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Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 293 added, 462 removed, 415 unchanged (65% of the section changed)

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022 (1)

(In thousands, except per share data)

17 unchanged sentences

Interest and other income 91 294

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

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

Gain on embedded derivative — 488 — 89,050

Interest expense ( 47,467 ) ( 69,308 )

Equity in earnings of unconsolidated affiliates 60,469 46,464

Total other income, net 6,034 5,027 18,010 99,026

Total other income (expense), net 13,093 ( 22,550 )

Income before income taxes 39,194 4,715

1 unchanged sentence

Net income including noncontrolling interest 35,407 4,299

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

Net income attributable to common shareholders 43,131 48,714 119,098 87,056

Net income attributable to Common Unit limited partners 23,857 2,863

6 unchanged sentences

Diluted 58,392 47,825

(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 Condensed Consolidated Financial Statements in this Form 10-Q for further information.

(2) Includes amounts associated with related parties of $ 13.3 million and $ 19.9 million for the three months ended September 30, 2023 and 2022, respectively, and $ 34.5 million and $ 59.4 million for the nine months ended September 30, 2023 and 2022, respectively.

(3) Includes amounts associated with related parties of $ 8.7 million and $ 3.1 million for the three months ended September 30, 2023 and 2022, respectively, and $ 14.2 million and $ 16.3 million for the nine months ended September 30, 2023 and 2022, respectively .

(4) Cost of sales (exclusive of depreciation and amortization) is net of gas service revenues totaling $ 38.6 million and $ 17.1 million for the three months ended September 30, 2023 and 2022, respectively, and $ 107.1 million and $ 51.1 million for the nine months ended September 30, 2023 and 2022, respectively, for certain volumes where we act as principal .

(5) 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.

(1) Includes amounts associated with related parties of $ 17.2 million and $ 25.8 million for the three months ended March 31, 2024 and 2023, respectively.

(2) Includes amounts associated with related parties of $ 23.3 million and $ 19.7 million for the three months ended March 31, 2024 and 2023, respectively .

(3) Cost of sales (exclusive of depreciation and amortization) is net of gas service revenues totaling $ 44.5 million and $ 30.5 million for the three months ended March 31, 2024 and 2023, respectively, for certain volumes where we act as principal.

(4) Weighted average Class A common shares have been retrospectively restated due to effect of Class A common shares issued under the Reinvestment Agreement for all periods presented in which the Class A common shares were outstanding.

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, December 31,

(In thousands, except per share data)

March 31, December 31,

(In thousands, except shares data)

CURRENT ASSETS:

9 unchanged sentences

Derivative asset, non-current 134 165

Deferred tax assets 238,258 235,627

Operating lease right-of-use assets 27,015 37,569

24 unchanged sentences

Class A Common Stock:

$ 0.0001 par, 1,500,000,000 shares authorized, 54,519,658 and 45,679,447 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively (2)

$ 0.0001 par, 1,500,000,000 shares authorized, 59,712,487 and 57,096,538 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

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 September 30, 2023 and December 31, 2022, respectively (2)

$ 0.0001 par, 1,500,000,000 shares authorized, 93,942,788 and 94,089,038 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital — 192,678

2 unchanged sentences

Total liabilities, noncontrolling interest, and equity $ 6,447,584 $ 6,496,873

(1) Includes amounts of $ 15.0 million and $ 17.6 million associated with related parties as of September 30, 2023 and December 31, 2022, respectively.

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

(1) Includes amounts of $ 11.4 million and $ 15.8 million associated with related parties as of March 31, 2024 and December 31, 2023, respectively.

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

5 unchanged sentences

Amortization of contract costs 1,655 1,655

Contingent liabilities remeasurement — ( 839 )

Distributions from unconsolidated affiliates 77,213 67,764

2 unchanged sentences

Warrants fair value adjustment — ( 44 )

Gain on redemption of mandatorily redeemable Preferred Units — ( 9,580 )

Loss on disposal of assets 4,166 102

Equity in earnings from unconsolidated affiliates ( 60,469 ) ( 46,464 )

Loss on debt extinguishment — 27,975

Share-based compensation 22,561 17,540

14 unchanged sentences

Cash proceeds from disposals 251 14

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

Net cash paid for acquisitions

— ( 125,000 )

Net cash used in investing activities ( 61,980 ) ( 246,468 )

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 ( 11 ) —

1 unchanged sentence

Payments on revolver ( 91,000 ) ( 125,000 )

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

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

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 ( 38,747 ) ( 16,927 )

1 unchanged sentence

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

Net cash provided by (used in) financing activities 170,689 ( 243,827 )

Net cash (used in) provided by financing activities

( 86,479 ) 122,467

Net change in cash 5,246 ( 4,410 )

5 unchanged sentences

Class A Common Stock issued through dividend and distribution reinvestment plan $ 74,247 $ 87,658

Fair value of ALTM assets acquired $ — $ 2,446,430

Class A Common Stock issued in exchange — 1,013,745

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

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

1 unchanged sentence

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

1 unchanged sentence

Common Stock Additional Paid-in Capital Accumulated Deficit Treasury

Amount Shares (1)

(In thousands) (In thousands)

For the Quarter Ended September 30, 2022

Balance at June 30, 2022

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

Redemption of Common Units — ( 6,765 ) 180 — ( 180 ) — 6,765 — — 6,765

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

Excess of carrying amount over Preferred Units redemption price ( 102,586 ) 76,623.00 — — — — — 32,900 — 32,900

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

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

Net income 708 33,778 — — — — — 14,936 — 14,936

Change in redemption value of noncontrolling interests — ( 222,227 ) — — — — — 222,227 — 222,227

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

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

— — — — — — — ( 30,467 ) — ( 30,467 )

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

For the Quarter Ended September 30, 2023

Balance at June 30, 2023

$ — $ 3,242,619 51,973 $ 5 94,089 $ 9 $ — $ ( 902,446 ) $ ( 3,325 ) $ ( 905,757 )

Issuance of common stock through dividend and distribution reinvestment plan — — 2,546 1 — — 88,144 — 88,145

Retirement of treasury stock — — — — — — — ( 3,325 ) 3,325 —

Share-based compensation — — 1 — — — 12,502 — — 12,502

Net income — 27,551 — — — — — 15,580 — 15,580

Change in redemption value of noncontrolling interests — 8,899 — — — — ( 8,899 ) — — ( 8,899 )

Distribution paid to Common Unit limited partners — ( 70,568 ) — — — — — — — —

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

— — — — — — — ( 39,587 ) — ( 39,587 )

Balance at September 30, 2023 $ — $ 3,208,501 54,520 $ 6 94,089 $ 9 $ 91,747 $ ( 929,778 ) $ — $ ( 838,016 )

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 Nine Months Ended September 30, 2022

Shares Amount Shares Amount

(In thousands)

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

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

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

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

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

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

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

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

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

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

Net income 2,863 205 — — — — 1,436 — 1,436

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

Distribution paid to Common Unit limited partners — ( 141,729 ) — — — — — — — —

Cash dividends on Class A Common Stock ($ 1.50 per share)

Distributions paid to Common Unit limited partners ( 70,566 ) — — — — — — — —

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

— — — — — — ( 34,470 ) — ( 34,470 )

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

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 Nine Months Ended September 30, 2023

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

Balance at December 31, 2023 $ 3,157,807 57,097 $ 6 94,089 $ 9 $ 192,678 $ ( 723,516 ) $ — $ ( 530,823 )

1 unchanged sentence

Issuance of common stock through dividend and distribution reinvestment plan — 2,179 — — — 74,247 — — 74,247

Retirement of treasury stock — — — — — — — ( 5,757 ) 5,757 —

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

Share-based compensation — 290 — — — 22,561 — — 22,561

1 unchanged sentence

Change in redemption value of noncontrolling interests 518,581 — — — — ( 300,296 ) ( 218,285 ) — ( 518,581 )

Recognition of deferred tax asset

— — — — — 5,750 — — 5,750

Distribution paid to Common Unit limited partners ( 70,515 ) — — — — — — — —

Cash dividends on Class A Common Stock ($ 2.25 per share)

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

— — — — — — ( 43,200 ) — ( 43,200 )

Balance at September 30, 2023 $ — $ 3,208,501 54,520 $ 6 94,089 $ 9 $ 91,747 $ ( 929,778 ) $ — $ ( 838,016 )

(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 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 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.

All outstanding Preferred Units were redeemed in 2022.

Balance at March 31, 2024 $ 3,624,670 59,712 $ 6 93,943 $ 9 $ — $ ( 973,451 ) $ — $ ( 973,436 )

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

5 unchanged sentences

All such adjustments are of a normal recurring nature.

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.

Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with 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 the Company’s audited financial statements and related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 5, 2024 .

DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

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

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

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, 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.

The Company is a holding company, whose only significant assets are ownership of the non-economic general partner interest and an approximate 39 % limited partner interest in Kinetik Holdings LP, a Delaware limited partnership (the “Partnership”).

As the owner of the non-economic general partner interest in the Partnership, the Company is responsible for all operational, management and administrative decisions related to, and consolidates the results of, the Partnership and its 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 U.S.

Basis of Presentation

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.

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

These reclassifications have no impact on net income.

1 unchanged sentence

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 Condensed Consolidated Financial Statements in conjunction with our consolidated financial statements and related notes included in our 2022 Form 10-K.

accordingly, you should read these Condensed Consolidated Financial Statements in conjunction with our consolidated financial statements and related notes included in our 2023 Annual Report on 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 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.

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

Refer to Note 2—Business Combination s to our Condensed Consolidated Financial Statements herein for additional discussion.

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 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 and herein 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.

Significant Accounting Policies

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

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

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

Inventory was valued at $ 9.1 million and $ 4.8 million as of September 30, 2023 and December 31, 2022, respectively.

Transactions with Affiliates

The Company has revenue contracts and incurs cost of sales and operating expenses with Apache, which is considered the Company’s affiliate as it owns more than 10 % of the Company’s common stock.

Accounts receivable from this affiliate was $ 15.0 million and $ 17.6 million as of September 30, 2023 and December 31, 2022, respectively.

Revenue from Apache was $ 13.3 million and $ 19.9 million for the three months ended September 30, 2023 and 2022, respectively, and $ 34.5 million and $ 59.4 million for the nine months ended September 30, 2023 and 2022, respectively.

Accounts payable and accrued expense due to this affiliate was immaterial as of September 30, 2023 and December 31, 2022.

The Company incurred immaterial operating expenses with Apache for the three and nine months ended September 30, 2023.

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 on Form 10-K.

There were no significant updates or revisions to our accounting policies during the three months ended March 31, 2024.

Transactions with related parties

The Company has revenue contracts and incurs cost of sales and operating expenses with Apache Midstream LLC (“Apache”), which owned more than 5 % of the Company’s common stock prior to its secondary offerings completed in December 2023 and March 2024.

Pursuant to FASB ASC 850, Related Party Transactions, Apache was no longer a related party after the completion of its secondary offering in December 2023 as its owned less than 10 % of the Company’s common stock.

Pursuant to Regulation S-K, Item 404(a), Apache ceased to be a related party as of March 18, 2024 as it no longer owned any of the Company’s common stock.

In 2024, for the period ended March 18, 2024, revenue from Apache was $ 17.2 million, cost of sales was $ 9.4 million and operating expenses were $ 0.2 million.

In 2023, for the three months ended March 31, 2023, revenue from Apache was $ 25.8 million, cost of sales was $ 17.8 million and operating expenses were $ 0.3 million.

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

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

For the three months ended September 30, 2023 and 2022, the Company recorded cost of sales of $ 2.4 million and $ 3.7 million, respectively, and $ 6.4 million and $ 10.8 million, for the nine months ended September 30, 2023 and 2022, respectively, with these affiliates.

The Company pays a demand fee to PHP and pays a capacity fee to Breviloba for certain volumes moving on the Shin Oak NGL Pipeline (“Shin Oak”).

For each of the three months ended March 31, 2024 and 2023, the Company recorded cost of sales of $ 13.9 million and $ 1.9 million, respectively, with these affiliates.

BUSINESS COMBINATIONS

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

As of March 31, 2024, our allocation of purchase price for acquisitions made during 2023 are detailed below:

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

2 unchanged sentences

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

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

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

6 unchanged sentences

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.

These transactions were accounted for as a business combination in accordance with ASC 805, and the measurement period ended on December 31, 2023.

Acquisition-related costs were immaterial for this transaction.

Acquired net assets from this business combination were included in the Midstream Logistic segment.

Altus Midstream Company

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

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

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

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

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

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

Goodwill was included in the Midstream Logistics segment.

The Company incurred acquisition-related costs of nil and $ 0.1 million for the three months ended September 30, 2023 and 2022, respectively, and nil and $ 6.4 million for the nine months ended September 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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

(In thousands)

2 unchanged sentences

Other revenue 2,632 3,791

Total revenues and other $ 330,301 $ 325,176 $ 907,544 $ 917,997

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

The Company recognized revenues from minimum volume commitment (“MVC”) deficiency payments of $ 0.4 million and $ 0.7 million for the three months ended September 30, 2023 and 2022, respectively, and $ 1.6 million and $ 1.0 million for the nine months ended September 30, 2023 and 2022, respectively.

Total revenues $ 341,394 $ 281,040

There have been no significant changes to the Company’s contracts with customers during the three months ended March 31, 2024.

The Company recognized revenues from MVC deficiency payments of nil and $ 1.1 million for the three months ended March 31, 2024 and 2023, respectively.

Remaining Performance Obligations

The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenues as of September 30, 2023:

The following table presents our estimated revenue from contracts with customers for remaining performance obligations that have not yet been recognized, representing our contractually committed revenues as of March 31, 2024:

Fiscal Year (In thousands)

3 unchanged sentences

Contract Liabilities

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

The following table provides information about contract liabilities from contracts with customers as of March 31, 2024:

(In thousands)

2 unchanged sentences

Cash received in advance and not recognized as revenue 514

Balance at September 30, 2023 31,307

Balance at March 31, 2024 31,138

Current portion 6,301

3 unchanged sentences

Contract Cost Assets

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 September 30, 2023 and December 31, 2022, the Company had contract acquisition cost assets of $ 72.8 million and $ 17.8 million, respectively.

The Company has capitalized certain costs incurred to obtain a contract or additional contract dedicated acreage or volumes that would not have been incurred if the contract or associated acreage and volumes had not been obtained.

As of March 31, 2024 and December 31, 2023, the Company had contract acquisition cost assets of $ 69.5 million and $ 71.2 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 September 30, 2023 and 2022, respectively, and $ 5.0 million and $ 1.3 million for the nine months ended September 30, 2023 and 2022, respectively.

The Company recognized cost of sales associated with these assets of $ 1.7 million and $ 1.7 million for the three months ended March 31, 2024 and 2023, respectively.

PROPERTY, PLANT AND EQUIPMENT

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

September 30, December 31,

March 31, December 31,

(In thousands)

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

The Company recorded $ 39.4 million and $ 34.9 million of depreciation expense for the three months ended September 30, 2023 and 2022, respectively, and $ 116.6 million and $ 102.4 million of depreciation expense for the nine months ended September 30, 2023 and 2022, respectively.

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

GOODWILL AND INTANGIBLE ASSETS, NET

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.

Company’s management assesses whether there have been events or circumstances that trigger the fair value of the reporting unit to be lower than its net carrying value since consummation of the Transaction and concluded that goodwill was not impaired as of September 30, 2023.

Intangible Assets

The Company recorded $ 42.9 million and $ 38.4 million of depreciation expense for the three months ended March 31, 2024 and 2023, respectively.

There were no impairment triggering events for property, plant and equipment during the three months ended March 31, 2024 and 2023.

INTANGIBLE ASSETS, NET

Intangible assets, net, are comprised of the following:

September 30, December 31,

March 31, December 31,

(In thousands)

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Total amortizable intangible assets, net $ 562,837 $ 591,670

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, 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 which have a useful life of ten years and are amortized using the straight-line method.

The right of way agreements are typically 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 September 30, 2023, the remaining weighted average amortization periods for customer contracts and right of way assets were approximately 7.08 years and 6.86 years, respectively.

The overall remaining weighted average amortization period for the intangible assets as of September 30, 2023 was approximately 7.05 years.

The Company recorded $ 30.6 million and $ 30.1 million of amortization expense for the three months ended September 30, 2023 and 2022, respectively, and $ 91.6 million and $ 90.2 million of amortization expense for the nine months ended September 30, 2023 and 2022, respectively.

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

On March 31, 2024, the remaining weighted average amortization periods for customer contracts and right of way assets were approximately 6.81 years and 6.45 years, respectively.

The overall remaining weighted average amortization period for the intangible assets as of March 31, 2024 was approximately 6.76 years.

The Company recorded $ 30.7 million and $ 30.5 million of amortization expense for the three months ended March 31, 2024 and 2023, respectively.

There was no impairment recognized on intangible assets for the three months ended March 31, 2024 or 2023.

EQUITY METHOD INVESTMENTS

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

As of March 31, 2024, 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:

September 30, December 31,

March 31, December 31,

Ownership (1)

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33.0 % 440,869 443,684

Gulf Coast Express Pipeline LLC (“GCX”)

16.0 % 430,489 431,051

$ 2,526,278 $ 2,540,989

Additionally, as of September 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 and nine months ended September 30, 2023.

The unamortized basis differences included in the EMI pipeline balances were $ 352.8 million and $ 363.2 million as of September 30, 2023 and December 31, 2022, respectively.

(1) As of March 31, 2024 the Company also owned 15.0 % of Epic Crude Holdings, LP (“EPIC”).

The unamortized basis differences included in the EMI pipeline balances were $ 345.9 million and $ 349.3 million as of March 31, 2024 and December 31, 2023, 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 $ 21.6 million and $ 13.4 million as of September 30, 2023 and December 31, 2022, respectively.

Unamortized basis differences will be amortized into equity income over the useful lives of the underlying pipeline assets, which ranged from 20 years to 32 years as determined at the Closing of the ALTM business combination.

There was capitalized interest of $ 24.5 million and $ 24.7 million as of March 31, 2024 and December 31, 2023, respectively.

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

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

The following table presents the activity in the Company’s EMIs for the three months ended March 31, 2024:

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

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( 58,375 ) ( 10,485 ) ( 9,593 ) ( 78,453 )

Capitalized interest 8,605 — — 8,605

Equity income, net (2)

43,768 7,670 9,031 60,469

Balance at September 30, 2023 $ 1,638,319 $ 446,314 $ 434,580 $ 2,519,213

(1) Distributions consisted of distributions from a return on investment of $ 205.9 million, which was included in cash flow from operating activities and distribution from a return of investment of $ 5.8 million, which was included in cash flow from investing activities.

(2) For the nine months ended September 30, 2023, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $ 5.6 million from PHP, $ 0.5 million from Breviloba, LLC and $ 4.7 million from GCX.

Balance at March 31, 2024 $ 1,654,920 $ 440,869 $ 430,489 $ 2,526,278

(1) Distributions consisted of distributions from returns on investment of $ 77.2 million, which was included in cash flows from operating activities and distributions from returns of investment of $ 1.2 million, which was included in cash flows from investing activities.

(2) For the three months ended March 31, 2024, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $ 2.0 million from PHP, $ 0.2 million from Breviloba, LLC and $ 1.6 million from GCX.

Summarized Financial Information

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

Three Months Ended September 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 $ 99,923 $ 51,002 $ 91,901 $ 100,114 $ 53,120 $ 91,800

Operating income 65,549 25,170 68,531 69,851 22,205 70,870

Net income 66,630 25,223 68,327 69,926 22,060 70,742

Nine Months Ended September 30,

The following table represents selected data for the Company’s EMI pipelines (on a 100 percent basis) for the three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

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

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DEBT AND FINANCING COSTS

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

September 30, December 31,

The following table summarizes the Company’s debt obligations as of March 31, 2024 and December 31, 2023:

March 31, December 31,

(In thousands)

$ 2.0 billion unsecured term loan

Unsecured term loan $ 1,200,000 $ 1,200,000

$ 1.00 billion 2030 senior unsecured notes

1,000,000 1,000,000

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( 30,241 ) ( 31,510 )

Unamortized debt premiums and discounts, net 356 319

Total long-term debt, net $ 3,517,115 $ 3,562,809

(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 $ 5.7 million and $ 6.9 million as of September 30, 2023 and December 31, 2022, respectively.

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

Unamortized debt issuance cost associated with the revolving line of credit was $ 5.0 million and $ 5.4 million as of March 31, 2024 and December 31, 2023, 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.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(In thousands)

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Total financing costs, net of capitalized interest $ 47,467 $ 69,308

As of September 30, 2023 and December 31, 2022, unamortized debt issuance costs associated with the senior unsecured notes and the term loan were $ 23.0 million and $ 26.5 million, respectively.

As of March 31, 2024 and December 31, 2023, unamortized debt issuance costs associated with the 5.875 % Sustainability-Linked Senior Notes due 2030 (the “2030 Notes”), the 6.625 % Sustainability-Linked Senior Notes due 2028 (the “2028 Notes”) and the unsecured term loan were $ 30.2 million and $ 31.5 million, respectively, and unamortized debt premiums and discount, net, associated with the 2028 Notes and the unsecured term loan were $ 0.4 million and $ 0.3 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, 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 September 30, 2023, the Partnership was in compliance with all customary and financial covenants.

as administrative agent, and the term loan credit agreement with PNC Bank as administrative agent (the “Term Loan Credit Facility”), contain customary covenants and restrictive provisions which may, among other things, limit the Partnership’s ability to create liens, incur additional indebtedness and make restricted payments and the Partnership’s ability to liquidate, dissolve, consolidate with or merge into or with any other person.

The 2030 Notes and the 2028 Notes 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.

As of March 31, 2024, the Partnership was in compliance with all customary and financial covenants.

Letters of Credit

Our $ 1.25 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”) scheduled to mature on or before June 8, 2027 can be used for letters of credit.

Our obligations with respect to related letters of credit totaled $ 12.6 million as of March 31, 2024 and December 31, 2023, respectively.

Fair Value of Financial Instruments

The fair value of the Company and its subsidiaries’ consolidated debt as of September 30, 2023 and December 31, 2022 was $ 3.54 billion and $ 3.34 billion, respectively.

On September 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.

The fair value of the Company and its subsidiaries’ consolidated debt as of March 31, 2024 and December 31, 2023 was $ 3.53 billion and $ 3.57 billion, respectively.

On March 31, 2024, the senior unsecured notes’ fair value was based on Level 1 inputs and the Term Loan and Revolving Credit Facility 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 September 30, 2023 and December 31, 2022:

September 30, December 31,

The following table provides detail of the Company’s current accrued expenses on March 31, 2024 and December 31, 2023:

March 31, December 31,

(In thousands)

5 unchanged sentences

Accrued other expenses 15,495 13,451

Total current accrued expenses $ 188,062 $ 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 September 30, 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 $ 11.7 million and $ 9.9 million for the three months ended September 30, 2023 and 2022, respectively, and $ 34.3 million and $ 28.2 million for the nine months ended September 30, 2023 and 2022, respectively.

Short-term lease costs were $ 1.0 million and $ 1.0 million for the three months ended September 30, 2023 and 2022, respectively, and $ 2.0 million and $ 5.1 million for the nine months ended September 30, 2023 and 2022, respectively.

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

The following table presents other supplemental lease information:

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

2023 2022 2023 2022

(In thousands)

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

Operating cash flows from operating leases $ 11,721 $ 9,510 $ 34,092 $ 27,797

Right-of-use assets obtained in exchange for new operating lease liabilities $ 211 $ — $ 5,189 $ 21,386

Weighted-average remaining lease term — operating leases (in years) 1.62 1.73 1.62 1.73

Weighted-average discount rate — operating leases 8.81 % 7.01 % 8.81 % 7.01 %

EQUITY AND WARRANTS

Total accrued expenses $ 170,075 $ 177,421

Redeemable Noncontrolling Interest — Common Unit Limited Partners

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

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

Please refer to the “Transaction” above.

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.

The redemption option of the Common Unit is not legally detachable or separately exercisable from the instrument and is non-transferable;

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 nine 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 September 30, 2023.

The Common Units fair value was approximately $ 3.21 billion as of September 30, 2023.

As of September 30, 2023, there were 54,519,658 and 94,089,038 shares, respectively, of Class A Common Stock and Class C Common Stock issued and outstanding (collectively, “Common Stock”).

Public Warrants

As of September 30, 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”).

The Public Warrants expire on November 9, 2023 or upon redemption or liquidation.

The Company may call the Public Warrants for redemption, in whole and not in part, at a price of $ 0.01 per warrant with not less than 30 days’ notice provided to the Public Warrant holders.

However, this redemption right can only be exercised if the reported last sale price of the Class A Common Stock equals or exceeds $ 180.00 per share for any 20 -trading days within a 30 -trading day period ending three business days prior to sending the notice of redemption to the Public Warrant holders.

Private Placement Warrants

As of September 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 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 $ 9 thousand for the Public Warrants and a fair value of $ 6 thousand for the Private Warrants as of September 30, 2023 on the Condensed Consolidated Balance Sheets in “Other 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.

During the three months ended March 31, 2024, 146,250 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 93.9 million Common Units and an equal number of Class C Common Stock issued and outstanding as of March 31, 2024.

The Common Units fair value was approximately $ 3.62 billion as of March 31, 2024.

As of March 31, 2024, there were 59.7 million and 93.9 million shares, respectively, of Class A Common Stock and Class C Common Stock issued and outstanding (collectively, “Common Stock”).

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.

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

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

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

During the quarter ended September 30, 2023, the Company did not repurchase any of its Class A Common Stock under the Repurchase Program.

During the first half of 2023, the Company repurchased 194,174 of its Class A Common Stock at a total cost of $ 5.8 million.

The Company retired all treasury stock as of September 30, 2023.

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 August 16, 2023, the Company made cash dividend payments of $ 22.0 million to holders of Class A Common Stock and Class C Common Units and $ 88.1 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 $ 58.6 million and $ 263.8 million was reinvested in shares of Class A Common Stock by Reinvestment Holders for the nine months ended September 30, 2023.

During the quarter ended March 31, 2024, the Company did not repurchase any of its Class A Common Stock under the Repurchase Program.

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

Under the Reinvestment Agreement, each Reinvestment Holder was obligated to reinvest a specified percent of distributions on Common Units or dividends on shares of Class A Common Stock in the Company’s Class A Common Stock.

The Reinvestment Agreement terminated automatically on March 8, 2024.

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

On March 7, 2024, the Company made cash dividend payments of $ 39.5 million to holders of Class A Common Stock and Common Units and $ 74.2 million was reinvested in shares of Class A Common Stock by Reinvestment Holders.

FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

GAAP, clarifies the definition of fair value within that framework and requires disclosures about the use of fair value measurements.

Topic 820 defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

Topic 820 provides a framework for measuring fair value, establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and requires consideration of the counterparty’s creditworthiness when valuing certain assets.

Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1 inputs).

The three levels of the fair value hierarchy under Topic 820 are described below:

Level 1 inputs :

Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

An active market is defined as a market where transactions for a financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 inputs :

Inputs, other than quoted prices in active markets, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 inputs :

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.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Where available, fair value is based on observable market prices or inventory parameters or derived from such prices or parameters.

Where observable prices or inputs are not available, valuation models are applied.

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

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

September 30, 2023

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023:

March 31, 2024

Level 1 Level 2 Level 3 Total

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Commodity swaps $ — $ 14,889 $ — $ 14,889

Public warrants 9 — — 9

Private warrants — — 6 6

Interest rate derivatives — 340 — 340

Total liabilities $ — $ 15,229 $ — $ 15,229

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Interest rate derivatives — 5,348 — 5,348

Public warrants 50 — — 50

Private warrants — — 38 38

Total liabilities $ — $ 7,097 $ — $ 7,097

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

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

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

Refer to Note 12—Derivatives and Hedging Activities in the Notes to 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.

The carrying value of the Company’s Private Placement Warrants are recorded at fair value determined using an option pricing model, a Level 3 fair value measurement, which is calculated based on key assumptions related to expected volatility of the Company’s common stock, an expected dividend yield, the remaining term of the warrants outstanding and the risk-free rate based on the U.S.

Treasury yield curve in effect at the time of the valuation.

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

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

The carrying amounts reported on the Condensed Consolidated Balance Sheets for the Company’s remaining financial assets and liabilities are of 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 nine months ended September 30, 2023 and 2022.

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

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

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

Refer to Note 11—Derivatives and Hedging Activities in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further discussion related to commodity and interest rate derivatives.

Long-term debt’s carrying value can vary from fair value.

See Note 7—Debt and Financing Costs in the Notes to Condensed Financial Statements for further information.

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, 2024 and 2023.

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 September 30, 2023 and December 31, 2022.

Interest Rate Risk

4 unchanged sentences

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

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

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

As of March 31, 2024, the Company had two interest rate swap contracts with total notional amounts of $ 1.70 billion maturing on May 31, 2025 that pay a fixed rate ranging from 4.38 % to 4.48 % for the respective notional amounts.

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

Interest rate swap derivative assets were $ 21.8 million and $ 2.7 million as of September 30, 2023 and December 31, 2022, respectively.

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

The Company recorded cash settlements on interest rate swap derivatives of $ 4.7 million and nil for the three months ended September 30, 2023 and 2022, respectively, and $ 7.1 million and $ 11.3 million for the nine months ended September 30, 2023 and 2022, respectively, in “Interest expense” of the Condensed Consolidated Statements of Operations.

In addition, the Company recorded fair value adjustments of $ 12.5 million and nil for the change in fair value of the interest rate swap derivatives for the three months ended September 30, 2023 and 2022, respectively, and $ 34.6 million and $ 14.0 million for the nine months ended September 30, 2023 and 2022, respectively, in “Interest expense” of the Condensed Consolidated Statements of Operations.

The following table presents the fair value of derivative assets and liabilities related to the interest rate swap contracts:

March 31, December 31,

(In thousands)

Derivatives assets - current $ 8,682 $ 4,314

Total derivative assets $ 8,682 $ 4,314

Derivatives liabilities - noncurrent $ 340 $ 5,348

Total derivative liabilities $ 340 $ 5,348

The Company recorded cash settlements and change in fair value of the interest rate swap contracts in “Interest expense” of the Condensed Consolidated Statements of Operations.

The following table presents interest rate derivative activities for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(In thousands)

Cash settlements $ 3,952 $ —

Favorable (unfavorable) fair value adjustment $ 13,329 $ ( 17,190 )

Commodity Price Risk

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

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

During the past twelve months, the Company entered into multiple commodity swap and collar contracts based on the OPIS NGL Mont Belvieu prices for ethane, propane and butane, the Waha Basis index, the HSC index and the NYMEX West Texas Intermediate Control index.

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

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

These index swaps are effective over the next 1 to 17 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 September 30, 2023 (in thousands, except volumes):

September 30, 2023

Commodity Instruments Unit Volume Net Fair Value

Natural Gas Commodity Swap MMBtus 3,010,000 $ 89

NGL Commodity Swap Gallons 124,179,300 ( 1,358 )

Crude Commodity Swap Bbl 171,900 ( 1,341 )

Commodity Swap Bbl 109,600 ( 537 )

Natural Gas Basis Spread Swaps Commodity Swap MMBtus 203,200 138

Crude Gas Basis Spread Swaps Commodity Swap Bbl 24,395,000 16

These contracts are effective over the next 1 to 26 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 following table presents detailed information of commodity swaps outstanding as of March 31, 2024 (in thousands, except volumes):

March 31, 2024

Commodity Unit Volume Net Fair Value

Natural Gas MMBtus 6,225,000 $ ( 4,224 )

NGL Gallons 191,058,000 ( 2,078 )

Crude Bbl 201,500 ( 1,023 )

Crude Collars Bbl 73,200 ( 376 )

Crude Basis Spread Swaps

95,600 ( 36 )

Natural Gas Basis Spread Swaps

MMBtus 27,565,000 ( 5,436 )

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 $ 2.3 million and $ 4.3 million as of September 30, 2023 and December 31, 2022, respectively.

Commodity swap derivative liabilities were $ 5.2 million and $ 5.7 million as of September 30, 2023 and December 31, 2022, respectively.

The Company recorded cash settlements on commodity swap derivatives of $ 0.2 million and nil for the three months ended September 30, 2023 and 2022, respectively, and $ 8.0 million and $ 0.2 million for the nine months ended September 30, 2023 and 2022, respectively, in “Product revenue” of the Condensed Consolidated Statements of Operations.

In addition, the Company recorded fair value adjustments of $ 8.1 million and nil for the three months ended September 30, 2023 and 2022, respectively, and $ 6.5 million and nil for the change in fair value of commodity swap derivatives for the nine months ended September 30, 2023 and 2022, respectively, in “Product revenue” of the Condensed Consolidated Statements of Operations.

The following table presents the fair value of derivative assets and liabilities related to commodity swaps:

March 31, December 31,

(In thousands)

Derivatives assets - current $ 1,582 $ 3,498

Derivative assets - noncurrent 134 165

Total derivative assets

$ 1,716 $ 3,663

Derivative liabilities - current $ 14,811 $ 1,734

Derivatives liabilities - noncurrent 78 15

Total derivative liabilities

$ 14,889 $ 1,749

The Company recorded cash settlements and fair value adjustments on commodity swap derivatives in “Product revenue” of the Consolidated Statements of Operations.

The following table presents commodity derivative activities for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(In thousands)

Cash settlements $ ( 198 ) $ 974

(Unfavorable) favorable fair value adjustment

$ ( 15,286 ) $ 5,420

SHARE-BASED COMPENSATION

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

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

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

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

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

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

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

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

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

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

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

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

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

During 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.

During the second quarter of 2023, the Company granted approximately 16,000 RSUs to certain members of the Board and vested immediately on grant date.

With respect to the above grants, the Company recorded compensation expenses of $ 12.5 million and $ 12.7 million for the three months ended September 30, 2023 and 2022, respectively, and $ 43.3 million and $ 31.0 million for the nine months ended September 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 has granted various Class A and Class C Shares, restricted stock units (“RSUs”) and performance stock units (“PSUs”) to members of the Board of Directors ( the “Board”) and employees under the Kinetik Holdings Inc.

2019 Omnibus Incentive Plan (the “2019 Plan”).

Class A Shares and Class C Shares

The Class A Shares and Class C Shares were granted at the Closing of the Altus Midstream Company (“ALTM”) business combination upon conversion of previously outstanding incentive units.

These shares were held in escrow and will vest over three to four years .

These units are recorded at grant-date fair value, which was determined to be fair value on the closing date of the business combination, and compensation expense is recognized on a straight‑line basis over the vesting period within “General and Administrative Expenses” of the Condensed Consolidated Statements of Operations in accordance with FASB ASC 718 , C ompensation - Stock Compensation .

Forfeitures are recognized as they occur.

In addition, upon the Closing of the ALTM business combination, 395,416 performance Class A awards were granted that will vest over a four year service period and upon certain shareholder’s selling of the Company’s Class A Common Stock at defined return levels.

As the performance outcome is not estimable, no compensation expense is recorded for these performance awards for the three months ended March 31, 2024 and 2023.

The table below summarizes Class A Share and Class C Share activities for the three months ended March 31, 2024:

Number of Shares Weighted Avg Grant-Date Fair Market Value Per Unit

Outstanding and unvested shares at December 31, 2023 5,444,488 $ 28.91

Outstanding and unvested shares at March 31, 2024 5,427,288 $ 28.90

Table below summarizes aggregate intrinsic value (market value at vesting date) and grant-date fair value of vested Class A Shares for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(In thousands)

Aggregate intrinsic value of vested Class A Shares $ 654 $ —

Grant-date fair value of vested Class A Shares $ 511 $ —

No vesting or forfeiture occurred for Class C Shares for the three months ended March 31, 2024.

No vesting or forfeiture occurred for Class A or Class C Shares for the three months ended March 31, 2023.

As of March 31, 2024, there were $ 61.6 million of unrecognized compensation costs related to unvested Class A Shares and Class C Shares.

These costs are expected to be recognized over a weighted average period of 1.55 years.

Restricted Stock Units

Certain RSUs were granted in the first quarter of 2024 to certain executives and employees under the 2019 Plan.

Granted RSUs are subject to various service vesting requirements and may be settled only for shares of Class A Common Stock on a one -for-one basis contingent upon continued employment.

RSUs are recorded at grant-date fair value and compensation expense is recognized on a straight‑line or graded straight-line basis over the vesting period within “General and Administrative Expenses.”

The table below summarizes RSU activities for the three months ended March 31, 2024:

Number of Shares (1)

Weighted Avg Grant-Date Fair Market Value Per Unit (1)

Outstanding and unvested shares at December 31, 2023 435,220 $ 31.15

585,340 35.17

290,708 34.24

Outstanding and unvested shares at March 31, 2024 725,813 $ 33.30

(1) Number of shares and weighted average fair market value per share here include RSUs issued to new employees that transitioned from ALTM as part of the merger as replacement awards.

Table below summarizes aggregate intrinsic value (market value at vesting date) and grant-date fair value of RSUs for the three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

(In thousands)

Aggregate intrinsic value of vested RSUs $ 10,148 $ 6,700

Grant-date fair value of vested RSUs $ 9,954 $ 6,188

As of March 31, 2024, there were $ 18.5 million of unrecognized compensation costs related to the RSUs.

These costs are expected to be recognized over a weighted average period of 2.03 years.

Performance Stock Units

The Company granted PSUs pursuant to the 2019 Plan to certain of its employees and executives in the first quarter of 2024.

These PSUs vest and become earned upon the achievement of certain performance goals based on the Company’s annualized absolute total stockholder return and the Company’s relative total stockholder return as compared to the performance peer group during the performance period, if the PSUs holders also satisfy the continued employment requirement during the performance period.

Depending on the results achieved during the three-year performance period, the actual number of Class A Common Stock that a holder of the PSUs earns at the end of the performance period may range from 0 % to 200 % of the target number of PSUs granted.

The fair value of the PSUs is determined using a Monte Carlo simulation at the grant date.

The Company recognized compensation expense for PSUs on a straight-line basis over the performance period.

Any PSU not earned at the end of the performance period will be forfeited.

The table below summarizes PSU activities for the three months ended March 31, 2024:

Number of Shares

Weighted Avg Grant-Date Fair Market Value Per Unit

Granted in 2024 198,703 $ 36.76

Outstanding and unvested shares at March 31, 2024 198,703 $ 36.76

No vesting or forfeiture occurred for PSUs for the three months ended March 31, 2024.

The table below presents a summary of the grant-date fair value assumptions used to value the PSUs on grant date:

Grant-date fair value per unit $ 36.76

Beginning average price

Risk-free interest rate 4.21 %

Volatility factor 37 %

Expected term

As of March 31, 2024, there were $ 7.1 million of unrecognized compensation costs related to the PSUs.

These costs are expected to be recognized over a weighted average period of 2.75 years.

With respect to above Class A Shares, Class C Shares, RSUs and PSUs, the Company recorded compensation expenses of $ 22.6 million and $ 17.5 million for the three months ended March 31, 2024 and 2023, respectively.

The Company is subject to U.S.

federal income tax and the Texas margin tax.

Income tax expense included in the condensed consolidated financial statements in this Form 10-Q is as follows:

federal income tax and state taxes.

Income tax expense included in the condensed consolidated financial statements in this Quarterly Report on Form 10-Q is as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(In thousands)

2 unchanged sentences

Effective tax rate 9.66 % 8.82 %

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

The effective tax rate for the three months ended March 31, 2024 was lower than the statutory rate mainly due to the impact of tax attributable to noncontrolling interests related to the Common Unit limited partners.

NET INCOME PER SHARE

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(In thousands, except per share amounts)

2 unchanged sentences

( 4,394 ) ( 4,156 )

Excess preferred carrying amount over consideration paid (2)

— 32,900 — 32,900

Total net income attributable to Class A common shareholders

$ 7,156 $ ( 2,720 )

Weighted average shares outstanding - basic (2)

1 unchanged sentence

Dilutive effect of unvested Class A common shares (3)

123 39 255 33

Weighted average shares outstanding - diluted (2)(4)

58,392 47,825

Net income available per common share - basic

2 unchanged sentences

$ 0.12 $ ( 0.06 )

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

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

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

(4) The 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.

(1) Represents dividends paid to unvested Class A Shares.

(2) Weighted average Class A common shares have been retrospectively restated due to bonus effect of Class A common shares issued under the Reinvestment Agreement for all periods presented in which the Class A common shares were outstanding.

(3) Includes dilutive effect from both RSUs and PSUs on unvested Class A common shares.

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

2 unchanged sentences

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

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

As of March 31, 2024 and December 31, 2023, there were no accruals for loss contingencies.

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

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

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

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

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

Thus, the Company’s exposure and ultimate losses may be 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.

There were no litigation related accrued reserves as of March 31, 2024 and December 31, 2023.

The Company has entered into litigation with a third party to collect receivables totaling $ 11.6 million and is waiting on settlement of $ 8.0 million in receivables from another counterparty related to prior litigation the Company had previously entered into and subsequently dropped.

These receivables remain outstanding from the Winter Storm Uri during February of 2021.

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

Environmental Matters

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

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

The Company is not aware of any environmental claims existing as of September 30, 2023, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.

The Company is subject to various local, state, and federal laws and regulations relating to various environmental matters during the ordinary course of business.

Although we believe our operations are in substantial compliance with applicable environmental laws and relations, risks of additional costs and liabilities are inherent in our operations.

Moreover, 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.

The Company is not aware of any environmental claims existing as of March 31, 2024, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.

Contingent Liabilities

2 unchanged sentences

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

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

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

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

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

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

Original Altus Transaction

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

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

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

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

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

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

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 September 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.

Our Chief Executive Officer is the CODM.

These segments are strategic business units with differing products and services.

The total monies paid under this arrangement are capped at $ 60.5 million and are payable on an annual basis over the earn-out period.

PDC’s actual annual Mcf volume did not exceed the incentive forecast volume during the past four years , and is not expected to over the next six years ;

therefore, the estimated fair value of the contingent consideration liability was nil as of March 31, 2024 and December 31, 2023.

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 CODM to make key operating decisions, assess performance and allocate resources.

These segments represent strategic business units with differing products and services.

No operating segments have been aggregated to form the reportable segments.

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• Pipeline Transportation:

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

The Pipeline Transportation segment consists of equity investment interests in four Permian Basin pipelines that access various points along the U.S.

Gulf Coast, as well as Kinetik NGL and Delaware Link Pipelines.

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.

Our Chief Executive Officer, who is the CODM, uses Segment Adjusted EBITDA, a non-GAAP measure, to measure profitability and allocate resources among segments.

Segment Adjusted EBITDA, a non-GAAP measure, is defined as segment net earnings adjusted to exclude interest expense, income tax expense, depreciation and amortization, the proportionate effect of these same items for our EMI pipelines and other non-recurring items.

The CODM considers budget-to-actual and forecast-to-actual variances on a monthly basis when making decisions about allocating capital and personnel to the segments.

The Midstream Logistics segment accounts for more than 99 % of the Company’s operating revenues, cost of sales (excluding depreciation and amortization), and operating expenses and more than 93 % of the ad valorem expenses.

The Pipeline Transportation segment contains all of the Company’s equity method investments, which contribute approximate 92 % of the segment’s Adjusted EBITDA.

Corporate and Other contains the Company’s executive and administrative functions, including 86 % 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 and nine months periods ended September 30, 2023 and 2022:

The following tables present the reconciliation of the non-GAAP measure Segment Adjusted EBITDA to the GAAP measure segment income (loss) before income taxes as of and for the three months period ended March 31, 2024 and 2023:

Midstream Logistics Pipeline Transportation Corporate and Other (1)

(In thousands)

For the Three Months Ended September 30, 2023

Segment net income (loss) including noncontrolling interests $ 56,583 $ 50,598 $ ( 64,050 ) $ 43,131

For the Three Months Ended March 31, 2024

Segment income (loss) before income taxes $ 50,173 $ 65,298 $ ( 76,277 ) $ 39,194

Interest expense 16 — 47,451 47,467

Income tax expense 1 — 1,302 1,303

Depreciation and amortization 71,310 2,290 6 73,606

3 unchanged sentences

Loss on disposal of assets 4,166 — — 4,166

Unrealized loss on derivatives

Commodity hedging unrealized loss

15,088 — — 15,088

Integration costs 41 — — 41

Acquisition transaction costs — — 378 378

Other one-time costs or amortization 536 — 1,889 2,425

Warrant valuation adjustment — — 4 4

Interest income

4 unchanged sentences

(In thousands)

For the Three Months Ended September 30, 2022

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

For the Three Months Ended March 31, 2023

Segment income (loss) before income taxes $ 51,012 $ 46,432 $ ( 92,729 ) $ 4,715

Interest expense 9 — 69,299 69,308

Income tax expense — — 1,406 1,406

Depreciation and amortization 68,393 455 6 68,854

Contract assets amortization 1,655 — — 1,655

Proportionate EMI EBITDA — 78,357 — 78,357

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

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

Integration costs 14 81 2,243 2,338

Acquisition transaction costs 5 — 57 62

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

Gain on embedded derivative — — 488 488

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

Segment adjusted EBITDA (3)

Commodity hedging unrealized gain

( 4,987 ) — — ( 4,987 )

Midstream Logistics Pipeline Transportation Corporate and Other (1)

(In thousands)

For the Nine Months Ended September 30, 2023

Segment net income (loss) including noncontrolling interests $ 163,794 $ 146,524 $ ( 191,220 ) $ 119,098

Interest expense 32 — 130,411 130,443

Income tax expense — — 2,030 2,030

Depreciation and amortization 206,855 1,398 18 208,271

Contract assets amortization 4,965 — — 4,965

Proportionate EMI EBITDA — 71,867 — 71,867

1 unchanged sentence

Loss on disposal of assets 102 — — 102

Unrealized loss on derivatives 616 — — 616

Integration costs 7 — 918 925

1 unchanged sentence

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

Interest income

Warrant valuation adjustment — — 44 44

2 unchanged sentences

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

Midstream Logistics Pipeline Transportation Corporate and Other (1)

Consolidated (2)

(In thousands)

For the Nine Months Ended September 30, 2022

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

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

Income tax expense (benefit) 457 ( 39 ) 1,826 2,244

Depreciation and amortization 192,007 597 5 192,609

Contract assets amortization 1,344 — — 1,344

Proportionate EMI EBITDA — 190,438 — 190,438

Share-based compensation — — 30,966 30,966

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

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

Integration costs 933 81 8,998 10,012

Acquisition transaction costs 9 — 6,403 6,412

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

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

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

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

Segment adjusted EBITDA (3)

$ 380,919 $ 190,023 $ ( 9,863 ) $ 561,079

(1) Corporate and Other represents those results that:

1 unchanged sentence

(ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain General and Administrative Expense items.

(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 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;

Items included here to reconcile operating segments profit and loss with the Company’s consolidated profit and loss.

(2) Segment 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 most directly comparable GAAP measure.

The following tables present the revenue for the individual operating segments for the three and nine month periods ended September 30, 2023 and 2022:

Midstream Logistics Pipeline Transportation Consolidated

(In thousands)

For the Three Months Ended September 30, 2023

Revenue $ 324,863 $ 766 $ 325,629

Other revenue 4,670 2 4,672

Total segment operating revenue $ 329,533 $ 768 $ 330,301

Midstream Logistics Pipeline Transportation Consolidated

(In thousands)

Three Months Ended September 30, 2022

Revenue $ 320,667 $ 733 $ 321,400

Other revenue 3,774 2 3,776

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

Midstream Logistics Pipeline Transportation Consolidated

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q, for a definition of segment adjusted EBITDA.

The following tables present the revenue for the individual operating segments for the three month periods ended March 31, 2024 and 2023:

Midstream Logistics Pipeline Transportation Elimination Consolidated

(In thousands)

For the Nine Months Ended September 30, 2023

For the Three Months Ended March 31, 2024

Revenue $ 336,688 $ 2,074 $ — $ 338,762

Other revenue 2,630 2 — 2,632

Intersegment revenue (1)

— 6,215 ( 6,215 ) —

Total segment operating revenue $ 339,318 $ 8,291 $ ( 6,215 ) $ 341,394

1 unchanged sentence

(In thousands)

For the Nine Months Ended September 30, 2022

For the Three Months Ended March 31, 2023

Revenue $ 276,555 $ 694 $ 277,249

1 unchanged sentence

Total segment operating revenue $ 280,344 $ 696 $ 281,040

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

September 30, December 31,

(1) The Company accounts for intersegment sales at market prices, while it accounts for asset transfers at book value.

Intersegment revenue is eliminated at consolidation.

The following table presents total assets for each operating segment as of March 31, 2024 and December 31, 2023:

March 31, December 31,

(In thousands)

5 unchanged sentences

Total assets $ 6,447,584 $ 6,496,873

(1) Includes investment in unconsolidated affiliates of $ 2.52 billion and $ 2.38 billion as of September 30, 2023 and December 31, 2022, respectively .

(1) Includes investment in unconsolidated affiliates of $ 2.53 billion and $ 2.54 billion as of March 31, 2024 and December 31, 2023, respectively .

SUBSEQUENT EVENTS

On November 1, 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 November 13, 2023 on November 22, 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 November 22, 2023.

Core Shareholders will reinvest 100% of dividends received on Class C Common Units based on the Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”).

On November 9, 2023, all of the Company’s 12,577,350 Public Warrants and 6,364,281 Private Placement Warrants expired.

No warrant was exercised prior to expiration.

On May 9, 2024, the Company entered into a Membership Interest Purchase Agreement (the “Durango MIPA”) with Durango Midstream LLC, an affiliate of Morgan Stanley Energy Partners (the “Durango Seller”), and the Partnership, pursuant to which the Partnership has agreed to purchase all of the membership interests of Durango Permian, LLC (“Durango”) from Durango Seller for an aggregate purchase price of approximately $ 765.0 million (the “Durango Acquisition”), consisting of $ 315.0 million of cash to be paid at closing, approximately 3.8 million common units in the Partnership and an equivalent number of shares of Class C Common Stock to be issued at closing and approximately 7.7 million common units in the Partnership and an equivalent number of shares of Class C Common Stock to be issued on July 1, 2025.

Durango Seller is also entitled to a $ 75.0 million earn out in cash contingent upon the Kings Landing gas processing complex in Eddy County, New Mexico (the “Kings Landing Project”), which is currently under construction, being placed into service (the “Kings Landing Earnout”).

The Kings Landing Earnout is subject to certain adjustments for capital costs associated with the Kings Landing Project.

The Durango Acquisition is expected to close in the second quarter of 2024, subject to satisfaction of customary closing conditions, including regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR”).

Also on May 9, 2024, the Company entered into a Purchase and Sale Agreement (the “GCX Purchase Agreement”) with GCX Pipeline, LLC, an affiliate of ArcLight Capital Partners, LLC (the “GCX Buyer”), pursuant to which the Company has agreed to sell its 16 % membership interest in GCX to the GCX Buyer for a total purchase price of $ 540.0 million, consisting of $ 510.0 million of cash (subject to customary adjustments) and an additional $ 30.0 million earn out in cash upon final investment decision on a capacity expansion project.

The transactions pursuant to the GCX Purchase Agreement are expected to close in the second quarter of 2024, subject to customary closing conditions.

On April 18, 2024, 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 April 29, 2024 on May 9, 2024.

On April 2, 2024, Kinetik Receivables LLC (“Kinetik Receivables”), a bankruptcy remote special purpose entity formed as a direct subsidiary of the Partnership, which is a subsidiary of the Company, entered into an accounts receivable securitization facility with an initial facility limit of $ 150.0 million (“A/R Facility”) which has a scheduled termination date of April 1, 2025 with renewal options.

Pursuant to the terms of the A/R Facility, Kinetik Receivables acquires certain receivables from the Partnership and other subsidiaries of the Company and makes further sales of such receivables to certain purchasers.

The net proceeds of the A/R Facility were used, together with cash on hand, to repay a portion of the outstanding borrowings under the existing Term Loan Credit Facility, lowering the remaining balance to $ 1.00 billion.

As a result, the maturity of the Term Loan Credit Facility extended to December 8, 2026.

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