Kinetik Holdings Inc. 10-K

ITEM 1A. RISK FACTORS The Company’s business activities and the value of its securities are subject to significant hazards and risks, including those described below. If any of such events should occur, Altus’ business, financial condition, liquidity, and/or results of operations could be materially harmed, and holders and purchasers of Altus’ securities could lose part or all of their investments. Additional risks relating to Altus’ securities may be included in the prospectuses for securities the Company may issue in the future. RISKS RELATED TO THE BCP BUSINESS COMBINATION Failure to complete, or significant delays in completing, the BCP Business Combination could negatively affect the trading price of the Class A Common Stock and Altus’ future business and financial results. Completion of the BCP Business Combination is not assured and is subject to risks, including the risks that approval of the issuance of the equity consideration by Altus’ stockholders or approval of the transaction by governmental agencies is not obtained or that other closing conditions are not satisfied. If the transaction is not completed, or if there are significant delays in completing the transaction, the trading price of the Class A Common Stock and Altus’ future business and financial results could be negatively affected, and the Company will be subject to several risks, including the following: • Altus may be liable for damages to Contributor under the terms of the BCP Contribution Agreement; • negative reactions from the financial markets, including a decline in the trading price of the Class A Common Stock due to the fact that current prices may reflect a market assumption that the transaction will be completed; • having to pay certain significant costs relating to the transaction, including, in certain circumstances, a termination fee to Contributor; and • the attention of Altus’ management will have been diverted to the transaction rather than Altus’ own operations and pursuit of other opportunities that could have been beneficial to it. The pendency of the BCP Business Combination could materially adversely affect the Company’s future business and operations or result in a loss of personnel. Uncertainty about the effect of the BCP Business Combination on personnel, customers, and suppliers may have an adverse effect on the Company’s business. These uncertainties may impair the ability to attract, retain, and motivate key personnel of Apache providing services to Altus pursuant to the COMA until the transactions are consummated and for a period of time thereafter, and could cause customers, suppliers, and others who deal with the Company to change their existing business relationships, which could negatively affect the Company’s revenues, earnings, and cash flows, as well as the market price of the Company’s Class A Common Stock, regardless of whether the transactions are completed. Retention of personnel may be particularly challenging during the pendency of the transactions because personnel may experience uncertainty about their future roles with the combined company. If, despite retention efforts, key personnel depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with or join the combined company, the Company’s business could be seriously harmed. Similar risks could affect BCP and, therefore, the combined company if the transactions are completed. The BCP Contribution Agreement includes restrictions relating to the conduct of the Company’s business while the transactions are pending, which could adversely affect the Company’s business and operations. Under the terms of the BCP Contribution Agreement, the Company is subject to certain restrictions on the conduct of its business prior to completing the transactions, which may adversely affect its ability to execute certain of its business strategies, including, subject to certain exceptions, restrictions on the acquisition or disposition of assets, the incurrence of capital expenditures, the entry into contracts, the incurrence of indebtedness, or the settlement of claims and lawsuits, unless the Company obtains the prior written consent of Contributor. Such limitations could negatively affect the Company’s business and operations prior to the completion of the transactions. The failure to successfully integrate the business and operations of the Contributed Entities in the expected time frame may adversely affect Altus’ future results. Altus believes that the acquisition of the Contributed Entities will result in certain benefits, including certain cost synergies and operational efficiencies. However, to realize these anticipated benefits, the businesses of Altus and the Contributed Entities must be successfully combined. The success of the BCP Business Combination will depend on Altus’ 9 ability to realize these anticipated benefits from combining the businesses of Altus and the Contributed Entities. Due to legal restrictions, Altus and Contributor have conducted, and until the completion of the transactions will conduct, only limited planning regarding the integration of the businesses following the transactions and will not determine the exact nature in which the businesses will be combined until after the transactions have been completed. The actual integration may result in additional and unforeseen expenses or delays. If the post-BCP Business Combination company is not able to successfully integrate the Contributed Entities’ businesses and operations, or if there are delays in combining the businesses, the anticipated benefits of the transaction may not be realized fully or at all or may take longer to realize than expected. Additional risks related to the BCP Business Combination are described in the Company’s definitive proxy statement filed with the SEC on January 12, 2022. RISKS RELATED TO THE COMPANY’S PRIMARY CUSTOMER AND MAJORITY OWNER Altus derives a substantial portion of its revenue from Apache, and if Apache changes its business strategy, alters its current drilling and development plan on acreage dedicated to Altus, or otherwise significantly reduces the volumes of natural gas or NGLs with respect to which Altus performs midstream services, Altus’ revenue would decline and its business, financial condition, results of operations, and cash flows would be materially and adversely affected. Substantially all of the Company’s current commercial agreements are with Apache, and as a result, Altus derives substantially all of its midstream services revenue from Apache. Accordingly, Altus will be subject to the operational and business risks of Apache, the most significant of which include the following: • a failure to recommence or any further or subsequent reduction in or slowing of Apache’s drilling and development plans for or deferrals of production from the acreage dedicated to the Company, including as a result of volatility in the price of crude oil, natural gas, and NGLs or the availability of capital to fund Apache’s activities, which would directly and adversely impact demand for Altus’ midstream services; • drilling and operating risks, including potential environmental liabilities, associated with Apache’s operations on the acreage dedicated to the Company; • downstream processing and transportation capacity constraints and interruptions, including the failure of Apache to have sufficient contracted transportation capacity; • adverse effects of increased or changed governmental and environmental regulation or enforcement of existing regulation, including legislative, regulatory, policy changes, or initiatives addressing the impact of global climate change, hydraulic fracturing, methane emissions, flaring, or water disposal; and • Apache’s financial condition, credit ratings, leverage, market reputation, responses to ESG initiatives, liquidity, and cash flows. Further, Altus does not have control over Apache’s business decisions and operations, and Apache is under no obligation to adopt a business strategy that is favorable to the Company. Thus, Altus will be subject to the risk of cancellation of planned development, nonperformance of commitments with respect to future dedications, and other nonpayment or nonperformance by Apache, including with respect to its commercial agreements, which do not contain minimum volume commitments. Furthermore, there is no guarantee that Apache will extend any agreements with the Company beyond their initial terms or that Altus will be able to renew or replace these agreements on equal or better terms, or at all, upon their expiration. Any material nonpayment or nonperformance by Apache under its commercial agreements with the Company would have a significant adverse impact on Altus’ business, financial condition, results of operations, and cash flows. Altus does not have any employees and relies entirely on services provided by Apache’s employees. The Company does not have any employees. Instead, Altus relies entirely on Apache’s employees to conduct the Company’s business and activities pursuant to the COMA. There could be material competition for the time and effort of the Apache officers and employees who provide services to both Altus and Apache. If Apache’s employees who provide services to the Company do not devote sufficient attention to the management and operation of Altus’ business and activities, Altus’ business, financial condition, results of operations, and cash flows could be materially and adversely affected. Although the COMA provides for certain fixed annual limits on the support services fee payable to Apache through 2022, there is no limit on such fees thereafter. As a result, after 2022, Altus may be required to pay Apache higher fees than would be available from third parties. The COMA is subject to termination by Altus or Apache under certain circumstances, including if Apache and its affiliates no longer own a direct or indirect interest in at least 50 percent of the voting or other equity securities of the Company. Should the COMA be terminated by Altus or Apache, Altus will be required to attract and hire employees to 10 perform the services currently performed by Apache’s employees under the COMA or otherwise contract with third parties for the provision of such services, which, in either case, could subject Altus to substantial additional costs, could cause significant disruptions to Altus’ business, may be on terms less favorable than the terms of the COMA, and as a result, Altus’ financial condition, results of operations, and cash flows could be adversely affected. Altus’ executive officers and directors may face potential conflicts of interest in managing the Company’s business. Altus’ executive officers and certain directors are also officers or employees of Apache. These relationships may create conflicts of interest regarding corporate opportunities and other matters. The resolution of any such conflicts may not always be in the Company’s or its stockholders’ best interests. In addition, these overlapping executive officers and directors allocate their time among Altus and Apache. These officers and directors face potential conflicts regarding the allocation of their time, which may adversely affect the Company’s business, results of operations, and financial condition. Substantially all of Altus’ gathering and processing operations are located within the Southern Delaware Basin of West Texas, making it vulnerable to risks associated with having revenue-producing operations concentrated in one geographic area. Altus’ revenue-producing operations are geographically concentrated primarily within the Southern Delaware Basin of West Texas, which disproportionately exposes the Company to risks associated with regional factors and increases its exposure to unexpected events that may occur in this region, such as natural disasters or localized pandemic outbreaks. Furthermore, the Company may be exposed to increases in costs as a result of regional economic conditions and the availability of goods and services, such as a skilled labor force, which could become more expensive (or at certain times, unavailable) if the labor market in the Permian Basin were to tighten. Any of these risks could adversely affect the Company’s financial condition, results of operations, or cash flows. Apache may suspend, reduce, or terminate its obligations under its commercial agreements with Altus in certain circumstances, which could have a material adverse effect on Altus’ financial condition, results of operations, and cash flow. Altus is party to certain commercial agreements with Apache that permit Apache to suspend, reduce, or terminate its obligations under the agreement if certain events occur. These events include force majeure events that would prevent the Company from performing some or all of the required services under the applicable agreement. Apache, as the counterparty under these commercial agreements, has the discretion to make such decisions, which may significantly and adversely affect the Company. Any such reduction, suspension, or termination of Apache’s obligations under these agreements would have a material adverse effect on the Company’s financial condition, results of operations, and cash flow. While Apache has granted Altus a right of first offer to provide additional midstream services and acquire Apache’s retained midstream assets in Alpine High, Apache does not have to accept the Company’s offer. Apache has granted Altus a right of first offer to provide additional midstream services and acquire Apache’s retained midstream assets in Alpine High. Although Apache granted Altus this right of first offer, the Company can make no assurances that the economic terms that it offers Apache will be acceptable to Apache, and another midstream services provider or a third party may be willing to make an offer to Apache on economic terms that Altus is unwilling or unable to offer. Altus’ inability to take advantage of the opportunities with respect to the right of first offer could adversely affect its growth strategy. A significant amount of the revenue currently generated by Altus is from contracts with Apache that contain most favored nations rights and other consent rights, limiting flexibility to offer certain rates or capacity to new shippers. Certain of the Company’s commercial agreements with Apache contain most favored nations rights (MFNs), which require that certain terms (including the rates charged thereunder) are no less favorable to Apache than those provided to any similarly situated counterparty. Without Apache’s consent, the MFNs effectively limit the Company’s flexibility in negotiating rates for some of Altus’ services with other shippers, because triggering the MFNs would lead to a reduction in the rates that the Company charges to Apache, which would adversely affect Altus’ financial condition, results of operations, or cash flows. Additionally, certain of the commercial agreements may require Apache’s consent to offer third-party customers priority of service in the Company’s facilities that is at least equal to Apache’s priority of service. If Apache refuses to grant such consent, the Company’s ability to attract third-party customers to its midstream facilities could be negatively impacted. 11 If Apache elects to sell acreage that is dedicated to Altus to a third party, then the third party’s financial condition could be materially worse than Apache’s, and Altus could be subject to the nonpayment or nonperformance by the third party. If Apache elects to sell acreage that is dedicated to the Company to a third party, then the third party’s financial condition could be materially worse than Apache’s. In such a case, the Company may be subject to risks of loss resulting from nonpayment or nonperformance by the third party, which risks may increase during periods of economic uncertainty. Furthermore, the third party may be subject to their own operating and regulatory risks, which increases the risk that they may default on their obligations to the Company. Any material nonpayment or nonperformance by the third party could adversely impact the business, financial condition, results of operations, and cash flows of the Company. Apache owns a majority of Altus’ outstanding voting shares and thus strongly influences all of Altus’ corporate actions. Apache and its affiliates beneficially own approximately 79 percent of Altus’ outstanding voting common stock. Under the Stockholders Agreement, Apache is entitled to nominate up to seven directors to Altus’ board of directors depending on its and its affiliates’ ownership of Altus’ outstanding voting common stock. As long as Apache and its affiliates own or control a significant percentage of Altus’ outstanding voting power, it will have the ability to strongly influence all corporate actions, including those requiring stockholder approval, the election and removal of directors, the size of Altus’ board of directors, any amendment of Altus’ charter or bylaws, any action impacting the Equity Method Interest Pipelines or the ownership of such interests, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of Altus’ assets, and will be able to cause or prevent a change in the composition of Altus’ board of directors or a change in control of the Company that could deprive stockholders of an opportunity to receive a premium for their common stock as part of a sale of the Company. The interests of Apache may not align with the interests of Altus’ other stockholders. RISKS RELATED TO CONSTRUCTING OR MAINTAINING ASSETS AND OPERATING THE BUSINESS The COVID-19 pandemic has and may continue to adversely impact the Company’s business, financial condition, and results of operations, the global economy, and the demand for and prices of oil, natural gas, and NGLs. The unprecedented nature of the current situation makes it impossible for the Company to identify all potential risks related to the pandemic or estimate the ultimate adverse impact that the pandemic may have on its business. The COVID-19 pandemic and the actions taken by third parties, including, but not limited to, governmental authorities, businesses, and consumers, in response to the pandemic have adversely impacted the global economy and created significant volatility in the global financial markets. Business closures, restrictions on travel, “stay-at-home” or “shelter-in-place” orders, and other restrictions on movement within and among communities have significantly reduced demand for and the prices of oil, natural gas, and NGLs. As of the date of this report, efforts to contain COVID-19 have not been successful in many regions, vaccination distribution programs have encountered delays, new variants have emerged, and the global pandemic remains ongoing. While some geographic regions have lifted, relaxed, or otherwise modified their pandemic response measures to lessen the impact of such measures on business operations and commerce, these regions may reinstitute restrictions as circumstances change. A continued, prolonged period or a renewed period of reduced demand, the failure to timely distribute or the ineffectiveness of or reluctance or refusal of individuals to take any vaccines, the failure to develop adequate treatments, and other adverse impacts from the pandemic may materially adversely affect the Company’s business, financial condition, cash flows, and results of operations. The Company’s operations rely on Apache and its workforce being able to access the Company’s various facilities. Additionally, because Apache has previously implemented, and may elect to or be required in the future to reimplement, remote working procedures for a significant portion of its workforce for health and safety reasons and/or to comply with applicable national, state, and/or local government requirements, the Company relies on such persons having sufficient access to applicable information technology systems, including through telecommunication hardware, software, and networks. If a significant portion of Apache’s workforce cannot effectively perform their responsibilities, whether resulting from a lack of physical or virtual access, quarantines, illnesses, governmental actions or restrictions, including vaccine mandates and the reactions thereto, information technology or telecommunication failures, or other restrictions or adverse impacts resulting from the pandemic, the Company’s business, financial condition, cash flows, and results of operations may be materially adversely affected. The unprecedented nature of the current situation resulting from the COVID-19 pandemic makes it impossible for the Company to identify all potential risks related to the pandemic or estimate the ultimate adverse impact that the pandemic may have on its business, financial condition, cash flows, or results of operations. Such results will depend on future events, which the Company cannot predict, including the scope, duration, and potential reoccurrence of the COVID-19 pandemic, the emergence and impact of additional variants, or any other localized epidemic or global pandemic, the distribution and effectiveness of vaccines, therapeutics and treatments, the demand for and the prices of oil, natural gas, and NGLs, and the 12 actions taken by third parties, including, but not limited to, governmental authorities, customers, contractors, and suppliers, in response to the COVID-19 pandemic or any other epidemics or pandemics. The COVID-19 pandemic and its unprecedented consequences have amplified, and may continue to amplify, the other risks identified in this report. Construction and maintenance of Altus’ assets (including the Equity Method Interest Pipelines) subjects the Company to risks of construction delays, cost over-runs, and negative effects on its financial condition, results of operations, or cash flows. The construction and maintenance of Altus’ assets (including the Equity Method Interest Pipelines) and any additions or modifications to any such assets are complex projects that are subject to a number of factors beyond the Company’s control, including numerous regulatory, environmental, political, and legal uncertainties, delays from third-party landowners or their refusal to provide necessary consents, the permitting process, complying with laws, unavailability or increased cost of or tariffs on materials, labor disruptions, labor availability, environmental hazards, protests, third-party legal actions, financing, accidents, weather, and other factors. If the Company undertakes these projects, it may not be able to complete them on schedule, at the budgeted cost, or at all. Any delay in the completion or continued maintenance of such assets or any increase in or change in the timing of capital expenditures necessary to fund such construction or maintenance may require the expenditure of significant amounts of capital and could adversely affect the Company’s financial condition, results of operations, liquidity, or cash flows. If the Company seeks to acquire assets or businesses but is unable to do so on economically acceptable terms or is unable to successfully integrate any acquired assets or operations, its future growth will be limited. From time to time, the Company may evaluate and seek to acquire assets or businesses that it believes complement its existing business and related assets. The Company may acquire assets or businesses that it plans to use in a manner materially different from their prior owners’ uses. Any acquisition involves potential risks, including the inability to integrate the operations of recently acquired businesses or assets, especially if the assets acquired are in a new business segment or geographic area, the failure to realize expected volumes, revenues, profitability, or growth, the failure to realize any expected synergies and cost savings, the assumption of unknown liabilities, the loss of customers or key employees from the acquired businesses, and potential environmental or regulatory liabilities and title problems. Any assessment of these risks will be inexact and may not reveal or resolve all existing or potential problems associated with an acquisition. Realization of any of these risks could adversely affect the Company’s financial condition, results of operations, and cash flows. If Altus consummates any future acquisition, its capitalization and results of operations may change significantly. If third-party pipelines or other midstream facilities interconnected to the Company’s gathering, processing, or transmission systems become partially or fully unavailable or if the volumes Altus gathers, processes, or transmits do not meet the quality requirements of the pipelines or facilities to which Altus connects, its cash flows could be adversely affected. The Company’s gathering, processing, and transmission assets connect to other pipelines or facilities owned and operated by unaffiliated third parties, and continuing access to such third-party pipelines, processing facilities, and other midstream facilities are not within the Company’s control. These pipelines, plants, and other midstream facilities may become unavailable because of testing, turnarounds, maintenance, reduced capacity, regulatory requirements, and other curtailments of receipt or deliveries. If the Company’s costs to access and transmit on these third-party pipelines significantly increase, if any of these pipelines or other facilities become unable to receive, transmit, or process product, or if the volumes the Company gathers or transmits do not meet the product quality requirements, then Altus’ cash flows could be adversely affected. Increased competitive pressure could adversely affect Altus’ financial condition, results of operations, or cash flows. Altus competes with similar enterprises in its industry, including large midstream companies that have greater financial resources and access to supplies than the Company. The principal elements of competition are rates, terms of service, and flexibility and reliability of service. Expansion or construction of competing gathering, processing, transmission, and storage systems and excess pipeline capacity would create additional competition for the services the Company provides to its customers. 13 Further, natural gas utilized as a fuel competes with other forms of energy available to end-users. Increased demand for such other forms of energy at the expense of natural gas could lead to a reduction in demand for Altus’ midstream services and could intensify the negative impact of factors that decrease demand for natural gas in the markets served by the Company’s systems, such as adverse economic conditions, weather, higher fuel costs, and taxes or other governmental or regulatory actions. All of these competitive pressures could adversely affect the Company’s financial condition, results of operations, or cash flows. Altus may not be able to retain or acquire new customers, which would reduce Altus’ revenues and limit its future profitability. The renewal or replacement of the Company’s existing contracts with its customers at rates sufficient to maintain or increase current revenues and cash flows depends on a number of factors, some of which are beyond the Company’s control, including competition and the price of, and demand for, commodities in the markets Altus serves. The inability of the Company to renew or replace its current or future contracts as they expire could have a negative effect on its profitability. Altus does not own in fee the land on which its assets are located, which could result in disruptions to its operations. The Company does not own in fee any of the land on which its midstream assets have been constructed. Altus’ only interests in these properties are rights granted under surface use agreements, rights-of-way, surface leases, or other easement rights (collectively, Rights-of-Way), of which Apache and certain of its affiliates are a party, and such Rights-of-Way may limit or restrict Altus’ access to or use of the surface estates, which may adversely affect Altus’ operations. The Company is also subject to the possibility of more onerous terms or increased costs to retain necessary land use if Altus does not have valid Rights-of-Way or if such usage rights lapse or terminate. The loss of these rights could have a material adverse effect on the business, financial condition, results of operations, and cash flows of the Company. A failure in Altus’ computer systems or a terrorist or cyberattack on Altus or third parties with whom Altus does business may adversely affect the Company’s ability to operate its business. The Company is reliant on technology to conduct its business. The Company depends upon its operational and financial computer systems to process the data necessary to conduct almost all aspects of its business, including operating its pipelines and gathering and processing facilities, recording and reporting commercial and financial transactions, and receiving and making payments. Any failure of the Company’s computer systems or those of its customers, suppliers, or others with whom it does business, including Apache, could materially disrupt the Company’s ability to operate its business. Cyberattacks against the Company may disrupt computer systems and operations and result in the theft of funds or data. In addition, the Company’s pipeline systems may be targets of terrorist attacks or environmental activist group activities that could disrupt Altus’ ability to conduct its business. Protecting against such threats may require the Company to expend significant additional resources, and any such attack or disruption could have a material adverse effect on Altus’ business and results of operations. Altus’ business involves many hazards and operational risks, some of which may not be fully covered by insurance. The occurrence of a significant event that is not fully insured could adversely affect Altus’ operations and financial condition. The Company’s operations are subject to the many hazards inherent in the gathering, compressing, processing, and transmission of natural gas and NGLs, including damage to pipelines, related equipment, and surrounding properties caused by hurricanes, floods, fires, explosions, freezes, other natural or anthropogenic disasters, acts of terrorism, and cyberattacks, leaks of natural gas, NGLs, and other hydrocarbons, and induced seismicity. These risks could result in substantial losses due to personal injury and/or loss of life, severe damage to and destruction of property and equipment, including information technology systems, and pollution or other environmental damage and may result in curtailment or suspension of the Company’s related operations. In accordance with typical industry practice, Altus has appropriate levels of business interruption, property, and other insurance, but the Company is not fully insured against all risks incident to its business. If a significant accident or event occurs that is not fully insured, it could adversely affect Altus’ financial condition, results of operations, or cash flows. RISKS RELATED TO THE EQUITY METHOD INTEREST PIPELINES AND OTHER NON-OPERATED ASSETS Altus owns or operates a portion of its business with one or more equity interest partners or in circumstances where Altus is not the operator, including the Equity Method Interest Pipelines, which may restrict its operational and corporate flexibility; actions taken by other partners or third-party operators may materially impact the Company’s financial position and results of operations, and Altus may not realize the benefits it expects to realize from an equity interest. 14 As is common in the midstream industry, Altus owns or operates one or more of its properties with one or more equity interest partners, including the Equity Method Interest Pipelines, or contracts with a third-party to control operations. These relationships require the Company to share operational and other control or to defer to another party’s control, such that it does not have the flexibility to control the development of these properties. If Altus does not timely meet its financial commitments in such circumstances, its rights to participate may be adversely affected. If an equity interest partner is unable or fails to pay its portion of development costs or if a third-party operator does not operate in accordance with the Company’s expectations, the Company’s costs of operations could be increased. Altus could also incur liability or not realize expected benefits as a result of actions taken by an equity interest partner or third-party operator. Actions taken by Apache may also negatively impact Altus’ ownership in or the expected benefits from such assets. Disputes between Altus and the other party or parties in an equity interest may result in litigation or arbitration that would increase the Company’s expenses, delay or terminate projects, and distract the Company’s officers and directors from focusing their time and effort on Altus’ business. If any of the Equity Method Interest Pipelines experience cost overruns or do not generate the cash flows Altus expects, the Company’s plans for growth and dividends will be impaired. The Company’s strategy to grow its business depends in part on the Equity Method Interest Pipelines. Altus can offer no assurance that the Equity Method Interest Pipelines will perform as expected. If applicable pipelines do not perform as expected, Altus may experience losses in relation to its equity interests. In addition, each of the Equity Method Interest Pipelines is subject to risks associated with cost over-runs, operational hazards, environmental matters, regulatory matters, creditworthiness of counterparties, and legal matters, as well as other risks and uncertainties, many of which are beyond the control of the operator of the pipeline. If any of these risks were to materialize, Altus’ financial condition, results of operations, and cash flows could be adversely affected. RISKS RELATED TO THE VOLUME AND PROCESSING OF PRODUCTS THE COMPANY SERVICES Altus is dependent on the supply of commodities to its system, and any decrease in such supply or the volumes that Altus gathers, processes, or transmits or any decrease in Altus’ processing efficiency would adversely affect its financial condition, results of operations, or cash flows. The Company’s financial performance depends to a large extent on the volumes of natural gas and NGLs gathered, processed, and transmitted on its assets, and decreases in such volumes would directly and adversely affect its financial condition, results of operations, or cash flows. These volumes can be influenced by factors beyond Altus’ control, including regulations, weather, storage levels, increased use of alternative energy sources, decreased demand, and changes in production. The Company’s financial condition, results of operations, or cash flows may also be adversely affected if the reserves or estimates thereof reported by the Company’s customers, for which the Company does not obtain independent evaluations, is less than anticipated or if the infrastructure to gather and process supply into and out of the Company’s systems are unavailable or inadequate. If the Company is unable to maintain or increase the volumes on its system or if its processing efficiency falls below contractually required levels, the Company’s business, financial conditions, results of operations, or cash flows could be adversely affected. The Company’s exposure to commodity price risk may change over time. The Company currently generates substantially all of its midstream services revenue pursuant to fee-based contracts under which the Company is paid based on the volumes that it gathers, processes, and transmits, rather than the underlying value of the commodity, and only has an immaterial portion of its revenues that are based on the underlying value of a commodity. However, Altus may enter into contracts or may acquire or develop additional midstream assets in a manner that increases its exposure to commodity price risk, which could adversely affect Altus’ financial condition, results of operations, or cash flows. RISKS RELATED TO CAPITAL EXPENDITURES To maintain and grow its business, Altus is, and will be, required to make substantial capital expenditures. To maintain and grow its business, Altus will need to make substantial capital expenditures to fund growth capital expenditures as well as its share of capital expenditures associated with the Equity Method Interest Pipelines. If the Company does not make sufficient or effective capital expenditures, it will be unable to maintain and grow its business, and, as a result, it may be unable to increase its cash flow over the long term. To fund Altus’ capital expenditures, it will be required to use cash from its operations, incur debt, engage in structured financial transactions, or sell additional shares of Class A Common Stock or other equity securities. 15 Additionally, the Company’s ability to obtain bank financing or its ability to access the capital markets for future equity or debt offerings may be limited by its then-current financial condition and the covenants in its then-current debt agreements, as well as by general economic conditions and uncertainties that are beyond its control. Also, due to Altus’ relationship with Apache, material adverse changes affecting Apache could negatively impact the Company’s ability to access the capital markets, including the pricing or other terms of any capital markets transactions, or engage in certain transactions that might otherwise be considered beneficial to the Company. The capital and global credit markets have experienced volatility and disruption in the past, and further volatility and disruption may have an adverse effect on Altus’s ability to access the credit markets to finance its operations or expansions. The capital and global credit markets have experienced volatility and disruption in the past. In many cases during these periods, the capital markets have exerted downward pressure on equity values and reduced the credit capacity for certain companies. Similar or more severe levels of global market disruption and volatility may have an adverse effect on Altus resulting from, but not limited to, disruption of Altus’ access to capital and credit markets, difficulty in obtaining financing necessary to expand facilities or acquire assets, increased financing costs, and increasingly restrictive covenants. If Altus is unable to access capital at competitive rates, the Company’s strategy of enhancing the earnings potential of its existing assets, including through capital-growth projects and acquisitions of complementary assets or businesses, may be affected adversely. RISKS RELATED TO THE COMPANY’S FINANCIAL CONDITION AND OBLIGATIONS Debt Altus incurs may limit its flexibility to obtain financing and to pursue other business opportunities. The Company’s current and future level of debt could have important consequences to it, and the Company’s ability to obtain additional financing, if necessary, for working capital, capital expenditures, or other purposes may be impaired or such financing may not be available on favorable terms. The funds available for operations, future business opportunities, and the payment of dividends, if any, to the Company’s stockholders will be reduced by that portion of its cash flows required to make interest payments on its debt, and the Company may be more vulnerable to competitive pressures or a downturn in its business or the economy generally. Altus’ ability to service any debt will depend upon, among other things, its future financial and operating performance, which will be affected by prevailing economic conditions and other factors, some of which are beyond its control. If the Company’s operating results are not sufficient to service any future indebtedness, it will be forced to take actions such as reducing or eliminating dividends, reducing or delaying its business activities, investments, or capital expenditures, selling assets, or issuing equity. Altus may not be able to effect any of these actions on satisfactory terms or at all. The discontinuation and uncertain cessation date of LIBOR, and the adoption of an alternative reference rate, may have a material adverse impact on Altus Midstream’s floating rate indebtedness and financing costs. Pursuant to the terms of Altus Midstream’s revolving credit facility, Altus Midstream may elect to use the London Interbank Offering Rate (LIBOR) as a benchmark for establishing the interest rate on floating interest rate borrowings under its revolving credit facility. On November 30, 2020, the ICE Benchmark Administration (IBA) announced that it intends to continue publishing LIBOR until the end of June 2023, beyond the previously announced 2021 cessation date. The IBA announcement was supported by announcements from the United Kingdom’s Financial Conduct Authority (FCA), which regulates LIBOR, and the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency (U.S. Regulators). However, both the FCA and U.S. Regulators in their announcements also advised banks to cease entering into new contracts referencing LIBOR after December 2021. These announcements indicate that the continuation of LIBOR in existing contracts may not be assured after 2021 and will not be assured beyond 2023. In light of these recent announcements, the future of LIBOR at this time is uncertain, and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phase-out could cause LIBOR to perform differently than in the past or cease to exist. In the United States, the Alternative Reference Rates Committee (the working group formed to recommend an alternative rate to LIBOR) has identified the Secured Overnight Financing Rate (SOFR) as its preferred alternative rate for LIBOR. There can be no guarantee that SOFR will become a widely-accepted benchmark in place of LIBOR. Although the full impact of the transition away from LIBOR, including the discontinuance of LIBOR publication and the adoption of SOFR as the replacement rate for LIBOR, remains unclear, these changes may have an adverse impact on Altus Midstream’s floating rate indebtedness and financing costs under its revolving credit facility. 16 Altus is exposed to the credit risk of its customers and counterparties, including Apache, and their nonpayment or nonperformance could have an adverse effect on the Company’s financial condition, results of operations, or cash flows. The Company is subject to risks of loss resulting from nonpayment or nonperformance by its customers or other counterparties, including Apache. Any increase in the nonpayment or nonperformance by such parties could adversely affect Altus’ financial condition, results of operations, or cash flows. Additionally, the combination of a reduction of cash flow resulting from lower commodity prices, a reduction in borrowing bases under reserve-based credit facilities, and the lack of availability of debt or equity financing may result in a significant reduction in the liquidity of such parties and their ability to make payment or perform on their obligations to the Company. Furthermore, some of the Company’s customers or other counterparties may be leveraged and subject to their own operating and regulatory risks, which increases the risk that they may default. Altus may be required to take write-downs, write-offs, or restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations, and stock price. Altus cannot assure its stockholders that its due diligence will reveal all material issues that may be present in the businesses that it may acquire, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of its control will not later arise. As a result, Altus may be forced to later write down or write off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even though these charges may be non-cash items and may not have an immediate impact on the Company’s liquidity, the fact that it reports charges of this nature could contribute to negative market perceptions about the Company or its securities. The Company’s ability to utilize net operating losses and other tax attributes to reduce future taxable income may be limited if the Company experiences an ownership change. As described in Note 12—Income Taxes within Part II, Item 8 of this Annual Report on Form 10-K, the Company has substantial net operating loss carryforwards (NOLs) and other tax attributes available to potentially offset future taxable income. If the Company were to experience an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended, which is generally defined as a greater than 50 percentage point change, by value, in the Company’s equity ownership by five-percent shareholders over a three-year period, the Company’s ability to utilize its pre-change NOLs and other pre-change tax attributes to potentially offset its post-change income or taxes may be limited. Such a limitation could materially adversely affect the Company’s operating results or cash flows by effectively increasing its future tax obligations. Altus’ ability to pay dividends depends on its ability to generate sufficient cash flow, which it may not be able to accomplish. The Company’s ability to pay dividends principally depends upon the amount of cash it generates from its operations, which will fluctuate from quarter to quarter based on, among other things, income from the Equity Method Interest Pipelines, the volumes of natural gas and NGLs it gathers and processes, commodity prices, and other factors impacting Altus’ financial condition, some of which are beyond its control. In addition, under Delaware law, dividends on Altus’ capital stock may only be paid from “surplus,” which is the amount by which the fair value of Altus’ total assets exceeds the sum of its total liabilities, including contingent liabilities, and the amount of its capital; if there is no surplus, cash dividends on capital stock may only be paid from Altus’ net profits for the then-current and/or the preceding fiscal year. Altus’ only significant assets are ownership of the non-economic general partner interest and an approximate 23.1 percent limited partner interest in Altus Midstream LP, and such ownership may not be sufficient for Altus Midstream LP to make distributions or loans to Altus to enable it to pay any dividends or satisfy its other financial obligations. Altus has no direct operations and no significant assets other than the ownership of the non-economic general partner interest and an approximate 23.1 percent limited partner interest in Altus Midstream LP. The Company depends on Altus Midstream LP for distributions, loans, and other payments to generate the funds necessary to meet its financial obligations and to pay dividends with respect to its Class A Common Stock. Subject to certain restrictions, Altus Midstream LP generally will be required to (i) make pro rata distributions to its partners, including the Company, on a quarterly basis in an amount at least sufficient to allow the Company to pay the Company’s taxes and make tax advances to Altus Midstream LP’s limited partners, other than the Company, in certain circumstances, and (ii) reimburse the Company for certain corporate and other overhead expenses. However, legal and contractual restrictions in agreements governing existing and future indebtedness of Altus Midstream LP, as well as the financial condition and operating requirements of Altus Midstream LP, may limit the Company’s ability to obtain cash from Altus Midstream LP. In addition, Altus Midstream LP is required to pay specified quarterly distributions on its Series A Cumulative Redeemable Preferred Units before paying distributions on Common Units. The earnings from, or other available assets of, Altus Midstream LP may not be sufficient to make distributions or loans to the Company, to enable it to pay dividends on its Class A Common Stock, or to satisfy its other financial obligations. The Delaware 17 Revised Uniform Limited Partnership Act generally restricts distributions to the extent that the liabilities of the limited partnership exceed the fair value of its assets. Holders of Altus Midstream’s Series A Cumulative Redeemable Preferred Units have rights, preferences, and privileges that are not held by, and are preferential to the rights of, holders of Common Units, and could dilute or otherwise adversely affect the holders of Common Units. Altus Midstream is required to pay specified quarterly distributions on the Series A Cumulative Redeemable Preferred Units (the Preferred Units) before paying distributions on its Common Units. If Altus Midstream fails to pay the Preferred Unit distribution in respect of any quarter in full in cash, then Altus Midstream will not be permitted to declare or make any distributions on its Common Units until all accrued and accumulated but unpaid Preferred Unit distributions have been paid in full. In addition, Altus Midstream’s cash payment of distributions on, and for redemption of, its Common Units is limited in amount and subject to satisfaction of leverage ratios. The Preferred Units are redeemable at any time at the option of Altus Midstream and under certain circumstances, the Preferred Units are redeemable at the holders’ option, in each case, at a price which incorporates an agreed return on the holders’ investment. The Preferred Units also rank senior to the Common Units in distribution and liquidation rights, and holders of Preferred Units will be entitled to receive a liquidation preference that incorporates an agreed return on the holders’ investment. The Company depends on Altus Midstream for distributions, loans, and other payments to generate the funds necessary to meet the Company’s financial obligations or to pay any dividends with respect to its Class A Common Stock. Obligations of Altus Midstream in respect of the Preferred Units may restrict, reduce, or render unavailable funds that otherwise may be available to be distributed, loaned, or paid to the Company by Altus Midstream or loaned to, or invested in, Altus Midstream by third parties. For additional information regarding the Preferred Units, refer to Note 11—Series A Cumulative Redeemable Preferred Units within Part IV, Item 15 of this Annual Report on Form 10-K. RISKS RELATED TO PERMITTING, REGULATIONS, AND OTHER LEGAL CHANGES Altus may be unable to obtain or renew permits necessary for its operations, which could inhibit its ability to do business. Performance of the Company’s operations require that it obtain and maintain a number of federal, state, and local permits, licenses, and approvals, which is an expensive and lengthy process, with terms and conditions containing a significant number of prescriptive limits and performance standards in order to operate. All of these permits, licenses, approvals, limits, and standards require a significant amount of monitoring, record keeping, and reporting. Noncompliance or incomplete documentation may result in the imposition of fines, penalties, and injunctive relief. Moreover, the public may engage in the permitting process, including through intervention in the courts. Negative public perception could cause the permits Altus requires to conduct its operations to be withheld, delayed, or burdened by restrictive requirements. A decision by a government agency to deny or delay the issuance of a new or existing material permit or other approval or to revoke or substantially modify an existing permit or other approval could adversely affect the Company’s financial condition, results of operations, or cash flows. Altus is subject to regulation by multiple governmental agencies, which could adversely impact its business, results of operations, and financial condition. The Company is subject to regulation by multiple federal, state, and local governmental agencies, including those related to pipeline and environmental safety, and regulation by the stock exchange on which its common stock is listed. Proposals and proceedings that could affect the Company or its industry are regularly considered by Congress, as well as by state legislatures and federal and state regulatory commissions, agencies, and courts and stock exchanges. The Company cannot predict when or whether any such proposals or proceedings may become effective or the magnitude of the impact changes in or interpretations of laws, regulations, and exemptions may have on its business. However, additions to the regulatory burden on the Company and the midstream industry can increase the Company’s cost of doing business and affect its profitability. 18 Altus may become subject to the requirements of the Investment Company Act of 1940, which would limit its business operations and require it to spend significant resources to comply with such act. The Investment Company Act of 1940 (the Investment Company Act) defines an “investment company” as an issuer that is engaged in the business of investing, reinvesting, owning, holding, or trading in securities and owns investment securities having a value exceeding 40 percent of the issuer’s unconsolidated assets, excluding cash items and securities issued by the federal government. It is possible that some or all of the interests in the Equity Method Interest Pipelines may be investment securities and that the value of those interests that are investment securities over time may exceed 40 percent of the applicable subsidiaries’ unconsolidated assets, excluding cash and government securities, in which case such subsidiaries may meet this threshold definition of an investment company. However, the Investment Company Act provides certain exclusions from this definition and other alternative relief from the application of the Investment Company Act. The ramifications of becoming an investment company, both in terms of the restrictions it would have on such subsidiary and the cost of compliance, would be significant. For example, in addition to expenses related to initially registering as an investment company, the Investment Company Act also would impose various restrictions with regard to the subsidiary’s ability to enter into affiliated transactions, the diversification of its assets, and its ability to borrow money. If any of Altus’ subsidiaries became subject to the Investment Company Act at some point in the future, then the subsidiary’s ability to continue pursuing its business plan would be severely limited. Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of Altus’ income or other tax returns could adversely affect its financial condition and results of operations. Altus is subject to income taxes in the United States, and its domestic tax liabilities may be subject to the allocation of expenses in differing jurisdictions. Altus’ future effective tax rates could be subject to volatility or adversely affected by a number of factors, including changes in the valuation of Altus’ deferred tax assets and liabilities, expected timing and amount of the release of any tax valuation allowances, tax effects of stock-based compensation, costs related to intercompany restructurings, changes in tax laws, regulations, or interpretations thereof, or lower than anticipated future earnings in jurisdictions where Altus has lower statutory tax rates and higher than anticipated future earnings in jurisdictions where Altus has higher statutory tax rates. In addition, Altus may be subject to audits of its income, franchise, sales, and other transaction taxes by U.S. federal and state authorities. Outcomes from these audits could have an adverse effect on the Company’s financial condition and results of operations. RISKS RELATED TO CLIMATE CHANGE Climate change legislation, and regulatory initiatives could result in increased operating costs and reduced demand for the natural gas and NGLs services the Company provides. Legislative bodies and governmental agencies have from time to time considered or adopted legislation or regulations to reduce emissions of GHGs. Wide-ranging policy debates regarding the impact of these gases and possible means for their regulation, along with efforts toward the adoption of international treaties or protocols that would address global climate change issues, are ongoing. Numerous proposals have been made and could continue to be made at the national, regional, and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate such future emissions. Moreover, on January 27, 2021, the President issued an executive order that commits to substantial action on climate change, calling for, among other things, the increased use of zero-emissions vehicles by the federal government, the elimination of subsidies provided to the fossil fuel industry, and increased emphasis on climate-related risk across governmental agencies and economic sectors. Any such legislation or regulation, if enacted, could either tax or assess some form of GHG-related fees on the Company’s operations and could lead to increased operating expenses or result in the Company making significant capital investments for infrastructure modifications. Additionally, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as GHG cap-and-trade programs, carbon taxes, reporting and tracking programs, restriction of emissions, electric vehicle mandates, and combustion engine phaseouts. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, oil, natural gas, and NGLs. Additionally, political, litigation, and financial risks related to climate change may result in curtailed refinery activity, increased regulation, or other adverse direct and indirect effects on the Company’s business, financial condition and results of operations. For example, there is a risk that financial institutions will be required to adopt policies that have the effect of reducing the funding provided to the fossil fuel sector. Recently, the Federal Reserve announced that it has joined the Network for Greening the Financial System, a consortium of financial regulators focused on addressing climate-related risks in the financial sector. 19 Although it is not possible at this time to predict whether legislation or regulations may be adopted to address GHG emissions or how such measures would impact the Company’s business, the imposition of reporting or permitting obligations on, or limiting emissions of GHGs from, Altus’ equipment and operations could require the Company to incur additional costs, adversely affect its performance of operations, or adversely affect demand for the Company’s services. Altus’ customers, including Apache, and suppliers are subject to the risk of increased federal, state, and local legislation and regulatory initiatives, which could adversely affect Altus’ financial condition, results of operations, or cash flows. The production of crude oil, natural gas, and NGLs by the Company’s customers, including Apache, and the Company’s suppliers are subject to regulation by multiple federal, state, and local governmental agencies, which may enact additional or more restrictive or onerous regulations, including those that may further regulate, restrict, or prohibit certain drilling methods, including hydraulic fracturing, or impose additional permit requirements and operational restrictions, such as a reduction or prohibition of venting or flaring, in certain jurisdictions or in environmentally sensitive areas. If additional levels of regulation and permits are required, that could lead to delays, increased operating costs, and process prohibitions for the Company’s suppliers and customers that could reduce the volumes of natural gas and NGLs that move through the Company’s systems, which could materially adversely affect its revenue and results of operations. RISKS RELATED TO THE COMPANY’S OWNERSHIP AND FILING STATUS Altus is a “controlled company” within the meaning of the Nasdaq listing rules and, as a result, qualifies for, and intends to rely on, exemptions from certain corporate governance requirements. Because Apache and its affiliates control a majority of Altus’ outstanding voting common stock, Altus is a controlled company within the meaning of the Nasdaq corporate governance standards. Under the Nasdaq listing rules, a controlled company may elect not to comply with certain Nasdaq corporate governance requirements, including the requirements that a majority of the board of directors consist of independent directors, the nominating and governance committee be composed entirely of independent directors, and the compensation committee be composed entirely of independent directors. These requirements will not apply to Altus as long as it remains a controlled company, and Altus currently utilizes and intends to continue to utilize some, if not all, of these exemptions. Accordingly, Altus’ stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq listing rules. The JOBS Act permits “emerging growth companies” like Altus to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies. Altus qualifies as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). As such, Altus is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies and of extended transition periods for as long as Altus continues to be an emerging growth company, including: • the exemption from the independent registered public accounting firm attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act; • the exemptions from say-on-pay, say-on-frequency, and say-on-golden parachute voting requirements; • an extended transition period for complying with new or revised accounting standards; and • reduced disclosure obligations regarding executive compensation in Altus’ periodic reports and proxy statements. As a result, Altus’ stockholders may not have access to certain information they deem important and may not be able to directly compare the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period, because of the potential differences in accounting standards used. Altus cannot predict if investors will find its Class A Common Stock less attractive if it relies on these exemptions. If some investors find Altus’ Class A Common Stock less attractive as a result, there may be a less active trading market for its Class A Common Stock, and its stock price may be more volatile. RISKS RELATED TO THE COMPANY’S WARRANTS Although Altus has registered the shares of Class A Common Stock issuable upon exercise of the warrants under the Securities Act, such registration may not be in place when an investor desires to exercise warrants, thus precluding such 20 investor from being able to exercise its warrants except on a cashless basis and potentially causing such warrants to expire worthless. Although Altus has registered the shares of Class A Common Stock issuable upon exercise of the warrants under the Securities Act, it may not be able to maintain a current prospectus relating to the Class A Common Stock issuable upon exercise of the warrants until the expiration of the warrants in accordance with the provisions of the warrant agreement. Altus cannot assure holders that it will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in such registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct, or the SEC issues a stop order. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, Altus will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and Altus will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption is available. Notwithstanding the above, if Altus’ Class A Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, Altus may, at its option, require holders of warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act, and, in the event Altus so elects, it will not be required to file or maintain in effect a registration statement, but it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will Altus be required to net cash settle any warrant or issue securities or other compensation in exchange for the warrants in the event that it is unable to register or qualify the shares underlying the warrants under applicable state securities laws. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant, and such warrant may have no value and expire worthless. If and when the warrants become redeemable by Altus, it may exercise its redemption right even if it is unable to register or qualify the underlying shares of Class A Common Stock for sale under all applicable state securities laws. Altus may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 50 percent of the then-outstanding public warrants. As a result, the exercise price of your public warrants could be increased, the exercise period could be shortened, and the number of shares of Altus’ Class A Common Stock purchasable upon exercise of a public warrant could be decreased, all without your approval. Altus’ public warrants were issued in connection with its initial public offering in registered form under a warrant agreement between American Stock Transfer & Trust Company, as warrant agent, and Altus. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50 percent of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, Altus may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50 percent of the then-outstanding public warrants approve of such amendment. Although Altus’ ability to amend the terms of the public warrants with the consent of at least 50 percent of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the public warrants, shorten the exercise period, or decrease the number of shares of Altus’ Class A Common Stock purchasable upon exercise of a public warrant. There is no guarantee that Altus’s warrants will ever be in the money prior to their expiration, and Altus may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making the warrants worthless. The exercise price for Altus’ warrants is $230.00 per share of Class A Common Stock. There is no guarantee that the public warrants will ever be in the money prior to their expiration, and, as such, the warrants may expire worthless. Additionally, Altus has the ability to redeem outstanding warrants at any time prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of its Class A Common Stock equals or exceeds $360.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date Altus sends the notice of redemption to the warrant holders. If and when the warrants become redeemable by Altus, it may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force the warrant holders to exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so, sell their warrants at the then-current market price 21 when they might otherwise wish to hold their warrants, or accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of their warrants. RISKS RELATED TO STOCK OWNERSHIP DILUTION The warrants are exercisable for Altus’ Class A Common Stock, which will, upon exercise, increase the number of shares eligible for future resale in the public market and result in dilution to Altus’ stockholders. Altus has outstanding public and private placement warrants to purchase shares of Class A Common Stock. To the extent such warrants are exercised, additional shares of Class A Common Stock will be issued, which will result in dilution to the then-existing holders of Altus’ Class A Common Stock and increase the number of shares eligible for resale in the public market, which could adversely affect the market price of Altus’ Class A Common Stock. In the future, Apache may receive earn-out consideration in the form of shares of Class A Common Stock upon the achievement of certain stock price and operational goals, which would increase the number of shares eligible for future resale in the public market and result in dilution to Altus’ stockholders. Pursuant to the Altus Contribution Agreement, Apache will have the right to receive earn-out consideration in the form of additional shares of Class A Common Stock if certain stock price and operational goals are achieved. To the extent such stock price or operational goals are achieved and Apache becomes entitled to receive a portion or all of the earn-out consideration, additional shares of Class A Common Stock will be issued, which will result in dilution to the then-existing holders of Class A Common Stock and increase the number of shares eligible for resale in the public market. The shares of Class A Common Stock issuable to Apache as earn-out consideration have been registered for resale with the SEC. Sales of substantial numbers of such shares by Apache in the public market could adversely affect the market price of Class A Common Stock. The Preferred Units may be exchanged for shares of Altus’ Class A Common Stock at a discount under certain circumstances, which could be dilutive to existing holders of its Class A Common Stock. The Preferred Units may be exchanged for shares of Altus’ Class A Common Stock at a discount under certain circumstances, which could be dilutive to existing holders of its Class A Common Stock. The number of shares of Class A Common Stock issued in any exchange would be based on its then-current trading price. Accordingly, the lower the trading price of Altus’ Class A Common Stock at the time of any exchange, the greater the number of shares of Class A Common Stock that would be issued upon exchange of the Preferred Units, increasing potential dilution to existing holders of Altus’ Class A Common Stock. Further, if the former holders of Preferred Units dispose of a substantial portion of their newly-exchanged Class A Common Stock in the public market, particularly over a short time period, it could adversely affect the market price for Altus’ Class A Common Stock and possibly make it more difficult for Altus to issue additional Class A Common Stock in the future at an attractive price. A significant portion of Altus’ total outstanding shares may be sold into the market in the near future. This could cause the market price of its Class A Common Stock to drop significantly, even if its business is doing well. Sales of a substantial number of shares of Class A Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of Altus’ Class A Common Stock. Additionally, Apache’s Common Units have been exchanged for shares of Class A Common Stock on a one-for-one basis. The shares of Class A Common Stock issued to Apache upon such exchange have been registered for resale with the SEC. Sales of substantial numbers of such shares by Apache in the public market could adversely affect the market price of Altus’ Class A Common Stock. RISKS RELATED TO RESTRICTIONS ON STOCKHOLDER ACTIONS Altus’ charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with Altus or its directors, officers, employees, or agents. The charter provides that, unless Altus consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (Court of Chancery) will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for any derivative action or proceeding brought on the Company’s behalf; any action asserting a claim of breach of a fiduciary duty owed by any of the Company’s directors, officers, or other employees to it or its stockholders; any action asserting a claim against the Company or any of its directors, officers, or employees arising pursuant to any provision of the DGCL, the charter, or the Company’s bylaws; or any action asserting a claim against the Company or any of its directors, officers, or other employees that is governed by the internal affairs doctrine. 22 The above does not apply for such claims as to which the Court of Chancery determines that it does not have personal jurisdiction over an indispensable party, exclusive jurisdiction is vested in a court or forum other than the Court of Chancery, or the Court of Chancery does not have subject matter jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of the Company’s capital stock will be deemed to have notice of, and consented to, the provisions of Altus’ charter described in the preceding sentence. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes with the Company or its directors, officers, or other employees, which may discourage such lawsuits against the Company and such persons. Alternatively, if a court were to find these provisions of Altus’ charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, the Company may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect its business, financial condition, or results of operations. Altus’ charter provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Accordingly, the charter provides that the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act, the Securities Act, or any other claim for which the federal courts have exclusive jurisdiction. GENERAL RISK FACTORS If Altus fails to maintain an effective system of internal controls, it may not be able to report accurately its financial results or prevent fraud. As a result, current and potential holders of the Company’s equity could lose confidence in its financial reporting, which would harm its business and cost of capital. Effective internal controls are necessary for Altus to provide reliable financial reports, prevent fraud, and operate successfully as a public company. The Company cannot be certain that its efforts to maintain its internal controls will be successful, that it will be able to maintain adequate controls over its financial processes and reporting in the future, or that it will be able to continue to comply with its obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to maintain effective internal controls or to implement or improve the Company’s internal controls could harm its operating results or cause it to fail to meet its reporting obligations. Ineffective internal controls could also cause investors to lose confidence in the Company’s reported financial information, which would likely have a negative effect on the trading price of its equity interests. If the performance of the Company does not meet the expectations of investors, stockholders, or financial analysts, the market price of Altus’ securities may decline. The price of the Company’s securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond the Company’s control, and such fluctuations could contribute to the loss of all or part of a stockholder’s investment. Fluctuations or changes in the Company’s quarterly financial results, changes in or failure to meet market or financial analysts’ expectations about the Company, changes in laws and regulations, commencement of or involvement in litigation, changes in the Company’s capital structure, and general economic and political conditions could have a material adverse effect on a stockholder’s investment in the Company’s securities, and its securities may trade at prices significantly below the price paid for them. In such circumstances, the trading price of the Company’s securities may not recover and may experience a further decline. Broad market and industry factors may materially harm the market price of the Company’s securities irrespective of Altus’ operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks and of the Company’s securities may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to the Company could depress the Company’s stock price regardless of its business, prospects, financial conditions, or results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 23 ITEM 3. LEGAL PROCEEDINGS For further information regarding legal proceedings, see Note 8—Commitments and Contingencies in the Notes to Consolidated Financial Statements set forth in Part IV, Item 15 of this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES None. 24 PART II