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Item 1A. Risk Factors

2024-03-05 compared with 2023-03-07 · 171 added, 110 removed, 243 unchanged (54% of the section changed)

Risks Related to Our Business

The Company’s operating assets are currently located exclusively in the Permian Basin, making it vulnerable to risks associated with operating in a single geographic area.

The Company’s wholly owned midstream assets are currently located exclusively in the Delaware Basin which is part of the broader Permian Basin.

We operate in rapidly changing economic and technological environments that present numerous risks, many of which are driven by factors that we cannot control or predict.

The following discussion, as well as our discussion in Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 7A—Quantitative and Qualitative Disclosures About Market Risk , highlights some of these risks.

The risks described below are not exhaustive and you should carefully consider these risks and uncertainties before investing in our securities.

Business and Operational Risks

The majority of the Company’s operating assets are currently located in the Permian Basin, making it vulnerable to risks associated with operating in a single geographic area.

The majority of the Company’s wholly owned midstream assets are currently located in the Delaware Basin which is part of the broader Permian Basin.

As a result of this concentration, the Company will be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, obtaining rights-of-way, market limitations, water shortages or restrictions, drought related conditions, or other weather-related conditions or interruption of the processing or transportation of crude oil, natural gas and water.

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• the availability and cost of capital;

• demand for and the prevailing and projected prices of crude oil, natural gas and NGLs;

• the prevailing and projected prices of crude oil, natural gas and NGLs;

fewer project opportunities or assumption of risk that results in weaker or more volatile financial performance than expected;

• assets that vary in age and were constructed over many decades which may cause our inspection, maintenance or repair costs to increase in the future;

• political and economic conditions and events in foreign oil, natural gas and NGL producing countries, including embargoes, disrupted global supply chains, continued hostilities in the Middle East and other sustained military campaigns, the armed conflict in Ukraine and associated economic sanctions on Russia;

• increase in interest rates and rising or sustained inflation;

• levels of reserves;

• geologic considerations;

• changes in the strategic importance customers assign to development in the Delaware Basin as opposed to other potential future operations they may acquire, which could adversely affect the financial and operational resources such customers are willing to devote to development of their acreage in the Permian Basin;

• levels of crude oil and natural gas reserves;

• contractor or supplier non-performance, weather, geological or other factors;

• Consolidation in the upstream sector and the resulting changes in the strategic importance customers assign to development in certain acreage or locations in the Delaware Basin as opposed to other areas, which could adversely affect the financial and operational resources devoted to development of their acreage dedicated to the Company;

• increased levels of taxation related to the exploration and production of crude oil, natural gas and NGLs;

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• the costs of producing and ability to produce crude oil, natural gas and NGLs and the availability and costs of drilling rigs, pipeline transportation facilities and other equipment.

Index to Financial Statements

Due to these and other factors, even if reserves are known to exist in areas served by the Company’s midstream assets, producers may choose not to develop those reserves.

If producers choose not to develop their reserves or they choose to slow their development rate in the Company’s areas of operation, utilization of its midstream systems will be below anticipated levels.

Reductions in development activity, coupled with the natural decline in production from its current dedicated acreage, would result in the Company’s inability to maintain the then-current levels of utilization of its midstream assets, which could materially and adversely affect its business, financial condition, results of operations, and cash flow.

The acquisition of additional businesses and assets is part of our growth strategy.

We may experience difficulties completing acquisitions or integrating new businesses and properties, and we may be unable to achieve the benefits we expect from any future acquisitions.

Part of the Company’s business strategy includes acquiring additional businesses and assets.

Reductions in development activity, coupled with the natural decline in production from its current dedicated acreage, could materially and adversely affect its business, financial condition, results of operations, and cash flows.

The acquisition or divestiture of businesses and assets is part of our strategy.

We may experience difficulties completing acquisitions or divestitures or integrating new businesses and properties, and we may be unable to achieve the benefits we expect from any future acquisitions or divestitures.

Part of the Company’s business strategy includes acquiring additional businesses and assets and/or divesting certain assets or portions of our business.

We cannot provide any assurance that we will be able to find complementary acquisition targets or complete such acquisitions or achieve the desired results from any acquisitions we do complete.

Any acquired businesses or assets will be subject to many of the same risks as our existing businesses and may not achieve the levels of performance that we anticipate.

We may not realize anticipated operating advantages and cost savings.

We may evaluate potential divestiture opportunities with respect to portions of our business from time to time that support our growth initiatives and may determine to proceed with a divestiture opportunity if and when we believe such opportunity is consistent with our business strategy.

We may not realize the anticipated operating advantages and cost savings.

Integration of acquired businesses or assets involves a number of risks, including (i) the loss of key customers of the acquired business;

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Because of difficulties in combining and expanding operations, we may not be able to achieve the cost savings and other size-related benefits that we hoped to achieve after these acquisitions, which could materially and adversely affect our financial condition and results of operations.

We also may not recognize the anticipated benefits of dispositions or other divestitures we may pursue in the future.

If we do not realize the expected strategic, economic or other benefits of any divestiture transaction, it could materially and adversely affect our financial condition and results of operations.

The Company owns interests in certain pipeline projects and other joint ventures, and it may in the future enter into additional joint ventures, and the Company’s control of such entities is limited by provisions of the limited partnership and limited liability company agreements of such entities and by the Company’s percentage ownership in such entities.

The Company has ownership interests in several joint ventures, including the PHP, GCX, Breviloba and EPIC joint ventures, and it may enter into other joint venture arrangements in the future.

While the Company owns equity interests and has certain voting rights with respect to its joint ventures, it does not act as operator of or control the joint ventures, each of which is operated by another joint venture partner.

The Company has limited ability to influence the business decisions of these entities, and it may therefore be difficult or impossible for the Company to cause the joint venture to take actions that the Company believes would be in its or the relevant joint venture’s best interests.

Moreover, joint venture arrangements involve various risks and uncertainties, such as committing the Company to fund operating and/or capital expenditures, the timing and amount of which the Company may not control, and which could materially and adversely affect its cash flow.

The Company also may be unable to control the amount of cash it will receive from the operation of these entities, which could further adversely affect its cash flow.

Joint venture arrangements may also restrict the Company’s operational and organizational flexibility and its ability to manage risk, which could have a material and adverse effect on its business, cash flow and results of operations.

If the third-party pipelines interconnected, or at some future point expected to be interconnected, to the Company’s pipelines become unavailable to transport or store crude oil, NGLs or natural gas, the Company’s revenue and available cash could be adversely affected.

The Company has ownership interests in several joint ventures, including the PHP, GCX, Breviloba and EPIC joint ventures, which were accounted for using the equity interest method, and it may enter into other joint venture arrangements in the future.

While the Company owns equity interests and has certain voting rights with respect to its joint ventures and can exercise significant influence over the operating and financial policies of the entity, it does not act as operator of or control the joint ventures, each of which is operated by another joint venture partner.

It may therefore be difficult or impossible for the Company to cause the joint venture to take actions that the Company believes would be in its or the relevant joint venture’s best interests.

The Company also may be unable to control the amount of cash it will receive from the operation of these entities, which could further adversely affect its cash flows.

Joint venture arrangements may also restrict the Company’s operational and organizational flexibility and its ability to manage risk, which could materially and adversely affect the Company’s financial condition, results of operations and cash flows.

If the third-party pipelines interconnected, or at some future point expected to be interconnected, to the Company’s pipelines become unavailable to transport or store crude oil, NGLs or natural gas, or if our cost of transporting on such third-party pipelines changes, the Company’s revenue and available cash could be adversely affected.

The Company depends upon third-party downstream pipelines and associated operations to provide delivery options from its processing system.

Because the Company does not control these pipelines and associated operations, their continuing operation is not within its control.

If any downstream pipeline were to become unavailable for current or future volumes due to repairs, damage to the facility, force majeure, lack of capacity, shut in by regulators, failure to meet quality requirements or any other reason, the Company’s ability to operate efficiently and continue shipping crude oil, natural gas and refined products to major demand centers could be restricted, thereby reducing revenue.

Any temporary or permanent interruption at these pipelines could materially and adversely affect the Company’s business, results of operations, financial condition or cash flow.

The Company’s customers may suspend, reduce or terminate their obligations under the Company’s commercial agreements with them in certain circumstances, which could have a material adverse effect on the Company’s financial condition, results of operations and cash flow.

If any downstream pipeline were to become unavailable for current or future volumes due to

Index to Financial Statements

repairs, damage to the facility, force majeure, lack of capacity, shut in by regulators, failure to meet quality requirements or any other reason, the Company’s ability to operate efficiently and continue shipping crude oil, natural gas and refined products to major demand centers could be restricted, thereby reducing revenue.

Any temporary or permanent interruption at these pipelines could materially and adversely affect the Company’s business, results of operations, financial condition or cash flows.

In addition, if our cost of transporting on such third-party pipelines changes, the Company’s revenue and available cash could be adversely affected.

The third parties on whom the Company relies for transportation services from its processing facilities are subject to complex federal, state, and other laws that could adversely affect our financial condition and results of operations.

The operations of the third parties on whom the Company relies on to provide downstream transportation and delivery options from its processing system are subject to complex and stringent laws and regulations that require obtaining and maintaining numerous permits, approvals and certifications from various federal, state and local government authorities.

These third parties may incur substantial costs in order to comply with existing laws and regulations.

If existing laws and regulations governing such third-party services are revised or reinterpreted, or if new laws and regulations become applicable to their operations, these changes may affect the costs that the Company pays for services.

Similarly, a failure to comply with such laws and regulations by the third parties could materially and adversely affect the Company’s business, results of operations, and financial condition.

The Company has entered into gas gathering, compression and processing agreements, crude oil gathering agreements, and produced water gathering and disposal agreements with its customers, which include provisions that permit the customer to suspend, reduce or terminate its obligations under each agreement if certain events occur.

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The customers have the discretion to make such decisions notwithstanding the fact that they may significantly and adversely affect the Company.

Any such reduction, suspension or termination of these customers’ obligations under their commercial agreements could materially and adversely affect the Company’s financial condition, results of operations and cash flow.

Increased competition from other companies that provide midstream services, or from alternative fuel sources, could have a negative impact on the demand for the Company’s services, which could materially and adversely affect its financial results.

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The Company’s exposure to commodity price risk may change over time and the Company cannot guarantee the terms of any existing or future agreements for its midstream services with its customers.

The Company currently generates revenues pursuant to a variety of different contractual arrangements, including fee-based agreements based on volumetric fees, keep-whole arrangements used for processing services, percent-of-proceeds arrangements based on a percent of the proceeds from the sale of gathering and processing outputs on behalf of a producer and percent-of-products arrangements in which the Company is assigned a portion of the natural gas it gathers and processes as partial compensation.

Consequently, the Company’s existing operations and cash flow have limited direct exposure to commodity price risk.

The Company currently generates revenues pursuant to a variety of different contractual arrangements, including fee-based agreements based on volumetric fees and percent-of-proceeds arrangements based on a percent of the proceeds from the sale of gathering and processing outputs on behalf of a producer and percent-of-products arrangements in which the Company

Index to Financial Statements

is assigned a portion of the natural gas it gathers and processes as partial compensation.

Consequently, the Company’s existing operations and cash flows have limited direct exposure to commodity price risk.

However, the Company’s customers are exposed to commodity price risk, and extended reduction in commodity prices could reduce the production volumes available for the Company’s midstream services in the future below expected levels.

In addition, in the past, excess capacity has created a highly competitive environment that has decreased commodity price differentials between the Permian Basin and end markets, which has reduced the demand for the Company's services resulting in decreases in volumes transported and lower rates the Company is able to charge to its customers.

Although the Company intends to maintain these pricing terms on both new contracts and existing contracts for which prices have not yet been set, its efforts to negotiate such terms may not be successful, which could materially and adversely affect its business.

The use of derivative financial instruments could result in material financial losses by us.

From time to time, the Company has sought to reduce its exposure to fluctuations in commodity prices and interest rates by using derivative instruments.

To the extent that we hedge our commodity price and interest rate exposures, we will forego the benefits we would otherwise experience if commodity prices or interest rates were to change in our favor.

In addition, hedging activities can result in losses that might be material to our financial condition, results of operations and cash flows.

The Company engages in commodity and interest rate hedging activities to reduce its exposure to fluctuations in commodity prices and interest rates by using derivative instruments.

H edging activities can result in losses that might be material to our financial condition, results of operations and cash flows.

Such losses could occur under various circumstances, including those situations where a counterparty does not perform its obligations under a hedge arrangement, the hedge is not effective in mitigating the underlying risk, or our risk management policies and procedures are not followed.

Adverse economic conditions (e.g., a significant decline in energy commodity prices that negatively impacts the cash flows of oil and gas producers) increase the risk of nonpayment or performance by our hedging counterparties.

The Company’s construction of new midstream assets may be subject to new or additional regulatory, environmental, political, contractual, legal and economic risks, which could materially and adversely affect its cash flow, results of operations and financial condition.

The construction of additions or modifications to the Company’s existing systems and the expansion into new production areas to service its customers involve numerous regulatory, environmental, political and legal uncertainties beyond the Company’s control and may require the expenditure of significant amounts of capital, and the Company may not be able to construct in certain locations due to setback requirements or expand certain facilities that are deemed to be part of a single source.

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The Company may construct facilities to capture anticipated future production growth from its customers in an area where such growth does not materialize.

As a result, new midstream assets may not be able to attract enough throughput to achieve their expected investment return, which could materially and adversely affect the Company’s business, financial condition, results of operations and cash flow.

The construction of additions to the Company’s existing assets may require it to obtain new rights-of-way, surface use agreements or other real estate agreements prior to constructing new pipelines or facilities.

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Additionally, it may become more expensive for the Company to obtain new rights-of-way or to expand or renew existing rights-of-way, leases or other agreements.

If the cost of renewing or obtaining new agreements increases, the Company’s cash flow could be materially and adversely affected.

If the cost of renewing or obtaining new agreements increases, the Company’s cash flows could be materially and adversely affected.

The Company’s business involves many hazards and operational risks, some of which may not be fully covered by insurance.

The occurrence of a significant accident or other event that is not fully insured could curtail its operations and materially and adversely affect its cash flow.

The occurrence of a significant accident or other event that is not fully insured could curtail its operations and materially and adversely affect its cash flows.

The Company’s operations are subject to all the hazards inherent in the gathering and transportation of crude oil, natural gas and produced water, including:

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• other hazards that could also result in personal injury and loss of life, pollution and suspension of operations.

Index to Financial Statements

The Company may elect to not obtain insurance, maintain a self-insured retention or increase deductibles for any or all of these risks if it believes that the cost of available insurance is excessive relative to the risks presented.

In addition, pollution and environmental risks generally are not fully insurable.

The occurrence of an event that is not fully covered by insurance could materially and adversely affect the Company’s business, financial condition, results of operations and cash flow.

The occurrence of an event that is not fully covered by insurance could materially and adversely affect the Company’s business, financial condition, results of operations and cash flows.

A shortage of equipment and skilled labor could reduce equipment availability and labor productivity and increase labor and equipment costs, which could materially and adversely affect the Company’s business and results of operations.

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The Company operates in a highly regulated environment and its business and profitability could be adversely affected by actions by governmental entities, changes to current laws or regulations, or a failure to comply with laws or regulations.

The Company’s business is highly regulated and subject to numerous governmental laws, rules, regulations and requires permits, authorizations and various governmental and agency approvals, in the various jurisdictions in which the Company operates, that impose various restrictions and obligations that may have material effects on the Company’s business and results of operations.

The Company’s business is highly regulated and subject to numerous governmental laws, rules and regulations and requires permits, authorizations and various governmental and agency approvals, in the various jurisdictions in which the Company operates, that impose various restrictions and obligations that may have material effects on the Company’s business and results of operations.

Each of the applicable laws or regulatory requirements and limitations is subject to change, either through new laws or regulations enacted on the federal, state or local level, or by new or modified regulations that may be implemented under existing law.

The nature and extent of any changes in these laws, rules, regulations and permits may be unpredictable, have retroactive effects and may have material effects on the Company’s business and profitability.

Future legislation and regulations or changes in existing legislation and regulations, or interpretations thereof, could cause additional expenditures, tax liabilities, restrictions and delays in connection with the Company’s current business as well as future projects, the extent of which cannot be predicted and which may require the Company to limit substantially, delay or cease operations in some circumstances.

The Company’s sales of oil, natural gas, and NGLs are subject to market manipulation requirements promulgated by FERC pursuant to the authority delegated to it by the Energy Policy Act of 2005 (“EPAct 2005”).

The nature and extent of any changes in these laws, rules, regulations and permits may be unpredictable, have retroactive effects and may have material effects on the Company’s financial condition, results of operations and cash flows.

Future legislation and regulations or changes in existing legislation and regulations, or interpretations thereof, could cause additional expenditures, liabilities, restrictions and delays in connection with the Company’s current business as well as future projects, the extent of which cannot be predicted and which may require the Company to limit substantially, delay or cease operations in some circumstances.

The Company’s sales of natural gas are subject to market manipulation requirements promulgated by FERC pursuant to the authority delegated to it by the Energy Policy Act of 2005 (“EPAct 2005”).

The EPAct 2005 amended the NGA and NGPA to give FERC authority to impose civil penalties for violations of these statutes and regulations.

The Commodity Futures Trading Commission (“CFTC”) also holds authority to monitor certain segments of the physical and futures energy commodities market pursuant to the Commodity Exchange Act.

The Company believes, however, that neither the EPAct 2005, nor the regulations promulgated by FERC as a result of the EPAct 2005, nor the regulations promulgated by the CFTC will affect it in a way that materially differs from the way they affect other sellers of oil, natural gas, or NGLs with which the Company competes.

For a general overview of federal, state and local regulation applicable to the Company’s assets, see the “Regulation” section included within Part I, Items 1 and 2 of this annual report.

In addition, the Federal Trade Commission (“FTC”) has the authority under the Federal Trade Commission Act and the Energy Independence and Security Act of 2007 to regulate wholesale petroleum markets.

The Company believes, however, that neither the EPAct 2005, nor the regulations promulgated by FERC as a result of the EPAct 2005, nor the regulations promulgated by the CFTC or FTC will affect it in a way that materially differs from the way they affect other sellers of oil, natural gas, or NGLs with which the Company competes.

For a general overview of federal, state and local regulations applicable to the Company’s assets, see the “Regulation” section included within Part I, Items 1 and 2 .

— Business and Properties of this annual report.

This regulatory oversight can affect certain aspects of the Company’s business and the market for its products and could materially and adversely affect the Company’s financial position, results of operations and cash flows.

Rate regulation, challenges by shippers to the rates the Company charges on its pipelines or changes in the jurisdictional characterization of some of the Company’s assets by federal, state or local regulatory agencies or a change in policy by those agencies may result in increased regulation of its assets, which may cause its operating expenses to increase, limit the rates it charges for certain services and decrease the amount of cash flow.

Changes to applicable tax laws and regulations or exposure to additional income tax liabilities could adversely affect our operating results and cash flows.

We are subject to various complex and evolving U.S.

federal, state and local tax laws.

federal, state and local tax laws, policies, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us, in each case, possibly with retroactive effect.

Any significant variance in our interpretation of current tax laws or a successful challenge of one or more of our tax positions by the IRS or other tax authorities could increase our future tax liabilities and adversely affect our operating results and cash flows.

Index to Financial Statements

Natural gas and crude oil gathering may receive greater regulatory scrutiny at the federal and state level.

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The Company’s intrastate NGL transportation services are subject to the TRRC regulations and must be provided in a manner that is just, reasonable and non-discriminatory.

Such operations could be subject to additional regulation if the NGLs and crude oil are transported in interstate or foreign commerce, whether by the Company’s pipelines or other means of transportation.

Such operations could be subject to additional regulation if the NGLs and crude oil are transported in interstate or through foreign commerce, whether by the Company’s pipelines or other means of transportation.

The Company cannot predict what effect, if any, such changes might have on its operations, but it could be required to incur additional capital expenditures and increased operating costs depending on future legislative and regulatory changes.

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The final rule also imposes reporting requirements on all gathering pipelines, and specifically requires operators to report safety information to PHMSA.

More recently, in August 2022, PHMSA published a final rule expanding the Management of Change process, extending corrosion requirements for gas transmission pipelines, adding requirements that operators ensure no conditions exist following an extreme weather event that could adversely affect the safe operation of the pipeline and adopting repair criteria for non-HCAs similar to those applicable to HCAs.

In August 2022, PHMSA published a final rule expanding the

Index to Financial Statements

Management of Change process, extending corrosion requirements for gas transmission pipelines, adding requirements that operators ensure no conditions exist following an extreme weather event that could adversely affect the safe operation of the pipeline and adopting repair criteria for non-HCAs similar to those applicable to HCAs.

Additionally, in May 2023, PHMSA published a proposed rule that would enhance requirements for detecting and repairing leaks on new and existing natural gas distribution, gas transmission and gas gathering pipelines and, separately, in September 2023, published a proposed rule that would enhance the safety requirements for gas distribution pipelines and would require updates to distribution integrity management programs, emergency response plans, operations and maintenance manuals, and other safety practices.

The adoption of laws or regulations that apply more comprehensive or stringent safety standards could require the Company to install new or modified safety controls, pursue new capital projects or conduct maintenance programs on an accelerated basis, all of which could require the Company to incur increasing operating costs that may be significant.

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Certain environmental groups have also suggested that additional laws at the federal, state and local levels of government may be needed to more closely and uniformly regulate the hydraulic fracturing process.

The Company cannot predict whether any such legislation will be enacted and if so, what its provisions would be.

The Company cannot predict whether any such legislation will be enacted and if so, what its provisions will be.

Governmental actions such as these could impact the oil and gas industry and the Company’s future potential growth in such areas.

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In recent history, public concern surrounding increased seismicity has heightened focus on the oil and gas industry’s use of water in operations, which may cause increased costs, regulations or environmental initiatives impacting the use or disposal of water.

The adoption of federal, state and local legislation and regulations intended to address induced seismicity in the areas in which the Company operates could restrict drilling and production activities, as well as the Company's ability to dispose of produced water gathered from such activities and could result in increased costs and additional operating restrictions or delays, that could, in turn, materially and adversely impact the Company's business and results of operations.

The adoption of federal, state and local legislation and regulations intended to address induced seismicity in the areas in which the Company operates could restrict drilling and production activities and could result in increased costs and additional operating restrictions or delays, that could, in turn, materially and adversely impact the Company's business and results of operations.

Adoption of new or more stringent legal standards relating to induced seismic activity associated with produced-water disposal could affect the Company’s operations.

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In response to such concerns, regulators in some states (including Texas, where the Company’s produced water gathering and disposal assets are) have imposed, or are considering imposing, additional requirements in the permitting and operating of produced-water disposal wells or are otherwise investigating the existence of a relationship between seismicity and the use of such wells.

These developments could result in additional regulation and restrictions on the Company’s use of injection wells to dispose of produced water, including a possible shut down of wells, which could materially and adversely affect its business, financial condition, and results of operations.

The Company currently operates produced water injection wells injecting into shallow formations in Texas, where the Texas Railroad Commission has recently addressed seismic activity by establishing Seismic Response Areas, curtailing injected volumes and/or suspending certain permits for disposal wells injecting into deep strata.

Should the Texas Railroad Commission take additional action within the existing Seismic Response Areas or establish new Seismic Response Areas near the Company’s operations, it could have a significant adverse effect on its business.

These developments could

Index to Financial Statements

result in additional regulation and restrictions on the Company’s use of injection wells to dispose of produced water, including a possible shut down of wells, which could materially and adversely affect its business, financial condition, and results of operations.

The Company currently operates produced water injection wells injecting into shallow formations in Texas, where the Texas Railroad Commission has addressed seismic activity by establishing Seismic Response Areas, curtailing injected volumes and/or suspending certain permits for disposal wells injecting into deep strata.

Furthermore, additional regulations and restrictions on the use of injection wells could indirectly result in reduced gas gathering and processing volumes and / or crude gathering volumes from the Company’s customers, which could materially and adversely affect its business, financial condition, and results of operations.

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Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued thereunder, oftentimes requiring difficult and costly response actions.

Failure to comply with these laws and regulations may result in the assessment of sanctions,

including administrative, civil and criminal penalties;

Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil and criminal penalties;

the imposition of investigatory, remedial or corrective action obligations;

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Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly requirements could require the Company to make significant expenditures to attain and maintain compliance or may otherwise have a material adverse effect on its operations, competitive position or financial condition.

For example, in March 2023, the EPA finalized its Plan which imposes further emissions controls on, among others, new and existing reciprocating internal combustion engines of a certain size used in pipeline transportation of natural gas.

The Plan aims to reduce nitrogen oxide pollution, an indirect GHG, from certain upwind states determined by the EPA to be impacting certain downwind states.

The requirements of the EPA’s Plan could result in increased compliance costs and operational disruptions, adversely impacting our natural gas business segment.

Public interest in the protection of the environment has increased dramatically in recent years.

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The impact of this changing demand could materially and adversely affect the Company’s business, operations and cash flows.

Index to Financial Statements

Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the crude oil and natural gas the Company gathers, while potential physical effects of climate change could disrupt the Company’s operations, cause damage to its pipelines and other facilities and cause it to incur significant costs in preparing for or responding to those effects.

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Information in such reporting may form the basis for further GHG regulation.

The EPA has also continued with its comprehensive strategy for further reducing methane and volatile organic compound (“VOC”) emissions from oil and gas operations.

In May 2016, a final rule established specific new requirements regarding emissions from production-related wet seal and reciprocating compressors, and from pneumatic controllers and storage vessels.

Additionally, the regulations placed new requirements to detect and repair VOC and methane leaks at certain well sites and compressor stations.

However, in September 2020, the EPA finalized a rule removing transportation and storage activities from the purview of the rules.

On January 20, 2021, President Biden signed an executive order calling for the suspension, revision, or rescission of the September 2020 rule, and the reinstatement or issuance of methane emissions standards for new, modified, and existing oil and gas facilities, including transmission and storage facilities.

Following approval by Congress, the resolution was signed into law in June 2021 and effectively vacated the September 2020 rule, reinstating the prior standards under the May 2016 rule.

In November 2021, as required by the President’s executive order, the EPA proposed new regulations to establish comprehensive standards of performance and emission guidelines for methane and VOC emissions from new and existing operations in the oil and gas sector, including the exploration and production, transmission, processing and storage segments.

On November 11, 2022, the EPA released its supplemental methane proposal.

The proposal includes the tightening of proposed requirements under the CAA for methane and VOC emissions from sources that commenced construction, modification, or reconstruction after November 15, 2021, to include proposed standards for previously unregulated emission sources for this category.

Additionally, the proposal sets forth specific revisions strengthening the first nationwide emission guidelines for states to limit methane emissions from existing crude oil and natural gas facilities.

The proposal also revises requirements for fugitive emissions monitoring and repair as well as equipment leaks and the frequency of monitoring surveys, establishes a “super-emitter” response program to timely mitigate emissions events, and provides additional options for the use of advanced monitoring to encourage the deployment of innovative technologies to detect and reduce methane emissions.

The EPA’s supplemental methane rule will likely work alongside the Inflation Reduction Act of 2022 (“IRA”), which was signed into law in August 2022, and appropriates significant federal funding for renewable energy initiatives, alongside amending the CAA to

impose a first-time fee on the emission of methane from sources required to report their GHG emissions to the EPA.

The EPA has also continued with its comprehensive strategy for further reducing methane and volatile organic compound emissions from oil and gas operations.

In response to President Biden’s executive order calling on the EPA to revisit federal regulations regarding methane, the EPA finalized more stringent methane rules for new, modified, and reconstructed facilities, known as OOOOb, as well as standards for existing sources for the first time ever, known as OOOOc, in December 2023.

Under the final rules, states have two years to prepare and submit their plans to impose methane emissions controls on existing sources.

The presumptive standards established under the final rule are generally the same for both new and existing sources and include enhanced leak detection survey requirements using optical gas imaging and other advanced monitoring to encourage the deployment of innovative technologies to detect and reduce methane emissions, reduction of emissions by 95% through capture and control systems, zero-emission requirements for certain devices, and the establishment of a “super emitter” response program that would allow third parties to make reports to EPA of large methane emission events, triggering certain investigation and repair requirements.

Fines and penalties for violations of these rules can be substantial.

It is likely, however, that the final rule and its requirements will be subject to legal challenges.

Moreover, compliance with the new rules may affect the amount we owe under the Inflation Reduction Act’s (“IRA”) methane emissions fee, as compliance with EPA’s methane rules would exempt an otherwise covered facility from the requirement to pay the fee.

The methane emissions charge imposes a fee on excess methane emissions from certain oil facilities starting at $900 per metric ton of leaked methane in 2024 and rising to $1,200 in 2025 and $1,500 in 2026 and thereafter.

Compliance with the EPA’s proposed new regulations and the IRA’s methane emissions fee could increase the Company’s operating costs and accelerate the transition away from fossil fuels, which could in turn reduce the demand for its services, thereby adversely affecting its operations and potentially restricting or delaying the Company’s ability to obtain applicable permits, approvals, or certificates for new or modified facilities.

The requirements of the EPA’s final methane rules and, as applicable, the IRA’s methane emissions fee could increase the Company’s operating costs and accelerate the transition away from fossil fuels, which could in turn reduce the demand for its services, thereby adversely affecting its operations and potentially restricting or delaying the Company’s ability to obtain applicable permits, approvals, or certificates for new or modified facilities.

Moreover, failure to comply with these requirements could result in the imposition of substantial fines and penalties, as well as costly injunctive relief.

Climate change remains a priority for the current administration, which could lead to additional regulations or restrictions on oil and gas development.

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The United States also announced, in conjunction with the European Union and other partner countries, that it would develop standards for monitoring and reporting methane emissions to help create a market for low methane-intensity gas.

Although no firm commitment or timeline to phase out or phase down all fossil fuels was made at COP27, there can be no guarantees that countries will not seek to implement such a phase out in the future.

At COP27 in Sharm El-Sheik in November 2022, countries reiterated the agreements from COP26 and were called upon to accelerate efforts toward the phase out of inefficient fossil fuel subsidies.

Meeting these goals may require further regulations that could adversely impact the Company’s operations and financial performance or otherwise reduce demand for the products it stores, processes, and transports.

In December 2023, the United Arab Emirates hosted COP28, where parties signed onto an agreement to transition “away from fossil fuels in energy systems in a just, orderly, and equitable manner” and increase renewable energy capacity so as to achieve net zero by 2050, although no timeline for doing so was set.

The impact of these orders, pledges, and agreements, and any legislation or regulation promulgated to fulfill the United States’ commitments under the Paris Agreement, COP26, COP27, and COP28, or other international conventions cannot be predicted at this time and it is unclear what additional initiatives may be adopted or implemented that could adversely impact the

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Company’s operations and financial performance or otherwise reduce demand for the products it stores, processes, and transports.

The adoption of legislation or regulatory programs to reduce emissions of GHGs could require the Company to incur increased operating costs, such as costs to purchase and operate emissions and vapor control systems or to comply with new regulatory or reporting requirements.

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Financial institutions may adopt policies that have the effect of reducing the funding provided to the fossil fuel sector.

For example, in late 2020, the Federal Reserve announced that it had joined the Network for Greening the Financial System (“NGFS”), a consortium of financial regulators focused on addressing climate-related risks in the financial sector, and, in September 2022, announced that six of the U.S.’ largest banks will participate in a pilot climate scenario analysis exercise, launched in early 2023, to enhance the ability of firms and supervisors to measure and manage climate-related financial risk.

For example, in October 2023, the Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.

released a finalized set of principles guiding financial institutions with $100 billion or more in assets on the management of physical and transition risks associated with climate change.

While the Company cannot predict what policies may result from this, a material reduction in the capital available to the fossil fuel industry could make it more difficult to secure funding for exploration, development, production, transportation and processing activities, which could result in decreased demand for the Company’s midstream services.

Additionally, in March 2022, the Securities and Exchange Commission released a proposed rule that would establish a framework for the reporting of climate risks, targets, and metrics.

Additionally, in March 2022, the SEC released a proposed rule that would establish a framework for the reporting of climate risks, targets, and metrics.

If a final rule is released, the Company cannot predict what any such rule may require.

To the extent the rule imposes additional reporting obligations, the Company could face increased costs.

Separately, the SEC has also announced that it is scrutinizing existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege an issuer’s climate disclosures are misleading or deficient.

Such agency action could also increase the potential for private litigation.

Relatedly, California has enacted new laws requiring additional disclosure with respect to certain climate-related risks and GHG emissions reduction claims.

Non-compliance with these new laws may result in the imposition of substantial fines or penalties.

Other states are considering similar laws.

Any new laws or regulations imposing more stringent requirements on our business related to the disclosure of climate-related risks may result in reputation harms among certain stakeholders if they disagree with our approach to mitigating climate-related risks, increased compliance costs results from the development of any disclosures, and increased costs of and restrictions on access to capital to the extent we do not meet any climate-related expectations or requirements of financial institutions.

Finally, it should be noted that there are increasing risks to the Company’s operations resulting from the potential physical impacts of climate change, such as drought, wildfires, damage to infrastructure and resources from flooding, storms and other natural disasters, chronic shifts in temperature and precipitation patterns and other physical disruptions.

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While the Company may participate in various voluntary frameworks and certification programs to improve the ESG profile of its operations and services, the Company cannot guarantee that such participation or certification will have the intended results on its ESG profile.

Moreover, while the Company may create and publish voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures will be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.

Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring, and reporting on many ESG matters.

Additionally, while the Company may also announce various voluntary ESG targets, such targets are aspirational.

The Company aims to achieve net zero Scope 1 and 2 GHG emissions by 2050 and has also set shorter-term targets related to GHG and methane gas emissions intensities by 2030.

While the Company may create and publish voluntary disclosures regarding these goals and other ESG matters from time to time, many of the statements in those voluntary disclosures will be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs

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associated therewith.

Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single, uniformed approach to identifying, measuring, and reporting on many ESG matters.

The standards for tracking and reporting on ESG matters are continuously evolving.

Our choice of disclosure frameworks, designed to align with various voluntary reporting standards, may change from time to time, potentially resulting in a lack of comparative data from period to period.

Furthermore, our interpretation of reporting standards may differ from that of others.

Although the Company may announce various voluntary ESG targets, such targets are aspirational.

The Company may not be able to meet such targets in the manner or on such a timeline as initially contemplated including, but not limited to, as a result of unforeseen or increased costs associated therewith.

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Also, despite these goals, the Company may receive pressure from investors, lenders, or other groups to adopt more aggressive climate or other ESG-related goals, but it cannot guarantee that it will be able to implement such goals because of potential costs or technical or operational obstacles.

Any failure or perceived failure to pursue our targets, goals and objectives, or to satisfy various reporting standards, could negatively impact our reputation.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters.

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Certain non-governmental organizations and other private actors have also filed lawsuits under various securities and consumer protection laws alleging that certain ESG-statements, goals or standards were misleading, false or otherwise deceptive.

Moreover, the Federal Trade Commission in August 2022 indicated its intent to issue revised “Green Guides” which will likely address greenwashing risks arising from ESG-related matters.

As a result, the Company may face increased litigation risks from private parties and governmental authorities related to its ESG efforts.

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Risks Related to Ownership of Our Common Stock

Entities controlled by Blackstone, I Squared Capital and Apache Midstream own a majority of the Company’s outstanding voting shares and thus strongly influence all the Company’s corporate actions.

As long as Blackstone, I Squared Capital, Apache Midstream and their respective affiliates own or control a significant percentage of the Company’s outstanding voting power, they will have the ability to strongly influence all corporate actions, including stockholder approval of the election of and removal of directors.

The interests of Blackstone, I Squared Capital or Apache Midstream may not align with the interests of the Company’s other stockholders.

Although we currently are not considered to be a “controlled company” under the NYSE corporate governance rules, we may in the future become a controlled company due to the concentration of voting power among entities controlled by Blackstone.

Although we currently are not considered to be a “controlled company” under the NYSE corporate governance rules, we may in the future become a controlled company.

As of December 31, 2022, entities controlled by Blackstone own approximately 49.8% of our outstanding Common Stock and, pursuant to the Reinvestment Agreement, will be obligated to reinvest all 2023 dividends and distributions in shares of Class A Common Stock.

Consequently, entities controlled by Blackstone may own more than 50% of our Common Stock at some point in 2023.

Entities controlled by Blackstone and I Squared Capital are parties to the amended and restated stockholders agreement granting certain director designation rights and own a majority of the Company’s outstanding voting shares and thus strongly influence all of the Company’s corporate actions.

We and each of Blackstone and I Squared Capital are party to the amended and restated stockholders agreement, dated as of October 21, 2021 and effective as of February 22, 2022, which entitles each of Blackstone and I Squared Capital to, among other things, certain director designation rights for so long as each holder continues beneficially own at least 10% of our Common Stock.

As long as Blackstone and I Squared Capital and their respective affiliates own or control a significant percentage of the Company’s outstanding voting power, they will have the ability to strongly influence all corporate actions, including stockholder approval of the election of and removal of directors.

The interests of Blackstone or I Squared Capital may not align with the interests of the Company’s other stockholders.

Although we do not currently avail ourselves of the “controlled company” exemption under the NYSE corporate governance rules, we may elect to rely on such exemption in the future due to the concentration of voting power among entities controlled by Blackstone.

As of November 22, 2023, entities controlled by Blackstone held approximately 50.3% of the voting power of our outstanding Common Stock.

A “controlled company” pursuant to the NYSE corporate governance rules is a company of which more than 50% of the voting power is held by an individual, group, or another company.

In the event that Blackstone and its affiliates or other stockholders own more than 50% of the voting power of the Company, we may in the future be able to rely on the “controlled company” exemptions under the NYSE corporate governance rules due to this concentration of voting power.

If we were a controlled company, we would be eligible, and could elect, not to comply with certain of the NYSE corporate governance standards.

Although we do not currently avail

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ourselves of such exemption, we may in the future rely on the “controlled company” exemptions under the NYSE corporate governance rules due to this concentration of voting power.

As a controlled company, we are eligible, and could elect, not to comply with certain of the NYSE corporate governance standards.

Such standards include the requirement that a majority of directors on our Board are independent directors, subject to certain phase-in periods, and the requirement that our compensation, nominating and governance committee consist entirely of independent directors.

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Potential future sales pursuant to registration rights granted by the Company and under Rule 144 may depress the market price for our shares of Class A Common Stock.

The Company has granted a number of its stockholders, including Blackstone, I Squared Capital and Apache Midstream, registration rights with respect to their shares of Class A Common Stock, including shares of Class A Common Stock issuable upon redemption of OpCo Units.

The Company has granted a number of its stockholders, including Blackstone, I Squared Capital and Apache Midstream LLC (“Apache Midstream”), registration rights with respect to their shares of Class A Common Stock, including shares of Class A Common Stock issuable upon redemption of Common Units.

In addition, under Rule 144 under the Securities Act, a person who has satisfied a minimum holding period of between six months and one year and any other applicable requirements of Rule 144, may thereafter sell such shares in transactions exempt from registration.

A significant number of our currently issued and outstanding shares of Class A Common Stock held by existing stockholders, including officers and directors and other principal stockholders are currently eligible for resale pursuant to and in accordance with the provisions of Rule 144.

The possible future sale of our shares by our existing stockholders, pursuant to and in accordance with the provisions of Rule 144, may have a depressive effect on the price of our shares of Class A Common Stock in the applicable trading marketplace.

The Company’s ability to return capital to stockholders through dividends and stock repurchases depends on its ability to generate sufficient cash flow, which it may not be able to accomplish.

The Company’s ability to return capital to stockholders through dividends and stock repurchases principally depends upon the amount of cash it generates from its operations, which will fluctuate from quarter to quarter based on, among other things, income from the Pipeline Transportation JVs, the volumes of natural gas and NGLs it gathers and processes, commodity prices, and other factors impacting the Company’s financial condition, some of which are beyond its control.

During 2023, Apache Midstream sold 7,475,000 shares of Class A Common Stock through a Secondary Offering.

The potential future sale of our shares by our existing stockholders, pursuant to and in accordance with the provisions of Rule 144, may have a depressive effect on the price of our shares of Class A Common Stock in the applicable trading marketplace.

The Company’s ability to return capital to stockholders through dividends and stock repurchases depends on its ability to generate sufficient cash flows, which it may not be able to accomplish.

The Company’s ability to return capital to stockholders through dividends and stock repurchases principally depends upon the amount of cash it generates from its operations, which will fluctuate from quarter to quarter based on, among other things, income from the Pipeline Transportation JVs, which are accounted for using equity method, the volumes of natural gas and NGLs it gathers and processes, commodity prices, and other factors impacting the Company’s financial condition, some of which are beyond its control.

In addition, under Delaware law, dividends on the Company’s capital stock may only be paid from “surplus,” which is the amount by which the fair value of the Company’s total assets exceeds the sum of its total liabilities, including contingent liabilities, and the amount of its capital;

if there is no surplus, cash dividends on capital stock may only be paid from the Company’s net profits for the then-current and/or the preceding fiscal year.

The Company’s charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers, employees or agents.

The charter provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (Court of Chancery) will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for any derivative action or proceeding brought on the Company’s behalf;

The Company’s charter designates the Court of Chancery of the State of Delaware (the “Court of Chancery”) as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers, employees or agents.

The charter provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for any derivative action or proceeding brought on the Company’s behalf;

any action asserting a claim of breach of a fiduciary duty owed by any of the Company’s directors, officers or other employees to it or its stockholders;

any action asserting a claim against the Company or any of its directors, officers or employees arising pursuant to any provision of the DGCL, the charter or the Company’s bylaws;

any action asserting a claim against the Company or any of its directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law (“DGCL”), the charter or the Company’s bylaws;

or any action asserting a claim against the Company or any of its directors, officers or other employees that is governed by the internal affairs doctrine.

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Alternatively, if a court were to find these provisions of the Company’s charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, the Company may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect its business, financial condition or results of operations.

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The Company’s charter provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law.

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A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to the Company could depress the Company’s stock price regardless of its business, prospects, financial conditions or results of operations.

We cannot guarantee that our stock repurchase program will enhance long-term stockholder value.

Our stock repurchase program does not have an expiration date and we are not obligated to repurchase a specified number or dollar value of shares.

Further, our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.

However, we do not expect to significantly increase the amount of stock repurchases until our gross debt is reduced below certain thresholds.

Although the Company repurchased Class A Common Stock during 2023 and will continue to repurchase Class A Common Stock in accordance with the stock repurchase program, such program may not enhance long-term stockholder value.

Furthermore, the IRA provides for the imposition of a 1% non-deductible U.S.

federal excise tax (the “Stock Buyback Tax”) on certain repurchases of stock by publicly traded U.S.

corporations such as us after December 31, 2022.

Accordingly, the Stock Buyback Tax will apply to our stock repurchase program, provided, that the amount of stock repurchases in the relevant taxable year subject to the Stock Buyback Tax is reduced by the fair market value of any stock issued by us during such taxable year, including the fair market value of any stock issued or provided to our employees or specified affiliates.

The Biden Administration has proposed increasing the amount of the Stock Buyback Tax from 1% to 4%;

however, it is unclear whether such a change in the amount of the Stock Buyback Tax will be enacted and, if enacted, how soon any such change could take effect.

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General Risks

Continuing or worsening inflationary issues and associated changes in monetary policy have resulted in and may result in additional increases to the cost of the Company’s services and personnel, which in turn cause the Company’s capital expenditures and operating costs to rise.

inflation rate has been steadily increasing throughout 2022.

These inflationary pressures have resulted in and may result in additional increases to the costs of the Company’s services and personnel, which in turn cause the Company’s capital expenditures and operating costs to rise.

Although inflation has moderated in 2023, inflationary pressures have resulted in and may result in additional increases to the costs of the Company’s services and personnel, which in turn cause the Company’s capital expenditures and operating costs to rise.

Sustained levels of high inflation have likewise caused the U.S.

Federal Reserve and other central banks to increase interest rates multiple times in 2022 and the U.S.

Federal Reserve has indicated its intention to continue to raise benchmark interest rates throughout the remainder of 2022 and into 2023 in an effort to curb inflationary pressure on the costs of goods and services across the U.S., which could have the effects of raising the cost of capital and depressing economic growth, either of which—or the combination thereof—could hurt the financial and operating results of the Company’s business.

To the extent elevated inflation remains, the Company may experience further cost increases for its operations.

A terrorist attack, cyber-attack or armed conflict could harm the Company’s business.

Terrorist activities, cyber-attacks, anti-terrorist efforts and other armed conflicts involving the United States or other countries may adversely affect the United States and global economies and could prevent the Company from meeting its financial and other obligations.

For example, on February 24, 2022, Russia launched a large-scale invasion of Ukraine.

As a result, the United States, the United Kingdom, the member states of the European Union and other public and private actors have levied severe sanctions on Russia.

The geopolitical and macroeconomic consequences of this invasion and associated sanctions have impacted the world economy, particularly with regard to demand and prices for crude oil and natural gas, and the ongoing effect of further hostilities in Ukraine cannot be predicted.

If any of these events occur, the resulting political instability and societal disruption could reduce overall demand for crude oil and natural gas, potentially putting downward pressure on demand for the Company’s services and causing a reduction in its revenues.

Federal Reserve and other central banks to increase interest rates multiple times in 2023 in an effort to curb inflationary pressure on the costs of goods and services across the U.S., which could have the effects of raising the cost of capital and depressing economic growth, either of which—or the combination thereof—could hurt the financial and operating results of the Company’s business.

Bank failures or issues in the broader U.S.

or global financial systems may have an impact on the broader capital markets and, in turn, our ability to access those markets.

While the U.S.

Federal Reserve has projected rate cuts in 2024 as the inflation outlook improves, to the extent elevated inflation remains, the Company may experience further cost increases for its operations.

The Company’s operations could be disrupted by natural or human causes beyond its control.

Kinetik operates in both urban areas and remote areas.

The Company’s operations are therefore subject to disruption from natural or human causes beyond its control, including risks from hurricanes, severe storms, floods, heat waves, other forms of severe weather, wildfires, sea level rise, ambient temperature increases, war or other military conflicts such as the ongoing conflicts in Ukraine, Israel and the Gaza Strip, accidents, civil unrest, global political events, fires, earthquakes, and epidemic or pandemic diseases such as the COVID-19 pandemic, some of which may be impacted by climate change and any of which could result in suspension of operations or harm to people or the natural environment.

Crude oil and natural gas related facilities could be direct targets of terrorist attacks, and the Company’s operations could be adversely impacted if infrastructure integral to its operations is destroyed or damaged.

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Costs for insurance and other security may increase as a result of these threats, and some insurance coverage may become more difficult to obtain, if available at all.

A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss.

Furthermore, any regional or domestic political turmoil and the related potential impact on the U.S.

stability remain factors that contribute to an environment of economic and political uncertainty that could adversely affect our results of operations and financial condition, including our revenue growth and profitability.

The Company’s risk management systems are designed to assess potential physical and other risks to its operations and assets and to plan for their resiliency.

While capital investment reviews and decisions incorporate potential ranges of physical risks such as winter storm severity and frequency, air and water temperature, precipitation, among other factors, it is difficult to predict with certainty the timing, frequency or severity of such events, any of which could have a material adverse effect on the company's results of operations or financial condition.

Cybersecurity breaches of our IT systems could result in information theft, data corruption, operational disruption and/or financial loss.

The oil and gas industry has become increasingly dependent on digital technologies to conduct day-to-day operations including certain midstream activities.

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In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period.

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A cyber incident involving the Company’s information systems and related infrastructure, or that of its business service providers, could disrupt its business plans and negatively impact its operations in the following ways, among others:

• a cyber-attack on a vendor or other service provider could result in supply chain disruptions, which could delay or halt development of additional infrastructure, effectively delaying the start of cash flow from the project;

• a cyber-attack on downstream pipelines could prevent the Company from delivering product at the tailgate of its facilities, resulting in a loss of revenues;

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• a deliberate corruption of its financial or operational data could result in events of non-compliance which could lead to regulatory fines or penalties;

• business interruptions could result in expensive remediation efforts, distraction of management, damage to its reputation or a negative impact on cash flow.

• business interruptions could result in expensive remediation efforts, distraction of management, damage to its reputation or a negative impact on cash flows.

The Company’s implementation of various controls and processes, including globally incorporating a risk-based cyber security framework, to monitor and mitigate security threats and to increase security for its information, facilities and infrastructure is costly and labor intensive.

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Any such breakdowns or breaches, or resulting access, disclosure or other loss of information, could significantly disrupt the Company’s business and result in legal claims or proceedings, liability under laws that protect the privacy of personal information and damage to its reputation, any of which could materially and adversely affect its business, financial position, results of operations or cash flows.

UNRESOLVED STAFF COMMENTS

LEGAL PROCEEDINGS

For further information regarding legal proceedings, see Note 18—Commitments and Contingencies in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Annual Report on this Form 10-K.

See additional information related to cybersecurity risks and how the Company manages such risk in Part I — Item 1 C.

Cybersecurity of this Annual Report .

Changes in management’s estimates and assumptions may have a material impact on the company’s consolidated financial statements and financial or operational performance in any given period.

In preparing the Company’s periodic reports under the Exchange Act, including its financial statements, Kinetik’s management is required under applicable rules and regulations to make estimates and assumptions as of a specified date.

These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial risk and uncertainty.

Materially different results may occur as circumstances change and additional information becomes known.

Areas requiring significant estimates and assumptions by management include revenue recognition, impairments to property, plant and equipment, accruals for estimated liabilities, including litigation reserves.

Changes in estimates or assumptions or the information underlying the assumptions, such as changes in the Company’s business plans, general market conditions, or changes in the Company’s outlook on commodity prices, could affect reported amounts of assets, liabilities or expenses.

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-K

Item 1A. Risk Factors