordance with the provisions of Rule 144, may have a depressive effect on the price of our shares of Class A Common Stock in the applicable trading marketplace.
+Added: The Company’s ability to return capital to stockholders through dividends and stock repurchases depends on its ability to generate sufficient cash flow, which it may not be able to accomplish.
+Added: The Company’s ability to return capital to stockholders through dividends and stock repurchases principally depends upon the amount of cash it generates from its operations, which will fluctuate from quarter to quarter based on, among other things, income from the Pipeline Transportation JVs, the volumes of natural gas and NGLs it gathers and processes, commodity prices, and other factors impacting the Company’s financial condition, some of which are beyond its control.
+Added: In addition, under Delaware law, dividends on the Company’s capital stock may only be paid from “surplus,” which is the amount by which the fair value of the Company’s total assets exceeds the sum of its total liabilities, including contingent liabilities, and the amount of its capital;
+Added: if there is no surplus, cash dividends on capital stock may only be paid from the Company’s net profits for the then-current and/or the preceding fiscal year.
+Added: The Company’s charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers, employees or agents.
+Added: The charter provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (Court of Chancery) will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for any derivative action or proceeding brought on the Company’s behalf;
any action asserting a claim of breach of a fiduciary duty owed by any of the Company’s directors, officers or other employees to it or its stockholders;
2 unchanged sentences
The above does not apply for such claims as to which the Court of Chancery determines that it does not have personal jurisdiction over an indispensable party, exclusive jurisdiction is vested in a court or forum other than the Court of Chancery or the Court of Chancery does not have subject matter jurisdiction.
−Removed: Any person or entity purchasing or otherwise acquiring any interest in shares of the Company’s capital stock will be deemed to have notice of, and consented to, the provisions of Altus’ charter described in the preceding sentence.
+Added: Any person or entity purchasing or otherwise acquiring any interest in shares of the Company’s capital stock will be deemed to have notice of, and consented to, the provisions of the Company’s charter described in the preceding sentence.
This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes with the Company or its directors, officers or other employees, which may discourage such lawsuits against the Company and such persons.
−Removed: Alternatively, if a court were to find these provisions of Altus’ charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, the Company may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect its business, financial condition, or results of operations.
−Removed: Altus’ charter provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law.
+Added: Alternatively, if a court were to find these provisions of the Company’s charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, the Company may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect its business, financial condition or results of operations.
+Added: The Company’s charter provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
Accordingly, the charter provides that the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act, the Securities Act or any other claim for which the federal courts have exclusive jurisdiction.
−Removed: GENERAL RISK FACTORS
−Removed: If Altus fails to maintain an effective system of internal controls, it may not be able to report accurately its financial results or prevent fraud.
+Added: If the Company fails to maintain an effective system of internal controls, it may not be able to report accurately its financial results or prevent fraud.
As a result, current and potential holders of the Company’s equity could lose confidence in its financial reporting, which would harm its business and cost of capital.
−Removed: Effective internal controls are necessary for Altus to provide reliable financial reports, prevent fraud, and operate successfully as a public company.
−Removed: The Company cannot be certain that its efforts to maintain its internal controls will be successful, that it will be able to maintain adequate controls over its financial processes and reporting in the future, or that it will be able to continue to comply with its obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
+Added: Effective internal controls are necessary for the Company to provide reliable financial reports, prevent fraud, and operate successfully as a public company.
+Added: The Company cannot be certain that it will be able to maintain adequate controls over its financial processes and reporting in the future, or that it will be able to continue to comply with its obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
Any failure to maintain effective internal controls or to implement or improve the Company’s internal controls could harm its operating results or cause it to fail to meet its reporting obligations.
Ineffective internal controls could also cause investors to lose confidence in the Company’s reported financial information, which would likely have a negative effect on the trading price of its equity interests.
−Removed: If the performance of the Company does not meet the expectations of investors, stockholders, or financial analysts, the market price of Altus’ securities may decline.
+Added: If the performance of the Company does not meet the expectations of investors, stockholders or financial analysts, the market price of the Company’s securities may decline.
The price of the Company’s securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond the Company’s control, and such fluctuations could contribute to the loss of all or part of a stockholder’s investment.
−Removed: Fluctuations or changes in the Company’s quarterly financial results, changes in or failure to meet market or financial analysts’ expectations about the Company, changes in laws and regulations, commencement of or involvement in litigation, changes in the Company’s capital structure, and general economic and political conditions could have a material adverse effect on a stockholder’s investment in the Company’s securities, and its securities may trade at prices significantly below the price paid for them.
+Added: Fluctuations or changes in the Company’s quarterly financial results, changes in or failure to meet market or financial analysts’ expectations about the Company, changes in laws and regulations, commencement of or involvement in litigation, changes in the Company’s capital structure and general economic and political conditions could materially and adversely affect a stockholder’s investment in the Company’s securities, and its securities may trade at prices significantly below the price paid for them.
In such circumstances, the trading price of the Company’s securities may not recover and may experience a further decline.
−Removed: Broad market and industry factors may materially harm the market price of the Company’s securities irrespective of Altus’ operating performance.
−Removed: The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected.
+Added: Broad market and industry factors may materially harm the market price of the Company’s securities irrespective of the Company’s operating performance.
+Added: The stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected.
The trading prices and valuations of these stocks and of the Company’s securities may not be predictable.
A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to the Company could depress the Company’s stock price regardless of its business, prospects, financial conditions or results of operations.
+Added: General Risks
+Added: Continuing or worsening inflationary issues and associated changes in monetary policy have resulted in and may result in additional increases to the cost of the Company’s services and personnel, which in turn cause the Company’s capital expenditures and operating costs to rise.
+Added: inflation rate has been steadily increasing throughout 2022.
+Added: These inflationary pressures have resulted in and may result in additional increases to the costs of the Company’s services and personnel, which in turn cause the Company’s capital expenditures and operating costs to rise.
+Added: Sustained levels of high inflation have likewise caused the U.S.
+Added: Federal Reserve and other central banks to increase interest rates multiple times in 2022 and the U.S.
+Added: Federal Reserve has indicated its intention to continue to raise benchmark interest rates throughout the remainder of 2022 and into 2023 in an effort to curb inflationary pressure on the costs of goods and services across the U.S., which could have the effects of raising the cost of capital and depressing economic growth, either of which—or the combination thereof—could hurt the financial and operating results of the Company’s business.
+Added: To the extent elevated inflation remains, the Company may experience further cost increases for its operations.
+Added: A terrorist attack, cyber-attack or armed conflict could harm the Company’s business.
+Added: Terrorist activities, cyber-attacks, anti-terrorist efforts and other armed conflicts involving the United States or other countries may adversely affect the United States and global economies and could prevent the Company from meeting its financial and other obligations.
+Added: For example, on February 24, 2022, Russia launched a large-scale invasion of Ukraine.
+Added: As a result, the United States, the United Kingdom, the member states of the European Union and other public and private actors have levied severe sanctions on Russia.
+Added: The geopolitical and macroeconomic consequences of this invasion and associated sanctions have impacted the world economy, particularly with regard to demand and prices for crude oil and natural gas, and the ongoing effect of further hostilities in Ukraine cannot be predicted.
+Added: If any of these events occur, the resulting political instability and societal disruption could reduce overall demand for crude oil and natural gas, potentially putting downward pressure on demand for the Company’s services and causing a reduction in its revenues.
+Added: Crude oil and natural gas related facilities could be direct targets of terrorist attacks, and the Company’s operations could be adversely impacted if infrastructure integral to its operations is destroyed or damaged.
+Added: Additionally, destructive forms of protest or opposition by activists, including acts of sabotage or eco-terrorism could cause significant damage or injury to people, property, or the environment or lead to extended interruptions of our operations.
+Added: Costs for insurance and other security may increase as a result of these threats, and some insurance coverage may become more difficult to obtain, if available at all.
+Added: A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss.
+Added: The oil and gas industry has become increasingly dependent on digital technologies to conduct day-to-day operations including certain midstream activities.
+Added: For example, software programs are used to manage gathering and transportation systems and for compliance reporting.
+Added: The use of mobile communication devices has increased rapidly.
+Added: Industrial control systems such as SCADA (supervisory control and data acquisition) now control large scale processes that can include multiple sites and long distances, such as crude oil and natural gas pipelines.
+Added: The Company depends on digital technology, including information systems and related infrastructure as well as cloud applications and services, to process and record financial and operating data and to communicate with its employees and business service providers.
+Added: The Company’s business service providers, including vendors and financial institutions, are also dependent on digital technology.
+Added: The technologies needed to conduct midstream activities make certain information the target of theft or misappropriation.
+Added: The Company’s technologies, systems, networks, and those of its business partners may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of its business operations.
+Added: In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period.
+Added: A cyber incident involving the Company’s information systems and related infrastructure, or that of its business service providers, could disrupt its business plans and negatively impact its operations in the following ways, among others:
+Added: • a cyber-attack on a vendor or other service provider could result in supply chain disruptions, which could delay or halt development of additional infrastructure, effectively delaying the start of cash flow from the project;
+Added: • a cyber-attack on downstream pipelines could prevent the Company from delivering product at the tailgate of its facilities, resulting in a loss of revenues;
+Added: • a cyber-attack on a communications network or power grid could cause operational disruption resulting in loss of revenues;
+Added: • a deliberate corruption of its financial or operational data could result in events of non-compliance which could lead to regulatory fines or penalties;
+Added: • business interruptions could result in expensive remediation efforts, distraction of management, damage to its reputation or a negative impact on cash flow.
+Added: The Company’s implementation of various controls and processes, including globally incorporating a risk-based cyber security framework, to monitor and mitigate security threats and to increase security for its information, facilities and infrastructure is costly and labor intensive.
+Added: Moreover, there can be no assurance that such measures will be sufficient to prevent security breaches from occurring.
+Added: As cyber threats continue to evolve, the Company may be required to expend significant additional resources to continue to modify or enhance its protective measures or to investigate and remediate any information security vulnerabilities.
+Added: Any such breakdowns or breaches, or resulting access, disclosure or other loss of information, could significantly disrupt the Company’s business and result in legal claims or proceedings, liability under laws that protect the privacy of personal information and damage to its reputation, any of which could materially and adversely affect its business, financial position, results of operations or cash flows.
UNRESOLVED STAFF COMMENTS
LEGAL PROCEEDINGS
−Removed: For further information regarding legal proceedings, see Note 8—Commitments and Contingencies in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Annual Report on Form 10-K.
−Removed: MINE SAFETY DISCLOSURES
+Added: For further information regarding legal proceedings, see Note 18—Commitments and Contingencies in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Annual Report on this Form 10-K.
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