What changed in this filing

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Item 1. Financial Statements

2023-08-08 compared with 2023-05-04 · 302 added, 173 removed, 557 unchanged (46% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022 (1)

7 unchanged sentences

Operating costs and expenses:

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

Costs of sales (exclusive of depreciation and amortization) (4)

110,467 152,714 226,344 272,989

9 unchanged sentences

Gain on redemption of mandatorily redeemable Preferred Units — 5,087 — 9,580

Loss on embedded derivative — ( 2,886 )

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

Gain on embedded derivative — 91,448 — 88,562

Interest expense ( 16,126 ) ( 25,347 ) ( 85,434 ) ( 52,121 )

Equity in earnings of unconsolidated affiliates 49,610 47,786 96,074 75,703

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

Total other income, net 34,526 90,999 11,976 93,999

Income before income taxes 71,979 131,610 76,694 153,675

5 unchanged sentences

Net income attributable to Class A Common Stock Shareholders $ 25,014 $ 6,438 $ 26,450 $ 10,303

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

Net income attributable to Class A Common Shareholders per share

Basic $ 0.41 $ 0.06 $ 0.36 $ 0.16

3 unchanged sentences

Diluted 50,625 39,329 49,220 38,796

(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.

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

Refer to the 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.

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

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

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

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

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

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

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, December 31,

June 30, December 31,

(In thousands, except per share data)

9 unchanged sentences

Intangible assets, net 649,897 695,389

Derivative asset, non-current 124 —

Operating lease right-of-use assets 58,581 28,551

Deferred charges and other assets 83,513 32,275

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

Investments in unconsolidated affiliates 2,490,112 2,381,340

Goodwill 5,077 5,077

21 unchanged sentences

Class A Common Stock:

$ 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

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

Class C Common Stock:

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

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

Additional paid-in capital — 118,840

Accumulated deficit ( 902,446 ) ( 958,629 )

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

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

Total equity ( 905,757 ) ( 839,775 )

Total liabilities, noncontrolling interest, and equity $ 6,226,921 $ 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.

(1) 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

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

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

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

5 unchanged sentences

Amortization of contract costs 3,310 896

Distributions from unconsolidated affiliate 67,764 48,073

Contingent liabilities remeasurement — ( 839 )

Distributions from unconsolidated affiliates 136,230 117,544

Derivatives settlement 10,270 11,115

18 unchanged sentences

Intangible assets expenditures ( 13,957 ) ( 8,516 )

Investments in unconsolidated affiliate ( 58,658 ) —

Investments in unconsolidated affiliates ( 154,721 ) ( 2,675 )

Distributions from unconsolidated affiliate 5,793 —

3 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of long-term debt — 3,000,000

Principal payments on long-term debt — ( 2,294,130 )

Payments on debt issuance cost — ( 37,042 )

Proceeds from revolver 563,000 7,000

1 unchanged sentence

Redemption of mandatorily redeemable Preferred Units — ( 152,580 )

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

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

Cash dividends paid to Class A Common Stock shareholders ( 36,196 ) ( 11,239 )

12 unchanged sentences

ALTM liabilities and mezzanine equity assumed $ — $ 1,432,685

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

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

KINETIK HOLDINGS INC.

1 unchanged sentence

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

Redeemable Noncontrolling Interest — Common Unit Limited Partners Class A

Common Stock Class C

Common Stock Additional Paid-in Capital Accumulated Deficit Treasury

Amount Shares (1)

(In thousands) (In thousands)

For the Three Months Ended March 31, 2022

For the Quarter Ended June 30, 2022

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

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

Redemption of Common Units — ( 2,499 ) 70 — ( 70 ) — 2,499 — — 2,499

Issuance of Class A Common Stock through dividend and distribution reinvestment plan — — 2,504 — — — 87,697 — — 87,697

Share-based compensation — — 4 — — — 12,173 — — 12,173

Net income 109,502 15,508 — — — — — 6,438 — 6,438

Change in redemption value of noncontrolling interests — 123,741 — — — — ( 102,369 ) ( 21,372 ) — ( 123,741 )

Distributions paid to Common Unit limited partners — ( 70,891 ) — — — — — — — —

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

— — — — — — — ( 28,536 ) — ( 28,536 )

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

For the Quarter Ended June 30, 2023

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

Issuance of common stock through dividend and distribution reinvestment plan — — 3,024 — — — 87,968 — — 87,968

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

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

Share-based compensation — — 7 — — — 13,299 — — 13,299

Net income — 46,654 — — — — — 25,014 — 25,014

Change in redemption value of noncontrolling interests — 355,670 — — — — ( 330,939 ) ( 24,731 ) — ( 355,670 )

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

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

— ( 174 ) — — — — — ( 36,845 ) — ( 36,845 )

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

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

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

Amount Shares (1)

(In thousands) (In thousands)

For the Six Months Ended June 30, 2022

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

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

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

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

Redemption of Common Units — ( 172,559 ) 5,550 1 ( 5,550 ) ( 1 ) 172,559 — — 172,559

Issuance of common stock through dividend and distribution reinvestment plan — — 2,504 — — — 87,697 — — 87,697

Share-based compensation — — 4 — — — 18,304 — — 18,304

2 unchanged sentences

Change in redemption value of noncontrolling interests — 2,459,863 — — — — ( 1,296,753 ) ( 1,163,110 ) — ( 2,459,863 )

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

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

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

— — — — — — — ( 28,536 ) — ( 28,536 )

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

For the Six Months Ended June 30, 2023

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

1 unchanged sentence

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

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

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

3 unchanged sentences

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

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

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

Amount Shares (1)

(In thousands) (In thousands)

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

— — — — — — — ( 71,315 ) — ( 71,315 )

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

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

(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.

Refer to Note 10—Equity and Warrants in the Notes to 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

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

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

KINETIK HOLDINGS INC.

5 unchanged sentences

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, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 7, 2023.

This Quarterly Report on Form 10-Q should be read along with the Company’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

1 unchanged sentence

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.

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

5 unchanged sentences

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.

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

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

Basis of Presentation

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

The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP.

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

1 unchanged sentence

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

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

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..

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

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

All intercompany balances and transactions have been eliminated in consolidation.

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

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

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

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

2 unchanged sentences

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

All corresponding per-share and share amounts for periods prior to June 8, 2022 have been 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.

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

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

1 unchanged sentence

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

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

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

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

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

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

Transactions with Affiliates

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

Accounts receivable from affiliates was $ 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 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.

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

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

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

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

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

BUSINESS COMBINATIONS

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

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

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

5 unchanged sentences

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

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.

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

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

9 unchanged sentences

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.

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

REVENUE RECOGNITION

1 unchanged sentence

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

Three Months Ended March 31,

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

2023 2022 2023 2022

(In thousands)

3 unchanged sentences

Total revenues and other $ 296,203 $ 335,572 $ 577,243 $ 592,821

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.

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

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

Remaining Performance Obligations

The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenues as of March 31, 2023:

Fiscal Year (In thousands)

3 unchanged sentences

Contract Liabilities

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

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

(In thousands)

2 unchanged sentences

Cash received in advance and not recognized as revenue 6,872

Balance at March 31, 2023 27,910

Balance at June 30, 2023 31,841

Current portion 7,306

3 unchanged sentences

Contract Cost Assets

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

The Company has capitalized certain costs incurred to obtain a contract that would not have been incurred otherwise.

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

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.

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

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

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

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

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

PROPERTY, PLANT AND EQUIPMENT

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

March 31, December 31,

June 30, December 31,

(In thousands)

2 unchanged sentences

Computers and equipment 6,048 4,289

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

accumulated depreciation ( 547,712 ) ( 474,258 )

Total depreciable assets, net 2,487,511 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 $ 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.

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

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

GOODWILL AND INTANGIBLE ASSETS, NET

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

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

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

Goodwill is tested at least annually as of November 30 of each year, or more frequently as events occur or circumstances change that would more-likely-than-not reduce 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 March 31, 2023.

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

Intangible Assets

Intangible assets, net, are comprised of the following:

March 31, December 31,

June 30, December 31,

(In thousands)

4 unchanged sentences

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

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

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

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

On 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.

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

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

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

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

EQUITY METHOD INVESTMENTS

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

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

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

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

March 31, December 31,

June 30, December 31,

Ownership 2023 2022

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$ 2,490,112 $ 2,381,340

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

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

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

No additional contribution was made to EPIC and no distribution or equity income was received from EPIC during the three 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.

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

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

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 $ 14.7 million and $ 13.4 million as of March 31, 2023 and December 31, 2022, respectively.

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

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

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

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

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

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62,014 15,226 18,834 96,074

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.

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

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

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 months ended March 31, 2023 and 2022.

Three Months Ended March 31,

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

Three Months Ended June 30,

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

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Net income 64,342 22,651 66,400 61,307 25,284 64,461

Six Months Ended June 30,

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

(In thousands)

Revenues $ 191,935 $ 92,542 $ 180,608 $ 196,664 $ 98,612 $ 180,742

Operating income 120,312 44,496 131,472 120,770 51,672 128,259

Net income 124,032 44,863 137,491 120,520 51,651 127,990

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,

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

June 30, December 31,

(In thousands)

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Total long-term debt, net $ 3,625,799 $ 3,368,510

Current portion, net — —

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

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

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

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

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,

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(In thousands)

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Total financing costs, net of capitalized interest $ 16,126 $ 25,347 $ 85,434 $ 52,121

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.

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

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.

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, which may, among other things, limit the Partnership’s and its subsidiaries’ ability to create liens to secure indebtedness and the Partnership’s ability to consolidate or combine with or merge into any other person.

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

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.

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

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

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,

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

June 30, December 31,

(In thousands)

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Total current accrued expenses $ 112,086 $ 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.

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

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

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

The following table presents other supplemental lease information:

Three Months Ended March 31,

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

2023 2022 2023 2022

(In thousands)

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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 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”).

Therefore, the Common Unit is accounted for

as redeemable noncontrolling interest and classified as temporary equity on the Company’s Condensed Consolidated Balance Sheets.

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

There were 94,089,038 Common Units and an equal number of Class C Common Stock issued and outstanding as of June 30, 2023.

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

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

Public Warrants

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

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

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

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Private Placement Warrants

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

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

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

The Company recorded a fair value of $ 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.

Stock Repurchase Program

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

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

Share 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.

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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.

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

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

For more information regarding the 1% U.S.

federal excise tax imposed on certain repurchases of stock by publicly traded U.S.

corporations, please refer to “Item 2.

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

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

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

FAIR VALUE MEASUREMENTS

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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.

See Note 7—Debt and Financing Costs in the Notes to 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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Level 3 inputs :

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

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

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

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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 March 31, 2023 and December 31, 2022:

March 31, 2023

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

June 30, 2023

Level 1 Level 2 Level 3 Total

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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.

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

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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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 months ended March 31, 2023 and 2022.

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

DERIVATIVES AND HEDGING ACTIVITIES

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

Interest rate swap derivative assets were $ 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.

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

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

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

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

Commodity Price Risk

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These index swaps are effective over the next 1 to 12 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

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

June 30, 2023

Commodity Instruments Unit Volume Net Fair Value

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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.

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

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

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

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

SHARE-BASED COMPENSATION

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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.

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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.

During the first quarter of 2023, pursuant to the Company’s 2019 Omnibus Compensation Plan, as amended from time to time , 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 that vested immediately were granted to employees who received their bonus in Company stock in lieu of cash bonus awards.

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

The Company is subject to U.S.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(In thousands)

2 unchanged sentences

Effective tax rate 0.43 % 0.12 % 0.95 % 0.55 %

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.

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

NET INCOME PER SHARE

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(In thousands, except per share amounts)

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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

( 4,426 ) ( 4,184 ) ( 8,582 ) ( 4,184 )

Total net income attributable to Class A common shareholders $ 20,588 $ 2,254 $ 17,868 $ 6,119

Weighted average shares outstanding - basic (2)

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(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.

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

(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.

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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.

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

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

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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.

Thus, the Company’s exposure and ultimate losses may be different than the amounts accrued.

The Company has entered into litigation with two third parties to collect 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.

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

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

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

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

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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.

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

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

Original Altus Transaction

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

Letters of Credit

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

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

Our 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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• Midstream Logistics:

The Midstream Logistics segment operates under three streams, 1) gas gathering and processing, 2) crude oil gathering, stabilization and storage services and 3) water gathering and disposal.

The Midstream Logistics segment operates under three streams, 1) gas gathering and processing, 2) crude oil gathering, stabilization and storage services and 3) produced water gathering and disposal.

• Pipeline Transportation:

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

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

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

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

The Pipeline Transportation segment

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

Corporate and Other contains the Company’s executive and administrative functions, including 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:

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

Midstream Logistics Pipeline Transportation Corporate and Other (1)

(In thousands)

For the Three Months Ended March 31, 2023

For the Three Months Ended June 30, 2023

Segment net income (loss) including noncontrolling interests $ 55,680 $ 49,493 $ ( 33,505 ) $ 71,668

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

Income tax expense (benefit) — — 416 416

Interest expense 11 — 16,115 16,126

Income tax expense — — 311 311

Depreciation and amortization 69,005 471 6 69,482

Contract assets amortization 1,655 — — 1,655

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

Proportionate EMI EBITDA — 74,481 — 74,481

Share-based compensation — — 13,299 13,299

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

Loss on disposal of assets 12,137 — — 12,137

Acquisition transaction costs 2 — — 2

Integration costs 15 — 26 41

Other one-time costs or amortization 743 — 361 1,104

Warrant valuation adjustment — — 33 33

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

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

Equity income from unconsolidated affiliates — 49,610 — 49,610

Segment adjusted EBITDA (3)

$ 136,570 $ 74,835 $ ( 3,420 ) $ 207,985

Midstream Logistics Pipeline Transportation Corporate and Other (1)

(In thousands)

For the Three Months Ended June 30, 2022

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

Interest expense 20,641 942 3,764 25,347

Income tax expense 162 — — 162

Depreciation and amortization 66,459 122 — 66,581

Contract assets amortization 448 — — 448

Proportionate EMI EBITDA — 71,340 — 71,340

Share-based compensation — — 12,173 12,173

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

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

Integration costs 579 — 4,707 5,286

Acquisition transaction costs — — 674 674

Other one-time costs or amortization 1,239 — 1,020 2,259

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

Gain on embedded derivative — — 91,448 91,448

Equity income from unconsolidated affiliates — 47,786 — 47,786

Segment adjusted EBITDA (3)

$ 140,654 $ 70,887 $ ( 3,623 ) $ 207,918

Midstream Logistics Pipeline Transportation Corporate and Other (1)

(In thousands)

For the Six Months Ended June 30, 2023

Segment net income (loss) including noncontrolling interests $ 107,211 $ 95,927 $ ( 127,171 ) $ 75,967

Interest expense 21 — 85,413 85,434

Income tax expense — — 727 727

Depreciation and amortization 137,398 926 12 138,336

Contract assets amortization 3,310 — — 3,310

Proportionate EMI EBITDA — 146,348 — 146,348

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

Loss on disposal of assets 12,239 — — 12,239

Loss (gain) on debt extinguishment — — — —

Integration costs — — 953 953

Acquisition transaction costs 33 — 237 270

Other one-time costs or amortization 3,793 — 1,071 4,864

Warrant valuation adjustment — — 77 77

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

Gain on embedded derivative — — — —

Equity income from unconsolidated affiliates — 96,074 — 96,074

4 unchanged sentences

(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

For the Six Months Ended June 30, 2022

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

Interest expense (income) 47,412 ( 672 ) 5,381 52,121

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

Income tax expense (benefit) 457 ( 39 ) 420 838

3 unchanged sentences

Share-based compensation — — 18,304 18,304

Loss on disposal of assets 110 — — 110

Loss on debt extinguishment 129 — — 129

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

Loss (gain) on disposal of assets 8,690 — ( 34 ) 8,656

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

Integration costs 4,683 — 6,755 11,438

1 unchanged sentence

Other one-time costs or amortization 2,157 — 1,297 3,454

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

Gain on embedded derivative — — 88,562 88,562

Equity income from unconsolidated affiliates — 75,703 — 75,703

5 unchanged sentences

(2) Results do not include legacy ALTM 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 in this Form 10-Q, for further information on the Company’s basis of presentation.

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

(3) Adjusted EBITDA is a non-GAAP measure;

please see Key Performance Metrics in “Item 2.

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 months ended March 31, 2023 and 2022:

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

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

Midstream Logistics Pipeline Transportation Consolidated

(In thousands)

For the Three Months Ended March 31, 2023

For the Three Months Ended June 30, 2023

Revenue $ 293,251 $ 730 $ 293,981

3 unchanged sentences

(In thousands)

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

Revenue $ 331,731 $ — $ 331,731

1 unchanged sentence

Total segment operating revenue $ 335,570 $ 2 $ 335,572

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

March 31, December 31,

Midstream Logistics Pipeline Transportation Consolidated

(In thousands)

For the Six Months Ended June 30, 2023

Revenue $ 569,806 $ 1,424 $ 571,230

Other revenue 6,009 4 6,013

Total segment operating revenue $ 575,815 $ 1,428 $ 577,243

Midstream Logistics Pipeline Transportation Consolidated

(In thousands)

For the Six Months Ended June 30, 2022

Revenue $ 587,104 $ — $ 587,104

Other revenue 5,713 4 5,717

Total segment operating revenue $ 592,817 $ 4 $ 592,821

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

June 30, December 31,

(In thousands)

Midstream Logistics $ 3,582,410 $ 3,486,948

4 unchanged sentences

Total assets $ 6,226,921 $ 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 .

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

SUBSEQUENT EVENTS

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.

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

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

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