UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~Form~~

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2018~~

2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to

_________

Commission File Number:001-38048

~~KAYNE ANDERSON ACQUISITION CORP.~~

Altus Midstream Company

(Exact name of ~~Registrant~~registrant as specified in its charter)



Delaware		81-4675947
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~811 Main Street~~

~~14th Floor~~

~~Houston, TX~~

~~77002~~

~~(Address of principal executive offices)~~

~~(Zip Code)~~

~~(713)493-2000~~

One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas77056-4400

(Address of principal executive offices) (Zip Code)

(713) 296-6000

(Registrant’s telephone number, including area code)

~~N/A~~

~~(Former name, former address and former fiscal year, if changed since last report)~~

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.0001 par value	ALTM	NASDAQ Global Select Market

Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.



Large accelerated filer	☐		Accelerated ~~Filer~~		☐

~~Non-accelerated~~ filer	☒
Non-accelerated filer	☐	Smaller reporting company		☐

			Emerging growth company		☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☒☐ No ☐

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date: As of November 6, 2018 , there were 37,732,112 Class A common stock, par value $0.0001 (“Class A Common Stock”) and 9,433,028 shares of the Company’s Class B common stock, par value $0.0001 (“Class B Common Stock”), issued and outstanding.

☒

~~KAYNE ANDERSON ACQUISITION CORP.~~

~~TABLE OF CONTENTS~~



~~PART I —FINANCIAL INFORMATION~~ Number of shares of registrant’s Class A common stock, par value $0.0001 per share issued and outstanding as of October 31, 2019			74,929,305

~~Item 1.~~	~~Financial Statements~~

	~~Condensed Consolidated Balance Sheets~~ Number of shares of registrant’s Class C common stock, par value $0.0001 per share issued and outstanding as of ~~September 30, 2018 (unaudited) and December~~October 31, ~~2017~~ 2019	250,000,000		1

	~~Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018 (unaudited) and September 30, 2017 (unaudited)~~			2

	~~Condensed Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2018 (unaudited)~~			3

	~~Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 (unaudited) and September 30, 2017 (unaudited)~~			4

	~~Notes to Condensed Consolidated Financial Statements (unaudited)~~			5

~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~			16

~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~			19

~~Item 4.~~	~~Controls and Procedures~~			19

TABLE OF CONTENTS



Item		Page
	PART I — FINANCIAL INFORMATION

1.	FINANCIAL STATEMENTS	1

	STATEMENT OF CONSOLIDATED OPERATIONS	1

	STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)	2

	CONSOLIDATED BALANCE SHEET	3

	STATEMENT OF CONSOLIDATED CASH FLOWS	4

	STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS	5

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7

2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26

3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38

4.	CONTROLS AND PROCEDURES	38

	PART II — OTHER INFORMATION

1.	LEGAL PROCEEDINGS	39

1A.	RISK FACTORS	39

6.	EXHIBITS	40

FORWARD-LOOKING STATEMENTS AND RISK

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans, and objectives of management for future operations, are forward-looking statements. Such forward-looking statements are based on our examination of historical operating trends, production and growth forecasts of Apache Corporation’s Alpine High field development and other data in our possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “plan,” “believe,” or “continue” or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, our assumptions about:

the market prices of oil, natural gas, natural gas liquids (NGLs), and other products or services;

pipeline and gathering system capacity;

production rates, throughput volumes, reserve levels and development success of dedicated oil and gas fields;

economic and competitive conditions;

the availability of capital;

cash flow and the timing of expenditures;

capital expenditures and other contractual obligations;

weather conditions;

inflation rates;

the availability of goods and services;

legislative, regulatory, or policy changes;

terrorism or cyber attacks;

occurrence of property acquisitions or divestitures;

the integration of acquisitions;

a decline in oil, natural gas, and NGL production, and the impact of general economic conditions on the demand for oil, natural gas, and NGLs;

the impact of environmental, health and safety, and other governmental regulations and of current or pending legislation;

environmental risks;

effects of competition;

our ability to retain key members of our senior management and key technical employees;

increases in interest rates;

the effectiveness of our business strategy;

changes in technology;

market-related risks such as general credit, liquidity and interest-rate risks;

the timing, amount and terms of our future issuances of equity and debt securities; and

other factors disclosed under Item 1A — Risk Factors, Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7A — Quantitative and Qualitative Disclosures About Market Risk and elsewhere in our most recently filed Annual Report on Form 10-K, other risks and uncertainties in our third-quarter 2019 earnings release, other factors disclosed under Part II, Item 1A — Risk Factors of this Quarterly Report on Form 10-Q, and any other factors disclosed in the other filings that we make with the Securities and Exchange Commission.

All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. We assume no duty to update or revise our forward-looking statements based on changes in internal estimates or expectations or otherwise.

iii

GLOSSARY OF TERMS

The following are abbreviations and definitions of certain terms used in this report and certain terms which are commonly used in the exploration, production and midstream sectors of the oil and natural gas industry:


~~PART II —OTHER INFORMATION~~ •	Bbl. One stock tank barrel of 42 U.S. gallons liquid volume used herein in reference to crude oil, condensate or NGLs.


•	Bbl/d. One Bbl per day.


~~Item 1.~~ •		~~Legal Proceedings~~			19	Bcf. One billion cubic feet of natural gas.


~~Item 1A.~~ •		~~Risk Factors~~			19	Bcf/d. One billion cubic feet of natural gas per day.


~~Item 2.~~ •		~~Unregistered Sales~~ Btu. One British thermal unit, which is the quantity of ~~Equity Securities and Use~~heat required to raise the temperature of ~~Proceeds~~			20	a one-pound mass of water by one degree Fahrenheit.


~~Item 3.~~ •		~~Defaults Upon Senior Securities~~			20	COMA. Construction, Operations and Maintenance Agreement


~~Item 4.~~ •		~~Mine Safety Disclosures~~			20	Field. An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.


~~Item 5.~~ •		~~Other Information~~			20	Formation. A layer of rock which has distinct characteristics that differs from nearby rock.


~~Item 6.~~ •		~~Exhibits~~			20	MBbl. One thousand barrels of crude oil, condensate or NGLs.


•	MBbl/d. One thousand barrels of crude oil, condensate or NGLs per day.


•	Mcf. One thousand cubic feet of natural gas.


•	Mcf/d. One Mcf per day.


•	MMBbl. One million barrels of crude oil, condensate or NGLs.


•	MMBtu. One million British thermal units.


•	MMcf. One million cubic feet of natural gas.


•	NGLs. Natural gas liquids. Hydrocarbons found in natural gas, which may be extracted as liquefied petroleum gas and natural gasoline.

Effective February 14, 2019 each of the Alpine High Entities’ names were changed to replace “Alpine High” in each name with “Altus Midstream.” As such, references to the Altus Midstream Entities and Altus Midstream Operating shall have the same meanings as ascribed to the Alpine High Entities and Alpine High Midstream, respectively, in the Company’s most recently filed Annual Report on Form 10-K.

PART I ~~—FINANCIAL~~— FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

~~Item 1.Financial Statements~~

~~KAYNE ANDERSON ACQUISITION CORP.~~

~~CONDENSED~~

ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED ~~BALANCE SHEETS~~

   September 30,
2018
(unaudited)    December 31,
2017
ASSETS

Current assets

Cash
   $ 40,565    $ 479,055
Prepaid expenses and other current assets
   120,375    67,479




Total Current Assets
   160,940    546,534
Investment held in trust account
   382,384,785    379,176,865




Total Assets
   $ 382,545,725    $ 379,723,399




LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accrued expenses
   $ 2,738,179    $ 742,688
Accrued franchise taxes
   30,038    200,050
Accrued income taxes
   357,823    304,876
Sponsor note
   600,000    —




Total Current Liabilities
   3,726,040    1,247,614
Deferred underwriting compensation
   13,206,239    13,206,239




Total Liabilities
   16,932,279    14,453,853
Class A common stock subject to possible redemption; 36,061,344 and 36,026,954 shares, respectively, at September 30, 2018 and December 31, 2017 (at approximately $10.00 per share)
   360,613,440    360,269,540
Stockholders’ equity:

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
   —      —
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 1,670,768 and 1,705,158 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively (excluding 36,061,344 and 36,026,954 shares subject to possible redemption as of September 30, 2018 and December 31, 2017, respectively)
   167    170
Class B convertible common stock, $0.0001 par value; 20,000,000 shares authorized; 9,433,028 shares issued and outstanding as of September 30, 2018 and December 31, 2017
   943    943
Additionalpaid-in capital
   4,844,480    5,188,377
Retained earnings (accumulated deficit)
   154,416    (189,484 )




Total Stockholders’ Equity
   5,000,006    5,000,006




Total Liabilities and Stockholders’ Equity
   $ 382,545,725    $ 379,723,399

~~See~~OPERATIONS

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands, except per share data)
REVENUES:
Midstream services revenue — affiliate (Note 3)	$	34,009		$	25,437		$	91,994		$	50,053
Total revenues	34,009			25,437			91,994			50,053
COSTS AND EXPENSES:
Operations and maintenance ⁽¹⁾	13,063			16,579			43,466			38,798
General and administrative ⁽²⁾	3,242			1,865			8,314			5,126
Depreciation and accretion	11,710			5,483			28,468			14,404
Impairments	9,338			—			9,338			—
Taxes other than income	3,239			1,226			9,702			6,479
Total costs and expenses	40,592			25,153			99,288			64,807
Operating income (loss)	(6,583		)	284			(7,294		)	(14,754		)
Unrealized derivative instrument loss	(3,769		)	—			(3,769		)	—
Interest income	617			—			3,584			—
Income from equity method interests, net	1,564			—			536			—
Other	—			—			(17		)	—
Total other income (loss)	(1,588		)	—			334			—
Financing costs, net of capitalized interest	522			—			1,508			—
NET INCOME (LOSS) BEFORE INCOME TAXES	(8,693		)	284			(8,468		)	(14,754		)
Deferred income tax benefit	(505		)	(18,924		)	(510		)	(9,733		)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	(8,188		)	19,208			(7,958		)	(5,021		)
Net income attributable to Preferred Unit limited partners	17,480			—			21,623			—
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	(25,668		)	19,208			(29,581		)	(5,021		)
Net loss attributable to Apache limited partner	(20,804		)	—			(23,524		)	—
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS	$	(4,864	)	$	19,208		$	(6,057	)	$	(5,021	)

NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS, PER SHARE⁽³⁾
Basic	$	(0.06	)	$	0.09		$	(0.08	)	$	(0.03	)
Diluted	$	(0.07	)	$	0.09		$	(0.09	)	$	(0.03	)
WEIGHTED AVERAGE SHARES ⁽³⁾
Basic	74,929			218,470			74,929			179,493
Diluted	324,929			218,470			324,929			179,493


(1)	Includes amounts of $2.2 million and $2.3 million to related parties for the three months ended September 30, 2019 and 2018, respectively, and $7.1 million and $6.6 million for the nine months ended September 30, 2019 and 2018, respectively. Refer to Note 3 — Transactions with Affiliates.


(2)	Includes amounts of $2.1 million and $1.8 million to related parties for the three months ended September 30, 2019 and 2018, respectively, and $4.7 million and $5.1 million for the nine months ended September 30, 2019 and 2018, respectively. Refer to Note 3 — Transactions with Affiliates.


(3)	For periods prior to the Business Combination (as defined below), 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.

The accompanying notes to ~~condensed~~ consolidated financial statements

are an integral part of this statement.

~~KAYNE ANDERSON ACQUISITION CORP.~~

~~CONDENSED~~

ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED ~~STATEMENTS OF OPERATIONS~~

~~(unaudited)~~

   Three Months
Ended
September 30,
2018 Three Months
Ended
September 30,
2017 Nine Months
Ended
September 30,
2018 Nine Months
Ended
September 30,
2017
Revenues
   $ —   $ —   $ —   $ —
Expenses

General and administrative expenses
   2,266,757 276,956 2,981,085 1,340,902
Franchise tax expense
   50,013 55,900 150,038 98,900


Total expenses
   2,316,770 332,856 3,131,123 1,439,802


Loss from operations
   (2,316,770 ) (332,856 ) (3,131,123 ) (1,439,802 )
Other income – investment income on Trust Account
   1,712,170 809,858 4,362,433 1,353,883


Income (loss) before income taxes
   (604,600 ) 477,002 1,231,310 (85,919 )
Current income tax expense
   (349,053 ) (256,345 ) (887,410 ) (426,694 )


Net income (loss) attributable to common shares
   $ (953,653 ) $ 220,657 $ 343,900 $ (512,613 )


Weighted average number of shares outstanding:

Basic (excluding shares subject to redemption)
   11,009,468 11,191,898 11,138,060 10,582,053


Diluted
   11,009,468 47,165,140 47,165,140 10,582,053


Net income (loss) per common share:

Basic
   $ (0.09 ) $ 0.02 $ 0.03 $ (0.05 )


Diluted
   $ (0.09 ) $ 0.00 $ 0.01 $ (0.05 )

~~See~~COMPREHENSIVE INCOME (LOSS)

(Unaudited)



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
	(In thousands)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	$	(8,188	)	$	19,208	$	(7,958	)	$	(5,021	)
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Share of equity method interests other comprehensive loss	(591		)	—		(1,634		)	—
COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	(8,779		)	19,208		(9,592		)	(5,021		)
Comprehensive income attributable to Preferred Unit limited partners	17,480			—		21,623			—
Comprehensive loss attributable to Apache limited partner	(21,282		)	—		(24,845		)	—
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS	$	(4,977	)	$	19,208	$	(6,370	)	$	(5,021	)

The accompanying notes to ~~condensed~~ consolidated financial statements

are an integral part of this statement.

~~KAYNE ANDERSON ACQUISITION CORP.~~

~~CONDENSED~~

ALTUS MIDSTREAM COMPANY

CONSOLIDATED ~~STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY~~

~~For the nine months ended September 30, 2018~~

~~(unaudited)~~

   Class A Common
Stock Class B Common
Stock Retained Earnings
(Accumulated Deficit) Stockholders’
Equity
   Shares Amount Shares    Amount    Additional
Paid-in
Capital
Balances, December 31,
2017
   1,705,158 $ 170 9,433,028    $ 943    $ 5,188,377 $ (189,484 ) $ 5,000,006
Change in shares subject to possible redemption
   (34,390 ) (3 ) —      —      (343,897 ) —   (343,900 )
Net income
   —   —   —      —      —   343,900 343,900






Balances, September 30, 2018
   1,670,768 $ 167 9,433,028    $ 943    $ 4,844,480 $ 154,416 $ 5,000,006

~~See~~BALANCE SHEET

(Unaudited)



	September 30,			December 31,
	2019			2018
	(In thousands, except per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,594		$	449,935
Accounts receivable from Apache Corporation (Note 1)	1,135			—
Revenue receivables (Note 3)	11,726			10,914
Inventories and other	15,181			5,802
Assets held for sale	18,183			—
Prepaid assets and other	1,153			1,379
	49,972			468,030
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment	1,494,658			1,251,217
Less: Accumulated depreciation and amortization	(51,608		)	(24,320		)
	1,443,050			1,226,897
OTHER ASSETS:
Equity method interests	1,094,564			91,100
Deferred tax asset	68,598			67,558
Deferred charges and other	5,651			3,734
	1,168,813			162,392
Total assets	$	2,661,835		$	1,857,319

LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY
CURRENT LIABILITIES:
Accounts payable to Apache Corporation (Note 1)	$	—		$	13,595
Current debt (Note 6)	17,562			—
Other current liabilities (Note 7)	38,816			84,926
	56,378			98,521
LONG-TERM DEBT	235,000			—
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Asset retirement obligation	33,950			29,369
Deferred tax liability	3,089			2,643
Embedded derivative	98,228			—
Other non-current liabilities	1,206			—
	136,473			32,012
Total liabilities	427,851			130,533

COMMITMENTS AND CONTINGENCIES (Note 9)

Redeemable noncontrolling interest — Apache limited partner	1,251,370			1,940,500
Redeemable noncontrolling interest — Preferred Unit limited partners	538,413			—

EQUITY:
Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 74,929,305 shares issued and outstanding at September 30, 2019 and December 31, 2018	7			7
Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 250,000,000 shares issued and outstanding at September 30, 2019 and December 31, 2018	25			25
Additional paid-in capital	473,502			—
Accumulated deficit	(29,020		)	(213,746		)
Accumulated other comprehensive loss	(313		)	—
	444,201			(213,714		)
Total liabilities, noncontrolling interests, and equity	$	2,661,835		$	1,857,319

The accompanying notes to ~~condensed~~ consolidated financial statements

are an integral part of this statement.

~~KAYNE ANDERSON ACQUISITION CORP.~~

~~CONDENSED~~

ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED ~~STATEMENTS OF~~ CASH FLOWS

~~(unaudited)~~

   For the nine months
ended
September 30,
   2018 2017
Cash flows from operating activities:

Net income (loss)
   $ 343,900 $ (512,613 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:

Trust income retained in Trust Account (net of $1,154,513 and $0 of franchise taxes and income taxes paid, respectively)
   (3,207,920 ) (962,883 )
Changes in operating assets and liabilities:

Increase in prepaid expenses and other assets
   (52,896 ) (130,792 )
Increase in accrued expenses and taxes, net
   1,878,426 816,659


Net cash used in operating activities
   (1,038,490 ) (789,629 )
Net cash used in investing activities:

Cash deposited into Trust Account
   — (377,321,120 )
Cash flows from financing activities:

Proceeds from Public Offering
   — 377,321,120
Proceeds from sale of Private Placement Warrants
   — 9,546,422
Payment of underwriting costs
   — (7,546,422 )
Payment of offering costs
   — (642,617 )
Proceeds from Sponsor note
   600,000 245,000
Payment of Sponsor note
   — (265,000 )


Net cash provided by financing activities
   600,000 378,658,503
Net increase (decrease) in cash
   (438,490 ) 547,754
Cash at beginning of period
   479,055 7,500


Cash at end of period
   $ 40,565 $ 555,254


Supplemental disclosure of cash flow information:

Deferred underwriting compensation
   $ — $ 13,206,239


Income and franchise taxes paid
   $ 1,154,513 $ 391,000

~~See~~

(Unaudited)



	Nine Months Ended September 30,
	2019			2018 ⁽¹⁾
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss including noncontrolling interests	$	(7,958	)	$	(5,021	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Unrealized derivative instrument loss	3,769			—
Depreciation and accretion	28,468			14,404
Deferred income tax benefit	(510		)	(9,733		)
Income from equity method interests, net	(536		)	—
Distributions from equity method interests	3,391			—
Impairments	9,338			—
Adjustment for non-cash transactions with affiliate⁽¹⁾	—			(4,738		)
Other	666			—
Changes in operating assets and liabilities:
Increase in inventories and other	(676		)	(1,412		)
Decrease in prepaid and other	237			—
Increase in revenue receivables (Note 3)	(798		)	(3,119		)
Increase in accounts receivable from/payable to affiliate	(5,011		)	—
Increase in accrued expenses	9,056			9,619
NET CASH PROVIDED BY OPERATING ACTIVITIES	39,436			—

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ⁽²⁾	(307,010		)	—
Contributions to equity method interests	(337,412		)	—
Acquisition of equity method interests	(670,625		)	—
NET CASH USED IN INVESTING ACTIVITIES	(1,315,047		)	—

CASH FLOWS FROM FINANCING ACTIVITIES:
Redeemable noncontrolling interest - Preferred Unit limited partners, net	611,249			—
Proceeds from revolving credit facility	235,000			—
Finance lease	(17,187		)	—
Deferred facility fees	(792		)	—
NET CASH PROVIDED BY FINANCING ACTIVITIES	828,270			—

NET DECREASE IN CASH AND CASH EQUIVALENTS	(447,341		)	—
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	449,935			—
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,594		$	—
SUPPLEMENTAL CASH FLOW DATA:
Accrued capital expenditures ⁽³⁾	$	24,306		$	67,031
Finance lease liability⁽⁴⁾	29,000			—
Interest paid, net of capitalized interest	685			—

(1)

In all periods 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, Apache contributed its investments in gas gathering, processing and transmission facilities of approximately $408.4 million that is included within equity and redeemable noncontrolling interests for the nine months ended September 30, 2018. Refer to Note 3 — Transactions with Affiliates for more information.


(2)	Following the Business Combination, capital expenditure amounts represent the portion of the total settlements with Apache in the period that are capital in nature, pursuant to the terms of the Construction, Operations and Maintenance Agreement (COMA). Refer to Note 1 — Summary of Significant Accounting Policies and Note 3 — Transactions with Affiliates for more information.


(3)	Includes $0.6 million due from Apache pursuant to the terms of the COMA. Refer to Note 3 — Transactions with Affiliates for more information.


(4)	The Company entered into a finance lease in the first quarter of 2019. Refer to Note 1 — Summary of Significant Accounting Policies for more information.

The accompanying notes to ~~condensed~~ consolidated financial statements

are an integral part of this statement.

~~KAYNE ANDERSON ACQUISITION CORP.~~

ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

(Unaudited)

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

Shares⁽¹⁾

Amount⁽¹⁾

Shares⁽¹⁾

Amount⁽¹⁾

(In thousands) (In thousands)

For the Quarter Ended September 30, 2018
Balance at June 30, 2018 $ —
$ —
6,197
$ —
211,847
$ 21
$ 857,127
$ (42,804 ) $ —
$ 814,344
Issuance of shares —
—
1,116
—
38,153
4
121,175
—
—
121,179
Net income —
—
—
—
—
—
—
19,208
—
19,208
Balance at September 30, 2018 $ —
$ —
7,313
$ —
250,000
$ 25
$ 978,302
$ (23,596 ) $ —
$ 954,731

For the Quarter Ended September 30, 2019
Balance at June 30, 2019 $ 520,933
$ 1,272,652
74,929
$ 7
250,000
$ 25
$ 473,502
$ (24,156 ) $ (200 ) $ 449,178
Net income (loss) 17,480
(20,804 ) —
—
—
—
—
(4,864 ) —
(4,864 )
Accumulated other comprehensive loss —
(478 ) —
—
—
—
—
—
(113 ) (113 )
Balance at September 30, 2019 $ 538,413
$ 1,251,370
74,929
$ 7
250,000
$ 25
$ 473,502
$ (29,020 ) $ (313 ) $ 444,201


(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.


(2)	Certain redemption features embedded within the Preferred Unit purchase agreement require bifurcation and measurement at fair value. For further detail, refer to Note 12 — Series A Cumulative Redeemable Preferred Units.

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

ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS — (Continued)

(Unaudited)

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners 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

Shares⁽¹⁾

Amount⁽¹⁾

Shares⁽¹⁾

Amount⁽¹⁾

(In thousands) (In thousands)

For the Nine Months Ended September 30, 2018
Balance at December 31, 2017 $ —
$ —
3,965
$ —
135,540
$ 14
$ 574,611
$ (18,575 ) $ —
$ 556,050
Issuance of shares —
—
3,348
—
114,460
11
403,691
—
—
403,702
Net loss —
—
—
—
—
—
—
(5,021 ) —
(5,021 )
Balance at September 30, 2018 $ —
$ —
7,313
$ —
250,000
$ 25
$ 978,302
$ (23,596 ) $ —
$ 954,731

For the Nine Months Ended September 30, 2019
Balance at December 31, 2018 $ —
$ 1,940,500
74,929
$ 7
250,000
$ 25
$ —
$ (213,746 ) $ —
$ (213,714 )
Issuance of Series A Cumulative Redeemable Preferred Units⁽²⁾
516,790
—
—
—
—
—
—
—
—
—
Net income (loss) 21,623
(23,524 ) —
—
—
—
—
(6,057 ) —
(6,057 )
Change in redemption value of noncontrolling interests —
(664,285 ) —
—
—
—
473,502
190,783
—
664,285
Accumulated other comprehensive loss —
(1,321 ) —
—
—
—
—
—
(313 ) (313 )
Balance at September 30, 2019 $ 538,413
$ 1,251,370
74,929
$ 7
250,000
$ 25
$ 473,502
$ (29,020 ) $ (313 ) $ 444,201


(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.


(2)	Certain redemption features embedded within the Preferred Unit purchase agreement require bifurcation and measurement at fair value. For further detail, refer to Note 12 — Series A Cumulative Redeemable Preferred Units.

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

ALTUS MIDSTREAM COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

~~Note 1—Description~~

(Unaudited)

These consolidated financial statements have been prepared by Altus Midstream Company without audit, pursuant to the rules and regulations of ~~Organization~~the Securities and ~~Business~~Exchange Commission (SEC). They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods, on a basis consistent with the annual audited financial statements, with the exception of recently adopted accounting pronouncements discussed below. All such adjustments are of a normal recurring nature. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10-Q should be read along with Altus Midstream Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (Form 10-K), which contains a summary of the Company’s significant accounting policies and other disclosures. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Form 10-K.

Unless the context otherwise requires, “we,” “us,” “our,” the “Company,” “ALTM” and “Altus” refers to Altus Midstream Company and its consolidated subsidiaries. “Altus Midstream” refers to Altus Midstream LP and its consolidated subsidiaries.

Nature of Operations

~~Organization~~

Through its consolidated subsidiaries, Altus Midstream Company owns gas gathering, processing and ~~General~~

transmission assets in the Permian Basin of West Texas. Construction on the assets began in the fourth quarter of 2016, and operations commenced in the second quarter of 2017. Additionally, the Company owns, or has options to own, equity interests in a total of 5 Permian Basin pipelines. The Company’s operations consist of 1 reportable segment.

Organization

Altus originally incorporated on December 12, 2016 in Delaware under the name Kayne Anderson Acquisition Corp. ~~(the “Company”) was incorporated in Delaware on December 12, 2016. The Company was formed~~(KAAC), for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more ~~businesses (the “Initial Business Combination”).~~businesses. The ~~Company’s focus is to search for a target business~~Company closed its initial public offering in the ~~energy industry. The Company is an “emerging growth company,” as defined in Section 2(a)~~second quarter of ~~the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).~~ 2017.

On August 3, 2018, Altus Midstream LP ~~(“Altus Midstream”)~~ was formed in Delaware as a limited partnership and ~~wholly owned~~wholly-owned subsidiary of the Company. ~~See Note 7.~~

On ~~April~~August 8, 2018, KAAC and Altus Midstream LP entered into a contribution agreement (the Contribution Agreement) with certain wholly-owned subsidiaries of Apache Corporation (Apache), including the Altus Midstream Entities. The Altus Midstream Entities comprise 4 2017, the Company closed its initial public offering (“Public Offering”) (See Note 3). The Company will not generate any operating revenues until after completion of its Initial Business Combination, at the earliest. The Company generates~~non-operating~~ ~~income in the form of interest income on cash~~Delaware limited partnerships (collectively, Altus Midstream Operating) and ~~cash equivalents from the proceeds derived from the Public Offering. The Company has selected December 31 as its fiscal year end.~~

~~Sponsor~~

~~The Company’s sponsor is Kayne Anderson Sponsor,~~their general partner (Altus Midstream Subsidiary GP LLC, a Delaware limited liability ~~company (the “Sponsor”).~~

~~The Trust Account~~

~~The proceeds from~~company), formed by Apache between May 2016 and January 2017 for the ~~Company’s Public Offering, held~~purpose of acquiring, developing, and operating midstream oil and gas assets in the ~~trust account with American Stock Transfer & Trust Company, LLC acting as trustee~~Alpine High resource play (Alpine High).

On November 9, 2018 (the ~~“Trust Account”) are invested in money market funds~~Closing Date) and pursuant to the terms of that ~~meet~~ certain ~~conditions under Rule2a-7~~ ~~under~~Contribution Agreement, KAAC acquired from Apache the Investment Company Act of 1940, as amended (the “Investment Company Act”) and that invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummationentire equity interests of the ~~Initial Business Combination or (ii) the distribution~~Altus Midstream Entities and options to acquire equity interests in five separate third-party pipeline projects (the Pipeline Options). The acquisition of the ~~Trust Account proceeds~~entities and the Pipeline Options is referred to herein as ~~described below. The remaining proceeds outside~~ the ~~Trust Account may be used~~Business Combination. In exchange, the consideration provided to ~~pay for business, legal~~Apache included equity consideration, comprising economic voting and ~~accounting due diligence on prospective acquisitions~~non-economic voting shares in KAAC, and ~~continuing general~~common units representing limited partner interests in Altus Midstream (Common Units). Following the Closing Date and ~~administrative expenses.~~

~~The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of investment income to pay taxes, if any, none of the funds held~~ in ~~the Trust Account will be released until the earlier of: (i)~~connection with the completion of the ~~Initial~~ Business ~~Combination; (ii)~~Combination, KAAC changed its name to Altus Midstream Company. Refer to Note 2 — Recapitalization Transaction, for further discussion.

Ownership of Altus Midstream LP

Upon the ~~redemption~~closing of ~~any~~the Business Combination and as of September 30, 2019, Altus’ wholly-owned subsidiary, Altus Midstream GP LLC (Altus Midstream GP), was the sole general partner of Altus Midstream. The Company held approximately 23.1 percent of the outstanding Common Units of Altus Midstream, while Apache held the remaining 76.9 percent. Additionally, as of the Closing Date and as of September 30, 2019, Apache was the largest single holder of the Company’s voting common stock, comprising 100 percent of non-economic Class C Common Stock and approximately 9.8 percent of economic Class A Common Stock.

On June 12, 2019, Altus Midstream issued and sold Series A Cumulative Redeemable Preferred Units (the Preferred Units) in a private offering. 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 a Second Amended and Restated Agreement of Limited Partnership of Altus Midstream (the Amended LPA), and the purchasers were admitted as 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 12 — Series A Cumulative Redeemable Preferred Units.

The Amended LPA contains certain provisions intended to ensure that a 1-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 ~~included in~~and the ~~units (the “Public Shares”) sold in~~number of Altus Midstream Common Units held by Altus and (ii) the ~~Public Offering that have been properly tendered in connection with a stockholder vote to amend the Company’s certificate~~number of ~~incorporation to modify the substance or timing of its obligation to redeem 100% of such~~outstanding shares of Class AC Common Stock ~~if it does not complete the Initial Business Combination within 24 months from the closing of the Public Offering;~~ and (iii) the redemption of 100% of the shares of Class A Common Stock included in the Units sold in the Public Offering if the Company is unable to complete an Initial Business Combination within 24 months from the closing of the Public Offering (subject to the requirements of law). The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.

~~Initial Business Combination~~

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating an Initial Business Combination. The Initial Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the Initial Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect an Initial Business Combination.

The Company, after signing a definitive agreement for an Initial Business Combination, will either (i) seek stockholder approval of the Initial Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Initial Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business

Combination, including investment income but less taxes payable, or (ii) provide stockholders with the opportunity to sell their Public Shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including investment income but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Initial Business Combination or will allow stockholders to sell their Public Shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by law or under rules of The Nasdaq Stock Market. If the Company seeks stockholder approval, it will complete its Initial Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Initial Business Combination. However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon consummation of the Initial Business Combination. In such case, the Company would not proceed with the redemption of its Public Shares and the related Initial Business Combination, and instead may search for an alternate Initial Business Combination.

If the Company holds a stockholder vote or there is a tender offer for shares in connection with an Initial Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including investment income but less taxes payable. As a result, such shares of Class A Common Stock will be recorded at redemption amount and classified as temporary equity upon the completion of the Public Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity.”

In the event of a liquidation, dissolution or winding up of the Company after an Initial Business Combination, the Company’s stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The Company’s stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock, except that the Company will provide its stockholders with the opportunity to redeem their Public Shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, upon the completion of the Initial Business Combination, subject to the limitations described herein.

~~Liquidation and Going Concern~~

Pursuant to the Company’s amended and restated certificate of incorporation, if the Company is unable to complete the Initial Business Combination within 24 months from the closing of the Public Offering, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, subject to lawfully available funds therefor, redeem the Public Shares, at a~~per-share~~ price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including investment income earned on the funds held in the Trust Account and not previously released to us to pay the Company’s franchise and income taxes (less up to $100,000 of investment income to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. The Sponsor and the Company’s officers and directors have entered into letter agreements with the Company, pursuant to which they have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares (as defined below)Altus Midstream Common Units held by them if the Company fails to complete the Initial Business Combination within 24 months of the closing of the Public Offering. However, if the Sponsor or any of the Company’s directors, officers or affiliates acquire shares of Class A Common Stock in or after the Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete the Initial Business Combination within the prescribed time period.

~~In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”)2014-15,~~ management has determined that the mandatory liquidation and subsequent dissolution discussed above raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after April 4, 2019.

In the event of liquidation, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the Public Offering.

Apache.


1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~Note 2—Summary of Significant Accounting Policies~~

Basis of Presentation

The ~~accompanying unaudited interim condensed~~ consolidated financial statements ~~of the Company are presented~~have been prepared in ~~U.S. dollars in conformity~~accordance with accounting principles generally accepted in the United States (GAAP).

Principles of ~~America (“GAAP”)~~Consolidation

The consolidated financial results of Altus Midstream are included in Altus Midstream Company’s consolidated financial statements due to Altus Midstream Company’s 100 percent ownership interest in Altus Midstream GP, and ~~pursuant~~Altus Midstream GP’s control of Altus Midstream.

Altus Midstream Company has no independent operations or material assets other than its partnership interests in Altus Midstream, which constitutes all of its business. Altus Midstream Company’s only material net assets separate from Altus Midstream relate to deferred taxes and the ~~accounting~~current and ~~disclosure rules~~deferred income tax expense (benefit) associated with its investment in Altus Midstream. The deferred tax asset balance was $68.6 million and regulations of the Securities and Exchange Commission (“SEC”), and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position$67.6 million as of September 30, 2019 and December 31, 2018, respectively. Additionally, Altus Midstream 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 Preferred Unit holders. Refer to Note 13 — Income Taxes, Note 11 — Equity and Note 12 — Series A Cumulative Redeemable Preferred Units for further information.

Variable Interest Entity

Altus Midstream is a variable interest entity (VIE) because the partners in Altus Midstream with equity at risk lack the power, through voting or similar rights, to direct the activities that most significantly impact Altus Midstream’s economic performance.

A reporting entity that concludes it has a variable interest in a VIE must evaluate whether it has a controlling financial interest in the VIE, such that it is the VIE’s primary beneficiary and should consolidate. Altus Midstream Company is the primary beneficiary of the VIE, and therefore should consolidate Altus Midstream because (i) Altus Midstream Company has the ability to direct the activities of Altus Midstream that most significantly affect its economic performance, and (ii) Altus Midstream Company has the right to receive benefits or the obligation to absorb losses that could be potentially significant to Altus Midstream.

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 ~~operations~~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 ~~cash flows~~the Altus Midstream Entities following the closing of the Business Combination; and (iv) the Company’s equity structure for ~~the~~all periods presented. ~~Certain information~~No step-up in basis of the contributed assets and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results for a full year.

~~The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included~~no intangible assets or goodwill was recorded in the ~~Form10-K~~ ~~filed by the Company with the SEC on March 27, 2018.~~

~~Emerging Growth Company~~

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities and Exchange Act of 1934, as amended, or the “Exchange Act”) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to~~non-emerging~~ growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition, period difficult or impossible, because of the potential differences in accounting standards used.

~~Net Income (Loss) Per Common Share~~

Net income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period, plus, to the extent dilutive, the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method. An aggregate of 36,061,344 and 35,994,404 shares of Class A common stock subject to possible redemption at September 30, 2018 and at September 30, 2017, respectively, have been excluded from the calculation of basic income per common share. For all periods presented, the Company has not considered the effect of the warrants sold in the Public Offering (including the consummation of the over-allotment) and Private Placement Warrants to purchase 18,941,651 shares of the Company’s Class A common stock in the calculation of diluted income per share, since the exercise of the warrants and the conversion of the rights into shares of common stock is contingent upon the occurrence of future events.

~~Concentration of Credit Risk~~

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

~~Financial Instruments~~

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet.

Business Combination.

Use of Estimates

~~The preparation~~

Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities requires ~~the Company’s~~ management to make estimates and assumptions that affect ~~the~~ reported amounts of ~~assets and liabilities and disclosure of contingent~~ assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. ~~Actual results could differ from those estimates.~~

~~Income Taxes~~

The Company ~~follows~~bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the ~~asset and liability method~~circumstances, the results of ~~accounting~~which form the basis for ~~income taxes under FASB ASC 740, “Income Taxes.” Deferred tax~~making judgments about carrying values of assets and liabilities that are ~~recognized~~not readily apparent from other sources. The Company evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of its financial statements, and changes in these estimates are recorded when known.

Fair Value

Accounting Standards Codification (ASC) 820-10-35, “Fair Value Measurement” (ASC 820), provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in active markets. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs that are significant and unobservable; hence, these valuations have the lowest priority.

The valuation techniques that may be used to measure fair value include a market approach, an income approach and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models, and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

Embedded features identified within the Company’s agreements are bifurcated and measured at fair value at the end of each period on the Company’s consolidated balance sheet. Such recurring fair value measurements are presented in further detail in Note 15 — Fair Value Measurements. The Company also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment. During the three and nine month periods ended September 30, 2019, the Company recorded an impairment of $9.3 million on certain assets. Refer to Note 5 — Property, Plant and Equipment for further detail.

Accounts Receivable From/Payable To Apache

The accounts receivable from or payable to Apache represent the net result of Altus Midstream’s monthly revenue, capital and operating expenditures, and other miscellaneous transactions to be settled with Apache as provided under the COMA. Generally, cash in this amount will be transferred to Apache in the month after the Company’s transactions are processed and the net results of operations are determined. However, from time to time, the Company may estimate and transfer the cash settlement amount in the month the transactions are processed, in order to minimize related-party working capital balances. See discussion and additional detail in Note 3 — Transactions with Affiliates.

Leases

On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842),” which requires lessees to recognize separate right-of-use (ROU) assets and lease liabilities for most leases classified as operating leases under previous GAAP. Prior to adoption, the Financial Accounting Standards Board (FASB) issued transition guidance permitting an entity the option to not evaluate under ASU 2016-02 those existing or expired land easements that were not previously accounted for as leases, as well as an option to apply the provisions of the new standard at its adoption date instead of the earliest comparative period presented in the financial statements. The Company elected both transitional practical expedients. Under these transition options, comparative reporting was not required, and the provisions of the standard were applied prospectively to leases in effect at the date of adoption.

As allowed under the standard, the Company also applied practical expedients to carry forward its historical assessments of whether existing agreements contain a lease, classification of existing lease agreements, and treatment of initial direct lease costs. The Company also elected to exclude short-term leases (those with terms of 12 months or less) from the balance sheet presentation and accounts for non-lease and lease components as a single lease component for all asset classes. Short-term lease expense was not material for the ~~estimated future tax consequences attributable~~third quarter and first nine months of 2019.

The Company determines if an arrangement is an operating or finance lease at the inception of each contract. If the contract is classified as an operating lease, Altus records an ROU asset and corresponding liability reflecting the total remaining present value of fixed lease payments over the expected term of the lease agreement. The expected term of the lease may include options to ~~differences between~~extend or terminate the ~~financial statements carrying amounts~~lease when it is reasonably certain that the Company will exercise that option. In the normal course of ~~existing~~business, the Company enters into various lease agreements for real estate and equipment related to its midstream activities which are typically classified as operating leases under the provisions of the standard. ROU assets are reflected within “Deferred charges and ~~liabilities~~other” on the Company’s consolidated balance sheet, and ~~their respective tax bases. Deferred tax assets and~~the associated operating lease liabilities are ~~measured using enacted tax rates expected to apply to taxable income in~~reflected within “Other current liabilities” and “Other noncurrent liabilities,” as applicable.

Operating lease expense associated with the ~~years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax~~ROU assets ~~and liabilities of a change in tax rates~~ is recognized ~~in income in~~on a straight-line basis over the ~~period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.~~

FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. To the extent a tax position does not meet these recognition and measurement thresholds, the associated benefit is not recognized in whole or in part andlease term. Lease expense is reflected ~~as an unrecognized tax benefit. There were no unrecognized tax benefits as~~on the statement of ~~September 30, 2018 or 2017. The Company recognizes accrued interest~~consolidated operations commensurate with the leased activities and ~~penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued~~nature of the services performed. Fixed operating lease expense was $0.2 million and $0.5 million for the payment of interest and penalties at September 30, 2018 or 2017. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its tax position. The Company is subject to income tax examinations by major taxing authorities since inception.

~~During~~ the three and nine months ended September 30, ~~2018,~~2019, respectively.

In addition, the Company ~~recorded income tax expense of $349,053~~periodically enters into finance leases that are similar to those leases classified as capital leases under previous GAAP. The Company currently has 1 short-term finance lease, which is included in “Property, Plant and ~~$887,410, respectively, primarily related to investment income earned~~Equipment” on the ~~Trust Account. During~~consolidated balance sheet, and the associated finance lease liability is reflected within “Current debt.” The associated interest expense is reflected in the statement of consolidated operations within “Financing costs, net of capitalized interest.” Depreciation on the Company’s finance lease asset was $1.2 million and $3.7 million for the three and nine months ended September 30, ~~2017,~~2019, respectively. Interest on the Company’s finance lease asset was $0.2 million and $0.8 million for the three and nine months ended September 30, 2019, respectively.

The following table represents the Company’s weighted average lease term and discount rate as of September 30, 2019:

The undiscounted future minimum lease payments reconciled to the carrying value of the lease liabilities as of September 30, 2019 were as follows:



Net Minimum Commitments	Operating Leases⁽¹⁾			Finance Lease⁽²⁾
	(In thousands)
2019	$	163		$	7,954
2020	652			9,800
2021	622			—
2022	445			—
2023	—			—
Thereafter	—			—
Total future minimum lease payments	1,882			17,754
Less: imputed interest	(105		)	(192		)
Total lease liabilities	1,777			17,562
Current portion	(596		)	(17,562		)
Non-current portion	$	1,181		$	—


(1)	Amounts are primarily associated with the Lease Agreement (as defined below) entered into with Apache relating to the use of certain office buildings, warehouse and storage facilities as described in Note 3 — Transactions with Affiliates.


(2)	Amounts represent the Company’s finance lease obligation entered into during the first quarter of 2019 related to physical power generators being leased on a one-year term with the right to purchase.

The lease liability reflected in the table above represents the Company’s fixed minimum payments that are settled in accordance with the lease terms. Actual lease payments during the period may also include variable lease components such as common area maintenance, usage-based sales taxes and rate differentials, or other similar costs that are not determinable at the inception of the lease. Variable lease payments for the three and nine months ended September 30, 2019 were $0.1 million and $0.3 million, respectively.

Recently Issued Accounting Standards Not Yet Adopted

In June 2016, the FASB issued 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. The 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. This update is effective for Altus beginning in the first quarter of 2020, with early adoption permitted. The Company is in the process of finalizing its project plan for the implementation of the ASU and continues to evaluate and monitor standard setting activity. The Company does not believe the adoption and implementation of this ASU will have a material impact on its financial statements.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement,” which changes the disclosure requirements for fair value measurements by removing, adding, and modifying certain disclosures. ASU 2018-13 is effective for financial statements issued for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures.

2. 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 ~~recorded income tax expense~~issued to Apache an equivalent number of ~~$256,345~~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 ~~$426,694, respectively, primarily related~~(iii) the right to ~~investment income earned~~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.

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		Class B Common Stock⁽¹⁾		Class C Common Stock
Shares outstanding prior to the Business Combination	37,732,112		9,433,028		—
Less: redemption of public shares ⁽²⁾	(29,469,858	)	—		—
Add: shares issued in private placement	57,234,023		—		—
Total shares outstanding prior to the Business Combination	65,496,277		9,433,028		—
Shares, in connection with the Business Combination:
Forfeited ⁽³⁾	—		(7,313,028	)	—
Converted ⁽¹⁾	2,120,000		(2,120,000	)	—
Total shares outstanding immediately prior to the Closing Date	67,616,277		—		—
Issued as consideration to Apache ⁽⁴⁾	7,313,028		—		250,000,000
Total shares outstanding at the Closing Date	74,929,305		—		250,000,000


(1)	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.


(2)	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 29,469,858 shares were redeemed for an aggregate amount of approximately $298.8 million.

(3)

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, 7,313,028 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.


(4)	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.

3. TRANSACTIONS WITH AFFILIATES

Revenues

The Company has contracted to provide services including gas gathering, compression, processing, transportation, and NGL transportation, 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 ~~Trust Account. Until~~type and volume of product for which the services are provided. For all of the periods presented, the Company’s only customer was Apache, although Altus Midstream is pursuing contracts with third parties that could be accommodated by existing capacity.

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 4 — Revenue Recognition for further discussion.

Cost and Expenses

The Company has no employees, and prior to the Business Combination, the Company ~~completes an Initial Business Combination, its general~~had no banking or cash management facilities. As such, the Company has contracted with Apache to receive certain operational, maintenance, and ~~administrative~~management services. In accordance with the terms of these agreements, the Company incurred operations and maintenance expenses ~~will be deferred~~of $2.2 million and $2.3 million for ~~tax purposes.~~

~~During~~the three months ended September 30, 2019 and 2018, respectively, and $7.1 million and $6.6 million for the nine months ended September 30, 2019 and 2018, ~~the~~respectively. The Company made an estimated federal income tax payment of $834,463 of which $323,000 related to 2017 and $511,463 to 2018. Upon filing the 2017 tax return, the final tax liability was $307,683 resulting in an overpayment of $15,317. The overpayment has been applied to 2018, resulting in a current tax liability of $357,823.

   September 30, 2018 December 31, 2017
Current Tax Liability
   $ (357,823 ) $ (304,876 )
Deferred Tax Asset:

Deferred general and administrative expenses
   $ 948,993 $ 322,965
Valuation allowance at 21%
   (948,993 ) (322,965 )
Deferred Tax Asset, net
   $ —   $ —

~~At September 30, 2018 and December 31, 2017, the Company had $4,519,012 and $1,537,927, respectively, of deferred~~incurred general and administrative (G&A) expenses ~~resulting in a deferred tax asset~~ of ~~$948,993~~$2.1 million and ~~$322,965, respectively. Management has determined that a full valuation allowance on~~$1.8 million for the ~~deferred tax asset is appropriate at this time after consideration of all available positive~~three months ended September 30, 2019 and ~~negative evidence~~2018, respectively, and $4.7 million and $5.1 million for the nine months ended September 30, 2019 and 2018, respectively, including expenses related to the ~~realization of~~operational services agreement and COMA as further described below.

Further information on the ~~deferred tax asset.~~

~~On December 22, 2017,~~related-party agreements in place during the ~~Tax Cuts and Jobs Act (the “Tax Reform Bill”) was signed into law.~~ period is provided below.

Operational Services Agreement

Prior to the ~~enactment~~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 ~~Tax Reform Bill,~~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 ~~measured its deferred tax~~entered into the COMA with Apache, which superseded the Services Agreement. 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 will pay fees to Apache of: (i) $3.0 million for the period beginning on the execution of the COMA at the ~~federal rate of 34%. The Tax Reform Bill reduced the federal tax rate to 21% resulting in there-measurement~~closing of the ~~deferred tax asset. Beginning~~Business Combination through December 31, 2019; (ii) $5.0 million for the period of January 1, ~~2018,~~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, as may be adjusted upwards based on actual incurred costs, until terminated. The annual fee was negotiated as part of the Business Combination to reimburse Apache for indirect costs incurred in performing administrative corporate functions for the Company, ~~started~~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 directly incurred in connection with its role as service provider under the COMA. Apache records costs directly associated with midstream activity, where substantially all the services are rendered for Altus Midstream, to unique midstream cost centers that are subsequently charged to Altus Midstream on a monthly basis.

Lease Agreement

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. Under the ~~tax rate~~terms of ~~21%~~the Lease Agreement, Altus Midstream shall pay to ~~calculate~~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. The Company incurred total expenses of $0.3 million and $0.8 million for the three and nine months ended September 30, 2019, respectively, in relation to the Lease Agreement, which are included within operations and maintenance expenses. Unpaid amounts accrue interest until settled. The initial term of the

Lease Agreement is for four years and may be extended by Altus Midstream for 3 additional, consecutive periods of twenty-four months.

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 ~~any federal income tax due on taxable income.~~

qualifying midstream assets. The ~~Company’s federal statutory income tax rate is 21%~~amount of interest allocated and ~~the effective tax rate~~capitalized was $2.5 million and $7.1 million for the three and nine months ended September 30, 2018, respectively. 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.

4. REVENUE RECOGNITION

Revenue Recognition

The following table presents a disaggregation of the Company’s midstream services revenue by service type.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)
MIDSTREAM SERVICES REVENUE — AFFILIATE:
Gas gathering	$	4,604	$	2,563	$	10,914	$	4,578
Gas processing	25,315		18,150		68,994		33,657
Transmission	3,388		4,671		11,219		11,756
NGL transmission	702		53		867		62
	$	34,009	$	25,437	$	91,994	$	50,053

The Company currently recognizes revenue pursuant to separate midstream service agreements entered into with Apache for the midstream services presented above. These midstream service agreements have no minimum volume commitments or firm transportation commitments, instead they are underpinned by acreage dedications covering Alpine High. Pursuant to these agreements, Altus Midstream is obligated to perform services on all volumes produced from the dedicated acreage, so long as Apache has the right to market the production. In exchange for the above services and in accordance with the terms of the midstream service agreements, the Company charges a fixed fee on a per-unit basis. Altus Midstream does not own or take title to the volumes that it handles.

These performance obligations are satisfied over time as Apache simultaneously receives and consumes the benefits of the services performed. Service revenues are recognized when the right to invoice has been met, since the amount that the Company has the right to invoice (based upon the fixed fee and throughput volumes) corresponds directly with the value received by Apache.

Pursuant to the terms of the Contribution Agreement, all accounts receivable from Apache (including revenue receivables) on or prior to September 30, 2018, are for the account of Apache. No cash settlement of such balances was ~~-58%~~contemplated prior to September 30, 2018 and ~~72%~~as such, revenue receivables generated prior to this date were treated as a reduction to additional paid-in capital within equity. Following the Business Combination, service revenue invoices are provided to Apache on a monthly basis, pursuant to the terms of the COMA. Amounts owing to Apache under the terms of the COMA are reduced by the amounts of these invoices. Net cash settlement is performed on a monthly basis. The Company recognized services revenue earned but not yet invoiced to Apache of $11.7 million as of September 30, 2019.

5. PROPERTY, PLANT AND EQUIPMENT

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



	September 30,			December 31,
	2019			2018
	(In thousands)
Gathering, processing and transmission systems and facilities	$	1,304,175		$	729,585
Construction in progress ⁽¹⁾	152,551			521,609
Finance lease asset	34,749			—
Other property and equipment	3,183			23
Total property, plant and equipment	1,494,658			1,251,217
Less: accumulated depreciation and amortization	(51,608		)	(24,320		)
Total property, plant and equipment, net	$	1,443,050		$	1,226,897


(1)	Included in the Company’s construction in progress is capitalized interest of $2.7 million and $6.9 million at September 30, 2019 and December 31, 2018, respectively.

The cost of property classified as “Construction in progress” is excluded from capitalized costs being depreciated. These amounts represent property that is not yet available to be placed into productive service as of the respective balance sheet date.

During the third quarter of 2019, the Company elected to cancel construction on a compressor station given the deferral of previous processing expansion plans. Certain of the components were then marketed by the Company, and it was determined that these components met the criteria to be classified as held for sale. Accordingly, management reclassified these components to current assets and they were initially measured at fair value less costs to sell. The fair value was determined using the market approach and Level 1 inputs. As a result, the assets were written down to their estimated fair value of $18.1 million, and the Company recorded an impairment of $9.3 million for the three and nine months ended September 30, 2019. The impairment is recorded within “Impairments” on the Company’s statement of consolidated operations. Subsequent to September 30, 2019, the Company received cash proceeds of approximately $13 million in relation to the sale of certain of the assets classified as held for sale.

Other components of the compressor station totaling $8.7 million will be stored and used as inventory by the Company and are therefore recorded within inventory on the consolidated balance sheet as of September 30, 2019. These components will be recorded at the lower of cost or net realizable value at each balance sheet date.

6. DEBT AND FINANCING COSTS

In November 2018, Altus Midstream entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream’s 2, one year extension options). The agreement for this revolving credit facility, as amended (the Amended Credit Agreement), ~~respectively,~~provides aggregate commitments from a syndicate of banks of $650.0 million until the consolidated net income of Altus Midstream and its restricted subsidiaries, as adjusted pursuant to the agreement (EBITDA), for the immediately preceding fiscal quarter equals or exceeds $175.0 million on an annualized basis (such period, the Initial Period). Upon achieving such EBITDA, the Initial Period ends and the aggregate commitments increase to $800.0 million. All aggregate commitments include a letter of credit subfacility of up to $100.0 million and a swingline loan subfacility of up to $100.0 million. After the Initial Period, 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 September 30, 2019, total outstanding borrowings were $235.0 million and 0 letters of credit were outstanding under this facility. There were 0 outstanding borrowings or letters of credit as of December 31, 2018.

Altus Midstream’s revolving credit facility is unsecured and is not guaranteed by the Company, Apache, 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 Inter-bank Offered Rate (LIBOR), plus a margin; in each case, the margin during the Initial Period is 0.05 percent greater than the margin after the Initial Period. Altus Midstream also pays quarterly a facility fee at a rate per annum on total commitments. The margins and the facility fee vary based upon (i) the Leverage Ratio until Altus Midstream has a senior long-term debt rating and (ii) such senior long-term debt rating once it exists. The Leverage Ratio is the ratio of (1) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries to (2) EBITDA (as defined in the Amended Credit Agreement) of Altus Midstream and its restricted subsidiaries for the 12-month period ending immediately before the determination date. At September 30, 2019, the base rate margin was 0.10 percent, the LIBOR margin was 1.10 percent, and the facility fee was 0.20 percent. In addition, a commission is payable quarterly to the lenders on the face amount of each outstanding letter of credit at a per annum rate equal to the LIBOR margin then in effect. Customary letter of credit fronting fees and other charges are payable to issuing banks.

The Amended Credit Agreement contains restrictive covenants that may limit the ability of Altus Midstream and its restricted subsidiaries to, among other things, incur additional indebtedness or guaranty indebtedness, sell assets, make investments in unrestricted subsidiaries, enter into mergers, make certain payments and distributions, incur liens on certain property securing indebtedness, and engage in certain other transactions without the prior consent of the lenders. Altus Midstream also is subject to a financial covenant under the Amended Credit Agreement, which requires it to maintain one of the following financial ratios:

during the Initial Period, a debt-to-capital ratio of not greater than 30.0 percent at the end of any fiscal quarter, determined by reference to (i) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries to (ii) (A) the consolidated partners’ equity of Altus Midstream and its restricted subsidiaries plus (B) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries; and

beginning with the quarter ending on the earlier of (i) March 31, 2020 or (ii) the last day of the fiscal quarter during which the Initial Period ends, a Leverage Ratio not exceeding 5.00:1.00 at the end of any fiscal quarter, except that during the period of up to one year following a qualified acquisition, the Leverage Ratio cannot exceed 5.50:1.00 at the end of any fiscal quarter.

There are no clauses in the Amended Credit Agreement that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes. The Amended Credit Agreement has no drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, the agreement allows the lenders to accelerate payment maturity and terminate lending and issuance commitments for nonpayment and other breaches, and if Altus Midstream or any of its restricted subsidiaries defaults on other indebtedness in excess of the stated threshold, is insolvent, or has any unpaid, non-appealable judgment against it for payment of money in excess of the stated threshold. Lenders may also accelerate payment maturity and terminate lending and issuance commitments if Altus Midstream undergoes a specified change in control or has specified pension plan liabilities in excess of the stated threshold. Altus Midstream was in compliance with the terms of the Amended Credit Agreement as of September 30, 2019.

As of September 30, 2019, the Company had debt outstanding totaling $252.6 million, of which $17.6 million is related to a finance lease obligation. As a result of the ~~full valuation allowance against its deferred tax asset. The total income taxes were different~~debt outstanding and giving effect to the debt-to-capital ratio requirements under the credit agreement, the maximum amount of net assets available to be transferred from Altus Midstream to Altus Midstream Company was $0.9 billion. This amount of net assets available to be transferred does not include the proportionate share of net assets of entities in which Altus Midstream has an interest accounted for by the equity method. Additionally, the amount ~~computed~~of any cash distributions that may be transferred from these entities to Altus Midstream is subject to compliance with the terms of any debt or similar agreements held by ~~applying~~ the ~~federal statutory~~entities, as applicable. The terms of Altus Midstream’s Preferred Units also contain certain restrictions on distributions on Altus Midstream’s Common Units, including the Common Units held by the Company, and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation. Refer to Note 12 — Series A Cumulative Redeemable Preferred Units for further information.

Interest Income and Financing Costs, Net of Capitalized Interest

The following table presents the components of Altus Midstream’s interest income ~~tax~~and financing costs, net of capitalized interest:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018⁽¹⁾			2019			2018⁽¹⁾
	(In thousands)
Interest income	$	617		$	—		$	3,584		$	—
Interest income	$	617		$	—		$	3,584		$	—

Interest expense	$	1,496		$	2,504		$	3,234		$	7,054
Amortization of deferred facility fees	237			—			652			—
Capitalized interest	(1,211		)	(2,504		)	(2,378		)	(7,054		)
Financing costs, net of capitalized interest	$	522		$	—		$	1,508		$	—


(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.

7. OTHER CURRENT LIABILITIES

The following table provides detail of the Company’s other current liabilities at September 30, 2019 and December 31, 2018:



	September 30,		December 31,
	2019		2018
	(In thousands)
Accrued capital costs	$	24,931	$	80,696
Accrued taxes other than income	9,408		69
Accrued operations and maintenance expense	1,864		2,863
Accrued incentive compensation	1,362		468
Operating lease liability - current	596		—
Accrued interest	463		232
Other	192		598
Total other current liabilities	$	38,816	$	84,926

8. ASSET RETIREMENT OBLIGATION

The following table describes changes to the Company’s asset retirement obligation (ARO) liability for the nine months ended September 30, 2019:



	(In thousands)
Asset retirement obligation at December 31, 2018	$	29,369
Liabilities incurred during the period	3,406
Accretion expense	1,175
Asset retirement obligation at September 30, 2019	$	33,950

ARO reflects the estimated present value of the amount of dismantlement, removal, site reclamation and similar activities associated with the Company’s infrastructure assets which include central processing facilities, gathering systems and pipelines. Management utilizes independent valuation reports and estimates of current costs to project expected cash outflows for retirement obligations. Management estimates the ultimate productive life of the properties, a risk-adjusted discount rate, and an inflation factor in order to determine the current present value of ~~21%~~this obligation. To the extent future revisions to ~~income before income taxes~~these assumptions impact the present value of existing ARO, a corresponding adjustment is made to the property, plant and equipment balance.

9. COMMITMENTS AND CONTINGENCIES

Accruals for loss contingencies arising from claims, assessments, litigation, environmental and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted as ~~follows:~~

   Three months
Ended
September 30,
2018 Three months
Ended
September 30,
2017 Nine months
Ended
September 30,
2018 Nine months
Ended
September 30,
2017
Computed federal income tax benefit (expense) at 21% (2018) and 34% (2017)
   $ 126,966 $ (162,181 ) $ (258,575 ) $ 29,212
Permanent differences
   —   —   (2,807 ) —
Valuation allowance at 21% (2018) and 34% (2017)
   (476,019 ) (94,164 ) (626,028 ) (455,906 )


Total income tax expense
   $ (349,053 ) $ (256,345 ) $ (887,410 ) $ (426,694 )


additional information becomes available or circumstances change. As of September 30, 2019 and December 31, 2018, there were 0 accruals for loss contingencies.

~~Recent Accounting Pronouncements~~

Litigation

The ~~Company’s~~Company is subject to governmental and regulatory controls arising in the ordinary course of business. It is the opinion of management ~~does~~that any claims and litigation involving the Company are not ~~believe any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would~~likely to have a material adverse effect on the Company’s ~~financial statements.~~

~~Note 3—Public Offering~~

~~In April 2017,~~reported position or results of operations.

Environmental Matters

As an owner of the infrastructure assets and with rights to surface lands, the Company ~~closed its Public Offering~~is subject to various local and federal laws and regulations relating to discharge of ~~37,732,112 units at a price~~materials into, and protection of, ~~$10.00 per unit (the “Units”),~~the environment. These laws and regulations may, among other things, impose liability on the Company for the cost of pollution clean-up resulting from operations and subject us to liability for pollution damages. In some instances, Altus Midstream may be directed to suspend or cease operations. The Company maintains insurance coverage, which management believes is customary in the industry, although insurance does not fully cover against all environmental risks. Additionally, there can be no assurance that current regulatory requirements will not change or past non-compliance with ~~gross proceeds of $377,321,120~~environmental laws will not be discovered.

Contractual Obligations

Altus Midstream’s existing fee-based midstream services agreements, which have no minimum volume commitments or firm transportation commitments, are underpinned by acreage dedications covering Alpine High. 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 ~~sale~~dedicated acreage, so long as Apache has the right to market such gas.

Pursuant to the COMA with Apache, Altus Midstream will indirectly receive G&A support services including information technology, risk management, corporate planning, accounting, cash management, human resources, and other general corporate services. The COMA established a fixed annual support services fee to Apache of $3.0 million for the period from the execution of the COMA at the closing of the Business Combination through December 31, 2019, $5.0 million in 2020, and $7.0 million in 2021. Beginning in 2022 through the term of the COMA, the associated fee will be $9.0 million annually and may be adjusted upwards based on actual incurred costs.

Concurrent with the closing of the Business Combination, Altus Midstream entered into the Lease Agreement with Apache, 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. The initial term of the Lease Agreement is for four years and may be extended by Altus Midstream for 3 additional, consecutive periods of twenty-four months.

In the second quarter of 2019, Altus Midstream issued and sold the Preferred Units. ~~The closings occurred on April 4, 2017 with respect~~Under the terms of the Amended LPA, the Preferred Unit holders are entitled to ~~35,000,000~~receive quarterly distributions until such time as the Preferred Units are redeemed or exchanged. Refer to Note 12 — Series A Cumulative Redeemable Preferred Units for further discussion regarding the terms of the Preferred Units and ~~on April 21, 2017 with respect to 2,732,112 Units~~the rights of the holders thereof.

At September 30, 2019 and December 31, 2018, there were no other material contractual obligations related to the ~~partial~~entities included in the consolidated financial statements other than the performance of asset retirement obligations as referenced in Note 8 — Asset Retirement Obligation and required credit facility fees discussed in Note 6 — Debt and Financing Costs.

Following the exercise of each Pipeline Option, the ~~underwriters’ over-allotment option.~~

~~Each Unit consists~~Company will be required to fund its pro-rata portion of ~~one share~~any future capital expenditures for the development of the respective pipeline projects as referenced in Note 10 — Equity Method Interests.

10. EQUITY METHOD INTERESTS

As of September 30, 2019, the Company had exercised 4 of its 5 Pipeline Options and, as a result, owns the following equity method interests in Permian Basin long-haul pipeline entities. For each of the equity method interests, the Company has the ability to exercise significant influence based on certain governance provisions and its participation in the significant activities and decisions that impact the management and economic performance of the equity method interests.



	September 30, 2019				December 31, 2018
In thousands, unless stated	Ownership		Amount		Ownership		Amount
Gulf Coast Express Pipeline LLC	16.0	%	$	274,727	15.0	%	$	91,100
EPIC Crude Holdings, LP	15.0	%	127,742		—	%	—
Permian Highway Pipeline LLC	26.7	%	224,152		—	%	—
Breviloba, LLC	33.0	%	467,943		—	%	—
			$	1,094,564			$	91,100

As of September 30, 2019 and December 31, 2018, unamortized basis differences included in the equity method interest balances were $25.7 million and $5.8 million, respectively. These amounts represent differences in the Company’s contributions to date and Altus’ underlying equity in the separate net assets within the financial statements of the respective entities. Unamortized basis differences will be amortized into net income over the useful lives of the underlying pipeline assets when they are placed into service.

The following table presents the activity in the Company’s equity method interests for the nine months ended September 30, 2019:



	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		Total
	(In thousands)
Balance at December 31, 2018	$	91,100		$	—		$	—	$	—	$	91,100
Acquisitions	15,274			51,810			161,081		442,460		670,625
Contributions	169,131			82,499			62,895		22,887		337,412
Distributions	(3,391		)	—			—		—		(3,391		)
Equity income (loss), net	2,613			(4,849		)	176		2,596		536
Accumulated other comprehensive loss	—			(1,718		)	—		—		(1,718		)
Balance at September 30, 2019	$	274,727		$	127,742		$	224,152	$	467,943	$	1,094,564

Summarized Financial Information

The following table represents aggregated selected income statement data for the Company’s equity method interests (on a 100 percent basis):



	Three Months Ended September 30, 2019⁽¹⁾										Nine Months Ended September 30, 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
	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
	(In thousands)
Revenues	$	12,039	$	8,015		$	—		$	41,765	$	16,476	$	8,015		$	—		$	78,749
Operating expenses	1,033		27,679			21			12,857		1,218		33,610			41			27,189
Operating income (loss)	11,006		(19,664		)	(21		)	28,908		15,258		(25,595		)	(41		)	51,560
Net income (loss)	11,776		(20,890		)	554			28,908		17,090		(35,620		)	785			51,560
Other comprehensive loss	—		(4,145		)	—			—		—		(11,450		)	—			—

(1)

Although our interests in EPIC Crude Holdings, LP, Permian Highway Pipeline LLC, and Breviloba, LLC were acquired on February 4, 2019, May 17, 2019, and July 31, 2019, respectively, the financial results are presented for the entire three and nine month periods for comparability. Due to the timing for availability of financial statement information, summarized income statement data is presented on a one month delay for all equity interests.

11. EQUITY

Common Stock and Warrants

The Company’s second amended and restated certificate of incorporation authorizes the issuance of 1,500,000,000 shares of Class A Common Stock, $0.0001 par value, and~~one-third~~ 1,500,000,000 shares of ~~one warrant (each,~~Class C Common Stock, $0.0001 par value. The Company’s shares of Class A Common Stock are listed on the NASDAQ Global Select Market under the symbol “ALTM.” As of September 30, 2019, there were 74,929,305 and 250,000,000 issued and outstanding shares of Class A Common Stock and Class C Common Stock, respectively.

Holders of each of the Class A Common Stock and Class C Common Stock vote together as a ~~“Warrant”~~single class on all matters submitted to a vote of our 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.

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

Public Warrants

As of September 30, 2019, there were 12,577,350 Public Warrants outstanding. Each whole Public Warrant entitles the holder to purchase one share of Class A Common Stock at a price of $11.50 per share. ~~Each Warrant will become exercisable on the later of 30 days after the completion of the Company’s Initial Business Combination or 12 months from the closing of the~~The Public ~~Offering, and~~Warrants will expire five years after ~~the completion~~closing of the ~~Company’s Initial~~ Business Combination or earlier upon redemption or liquidation. ~~Once the Warrants become exercisable, the~~The Company may ~~redeem~~call the ~~outstanding~~Public Warrants for redemption, in whole and not in part, at a price of $0.01 per ~~Warrant upon a minimum of~~warrant with not less than 30 days’ ~~prior written~~ notice ofprovided to the Public Warrant holders. However, this redemption ~~if and~~right can only be exercised if the reported last sale price of the ~~Company’s~~ Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a30-trading day period ending ~~on the third trading day~~three business days prior to ~~the date on which the Company sent~~sending the notice of redemption to the Public Warrant holders.

Commencing on April 27, 2017, the holders of Units issued in its Public Offering may elect to separately trade shares of Class A Common Stock and Warrants included in the Units. The Units not separated will continue to trade on The Nasdaq Capital Market under the symbol “KAACU.” Shares of Class A Common Stock and the Warrants are trading on The Nasdaq Capital Market under the symbols “KAAC” and “KAACW,” respectively. No fractional warrants will be issued upon separation of the Units and only whole Warrants trade following the separation.

~~The Company paid an underwriting discount of 2.0% of the per Unit offering price (or $7,546,422) to the underwriters at~~

Following the closing of the Business Combination, the Public ~~Offering, with an additional fee (the “Deferred Discount”) of 3.5%~~Warrants continued trading under the symbol “ALTMW.” On December 11, 2018, the Company received notice from the Staff of the ~~gross offering proceeds (or $13,206,239) payable upon~~NASDAQ of a delisting determination with respect to our Public Warrants for failure to satisfy the ~~Company’s completion of an Initial Business Combination.~~NASDAQ’s minimum round lot holder listing requirement. The ~~Deferred Discount will become payable to~~Public Warrants ceased trading on the ~~underwriters from the amounts held in the Trust Account solely in the event the Company completes its Initial Business Combination.~~

~~The Company granted the underwriters a45-day~~ ~~option to purchase up to 5,250,000 additional Units to cover over-allotments, if any (“Over-Allotment Units”)~~NASDAQ at the ~~initial public offering price less the underwriting discounts and commissions.~~opening of business on December 20, 2018. The ~~2,732,112 Units issued in connection with the over-allotment option are identical to the Units issued in~~delisting of the Public ~~Offering.~~

~~Note 4—Related Party Transactions~~

~~Founder Shares~~

~~During December 2016,~~Warrants did not impact the ~~Sponsor purchased 10,062,500 shares of Class B Common Stock (the “Founder Shares”) for an aggregate price of $25,000,~~listing or approximately $0.002 per share. During the year ended December 31, 2017, the Sponsor transferred 40,000 Founder Shares to each of the Company’s three independent directors (or an aggregate of 120,000 Founder Shares) at their original purchase price. As used herein, unless the context otherwise requires, Founder Shares shall be deemed to include the shares of Class A Common Stock issuable upon conversion thereof. The Founder Shares are identical to the Class A common stock included in the Units sold in the Public Offering except that the Founder Shares automatically convert into shares of Class A Common Stock at the time of the Company’s Initial Business Combination and are subject to certain transfer restrictions, as described in more detail below. Holders of Founder Shares may also elect to convert their shares of Class B Common Stock into an equal number of shares of Class A Common Stock, subject to adjustment as provided above, at any time. Prior to the Public Offering, the Sponsor agreed to forfeit up to 1,312,500 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. The forfeiture was to be adjusted to the extent that the over-allotment option was not exercised in full by the underwriters so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Public Offering. On April 21, 2017, as a result of the partial exercise of the over-allotment option, the Sponsor forfeited 629,472 of its Founder Shares.

The Company’s initial stockholders agreed subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the Initial Business Combination or (B) subsequent to the Initial Business Combination, (x) if the last sale pricetrading of the Company’s Class A Common ~~Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any30-trading~~ day period commencing at least 150 days after the Initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Stock.

Private Placement Warrants

~~Upon the closing~~

As of ~~the Public Offering on April 4, 2017 and the underwriters’ partial exercise of their over-allotment option on April 21, 2017, the Sponsor purchased an aggregate of~~September 30, 2019, there were 6,364,281 warrants at a price of $1.50 per warrant in a private placement (the “Private Placement Warrants”) at a price of $1.50 per whole warrant ($9,546,422 in the aggregate) in a private placement. Each whole Private Placement Warrant is exercisable for one whole share of the Company’s Class A Common Stock at a price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants, ~~was added to the proceeds from the Public Offering that were deposited into the Trust Account. If the Initial Business Combination is not completed within 24 months from the closing~~ of the Public Offering, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.which Apache holds 3,182,140. The Private Placement Warrants are identical to the Public Warrants discussed above, except (i) they will not be~~non-redeemable~~ ~~and exercisable on a cashless basis~~ redeemable by the Company so long as they are held by the ~~Sponsor~~initial holders or their respective permitted transferees and (ii) they may be exercised by the holders on a cashless basis.

Redeemable Noncontrolling Interest - Apache Limited Partner

In conjunction with the issuance of the Class C Common Stock, Apache received 250,000,000 Altus Midstream Common Units, representing approximately 76.9 percent of the total Common Units issued and outstanding. The financial results of Altus Midstream and its ~~permitted transferees.~~

~~The Sponsor and~~subsidiaries are included in the Company’s ~~officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any~~consolidated financial statements as detailed in Note 1 —Summary of ~~their Private Placement Warrants until 30 days after the completion of the Initial Business Combination.~~

~~Registration Rights~~

The holders of Founder Shares, Private Placement Warrants and Warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A Common Stock) pursuant to a registration rights agreement. These holders will be entitled to certain demand and “piggyback” registration rights.

The holders of Founder Shares, Private Placement Warrants and Warrants that may be issued upon conversion of working capital loans will not be able to sell these securities until the termination of the applicable~~lock-up~~ ~~period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.~~

~~Related Party Loans~~

On March 21, 2018, the Company’s Sponsor agreed to loan up to $500,000, as needed, to fund working capital needs pursuant to a promissory note (the “Note”). On August 24, 2018, the Company’s Sponsor agreed to increase such loan up to $1,000,000. These loans will be~~non-interest~~ bearing, and the Company expects to repay the loans at the closing of its Initial Business Combination. At the option of the lender, such loans may be convertible into warrants, at a price of $1.50 per warrant, at the time of the Company’s Initial Business Combination. At September 30, 2018, there were $600,000 of borrowingsSignificant Accounting Policies, under the ~~Note. At December 31, 2017, there were no outstanding related party loans.~~

~~Administrative Services Agreement~~

~~Beginning April 2017,~~section titled “Principles of Consolidation.”

Apache has the Company agreed to pay an affiliate of the Sponsor a total of $5,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. Effective January 1, 2018, the Sponsor’s affiliate agreed to waive the monthly fee until the termination of the Company’s Administrative Service Agreement.

~~Note 5—Stockholders’ Equity~~

~~Common Stock~~

The authorized common stock of the Company includes up to 200,000,000 shares of Class A Common Stock and 20,000,000 shares of Class B Common Stock. If the Company enters into an Initial Business Combination, it may (depending on the terms of such an Initial Business Combination) be required to increase the number of shares of Class A Common Stock which the Company is authorized to issueright, at the same time as the Company’s stockholders vote on the Initial Business Combination, to the extent the Company seeks stockholder approval in connection with the Initial Business Combination. Holders of the Company’s common stock are entitled to one vote for each share of common stock. At September 30, 2018 and December 31, 2017, there were 37,732,112 shares of Class A Common Stock issued and outstanding, including 36,061,344 and 36,026,954 shares, respectively, which were subject to redemption at those dates. At September 30, 2018 and December 31, 2017, there were 9,433,028 shares of Class B Common Stock issued and outstanding, respectively.

~~Preferred Stock~~

~~The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from~~any time, to ~~time by the Company’s board of directors. At September 30, 2018 and December 31, 2017, there were no shares of preferred stock issued or outstanding.~~

~~Note 6—Fair Value Measurements~~

The following table presents information about the Company’s assets that are measured on a recurring basis as of September 30, 2018 and December 31, 2017, and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.

Description
   Fair Value    Quoted Prices in
Active Markets
(Level 1)    Significant Other
Observable
Inputs (Level 2)    Significant Other
Unobservable
Inputs (Level 3)
Investments held in Trust Account

September 30, 2018
   $ 382,384,785    $ 382,384,785    $             —    $             —








December 31, 2017
   $ 379,176,865    $ 379,176,865    $ —    $ —

~~Note 7 — Business Combination Agreements~~

~~Contribution Agreement~~

On August 8, 2018, the Company, and Altus Midstream, entered into a Contribution Agreement (the “Contribution Agreement”) with Apache Midstream LLC, a Delaware limited liability company (the “Apache Contributor”) and wholly owned subsidiary of Apache Corporation, a Delaware corporation (“Apache”), Alpine High Gathering LP, a Delaware limited partnership (“Alpine High Gathering”), Alpine High Pipeline LP, a Delaware limited partnership (“Alpine High Pipeline”), Alpine High Processing LP, a Delaware limited partnership (“Alpine High Processing”), Alpine High NGL Pipeline LP, a Delaware limited partnership (“Alpine High NGL”), and Alpine High Subsidiary GP LLC, a Delaware limited liability company (“Alpine High GP” and, together with Alpine High Gathering, Alpine High Pipeline, Alpine High Processing and Alpine High NGL, the “Alpine High Entities”), pursuant to which Altus Midstream and/or its subsidiaries will acquire from the Apache Contributor:

~~•100% of the equity interests in each of the Alpine High Entities; and~~

• options, currently held by the Apache Contributor, to acquire equity interests in certain third party pipelines that are expected to be placed into service in 2019 and 2020 (the “Options”), which include:

~~•an option to acquire up to a 15% equity interest (as well as pursuant to a supplemental option, an addition 1% equity interest) in the Gulf Coast Express pipeline (the “GCX Option”);~~

~~•an option to acquire up to a 15% equity interest in the EPIC Crude pipeline (the “EPIC Option”);~~

~~•an option to acquire a 50% equity interest in the Salt Creek NGL pipeline; and~~

~~•an option to acquire up to a 33% equity interest in the Shin Oak pipeline (the “Shin Oak Option”).~~

In addition, pursuant to the Purchase Rights and Restrictive Covenant Agreement to be entered into between the Company and Apache at the closing of the business combination (the “Purchase Rights and Restrictive Covenant Agreement”), Apache will, among other things, assign to the Company an option to acquire equity in either (i) a long-haul natural gas pipeline from the Permian Basin in Texas to the Texas Gulf Coast which recently announced it reached a “final investment decision” and is being developed by affiliates of Kinder Morgan, Inc. (the “Permian Highway Pipeline Project”) or (ii) the next similar pipeline project if the Permian Highway Pipeline Project is not placed into service (the “Additional Option”).

The acquisition of the Alpine High Entities and the Options pursuant to the Contribution Agreement is referred to herein as the “Altus Business Combination,” and the transactions contemplated by the Contribution Agreement are referred to herein as the “Transactions.”

~~Consideration~~

~~Pursuant to the Contribution Agreement, at the closing of the Transactions (the “Closing”), the Apache Contributor will receive the following consideration:~~

• equity consideration, consisting of: (a) 250,000,000 Common Units, (b) 1,862,606 newly-issued shares of Class A Common Stock and (c) a number of newly-issued shares of Class A Common Stock equal to the product of (i) the number of public shares of Class A Common Stock redeemed for cash at the closing of the Altus Business Combination minus 2,000,000 and (ii) 26.6% (provided that such number of shares of Class A Common Stock will not be less than zero or greater than 5,450,422) (the number of shares referred to in this clause (c), the “Assigned Shares”), with such amounts of Class A Common Stock set forth in clauses (b) and (c) corresponding to certain forfeitures of Class B Common Stock (as defined below) by the Sponsor, as described below in “Ancillary Agreements – Sponsor Forfeiture Agreement”;

• cash consideration in an amount equal to the capital expenditures incurred by or on behalf of the Alpine High Entities from and including October 1, 2018 through and including the closing date of the Altus Business Combination (the “Closing Date”);

• 3,182,140 warrants exercisable for shares of Class A Common Stock (the “Apache Warrants”), with such amount of Apache Warrants corresponding to certain forfeitures of Private Placement Warrants by the Sponsor as described below in “Ancillary Agreements — Sponsor Forfeiture Agreement”; and

~~• the right to receiveearn-out~~ ~~consideration of up to 37,500,000 shares of Class A Common Stock based on the achievement of certain share price and operational thresholds.~~

~~Pursuant to the Contribution Agreement, at the Closing, the Company will contribute cash to Altus Midstream in an amount equal to the Available Funds (as defined below) in exchange for the issuance by~~cause Altus Midstream to redeem all or a portion of the ~~Company of (a) a number of common units representing limited partner interests~~Common Units issued to Apache, in ~~Altus Midstream (“Common Units”) equal to the number of~~exchange for shares of the Company’s Class A Common Stock ~~outstanding as~~on a 1-for-one basis or, at Altus Midstream’s option, an equivalent amount of ~~the Closing and (b) a number of Altus Midstream warrants exercisable for Common Units equal to the number of the Company’s Warrants outstanding as of the Closing. Following the Closing,~~cash; provided that the Company ~~will control Altus Midstream through~~may, at its ~~ownership~~option, effect a direct exchange of ~~Altus Midstream GP LLC, a Delaware limited liability company and the sole general partner of Altus Midstream.~~

~~In addition, the Company will issue to Apache Contributor 250,000,000 newly issued shares ofnon-economic~~ capital stock of the Company, designated as Class C common stock, par value $0.0001 per share (the “Class C Common Stock”), corresponding to the number of Common Units received by the Apache Contributor at the Closing.

~~Redemption of Common Units~~

Beginning 180 days after Closing and subject to the requirement that the Apache Contributor hold a number of Common Units (and a corresponding number of shares of Class C Common Stock) sufficient to fulfill its obligations set forth under the Option Letter (as defined below), the Apache Contributor will have the right to redeem the Common Units it receives at Closing for shares ofcash or Class A Common Stock for such Common Units in lieu of such a redemption by Altus Midstream. Upon the future redemption or ~~cash (at the Company’s election). Upon any redemption~~exchange of Common Units held by ~~the~~ Apache, ~~Contributor,~~ a corresponding number of shares of Class C Common Stock ~~owned~~held by ~~the~~ Apache ~~Contributor~~ will be cancelled.

~~Warranties and Covenants~~

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 ~~Contribution Agreement contains customary warranties by~~redeemable noncontrolling interest is recognized at the ~~parties thereto, which shall not survive~~higher of (i) its initial fair value plus accumulated earnings/losses associated with the ~~Closing. The Contribution Agreement also contains customarypre-closing~~ ~~covenants~~noncontrolling interest or (ii) the maximum redemption value as of the ~~parties, including the obligation~~balance sheet date. The redemption value is determined based on a 5-day volume weighted average closing price of the ~~Apache Contributor to cause the Alpine High Entities to conduct their respective businesses~~Class A Common Stock (5-day VWAP) as defined in the ~~ordinary course and to refrain from taking certain specified actions, subject to certain exceptions, without~~Amended LPA, a Level 1 non-recurring fair value measurement. At September 30, 2019, the prior written consent of the Company. Additionally, the Apache Contributor and the Alpine High Entities have agreed not to directly or indirectly initiate, solicit, facilitate, or encourage participation in any discussions or negotiations with, enter into any contract, or furnish to any other person any information with respect to, any proposal from any person relating to an acquisition of any interests in the Alpine High Entities or all or substantially all of the assets of the Alpine High Entities. Similarly, the Company has agreed not to directly or indirectly initiate, solicit, facilitate, or encourage participation in any discussions or negotiations with, enter into any contract, or furnish to any other person any information with respect to, any proposal from any person relating to a business combination transaction.

~~Conditions to the Parties’ Obligations to Consummate the Transactions~~

Under the Contribution Agreement, the obligations of the parties to consummate the Transactions are subject to a number of customary conditions, including, among others, the following: (i) the absence of specified adverse laws or orders, (ii) the warranties of the other parties being true and correct, subject to the materiality standards contained in the Contribution Agreement, (iii) material compliance by the other parties with their respective~~pre-closing~~ covenants, subject to the materiality standards contained in the Contribution Agreement, (iv) the approval of the Altus Business Combination, the Transactions and certain proposals relating to amendments to the Company’s charter and the Company’s compliance with the listing rules of the NASDAQ Capital Market by the Company’s stockholders and (v) the Company having provided the Apache Contributor with a schedule of the Company’s fees through and including the Closing and the fees specified therein shall not have exceeded $30,000,000. In addition, the Apache Contributor’s obligations to consummate the Transaction is also conditioned upon the Company having a minimum of $475,000,000 in Available Funds at the time of Closing. “Available Funds” means (i) the amount of funds from the Trust Account that holds the proceeds (includingredeemable noncontrolling interest but net of franchise and income taxes payable) from the Company’s Public Offering and the concurrent private placement of warrants to the Sponsor, plus (ii) the proceeds received pursuant to the Private Placements (as defined below), minus (iii) the amount to be paid to the Company’s public stockholders who timely exercise and do not waive their right to have their public shares redeemed for cash at the closing of the Altus Business Combination, minus (iv) certain amounts payable by the Company and its subsidiaries in respect of all~~out-of-pocket~~ ~~costs, fees, and expenses incurred by or~~was recorded based on the ~~Company’s or its subsidiaries’ behalf, other than~~initial fair value plus accumulated earnings and losses to date. The maximum redemption value at September 30, 2019 based on the financing fees described in clause (v) below (including deferred underwriting commissions payable by the Company to the underwriters in the Public Offering and all costs, fees and expenses related to pursuing the Altus Business Combination), minus (v) approximately $3.8 million of fees related to the Private Placements and all~~out-of-pocket~~ costs, fees, and expenses incurred by the Apache Contributor or its affiliates related to marketing the Transactions that will not otherwise be subject to the COMA (as defined below), plus any amounts payable by the Company or any of its subsidiaries in respect of all~~out-of-pocket~~ ~~costs, fees, and expenses incurred by or on behalf of the Company related to obtaining a new credit facility prior to the Closing Date.~~

~~Termination Rights~~

~~The Contribution Agreement contains certain customary termination rights, including, among others, the following: (i) if the Closing has not occurred on or before~~5-day VWAP was $713.1 million. At December 31, 2018, ~~(the “Outside Date”); (ii) upon~~ the applicable parties’ mutual written consent; (iii) if the consummation of the Transactions is prohibited by law; or (iv) breach of a warranty, covenant or other agreement by a party which is not capable of being cured by the Outside Date, subject to the materiality standards contained in the Contribution Agreement.

~~None of the parties to the Contribution Agreement is required to pay a termination fee or reimburse any other party for its expenses as a result of a termination of the Contribution Agreement.~~

~~Ancillary Agreements~~

~~Option Letter~~

On August 8, 2018, the Company entered into a letter agreement with Apache and the Apache Contributor with respect to the GCX Option, the Shin Oak Option, and the EPIC Option (the “Option Letter”). Pursuant to the Option Letter, the Apache Contributor is required to comply in all material respects with the terms and conditions of the agreements governing such Options and use commercially reasonable efforts to preserve the ability of the Company or its designated subsidiaries to exercise such Options from and after closing of the Altus Business Combination. The Option Letter also imposes certain obligations on Apache with respect to certain commercial agreements associated with such Options. If, as a result of a breach of the obligations of the Apache Contributor or Apache, as applicable, under the Option Letter, the Company is not able to exercise one or more of the GCX Option, the Shin Oak Option, or the EPIC Option, certain of the Common Units (together with a corresponding number of shares of Class C Common Stock) received by the Apache Contributorredeemable noncontrolling interest was recorded at the ~~closing~~maximum redemption value based on the 5-day VWAP.

For further discussion of ~~the Altus Business Combination will be subject~~Apache’s right to ~~forfeiture. The maximum number of Common Units (and associated shares of Class C Common Stock) subject to forfeiture pursuant to the Option Letter is 40,000,000.~~

~~Subscription Agreements~~

In connection with its entry into the Contribution Agreement, the Company entered into Subscription Agreements (the “Subscription Agreements”) with certain qualified institutional buyers and accredited investors, including certain funds and accounts managed by Kayne Anderson Capital Advisors, L.P., a California limited partnership, pursuant to which, among other things, the Company agreed to issue and sell in private placements an aggregate of 57,234,023receive additional shares of Class A Common Stock, ~~to investors for aggregate consideration~~and other outstanding equity instruments that may impact ownership interests and the limited partner interests of ~~approximately $572.3 million (the “Private Placements”).~~Altus Midstream in future periods, see Note 14 — Net Income (Loss) Per Share.

Redeemable Noncontrolling Interest - Preferred Unit Limited Partners

On June 12, 2019, Altus Midstream issued and sold the Preferred Units in a private offering, and the purchasers of the Preferred Units were admitted as limited partners of Altus Midstream. The ~~proceeds from the Private Placements~~Preferred Units will be ~~used to fund a portion~~exchangeable for shares of the ~~cash consideration required to effect the Altus Business Combination. The Subscription Agreements provide that the Company must register the resale of the shares of~~Company’s Class A Common Stock ~~issued thereunder pursuant to a registration statement that must be filed with~~at the ~~Securities and Exchange Commission (the “SEC”) within 30 calendar days~~option of the Preferred Unit holders after the ~~Closing. In~~seventh anniversary of Closing (as defined below) or upon the ~~event that (i)~~occurrence of specified events, unless otherwise redeemed by Altus Midstream. Refer to Note 12 — Series A Cumulative Redeemable Preferred Units for further discussion.

12. SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS

On June 12, 2019, Altus Midstream issued and sold the Preferred Units in a private offering exempt from the registration ~~statement has not been declared effective by the SEC by the earlier~~requirements of (x) the 90th calendar day (or 120th calendar day if the SEC notifies the Company that it will “review” the registration statement) following the closing of the Altus Business Combination and (y) the 10th business day after the date that the Company is notified (orally or in writing, whichever is earlier) by the SEC that the registration statement will not be “reviewed” or will not be subject to further review, due to the Company’s failure to use commercially reasonable efforts; (ii) after the registration statement is declared effective by the SEC, (x) the registration statement ceases for any reason to remain continuously effective or (y) a holder is not permitted to utilize the registration statement to resell shares of Class A Common Stock; or (iii) after the date one year following the Closing Date, and only if the registration statement is not effective or available to sell shares of Class A Common Stock, the Company fails to file with the SEC any required reports under Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, such that the Company is not in compliance with Rule 144(c)(1) under the Securities Act of 1933, as amended (the ~~“Securities Act”) (or Rule 144(i)(2) under~~Closing). The Closing occurred pursuant to a Preferred Unit Purchase Agreement among Altus Midstream, the ~~Securities Act,~~Company, and the purchasers party thereto, dated as of May 8, 2019. A total of 625,000 Preferred Units were sold at a price of $1,000 per Preferred Unit, for an aggregate issue price of $625.0 million. Altus Midstream received approximately $611.2 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers.

At the Closing, the partners of Altus Midstream entered into the Amended LPA. The Amended LPA provides the terms of the Preferred Units, including the distribution rate, redemption rights, and rights to exchange the Preferred Units for shares of the Company’s Class A Common Stock, as well as rights of holders of the Preferred Units to approve certain partnership business, financial, and governance-related matters. The Preferred Units have a perpetual term, unless redeemed or exchanged as described below. Pursuant to the Amended LPA:

The Preferred Units entitle the holders thereof to receive quarterly distributions at a rate of 7 percent per annum, commencing with the quarter ended June 30, 2019. The rate increases to 10 percent per annum after the fifth anniversary of Closing and upon the occurrence of specified events. For any quarter ending on or prior to December 31, 2020, Altus Midstream may pay distributions in-kind.

The Preferred Units are redeemable at Altus Midstream’s option at any time in cash at a redemption price (the Redemption Price) equal to (a) the greater of (i) an 11.5 percent internal rate of return (increasing to 13.75 percent after the fifth anniversary of Closing), and (ii) a 1.3x multiple of invested capital plus (b) if ~~applicable), as~~applicable, the value of any accrued and unpaid distributions. The Preferred Units will be redeemable at the holder’s option upon a ~~result~~change of ~~which unaffiliated~~control or liquidation of Altus Midstream and certain other events, including certain asset dispositions. Subject to 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 Preferred Units will be exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders ~~are unable to sell~~after the seventh anniversary of Closing or upon the occurrence of specified events. Each Preferred Unit will be exchangeable for a number of shares of Class A Common Stock ~~without restriction under Rule 144~~equal to the Redemption Price divided by the volume-weighted average trading price of the Class A Common Stock on the NASDAQ Global Select Market for the 20 trading days immediately preceding the second trading day prior to the applicable exchange date, less a 6 percent discount.

Each outstanding Preferred Unit has a liquidation preference equal to the Redemption Price payable before any amounts are paid in respect of Altus Midstream’s Common Units and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation.

Altus Midstream is restricted from declaring or making cash distributions on its Common Units until all required distributions on the Preferred Units have been paid. In addition, before the fifth anniversary of Closing, aggregate cash distributions on, and redemptions of, Common Units are limited to $650 million of cash from ordinary course of operations if permitted under the ~~Securities Act) (each event referred~~Amended Credit Agreement. Cash distributions on, and redemptions of, Common Units also are subject to satisfaction of leverage ratio requirements specified in ~~clauses (i) through (iii),~~the Amended LPA.

Since the Preferred Units could be exchanged for a ~~“Registration Default” and the date on which such Registration Default occurs, a “Default Date”), then on each Default Date and on each monthly anniversary~~number of each Default Date until the applicable Registration Default is cured, the Company will pay to each holder an amount in cash, as liquidated damages and not as a penalty, equal to 0.50% of the aggregate purchase price paid by such holder for any shares of Class A Common Stock ~~that may not be disposed by the holder without restriction on the Default Date; provided, however, that in no event will the Company be required~~equal to ~~pay to a holder an aggregate amount that exceeds 5.0% of the aggregate purchase price paid by such holder for any shares of Class A Common Stock that may not be disposed.~~

The closings under the Subscription Agreements will occur substantially concurrently with the Closing of the Altus Business Combination and are conditioned thereon, as well as on other customary closing conditions. The Subscription Agreements will be terminated, and be of no further force and effect, upon the earlier to occur of (i) the termination of the Contribution Agreement in accordance with its terms, (ii) if any of the conditions to the closing under the Subscription Agreements are not satisfied20 percent or ~~waived on or prior to the closing, and (iii) December 31, 2018, if the Closing has not occurred by such date.~~

The shares of Class A Common Stock to be issued pursuant to the Subscription Agreements have not been registered under the Securities Act and will be issued in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. The Company will pay a placement fee of approximately $3.8 million in the aggregate in connection with such sales.

~~Sponsor Forfeiture Agreement~~

On August 8, 2018, the Company and the Sponsor entered into a Sponsor Forfeiture Agreement (the “Forfeiture Agreement”) with the Apache Contributor, pursuant to which the Sponsor will at the Closing forfeit to the Company (a) 1,862,606 sharesmore of the Company’s ~~Class B common stock, par value $0.0001 per share~~outstanding voting power, the Company has agreed to submit the potential issuance of such shares for approval of its stockholders (the “Class B Common Stock”), (b) a number of shares of Class B Common Stock equal to the number of Assigned Shares and (c) 3,182,140 of the Private Placement Warrants exercisable for shares of Class A Common Stock that were issued to the Sponsor simultaneously with the closing of the Public Offering.

For copies of the Contribution Agreement, Option Letter, Subscription Agreements and Sponsor Forfeiture Agreement, please see the Company’s Current Report on Form 8-K filed on August 8, 2018. The foregoing description of the agreements listed above, does not purport to be complete and is qualifiedStockholder Approval) at its annual stockholder meeting in ~~its entirety by the terms and conditions of the respective agreements.~~

~~Other Ancillary Agreements~~

2020. In connection with the ~~closing of the Altus Business Combination,~~Closing, Apache, the Company, ~~will also enter into various agreements with the Apache Contributor~~ and certain purchasers of its affiliates and Kayne Anderson Capital Advisors, L.P. and certain of its affiliates, including, among others, a stockholders agreement; construction, operations and maintenance agreement and the Purchase Rights and Restrictive Covenant Agreement. For more information related to these agreements, please see the Form 8-K filed with the SEC on August 8, 2018 and/or the Definitive Proxy Statement on Schedule 14A filed with the SEC on October 22, 2018.

~~Note 8 — Subsequent Events~~

~~On October 1, 2018, Altus Midstream (a wholly owned subsidiary of the Company)~~Preferred Units entered into a ~~commitment letter (the “Debt Commitment Letter”) with the lenders party thereto (collectively, the “Commitment Parties”),~~voting agreement pursuant to which Apache has agreed to vote all shares of common stock of the ~~Commitment Parties committed~~Company over which Apache has beneficial ownership in favor of the Stockholder Approval. The Amended LPA provides that the Preferred Units will not be exchangeable into more than 19.5 percent of the outstanding voting power of the Company unless the Stockholder Approval is obtained.

Accounting for the Preferred Units

Classification

The Preferred Units are accounted for on the Company’s consolidated balance sheets as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units, including the redemption rights with respect thereto.

Initial Measurement

The net transaction price as shown below was based on the negotiated transaction price, less issue discounts and transaction costs.



	June 12, 2019
	(In thousands)
Transaction price, gross	$	625,000
Issue discount	(3,675		)
Transaction costs to other third parties	(10,076		)
Transaction price, net	$	611,249

Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. As such, the net transaction price shown in the table above was allocated to ~~make available~~the preferred redeemable noncontrolling interest and the embedded features according to the associated initial fair value measurements as follows:



	June 12, 2019
	(In thousands)
Redeemable noncontrolling interest - Preferred Units	$	516,790
Long-term liability: Embedded derivative⁽¹⁾	94,459
	$	611,249


(1)	See Note 15 — Fair Value Measurements for further discussion on the nature and recognition of the embedded derivative.

Subsequent Measurement

The Company applies a two-step approach to subsequently measure the redeemable noncontrolling interest related to the Preferred Units, by first allocating a portion of the net income of Altus Midstream in accordance with the terms of the ~~Debt Commitment Letter, a senior unsecured revolving credit facility in~~Amended LPA described above.

After consideration of the foregoing, the Company records an ~~aggregate principal~~additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end, if applicable. The amount of upsuch adjustment is determined based upon the accreted value method to ~~$800,000,000, including a letter~~reflect the passage of ~~credit subfacility in~~time until the Preferred Units are exchangeable at the option of the holder. Pursuant to this method, the net transaction price is accreted using the effective interest method, to the Redemption Price calculated at the seventh anniversary of Closing. The total adjustment is limited to an ~~aggregate~~amount such that the carrying amount of upthe Preferred Unit redeemable noncontrolling interest at each period end is equal to ~~$100,000,000 (the “revolving credit facility”). The obligations~~the greater of (a)(i) the carrying amount of the ~~Commitment Parties under~~Preferred Units determined in accordance with ASC 810, plus (ii) the ~~Debt Commitment Letter are conditioned upon, among other things,~~fair value of the ~~execution~~embedded derivative liability or (b) the accreted value of ~~definitive documentation~~the net transaction price.

Activity related to the Preferred Units during the nine months ended September 30, 2019 is as follows:



	Nine Months Ended September 30, 2019
	Units Outstanding	Financial Position⁽³⁾
	(In thousands, except for unit data)
Redeemable noncontrolling interest - Preferred Units: beginning of period	—	$	—
Issuance of Preferred Units, net	625,000	516,790
Distribution of in-kind additional Preferred Units⁽¹⁾	2,188	—
Allocation of Altus Midstream net income	N/A	20,844
Accreted value adjustment	N/A	779
Redeemable noncontrolling interest - Preferred Units: end of period	627,188	$	538,413
Embedded derivative liability⁽²⁾		98,228
		$	636,641

(1)

Subsequent to the balance sheet date, Altus Midstream provided notice to the Preferred Unit holders of record at September 30, 2019 of the amount of the distribution on the Preferred Units for the quarter ended September 30, 2019. The holders also were notified that Altus Midstream elected to pay the entire amount of the approximate $11.0 million distribution in-kind in additional Preferred Units (PIK Units) on November 14, 2019. In total, 10,975.8 PIK Units will be issued in satisfaction of the required distribution.


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


(3)	As of September 30, 2019, the aggregate Redemption Price was $645.8 million, based on an internal rate of return of 11.5 percent.

N/A - not applicable.

13. INCOME TAXES

Altus Midstream Company is subject to U.S. federal income tax and Texas Margin tax. At September 30, 2019, Altus Midstream Company had a net deferred tax asset of $68.6 million, primarily related to its net operating loss carryforward and its investment in Altus Midstream LP. Altus Midstream LP is a partnership for federal income tax purposes and passes through its taxable income to its partners. Thus, Altus Midstream LP does not record a federal income tax provision. Altus Midstream LP is subject to the Texas Margin tax and as such, records a state income tax provision. At September 30, 2019, Altus Midstream LP had a net deferred state income tax liability of $3.1 million.

On June 12, 2019, Altus Midstream issued and sold the Preferred Units in a private offering that admitted additional limited partners with separate rights for the ~~revolving credit facility~~Preferred Unit holders. The Preferred Units are accounted for on the Company’s consolidated balance sheet as a redeemable noncontrolling interest classified as temporary equity. For financial statement reporting purposes, the Company applies a two-step approach to subsequent measurement of the Preferred Units. Under this approach, net income is first allocated to the Preferred Unit holders in accordance with the terms of the Amended LPA. An additional adjustment may be made to increase the carrying amount after the attribution of net income, as further described in Note 12 — Series A Cumulative Redeemable Preferred Units. Both the allocation of net income and any subsequent adjustment based upon accretion of the net transaction price (if applicable) reflect income that will be taxable to the Preferred Unit holders. Accordingly, Altus Midstream Company’s federal income tax provision reflects this income allocation as a reduction in the Company’s effective tax rate.

During the three and nine months ended September 30, 2019, the Company’s effective income tax rate was primarily impacted by the net loss attributable to Apache limited partner, subsequent measurement of the Preferred Units as described above, and the ~~closing~~impact of state income taxes. During the three and nine months ended September 30, 2018, the Company’s effective income tax rate was primarily impacted by the release of the ~~Altus Business Combination.~~ valuation allowance.

The Company ~~expects~~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 ~~revolving credit facility~~financial statements. Each quarter, the Company assesses the recognition amount and, as a result, may increase (expense) or reduce (benefit) the amount of interest and penalties. Interest and penalties are recorded as a component of income tax expense. The contributor of Altus Midstream’s operating assets, Apache, is currently under IRS audit for the 2014-2017 tax years as part of its normal course of business.

14. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is calculated by dividing net income (loss) available to ~~be in place at~~Class A common shareholders by the ~~closing~~weighted average numbers of shares outstanding during the ~~Altus Business Combination and~~period. Class C Common Stock is excluded from the weighted average shares outstanding immediately following the Closing Date for the calculation of basic net income per share, as holders of Class C Common Stock are not entitled to ~~initially have availability of up to $450,000,000, which will increase to up to $800,000,000 upon the achievement of certain performance and minimum capital thresholds.~~ any dividends or liquidating distributions.

The Company ~~also expects~~uses the ~~credit agreement will have customary terms, including affirmative~~“if-converted method” to determine the potential dilutive effect of (i) exchanges of outstanding Common Units of Altus Midstream and ~~negative covenants and events of default.~~

~~On November 6, 2018, the Company held a special meeting in lieu~~corresponding shares of its ~~2018 annual meeting of stockholders to consider, among other things, a proposal to approve~~outstanding Class C Common Stock (ii) earn-out consideration and ~~adopt the Contribution Agreement and the Altus Business Combination. At the special meeting, holders of a majority~~(iii) assumed exchange of the outstanding Preferred Units of Altus Midstream for shares of Class A Common Stock. The treasury stock method is used to determine the potential dilutive effect of its outstanding warrants.

The computation of basic and diluted net income (loss) per share for the periods presented in the consolidated financial statements is shown in the table below.



	Three Months Ended September 30,
	2019							2018⁽¹⁾
	Loss			Shares	Per Share			Income		Shares	Per Share
	(In thousands, except per share data)
Basic:
Net income (loss) attributable to Class A common shareholders	$	(4,864	)	74,929	$	(0.06	)	$	19,208	218,470	$	0.09

Effective of dilutive securities:
Redeemable noncontrolling interest — Apache limited partner	$	(19,222	)	250,000				$	—	—

Diluted:
Net income (loss) attributable to Class A common shareholders	$	(24,086	)	324,929	$	(0.07	)	$	19,208	218,470	$	0.09



	Nine Months Ended September 30,
	2019							2018⁽¹⁾
	Loss			Shares	Per Share			Loss			Shares	Per Share
	(In thousands, except per share data)
Basic:
Net loss attributable to Class A common shareholders	$	(6,057	)	74,929	$	(0.08	)	$	(5,021	)	179,493	$	(0.03	)

Effective of dilutive securities:
Redeemable noncontrolling interest — Apache limited partner	$	(21,919	)	250,000				$	—		—

Diluted:
Net loss attributable to Class A common shareholders	$	(27,976	)	324,929	$	(0.09	)	$	(5,021	)	179,493	$	(0.03	)

(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.

The diluted earnings per share calculation excludes the effect of an assumed exchange of the Preferred Units for shares of Class A Common Stock and ~~Class B Common Stock entitled to vote and cast on such proposal approved and adopted~~ the ~~Contribution Agreement and the Altus Business Combination. The number of shares~~effect of the ~~Company’s~~outstanding warrants of the Company to purchase an aggregate 18,941,631 shares of Class A Common Stock, ~~presented~~since the associated impacts would have been anti-dilutive for all relevant periods presented. Further discussion of the Company’s outstanding common stock, warrants and earn-out consideration as well as any applicable redemption rights is provided in ~~connection~~Note 11 — Equity. Further discussion of the Preferred Units and associated embedded features can be found in Note 12 — Series A Cumulative Redeemable Preferred Units and Note 15 — Fair Value Measurements, respectively. Earn-out consideration granting Apache the right to receive up to 37,500,000 shares of Class A Common Stock is not included in the earnings per share calculation above, as the conditions for issuance were not satisfied as of the quarter ended September 30, 2019.

15. FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities measured at fair value on a recurring basis consist of: cash and cash equivalents; revenue receivables; accounts receivable from, or payable to, Apache and an embedded derivative liability related to the issuance of Preferred Units (as further described above). This embedded derivative liability is recorded on the Company’s consolidated balance sheet at fair value. The carrying amount of Altus Midstream’s revolving credit facility approximates fair value because the interest rate is variable and reflective of market rates. The carrying amounts reported on the consolidated balance sheet for the Company’s remaining financial assets and liabilities approximate fair value due to their short-term nature. There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the quarter ended September 30, 2019 or September 30, 2018.

The Company bifurcated and recognized the embedded derivative associated with the ~~special meeting and~~Preferred Units related to the ~~Altus Business Combination~~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 ~~29,469,858. Please see~~based on a range of factors including: expected future interest rates using the ~~Form 8-K filed with the SEC on November 6, 2018 for additional information on the matters voted upon and approved at the special meeting by~~Black-Karasinski model; the Company’s ~~stockholders.~~

imputed interest rate; the timing of periodic cash distributions and dividend yields of the Preferred Units. The embedded derivative liability had an initial fair value of $94.5 million at Closing. During the three and nine months ended September 30, 2019, the Company recorded an unrealized loss related to this derivative liability totaling $3.8 million, which is recorded in “unrealized derivative instrument loss” in the statement of consolidated operations.

The Company has additional embedded derivatives in the Preferred Units related to the exchange option and redemption features that are accounted for separately from the Preferred Units. Level 3 valuation of the embedded derivatives are based on a range of factors including the likelihood of the event occurring, and these factors are assessed quarterly. There was no value associated with these additional identified embedded derivatives for any applicable period presented.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read together with the Company’s consolidated financial statements and accompanying notes included under Part I, Item ~~2.Management’s~~1, “Financial Statements” of this Quarterly Report on Form 10-Q, as well as the Company’s consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~References~~ included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (Form 10-K). Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Form 10-K.

Unless the context otherwise requires, “we,” “us,” “our,” the “Company,” ~~“us”~~“ALTM” and “Altus” refers to Altus Midstream Company and its consolidated subsidiaries. “Altus Midstream” refers to Altus Midstream LP and its consolidated subsidiaries.

Overview

Altus Midstream Company, through our ownership interest in Altus Midstream, owns gas gathering, processing and transmission assets in the Permian Basin of West Texas, anchored by midstream service agreements to service Apache Corporation’s (Apache) production from its Alpine High resource play (Alpine High). Additionally, we own, or ~~“we” refer~~have options to ~~Kayne Anderson Acquisition Corp. The following discussion~~own, equity interests in a total of five Permian Basin pipelines (the Pipeline Options), four of which go to various points along the Texas Gulf Coast, providing the Company with additional access to fully integrated, wellhead-to-water connectivity. Our operations comprise one reportable segment.

We have no independent operations or material assets outside our ownership interest in Altus Midstream, which we report on a consolidated basis. As of September 30, 2019, Altus Midstream’s assets included approximately 178 miles of in-service natural gas gathering pipelines, approximately 55 miles of residue gas pipelines with four market connections, and ~~analysis~~approximately 38 miles of NGL pipelines. Two of three planned new cryogenic processing trains, each with nameplate capacity of 200 MMcf/d, were placed into service in the ~~Company’s financial condition and results~~first nine months of ~~operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto contained elsewhere in this report.~~

~~Cautionary Note Regarding Forward-Looking Statements~~

~~All statements other than statements of historical fact included in this Form10-Q~~ including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Form~~10-Q,~~ words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based2019. Construction on the ~~beliefs~~third train is complete and is expected to be in-service in the fourth quarter of ~~management, as well as assumptions made by,~~2019. Other assets include an NGL truck loading terminal with six lease automatic custody transfer (LACT) units and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filingseight NGL bullet tanks with ~~the SEC.~~

~~Overview~~

90,000 gallon capacity per tank.

Corporate History

We ~~are a blank check company~~were originally incorporated on December 12, 2016 ~~as a~~in Delaware ~~corporation and formed~~under the name Kayne Anderson Acquisition Corp. (KAAC), for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more ~~businesses (the “Initial Business Combination”).~~businesses. We ~~intend to focus~~completed our ~~search for a target business~~initial public offering in the ~~energy industry. For~~second quarter of 2017, after which our ~~purposes, we define~~initial securities began trading on the energy industry as companies that own and operate assets that are used in or provided services to the energy sector, including, but not limited to, assets used in exploring, developing, producing, transporting, storing, gathering, processing, fractionating, refining, distributing or marketing of natural gas, natural gas liquids, crude oil or refined products. We intend to effectuate our Initial Business Combination using cash from the proceeds of our public offering (the “Public Offering”) and the sale of warrants in a private placement that occurred simultaneously with the Public Offering (the “Private Placement Warrants”), our capital stock, debt or a combination of cash, stock and debt.

~~The issuance of additional shares of our stock in a business combination:~~

NASDAQ Global Select Market.

may significantly dilute the equity interest of investors, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of shares of Class A common stock on a greater than~~one-to-one~~ ~~basis upon conversion of the Class B common stock;~~

~~may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;~~

could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;

~~may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and~~

~~may adversely affect prevailing market prices for our Class A common stock and/or warrants.~~

~~Similarly, if we issue debt securities, it could result in:~~

~~default and foreclosure on our assets if our operating revenues after an Initial Business Combination are insufficient to repay our debt obligations;~~

acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;

~~our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;~~

~~our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;~~

~~our inability to pay dividends on our common stock;~~

using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes;

~~limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;~~

~~increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;~~

~~limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and~~

~~other purposes and other disadvantages compared to our competitors who have less debt.~~

We expect to incur significant costs in the pursuit of our business combination plans. We cannot assure you that our plans to raise capital or to complete our Initial Business Combination will be successful.

~~Recent Developments~~

On August 8, 2018, ~~we,~~KAAC and our then wholly-owned subsidiary, Altus Midstream LP, a Delaware limited partnership, ~~and our wholly owned subsidiary (“Altus Midstream”),~~ entered into a contribution agreement (the Contribution ~~Agreement (the “Contribution Agreement” and~~Agreement) with certain wholly-owned subsidiaries of Apache, including the ~~business combination contemplated thereby, the “Altus Business Combination”) with Apache~~Altus Midstream ~~LLC, a~~Entities. The Altus Midstream Entities comprise four Delaware limited ~~liability company (the “Apache Contributor”)~~partnerships (collectively, Altus Midstream Operating) and wholly owned subsidiary of Apache Corporation, a Delaware corporation (“Apache”), Alpine High Gathering LP, a Delaware limited partnership (“Alpine High Gathering”), Alpine High Pipeline LP, a Delaware limited partnership (“Alpine High Pipeline”), Alpine High Processing LP, a Delaware limited partnership (“Alpine High Processing”), Alpine High NGL Pipeline LP, a Delaware limited partnership (“Alpine High NGL”), and Alpine Hightheir general partner (Altus Midstream Subsidiary GP LLC, a Delaware limited liability ~~company (“~~company), formed by Apache between May 2016 and January 2017 for the purpose of acquiring, developing, and operating midstream oil and gas assets in Alpine ~~High GP”~~High.

On November 9, 2018 (the Closing Date) and ~~together with Alpine High Gathering, Alpine High Pipeline, Alpine High Processing and Alpine High NGL, the “Alpine High Entities”),~~ pursuant to ~~which~~the terms of that certain Contribution Agreement, we acquired from Apache the entire equity interests of the Altus Midstream ~~and/or its subsidiaries will acquire from the Apache Contributor: (i) 100% of the equity interests in each of the Alpine High~~ Entities and ~~(ii) options, currently held by the Apache Contributor,~~Pipeline Options to acquire equity interests in ~~certain~~five separate third-party ~~pipelines that~~pipeline projects. We refer to the acquisition of the entities and the Pipeline Options as the Business Combination. In exchange, the consideration provided to Apache included economic voting and non-economic voting shares in Altus Midstream Company and common partnership units representing limited partner interests in Altus Midstream (Common Units). At the time of the Business Combination, we changed our name from Kayne Anderson Acquisition Corp. to Altus Midstream Company.

Presentation of Financial and Operating Information

While Altus Midstream Company (formerly KAAC) was the surviving legal entity, the Business Combination was accounted for as a reverse recapitalization. Under this method of accounting, Altus Midstream Company was treated as the acquired company for financial reporting purposes. As a result, the historical operations of Altus Midstream Operating are ~~expected~~deemed to be ~~placed into service~~those of the Company. Thus, the financial statements and related information included in ~~2019~~this Quarterly Report on Form 10-Q reflect (i) the historical operating results of Altus Midstream Operating prior to the Closing Date, (ii) the net assets of Altus Midstream Operating at their historical cost, (iii) the consolidated results of Altus and ~~2020, which include (A)~~Altus Midstream Operating after the Closing Date, and (iv) Altus’ equity structure for all periods presented.

Altus Midstream Operational Assessment

We use a variety of financial and operational metrics to assess the performance of our operations and growth compared to expected plan estimates. These metrics include:

Adjusted EBITDA (as defined below);

Throughput volumes and associated revenues; and

Costs and expenses.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) including noncontrolling interests before financing costs (net of capitalized interest), interest income, income taxes, depreciation, and accretion and adjust such items, as applicable, from income from our equity method interests. We also exclude (when applicable) impairments, unrealized gains or losses on derivative instruments, and other items affecting comparability of results to peers. Our management believes Adjusted EBITDA is useful for evaluating our operating performance and comparing results of our operations from period-to-period and against peers without regard to financing or capital structure. Adjusted EBITDA should not be considered as an ~~option~~alternative to, ~~acquire up to a 15% equity interest (as~~or more meaningful than, net income (loss) including noncontrolling interests or any other measure determined in accordance with accounting principles generally accepted in the United States (GAAP) or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing our financial performance, such as our cost of capital and tax structure, as well as ~~pursuant~~the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. The presentation of Adjusted EBITDA should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Additionally, our computation of Adjusted EBITDA may not be comparable to ~~a supplemental option, an additional 1% equity interest)~~other similarly titled measures of other companies.

Adjusted EBITDA is not defined in the Gulf Coast Express pipeline, (B) an option to acquire up to a 15% equity interest in the EPIC Crude pipeline, (C) an option to acquire a 50% equity interest in the Salt Creek NGL pipeline, and (D) an option to acquire up to a 33% equity interest in the Shin Oak pipeline (collectively, the “Options”).

~~On November 6, 2018,~~GAAP

The GAAP measure used by the Company ~~held~~that is most directly comparable to Adjusted EBITDA is net income (loss) including noncontrolling interests. Adjusted EBITDA should not be considered as an alternative to the GAAP measure of net income (loss) including noncontrolling interests or any other measure of financial performance presented in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool because it excludes some, but not all, items that affect net income (loss) including noncontrolling interests. Adjusted EBITDA should not be considered in isolation or as a special meeting in lieu of its 2018 annual meeting of stockholders to consider, among other things, a proposal to approve and adopt the Contribution Agreement and the Altus Business Combination. At the special meeting, holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote and cast on such proposal approved and adopted the Contribution Agreement and the Altus Business Combination. The number of sharessubstitute for analysis of the Company’s ~~Class A Common Stock presented~~results as reported under GAAP. Our definitions of Adjusted EBITDA may not be comparable to similarly titled measures of other companies in our industry, thereby diminishing its utility.

Reconciliation of non-GAAP financial measures

Our management compensates for ~~redemption~~the limitations of Adjusted EBITDA as an analytical tool by reviewing the comparable GAAP measure, understanding the differences between Adjusted EBITDA as compared to net income (loss) including noncontrolling interests, and incorporating this knowledge into its decision-making processes. Our management believes that investors benefit from having access to the same financial measures that the Company uses in ~~connection~~evaluating operating results.

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands)
Reconciliation of net income (loss) including noncontrolling interests to Adjusted EBITDA
Net income (loss) including noncontrolling interests	$	(8,188	)	$	19,208		$	(7,958	)	$	(5,021	)
Add:
Financing costs, net of capitalized interest	522			—			1,508			—
Deferred income tax benefit	(505		)	(18,924		)	(510		)	(9,733		)
Depreciation and accretion	11,710			5,483			28,468			14,404
Impairments	9,338			—			9,338			—
Unrealized derivative instrument loss	3,769			—			3,769			—
Equity method interests Adjusted EBITDA	2,707			—			2,873			—
Other	644			—			644			—
Less:
Interest income	617			—			3,584			—
Income from equity method interests, net	1,564			—			536			—
Adjusted EBITDA	$	17,816		$	5,767		$	34,012		$	(350	)

Results of Operations

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands)
REVENUES:
Midstream services revenue — affiliate	$	34,009		$	25,437		$	91,994		$	50,053
Total revenues	34,009			25,437			91,994			50,053
COSTS AND EXPENSES:
Operations and maintenance	13,063			16,579			43,466			38,798
General and administrative	3,242			1,865			8,314			5,126
Depreciation and accretion	11,710			5,483			28,468			14,404
Impairments	9,338			—			9,338			—
Taxes other than income	3,239			1,226			9,702			6,479
Total costs and expenses	40,592			25,153			99,288			64,807
Operating income (loss)	(6,583		)	284			(7,294		)	(14,754		)
Unrealized derivative instrument loss	(3,769		)	—			(3,769		)	—
Interest income	617			—			3,584			—
Income from equity method interests, net	1,564			—			536			—
Other	—			—			(17		)	—
Total other income (loss)	(1,588		)	—			334			—
Financing costs, net of capitalized interest	522			—			1,508			—
NET INCOME (LOSS) BEFORE INCOME TAXES	(8,693		)	284			(8,468		)	(14,754		)
Deferred income tax benefit	(505		)	(18,924		)	(510		)	(9,733		)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS	(8,188		)	19,208			(7,958		)	(5,021		)
Net income attributable to Preferred Unit limited partners	17,480			—			21,623			—
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	(25,668		)	19,208			(29,581		)	(5,021		)
Net loss attributable to Apache limited partner	(20,804		)	—			(23,524		)	—
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS	$	(4,864	)	$	19,208		$	(6,057	)	$	(5,021	)
KEY PERFORMANCE METRICS:
Adjusted EBITDA ⁽¹⁾	$	17,816		$	5,767		$	34,012		$	(350	)
OPERATING DATA:
Average throughput volumes of natural gas (MMcf/d)	467			392			464			286
Average volumes of natural gas processed (MMcf/d)	467			392			464			286

(1)

Adjusted EBITDA is not defined by GAAP and should not be considered an alternative to, or more meaningful than, net income (loss), operating income (loss), net cash provided by (used in) operating activities or any other measures prepared under GAAP. For definitions and reconciliations of Adjusted EBITDA most directly comparable to GAAP measures, see the section entitled “Adjusted EBITDA” above.

Our operations commenced in the second quarter of 2017 and since that time, our only customer has been Apache, although Altus Midstream is pursuing contracts with third-parties that could be accommodated by existing capacity. Our midstream service agreements with Apache contain no minimum volume commitments and as such, our future results of operations may be materially impacted, depending on Apache’s production volumes from Alpine High and our ability to contract third-party business. Refer to Part I, Item 1A — Risk Factors of the ~~special meeting~~Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and Part I, Item 3 — Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q, for further discussion.

For purposes of the ~~Altus Business Combination was 29,469,858.~~

~~Please~~following discussion, any increases or decreases “for the three months ended September 30, 2019” refer to ~~Note 7 and Note 8~~the comparison of the three months ended September 30, 2019 to the ~~Financial Statements above~~three months ended September 30, 2018 and any increases or decreases “for the nine months ended September 30, 2019” refer to the ~~Company’s Definitive Proxy Statement on Schedule 14A filed with~~comparison of the ~~SEC on October 22,~~nine months ended September 30, 2019 to the nine months ended September 30, 2018 ~~and~~.

Midstream Revenues

The following table summarizes the Company’s ~~Current Reports on Form8-K~~ ~~filed on August 8,~~revenues for the periods presented:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)
REVENUES:
Midstream services revenue — affiliate	$	34,009	$	25,437	$	91,994	$	50,053
Total revenues	$	34,009	$	25,437	$	91,994	$	50,053

All midstream services revenues were generated through our fee-based midstream service agreements with Apache. These services include gas gathering, processing, and transmission. The revenue earned from these services is directly related to the volume of natural gas and NGLs that flow through our systems, and we do not take ownership of the natural gas or NGLs handled for Apache.

Three months ended September 30, 2019 as compared to three months ended September 30, 2018

Midstream services revenue from affiliate increased by $8.6 million to $34.0 million for the three months ended September 30, 2019, as compared to $25.4 million for the three months ended September 30, 2018. The increase was primarily driven by higher throughput of rich natural gas volumes, which increased revenues by approximately $7.8 million for the three months ended September 30, 2019. Lean gas throughput volumes increased throughout the quarter, as Apache ramped up production following deferral of a portion of its gas volumes at Alpine High in April 2019 in response to price weakness in the region.

Nine months ended September 30, 2019 as compared to nine months ended September 30, 2018

Midstream services revenue from affiliate increased by $41.9 million to $92.0 million for the nine months ended September 30, 2019, as compared to $50.1 million for the nine months ended September 30, 2018. Approximately $28.7 million of the increase was primarily driven by higher throughput volumes of natural gas as Apache increased production from Alpine High. The volume increase was partially limited by Apache’s deferral of a portion of its gas volumes at Alpine High beginning April 2019, in response to price weakness in the region. These volumes returned incrementally throughout the third quarter of 2019. A further $11.4 million is attributable to changes in rates pursuant to the terms of new midstream service agreements with Apache, which became effective during 2018.

Costs and ~~November 6,~~Expenses

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)
Operations and maintenance	$	13,063	$	16,579	$	43,466	$	38,798
General and administrative	3,242		1,865		8,314		5,126
Depreciation and accretion	11,710		5,483		28,468		14,404
Impairments	9,338		—		9,338		—
Taxes other than income	3,239		1,226		9,702		6,479
Total costs and expenses	$	40,592	$	25,153	$	99,288	$	64,807

Three months ended September 30, 2019 as compared to three months ended September 30, 2018 ~~for additional information.~~

~~Results of~~

Operations and ~~Known Trends or Future Events~~

~~We have neither engaged~~maintenance

Operations and maintenance expenses decreased by $3.5 million to $13.1 million for the three months ended September 30, 2019, as compared to $16.6 million for the three months ended September 30, 2018, primarily driven by a decrease in ~~any operations nor generated any operating revenue to date. Our only activities since inception relate to our formation, the Public Offering which was consummated on April 4, 2017~~employee related costs and efforts directed toward locating a suitable Initial Business Combination. We will not generate any operating revenue until after completion of an Initial Business Combination, at the earliest. Prior to such time, we will generate~~non-operating~~ ~~income in form of interest income on cash~~lower repair and ~~cash equivalents. We incur increased~~maintenance expenses as a result of ~~being a~~transitioning to our centralized Diamond cryogenic complex from mechanical refrigeration units.

General and administrative expense

General and administrative (G&A) expense increased by $1.3 million to $3.2 million for the three months ended September 30, 2019, as compared to $1.9 million for the three months ended September 30, 2018, primarily driven by higher expenses incurred related to severance costs, insurance, legal, audit and other public company ~~(for~~requirements. These increases were partially offset by lower employee related costs charged to Altus by Apache under the terms of the COMA.

Depreciation and accretion expense

Depreciation and accretion expense increased by $6.2 million to $11.7 million for the three months ended September 30, 2019, as compared to $5.5 million for the three months ended September 30, 2018. The $6.2 million increase represents the timing of placing assets into service following construction activity over the historical period. Depreciation and accretion expense is expected to increase over the next year as a result of the cryogenic plants being placed into service in the second half of 2019.

Impairments

The impairment charge of $9.3 million for the three months ended September 30, 2019 relates to the cancellation of construction on a previously planned compressor station. The Company expects to sell certain of the underlying components in the fourth quarter of 2019. Refer to Note 5 — Property, Plant and Equipment within Part I, Item 1 — Financial Statements of this Quarterly Report on Form 10-Q.

No impairments were recorded for the three months ended September 30, 2018.

Taxes other than income

The increase in taxes other than income was driven by ad valorem taxes, which increased by $2.0 million to $3.2 million for the three months ended September 30, 2019, as compared to $1.2 million for the three months ended September 30, 2018. The $2.0 million increase represents the higher tax assessment in the current year related to completion of construction of certain assets.

Nine months ended September 30, 2019 as compared to nine months ended September 30, 2018

Operations and maintenance

Operations and maintenance expenses increased by $4.7 million to $43.5 million for the nine months ended September 30, 2019, as compared to $38.8 million for the nine months ended September 30, 2018, primarily driven by higher operating costs including contract labor, equipment rentals and supplies as a result of increased throughput volumes.

General and administrative expense

G&A expense increased by $3.2 million to $8.3 million for the nine months ended September 30, 2019, as compared to $5.1 million for the nine months ended September 30, 2018, primarily driven by higher expenses incurred related to severance costs, insurance, legal, ~~financial reporting~~audit and ~~auditing compliance),~~other public filing requirements. These increases were partially offset by lower employee related costs charged to Altus by Apache under the terms of the COMA.

Depreciation and accretion expense

Depreciation and accretion expense increased by $14.1 million to $28.5 million for the nine months ended September 30, 2019, as compared to $14.4 million for the nine months ended September 30, 2018. The increase represents the timing of placing assets into service following construction activity over the historical period. Depreciation and accretion expense is expected to increase over the next year as a result of the cryogenic plants being placed into service in the second half of 2019.

Impairments

The impairment charge of $9.3 million for the nine months ended September 30, 2019 relates to the cancellation of construction on a previously planned compressor station. The Company expects to sell certain of the underlying components in the fourth quarter of 2019. Refer to Note 5 — Property, Plant and Equipment within Part I, Item 1 — Financial Statements of this Quarterly Report on Form 10-Q.

Taxes other than income

The increase in taxes other than income was driven by ad valorem taxes, which increased by $3.1 million to $9.5 million for the nine months ended September 30, 2019, as compared to $6.4 million for the nine months ended September 30, 2018. The $3.1 million increase represents the higher tax assessment in the current year related to completion of construction of certain assets.

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

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018⁽¹⁾			2019			2018⁽¹⁾
	(In thousands)
Unrealized derivative instrument loss	$	(3,769	)	$	—		$	(3,769	)	$	—
Interest income	617			—			3,584			—
Income from equity method interests, net	1,564			—			536			—
Other	—			—			(17		)	—
Total other income (loss)	$	(1,588	)	$	—		$	334		$	—

Interest expense	$	1,496		$	2,504		$	3,234		$	7,054
Amortization of deferred facility fees	237			—			652			—
Capitalized interest	(1,211		)	(2,504		)	(2,378		)	(7,054		)
Financing costs, net of capitalized interest	$	522		$	—		$	1,508		$	—


(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.

Unrealized derivative instrument loss

During the three and nine month periods ending September 30, 2019, the Company recognized an unrealized loss of $3.8 million in relation to an embedded feature identified upon the issuance and sale of Series A Cumulative Redeemable Preferred Units (the Preferred Units) in the second quarter of 2019. The associated derivative is recorded on the consolidated balance sheet at fair value. The fair value of the embedded derivative is determined (using an income approach) by a range of factors including: expected future interest rates using the Black-Karasinski model; the Company’s imputed interest rate; the timing of periodic cash distributions and dividend yields of the Preferred Units. Refer to Note 12 — Series A Cumulative Redeemable Preferred Units within Part I, Item 1 — Financial Statements of this Quarterly Report on Form 10-Q for further discussion.

Income from equity method interests

In the third quarter of 2019, the Company completed the acquisition of a 33 percent equity interest in Breviloba, LLC which owns the Shin Oak NGL pipeline project (Shin Oak). Income from equity method interests was positively impacted as a result of this acquisition, as well as ~~expenses~~from its proportionate share of net income generated by Gulf Coast Express Pipeline LLC, in which the Company has a 16 percent interest. Gulf Coast Express Pipeline LLC operates the Gulf Coast Express Pipeline Project (GCX) which ramped-up throughput volumes during the period, as ~~we conduct due diligence~~the project moved toward full service at the end of September 2019. As of September 30, 2019, the Company had exercised four of its five Pipeline Options.

Financing costs, net of capitalized interest

For the three and nine month periods ending September 30, 2019, financing costs incurred, net of capitalized interest were $0.5 million and $1.5 million, respectively. These costs relate to interest, which is not capitalized, on ~~prospective business combination candidates.~~

finance lease obligations and amortization of fees on the revolving credit facility entered into by Altus Midstream in November 2018.

Provision for Income Taxes

On June 12, 2019, Altus Midstream issued and sold the Preferred Units in a private offering that admitted additional limited partners with separate rights for the Preferred Unit holders. The Preferred Units are accounted for on the Company’s consolidated balance sheet as a redeemable noncontrolling interest classified as temporary equity. For financial statement reporting purposes, the Company applies a two-step approach to subsequent measurement of the Preferred Units. Under this approach, net income is first allocated to the Preferred Unit holders in accordance with the terms of the Amended LPA. An additional adjustment may be made to increase the carrying amount after the attribution of net income, as further described in Note 12 — Series A Cumulative Redeemable Preferred Units. Both the allocation of net income and any subsequent adjustment based upon accretion of the net transaction price (if applicable) reflect income that will be taxable to the Preferred Unit holders. Accordingly, Altus Midstream Company’s federal income tax provision reflects this income allocation as a reduction in the Company’s effective tax rate.

During the three and nine months ended September 30, 2019, the Company’s effective income tax rate was primarily impacted by the net loss attributable to Apache limited partner, subsequent measurement of the Preferred Units as described above, and the impact of state income taxes. During the three and nine months ended September 30, 2018, ~~we had~~the Company’s effective income tax rate was primarily impacted by the release of the valuation allowance.

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. Each quarter, the Company assesses the recognition amount and, as a result, may increase (expense) or reduce (benefit) the amount of interest and penalties. Interest and penalties are recorded as a component of income tax expense. The contributor of Altus Midstream’s operating assets, Apache, is currently under IRS audit for the 2014-2017 tax years as part of its normal course of business.

Key Performance Metrics

Three months ended September 30, 2019 as compared to three months ended September 30, 2018

The Company realized a net loss before income ~~(loss)~~tax of ~~($953,653)~~$8.7 million and ~~$343,900, respectively, which consisted~~net income before income tax of $0.3 million for the three months ended September 30, 2019 and 2018, respectively. Adjusted EBITDA increased by $12.0 million for the three months ended September 30, 2019. The increase in Adjusted EBITDA is primarily due to an $8.6 million increase in midstream services revenue from affiliate coupled with a $3.5 million decrease in operations and maintenance expenses and a $2.7 million increase in the Company’s proportionate share of ~~investment income from the Trust Account of $1,712,170 and $4,362,433, respectively. This income was~~EBITDA generated by its equity interests. These amounts were partially offset by ~~general~~a $2.0 million increase in taxes other than income and ~~administrative~~a $0.7 million increase in G&A expenses net of ~~$2,266,757~~separation costs. Net loss before income taxes was detrimentally impacted by a $9.3 million impairment expense recorded in the third quarter of 2019, a $6.2 million increase in depreciation expense, and ~~$2,981,085, respectively, franchise tax~~a $3.8 million expense arising from the fair value measurement of ~~$50,013 and $150,038, respectively and income tax expense of $349,053 and $887,410, respectively.~~

~~For the three and~~an embedded derivative at September 30, 2019.

Nine months ended September 30, 2019 as compared to nine months ended September 30, ~~2017, we had~~2018

Net loss before income taxes decreased by $6.3 million and Adjusted EBITDA increased by $34.4 million for the nine months ended September 30, 2019, primarily due to a ~~net income (loss)~~$41.9 million increase in midstream services revenue from affiliate coupled with a $2.8 million increase in the Company’s proportionate share of ~~$220,657 and ($512,613), respectively, which consisted primarily of investment income from the Trust Account of $809,858 and $1,353,883, respectively. This income was~~EBITDA generated by its equity interests. These amounts were partially offset by ~~general~~a $4.7 million increase in operations and ~~administrative~~maintenance expenses, a $3.2 million increase in taxes other than income and a $2.5 million increase in G&A expenses net of ~~$276,956 and $1,340,902, respectively, franchise tax~~separation costs. Net loss before income taxes was detrimentally impacted by a $13.9 million increase in depreciation expense, ~~of $55,900 and $98,900, respectively and income tax~~a $9.3 million impairment expense ~~of $256,345 and $426,694, respectively.~~

~~Liquidity and Capital Resources~~

In April 2017, upon the completing the Public Offering (including the sale of Over-Allotment Units) and the Private Placement Warrants, $377,321,120 was deposited in a trust account with American Stock Transfer & Trust Company acting as trustee (the “Trust Account”). Other than the withdrawal of investment income to pay taxes, the proceeds heldrecorded in the ~~Trust Account will remain in the Trust Account until the earlier (i) the completion~~third quarter of ~~the Initial Business Combination; (ii) the redemption of any shares of Class A Common Stock included in the Units sold in the Public Offering that have been properly tendered in connection with~~2019, and a ~~stockholder vote~~$3.8 million increase to amend the Company’s certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of such shares of Class A Common Stock if we do not complete the Initial Business Combination within 24 monthsexpense arising from the ~~closing~~fair value measurement of ~~the Public Offering;~~an embedded derivative at September 30, 2019.

Capital Resources and ~~(iii) the redemption~~Liquidity

Altus Midstream Overview

The Company’s proportionate share of 100% of the shares of Class A Common Stock included in the Units sold in the Public Offering if the Company is unable to complete an Initial Business Combination within 24 months from the closing of the Public Offering (subjectcosts relating to the ~~requirements~~Pipeline Options still under construction will require significant capital expenditures in excess of ~~law).~~

On March 21, 2018, our Sponsor agreed to loan us up to $500,000, as needed, to fund our working capital needs. On August 24, 2018, our Sponsor agreed to increase such loan up to $1,000,000. These loans are~~non-interest~~ ~~bearing,~~current cash on hand and we expect to repay the loans at the closing of our Initial Business Combination. At the option of the lender, such loans may be convertible into warrants, at a price of $1.50 per warrant, at the time of our Initial Business Combination. Such warrants will be identical to private placement warrants issued simultaneously with the consummation of our initial public offering.operational cash flow. As of September 30, ~~2018, we had $600,000 borrowed under~~2019, our primary use of capital has been for the ~~unsecured promissory note. As~~initial construction of ~~September 30, 2018, we had $40,565 in cash held outside~~gathering and processing assets, as well as the ~~Trust Account which may be used~~exercise of four of the five Pipeline Options and associated subsequent construction costs, as further described below. Prior to ~~pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. In addition, investment income on~~ the ~~funds held in the Trust Account may be released to pay~~Business Combination, our ~~franchise and income taxes.~~primary source of liquidity was capital contributions from Apache. During the nine months ended September 30, ~~2018,~~2019, the Company’s primary sources of capital were proceeds from the issuance of the Preferred Units, borrowings under the revolving credit facility, and cash generated from operations. While certain of the Pipeline Options are being constructed, ongoing sources of liquidity are expected to be cash generated from operations, which is anticipated to increase over time, and revolving credit facility borrowing capacity.

Based on our current financial plan and related assumptions, we ~~paid $320,050~~believe our operations and capital program for midstream operations will begin to generate operating cash flows in excess of ~~franchise taxes~~investment expenditures by year-end 2020. We anticipate using our cash position, revolving credit facility borrowing capacity, and ~~$834,463 estimated federal income tax with funds~~reinvested operating cash flow to fund our near-term capital requirements.

Altus Midstream Capital Requirements

As part of the Business Combination, we obtained the right, but not the obligation, to exercise five Pipeline Options. In the third quarter of 2019, we exercised our fourth Pipeline Option to acquire an approximate 33 percent ownership interest in Shin Oak for approximately $442 million. The project, which is already in service, is expected to have ultimate capacity of approximately 550 MBbl/d and transports NGLs primarily from the Permian Basin to Mont Belvieu, Texas. Shin Oak is owned by Breviloba, LLC (Breviloba) and is operated by Enterprise Products Operating LLC (Enterprise).

As a result, at September 30, 2019, we held the following interests in third-party operated pipelines:

A 33.0 percent interest in Shin Oak.

A 26.7 percent interest in the ~~Trust Account.~~ Permian Highway Pipeline Project (PHP). PHP is a long-haul pipeline under construction that is expected to have approximately 2.1 Bcf/d of natural gas transportation capacity. The pipeline will transport natural gas from the Waha area in northern Pecos County, Texas, to the Katy, Texas area, with connections to Texas Gulf Coast and other markets. PHP is anticipated to be in service in early 2021.

A 16.0 percent interest in GCX, which delivers natural gas from the Waha area in West Texas to Agua Dulce near the Texas Gulf Coast. Full commercial service began at the end of September 2019 and the total capacity of 2.0 Bcf/d is fully subscribed under long-term contracts.

A 15.0 percent interest in the EPIC Crude Oil Pipeline Project (EPIC). EPIC is currently under construction and is anticipated to be in service in January 2020. Upon completion, the pipeline is anticipated to have initial capacity of 590 MBbl/d and will transport crude oil from Orla, Texas to the Port of Corpus Christi, Texas.

The Company’s remaining outstanding Pipeline Option can be exercised at any time up until January 31, 2020. With Shin Oak and GCX already in service, we anticipate that the Company’s existing capital resources (discussed below) will be sufficient to fund the Company’s obligations, primarily related to the remaining construction periods of PHP and EPIC.

With construction on all three planned cryogenic processing plants now complete, the Company’s future growth capital requirements in relation to its gathering and processing assets may be directed toward the addition of further cryogenic processing capacity over the next several years, commensurate with throughput increases from Alpine High production and potential third-party volumes.

Sources and Uses of Cash

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



	For the Nine Months Ended September 30,
	2019			2018
	(In thousands)
Sources of cash and cash equivalents:
Redeemable noncontrolling interest - Preferred Unit limited partners, net	$	611,249		$	—
Proceeds from revolving credit facility	235,000			—
Net cash provided by operating activities	39,436			—
	$	885,685		$	—
Uses of cash and cash equivalents:
Capital expenditures⁽¹⁾	$	(307,010	)	$	—
Equity method interests	(1,008,037		)	—
Finance lease payments	(17,187		)	—
Deferred facility fees	(792		)	—
	(1,333,026		)	—
Decrease in cash and cash equivalents	$	(447,341	)	$	—


(1)	The table presents capital expenditures on a cash basis; therefore, the amounts may differ from those discussed elsewhere in this document, which include accruals.

Liquidity

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



	September 30, 2019		December 31, 2018
	(In thousands)
Cash and cash equivalents	$	2,594	$	449,935
Total debt	252,562		—
Available committed borrowing capacity	415,000		450,000

Cash and cash equivalents

At September 30, 2019 and December 31, 2018, ~~$5,063,665~~we had $2.6 million and $449.9 million, respectively, in cash and cash equivalents. The majority of the cash is ~~available~~invested in highly liquid, investment-grade instruments with maturities of three months or less at the time of purchase.

Debt

As of September 30, 2019, the Company had outstanding debt of $252.6 million, of which $17.6 million is related to ~~pay any additional taxes.~~

Toa finance lease obligation.

Available credit facilities

In November 2018, Altus Midstream entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream’s two, one-year extension options). The agreement for this revolving credit facility, as amended (the Amended Credit Agreement), provides aggregate commitments from a syndicate of banks of $650.0 million until the ~~extent that we require additional funds to operate our business prior~~consolidated net income of Altus Midstream and its restricted subsidiaries, as adjusted pursuant to the ~~consummation~~agreement (EBITDA), for the immediately preceding fiscal quarter equals or exceeds $175.0 million on an annualized basis (such period, the Initial Period). Upon achieving such EBITDA, the Initial Period ends and aggregate commitments increase to $800.0 million. All aggregate commitments include a letter of credit subfacility of up to $100.0 million and a swingline loan subfacility of up to $100.0 million. After the Initial Period, Altus Midstream may increase commitments up to an ~~Initial Business Combination, our Sponsor~~aggregate $1.5 billion by adding new lenders or ~~an affiliate~~obtaining the consent of ~~our Sponsor~~any increasing existing lenders. As of September 30, 2019, total outstanding borrowings were $235.0 million and no letters of credit were outstanding under this facility. There were no outstanding borrowings or letters of credit as of December 31, 2018.

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

At Altus Midstream’s option, the interest rate per annum for borrowings under its 2018 amended credit facility is either a base rate, as defined, plus a margin, or the London Inter-bank Offered Rate (LIBOR), plus a margin. Altus Midstream also pays quarterly a facility fee at a per annum rate on total commitments. The margins and the facility fee vary based upon (i) the Leverage Ratio until Altus Midstream has a senior long-term debt rating and (ii) such senior long-term debt rating once it exists. The Leverage Ratio is the ratio of (1) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries to (2) EBITDA (as defined in the Amended Credit Agreement) of Altus Midstream and its restricted subsidiaries for the 12-month period ending immediately before the determination date. At September 30, 2019, the base rate margin was 0.10 percent, the LIBOR margin was 1.10 percent, and the facility fee was 0.20 percent. A commission is payable quarterly to lenders on the face amount of each outstanding letter of credit at a per annum rate equal to the LIBOR margin then in effect. Customary letter of credit fronting fees and other charges are payable to issuing banks.

The Amended Credit Agreement contains restrictive covenants that may limit the ability of Altus Midstream and its restricted subsidiaries to, among other things, incur additional indebtedness or guaranty indebtedness, sell assets, make investments in unrestricted subsidiaries, enter into mergers, make certain ~~of our officers~~payments and ~~directors may, but are not obligated to loan us funds as may be required. If we complete our Initial Business Combination, we would repay such additional loaned amounts out~~distributions, incur liens on certain property securing indebtedness, and engage in certain other transactions without the prior consent of the ~~proceeds~~lenders. Altus Midstream also is subject to a financial covenant under the Amended Credit Agreement, which requires it to maintain one of the ~~Trust Account released~~following financial ratios:

during the Initial Period, a debt-to-capital ratio of not greater than 30.0 percent at the end of any fiscal quarter, determined by reference to ~~us. In~~(i) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries to (ii) (A) the consolidated partners’ equity of Altus Midstream and its restricted subsidiaries plus (B) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries; and

There are no clauses in the Amended Credit Agreement that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes. The Amended Credit Agreement has no drawdown restrictions or prepayment obligations in the event ~~that our Initial Business Combination~~of a decline in credit ratings. However, it does ~~not close, we may use a portion~~allow the lenders to accelerate payment maturity and terminate lending and issuance commitments for nonpayment and other breaches, and if Altus Midstream or any of its restricted subsidiaries defaults on other indebtedness in excess of the ~~working capital held outside~~stated threshold, is insolvent, or has any unpaid, non-appealable judgment against it for payment of money in excess of the ~~Trust Account~~stated threshold. Lenders may also accelerate payment maturity and terminate lending and issuance commitments if Altus Midstream undergoes a specified change in control or has specified pension plan liabilities in excess of the stated threshold. Altus Midstream was in compliance with the terms of the Amended Credit Agreement as of September 30, 2019.

There is no assurance that the financial condition of banks with lending commitments to ~~repay such loaned amounts, but no proceeds~~Altus Midstream will not deteriorate. We closely monitor the ratings of the banks in our bank group. Having a large bank group allows the Company to mitigate the potential impact of any bank’s failure to honor its lending commitment.

Series A Cumulative Redeemable Preferred Units

On June 12, 2019, Altus Midstream issued and sold the Preferred Units in a private offering exempt from ~~our Trust Account would be used~~the registration requirements of the Securities Act of 1933, as amended (the Closing). The Closing occurred pursuant to ~~repay such loaned amounts. Up to $1,500,000~~a Preferred Unit Purchase Agreement among Altus Midstream, the Company, and the purchasers party thereto, dated as of ~~such loans, including loans made under the August 2018 agreement may be convertible into warrants,~~May 8, 2019. A total of 625,000 Preferred Units were sold at a price of ~~$1.50~~$1,000 per ~~warrant,~~Preferred Unit, for an aggregate issue price of $625.0 million. Altus Midstream received approximately $611.2 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers. These proceeds were used to fund ongoing capital contributions related to Altus’ equity interests in the Pipeline Options and repayment of outstanding principal on the revolving credit facility (discussed above).

The Preferred Units are redeemable at Altus Midstream’s option at any time in cash at a redemption price (the Redemption Price) equal to (a) the greater of (i) an 11.5 percent internal rate of return (increasing to 13.75 percent after the fifth anniversary of Closing), and (ii) a 1.3x multiple of invested capital plus (b) if applicable, the value of any accrued and unpaid distributions. 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. Subject to 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 Preferred Units will be exchangeable for shares of the Company’s Class A Common Stock at the option of the ~~lender. The warrants would~~Preferred Unit holders after the seventh anniversary of Closing or upon the occurrence of specified events. Each Preferred Unit will be ~~identical~~exchangeable for a number of shares of Class A Common Stock equal to the ~~Private Placement Warrants, including as~~Redemption Price divided by the volume-weighted average trading price of the Class A Common Stock on the NASDAQ Global Select Market for the 20 trading days immediately preceding the second trading day prior to the ~~exercise price, exercisability~~applicable exchange date, less a 6 percent discount.

Each outstanding Preferred Unit has a liquidation preference equal to the Redemption Price payable before any amounts are paid in respect of Altus Midstream's Common Units and ~~exercise period.~~

~~On October 1, 2018,~~ any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation.

Altus Midstream ~~(our wholly owned subsidiary) entered into a commitment letter (the “Debt Commitment Letter”) with~~is restricted from declaring or making cash distributions on its Common Units until all required distributions on the ~~lenders party thereto (collectively,~~Preferred Units have been paid. In addition, before the ~~“Commitment Parties”), pursuant~~fifth anniversary of Closing, aggregate cash distributions on, and redemptions of, Common Units are limited to ~~which~~$650 million of cash from ordinary course of operations if permitted under Altus Midstream’s Amended Credit Agreement. Cash distributions on, and redemptions of, Common Units also are subject to satisfaction of leverage ratio requirements specified in the ~~Commitment Parties committed to make available to Altus Midstream,~~Amended LPA.

Distributions not paid in accordance with the terms of the ~~Debt Commitment Letter, a senior unsecured~~Amended LPA attract an additional percentage per annum, cumulative to the distribution rates noted above. Altus Midstream’s ability to exercise or satisfy redemption options in cash or pay quarterly distributions is predicated upon Altus Midstream’s ability to generate sufficient cash from operations in addition to the availability of borrowing capacity under its existing revolving credit ~~facility in an aggregate principal amount~~facility.

Since the Preferred Units could be exchanged for a number of upshares of Class A Common Stock equal to ~~$800 million, including a letter of credit subfacility in an aggregate amount of up to $100 million (the “revolving credit facility”). The obligations~~20 percent or more of the ~~Commitment Parties under~~Company’s outstanding voting power, the ~~Debt Commitment Letter are conditioned upon, among other things,~~Company has agreed to submit the ~~execution~~potential issuance of ~~definitive documentation~~such shares for ~~the revolving credit facility and the closing~~approval of ~~the business combination. We expect the revolving credit facility to be~~its stockholders (the Stockholder Approval) at its annual stockholder meeting in place at the closing of the Altus Business Combination and to initially have availability of up to $450 million, which will increase to up to $800 million upon the achievement of certain performance and minimum capital thresholds. We also expect the credit agreement will have customary terms, including affirmative and negative covenants and events of default.

~~Off-Balance~~ ~~Sheet Arrangements; Commitments and Contractual Obligations~~

~~As of September 30, 2018, we did not have anyoff-balance~~ ~~sheet arrangements as defined in Item 303(a)(4)(ii) of RegulationS-K~~ ~~and did not have any commitments or contractual obligations.~~2020. In connection with ~~our Public Offering, we~~the Closing, Apache, the Company, and certain purchasers of Preferred Units entered into ~~an Administrative Services Agreement, by and between us and KA Fund Advisors, LLC an affiliate of our Sponsor. We have~~a voting agreement pursuant to which Apache has agreed to ~~pay KA Fund Advisors, LLC a total~~vote all shares of $5,000 per month for office space, utilities and secretarial and administrative support. Effective January 1, 2018, KA Fund Advisors, LLC agreed to waive the monthly fee until the termination date of our Administrative Services Agreement.

~~The underwriters are entitled to underwriting discounts and commissions of 5.5%, of which 2.0% ($7,546,422) were paid at the closing~~common stock of the ~~Public Offering and 3.5% ($13,206,239) was deferred and placed~~Company over which Apache has beneficial ownership in favor of the Stockholder Approval. The Amended LPA provides that the Preferred Units will not be exchangeable into more than 19.5 percent of the outstanding voting power of the Company unless the Stockholder Approval is obtained.

Off-Balance Sheet Arrangements

Other than the arrangements described in the ~~Trust Account. The deferred discount and commissions will become payable to~~Company’s Annual Report on Form 10-K for the ~~underwriters only on completion of~~fiscal year ended December 31, 2018, the ~~Initial Business Combination, subject to the terms of the underwriting agreement.~~

~~JOBS Act~~

~~On April 5, 2012, the JOBS Act was signed~~Company has not entered into ~~law. The JOBS Act contains provisions that, among~~any transactions, agreements, or other ~~things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply~~contractual arrangements with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for~~non-emerging~~ ~~growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.~~

~~Critical Accounting Policies and Estimates~~

This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instrument and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilitiesunconsolidated entities that are ~~not readily apparent from other sources. Actual results may differ from these estimates under different assumptions~~reasonably likely to materially affect our liquidity or ~~conditions.~~

capital resource positions.

~~Item 3.Quantitative~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative ~~Disclosures~~Disclosure About Market ~~Risk.~~

~~The net proceeds~~Risk

We are exposed to various market risks, including the effects of adverse changes in commodity prices and credit risk as described below.

Commodity Price Risk

Currently all of our ~~initial public offering~~midstream service agreements are fee-based, with no direct commodity price exposure to oil, natural gas, or NGLs. However, we are indirectly exposed to adverse changes in commodity prices through Apache and potential third-party customers’ economic decisions to develop and produce oil and natural gas from which we receive revenues for providing gathering, processing and transmission services.

Fluctuations in commodity prices also impact operating cost elements both directly and indirectly. For example, commodity prices directly impact costs such as power and fuel, which are expenses that increase (or decrease) in line with changes in commodity prices. Commodity prices also affect industry activity and demand, thus indirectly impacting the ~~sale~~cost of items such as labor and equipment rentals. Management regularly reviews our potential exposure to commodity price risk, and may periodically enter into financial or physical arrangements intended to mitigate potential volatility.

Credit Risk

We are subject to credit risk resulting from nonpayment or nonperformance by, or the ~~private placement warrants held~~insolvency or liquidation of, Apache or potential third-party customers. Any increase in the ~~trust account are invested in money market funds meeting certain conditions under Rule2a-7~~ ~~under~~nonpayment and nonperformance by, or the ~~Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature~~insolvency or liquidation of, ~~these investments, we believe there will be no associated material exposure to interest rate risk.~~

our customers could adversely affect our results of operations.

~~Item 4.Controls and Procedures.~~

~~Evaluation of~~

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

~~Disclosure~~

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 our disclosure controls and procedures ~~are~~as of September 30, 2019, the end of the period covered by this report. Based on that evaluation and as of the date of that evaluation, these officers concluded that the Company’s disclosure controls and ~~other~~ procedures ~~that are designed~~were effective, providing effective means to ensure that the information we are required to ~~be disclosed in our reports filed or submitted~~disclose under ~~the Securities~~applicable laws and ~~Exchange Act of 1934, as amended (the “Exchange Act”)~~regulations is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulatedforms and communicated to our management, including our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer,~~principal financial officer, to allow timely decisions regarding required disclosure.

~~As required by Rules13a-15~~ ~~and15d-15~~ ~~under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of~~

We periodically review the design and ~~operation~~effectiveness of our disclosure controls, including compliance with various laws and regulations that apply to our operations. We make modifications to improve the design and effectiveness of our disclosure controls, and ~~procedures as of September 30, 2018. Based upon their evaluation,~~may take other corrective action, if our ~~Chief Executive Officer and Chief Financial Officer concluded that~~reviews identify deficiencies or weaknesses in our ~~disclosure controls and procedures (as defined in Rules13a-15~~ ~~(e) and15d-15~~ ~~(e) under the Exchange Act) were effective.~~

controls.

Changes in Internal Control ~~over~~Over Financial Reporting

~~During the three months ended September 30, 2018, there has been~~

There were no ~~change~~changes in our internal control over financial reporting during the quarter ended September 30, 2019, that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

PART II ~~—OTHER~~— OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not aware of any pending or threatened legal proceedings against us at the time of the filing of this Quarterly Report on Form 10-Q.

~~Item 1.Legal Proceedings.~~

~~None.~~

ITEM 1A. RISK FACTORS

Refer to Part I, Item ~~1A.Risk Factors.~~

As1A — Risk Factors of the ~~date~~Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, Part II, Item 1A — Risk Factors of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2019 and Part I, Item 3 — Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q. Except as stated herein, there have been no material changes to ~~the~~our risk factors ~~disclosed in~~since our Annual Report on Form10-K ~~filed with~~ for the SEC on March 27, 2018 except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC including, but not limited to, those risks disclosed in our Definitive Proxy Statement on Schedule 14A filed with the SEC on October 22,fiscal year ended December 31, 2018.

~~Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.~~

~~None~~

~~Item 3.Defaults Upon Senior Securities.~~

~~None~~

~~Item 4.Mine Safety Disclosures.~~

~~Not Applicable.~~

~~Item 5.Other Information.~~

~~None~~

~~Item 6.Exhibits.~~

ITEM 6. EXHIBITS



EXHIBIT NO.		DESCRIPTION
2.1***	–	Contribution Agreement, dated as of August 8, 2018, by and among Kayne Anderson Acquisition Corp., Altus Midstream LP, Apache Midstream LLC, Alpine High Gathering LP, Alpine High Pipeline LP, Alpine High Processing LP, Alpine High NGL Pipeline LP and Alpine High 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. 001-38048).
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. 001-38048).
3.2	–	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. 333-216514).
31.1*	–	Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
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 Officer required by Rule 13a-14(a) or Rule 15d-14(b) and 18 U.S.C. 1350.
101*	–	The following financial statements from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL: (i) Statement of Consolidated Operations, (ii) Statement of Consolidated Comprehensive Income (Loss), (iii) Consolidated Balance Sheet, (iv) Statement of Consolidated Cash Flows, (v) Statement of Consolidated Changes in Equity and Noncontrolling Interests and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
101.SCH*	–	Inline XBRL Taxonomy Schema Document.
101.CAL*	–	Inline XBRL Calculation Linkbase Document.
101.DEF*	–	Inline XBRL Definition Linkbase Document.
101.LAB*	–	Inline XBRL Label Linkbase Document.
101.PRE*	–	Inline XBRL Presentation Linkbase Document.
104*	–	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


~~Exhibit~~ ~~Number~~		~~Description~~
	* Filed herewith.
2.1**		Contribution Agreement, dated as of August 8, 2018, by and among Kayne Anderson Acquisition Corp., Altus Midstream LP, Apache Midstream LLC, Alpine High Gathering LP, Alpine High Pipeline LP, Alpine High Processing LP, Alpine High NGL Pipeline LP and Alpine High Subsidiary GP LLC.(1)* Furnished herewith.

~~10.1~~		~~Option Letter Agreement, dated as of August 8, 2018, by and among Kayne Anderson Acquisition Corp., Apache Midstream LLC and Apache Corporation.(1)~~

~~10.2~~		~~Form of Subscription Agreement, by and between Kayne Anderson Acquisition Corp. and the subscriber named therein.(1)~~

~~10.3~~		~~Sponsor Forfeiture Agreement, dated as of August 8, 2018, by and among Kayne Anderson Acquisition Corp., Kayne Anderson Sponsor, LLC and Apache Midstream LLC.(1)~~

31.1*		~~Certification of the Principal Executive Officer Pursuant to Rules13a-14(a)~~ ~~and15d-14(a)~~ ~~under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

31.2*		~~Certification of the Principal Financial Officer Pursuant to Rules13a-14(a)~~ ~~and15d-14(a)~~ ~~under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32.1*		~~Certification of the Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

32.2*		~~Certification of the Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~		~~XBRL Instance Document~~

~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

*	~~Furnished herewith~~

**	* Schedules and exhibits to this Exhibit have been omitted pursuant to Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.

~~(1)~~

~~Incorporated by reference to the Company’s Current Report on Form8-K~~ ~~filed on August 8, 2018.~~

SIGNATURES

~~In accordance~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned ~~thereunto~~hereunto duly authorized.


				~~KAYNE ANDERSON ACQUISITION CORP.~~

~~Date: November 7, 2018~~			ALTUS MIDSTREAM COMPANY

Dated:	October 31, 2019		/s/ ~~ROBERT S. PURGASON~~ Ben C. Rodgers
			Ben C. Rodgers
			Chief Financial Officer and Treasurer
		~~Robert S. Purgason~~	(Principal Financial Officer)

Dated:	October 31, 2019		/s/ Rebecca A. Hoyt
		~~Chief Executive Officer~~	Rebecca A. Hoyt
			Senior Vice President, Chief Accounting Officer, and Controller
				(Principal ~~Executive Officer)~~

~~Date: November 7, 2018~~					~~/s/ TERRY A. HART~~
					~~Terry A. Hart~~
					~~Chief Financial Officer)~~
					~~(Principal Financial and~~ Accounting Officer)


	September 30, 2018 (unaudited)		December 31, 2017
ASSETS
Current assets
Cash	$	40,565	$	479,055
Prepaid expenses and other current assets		120,375		67,479

Total Current Assets		160,940		546,534
Investment held in trust account		382,384,785		379,176,865

Total Assets	$	382,545,725	$	379,723,399

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accrued expenses	$	2,738,179	$	742,688
Accrued franchise taxes		30,038		200,050
Accrued income taxes		357,823		304,876
Sponsor note		600,000		—

Total Current Liabilities		3,726,040		1,247,614
Deferred underwriting compensation		13,206,239		13,206,239

Total Liabilities		16,932,279		14,453,853
Class A common stock subject to possible redemption; 36,061,344 and 36,026,954 shares, respectively, at September 30, 2018 and December 31, 2017 (at approximately $10.00 per share)		360,613,440		360,269,540
Stockholders’ equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding		—		—
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 1,670,768 and 1,705,158 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively (excluding 36,061,344 and 36,026,954 shares subject to possible redemption as of September 30, 2018 and December 31, 2017, respectively)		167		170
Class B convertible common stock, $0.0001 par value; 20,000,000 shares authorized; 9,433,028 shares issued and outstanding as of September 30, 2018 and December 31, 2017		943		943
Additionalpaid-in capital		4,844,480		5,188,377
Retained earnings (accumulated deficit)		154,416		(189,484	)

Total Stockholders’ Equity		5,000,006		5,000,006

Total Liabilities and Stockholders’ Equity	$	382,545,725	$	379,723,399


	Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Revenues	$	—		$	—		$	—		$	—
Expenses
General and administrative expenses		2,266,757			276,956			2,981,085			1,340,902
Franchise tax expense		50,013			55,900			150,038			98,900

Total expenses		2,316,770			332,856			3,131,123			1,439,802

Loss from operations		(2,316,770	)		(332,856	)		(3,131,123	)		(1,439,802	)
Other income – investment income on Trust Account		1,712,170			809,858			4,362,433			1,353,883

Income (loss) before income taxes		(604,600	)		477,002			1,231,310			(85,919	)
Current income tax expense		(349,053	)		(256,345	)		(887,410	)		(426,694	)

Net income (loss) attributable to common shares	$	(953,653	)	$	220,657		$	343,900		$	(512,613	)

Weighted average number of shares outstanding:
Basic (excluding shares subject to redemption)		11,009,468			11,191,898			11,138,060			10,582,053

Diluted		11,009,468			47,165,140			47,165,140			10,582,053

Net income (loss) per common share:
Basic	$	(0.09	)	$	0.02		$	0.03		$	(0.05	)

Diluted	$	(0.09	)	$	0.00		$	0.01		$	(0.05	)


	Class A Common Stock						Class B Common Stock							Retained Earnings (Accumulated Deficit)			Stockholders’ Equity
	Shares			Amount			Shares		Amount		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Stockholders’ Equity
Balances, December 31, 2017		1,705,158		$	170			9,433,028	$	943	$	5,188,377		$	(189,484	)	$	5,000,006
Change in shares subject to possible redemption		(34,390	)		(3	)		—		—		(343,897	)		—			(343,900	)
Net income		—			—			—		—		—			343,900			343,900

Balances, September 30, 2018		1,670,768		$	167			9,433,028	$	943	$	4,844,480		$	154,416		$	5,000,006


	For the nine months ended September 30,
	2018			2017
Cash flows from operating activities:
Net income (loss)	$	343,900		$	(512,613	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Trust income retained in Trust Account (net of $1,154,513 and $0 of franchise taxes and income taxes paid, respectively)		(3,207,920	)		(962,883	)
Changes in operating assets and liabilities:
Increase in prepaid expenses and other assets		(52,896	)		(130,792	)
Increase in accrued expenses and taxes, net		1,878,426			816,659

Net cash used in operating activities		(1,038,490	)		(789,629	)
Net cash used in investing activities:
Cash deposited into Trust Account		—			(377,321,120	)
Cash flows from financing activities:
Proceeds from Public Offering		—			377,321,120
Proceeds from sale of Private Placement Warrants		—			9,546,422
Payment of underwriting costs		—			(7,546,422	)
Payment of offering costs		—			(642,617	)
Proceeds from Sponsor note		600,000			245,000
Payment of Sponsor note		—			(265,000	)

Net cash provided by financing activities		600,000			378,658,503
Net increase (decrease) in cash		(438,490	)		547,754
Cash at beginning of period		479,055			7,500

Cash at end of period	$	40,565		$	555,254

Supplemental disclosure of cash flow information:
Deferred underwriting compensation	$	—		$	13,206,239

Income and franchise taxes paid	$	1,154,513		$	391,000


	September 30, 2018			December 31, 2017
Current Tax Liability	$	(357,823	)	$	(304,876	)
Deferred Tax Asset:
Deferred general and administrative expenses	$	948,993		$	322,965
Valuation allowance at 21%		(948,993	)		(322,965	)
Deferred Tax Asset, net	$	—		$	—


Description	Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Investments held in Trust Account
September 30, 2018	$	382,384,785	$	382,384,785	$	—	$	—

December 31, 2017	$	379,176,865	$	379,176,865	$	—	$	—

Operating Leases

Finance Lease

Weighted average remaining lease term

Weighted average discount rate