What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-05 compared with 2021-08-05 · 83 added, 86 removed, 284 unchanged (37% of the section changed)

6 unchanged sentences

The Company has no independent operations or material assets outside its ownership interest in Altus Midstream, which is reported on a consolidated basis.

As of June 30, 2021, Altus Midstream’s assets included approximately 182 miles of in-service natural gas gathering pipelines, approximately 46 miles of residue gas pipelines with four market connections, and approximately 38 miles of NGL pipelines.

As of September 30, 2021, Altus Midstream’s assets included approximately 182 miles of in-service natural gas gathering pipelines, approximately 46 miles of residue gas pipelines with four market connections, and approximately 38 miles of NGL pipelines.

Three cryogenic processing trains, each with nameplate capacity of 200 MMcf/d, were placed into service during 2019.

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The Company’s existing gathering, processing, and transmission infrastructure is expected to provide capacity levels capable of fulfilling its midstream contracts to service Apache’s production from Alpine High and potential third-party customers.

As of June 30, 2021, the Company owns the following Equity Method Interest Pipelines:

As of September 30, 2021, the Company owns the following Equity Method Interest Pipelines:

• A 16 percent equity interest in the Gulf Coast Express Pipeline Project (GCX), which is owned and operated by Kinder Morgan Texas Pipeline, LLC (Kinder Morgan).

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Shin Oak was placed in service during 2019, with total capacity of up to 550 MBbl/d.

On October 21, 2021, the Company announced that it will combine with privately-owned BCP in an all-stock transaction.

BCP is the parent company of EagleClaw Midstream, which includes EagleClaw Midstream Ventures, the Caprock Midstream and Pinnacle Midstream businesses, and a 26.7% interest in the Permian Highway Pipeline.

As consideration for the transaction, the Company will issue 50 million Class C common shares (and Altus Midstream will issue corresponding Common Units) to BCP’s unitholders, which are principally funds affiliated with Blackstone and I Squared Capital.

The transaction is expected to close during the first quarter 2022 following completion of customary closing conditions, including approval by the Company’s shareholders and regulatory reviews.

The global economy and the energy industry have been deeply impacted by the effects of the coronavirus disease 2019 (COVID-19) pandemic and related governmental actions.

Uncertainty in the oil markets and the negative demand implications of the COVID-19 pandemic continue to impact oil supply and demand.

Altus management continues to monitor natural gas throughput volumes from Apache and capacity utilization of the Equity Method Interest Pipelines.

The Company remains focused on increasing third-party processing opportunities in addition to Alpine High;

however, the current market situation has slowed the pace of this activity.

Altus management continues to monitor natural gas

throughput volumes from Apache and capacity utilization of the Equity Method Interest Pipelines.

Altus has no upcoming debt maturities, and the term of its revolving credit facility extends through November of 2023.

The current crisis, however, is still evolving and may become more severe and complex.

any additional waves of the virus, the availability and ultimate efficacy of the vaccines on new variants of the virus, and the effect of the pandemic on short- and long-term general economic conditions.

The ultimate impact and the extent to which the COVID-19 pandemic will continue to affect the Company’s business, results of operation, and financial condition is difficult to predict and depends on numerous evolving factors outside Altus’ control, including the duration and scope of the pandemic, new and continuing government, social, business, and other actions taken in response to the pandemic, any additional waves of the virus, the mandate, availability, and ultimate efficacy of the vaccines on new variants of the virus, and the effect of the pandemic on short- and long-term general economic conditions.

As a result, the COVID-19 pandemic may still materially and adversely affect Altus’ results in a manner that is either not currently known or that the Company does not currently consider to be a significant risk to its business.

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For the periods presented, substantially all revenues were generated through fee-based agreements with Apache, a related party.

The volumes of natural gas that Altus gathers or processes in future periods will depend on the production level of Apache’s assets in areas Altus services and any additional third-party service contracts or incremental use of Altus Midstream infrastructure resulting from the potential close of the business combination transaction with BCP discussed above.

The Company’s assets were initially constructed to serve Apache’s anticipated development of Alpine High and its surrounding areas.

As such, the amount and pace of upstream development activity by Apache will directly impact Altus’ aggregate gathering and processing volumes because the production rate of natural gas wells declines over time.

As such, the amount and pace of upstream development activity by Apache could directly impact Altus’ aggregate gathering and processing volumes because the production rate of natural gas wells declines over time.

The Company entered into a new Gas Processing Agreement with Apache in October 2021, which superseded the prior agreement.

The updated processing agreement contains modified gas processing fees for new volumes from future Apache drilling activities at Alpine High that are more consistent with current market practices.

The circumstances that existed when the original agreement was signed have changed dramatically, and the updated terms may help to attract new business from both Apache, our existing customer, and third-party producers and midstream companies.

The Company remains focused on increasing third-party processing opportunities in addition to Alpine High, and other producers are developing oil and gas plays in surrounding areas that may provide Altus opportunities to enter into third-party processing and gathering agreements.

Producers’ willingness to engage in new drilling is determined by a number of factors, all of which are affected by the COVID-19 pandemic, the most important of which are the prevailing and projected prices of oil, natural gas, and NGLs, the cost to drill and operate a well, the availability and cost of capital, and environmental and government regulations.

Company management believes that its midstream assets are positioned in one of the most active regions for oil and gas exploration and development activities in the United States, and the Company is actively pursuing new supplies of natural gas and processing arrangements with third parties to increase throughput volumes in its systems.

Company management believes that its midstream assets are positioned in one of the most active regions for oil and gas exploration and development activities in the United States.

The Company has actively pursued strategic alternatives for future growth, which culminated in the recently announced business combination with BCP, a midstream company that has existing commitments with various third-party customers.

Costs and Expenses

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

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

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

2021 2020 (1)

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(In thousands)

Reconciliation of net income (loss) including noncontrolling interests to Adjusted EBITDA

Net income (loss) including noncontrolling interests $ 73,841 $ 16,034 $ 96,330 $ (9,337)

Reconciliation of net income including noncontrolling interests to Adjusted EBITDA

Net income including noncontrolling interests $ 49,689 $ 31,198 $ 146,019 $ 21,860

Financing costs, net of capitalized interest 2,674 413 7,887 978

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Equity method interests Adjusted EBITDA 50,109 29,952 138,405 81,869

Warrants valuation adjustment — 417 442 —

Other 325 — 781 290

Gain on sale of assets 194 — 470 76

Interest income 1 2 2 9

Unrealized derivative instrument gain 4,010 — 18,487 —

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The following table presents the Company’s results of operations for the periods presented:

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

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

2021 2020 (1)

14 unchanged sentences

Unrealized derivative instrument gain (loss) 4,010 (3,533) 18,487 (76,102)

Interest income 1 2 2 9

Income from equity method interests, net 32,479 15,987 82,633 47,541

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Financing costs, net of capitalized interest 2,674 413 7,887 978

NET INCOME (LOSS) BEFORE INCOME TAXES 73,841 16,034 96,330 (10,033)

NET INCOME BEFORE INCOME TAXES 49,689 31,198 146,019 21,164

Current income tax benefit — — — (696)

NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS 73,841 16,034 96,330 (9,337)

NET INCOME INCLUDING NONCONTROLLING INTERESTS 49,689 31,198 146,019 21,860

Net income attributable to Preferred Unit limited partners 29,166 19,332 72,662 56,358

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The following table summarizes the Company’s revenues for the periods presented:

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

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

2021 2020 2021 2020

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For more details, please refer to Note 3—Revenue Recognition in the Notes to Consolidated Financial Statements set forth in Part I of this Quarterly Report on Form 10-Q for further information.

Three months ended June 30, 2021 as compared to three months ended June 30, 2020

Midstream services revenue from affiliate increased by $0.9 million to $32.5 million for the three months ended June 30, 2021, as compared to $31.6 million for the three months ended June 30, 2020.

The increase was primarily driven by slightly higher throughput of natural gas volumes from Apache.

The $3.1 million in product sales revenues during the three months ended June 30, 2021 were generated from NGLs and condensates purchased and processed by Altus from a third party and subsequently sold to non-affiliated customers.

No significant revenues from such sales occurred during the three months ended June 30, 2020.

Six months ended June 30, 2021 as compared to six months ended June 30, 2020

Midstream services revenue from affiliate decreased by $8.4 million to $64.0 million for the six months ended June 30, 2021, as compared to $72.4 million for the six months ended June 30, 2020.

Three months ended September 30, 2021 as compared to three months ended September 30, 2020

Midstream services revenue from affiliate decreased by $4.4 million to $34.5 million for the three months ended September 30, 2021, as compared to $38.9 million for the three months ended September 30, 2020.

The decrease was primarily driven by lower throughput of natural gas volumes from Apache.

The $5.7 million in product sales revenues during the six months ended June 30, 2021 were generated from NGLs and condensates purchased and processed by Altus from a third party and subsequently sold to non-affiliated customers.

No significant revenues from such sales occurred during the six months ended June 30, 2020.

The $1.3 million in product sales revenues during the three months ended September 30, 2020 were generated from NGLs and condensates purchased and processed by Altus from a third party and subsequently sold to non-affiliated customers.

No revenues from such sales occurred during the three months ended September 30, 2021.

Nine months ended September 30, 2021 as compared to nine months ended September 30, 2020

Midstream services revenue from affiliate decreased by $12.8 million to $98.5 million for the nine months ended September 30, 2021, as compared to $111.3 million for the nine months ended September 30, 2020.

The decrease was primarily driven by lower throughput of natural gas volumes from Apache.

The $3.8 million increase in product sales revenues during the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was driven by higher volumes of NGLs and condensates purchased and processed by Altus from a third party and subsequently sold to non-affiliated customers.

Costs and Expenses

The following table summarizes the Company’s costs and expenses for the periods presented:

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

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

2021 2020 2021 2020

7 unchanged sentences

Total costs and expenses $ 19,958 $ 21,224 $ 63,044 $ 63,771

Three months ended June 30, 2021 as compared to three months ended June 30, 2020

Three months ended September 30, 2021 as compared to three months ended September 30, 2020

Costs of product sales

The $3.4 million in costs of product sales represent purchases of NGLs from a third-party, which were used to support the product sales to third parties discussed above.

The $1.2 million in costs of product sales during the three months ended September 30, 2020 represent purchases of NGLs from a third-party, which were used to support the product sales to third parties discussed above.

No costs of product sales were incurred during the three months ended September 30, 2021.

Operations and maintenance

Operations and maintenance expenses decreased by approximately $2.2 million to $7.3 million for the three months ended June 30, 2021, as compared to $9.5 million for the three months ended June 30, 2020.

This decrease was primarily driven by increased operational efficiency as a result of transitioning from mechanical refrigeration units to the Company’s centralized Diamond cryogenic complex.

Work related to this transition was still being completed in the second quarter of 2020.

The transition resulted in decreases in various costs, the most significant being contract labor, equipment rentals, chemical expenses, and an overall decrease in Company labor from headcount reductions.

Operations and maintenance expenses were consistent period over period, increasing by approximately $0.6 million to $9.6 million for the three months ended September 30, 2021, as compared to $9.0 million for the three months ended September 30, 2020.

General and administrative

G&A expense increased by $0.5 million to $3.5 million for the three months ended June 30, 2021, as compared to $3.0 million for the three months ended June 30, 2020, primarily driven by higher fees paid under the COMA, which escalate on an annual basis per the terms of the agreement.

Refer to Note 2—Transactions with Affiliates in the Notes to Consolidated Financial Statements set forth in Part I of this Quarterly Report on Form 10-Q for further information.

G&A expense was consistent period over period, increasing by $0.5 million to $3.4 million for the three months ended September 30, 2021, as compared to $2.9 million for the three months ended September 30, 2020.

Taxes other than income

The increase in taxes other than income was driven by ad valorem taxes, which increased by $0.4 million to $3.7 million for the three months ended June 30, 2021, as compared to $3.3 million for the three months ended June 30, 2020.

The $0.4 million increase reflects adjustments in estimated tax assessments related to the completion of construction and capacity utilization of certain assets.

Six months ended June 30, 2021 as compared to six months ended June 30, 2020

The decrease in taxes other than income was driven by ad valorem taxes, which decreased by $1.3 million to $2.7 million for the three months ended September 30, 2021, as compared to $4.1 million for the three months ended September 30, 2020.

The $1.3 million overall decrease is primarily related to a decrease in tax assessed value for the Company’s property, plant, and equipment.

Nine months ended September 30, 2021 as compared to nine months ended September 30, 2020

Costs of product sales

The $5.3 million in costs of product sales represent purchases of NGLs from a third-party, which were used to support the product sales to third parties discussed above.

The $3.7 million increase in costs of product sales during the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was driven by higher volumes of purchases of NGLs from a third-party, which were used to support the product sales to third parties discussed above.

Operations and maintenance

Operations and maintenance expenses decreased by $5.4 million to $14.7 million for the six months ended June 30, 2021, as compared to $20.1 million for the six months ended June 30, 2020.

Operations and maintenance expenses decreased by $4.7 million to $24.4 million for the nine months ended September 30, 2021, as compared to $29.1 million for the nine months ended September 30, 2020.

This decrease was primarily driven by increased operational efficiency as a result of transitioning from mechanical refrigeration units to the Company’s centralized Diamond cryogenic complex.

Work related to this transition was still being completed in the first half of 2020.

The transition resulted in

decreases in various costs, the most significant being contract labor, equipment rentals, chemical expenses, and an overall decrease in Company labor from headcount reductions.

These savings were partially offset by higher power usage costs.

The transition resulted in decreases in various costs, the most significant being contract labor, equipment rentals, and chemical expenses.

These savings were partially offset by higher power costs and higher repair and maintenance expenses.

General and administrative

G&A expense decreased by $0.3 million to $6.9 million for the six months ended June 30, 2021, as compared to $7.2 million for the six months ended June 30, 2020, primarily driven by lower professional fees, offset by higher fees paid under the COMA, which escalate on an annual basis per the terms of the agreement.

Refer to Note 2—Transactions with Affiliates in the Notes to Consolidated Financial Statements set forth in Part I of this Quarterly Report on Form 10-Q for further information.

G&A expense was consistent period over period, increasing by $0.3 million to $10.4 million for the nine months ended September 30, 2021, as compared to $10.1 million for the nine months ended September 30, 2020.

Taxes other than income

The increase in taxes other than income was driven by ad valorem taxes, which increased by $0.8 million to $7.4 million for the six months ended June 30, 2021, as compared to $6.6 million for the six months ended June 30, 2020.

The $0.8 million increase reflects adjustments in estimated tax assessments related to the completion of construction and capacity utilization of certain assets.

The $0.5 million decrease in taxes other than income for the comparative periods was driven by ad valorem taxes, which decreased by $0.5 million to $10.2 million for the nine months ended September 30, 2021, as compared to $10.7 million for the nine months ended September 30, 2020.

Other Income (Loss) and Financing Costs, Net of Capitalized Interest

The components of other income, other loss and financing costs, net of capitalized interest are presented below:

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

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

2021 2020 (1)

2 unchanged sentences

Unrealized derivative instrument gain (loss) $ 4,010 $ (3,533) $ 18,487 $ (76,102)

Interest income 1 2 2 9

Income from equity method interests, net 32,479 15,987 82,633 47,541

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Unrealized derivative instrument gain (loss)

During the three and six months ended June 30, 2021, the Company recognized an unrealized derivative instrument gain of $31.0 million and $14.5 million, respectively, in relation to an embedded exchange option identified upon the issuance and sale of Series A Cumulative Redeemable Preferred Units (the Preferred Units).

The unrealized loss related to this embedded feature was $10.6 million and $72.6 million for the three and six months ended June 30, 2020, respectively.

During the three and nine months ended September 30, 2021, the Company recognized an unrealized derivative instrument gain of $4.0 million and $18.5 million, respectively, in relation to an embedded exchange option identified upon the issuance and sale of Series A Cumulative Redeemable Preferred Units (the Preferred Units).

The unrealized loss related to this embedded feature was $3.5 million and $76.1 million for the three and nine months ended September 30, 2020, respectively.

The associated derivative liability is recorded on the consolidated balance sheet at fair value.

The fair value of the embedded derivative is determined (using an income approach) by a range of factors, including expected future interest rates using the Black-Karasinski model, interest rate volatility, the Company’s imputed interest rate, the expected timing of periodic cash distributions, the estimated timing for the potential exercise of the exchange option, and anticipated dividend yields of the Preferred Units.

The value of the derivative during the three and six months ended June 30, 2021 was primarily impacted by expected future interest rates.

The value of the derivative during the three and nine months ended September 30, 2021 was primarily impacted by expected future interest rates.

Refer to Note 13—Fair Value Measurements within Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q for further discussion.

Income from equity method interests, net

Income from equity method interests increased $12.8 million and $18.6 million for the three and six months ended June 30, 2021, respectively, as compared to the three and six months ended June 30, 2020.

Income from equity method interests increased $16.5 million and $35.1 million for the three and nine months ended September 30, 2021, respectively, as compared to the three and nine months ended September 30, 2020.

The increase was primarily due to the Company’s 26.7 percent share of net income from the Permian Highway Pipeline which commenced service in January 2021.

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If the Company does not utilize all of its fixed purchase volumes under this contract, then it will receive a credit based on a market rate for the related underutilization.

In February 2021, in conjunction with increased power pricing due to the Texas freeze event and underutilization of contractual electricity volumes, the Company recognized an estimated credit of approximately $2.5 million and $9.7 million for the three and six months ended June 30, 2021, respectively.

No credits were recorded for the three and six months ended June 30, 2020.

In February 2021, in conjunction with increased power pricing due to the Texas freeze event and underutilization of contractual electricity volumes, the Company recognized an estimated credit of approximately $9.7 million for the nine months ended September 30, 2021.

No credits were recognized for the three months ended September 30, 2021 or for the three and nine months ended September 30, 2020.

Financing costs, net of capitalized interest

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Key Performance Metric—EBITDA

Three months ended June 30, 2021 as compared to three months ended June 30, 2020

Net income before income taxes was $73.8 million for the three months ended June 30, 2021, an increase of $57.8 million from net income before income taxes of $16.0 million for the three months ended June 30, 2020.

The increase in net income before income taxes was primarily driven by a $41.6 million decrease to expense related to the fair value measurement of an embedded derivative at June 30, 2021, a $12.8 million increase in income from the Equity Method Interest Pipelines, a $4.0 million increase in total revenues, a $3.3 million increase of other income primarily related to a power credit, and a $2.2 million decrease in operations and maintenance expenses.

The increases to net income were offset by a $2.3 million increase in interest expense, and a $3.8 million net increase of various other individually insignificant costs.

Adjusted EBITDA increased by $25.6 million for the three months ended June 30, 2021 compared to the prior year period.

Adjusted EBITDA, which excludes the impacts of depreciation, accretion, impairments, interest expense, and the changes to the embedded derivative noted above, benefited from an incremental $7.4 million increase related to excluding depreciation, interest and other discrete items in the Company’s proportionate share of EBITDA from its Equity Method Interest Pipelines.

Six months ended June 30, 2021 as compared to six months ended June 30, 2020

Net income before income taxes was $96.3 million for the six months ended June 30, 2021, an increase of $106.4 million from net loss before income taxes of $10.0 million for the six months ended June 30, 2020.

The increase in net income before income taxes was primarily driven by an $87.0 million decrease to expense related to the fair value measurement of an embedded derivative at June 30, 2021, an $18.6 million increase in income from the Equity Method Interest Pipelines, an $11.0 million increase of other income primarily related to a power credit, and a $5.4 million decrease in operations and maintenance expenses.

The increases to net income were offset by a $5.3 million increase in costs of product of sales, a $2.6 million decrease in total revenue, a $4.6 million increase in interest expense, and a $3.1 million net increase of various other costs.

Adjusted EBITDA increased by $44.1 million for the six months ended June 30, 2021 compared to the prior year period.

Adjusted EBITDA, which excludes the impacts of depreciation, accretion, impairments, interest expense, and the changes to the embedded derivative noted above, benefited from an incremental $17.8 million increase related to excluding depreciation, interest and other discrete items in the Company’s proportionate share of EBITDA from its Equity Method Interest Pipelines.

Three months ended September 30, 2021 as compared to three months ended September 30, 2020

Net income before income taxes was $49.7 million for the three months ended September 30, 2021, an increase of $18.5 million from net income before income taxes of $31.2 million for the three months ended September 30, 2020.

The increase in net income before income taxes was primarily driven by a $16.5 million increase in income from the Equity Method Interest Pipelines, a $7.5 million decrease to expense related to the fair value measurement of an embedded derivative at September 30, 2021, and a $2.4 million net decrease of various other individually insignificant costs.

The increases to net income were offset by a $5.6 million decrease in total revenues and a $2.3 million increase in interest expense.

Adjusted EBITDA increased by $16.6 million for the three months ended September 30, 2021 compared to the prior year period.

Adjusted EBITDA, which excludes the impacts of depreciation, accretion, impairments, interest expense, and the changes to the embedded derivative noted above, benefited from an incremental $3.7 million increase, primarily driven by Permian Highway Pipeline being placed in service in January 2021.

Nine months ended September 30, 2021 as compared to nine months ended September 30, 2020

Net income before income taxes was $146.0 million for the nine months ended September 30, 2021, an increase of $124.8 million from net income before income taxes of $21.2 million for the nine months ended September 30, 2020.

The increase in net income before income taxes was primarily driven by a $94.6 million decrease to expense related to the fair value measurement of an embedded derivative at September 30, 2021, a $35.1 million increase in income from the Equity Method Interest Pipelines, an $11.8 million increase of other income primarily related to a power credit, and a $4.7 million decrease in operations and maintenance expenses.

The increases to net income were offset by an $8.9 million decrease in total revenue, a $3.7 million increase in costs of product of sales, a $6.9 million increase in interest expense, and a $1.8 million net increase of various other costs.

Adjusted EBITDA increased by $60.7 million for the nine months ended September 30, 2021 compared to the prior year period.

Adjusted EBITDA, which excludes the impacts of depreciation, accretion, impairments, interest expense, and the changes to the embedded derivative noted above, benefited from an incremental $21.4 million increase, primarily due to Permian Highway Pipeline being placed in service in January 2021.

This amount was further benefited by an insignificant decrease, in the aggregate, of $1.6 million of various other costs of the Company.

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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 Equity Method Interest Pipelines and associated subsequent construction costs.

For 2021, the Company’s primary capital spending requirements are anticipated to be related to equity contributions associated with its proportionate share of remaining construction, commissioning, and maintenance costs relating to the Equity Method Interest Pipelines, and the Company’s payment of a quarterly cash dividend on its Class A common stock as may be declared by its Board of Directors.

During the six months ended June 30, 2021, the Company’s primary sources of cash were distributions from the Equity Method Interest Pipelines, borrowings under the revolving credit facility, and cash generated from operations.

For 2021, the Company’s primary capital spending requirements are anticipated to be related to equity contributions associated with its proportionate share of capital calls relating to the Equity Method Interest Pipelines, and the Company’s payment of a quarterly cash dividend on its Class A common stock as may be declared by its Board of Directors.

During the nine months ended September 30, 2021, the Company’s primary sources of cash were distributions from the Equity Method Interest Pipelines, borrowings under the revolving credit facility, and cash generated from operations.

Based on Altus’ current financial plan and related assumptions, the Company believes that cash from operations, a reduced capital program for its midstream infrastructure, and distributions from the Equity Method Interest Pipelines will generate cash flows in excess of capital expenditures and the amount required to fund the Company’s planned quarterly dividend during 2021.

Given recent crude oil price volatility and uncertain economic activity resulting from the COVID-19 pandemic and related governmental actions, the Company continues to monitor expected natural gas throughput volumes from Apache and capacity utilization of the Equity Method Interest Pipelines.

Projections for 2021 remain dynamic.

Altus' results, including projections related to capital resources and liquidity, could be materially affected by the continuing COVID-19 pandemic.

Further, as noted above, the Company recently announced approval of a business combination with BCP.

Given pending business combination, together with the recent price volatility and continuing economic uncertainty related to COVID-19, future projections remain dynamic.

Altus’ results, including projections related to capital resources and liquidity, could be materially affected by the continuing COVID-19 pandemic and the effects of the business combination if closed.

Altus Midstream Capital Requirements

During the six months ended June 30, 2021 and 2020, capital spending for midstream infrastructure assets totaled $2.4 million and $26.5 million, respectively.

During the nine months ended September 30, 2021 and 2020, capital spending for midstream infrastructure assets totaled $3.3 million and $29.5 million, respectively.

Management believes its existing gathering, processing, and transmission infrastructure capacity is capable of fulfilling its midstream contracts to service Apache’s production from Alpine High and any additional third-party customers.

As such, the Company expects remaining capital requirements for its existing infrastructure assets during 2021 to be minimal.

Additionally, during the six months ended June 30, 2021 and 2020, the Company made cash contributions totaling $24.2 million and $154.4 million, respectively, to the Equity Method Interest Pipelines, which includes the following equity interest ownership stakes:

Additionally, during the nine months ended September 30, 2021 and 2020, the Company made cash contributions totaling $27.3 million and $286.2 million, respectively, to the Equity Method Interest Pipelines, which includes the following equity interest ownership stakes:

• a 16.0 percent interest in GCX;

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• a 33.0 percent interest in Shin Oak.

The Company estimates it will incur minimal capital contributions of between $5 million to $7 million for its equity interest in these joint venture pipelines.

The Company estimates it will incur minimal capital contributions of between $2 million to $4 million for its equity interest in these joint venture pipelines for the remainder of 2021.

The Company anticipates its existing capital resources will be sufficient to fund the Company’s future capital expenditures for the Equity Method Interest Pipelines and the Company’ existing infrastructure assets.

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Altus Midstream Class A Common Stock Dividend and Common Units Distributions

In the first and second quarters of 2021, the Company made payments of $24.4 million, per quarter, related to its quarterly dividend program.

In the first, second, and third quarters of 2021, the Company made payments of $24.4 million, per quarter, related to its quarterly dividend program.

For more information please refer to Note 2—Transactions with Affiliates and Note 9—Equity in the Notes to Consolidated Financial Statements set forth in Part I, of this Quarterly Report on Form 10-Q.

On August 3, 2021, the Company’s Board of Directors declared a cash dividend of $1.50 per share on the Company’s Class A Common Stock, totaling $5.6 million, to be paid on September 30, 2021, to stockholders of record as of the close of business on August 27, 2021.

On November 2, 2021, the Company’s Board of Directors declared a cash dividend of $1.50 per share on the Company’s Class A Common Stock, totaling $5.6 million, to be paid on December 30, 2021, to stockholders of record as of the close of business on November 30, 2021.

The Class A Common Stock dividend will be funded by a distribution from Altus Midstream to its common unitholders of $1.50 per Common Unit, totaling $24.4 million, of which $5.6 million is payable to the Company and the balance is payable to Apache.

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The following table presents the sources and uses of the Company’s cash and cash equivalents for the periods presented.

For the Six Months Ended

For the Nine Months Ended

September 30,

(In thousands)

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(In thousands)

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Cash and cash equivalents

As of June 30, 2021 and December 31, 2020, the Company had $75.1 million and $24.2 million, respectively, in cash and cash equivalents.

As of September 30, 2021 and December 31, 2020, the Company had $109.0 million and $24.2 million, respectively, in cash and cash equivalents.

The majority of the cash is invested in highly liquid, investment-grade instruments with maturities of three months or less at the time of purchase.

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Altus Midstream may increase commitments up to an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders.

As of June 30, 2021, there were $657.0 million of borrowings and a $2.0 million of letter of credit outstanding under this facility.

As of September 30, 2021, there were $657.0 million of borrowings and a $2.0 million of letter of credit outstanding under this facility.

As of December 31, 2020, there were $624.0 million of borrowings and no letters of credit were outstanding under this facility.

4 unchanged sentences

The Leverage Ratio is the ratio of (1) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries to (2) EBITDA (as defined in the Amended Credit Agreement) of Altus Midstream and its restricted subsidiaries for the 12-month period ending immediately before the determination date.

At June 30, 2021, the base rate margin was 0.05 percent, the LIBOR margin was 1.05 percent, and the facility fee was 0.20 percent.

At September 30, 2021, the base rate margin was 0.05 percent, the LIBOR margin was 1.05 percent, and the facility fee was 0.20 percent.

In addition, a commission is payable quarterly to the lenders on the face amount of each outstanding letter of credit at a per annum rate equal to the LIBOR margin then in effect.

5 unchanged sentences

In no event can any distribution be made that would, after giving effect to it on a pro forma basis, result in a Leverage Ratio greater than (i) 5.00:1.00 or (ii) for a specified period after a qualifying acquisition, 5.50:1.00.

The Leverage Ratio as of June 30, 2021 was less than 4.00:1.00.

The Leverage Ratio as of September 30, 2021 was less than 4.00:1.00.

The terms of Altus Midstream’s Preferred Units also contain certain restrictions on distributions on Altus Midstream LP’s Common Units, including the Common Units held by the Company, and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation.

5 unchanged sentences

Lenders may also accelerate payment maturity and terminate lending and issuance commitments if Altus Midstream undergoes a specified change in control or has specified pension plan liabilities in excess of the stated threshold.

Altus Midstream was in compliance with the terms of the Amended Credit Agreement as of June 30, 2021.

Altus Midstream was in compliance with the terms of the Amended Credit Agreement as of September 30, 2021.

There is no assurance that the financial condition of banks with lending commitments to Altus Midstream will not deteriorate.

4 unchanged sentences

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 2. Management’s Discussion and Analysis