Kinetik Holdings Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) KINETIK HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, 2024 2023 (In thousands, except per share data) Operating revenues: Service revenue $ 102,195 $ 103,425 Product revenue 236,567 173,824 Other revenue 2,632 3,791 Total operating revenues (1) 341,394 281,040 Operating costs and expenses: Costs of sales (exclusive of depreciation and amortization) (2) (3) 153,687 115,877 Operating expenses 43,406 35,973 Ad valorem taxes 6,292 5,458 General and administrative expenses 34,136 27,511 Depreciation and amortization expenses 73,606 68,854 Loss on disposal of assets 4,166 102 Total operating costs and expenses 315,293 253,775 Operating income 26,101 27,265 Other income (expense): Interest and other income 91 294 Interest expense ( 47,467 ) ( 69,308 ) Equity in earnings of unconsolidated affiliates 60,469 46,464 Total other income (expense), net 13,093 ( 22,550 ) Income before income taxes 39,194 4,715 Income tax expense 3,787 416 Net income including noncontrolling interest 35,407 4,299 Net income attributable to Common Unit limited partners 23,857 2,863 Net income attributable to Class A Common Stock Shareholders $ 11,550 $ 1,436 Net income attributable to Class A Common Shareholders, per share Basic $ 0.12 $ ( 0.06 ) Diluted $ 0.12 $ ( 0.06 ) Weighted-average shares (4) Basic 57,869 47,612 Diluted 58,392 47,825 (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 Table of Contents KINETIK HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 2024 2023 (In thousands, except shares data) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 9,756 $ 4,510 Accounts receivable, net of allowance for credit losses of $ 1,000 in 2024 and 2023 (1) 209,878 215,721 Derivative assets 10,264 7,812 Prepaid and other current assets 27,391 29,256 257,289 257,299 NONCURRENT ASSETS: Property, plant and equipment, net 2,747,483 2,743,227 Intangible assets, net 562,837 591,670 Derivative asset, non-current 134 165 Deferred tax assets 238,258 235,627 Operating lease right-of-use assets 27,015 37,569 Deferred charges and other assets 83,213 85,250 Investments in unconsolidated affiliates 2,526,278 2,540,989 Goodwill 5,077 5,077 6,190,295 6,239,574 Total assets $ 6,447,584 $ 6,496,873 LIABILITIES, NONCONTROLLING INTEREST, AND EQUITY CURRENT LIABILITIES: Accounts payable $ 16,467 $ 34,000 Accrued expenses 170,075 177,421 Derivative liabilities 14,811 1,734 Current portion of operating lease liabilities 24,987 29,203 Other current liabilities 7,611 7,786 233,951 250,144 NONCURRENT LIABILITIES Long term debt, net 3,517,115 3,562,809 Contract liabilities 24,837 25,761 Operating lease liabilities 3,014 9,349 Derivative liabilities 418 5,363 Other liabilities 3,230 3,219 Deferred tax liabilities 13,785 13,244 3,562,399 3,619,745 Total liabilities 3,796,350 3,869,889 COMMITMENTS AND CONTINGENCIES (Note 15) Redeemable noncontrolling interest — Common Unit limited partners 3,624,670 3,157,807 EQUITY: Class A Common Stock: $ 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 6 6 Class C Common Stock: $ 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 9 9 Additional paid-in capital — 192,678 Accumulated deficit ( 973,451 ) ( 723,516 ) Total equity ( 973,436 ) ( 530,823 ) Total liabilities, noncontrolling interest, and equity $ 6,447,584 $ 6,496,873 (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. 2 Table of Contents KINETIK HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 2024 2023 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income including noncontrolling interests $ 35,407 $ 4,299 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 73,606 68,854 Amortization of deferred financing costs 1,699 1,521 Amortization of contract costs 1,655 1,655 Distributions from unconsolidated affiliates 77,213 67,764 Derivatives settlement 3,754 974 Derivative fair value adjustment 1,957 11,770 Warrants fair value adjustment — ( 44 ) Loss on disposal of assets 4,166 102 Equity in earnings from unconsolidated affiliates ( 60,469 ) ( 46,464 ) Share-based compensation 22,561 17,540 Deferred income taxes 3,660 363 Changes in operating assets and liabilities: Accounts receivable 5,843 5,008 Other assets 1,865 ( 2,206 ) Accounts payable ( 20,982 ) ( 3,175 ) Accrued liabilities 1,756 ( 10,679 ) Other non-current liabilities 11 1,677 Operating leases 3 632 Net cash provided by operating activities 153,705 119,591 CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment expenditures ( 57,975 ) ( 58,862 ) Intangible assets expenditures ( 2,223 ) ( 9,755 ) Investments in unconsolidated affiliates ( 3,273 ) ( 58,658 ) Distributions from unconsolidated affiliate 1,240 5,793 Cash proceeds from disposals 251 14 Net cash paid for acquisitions — ( 125,000 ) Net cash used in investing activities ( 61,980 ) ( 246,468 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on debt issuance cost ( 11 ) — Proceeds from revolver 44,000 267,000 Payments on revolver ( 91,000 ) ( 125,000 ) Cash dividends paid to Class A Common Stock shareholders ( 38,747 ) ( 16,927 ) Distributions paid to Class C Common Unit limited partners ( 721 ) ( 174 ) Repurchase of Class A Common Stock — ( 2,432 ) Net cash (used in) provided by financing activities ( 86,479 ) 122,467 Net change in cash 5,246 ( 4,410 ) CASH, BEGINNING OF PERIOD 4,510 6,394 CASH, END OF PERIOD $ 9,756 $ 1,984 SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES Cash paid for interest, net of amounts capitalized $ 57,095 $ 36,745 Property and equipment and intangible accruals in accounts payable and accrued liabilities $ 20,564 $ 32,715 Class A Common Stock issued through dividend and distribution reinvestment plan $ 74,247 $ 87,658 The accompanying notes are an integral part of the Condensed Consolidated Financial Statements. 3 KINETIK HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS (Unaudited) Redeemable Noncontrolling Interest — Common Unit Limited Partners Class A Common Stock Class C Common Stock Additional Paid-in Capital Accumulated Deficit Treasury Stock Total Equity 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 ) Redemption of Common Units ( 5,634 ) 181 — ( 181 ) — 5,634 — — 5,634 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 Net income 2,863 205 — — — — 1,436 — 1,436 Change in redemption value of noncontrolling interests ( 128,211 ) — — — — — 128,211 — 128,211 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 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 ) Redemption of Common Units ( 5,060 ) 146 — ( 146 ) — 5,060 — — 5,060 Issuance of common stock through dividend and distribution reinvestment plan — 2,179 — — — 74,247 — — 74,247 Share-based compensation — 290 — — — 22,561 — — 22,561 Net income 23,857 — — — — — 11,550 — 11,550 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 ) — — — — — — — — Dividends on Class A Common Stock ($ 0.75 per share) — — — — — — ( 43,200 ) — ( 43,200 ) 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. 4 Table of Contents KINETIK HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) These Condensed Consolidated Financial Statements have been prepared by Kinetik Holdings Inc. (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for interim periods, on a basis consistent with the annual audited financial statements, with the exception of recently adopted accounting pronouncements. 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 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 . 1. DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization 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. Gulf Coast. 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 the current year’s presentation. These reclassifications have no impact on net income. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year; accordingly, you should read these 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. 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 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. 5 Table of Contents 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 (“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. 2. BUSINESS COMBINATIONS 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 (In thousands) (1) Q1 2023 Midstream Infrastructure Assets and Incentive and Acceleration Agreement (a) $ 125,000 $ 4,736 $ 61,850 $ 3,150 $ 55,264 $ — $ — $ — (a) Consideration includes $ 65 million paid for certain midstream assets and the $ 60 million paid related to the incentive and acceleration agreement. Midstream Infrastructure Assets In the first quarter of 2023, the Partnership closed on a purchase and sale agreement for certain midstream assets for $ 65.0 million together with a new 20-year midstream service agreement. Midstream assets acquired consisted of water gathering and disposal assets and intangible right-of-way assets. As the net book value of the acquired assets were approximate to their fair market value, consideration was allocated to property, plant and equipment and intangibles based on the ratio of historical long-lived assets and intangible assets acquired. In addition, the Partnership entered into an incentive and acceleration agreement related to near term supplemental development activities on acreage dedicated for midstream services to affiliates of the Partnership. Such development activities began in October 2023 and are subject to semi-annual performance milestones and subject to refund with consequential monetary penalty if not satisfied. Consideration for the incentive and acceleration agreement of $ 60.0 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, 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. 3. REVENUE RECOGNITION Disaggregation of Revenue The following table presents a disaggregation of the Company’s revenue: Three Months Ended March 31, 2024 2023 (In thousands) Gathering and processing services $ 102,195 $ 103,425 Natural gas, NGLs and condensate sales 236,567 173,824 Other revenue 2,632 3,791 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. 6 Table of Contents Remaining Performance Obligations 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: Amount Fiscal Year (In thousands) Remaining of 2024 $ 44,181 2025 69,099 2026 64,789 2027 64,105 2028 63,012 Thereafter 203,692 $ 508,878 Our contractually committed revenue, for the purposes of the tabular presentation above, is limited to customer contracts that have fixed pricing and fixed volume terms and conditions, including contracts with payment obligations associated with MVCs. Contract Liabilities The following table provides information about contract liabilities from contracts with customers as of March 31, 2024: Amount (In thousands) Balance at December 31, 2023 $ 32,238 Reclassification of beginning contract liabilities to revenue as a result of performance obligations being satisfied ( 1,614 ) Cash received in advance and not recognized as revenue 514 Balance at March 31, 2024 31,138 Less: Current portion 6,301 Non-current portion $ 24,837 Contract liabilities relate to payments received in advance of satisfying performance obligations under a contract, which result from contribution in aid of construction payments. Current and noncurrent contract liabilities are included in “Other Current Liabilities” and “Contract Liabilities,” respectively, of the Condensed Consolidated Balance Sheets. Contract Cost Assets 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 $ 1.7 million for the three months ended March 31, 2024 and 2023, respectively. 7 Table of Contents 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, at carrying value, is as follows: March 31, December 31, 2024 2023 (In thousands) Gathering, processing, and transmission systems and facilities $ 3,300,290 $ 3,253,539 Vehicles 12,642 11,447 Computers and equipment 7,324 6,242 Less: accumulated depreciation ( 666,838 ) ( 626,223 ) Total depreciable assets, net 2,653,418 2,645,005 Construction in progress 68,816 74,369 Land 25,249 23,853 Total property, plant, and equipment, net $ 2,747,483 $ 2,743,227 The cost of property classified as “Construction in progress” is excluded from capitalized costs being depreciated. These amounts represent property that is not yet available to be placed into productive service as of the respective reporting date. 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. 5. INTANGIBLE ASSETS, NET Intangible assets, net, are comprised of the following: March 31, December 31, 2024 2023 (In thousands) Customer contracts $ 1,139,633 $ 1,139,665 Right of way assets 143,653 141,711 Less accumulated amortization ( 720,449 ) ( 689,706 ) 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 ranged from one to twenty years . 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 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. 8 Table of Contents 6. EQUITY METHOD INVESTMENTS 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. For each EMI pipeline entity, the Company has the ability to exercise significant influence based on certain governance provisions and its participation in the significant activities and decisions that impact the management and economic performance of the EMI pipeline. The table below presents the ownership percentages and investment balances held by the Company for each entity: March 31, December 31, Ownership (1) 2024 2023 (In thousands) PHP 55.5 % $ 1,654,920 $ 1,666,254 Breviloba 33.0 % 440,869 443,684 Gulf Coast Express Pipeline LLC (“GCX”) 16.0 % 430,489 431,051 $ 2,526,278 $ 2,540,989 (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, 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 three months ended March 31, 2024: Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC Total (In thousands) Balance at December 31, 2023 $ 1,666,254 $ 443,684 $ 431,051 $ 2,540,989 Contributions 3,273 — — 3,273 Distributions (1) ( 58,375 ) ( 10,485 ) ( 9,593 ) ( 78,453 ) Equity income, net (2) 43,768 7,670 9,031 60,469 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 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, 2024 2023 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 $ 126,215 $ 50,958 $ 91,001 $ 92,840 $ 45,901 $ 89,748 Operating income 80,567 25,420 66,580 56,805 21,949 65,216 Net income 80,159 25,552 66,429 59,691 22,211 71,091 9 Table of Contents 7. DEBT AND FINANCING COSTS The following table summarizes the Company’s debt obligations as of March 31, 2024 and December 31, 2023: March 31, December 31, 2024 2023 (In thousands) Unsecured term loan $ 1,200,000 $ 1,200,000 $ 1.00 billion 2030 senior unsecured notes 1,000,000 1,000,000 $ 0.80 billion 2028 senior unsecured notes 800,000 800,000 $ 1.25 billion revolving line of credit 547,000 594,000 Total long-term debt 3,547,000 3,594,000 Debt issuance costs, net (1) ( 30,241 ) ( 31,510 ) Unamortized debt premiums and discounts, net 356 319 Total long-term debt, net $ 3,517,115 $ 3,562,809 (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. The table below presents the components of the Company’s financing costs, net of capitalized interest: Three Months Ended March 31, 2024 2023 (In thousands) Capitalized interest $ ( 944 ) $ ( 2,233 ) Debt issuance costs 1,699 1,521 Interest expense 46,712 70,020 Total financing costs, net of capitalized interest $ 47,467 $ 69,308 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 (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. 10 Table of Contents Fair Value of Financial Instruments 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. 8. ACCRUED EXPENSES The following table provides detail of the Company’s current accrued expenses on March 31, 2024 and December 31, 2023: March 31, December 31, 2024 2023 (In thousands) Accrued product purchases $ 100,087 $ 109,172 Accrued taxes 6,528 632 Accrued salaries, vacation, and related benefits 3,848 1,872 Accrued capital expenditures 8,371 18,534 Accrued interest 35,746 33,760 Accrued other expenses 15,495 13,451 Total accrued expenses $ 170,075 $ 177,421 Accrued product purchases mainly accrue the liabilities related to producer payments and any additional business-related miscellaneous fees we owe to third parties, such as transport or capacity fees as of March 31, 2024. 9. EQUITY Redeemable Noncontrolling Interest — Common Unit Limited Partners 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 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. Common Stock 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 During the quarter ended March 31, 2024, the Company did not repurchase any of its Class A Common Stock under the Repurchase Program. 11 Table of Contents Dividend 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. 10. FAIR VALUE MEASUREMENTS 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 (In thousands) Commodity swap $ — $ 1,716 $ — $ 1,716 Interest rate derivatives — 8,682 — 8,682 Total assets $ — $ 10,398 $ — $ 10,398 Commodity swaps $ — $ 14,889 $ — $ 14,889 Interest rate derivatives — 340 — 340 Total liabilities $ — $ 15,229 $ — $ 15,229 December 31, 2023 Level 1 Level 2 Level 3 Total (In thousands) Commodity swap $ — $ 3,663 $ — $ 3,663 Interest rate derivatives — 4,314 — 4,314 Total assets $ — $ 7,977 $ — $ 7,977 Commodity swaps $ — $ 1,749 $ — $ 1,749 Interest rate derivatives — 5,348 — 5,348 Total liabilities $ — $ 7,097 $ — $ 7,097 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. 12 Table of Contents 11. DERIVATIVES AND HEDGING ACTIVITIES The Company is exposed to certain risks arising from both its business operations and economic conditions, and it enters into certain derivative contracts to manage exposure to these risks. To minimize counterparty credit risk in derivative instruments, the Company enters into transactions with high credit-rating counterparties. The Company did not elect to apply hedge accounting to these derivative contracts and recorded the fair value of the derivatives on the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023. Interest Rate Risk The Company manages market risks, including interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of its debt funding and by using derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract. 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. The following table presents the fair value of derivative assets and liabilities related to the interest rate swap contracts: March 31, December 31, 2024 2023 (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, 2024 2023 (In thousands) Cash settlements $ 3,952 $ — Favorable (unfavorable) fair value adjustment $ 13,329 $ ( 17,190 ) Commodity Price Risk The results of the Company’s operations may be affected by the market prices of oil, natural gas and NGLs. A portion of the Company’s revenue is directly tied to local natural gas, natural gas liquids and condensate prices in the Permian Basin and the U.S. Gulf Coast. Fluctuations in commodity prices also impact operating cost elements both directly and indirectly. Management regularly reviews the Company’s potential exposure to commodity price risk and manages exposure of such risk through commodity hedge contracts. 13 Table of Contents 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 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 Bbl 95,600 ( 36 ) Natural Gas Basis Spread Swaps MMBtus 27,565,000 ( 5,436 ) $ ( 13,173 ) The fair value or settlement value of the swaps outstanding are presented on a gross basis on the Condensed Consolidated Balance Sheets. The following table presents the fair value of derivative assets and liabilities related to commodity swaps: March 31, December 31, 2024 2023 (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, 2024 2023 (In thousands) Cash settlements $ ( 198 ) $ 974 (Unfavorable) favorable fair value adjustment $ ( 15,286 ) $ 5,420 12. SHARE-BASED COMPENSATION 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”). 14 Table of Contents 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 Vested 16,404 31.18 Forfeited 796 31.18 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, 2024 2023 (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.” 15 Table of Contents 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 Granted 585,340 35.17 Vested 290,708 34.24 Forfeited 4,039 32.44 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, 2024 2023 (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. 16 Table of Contents The table below presents a summary of the grant-date fair value assumptions used to value the PSUs on grant date: March 2024 Grant-date fair value per unit $ 36.76 Beginning average price $ 32.84 Risk-free interest rate 4.21 % Volatility factor 37 % Expected term 2.82 years 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. 13. INCOME TAXES The Company is subject to U.S. 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 March 31, 2024 2023 (In thousands) Income before income taxes $ 39,194 $ 4,715 Income tax expense $ 3,787 $ 416 Effective tax rate 9.66 % 8.82 % 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. 14. NET INCOME PER SHARE The computation of basic and diluted net income per share for the periods presented in the condensed consolidated financial statements is shown in the tables below: Three Months Ended March 31, 2024 2023 (In thousands, except per share amounts) Net income attributable to Class A common shareholders $ 11,550 $ 1,436 Less: Net income available to participating unvested restricted Class A common shareholders (1) ( 4,394 ) ( 4,156 ) Total net income attributable to Class A common shareholders $ 7,156 $ ( 2,720 ) Weighted average shares outstanding - basic (2) 57,869 47,612 Dilutive effect of unvested Class A common shares (3) 523 213 Weighted average shares outstanding - diluted (2)(4) 58,392 47,825 Net income available per common share - basic $ 0.12 $ ( 0.06 ) Net income available per common share - diluted $ 0.12 $ ( 0.06 ) (1) Represents dividends paid to unvested Class A Shares. 17 Table of Contents (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. 15. COMMITMENTS AND CONTINGENCIES Accruals for loss contingencies arising from claims, assessments, litigation, environmental and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. As of March 31, 2024 and December 31, 2023, there were no accruals for loss contingencies. Litigation The Company is a party to various legal actions arising in the ordinary course of its business. 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. 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 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 Permian Gas Acquisition As part of the acquisition of Permian Gas on June 11, 2019, consideration included a contingent liability arrangement with PDC Permian, Inc. (“PDC”). 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 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. 18 Table of Contents 16. SEGMENTS 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. Therefore, our two operating segments represent our reportable segments. The activities of each of our reportable segments from which the Company earns revenues and incurs expenses are described below: • Midstream Logistics: The Midstream Logistics segment operates under three streams, 1) gas gathering and processing, 2) crude oil gathering, stabilization and storage services and 3) produced water gathering and disposal. • Pipeline Transportation: The Pipeline Transportation segment consists of equity investment interests in four Permian Basin pipelines that access various points along the U.S. Gulf Coast, as well as Kinetik NGL and Delaware Link Pipelines. The current operating pipelines transport crude oil, natural gas and NGLs. 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 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) Consolidated (In thousands) For the Three Months Ended March 31, 2024 Segment income (loss) before income taxes $ 50,173 $ 65,298 $ ( 76,277 ) $ 39,194 Add back: Interest expense 16 — 47,451 47,467 Depreciation and amortization 71,310 2,290 6 73,606 Contract assets amortization 1,655 — — 1,655 Proportionate EMI EBITDA — 88,402 — 88,402 Share-based compensation — — 22,561 22,561 Loss on disposal of assets 4,166 — — 4,166 Commodity hedging unrealized loss 15,088 — — 15,088 Integration costs 41 — — 41 Other one-time costs or amortization 536 — 1,889 2,425 Deduct: Interest income — — 577 577 Equity income from unconsolidated affiliates — 60,469 — 60,469 Segment Adjusted EBITDA (2) $ 142,985 $ 95,521 $ ( 4,947 ) $ 233,559 19 Table of Contents Midstream Logistics Pipeline Transportation Corporate and Other (1) Consolidated (In thousands) For the Three Months Ended March 31, 2023 Segment income (loss) before income taxes $ 51,012 $ 46,432 $ ( 92,729 ) $ 4,715 Add back: Interest expense 9 — 69,299 69,308 Depreciation and amortization 68,393 455 6 68,854 Contract assets amortization 1,655 — — 1,655 Commodity hedging unrealized gain ( 4,987 ) — — ( 4,987 ) Proportionate EMI EBITDA — 71,867 — 71,867 Share-based compensation — — 17,540 17,540 Loss on disposal of assets 102 — — 102 Integration costs 7 — 918 925 Acquisition transaction costs 33 — 235 268 Other one-time costs or amortization 3,025 — 723 3,748 Deduct: Warrant valuation adjustment — — 44 44 Equity income from unconsolidated affiliates — 46,464 — 46,464 Segment Adjusted EBITDA (2) $ 119,249 $ 72,290 $ ( 4,052 ) $ 187,487 (1) Corporate and Other represents those results that: (i) are not specifically attributable to a reportable segment; (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. 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” 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 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 Midstream Logistics Pipeline Transportation Consolidated (In thousands) For the Three Months Ended March 31, 2023 Revenue $ 276,555 $ 694 $ 277,249 Other revenue 3,789 2 3,791 Total segment operating revenue $ 280,344 $ 696 $ 281,040 (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. 20 Table of Contents The following table presents total assets for each operating segment as of March 31, 2024 and December 31, 2023: March 31, December 31, 2024 2023 (In thousands) Midstream Logistics $ 3,734,578 $ 3,772,764 Pipeline Transportation (1) 2,686,670 2,703,588 Segment total assets 6,421,248 6,476,352 Corporate and other 26,336 20,521 Total assets $ 6,447,584 $ 6,496,873 (1) Includes investment in unconsolidated affiliates of $ 2.53 billion and $ 2.54 billion as of March 31, 2024 and December 31, 2023, respectively . 17. SUBSEQUENT EVENTS 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. 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 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. 21 Table of Contents