What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-09 · 380 added, 643 removed, 350 unchanged (75% of the section changed)

3 unchanged sentences

Three Months Ended

September 30,* Nine Months Ended

September 30,*

2023 2022 (4)

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Total operating revenues (1)

281,040 257,249

Operating costs and expenses:

Costs of sales (exclusive of depreciation and amortization shown separately below) (2)

115,877 120,275

Operating expenses 35,973 29,871

1 unchanged sentence

General and administrative expenses 27,511 22,752

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

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

Depreciation and amortization expenses 68,854 61,023

Loss on disposal of assets 102 110

Total operating costs and expenses 253,775 238,184

3 unchanged sentences

Gain on redemption of mandatorily redeemable Preferred Units — 4,493

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

Gain on embedded derivative 488 — 89,050 —

Loss on embedded derivative — ( 2,886 )

Interest expense ( 69,308 ) ( 26,774 )

Equity in earnings of unconsolidated affiliates 46,464 27,917

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

Total other (expense) income, net ( 22,550 ) 3,000

Income before income taxes 4,715 22,065

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Net income attributable to Common Unit limited partners 2,863 12,531

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

Net income attributable to Class A Common Shareholders per share

Net income attributable to Class A Common Stock Shareholders $ 1,436 $ 3,865

Net (loss) income attributable to Class A Common Shareholders per share

Basic $ ( 0.06 ) $ 0.10

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Diluted 47,605 37,426

(1) Includes amounts of $ 25.3 million and $ 15.6 million associated with related parties for the three months ended March 31, 2023 and 2022, respectively.

(2) Includes amounts of $ 14.6 million and $ 3.6 million associated with related parties for the three months ended March 31, 2023 and 2022, respectively.

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

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

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

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

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

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

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CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, December 31,

(In thousands, except share amounts)

March 31, December 31,

(In thousands, except per share data)

CURRENT ASSETS:

2 unchanged sentences

199,028 204,036

Derivative assets 13,834 6,963

Prepaid and other current assets 31,366 24,474

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Intangible assets, net 676,516 695,389

Derivative asset, non-current 124 —

Operating lease right-of-use assets 64,097 28,551

Deferred charges and other assets 85,551 32,275

Investment in unconsolidated affiliates 2,372,596 626,477

Investment in unconsolidated affiliate 2,412,905 2,381,340

Goodwill 5,077 5,077

1 unchanged sentence

Total assets $ 6,124,655 $ 5,919,711

LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY

LIABILITIES, NONCONTROLLING INTEREST, AND EQUITY

CURRENT LIABILITIES:

3 unchanged sentences

Current portion of operating lease liabilities 39,773 22,810

Current portion of long-term debt, net — 54,280

Other current liabilities 7,236 7,487

6 unchanged sentences

Other liabilities 4,310 2,677

Contingent liabilities — 839

Deferred tax liabilities 11,381 11,018

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Class A Common Stock:

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

$ 0.0001 par, 1,500,000,000 shares authorized, 49,054,411 and 45,679,447 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Class C Common Stock:

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

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

Additional paid-in capital 229,672 118,840

Accumulated deficit ( 863,452 ) ( 958,629 )

( 834,552 ) 10

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

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

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

Treasury stock, at cost ( 81,862 and nil shares as of March 31, 2023 and December 31, 2022, respectively)

Total equity ( 636,198 ) ( 839,775 )

Total liabilities, noncontrolling interest, and equity $ 6,124,655 $ 5,919,711

(1) Includes amounts of $ 24.2 million and $ 17.6 million associated with related parties as of March 31, 2023 and December 31, 2022, respectively.

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

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

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Depreciation and amortization expense 68,854 61,023

Amortization of debt issuance costs 8,053 9,991

Amortization of deferred financing costs 1,521 3,389

Amortization of contract costs 1,655 448

Contingent liabilities remeasurement ( 839 ) ( 377 )

Distributions from unconsolidated affiliates 185,786 47,017

Distributions from unconsolidated affiliate 67,764 48,073

Derivatives settlement 974 ( 884 )

Derivatives fair value adjustment ( 103,032 ) 13,943

Derivative fair value adjustment 11,770 ( 8,745 )

Warrants fair value adjustment ( 44 ) —

Gain on redemption of mandatorily redeemable Preferred Units — ( 4,493 )

1 unchanged sentence

Equity in earnings from unconsolidated affiliates ( 46,464 ) ( 27,917 )

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

Loss on debt extinguishment — 129

Share-based compensation 17,540 6,132

Deferred income taxes 363 676

Change in operating assets and liabilities:

Changes in operating assets and liabilities:

Accounts receivable 5,008 ( 67,446 )

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Accrued liabilities ( 10,679 ) 73,961

Operating lease liabilities ( 281 ) 1,994

Other non-current liabilities 1,677 —

Operating leases 632 ( 230 )

Net cash provided by operating activities 119,591 98,393

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Intangible assets expenditures ( 9,755 ) ( 3,559 )

Investment in unconsolidated affiliates ( 56,199 ) ( 20,522 )

Investments in unconsolidated affiliate ( 58,658 ) —

Distributions from unconsolidated affiliate 5,793 —

Cash proceeds from disposals 14 —

Net cash acquired in acquisition 13,401 —

Net cash (paid for) acquired in acquisitions ( 125,000 ) 13,401

Net cash used in investing activities ( 246,468 ) ( 19,392 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of long-term debt 3,000,000 30,189

Principal payments on long-term debt — ( 26,382 )

Payment on debt issuance costs ( 36,873 ) ( 3,152 )

Proceeds from revolver 267,000 7,000

Payment on revolver ( 771,000 ) ( 27,000 )

Payments on revolver ( 125,000 ) —

Redemption of mandatorily redeemable Preferred Units — ( 60,702 )

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

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

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

Cash dividends paid to Class A Common Stock shareholders ( 16,927 ) —

Distributions paid to Class C Common Units limited partners ( 929 ) ( 30,189 )

Equity contributions — 14,890

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

Distribution paid to Class C Common Unit limited partners ( 174 ) —

Repurchase of Class A Common Stock ( 2,432 ) —

Net cash provided by (used in) financing activities 122,467 ( 80,084 )

Net change in cash ( 4,410 ) ( 1,083 )

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners* Redeemable Noncontrolling Interest — Common Unit Limited Partners Class A Common Stock Class C Common Stock Additional Paid-in Capital Accumulated Deficit Total Equity

Shares** Amount Shares** Amount

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners (2)

Redeemable Noncontrolling Interest — Common Unit Limited Partners Class A Common Stock Class C Common Stock Additional Paid-in Capital Accumulated Deficit Treasury Stock Total Equity

Amount Shares (1)

(In thousands) (In thousands)

For the Quarter Ended September 30, 2021

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

Net income — 4,640 — — — — — — —

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

For the Quarter Ended September 30, 2022

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

For the Three Months Ended March 31, 2022

Balance at December 31, 2021 $ — $ 1,006,843 — $ — 50,000 $ 5 $ — $ — $ — $ 5

ALTM acquisition 462,717 — 16,246 2 — — 1,013,743 — — 1,013,745

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

Redemption of Common Units — ( 170,060 ) 2,740 — ( 2,740 ) — 170,060 — — 170,060

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

Excess of carrying amount over Preferred Units redemption price ( 102,586 ) 76,623 — — — — — 32,900 32,900

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

Share-based compensation — — — — — — 6,132 — — 6,132

Remeasurement of contingent consideration — — — — — — 4,450 — — 4,450

Net income 4,993 12,531 — — — — — 3,865 — 3,865

Change in redemption value of noncontrolling interests — 2,336,117 — — — — ( 1,194,385 ) ( 1,141,732 ) — ( 2,336,117 )

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

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

— — — — — — — ( 30,467 ) ( 30,467 )

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

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

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

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

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

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

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS - (Continued)

Shares** Amount Shares** Amount

(In thousands) (In thousands)

For the Nine Months Ended September 30, 2021

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

Contribution — 14,890 — — 492 — — — —

Distribution paid to Common Unit limited partners — ( 30,189 ) — — ( 996 ) — — — —

Net income — 7,410 — — — — — — —

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

For the Nine Months Ended September 30, 2022

Balance at March 31, 2022 $ 460,773 $ 3,185,431 18,986 $ 2 47,260 $ 5 $ — $ ( 1,137,867 ) $ — $ ( 1,137,860 )

For the Three Months Ended March 31, 2023

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

ALTM acquisition 462,717 — 32,493 3 — — 1,013,742 — 1,013,745

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

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

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

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

Issuance of common stock through dividend and distribution reinvestment plan — — 3,071 — — — 87,658 — — 87,658

Repurchase of Class A Common Stock — — ( 82 ) — — — — — ( 2,432 ) ( 2,432 )

Share-based compensation — — 205 — — — 17,540 — — 17,540

Remeasurement of contingent consideration — — — — — — 4,451 — 4,451

Net income — 2,863 — — — — — 1,436 — 1,436

Change in redemption value of noncontrolling interests — ( 128,211 ) — — — — — 128,211 — 128,211

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

Dividends on Class A Common Stock ($ 1.50 per share)

Distribution paid to Common Units limited partners — ( 70,566 ) — — — — — — — —

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

— — — — — — — ( 34,470 ) — ( 34,470 )

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This Quarterly Report on Form 10-Q should be read along with Kinetik Holdings Inc.’s audited financial statements and related notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 7, 2023.

DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Transaction

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

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

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

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

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

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

The Company completed a two -for-one Stock Split in the form of a stock dividend on June 8, 2022.

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

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

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

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

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

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

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

BCP Raptor Holdco, LP (“ BCP”), the Company’s predecessor for accounting purposes, was formed on April 25, 2017 as a Delaware limited partnership to acquire and develop midstream oil and gas assets.

BCP’s primary operating subsidiaries are EagleClaw Midstream Ventures, LLC and CR Permian Holdings, LLC.

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

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

Altus Midstream Company (“ALTM”) was originally incorporated on December 12, 2016 in Delaware under the name Kayne Anderson Acquisition Corp.

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

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

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

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

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

On February 22, 2022, upon the Closing, BCP and its subsidiaries became wholly owned subsidiaries of the Partnership.

The Transaction was accounted for as a reverse merger pursuant to ASC 805 Business Combination (“ASC 805”).

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

Nature of Operations

The transactions contemplated by the Contribution Agreement are referred to herein as the “Transaction.” In connection with the closing of the Transaction (the “Closing”), the Company changed its name from “Altus Midstream Company” to “Kinetik Holdings Inc.” Unless the context otherwise requires, “ALTM” refers to the registrant prior to the Closing and “we,” “us,” “our,” and the “Company” refer to Kinetik Holdings Inc., the registrant and its subsidiaries following the Closing.

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

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

accordingly, you should read these consolidated financial statements in conjunction with our

consolidated financial statements and related notes included in our 2022 Form 10-K..

All intercompany balances and transactions have been eliminated in consolidation.

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

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

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

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

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

Use of Estimates

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

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

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

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

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

Variable Interest Entity

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

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

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

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

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

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

Redeemable Noncontrolling Interest — Common Units Limited Partners

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

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

Please refer to “The Transaction” above.

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

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

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

See discussion and additional details in Note 10—Equity and Warrant s in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners

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

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

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

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

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

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

Equity Method Investments

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

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

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

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

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

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

See discussion and additional detail in Note 2—Business Combination in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for purchase price allocation of the Transaction.

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

Significant Accounting Policies

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

There were no significant updates or revisions to our accounting policies during the three months ended March 31, 2023.

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

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

Inventory was valued at $ 13.1 million and $ 2.1 million as of September 30, 2022 and December 31, 2021, respectively.

Impairment of Long-Lived Assets

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

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

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

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

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

Inventory was valued at $ 4.2 million and $ 4.8 million as of March 31, 2023 and December 31, 2022, respectively.

Transactions with Affiliates

The accounts receivable from or payable to affiliates represent the net result of the Company’s monthly revenue, capital and operating expenditures, and other miscellaneous transactions to be settled with Apache and its subsidiaries, who controlled the Company prior to the Transaction.

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

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

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

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

Accounts receivable from affiliates was $ 24.2 million and $ 17.6 million as of March 31, 2023 and December 31, 2022, respectively.

Revenue from affiliates was $ 25.3 million and $ 15.6 million for the three months ended March 31, 2023 and 2022, respectively.

Accrued expense due to affiliates was immaterial, and operating expenses were $ 0.3 million and nil for the three months ended March 31, 2023 and 2022, respectively.

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

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

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

Net Income Per Share

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

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

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

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

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

Recently Adopted Accounting Pronouncement

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

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

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

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

Effective January 1, 2022, the Company adopted ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”) .

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

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

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

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

Recent Accounting Pronouncement Not Yet Adopted

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”).

The amendments in ASU 2022-03 clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction.

The amendments also require the following disclosures for equity securities subject to contractual sale restrictions:

(1) The fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet;

(2) The nature and remaining duration of the restriction(s);

(3) The circumstances that could cause a lapse in the restriction(s).

This guidance is effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

The Company is currently evaluating the effect that ASU 2022-03 will have on its Consolidated Financial Statements.

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

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

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

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

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

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

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

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

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

Early adoption is permitted on any date on or after the issuance of ASU 2022-01 for any entity that has adopted the amendments in ASU 2017-02 for the corresponding period.

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

BUSINESS COMBINATION

Altus Business Combination

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

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

For the three months ended March 31, 2023 and 2022, the Company recorded cost of sales of $ 14.6 million and $ 3.6 million, respectively, with these affiliates.

BUSINESS COMBINATIONS

As of March 31, 2023, our allocation of purchase price for acquisitions made during 2023 and 2022 are detailed below:

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

(In thousands)

(1) Q1 2023 Midstream Infrastructure Assets and Incentive and Acceleration Agreement (a)

$ 125,000 $ 4,736 $ 61,850 $ 3,150 $ 55,264 $ — $ — $ —

(2) Q1 2022 Altus Midstream Company (“ALTM”) $ 1,013,745 $ 38,750 $ 634,923 $ 13,200 $ 1,752,500 $ 5,077 $ ( 967,988 ) $ ( 462,717 )

(a) Consideration includes $ 65 million paid for certain midstream assets and the $ 60 million paid related to the incentive and acceleration agreement.

Midstream Infrastructure Assets

The Partnership closed on a purchase and sale agreement for certain midstream assets for $ 65.0 million together with a new 20 year midstream service agreement.

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

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

Consideration for the incentive and acceleration agreement of $ 60 million was capitalized as a contract asset in accordance with ASC 606, of which $ 4.7 million is included in “Prepaid and Other Current Assets” and $ 55.3 million is included in “Deferred Charges and Other Assets” in the condensed consolidated balance sheet as of March 31, 2023.

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

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

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

Acquisition-related costs were immaterial for this transaction.

Altus Midstream Company

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

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

Please refer to “The Transaction” discussed above.

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

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

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

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

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

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

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

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

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

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

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

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

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

(In thousands) Amount

Cash and cash equivalent $ 13,401

Accounts receivable 1,919

Accounts receivable - affiliates 15,681

Property, plant, and equipment, net 634,923

Intangible assets, net 13,200

Investments in unconsolidated affiliates 1,755,000

Prepaid expense and other assets 7,748

Goodwill 4,557

Total assets acquired 2,446,429

Accrued expenses and other accrued liabilities 5,687

Long-term debt 657,000

Embedded derivative liabilities 89,050

Contract liabilities 9,102

Mandatory redeemable Preferred Units 200,667

Deferred tax liabilities 4,010

Contingent liabilities 4,451

Total liabilities assumed 969,967

Redeemable noncontrolling interest - Preferred Unit limited partners 462,717

Total consideration transferred $ 1,013,745

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

Supplemental Pro Forma Information

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

The results below for the three and nine months ended September 30, 2022 and 2021 combine the results of the Company and the Partnership, giving effect to the Transaction as if it had been completed on January 1, 2021.

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

2022 2021 2022 2021

(In thousands) Pro forma Pro forma Pro forma Pro forma

Revenues $ 325,176 $ 201,134 $ 944,850 $ 554,742

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

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

During the 12-month measurement period following the acquisition date, the Company made necessary adjustments as information became available to the purchase price allocation, including, but not limited to, working capital and valuation of the underlying assets of the equity method investments.

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

The Company incurred acquisition-related costs of nil and $ 5.7 million for the three months ended March 31, 2023 and 2022, respectively, related to the Transaction.

REVENUE RECOGNITION

1 unchanged sentence

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

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

2022 2021 2022 2021

Three Months Ended March 31,

(In thousands)

3 unchanged sentences

Total revenues and other $ 281,040 $ 257,249

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

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

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

There have been no significant changes to the Company’s contracts with customers during the three months ended March 31, 2023.

The Company recognized revenues from minimum volume commitment (“MVC”) deficiency payments of $ 1.1 million and nil for the three months ended March 31, 2023 and 2022, respectively.

Remaining Performance Obligations

The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenues as of September 30, 2022:

Fiscal Year (In thousands)

3 unchanged sentences

Contract Liabilities

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

The following table provides information about contract liabilities from contracts with customers as of March 31, 2023:

(In thousands)

Balance at December 31, 2022 $ 29,300

Reclassification of beginning contract liabilities to revenue as a result of performance obligation being satisfied ( 5,159 )

Cash received and not recognized as revenue 20,268

Balance at September 30, 2022 29,865

Reclassification of beginning contract liabilities to revenue as a result of performance obligations being satisfied ( 2,059 )

Cash received in advance and not recognized as revenue 669

Balance at March 31, 2023 27,910

Current portion 5,919

5 unchanged sentences

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

As of September 30, 2022 and December 31, 2021, the Company had contract acquisition cost assets of $ 15.3 million and $ 18.4 million, respectively.

As of March 31, 2023 and December 31, 2022, the Company had contract acquisition cost assets of $ 76.2 million and $ 17.8 million, respectively.

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

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

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

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

The Company recognized cost of sales associated with these assets of $ 1.7 million and $ 0.4 million for the three months ended March 31, 2023 and 2022, respectively.

PROPERTY, PLANT AND EQUIPMENT

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

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

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

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

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

September 30, 2022 December 31, 2021

March 31, December 31,

(In thousands)

2 unchanged sentences

Computers and equipment 5,504 4,289

accumulated depreciation ( 437,049 ) ( 337,030 )

accumulated depreciation and accretion ( 512,451 ) ( 474,258 )

Total depreciable assets, net 2,507,400 2,443,405

4 unchanged sentences

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

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

The Company recorded $ 38.4 million and $ 30.8 million of depreciation expense for the three months ended March 31, 2023 and 2022, respectively.

There were no triggering events for property, plant and equipment during the three months ended March 31, 2023 and 2022.

GOODWILL AND INTANGIBLE ASSETS, NET

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

The Transaction was accounted for as a business combination pursuant to ASC 805.

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

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

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

Company’s management assesses whether there have been events or circumstances that trigger the fair value of the reporting unit to be lower than its net carrying value since consummation of the Transaction and concluded that goodwill was not impaired as of September 30, 2022.

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

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

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

Intangible Assets

Intangible assets, net, are comprised of the following:

September 30, 2022 December 31, 2021

March 31, December 31,

(In thousands)

6 unchanged sentences

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

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

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

DEBT AND FINANCING COSTS

June 2030 Senior Notes

On June 8, 2022, the Partnership completed a private placement of $ 1.00 billion aggregate principal amount of its 5.875 % Sustainability-Linked Senior Notes due 2030 (the “Notes”), which are fully and unconditionally guaranteed by the Company.

The Notes were issued at 99.588 % of their face amount and will mature on June 15, 2030.

Interest accrues from June 8, 2022 and is payable semi-annually on June 15 and December 15 of each year, commencing December 15, 2022.

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

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

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

The interest rate accruing on the Notes will be increased by an additional 0.083 % per annum for each SPT which has not been satisfied and externally verified.

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

Revolving Credit Facility

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

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

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

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

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

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

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

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

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

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

Term Loan Credit Facility

On June 8, 2022, concurrently with the closing of the Revolving Credit Facility, the Partnership entered into a term loan credit agreement (the “TLA”) among PNC Bank, National Association, as administrative agent (“PNC Bank”), and the banks and other financial institutions party thereto, as lenders.

The TLA provides for a $ 2.00 billion senior unsecured term loan credit facility (the “Term Loan Credit Facility”).

The TLA matures on June 8, 2025.

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

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

Base rate loans bear interest at a rate per annum equal to the greatest of (a) the prime rate as announced from time to time by PNC Bank, (b) the greater of (i) the federal funds effective rate and (ii) the overnight bank funding rate, plus 1/2 of 1.00% and (c) the adjusted term SOFR rate for an interest period of one month plus 1.00 %, plus a margin that ranges between 0.25 % and 1.0 %, depending on the credit rating of the Partnership.

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

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

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

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

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

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

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

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

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

Repayment of Existing Credit Facilities

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

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

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

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

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

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

September 30, 2022 December 31, 2021

(In thousands)

$ 2.0 billion unsecured term loan

$ 2,000,000 $ —

$ 1.0 billion 2030 senior unsecured Notes

$ 1.25 billion revolving credit facility

$ 1.25 billion term loan

$ 690 million term loan

$ 513 million term loan

$ 125 million revolving line of credit

Total Long-term debt 3,475,000 2,346,187

Debt issuance costs, net (1)

( 27,487 ) ( 38,485 )

3,447,513 2,307,702

Current portion, net — ( 54,280 )

Long-term portion of debt and finance lease obligations, net $ 3,447,513 $ 2,253,422

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

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

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

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

2022 2021 2022 2021

(In thousands)

Capitalized interest $ 961 $ 226 $ 1,262 $ 712

Debt issuance costs 1,515 3,354 8,053 9,991

Interest expense 37,988 26,961 83,270 77,755

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

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

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

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

Condensed Consolidated Balance Sheets .

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

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

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

ACCRUED EXPENSES

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

September 30, 2022 December 31, 2021

(In thousands)

Accrued product purchases $ 175,575 $ 118,364

Accrued taxes 19,442 4,299

Accrued salaries, vacation, and related benefits 4,616 2,113

Accrued capital expenditures 8,713 2,995

Accrued interest expenses 19,120 —

Accrued other expenses 7,694 7,872

Total accrued expenses $ 235,160 $ 135,643

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

COMMITMENTS AND CONTINGENCIES

Accruals for loss contingencies arising from claims, assessments, litigation, environmental, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

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

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

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

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

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

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

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

The Company has entered into litigation with two third parties to collect outstanding receivables totaling $ 19.6 million that remain outstanding from the Winter Storm Uri during February of 2021.

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

Environmental Matters

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

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

The Company is not aware of any environmental claims existing as of September 30, 2022, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.

Contingent Liabilities

Permian Gas Acquisition

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

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

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

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

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

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

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

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

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

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

Original Altus Transaction

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

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

• 1,250,000 shares if the per share closing price of the Class A Common Stock as reported by the NYSE during any 30 -trading-day period ending prior to November 9, 2023 is equal to or greater than $ 160.00 for any 20 trading days within such 30 -trading-day period.

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

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

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

On March 31, 2023, remaining weighted average amortization periods for customer contracts and right of way assets were approximately 7.36 years and 6.95 years, respectively.

Overall remaining weighted average amortization period for the intangible assets as of March 31, 2023 was approximately 7.31 years.

The Company recorded $ 30.5 million and $ 30.2 million of amortization expense for the three months ended March 31, 2023 and 2022, respectively.

There was no impairment recognized on intangible assets for the three months ended March 31, 2023 and 2022.

EQUITY METHOD INVESTMENTS

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

As of March 31, 2023, the Company owned investments in the following long-haul pipeline entities in the Permian Basin.

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

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

Ownership September 30, 2022 December 31, 2021

March 31, December 31,

Ownership 2023 2022

(In thousands)

Permian Highway Pipeline LLC (1)

53.3 % $ 1,459,096 $ 626,477

Breviloba, LLC (Shin Oak) 33.0 % 462,691 —

Gulf Coast Express Pipeline LLC 16.0 % 450,809 —

Permian Highway Pipeline LLC ("PHP") 53.3 % $ 1,519,825 $ 1,474,800

Breviloba, LLC ("Breviloba") 33.0 % 450,926 455,057

Gulf Coast Express Pipeline LLC ("GCX") 16.0 % 442,154 451,483

$ 2,412,905 $ 2,381,340

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

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

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

No additional contribution was made to EPIC and no distribution or equity income was received from EPIC during the three and nine months ended September 30, 2022.

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

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

Additionally, as of March 31, 2023, the Company also owned 15.0 % of Epic Crude Holdings, LP (“EPIC”).

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

No additional contribution was made to EPIC and no distribution or equity income was received from EPIC during the three months ended March 31, 2023.

The unamortized basis differences included in the EMI pipeline balances were $ 359.8 million and $ 363.2 million as of March 31, 2023 and December 31, 2022, respectively.

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

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

There was capitalized interest of $ 12.5 million and $ 12.8 million as of September 30, 2022 and December 31, 2021, respectively.

There was capitalized interest of $ 14.7 million and $ 13.4 million as of March 31, 2023 and December 31, 2022, respectively.

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

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

The following table presents the activity in the Company’s EMIs for the three months ended March 31, 2023:

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

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Distributions ( 42,570 ) ( 11,869 ) ( 19,118 ) ( 73,557 )

Capitalized interest 1,440 — — 1,440

Equity income, net (1)

28,937 7,738 9,789 46,464

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

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

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

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

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

Balance at March 31, 2023 $ 1,519,825 $ 450,926 $ 442,154 $ 2,412,905

(1) For the three months ended March 31, 2023, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $ 1.9 million from PHP, $ 0.2 million from Breviloba, LLC and $ 1.6 million from GCX.

Summarized Financial Information

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

Three Months Ended September 30,

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

Breviloba, LLC (1)

Gulf Coast Express Pipeline LLC (1)

The following tables represent selected statement of operations data for the Company’s EMI pipelines (on a 100 percent basis) for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

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

(In thousands)

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Net income 59,691 22,211 71,091 59,213 26,366 63,529

Nine Months Ended September 30,

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

Breviloba, LLC (1)

Gulf Coast Express Pipeline LLC (1)

DEBT AND FINANCING COSTS

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

March 31, December 31,

(In thousands)

Revenues $ 296,779 $ 151,732 272,542 $ 297,132 $ 127,030 $ 270,526

Operating income 190,620 73,877 199,130 167,011 72,098 186,356

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

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

$ 2.0 billion unsecured term loan

$ 2,000,000 $ 2,000,000

$ 1.0 billion 2030 senior unsecured notes

1,000,000 1,000,000

$ 1.25 billion revolving line of credit

537,000 395,000

Total long-term debt 3,537,000 3,395,000

Debt issuance costs, net (1)

( 25,352 ) ( 26,490 )

Total long-term debt, net $ 3,511,648 $ 3,368,510

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

Unamortized debt issuance cost associated with the revolving line of credit was $ 6.5 million and $ 6.9 million as of March 31, 2023 and December 31, 2022, respectively.

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

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

Three Months Ended March 31,

(In thousands)

Capitalized interest $ ( 2,233 ) $ ( 104 )

Debt issuance costs 1,521 3,389

Interest expense 70,020 23,489

Total financing costs, net of capitalized interest $ 69,308 $ 26,774

As of March 31, 2023 and December 31, 2022, unamortized debt issuance costs associated with the senior unsecured notes and the term loan were $ 25.4 million and $ 26.5 million, respectively.

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

The amount of debt issuance costs included in interest expense was $ 1.5 million and $ 3.4 million for the three months ended March 31, 2023 and 2022, respectively.

Compliance with our Covenants

Both the revolving credit agreement with Bank of America, N.A., as administrative agent and the term loan credit agreement with PNC Bank as administrative agent contain customary covenants and restrictive provisions which may, among other things, limit the Partnership’s ability to create liens, incur additional indebtedness, make restricted payments, or liquidate, dissolve, consolidate with, or merge into or with any other person.

The 5.875 % Senior Notes due 2030 also contain covenants and restrictive provisions.

As of March 31, 2023, the Partnership was in compliance with all customary and financial covenants.

Fair Value of Financial Instruments

The fair value of the Company and its subsidiaries’ consolidated debt as of March 31, 2023 and December 31, 2022 was $ 3.52 billion and $ 3.34 billion, respectively.

On March 31, 2023, the senior unsecured notes’ fair value was based on Level 1 inputs and the term loan and revolving line of credit’s fair value was based on Level 3 inputs.

ACCRUED EXPENSES

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

March 31, December 31,

(In thousands)

Accrued product purchases $ 95,922 $ 115,773

Accrued taxes 5,785 19,509

Accrued salaries, vacation, and related benefits 3,143 3,934

Accrued capital expenditures 15,830 3,892

Accrued interest 38,774 24,815

Accrued other expenses 16,853 5,991

Total current accrued expenses $ 176,307 $ 173,914

Accrued product purchases mainly accrue the liabilities related to producer payments and any additional business-related miscellaneous fees we owe to third parties, such as transport or capacity fees as of March 31, 2023.

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

Total operating lease costs were $ 10.8 million and $ 9.1 million for the three months ended March 31, 2023 and 2022, respectively.

Short-term lease costs were $ 19 thousand and $ 2.6 million for the three months ended March 31, 2023 and 2022, respectively.

Variable lease cost was immaterial for the three months ended March 31, 2023 and 2022.

The following table presents other supplemental lease information:

Three Months Ended March 31,

(In thousands)

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 10,632 $ 9,154

Right-of-use assets obtained in exchange for new operating lease liabilities $ 63 $ 4,490

Weighted-average remaining lease term — operating leases (in years) 1.94 1.82

Weighted-average discount rate — operating leases 8.89 % 7.58 %

EQUITY AND WARRANTS

Redeemable Noncontrolling Interest — Common Unit Limited Partners

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

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

On February 22, 2022, the Company consummated a business combination with Altus pursuant to the Contribution Agreement.

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

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

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

During the first nine months of 2022, 5,730,000 common units were redeemed on a one -for-one basis for shares of Class A Common Stock and a corresponding number of shares of Class C Common Stock were cancelled.

There were 94,270,000 Common Units and an equal number of Class C Common Stock issued and outstanding as of September 30, 2022.

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

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners

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

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

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

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

During the first three months of 2023, 180,962 common units were redeemed on a one -for-one basis for shares of Class A Common Stock and a corresponding number of shares of Class C Common Stock were cancelled.

There were 94,089,038 Common Units and an equal number of Class C Common Stock issued and outstanding as of March 31, 2023.

The Common Units fair value was approximately $ 2.91 billion as of March 31, 2023.

As of March 31, 2023, there were 49,054,411 and 94,089,038 shares, respectively, of Class A Common Stock and Class C Common Stock issued and outstanding (collectively, “Common Stock”).

Public Warrants

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

As of March 31, 2023, there were 12,577,350 Public Warrants (as defined below) outstanding.

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

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Private Placement Warrants

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

As of March 31, 2023, there were 6,364,281 Private Placement Warrants (as defined below) outstanding, of which Apache holds 3,182,140 .

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

The Company recorded a fair value of $ 0.1 million for the Public Warrants and a fair value of $ 0.1 million for the Private Warrants as of September 30, 2022 on the Condensed Consolidated Balance Sheet in other non-current liabilities.

The Company recorded a fair value of $ 25 thousand for the Public Warrants and a fair value of $ 19 thousand for the Private Warrants as of March 31, 2023 on the Condensed Consolidated Balance Sheet in other non-current liabilities.

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

On February 22, 2022, the Company entered into a Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”) with certain stockholders including BCP Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP, Buzzard Midstream LLC, APA Corporation Apache Midstream LLC, and certain individuals (each, a “Reinvestment Holder”).

Under the Reinvestment Agreement, each Reinvestment Holder is obligated to reinvest at least 20 % of all distributions on Common Units or dividends on shares of Class A Common Stock in the Company’s Class A Common Stock.

Additionally, the Audit Committee and subsequently the Company’s Board of Directors (the “Board”) resolved that for the calendar year 2022, 100 % of all distributions or dividends received by each Reinvestment Holder would be reinvested in newly issued shares of Class A Common Stock.

As described in these Condensed Consolidated Financial Statements, as the context requires, dividends paid to holders of Class A Common Stock and distributions paid to holders of Common Units may be referred to collectively as “dividends.”

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

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

Dividends are payable on November 17, 2022.

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

On May 19, 2022, the Company announced that its Board approved and declared a two -for-one stock split with respect to its Class A Common Stock and Class C Common Stock, in the form of a stock dividend (the “Stock Split”).

The Stock Split was accomplished by distributing one additional share of Class A Common Stock for each share of Class A Common Stock outstanding and one additional share of Class C Common Stock for each share of Class C Common Stock outstanding.

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

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

SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS

Prior to the Closing Date of the Transaction, the Partnership had 625,000 Preferred Units issued and outstanding.

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

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

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

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

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

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

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

Units Outstanding Amount

(In thousands, except for unit data)

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

396,417 $ 462,717

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

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

Allocation of net income — 18,128

Accreted redemption value adjustment — 97,075

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

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

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

SHARE-BASED COMPENSATION

Prior to the Closing, the Company issued incentive units, which included performance and service conditions, to certain employees and board members.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Company is subject to U.S.

federal income tax and the Texas margin tax.

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

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

(In thousands)

Income before income taxes $ 50,828 $ 204,503

Income tax expense $ 1,406 $ 2,244

Effective tax rate (1)

2.77 % 1.10 %

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

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

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

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

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

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

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

(In thousands) Amount

Balance at December 31, 2021 $ —

Increase related to ALTM acquisition 5,238

Reduction related to current year activities ( 5,238 )

Balance at September 30, 2022 $ —

NET INCOME PER SHARE

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

Three Months Ended September 30,

Income Weighted-average shares (3)

Per Share Income Weighted-average shares (3)

(In thousands, except per share data)

Net income attributable to Class A common shareholders $ 14,936 41,816 $ 0.36 $ — — $ —

Net income available to participating unvested restricted Class A common shareholders (4)

( 4,174 ) — $ — — — $ —

Excess preferred carrying amount over consideration paid (5)

32,900 — $ — — — $ —

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

Effect of dilutive securities:

Unvested Class A common shares — 39 $ — — — $ —

Diluted (1)(2) :

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

Nine Months Ended September 30,

Income Weighted-average shares (3)

Per Share Income Weighted-average share (3)

(In thousands, except per share data)

Net income attributable to Class A common shareholders $ 25,239 40,042 $ 0.63 $ — — $ —

Net income available to participating unvested restricted Class A common shareholders (4)

( 8,358 ) — $ — — — $ —

Excess preferred carrying amount over consideration paid (5)

32,900 — $ — — — $ —

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

Effect of dilutive securities:

Unvested Class A common shares — 33 $ — — — $ —

Diluted (1)(2) :

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

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

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

(3) Share amounts have been retroactively restated to reflect the Company’s two -for-one Stock Split.

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

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

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

Stock Repurchase Program

In February 2023, the Board of Directors (the “Board”) approved a share repurchase program (“Repurchase Program”), authorizing discretionary purchases of the Company’s Class A Common Stock up to $ 100.0 million in the aggregate.

Repurchases may be made at management’s discretion from time to time, in accordance with applicable securities laws, on the open market or through privately negotiated transactions and may be made pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act.

Privately negotiated repurchases from affiliates are also authorized under the Repurchase Program, subject to such affiliates’ interest and other limitations.

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

For the three months ended March 31, 2023, the Company repurchased 81,862 shares at a total cost of $ 2.4 million.

During the three months ended March 31, 2023, the Company made cash dividend payments of $ 17.1 million to holders of Class A Common Stock and Class C Common Units and $ 87.9 million was reinvested in shares of Class A Common Stock by Reinvestment Holders.

See Note 18 - Subsequent Events for discussion of dividend declared on April 19, 2023.

FAIR VALUE MEASUREMENTS

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

The Company’s Condensed Consolidated Balance Sheets reflect a mixture of measurement methods for financial assets and liabilities.

Public and private warrants, contingent liabilities and derivative financial instruments are reported at fair value.

Other financial instruments are reported at historical cost or amortized cost on our Condensed Consolidated Balance Sheets.

Long-term debt is primarily the other financial instrument for which carrying value could vary significantly from fair value.

See Note 7—Debt and Financing Costs in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.

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

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

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

September 30, 2022

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

March 31, 2023

Level 1 Level 2 Level 3 Total

(In thousands)

Commodity swap $ — $ 10,545 $ — $ 10,545

Interest rate derivatives — 3,413 — 3,413

Total assets $ — $ 13,958 $ — $ 13,958

Commodity swaps $ — $ 7,529 $ — $ 7,529

Interest rate derivatives — 26,256 — 26,256

Public warrants 25 — — 25

4 unchanged sentences

(In thousands)

Commodity swap $ — $ 4,288 $ — $ 4,288

Interest rate derivatives — 2,675 — 2,675

Total assets $ — $ 6,963 $ — $ 6,963

Commodity swaps $ — $ 5,718 $ — $ 5,718

Interest rate derivatives — 8,328 — 8,328

Contingent liabilities — — 839 839

Public warrants 50 — — 50

Private warrants — — 38 38

Total liabilities $ 50 $ 14,046 $ 38 $ 14,134

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

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

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

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

Refer to Note 12—Derivatives and Hedging Activities in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further discussion related to commodity swaps and interest rate derivatives.

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

The Company redeemed all outstanding Preferred Units in July 2022 and wrote off related embedded derivative liabilities as of September 30, 2022.

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

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

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

The Company has recorded a liability of $ 0.2 million as of September 30, 2022.

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

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

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

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

There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three months ended March 31, 2023 and 2022.

DERIVATIVES AND HEDGING ACTIVITIES

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

The Company did not elect to apply hedge accounting to these derivative contracts and recorded fair value of the derivatives on the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021.

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

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

Interest Rate Risk

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

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

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

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

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

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

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

In June 2022, all of BCP PHP, LLC’s (“BCP PHP”) outstanding interest rate swaps were terminated as BCP PHP’s outstanding term loan credit facility was extinguished on June 8, 2022.

Refer to Note 6—Debt and Financing Costs in the Notes to our Condensed Consolidated Financial Statements for additional information about the refinancing transactions.

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

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

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

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

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

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

Interest rate swap derivative assets were $ 3.4 million and $ 2.7 million as of March 31, 2023 and December 31, 2022, respectively.

Interest rate swap derivative liabilities were $ 26.3 million and $ 8.3 million as of March 31, 2023 and December 31, 2022, respectively.

The Company recorded cash settlements on interest rate swap derivatives of nil and $ 0.7 million for the three months ended March 31, 2023 and 2022, respectively, in “Interest expense” of the Condensed Consolidated Statements of Operations.

In addition, the Company recorded fair value adjustments of $ 17.2 million and $ 11.6 million for the three months ended March 31, 2023 and 2022, respectively, in “Interest expense” of the Condensed Consolidated Statements of Operations.

Commodity Price Risk

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

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

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

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

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

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

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

The results of the Company’s operations may be affected by the market prices of oil, natural gas and NGLs.

A portion of the Company’s revenue is directly tied to local natural gas, natural gas liquids and condensate prices in the Permian Basin and the U.S.

Fluctuations in commodity prices also impact operating cost elements both directly and indirectly.

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

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

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

Similarly, the Company has entered into various natural gas and crude basis spread swaps.

These index swaps are effective over the next 1 to 15 months and are used to hedge against location price risk of the respective commodity resulting from supply and demand volatility and protect cash flows against price fluctuations.

The table below presents detailed information of commodity swaps outstanding as of March 31, 2023 (in thousands, except volumes):

March 31, 2023

Commodity Instruments Unit Volume Net Fair Value

Natural Gas Commodity Swap MMBtus 6,380,000 $ ( 6,254 )

NGL Commodity Swap Gallons 157,281,600 9,252

Crude Commodity Swap Bbl 137,500 258

Natural Gas Basis Spread Swaps Commodity Swap MMBtus 29,850,000 ( 574 )

Crude Gas Basis Spread Swaps Commodity Swap Bbl 496,000 334

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

Commodity swap derivative assets were $ 10.5 million and $ 4.3 million as of March 31, 2023 and December 31, 2022, respectively.

Commodity swap derivative liabilities were $ 7.5 million and $ 5.7 million as of March 31, 2023 and December 31, 2022, respectively.

The Company recorded cash settlements on commodity swap derivatives of $ 1.0 million and $ 0.2 million for the three months ended March 31, 2023 and 2022, respectively, in “Product revenue” of the Condensed Consolidated Statements of Operations.

In addition, the Company recorded fair value adjustments of $ 5.4 million and nil for the

change in fair value of commodity swap derivatives for the three months ended March 31, 2023 and 2022, respectively, in “Product revenue” of the Condensed Consolidated Statements of Operations.

SHARE-BASED COMPENSATION

Prior to the Closing, the Company issued incentive units, which included performance and service conditions, to certain employees and Board members.

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

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

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

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

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

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

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

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

During the first quarter of 2023, pursuant to the Company’s 2019 Omnibus Compensation Plan, as amended from time to time (the “Plan”) , the Company granted approximately 370,000 restricted stock units (“RSUs”) to its employees with cliff vesting on January 1, 2026 and approximately 181,000 RSUs to employees that were vested immediately.

The 181,000 RSUs with no vesting terms were granted to employees who received their bonus in Company stock in lieu of cash bonus awards.

With respect to the above shares, the Company recorded compensation expenses of $ 17.5 million and $ 6.1 million for the three months ended March 31, 2023 and 2022, respectively, based on a straight-line amortization of the associated awards’ fair value over the respective vesting life of the shares.

The Company is subject to U.S.

federal income tax and the Texas margin tax.

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

Three Months Ended

(In thousands)

Income before income taxes $ 4,715 $ 22,065

Income tax expense $ 416 $ 676

Effective tax rate 8.82 % 3.06 %

The effective tax rate for the three months ended March 31, 2023 was lower than the statutory rate mainly due to the impact of tax attributable to noncontrolling interests related to the Common Units limited partners and valuation allowance.

NET INCOME PER SHARE

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

Three Months Ended

(In thousands, except per share amounts)

Net income attributable to Class A common shareholders $ 1,436 $ 3,865

Net income available to participating unvested restricted Class A common shareholders (1)

Total net income (loss) attributable to Class A common shareholders $ ( 2,720 ) $ 3,865

Weighted average shares outstanding - basic (2)

47,392 37,392

Dilutive effect (3)(4) of unvested Class A common shares

Weighted average shares outstanding - diluted 47,605 37,426

Net income (loss) available per common share - basic $ ( 0.06 ) $ 0.10

Net income (loss) available per common share - diluted $ ( 0.06 ) $ 0.10

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

(2) Share amounts have been retrospectively restated to reflect the Company’s two -for-one Stock Split.

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

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

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

COMMITMENTS AND CONTINGENCIES

Accruals for loss contingencies arising from claims, assessments, litigation environmental, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

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

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

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

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

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

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

The Company has entered into litigation with two third parties to collect outstanding receivables totaling $ 19.6 million that remain outstanding from the Winter Storm Uri during February of 2021.

Environmental Matters

The Company is not aware of any environmental claims existing as of March 31,

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

Contingent Liabilities

Permian Gas Acquisition

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

The total monies paid under this arrangement are capped at $ 60.5 million.

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

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

PDC’s actual annual Mcf volume did not exceed the incentive rate during the past three years and the Company did not expect PDC’s actual annual Mcf volume amounts to exceed forecasted amounts as of March 31, 2023;

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

Original Altus Transaction

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

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

Our two operating segments represent the Company’s segments for which discrete financial information is available and is utilized on a regular basis by our chief operating decision maker (“CODM”) to make key operating decisions, assess performance and allocate resources.

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• Pipeline Transportation:

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

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

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

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

The Company then renamed its Gathering and Processing segment to Midstream Logistics and its Transmission segment to Pipeline Transportation.

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

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

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

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

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

Corporate and Other contains the Company’s executive and administrative functions, including 85 % of the Company’s general and administrative expenses and all of the Company’s debt service costs.

The following tables present the reconciliation of the segment profit measure as of and for the three months ended March

31, 2023 and 2022:

Midstream Logistics Pipeline Transportation Corporate and Other (1)

Consolidated (2)

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

(In thousands)

For the Three Months Ended March 31, 2023

Segment net income (loss) including noncontrolling interests $ 51,012 $ 46,432 $ ( 93,145 ) $ 4,299

Interest expense 7 — 40,457 40,464

Income tax expense — — 1,406 1,406

Interest expense (income) 9 — 69,299 69,308

Income tax expense (benefit) — — 416 416

Depreciation and amortization 68,393 455 6 68,854

Contract assets amortization 1,655 — — 1,655

Unrealized hedging (gain) loss ( 4,987 ) — — ( 4,987 )

Proportionate EMI EBITDA — 71,867 — 71,867

Share-based compensation — — 17,540 17,540

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

Loss (gain) on disposal of assets 102 — — 102

Integration costs 7 — 918 925

1 unchanged sentence

Other one-time costs or amortization 3,025 — 723 3,748

Gain on embedded derivative — — 488 488

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

Segment adjusted EBITDA $ 137,545 $ 78,692 $ ( 3,867 ) $ 212,370

Midstream Logistics Pipeline Transportation Corporate and Other (1)

Consolidated (2)

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

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

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

Income tax expense 1,207 — — 1,207

Depreciation and amortization 57,026 128 — 57,154

Contract assets amortization 448 — — 448

Proportionate EMI EBITDA — 21,704 — 21,704

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

Loss on debt extinguishment 56 — — 56

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

Interest and other income 74 — — 74

Warrant valuation adjustment — — 44 44

Equity income from unconsolidated affiliates — 46,464 — 46,464

Segment adjusted EBITDA (3)

$ 119,249 $ 72,290 $ ( 4,052 ) $ 187,487

Midstream Logistics Pipeline Transportation Corporate and Other (1)

Consolidated (2)

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

(In thousands)

For the Three Months Ended March 31, 2022

Segment net income (loss) including noncontrolling interests $ 9,185 $ 29,136 $ ( 16,932 ) $ 21,389

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

Interest expense (income) 26,642 ( 1,614 ) 1,617 26,645

Gain on redemption of mandatorily redeemable Preferred units — — ( 4,493 ) ( 4,493 )

Income tax expense (benefit) 457 ( 39 ) 258 676

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Share-based compensation — — 6,132 6,132

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

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

Loss on disposal of assets 110 — — 110

Loss on debt extinguishment 129 — — 129

Unrealized loss on embedded derivatives — — 2,886 2,886

Integration costs 4,104 — 2,047 6,151

1 unchanged sentence

Other one-time costs or amortization 918 — 277 1,195

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

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

Equity income from unconsolidated affiliates — 27,917 — 27,917

Segment adjusted EBITDA (3)

Midstream Logistics Pipeline Transportation Corporate and Other (1)

Consolidated (2)

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

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

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

Income tax expense 1,207 — — 1,207

Depreciation and amortization 169,906 385 — 170,291

Contract assets amortization 1,815 — — 1,815

Proportionate EMI EBITDA — 59,677 — 59,677

Loss on disposal of assets 394 23 — 417

Gain on debt extinguishment ( 4 ) — — ( 4 )

Derivatives loss due to Winter Storm Uri 13,456 — — 13,456

Other one-time costs or amortization 1,675 182 153 2,010

Producer settlement 6,827 — — 6,827

Interest and other income 115 — — 115

Equity income from unconsolidated affiliates — 44,692 — 44,692

Segment adjusted EBITDA $ 255,890 $ 58,138 $ ( 7,271 ) $ 306,757

$ 102,890 $ 40,437 $ ( 2,536 ) $ 140,791

(1) Corporate and Other represents those results that:

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

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

Midstream Logistics Pipeline Transportation Consolidated

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

Revenue $ 320,667 $ 733 $ 321,400

Other revenue 3,774 2 3,776

Total segment operating revenue $ 324,441 $ 735 $ 325,176

Midstream Logistics Pipeline Transportation Consolidated

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

Revenue $ 165,844 $ — $ 165,844

Other revenue 740 2 742

Total segment operating revenue $ 166,584 $ 2 $ 166,586

The following tables present the revenue for individual operating segment for the three months ended March 31, 2023 and 2022:

Midstream Logistics Pipeline Transportation Consolidated

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

(In thousands)

For the Three Months Ended March 31, 2023

Revenue $ 276,555 $ 694 $ 277,249

2 unchanged sentences

Midstream Logistics Pipeline Transportation Consolidated

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

(In thousands)

For the Three Months Ended March 31, 2022

Revenue $ 255,373 $ — $ 255,373

1 unchanged sentence

Total segment operating revenue $ 257,247 $ 2 $ 257,249

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

September 30, 2022 December 31, 2021

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

March 31, December 31,

(In thousands)

1 unchanged sentence

Pipeline Transportation (1)

2,463,333 2,414,829

Segment total assets 6,100,336 5,901,777

1 unchanged sentence

Total assets $ 6,124,655 $ 5,919,711

(1) Includes investment in unconsolidated affiliates of $ 2.41 billion and $ 2.38 billion as of March 31, 2023 and December 31, 2022, respectively .

SUBSEQUENT EVENTS

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

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

On October 19, 2022, the Board declared a cash dividend of $ 0.75 per share on the Company’s Class A Common Stock which will be payable to stockholders on November 17, 2022.

On April 19, 2023, the Board declared a cash dividend of $ 0.75 per share on the Company’s Class A Common Stock which will be payable to stockholders of record as of May 5, 2023 on May 17, 2023.

The Company, through its ownership of the general partner of the Partnership, declared a distribution of $ 0.75 per Common Unit from the Partnership to the holders of Common Units.

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements