What changed in this filing

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Item 1. Financial Statements

2024-11-08 compared with 2024-08-09 · 239 added, 207 removed, 736 unchanged (38% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

13 unchanged sentences

Depreciation and amortization expenses 87,583 69,935 236,250 208,271

(Gain) loss on disposal of assets

Loss on disposal of assets

— 2,927 4,090 15,166

19 unchanged sentences

Diluted 60,424 53,463 59,852 50,719

(1) Includes amounts associated with related parties of nil and $ 25.1 million for the three months ended June 30, 2024 and 2023, respectively, and $ 17.2 million and $ 50.9 million for the six months ended June 30, 2024 and 2023, respectively.

(2) Includes amounts associated with related parties of $ 12.5 million and $ 15.4 million for the three months ended June 30, 2024 and 2023, respectively, and $ 35.9 million and $ 35.1 million for the six months ended June 30, 2024 and 2023, respectively .

(3) Cost of sales (exclusive of depreciation and amortization) is net of gas service revenues totaling $ 54.7 million and $ 38.1 million for the three months ended June 30, 2024 and 2023, respectively, and $ 99.2 million and $ 68.5 million for the six months ended June 30, 2024 and 2023, respectively, for certain volumes where we act as principal.

(1) Includes amounts associated with related parties of nil and $ 20.0 million for the three months ended September 30, 2024 and 2023, respectively, and $ 17.2 million and $ 70.9 million for the nine months ended September 30, 2024 and 2023, respectively.

(2) Includes amounts associated with related parties of $ 12.8 million and $ 15.5 million for the three months ended September 30, 2024 and 2023, respectively, and $ 48.7 million and $ 50.6 million for the nine months ended September 30, 2024 and 2023, respectively .

(3) Cost of sales (exclusive of depreciation and amortization) is net of gas service revenues totaling $ 60.2 million and $ 38.6 million for the three months ended September 30, 2024 and 2023, respectively, and $ 159.4 million and $ 107.1 million for the nine months ended September 30, 2024 and 2023, respectively, for certain volumes where we act as principal.

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

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, December 31,

September 30, December 31,

(In thousands, except shares data)

39 unchanged sentences

Class A Common Stock:

$ 0.0001 par, 1,500,000,000 shares authorized, 59,735,864 and 57,096,538 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

$ 0.0001 par, 1,500,000,000 shares authorized, 59,751,435 and 57,096,538 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Class C Common Stock:

$ 0.0001 par, 1,500,000,000 shares authorized, 97,783,034 and 94,089,038 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

$ 0.0001 par, 1,500,000,000 shares authorized, 97,783,034 and 94,089,038 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Deferred consideration

4 unchanged sentences

(1) Includes amounts of $ 15.8 million associated with related parties as of December 31, 2023.

No related party balance as of June 30, 2024.

No related party balance as of September 30, 2024.

See Note 1—Description of the Organization and Summary of Significant Accounting Polices in the Notes to Condensed Consolidated Financial Statements for additional information.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income including noncontrolling interests $ 144,355 $ 75,967

Net income including noncontrolling interest

$ 228,009 $ 119,098

Adjustments to reconcile net income to net cash provided by operating activities:

2 unchanged sentences

Amortization of contract costs 4,965 4,965

Contingent liabilities fair value adjustment 1,400 —

Distributions from unconsolidated affiliates 223,670 205,891

4 unchanged sentences

Loss on disposal of assets 4,090 15,166

Equity in earnings from unconsolidated affiliates ( 116,424 ) ( 96,074 )

Equity in earnings of unconsolidated affiliates ( 169,668 ) ( 146,828 )

Loss on debt extinguishment 525 —

13 unchanged sentences

Investments in unconsolidated affiliates ( 3,273 ) ( 202,729 )

Net cash paid for acquisition of interest in unconsolidated affiliate

Distributions from unconsolidated affiliate 2,789 5,793

3 unchanged sentences

( 341,183 ) ( 125,000 )

Net cash provided by (used in) investing activities

Net cash used in investing activities

( 65,909 ) ( 582,600 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from borrowing under A/R Facility

Proceeds from borrowings under A/R Facility

Payments on A/R Facility ( 1,200 ) —

11 unchanged sentences

Net change in cash 15,928 ( 6,326 )

CASH, BEGINNING OF PERIOD 4,510 6,394

CASH, END OF PERIOD $ 12,549 $ 2,237

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

CASH, BEGINNING OF PERIOD 4,510 6,394

CASH, END OF PERIOD $ 20,438 $ 68

SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES

2 unchanged sentences

Property and equipment and intangible accruals in accounts payable and accrued liabilities $ 24,140 $ 25,237

Lease assets obtained in exchange for lease liabilities

Right-of-use assets obtained in exchange for lease liabilities

$ 42,974 $ 5,189

7 unchanged sentences

Durango liabilities assumed

(1) See Note 2—Business Combinations in the Notes to Condensed Consolidated Financial Statements for additional information regarding the Durango Acquisition (as defined herein).

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

6 unchanged sentences

(In thousands)

For the Quarter Ended June 30, 2023

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

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 —

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

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

4 unchanged sentences

— — — — — — — — ( 39,587 ) — ( 39,587 )

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

For the Quarter Ended September 30, 2024

Balance at June 30, 2024 $ 4,289,591 59,736 $ 6 97,783 $ 9 7,680 $ 1 $ — $ ( 1,206,909 ) $ — $ ( 1,206,893 )

For the Quarter Ended June 30, 2024

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

Durango Acquisition

423,200 — — 3,840 — 7,680 1 — — — 1

Issuance of common stock through dividend and distribution reinvestment plan — 11 — — — — — 444 — — 444

6 unchanged sentences

— — — — — — — — ( 45,341 ) — ( 45,341 )

Balance at June 30, 2024 $ 4,289,591 59,736 $ 6 97,783 $ 9 7,680 $ 1 $ — $ ( 1,206,909 ) $ — $ ( 1,206,893 )

Balance at September 30, 2024 $ 4,783,180 59,751 $ 6 97,783 $ 9 7,680 $ 1 $ — $ ( 1,720,721 ) $ — $ ( 1,720,705 )

KINETIK HOLDINGS INC.

5 unchanged sentences

(In thousands)

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Balance at December 31, 2022

10 unchanged sentences

— — — — — — — — ( 110,902 ) — ( 110,902 )

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

For the Six Months Ended June 30, 2024

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

For the Nine Months Ended September 30, 2024

Balance at December 31, 2023

11 unchanged sentences

— — — — — — — — ( 133,868 ) — ( 133,868 )

Balance at June 30, 2024 $ 4,289,591 59,736 $ 6 97,783 $ 9 7,680 $ 1 $ — $ ( 1,206,909 ) $ — $ ( 1,206,893 )

Balance at September 30, 2024 $ 4,783,180 59,751 $ 6 97,783 $ 9 7,680 $ 1 $ — $ ( 1,720,721 ) $ — $ ( 1,720,705 )

(1) Pursuant to the Durango MIPA (as defined herein), deferred consideration of 7.7 million shares of Class C Common Stock is to be issued on July 1, 2025.

Fair value of the deferred consideration was included in the “Redeemable noncontrolling interest—Common Units limited partners” of the Condensed Consolidated Balance Sheets as of June 30, 2024.

Fair value of the deferred consideration was included in the “Redeemable noncontrolling interest—Common Units limited partners” of the Condensed Consolidated Balance Sheets as of September 30, 2024.

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

2 unchanged sentences

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”).

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

17 unchanged sentences

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 six months ended June 30, 2024, except discussed herein.

There were no significant updates or revisions to our accounting policies during the nine months ended September 30, 2024, except as discussed herein.

Accounts Receivable Securitization Facility

Pursuant to ASC 860, Transfers and Servicing, accounts receivable that are sold or contributed by the Partnership to the special purpose vehicle (“SPV”) are treated as collateral for borrowings under the third party A/R Facility (as defined below) and are included in “Accounts receivable pledged” of the Condensed Consolidated Balance Sheet as pledged receivables.

Proceeds from the transfer of the eligible accounts receivable under the third party A/R Facility are secured borrowings included in the “Current debt obligations” of our Condensed Consolidated Balance Sheets.

Pursuant to ASC 860, Transfers and Servicing, accounts receivable that are sold or contributed by the Partnership to the special purpose vehicle are treated as collateral for borrowings under the third party A/R Facility (as defined below) and are included as “Accounts receivable pledged” within the Condensed Consolidated Balance Sheet.

Proceeds from the transfer of the eligible accounts receivable under the third party A/R Facility are secured borrowings included as “Current debt obligations” within our Condensed Consolidated Balance Sheets.

Proceeds and repayments under such facility are reflected as cash flows from financing activities in our Consolidated Statements of Cash Flows.

See Note 7—Debt and Financing Cost s in the Notes to our Condensed Consolidated Financial Statements set forth in this Form 10-Q for further discussion.

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

Transactions with related parties

3 unchanged sentences

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, revenue from Apache was $ 25.1 million and $ 50.9 million, cost of sales was $ 13.3 million and $ 31.1 million, and operating expenses were $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2023, respectively.

In 2023, revenue from Apache was $ 20.0 million and $ 70.9 million, cost of sales was $ 13.1 million and $ 44.2 million, and operating expenses were $ 0.1 million and $ 0.5 million for the three and nine months ended September 30, 2023, respectively.

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 and six months ended June 30, 2024, the Company recorded cost of sales of $ 12.5 million and $ 26.5 million, respectively, with these affiliates.

For the three and six months ended June 30, 2023, the Company recorded cost of sales of $ 2.1 million and $ 4.0 million, respectively, with these affiliates.

For the three and nine months ended September 30, 2024, the Company recorded cost of sales of $ 12.8 million and $ 39.3 million, respectively, with these affiliates.

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

Recently issued accounting pronouncements not yet adopted

7 unchanged sentences

We are evaluating the effect of the amendments on our consolidated financial statements and expect to disclose the required information for fiscal years beginning in the Annual Report on Form 10-K for the year ended December 31, 2024 and for interim periods beginning in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2025.

The impact of the adoption will be limited to additional disclosure in the notes to the consolidated financial statements.

Improvements to Income Tax Disclosures

6 unchanged sentences

BUSINESS COMBINATIONS

For acquired businesses, we recognize the identifiable assets acquired, the liabilities assumed at their estimated fair values on the date of acquisition with any excess purchase price over the fair value of net assets acquired recorded to goodwill.

For acquired businesses, we recognize the identifiable assets acquired and the liabilities assumed at their estimated fair values on the date of acquisition with any excess purchase price over the fair value of net assets acquired recorded to goodwill.

Determining the fair value of these items requires management’s judgment and the utilization of an independent valuation specialist, if applicable, and involves the use of significant estimates and assumptions.

3 unchanged sentences

The Kings Landing Earnout is subject to reduction based on actual capital costs associated with the Kings Landing Project.

The Durango Acquisition allows the Company to further expands its footprint into New Mexico and across the Northern Delaware Basin.

The Durango Acquisition allows the Company to further expand its footprint into New Mexico and across the Northern Delaware Basin.

The Durango Acquisition was accounted for as a business combination in accordance with ASC 805 Business Combination (“ASC 805”).

Starting on the Closing Date, our Consolidated Financial Statements reflected Durango as a consolidated subsidiary.

The accompanying Condensed Consolidated Financial Statements herein include (i) the combined net assets of the Company carried at historical costs and net assets of Durango carried at fair value as of the Closing Date and (ii) the combined results of operations with Durango’s results presented within the Condensed Consolidated Financial Statements from the Closing Date going forward.

The preliminary purchase price allocation, based on Durango’s latest financial statements available as of May 31, 2024, includes preliminary adjustments for working capital and fair value of underlying assets acquired and liabilities assumed.

The accompanying Condensed Consolidated Financial Statements herein include (i) the combined net assets of the Company carried at historical costs and net assets of Durango carried at fair value as of the Closing Date and (ii) the combined results of operations of the Company with Durango’s results presented within the Condensed Consolidated Financial Statements from the Closing Date going forward.

The preliminary purchase price allocation was based on Durango’s latest financial statements available as of May 31, 2024, and included preliminary adjustments for working capital and fair value of underlying assets acquired and liabilities assumed.

Both observable and non-observable market data, thus Level 2 and Level 3 inputs, are used in the assessment of the fair value of the assets acquired and liabilities assumed listed in the below table.

The Company recorded goodwill of $ 10.4 million related to operational synergies and the acquired assembled workforce.

The fair value of the processing plants, gathering system and related facilities and equipment is based on market and cost approaches and will be depreciated over an estimated useful life of 20 years, which is consistent with the Company’s policy over similar facilities and equipment.

The fair value of the intangible assets is based on the market approach for the right-of-way (“ROW”) and discounted cash flow approach for customer contracts, which will be amortized over estimated useful lives ranging from seven to twenty years .

The fair value of the processing plants, gathering system and related facilities and equipment is based on market and cost approaches and will be depreciated over an estimated useful life ranging from five to thirty years , which is consistent with the Company’s policy over similar facilities and equipment.

The fair value of the intangible assets is based on the market approach for the right-of-way and discounted cash flow approach for customer contracts, which will be amortized over estimated useful lives ranging from seven to twelve years .

The assumed liabilities are approximate to fair value at the Closing Date.

The Company will continue to identify necessary adjustments to finalize the purchase price allocation during the 12-month period following the acquisition Closing Date as information about facts and circumstances that existed at the acquisition Closing Date become available.

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

In addition, the Company recorded contingent liabilities related to the Kings Landing Earnout based on project completion probability, see additional information in Note 15 —C ommitments and Contingencies in the Notes to our Condensed Consolidated Financial Statements set forth in this Form 10-Q.

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

In addition, the Company recorded a contingent liability related to the Kings Landing Earnout based on project completion probability, see additional information in Note 15—Commitments and Contingencies in the Notes to our Condensed Consolidated Financial Statements set forth in this Form 10-Q.

Since the Closing Date, the Company has made necessary adjustments to the purchase price allocation as information about facts and circumstances that existed at the Closing Date have become available.

This included certain working capital adjustments as a result of obtaining Durango’s closing balance sheet as of June 30, 2024.

During the three months ended September 30, 2024, the Company identified working capital adjustments of $ 21.0 million resulting from the final closing balance sheet, and valuation adjustments related to the long-lived assets and intangible assets of $ 10.6 million, resulting in a decrease in goodwill of $ 10.4 million.

The Company will continue to identify necessary adjustments to finalize the purchase price allocation during the 12-month period following the Closing Date as we obtain the remaining original cost data for our tangible asset valuation, as well as complete our evaluation of the potential liabilities assumed, including certain historical environmental exposures.

The following table summarizes the estimated fair value of assets acquired and liabilities assumed in the Durango Acquisition as of June 24, 2024, in accordance with ASC 805:

7 unchanged sentences

Operating lease ROU assets

Goodwill 10,411

Total assets acquired 910,221

7 unchanged sentences

Consideration transferred

The Company incurred acquisition-related costs of $ 3.2 million for the three and six months ended June 30, 2024, which was included in the “General and administrative expenses” of the Condensed Consolidated Statements of Operations.

The Company’s Condensed Consolidated Statement of Operations included results of operations from Durango starting from the Closing Date through June 30, 2024, which included estimated revenues of $ 3.2 million and net income including noncontrolling interest of $ 0.2 million, excluding intercompany revenue and cost of sales, for the three and six months ended June 30, 2024.

(1) Pursuant to ASC 805, the Company evaluated the earn-out consideration classification in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”).

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

Therefore, the Company records the contingent consideration at fair value as of September 30, 2024.

Additional discussion in Note 15—Commitments and Contingencies in the Notes to our Condensed Consolidated Financial Statements set forth in this Form 10-Q.

The Company incurred acquisition-related costs of $ 3.2 million for the nine months ended September 30, 2024, which were included in the “General and administrative expenses” of the Condensed Consolidated Statements of Operations.

The Company’s Condensed Consolidated Statement of Operations included results of operations from Durango starting from the Closing Date through September 30, 2024, which included revenues of $ 35.8 million and $ 38.9 million, and net income including noncontrolling interest of $ 1.4 million and $ 1.6 million for the three and nine months ended September 30, 2024, respectively.

Supplemental Pro Forma Information

The unaudited supplemental pro forma financial data is for informational purposes only and is not indicative of future results.

The results below for the three and six months ended June 30, 2024 and 2023 combine the results of the Company and Durango, giving effect to the Durango Acquisition as if it had been completed on January 1, 2023.

Three Months Ended June 30,

Six Months Ended June 30,

The results below for the three and nine months ended September 30, 2024 and 2023, respectively, combine the results of the Company and Durango, giving effect to the Durango Acquisition as if it had been completed on January 1, 2023.

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

2024 2023 2024 2023

2 unchanged sentences

Net income including noncontrolling interest $ 83,602 $ 46,575 $ 228,652 $ 123,738

Given the assumed pro forma transaction date of January 1, 2023, we removed $ 3.3 million and $ 3.5 million of acquisition-related expenses for the three and six months ended June 30, 2024, respectively, and recognized $ 3.5 million of acquisition-related expenses for six months ended June 30, 2023.

We also removed $ 5.9 million and $ 12.2 million of interest expense on Durango’s debt for the three and six months ended June 30, 2024, respectively, and $ 3.7 million and $ 7.2 million for the three and six months ended June 30, 2023, respectively, as if the business combination had occurred and the debt had been paid off on January 1, 2023.

Given the assumed pro forma transaction date of January 1, 2023, we removed $ 3.5 million of acquisition-related expenses for the nine months ended September 30, 2024 and recognized $ 3.5 million of acquisition-related expenses for the nine months ended September 30, 2023.

We also removed $ 24.0 million of interest expense on Durango’s debt for the nine months ended September 30, 2024, and $ 3.9 million and $ 11.1 million for the three and nine months ended September 30, 2023, respectively, as if the business combination had occurred and the debt had been paid off on January 1, 2023.

Midstream Infrastructure Assets

4 unchanged sentences

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

The Company had goodwill of $ 15.5 million recorded in the Midstream Logistic segment related to various business combinations as of June 30, 2024.

The Company had goodwill of $ 5.1 million recorded in the Midstream Logistic segment related to a past business combination as of September 30, 2024.

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

Company’s management assessed 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 respective business combinations and concluded that goodwill was no t impaired as of June 30, 2024.

Company’s management assessed 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 respective business combination and concluded that goodwill was not impaired as of September 30, 2024.

REVENUE RECOGNITION

1 unchanged sentence

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

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

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

2024 2023 2024 2023

4 unchanged sentences

Total revenues $ 396,362 $ 330,301 $ 1,097,213 $ 907,544

There have been no significant changes to the Company’s contracts with customers during the three and six months ended June 30, 2024.

The Company recognized revenues from MVC deficiency payments of nil for the three and six months ended June 30, 2024 and $ 0.1 million and $ 1.2 million for the three and six months ended 2023, respectively.

There have been no significant changes to the Company’s contracts with customers during the three and nine months ended September 30, 2024 aside from the addition of certain gas gathering and processing agreements associated with the Durango acquisition.

The Company did not recognize revenues from MVC deficiency payments for the three and nine months ended September 30, 2024 and recognized $ 0.4 million and $ 1.6 million of revenues from MVC deficiency payments for the three and nine months ended September 30, 2023, respectively.

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 June 30, 2024:

Fiscal Year (In thousands)

3 unchanged sentences

Contract Liabilities

The following table provides information about contract liabilities from contracts with customers as of June 30, 2024:

The following table provides information about contract liabilities from contracts with customers as of September 30, 2024:

(In thousands)

2 unchanged sentences

Cash received in advance and not recognized as revenue 997

Balance at June 30, 2024 29,479

Balance at September 30, 2024 28,053

Current portion 6,195

1 unchanged sentence

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.

Current and noncurrent contract liabilities are included in “Other Current Liabilities” and “Contract Liabilities,” respectively, in 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 June 30, 2024 and December 31, 2023, the Company had contract acquisition cost assets of $ 68.1 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.

As of September 30, 2024 and December 31, 2023, the Company had contract acquisition cost assets of $ 66.2 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, in 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 for the three months ended June 30, 2024 and 2023, respectively, and $ 3.3 million for the six months ended June 30, 2024 and 2023, respectively.

The Company recognized cost of sales associated with these assets of $ 1.7 million for the three months ended September 30, 2024 and 2023, respectively, and $ 5.0 million for the nine months ended September 30, 2024 and 2023, respectively.

PROPERTY, PLANT AND EQUIPMENT

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

June 30, December 31,

September 30, December 31,

(In thousands)

9 unchanged sentences

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

The Company recorded $ 43.8 million and $ 38.9 million of depreciation expense for the three months ended June 30, 2024 and 2023, respectively, and $ 86.6 million and $ 77.3 million for the six months ended June 30, 2024 and 2023, respectively.

There were no impairment triggering events for property, plant and equipment during the three and six months ended June 30, 2024 and 2023.

The Company recorded $ 48.7 million and $ 39.4 million of depreciation expense for the three months ended September 30, 2024 and 2023, respectively, and $ 135.3 million and $ 116.6 million for the nine months ended September 30, 2024 and 2023, respectively.

There were no impairment triggering events for property, plant and equipment during the three and nine months ended September 30, 2024 and 2023.

INTANGIBLE ASSETS, NET

Intangible assets, net, are comprised of the following:

June 30, December 31,

September 30, December 31,

(In thousands)

3 unchanged sentences

Total amortizable intangible assets, net $ 878,141 $ 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 .

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 terms of the customer contracts, which range from one to seventeen years .

Right-of-way assets relate primarily to underground pipeline easements which generally 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 June 30, 2024, the remaining weighted average amortization periods for customer contracts and right of way assets were approximately 12.30 years and 6.86 years, respectively.

The overall remaining weighted average amortization period for the intangible assets as of June 30, 2024 was approximately 11.41 years.

The Company recorded $ 31.3 million and $ 30.6 million of amortization expense for the three months ended June 30, 2024 and 2023, respectively, and $ 62.0 million and $ 61.1 million for the six months ended June 30, 2024 and 2023, respectively.

There was no impairment recognized on intangible assets for the three and six months ended June 30, 2024 and 2023.

On September 30, 2024, the remaining weighted average amortization periods for customer contracts and right of way assets were approximately 9.03 years and 6.67 years, respectively.

The overall remaining weighted average amortization period for the intangible assets as of September 30, 2024 was approximately 8.69 years.

The Company recorded $ 38.9 million and $ 30.6 million of amortization expense for the three months ended September 30, 2024 and 2023, respectively, and $ 100.9 million and $ 91.6 million for the nine months ended September 30, 2024 and 2023, respectively.

There was no impairment recognized on intangible assets for the three and nine months ended September 30, 2024 and 2023.

EQUITY METHOD INVESTMENTS

As of June 30, 2024, the Company owned investments in the following long-haul pipeline entities in the Permian Basin.

As of September 30, 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.

1 unchanged sentence

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

June 30, December 31,

September 30, December 31,

Ownership (1)

2 unchanged sentences

33.0 % 433,193 443,684

Epic Crude Holdings, LP (“EPIC”) (1)

27.5 % 85,627 —

Gulf Coast Express Pipeline LLC (“GCX”) (2)

1 unchanged sentence

$ 2,141,947 $ 2,540,989

(1) As of June 30, 2024 the Company also owned 15 % of Epic Crude Holdings, LP (“EPIC”).

(1) Investment balance is primarily comprised of the additional 12.5 % interest that was acquired during July 2024.

(2) The Company owned 16 % of GCX as of December 31, 2023 and divested entire ownership in June 2024.

On June 4, 2024, the Company consummated the previously announced transaction contemplated by the Purchase and Sale Agreement dated as of May 9, 2024 (the "GCX Purchase Agreement"), to sell its 16 % equity interest in GCX to GCX Pipeline, LLC (the "GCX Buyer") for an adjusted price of $ 524.4 million (the "GCX Sale"), consisting of cash, including working capital adjustments at closing and an additional $ 30.0 million earn out in cash upon the approval by the GCX Board of Directors of one or more capital projects that achieve certain capacity expansion criteria.

Net cash proceeds of $ 494.4 million were received from the GCX Buyer on June 4, 2024.

The Company recognized a gain of $ 59.9 million upon closing of the GCX Sale and no gain contingency related to the earn out was recognized.

The unamortized basis differences included in the EMI pipeline balances were $ 205.1 million and $ 349.3 million as of June 30, 2024 and December 31, 2023, respectively.

During the quarter, the Company entered into an Equity Sale and Purchase Agreement with third parties to purchase a 12.5 % equity interest in EPIC, increasing our total equity interest in EPIC to 27.5 %.

As the increase in ownership did not result in a controlling interest, and did not represent the funding of prior losses, the Company resumed accounting for its investment in EPIC using the equity method of accounting upon the closing of the acquisition of the additional interests during July 2024.

On June 4, 2024, the Company consummated the previously announced transaction contemplated by the Purchase and Sale Agreement dated as of May 9, 2024, to sell its 16 % equity interest in GCX to GCX Pipeline, LLC (the "GCX Buyer") for an adjusted price of $ 524.4 million (the "GCX Sale"), including a $ 30.0 million earn out in cash upon the approval by the GCX Board of Directors of one or more capital projects that achieve certain capacity expansion criteria.

The Company recognized a net gain of $ 89.8 million for the nine months ended September 30, 2024 in relation to this transaction.

The unamortized basis differences included in the EMI pipeline balances were $ 365.7 million and $ 349.3 million as of September 30, 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.

Due to the GCX Sale, its unamortized basis difference of $ 137.8 million was written off upon closing of the transaction.

There was capitalized interest of $ 24.3 million and $ 24.7 million as of June 30, 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 six months ended June 30, 2024:

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

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

There was capitalized interest of $ 24.1 million and $ 24.7 million as of September 30, 2024 and December 31, 2023, respectively.

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

The following table presents the activity in the Company’s EMIs for the nine months ended September 30, 2024:

Permian Highway Pipeline LLC Breviloba, LLC EPIC Crude Holdings, LP 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

Contributions and acquisitions

3,273 — 85,417 — 88,690

Distributions (1)

3 unchanged sentences

130,772 23,186 210 15,500 169,668

Balance at June 30, 2024 $ 1,639,627 $ 436,261 $ — $ 2,075,888

Balance at September 30, 2024 $ 1,623,127 $ 433,193 $ 85,627 $ — $ 2,141,947

(1) Distributions consisted of distributions from a return on investment of $ 223.7 million, which was included in cash flows from operating activities and distributions from a return of investment of $ 2.8 million, which was included in cash flows from investing activities.

(2) For the six months ended June 30, 2024, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $ 3.9 million from PHP, $ 0.3 million from Breviloba, LLC and $ 2.7 million from GCX.

(2) For the nine months ended September 30, 2024, net of amortization and accretion of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $ 5.9 million from PHP, $ 0.5 million from Breviloba, LLC, $ 2.7 million from GCX and accretion of $ 1.6 million from EPIC.

Summarized Financial Information

The following table represents selected data for the Company’s ongoing EMI pipelines (on a 100 percent basis) for the three and six months ended June 30, 2024 and 2023.

Three Months Ended June 30,

Permian Highway Pipeline LLC Breviloba, LLC Permian Highway Pipeline LLC Breviloba, LLC

The following table represents selected data for the Company’s ongoing EMI pipelines (on a 100 percent basis) for the three and nine months ended September 30, 2024 and 2023.

Three Months Ended September 30,

Permian Highway Pipeline LLC Breviloba, LLC EPIC Crude Holdings, LP Permian Highway Pipeline LLC Breviloba, LLC EPIC Crude Holdings, LP

(In thousands)

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Operating income 83,785 27,398 25,052 65,549 25,170 22,521

Net income 81,074 21,895 64,342 22,651

Six Months Ended June 30,

Permian Highway Pipeline LLC Breviloba, LLC Permian Highway Pipeline LLC Breviloba, LLC

Net income (loss) 83,783 27,558 ( 5,159 ) 66,630 25,223 ( 11,330 )

Nine Months Ended September 30,

Permian Highway Pipeline LLC Breviloba, LLC EPIC Crude Holdings, LP Permian Highway Pipeline LLC Breviloba, LLC EPIC Crude Holdings, LP

(In thousands)

1 unchanged sentence

Operating income 245,467 74,563 70,631 185,862 69,666 36,148

Net income 161,233 47,447 124,032 44,863

Net income (loss) 245,016 75,005 ( 29,889 ) 190,662 70,086 ( 62,312 )

DEBT AND FINANCING COSTS

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The aggregate fees and expenses paid directly to third parties in obtaining the A/R Facility totaled $ 1.1 million and were capitalized as debt issuance costs and included in the Condensed Consolidated Balance Sheets as a current asset within “Prepaid and other current assets”, amortized over the term of the A/R Facility to interest expense using the effective-interest method.

There were unamortized debt issuance costs related to the A/R Facility of $ 0.8 million as of June 30, 2024.

There were unamortized debt issuance costs related to the A/R Facility of $ 0.6 million as of September 30, 2024.

Pursuant to the A/R Facility, the Company and certain of its subsidiaries continuously transfer receivables to Kinetik Receivables and Kinetik Receivables transfers receivables that meet certain qualifying conditions to third-party purchasers in exchange for cash.

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Yield and fees payable by the Company under the AR Facility are due monthly.

As of June 30, 2024, eligible accounts receivable of $ 148.8 million were pledged to the A/R Facility as collateral and $ 1.2 million was available to be invested by the purchasers.

As of September 30, 2024, eligible accounts receivable of $ 150.0 million were pledged to the A/R Facility as collateral.

The Partnership has continuing involvement with the receivables transferred by Kinetik Receivables to the third-party purchasers by providing collection services.

The A/R Facility is linked to sustainability performance targets (“SPTs”) with respect to (a) female representation in corporate officer positions and (b) reduction in methane emissions intensity.

A positive 0.02 % and 0.05 % fee and interest rate adjustments will be applied, respectively, if neither of the SPTs have been satisfied and a negative 0.02 % and 0.05 % fee and interest rate adjustments will be applied, respectively, if both of the SPTs have been satisfied.

A positive 0.02 % and 0.05 % fee and yield rate adjustments will be applied, respectively, if neither of the SPTs have been satisfied and a negative 0.02 % and 0.05 % fee and interest rate adjustments will be applied, respectively, if both of the SPTs have been satisfied.

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 (“Term Loan Credit Facility”), lowering the remaining balance to $ 1.0 billion.

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The Company recognized a loss on debt extinguishment of $ 0.5 million for the partial payment made on the Term Loan Credit Facility.

The following table summarizes the Company’s debt obligations as of June 30, 2024 and December 31, 2023:

June 30, December 31,

The following table summarizes the Company’s debt obligations as of September 30, 2024 and December 31, 2023:

September 30, December 31,

(In thousands)

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

Unamortized debt issuance costs associated with the revolving line of credit were $ 4.6 million and $ 5.4 million as of June 30, 2024 and December 31, 2023, respectively.

Unamortized debt issuance costs associated with the revolving line of credit were $ 4.2 million and $ 5.4 million as of September 30, 2024 and December 31, 2023, respectively.

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

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

4 unchanged sentences

Total financing costs, net of capitalized interest $ 66,029 $ 45,009 $ 167,545 $ 130,443

As of June 30, 2024 and December 31, 2023, unamortized debt issuance costs associated with the 2030 Notes, the 2028 Notes and the Term Loan Credit Facility were $ 28.7 million and $ 31.5 million, respectively, and unamortized debt premiums and discount, net, associated with the 2028 Notes and the unsecured term loan were $ 0.1 million and $ 0.3 million, respectively.

As of September 30, 2024 and December 31, 2023, unamortized debt issuance costs associated with the 2030 Notes, the 2028 Notes and the Term Loan Credit Facility were $ 27.4 million and $ 31.5 million, respectively, and unamortized debt premiums and discount, net, associated with the 2028 Notes and the unsecured term loan were $ 0.1 million and $ 0.3 million, respectively.

Compliance with our Covenants

3 unchanged sentences

The A/R Facility contains covenants and restrictive provisions with respect to the Partnership and Kinetik Receivables that are customary for accounts receivable securitization facilities.

As of June 30, 2024, the Partnership was in compliance with all customary and financial covenants.

As of September 30, 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 June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024, the Revolving Credit Facility has a borrowing base of $ 750.4 million available.

Our obligations with respect to related letters of credit totaled $ 12.6 million as of September 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024, the Revolving Credit Facility has a borrowing base of $ 730.4 million available.

Fair Value of Financial Instruments

The fair value of the Company and its subsidiaries’ consolidated debt as of June 30, 2024 and December 31, 2023 was $ 3.42 billion and $ 3.57 billion, respectively.

On June 30, 2024, the senior unsecured notes’ fair value was based on Level 1 inputs, the Term Loan Credit Facility and Revolving Credit Facility’s fair value was based on Level 3 inputs and the A/R Facility’s fair value is approximate its carrying value due to its short term nature.

The fair value of the Company and its subsidiaries’ consolidated debt as of September 30, 2024 and December 31, 2023 was $ 3.48 billion and $ 3.57 billion, respectively.

On September 30, 2024, the senior unsecured notes’ fair value was based on Level 1 inputs, the Term Loan Credit Facility and Revolving Credit Facility’s fair value was based on Level 3 inputs and the A/R Facility’s fair value approximates its carrying value due to its short term nature.

ACCRUED EXPENSES

The following table provides detail of the Company’s current accrued expenses on June 30, 2024 and December 31, 2023:

June 30, December 31,

The following table provides detail of the Company’s current accrued expenses on September 30, 2024 and December 31, 2023:

September 30, December 31,

(In thousands)

6 unchanged sentences

Total accrued expenses $ 191,789 $ 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 June 30, 2024.

Redeemable Noncontrolling Interest — Common Unit Limited Partners

2 unchanged sentences

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 six months ended June 30, 2024, 146,250 Common Units were redeemed on a one -for-one basis for shares of Class A Common Stock, par value $ 0.0001 per share of the Company (“Class A Common Stock”) and a corresponding number of shares of Class C Common Stock were cancelled.

During the nine months ended September 30, 2024, 146,250 Common Units were redeemed on a one -for-one basis for shares of Class A Common Stock, par value $ 0.0001 per share of the Company (“Class A Common Stock”) and a corresponding number of shares of Class C Common Stock were cancelled.

In addition, as part of the Durango Acquisition purchase price consideration, approximately 3.8 million shares of Class C Common Stock and an equivalent number of Common Units were issued at closing.

There were 97.8 million Common Units and an equal number of Class C Common Stock issued and outstanding as of June 30, 2024 and 7.7 million shares of Class C Common Stock and equivalent number of Common Units of deferred consideration for the Durango Acquisition that will be issued on July 1, 2025.

The Common Units fair value was approximately $ 4.29 billion, including deferred consideration valued as of June 30, 2024.

As of June 30, 2024, there were 59.7 million and 97.8 million shares, respectively, of Class A Common Stock and Class C Common Stock issued and outstanding (collectively, “Common Stock”).

In addition, 7.7 million shares of Class C Common Stock will be issued as deferred consideration for the Durango Acquisition.

There were 97.8 million Common Units and an equal number of Class C Common Stock issued and outstanding as of September 30, 2024 and 7.7 million shares of Class C Common Stock and equivalent number of Common Units of deferred consideration for the Durango Acquisition that will be issued on July 1, 2025.

The Common Units fair value was approximately $ 4.78 billion, including deferred consideration valued as of September 30, 2024.

As of September 30, 2024, there were 59.8 million and 97.8 million shares, respectively, of Class A Common Stock and Class C Common Stock issued and outstanding (collectively, “Common Stock”).

In addition, 7.7 million shares of Class C Common Stock will be issued as deferred consideration for the Durango Acquisition on July 1, 2025.

Share Repurchase Program

During the quarter ended June 30, 2024, the Company did not repurchase any of its Class A Common Stock under the Repurchase Program.

On May 9, 2024, the Company made cash dividend payments of $ 115.2 million to holders of Class A Common Stock and Common Units and $ 0.6 million was reinvested in shares of Class A Common Stock.

During the quarter ended September 30, 2024, the Company did not repurchase any of its Class A Common Stock under the Repurchase Program.

On August 7, 2024, the Company made cash dividend payments of $ 118.2 million to holders of Class A Common Stock and Common Units and $ 0.4 million was reinvested in shares of Class A Common Stock.

The significant decrease in the amount reinvested in shares of Class A Common Stock compared with prior quarters was due to the automatic termination of the Dividend and Distribution Reinvestment Agreement on March 8, 2024.

FAIR VALUE MEASUREMENTS

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:

June 30, 2024

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023:

September 30, 2024

Level 1 Level 2 Level 3 Total

4 unchanged sentences

Commodity swaps $ — $ 3,936 $ — $ 3,936

Interest rate derivatives — 3,888 — 3,888

Contingent liability

— — 65,400 65,400

Total liabilities $ — $ 7,824 $ 65,400 $ 73,224

12 unchanged sentences

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 swaps and interest rate derivatives.

The Company recorded a contingent liability related to the Kings Landing Earnout using Level 3 inputs, including projected spending and completion probability of the project.

Refer to Note 15—Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further discussion related to Kings Landing Earnout contingent liability.

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

1 unchanged sentence

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 six months ended June 30, 2024 and 2023.

There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the nine months ended September 30, 2024 and 2023.

DERIVATIVES AND HEDGING ACTIVITIES

1 unchanged sentence

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 June 30, 2024 and December 31, 2023.

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.

As of June 30, 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.

As of September 30, 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 % and one interest rate swap contract with a notional amount of $ 0.08 billion maturing on December 31, 2025 that pays a fixed rate of 3.02 %.

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:

June 30, December 31,

September 30, December 31,

(In thousands)

Derivatives assets - current $ 76 $ 4,314

Derivative assets - noncurrent 8 —

Total derivative assets $ 84 $ 4,314

Derivative liabilities - current $ 3,888 $ —

Derivatives liabilities - noncurrent — 5,348

1 unchanged sentence

The Company recorded cash settlements and changes 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 swap derivatives activities for the three and six months ended June 30, 2024 and 2023:

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

The following table presents interest rate swap derivatives activities for the three and nine months ended September 30, 2024 and 2023:

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

2024 2023 2024 2023

(In thousands)

Cash settlements $ 3,953 $ 2,417 $ 7,905 $ 2,417

Favorable fair value adjustment

Realized gain on interest rate swaps

$ 3,994 $ 4,665 $ 11,899 $ 7,082

(Unfavorable) favorable fair value adjustment

$ ( 8,342 ) $ 12,500 $ 9,129 $ 34,562

Commodity Price Risk

7 unchanged sentences

These contracts are effective over the next 1 to 20 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 June 30, 2024 (in thousands, except volumes):

June 30, 2024

The following table presents detailed information of commodity swaps outstanding as of September 30, 2024 (in thousands, except volumes):

September 30, 2024

Commodity Unit Notional Volume

5 unchanged sentences

Crude Basis Spread Swaps

59,200 ( 23 )

Natural Gas Basis Spread Swaps

2 unchanged sentences

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

September 30, December 31,

(In thousands)

8 unchanged sentences

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 swap derivatives activities for the three and six months ended June 30, 2024 and 2023:

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

The following table presents commodity swap derivatives activities for the three and nine months ended September 30, 2024 and 2023:

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

2024 2023 2024 2023

(In thousands)

Cash settlements $ ( 17,014 ) $ 6,879 $ ( 17,212 ) $ 7,853

(unfavorable) favorable fair value adjustment

Realized (loss) gain on commodity swaps

$ ( 2,790 ) $ 176 $ ( 20,002 ) $ 8,029

Favorable (unfavorable) fair value adjustment

$ 6,027 $ ( 8,083 ) $ ( 18,067 ) $ 6,466

SHARE-BASED COMPENSATION

4 unchanged sentences

Class A Shares and Class C Shares

The table below summarizes Class A Share and Class C Share activities for the six months ended June 30, 2024:

The table below summarizes Class A Share and Class C Share activities for the nine months ended September 30, 2024:

Number of Shares

1 unchanged sentence

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

Outstanding and unvested shares at June 30, 2024

Outstanding and unvested shares at September 30, 2024

5,399,730 $ 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 June 30, 2024 and 2023:

Six Months Ended June 30,

Table below summarizes aggregate intrinsic value (market value at vesting date) and grant-date fair value of vested Class A Shares for the nine months ended September 30, 2024:

Three Months Ended

Nine Months Ended

September 30, 2024 September 30, 2024

(In thousands)

1 unchanged sentence

Grant-date fair value of vested Class A Shares $ 834 $ 1,346

No vesting or forfeiture occurred for Class C Shares for the three and six months ended June 30, 2024 and 2023.

No vesting or forfeiture occurred for Class A Shares for the three months ended June 30, 2024 and 2023.

As of June 30, 2024, there were $ 50.4 million of unrecognized compensation costs related to unvested Class A Shares and Class C Shares.

No vesting or forfeiture occurred for Class C Shares for the three and nine months ended September 30, 2024 and 2023.

No vesting occurred for Class A Shares for the three and nine months ended September 30, 2023.

As of September 30, 2024, there were $ 38.8 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 1.16 years.

Restricted Stock Units

Certain RSUs were granted in the first half of 2024 to certain executives and employees under the Kinetik Holdings Inc.

RSUs were granted to certain executives and employees under the Kinetik Holdings Inc.

Amended and Restated 2019 Omnibus Compensation Plan (the “2019 Plan”) with various service vesting requirements.

Such RSUs may be settled only for shares of Class A Common Stock on a one -for-one basis, contingent upon continued employment.

The table below summarizes RSU activities for the six months ended June 30, 2024:

The table below summarizes RSUs activities for the nine months ended September 30, 2024:

Number of Shares (1)

3 unchanged sentences

323,158 34.79

Outstanding and unvested shares at June 30, 2024 723,507 $ 33.21

Outstanding and unvested shares at September 30, 2024

709,830 $ 33.12

(1) The number of shares and weighted average fair market value per share 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 and six months ended June 30, 2024 and 2023.

Three Months Ended June 30,

Six Months Ended June 30,

Table below summarizes aggregate intrinsic value (market value at vesting date) and grant-date fair value of RSUs for the three and nine months ended September 30, 2024 and 2023.

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

2024 2023 2024 2023

2 unchanged sentences

Grant-date fair value of vested RSUs $ 372 $ 35 $ 11,243 $ 6,827

As of June 30, 2024, there were $ 16.0 million of unrecognized compensation costs related to the RSUs.

As of September 30, 2024, there were $ 13.0 million of unrecognized compensation costs related to the RSUs.

These costs are expected to be recognized over a weighted average period of 1.64 years.

Performance Stock Units

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

The Company granted PSUs pursuant to the 2019 Plan to certain of its employees and executives during 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 a three-year 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 the Monte Carlo simulation at the grant date.

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 six months ended June 30, 2024:

The table below summarizes PSU activities for the nine months ended September 30, 2024:

Number of Shares

1 unchanged sentence

Granted in 2024 198,703 $ 36.76

Outstanding and unvested shares at June 30, 2024 198,703 $ 36.76

No vesting or forfeiture occurred for PSUs for the three and six months ended June 30, 2024.

Outstanding and unvested shares at September 30, 2024

198,703 $ 36.76

No vesting or forfeiture occurred for PSUs for the three and nine months ended September 30, 2024.

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

4 unchanged sentences

Expected term

As of June 30, 2024, there were $ 6.5 million of unrecognized compensation costs related to the PSUs.

As of September 30, 2024, there were $ 5.8 million of unrecognized compensation costs related to the PSUs.

These costs are expected to be recognized over a weighted average period of 2.25 years.

With respect to above Class A Shares, Class C Shares, RSUs and PSUs, the Company recorded compensation expenses of $ 15.1 million and $ 13.3 million for the three months ended June 30, 2024 and 2023, respectively, and $ 37.7 million and $ 30.8 million for the six months ended June 30, 2024 and 2023.

With respect to above Class A Shares, Class C Shares, RSUs and PSUs, the Company recorded compensation expenses of $ 15.2 million and $ 12.5 million for the three months ended September 30, 2024 and 2023, respectively, and $ 52.9 million and $ 43.3 million for the nine months ended September 30, 2024 and 2023.

The Company is subject to U.S.

1 unchanged sentence

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

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

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

2024 2023 2024 2023

3 unchanged sentences

Effective tax rate 8.99 % 2.93 % 8.53 % 1.68 %

The effective tax rate for the three and six months ended June 30, 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.

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

The effective tax rate for the three and nine months ended September 30, 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.

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 a full valuation allowance on deferred tax assets as of September 30, 2023.

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

Six Months Ended

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

2024 2023 2024 2023

15 unchanged sentences

$ 0.35 $ 0.21 $ 1.02 $ 0.57

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

(1) Represents dividends paid to unvested Class A and Class C Shares, RSUs and PSUs.

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

3 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, there were no accruals for loss contingencies.

As of September 30, 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.

2 unchanged sentences

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 June 30, 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.

There were no litigation-related accrued reserves as of September 30, 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 outstanding vendor credits from another counterparty related to prior litigation the Company had previously entered into and subsequently dropped.

These amounts 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.

3 unchanged sentences

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 material environmental claims existing as of June 30, 2024, 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 not aware of any material environmental claims existing as of September 30, 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

3 unchanged sentences

This earn out is subject to reduction based on actual capital costs associated with the Kings Landing Project.

The Company recorded a $ 64.0 million contingent liability for the Kings Landing Earnout, based on the project’s completion probability and projected spend, in the “Other liabilities” of the Condensed Consolidated Balance Sheet as of June 30, 2024.

Upon Closing, the Company evaluated the earn-out consideration classification in accordance with ASC 480.

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

As of Closing, the Company recorded an initial contingent liability of $ 64.0 million based on the project’s completion probability and projected spend.

Pursuant to ASC 805, the Company recorded a subsequent fair value adjustment of $ 1.4 million within “Costs of sales (exclusive of depreciation and amortization)” of the Condensed Consolidated Statement of Operations for the three months ended September 30, 2024.

The contingent liability associated with the Kings Landing Project was $ 65.4 million as of September 30, 2024.

Permian Gas Acquisition

2 unchanged sentences

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 June 30, 2024 and December 31, 2023.

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 five years ;

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

4 unchanged sentences

• 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.

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

• Pipeline Transportation:

6 unchanged sentences

The Midstream Logistics segment accounts for more than 97 % of the Company’s operating revenues, more than 99 % of the cost of sales (excluding depreciation and amortization) and operating expenses and more than 94 % of the ad valorem expenses.

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

The Pipeline Transportation segment contains all of the Company’s equity method investments.

Corporate and Other contains the Company’s executive and administrative functions, including 84 % 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 and six months period ended June 30, 2024 and 2023:

For the three months ended September 30, 2024, the Midstream Logistics segment and the Pipeline Transportation segment represent 65 % and 36 % of total consolidated adjusted EBITDA, respectively, which is consistent with the prior year contributions from each segment.

Midstream Logistics Pipeline Transportation Corporate and Other (1)

(In thousands)

For the Three Months Ended June 30, 2024

For the Three Months Ended September 30, 2024

Segment income (loss) before income taxes $ 88,581 $ 88,797 $ ( 85,464 ) $ 91,914

Interest expense 2,666 — 63,363 66,029

Depreciation and amortization 72,753 2,302 6 75,061

Depreciation and amortization expenses

85,273 2,305 5 87,583

Contract assets amortization 1,655 — — 1,655

1 unchanged sentence

Share-based compensation — — 15,171 15,171

Loss on debt extinguishment

Contingent liabilities fair value adjustment 1,400 — — 1,400

Integration costs 1,208 — 1,332 2,540

1 unchanged sentence

Other one-time costs or amortization 1,657 — 2,060 3,717

Other interest income

Gain on disposal of assets

Interest income

Commodity hedging unrealized gain

7 unchanged sentences

(In thousands)

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

Segment income (loss) before income taxes

1 unchanged sentence

Interest expense 12 — 44,997 45,009

Depreciation and amortization 69,005 471 6 69,482

Depreciation and amortization expenses

69,456 473 6 69,935

Contract assets amortization 1,655 — — 1,655

2 unchanged sentences

Loss on disposal of assets 2,927 — — 2,927

Acquisition transaction costs 2 — — 2

Unrealized loss on derivatives 8,259 — — 8,259

Integration costs 21 — — 21

Acquisition transaction costs — — 378 378

Other one-time costs or amortization 1,529 — 1,133 2,662

Warrant valuation adjustment — — 4 4

Commodity hedging unrealized gain

2,678 — — 2,678

Interest income — — 293 293

Equity income from unconsolidated affiliates — 50,754 — 50,754

3 unchanged sentences

(In thousands)

For the Six Months Ended June 30, 2024

For the Nine Months Ended September 30, 2024

Segment income (loss) before income taxes $ 215,196 $ 275,246 $ ( 241,172 ) $ 249,270

Interest expense 5,273 — 162,272 167,545

Depreciation and amortization 144,063 4,592 12 148,667

Depreciation and amortization expenses

229,336 6,897 17 236,250

Contract assets amortization 4,965 — — 4,965

3 unchanged sentences

Loss on debt extinguishment

Commodity hedging unrealized loss

6,883 — — 6,883

Contingent liabilities fair value adjustment 1,400 — — 1,400

Integration costs 1,792 — 3,299 5,091

2 unchanged sentences

Other interest income

— — 1,459 1,459

Commodity hedging unrealized gain

1,935 — — 1,935

Gain on sale of equity method investment

5 unchanged sentences

(In thousands)

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Segment income (loss) before income taxes $ 163,794 $ 146,524 $ ( 189,190 ) $ 121,128

Interest expense 32 — 130,411 130,443

Depreciation and amortization 137,398 926 12 138,336

Depreciation and amortization expenses

206,855 1,398 18 208,271

Contract assets amortization 4,965 — — 4,965

2 unchanged sentences

Loss on disposal of assets 15,166 — — 15,166

Unrealized loss on derivatives 616 — — 616

Integration costs 29 — 956 985

1 unchanged sentence

Other one-time costs or amortization 5,310 — 2,235 7,545

Interest income — — 314 314

Warrant valuation adjustment — — 73 73

Commodity hedging unrealized gain

7,643 — — 7,643

Equity income from unconsolidated affiliates — 146,828 — 146,828

8 unchanged sentences

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

The following tables present the revenue for the individual operating segments for the three and six month period ended June 30, 2024 and 2023:

The following tables present the revenue for the individual operating segments for the three and nine month period ended September 30, 2024 and 2023:

Midstream Logistics Pipeline Transportation Elimination Consolidated

(In thousands)

For the Three Months Ended June 30, 2024

For the Three Months Ended September 30, 2024

Revenue $ 391,331 $ 2,192 $ — $ 393,523

5 unchanged sentences

(In thousands)

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

Revenue $ 324,863 $ 766 $ — $ 325,629

3 unchanged sentences

(In thousands)

For the Six Months Ended June 30, 2024

For the Nine Months Ended September 30, 2024

Revenue $ 1,082,236 $ 6,566 $ — $ 1,088,802

5 unchanged sentences

(In thousands)

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Revenue $ 894,669 $ 2,190 $ — $ 896,859

3 unchanged sentences

Intersegment revenue is eliminated at consolidation.

The following table presents total assets for each operating segment as of June 30, 2024 and December 31, 2023:

June 30, December 31,

The following table presents total assets for each operating segment as of September 30, 2024 and December 31, 2023:

September 30, December 31,

(In thousands)

5 unchanged sentences

Total assets $ 6,860,461 $ 6,496,873

(1) Includes investment in unconsolidated affiliates of $ 2.08 billion and $ 2.54 billion as of June 30, 2024 and December 31, 2023, respectively.

(1) Includes investment in unconsolidated affiliates of $ 2.14 billion and $ 2.54 billion as of September 30, 2024 and December 31, 2023, respectively .

SUBSEQUENT EVENTS

On July 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 July 29, 2024 on August 7, 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 August 7, 2024.

On October 17, 2024, the Board declared a cash dividend of $ 0.78 per share on the Company’s Class A Common Stock which will be payable to stockholders of record as of October 28, 2024 on November 7, 2024.

The Company, through its ownership of the general partner of the Partnership, declared a distribution of $ 0.78 per Common Unit from the Partnership to the holders of Common Units, which will be payable on November 7, 2024.

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