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Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-03-05 · 177 added, 199 removed, 212 unchanged (64% of the section changed)

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Unless otherwise noted or the context requires otherwise, references herein to Kinetik Holdings Inc.,“the Company”, “us”, “our”, “we” or similar terms, with respect to time periods prior to February 22, 2022, include BCP and its consolidated subsidiaries and do not include ALTM and its consolidated subsidiaries, while references herein to Kinetik Holdings Inc.,“the Company”, “us”, “our”, “we” or similar terms, with respect to time periods from and after February 22, 2022, include ALTM and its consolidated subsidiaries.

Business Combination

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

The transactions contemplated by the Contribution Agreement are referred to herein as the “Transaction.” In connection with the closing of the Transaction (the “Closing”), the Company changed its name from “Altus Midstream Company” to “Kinetik Holdings Inc.” Upon closing of the business combination, BCP and its subsidiaries became wholly owned subsidiaries of the Partnership.

The Transaction was accounted for as a reverse merger pursuant to ASC 805, Business Combination (“ASC 805”).

Refer to Note 3—Business Combination in the Notes to the Consolidated Financial Statements for further information regarding the Transaction.

Significant Business Combinations

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

New BCP Raptor Holdco, LLC, a Delaware limited liability company, and BCP.

The transactions contemplated by the Contribution Agreement are referred to herein as the “Altus Acquisition.” In connection with the closing of the transaction, the Company changed its name from “Altus Midstream Company” to “Kinetik Holdings Inc.” Upon closing of the business combination, BCP and its subsidiaries became wholly owned subsidiaries of the Partnership.

The Altus Acquisition was accounted for as a reverse merger pursuant to ASC 805.

On June 24, 2024 (the “Durango Closing Date”), the Company consummated the previously announced transaction contemplated by the Membership Interest Purchase Agreement (the “Durango MIPA”), dated May 9, 2024, by and between the Company, the Partnership, and Durango Midstream LLC, an affiliate of Morgan Stanley Equity Partners (the “Durango Seller”), pursuant to which the Partnership purchased all of the membership interests of Durango Permian LLC and its wholly owned subsidiaries (“Durango”) from Durango Seller (“Durango Acquisition”).

The Durango Acquisition was accounted for as a business combination in accordance with ASC 805.

Refer to Note 3—Business Combination in the Notes to the Consolidated Financial Statements in this Annual Report for further information regarding the Durango Acquisition.

We are an integrated midstream energy company in the Permian Basin providing comprehensive gathering, transportation, compression, processing and treating services.

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

The Pipeline Transportation segment consists of four EMI pipelines originating in the Permian Basin with various access points to the U.S.

The Pipeline Transportation segment consists of three EMI pipelines originating in the Permian Basin with various access points to the U.S.

Gulf Coast, Kinetik NGL Pipelines and Delaware Link Pipeline.

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Gas Gathering and Processing.

The Midstream Logistics segment provides gas gathering and processing services with over 1,600 miles of low and high-pressure steel pipeline located throughout the Delaware Basin.

Gas processing assets are centralized at five processing complexes with total cryogenic processing capacity of approximately 2.0 Bcf/d.

The Midstream Logistics segment provides gas gathering and processing services with over 3,900 miles of low and high-pressure steel pipeline located throughout the Delaware Basin, including over 2,300 miles of gas

Index to Financial Statements

pipeline acquired through the Durango Acquisition, and over 570,000 horsepower of compression capacity.

An additional 214 miles of gathering pipeline was added to our system through the Permian Resources Midstream Acquisition closed during January 2025.

Gas processing assets are centralized at seven processing complexes with system-wide front-end amine treating capability, 6.5 MMcf/d AGI capacity and total cryogenic processing capacity of approximately 2.2 Bcf/d as of today and over 2.4 BCF/d once the Kings Landing Project is complete in mid-2025.

Crude Oil Gathering, Stabilization and Storage Services.

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The system includes approximately 220 miles of gathering pipeline and 90,000 barrels of crude storage.

Index to Financial Statements

An additional 75 miles of gathering pipeline was added to our crude gathering assets through the Permian Resources Midstream Acquisition closed during January 2025.

Water Gathering and Disposal.

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EMI pipelines.

The Company owns the following equity interests in four EMI pipelines in the Permian Basin with access to various points along the Texas Gulf Coast:

The Company owns the following equity interests in three EMI pipelines in the Permian Basin with access to various points along the U.S.

1) an approximate 55.5% equity interest in Permian Highway Pipeline LLC (“ PHP”), which is also owned and operated by Kinder Morgan;

The increase of equity interest in PHP was related to the completion of PHP’s expansion project in December 2023;

2) 16.0% equity interest in Gulf Coast Express Pipeline LLC (“ GCX”), which is also owned and operated by Kinder Morgan;

2) 33.0% equity interest in Shin Oak, which is owned by Breviloba, LLC, and operated by Enterprise Products Operating LLC;

and 3) 27.5% equity interest in Epic Crude Holdings, LP (“EPIC”), which is operated by EPIC Consolidated Operations, LLC.

The increase of equity interest in EPIC was related to the purchase of an additional 12.5% equity interest from a third party in July 2024.

Kinetik NGL Pipelines.

The Kinetik NGL Pipelines consist of approximately 96 miles of NGL pipelines connecting our East Toyah and Pecos complexes to Waha, including our 20-inch Dewpoint pipeline that spans 40 miles, and our 30 mile, 20-inch Brandywine Pipeline connecting to our Diamond Cryogenic complex.

The Kinetik NGL pipeline system has a capacity of approximately 580 MBbl/d.

The Kinetik NGL pipeline system has a capacity approximate 580 MBbl/d.

Delaware Link Pipeline.

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Recent Developments

Permian Resources Midstream Assets Acquisition

On December 10, 2024, the Company announced it has entered into a definitive agreement with Permian Resources to acquire certain natural gas and crude oil gathering systems assets, primarily located in Reeves County, Texas, for $178.4 million of cash consideration.

The Permian Resources Midstream Acquisition provides a multi-stream opportunity for natural gas gathering, compression and processing, as well as crude gathering services for the Company.

The transaction closed in early January 2025 following satisfaction of customary closing conditions.

EPIC Equity Interest

During the third quarter of 2024, the Company consummated the Equity Sale and Purchase Agreement with Dos Rios Crude Intermediate LLC to purchase a 12.5% of equity interest in EPIC.

The acquisition of additional interest is accounted for as a business acquisition pursuant to ASC 805.

After completion of the transaction, the Company owned a 27.5% equity interest in EPIC.

EPIC has over 800 miles of pipeline connecting the Delaware and Midland Basins to the U.S.

Gulf Coast and has a capacity of 625 MBbl/d.

Index to Financial Statements

Durango Acquisition

On June 24, 2024, the Company consummated the previously announced Durango Acquisition for an adjusted purchase price of approximately $785.7 million, consisting of (i) $358.0 million of cash consideration paid at closing, (ii) approximately 3.8 million shares of Class C Common Stock and an equivalent number of common units in the Partnership (“OpCo Units”), issued at closing and (iii) approximately 7.7 million shares of Class C Common Stock and an equivalent number of OpCo Units to be issued on July 1, 2025.

Durango Seller is also entitled to an earn out of up to $75.0 million in cash contingent upon the completion and placing into service of the Kings Landing Project in Eddy County, New Mexico, which is currently under construction.

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

This transaction was accounted for as a business combination pursuant to ASC 805.

Refer to Note 3—Business Combinations in the Notes to our Consolidated Financial Statements in this Annual Report for further information.

The Durango Acquisition significantly expands Kinetik’s footprint into New Mexico and the Northern Delaware Basin, expanding Kinetik’s processing capacity by over 200 MMcf/d and doubling its existing gathering pipeline mileage.

An additional 200 MMcf/d of processing capacity will be added upon completion of the Kings Landing Project.

GCX Divestiture

On June 4, 2024, the Company consummated the previously announced transaction contemplated by the GCX Purchase Agreement to sell its 16% equity interest in GCX for an adjusted purchase price of $524.4 million (the "GCX Sale"), including 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 and the cash earn out was received in September 2024.

The Company recognized a gain of $89.8 million upon closing of the GCX Sale.

On April 2, 2024, 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 A/R Facility with an initial facility limit of $150.0 million with PNC Bank, as the administrative agent, and certain purchasers party thereto from time to time, which has a scheduled termination date of April 1, 2025.

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.

These receivables are held by Kinetik Receivables and are pledged to secure the collectability of the sold receivables.

The amount available for borrowings at any one time under the A/R Facility is limited to an amount calculated based on the outstanding balance of eligible receivables sold to the purchasers, subject to certain reserves, concentration limits, and other limitations.

As of December 31, 2024, eligible accounts receivable of $140.2 million was pledged to the A/R Facility as collateral and $9.8 million was available to be invested by the 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 (the “Term Loan Credit Facility”), lowering the remaining balance to $1.0 billion.

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

Secondary Offering of Common Stock

On December 11, 2023, the Company and Apache Midstream (the “Selling Stockholder”) entered into an Underwriting Agreement with J.P.

Morgan Securities LLC, as representative of the several underwriters named therein (collectively, the “Underwriters”), pursuant to which the Selling Stockholder agreed to sell to the Underwriters, and the Underwriters agreed to purchase from the Selling Stockholder, subject to and upon the terms and conditions set forth therein, 7,475,000 shares of Class A Common Stock.

On March 13, 2024, the Company and Apache (the “Selling Stockholder”) entered into an Underwriting Agreement with Goldman Sachs & Co.

LLC, as representative of the several underwriters named therein (collectively, the “Underwriters”), pursuant to which the Selling Stockholder agreed to sell to the Underwriters, and the Underwriters agreed to purchase from the Selling Stockholder, subject to and upon the terms and conditions set forth therein, 13,079,871 shares of Class A Common Stock.

The Company did not receive any proceeds from the sale of shares of Common Stock in the offering.

Sustainability-Linked Senior Notes Offerings

On December 6, 2023, the Partnership completed a private placement of $500.0 million aggregate principal amount of 6.625% Sustainability-Linked Senior Notes due 2028 (the “Original 2028 Notes”) at par;

further, on December 19, 2023, the Company completed an additional private placement of $300.0 million aggregate principal amount of 6.625% Sustainability-Linked Senior Notes due 2028 (the “Additional 2028 Notes”) at 100.50% of face amount (collectively, the “2028 Notes”).

The Original 2028 Notes and Additional 2028 Notes are treated as a single series of securities under the indenture governing the 2028 Notes, vote together as a single class, and have substantially identical terms, other than the issue date and issue price.

The 2028 Notes are fully and unconditionally guaranteed by the Company and issued under our Sustainability-Linked Financing Framework.

The Sustainability Performance Targets (“SPT”) as defined in the indenture governing the 2028 Notes related to three key performance indicators:

(1) Reduction of Scope 1 and Scope 2 greenhouse gas emissions intensity, (2) Reduction of Scope 1 and Scope 2 methane gas emissions intensity and (3) female representation in corporate officer positions.

For additional information regarding our SPTs, please see “—Sustainability-Linked Financing Framework” below.

Proceeds from the 2028 Notes together with cash on hand and borrowings under the Company’s Revolving Credit Facility (as defined below) were used to repay a portion of the outstanding borrowings under the Company’s existing Term Loan (as defined below).

Term Loan Credit Facility Amendment 2023

On December 6, 2023, the Partnership, the Company, PNC Bank, National Association (“PNC Bank”), as administrative agent, and the banks and other financial institutions party thereto, as lenders, entered into a First Amendment to Credit Agreement (the “First Amendment”) to amend certain terms of its existing Term Loan Credit Facility (the “Term Loan”), concurrently with the closing of its 2028 Notes discussed above.

The First Amendment (1) extended the maturity of the Term Loan from June 8, 2025 to June 8, 2026 upon the prepayment of a principal amount of loans under the Term Loan of no less than $500.0 million;

and (2) provided for an additional automatic six-month extension of the amended maturity date to December 8, 2026, at such time as no more than $1.00 billion of an aggregate principal amount of loans under the Term Loan remain outstanding, subject to customary conditions.

The Company determined that the amendment of the maturity date is a

Index to Financial Statements

modification of the original Term Loan.

The fee paid directly to lenders in arranging the modification totaling $1.5 million was recorded as original debt discount and the costs incurred with third parties directly related to the modification totaling $0.6 million was expensed as incurred.

Furthermore, the partial paydown of the principal totaling $800.0 million, using proceeds from the 2028 Notes, resulted in the $1.9 million write off (loss on extinguishment) of a proportional amount of the remaining unamortized debt issuance cost and original discount from the Term Loan immediately prior to the paydown.

PHP Expansion Project

In June 2022, PHP announced a final investment decision to proceed with its expansion project to increase total capacity to 2.65 Bcf/d, fully subscribed under 10 year take-or-pay contracts.

The expansion project increased PHP’s capacity by nearly 550 MMcf/d.

Approximately 67% of the funding for the expansion project was borne by the Company and the remainder by Kinder Morgan.

As a result, upon completion of the project, the Company’s ownership interest in PHP increased to approximately 55.5%.

The Company contributed $238.8 million to the expansion project during 2023 and the expansion went into service on December 1, 2023.

Sustainability-Linked Financing Framework

On May 16, 2022, we published our Sustainability-Linked Financing Framework, which we developed in alignment with the five components outlined in the International Capital Markets Association Sustainability-Linked Bond Principles as of June 2020 and the Loan Syndications and Trading Association Sustainability-Linked Loan Principles as of July 2021 (each as referred to in our Sustainability-Linked Financing Framework) and corresponding Second Party Opinion provided by ISS ESG.

This framework establishes KPIs that will be used to measure our progress against our SPTs.

Under this framework, our KPIs are (1) Scope 1 and Scope 2 greenhouse gas emissions intensity, (2) Scope 1 and Scope 2 methane gas emissions intensity and (3) female representation in corporate officer positions.

Our long-term SPTs are (1) reducing the intensity of all Scope 1 and Scope 2 greenhouse gas emissions from our operations by 35% by 2030 from a 2021 baseline year (as described in the Sustainability-Linked Financing Framework), (2) reducing the intensity of Scope 1 and Scope 2 methane gas emissions from our operations by 30% by 2030 from a 2021 baseline year, and (3) increasing female representation in corporate officer positions of Vice President and above to 20% by year-end 2026 from a 2021 baseline year.

Fiscal year 2022 marked the first measurement period for our Term Loan and Revolving Credit Facility, which are linked to the methane emissions intensity ratio KPI and the female officer representation KPI.

For the methane emissions intensity ratio KPI, we achieved a 12.0% reduction from 2021 to 2022, which was 8.70% higher than the defined 2022 target in our debt agreements.

For the female officer representation KPI, Kinetik achieved a 17.70% female participation rate in 2022, which was 8.00% higher than the defined 2022 target in our debt agreements.

Factors Affecting Our Business

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There has been, and we believe there will continue to be, volatility in commodity prices and in the relationships among NGLs, crude oil and natural gas prices.

As a result of uncertainty around global commodity supply and demand, the current armed conflict in Israel and the Gaza Strip, the ongoing armed conflict in Ukraine, and uncertainty from failures of two U.S.

banks and the resulting effects on financial markets, global oil and natural gas commodity prices continue to remain volatile.

As a result of uncertainty around global commodity supply and demand, global geopolitical conflicts, foreign and trade policies with the new U.S.

presidential administration, as well as the ongoing armed conflict in Ukraine, global oil and natural gas commodity prices continue to remain volatile.

The volatility and uncertainty of natural gas, crude oil and NGL prices impact drilling, completion and other investment decisions by producers and ultimately supply to our systems.

Although ongoing armed conflicts might generate commodity price upward pressure, and our operations could benefit in an environment of higher natural gas, NGLs and condensate prices, the instability of the international political environment and human and economic hardship resulting from the conflicts would have a highly uncertain impact on the U.S.

economy, which in turn, might affect our business and operations adv ersely.

Although ongoing armed conflicts might generate commodity price upward pressure, and our operations

Index to Financial Statements

could benefit in an environment of higher natural gas, NGLs and condensate prices, the instability of the international political environment and human and economic hardship resulting from the conflicts would have a highly uncertain impact on the U.S.

economy, which in turn, might affect our business and operations adversely.

Our product sales revenue is exposed to commodity price fluctuations.

Therefore, commodity price decline and sustained periods of low natural gas and NGL prices could have an adverse effect on our product revenue stream.

Also, after a rapid rise of oil and natural gas prices in the first half of 2022, oil and natural gas prices have moderated from their peaks during the past twelve months in 2023.

The Company continues to monitor commodity prices closely and may enter into commodity price hedges from time to time as necessary to mitigate the volatility risk.

In addition, the Company, when economically appropriate, enters into fee-based arrangements that insulate the Company from commodity price volatility.

Index to Financial Statements

Inflation and Interest Rates

The annual rate of inflation in the United States was 3.10% for the 12 months ending January 2024 compared to 6.4% for the 12 months ending in January 2023, as measured by the Consumer Price Index.

The Federal Open Market Committee (“FOMC”) seeks to achieve maximum employment and inflation at the rate of 2.00% over the long run.

In support of these goals, the FOMC maintained the target range for the federal funds rate to 5.25% - 5.50% during its meeting in January 2024.

The Committee indicated it will not be appropriate to reduce the target range for the federal funds rate until it gains greater confidence that inflation is moving sustainably toward 2.00%.

Increased interest rates beyond the term of our hedges will increase our financing costs and have a negative impact on the Company’s ability to meet its contractual debt obligations and to fund its operating expenses, capital expenditures, dividends and distributions.

The annual rate of inflation in the U.S.

was 3.00% in January 2025 as measured by the Consumer Price Index.

In light of the recent economic activity, unemployment level and uncertainty in policy making with the Trump Administration, the FOMC decided to maintain the target range for the federal funds rate at 4.25 % - 4.50% during its meeting in January 2025.

During the meeting, the FOMC noted that the economic outlook is uncertain and the Committee is attentive to the risks to both sides of its dual mandate and is strongly committed to supporting maximum employment and returning inflation to its 2.00% objective.

If interest rates elevated beyond the term of our hedges, our financing cost will increase and could have a negative impact on the Company’s ability to meet its contractual debt obligations and to fund its operating expenses and capital expenditures.

The Company will continue to monitor the FOMC’s monetary policy and interest rate movement.

Refer to Note 13—Derivatives and Hedging Activities in the Notes to Consolidated Financial Statements in this Annual Report for additional discussion regarding our hedging strategies and objectives for interest rate risk.

Index to Financial Statements

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Year Ended December 31,

2024 2023 % Change

(In thousands, except percentages)

Operating revenues:

Service revenue $ 408,000 $ 417,751 (2) %

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Other revenue 11,943 16,251 (27) %

Total revenues 1,256,412 1,213,490 4 %

Total operating revenues 1,482,929 1,256,412 18 %

Operating costs and expenses:

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620,618 515,721 20 %

Operating expense 161,520 137,289 18 %

Operating expenses 195,970 161,520 21 %

Ad valorem taxes 24,714 21,622 14 %

General and administrative 97,906 94,268 4 %

General and administrative expenses 134,157 97,906 37 %

Depreciation and amortization expenses

324,197 280,986 15 %

Loss on disposal of assets 19,402 12,611 54 %

Loss on disposal of assets, net

4,040 19,402 (79) %

Total operating costs and expenses 1,303,696 1,097,157 19 %

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Other income (expense):

Interest and other income 2,004 489 NM

Gain on Preferred Units redemption — 9,580 (100) %

Interest and other income 2,802 2,004 40 %

Loss on debt extinguishment

(525) (1,876) (72) %

Gain on embedded derivative

— 89,050 (100) %

Gain on sale of equity method investment 89,802 — 100 %

Interest expense (217,235) (205,854) 6 %

Equity in earnings of unconsolidated affiliates 213,191 200,015 7 %

Total other (expense) income, net

(5,711) 102,848 (106) %

Income before income tax 153,544 253,337 (39) %

Income tax (benefit) expense

Total other income (expense), net

88,035 (5,711) NM

Income before income taxes

267,268 153,544 74 %

Income tax expense (benefit)

23,035 (232,908) (110) %

Net income including noncontrolling interests $ 244,233 $ 386,452 (37) %

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

Refer to the Annual Report basis of presentation in Note 1—Description of Business and Basis of Presentation in the Notes to Consolidated Financial Statements in this Annual Report, for further information.

*Cost of sales (exclusive of depreciation and amortization) is net of gas service revenues totaling $219.7 million and $148.3 million for the years ended December 31, 2024 and 2023, respectively, for certain volumes where we act as principal.

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For the year ended December 31, 2024, revenue increased $226.5 million, or 18%, to $1,482.9 million, compared to $1,256.4 million for the same period in 2023.

The increase was primarily driven by increases in gathered and disposed of produced water volumes, as well as similar increases in condensate and NGL volumes sold.

Index to Financial Statements

The increase was primarily driven by higher period-over-period product revenue due to increased natural gas residue volumes sold and increased gathered and processed gas volumes.

Service revenue

Service revenue consists of service fees paid to the Company by its customers for providing comprehensive gathering, treating, processing and water disposal services necessary to bring natural gas, NGLs and crude oil to market.

Service revenue for the year ended December 31, 2023, increased by $23.8 million, or 6%, to $417.8 million, compared to $394.0 million for the same period in 2022.

This increase is primarily due to a period-over-period increase in gathered and disposed of produced water volumes of 76.4 MBbls per day, or $28.2 million.

Period over period gathered and processed gas volumes increased 307.4 Mcf per day and 271.5 Mcf per day, respectively.

However, the total gathered and processed gas volumes where we function as the agent decreased period over period, which lead to a $3.1 million decrease in service fees.

Service revenue for the year ended December 31, 2024, decreased by $9.8 million, or 2%, to $408.0 million, compared to $417.8 million for the same period in 2023.

The decrease was primarily driven by lower period-over-period gas gathering fees of $9.5 million.

Total gathered and processed gas volumes increased 227.4 Mcf per day, or 13% and 189.9 Mcf per day, or 13%, respectively.

Of the increase, Durango’s operations, on a six months basis, accounted for 105.8 Mcf per day and 98.2 Mcf per day of gathered and processed gas volumes, respectively.

However, the total gathered and processed gas volumes where we function as the agent decreased period-over-period causing the change in net gas gathering fees presented as revenues to be down 3%.

Over 98% of service revenues are included in the Midstream Logistics segment.

Index to Financial Statements

Product revenue

Product revenue consists of commodity sales (including condensate, natural gas residue and NGLs).

Product revenue for the year ended December 31, 2023, increased by $16.1 million, or 2%, to $822.4 million, compared to $806.4 million for the same period in 2022, primarily due to a period-over-period increase in NGL and condensate sales volumes.

NGL and condensate sales volumes increased 14.7 million barrels, or over 80%.

The increase in volume was partially offset by decreases in c ondensate prices of $22.38 per barrel, or 24%, and decreases of NGL prices of $14.31 per barrel, or 40%.

In addition, natural gas residue sales volumes increased 0.5 million MMBtu, or 2%, but fully offsetting this increase in residue volumes, natural gas prices decreased period-over-period $3.84 per MMBtu, or 69%.

Product revenue for the year ended December 31, 2024, increased by $240.6 million, or 29%, to $1,063.0 million, compared to $822.4 million for the same period in 2023, primarily due to period-over-period increases in natural gas residue sales volumes of 51.7 million MMBtu, or over 200% and NGL and condensate volumes sold of 2.0 million barrels, or 6%.

The increase was also driven by a period-over-period increase in NGL prices of $0.62 per barrel, or 3% and condensate prices of $2.10 per barrel, or 3%.

The overall increase was partially offset by a decrease in natural gas prices of $0.42 per MMBtu, or 24%.

Product revenues are included entirely in the Midstream Logistics segment.

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Cost of sales (exclusive of depreciation and amortization) primarily consists of purchases of NGLs and natural gas from our producers at contracted market prices to support product sales to other third parties.

For the year ended December 31, 2023, cost of sales decreased $25.8 million, or 5%, to $515.7 million, compared to $541.5 million for the same period in 2022.

The decrease was primarily driven by the period-to-period decreases in the aforementioned commodity prices.

For the year ended December 31, 2024, cost of sales increased $104.9 million, or 20%, to $620.6 million, compared to $515.7 million for the same period in 2023.

As discussed above, the increase was primarily driven by period-over-period increases in natural gas residue and NGL and condensate volumes sold, slightly offset by lower natural gas prices.

More than 99% of the cost of sales (exclusive of depreciation and amortization) are included in the Midstream Logistics segment.

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Operating expenses increased by $34.5 million, or 21%, to $196.0 million for the year ended December 31, 2024, compared to $161.5 million for the same period in 2023.

Of the total increase, $6.3 million related to increased operating expenses from our water operations, predominantly related to the newly acquired midstream infrastructure assets.

The remaining increase was primarily the result of higher leased compression ($8.8 million) and electricity costs ($5.6 million) from the increased gathered and processed volumes discussed above.

Of the total increase, $23.6 million was driven by Durango’s operations that were acquired during late June 2024.

The remaining increase was primarily driven by increases in internal labor and repairs and maintenance totaling $10.7 million, which was related to the increased gathered and processed volumes during 2024.

Over 98% of operating expenses are included in the Midstream Logistics segment.

Loss on disposal of assets

For the year ended December 31, 2023, the Company recognized a loss on disposal of assets of $19.4 million compared with $12.6 million for the same period in 2022.

The change was primarily related to retirements of vehicles, compressor stations and a refrigeration plant that had become idle due to operational changes.

General and administrative expenses

General and administrative expenses increased by $36.3 million, or 37% to $134.2 million for the year ended December 31, 2024, compared to $97.9 million for the same period in 2023.

The increase was mainly driven by higher share-based compensation of $20.6 million primarily due to the 2024 STI bonus being paid via stock during December versus March for prior years and $9.1 million of integration and transaction costs associated with the 2024 Durango and EPIC transactions.

The remaining increase primarily relates to higher internal labor expenses of $3.3 million related to the overall growth of the organization and payroll taxes on the aforementioned 2024 STI bonus, and higher insurance costs of $1.5 million primarily related to the Durango Acquisition as well as an incremental increase in insurance rates related to the legacy business.

Depreciation and amortization expenses

Depreciation and amortization expense increased by $43.2 million, or 15% to $324.2 million for the year ended December 31, 2024, compared to $281.0 million for the same period in 2023.

Of the total increase, $25.5 million was driven by the Durango Acquisition that was completed during late June 2024.

The remaining increase was driven by assets placed in service since the second half of 2023, including the Delaware Link Pipeline that was placed in service in October 2023 and the rich gas lateral into Lea County, New Mexico.

Loss on disposal of assets, net

Loss on disposal of asset, net decreased by $15.4 million, or 79% to $4.0 million for the year ended December 31, 2024, compared to $19.4 million for the same period in 2023.

The decrease was mainly due to $14.9 million less asset write-offs of obsolete gathering and processing systems and facilities in 2024 compared to 2023.

Other Income (Expense)

Loss on debt extinguishment

For the year ended December 31, 2023, the Company recognized a loss on debt extinguishment of $1.9 million, compared with a loss of $28.0 million for the same period in 2022.

The loss on debt extinguishment recognized during 2023 was related to unamortized debt issuance costs written off in relation to the $800 million repayment of the Term Loan as discussed in Note—8 Debt and Financing Costs in the Notes to Consolidated Financial Statements.

The prior year loss on debt extinguishment was in relation to the comprehensive refinancing completed in June of 2022.

Gain on sale of equity method investment

For the year ended December 31, 2024, we had gain on sale of equity method investment of $89.8 million compared to the same period in 2023 related to the GCX Sale consummated in the second quarter of 2024.

There was no such gain in 2023.

Index to Financial Statements

Gain on embedded derivative

For the year ended December 31, 2022, the Company recognized a gain on an embedded derivative of $89.1 million as a result of the complete redemption of redeemable noncontrolling interest Preferred Units during July of 2022.

There were no similar redemptions or activities for the year ended December 31, 2023.

Interest expense

The Company incurred interest expense of $205.9 million for the year ended December 31, 2023 compared with $149.3 million for the same period in 2022.

Increases of $77.3 million were driven by higher average debt obligations and an overall increase in interest rates associated with the Term Loan and Revolving Credit Facility, which carried some variability.

This increase was partially offset by higher capitalized interest of $15.5 million related to ongoing growth capital projects and the PHP expansion, as well as $7.8 million of year over year favorable valuation marks on our interest rate swaps.

Refer to Note—1 3 Derivatives and Hedging Activities in the Notes to Consolidated Financial Statements regarding the Company’s strategy in managing interest rate risk.

Equity in earnings of unconsolidated affiliates

Income from EMI pipelines increased by $19.1 million, or 11% to $200.0 million for the year ended December 31, 2023, compared to $181.0 million for the same period in 2022.

The increase was primarily due to additional equity interests in PHP from the recently completed expansion and due to the Company owning the former ALTM EMI pipelines for a full 12 months during 2023 versus 10 months in 2022.

Equity in earnings of unconsolidated affiliates is included entirely in the Pipeline Transportation segment.

Income taxes (benefit) expense

The Company recorded income tax benefit of $232.9 million for the year ended December 31, 2023, compared to income tax expense of $2.6 million for the same period in 2022.

The current year tax benefit was primarily due to the release of the valuation allowance on federal deferred tax assets during the fourth quarter of 2023.

As the Company achieved a three-year cumulative level of profitability as of December 31, 2023, the Company has concluded that it is more likely than not that its deferred tax assets will be realized and as such, no valuation allowance was recorded.

The Company recorded income tax expense of $23.0 million for the year ended December 31, 2024, compared to income tax benefit of $232.9 million for the sa me period in 2023.

The increase was primarily due to the release of the valuation allowance on federal deferred tax assets during the fourth quarter of 2023 compared to the recognition of deferred federal income tax of $19.5 million for year ended December 31, 2024.

As the Company achieved a three-year cumulative level of profitability as of December 31, 2024 and 2023, the Company concluded that it is more likely than not that its deferred tax assets will be realized and as such, no valuation allowance was recorded.

Key Performance Metrics

Adjusted EBITDA

Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for interest, taxes, depreciation and amortization, impairment charges, asset write-offs, the proportionate EBITDA from our EMI pipelines, equity in earnings from investments recorded using the equity method, share-based compensation expense, noncash increases and decreases related to trading and hedging agreements, extraordinary losses and unusual or non-recurring charges.

Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for interest, taxes, depreciation and amortization, gain or loss on disposal of assets and debt extinguishment, the proportionate EBITDA from our EMI pipelines, equity income and gain from sale of investments recorded using the equity method, share-based compensation expense, noncash increases and decreases related to hedging activities, fair value adjustments for contingent liabilities, integration and transaction costs and extraordinary losses and unusual or non-recurring charges.

Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance.

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• Is used by our management for various purposes, including as a measure of performance and as a basis for strategic planning and forecasting.

Index to Financial Statements

Adjusted EBITDA is not defined in GAAP

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Management believes that investors benefit from having access to the same financial measure that the Company uses in evaluating operating results.

Index to Financial Statements

The following table presents a reconciliation of the GAAP financial measure of net income including noncontrolling interests to the non-GAAP financial measure of Adjusted EBITDA.

For The Year Ended December 31,

2024 2023 % Change

(In thousands, except percentage)

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Income tax (benefit) expense 23,035 (232,908) (110) %

(232,908) 2,616 NM

Depreciation and amortization 280,986 260,345 8 %

Amortization of contract costs 6,620 1,807 NM

Depreciation and amortization expenses 324,197 280,986 15 %

Amortization of contract costs 6,621 6,620 — %

Proportionate EMI EBITDA 346,666 306,072 13 %

Share-based compensation 76,536 55,983 37 %

Loss on disposal of assets 19,402 12,611 54 %

Loss on disposal of assets, net 4,040 19,402 (79) %

Loss on debt extinguishment 525 1,876 (72) %

1,876 27,975 (93) %

Integration Costs 1,015 12,208 (92) %

Transaction Costs 648 6,412 (90) %

Other one-time cost or amortization 11,901 16,355 (27) %

Commodity hedging unrealized loss 10,788 — 100 %

Contingent liabilities fair value adjustment 200 — 100 %

Integration costs 5,826 1,015 NM

Acquisition transaction costs 4,096 648 NM

Other one-time cost and amortization 12,101 11,901 2 %

Interest income 1,988 677 194 %

Warrant valuation adjustment — 88 (100) %

Gain on redemption of mandatorily redeemable Preferred Units — 9,580 (100) %

Unrealized gain on derivatives 4,291 — 100 %

Gain on embedded derivative — 89,050 (100) %

Commodity hedging unrealized gain — 4,291 (100) %

Gain on sale of equity method investment 89,802 — 100 %

Equity income from unconsolidated affiliates 213,191 200,015 7 %

Adjusted EBITDA $ 971,118 $ 838,830 16 %

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

NM - Not meaningful

Index to Financial Statements

Adjusted EBITDA increased by $132.3 million, or 16% to $971.1 million for the year ended December 31, 2024, compared to $838.8 million for the same period in 2023.

As discussed in the Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations to this Annual Report, $36.2 million of the increase was due to an increase in operating revenues of $42.9 million and lower cost of sales (exclusive of depreciation and amortization) of $25.8 million, partially offset by an increase in operating expenses, ad valorem taxes and general and administrative expenses totaling of $32.5 million.

The increase was also driven by (i) higher proportionate EMI EBITDA of $37.2 million due to owning the EMI investments acquired through the Transaction for a full 12 months in 2023 and increased equity ownership in PHP upon completion of the PHP expansion project in December 2023 and (ii) an increase in the add back related to share-based compensation of $13.2 million due primarily to a full 12 months of amortization for the Class A Shares versus only 10 months in the prior period.

These increases were partially offset by decreases in the add backs related to transaction and integration costs totaling $17.0 million related to the Transaction from 2022.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations to this Annual Report, $226.5 million of the increase was due to increased total operating revenues, partially offset by increased cost of sales (exclusive of depreciation and amortization) of $104.9 million and an increase in operating expenses, ad valorem taxes and general and administrative expenses totaling of $73.8 million.

The increase was also driven by (i) higher proportionate EMI EBITDA of $40.6 million due to increased profitability at PHP related to expanded capacity that was placed into service starting in December 2023;

(ii) an increase in the add back related to share-based compensation of $20.6 million primarily due to new RSUs and PSUs granted during 2024;

(iii) an increase in the add back related to unrealized commodity hedging activities of $15.1 million;

and (iv) an increase in the add back of integration and acquisition transaction costs of $8.3 million primarily due to the Durango Acquisition in 2024.

Segment Adjusted EBITDA

Segment Adjusted EBITDA 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 following table presents segment adjusted EBITDA.

Also refer to Note 19 — Segments in the Notes to our Consolidated Financial Statements in this Annual Report for reconciliation of segment adjusted EBITDA to net income including noncontrolling interests.

Segment Adjusted EBITDA is defined as segment net income including noncontrolling interests adjusted for taxes, depreciation and amortization, gain or loss on disposal of assets, the proportionate EBITDA from our EMI pipelines, equity income and gain from sale of investments recorded using the equity method, noncash increases and decreases related to hedging activities, fair value adjustments for contingent liabilities, integration and transaction costs and extraordinary losses and unusual or non-recurring charges The following table presents Segment Adjusted EBITDA.

Also refer to Note 19—Segments in the Notes to our Consolidated Financial Statements in this Annual Report for reconciliation of segment adjusted EBITDA to Income before income taxes.

Index to Financial Statements

For The Year Ended December 31,

2024 2023 % Change

(In thousands, except percentage)

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Total segment adjusted EBITDA $ 971,118 $ 838,830 16 %

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

Refer to Note 1—Description of Business and Basis of Presentation in the Notes to the Consolidated Financial Statements of this Annual Report for further information on the Company’s financial statement consolidation.

* Corporate and Other represents those results that:

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Midstream Logistics segment adjusted EBITDA increased by $71.7 million, or 13%, to $614.9 million for the year ended December 31, 2024, compared to $543.2 million for the same period in 2023.

The increase was primarily driven by an increase in the segment’s operating revenue of $38.0 million, or 3% and a decrease in costs of sales, excluding deprecation and amortization expense, of $25.8 million, or 5%.

The increase was partially offset by an increase in operating expense of $24.8 million, or 18%.

The increase was primarily due to the increased total operating revenue of $223.9 million, or 18%, partially offset by increases in cost of sales (exclusive of depreciation and amortization) of $106.6 million, or 21%, and operating expense and ad valorem taxes of $35.1 million or 19%.

The reasons for the fluctuations are discussed in the Item 7.

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Pipeline Transportation segment adjusted EBITDA increased by $66.4 million, or 21%, to $377.6 million for the year ended December 31, 2024, compared to $311.1 million for the same period in 2023.

The increase was driven by an increase in segment’s operating revenue of $4.9 million, or 267%, due to higher service revenue and other revenue from the pipelines acquired and constructed by the Company, and an increase in the Company’s EMIs’ proportionate EBITDA of $37.2 million, or 14%, due to owning the EMI investments acquired through the Transaction for a full 12 months and increased equity ownership in PHP upon completion of the PHP expansion project in December 2023.

The increase was primarily driven by higher proportionate EMI EBITDA of $40.6 million, or 13%, due to increased profitability at PHP related to expanded capacity that was placed into service starting in December 2023.

The increase was also related to an increase in total operating revenue of $27.0 million, primarily related to the Delaware Link Pipeline that was placed in service in October 2023.

Contractual Obligations

We have contractual obligations for principal and interest payments on our 2028 Notes, 2030 Notes and Term Loan.

We have contractual obligations for principal and interest payments on our 2028 Notes, 2030 Notes, the Term Loan Credit Facility, Revolving Credit Facility and A/R Facility.

See Note 8—Debt and Financing Costs in the Notes to our Consolidated Financial Statements in this Annual Report.

Under certain clauses of our transportation services agreements with third party pipelines to transport natural gas and NGLs, if we fail to ship a minimum throughput volume, then we will pay certain deficiency payments for transportation based on the volume shortfall up to the MVC amount.

Index to Financial Statements

For additional information regarding the Company’s obligations, please see Note 8—Debt and Financing Costs and Note 17—Commitments and Contingencies in the Notes to the Consolidated Financial Statements in this Annual Report.

Capital Resources and Liquidity

The Company’s primary use of capital since inception has been for the initial construction of gathering and processing assets, as well as the acquisition of the EMI pipelines and associated subsequent construction costs.

For 2023, the Company’s primary capital spending were related to the PHP expansion project, the midstream infrastructure acquisition and other budgeted capital expenditures for construction of gathering and processing assets, the Company’s contractual debt obligations and quarterly cash dividends and distributions.

During the year ended December 31, 2023, the Company’s primary sources of cash were distributions from the EMI pipelines, borrowings under the Revolving Credit Facility, proceeds from debt offerings and cash generated from operations.

Based on the Company’s current financial plan, the Company believes that cash from operations and distributions from the EMI pipelines, and remaining borrowing capacity on our Revolving Credit Facility will generate cash flows in excess of capital expenditures and the amount required to fund the Company’s planned quarterly dividend over the next 12 months.

In addition, the Company entered into the First Amendment, which extended maturity of its Term Loan through June 2026.

Upon the closing of the First Amendment and in conjunction with paying down $800 million on the Term Loan, the Company terminated one of its existing interest rate swap contracts and partially terminated another.

As of December 31, 2023, the Company had two interest rate swap contracts with total notional amounts of $1.70 billion maturing on May 31, 2025, which pay a fixed rate ranging from 4.38% to 4.48% for the respective notional amounts.

Comprehensive Refinancing

On June 8, 2022, the Partnership completed the private placement of $1.00 billion aggregate principal amount of the 2030 Notes, which are fully and unconditionally guaranteed by the Company.

The 2030 Notes are issued under our Sustainability-Linked Financing Framework and include sustainability-linked features.

In addition, the Partnership entered into a revolving credit agreement, which provides for a $1.25 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”) maturing on June 8, 2027, and term loan credit agreement, which provides for a $2.00 billion senior unsecured Term Loan maturing on June 8, 2025, which was then extended to June 8, 2026 pursuant to the First Amendment.

The Term Loan may be further extended to December 8, 2026, at such time as no more than $1.00 billion of an aggregate principal amount of loans under the Term Loan remain outstanding, subject to customary conditions.

Proceeds from the 2030 Notes and the Term Loan were used to repay all outstanding borrowings under our then existing credit facilities and to pay fees and expenses related to the offering.

Refer to Note 8 — Debt and Financing Costs in the Notes to our Consolidated Financial Statements in this Annual Report for further information.

December 2028 Sustainability-Linked Senior Notes

On December 6, 2023, the Partnership completed a private placement of $500.0 million aggregate principal amount at par.

Further, on December 19, 2023, the Company completed an additional private placement of $300.0 million aggregate principal amount at 100.50% of the face amount.

The Original 2028 Notes and the Additional 2028 Notes are treated as a single series of securities under the indenture governing the 2028 Notes, vote together as a single class, and have substantially identical terms, other than the issue date and issue price.

The 2028 Notes are fully and unconditionally guaranteed by the Company and issued under our Sustainability-Linked Financing Framework.

Proceeds from the 2028 Notes together with cash on hand and borrowings under the Partnership’s Revolving Credit Facility were used to repay a portion of the outstanding borrowings under the Partnership’s existing Term Loan.

Term Loan Amendment 2023

On December 6, 2023, the Partnership, the Company, PNC Bank and the banks and other financial institutions party thereto, as lenders, entered into the First Amendment concurrently with the closing of the Partnership’s 2028 Notes discussed above.

The First Amendment (1) extended the maturity of the Term Loan from June 8, 2025 to June 8, 2026 upon the prepayment of a principal amount of loans under the Term Loan of no less than $500.0 million;

and (2) provided for an additional automatic six-month extension of the amended maturity date if certain criteria are met.

In conjunction with the principal prepayment of the existing Term Loan, the Company recognized a loss on extinguishment of debt of approximately $1.9 million from writing off the proportionate amount of unamortized debt issuance costs and original discount related to the partial extinguishment for the year ended December 31, 2023.

Liquidity and Capital Resources

The Company’s primary use of capital since inception has been for the initial construction of gathering and processing assets, as well as the acquisitions of businesses and EMI pipelines and associated subsequent construction costs.

For 2024, the Company’s primary spending requirements were related to the business acquisitions and other budgeted capital expenditures for construction and maintenance of gathering and processing assets, the Company’s contractual debt obligations and quarterly cash dividends.

In addition, the Company may repurchase its Class A Common Stock pursuant to the Share Repurchase Program from time to time.

During the year ended December 31, 2024, the Company’s primary sources of cash were distributions from the EMI pipelines, borrowings under the Revolving Credit Facility and the A/R Facility, proceeds from the GCX Sale and cash generated from operations.

Based on the Company’s current financial plan, the Company believes that cash from operations and distributions from the EMI pipelines, and remaining borrowing capacity on our credit facilities will generate cash flows in excess of capital expenditures and the amount required to fund the Company’s planned quarterly dividend over the next 12 months.

Index to Financial Statements

Capital Requirements and Expenditures

Long-term Financing

From time to time, we issue long-term debt.

Our senior unsecured notes are fixed rate borrowings;

however, we have some exposure to the risk of changes in interest rates, primarily as a result of the variable rate borrowings under the Revolving Credit Facility, the Term Loan Credit Facility and the A/R Facility.

We use interest rate swaps to mitigate the impact of changes in interest rates on cash flows.

See Note 13—Derivatives and Hedging Activities in the Notes to the Consolidated Financial Statements in this Annual Report for detailed discussion.

As of December 31, 2024, we had $800.0 million of our 6.625% senior unsecured notes due 2028 and $1.0 billion of our 5.875% senior unsecured notes due 2030 outstanding.

The Term Loan Credit Facility and the Revolving Credit Facility, both with variable rates and maturing in 2026 and 2027, had outstanding borrowings of $1.00 billion and $590.0 million as of December 31,2024, respectively.

On April 2, 2024, 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 with PNC Bank, as the administrative agent, and certain purchasers party thereto from time to time, which has a scheduled termination date of April 1, 2025.

As of December 31, 2024, we had outstanding borrowing under the A/R Facility of $140.2 million.

Our operations can be capital intensive, requiring investments to expand, upgrade, maintain or enhance existing operations and to meet environmental and operational regulations.

During the year ended December 31, 2023 and 2022, capital spending for property, plant and equipment totaled $312.9 million and $206.2 million in 2022, and intangible asset purchases of $16.7 million in 2023 and $15.4 million in 2022.

In addition, the Company acquired midstream infrastructure assets totaling $125.0 million through a business combination that closed in the first quarter 2023, see additional information in Note—3.

During the year ended December 31, 2024 and 2023, capital spending for property, plant and equipment totaled $263.5 million and $312.9 million, respectively, intangible asset purchases of $12.3 million and $16.7 million, respectively, contributions to EMI totaled $3.3 million and $238.8 million, respectively, and paid net cash of $85.4 million to acquire additional equity interests in EPIC in second quarter 2024.

In addition, the Company paid net cash of $341.2 million associated with the Durango Acquisition and net cash of $125.0 million to acquire midstream infrastructure assets through a business combination that closed in the first quarter 2023, see additional information in Note—3.

Business Combinations in the Notes to the Consolidated Financial Statements in this Annual Report.

Management believes its existing gathering, processing, and transmission infrastructure capacity is capable of fulfilling its contracts to service its customers.

During the year ended December 31, 2023, the Company contributed $238.8 million to PHP for the expansion project, compared to $78.2 million contributed to the same period of 2022.

See Note 19—Segments in the Notes to the Consolidated Financial Statements in this Annual Report for capital expenditure for each operating segment.

The Company estimates 2024 capital expenditures of approximately $125.0 million to $165.0 million, which is significantly lower than that in 2023 as the Company concluded the Delaware Link Pipeline construction in September 2023 and the PHP Expansion Project went in service during December 2023.

The Company estimates 2025 capital expenditures of approximately $450.0 million to $540.0 million, which is slightly higher than 2024.

This estimate reflects capital to complete the Kings Landing Project, including contingent liabilities due to Durango’s former owner, to continue the build out of the low- and high-pressure gathering system in Eddy County, New Mexico, to integrate the new gathering assets acquired through the Permian Resources Midstream Acquisition in Reeves County, and growth and maintenance capital across the existing Texas and New Mexico systems.

The Company anticipates its existing capital resources will be sufficient to fund the future capital expenditures for EMI pipelines and the Company’s existing infrastructure assets over the next 12 months.

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Cash used in investing activities $ (176,887) $ (686,320)

Cash provided by (used in) financing activities

Cash (used in) provided by financing activities

$ (461,363) $ 99,956

Index to Financial Statements

Operating Activities .

Net cash provided by operating activities decreased by $28.5 million for the year ended December 31, 2023 compared with the same period in 2022.

The change in the operating cash flows reflected an increase in net income including noncontrolling interests of $135.7 million, and decreases in adjustments related to non-cash items of $135.5 million and cash provided by changes in working capital of $28.7 million.

Period-to-period decrease in non-cash adjustments was primarily driven by a $235.5 million increase in deferred tax benefit due to the release of the Company’s valuation allowance for deferred tax assets during 2023 and a decrease in loss on debt extinguishment of $26.1 million related to the comprehensive refinancing which was completed in 2022.

The decrease was partially offset by increases in derivative fair value adjustments of $61.8 million and depreciation and amortization expense of $20.6 million.

Period-to-period changes in working capital was primarily related to a decrease in accrued liabilities and fluctuations in trade receivables and payables due to timing of collections and payments.

Net cash provided by operating activities increased by $52.9 million for the year ended December 31, 2024 compared with the same period in 2023.

The change in the operating cash flows reflected a decrease in net income including noncontrolling interests of $142.2 million, an increase in adjustments related to non-cash items of $234.4 million and a decrease in cash provided by changes in working capital of $39.3 million.

Period-over-period increase in non-cash adjustments was primarily driven by a $252.9 million increase in deferred tax expense due to recognition of income tax expense from deferred tax assets in 2024 compared to the release of valuation allowance for deferred tax assets made in 2023, an increase in depreciation and amortization expense of $43.2 million compared with the same period in 2023 due to increase in property, plant and equipment acquired and put into service since second half of 2023, an increase in share-based compensation expense of $20.6 million compared with the same period in 2023 due to the 2024 STI bonus being paid in December for 2024 versus March in prior years, and an increase in distribution from unconsolidated affiliates of $17.5 million compared with the same period in 2023 driven by PHP’s expansion project.

The increase was partially offset by gain from sale of all equity interest in GCX of $89.8 million, and a decrease in loss on disposal of assets of $15.4 million.

Period-over-period changes in working capital were related to fluctuations in trade receivable and payable balances due to timing of collection and payments and fluctuations in accrued revenue and accrued purchases.

Investing Activities .

Net cash used in investing activities increased by $400.2 million for the year ended December 31, 2023 compared with the same period in 2022.

The increase was primarily driven by increases in property, plant and equipment expenditures, contributions made to the PHP expansion project and cash paid for the acquisition of certain midstream assets.

Net cash used in investing activities decreased by $509.4 million for the year ended December 31, 2024 compared with the same period in 2023.

The decrease was primarily driven by cash consideration received as a result of the GCX Sale of $524.4 million and a decrease of $235.5 million in contributions made to unconsolidated affiliates as PHP’s expansion project was completed and put into service in December 2023.

The decrease was partially offset by the payment of net cash consideration of $341.2 million related to Durango Acquisition.

Financing Activities .

Net cash provided by financing activities totaled $100.0 million for the year ended December 31, 2023 compared with net cash used in financing activities totaling $339.2 million in the same period in 2022.

The $439.2 million change was primarily due to a reduction of cash outflow related to the redemption of Preferred Units for $644.8 million, as all Preferred Units were redeemed in 2022, lower net long term debt proceeds of $167.1 million and an increase in cash dividends paid to Class A Common Stock shareholders of $42.1 million.

Net cash used in financing activities totaled $461.4 million for the year ended December 31, 2024 compared with net cash provided by financing activities totaling $100.0 million in the same period in 2023.

The $561.3 million change was primarily due to a net repayment of outstanding debt of $65.4 million made in 2024 compared to net proceeds of $187.8 million from the long-term debt and Revolving Credit Facility in 2023.

Increase in cash outflow was also due to an increase of $313.9 million in cash dividends paid to Class A Common Stock shareholders and Class C Common Unit holders as the Reinvestment Agreement (as defined below) terminated in March 2024.

Dividend and Distribution Reinvestment Agreement

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 Midstream LLC and certain individuals (each, a

Index to Financial Statements

“Reinvestment Holder”).

Under the Reinvestment Agreement, each Reinvestment Holder is obligated to reinvest at least 20% of all distributions on common units representing limited partner interests in the Partnership (“Common Units”) or dividends on shares of Class A Common Stock in the Company’s Class A Common Stock.

Under the Reinvestment Agreement, each Reinvestment Holder was obligated to reinvest at least 20% of all distributions on common units representing limited partner interests in the Partnership (“Common Units”) or dividends on shares of Class A Common Stock in the Company’s Class A Common Stock.

For the calendar year 2023, the Audit Committee resolved 100% of all distributions or dividends received by each Reinvestment Holder would be reinvested in shares of Class A Common Stock.

The Reinvestment Agreement will terminate automatically on March 8, 2024.

The Reinvestment Agreement terminated automatically on March 8, 2024.

During 2024, the Company made cash dividend payments of $396.0 million to holders of Class A Common Stock and Common Units and $75.6 million was reinvested in shares of Class A Common Stock by the Reinvestment Holders.

On May 19, 2022, the Company announced a stock split with respect to its Class A Common Stock and Class C Common Stock in the form of a stock dividend (the “Stock Split”).

The Stock Split was accomplished by distributing one additional share of Class A Common Stock for each share of Class A Common Stock outstanding and one additional share of Class C Common Stock for each share of Class C Common Stock outstanding.

The additional shares of Common Stock were issued on June 8, 2022 to holders of record at the close of business on May 31, 2022.

Stock Repurchase Program

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

During the year ended December 31, 2023, the Company repurchased 194,174 shares at a total cost of $5.8 million.

The Company retired all treasury stock as of December 31, 2023.

During the year ended December 31, 2024, the Company did not repurchase any of its outstanding shares.

For more information regarding the non-deductible 1% U.S.

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corporations, please refer to Part I—Item 1A Risk Factors—Risks Related to Ownership of our Common Stock .

On January 23, 2024, the Company declared a cash dividend of $0.75 per share on the Company’s Class A Common Stock and a distribution of $0.75 per Common Unit from the Partnership to the holders of Common Units.

Dividends are payable on March 7, 2024 to holders of record as of market close on February 22, 2024.

Certain holders of Class A Common Stock and Common Units will receive a cash dividend with the balance receiving additional shares of Class A Common Stock under the Reinvestment Agreement.

Series A Cumulative Redeemable Preferred Units

The Company issued Series A Cumulative Redeemable Preferred Units (“Preferred Units”) on June 12, 2019.

Because the Transaction was accounted for as a reverse merger, certain Preferred Units that were issued and outstanding were assumed at Closing for accounting purposes.

The Company assumed 525,000 Preferred Units as well as 29,983 paid-in-kind (“PIK”) Preferred Units immediately after the Closing.

In 2022, the Company redeemed all outstanding Preferred Units and PIK units for an aggregate redemption price of $644.8 million.

The Company recognized a gain of $9.6 million on redemption of the mandatory redeemable Preferred Units and excess of carrying amount over redemption price of $109.5 million on redemption of the redeemable noncontrolling interest Preferred Units during 2022.

Index to Financial Statements

On January 22, 2025, the Company declared a cash dividend of $0.78 per share on the Company’s Class A Common Stock and a distribution of $0.78 per Common Unit from the Partnership to the holders of Common Units.

Dividends are payable on February 12, 2025 to holders of record as of market close on February 3, 2025.

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.”

The following table presents a summary of the Company’s key financial indicators:

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If there is an indication that the carrying amount of an asset may not be recovered, the asset is assessed for impairment through an established process in which changes to significant assumptions such as service prices, throughput volumes, future development plans and fluctuation of commodity prices are reviewed.

If, upon review, the sum of the undiscounted pre-tax cash flows is less than the carrying value of the asset group, the carrying value is written down to an estimated fair value.

If, upon review, the sum of the undiscounted pre-tax cash flows is less than the carrying value of the asset

Index to Financial Statements

group, the carrying value is written down to an estimated fair value.

Such fair value is generally determined by discounting anticipated future net cash flows, an income valuation approach, or by a market-based valuation approach, which are Level 3 fair value measurements.

1 unchanged sentence

An estimate of the sensitivity to changes in underlying assumptions of a fair value calculation is not practicable, given the numerous assumptions that can materially affect our estimates.

Index to Financial Statements

Equity Method Investment

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis