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Item 9A. Controls and Procedures

2022-02-22 compared with 2021-02-26 · 224 added, 326 removed, 1007 unchanged (35% of the section changed)

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Disclosure Controls and Procedures

The Company’s Chief Executive Officer and President, in his capacity as principal executive officer, and the Company’s Chief Financial Officer and Treasurer, in his capacity as principal financial officer, evaluated the effectiveness of its disclosure controls and procedures as of December 31, 2020, the end of the period covered by this Annual Report on Form 10-K.

The Company’s Chief Executive Officer and President, in his capacity as principal executive officer, and the Company’s Chief Financial Officer and Treasurer, in his capacity as principal financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2021, the end of the period covered by this Annual Report on Form 10-K.

Based on that evaluation and as of the date of that evaluation, these officers concluded that the Company’s disclosure controls and procedures were effective, providing effective means to ensure that the information the Company is required to disclose under applicable laws and regulations is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms and accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

The Company periodically reviews the design and effectiveness of its disclosure controls, including compliance with various laws and regulations that apply to operations.

The Company makes modifications to improve the design and effectiveness of its disclosure controls, and may take other corrective action, if the Company’s reviews identify deficiencies or weaknesses in its controls.

Management’s Annual Report on Internal Control Over Financial Reporting

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OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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Report of Management on Internal Control Over Financial Reporting

Reports of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020, and 2019

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Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020, and 2019

Statements of C onsolidated Changes in Equity and Noncontrolling Interests for the Years Ended December 31, 2020, 2019, and 2018

Statements of Consolidated Changes in Equity and Noncontrolling Interests for the Years Ended December 31, 2021, 2020, and 2019

Notes to Consolidated Financial Statements

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2.1*** – Contribution Agreement, dated as of August 8, 2018, by and among Kayne Anderson Acquisition Corp., Altus Midstream LP, Apache Midstream LLC, Altus Midstream Gathering LP, Altus Midstream Pipeline LP, Altus Midstream Processing LP, Altus Midstream NGL Pipeline LP and Altus Midstream Subsidiary GP LLC (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 8, 2018, SEC File No.

2.2*** – Contribution Agreement, dated as of October 21, 2021, by and among Altus Midstream Company, Altus Midstream LP, New BCP Raptor Holdco, LLC and BCP Raptor Holdco, LP (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 21, 2021, SEC File No.

3.1 – Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 13, 2018, SEC File No.

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3.3 – Bylaws (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1 filed on March 7, 2017, SEC File No.

4.1 – Description of Securities of the Registrant.Description of Securities of the Registrant (incorporated by reference to Exhibit 4.1 to Description of Securities of the Registrant.Description of Securities of the Registrant (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, SEC File No.

Company’s Annual Report on Form 10-K for the year ended December 31, 2019, SEC File No.

4.1 – Description of Securities of the Registrant (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, SEC File No.

4.2 – Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Company’s Amendment No.

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(n/k/a Altus Midstream Company) (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on November 13, 2018, SEC File No.

10.11‡ – Intrastate Firm Natural Gas Transportation Service Agreement, dated April 1, 2017, by and between Apache Corporation and Altus Midstream Pipeline LLC (incorporated by reference to Exhibit 10.15 of the Company’s Annual Report on Form 10-K for year ended December 31, 2018, SEC File No.

10.12‡ – Gas Processing Agreement, dated July 1, 2018, by and between Apache Corporation and Altus Midstream Processing LP (incorporated by reference to Exhibit 10.16 of the Company’s Annual Report on Form 10-K for year ended December 31, 2018, SEC File No.

10.11‡ – Intrastate Firm Natural Gas Transportation Service Agreement, dated April 1, 2017, by and between Apache Corporation and Altus Midstream Pipeline LP (incorporated by reference to Exhibit 10.15 of the Company’s Annual Report on Form 10-K for year ended December 31, 2018, SEC File No.

10.12‡ – Gas Gathering Agreement, dated July 1, 2018, by and between Apache Corporation and Altus Midstream Gathering LP (incorporated by reference to Exhibit 10.17 of the Company’s Annual Report on Form 10-K for year ended December 31, 2018, SEC File No.

10.14‡ – Residue Gas Transportation Services Agreement, dated July 1, 2018, by and between Apache Corporation and Altus Midstream NGL Pipeline LP (incorporated by reference to Exhibit 10.18 of the Company’s Annual Report on Form 10-K for year ended December 31, 2018, SEC File No.

10.13‡ – Transportation Services Agreement, dated July 1, 2018, by and between Apache Corporation and Altus Midstream NGL Pipeline LP (incorporated by reference to Exhibit 10.18 of the Company’s Annual Report on Form 10-K for year ended December 31, 2018, SEC File No.

10.14‡ – Gas Processing Agreement, dated effective September 1, 2021, by and between Apache Corporation and Altus Midstream Processing LP (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 14, 2021, SEC File No.

10.15† – Altus Midstream Company Restricted Stock Units Plan, dated December 17, 2018 (incorporated by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K for year ended December 31, 2018, SEC File No.

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23.2* – Consent of Ernst & Young LLP.

23.3* – Consent of BDO USA, LLP.

23.4* – Consent of BDO USA, LLP.

23.3* – Consent of BDO USA, LLP relating to the financial statements of Gulf Coast Express Pipeline LLC.

23.4* – Consent of BDO USA, LLP relating to the financial statements of Permian Highway Pipeline LLC.

23.5* – Consent of KPMG LLP.

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31.2* – Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).

32.1** – Certification of the Principal Executive Officer and Principal Financial O fficer required by Rule 13a-14(a) or Rule 15d-14(b) and 18 U.S.C.

32.1** – Certification of the Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(b) and 18 U.S.C.

99.1* – Gulf Coast Express Pipeline LLC audited financial statements as of December 31, 202 1 .

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† Management contracts or compensatory plans or arrangements required to be filed herewith pursuant to Item 15 hereof.

‡ Portions have been omitted pursuant to a request for confidential treatment.

‡ Portions have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv), because the omitted information is both not material and is the type that the Company treats as private or confidential.

FORM 10-K SUMMARY

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or Permian Highway Pipeline LLC (“PHP”), an entity in which the Company has an approximately 26.7% interest, for the year ended December 31, 2019.

In the consolidated financial statements, the Company’s equity method interest in GCX is stated at approximately $284 million and $292 million as of December 31, 2020 and 2019, respectively, and the Company’s income from equity method interest, net, of GCX is stated at approximately $42 million and $18 million for the years ended December 31, 2020 and 2019, respectively.

In the consolidated financial statements, the Company’s equity method interest in GCX is stated at approximately $274 million and $284 million as of December 31, 2021 and 2020, respectively, and the Company’s income from equity method interest, net, of GCX is stated at approximately $40 million in 2021, $42 million in 2020, and $18 million in 2019.

The Company’s equity method interest in EPIC is approximately $177 million as of December 31, 2020, and the Company’s loss from equity method interest, net, of EPIC is approximately $16 million for the year ended December 31, 2020.

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Opinion on the Financial Statements

We have audited the accompanying balance sheets of Gulf Coast Express Pipeline LLC (the “Company”) as of December 31, 2020 and 2019, the related statements of income, members’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheets of Gulf Coast Express Pipeline LLC (the “Company”) as of December 31, 2021 and 2020, the related statements of income, members’ equity and cash flows for each of the three years ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years ended December 31, 2021 , in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

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We have served as the Company's auditor since 2020.

Houston, Texas

February 16, 2022

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Opinion on the Financial Statements

We have audited the accompanying balance sheet of Permian Highway Pipeline, LLC (the “Company”) as of December 31, 2019, and the related statements of operations, members’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying statements of operations, members’ equity, and cash flows of Permian Highway Pipeline LLC (the “Company”) for the year ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Midstream services revenue — affiliate (Note 3) $ 142,727 $ 144,714 $ 135,798

Product sales — affiliate (Note 3) 9,754 — —

Product sales — third parties 8,136 3,695 —

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COSTS AND EXPENSES:

Costs of product sales 2,988 — —

Costs of product sales — affiliate (Note 3) 9,754 — —

Costs of product sales — third parties 7,793 2,988 —

Operations and maintenance (1)

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OPERATING INCOME (LOSS) 65,612 61,616 ( 1,285,791 )

Unrealized derivative instrument loss ( 36,080 ) ( 8,470 ) —

Unrealized derivative instrument gain (loss) 82,114 ( 36,080 ) ( 8,470 )

Interest income 4 9 3,606

Income from equity method interests, net 113,764 58,739 19,069

Impairment on equity method interests ( 160,441 ) — —

Warrants valuation adjustment 664 1,200 11,180

Transaction costs ( 4,472 ) — —

Other 12,574 ( 2,306 ) ( 622 )

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Current income tax benefit — ( 696 ) ( 15 )

Deferred income tax (benefit) expense — 64,915 ( 9,460 )

Deferred income tax expense — — 64,915

NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS 99,221 81,684 ( 1,327,720 )

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(3) Share and per share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020.

Refer to Note—11 Equ i ty for further information.

Refer to Note—10 Equity and Warrants for further information.

The accompanying notes to consolidated financial statements are an integral part of this statement.

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CURRENT LIABILITIES:

Distributions payable to Preferred Unit limited partners $ 11,562 $ —

Dividends payable — 5,620

Distributions payable to Apache Corporation (Note 1) — 18,750

Current debt (Note 6) — 9,767

Other current liabilities (Note 6) 15,682 5,613

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(1) Share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020.

Refer to Note 1 1 — Equity for further information.

Refer to Note 10—Equity and Warrants for further information.

The accompanying notes to consolidated financial statements are an integral part of this statement.

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Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Unrealized derivative instrument loss 36,080 8,470 —

Unrealized derivative instrument (gain) loss ( 82,114 ) 36,080 8,470

Depreciation and accretion 16,201 15,945 41,480

Deferred income tax expense (benefit) — 64,915 ( 9,460 )

Deferred income tax expense — — 64,915

Income from equity method interests, net ( 113,764 ) ( 58,739 ) ( 19,069 )

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Impairments 441 1,643 1,300,719

Adjustment for non-cash transactions with affiliate (1)

— — ( 4,238 )

Impairment on equity method interests 160,441 — —

Power credit, net ( 5,701 ) — —

Warrants valuation adjustment ( 664 ) ( 1,200 ) ( 11,180 )

Other 2,741 3,368 907

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(Increase) decrease in account receivables from/payable to affiliate ( 8,174 ) 1,043 ( 6,361 )

Increase in interest receivable — — ( 226 )

Increase in accrued expenses 9,353 280 71

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Capitalized interest paid — ( 8,733 ) ( 2,370 )

NET CASH USED IN INVESTING ACTIVITIES ( 338,360 ) ( 1,503,688 ) ( 175,100 )

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 8,784 ( 338,360 ) ( 1,503,688 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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Distributions paid to Preferred Unit limited partners ( 46,249 ) ( 23,124 ) —

Distributions paid to Apache limited partner ( 75,000 ) — —

Dividends paid ( 22,479 ) — —

Proceeds from revolving credit facility 33,000 228,000 396,000

Finance lease — ( 11,789 ) ( 22,994 )

Recapitalization transaction (Note 2) — — 628,154

Deferred facility fees — ( 816 ) ( 792 )

NET CASH PROVIDED BY FINANCING ACTIVITIES 192,271 983,463 624,374

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ( 110,728 ) 192,271 983,463

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 107,775 18,205 ( 443,952 )

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Cash received for income tax refunds — 696 527

(1) Prior to the Business Combination, the Company had no banking or cash management activities.

Transactions with Apache and asset transfers to and from the Company were not settled in cash and are therefore reflected as a component of equity and redeemable noncontrolling interests on the consolidated balance sheet.

In addition to the above, Apache contributed its investments in gas gathering, processing, and transmission facilities of approximately $ 484.5 million, that is included within equity and redeemable noncontrolling interests for the year ended December 31, 2018.

Refer to Note 3—Transactions with Affiliates for more information.

(2) Includes $ 0.4 million, $ 1.5 million, and $ 9.1 million of capital expenditures due to Apache for the years ended December 31, 2020, 2019, and 2018, respectively, pursuant to the terms of the Construction, Operations, and Maintenance Agreement entered into at the closing of the Business Combination.

(1) Includes $ 0.8 million due from Apache and $ 0.4 million and $ 1.5 million due to Apache of capital expenditures for the years ended December 31, 2021, 2020, and 2019, respectively, pursuant to the terms of the Construction, Operations, and Maintenance Agreement entered into at the closing of the Altus Combination.

Refer to Note 2—Transactions with Affiliates for more information.

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Redeemable Noncontrolling Interest — Preferred Unit Limited Partners (2)

Redeemable Noncontrolling Interest — Apache Limited Partner Class A Common Stock Class C Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Total Equity (Deficit)

Shares (1)(2)

Amount Shares (1)

(In thousands) (In thousands)

Balance at December 31, 2018 $ — $ 1,940,500 3,746 $ 1 12,500 $ 1 $ ( 22,464 ) $ ( 204,517 ) $ — $ ( 226,979 )

Issuance of shares — — 167 — 5,723 — 480,283 — — 480,283

Effect of reverse recapitalization — 1,272,066 3,381 1 — — ( 581,392 ) — — ( 581,391 )

Net income (loss) — 4,149 — — — — — ( 4,388 ) — ( 4,388 )

Change in redemption value of noncontrolling interest — 664,285 — — — — ( 473,502 ) ( 190,783 ) — ( 664,285 )

Balance at December 31, 2018 — 1,940,500 3,746 1 12,500 1 30 ( 213,746 ) — ( 213,714 )

Issuance of Series A Cumulative Redeemable Preferred Units 516,790 — — — — — — — — —

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Distributions payable to Apache limited partner — ( 18,750 )

Common Dividends declared ($ 1.50 per share)

Quarterly Common Dividends declared ($ 1.50 per share)

— — — — — — ( 5,620 ) — — ( 5,620 )

Net income 75,906 2,987 — — — — — 2,791 — 2,791

Change in redemption value of noncontrolling interest — ( 110,514 ) — — — — 110,514 — — 110,514

Accumulated other comprehensive income — 402 — — — — — — 121 121

Balance at December 31, 2020 608,381 575,125 3,746 1 12,500 1 122,222 ( 369,433 ) ( 145 ) ( 247,354 )

Distributions paid to Preferred Unit limited partners ( 46,249 ) — — — — — — — — —

Distributions payable to Preferred Unit limited partners ( 11,562 ) — — — — — — — — —

Distributions paid to Apache limited partner — ( 56,250 ) — — — — — — — —

Quarterly Common Dividends declared ($ 1.50 per share)

— — — — — — ( 16,860 ) — — ( 16,860 )

Net income (loss) 161,906 ( 48,741 ) — — — — — ( 13,944 ) — ( 13,944 )

Change in redemption value of noncontrolling interests — 299,236 — — — — ( 105,362 ) ( 193,874 ) — ( 299,236 )

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Balance at December 31, 2021 $ 712,476 $ 769,855 3,746 $ 1 12,500 $ 1 $ — $ ( 577,251 ) $ — $ ( 577,249 )

(1) For periods prior to the Business Combination, the number of shares has been retroactively restated to reflect the number of shares received by Apache.

For further detail of the Business Combination and associated financial statement presentation, please refer to Note 1—Summary of Significant Accounting Policies and Note 2—Recapitalization Transaction .

(1) Share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020.

Refer to Note 11 —Equity for further information.

Refer to Note 10—Equity and Warrants for further information.

(2) Certain redemption features embedded within the Preferred Unit purchase agreement require bifurcation and measurement at fair value.

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All references to the Company’s Class A common stock, $ 0.0001 par value (Class A Common Stock), and Class C common stock, $ 0.0001 par value (Class C Common Stock), reflect such share amounts as retrospectively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020.

Refer to Note—11 Equity for further information.

Refer to Note—10 Equity and Warrants for further information.

Nature of Operations

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On August 3, 2018, Altus Midstream LP was formed in Delaware as a limited partnership and wholly-owned subsidiary of KAAC.

On August 8, 2018, KAAC and Altus Midstream LP entered into a contribution agreement (the Contribution Agreement) with certain wholly-owned subsidiaries of Apache, including four Delaware limited partnerships (collectively, Altus Midstream Operating) and their general partner (Altus Midstream Subsidiary GP LLC, a Delaware limited liability company, and together with Altus Midstream Operating, the Altus Midstream Entities).

On August 8, 2018, KAAC and Altus Midstream LP entered into a contribution agreement (the Altus Contribution Agreement) with certain wholly-owned subsidiaries of Apache, including four Delaware limited partnerships (collectively, Altus Midstream Operating) and their general partner (Altus Midstream Subsidiary GP LLC, a Delaware limited liability company, and together with Altus Midstream Operating, the Altus Midstream Entities).

The Altus Midstream Entities were formed by Apache between May 2016 and January 2017 for the purpose of acquiring, developing, and operating midstream oil and gas assets in the Alpine High resource play and surrounding areas (Alpine High).

On November 9, 2018 (the Closing Date) and pursuant to the terms of the Contribution Agreement, KAAC acquired from Apache the entire equity interests of the Altus Midstream Entities and options to acquire equity interests in five separate third-party pipeline projects (the Pipeline Options).

The acquisition of the entities and the Pipeline Options is referred to herein as the Business Combination.

In exchange, the consideration provided to Apache included economic voting and non-economic voting shares in KAAC and common units representing limited partner interests in Altus Midstream LP (Common Units).

Following the Closing Date and in connection with the completion of the Business Combination, KAAC changed its name to Altus Midstream Company.

On November 9, 2018 (the Closing Date) and pursuant to the terms of the Altus Contribution Agreement, KAAC acquired from Apache the entire equity interests of the Altus Midstream Entities and options to acquire equity interests in five separate third-party pipeline projects (the Pipeline Options).

The acquisition of the entities and the Pipeline Options is referred to herein as the Altus Combination.

In exchange, the consideration provided to Apache included economic voting and non-economic voting shares in KAAC and partnership units representing limited partner interests in Altus Midstream LP (Common Units).

Following the Closing Date and in connection with the completion of the Altus Combination, KAAC changed its name to Altus Midstream Company.

Ownership of Altus Midstream LP

As of and following the Closing Date and in connection with the completion of the Business Combination, the Company’s wholly-owned subsidiary, Altus Midstream GP LLC, a Delaware limited liability company (Altus Midstream GP), is the sole general partner of Altus Midstream LP.

As of and following the Closing Date and in connection with the completion of the Altus Combination, the Company’s wholly-owned subsidiary, Altus Midstream GP LLC, a Delaware limited liability company (Altus Midstream GP), is the sole general partner of Altus Midstream LP.

The Company operates its business through Altus Midstream LP and its subsidiaries, which include Altus Midstream Operating.

The Company holds approximately 23.1 percent of the outstanding Common Units, and a controlling interest, in Altus Midstream, while Apache holds the remaining 76.9 percent.

The Company’s Class A Common Stock continued trading on the Nasdaq under the new symbol “ALTM.”

Refer to Note 2—Recapitalization Transaction , for further discussion of the ownership structure and the partnership structure of Altus Midstream.

As of December 31, 2021, the Company held approximately 23.1 percent of the outstanding Common Units, and a controlling interest, in Altus Midstream and Apache held the remaining 76.9 percent.

As a result of a direct exchange by the Company of Class A Common Stock for Apache’s Common Units in January 2022, the Company owns 100% of the outstanding Common Units (see Note—10 Equity and Warrants ).

Business Combination with BCP

On October 21, 2021, the Company announced that it will combine with privately-owned BCP Raptor Holdco LP (BCP and, together with BCP Raptor Holdco GP, LLC, the Contributed Entities) in an all-stock transaction, pursuant to the Contribution Agreement dated as of that same date and entered into by and among Altus, Altus Midstream LP (the Partnership), New BCP Raptor Holdco, LLC (the Contributor), and BCP (the BCP Contribution Agreement).

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

Pursuant to the BCP Contribution Agreement,

Contributor will contribute all of the equity interests of the Contributed Entities (the Contributed Interests) to the Partnership, with each Contributed Entity becoming a wholly-owned subsidiary of the Partnership (the BCP Business Combination).

As consideration for the contribution of the Contributed Interests, the Company will issue 50 million shares of Class C Common Stock (and Altus Midstream LP will issue a corresponding number of 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 of 2022 following completion of customary closing conditions .

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Additionally, the Company’s balance sheet reflects the presentation of noncontrolling interest ownership attributable to the limited partner interests in Altus Midstream held by Apache and the holders of Series A Cumulative Redeemable Preferred Units (the Preferred Units).

Refer to Note 13 —Income Taxes , Note 11 —Equity , and Note 12 —Series A Cumulative Redeemable Preferred Units for further information.

Refer to Note 12—Income Taxes , Note 10—Equity and Warrants , and Note 11—Series A Cumulative Redeemable Preferred Units for further information.

Variable Interest Entity

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Redeemable Noncontrolling Interest — Apache Limited Partner

The Company’s redeemable noncontrolling interest presented in the consolidated financial statements consists of Common Units representing limited partner interests in Altus Midstream held by Apache.

Pursuant to certain provisions of the partnership agreement of Altus Midstream (as amended in connection with the Business Combination, and subsequent issuance of Preferred Units, the Amended LPA), the limited partner interests held by Apache are equal to the number of shares of the Company’s Class C Common Stock held by Apache (see Note 2—Recapitalization Transaction for further information).

The Company initially recorded the redeemable noncontrolling interest upon the issuance of the Common Units to Apache as part of the Business Combination and based on the recapitalization value ascribed at the Closing Date to the limited partner interest.

All or a portion of these Common Units may be redeemed at Apache’s option.

The Company has the ability to settle the redemption option either (i) in shares of Class A Common Stock on a one -for-one basis or (ii) in cash (based on the fair market value of the Class A Common Stock as determined pursuant to the Contribution Agreement), subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications.

Upon the future redemption or exchange of Common Units held by Apache, a corresponding number of shares of Class C Common Stock will be cancelled.

As of December 31, 2021, the Company’s redeemable noncontrolling interest presented in the consolidated financial statements consisted of Common Units representing limited partner interests in Altus Midstream held by Apache.

Pursuant to certain provisions of the partnership agreement of Altus Midstream (as amended in connection with the Altus Combination, and subsequent issuance of Preferred Units, the Amended LPA), the limited partner interests held by Apache were equal to the number of shares of the Company’s Class C Common Stock held by Apache.

The Company initially recorded the redeemable noncontrolling interest upon the issuance of the Common Units to Apache as part of the Altus Combination and based on the recapitalization value ascribed at the Closing Date to the limited partner interest.

All or a portion of these Common Units could be redeemed at Apache’s option, which it elected in January 2022 in respect of all such Common Units.

The Company had the ability to settle the redemption option either (i) in shares of Class A Common Stock on a one -for-one basis, which it did in January 2022, or (ii) in cash (based on the fair market value of the Class A Common Stock as determined pursuant to the Altus Contribution Agreement), subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications.

Upon the January 2022 exchange of Common Units held by Apache for Class A Common Stock, a corresponding number of shares of Class C Common Stock were cancelled.

The Company’s policy is to record the redeemable noncontrolling interest represented by the Common Units held by Apache at the higher of (i) its initial fair value plus accumulated earnings/losses associated with the noncontrolling interest or (ii) the redemption value as of the balance sheet date.

See discussion and additional detail further discussed in Note 2—Recapitalization Transaction and Note 11—Equity .

See discussion and additional detail further discussed in Note 10—Equity and Warrants .

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners

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Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value and are accounted for on the Company’s consolidated balance sheet as a long-term liability embedded derivative.

See discussion and additional detail further discussed in Note 1 2 —Series A Cumulative Redeemable Preferred Units and N ote 15—Fair Value Measurements .

See discussion and additional detail further discussed in Note 11—Series A Cumulative Redeemable Preferred Units and Note 14—Fair Value Measurements .

Equity Method Interests

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Under this method, the equity interests are carried originally at acquisition cost, increased by Altus’ proportionate share of the equity interest’s net income and contributions made by Altus, and decreased by Altus’ proportionate share of the equity interest’s net losses and distributions received by Altus.

Please refer to Note 10 —Equity Method Interests , for further details of the Company’s equity method interests.

Financial Statement Presentation

While Altus Midstream Company (formerly KAAC) was the surviving legal entity, the Business Combination was accounted for as a reverse recapitalization.

As such, Altus Midstream Company was treated as the acquired company for financial reporting purposes.

As a result of the Altus Midstream Entities being the accounting acquirer, the historical operations of the Altus Midstream Entities are deemed to be those of the Company.

Thus, the financial statements included in this report reflect:

(i) the historical operating results of the Altus Midstream Entities prior to the Business Combination;

(ii) the net assets of the Altus Midstream Entities at their historical cost;

(iii) the consolidated results of the Company and the Altus Midstream Entities following the closing of the Business Combination;

and (iv) the Company’s equity structure for all periods presented.

No step-up in basis of the contributed assets and no intangible assets or goodwill was recorded in the Business Combination.

Equity method interests are assessed for impairment whenever changes in the facts and circumstances indicate a loss in value has occurred, if the loss is deemed to be other than temporary.

When the loss is deemed to be other than temporary, the carrying value of the equity method investment is written down to fair value, and the amount of the write-down is included in income.

As part of its review of the fair value of its assets in relation to the announced BCP Business Combination, Altus determined the current fair value of its investment in EPIC was below carrying value.

The Company subsequently determined that this loss in value was deemed to be other than temporary.

As such, in the fourth quarter of 2021, Altus recorded an impairment charge of $ 160.4 million on its equity method interest in EPIC.

The fair value of the impaired interest was determined using the income approach, which considered Altus’ estimates of future throughput volumes, tariff rates, and costs.

These assumptions were applied to develop future operating cash flow projections that were then discounted to estimated fair value using a discount rate believed to be consistent with that which would be applied by market participants.

The amount arrived at was then considered against EPIC’s debt and the carrying value of the Company’s interest in EPIC to determine the recoverability of Altus’ interest as of December 31, 2021, resulting in the fourth quarter impairment charge.

Altus has classified this nonrecurring fair value measurements as Level 3 in the fair value hierarchy.

Refer to Note 9—Equity Method Interests for further details of the Company’s equity method interests.

Use of Estimates

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The Company also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment.

During the years ended December 31, 2020 and 2019, the Company recorded an impairment of $ 1.6 million and $ 1.3 billion, respectively, on certain assets.

During the years ended December 31, 2021, 2020, and 2019, the Company recorded an impairment charge of $ 0.4 million, $ 1.6 million, and $ 1.3 billion, respectively, on certain assets.

Refer to Property, Plant and Equipment—Impairment within this Note below and Note 4—Property, Plant and Equipment , for further detail.

During the year ended December 31, 2021, the Company separately recorded an impairment of $ 160.4 million on its interest in EPIC.

Refer to Equity Method Interests within this Note above and Note 9 — Equity M ethod Interests for further detail.

Cash and Cash Equivalents

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Inventories consist principally of equipment and material, stated at the lower of cost or net realizable value.

As part of its impairment for long-lived assets, the Company recorded an inventory allowance of $ 11.1 million to its estimated net realizable value as of December 31, 2019.

No additional inventory allowance was recorded for the year ended December 31, 2020.

Property, Plant, and Equipment

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Depreciation is computed over each asset’s estimated useful life using the straight-line method based on estimated useful lives and estimated asset salvage values.

The estimated lives are generally 30 years for plants and facilities and 40 years for pipelines and such estimated useful lives were used to depreciate the Company’s assets in 2019 and 2018.

The estimation of useful life also takes into consideration anticipated production lives from the fields serviced by these assets, whether Apache-operated or third-party.

The estimated lives are generally 30 years for plants and facilities and 40 years for pipelines and such estimated useful lives were used to depreciate the Company’s assets in 2019.

The estimation of useful life also takes into consideration anticipated production lives from the fields serviced by these assets, whether operated by Apache or a third-party.

Determination of depreciation expense requires judgment regarding the estimated useful lives and salvage values of property, plant, and equipment.

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Altus has classified these nonrecurring fair value measurements as Level 3 in the fair value hierarchy.

No impairments were recorded for the year ended December 31, 2018.

These asset impairments are recorded within “Impairments” on the Company’s consolidated statement of operations.

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See discussion and additional detail in Note 2—Transactions with Affiliates .

In 2020, the Company entered into a contract with a provider to supply the Company with electrical power.

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

The Company did no t recognize any additional credit during the remainder of 2021.

These amounts are recorded on the statement of consolidated operations in “Other income.” The related power credit will offset the Company’s future monthly power payments and is recorded in “Prepaid assets and other” for the current portion and “Deferred charges and other” for the long-term portion on the consolidated balance sheet.

No credits were recorded for the years ended December 31, 2020 and 2019.

The Company has no remaining performance obligations related to these credits as of December 31, 2021.

Distributions to Apache

In December 2020, the general partner of Altus Midstream declared a cash distribution of $ 1.50 per Common Unit payable by Altus Midstream in the first quarter of 2021, totaling $ 24.4 million.

Apache, through its 76.9 percent ownership of the outstanding Common Units, will receive approximately $ 18.8 million of this distribution.

Please refer to Note 11—Equity for further information.

During 2021, the Company paid an aggregate $ 22.5 million in dividends on the Company’s Class A Common Stock, of which $ 5.6 million, or $ 1.50 per share, was paid in each quarter of 2021.

Each quarterly Class A Common Stock dividend was funded by a distribution from Altus Midstream to its common unitholders of $ 1.50 per Common Unit, with each quarterly distribution totaling $ 24.4 million, of which $ 5.6 million was paid to the Company and the balance was paid to Apache due to its 76.9 percent ownership of outstanding Common Units.

Please refer to Note 10—Equity and Warrants for further information.

General and Administrative Expense

General and administrative (G&A) expense represents indirect costs and overhead expenditures incurred by the Company associated with managing the midstream assets.

In connection with the closing of the Business Combination, the Company entered into the COMA, as described above, pursuant to which Apache will provide certain services related to the design, development, construction, operation, management, and maintenance of Altus Midstream’s assets, on the Company’s behalf.

In connection with the closing of the Altus Combination, the Company entered into the COMA, as described above, pursuant to which Apache will provide certain services related to the design, development, construction, operation, management, and maintenance of Altus Midstream’s assets, on the Company’s behalf.

See discussion and additional detail further discussed in Note 2—Transactions with Affiliates .

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For more information on equity method interests owned by the Company, please refer to Note 9—Equity Method Interests .

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, “Financial Instruments-Credit Losses.” The standard changes the impairment model for trade receivables, held-to-maturity debt securities, net investments in leases, loans, and other financial assets measured at amortized cost.

This ASU requires the use of a new forward-looking “expected loss” model compared to the current “incurred loss” model, resulting in accelerated recognition of credit losses.

The Company adopted this standard in the first quarter of 2020 with no material impact on its financial statements.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This pronouncement is part of the Simplification Initiative and simplifies the accounting for income taxes by removing certain exceptions to the general principles of ASC Topic 740 “Income Taxes.” In addition, the amendment improves consistent application of and simplifies GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance.

This update is effective for the Company beginning in the first quarter of 2021, with early adoption permitted.

The Company early adopted this standard in the first quarter of 2020 with no material impact on its financial statements.

New Pronouncements Issued But Not Yet Adopted

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In January 2021, the FASB issued ASU 2021-01, which clarified the scope and application of the original guidance.

The guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022.

was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022.

The Company is evaluating whether to apply any of these expedients and, if elected, will adopt these standards when LIBOR is discontinued.

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This update is effective for the Company beginning in the first quarter of 2022, with early adoption permitted, using either the modified or fully retrospective method with a cumulative effect adjustment to the opening balance of retained earnings.

The Company is evaluating the effect of adoption of the ASU and does not believe it will have a material impact on its financial statements.

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” which clarifies or improves disclosure requirements for various topics to align with the SEC’s regulations.

This update is effective for the Company beginning in the first quarter of 2021 and will be applied retrospectively.

The Company is evaluating the effect of the adoption of the ASU and does not believe it will have a material impact on its financial statements.

RECAPITALIZATION TRANSACTION

Background and Summary

On August 8, 2018, KAAC and its then wholly-owned subsidiary, Altus Midstream LP, entered into the Contribution Agreement with certain wholly-owned subsidiaries of Apache, including the Altus Midstream Entities.

The terms of the Contribution Agreement included that Altus Midstream would acquire from Apache, all of the outstanding equity interests in each of the Altus Midstream Entities and the Pipeline Options to acquire equity interests in certain third-party pipeline projects.

The Company consummated the Business Combination and certain other transactions contemplated by the Contribution Agreement on the Closing Date.

On the Closing Date:

• Altus Midstream issued Common Units to Apache, and the Company issued to Apache an equivalent number of shares of a newly-created class of voting-only common stock (Class C Common Stock).

• The Company issued to Apache (i) newly issued shares of Class A Common Stock, (ii) warrants exercisable for shares of Class A Common Stock, and (iii) the right to receive additional shares of Class A Common Stock, based upon the achievement of certain price and operational thresholds.

• The Company contributed $ 628.2 million in cash to Altus Midstream and in return, Altus Midstream issued to the Company a number of Common Units equal to the total number of shares of the Company’s Class A Common Stock outstanding as of the Closing Date.

For further discussion of Apache’s right to receive additional shares of Class A Common Stock, and other outstanding equity instruments that may impact ownership interests and the limited partnership interests of Altus Midstream in future periods, please see Note 11 —Equity .

Ownership of Altus

Upon the closing of the Business Combination and as of December 31, 2020, Altus’ wholly-owned subsidiary, Altus Midstream GP, was the sole general partner of Altus Midstream and the Company held an approximate 23.1 percent controlling interest in Altus Midstream.

Altus Midstream’s other limited partner (Apache) held the remaining 76.9 percent noncontrolling interest.

Additionally, as of the Closing Date and at December 31, 2020, Apache was the largest single holder of the Company’s voting common stock, comprising 100 percent of newly-created, non-economic Class C Common Stock, and approximately 9.8 percent of economic, Class A Common Stock.

The Amended LPA contains certain provisions intended to ensure that a one-to-one ratio is maintained, at all times and subject only to limited exceptions, between (i) the number of outstanding shares of Class A Common Stock and the number of Common Units held by Altus and (ii) the number of outstanding shares of Class C Common Stock and the number of Common Units held by Apache.

For further discussion of the earn-out consideration provided to Apache and outstanding equity instruments that may impact ownership interests and the limited partnership interests of Altus Midstream in future periods, please see Note 11 —Equity and Note 12 —Series A Cumulative Redeemable Preferred Units .

Cash Contribution to Altus Midstream

As illustrated in the table below, the cash contribution to Altus Midstream was funded primarily from (i) the private placement of shares of Class A Common Stock to certain qualified institutional buyers and accredited investors, which closed immediately prior to the Business Combination, and (ii) the funds remaining from the Company’s initial public offering, net of cash paid to shareholders who redeemed shares.

For further discussion of the significant transactions impacting the Company’s ownership structure throughout the historical period, including the private placement, as well as the initial public offering and subsequent share redemptions, please see Note 11 —Equity .

(In thousands)

Cash from private placement $ 572,340

Cash remaining from initial public offering (net of redemptions) (1)

Issuance of newly-created Class C Common Stock to Apache 25

deferred underwriter fees ( 13,206 )

closing fees and other (2)

Net cash received by Altus Midstream LP at the Closing Date $ 628,154

(1) Pursuant to the terms of KAAC’s amended and restated certificate of incorporation, public stockholders had the opportunity, in connection with the Business Combination, to redeem shares of Class A Common Stock.

A total of 1,473,493 shares (as retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020) were redeemed for an aggregate amount of approximately $ 298.8 million.

Refer to Note 11 —Equity , for further information.

(2) Includes the repayment of a loan with a related party.

Refer to Note 3—Transactions with Affiliates , for further information.

Number of Shares at the Closing Date

The number of shares issued and outstanding immediately following the closing of the Business Combination is summarized in the table below.

number of shares Class A Common Stock (1)

Class B Common Stock (1)(2)

Class C Common Stock (1)

Shares outstanding prior to the Business Combination 1,886,606 471,646 —

redemption of public shares (3)

( 1,473,493 ) — —

shares issued in private placement 2,861,701 — —

Total shares outstanding prior to the Business Combination 3,274,814 471,646 —

Shares, in connection with the Business Combination:

Forfeited (4)

— ( 365,646 ) —

Converted (2)

106,000 ( 106,000 ) —

Total shares outstanding immediately prior to the Closing Date 3,380,814 — —

Issued as consideration to Apache (5)

365,646 — 12,500,000

Total shares outstanding at the Closing Date 3,746,460 — 12,500,000

(1) Share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020.

Refer to Note 11—Equity for further information.

(2) Shares of Class B Common Stock, $ 0.0001 par value (Class B Common Stock), were purchased by the Sponsor, upon the Company’s incorporation in December 2016.

Class B Common Stock is identical to Class A Common Stock except that they automatically converted to Class A Common Stock at the time of the Business Combination.

(3) Pursuant to the terms of KAAC’s amended and restated certificate of incorporation, public stockholders had the opportunity, in connection with the Business Combination, to redeem shares of Class A Common Stock.

A total of 1,473,493 shares were redeemed for an aggregate amount of approximately $ 298.8 million.

(4) In connection with the Business Combination, the Sponsor agreed to forfeit shares of Class B Common Stock.

As part of the consideration transferred in the Business Combination, 365,646 newly-issued shares of Class A Common Stock were issued to Apache, equivalent to the number of shares of Class B Common Stock forfeited by the Sponsor.

Additionally, the Sponsor forfeited a number of warrants originally issued simultaneously with the public offering.

(5) The equity structure of the Altus Midstream Entities (the accounting acquirer) has been restated to reflect the number of shares of Altus Midstream Company (the accounting acquiree) issued in the recapitalization transaction.

Please refer to the section below entitled “Basis of Presentation of Equity Structure” for further discussion.

Basis of Presentation of Equity Structure

As discussed in Note 1—Summary of Significant Accounting Policies , the Business Combination was accounted for as a reverse recapitalization, with Altus Midstream Company treated as the acquired company, and the Altus Midstream Entities treated as the acquirer, for financial reporting purposes.

Therefore, the equity structure in the consolidated financial statements is that of the Company restated for all periods presented.

In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares issued to Apache in connection with the recapitalization transaction.

The value allocated to the shares issued to Apache reflects the capital structure of the Altus Midstream Entities prior to the Business Combination, which solely comprised capital contributions from Apache.

Accordingly, shares of common stock issued to Apache in exchange for its ownership interests in the Altus Midstream Entities are retroactively restated from May 26, 2016 (inception), proportionate to the capital contributions made by Apache to the Altus Midstream Entities up to the Closing Date.

The Company will adopt this ASU in the first quarter of 2022 and does not believe it will have a material impact on its financial statements.

TRANSACTIONS WITH AFFILIATES

The Company has contracted to provide services including gas gathering, compression, processing, transmission, and NGL transmission, pursuant to acreage dedications provided by Apache, comprising the entire Alpine High acreage.

In accordance with the terms of these agreements, the Company receives prescribed fees based on the type and volume of product for which the services are provided.

In accordance with the terms of these agreements, the Company receives prescribed fees and may receive excess recovery volumes based on the type and volume of product for which the services are provided.

Additionally, beginning in 2020 Altus Midstream entered into three agreements to provide operating and maintenance services for Apache’s compressors in exchange for a fixed monthly fee per compressor serviced.

Revenues generated under these agreements are presented on the Company’s consolidated statement of operations as “Midstream services revenue — affiliate.” Revenues earned that have not yet been invoiced to Apache are presented on the Company’s consolidated balance sheet as “Revenue receivables.” Refer to Note 4 —Revenue Recognition , for further discussion.

Revenues generated under these agreements are presented on the Company’s statement of consolidated operations as “Midstream services revenue — affiliate.” Revenues earned that have not yet been invoiced to Apache are presented on the Company’s consolidated balance sheet as “Revenue receivables.” Refer to Note 3—Revenue Recognition , for further discussion.

Cost and Expenses

The Company has no employees, and prior to the Business Combination, the Company had no banking or cash management facilities.

The Company has no employees, and prior to the Altus Combination, the Company had no banking or cash management facilities.

As such, the Company has contracted with Apache to receive certain operational, maintenance, and management services.

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Further information on the related-party agreements in place during the period is provided below.

Operational Services Agreement

Prior to the Business Combination, Apache provided operations, maintenance, and management services to Altus Midstream Operating, pursuant to a service agreement (the Services Agreement).

In accordance with the terms of the Services Agreement, Apache received a fixed fee per month for its overhead and indirect costs incurred on behalf of Altus Midstream Operating.

All costs incurred by Altus Midstream Operating were paid by Apache.

Construction, Operations, and Maintenance Agreement

At the closing of the Business Combination, the Company entered into the COMA with Apache.

At the closing of the Altus Combination, the Company entered into the COMA with Apache.

Under the terms of the COMA, Apache provides certain services related to the design, development, construction, operation, management, and maintenance of certain gathering, processing and other midstream assets, on behalf of the Company.

In return, the Company paid or will pay fees to Apache of (i) $ 3.0 million for the period beginning on the execution of the COMA at the closing of the Business Combination through December 31, 2019, (ii) $ 5.0 million for the period of January 1, 2020 through December 31, 2020, (iii) $ 7.0 million for the period of January 1, 2021 through December 31, 2021 and (iv) $ 9.0 million annually thereafter, adjusted based on actual internal overhead and general and administrative costs incurred, until terminated.

The annual fee was negotiated as part of the Business Combination to reimburse Apache for indirect costs of performing administrative corporate functions for the Company, including services for information technology, risk management, corporate planning, accounting, cash management, and others.

In return, the Company paid or will pay fees to Apache of (i) $ 3.0 million for the period beginning on the execution of the COMA at the closing of the Altus Combination through December 31, 2019, (ii) $ 5.0 million for the period of January 1, 2020 through December 31, 2020, (iii) $ 7.0 million for the period of January 1, 2021 through December 31, 2021 and (iv) $ 9.0 million annually thereafter, adjusted based on actual internal overhead and general and administrative costs incurred, until terminated.

The annual fee was negotiated as part of the Altus Combination to reimburse Apache for indirect costs of performing administrative corporate functions for the Company, including services for information technology, risk management, corporate planning, accounting, cash management, and others.

In addition, Apache may be reimbursed for certain internal costs and third-party costs incurred in connection with its role as service provider under the COMA.

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Lease Agreements

Concurrent with the closing of the Business Combination, Altus Midstream entered into an operating lease agreement with Apache (the Lease Agreement) relating to the use of certain office buildings, warehouse and storage facilities located in Reeves County, Texas.

Concurrent with the closing of the Altus Combination, Altus Midstream entered into an operating lease agreement with Apache (the Lease Agreement) relating to the use of certain office buildings, warehouse and storage facilities located in Reeves County, Texas.

Under the terms of the Lease Agreement, Altus Midstream shall pay to Apache on a monthly basis the sum of (i) a base rental charge of $ 44,500 and (ii) an amount based on Apache’s estimate of the annual costs it expects to incur in connection with the ownership, operation, repair, and/or maintenance of the facilities.

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Lease expense is reflected on the consolidated statement of operations commensurate with the leased activities and nature of the services performed.

The undiscounted future minimum lease payments as of December 31, 2020 are $ 0.6 million and $ 0.4 million for 2021 and 2022, respectively.

In July of 2020, Altus Midstream entered into an operating lease agreement with Apache related to the use of certain of Altus Midstream’s compressors.

Under the terms of the agreement, Apache pays Altus Midstream fixed monthly lease payments of $ 110,000 , which are recorded as “Other” in the Company’s consolidated statement of operations.

The lease agreement has an initial term of thirty months and automatically extends on a month to month basis unless either party cancels the agreement.

In November of 2020, Altus Midstream entered into a second operating lease agreement with Apache which commenced in January of 2021.

The terms of this agreement are the same as described above with the exception of monthly lease payments being $ 75,000 .

The remaining undiscounted future minimum lease payment as of December 31, 2021 is $ 0.4 million, which will be paid in 2022.

In 2020 and 2021, Altus Midstream entered into various operating lease agreements with Apache related to the use of certain of Altus Midstream’s compressors.

Under the terms of the agreement, Apache pays Altus Midstream fixed monthly lease payments, which are recorded as “Other” in the Company’s consolidated statement of operations.

Each of the lease agreements has an initial term of thirty months and automatically extends on a month-to-month basis unless either party cancels the agreement.

The Company recorded income related to these agreements of $ 1.6 million and $ 0.4 million for the years ended December 31, 2021 and 2020, respectively.

Altus also earns a monthly fee to operate and maintain the compressors under lease.

Refer to Note 3—Revenue Recognition for further discussion.

Capitalized Interest

Prior to the Business Combination, the Company’s operations were funded entirely by contributions from Apache.

Accordingly, Apache allocated a portion of interest on its corporate debt in determining capitalized interest associated with the development of Altus Midstream Operating.

Commensurate with Apache’s calculation, interest is capitalized as part of the historical cost of developing and constructing assets.

Significant midstream development assets that have not commenced operations qualify for interest capitalization.

The associated capitalized interest was determined by multiplying Apache’s weighted-average borrowing cost of debt by the average amount of qualifying midstream assets.

The amount of interest allocated and capitalized was $ 8.2 million for the year ended December 31, 2018.

Management believes the methods used to allocate such expenses incurred by Apache on behalf of the Company are reasonable.

Following the closing of the Business Combination, capitalized interest is determined based on interest expense incurred by Altus Midstream.

Refer to Note 6 —Debt and Financing Costs , for further information.

Distributions to Apache

In December 2020, the general partner of Altus Midstream declared a cash distribution of $ 1.50 per Common Unit payable by Altus Midstream in the first quarter of 2021, totaling $ 24.4 million.

Apache, through its 76.9 percent ownership of the outstanding Common Units, will receive approximately $ 18.8 million of this distribution.

Please refer to Note 11 — Equity for further information.

Business Combination Agreements

During 2021, the Company paid an aggregate $ 22.5 million in dividends on the Company’s Class A Common Stock, of which $ 5.6 million, or $ 1.50 per share, was paid in each quarter of 2021.

Altus Combination Agreements

Limited Partnership Agreement of Altus Midstream LP

In connection with the Business Combination, Altus Midstream Company, Altus Midstream GP, Altus Midstream LP, and Apache entered into an amended and restated limited partnership agreement of Altus Midstream LP, which was further amended in connection with the subsequent issuance of Preferred Units.

In connection with the Altus Combination, Altus Midstream Company, Altus Midstream GP, Altus Midstream LP, and Apache entered into an amended and restated limited partnership agreement of Altus Midstream LP, which was further amended in connection with the subsequent issuance of Preferred Units.

The Amended LPA sets forth, among other things, the rights and obligations of (i) Altus Midstream GP as general partner and (ii) Altus Midstream Company, Apache, and Preferred Unit holders as limited partners of Altus Midstream LP.

Altus Midstream GP is not entitled to reimbursement for its services as general partner.

Refer to Note 1—Summary of Significant Accounting Policies , Note 2—Recapitalization Transaction , and Note 12 —Series A Cumulative Redeemable Preferred Units , for further information.

Refer to Note 1—Summary of Significant Accounting Policies and Note 11—Series A Cumulative Redeemable Preferred Units , for further information.

Purchase Rights and Restrictive Covenants Agreement

At the closing of the Business Combination, the Company entered into a purchase rights and restrictive covenants agreement (the Purchase Rights and Restrictive Covenants Agreement) with Apache.

Under the Purchase Rights and Restrictive Covenants Agreement, until the later of the five-year anniversary of the Closing and the date on which Apache and its affiliates cease to own a majority of the Company’s voting common stock, Apache is obligated to provide (i) the first right to pursue any opportunity (including any expansion opportunities) of Apache to acquire or invest, directly or indirectly (including equity investments), in any midstream assets or participate in any midstream opportunities located, in whole or part, within an area covering approximately 1.7 million acres in Reeves, Pecos, Brewster, Culberson, and Jeff Davis Counties in Texas, and (ii) a right of first offer on certain retained midstream assets of Apache.

Transactions Prior to the Business Combination

Prior to the Business Combination, the Company engaged in certain transactions with Kayne Anderson Sponsor LLC, a Delaware limited liability company (the Sponsor).

The Sponsor is a related party as during the periods presented, it owned more than 10 percent of the voting interests of the entity, resulting from the purchase of the Company’s entire share capital upon incorporation in December 2016.

The nature of the majority of these transactions is associated with the Company’s incorporation, public offering and Business Combination, as further described in Note 11—Equity .

Other transactions with the Sponsor during the periods presented relate to a loan from the Sponsor and a separate administrative services agreement that were terminated at the closing of the Business Combination.

At the closing of the Altus Combination, the Company entered into a purchase rights and restrictive covenants agreement (the Purchase Rights and Restrictive Covenants Agreement) with Apache.

covering approximately 1.7 million acres in Reeves, Pecos, Brewster, Culberson, and Jeff Davis Counties in Texas, and (ii) a right of first offer on certain retained midstream assets of Apache.

REVENUE RECOGNITION

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Midstream services revenue — affiliate 142,727 144,714 135,798

Product sales — affiliate

Product sales — third parties

8,136 3,695 —

Total revenues $ 160,617 $ 148,409 $ 135,798

The Company primarily generates revenue from its contracts with customers for the gathering, compression, processing, transmission, and sale of natural gas and NGLs in exchange for a fee per unit of volumes processed or delivered during a given month.

Midstream Services Revenue — Affiliate

Midstream services revenue is attributable to services performed for Apache pursuant to separate long-term commercial midstream agreements .

Midstream services revenue is primarily attributable to services performed for Apache pursuant to separate long-term commercial midstream agreements .

As part of these agreements, substantially all of Apache’s natural gas production from its existing and future owned or controlled properties within the dedicated area of its entire Alpine High resource play is provided to the Company, so long as Apache has the right to market such product.

Providing the related service on each volumetric unit represents a single, distinct performance obligation that is satisfied over time as services are rendered.

The Company does not own or take title to the volumes it services under these agreements.

Prior to the Company entering the new Gas Processing Agreement discussed below, the Company did not own or take title to the volumes it serviced under these agreements.

Altus Midstream, in return for its performance, receives a fee per volumetric unit serviced during a given month.

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The transaction price is not constrained as variability is resolved prior to the recognition of revenue.

Additionally, beginning in 2020, Altus Midstream entered into two separate agreements with Apache to provide compressor maintenance, operations, and other related services for various compressors at compressor stations owned by Apache.

Altus Midstream receives a fixed monthly fee of $ 75,000 under the first contract and $ 29,000 under the second contract for each month that services are provided.

Providing such services on each compressor unit represents a single, distinct performance obligation that is satisfied over time as services are rendered.

Income generated from these contracts in 2020 totaled $ 0.9 million and is classified as “Other” within Midstream Services Revenue — Affiliate in the table above.

Product Sales Revenue

Product sales revenues are attributable to the sale of purchased and processed NGL volumes with third-party customers.

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

In addition to the service fees discussed above, the new Gas Processing Agreement contains terms for Apache to provide the Company with excess recovery volumes as consideration under the contract.

Excess recovery volumes represent the net difference between the actual recovery rate of processed volumes and contractually fixed volumetric recovery rates.

The Company obtains control of excess recovery volumes, if any, on a monthly basis.

Any product received is reflected as non-cash consideration and the associated value is included in the transaction price for gas processing services on a net basis.

The associated revenue is valued using the market price of the relevant product during the month such product was processed.

The subsequent sale of any excess recovery volumes to third parties is recorded as “Product sales — third parties” and the subsequent sale of any excess recovery volumes to Apache is recorded as “Product sales — affiliate” in the Company’s statement of operations.

The associated costs of excess recovery volumes sold are recorded based on the market price of the relevant product and are recorded as “Cost of product sales — third parties” or “Cost of product sales — affiliate” in the Company’s consolidated statement of operations.

In 2021, the Company recorded $ 9.8 million of revenues and costs related to sales of excess recovery volumes to Apache and $ 2.4 million of revenues and costs related to sales of excess recovery volumes to third parties.

In addition to the $ 2.4 million of revenue and costs related to the sales of excess recovery volumes to third parties under the new Gas Processing Agreement, the Company also purchased and processed NGL volumes for other third-party customers during 2021 and 2020.

As part of these agreements, Altus Midstream purchases volumes from a third party, which Altus Midstream then owns, controls and services, prior to ultimate sale to the customer.

The physical delivery of each unit of quantity represents a single, distinct performance obligation that is satisfied at a point in time when control transfers to the customer, generally determined as the point of delivery.

The Company recorded revenue related to these contracts of $ 5.7 million and $ 3.7 million, respectively, in 2021 and 2020, with associated purchase costs of $ 5.4 million and $ 3.0 million, respectively.

As it relates to product sales, the physical delivery of each unit of quantity represents a single, distinct performance obligation that is satisfied at a point in time when control transfers to the customer, generally determined as the point of delivery.

Prices are determined based on market-indexed values, adjusted for quality and other market-reflective differentials.

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The transaction price is not constrained as variability is resolved prior to the recognition of revenue.

Sales revenues and associated expenses related to such third-party purchases are recorded as “Product sales — third parties” and “Costs of product sales,” respectively, in the Company’s consolidated statement of operations.

Other Midstream Service Revenue — Affiliate

Beginning in 2020, Altus Midstream entered into various agreements with Apache to provide compressor maintenance, operations, and other related services for various compressors at compressor stations owned by Apache.

Altus Midstream receives a fixed monthly fee under these contracts for each month that services are provided.

Providing such services on each compressor unit represents a single, distinct performance obligation that is satisfied over time as services are rendered.

Income generated from these contracts in 2021 and 2020 totaled $ 1.7 million and $ 0.9 million, respectively, and is classified as “Other” within Midstream Services Revenue — Affiliate in the table above.

Payment Terms and Contract Balances

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Revenue receivables from the Company’s contracts with Apache totaled $ 13.7 million and $ 11.4 million, as of December 31, 2021 and 2020, respectively, as presented on the Company’s consolidated balance sheet.

Sales revenue receivables from the Company’s contracts with third parties totaled $ 1.0 million and nil as of December 31, 2020 and 2019, respectively, as presented on the Company’s consolidated balance sheet.

Sales revenue receivables from the Company’s contracts with third parties totaled $ 2.2 million and $ 1.0 million as of December 31, 2021 and 2020, respectively, as presented on the Company’s consolidated balance sheet.

In accordance with the provisions of ASC Topic 606, “Revenue from Contracts with Customers,” a variable transaction price for each short-term sale is allocated to each performance obligation as the terms of payment relate specifically to the Company’s efforts to satisfy its obligations.

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Gathering, processing, and transmission systems and facilities (1)

$ 208,211 $ 204,643

Construction in progress 335 904

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Total property, plant, and equipment, net $ 186,987 $ 195,836

$ 195,836 $ 205,802

(1) Included in construction in progress was capitalized interest of $ 0.6 million at December 31, 2019.

There was no capitalized interest included in construction in progress as of December 31, 2020.

(2) Included in gathering, processing, and transmissions systems and facilities are compressors under lease to Apache totaling $ 6.2 million, net as of December 31, 2020.

(1) Included in Gathering, processing, and transmissions systems and facilities are compressors under lease to Apache totaling $ 10.0 million and $ 6.2 million, net as of December 31, 2021 and December 31, 2020, respectively.

The cost of property classified as “Construction in progress” is excluded from capitalized costs being depreciated.

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Interest on the Company's finance lease assets was $ 0.9 million for the year ended December 31, 2019.

No depreciation expense nor interest were recorded related to this finance lease for the year ended December 31, 2020.

No depreciation expense nor interest were recorded related to this finance lease for the years ended December 31, 2021 and 2020.

DEBT AND FINANCING COSTS

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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 December 31, 2020 and 2019, total outstanding borrowings were $ 624.0 million and $ 396.0 million, respectively, and no letters of credit were outstanding under this facility.

Altus Midstream’s revolving credit facility is unsecured and is not guaranteed by the Company, Apache, or any of their respective subsidiaries.

As of December 31, 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 outstanding under this facility.

Altus Midstream’s revolving credit facility is unsecured and is not guaranteed by the Company, Apache, APA Corporation or any of their respective subsidiaries.

At Altus Midstream’s option, the interest rate per annum for borrowings under this facility is either a base rate, as defined, plus a margin, or the London Interbank Offered Rate (LIBOR), plus a margin.

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Altus Midstream was in compliance with the terms of the Amended Credit Agreement as of December 31, 2021.

As of December 31, 2020 and 2019, the Company had debt outstanding totaling $ 624.0 million and $ 405.8 million, respectively.

At December 31, 2019, $ 9.8 million of debt outstanding was related to a finance lease obligation for which the term ended in the first quarter of 2020.

Refer to Note 5 — Property , Plant and Equipment for further information related to this finance lease obligation.

Interest Income and Financing Costs, Net of Capitalized Interest

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Financing costs, net of capitalized interest $ 10,598 $ 2,190 $ 1,792

(1) Prior to the Business Combination, the Company’s operations were funded entirely by contributions from Apache.

Accordingly, Apache allocated a portion of interest on its corporate debt in determining capitalized interest associated with the development of Alpine High infrastructure.

Refer to Note 3—Transactions with Affiliates , for further information.

OTHER CURRENT LIABILITIES

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(In thousands)

Accrued taxes other than income $ 10,888 $ 165

Accrued capital costs 1,346 360

Accrued incentive compensation 1,585 1,466

Accrued operations and maintenance expense 645 926

Accrued capital costs 464 17,035

Accrued professional and consulting fees 421 158

Accrued finance lease liability — 1,989

Accrued taxes other than income 165 689

Other 1,218 2,696

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Pursuant to these agreements, Altus Midstream is obligated to perform low and high pressure gathering, processing, dehydration, compression, treating, conditioning, and transportation on all volumes produced from the dedicated acreage, so long as Apache has the right to market such gas.

At the closing of the Business Combination, the Company entered into the COMA and the Lease Agreement with Apache, which include contractual obligations for the Company to pay certain management and lease rental fees, respectively, to Apache over the term of the agreements.

At the closing of the Altus Combination, the Company entered into the COMA and the Lease Agreement with Apache, which include contractual obligations for the Company to pay certain management and lease rental fees, respectively, to Apache over the term of the agreements.

Refer to Note 2—Transactions with Affiliates for further discussion.

During the fourth quarter of 2020, the Company entered into a three year fixed-rate power contract with a third-party.

The Company estimates its minimum obligation will be $ 5.4 million, $ 4.7 million, and $ 3.6 million for 2021, 2022, and 2023, respectively.

The Company estimates its minimum obligation will be $ 4.7 million and $ 3.6 million for 2022 and 2023, respectively.

The actual amount incurred will vary based on usage.

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Balance at December 31, 2019 $ 291,628 $ 163,199 $ 310,421 $ 492,800 $ 1,258,048

Acquisitions 15,274 51,810 161,081 442,460 670,625

Contributions 1,715 29,250 296,340 — 327,305

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Distributions ( 49,953 ) — ( 73,668 ) ( 49,108 ) ( 172,729 )

Capitalized interest (1)

— — 8,733 — 8,733

Equity income (loss), net 40,049 ( 19,079 ) 62,522 30,272 113,764

Other comprehensive income — 630 — — 630

Impairment (2)

— ( 160,441 ) — — ( 160,441 )

Balance at December 31, 2021 $ 273,940 $ — $ 629,896 $ 460,990 $ 1,364,826

(1) Altus’ proportionate share of the 2019 and 2020 PHP construction costs were funded with the revolving credit facility.

Accordingly, Altus capitalized $ 2.4 million and $ 8.7 million of related interest expense during 2019 and 2020, respectively, which are included in the basis of the PHP equity interest.

(1) Altus’ proportionate share of the PHP construction costs were funded with the revolving credit facility.

Accordingly, Altus capitalized $ 8.7 million of related interest expense during 2020, which is included in the basis of the PHP equity interest.

(2) The Company impaired its investment in EPIC in the fourth quarter of 2021.

Refer to Note 1 — Summary of Si gnificant Accounting P olicies for further details on this impairment charge.

Summarized Financial Information

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Net income (loss) 264,956 ( 109,614 ) ( 1,140 ) 102,048

Other comprehensive loss — ( 7,681 ) — —

Other comprehensive income — 3,484 — —

For the Year Ended December 31,

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Net income (loss) 109,997 ( 72,535 ) 1,587 81,469

Other comprehensive loss — ( 7,681 ) — —

(1) Although the Company’s interests in EPIC Crude Holdings, LP, Permian Highway Pipeline LLC, and Breviloba, LLC were acquired in March, May, and July of 2019, respectively, the financial results for all equity method interests are presented for the entire twelve months of 2019 for comparability.

As of December 31,

2020 2019 (1)

Gulf Coast Express Pipeline LLC EPIC Crude Holdings, LP Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC EPIC Crude Holdings, LP Permian Highway Pipeline LLC Breviloba, LLC

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Total liabilities and equity $ 1,730,349 $ 2,278,805 $ 2,337,935 $ 1,378,337 $ 1,773,972 $ 2,395,800 $ 2,339,910 $ 1,428,361

(2) Altus exercised its first pipeline equity option, Gulf Coast Express Pipeline LLC, in December 2018;

however, the financial results are presented for the entire twelve months for comparability.

EQUITY AND WARRANTS

Reverse Stock Split

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The Company’s shares of Class A Common Stock are listed on the Nasdaq under the symbol “ALTM.” As of December 31, 2021, there were 3,746,460 and 12,500,000 issued and outstanding shares of Class A Common Stock and Class C Common Stock, respectively.

In January 2022, a direct exchange by the Company and Apache was effectuated under the Amended LPA, pursuant to which the Company succeeded to Apache’s 12,500,000 Common Units, issued an additional 12,500,000 shares of Class A Common Stock to Apache, and cancelled Apache’s 12,500,000 shares of Class C Common Stock, whereupon the Company and Altus Midstream remained subsidiaries of Apache.

Holders of each of the Class A Common Stock and Class C Common Stock vote together as a single class on all matters submitted to a vote of the Company’s stockholders, except as required by law.

Only holders of Class A Common Stock are entitled to dividends or other liquidating distributions made by the Company.

On December 10, 2020, the Company announced that its Board of Directors declared a cash dividend of $ 1.50 per share on the Company’s Class A common stock as further detailed below under the section titled “Common Stock Dividend.”

Shares of Class A Common Stock and certain warrants were originally issued in connection with the Company’s public offering, while shares of Class C Common Stock were newly-issued in connection with the Business Combination.

Public Offering

In the second quarter of 2017, KAAC completed the initial public offering of its units.

Each unit comprised one share of Class A Common Stock and one third of one warrant (hereby referred to as the Public Warrants and discussed in further detail below).

In the aggregate, 1,886,606 units were sold at an offering price of $ 200.00 per unit, including 136,606 units purchased pursuant to an over-allotment option granted to the underwriters.

On December 10, 2020, the Company announced that its board of directors initiated a dividend program on the Company’s Class A Common Stock as further detailed below under the section titled “Common Stock Dividend.”

Public Warrants

As of December 31, 2020, there were 12,577,350 Public Warrants outstanding.

Each whole Public Warrant entitles the holder to purchase one twentieth of a share of Class A Common Stock at a price of $ 230.00 per share.

The Public Warrants will expire five years after closing of the Business Combination or earlier upon redemption or liquidation.

As of December 31, 2021, 2020, and 2019 there were 12,577,350 Public Warrants (as defined below) outstanding.

Each whole public warrant entitles the holder to purchase one twentieth of a share of Class A Common Stock at a price of $ 230.00 per share (the Public Warrants).

The Public Warrants will expire five years after closing of the Altus Combination or earlier upon redemption or liquidation.

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

However, this redemption right can only be exercised if the reported last sale price of the Class A Common Stock equals or exceeds $ 360.00 per share for any 20 trading days within a 30 -trading day period ending three business days prior to sending the notice of redemption to the Public Warrant holders.

Following the closing of the Business Combination, the Public Warrants continued trading under the symbol “ALTMW.” On December 11, 2018, the Company received notice from the Staff of the Nasdaq of a delisting determination with respect to its Public Warrants for failure to satisfy the Nasdaq’s minimum round lot holder listing requirement.

Following the closing of the Altus Combination, the Public Warrants continued trading under the symbol “ALTMW.” On December 11, 2018, the Company received notice from the Staff of the Nasdaq of a delisting determination with respect to its Public Warrants for failure to satisfy the Nasdaq’s minimum round lot holder listing requirement.

The Public Warrants ceased trading on the Nasdaq at the opening of business on December 20, 2018.

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Private Placement Warrants

As of December 31, 2020, there were 6,364,281 Private Placement Warrants, of which Apache holds 3,182,140 .

The Private Placement Warrants are identical to the Public Warrants discussed above, except (i) they will not be redeemable by the Company so long as they are held by the initial holders or their respective permitted transferees and (ii) they may be exercised by the holders on a cashless basis.

Business Combination

At a special meeting held on November 6, 2018 (the Special Meeting) the Business Combination was approved by holders of a majority of the outstanding shares of Class A and Class B Common Stock.

Refer to Note 2—Recapitalization Transaction for further detail of the Business Combination, including the basis of presentation of the Company’s equity structure in the consolidated financial statements.

The paragraphs below provide further detail of the transactions that occurred in connection with the Special Meeting and the Business Combination:

Public Stockholder Redemptions

Pursuant to redemption rights granted to public stockholders by KAAC’s amended and restated certificate of incorporation, an aggregate of 1,473,493 shares of Class A Common Stock were redeemed.

Sponsor Forfeiture

Pursuant to an agreement dated as of August 8, 2018 between KAAC and the Sponsor, an aggregate of 365,646 shares of Class B Common Stock and 3,182,140 Private Placement Warrants were forfeited by the Sponsor to KAAC.

Conversion of Class B Common Stock

In accordance with KAAC’s amended and restated certificate of incorporation, 106,000 shares of Class B Common Stock that remained outstanding following the Sponsor forfeiture (described above) were converted into shares of Class A Common Stock on a one -for-one basis.

Private Placement

On November 9, 2018 KAAC issued and sold an aggregate of 2,861,701 shares of Class A Common Stock to certain qualified institutional buyers and accredited investors (including certain funds and client accounts advised by Kayne Anderson Capital Advisors, L.P., together with its affiliates, and directors, management and employees of KAAC, Kayne Anderson, and Apache) at a price of $ 200.00 per share.

Creation of Class C Common Stock

An ame ndment to the Company’s first amended and restated certificate of incorporation was approved to create a new class of common stock - Class C Common Stock, $ 0.0001 par value.

A total of 1,500,000,000 shares were authorized pursuant to the amendment.

Holders of Class C Common Stock, together with holders of Class A Common Stock voting as a single class, will have the right to vote on all matters properly submitted to a vote of the stockholders, but holders of Class C Common Stock will not be entitled to any dividends or liquidating distributions.

Contribution to Altus Midstream LP

At the closing of the Business Combination and in accordance with the Contribution Agreement, KAAC contributed to Altus Midstream LP $ 628.2 million of cash.

In return, it received 3,746,460 common units in Altus Midstream LP, equivalent to the number of shares of Class A Common Stock outstanding after consummation of the Business Combination.

Additionally, the Company received 18,941,631 Altus Midstream LP warrants (equivalent to the aggregate of the Public Warrants, Private Placement Warrants and Apache Warrants outstanding upon consummation of the Business Combination).

Each whole warrant entitles the Company to purchase one twentieth of a common unit in Altus Midstream LP for an exercise price of $ 230.00 per common unit.

These warrants are herein referred to as the (Partnership Warrants).

Consideration Received by Apache

In exchange for the equity interests in the Altus Midstream Entities and the Pipeline Options to acquire equity interests in five separate third-party pipeline projects, the consideration received by Apache at the closing of the Business Combination on November 9, 2018, included the following:

Equity consideration

• 365,646 shares of Class A Common Stock, equivalent to the number of shares of Class B Common Stock forfeited by the Sponsor to KAAC, as discussed above.

• 12,500,000 shares of Class C Common Stock, equivalent to the economic interest held by Apache in Altus Midstream LP at the closing of the Business Combination as a result of the issuance of Common Units.

• 3,182,140 warrants, equivalent to the number of Private Placement Warrants forfeited by the Sponsor.

As of December 31, 2021, 2020, and 2019 , there were 6,364,281 Private Placement Warrants (as defined below) outstanding, of which Apache holds 3,182,140 .

The private placement warrants are identical to the Public Warrants discussed above, except (i) they will not be redeemable by the Company so long as they are held by the initial holders or their respective permitted transferees and (ii) they may be exercised by the holders on a cashless basis (the Private Placement Warrants and, together with the Public Warrants, the Warrants).

The Warrants are recorded at a fair value of $ 0.2 million and $ 0.9 million as of December 31, 2021 and 2020, respectively, on the consolidated balance sheet in other non-current liabilities.

Earn-Out Consideration

• Apache was granted the right to receive earn-out consideration of up to 1,875,000 shares of Class A Common Stock as follows:

◦ 625,000 shares if, during the calendar year 2021, the aggregate gathered gas from an area of dedication in Reeves, Pecos, Culberson, and Jeff Davis Counties in Texas that is assessed a low pressure gathering fee pursuant to that certain Amended and Restated Gas Gathering Agreement, dated August 8, 2018, between Apache and Altus Midstream Gathering, LP is equal to or greater than 574,380 million cubic feet.

As part of the Altus Combination, Apache was granted the right to receive earn-out consideration of up to 1,250,000 shares of Class A Common Stock as follows:

• 625,000 shares if the per share closing price of the Class A Common Stock as reported by Nasdaq during any 30 -trading-day period ending prior to the fifth anniversary of the Closing Date is equal to or greater than $ 280.00 for any 20 trading days within such 30 -trading-day period.

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Redeemable Noncontrolling Interest — Apache Limited Partner

In conjunction with its ownership of the Class C Common Stock, Apache owns 12,500,000 Altus Midstream Common Units, approximately 76.9 percent of the total Common Units issued and outstanding.

As of December 31, 2021, in conjunction with its ownership of the Class C Common Stock, Apache owned 12,500,000 Altus Midstream Common Units, approximately 76.9 percent of the total Common Units issued and outstanding.

The financial results of Altus Midstream and its subsidiaries are included in the Company’s consolidated financial statements as detailed in Note 1—Summary of Significant Accounting Policies , under the section titled “Principles of Consolidation.”

Apache has the right, at any time, to cause Altus Midstream to redeem all or a portion of the Common Units issued to Apache, in exchange for shares of the Company’s Class A Common Stock on a one -for-one basis or, at Altus Midstream’s option, an equivalent amount of cash;

provided that the Company may, at its option, effect a direct exchange of cash or Class A Common Stock for such Common Units in lieu of such a redemption by Altus Midstream.

Upon the future redemption or exchange of Common Units held by Apache, a corresponding number of shares of Class C Common Stock held by Apache will be cancelled.

Apache’s limited partner interest associated with the Common Units issued with the Class C Common Stock is reflected as a redeemable noncontrolling interest in the Company.

As of December 31, 2021, Apache had the right, at any time, to cause Altus Midstream to redeem all or a portion of the Common Units issued to Apache, in exchange for shares of the Company’s Class A Common Stock on a one -for-one basis or, at Altus Midstream’s option, an equivalent amount of cash;

provided that the Company could, at its option, effect a direct exchange of cash or Class A Common Stock for such Common Units in lieu of such a redemption by Altus Midstream.

Upon the future redemption or exchange of Common Units held by Apache, a corresponding number of shares of Class C Common Stock held by Apache would be cancelled.

As of December 31, 2021, Apache’s limited partner interest associated with the Common Units issued with the Class C Common Stock is reflected as a redeemable noncontrolling interest in the Company.

The redeemable noncontrolling interest is recognized at the higher of (i) its initial fair value plus accumulated earnings/losses associated with the noncontrolling interest and (ii) the maximum redemption value as of the balance sheet date.

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Common Stock Dividend

On December 10, 2020, the Company announced that its 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 to stockholders in the first quarter of 2021.

The common stock dividend will be funded by Altus Midstream LP’s distribution 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.

During 2021, the Company paid an aggregate $ 22.5 million in dividends on the Company’s Class A Common Stock, of which $ 5.6 million, or $ 1.50 per share, was paid in each quarter of 2021.

Refer to Note 2—Transactions with Affiliates for further discussion of the Common Unit distribution.

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The Preferred Units will be redeemable at the holder’s option upon a change of control or liquidation of Altus Midstream and certain other events, including certain asset dispositions.

compliance with minimum ownership requirements and redemption restrictions of the Amended LPA, Apache’s election to cause its Common Units in Altus Midstream to be redeemed for shares of the Company’s Class A Common Stock or cash (as further discussed in Note 11 —Equity ) would not be a change of control.

The Company and Altus Midstream remained subsidiaries of Apache upon consummation of the January 2022 direct exchange by the Company and Apache under the Amended LPA, pursuant to which the Company succeeded to Apache’s 12.5 million Common Units, issued an additional 12.5 million shares of Class A Common Stock to Apache, and cancelled Apache’s 12.5 million shares of Class C Common Stock (as further discussed in Note 10—Equity and Warrants ).

• The Preferred Units will be exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders after the seventh anniversary of Closing or upon the occurrence of specified events.

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at December 31, 2019 638,163 $ 555,599

Issuance of Preferred Units, net 625,000 516,790

Distribution of in-kind additional Preferred Units 22,531 —

Cash distributions paid to Preferred Unit limited partners — ( 23,124 )

Allocation of Altus Midstream net income N/A 75,906

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at December 31, 2020 660,694 608,381

Distribution of in-kind additional Preferred Units 22,531 —

Cash distributions paid to Preferred Unit limited partners — ( 46,249 )

Distributions payable to Preferred Unit limited partners — ( 11,562 )

Allocation of Altus Midstream net income N/A 79,931

Accreted redemption value adjustment N/A 81,975

Redeemable noncontrolling interest — Preferred Units:

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Embedded derivative liability (2)

(1) See Note 15 —Fair Value Measurements for discussion of the fair value changes in the embedded derivative liability during the period.

(2) The Preferred Units are redeemable at Altus Midstream’s option at a redemption price (the Redemption Price), which as of December 31, 2020 was the greater of (i) an 11.5 percent internal rate of return and (ii) a 1.3 times multiple of invested capital.

As of December 31, 2020, the Redemption Price would have been based on 1.3 times multiple of invested capital, which was $ 812.5 million, which is greater than using an 11.5 percent internal rate of return, which would equate to a redemption value of $ 716.6 million.

(1) The Preferred Units are redeemable at Altus Midstream’s option at a redemption price (the Redemption Price), which as of December 31, 2021 is calculated as the greater of (i) an 11.5 percent internal rate of return and (ii) a 1.3 times multiple of invested capital.

As of December 31, 2021, the Redemption Price would have been based on an 11.5 percent internal rate of return, which would equate to a redemption value of $ 738.7 million.

(2) Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value.

Refer to Note 14—Fair Value Measurements for discussion of the fair value changes in the embedded derivative liability during the period.

N/A - not applicable.

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State — — ( 2,601 )

— 64,915 ( 9,460 )

Total $ — $ ( 696 ) $ 64,900

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Income tax benefit attributable to Preferred Unit limited partners ( 7,833 ) ( 3,676 ) ( 1,879 )

State tax expense (benefit) (1)

State tax benefit (1)

— — ( 2,610 )

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3,068 ( 620 ) 130,988

Warrant valuation adjustment ( 139 ) ( 252 ) ( 2,348 )

All other, net — 2 97

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(1) The change in state valuation allowance is included as a component of state income tax.

The net deferred tax assets reflect the tax impact of temporary differences between the asset and liability amounts carried on the balance sheet under GAAP and amounts utilized for income tax purposes.

The net deferred tax assets consists of the following:

The net deferred tax assets reflect the tax impact of temporary differences between the asset and liability amounts carried on the balance sheet under U.S.

GAAP and amounts utilized for income tax purposes.

The net deferred tax assets consist of the following:

(In thousands)

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Deferred tax liabilities:

Property, plant, and equipment — —

Other 1,098 2,430

Net deferred tax assets $ — $ —

In 2020, the Company recorded a decrease in valuation allowance against its net deferred tax asset.

In 2021, the Company recorded an increase in valuation allowance against its net deferred tax asset.

The Company has assessed the future potential to realize these deferred tax assets and has concluded that it is more likely than not that these deferred tax assets will not be realized.

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As such, the Company’s effective tax rate includes adjustments to remove income (loss) attributed to the noncontrolling interests.

In 2020 and 2019, the Company recorded a tax benefit adjustment of $ 12.9 million and tax expense adjustment of $ 205.8 million, respectively, associated with income and losses allocated to Apache.

In 2021, 2020, and 2019, the Company recorded tax benefit adjustments of $ 15.9 million and $ 12.9 million and a tax expense adjustment of $ 205.8 million, respectively, associated with income and losses allocated to Apache.

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief and Economic Security Act (CARES Act) in response to the COVID-19 pandemic.

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Concurrently, the Preferred Units were established as a new class of partnership unit representing limited partner interests in Altus Midstream pursuant to the terms of the Amended LPA, and the purchasers were admitted as limited partners of Altus Midstream.

In 2020 and 2019, the Company recorded a tax benefit adjustment of $ 3.7 million and $ 1.9 million, respectively, associated with income allocated to the noncontrolling Preferred Unit limited partners of Altus Midstream.

In 2021, 2020 and 2019, the Company recorded a tax benefit adjustment of $ 7.8 million, $ 3.7 million, and $ 1.9 million, respectively, associated with income allocated to the noncontrolling Preferred Unit limited partners of Altus Midstream.

For further details on the terms of the Preferred Units and the rights of the holders thereof, refer to Note 11—Series A Cumulative Redeemable Preferred Units .

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The Company has recorded a full valuation allowance against the federal net operating loss because it is more likely than not that this attribute will not be realized.

On January 14, 2022, a direct exchange by the Company and Apache Midstream LLC was effectuated under the Amended LPA, pursuant to which the Company succeeded to Apache’s 12,500,000 Common Units, issued an additional 12,500,000 shares of Class A Common Stock to Apache, and cancelled Apache’s 12,500,000 shares of Class C Common Stock (as further discussed in Note 10—Equity and Warrants ).

For federal income tax purposes, the Company is deemed to have acquired 12,500,000 Common Units and as a result, the tax basis of the assets held by Altus Midstream LP was increased to the market value of Class A Common Stock on the exchange date.

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes,” which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements.

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2021 2020 2019

Shares Per Share Loss Shares (4)

Per Share (4)

Loss Shares (4)

Per Share (4)

Loss Shares Per Share Income Shares Per Share Loss Shares (3)

(In thousands, except per share data)

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Net income (loss) attributable to Class A common shareholders $ ( 62,685 ) 16,246 $ ( 3.86 ) $ 5,778 16,246 $ 0.36 $ ( 358,490 ) 3,746 $ ( 95.70 )

(1) Shares of Class A Common Stock and Class C Common Stock issued to Apache in exchange for its ownership interests in the Altus Midstream Entities were retroactively restated from May 26, 2016 (inception) to the Closing Date, based on the proportionate value of the capital contributions made by Apache to the Altus Midstream Entities.

The calculation of the weighted average shares outstanding from inception up to the Closing Date includes all shares issued to Apache, in order to reflect Apache’s 100 percent economic interest in the Altus Midstream Entities until that time.

For further detail of the Business Combination and associated financial statement presentation, see Note 1—Summary of Significant Accounting Policies and Note 2—Recapitalization Transaction .

(2) The effect of an assumed exchange of outstanding Common Units of Altus Midstream (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) would have been anti-dilutive the years ended December 31, 2019 and 2018.

(1) The effect of an assumed exchange of outstanding Common Units of Altus Midstream (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) would have been anti-dilutive for the year ended December 31, 2019.

(2) The effect of an assumed exchange of the outstanding Preferred Units of Altus Midstream for shares of Class A Common Stock would have been anti-dilutive for all periods presented in which the Preferred Units were outstanding.

(3) Share and per share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020.

Refer to Note 11—Equity for further information.

Refer to Note 10—Equity and Warrants for further information.

The diluted earnings per share calculation excludes the effects of the outstanding warrants of the Company to purchase an aggregate 947,082 shares of Class A Common Stock, since the associated impacts would have been anti-dilutive for all periods presented.

Earn-out consideration granting Apache the right to receive additional shares of Class A Common Stock is also not included in the earnings per share calculation above, as the conditions for issuance were not satisfied as of the year ended December 31, 2021.

Further discussion of the Company’s outstanding common stock, warrants, and earn-out consideration as well as any applicable redemption rights is provided in Note 11 —Equity .

Further discussion of the Company’s outstanding common stock, warrants, and earn-out consideration as well as any applicable redemption rights is provided in Note 10—Equity and Warrants .

Further discussion of the Preferred Units and associated embedded features can be found in Note 11—Series A Cumulative Redeemable Preferred Units and Note 14—Fair Value Measurements , respectively.

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revenue receivables;

accounts receivable from/payable to Apache and an embedded derivative liability related to the issuance of Preferred Units (as further described above).

accounts receivable from/payable to Apache, the Company’s warrant liability, and an embedded derivative liability related to the issuance of Preferred Units.

This embedded derivative liability is recorded on the Company’s consolidated balance sheet at fair value.

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The carrying amount of Altus Midstream’s revolving credit facility approximates fair value because the interest rate is variable and reflective of market rates.

There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the years ended December 31, 2020 or December 31, 2019.

There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the years ended December 31, 2021 or 2020.

The Company bifurcated and recognized the embedded derivative associated with the Preferred Units related to the exchange option provided to the Preferred Unit holders under the terms of the Amended LPA.

The valuation of the embedded derivative (using an income approach) was based on a range of factors including expected future interest rates using the Black-Karasinski model, the Company’s imputed interest rate, interest rate volatility, 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 Company recorded an unrealized loss of $ 36.1 million, $ 8.5 million and nil for the years ended December 31, 2020, 2019 and 2018, respectively, which are recorded in “Unrealized derivative instrument loss” in the consolidated statement of operations.

The valuation of the embedded derivative (using an income approach) was based on a range of factors including expected future interest rates using the Black-Karasinski model, the Company’s imputed interest rate, interest rate volatility, the expected timing of periodic cash distributions, any anticipated early redemptions of the Preferred Units, the estimated timing for the potential exercise of the exchange option, and anticipated dividend yields of the Preferred Units.

The Company recorded an unrealized gain of $ 82.1 million and unrealized losses of $ 36.1 million and $ 8.5 million for the years ended December 31, 2021, 2020 and 2019, respectively, which are recorded in “Unrealized derivative instrument loss” in the consolidated statement of operations.

Altus has classified these recurring fair value measurements as Level 3 in the fair value hierarchy.

5 unchanged sentences

Interest Rate Volatility 40.08 %

In addition, no early redemptions of the Preferred Units were assumed for the December 31, 2020 valuation.

As a result of the announced BCP Business Combination and associated publicly filed information, the December 31, 2021 valuation assumed 250,000 Preferred Units would be redeemed before the Preferred Unit holders had the right to exercise their exchange option.

This early redemption assumption significantly reduced the value of the derivative liability year over year.

A one percent increase in the imputed interest rate assumption would significantly increase the value of the embedded derivative liability at December 31, 2021, while a one percent decrease would lead to a similar decrease in value as of December 31, 2021.

3 unchanged sentences

There was no value associated with these additional identified embedded derivatives for any applicable period presented.

The fair value of the Company’s warrant liability was insignificant as of December 31, 2021 and 2020.

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 9A. Controls and Procedures