UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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 ~~June 30, 2022~~March 31, 2023


☐			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

KINETIK HOLDINGS INC.

(Exact name of registrant as specified in its charter)


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

2700 Post Oak Blvd, Suite 300

Houston, Texas, 77056

(Address of principal executive offices)

(Zip Code)

(713) 621-7330

(Registrant’s telephone number, including area code)

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

KNTK

~~Nasdaq Global Market~~New York Stock Exchange

Indicate by check mark whether the 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-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, a non-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 Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

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 Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of registrant’s Class A Common Stock, par value $0.0001 per share issued and outstanding as of ~~July 31, 2022~~April 30, 2023

~~40,550,555~~49,057,209

Number of shares of registrant’s Class C Common Stock, par value $0.0001 per share issued and outstanding as of ~~July 31, 2022~~April 30, 2023

~~94,450,000~~94,089,038

TABLE OF CONTENTS

Item Page
PART I — FINANCIAL INFORMATION (UNAUDITED)
1.
FINANCIAL STATEMENTS
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
1
CONDENSED CONSOLIDATED BALANCE SHEETS
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS
4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6
2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
32
3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
46
4.
CONTROLS AND PROCEDURES
47
PART II — OTHER INFORMATION
1.
LEGAL PROCEEDINGS
48
1A.
RISK FACTORS
48
6.
EXHIBITS
49
SIGNATURES
50


Item		Page
	PART I — FINANCIAL INFORMATION (UNAUDITED)

1.	FINANCIAL STATEMENTS	1

	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2023 AND 2022	1



	CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF MARCH 31, 2023 AND DECEMBER 31, 2022	2

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE MONTHS ENDED MARCH 31, 2023 AND 2022	3

	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS - THREE MONTHS ENDED MARCH 31, 2023 AND 2022	4

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	5

	1.DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	5

	2.BUSINESS COMBINATIONS	6

	3.REVENUE RECOGNITION	7

	4.PROPERTY, PLANT AND EQUIPMENT	9

	5.GOODWILL AND INTANGIBLE ASSETS, NET	9

	6.EQUITY METHOD INVESTMENTS	10

	7.DEBT AND FINANCING COSTS	11

	8.ACCRUED EXPENSES	12

	9.LEASE	12

	10.EQUITY AND WARRANTS	13

	11.FAIR VALUE MEASUREMENTS	14

	12.DERIVATIVES AND HEDGING ACTIVITIES	15

	13.SHARE-BASED COMPENSATION	17

	14.INCOME TAXES	17

	15.NET INCOME PER SHARE	18

	16.COMMITMENTS AND CONTINGENCIES	18

	17.SEGMENTS	19

	18.SUBSEQUENT EVENTS	21

2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22

3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32

4.	CONTROLS AND PROCEDURES	32

	PART II — OTHER INFORMATION

1.	LEGAL PROCEEDINGS	33

1A.	RISK FACTORS	33

2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	33

5.	OTHER INFORMATION	33

6.	EXHIBITS	35
	SIGNATURES	36

GLOSSARY OF TERMS

The following are abbreviations and definitions of certain terms used in this Quarterly Report on Form 10-Q and certain terms which are commonly used in the exploration, production and midstream sectors of the oil and natural gas industry:

•ASC. Accounting Standards ~~Codification.~~

•~~ASU. Accounting Standards Update.~~Codification

•Bbl. One stock tank barrel of 42 United States (“U.S.”) gallons liquid volume used herein in reference to crude oil, condensate or ~~NGLs.~~natural gas liquids

•Bcf. One billion cubic feet

•Bcf/d. One ~~billion cubic feet~~Bcf per ~~day.~~day

•Btu. One British thermal unit, which is the quantity of heat required to raise the temperature of a one-pound mass of water by one degree ~~Fahrenheit.~~Fahrenheit

•CODM. Chief Operating Decision ~~Maker.~~Maker

•Delaware ~~basin~~Basin. Located on the western section of the Permian Basin. The Delaware Basin covers a 6.4M acre ~~area.~~

•~~FASB.~~ ~~Financial Accounting Standards Board.~~area

•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.~~

•~~Formation.~~ ~~A layer of rock which has distinct characteristics that differs from nearby rock.~~formations

•GAAP. United States Generally Accepted Accounting ~~Principles.~~

•~~GHG.~~ ~~Greenhouse gas.~~

•~~LIBOR. London Interbank Offered Rate.~~Principles

•MBbl. One thousand barrels of crude oil, condensate or ~~NGLs.~~NGLs

•MBbl/d. One MBbl per ~~day.~~day

•Mcf. One thousand cubic feet of natural ~~gas.~~gas

•Mcf/d. One Mcf per ~~day.~~

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

•MMBtu. One million British thermal ~~units.~~units

•MMcf. One million cubic feet of natural ~~gas.~~gas

•MMcf/d. One MMcf per ~~day.~~day

•MVC. Minimum volume ~~commitments.~~commitments

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

•Throughput. The volume of crude oil, natural gas, NGLs, water and refined petroleum products transported or passing through a pipeline, plant, terminal or other facility during a particular ~~period.~~period

•SEC. ~~U.S.~~United States Securities and Exchange ~~Commission.~~Commission

•SOFR. Secured Overnight Financing ~~Rate.~~Rate

•WTI. West Texas Intermediate crude ~~oil.~~oil

All references to the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”), and Class C common stock, par value $0.0001 per share (“Class C Common Stock”), reflect such share amounts as retrospectively restated to reflect the Company’s two-for-one stock split, which was effected via stock dividend on June 8, 2022.

FORWARD-LOOKING STATEMENTS AND RISK

This Quarterly Report on ~~Form10-Q~~Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the ~~Securities Act)~~“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~Exchange Act)~~“Exchange Act”). All statements other than statements of historical facts included or incorporated by reference in this Quarterly Report on Form 10-Q, 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. 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,” “continue,” “seek,” “guidance,” “might,” “outlook,” “possibly,” “potential,” “prospect,” “should,” “would,” or similar terminology, but the absence of these words does not mean that a statement is not forward looking. Although we believe that the expectations reflected in such forward-looking statements are reasonable under the circumstances, 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, assumptions about:

•~~our ability to integrate operations or realize any anticipated benefits, savings or growth of the Transaction (as defined herein). See~~ ~~Note 2 — Business Combination~~ ~~in the Notes to our Condensed Consolidated Financial Statements set forth in this Form 10-Q;~~

•the scope, duration, and reoccurrence of any epidemics or pandemics (including, specifically, the coronavirus disease 2019 (“COVID-19”) pandemic or any related variants) and the actions taken by third parties in response to such epidemics or pandemics;

•the market prices of oil, natural gas, NGLs and other products or services;

•~~pipeline~~competition from other pipelines, terminals or other forms of transportation and competition from other service providers for gathering system capacity and availability;

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

•our future financial condition, results of operations, liquidity, compliance with debt covenants and competitive position;

•our future revenues, cash flows and expenses;

•our access to capital and ~~its~~our anticipated liquidity;

•our future business strategy and other plans and objectives for future operations;

•the amount, nature and timing of our future capital expenditures, including future development costs;

•the risks associated with potential acquisitions, divestitures, new joint ventures or other strategic opportunities;

•the recruitment and retention of our officers and personnel;

•the likelihood of success of and impact of litigation and other proceedings, including regulatory proceedings;

•our assessment of our counterparty risk and the ability of our counterparties to perform their future obligations;

•the impact of federal, state and local political, regulatory and environmental developments where we conduct our business operations;

•the occurrence of an extreme weather event, ~~such as Winter Storm Uri,~~ terrorist attack or other event that materially impacts project construction and our operations, including cyber or other attached on electronic systems;

•our ability to successfully implement and execute our environmental, social and governance goals and initiatives and achieve the anticipated results of such initiatives;

•our ability to successfully implement our share repurchase program;

•our ability to integrate operations or realize any anticipated benefits, savings or growth of the Transaction (as defined herein). See Note 2 – Business Combination in the Notes to our Condensed Consolidated Financial Statements set forth in this Form 10-Q;

•general economic and political conditions, including the armed conflict in Ukraine, epidemics or pandemics and the actions taken by third parties in response to such epidemics or pandemics, the impact of continued inflation, central bank policy actions, bank failures and associated ~~changes~~liquidity risks and other factors; and other factors disclosed in ~~monetary policy; and~~“Part I, Item 1A. — Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 7, 2023.

iii

•~~other factors disclosed in Part II, Item 1A — Risk Factors of the Company’s Quarterly Report on Form 10-Q for the first quarter of 2022, filed on May 10, 2022.~~

Other factors or events that could cause the Company’s actual results to differ materially from the Company’s expectations may emerge from time to time, and it is not possible for the Company to predict all such factors or events. 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. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, the Company disclaims any obligation to update or revise its forward-looking statements, whether based on changes in internal estimates or expectations, new information, future developments or otherwise.

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended June 30,*				Six Months Ended June 30,*					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022(4)

		(In thousands, except per share data)										(In thousands, except per share data)
Operating revenues:	Operating revenues:									Operating revenues:
Service revenue	Service revenue	$	102,080	$	62,242	$	182,525	$	129,904	Service revenue		$	103,425	$	80,445
Product revenue	Product revenue	229,651		71,099		404,579		151,092		Product revenue		173,824		174,928
Other revenue	Other revenue	3,841		2,425		5,717		2,873		Other revenue		3,791		1,876
Total operating revenues(1)	Total operating revenues(1)	335,572		135,766		592,821		283,869		Total operating revenues(1)		281,040		257,249
Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Costs of sales (exclusive of depreciation and amortization shown separately below)(2)	Costs of sales (exclusive of depreciation and amortization shown separately below)(2)	152,714		43,503		272,989		80,508		Costs of sales (exclusive of depreciation and amortization shown separately below)(2)		115,877		120,275
Operating expenses	Operating expenses	35,280		25,280		65,151		40,844		Operating expenses		35,973		29,871
Ad valorem taxes	Ad valorem taxes	5,880		3,414		10,033		5,765		Ad valorem taxes		5,458		4,153
General and administrative expenses	General and administrative expenses	25,960		5,337		48,712		10,963		General and administrative expenses		27,511		22,752
Depreciation and amortization		66,581		57,166		127,604		113,137
Depreciation and amortization expenses										Depreciation and amortization expenses		68,854		61,023
Loss on disposal of assets	Loss on disposal of assets	8,546		422		8,656		454		Loss on disposal of assets		102		110

Total operating costs and expenses	Total operating costs and expenses	294,961		135,122		533,145		251,671		Total operating costs and expenses		253,775		238,184
Operating income	Operating income	40,611		644		59,676		32,198		Operating income		27,265		19,065
Other income (expense):	Other income (expense):									Other income (expense):
Interest and other income	Interest and other income	—		26		250		563		Interest and other income		294		250
Gain on redemption of mandatorily redeemable Preferred Units	Gain on redemption of mandatorily redeemable Preferred Units	5,087		—		9,580		—		Gain on redemption of mandatorily redeemable Preferred Units		—		4,493
Gain (loss) on debt extinguishment		(27,975)		60		(27,975)		60
Unrealized gain on embedded derivative		91,448		—		88,562		—

Loss on embedded derivative										Loss on embedded derivative		—		(2,886)
Interest expense	Interest expense	(25,347)		(32,607)		(52,121)		(57,917)		Interest expense		(69,308)		(26,774)
Equity in earnings of unconsolidated affiliates	Equity in earnings of unconsolidated affiliates	47,786		16,511		75,703		27,866		Equity in earnings of unconsolidated affiliates		46,464		27,917
Total other income (expense), net		90,999		(16,010)		93,999		(29,428)
Income (loss) before income taxes		131,610		(15,366)		153,675		2,770

Total other (expense) income, net										Total other (expense) income, net		(22,550)		3,000
Income before income taxes										Income before income taxes		4,715		22,065
Income tax expense	Income tax expense	162		—		838		—		Income tax expense		416		676
Net income including noncontrolling interest										Net income including noncontrolling interest		4,299		21,389
Net income attributable to Preferred Unit limited partners										Net income attributable to Preferred Unit limited partners		—		4,993
Net income attributable to common shareholders										Net income attributable to common shareholders		4,299		16,396
Net income attributable to Common Unit limited partners										Net income attributable to Common Unit limited partners		2,863		12,531
Net income attributable to Class A Common Stock Shareholders										Net income attributable to Class A Common Stock Shareholders		$	1,436	$	3,865

Net income (loss) including noncontrolling interest		131,448		(15,366)		152,837		2,770
Net income attributable to Preferred Unit limited partners		109,502		—		114,495		—
Net Income (loss) attributable to common shareholders		21,946		(15,366)		38,342		2,770
Net income (loss) attributable to Common Unit limited partners		15,508		(15,366)		28,039		2,770
Net income attributable to Class A Common Shareholders		$	6,438	$	—	$	10,303	$	—

Net income attributable to Class A Common Shareholders per share
Net (loss) income attributable to Class A Common Shareholders per share										Net (loss) income attributable to Class A Common Shareholders per share
Basic	Basic	$	0.06	$	—	$	0.16	$	—	Basic		$	(0.06)	$	0.10
Diluted	Diluted	$	0.06	$	—	$	0.16	$	—	Diluted		$	(0.06)	$	0.10
Weighted-average shares **

Weighted-average shares(3)										Weighted-average shares(3)
Basic	Basic	39,297		—		38,766		—		Basic		47,392		37,392
Diluted	Diluted	39,329		—		38,796		—		Diluted		47,605		37,426

* (1)Includes amounts of $25.3 million and $15.6 million associated with related parties for the three months ended March 31, 2023 and 2022, respectively.

(2)Includes amounts of $14.6 million and $3.6 million associated with related parties for the three months ended March 31, 2023 and 2022, respectively.

(3)Share and per share amounts have been retrospectively restated to reflect the Company’s reverse stock split, which was effected June 8, 2022.

(4)The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to the ~~Form 10-Q~~ basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.

** ~~Share amounts have been retroactively restated to reflect the Company’s Stock Split (as defined in~~ ~~Note 10~~—~~Equity and Warrants), which was effected on June 8, 2022. Refer to~~ ~~Note 10 – Equity and Warrants~~ ~~in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.~~

The accompanying ~~notes~~Notes are an integral part of the unaudited Condensed Consolidated Financial Statements

Table of Contents

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


		June 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022

		(In thousands, except share amounts)					(In thousands, except per share data)
ASSETS	ASSETS					ASSETS
CURRENT ASSETS:	CURRENT ASSETS:					CURRENT ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	5,319	$	18,729	Cash and cash equivalents	$	1,984	$	6,394
Accounts receivable, net of allowance for credit losses of $1,000 in 2022 and 2021		296,218		178,107

Accounts receivable, net of allowance for credit losses of $1,000 in 2023 and 2022(1)						Accounts receivable, net of allowance for credit losses of $1,000 in 2023 and 2022(1)	199,028		204,036
Derivative assets						Derivative assets	13,834		6,963
Prepaid and other current assets	Prepaid and other current assets	40,226		20,683		Prepaid and other current assets	31,366		24,474
		341,763		217,519			246,212		241,867
NONCURRENT ASSETS:	NONCURRENT ASSETS:					NONCURRENT ASSETS:
Property, plant and equipment, net	Property, plant and equipment, net	2,481,072		1,839,279		Property, plant and equipment, net	2,634,173		2,535,212
Intangible assets, net	Intangible assets, net	747,721		786,049		Intangible assets, net	676,516		695,389

Derivative asset, non-current						Derivative asset, non-current	124		—
Operating lease right-of-use assets	Operating lease right-of-use assets	53,016		61,562		Operating lease right-of-use assets	64,097		28,551
Deferred charges and other assets	Deferred charges and other assets	26,384		22,320		Deferred charges and other assets	85,551		32,275
Investment in unconsolidated affiliates		2,342,311		626,477

Investment in unconsolidated affiliate						Investment in unconsolidated affiliate	2,412,905		2,381,340
Goodwill	Goodwill	4,081		—		Goodwill	5,077		5,077
		5,654,585		3,335,687			5,878,443		5,677,844
Total assets	Total assets	$	5,996,348	$	3,553,206	Total assets	$	6,124,655	$	5,919,711

LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY
LIABILITIES, NONCONTROLLING INTEREST, AND EQUITY						LIABILITIES, NONCONTROLLING INTEREST, AND EQUITY
CURRENT LIABILITIES:	CURRENT LIABILITIES:					CURRENT LIABILITIES:
Accounts payable	Accounts payable	$	10,907	$	12,220	Accounts payable	$	18,323	$	17,899
Accrued expenses	Accrued expenses	245,951		135,643		Accrued expenses	176,307		173,914
Distribution payable to Preferred Unit limited partners		6,937		—

Derivative liabilities	Derivative liabilities	—		2,667		Derivative liabilities	6,662		5,718

Current portion of operating lease liabilities						Current portion of operating lease liabilities	39,773		22,810

Current portion of operating lease liabilities		35,327		31,776
Current portion of long-term debt, net		—		54,280
Other current liabilities	Other current liabilities	6,835		4,339		Other current liabilities	7,236		7,487
		305,957		240,925			248,301		227,828
NONCURRENT LIABILITIES:
Long-term debt, net		2,971,270		2,253,422
NONCURRENT LIABILITIES						NONCURRENT LIABILITIES
Long term debt, net						Long term debt, net	3,511,648		3,368,510
Contract liabilities	Contract liabilities	22,899		11,674		Contract liabilities	21,991		22,693
Operating lease liabilities	Operating lease liabilities	17,447		29,889		Operating lease liabilities	25,238		6,023
Embedded derivative liabilities		488		—

Derivative liabilities	Derivative liabilities	—		200		Derivative liabilities	27,123		8,328
Other liabilities	Other liabilities	2,459		2,219		Other liabilities	4,310		2,677
Contingent liabilities		—		839

Deferred tax liabilities	Deferred tax liabilities	11,813		7,190		Deferred tax liabilities	11,381		11,018

Mandatorily redeemable Preferred Units		30,717		—

		3,057,093		2,305,433			3,601,691		3,419,249
Total liabilities	Total liabilities	3,363,050		2,546,358		Total liabilities	3,849,992		3,647,077

COMMITMENTS AND CONTINGENCIES (Note 8)		0		0

COMMITMENTS AND CONTINGENCIES (Note 16)						COMMITMENTS AND CONTINGENCIES (Note 16)
Redeemable noncontrolling interest — Common Unit limited partners	Redeemable noncontrolling interest — Common Unit limited partners	3,251,290		1,006,838		Redeemable noncontrolling interest — Common Unit limited partners	2,910,861		3,112,409
Redeemable noncontrolling interest — Preferred Unit limited partners		563,338		—

EQUITY:	EQUITY:					EQUITY:

Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 40,550,555 and nil shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively*		4		—
Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 94,450,000 and 100,000,000 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively*		9		10

Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 49,054,411 and 45,679,447 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 49,054,411 and 45,679,447 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	5		5
Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 94,089,038 and 94,270,000 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively(2)						Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 94,089,038 and 94,270,000 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively(2)	9		9
Additional paid-in capital						Additional paid-in capital	229,672		118,840
Accumulated deficit	Accumulated deficit	(1,181,343)		—		Accumulated deficit	(863,452)		(958,629)

		(1,181,330)		10
Total liabilities, noncontrolling interests, and equity		$	5,996,348	$	3,553,206
Treasury stock, at cost (81,862 and nil shares as of March 31, 2023 and December 31, 2022, respectively)						Treasury stock, at cost (81,862 and nil shares as of March 31, 2023 and December 31, 2022, respectively)	(2,432)		—
Total equity						Total equity	(636,198)		(839,775)
Total liabilities, noncontrolling interest, and equity						Total liabilities, noncontrolling interest, and equity	$	6,124,655	$	5,919,711

(1)Includes amounts of $24.2 million and $17.6 million associated with related parties as of March 31, 2023 and December 31, 2022, respectively.

* (2)Share amounts have been ~~retroactively~~retrospectively restated to reflect the Company’s ~~Stock Split. Refer to~~ ~~Note 10—Equity and Warrants~~ ~~in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.~~

stock split, which was effected June 8, 2022.

The accompanying ~~notes~~Notes are an integral part of the unaudited Condensed Consolidated Financial Statements

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KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022

		(In thousands)					(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS FROM OPERATING ACTIVITIES:						CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests	Net income including noncontrolling interests	$	152,837	$	2,770	Net income including noncontrolling interests	$	4,299	$	21,389
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	Depreciation and amortization expense	127,604		113,137		Depreciation and amortization expense	68,854		61,023
Amortization of deferred financing costs	Amortization of deferred financing costs	6,538		6,637		Amortization of deferred financing costs	1,521		3,389
Amortization of contract costs	Amortization of contract costs	896		896		Amortization of contract costs	1,655		448
Contingent liabilities remeasurement		(839)		—
Distributions from unconsolidated affiliates		117,544		27,882

Distributions from unconsolidated affiliate						Distributions from unconsolidated affiliate	67,764		48,073
Derivatives settlement	Derivatives settlement	11,115		(16,297)		Derivatives settlement	974		(884)
Derivatives fair value adjustment		(102,544)		13,409
Derivative fair value adjustment						Derivative fair value adjustment	11,770		(8,745)
Warrants fair value adjustment						Warrants fair value adjustment	(44)		—
Gain on redemption of mandatorily redeemable Preferred Units	Gain on redemption of mandatorily redeemable Preferred Units	(9,580)		—		Gain on redemption of mandatorily redeemable Preferred Units	—		(4,493)
Loss on disposal of assets	Loss on disposal of assets	8,656		454		Loss on disposal of assets	102		110
Equity in earnings from unconsolidated affiliates	Equity in earnings from unconsolidated affiliates	(75,703)		(27,866)		Equity in earnings from unconsolidated affiliates	(46,464)		(27,917)
(Gain) loss on debt extinguishment		27,975		(60)
Loss on debt extinguishment						Loss on debt extinguishment	—		129
Share-based compensation	Share-based compensation	18,304		—		Share-based compensation	17,540		6,132
Deferred income taxes	Deferred income taxes	613		—		Deferred income taxes	363		676

Change in operating assets and liabilities:
Changes in operating assets and liabilities:						Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(100,511)		(62,213)		Accounts receivable	5,008		(67,446)
Other assets	Other assets	(11,892)		(14,675)		Other assets	(2,206)		(456)

Accounts payable	Accounts payable	(3,844)		(777)		Accounts payable	(3,175)		(6,766)
Accrued liabilities	Accrued liabilities	102,094		49,570		Accrued liabilities	(10,679)		73,961

Operating lease liabilities		(345)		1,343
Other non-current liabilities						Other non-current liabilities	1,677		—
Operating leases						Operating leases	632		(230)
Net cash provided by operating activities	Net cash provided by operating activities	268,918		94,210		Net cash provided by operating activities	119,591		98,393
CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:						CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures	Property, plant and equipment expenditures	(71,429)		(39,371)		Property, plant and equipment expenditures	(58,862)		(29,234)
Intangible assets expenditures	Intangible assets expenditures	(8,516)		(2,682)		Intangible assets expenditures	(9,755)		(3,559)
Investment in unconsolidated affiliates		(2,675)		(20,522)
Investments in unconsolidated affiliate						Investments in unconsolidated affiliate	(58,658)		—
Distributions from unconsolidated affiliate						Distributions from unconsolidated affiliate	5,793		—
Cash proceeds from disposals	Cash proceeds from disposals	160		58		Cash proceeds from disposals	14		—
Net cash acquired in acquisition		13,401		—
Net cash (paid for) acquired in acquisitions						Net cash (paid for) acquired in acquisitions	(125,000)		13,401
Net cash used in investing activities	Net cash used in investing activities	(69,059)		(62,517)		Net cash used in investing activities	(246,468)		(19,392)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt		3,000,000		30,189
CASH FLOWS FROM FINANCING ACTIVITIES:						CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on long-term debt	Principal payments on long-term debt	(2,294,130)		(50,980)		Principal payments on long-term debt	—		(26,382)
Payment on debt issuance costs		(37,042)		(3,152)

Proceeds from revolver	Proceeds from revolver	7,000		21,500		Proceeds from revolver	267,000		7,000
Payment on revolver		(716,000)		(14,500)
Payments on revolver						Payments on revolver	(125,000)		—
Redemption of mandatorily redeemable Preferred Units	Redemption of mandatorily redeemable Preferred Units	(152,580)		—		Redemption of mandatorily redeemable Preferred Units	—		(60,702)
Distributions paid to mandatorily redeemable Preferred Units holders		(1,850)		—
Distributions paid to redeemable noncontrolling interests Preferred Units limited partners		(6,937)		—

Cash dividends paid to Class A Common Stock shareholders	Cash dividends paid to Class A Common Stock shareholders	(11,239)		—		Cash dividends paid to Class A Common Stock shareholders	(16,927)		—
Distributions paid to Class C Common Units limited partners		(491)		(30,189)
Equity contributions		—		14,890

Net cash (used in) provided by financing activities		(213,269)		(32,242)
Distribution paid to Class C Common Unit limited partners						Distribution paid to Class C Common Unit limited partners	(174)		—

Repurchase of Class A Common Stock						Repurchase of Class A Common Stock	(2,432)		—
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	122,467		(80,084)
Net change in cash	Net change in cash	$	(13,410)	$	(549)	Net change in cash	(4,410)		(1,083)

CASH, BEGINNING OF PERIOD	CASH, BEGINNING OF PERIOD	$	18,729	$	19,591	CASH, BEGINNING OF PERIOD	6,394		18,729
CASH, END OF PERIOD	CASH, END OF PERIOD	$	5,319	$	19,042	CASH, END OF PERIOD	$	1,984	$	17,646

SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES	SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES					SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES
Cash paid for interest, net of amounts capitalized	Cash paid for interest, net of amounts capitalized	$	52,982	$	54,308	Cash paid for interest, net of amounts capitalized	$	36,745	$	25,801
Property and equipment and intangible accruals in accounts payable and accrued liabilities	Property and equipment and intangible accruals in accounts payable and accrued liabilities	$	20,344	$	9,322	Property and equipment and intangible accruals in accounts payable and accrued liabilities	$	32,715	$	14,340
Class A Common Stock issued through dividend and distribution reinvestment plan	Class A Common Stock issued through dividend and distribution reinvestment plan	$	87,697	$	—	Class A Common Stock issued through dividend and distribution reinvestment plan	$	87,658	$	—

Fair value of ALTM assets acquired	Fair value of ALTM assets acquired	$	2,446,430	$	—	Fair value of ALTM assets acquired	$	—	$	2,445,665
Class A Common Stock issued in exchange	Class A Common Stock issued in exchange	1,013,745		—		Class A Common Stock issued in exchange	—		1,013,745
ALTM liabilities and mezzanine equity assumed	ALTM liabilities and mezzanine equity assumed	$	1,432,685	$	—	ALTM liabilities and mezzanine equity assumed	$	—	$	1,431,920

The accompanying ~~notes~~Notes are an integral part of the unaudited Condensed Consolidated Financial Statements

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KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

(Unaudited)

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners* Redeemable Noncontrolling Interest — Common Unit Limited Partners Class A Common Stock Class C Common Stock Additional Paid-in Capital Accumulated Deficit Total Equity
Shares** Amount Shares** Amount
(In thousands) (In thousands)
For the Quarter Ended June 30, 2021
Balance at March 31, 2021 $ — $ 1,044,492 — $ — 100,694 $ 10 $ — $ — $ 10
Net loss — (15,366) — — — — — — —
Balance at June 30, 2021 $ — $ 1,029,126 — $ — 100,694 $ 10 $ — $ — $ 10
For the Quarter Ended June 30, 2022
Balance at March 31, 2022 $ 460,773 $ 3,185,431 37,973 $ 4 94,520 $ 9 $ — $ (1,137,873) $ (1,137,860)
Distributions payable to Preferred Unit limited partners (6,937) — — — — — — — —
Redemption of Common Units — (2,499) 70 — (70) — 2,499 — 2,499
Issuance of Class A Common Stock through dividend and distribution reinvestment plan — — 2,504 — — — 87,697 — 87,697
Share-based compensation — — 4 — — — 12,173 — 12,173
Net income 109,502 15,508 — — — — — 6,438 6,438
Change in redemption value of noncontrolling interests — 123,741 — — — — (102,369) (21,372) (123,741)
Distributions paid to Common Unit limited partners — (70,891) — — — — — — —
Cash dividends on Class A Common Stock ($0.75 per share) — — — — — — — (28,536) (28,536)
Balance at June 30, 2022 $ 563,338 $ 3,251,290 40,551 $ 4 94,450 $ 9 $ — $ (1,181,343) $ (1,181,330)


	Redeemable Noncontrolling Interest — Preferred Unit Limited Partners(2)		Redeemable Noncontrolling Interest — Common Unit Limited Partners		Class A Common Stock			Class C Common Stock			Additional Paid-in Capital		Accumulated Deficit		Treasury Stock		Total Equity
					Shares(1)	Amount		Shares(1)	Amount

	(In thousands)				(In thousands)
For the Three Months Ended March 31, 2022
Balance at December 31, 2021	$	—	$	1,006,843	—	$	—	50,000	$	5	$	—	$	—	$	—	$	5
ALTM acquisition	462,717		—		16,246	2		—	—		1,013,743		—		—		1,013,745
Distributions payable to Preferred Unit limited partners	(6,937)		—		—	—		—	—		—		—		—		—
Redemption of Common Units	—		(170,060)		2,740	—		(2,740)	—		170,060		—		—		170,060
Share-based compensation	—		—		—	—		—	—		6,132		—		—		6,132
Remeasurement of contingent consideration	—		—		—	—		—	—		4,450		—		—		4,450
Net income	4,993		12,531		—	—		—	—		—		3,865		—		3,865
Change in redemption value of noncontrolling interests	—		2,336,117		—	—		—	—		(1,194,385)		(1,141,732)		—		(2,336,117)
Balance at March 31, 2022	$	460,773	$	3,185,431	18,986	$	2	47,260	$	5	$	—	$	(1,137,867)	$	—	$	(1,137,860)

For the Three Months Ended March 31, 2023
Balance at December 31, 2022	$	—	$	3,112,409	45,679	$	5	94,270	$	9	$	118,840	$	(958,629)	$	—	$	(839,775)
Redemption of Common Units	—		(5,634)		181	—		(181)	—		5,634		—		—		5,634
Issuance of common stock through dividend and distribution reinvestment plan	—		—		3,071	—		—	—		87,658		—		—		87,658
Repurchase of Class A Common Stock	—		—		(82)	—		—	—		—		—		(2,432)		(2,432)
Share-based compensation	—		—		205	—		—	—		17,540		—		—		17,540
Net income	—		2,863		—	—		—	—		—		1,436		—		1,436
Change in redemption value of noncontrolling interests	—		(128,211)		—	—		—	—		—		128,211		—		128,211
Distribution paid to Common Units limited partners	—		(70,566)		—	—		—	—		—		—		—		—
Cash dividends on Class A Common Stock ($0.75 per share)	—		—		—	—		—	—		—		(34,470)		—		(34,470)
Balance at March 31, 2023	$	—	$	2,910,861	49,054	$	5	94,089	$	9	$	229,672	$	(863,452)	$	(2,432)	$	(636,198)

* Certain redemption features embedded within the Preferred Units require bifurcation and measurement at fair value. For further detail, refer to ~~Note 11—Series A Cumulative Redeemable Preferred Units~~ ~~in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.~~

** (1)Share amounts have been ~~retroactively~~retrospectively restated to reflect the Company’s S~~tock Split.~~Stock Split, which was effected on June 8, 2022. Refer to Note 10—Equity and Warrants in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.

(2)

~~The accompanying notes are an integral part of the unaudited condensed consolidated financial statements~~

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~~KINETIK HOLDINGS INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS - (Continued)~~

~~(Unaudited)~~

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners* Redeemable Noncontrolling Interest — Common Unit Limited Partners Class A Common Stock Class C Common Stock Additional Paid-in Capital Accumulated Deficit Total Equity
Shares** Amount Shares** Amount
(In thousands) (In thousands)
For the Six Months Ended June 30, 2021
Balance at December 31, 2020 $ — $ 1,041,655 — $ — 101,198 $ 10 $ — $ — $ 10
Contribution — 14,890 — — 492 — — — —
Distribution paid to Common Unit limited partners — (30,189) — — (996) — — — —
Net income — 2,770 — — — — — — —
Balance at June 30, 2021 $ — $ 1,029,126 — $ — 100,694 $ 10 $ — $ — $ 10
For the Six Months Ended June 30, 2022
Balance at December 31, 2021 $ — $ 1,006,838 — $ — 100,000 $ 10 $ — $ — $ 10
ALTM acquisition 462,717 — 32,493 3 — — 1,013,742 — 1,013,745
Distributions paid to Preferred Unit limited partners (6,937) — — — — — — — —
Distributions payable to Preferred Unit limited partners (6,937) — — — — — — — —
Redemption of Common Units — (172,559) 5,550 1 (5,550) (1) 172,559 — 172,559
Issuance of common stock through dividend and distribution reinvestment plan — — 2,504 — — — 87,697 — 87,697
Share-based compensation — — 4 — — — 18,304 — 18,304
Remeasurement of contingent consideration — — — — — — 4,451 — 4,451
Net income 114,495 28,039 — — — — — 10,303 10,303
Change in redemption value of noncontrolling interests — 2,459,863 — — — — (1,296,753) (1,163,110) (2,459,863)
Distributions paid to Common Units limited partners — (70,891) — — — — — — —
Cash dividends on Class A Common Stock ($0.75 per share) — — — — — — — (28,536) (28,536)
Balance at June 30, 2022 $ 563,338 $ 3,251,290 40,551 $ 4 94,450 $ 9 $ — $ (1,181,343) $ (1,181,330)

* Certain redemption features embedded within the Preferred Units require bifurcation and measurement at fair value. For further detail, refer to Note ~~11—~~12—Series A Cumulative Redeemable Preferred Units in the Notes to the ~~Condensed Consolidated Financial Statements.~~

** ~~Share amounts have been retroactively restated to reflect the Company’s Stock Split. Refer to~~ ~~Note 10~~—~~Equity and Warrantsin the Notes to our Condensed~~ Consolidated Financial Statements in ~~this~~our Annual Report on Form ~~10-Q~~10-K for ~~further information.~~the year ended December 31, 2022 filed with the Commission on March 7, 2023.

The accompanying ~~notes~~Notes are an integral part of the unaudited condensed consolidated financial statements

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KINETIK HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

These condensed consolidated financial statements have been prepared by Kinetik Holdings Inc. ~~(formerly known as Altus Midstream Company)~~ (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for interim periods, on a basis consistent with the annual audited financial statements, with the exception of recently adopted accounting pronouncements. 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 Kinetik Holdings Inc.’s audited financial statements and related notes thereto for the year ended December 31, ~~2021 filed as Exhibit 99.1 to~~2022 included in the Company’s ~~Current~~Annual Report on Form ~~8-K~~10-K filed with the SEC on July 5, 2022 and the Company’s Quarterly Report on Form 10-Q for the first quarter of 2022 filed on May 10, 2022. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the audited financial statements for the year ended December 31, 2021 filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on July 5, 2022 and the Company’s Quarterly Report on Form 10-Q filed on May 10, 2022.

March 7, 2023.

1. DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~The Transaction~~Organization

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

~~Pursuant to the Contribution Agreement, in connection with the closing of the Transaction (the “Closing”)~~, (i) Contributor contributed all of the equity interests of BCP and BCP Raptor Holdco GP, LLC, a Delaware limited liability company and the general partner of BCP (“BCP GP” and, together with BCP, the “Contributed Entities”), to the Partnership; and (ii) in exchange for such contribution, the Partnership issued 50,000,000 common units representing limited partner interests in the Partnership (“Common Units”) and the Company issued 50,000,000 shares of the Company’s ~~Class C Common Stock, par value $0.0001 per share (“Class C Common Stock”), to Contributor.~~

The Company’s stockholders immediately prior to the Closing continued to hold their shares of the Company’s Class A Common Stock, par value $0.0001 per share (“Class A Common Stock,” and together with the Company’s Class C Common Stock, “Common Stock”). As a result of the Transaction, immediately following the Closing (i) Contributor held approximately 75% of the issued and outstanding Common Stock, (ii) Apache Midstream LLC, a Delaware limited liability company (“Apache Midstream”), held approximately 20% of the issued and outstanding Common Stock, and (iii) the Company’s remaining stockholders held approximately 5% of the issued and outstanding Common Stock.

~~The Company completed a 2-for-one Stock Split in the form of a stock dividend on June 8, 2022. All corresponding per-share and share amounts~~predecessor for ~~periods prior to June 8, 2022 have been retroactively restated elsewhere in this Form 10-Q to reflect the~~ ~~2-for-one~~ Stock Split. However, the number of Common Units and shares of Class C Common Stock described in this Form 10-Q in relation to the Transaction are presented at pre-Stock-Split amounts to be consistent with our previous public filings and the terms of the Contribution Agreement.

In connection with the Closing, the Company changed its name from “Altus Midstream Company” (“ALTM”) to “Kinetik Holdings Inc.” Unless the context otherwise requires, “ALTM” refers to the registrant prior to the Closing and “we,” “us,” “our,” and the “Company” refer to Kinetik Holdings Inc., the registrant and its subsidiaries following the Closing.

~~Organization~~

~~BCP~~accounting purposes, was formed on April 25, 2017 as a Delaware limited partnership to acquire and develop midstream oil and gas assets. BCP’s primary operating subsidiaries are EagleClaw Midstream Ventures, LLC ~~(“EagleClaw”)~~ and CR Permian Holdings, ~~LLC (“CR Permian”).~~LLC. Both subsidiaries were formed to design, engineer, install, own and operate facilities and

~~Table of Contents~~

provide services for produced natural gas gathering, compression, processing, treating and dehydration, and condensate separation, stabilization, and storage, crude oil gathering and storage, water gathering and disposal assets.

~~ALTM~~Altus Midstream Company (“ALTM”) was originally incorporated on December 12, 2016 in Delaware 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. KAAC completed its initial public offering in the second quarter of 2017. On August 3, 2018, Altus Midstream LP was formed in Delaware as a limited partnership and wholly-owned subsidiary of KAAC and entered into a contribution agreement with certain affiliates of Apache Corporation (“Apache” and such affiliates the “Altus Midstream Entities”), formed by Apache between May 2016 and January 2017, for the purpose of acquiring, developing and operating midstream oil and gas assets in the Alpine High resource play and surrounding ~~areas (“Alpine High”).~~areas. On November 9, 2018, KAAC acquired all equity interests of the Altus Midstream Entities and changed its name to Altus Midstream Company.

On February 22, 2022 ~~upon~~(the “Closing Date”), Kinetik Holdings Inc., a Delaware corporation (formerly known as Altus Midstream Company), consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021 (the “Contribution Agreement”), by and among the Company, Altus Midstream LP (now known as Kinetik Holdings LP), a Delaware limited partnership and subsidiary of Altus Midstream Company (the “Partnership”), New BCP Raptor Holdco, LLC, a Delaware limited liability company (“Contributor”), and BCP. The transactions contemplated by the Contribution Agreement are referred to herein as the “Transaction.” In connection with the closing of the Transaction (the “Closing”), the Company changed its name from “Altus Midstream Company” to “Kinetik Holdings Inc.” Unless the context otherwise requires, “ALTM” refers to the registrant prior to the Closing ~~BCP~~and “we,” “us,” “our,” and the “Company” refer to Kinetik Holdings Inc., the registrant and its subsidiaries ~~became wholly owned subsidiaries of~~following the ~~Partnership. The Transaction was accounted for as a reverse merger pursuant to~~ ~~ASC 805 Business Combination (“ASC 805”).~~ ~~Refer to~~ ~~Note 2—Business Combination~~ ~~in the Notes to our Condensed Consolidated Financial Statements for additional details.~~

~~Nature of Operations~~Closing.

Through its consolidated subsidiaries, the Company provides comprehensive gathering, water disposal, transportation, compression, processing and treating services necessary to bring natural gas, NGLs and crude oil to market. Additionally, the Company owns equity interests in four separate Permian Basin pipeline entities that have access to various markets along the Texas Gulf Coast.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with GAAP. Certain reclassifications of prior year balances have been made to conform such amounts to current year presentation. These reclassifications have no impact on net income. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full ~~year.~~year; accordingly, you should read these consolidated financial statements in conjunction with our

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consolidated financial statements and related notes included in our 2022 Form 10-K.. All intercompany balances and transactions have been eliminated in consolidation.

Prior to the Closing, the Company’s financial statements that were filed with the SEC were derived from ALTM’s accounting records. As the Transaction was determined to be a reverse merger, BCP was considered as the accounting acquirer and ALTM was the legal acquirer. The accompanying Condensed Consolidated Financial Statements herein include (1) BCP’s net assets carried at historical value, (2) BCP’s historical results of operations prior to the Transaction, (3) the ALTM’s net assets carried at fair value as of the Closing Date and (4) the combined results of operations with the Company’s results presented within the Condensed Consolidated Financial Statements from February 22, 2022 going forward. Therefore, the results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to Note 2—Business Combination to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion.

The Company completed a two-for-one Stock Split on June 8, 2022. All corresponding per-share and share amounts for periods prior to June 8, 2022 have been retroactively restated in this Form 10-Q to reflect the two-for-one Stock Split, except for the number of Common Units and shares of Class C Common Stock described above in relation to the Transaction, which are presented at pre-Stock-Split amounts. This presentation ~~election~~ is consistent with our previous public filings and the terms of the Contribution Agreement.

~~Use~~Significant Accounting Policies

The accounting policies that we follow are set forth in Note 2 – Summary of ~~Estimates~~

Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the dateSignificant Accounting Policies of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are 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 condensed consolidated financial statements, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include the valuation of derivatives, tangible and intangible assets, share-based compensation, contingent liabilities, mandatorily redeemable Preferred Units (as defined below) and noncontrolling interests.

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~~Variable Interest Entity~~

The Company uses a qualitative approach in assessing the consolidation requirement for variable interest entities. The approach focuses on identifying which enterprise has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. In the event that the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity would be consolidated in our financial statements. The Company has determined that it has significant influence over the operating and financial policies of the four pipeline entities in which it is invested, but does not exercise control over them; and hence, it accounts for these investments using the equity method. Refer to ~~Note 9—Equity Method Investmentsin the~~ Notes to ~~our Condensed~~ Consolidated Financial Statements in ~~this Form 10-Q.~~

~~Redeemable Noncontrolling Interest — Common Units Limited Partners~~

Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of the Contributed Entities to the Partnership; and (ii) in exchange for such contribution, the Partnership issued 50,000,000 common units representing limited partner interests in the Partnership and the Company issued 50,000,000 shares of the Company’s Class C Common Stock, par value $0.0001 per share, to Contributor. Please refer to “The Transaction” above.

The Common Units are redeemable at the option of unit holders and accounted for in the Company’s Condensed Consolidated Balance Sheet as a redeemable noncontrolling interest classified as temporary equity. The Company records the redeemable noncontrolling interest at the higher of (i) its initial value plus accumulated earnings/losses associated with the noncontrolling interestour Annual Report. There were no significant updates or (ii) the maximum redemption value as of the balance sheet date. The redemption value was determined based on a 5-day volume weighted-average closing price of the Class A Common Stock. See discussion and additional details in ~~Note 10—Equity and Warrant~~s ~~in the Notes~~revisions to our ~~Condensed Consolidated Financial Statements in this Form 10-Q.~~

~~Redeemable Noncontrolling Interest — Preferred Unit Limited Partners~~

~~The Partnership issued Series A Cumulative Redeemable Preferred Units (“Preferred Units”) on June 12, 2019. As~~accounting policies during the Transaction was accounted for as a reverse merger, the Company assumed certain Preferred Units that were issued and outstanding were assumed at Closing for accounting purposes. The Preferred Units are exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company. In July 2022, the Company redeemed all outstanding redeemable noncontrolling interest Preferred Units. See ~~Note 18—Subsequent Events~~ ~~in the Notes to our Condensed Consolidated Financial Statements for additional information.~~

The Preferred Units are accounted for on the Company’s Condensed Consolidated Balance Sheet as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units. Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value and are accounted for on the Company’s Condensed Consolidated Balance Sheet as a long-term liability embedded derivative. See discussion and additional detail in ~~Note 11—Series A Cumulative Redeemable Preferred Unitsin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.~~

~~Equity Method Investments~~

The Company follows the equity method of accounting when it does not exercise control over its equity interests, but can exercise significant influence over the operating and financial policies of the entity. Under this method, the equity investments are carried originally at acquisition cost, increased by the Company’s proportionate share of the equity interest’s net income and contributions made, and decreased by the Company’s proportionate share of the equity interest’s net losses and distributions received. Please refer to ~~Note 9—Equity Method Investments~~in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q, for further details of the Company’s equity method investments. Equity method investments acquired in the Transaction were recorded at fair value upon Closing. See discussion and additional detail in ~~Note 2—Business Combinationin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for purchase price allocation of the Transaction.~~

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three months ended March 31, 2023.

Inventory

Other current assets include condensate, residue gas and NGLs inventories that are valued at the lower of cost or market. ~~At the end of each reporting period, the Partnership assesses the carrying value of inventory and makes any adjustments necessary to reduce the carrying value to the applicable net realizable value.~~ Inventory was valued at ~~$13.0~~$4.2 million and ~~$2.1~~$4.8 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

~~Impairment of Long-Lived Assets~~

~~In accordance with Financial Accounting Standards Board (“FASB”) ASC 360,~~ ~~Property, Plant and Equipment,~~ long-lived assets, excluding goodwill, to be held and used by the Company are reviewed for impairment annually or on an interim basis if events or circumstances indicate that the fair value of the assets have decreased below their carrying value. For long-lived assets to be held and used, the Company bases their evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present.

The Company’s management assesses whether there has been an impairment trigger, and if a trigger is identified, then the Company would perform an undiscounted cash flow test at the lowest level for which identifiable cash flows are independent of cash flows from other assets. If the sum of the undiscounted future net cash flows is less than the net book value of the property, an impairment loss is recognized for any excess of the property’s net book value over its estimated fair value. The Company did not recognize impairment losses for long-lived assets during the three and six months ended June 30, 2022 and 2021.

Transactions with Affiliates

The accounts receivable from or payable to affiliates represent the net result of the Company’s monthly revenue, capital and operating expenditures, and other miscellaneous transactions to be settled with Apache and its subsidiaries, who controlled the Company prior to the Transaction. Accounts receivable from affiliates was ~~$20.2~~$24.2 million and $17.6 million as of ~~June 30, 2022.~~March 31, 2023 and December 31, 2022, respectively. Revenue from affiliates was ~~$30.5~~$25.3 million and ~~$46.2~~$15.6 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, respectively. Accrued expense due to affiliates was ~~$0.2 million as of June 30, 2022,~~immaterial, and operating expenses were $0.3 million and nil for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~were immaterial.~~respectively.

~~Net Income Per Share~~

~~Basic net income per share is calculated by dividing net income attributable~~In addition, the Company incurred cost of sales with two of its equity method investment (“EMI”) pipeline entities, Permian Highway Pipeline LLC (“PHP”) and Breviloba, LLC (“Breviloba”). The Company paid a demand fee to ~~Class A common shareholders by~~PHP and paid a capacity fee to Breviloba for certain volumes moving on the weighted-average number of shares of Class A Common Stock outstanding during the period. Class C Common Stock is excluded from the weighted-average shares outstanding for the calculation of basic net income per share, as holders of Class C Common Stock are not entitled to any dividends or liquidating distributions. No net income per share was computed forShin Oak NGL Pipeline. For the three ~~and six~~ months ended ~~June 30, 2021, as no Class A Common Stock was outstanding with respect to BCP as the accounting acquirer as of June 30, 2021.~~

The Company uses the “if-converted method” to determine the potential dilutive effect of (i) an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) for shares of Class A Common Stock, (ii) an assumed exercise of the outstanding publicMarch 31, 2023 and private warrants for shares of Class A Common Stock and (iii) an assumed exchange of the outstanding Preferred Units for shares of Class A Common Stock. The dilutive effect of any earn-out consideration payable in shares is only included in periods for which the underlying conditions for the issuance are met.

~~Recently Adopted Accounting Pronouncement~~

~~Effective January 1,~~ 2022, the Company ~~adopted ASU 2021-08~~recorded cost of sales of $14.6 million and $3.6 million, respectively, with these affiliates.

~~, Business Combinations (Topic 805), Accounting~~

2. BUSINESS COMBINATIONS

As of March 31, 2023, our allocation of purchase price for ~~Contract Assets~~acquisitions made during 2023 and ~~Contract Liabilities from Contracts with Customers (“ASU 2021-08”),~~ which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, ~~Revenue from Contracts with Customers~~. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value. With adoption of ASU 2021-08, the Company assumed contract liabilities at carrying value of $9.1 million upon Closing.2022 are detailed below:

~~Effective January 1, 2022, the Company adopted ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848) (“ASU 2020-04”)~~. ASU 2020-04 was issued to ease the potential accounting burden expected when global capital markets move away from LIBOR, the benchmark interest rate banks use to make short-term loans to each other. The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationship, and other transactions affected by


	Acquisition Date	Acquisition	Considerations Transferred		Current Assets		Property Plant & Equipment		Intangible Assets		Other Long Term Assets		Goodwill		Liabilities		Noncontrolling Interest
			(In thousands)
(1)	Q1 2023	Midstream Infrastructure Assets and Incentive and Acceleration Agreement(a)	$	125,000	$	4,736	$	61,850	$	3,150	$	55,264	$	—	$	—	$	—
(2)	Q1 2022	Altus Midstream Company (“ALTM”)	$	1,013,745	$	38,750	$	634,923	$	13,200	$	1,752,500	$	5,077	$	(967,988)	$	(462,717)

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~~reference rate reform if~~

(a)Consideration includes $65 million paid for certain ~~criteria are met. Interest rate applied~~midstream assets and the $60 million paid related to the ~~Company’s~~incentive and acceleration agreement.

Midstream Infrastructure Assets

The Partnership closed on a purchase and sale agreement for certain midstream assets for $65.0 million together with a new ~~debt resulting from~~20 year midstream service agreement. In addition, the ~~comprehensive refinance is based~~Partnership entered into an incentive and acceleration agreement related to near term supplemental development activities on ~~Secured Overnight Financing Rate (“SOFR”), which is a broad measure~~acreage dedicated for midstream services to affiliates of the ~~cost~~Partnership. Such development activities will begin in 2023 and are subject to semi-annual performance milestones and subject to refund with consequential monetary penalty if not satisfied. Consideration for the incentive and acceleration agreement of ~~borrowing cash overnight collateralized by treasury securities. Refer to~~ ~~Note 6—Debt~~$60 million was capitalized as a contract asset in accordance with ASC 606, of which $4.7 million is included in “Prepaid and ~~Financing Cos~~tsOther Current Assets” and $55.3 million is included in “Deferred Charges and Other Assets” in the ~~Notes~~condensed consolidated balance sheet as of March 31, 2023. These transactions were accounted for as a business combination in accordance with ASC 805. Certain data necessary to ~~our Condensed Consolidated Financial Statements of this Form 10-Q for discussion of SOFR applicable~~complete the purchase price allocation is not yet available, including, but not limited to, the ~~Company’s debt structures.~~

~~Recent Accounting Pronouncement Not Yet Adopted~~

~~In June 2022, the FASB issued ASU 2022-03,~~ ~~Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”).~~ ~~The amendments in ASU 2022-03 clarify that a contractual restriction on the sale of an equity security is not considered part~~completion of the ~~unit of account~~valuation of the ~~equity security~~underlying assets and therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendments also require the following disclosures for equity securities subject to contractual sale restrictions: (1) The fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet; (2) The nature and remaining duration of the restriction(s); (3) The circumstances that could cause a lapse in the restriction(s). This guidance is effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.liabilities assumed. The Company is ~~currently evaluating~~continuing its review of these matters during the ~~effect that ASU 2022-03 will have on its Consolidated Financial Statements.~~measurement period. Acquisition-related costs were immaterial for this transaction.

~~In March 2022, the FASB issued ASU 2022-01,~~ ~~Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method~~ ~~(“ASU 2022-01”)~~. Current GAAP permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio. The amendments in ASU 2022-01 allow nonprepayable financial assets also to be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets, thereby allowing consistent accounting for similar hedges. The amendments in ASU 2022-01 also clarify the accounting for and promote consistency in the reporting of hedge basis adjustments applicable to both a single hedged layer and multiple hedged layers as follows: (1) an entity is required to maintain basis adjustments in an existing hedge on a closed portfolio basis (that is, not allocated to individual assets), (2) an entity is required to immediately recognize and present the basis adjustment associated with the amount of the designated layer that was breached in interest income. In addition, an entity is required to disclose that amount and the circumstances that led to the breach, (3) an entity is required to disclose the total amount of the basis adjustments in existing hedges as a reconciling amount if other areas of GAAP require the disaggregated disclosure of the amortized cost basis of assets included in the closed portfolio, and (4) an entity is prohibited from considering basis adjustments in an existing hedge when determining credit losses. The guidance is effective for public business entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of ASU 2022-01 for any entity that has adopted the amendments in ASU 2017-02 for the corresponding period. TheAltus Midstream Company ~~is currently evaluating the effect that ASU 2022-01 will have on its Consolidated Financial Statements.~~

~~2. BUSINESS COMBINATION~~

On February 22, 2022, the Company consummated the ~~previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021.~~Transaction. Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of BCP and BCP Raptor Holdco GP, LLC, a Delaware limited liability company and the ~~Contributed Entities~~general partner of BCP (the “Contributed Entities”) to the Partnership; and (ii) in exchange for such contribution, the Partnership ~~issued~~transferred to Contributor 50,000,000 common units representing limited partner interests in the Partnership and ~~the Company issued~~ 50,000,000 shares of the Company’s Class C Common Stock, par value $0.0001 per ~~share, to Contributor. Please refer to ““—The Transaction” discussed above.~~share.

The Transaction was accounted ~~for~~ as a ~~business combination~~reverse merger in accordance with ASC 805, which, among other things, requires assets acquired and liabilities assumed to be measured at their acquisition date fair value. ~~The Company also adopted ASU 2021-08, effective as of January 1, 2022, to record contract liabilities at their carrying value as of~~During the acquisition date. Although the Company was the legal acquirer, BCP was determined to be the accounting acquirer and legal acquiree. As a result, BCP and its subsidiaries’ net assets were carried at historical value, acquired net assets were measured at fair value except contract liabilities being recorded at carrying value at12-month measurement period following the acquisition date, ~~and results of operations of ALTM and its subsidiaries were included in~~ the ~~Company’s Condensed Consolidated Financial Statements from the Closing Date going forward.~~

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The preliminary purchase price allocation is based on an assessment of the fair value of the assets acquired and liabilities assumed in the acquisition using inputs that are not observable in the market and thus level 3 inputs. The fair value of the processing plant, gathering system and related facilities and equipment are based on market and cost approaches. The goodwill of $4.1 million relatesCompany made necessary adjustments as information became available to operational synergies. The value of the Preferred Units and assumed contingent liability was determined through a probability-weighted analysis of the expected future cash flows and other applicable valuation techniques. See additional details for Preferred Units in ~~Note 11—Series A Cumulative Redeemable Preferred Unitsand contingent liabilities inNote 8—Commitments and Contingenciesin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q. Certain data necessary to complete~~ the purchase price allocation, ~~is not yet available,~~ including, but not limited to, working capital and valuation of the underlying assets of the equity method investments and liabilities assumed. However, the Company is continuing its review of these matters during the measurement period, and if new information obtained about facts and circumstances that existed at the acquisition date identifies adjustments to the liabilities initially recognized, as well as any additional liabilities that existed at the acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to the provisional amounts initially recognized.investments. The Company ~~will finalize the purchase price allocation during the 12-month period following the acquisition date.~~

~~The following table summarizes the preliminary estimated fair value~~recorded goodwill of ~~assets acquired and liabilities assumed in the Transaction in accordance with ASC 805:~~

~~(In thousands)~~

~~Amount~~

~~Cash and cash equivalent~~

~~13,401~~

~~Accounts receivable~~

~~1,919~~

~~Accounts receivable - affiliates~~

~~15,681~~

~~Property, plant, and equipment, net~~

~~634,923~~

~~Intangible assets, net~~

~~13,200~~

~~Investments in unconsolidated affiliates~~

~~1,755,000~~

~~Prepaid expense and other assets~~

~~8,225~~

~~Goodwill~~

~~4,081~~

~~Total assets acquired~~

~~2,446,430~~

~~Accrued expenses and other accrued liabilities~~

~~5,688~~

~~Long-term debt~~

~~657,000~~

~~Embedded derivative liabilities~~

~~89,050~~

~~Contract liabilities~~

~~9,102~~

~~Mandatory redeemable Preferred Units~~

~~200,667~~

~~Deferred tax liabilities~~

~~4,010~~

~~Contingent liabilities~~

~~4,451~~

~~Total liabilities assumed~~

~~969,968~~

~~Redeemable noncontrolling interest - Preferred Unit limited partners~~

~~462,717~~

~~Total consideration transferred~~

~~1,013,745~~

$5.1 million as of December 31, 2022 related to operational synergies. The Company incurred acquisition-related costs of ~~$0.7 million~~nil and ~~$6.4~~$5.7 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~respectively.~~

~~Supplemental Pro Forma Information~~

The unaudited supplemental pro forma financials are for informational purposes only and are not indicative of future results. The results below for the three and six months ended June 30, 2022 and 2021 combine the results of the Company and the Partnership, giving effectrespectively, related to the ~~Transaction as if it had been completed on January 1, 2021.~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(In thousands) Pro forma Pro forma Pro forma Pro forma
Revenues $ 335,572 $ 171,359 $ 619,674 $ 353,608
Net income including noncontrolling interest $ 132,159 $ 18,845 $ 145,627 $ 35,647

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Given the assumed pro forma transaction date of January 1, 2021, we removed $0.7 million and $19.5 million of acquisition-related expenses for the three and six months ended June 30, 2022, respectively, and recognized $2.2 million and $31.1 million of total acquisition-related expenses for the three and six months ended June 30, 2021, respectively.Transaction.

3. REVENUE RECOGNITION

Disaggregation of Revenue

The following table presents a disaggregation of the Company’s ~~revenue.~~revenue:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022

		(In thousands)										(In thousands)
Gathering and processing services	Gathering and processing services	$	102,080	$	62,242	$	182,525	$	129,904	Gathering and processing services		$	103,425	$	80,445
Natural gas, NGLs and condensate sales	Natural gas, NGLs and condensate sales	229,651		71,099		404,579		151,092		Natural gas, NGLs and condensate sales		173,824		174,928
Other revenue	Other revenue	3,841		2,425		5,717		2,873		Other revenue		3,791		1,876

Total revenues and other	Total revenues and other	$	335,572	$	135,766	$	592,821	$	283,869	Total revenues and other		$	281,040	$	257,249

There have been no significant changes to the Company’s contracts with customers during the three ~~and six~~ months ended ~~June 30, 2022. Contracts with customers acquired through the Transaction had similar structures as the Company’s existing contracts with customers.~~March 31, 2023. The Company recognized revenues from ~~MVC~~minimum volume commitment (“MVC”) deficiency payments of ~~$0.3~~$1.1 million and ~~NaN~~nil for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $0.3 million and $2.5 million for the six months ended June 30, 2022 and 2021,~~ respectively.

Remaining Performance Obligations

The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenues as of ~~June 30, 2022:~~March 31, 2023:

Amount
Fiscal Year (In thousands)
Remaining of 2022 $ 10,633
2023 43,177
2024 40,247
2025 49,182
2026 34,631
Thereafter 191,293
$ 369,163

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	Amount

Fiscal Year	(In thousands)
Remaining of 2023	$	27,703
2024	38,970
2025	44,498
2026	34,631
2027	35,405
Thereafter	155,888
	$	337,095

Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to customer contracts that have fixed pricing and fixed volume terms and conditions, generally including contracts with payment obligations associated with MVCs.

Contract Liabilities

The following table provides information about contract liabilities from contracts with customers as of ~~June 30, 2022:~~March 31, 2023:

Amount

(In thousands)

Balance at December 31, ~~2021~~2022

~~14,756~~29,300

Reclassification of beginning contract liabilities to revenue as a result of performance ~~obligation~~obligations being satisfied

~~(3,224)~~(2,059)

Cash received in advance and not recognized as revenue

~~17,517~~669

Balance at ~~June 30, 2022~~March 31, 2023

~~29,049~~27,910

Less: Current portion

~~6,150~~5,919

Non-current portion

~~22,899~~21,991

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Contract liabilities relate to payments received in advance of satisfying performance obligations under a contract, which result from contribution in aid of construction payments. Current and noncurrent contract liabilities are included in “Other Current Liabilities” and “Contract Liabilities,” respectively, of the Condensed Consolidated Balance Sheets.

Contract Cost Assets

The Company has capitalized certain costs incurred to obtain a contract that would not have been incurred if the contract had not been obtained. These costs are recovered through the net cash flows of the associated contract. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had contract acquisition cost assets of ~~$17.5~~$76.2 million and ~~$18.4~~$17.8 million, respectively. Current and noncurrent contract cost assets are included in “Prepaid and Other Current Assets” and “Deferred Charges and Other Assets,” respectively, of the Condensed Consolidated Balance Sheets. The Company amortizes these assets as cost of sales on a straight-line basis over the life of the associated long-term customer ~~contract.~~contracts. The Company recognized cost of sales associated with these assets of ~~$0.4~~$1.7 million and $0.4 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $0.9 million and $0.9 million for the six months ended June 30, 2022 and 2021,~~ respectively.

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4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost or fair market value at the date of acquisition less accumulated depreciation. The cost basis of constructed assets includes materials, labor, and other direct costs. Major improvements or betterment are capitalized, while repairs that do not improve the life of the respective assets are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets.

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


							March 31,		December 31,
		June 30, 2022		December 31, 2021			2023		2022

		(In thousands)					(In thousands)
Gathering, processing and transmission systems and facilities		$	2,788,565	$	2,121,434
Gathering, processing, and transmission systems and facilities						Gathering, processing, and transmission systems and facilities	$	3,004,016	$	2,904,084
Vehicles	Vehicles	7,194		6,090		Vehicles	10,331		9,290
Computers and equipment	Computers and equipment	3,796		4,271		Computers and equipment	5,504		4,289
Less: accumulated depreciation		(402,994)		(337,030)
Less: accumulated depreciation and accretion						Less: accumulated depreciation and accretion	(512,451)		(474,258)
Total depreciable assets, net	Total depreciable assets, net	2,396,561		1,794,765		Total depreciable assets, net	2,507,400		2,443,405
Construction in progress	Construction in progress	64,332		24,888		Construction in progress	104,900		70,325
Land	Land	20,179		19,626		Land	21,873		21,482
Total property, plant and equipment, net		$	2,481,072	$	1,839,279
Total property, plant, and equipment, net						Total property, plant, and equipment, net	$	2,634,173	$	2,535,212

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 reporting date. The Company recorded ~~$36.6~~$38.4 million and ~~$26.6~~$30.8 million of depreciation expense for the three months ended ~~June 30,~~March 31, 2023 and 2022, respectively. There were no triggering events for property, plant and ~~2021, respectively, and $67.5 million and $52.2 million of depreciation expense for~~equipment during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021, respectively.~~2022.

5. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

Goodwill totaled $5.1 million as of March 31, 2023 and December 31, 2022. The ~~Company closed a business combination transaction on February 22, 2022, refer~~goodwill of $5.1 million is within the Midstream Logistics segment, and pertains to ~~the Transaction in~~ ~~Note 2—Business Combination~~ in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q. The Transaction was accounted for as a business combination pursuant to ASC 805. In connection with the Transaction, the Company recorded excess of the purchase price over net assets acquired ~~as goodwill. The Company recorded goodwill of $4.1 million as of June 30, 2022.~~in connection with the Transaction.

Goodwill is tested at least annually as of ~~December 31~~November 30 of each year, or more frequently as events occur or circumstances change that would more-likely-than-not reduce fair value of a reporting unit below its carrying value. Company’s management assesses whether there have been events or circumstances that trigger the fair value of the reporting unit to be lower than its net carrying value since consummation of the Transaction and concluded that goodwill was not impaired as of ~~June 30, 2022.~~

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March 31, 2023.

Intangible Assets

Intangible assets, net, are comprised of the following:


							March 31,		December 31,
		June 30, 2022		December 31, 2021			2023		2022

		(In thousands)					(In thousands)
Customer contracts	Customer contracts	$	1,136,728	$	1,135,963	Customer contracts	$	1,142,278	$	1,137,831
Right of way assets	Right of way assets	120,401		99,345		Right of way assets	134,716		127,539
Less accumulated amortization	Less accumulated amortization	(509,408)		(449,259)		Less accumulated amortization	(600,478)		(569,981)
Total amortizable intangible assets, net	Total amortizable intangible assets, net	$	747,721	$	786,049	Total amortizable intangible assets, net	$	676,516	$	695,389

The fair value of acquired customer contracts was capitalized as a result of acquiring favorable customer contracts as of the closing dates of certain past acquisitions and is being amortized using a straight-line method over the remaining term of the customer contracts, which range from one to twenty years. ~~Right of way~~Right-of-way assets relate primarily to underground pipeline easements and have a useful life of ten years and are amortized using the straight-line method. The right of way agreements are generally for an initial term of ten years with an option to renew for an additional ten years at agreed upon renewal rates based on certain indices or up to 130% of the original consideration paid.

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On March 31, 2023, remaining weighted average amortization periods for customer contracts and right of way assets were approximately 7.36 years and 6.95 years, respectively. Overall remaining weighted average amortization period for the intangible assets as of March 31, 2023 was approximately 7.31 years.

The Company recorded ~~$30.0~~$30.5 million and ~~$30.5~~$30.2 million of amortization expense for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $60.1 million and $60.9 million of amortization expense for the six months ended June 30, 2022 and 2021,~~ respectively. There was no impairment recognized on intangible assets for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

6. ~~DEBT AND FINANCING COSTS~~

~~June 2030 Senior Notes~~

On June 8, 2022, the Partnership completed a private placement of $1.00 billion aggregate principal amount of its 5.875% Sustainability-Linked Senior Notes due 2030 (the “Notes”), which are fully and unconditionally guaranteed by the Company.

The Notes were issued at 99.588% of their face amount and will mature on June 15, 2030. Interest accrues from June 8, 2022 and is payable semi-annually on June 15 and December 15 of each year, commencing December 15, 2022. The aggregate fees, expenses, and original issue discount paid to obtain the notes totaled $21.6 million and were capitalized as debt issuance cost and included in the Condensed Consolidated Balance Sheets as a direct deduction to the Notes as the Notes were transferred to third-party investors that pay the stated principal amount without deduction for the initial purchasers’ discount.

On or after June 15, 2027, the interest rate accruing on the Notes will be increased by an additional 0.250% per annum unless the Partnership satisfies, and an independent external verifier confirms satisfaction of the Sustainability Performance Targets (“SPT”) for the three key performance indicators outlined in the Sustainability-Linked Financing Framework published by the Company on May 16, 2022: 1) Scope 1 and Scope 2 greenhouse gas emissions intensity, 2) Scope 1 and Scope 2 methane gas emissions intensity and 3) female representation in corporate officer positions. The interest rate accruing on the Notes will be increased by an additional 0.083% per annum for each SPT which has not been satisfied and externally verified.

The Partnership may redeem some or all of the notes at any time or from time to time prior to maturity based on terms prescribed in the Notes. As of June 30, 2022, unamortized debt issuance costs associated with the Notes were $19.3 million.

~~Revolving Credit Facility~~

On June 8, 2022, the Partnership entered into a revolving credit agreement (the “Revolving Credit Agreement”) among Bank of America, N.A., as administrative agent (“Bank of America”), and the banks and other financial institutions party thereto, as lenders. The Revolving Credit Agreement provides for a $1.25 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”).

The Partnership may prepay borrowings under the Revolving Credit Facility at any time without premium or penalty (other than customary SOFR breakage costs), subject to certain notice requirements. All borrowings under the Revolving Credit Facility mature on June 8, 2027. The obligations under the Revolving Credit Agreement are fully and unconditionally guaranteed by the Company.

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The Revolving Credit Agreement provides for borrowings of either, at the Partnership’s option, base rate loans or term SOFR loans. Base rate loans bear interest at a rate per annum equal to the greatest of (a) the prime rate as announced from time to time by Bank of America, (b) the greater of (i) the federal funds effective rate and (ii) the overnight bank funding rate, plus 1/2 of 1.00% and (c) the adjusted term SOFR rate for an interest period of one month plus 1.00%, plus a margin that ranges between 0.25% and 1.00%, depending on the credit rating of the Partnership. SOFR loans bear interest at a rate per annum equal to the term SOFR rate for such interest periods plus 0.10%, plus a margin that ranges between 1.25% and 2.00%, depending on the credit rating of the Partnership. In obtaining the Revolving Credit Agreement, the Partnership incurred fees and expenses totaling $7.8 million, which was capitalized and included in the Condensed Consolidated Balance Sheets as “Prepaid and other current assets” and “Deferred charges and other assets.”

In addition, the Partnership is required to pay to each lender a commitment fee on the daily unfunded amount of such lender’s revolving commitment, which accrues at a rate that ranges between 0.15% and 0.35% depending on the credit rating of the Partnership.

~~There were no outstanding borrowings under the Revolving Credit Facility as of June 30, 2022.~~

~~Term Loan Credit Facility~~

On June 8, 2022, concurrently with the closing of the Revolving Credit Facility , the Partnership entered into a term loan credit agreement (the “TLA”) among PNC Bank, National Association, as administrative agent (“PNC Bank”), and the banks and other financial institutions party thereto, as lenders. The TLA provides for a $2.00 billion senior unsecured term loan credit facility (the “Term Loan Credit Facility”). The TLA matures on June 8, 2025. The obligations under the TLA are fully and unconditionally guaranteed by the Company.

The TLA provides for borrowings of either, at the Partnership’s option, base rate loans or term SOFR loans. Base rate loans bear interest at a rate per annum equal to the greatest of (a) the prime rate as announced from time to time by PNC Bank, (b) the greater of (i) the federal funds effective rate and (ii) the overnight bank funding rate, plus 1/2 of 1.00% and (c) the adjusted term SOFR rate for an interest period of one month plus 1.00%, plus a margin that ranges between 0.25% and 1.0%, depending on the credit rating of the Partnership. SOFR loans bear interest at a rate per annum equal to the term SOFR rate for such interest periods plus 0.10%, that if the plus a margin that ranges between 1.25% and 2.0%, depending on the credit rating of the Partnership. In obtaining the TLA, the Partnership incurred fee and expenses totaled $7.6 million, which was capitalized as debt issuance cost and included in the Condensed Consolidated Balance Sheets as direct deduction to the Term Loan Credit Facility.

Both the Revolving Credit Agreement and the TLA contain a “Sustainability Adjustments” feature that could result in a 0.05% increase or reduction to the effective interest rate if the Company fails to meet certain sustainability targets after 2022. “Sustainability Rate Adjustment” means, with respect to any KPI Metrics Report, for any period between Sustainability Pricing Adjustment Dates, (a) positive 0.05%, if neither of the Sustainability Performance Targets as set forth in the KPI Metrics Report have been satisfied for the relevant calendar year, (b) 0.00% if only one of the Sustainability Performance Targets as set forth in the KPI Metrics Report has been satisfied for the relevant calendar year and (c) negative 0.05% if both of the Sustainability Performance Targets as set forth in the KPI Metrics Report have been satisfied for the relevant calendar year.

“Sustainability Performance Targets” in the Revolving Credit Agreement and TLA mean, for any calendar year, with respect to (a) the Female Representation KPI, the target percentage of female representation in corporate officer positions for such calendar year and (b) the Methane Emissions KPI, the percentage reduction in methane gas emissions intensity relative to the baseline year for such calendar year; provided that, in each case, if the Partnership subsequently issues a sustainability-linked debt instrument linked to the same KPI Metric and with an observation date for such calendar year, but with a higher percentage of representation or reduction, as the case may be, the relevant Sustainability Performance Target shall be automatically adjusted upward to equal the percentage of representation or reduction, as applicable, required by such subsequent sustainability-linked debt instrument.

Both the Revolving Credit Agreement and the TLA contain customary covenants and restrictive provisions which may, among other things, limit Partnership’s ability to create liens, incur additional indebtedness, make restricted payments, or liquidate, dissolve, consolidate with, or merge into or with any other person. As of June 30, 2022, the Partnership is in compliance with all customary and financial covenants.

~~Repayment of Existing Credit Facilities~~

In June 2022, the Company used the net proceeds from the Notes, together with cash on hand and proceeds from the term loan credit facility, to repay all outstanding borrowings under its existing credit facilities and to pay certain related fees and

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expenses. In conjunction with the extinguishment of existing outstanding borrowings, the Company recognized a loss on extinguishment of debt of approximately $28.0 million. In addition, the unamortized debt issuance costs related to the existing outstanding borrowings were fully amortized and included in the loss on debt extinguishment calculation for the three and six months ended June 30, 2022.

The fair value of the term loan credit facility approximates fair value and is not publicly traded. The fair value of the Company and its subsidiaries’ consolidated debt as of June 30, 2022 and December 31, 2021 was $2.95 billion and $2.34 billion, respectively.

~~The following table summarizes the Company’s debt obligations as of June 30, 2022 and December 31, 2021:~~

June 30, 2022 December 31, 2021
(In thousands)
$2.0 billion unsecured term loan $ 2,000,000 $ —
$1.0 billion 2030 senior unsecured notes 1,000,000 —
$1.25 billion term loan — 1,175,417
$690 million term loan — 639,393
$513 million term loan — 479,377
$125 million revolving line of credit — 52,000
Total Long-term debt 3,000,000 2,346,187
Less: Debt issuance costs, net(1)
(28,730) (38,485)
2,971,270 2,307,702
Less: Current portion, net — (54,280)
Long-term portion of debt and finance lease obligations, net $ 2,971,270 $ 2,253,422

(1) Excluded unamortized debt issuance cost related to the Revolving Credit Facility. Unamortized debt issuance cost associated with the Revolving Credit Facility was $7.7 million and $2.2 million as of June 30, 2022 and December 31, 2021, respectively, and were included in the “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets.

~~The table below presents the components of the Company’s financing costs, net of capitalized interest:~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(In thousands)
Capitalized interest $ 197 $ 275 $ 301 $ 486
Debt issuance costs 3,149 3,332 6,538 6,637
Interest expense 22,001 29,000 45,282 50,794
Total financing costs, net of capitalized interest $ 25,347 $ 32,607 $ 52,121 $ 57,917

~~As of June 30, 2022 and December 31, 2021, unamortized debt issuance costs associated with the Notes and the Term Loan Credit Facility were $28.7 million and $38.5 million, respectively.~~

Debt issuance costs associated with the new and existing revolving credit facilities were $7.7 million and $2.2 million as of June 30, 2022 and December 31, 2021, respectively. As of June 30, 2022, the unamortized debt issuance costs associated with the new and existing revolving credit facilities were included in the “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets as there were no borrowings on the new or existing revolving credit facilities. As of December 31, 2021, the current and non-current portion of the unamortized debt issuance costs were included in the “Other non-current assets” and “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets.

The amortization of the debt issuance costs was charged to interest expense for the periods presented. The amount of debt issuance costs included in interest expense was $3.1 million and $3.3 million for the three months ended June 30, 2022 and 2021, respectively, and $6.5 million and $6.6 million for the six months ended June 30, 2022 and 2021, respectively.

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~~7. ACCRUED EXPENSES~~

~~The following table provides detail of the Company’s accrued expenses at June 30, 2022 and December 31, 2021:~~

June 30, 2022 December 31, 2021
(In thousands)
Accrued product purchases $ 199,292 $ 118,364
Accrued taxes 13,077 4,299
Accrued salaries, vacation, and related benefits 4,799 2,113
Accrued capital expenditures 11,255 2,995
Accrued interest expenses 3,787 —
Accrued other expenses 13,741 7,872
Total accrued expenses $ 245,951 $ 135,643

~~8. 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 additional information becomes available or circumstances change. As of June 30, 2022 and December 31, 2021, there were no accruals for loss contingencies.

~~Litigation~~

~~The Company is a party to various legal actions arising in the ordinary course of its businesses. In accordance with ASC 450,~~ ~~Contingencies~~, the Company accrues reserves for outstanding lawsuits, claims, and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more, than the amounts accrued.

The Company has entered into litigation with two third parties to collect outstanding receivables totaling $19.6 million that remain outstanding from the Winter Storm Uri during February of 2021. Given the counterparties’ sufficient creditworthiness and the valid claims that we hold, no allowance has currently been established for these items as we have legally enforceable agreements with these parties.

~~Environmental Matters~~

As an owner of infrastructure assets with rights to surface lands, the Company is subject to various local and federal laws and regulations relating to discharge of materials into, and protection of, 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 the Company to liability for pollution damages. The Company is not aware of any environmental claims existing as of June 30, 2022, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.

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~~Contingent Liabilities~~

~~Permian Gas Acquisition~~

As part of the acquisition of Permian Gas on June 11, 2019, consideration included a contingent liability arrangement with PDC Permian, Inc. (“PDC”) The arrangement requires additional monies to be paid by the Company to PDC on a per Mcf basis if the actual annual Mcf volume amounts exceed forecasted annual Mcf volume amounts starting in 2020 and continuing through 2029. The arrangement defines the incentive rate per Mcf for each qualifying year and the total monies paid under this arrangement are capped at $60.5 million. Amounts are payable on an annual basis over the earn-out period. The fair value of the contingent liability recognized on the acquisition date of $3.9 million was estimated utilizing the following key assumptions: (1) present value factors based on the Company’s weighted-average cost of capital, 2) a probability weighted payout based on an estimate of future volumes and (3) a discount period consistent with the arrangement’s life and the respective due dates of the potential future payments. Based on current forecasts and discussions with PDC, management revalued this contingent liability with updated assumptions at each reporting period. The Company did not expect PDC’s actual annual Mcf volume amounts to exceed forecasted amounts as of June 30, 2022; therefore, the estimated fair value of the contingent consideration liability was nil as of June 30, 2022. The estimated fair value of the contingent consideration liability related to this acquisition was $0.8 million as of December 31, 2021.

~~The Transaction~~

~~As part of the Transaction, the Company assumed contingent liabilities of $4.5 million related to earn-out a consideration of up to 2,500,000 shares of Class A Common Stock as follows:~~

• 1,250,000 shares if the per share closing price of the Class A Common Stock as reported by Nasdaq during any 30-trading-day period ending prior to November 9, 2023 is equal to or greater than $140.00 for any 20 trading days within such 30-trading-day period.

• 1,250,000 shares if the per share closing price of the Class A Common Stock as reported by Nasdaq during any 30-trading-day period ending prior to November 9, 2023 is equal to or greater than $160.00 for any 20 trading days within such 30-trading-day period.

Pursuant to ASC 805, this earn-out consideration was a pre-existing contingency and accounted for as an assumed liability to the acquirer on acquisition date. Immediately subsequent to the Closing, the Company evaluated the earn-out consideration classification in accordance with ~~ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).~~ ~~The Company determined the earn-out consideration to be classified as equity based on the settlement provision.~~

9. EQUITY METHOD INVESTMENTS

As of ~~June 30, 2022,~~March 31, 2023, the Company owned investments in the following long-haul pipeline entities in the Permian Basin. These investments were accounted for using the equity method of accounting. For each ~~equity method investment (“EMI”)~~EMI pipeline entity, 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 EMI pipeline. The table below presents the ownership percentages and investment balances held by the Company for each entity:

Ownership June 30, 2022 December 31, 2021
(In thousands)
Permian Highway Pipeline LLC(1)
53.3% $ 1,416,318 $ 626,477
Breviloba, LLC (Shin Oak) 33.0% 465,444 —
Gulf Coast Express Pipeline LLC 16.0% 460,549 —
$ 2,342,311 $ 626,477

~~(1) Ownership for Permian Highway Pipeline LLC (“PHP”) was 53.3% and 26.7% as of June 30, 2022 and December 31, 2021, respectively.~~


		March 31,		December 31,
	Ownership	2023		2022

		(In thousands)
Permian Highway Pipeline LLC ("PHP")	53.3%	$	1,519,825	$	1,474,800
Breviloba, LLC ("Breviloba")	33.0%	450,926		455,057
Gulf Coast Express Pipeline LLC ("GCX")	16.0%	442,154		451,483
		$	2,412,905	$	2,381,340

Additionally, as of ~~June 30, 2022,~~March 31, 2023, the Company also owned 15.0% of Epic Crude Holdings, LP (“EPIC”). However, no dollar value was assigned through the Transaction’s purchase price allocation as an adjustment was made to eliminate equity in losses of EPIC. No additional contribution was made to EPIC and no distribution or equity income was received from EPIC during the three ~~and six~~ months ended ~~June 30, 2022.~~March 31, 2023.

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~~As of June 30, 2022, the~~The unamortized basis differences included in the EMI ~~pipelines~~pipeline balances were ~~$414.3 million. There was no unamortized basis difference~~$359.8 million and $363.2 million as of March 31, 2023 and December 31, ~~2021.~~2022, respectively. These amounts represent differences in the Company’s contributions to date and the Company’s underlying equity in the separate net assets within the financial statements of the respective entities. Unamortized basis differences will be amortized into equity income over the useful lives of the underlying pipeline assets. There was capitalized interest of ~~$12.2~~$14.7 million and ~~$12.8~~$13.4 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Capitalized interest is amortized on a straight-line basis into equity income.

The following table presents the activity in the Company’s EMIs for the ~~six~~three months ended ~~June 30, 2022:~~March 31, 2023:


			Permian Highway Pipeline LLC			Breviloba, LLC		Gulf Coast Express Pipeline LLC			Total(2)			Permian Highway Pipeline LLC		Breviloba, LLC			Gulf Coast Express Pipeline LLC		Total
					Gulf Coast Express Pipeline LLC					Permian Highway Pipeline LLC

																		(In thousands)
		(In thousands)
Balance at December 31, 2021			$	626,477		$	—	$	—		$	626,477
Balance at December 31, 2022													Balance at December 31, 2022	$	1,474,800	$	455,057		$	451,483	$	2,381,340
Acquisitions	Acquisitions		815,000			470,000		470,000			1,755,000		Acquisitions	—		—					—
Contributions	Contributions		2,675			—		—			2,675		Contributions	57,218		—			—		57,218
Distributions	Distributions		(79,508)			(16,868)		(21,168)			(117,544)		Distributions	(42,570)		(11,869)			(19,118)		(73,557)

Capitalized interest													Capitalized interest	1,440		—			—		1,440
Equity income, net(1)	Equity income, net(1)		51,674			12,312		11,717			75,703		Equity income, net(1)	28,937		7,738			9,789		46,464

Balance at June 30, 2022			$	1,416,318		$	465,444	$	460,549		$	2,342,311
Balance at March 31, 2023													Balance at March 31, 2023	$	1,519,825	$	450,926		$	442,154	$	2,412,905

(1)For the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was ~~$3.3~~$1.9 million from ~~Permian Highway Pipeline LLC, $0.3~~PHP, $0.2 million from Breviloba, LLC and ~~$2.7~~$1.6 million from ~~Gulf Coast Express Pipeline, LLC.~~GCX.

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~~(2)~~

The EMIs acquired in the Transaction are included in the results from February 22, 2022 to June 30, 2022, and this is also the case for the additional 26.67% of PHP that was acquired in the Transaction. The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to
~~Note 1—Description of the Organization and Summary of Significant Accounting Policiesin the Notes to our Condensed Consolidated Financial Statements of this Form 10-Q, for further information on the Company’s basis of presentation~~.

Summarized Financial Information

The following tables represent selected statement of operations data for the Company’s EMI pipelines (on a 100 percent basis) for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.


		Three Months Ended June 30,
		2022											2021
																								Three Months Ended March 31,
		Permian Highway Pipeline LLC			Breviloba, LLC		Gulf Coast Express Pipeline LLC						Permian Highway Pipeline LLC(1)		Breviloba, LLC(1)			Gulf Coast Express Pipeline LLC(1)						2023													2022
								Permian Highway Pipeline LLC(1)	Gulf Coast Express Pipeline LLC(1)			Permian Highway Pipeline LLC		Breviloba, LLC							Gulf Coast Express Pipeline LLC				Permian Highway Pipeline LLC				Breviloba, LLC				Gulf Coast Express Pipeline LLC
																	Permian Highway Pipeline LLC		Breviloba, LLC				Gulf Coast Express Pipeline LLC				Permian Highway Pipeline LLC				Breviloba, LLC							Gulf Coast Express Pipeline LLC

				(In thousands)																					(In thousands)
Revenues	Revenues	$	98,808		$	50,091				$	90,769							$	99,366						$	47,447			$	90,703	Revenues				$	92,840				$	45,901			$	89,748			$	97,856	$	48,521	$	89,973
Operating income	Operating income	61,294			25,359		64,816						62,444			28,002				60,766		Operating income				56,805				21,949				65,216					59,476				26,314				63,443
Net income	Net income	61,307			25,284		64,461						62,329		27,645			60,551			Net income			59,691				22,211				71,091					59,213					26,366				63,529

Six Months Ended June 30,
2022 2021
Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC
Permian Highway Pipeline LLC(1)
Breviloba, LLC(1)
Gulf Coast Express Pipeline LLC(1)
(In thousands)
Revenues $ 196,664 $ 98,612 180,742 $ 197,214 $ 81,976 $ 179,072
Operating income 120,770 51,672 128,259 105,024 45,302 120,874
Net income 120,520 51,651 127,990 104,909 45,004 120,319

7. DEBT AND FINANCING COSTS

The following table summarizes the Company’s debt obligations as of March 31, 2023 and December 31, 2022:


	March 31,		December 31,
	2023		2022

	(In thousands)
$2.0 billion unsecured term loan	$	2,000,000	$	2,000,000
$1.0 billion 2030 senior unsecured notes	1,000,000		1,000,000
$1.25 billion revolving line of credit	537,000		395,000



Total long-term debt	3,537,000		3,395,000
Less: Debt issuance costs, net(1)	(25,352)		(26,490)
Total long-term debt, net	$	3,511,648	$	3,368,510

(1) ~~For~~Excluded unamortized debt issuance cost related to the revolving line of credit. Unamortized debt issuance cost associated with the revolving line of credit was $6.5 million and $6.9 million as of March 31, 2023 and December 31, 2022, respectively. The current and non-current portion of the unamortized debt issuance costs related to the revolving credit facilities were included in the “Prepaid and other current assets” and the “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets.

The table below presents the components of the Company’s financing costs, net of capitalized interest:


	Three Months Ended March 31,
		2023		2022

		(In thousands)
Capitalized interest		$	(2,233)	$	(104)
Debt issuance costs		1,521		3,389
Interest expense		70,020		23,489
Total financing costs, net of capitalized interest		$	69,308	$	26,774

As of March 31, 2023 and December 31, 2022, unamortized debt issuance costs associated with the senior unsecured notes and the term loan were $25.4 million and $26.5 million, respectively. The amortization of the debt issuance costs was charged to interest expense for the periods presented. The amount of debt issuance costs included in interest expense was $1.5 million and $3.4 million for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2023 and 2022, respectively.

Compliance with our Covenants

Both the revolving credit agreement with Bank of America, N.A., as administrative agent and the term loan credit agreement with PNC Bank as administrative agent contain customary covenants and restrictive provisions which may, among other things, limit the Partnership’s ability to create liens, incur additional indebtedness, make restricted payments, or liquidate, dissolve, consolidate with, or merge into or with any other person. The 5.875% Senior Notes due 2030 also contain covenants and restrictive provisions.

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As of March 31, 2023, the Partnership was in compliance with all customary and financial covenants.

Fair Value of Financial Instruments

The fair value of the Company ~~only had equity interest~~and its subsidiaries’ consolidated debt as of March 31, 2023 and December 31, 2022 was $3.52 billion and $3.34 billion, respectively. On March 31, 2023, the senior unsecured notes’ fair value was based on Level 1 inputs and the term loan and revolving line of credit’s fair value was based on Level 3 inputs.

8. ACCRUED EXPENSES

The following table provides detail of the Company’s current accrued expenses on March 31, 2023 and December 31, 2022:


	March 31,		December 31,
	2023		2022

	(In thousands)
Accrued product purchases	$	95,922	$	115,773
Accrued taxes	5,785		19,509
Accrued salaries, vacation, and related benefits	3,143		3,934
Accrued capital expenditures	15,830		3,892
Accrued interest	38,774		24,815

Accrued other expenses	16,853		5,991
Total current accrued expenses	$	176,307	$	173,914

Accrued product purchases mainly accrue the liabilities related to producer payments and any additional business-related miscellaneous fees we owe to third parties, such as transport or capacity fees as of March 31, 2023.

9. LEASE

Components of lease costs are included in ~~Permian Highway Pipeline LLC.~~the Condensed Consolidated Statements of Operations as general and administrative expense for real-estate leases and operating expense for non-real estate leases. Total operating lease costs were $10.8 million and $9.1 million for the three months ended March 31, 2023 and 2022, respectively. Short-term lease costs were $19 thousand and $2.6 million for the three months ended March 31, 2023 and 2022, respectively. Variable lease cost was immaterial for the three months ended March 31, 2023 and 2022.

The following table presents other supplemental lease information:


	Three Months Ended March 31,
			2023			2022

		(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases			$	10,632		$	9,154

Right-of-use assets obtained in exchange for new operating lease liabilities			$	63		$	4,490
Weighted-average remaining lease term — operating leases (in years)			1.94			1.82
Weighted-average discount rate — operating leases			8.89		%	7.58		%

1912

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10. EQUITY AND WARRANTS

Redeemable Noncontrolling Interest — Common Unit Limited Partners

On February 22, 2022, the Company consummated ~~the previously announced~~a business combination ~~transactions contemplated by the Contribution Agreement, dated as of October 21, 2021. Pursuant~~with Altus pursuant to the Contribution ~~Agreement, in~~Agreement. In connection with the ~~Closing,~~closing, (i) Contributor contributed all of the equity interests of the Contributed Entities to the Partnership; and (ii) in exchange for such contribution, the Partnership ~~issued~~transferred to Contributor 50,000,000 common units representing limited partner interests in the Partnership and ~~the Company issued~~ 50,000,000 shares of the Company’s Class C Common Stock, par value $0.0001 per ~~share, to Contributor.~~share. Please refer to ~~“The Transaction”~~the “Transaction” above.

The redemption option of the Common Unit is not legally detachable or separately exercisable from the instrument and is non-transferable, and the Common Unit is redeemable at the option of the holder. Therefore, the Common Unit is accounted for as redeemable noncontrolling interest and classified as temporary equity on the Company’s Condensed Consolidated Balance ~~Sheet.~~Sheets. During the first ~~half~~three months of ~~2022, 5,550,000~~2023, 180,962 common units were redeemed on a ~~1-for-one~~one-for-one basis for shares of Class A Common Stock and a corresponding number of shares of Class C Common Stock were cancelled. There were ~~94,450,000~~94,089,038 Common Units and an equal number of Class C Common Stock issued and outstanding as of ~~June 30, 2022.~~March 31, 2023. The Common Units fair value was approximately ~~$3.25~~$2.91 billion as of ~~June 30, 2022.~~March 31, 2023.

~~Redeemable Noncontrolling Interest — Preferred Unit Limited Partners~~Common Stock

~~Upon Closing, the Company assumed certain Preferred Units that~~As of March 31, 2023, there were ~~issued~~49,054,411 and ~~outstanding on acquisition date. The Preferred Units will be exchangeable for~~94,089,038 shares, respectively, of ~~the Company’s~~ Class A Common Stock ~~at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company. Refer to~~ ~~Note 11—Series A Cumulative Redeemable Preferred Units~~ ~~for further discussion. In July 2022, the Company redeemed all~~and Class C Common Stock issued and outstanding ~~redeemable noncontrolling interest Preferred Units. See~~ ~~Note 18—Subsequent Events~~ ~~in the Notes to our Condensed Consolidated Financial Statements for additional information.~~(collectively, “Common Stock”).

Public Warrants

As of ~~June 30, 2022,~~March 31, 2023, there were 12,577,350 Public Warrants (as defined below) outstanding. Each whole public warrant entitles the holder to purchase one tenth of a share of Class A Common Stock at a price of $115.00 per share (the “Public Warrants”). The Public Warrants will expire on November 9, 2023 or upon redemption or liquidation. The Company may call the Public Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant with not less than 30 days’ notice provided to the Public Warrant holders. However, this redemption right can only be exercised if the reported last sale price of the Class A Common Stock equals or exceeds $180.00 per share for any 20-trading days within a 30-trading day period ending three business days prior to sending the notice of redemption to the Public Warrant holders.

Private Placement Warrants

As of ~~June 30, 2022,~~March 31, 2023, there were 6,364,281 Private Placement Warrants (as defined below) outstanding, of which Apache holds 3,182,140. The private placement warrants will expire on November 9, 2023 and are identical to the Public Warrants discussed above, except (i) they will not be redeemable by the Company so long as they are held by the initial holders or their respective permitted transferees and (ii) they may be exercised by the holders on a cashless basis (the “Private Placement Warrants” and, together with the Public Warrants, the “Warrants”).

The Company recorded a fair value of ~~$0.1 million~~$25 thousand for the Public Warrants and a fair value of ~~$0.1 million~~$19 thousand for the Private Warrants as of ~~June 30, 2022~~March 31, 2023 on the Condensed Consolidated Balance Sheet in other non-current liabilities. Refer to Note ~~15—~~11—Fair Value Measurement in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding valuation of the Warrants.

Stock Repurchase Program

In February 2023, the Board of Directors (the “Board”) approved a share repurchase program (“Repurchase Program”), authorizing discretionary purchases of the Company’s Class A Common Stock up to $100.0 million in the aggregate. Repurchases may be made at management’s discretion from time to time, in accordance with applicable securities laws, on the open market or through privately negotiated transactions and may be made pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act. Privately negotiated repurchases from affiliates are also authorized under the Repurchase Program, subject to such affiliates’ interest and other limitations. The repurchases will depend on market conditions and may be discontinued at any time without prior notice. For the three months ended March 31, 2023, the Company repurchased 81,862 shares at a total cost of $2.4 million.

Dividend

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~~Dividend~~

~~On February 22, 2022,~~During the Company entered into a Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”) with certain stockholders including BCP Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP, Buzzard Midstream LLC, APA Corporation Apache Midstream LLC, and certain individuals (each, a “Reinvestment Holder”). Under the Reinvestment Agreement, each Reinvestment Holder is obligated to reinvest at least 20% of all distributions on Common Units or dividends on shares of Class A Common Stock in the Company’s Class A Common Stock. Additionally, the Audit Committee and subsequently the Company’s Board of Directors (the “Board”) resolved that for the calendar year 2022, 100% of all distributions or dividends received by each Reinvestment Holder would be reinvested in newly issued shares of Class A Common Stock. As described in these Condensed Consolidated Financial Statements, as the context requires, dividends paid to holders of Class A Common Stock and distributions paid to holders of Common Units may be referred to collectively as “dividends.”

~~On May 17, 2022,~~three months ended March 31, 2023, the Company made cash dividend payments of ~~$11.7~~$17.1 million to holders of Class A Common Stock and Class C Common Units and ~~$87.7~~$87.9 million was reinvested in shares of Class A Common Stock by ~~each~~ Reinvestment ~~Holder.~~Holders.

~~On July 20, 2022, the Board~~See Note 18 - Subsequent Events for discussion of dividend declared ~~a cash dividend of $0.75 per share~~ on the Company’s Class A Common Stock and a distribution of $0.75 per Common Unit from the Partnership to the holders of Common Units. Dividends are payable on August 17, 2022. Certain holders of Class A Common Stock and Class C Common Stock will receive a cash dividend with the balance receiving additional shares of Class A Common Stock under the Reinvestment Agreement.

~~Stock Split~~

~~On May~~April 19, 2022, the Company announced that its Board approved and declared a 2-for-one stock split with respect to its Class A Common Stock and Class C Common Stock, in the form of a stock dividend (the “Stock Split”). The Stock Split was accomplished by distributing 1 additional share of Class A Common Stock for each share of Class A Common Stock outstanding and 1 additional share of Class C Common Stock for each share of Class C Common Stock outstanding. The additional shares of Common Stock were issued on June 8, 2022 to holders of record at the close of business on May 31, 2022.

~~All corresponding per-share and share amounts for periods prior to June 8, 2022 have been retroactively restated in this Form 10-Q to reflect the Stock Split.~~2023.

11. ~~SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS~~

Prior to the Closing Date of the Transaction, the Partnership had 625,000 Preferred Units issued and outstanding. Immediately prior to the Closing, on February 22, 2022, the Partnership redeemed for cash, 100,000 Preferred Units in an amount equal to approximately $120.1 million. The Company assumed the remaining 525,000 Preferred Units as well as 29,983 paid-in-kind (“PIK”) Preferred Units that were issued and outstanding at the close of the acquisition. 150,000 of these Preferred Units and a pro rata amount of the PIK units contain a mandatory redemption feature as further discussed below.

~~Mandatorily Redeemable Preferred Units~~FAIR VALUE MEASUREMENTS

At the close of the Transaction, the Company effectuated the Third Amended and Restated Agreement of Limited Partnership of the Partnership (“Partnership LPA”), which among other things, provides for mandatory pro-rata redemptions by the Partnership of 50,000 Preferred Units at or prior to each of the six-, twelve- and eighteen-month anniversaries of the effectiveness of the Partnership LPA, for an aggregate of 150,000 Preferred Units over the eighteen-month period. Given this mandatory redemption feature and pursuant to ~~ASC 480, liability classification is required for these 150,000 Preferred Units and the pro rata PIK units.~~ The ~~Company values the liability as of each reporting date and records the change in valuation in the “Other income (expenses)” in the Condensed Consolidated Statements of Operations.~~

During the first half of 2022, the Partnership declared and paid mandatorily redeemable Preferred Units holders distribution of $1.9 million and the Partnership redeemed 125,000 units along with 7,138 PIK units for an aggregate amount totaling $152.6 million. Gains of $5.1 million and $9.6 million were recorded for the redemption for the three and six months ended June 30, 2022, respectively. For the remaining 25,000 Preferred Units that contain the mandatory redemption feature, the Company recorded $30.7 million as liability in “Other Liabilities” of the Condensed Consolidated Balance Sheet as of June 30, 2022. These remaining units were subsequently redeemed in July 2022. See ~~Note 18—Subsequent Events~~ ~~in the Notes to our Condensed Consolidated Financial Statements for additional information.~~

~~Table of Contents~~

~~Redeemable Noncontrolling Interest Preferred Units~~

~~The remaining 375,000 Preferred Units assumed on the Closing Date do not contain a mandatory redemption feature, and are accounted for on the~~ Company’s Condensed Consolidated Balance Sheets asreflect a ~~redeemable noncontrolling interest classified as temporary equity in accordance with the terms~~mixture of ~~the Preferred Units, including the redemption rights with respect thereto. The Preferred Units~~measurement methods for financial assets and liabilities. Public and private warrants, contingent liabilities and derivative financial instruments are ~~exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company.~~

The Company applies a two-step approach to measure the redeemable noncontrolling interest related to the Preferred Units, by first allocating a portion of the Company’s net income in accordance with the terms of the Partnership LPA.

After consideration of the foregoing, the Company records an additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end, if applicable. The amount of such adjustment is determined based upon the accreted value method to reflect the passage of 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 Series A Redemption Price (as defined in the Partnership LPA) calculated at the seventh anniversary of the closing of the Preferred Unit Offering. The total adjustment is limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end is equal to the greater of (a) the sum of (i) the carrying amount of the Preferred Units determined in accordance with ASC 810, plus (ii) the fair value of the embedded derivative liability and (b) the accreted value of the net transaction price.

~~Activities related to Preferred Units for the six months ended June 30, 2022 are as follows:~~

Units Outstanding
Amount (3)
(In thousands, except for unit data)
Redeemable noncontrolling interest — Preferred Units, immediately upon Closing Date of Transaction(1)
396,417 $ 462,717
Cash distribution paid to Preferred Unit limited partners — (6,937)
Distribution payable to Preferred Unit limited partners (6,937)
Allocation of net income — 17,420
Accreted redemption value adjustment — 97,075
Redeemable noncontrolling interest — Preferred Units, as of June 30, 2022 396,417 563,338
Embedded derivative liability(2)
488
$ 563,826

~~(1)Included 21,417 PIK units on a pro rata basis.~~

~~(2)Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement~~reported at fair value. ~~Refer toNote 15—Fair Value Measurements~~Other financial instruments are reported at historical cost or amortized cost on our Condensed Consolidated Balance Sheets. Long-term debt is primarily the other financial instrument for ~~discussion of the~~which carrying value could vary significantly from fair ~~value changes in the embedded derivative liability during the period.~~

~~(3)As of June 30, 2022, the Redemption Price would have been based on an 11.08% internal rate of return, which would equate to a redemption value of $700.0 million.~~

~~On July 8, 2022, the Company redeemed all outstanding redeemable noncontrolling interest Preferred Units.~~value. See Note 18 ~~—Subsequent Events~~ ~~in the Notes to our Condensed Consolidated Financial Statements for additional information.~~

~~12. SHARE-BASED COMPENSATION~~

~~The Company previously issued incentive units, which included performance~~7—Debt and service conditions, to certain employees and board members. The units consisted of Class A-1, Class A-2, and Class A-3 units. These units derived value from the Company’s certain wholly owned subsidiaries. Class A-1 and A-2 units would have vested upon either (i) the date of consummation of a change in control or (ii) the date that is 1-year following the consummation of the initial public offering (“IPO”) of the Company (or its successor) (collectively “Exit Events”). Class A-3 units would have vested upon a change in control, if the participants were employed at the time of the event, or upon termination of the participant by the Company.

~~Table of Contents~~

Immediately upon Closing, all outstanding Class A-1 and Class A-2 units were cancelled and exchanged for 5,300,000 shares (the “Class A Shares”), post 2-for-one stock split, of the Company’s Class A Common Stock. These Class A Shares are issued and outstanding as they were distributed pro rata to all holders of Class A-1 and Class A-2 units by the Common Unit limited partners from the 50,000,000 common units, pre-stock-split, they received upon the Closing. The Common Unit limited partners redeemed Common Units needed for the Class A shares distribution upon the Closing. The Class A Shares are held in escrow and will vest over ~~three~~ to four years. Similarly, the Class A-3 units were exchanged for approximately 326,000, post two-for-one stock split, Class C Common Stock and Common Units (the “Class C Shares”) and will vest over four years. The Company also issued approximately 76,000, post 2-for-one stock split, replacement restricted share awards (“Replacement Awards”) to new employees that transitioned from ALTM as part of the merger. These changes for all three share types established a new measurement date. The Class A Shares, Class C Shares and Replacement Awards were valued based on the Company’s publicly quoted stock price on the measurement date, which was the Closing Date of the Transaction. With respect to these shares, the Company recorded compensation expenses of $12.2 million and $18.3 million for the three and six months ended June 30, 2022, respectively, based on a straight line amortization of the associated awards’ fair value over the respective vesting life of the shares. With respect to the incentive units, no compensation expenses were recorded for the three and six months ended June 30, 2021, as the incentive units were considered non-vested prior to their cancellation and exchange for Class A or Class C Common Stock.

~~13. INCOME TAXES~~

~~The Company is subject to U.S. federal income tax and the Texas margin tax. Income tax expense included in the Condensed Consolidated Financial Statements in this Form 10-Q is as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2022
(In thousands)
Income before income taxes $ 131,610 $ 153,675
Income tax expense $ 162 $ 838
Effective tax rate (1)
0.12 % 0.55 %

(1) Prior to the Closing on February 22, 2022, BCP, the accounting acquirer, was organized as limited partnership and was not subject to the U.S. federal income tax for the three and six months ended June 30, 2021.

The effective tax rate for the three and six months ended June 30, 2022 was lower than the statutory rate mainly due to the impact of tax attributable to noncontrolling interests related to the Common Units and Preferred Units limited partners and valuation allowance.

~~Upon Closing, the Company assumed certain uncertain tax positions from ALTM. The Company accounts for income taxes in accordance with~~ ~~ASC 740—Income Taxes~~, which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements. Tax positions generally refer to a position taken in a previously filed income tax return or expected to be included in a tax return to be filed in the future that is reflected in the measurement of current and deferred income tax assets and liabilities. Reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:

~~(In thousands)~~

~~Amount~~

~~Balance at December 31, 2021~~

—

~~Increase related to ALTM acquisition~~

~~5,238~~

~~Reduction related to current year activities~~

~~(2,455)~~

~~Balance at June 30, 2022~~

~~2,783~~

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~~14. NET INCOME PER SHARE~~

~~The computation of basic and diluted net income per share for the periods presented in the Condensed Consolidated Financial Statements is shown in the tables below.~~

Three Months Ended June 30,
2022 2021
Income
Weighted-average shares(3)
Per Share Income
Weighted-average shares(3)
Per Share
(In thousands, except per share data)
Basic:
Net income attributable to Class A common shareholders $ 6,438 39,297 $ 0.16 $ — — $ —
Less: Net income available to participating unvested restricted Class A common shareholders(4)
(4,184) — $ — — — $ —
Total net income attributable to Class A common shareholders $ 2,254 39,297 $ 0.06 $ — — $ —
Effect of dilutive securities:
Unvested Class A common shares — 32 $ — — — $ —
Diluted(1)(2):
Net income attributable to Class A common shareholders $ 2,254 39,329 $ 0.06 $ — — $ —

Six Months Ended June 30,
2022 2021
Income
Weighted-average shares(3)
Per Share Income
Weighted-average share (3)
Per Share
(In thousands, except per share data)
Basic:
Net income attributable to Class A common shareholders $ 10,303 38,766 $ 0.27 $ — — $ —
Less: Net income available to participating unvested restricted Class A common shareholders(4)
(4,184) — $ — — — $ —
Total net income attributable to Class A common shareholders $ 6,119 38,766 $ 0.16 $ — — $ —
Effect of dilutive securities:
Unvested Class A common shares — 30 $ — — — $ —
Diluted(1)(2):
Net income attributable to Class A common shareholders $ 6,119 38,796 $ 0.16 $ — — $ —

~~(1)~~The effect of an assumed exchange of the outstanding Preferred Units and outstanding public and private warrants for shares of Class A Common Stock would have been anti-dilutive for all periods presented in which the Preferred Units and public and private warrants were outstanding.

~~(2)~~The effect of an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) would have been anti-dilutive for all periods presented in which the Common Units were outstanding.

~~(3)Share amounts have been retroactively restated to reflect the Company’s~~ ~~2-for-one~~ ~~Stock Split. Refer to~~ ~~Note 10—Equity and Warrants~~Financing Costs in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.

~~(4)Represents dividends paid to unvested restricted Class A common shareholders.~~

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~~15. FAIR VALUE MEASUREMENTS~~

The Company’s financial assets and liabilities measured at fair value on a recurring basis include cash and cash equivalents, accrued receivables, accounts receivable, accounts receivable from affiliates, dividends and distributions payable, interest rate and commodity swap derivatives, and Company’s private and public warrants and an embedded derivative liability related to the issuance of Preferred Units.

Topic 820 establishes a framework for measuring fair value in U.S. GAAP, clarifies the definition of fair value within that framework and requires disclosures about the use of fair value measurements. Topic 820 defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Topic 820 provides a framework for measuring fair value, establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and requires consideration of the counterparty’s creditworthiness when valuing certain assets.

Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1 inputs). The three levels of the fair value hierarchy under Topic 820 are described below:

Level 1 inputs: Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 inputs: Inputs, other than quoted prices in active markets, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 inputs: Prices or valuations that require unobservable inputs that are both significant to the fair value measurement and unobservable. Valuation under Level 3 generally involves a significant degree of judgment from management.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Where available, fair value is based on observable market prices or inventory parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instrument’s complexity.

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~

June 30, 2022
Level 1 Level 2 Level 3 Total
(In thousands)
Mandatorily redeemable Preferred Units $ — $ — $ 30,717 $ 30,717
Embedded derivative — — 488 488
Public warrants 126 — — 126
Private warrants — — 95 95
Total liabilities $ 126 $ — $ 31,300 $ 31,426

December 31, 2021
Level 1 Level 2 Level 3 Total
(In thousands)
Commodity swaps $ — $ 205 $ — $ 205
Interest rate derivatives — 2,662 — 2,662
Total liabilities $ — $ 2,867 $ — $ 2,867
2022:

2514

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~~The Company is exposed to certain risks arising from both its business operations and economic conditions, and the Company enters into certain~~


	March 31, 2023
	Level 1		Level 2		Level 3		Total

	(In thousands)
Commodity swap	$	—	$	10,545	$	—	$	10,545
Interest rate derivatives	—		3,413		—		3,413
Total assets	$	—	$	13,958	$	—	$	13,958

Commodity swaps	$	—	$	7,529	$	—	$	7,529
Interest rate derivatives	—		26,256		—		26,256

Public warrants	25		—		—		25
Private warrants	—		—		19		19

Total liabilities	$	25	$	33,785	$	19	$	33,829


	December 31, 2022
	Level 1		Level 2		Level 3		Total

	(In thousands)
Commodity swap	$	—	$	4,288	$	—	$	4,288
Interest rate derivatives	—		2,675		—		2,675
Total assets	$	—	$	6,963	$	—	$	6,963

Commodity swaps	$	—	$	5,718	$	—	$	5,718
Interest rate derivatives	—		8,328		—		8,328

Public warrants	50		—		—		50
Private warrants	—		—		38		38

Total liabilities	$	50	$	14,046	$	38	$	14,134

Our derivative contracts consist of interest rate swaps and commodity swaps. Valuation of these derivative contracts involved both observable publicly quoted prices and certain inputs to ~~manage~~ the ~~exposures.~~credit valuation that may not be readily observable in the marketplace. As such our derivative contracts are classified as Level 2 in the hierarchy. Refer to Note ~~16—~~12—Derivatives and Hedging Activities in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further discussion related to commodity swaps and interest rate derivatives.

The Company bifurcated and recognized the embedded derivative associated with the Preferred Units related to the exchange option provided to the Preferred Unit holders under the terms of the Partnership LPA. The valuation of the embedded derivative, (using an income approach), was based on expected future interest rates using the Black-Karasinski model, the Company’s imputed interest rate of 5.88%, interest rate volatility of 39.51%, the expected timing of periodic cash distributions, the estimated timing for the potential exercise of the exchange option of 4.0 years and anticipated dividend yields of the Preferred Units. The Company recorded unrealized gains of $91.4 million and $88.6 million for the three and six months ended June 30, 2022, which was recorded as an “Unrealized gain on embedded derivative” in the Condensed Consolidated Statement of Operations. The Company has classified these recurring fair value measurements as Level 3 in the fair value hierarchy.

The carrying value of the Company’s Public Warrants are recorded at fair value based on quoted market prices, a Level 1 fair value measurement. The carrying value of the Company’s Private Placement Warrants are recorded at fair value determined using an option pricing model, a Level 3 fair value measurement, which is calculated based on key assumptions related to expected volatility of the Company’s common stock, an expected dividend yield, the remaining term of the warrants outstanding and the risk-free rate based on the U.S. Treasury yield curve in effect at the time of the valuation. These assumptions are estimated utilizing historical trends of the Company’s common stock, Public Warrants and other factors. ~~The Company has recorded a liability of $0.2 million as of June 30, 2022. There was no change~~Change in fair value of the warrants since closing of the Transaction through reporting ~~date.~~date was recorded in “Interest and other income” of the Condensed Consolidated Statements of Operations.

The carrying amounts reported on the Condensed Consolidated Balance Sheets 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 three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

~~16.~~12. DERIVATIVES AND HEDGING ACTIVITIES

The Company is exposed to certain risks arising from both its business operations and economic conditions, and it enters into certain derivative contracts to manage exposure to these risks. To minimize counterparty credit risk in derivative instruments, the Company enters into transactions with high credit-rating counterparties. The Company did not elect to apply hedge accounting to these derivative contracts and recorded the fair value of the derivatives on the Condensed Consolidated Balance Sheets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

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Interest Rate Risk

The Company manages market risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and by using derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. ~~The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high credit-rating counterparties.~~

The Company’s objectives in using interest rate derivatives isare to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract.

~~In June~~During November 2022 ~~all of BCP PHP, LLC’s (“BCP PHP”) outstanding~~and March 2023, the Company entered into three interest rate ~~swaps were terminated as BCP PHP’s outstanding term loan credit facility was extinguished on June 8, 2022. Refer to~~ ~~Note 6—Debt and Financing Costs~~swaps inwith total notional amounts of $2.25 billion that are effective on May 1, 2023 and mature on May 31, 2025. Under these swaps, the ~~Notes~~Company pays a fixed rate ranging from 4.38% to ~~our Condensed Consolidated Financial Statements~~4.49% for ~~additional information about~~ the ~~refinancing transactions.~~

~~Table of Contents~~ respective notional amounts.

The fair value or settlement value of the consolidated interest rate swaps outstanding are presented on a gross basis on the Condensed Consolidated Balance Sheets. Interest rate swap derivative ~~liabilities~~assets were ~~nil~~$3.4 million and $2.7 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Interest rate swap derivative liabilities were $26.3 million and $8.3 million as of March 31, 2023 and December 31, 2022, respectively. The Company recorded cash settlements on interest rate swap derivatives of ~~$12.0 million~~nil and $0.7 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $11.3 and $1.5 million for the six months ended June 30, 2022 and 2021,~~ respectively, in “Interest ~~Expense”~~expense” of the Condensed Consolidated Statements of Operations. In addition, the Company recorded fair value adjustments of ~~$2.4~~$17.2 million and ~~$1.9~~$11.6 million ~~for the change in fair value of the interest rate swap derivatives~~ for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $14.0 million and $3.1 million for the six months ended June 30, 2022 and 2021,~~ respectively, in “Interest ~~Expense”~~expense” of the Condensed Consolidated Statements of Operations.

Commodity Price Risk

~~Similarly, in 2020~~The results of the Company’s operations may be affected by the market prices of oil, natural gas and ~~2021 BCP Raptor, LLC (“BCP I”)~~NGLs. A portion of the Company’s revenue is directly tied to local natural gas, natural gas liquids and ~~BCP Raptor II, LLC (“BCP II”) had WTI crude hedges at a specific notional that provides for a fixed price for crude~~condensate prices in the Permian Basin and the U.S. Gulf Coast. Fluctuations in commodity prices also impact operating cost elements both directly and indirectly. Management regularly reviews the Company’s potential exposure to commodity price risk and manages exposure of such risk through commodity hedge contracts.

During the past two quarters, the Company has entered into numerous commodity swap contracts based on the OPIS NGL Mont Belvieu prices for ethane, propane and butane, the Waha ~~basis hub hedges~~Basis index and the NYMEX WTI index. These contracts are on various notional quantities of ~~gas that either provided for a fixed price differential of~~NGLs, natural gas inand crude. Similarly, the ~~Permian Basin relative to the NYMEX~~Company has entered into various natural gas ~~contract or provided for a fixed~~and crude basis spread swaps. These index swaps are effective over the next 1 to 15 months and are used to hedge against location price ~~for natural gas in the Permian Basin.~~

~~All~~risk of the ~~Company’s~~respective commodity resulting from supply and demand volatility and protect cash flows against price fluctuations. The table below presents detailed information of commodity swaps ~~had reached maturity~~outstanding as of ~~December~~March 31, ~~2021.~~ 2023 (in thousands, except volumes):

March 31, 2023

Commodity

Instruments

Unit

Volume

Net Fair Value

Natural Gas

Commodity Swap

MMBtus

6,380,000

(6,254)

NGL

Commodity Swap

Gallons

157,281,600

9,252

Crude

Commodity Swap

Bbl

137,500

258

Natural Gas Basis Spread Swaps

Commodity Swap

MMBtus

29,850,000

(574)

Crude Gas Basis Spread Swaps

Commodity Swap

Bbl

496,000

334

3,016

The fair value or settlement value of the swaps outstanding are presented on a gross basis on the Condensed Consolidated Balance ~~Sheet.~~Sheets. Commodity swap derivative ~~liability was nil~~assets were $10.5 million and ~~$0.2~~$4.3 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Commodity swap derivative liabilities were $7.5 million and $5.7 million as of March 31, 2023 and December 31, 2022, respectively. The Company recorded cash settlements on commodity swap derivatives of ~~nil~~$1.0 million and ~~$14.1~~$0.2 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $0.2 million and $14.8 million for the six months ended June 30, 2022 and 2021,~~ respectively, in ~~“Interest Expense”~~“Product revenue” of the Condensed Consolidated Statements of Operations. In addition, the Company recorded fair value adjustments of ~~$1.0~~$5.4 million and ~~$16.5 million~~nil for the

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change in fair value of commodity swap derivatives for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2023 and 2022, respectively, in ~~“Interest Expense”~~“Product revenue” of the Condensed Consolidated Statements of Operations. ~~No fair~~

13. SHARE-BASED COMPENSATION

Prior to the Closing, the Company issued incentive units, which included performance and service conditions, to certain employees and Board members. The units consisted of Class A-1, Class A-2 and Class A-3 units. These units derived value ~~adjustment recognized~~from the Company’s certain wholly owned subsidiaries. Class A-1 and A-2 units would have vested upon either (i) the date of consummation of a change in control or (ii) the date that is 1-year following the consummation of the initial public offering (“IPO”) of the Company (or its successor) (collectively “Exit Events”). Class A-3 units would have vested upon a change in control, if the participants were employed at the time of the event, or upon termination of the participant by the Company.

Immediately upon Closing, all outstanding Class A-1 and Class A-2 units were cancelled and exchanged for 5,300,000 shares (the “Class A Shares”), post-Stock Split, of the Company’s Class A Common Stock. These Class A Shares are issued and outstanding as they were distributed pro rata to all holders of Class A-1 and Class A-2 units by the Common Unit limited partners from the 50,000,000 common units, pre-Stock-Split, that such limited partners received upon the Closing. The Common Unit limited partners redeemed Common Units needed for the Class A Shares distribution upon the Closing. The Class A Shares are held in escrow and will vest over three to four years. Similarly, the Class A-3 units were exchanged for approximately 326,000, post Stock Split, Class C Common Stock and Common Units (the “Class C Shares”) and will vest over four years. The Company also issued approximately 76,000, post Stock Split, replacement restricted share awards (“Replacement Awards”) to new employees that transitioned from ALTM as part of the Transaction. These changes for all three share types established a new measurement date. The Class A Shares, Class C Shares and Replacement Awards were valued based on the Company’s publicly quoted stock price on the measurement date, which was the Closing Date of the Transaction.

During the first quarter of 2023, pursuant to the Company’s 2019 Omnibus Compensation Plan, as amended from time to time (the “Plan”), the Company granted approximately 370,000 restricted stock units (“RSUs”) to its employees with cliff vesting on January 1, 2026 and approximately 181,000 RSUs to employees that were vested immediately. The 181,000 RSUs with no vesting terms were granted to employees who received their bonus in Company stock in lieu of cash bonus awards.

With respect to the above shares, the Company recorded compensation expenses of $17.5 million and $6.1 million for the three ~~and six~~ months ended March 31, 2023 and 2022, respectively, based on a straight-line amortization of the associated awards’ fair value over the respective vesting life of the shares.

14. INCOME TAXES

The Company is subject to U.S. federal income tax and the Texas margin tax. Income tax expense included in the Condensed Consolidated Financial Statements in this Form 10-Q is as follows:


	Three Months Ended March 31,
		2023			2022

		(In thousands)
Income before income taxes		$	4,715		$	22,065
Income tax expense		$	416		$	676
Effective tax rate		8.82		%	3.06		%

The effective tax rate for the three months ended March 31, 2023 was lower than the statutory rate mainly due to the impact of tax attributable to noncontrolling interests related to the Common Units limited partners and valuation allowance.

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15. NET INCOME PER SHARE

The computation of basic and diluted net income per share for the periods presented in the Condensed Consolidated Financial Statements is shown in the tables below.


	Three Months Ended March 31,
		2023		2022
		(In thousands, except per share amounts)
Net income attributable to Class A common shareholders		$	1,436	$	3,865
Less: Net income available to participating unvested restricted Class A common shareholders(1)		(4,156)		—

Total net income (loss) attributable to Class A common shareholders		$	(2,720)	$	3,865

Weighted average shares outstanding - basic(2)		47,392		37,392
Dilutive effect(3)(4) of unvested Class A common shares		213		34
Weighted average shares outstanding - diluted		47,605		37,426

Net income (loss) available per common share - basic		$	(0.06)	$	0.10
Net income (loss) available per common share - diluted		$	(0.06)	$	0.10

(1)Represents dividends paid to unvested restricted Class A common shareholders.

(2)Share amounts have been retrospectively restated to reflect the Company’s two-for-one Stock Split. Refer to Note 10—Equity and Warrantsin the Notes to our Condensed Consolidated Financial Statements for further information.

(3)The effect of an assumed exchange of the outstanding public and private warrants for shares of Class A Common Stock would have been anti-dilutive for all periods presented in which the public and private warrants were outstanding.

(4)The effect of an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) would have been anti-dilutive for all periods presented in which the Common Units were outstanding.

16. 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 additional information becomes available or circumstances change. As of March 31, 2023 and December 31, 2022, there were no accruals for loss contingencies.

Litigation

The Company is a party to various legal actions arising in the ordinary course of its businesses. In accordance with ASC 450, Contingencies, the Company accrues reserves for outstanding lawsuits, claims and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more, than the amounts accrued.

Environmental Matters

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2023, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.

Contingent Liabilities

Permian Gas Acquisition

As part of the acquisition of Permian Gas on June ~~30,~~11, 2019, consideration included a contingent liability arrangement with PDC Permian, Inc. (“PDC”). The arrangement requires additional monies to be paid by the Company to PDC on a per Mcf basis if the actual annual Mcf volume amounts exceed forecasted annual Mcf volume amounts starting in 2020 and continuing through 2029. The total monies paid under this arrangement are capped at $60.5 million. Amounts are payable on an annual basis over the earn-out period. Based on current forecasts and discussions with PDC, management revalues this contingent liability with updated assumptions at each reporting period. PDC’s actual annual Mcf volume did not exceed the incentive rate during the past three years and the Company did not expect PDC’s actual annual Mcf volume amounts to exceed forecasted amounts as of March 31, 2023; therefore, the estimated fair value of the contingent consideration liability was nil as of March 31, 2023 and December 31, 2022.

Original Altus Transaction

As part of the Transaction, the Company assumed contingent liabilities of $4.5 million related to earn-out consideration of up to 2,500,000 shares of Class A Common Stock, which was part of the original Altus transaction, as follows:

• 1,250,000 shares if the per share closing price of the Class A Common Stock as reported by the New York Stock Exchange (“NYSE”) during any 30-trading-day period ending prior to November 9, 2023 is equal to or greater than $140.00 for any 20 trading days within such 30-trading-day period.

• 1,250,000 shares if the per share closing price of the Class A Common Stock as reported by the NYSE during any 30-trading-day period ending prior to November 9, 2023 is equal to or greater than $160.00 for any 20 trading days within such 30-trading-day period.

Pursuant to ASC 805, this earn-out consideration was a pre-existing contingency and accounted for as an assumed liability to the acquirer on the acquisition date. Immediately subsequent to the Closing, the Company evaluated the earn-out consideration classification in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The Company determined the earn-out consideration to be classified as equity based on the settlement provision.

17. SEGMENTS

Our 2two operating segments represent the Company’s segments for which discrete financial information is available and is utilized on a regular basis by our chief operating decision maker (“CODM”) to make key operating decisions, assess performance and allocate resources. Our Chief Executive Officer is the CODM. These segments are strategic business units with differing products and services. No operating segments have been aggregated to form the reportable segments. Therefore, our 2two operating segments represent our reportable segments. The activities of each of our reportable segments from which the Company earns revenues and incurs expenses are described below:

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

•Pipeline Transportation: The Pipeline Transportation segment consists of equity investment interests in 4four Permian Basin pipelines that access various points along the Texas Gulf Coast, Kinetik NGL Pipeline and ~~our~~ Delaware Link Pipeline that is under development. The current operating pipelines transport crude oil, natural gas and ~~NGLs to the Texas Gulf Coast.~~NGLs.

~~Upon Closing, our CODM reviewed the Company and ALTM’s reporting segment activities.~~ The ~~Company then renamed its Gathering and Processing segment to~~ Midstream Logistics ~~and its Transmission~~ segment ~~to Pipeline Transportation. These name changes were made to better align segment activities with the name~~accounts for more than 99% of the ~~respective segment. There was no change in~~Company’s operating revenues, cost of sales (excluding depreciation and amortization), operating expenses and ad valorem expenses. The Pipeline Transportation segment ~~composition or structure for~~contains all of the ~~three~~Company’s equity method investments, which contribute more than 99% of the segment’s EBITDA. Corporate and ~~six months ended June 30, 2022.~~

~~Table~~Other contains the Company’s executive and administrative functions, including 85% of ~~Contents~~

the Company’s general and administrative expenses and all of the Company’s debt service costs.

The following tables present the reconciliation of the segment profit measure as of and for the three ~~and six~~ months ended ~~June 30, 2022 and 2021:~~

Midstream Logistics Pipeline Transportation
Corporate and Other(1)
Consolidated(2)
For the three months ended June 30, 2022 (In thousands)
Segment net income including noncontrolling interests $ 14,563 $ 46,277 $ 70,608 $ 131,448
Add back:
Interest expense 20,641 942 3,764 25,347
Income tax expense 162 — — 162
Depreciation and amortization 66,459 122 — 66,581
Contract assets amortization 448 — — 448
Proportionate EMI EBITDA — 71,340 — 71,340
Share-based compensation — — 12,174 12,174
Loss (gain) on disposal of assets 8,580 — (34) 8,546
(Gain) loss on debt extinguishment 27,983 (8) — 27,975
Integration costs 579 — 4,707 5,286
Acquisition transaction costs — — 674 674
Other one-time costs or amortization 1,239 — 1,020 2,259
Deduct:
Gain on redemption of mandatorily redeemable Preferred units — — 5,087 5,087
Unrealized gain on embedded derivatives — — 91,448 91,448
Equity income from unconsolidated affiliates — 47,786 — 47,786
Segment adjusted EBITDA $ 140,654 $ 70,887 $ (3,622) $ 207,919

Midstream Logistics Pipeline Transportation
Corporate and Other(1)
Consolidated(2)
For the three months ended June 30, 2021 (In thousands)
Segment net income (loss) including noncontrolling interests $ (24,222) $ 11,310 $ (2,454) $ (15,366)
Add back:
Interest expense 27,829 4,778 — 32,607
Depreciation and amortization 57,038 128 — 57,166
Contract assets amortization 448 — — 448
Proportionate EMI EBITDA — 21,717 — 21,717
Loss on disposal of assets 422 — — 422
Gain on debt extinguishment (60) — — (60)
Other one-time costs or amortization 485 13 17 515
Producer settlement 6,827 — — 6,827
Deduct:
Interest and other income 24 — — 24
Equity income from unconsolidated affiliates — 16,511 — 16,511
Segment adjusted EBITDA $ 68,743 $ 21,435 $ (2,437) $ 87,741
March

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Midstream Logistics Pipeline Transportation
Corporate and Other(1)
Consolidated(2)
For the six months ended June 30, 2022 (In thousands)
Segment net income including noncontrolling interests $ 23,749 $ 75,412 $ 53,676 $ 152,837
Add back:
Interest expense 47,412 (672) 5,381 52,121
Income tax expense (benefit) 457 (39) 420 838
Depreciation and amortization 127,352 252 — 127,604
Contract assets amortization 896 — — 896
Proportionate EMI EBITDA — 112,081 — 112,081
Share-based compensation — — 18,304 18,304
Loss (gain) on disposal of assets 8,690 — (34) 8,656
Loss on debt extinguishment 27,983 (8) — 27,975
Integration costs 4,683 — 6,755 11,438
Acquisition transaction costs 4 —�� 6,346 6,350
Other one-time costs or amortization 2,157 — 1,297 3,454
Deduct:
Interest and other income — — — —
Gain on redemption of mandatorily redeemable Preferred units — — 9,580 9,580
Unrealized gain on embedded derivatives — — 88,562 88,562
Equity income from unconsolidated affiliates — 75,703 — 75,703
Segment adjusted EBITDA $ 243,383 $ 111,323 $ (5,997) $ 348,709

Midstream Logistics Pipeline Transportation
Corporate and Other(1)
Consolidated(2)
For the six months ended June 30, 2021 (In thousands)
Segment net income (loss) including noncontrolling interests $ (16,027) $ 23,739 $ (4,942) $ 2,770
Add back:
Interest expense 55,285 2,632 — 57,917
Depreciation and amortization 112,880 257 — 113,137
Contract assets amortization 896 — — 896
Proportionate EMI EBITDA — 37,973 — 37,973
Loss on disposal of assets 454 — — 454
Gain on debt extinguishment (60) — — (60)
Derivatives loss due to Winter Storm Uri 13,456 — — 13,456
Other one-time costs or amortization 874 21 (52) 843
Producer settlement 6,827 — — 6,827
Deduct:
Interest and other income 41 — — 41
Equity income from unconsolidated affiliates — 27,866 — 27,866
Segment adjusted EBITDA $ 174,544 $ 36,756 $ (4,994) $ 206,306
31, 2023 and 2022:


	Midstream Logistics		Pipeline Transportation		Corporate and Other(1)		Consolidated
	(In thousands)
For the Three Months Ended March 31, 2023
Segment net income (loss) including noncontrolling interests	$	51,012	$	46,432	$	(93,145)	$	4,299
Add back:
Interest expense (income)	9		—		69,299		69,308

Income tax expense (benefit)	—		—		416		416
Depreciation and amortization	68,393		455		6		68,854
Contract assets amortization	1,655		—		—		1,655

Unrealized hedging (gain) loss	(4,987)		—		—		(4,987)
Proportionate EMI EBITDA	—		71,867		—		71,867
Share-based compensation	—		—		17,540		17,540
Loss (gain) on disposal of assets	102		—		—		102



Integration costs	7		—		918		925
Acquisition transaction costs	33		—		235		268
Other one-time costs or amortization	3,025		—		723		3,748
Deduct:
Warrant valuation adjustment	—		—		44		44


Equity income from unconsolidated affiliates	—		46,464		—		46,464
Segment adjusted EBITDA(3)	$	119,249	$	72,290	$	(4,052)	$	187,487


	Midstream Logistics		Pipeline Transportation		Corporate and Other(1)		Consolidated(2)

	(In thousands)
For the Three Months Ended March 31, 2022
Segment net income (loss) including noncontrolling interests	$	9,185	$	29,136	$	(16,932)	$	21,389
Add back:
Interest expense (income)	26,642		(1,614)		1,617		26,645
Gain on redemption of mandatorily redeemable Preferred units	—		—		(4,493)		(4,493)
Income tax expense (benefit)	457		(39)		258		676
Depreciation and amortization	60,893		130		—		61,023
Contract assets amortization	448		—		—		448
Proportionate EMI EBITDA	—		40,741		—		40,741
Share-based compensation	—		—		6,132		6,132
Loss on disposal of assets	110		—		—		110
Loss on debt extinguishment	129		—		—		129
Unrealized loss on embedded derivatives	—		—		2,886		2,886

Integration costs	4,104		—		2,047		6,151
Acquisition transaction costs	4		—		5,672		5,676
Other one-time costs or amortization	918		—		277		1,195
Deduct:



Equity income from unconsolidated affiliates	—		27,917		—		27,917
Segment adjusted EBITDA(3)	$	102,890	$	40,437	$	(2,536)	$	140,791

(1)Corporate and Other represents those results that: (i) are not specifically attributable to a reportable segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items.

(2)Results do not include legacy ALTM prior to February 22, 2022. Refer to Note 1 ~~—Description~~ —Description of the Organization and Summary of Significant Accounting Policies in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q, for further information on the Company’s basis of presentation.

(3)Adjusted EBITDA is a non-GAAP measure; please see Key Performance Metrics in ~~Item~~“Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations” of this Form 10-Q, for a definition and reconciliation to the GAAP measure.

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The following tables present the revenue for individual operating segment for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Midstream Logistics		Pipeline Transportation		Consolidated			Midstream Logistics		Pipeline Transportation		Consolidated

For the three months ended June 30, 2022		(In thousands)
									(In thousands)
For the Three Months Ended March 31, 2023								For the Three Months Ended March 31, 2023
Revenue	Revenue	$	331,731	$	—	$	331,731	Revenue	$	276,555	$	694	$	277,249
Other revenue	Other revenue	3,839		2		3,841		Other revenue	3,789		2		3,791
Total segment operating revenue	Total segment operating revenue	$	335,570	$	2	$	335,572	Total segment operating revenue	$	280,344	$	696	$	281,040

Midstream Logistics Pipeline Transportation Consolidated
For the three months ended June 30, 2021 (In thousands)
Revenue $ 133,341 $ — $ 133,341
Other revenue 2,423 2 2,425
Total segment operating revenue $ 135,764 $ 2 $ 135,766

Midstream Logistics Pipeline Transportation Consolidated
For the six months ended June 30, 2022 (In thousands)
Revenue $ 587,104 $ — $ 587,104
Other revenue 5,713 4 5,717
Total segment operating revenue $ 592,817 $ 4 $ 592,821


		Midstream Logistics		Pipeline Transportation		Consolidated			Midstream Logistics		Pipeline Transportation		Consolidated

For the six months ended June 30, 2021		(In thousands)
									(In thousands)
For the Three Months Ended March 31, 2022								For the Three Months Ended March 31, 2022
Revenue	Revenue	$	280,996	$	—	$	280,996	Revenue	$	255,373	$	—	$	255,373
Other revenue	Other revenue	2,869		4		2,873		Other revenue	1,874		2		1,876
Total segment operating revenue	Total segment operating revenue	$	283,865	$	4	$	283,869	Total segment operating revenue	$	257,247	$	2	$	257,249

The following table presents total assets for each operating segment as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


							March 31,			December 31,
		June 30, 2022		December 31, 2021			2023			2022

		(In thousands)					(In thousands)
Midstream Logistics	Midstream Logistics	$	3,619,400	$	2,916,774	Midstream Logistics	$	3,637,003		$	3,486,948
Pipeline Transportation(1)	Pipeline Transportation(1)	2,362,248		635,784		Pipeline Transportation(1)			2,463,333			2,414,829
Segment total assets	Segment total assets	5,981,648		3,552,558		Segment total assets	6,100,336			5,901,777
Corporate and other	Corporate and other	14,700		648		Corporate and other	24,319			17,934
Total assets	Total assets	$	5,996,348	$	3,553,206	Total assets	$	6,124,655		$	5,919,711

(1)Includes investment in unconsolidated affiliates of $2.41 billion and $2.38 billion as of March 31, 2023 and December 31, 2022, respectively.

18. SUBSEQUENT EVENTS

In July 2022, the Company redeemed the remaining 400,000 Preferred Units along with 22,845 PIK units for an aggregate redemption price of $492.2 million. Following the July redemptions, there were no outstanding Preferred Units or PIK units.

On July 12, 2022, the Company filed a registration statement on Form S-3 with the SEC to register up to a maximum offering price of $400,000,000 of shares of Class A Common Stock, shares of preferred stock, depositary shares and warrants of the Company and debt securities of the Partnership and to register 107,580,912 shares of Class A Common Stock that may be offered and sold by the selling stockholders named in the registration statement Form S-3 filed from time to time on any exchange on which the shares of Class A Common Stock are listed.

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~~On July 20, 2022,~~April 19, 2023, the Board declared a cash dividend of $0.75 per share on the Company’s Class A Common Stock which will be payable to stockholders of record as of May 5, 2023 on ~~August~~May 17, ~~2022.~~2023. The Company, through its ownership of the general partner of the Partnership, declared a distribution of $0.75 per Common Unit from the Partnership to the holders of Common Units. ~~Please refer to~~ ~~Note 10—Equity and Warrants~~ ~~in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional information.~~

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

The following discussion and analysis addresses the results of our operations for the three ~~and six~~ month periods ended ~~June 30, 2022,~~March 31, 2023, as compared to our results of operations for the same periods in ~~2021.~~2022. In addition, the discussion and analysis addresses our liquidity, financial condition and other matters for these periods. The ~~previously announced merger~~business combination of ALTM and BCP and their respective consolidated subsidiaries closed on February 22, 2022. As the ~~Transaction~~transaction was determined to be a reverse merger, BCP was considered the accounting acquirer and ALTM was considered the legal acquirer. Therefore, BCP’s net assets, carried at historical value, were presented as the predecessor to the Company’s historical financial statements and the comparable period presented herein reflects the results of operations of BCP for the three ~~and six~~ months ended ~~June 30, 2022. The~~March 31, 2022 and results of operations of ALTM ~~is reflected within the Company’s Condensed Consolidated Financial Statements~~ from the Closing Date through ~~June 30,~~March 31, 2022.

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

~~The Transaction~~Business Combination

On February 22, 2022 ~~the Company~~(the “Closing Date”), Kinetik Holdings Inc., a Delaware corporation (formerly known as Altus Midstream Company), consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021 (the “Contribution Agreement”), by and among the Company, ~~the Partnership, Contributor~~Altus Midstream LP (now known as Kinetik Holdings LP), a Delaware limited partnership and subsidiary of Altus Midstream Company (the “Partnership”), New BCP Raptor Holdco, LLC, a Delaware limited liability company (“Contributor”), and BCP. ~~Pursuant to~~The transactions contemplated by the Contribution Agreement inare referred to herein as the “Transaction.” In connection with the ~~Closing, (i) Contributor contributed all~~closing of the ~~equity interests in~~Transaction (the “Closing”), the Company changed its name from “Altus Midstream Company” to “Kinetik Holdings Inc.” Upon closing of the business combination, BCP and its ~~consolidated~~ subsidiaries ~~to the Partnership; and (ii) in exchange for such contribution, the Partnership issued 50,000,000 Common Units and the Company issued 50,000,000 shares~~became wholly owned subsidiaries of the ~~Company’s Class C Common Stock to Contributor.~~

The Company’s stockholders immediately prior to the Closing continued to hold their shares of the Company’s Class A Common Stock. As a result of the Transaction, immediately following the Closing (i) Contributor owns approximately 75% of the issued and outstanding Common Stock, (ii) Apache Midstream owns approximately 20% of the issued and outstanding Common Stock, and (iii) the Company’s remaining stockholders own approximately 5% of the issued and outstanding Common Stock. Upon close of the Transaction, the Company’s Pipeline Transportation segment expanded to include three additional EMI pipelines and to increase its ownership interest in PHP. Further note that a secondary offering of 4 million Apache shares was closed during March of 2022 further reducing Apache’s ownership to approximately 13%.

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

Refer to Note 2—Business Combination in ~~additional volume capacity from ALTM~~the Notes to our Condensed Consolidated Financial Statements for the Midstream Logistics segment, including 182 miles of in-service natural gas gathering pipelines, approximately 46 miles of residue gas pipelines with four market connections, and approximately 38 miles of NGLs pipelines. The increased volume capacity has contributed to the increase in operating revenue for the three and six months ended June 30, 2022 compared to the same periods in 2021.further information.

Overview

We are an integrated midstream energy company in the Permian Basin providing comprehensive gathering, transportation, compression, processing and treating services. Our core capabilities include a variety of service offerings ~~across multiple streams,~~ including natural gas gathering, transportation, compression, treating and processing; NGLs stabilization and transportation; produced water gathering and disposal; and crude oil gathering, stabilization, storage and transportation. ~~We have approximately 2.0 billion cubic feet per day (“Bcf/d”) cryogenic natural gas processing capacity~~The Company’s corporate office is located in Houston, TX and our operations are strategically located ~~near the Waha Hub in West Texas. As measured by processing capacity, we are the largest natural gas processor~~ in the heart of the Delaware ~~Basin and fourth largest across the entire Permian~~ Basin. ~~In addition, we have interests in four long-term contracted pipelines transporting natural gas, NGLs, and crude oil from the Permian Basin to the Gulf Coast.~~

Our Operations and Segments

Upon Closing, the Company renamed its Gathering and Processing segment to Midstream Logistics and renamed its Transmission segment to Pipeline Transportation. These name changes were made to better align segment activities with the name of each respective segment. The Midstream Logistics segment operates under three service offerings, 1) gas gathering and processing, 2) crude oil gathering, stabilization and storage services and 3) water gathering and disposal. The Pipeline Transportation segment consists of four ~~EMI~~equity method investment (“EMI”) pipelines originating in the Permian Basin with various access points to the Texas Gulf Coast, Kinetik NGL Pipeline and ~~our~~ Delaware Link Pipeline ~~which~~that is ~~now expected in commercial service in 2023.~~under development. The ~~EMI~~ pipelines transport crude oil, natural gas and NGLs within the Permian Basin and to the Texas Gulf Coast.

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Midstream Logistics

Gas Gathering and ~~Processing~~

Processing. The Midstream Logistics segment provides gas gathering and processing services with ~~approximately 1,200~~over 1,500 miles of low and high-pressure steel pipeline located throughout the ~~Southern~~ Delaware Basin. Gas processing assets are centralized at five processing complexes with total cryogenic processing capacity of approximately 2.0 Bcf/d: the East Toyah complex (460 MMcf/d), the Pecos Bend complex (540 MMcf/d), the Pecos complex (260 MMcf/d), the Sierra Grande complex (60 MMcf/d), and Diamond Cryogenic complex (600 MMcf/d). The Company plans to expand the Diamond Cryogenic complex to 720 MMcf/d by the end of the first quarter of 2023. Current and under construction residue gas outlets include the El Paso Natural Gas Pipeline, Energy Transfer Comanche Trail Pipeline, ONEOK Roadrunner Pipeline, Energy Transfer Oasis Pipeline, and Whitewater Aqua Blanca Pipeline. NGLs outlets include Energy Transfer’s Lone Star NGL Pipeline, Targa’s Grand Prix NGL Pipeline, and Enterprise’s Shin Oak NGL Pipeline.d.

Crude Oil Gathering, Stabilization and Storage ~~Services~~

~~The Midstream Logistics segment also includes crude oil gathering, stabilization, and storage services throughout the Texas Delaware Basin.~~ Services. Crude gathering assets are centralized at the Caprock Stampede Terminal and the Pinnacle Sierra Grande Terminal. The system includes approximately ~~200~~220 miles of gathering pipeline and 90,000 barrels of crude storage. ~~The crude facilities have connections for takeaway transportation into Plains’ 285 Central Station and State Line and Oryx’s Orla & Central Mentone facilities.~~

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Water Gathering and ~~Disposal~~

~~In addition, this segment includes water gathering and disposal assets located in northern Reeves County, Texas which are included in the Midstream Logistics segment.~~ Disposal. The system includes ~~approximately 70~~over 360 miles of gathering pipeline and approximately ~~500,000~~760,000 barrels per day of permitted disposal capacity.

Pipeline Transportation

EMI pipelines. The ~~Pipeline Transportation segment consists of~~Company owns the following equity interests in four EMI pipelines in the Permian Basin with access to various points along the Texas Gulf ~~Coast and the Delaware Link Pipeline, which is currently under development. EMI pipelines include the following:~~

•AnCoast: 1) an approximate 53.3% equity interest in ~~PHP,~~Permian Highway Pipeline LLC (“PHP”), which is also owned and operated by Kinder Morgan Texas Pipeline, LLC (“Kinder Morgan”). PHP transports natural gas from the Waha area in northern Pecos County, Texas to the Katy, Texas area with connections to Texas Gulf Coast and Mexico markets. PHP was placed in service January 2021, with the total capacity of 2.1 Bcf/d fully subscribed under long-term contracts. In June 2022, PHP announced a final investment decision to proceed with its expansion project to increase total capacity to 2.65 Bcf/d fully subscribed under 10 year take or pay contracts. The project will increase PHP’s capacity by nearly 550 MMcf/d with target in-service date in November 2023. The funding for the expansion is 67% by the Company and the reminder by Kinder Morgan. As a result, post the in service of the expansion, Kinetik’s ownership interest in PHP will increase to almost 56%.

•AMorgan; 2) 16% equity interest in ~~the~~ Gulf Coast Express Pipeline LLC (“GCX”), which is owned and operated by Kinder Morgan. GCX transports natural gas from the Permian Basin in West Texas to Agua Dulce near the Texas Gulf Coast. GCX was placed in service during 2019, with the total capacity of 2.0 Bcf/d fully subscribed under long-term contracts.

•AMorgan; 3) 33% equity interest in ~~the~~ Shin Oak, ~~NGL Pipeline (“Shin Oak”),~~ which is owned by Breviloba, LLC, and operated by Enterprise Products Operating ~~LLC. Shin Oak transports NGLs from the Permian Basin to Mont Belvieu, Texas. Shin Oak was placed in service during 2019, with total capacity of up to 550 MBbl/d.~~

•ALLC; and 4) 15% equity interest in ~~the EPIC~~Epic Crude ~~oil pipeline~~Holdings, LP (“EPIC”), which is operated by EPIC Consolidated Operations, LLC. ~~EPIC transports crude oil from Orla, Texas~~

Kinetik NGL Pipeline. Approximately 30 miles of 20-inch NGL pipelines connected to our Diamond Cryogenic complex.

Delaware Link Pipeline. The Company is currently building the Delaware Link Pipeline, which will provide additional transportation capacity to Waha when it is put into service. The project is expected to be complete in ~~Northern Reeves County~~the fourth quarter of 2023. Upon completion, this pipeline is estimated to ~~the Port of Corpus Christi, Texas. EPIC was placed in service early 2020, with initial throughput~~be 40 miles and to have a capacity of approximately ~~600 MBbl/~~1.0 Bcf/d.

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Factors Affecting Our Business

~~The Significance of Crude Oil and Producer Volumes on Our Revenues, Cost of Sales and Gross Margin~~

The Company’s assets include approximately 1,700 miles of NGLs, natural gas, condensate, produced water, and crude oil pipelines as well as approximately 2 Bcf/d of natural gas processing capacity as of June 30, 2022. Most of the gas gathered and processed by the Company is associated gas included in the oil stream, making producers’ oil break-even prices the primary driver of activity. The average price of WTI crude oil was $101.77/Bbl during the first half of 2022. If crude prices were to fall below producers’ break-even prices for a prolonged period of time, drilling activity and volumes might decline and might have a negative impact on our business. In addition, because the Company’s Pipeline Transportation segment provides NGLs transmission service through its EMI pipelines, a decrease in natural gas and NGL price will have an adverse impact on the Company’s results of operations as it may lead to lower natural gas production and thus lower volumes of NGLs transported. The average natural gas price was $6.06/MMBtu during the first half of 2022. For additional risk factors that affect the Company’s business, please refer to~~Part II, Item 1A — Risk Factors of the Company’s Quarterly Report Form 10-Q for the first quarter of 2022 filed on May 10, 2022.~~

~~Recent Developments~~

~~Comprehensive Refinancing~~

On June 8, 2022, the Partnership, completed a private placement of $1.00 billion aggregate principal amount of its 5.875% Sustainability-Linked Senior Notes due 2030 (the “Notes”), which are fully and unconditionally guaranteed by the Company. In addition, the Partnership entered into a new revolving credit agreement (the “Revolving Credit Agreement”), which provides for a $1.25 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”) maturing on June 8, 2027, and a new term loan agreement (the “TLA”), which provides for a $2.00 billion senior unsecured term loan credit facility (the “Term Loan Credit Facility”) maturing on June 8, 2025. Proceeds from the Notes and the Term Loan Credit Facility were used to repay all outstanding borrowings under our existing credit facilities and to pay fees and expenses related to the offering. Refer to ~~Note 6 — Debt and Financing Costs~~ ~~in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.~~

~~Sustainability-linked Financing Framework~~

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

This framework establishes key-performance indicators (“KPIs”) that will be used to measure our progress against sustainability performance targets (“SPTs”). Under this framework, our KPIs are Scope 1 and Scope 2 greenhouse gas emissions intensity, Scope 1 and Scope 2 methane gas emissions intensity and female representation in corporate officer positions and our SPTs are (1) reducing the intensity of all Scope 1 and Scope 2 greenhouse gas emissions from our operations by 35% by 2030 from a 2021 Baseline Year (as defined in the Sustainability Framework), (2) reducing the intensity of Scope 1 and Scope 2 methane gas emissions from our operations by 30% by 2030 from a 2021 Baseline Year, and (3) increasing female representation in corporate officer positions of Vice President and above to 20% by year-end 2026. Additionally, satisfaction of our SPTs is now linked to our new debt agreements. Refer to ~~Note 6 — Debt and Financing Costs~~ ~~in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.~~

~~Stock Split~~

On May 19, 2022, the Company announced a two-for-one stock split with respect to its Class A Common Stock and Class C Common Stock in the form of a stock dividend (the “Stock Split”). The Stock Split was accomplished by distributing one additional share of Class A Common Stock for each share of Class A Common Stock outstanding and one additional share of Class C Common Stock for each share of Class C Common Stock outstanding. The additional shares of Common Stock were issued on June 8, 2022 to holders of record at the close of business on May 31, 2022.

Commodity Price Volatility

There has been, and we believe there will continue to be, volatility in commodity prices and in the relationships among NGLs, crude oil and natural gas prices. As a result of uncertainty around global commodity supply and demand, uncertainty in global economic recovery from the aftereffects of the COVID-19 ~~pandemics~~pandemic and the armed conflict in Ukraine, and uncertainty from the recent banking turmoil and its effects on financial markets, global oil and natural gas commodity prices continue to remain volatile. The volatility and uncertainty of natural gas, crude oil and NGL prices impact drilling,

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completion and other investment decisions by producers and ultimately supply to our systems. Although the armed conflict in Ukraine generated commodity price upward pressure, and our operation could benefit in an environment of higher natural gas, NGLs and condensate prices, the instability of international political environment and human and economic hardship ~~result~~resulting from the conflict would have a highly uncertain impact on the U.S. economy, which in turn, might affect our business and operations ~~adversely.~~adversely. Our product sales revenue is exposed to commodity price fluctuations. Therefore, commodity price decline and sustained periods of low natural gas and NGL prices could have an adverse effect on our product revenue stream. Also, after a rapid rise of oil and natural gas prices in first half of 2022, oil and natural gas prices have moderated from their peaks during the past six months. The Company continues to monitor commodity prices closely and may enter into commodity price hedges from time to time as necessary to mitigate the volatility risk. In addition, the Company, when economically appropriate, enters into fee-based arrangements that insulate the Company from commodity price volatility.

Inflation and Interest Rates

The annual rate of inflation in the United States ~~hit 9.1%~~dropped slightly to 5.0% in ~~June~~March 2023 compared to 8.5% in March 2022, as measured by the Consumer Price ~~Index. We expect~~Index, which was the lowest since May 2021. However, the Federal Open Market Committee (“FOMC”) maintains its long run goals of maximum employment and inflation at the rate of 2.00%. In support of these goals, the FOMC decided to raise the target range for the federal funds rate to 4.75% and 5.00% during its meeting in March 2023. FOMC acknowledged the current stress on the banking system, stating that ~~inflation~~while the United States banking system is sound and resilient, recent developments are likely to result in ~~2022~~tighter credit conditions for households and businesses and to affect economic activity, hiring, and inflation. The extent of these effects is uncertain. There is uncertainty regarding whether inflation will continue to be tamed by the FOMC’s effort or whether the FOMC will continue to tighten its monetary policy in the next 12 months. Increased interest rates will increase our operating costs and the overall cost of capital projects we undertake. In addition, the Federal Reserve has continued to tighten its monetary policy by raising interest rates by three-quarters of a percentage point in June 2022 and July 2022 to maintain the federal funds rate in a target range of 2.25% - 2.50%. Furthermore, the Chairman of the Federal Reserve signaled that the Federal Reserve would continue to take necessary action to bring inflation down and to ensure price stability, including continued rate increases. Increased interest rates will have a negative impact on the Company’s ability to meet its contractual debt obligations and to fund its operating expenses, capital expenditures, dividends and distributions. While a significant portion of our debt is floating rate, even with expected further near term rate increases by the Federal Reserve, the possibility of an economic slowdown in 2023 and the uncertainty with the transition from LIBOR to SOFR, the all in cost of floating rate debt under the TLA is expected to remain lower than the current yield on the recent $1 billion Senior Notes issuance. The Company will continue to actively evaluate and analyze whether any ~~form~~additional forms of interest rate hedging should be implemented to mitigate interest rate exposure.

Supply Chain Considerations

During ~~2021 and the first half of~~ 2022, challenging supply chain issues ~~have~~ emerged that we expect will continue at least through the ~~remainder~~first half of ~~2022.~~2023. Geopolitical events have further disrupted global supply chains and caused volatile commodity prices for natural gas, NGLs and crude oil. The United States has banned the import of Russian oil, NGLs and other energy commodities and the European Union has taken steps to reduce imports of Russian oil and natural gas. The principal supply issues facing our industry for the

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next twelve months include: raw materials availability, finished good inventory, rising freight costs, delays due to port congestion and overall labor shortages.

Recent Developments

~~All bidding~~Share Repurchase Program

In February 2023, the Board of Directors (the “Board”) approved a share repurchase program (“Repurchase Program”), authorizing discretionary purchases of the Company’s Class A Common Stock up to $100 million in the aggregate. Repurchases may be made at management’s discretion from time to time, in accordance with applicable securities laws, on the open market or through privately negotiated transactions and may be made pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act. Privately negotiated repurchases from affiliates are also authorized under the Repurchase Program, subject to such affiliates’ interest and other limitations. The repurchases will ~~require~~depend on market conditions and may be discontinued at any time without prior notice.

For the ~~risk~~three months ended March 31, 2023, the Company repurchased 81,862 shares at a total cost of ~~shipping costs~~$2.4 million. For additional information, see “Part II, Item 2. Unregistered Sales of Equity Securities and ~~delays to be factored into proposals. Trucking availability and pricing will impact North American opportunities while sea-freight costs will impact sales~~Use of North American manufactured goods being delivered internationally for the foreseeable future. The import of raw materials from China will also incur price increases. To that end, accelerating tensions between China and the U.S. could also resultProceeds” in ~~further supply disruption.~~this Quarterly Report on Form 10-Q.

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Results of Operations

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


		Three Months Ended June 30,*						Six Months Ended June 30,*							Three Months Ended March 31,
		2022		2021		% Change		2022		2021		% Change				2023		2022*		% Change

		(In thousands, except percentages)														(In thousands, except percentages)
Revenues:	Revenues:													Revenues:
Service revenue	Service revenue	$	102,080	$	62,242	64	%	$	182,525	$	129,904	41	%	Service revenue		$	103,425	$	80,445	29	%
Product revenue	Product revenue	229,651		71,099		223	%	404,579		151,092		168	%	Product revenue		173,824		174,928		(1	%)
Other revenue	Other revenue	3,841		2,425		58	%	5,717		2,873		99	%	Other revenue		3,791		1,876		102	%
Total revenues		335,572		135,766		147	%	592,821		283,869		109	%
Total operating revenues														Total operating revenues		281,040		257,249		9	%
Operating costs and expenses:	Operating costs and expenses:													Operating costs and expenses:
Cost of sales (exclusive of depreciation and amortization)		152,714		43,503		251	%	272,989		80,508		239	%
Operating expense		35,280		25,280		40	%	65,151		40,844		60	%
Cost of sales (exclusive of depreciation and amortization shown separately below)														Cost of sales (exclusive of depreciation and amortization shown separately below)		115,877		120,275		(4	%)
Operating expenses														Operating expenses		35,973		29,871		20	%
Ad valorem taxes	Ad valorem taxes	5,880		3,414		72	%	10,033		5,765		74	%	Ad valorem taxes		5,458		4,153		31	%
General and administrative		25,960		5,337		386	%	48,712		10,963		344	%
Depreciation and amortization		66,581		57,166		16	%	127,604		113,137		13	%
General and administrative expenses														General and administrative expenses		27,511		22,752		21	%
Depreciation and amortization expenses														Depreciation and amortization expenses		68,854		61,023		13	%
Loss on disposal of assets	Loss on disposal of assets	8,546		422		1925	%	8,656		454		1807	%	Loss on disposal of assets		102		110		(7	%)
Total operating costs and expenses	Total operating costs and expenses	294,961		135,122		118	%	533,145		251,671		112	%	Total operating costs and expenses		253,775		238,184		7	%
Operating income	Operating income	40,611		644		6206	%	59,676		32,198		85	%	Operating income		27,265		19,065		43	%
Other income (expense):	Other income (expense):													Other income (expense):
Interest and other income	Interest and other income	—		26		(100)	%	250		563		(56)	%	Interest and other income		294		250		18	%
Gain on Preferred Units redemption		5,087		—		NM		9,580		—		NM
Gain (loss) on debt extinguishment		(27,975)		60		(46725)	%	(27,975)		60		(46725)	%
Unrealized gain on embedded derivatives		91,448		—		NM		88,562		—		NM
Gain on redemption of mandatorily redeemable Preferred Units														Gain on redemption of mandatorily redeemable Preferred Units		—		4,493		(100	%)

Gain on embedded derivatives														Gain on embedded derivatives		—		(2,886)		(100	%)
Interest expense	Interest expense	(25,347)		(32,607)		(22)	%	(52,121)		(57,917)		(10)	%	Interest expense		(69,308)		(26,774)		159	%
Equity in earnings of unconsolidated affiliates	Equity in earnings of unconsolidated affiliates	47,786		16,511		189	%	75,703		27,866		172	%	Equity in earnings of unconsolidated affiliates		46,464		27,917		66	%

Total other income (expense), net	Total other income (expense), net	90,999		(16,010)		(668)	%	93,999		(29,428)		(419)	%	Total other income (expense), net		(22,550)		3,000		NM

Income (loss) before income tax		131,610		(15,366)		(957)	%	153,675		2,770		5448	%
Current income tax expense		162		—		NM		838		—		NM

Net income (loss) including noncontrolling interests		$	131,448	$	(15,366)	(955)	%	$	152,837	$	2,770	5418	%

Income before income taxes														Income before income taxes		4,715		22,065		(79	%)
Income tax expense														Income tax expense		416		676		(38	%)
Net income including noncontrolling interests														Net income including noncontrolling interests		$	4,299	$	21,389	(80	%)

*The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q, for further information.

NM - Not meaningful

Three Months Ended ~~June 30, 2022~~March 31, 2023 Compared to Three Months Ended ~~June 30, 2021~~March 31, 2022

Revenues

For the three months ended ~~June 30, 2022,~~March 31, 2023, revenue increased ~~$199.8~~$23.8 million, or ~~147%~~9%, to ~~$335.6~~$281.0 million, compared to ~~$135.8~~$257.2 million for the same period in ~~2021.~~2022. The increase was primarily driven by ~~period~~period-to-period higher service revenues related to ~~period higher commodity prices,~~ increases in gathered and processed ~~volumes, as well as similar increases in condensate and NGL volumes sold.~~gas volumes.

Service revenue

Service revenue consists of service fees paid to us by our customers for providing comprehensive gathering, treating, processing and water disposal services necessary to bring natural gas, NGLs and crude oil to market. Service revenue for the three months ended ~~June 30, 2022,~~March 31, 2023, increased by ~~$39.8~~$23.0 million, or ~~64%~~29%, to ~~$102.1~~$103.4 million, compared to ~~$62.2~~$80.4 million for the same period in ~~2021.~~2022. This increase was primarily due to a ~~period over period~~period-over-period increase in gathered and processed gas volumes of ~~596.2~~169.3 Mcf per day ~~of which 370.3~~and 164.2 Mcf per day, ~~are a result~~respectively. Over 99% of ~~new operations acquired through the Transaction. Service~~service revenues are included ~~entirely~~ in the Midstream Logistics segment.

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Product revenue

Product revenue consists of commodity sales (including condensate, natural gas residue and NGLs). Product revenue for the three months ended ~~June 30, 2022, increased~~March 31, 2023, decreased by ~~$158.6~~$1.1 million, or ~~223%~~1%, to ~~$229.7~~$173.8 million, compared to ~~$71.1~~$174.9 million for the same period in ~~2021, primarily~~2022. Product revenues were flat due to period over period ~~increases~~decreases in natural gas, NGL and condensate prices, ~~combined with~~offset by increased sales volumes of these ~~liquids.~~ commodities. NGL prices ~~increased $10.36~~decreased $23.20 per barrel, or ~~34%~~49%, and condensate prices ~~increased $44.35~~decreased $20.61 per barrel, or ~~73%~~22%. NGL and condensate sales volumes increased ~~3.4~~3.8 million barrels, or ~~297%~~165%. ~~This substantial increase was due to our plants being run in recovery for most of the three months ended June 30, 2022 versus rejection during the same~~Similarly, natural gas prices decreased period ~~in 2021. For the same reason,~~over period by $3.14 per MMBtu, or 70%, while natural gas residue sales volumes ~~decreased~~increased by ~~2.4~~ 0.3 million MMBtu, or ~~42%. Offsetting this decrease in volumes, natural gas prices increased period over period $4.27 per MMBtu, or over 150%~~3%. Product revenues are included entirely in the Midstream Logistics segment.

Operating Costs and Expenses

Costs of sales (exclusive of depreciation and amortization)

Cost of sales (exclusive of depreciation and amortization) primarily consists of purchases of NGLs and natural gas from our producers at contracted market prices to support product sales to other third parties. For the three months ended ~~June 30, 2022,~~March 31, 2023, cost of sales ~~increased $109.2~~decreased $4.4 million, or ~~251%~~4%, to ~~$152.7~~$115.9 million, compared to ~~$43.5~~$120.3 million for the same period in ~~2021.~~2022. The ~~increase~~decrease was primarily driven by lower transportation costs during the ~~period to period increase in commodity prices and condensate and NGL volumes discussed above.~~current quarter. Cost of sales (exclusive of depreciation and amortization) are included entirely in the Midstream Logistics segment.

Operating expenses

Operating expenses increased by ~~$10.0~~$6.1 million, or ~~40%~~20%, to ~~$35.3~~$36.0 million for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$25.3~~$29.9 million for the same period in ~~2021.~~2022. Of the total increase, ~~$6.0~~$4.5 million was driven by the ~~new~~inclusion of Altus operations ~~acquired through~~for the ~~Transaction.~~entire period, versus just over a month during the same period of 2022. The remaining increase ~~was~~is primarily ~~driven by~~the result of higher ~~period over period~~compression and electricity ~~costs~~expenses from the increased gathered and processed volumes discussed above. Over 99% of ~~$1.6 million and higher period over period internal labor costs of $1.5 million, $0.5 million of which~~operating expenses are ~~integration related.~~included in the Midstream Logistics segment.

General and administrative

General and administrative ~~(“G&A”)~~ expense increased by ~~$20.6~~$4.8 million, or ~~386%~~21%, to ~~$26.0~~$27.5 million for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$5.3~~$22.8 million for the same period in ~~2021.~~2022. The increase was driven by higher share-based compensation of $11.4 million related to a full quarter of stock compensation amortization during 2023 versus just over a month of amortization during the same period of 2022 and due to certain members of management opting to receive their bonuses in the form of stock compensation during March 2023. This increase was partially offset by a decrease of $5.7 million of costs related to the Transaction incurred during the first quarter of 2022.

Depreciation and amortization

Depreciation and amortization expense increased by $7.8 million, or 13%, to $68.9 million for the three months ended March 31, 2023, compared to $61.0 million for the same period in 2022. The increase was primarily driven by ~~share-based compensation recognized of $12.2 million, acquisition and integration costs of $4.3 million incurred in relation to~~the new assets acquired through the Transaction, which closed inon February ~~2022, and an increase of $1.3 million in costs associated with ongoing litigation.~~22, 2022.

Other Income (Expense)

~~Gain (loss) on debt extinguishment~~Interest Expense

~~For~~Interest expense increased by $42.5 million, or 159%, to $69.3 million for the three months ended ~~June 30, 2022, the Company recognized a loss on debt extinguishment of $28.0 million,~~March 31, 2023, compared ~~with a gain of $0.1~~to $26.8 million for the same period in ~~2021.~~2022. The ~~change reflected~~increase was primarily driven by higher interest rate swap valuation marks of $28.8 million when comparing the ~~loss on~~first quarter of 2023 to the same period in 2022. The remaining increase relates to higher debt ~~extinguishment recognized in relation to~~obligations resulting from the comprehensive refinancing completed in June ~~2022.~~2022, as well as an overall increase in interest rates associated with the Term Loan Credit Facility (as defined below) and Revolving Credit Facility (as defined below, which carried some variability. Refer to Note—12 Derivatives and Hedging Activities in the Notes to our Consolidated Financial Statements regarding the Company’s strategy in managing interest rate risk.

~~Unrealized gain on embedded derivatives~~

~~For the three months ended June 30, 2022, the Company recognized an unrealized gain on derivatives~~

Table of $91.4 million. The unrealized gain is a result of the decrease in fair value of the embedded derivative related to the redeemable noncontrolling interest Preferred Units. The substantial decrease in fair value of this derivative relates to the comprehensive debt refinancing that achieved more favorable interest terms for the Company and the partial redemption of these Preferred Units on July 1, 2022, which was known as of the end of the second quarter.Contents

Equity in earnings of unconsolidated affiliates

Income from EMI pipelines increased by ~~$31.3~~$18.5 million, or ~~189%~~66%, to ~~$47.8~~$46.5 million for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$16.5~~$27.9 million for the same period in ~~2021.~~2022. The increase was primarily due to the acquisition of new EMI pipelines and additional equity interests in the Company’s existing EMI pipeline, PHP, through the Transaction, which closed in February ~~2022 and due to higher earnings. Equity in earnings of unconsolidated affiliates is included entirely in the Pipeline Transportation segment.~~

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~~Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021~~

~~Revenues~~

For the six months ended June 30, 2022, revenue increased $309.0 million, or 109%, to $592.8 million, compared to $283.9 million for the same period in 2021. The increase was primarily driven by period to period higher commodity prices, increases in gas gathered and processed volumes, as well as similar increases in condensate and NGL volumes sold.

~~Service revenue~~

Service revenue consists of service fees paid to us by our customers for providing comprehensive gathering, treating, processing and water disposal services necessary to bring natural gas, NGLs and crude oil to market. Service revenue for the six months ended June 30, 2022, increased by $52.6 million, or 41%, to $182.5 million, compared to $129.9 million for the same period in 2021. This increase is primarily due to a period over period increase in gathered gas volumes of 547.8 Mcf per day, of which 309.2 Mcf per day are a result of new operations acquired through the Transaction. Service revenues are included entirely in the Midstream Logistics segment.

~~Product revenue~~

Product revenue consists of commodity sales (including condensate, natural gas residue, and NGLs). Product revenue for the six months ended June 30, 2022, increased by $253.5 million, or 168%, to $404.6 million, compared to $151.1 million for the same period in 2021, primarily due to period over period increases in NGL and condensate prices combined with increased sales volumes of these liquids. NGL prices increased $13.49 per barrel, or 46%, and condensate prices increased $41.05 per barrel, or 72%. NGL and condensate sales volumes increased 4.6 million barrels, or 203%. This substantial increase was due to our plants being run in recovery for part of the six months ended June 30, 2022 versus rejection during the same period in 2021. For the same reason, natural gas residue sales volumes decreased by 1.3 million MMBtu, or 11%. Offsetting this decrease in volumes, natural gas prices increased period over period by $2.22 per MMBtu, or 65%. Product revenues are included entirely in the Midstream Logistics segment.

~~Operating Costs and Expenses~~

~~Costs of sales~~ ~~(exclusive of depreciation and amortization)~~

Cost of sales (exclusive of depreciation and amortization) primarily consists of purchases of NGLs and natural gas from our producers at contracted market prices to support product sales to other third parties. For the six months ended June 30, 2022, cost of sales increased $192.5 million, or 239%, to $273.0 million, compared to $80.5 million for the same period in 2021. The increase was primarily driven by the period to period increases in commodity prices and NGL and condensate volumes discussed above. Cost of sales (exclusive of depreciation and amortization) are included entirely in the Midstream Logistics segment.

~~Operating expenses~~

Operating expenses increased by $24.3 million, or 60%, to $65.2 million for the six months ended June 30, 2022, compared to $40.8 million for the same period in 2021. Of the total increase, $8.6 million was driven by the new operations acquired through the Transaction. The remaining increase was primarily driven by higher period over period electricity costs of $10.3 million, and higher internal labor costs of $3.2 million, $1.9 million of which are integration related. The higher electricity costs were due to electricity credits received from one of our primary electricity providers during the month of February 2021 related to the extreme weather caused by Winter Storm Uri.

~~General and administrative~~

General and administrative (“G&A”) expense increased by $37.7 million, or 344%, to $48.7 million for the six months ended June 30, 2022, compared to $11.0 million for the same period in 2021. The increase was primarily driven by $18.3 million of recognized share-based compensation, acquisition and integration costs of $15.7 million incurred in relation to the Transaction closed in February 2022, and an increase of $1.3 million in costs associated with an ongoing litigation.

~~Table of Contents~~

~~Other Income (Expense)~~

~~Gain (loss) on debt extinguishment~~

For the six months ended June 30, 2022, the Company recognized a loss on debt extinguishment of $28.0 million, compared with a gain of $0.1 million for the same period in 2021. The change reflected the loss on debt extinguishment recognized in relation to the comprehensive refinancing completed in June 2022.

~~Unrealized gain on embedded derivatives~~

For the six months ended June 30, 2022, the Company recognized an unrealized gain on derivatives of $88.6 million. The unrealized gain is a result of the decrease in fair value of the embedded derivative related to the redeemable noncontrolling interest Preferred Units. The substantial decrease in fair value of this derivative relates to the comprehensive debt refinancing that achieved more favorable interest terms for the Company and the partial redemption of these Preferred Units on July 1, 2022, which was known as of the end of the second quarter.

~~Equity in earnings of unconsolidated affiliates~~

Income from EMI pipelines increased by $47.8 million, or 172% to $75.7 million for the six months ended June 30, 2022, compared to $27.9 million for the same period in 2021. The increase was primarily due to the acquisition of new EMI pipelines and additional equity interests in the Company’s existing EMI pipeline, PHP, through the Transaction closed in February 2022 and due to higher earnings. Equity in earnings of unconsolidated affiliates is included entirely in the Pipeline Transportation segment.

Key Performance Metrics

Adjusted EBITDA

Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for interest, taxes, depreciation and amortization, impairment charges, asset write-offs, the proportionate EBITDA from our equity method investments, equity in earnings from investments recorded using the equity method, share-based compensation expense, extraordinary losses and unusual or non-recurring charges. Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance.

We believe that Adjusted EBITDA provides a meaningful understanding of certain aspects of earnings before the impact of investing and financing charges and income taxes. Adjusted EBITDA is useful to an investor in evaluating our performance because this measure:

•Isis widely used by analysts, investors and competitors to measure a company’s operating performance;

•Isis a financial measurement that is used by rating agencies, lenders, and other parties to evaluate our credit worthiness; ~~and;~~and

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

Adjusted EBITDA is not defined in GAAP

The GAAP measure used by the Company that is most directly comparable to Adjusted EBITDA is net income including noncontrolling interests. Adjusted EBITDA should not be considered as an alternative to the GAAP measure of net income 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 including noncontrolling interests. Adjusted EBITDA should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. The Company’s definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies in the industry, thereby diminishing its utility.

Reconciliation of non-GAAP financial measure

Company management compensates for 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 including noncontrolling interests, and incorporating this knowledge into its decision-making processes. Management believes that investors benefit from having access to the same financial measure that the Company uses in evaluating operating results.

~~Table of Contents~~

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

Three Months Ended June 30,* Six Months Ended June 30,*
2022 2021 % Change 2022 2021 % Change
Reconciliation of net income including noncontrolling interests to Adjusted EBITDA (In thousands, except percentages)
Net income including noncontrolling interests $ 131,448 $ (15,366) (955) % $ 152,837 $ 2,770 5418 %
Add back:
Interest expense 25,347 32,607 (22) % 52,121 57,917 (10) %
Income tax expense 162 — NM 838 — NM
Depreciation and amortization 66,581 57,166 16 % 127,604 113,137 13 %
Amortization of contract costs 448 448 — % 896 896 — %
Proportionate EMI EBITDA 71,340 21,717 228 % 112,081 37,973 195 %
Share-based compensation 12,174 — NM 18,304 — NM
Loss on sale of assets 8,546 422 1925 % 8,656 454 1807 %
Loss (gain) on debt extinguishment 27,975 (60) (46725) % 27,975 (60) (46725) %
Derivative loss due to Winter Storm Uri — — NM — 13,456 (100) %
Integration Costs 5,286 — NM 11,438 — NM
Transaction Costs 674 — NM 6,350 — NM
Other one-time cost or amortization 2,259 515 339 % 3,454 843 310 %
Producer Settlement — 6,827 (100) % — 6,827 (100) %
Deduct:
Interest and other income — 24 (100) % — 41 (100) %
Gain on redemption of mandatorily redeemable Preferred Units 5,087 — NM 9,580 — NM
Unrealized gain on embedded derivatives 91,448 — NM 88,562 — NM
Equity income from unconsolidated affiliates 47,786 16,511 189 % 75,703 27,866 172 %
Adjusted EBITDA $ 207,919 $ 87,741 137 % $ 348,709 $ 206,306 69 %

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	Three Months Ended March 31,
		2023		2022*		% Change

		(In thousands, except percentages)
Reconciliation of net income including noncontrolling interests to Adjusted EBITDA
Net income including noncontrolling interests		$	4,299	$	21,389	(80)	%
Add back:
Interest expense		69,308		26,645		160	%
Income tax expense		416		676		(38)	%
Depreciation and amortization		68,854		61,023		13	%
Amortization of contract costs		1,655		448		NM
Proportionate EMI EBITDA		71,867		40,741		76	%
Share-based compensation		17,540		6,132		186	%
Loss on disposal of assets		102		110		(7)	%
Loss on debt extinguishment		—		129		(100)	%
Unrealized (gain) loss on commodity or embedded derivatives		(4,987)		2,886		NM
Integration Costs		925		6,151		(85)	%
Transaction Costs		268		5,676		(95)	%
Other one-time cost or amortization		3,748		1,195		NM

Deduct:

Warrant valuation adjustment		44		—		100	%
Gain on redemption of mandatorily redeemable Preferred Units		—		4,493		(100)	%

Equity income from EMI's		46,464		27,917		66	%
Adjusted EBITDA		$	187,487	$	140,791	33	%

* The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to Note 1—Description of the Organization and Summary of Significant Accounting Policies for further information on the Company’s basis of presentation.

NM - not meaningful

Adjusted EBITDA increased by ~~$120.2~~$46.7 million, or ~~137%~~33%, to ~~$207.9~~$187.5 million for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$87.7~~$140.8 million for the same period in ~~2021.~~2022. The increase was primarily driven by ~~an increase in net income including noncontrolling interest of $146.8 million, or 955%, and~~ increases in add back related to the Company’s proportionate share of its EMI pipelines’ EBITDA of ~~$49.6~~$31.1 million, or ~~228%~~76%, share-based compensation of ~~$12.2~~$11.4 million, or 186%, and depreciation and amortization expense of $9.4 million, which are results of new operations acquired through the Transaction. The increase in add back was also due to increase in loss on debt extinguishment of $28.0 million as the Company completed its comprehensive refinancing in June 2022.$7.8 million. The increase in adjusted EBITDA was partially offset by ~~increases in unrealized gain on embedded derivatives of $91.4 million and~~ EMI pipelines equity income of ~~$31.3 million.~~

~~Adjusted EBITDA increased by $142.4~~$18.5 million, ~~or 69% to $348.7 million for the six months ended June 30, 2022, compared to $206.3 million for the same period in 2021. The increase was primarily driven by an increase~~a decrease in net income including noncontrolling interest of ~~$150.1~~$17.1 million, or ~~5418%~~(80)%, and increases in add back related to the Company’s proportionate share of its EMI pipelines’ EBITDA of $74.1 million, or 195%, share-based compensation of $18.3 million, depreciation and amortization expense of $14.5 million and integration costs of $11.4 million, which are results of new operations acquired through the Transaction. The increase in add back was also due to increase in loss on debt extinguishment of $28.0 million as the Company completed its comprehensive refinance in June 2022. The increase in adjusted EBITDA was partially offset by increases in unrealized gain on embedded derivatives of $88.6 million, EMI pipelines equity income of $47.8 million and a decrease in ~~derivative loss add back due to the Winter Storm Uri~~integration costs of ~~$13.5~~$5.2 million, ~~as no similar credit was taken during 2022.~~

The 2022 Adjusted EBITDA presented in the above table does not include any expected synergies including ad valorem taxes, operating expenses and corporate G&A, which will be recognized over the course of 2022.

~~Table of Contents~~

or 85%.

Segment Adjusted EBITDA

Segment ~~Adjusted~~adjusted EBITDA is defined as segment net earnings adjusted to exclude interest expense, income tax expense, depreciation and amortization, the proportionate effect of these same items for our equity method investments and other non-recurring items. The following table presents segment ~~adjustment~~adjusted EBITDA for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. Also refer to Note ~~17—~~16—Segments in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for a reconciliation of segment adjusted EBITDA to net income including noncontrolling interests.


		Three Months Ended June 30,*						Six Months Ended June 30,*							Three Months Ended March 31,
		2022		2021		% Change		2022		2021		% Change					2023		2022*		% Change

		(In thousands, except percentages)														(In thousands, except percentages)
Midstream Logistics	Midstream Logistics	$	140,654	$	68,743	105	%	$	243,383	$	174,544	39	%	Midstream Logistics			$	119,249	$	102,890	16	%
Pipeline Transportation	Pipeline Transportation	70,887		21,435		231	%	111,323		36,756		203	%	Pipeline Transportation			72,290		40,437		79	%
Corporate and Other**	Corporate and Other**	(3,622)		(2,437)		49	%	(5,997)		(4,994)		20	%	Corporate and Other**			(4,052)		(2,536)		60	%
Total segment adjusted EBITDA	Total segment adjusted EBITDA	$	207,919	$	87,741	137	%	$	348,709	$	206,306	69	%	Total segment adjusted EBITDA			$	187,487	$	140,791	33	%

* The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to Note 1—Description of the Organization and Summary of Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for further information on the Company’s financial statement consolidation.

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** Corporate and Other represents those results that: (i) are not specifically attributable to a reportable segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items.

Midstream Logistics segment adjusted EBITDA increased by ~~$71.9~~$16.4 million, or ~~105%~~16%, to ~~$140.7~~$119.2 million for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$68.7~~$102.9 million for the same period in ~~2021.~~2022. The increase was primarily driven by an increase in segment net income including noncontrolling interests of ~~$38.8~~$41.8 million and increases in the add back related to ~~loss~~interest expense of $26.6 million due to increased balances on ~~debt extinguishment of $28.0 million as~~ the ~~Company completed its comprehensive refinancing in June 2022, loss on sale of assets of $8.2 million for assets retired during the second quarter of 2022~~Company’s credit facilities and depreciation and amortization expense of ~~$9.4~~$7.5 million due to new operations acquired through the Transaction. The increase in adjusted EBITDA was partially offset by ~~a decrease~~decreased in ~~interest expense add back of $7.2 million.~~

Midstream Logistics segment adjusted EBITDA increased by $68.8 million, or 39%, to $243.4 million for the six months ended June 30, 2022, compared to $174.5 million for the same period in 2021. The increase was primarily driven by an increase in segment net income including noncontrolling interests of $39.8 million and increases in the add back related to ~~loss on debt extinguishment of $28.0 million as the Company completed its comprehensive refinancing in June 2022, depreciation~~integration and ~~amortization expense of $14.5 million and integration~~acquisition costs of $4.7 million due to new operations acquired through the Transaction, and loss on sale of assets of $8.2 million for assets retired during the second quarter of 2022. The increase was offset by a decrease in derivative loss due to the Winter Storm Uri of $13.5 million as no similar credit was taken in 2022 and a decrease in interest expense add back of $7.9$4.1 million.

Pipeline Transportation segment adjusted EBITDA increased by ~~$49.5~~$31.9 million, or ~~231%~~79%, to ~~$70.9~~$72.3 million for the three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$21.4~~$40.4 million for the same period in ~~2021.~~2022. The increase was driven by investments in GCX, EPIC and Shin Oak ~~and~~as well as a 100% increase in the Company’s investment in PHP, which were all acquired through the Transaction closed in February 2022. During the three months ended ~~June 30, 2021, the Company only held a 26.67% interest in PHP.~~

~~Pipeline Transportation segment adjusted EBITDA increased by $74.6 million, or 203%, to $111.3 million for the six months ended June 30,~~March 31, 2022, compared to $36.8 million for the same period in 2021. The increase was driven by investments in GCX and Shin Oak and a 100% increase in the Company’s investment in PHP, which were all acquired through the Transaction in February 2022. During the six months ended June 30, 2021, the Company only held a 26.67% interest in PHP.

~~Table of Contents~~

Capital Resources and Liquidity

The Company’s primary use of capital since inception has been for the initial construction of gathering and processing assets, as well as the acquisition of the EMI pipelines and associated subsequent construction costs. For ~~2022,~~2023, the Company’s primary capital spending requirements are ~~anticipated to be~~ related to ~~integration~~the PHP expansion project, the midstream infrastructure acquisition and other budgeted capital expenditures for construction of ~~the Alpine High~~ gathering ~~system with the legacy BCP system, certain integration related synergies including the relocation of compression units~~ and ~~treating~~processing assets ~~to the legacy BCP processing plants,~~and the Company’s contractual debt ~~obligation,~~obligations. The Company will continue to have Apache, Blackstone, I Squared and management reinvest 100% of their 2023 distribution and dividends into shares of our Class A Common Stock. In addition, the ~~Company’s payment~~Board has approved the Repurchase Program authorizing discretionary purchases of ~~quarterly cash dividend on its~~the Company’s Class A Common Stock ~~and Common Units as may be declared by its Board of Directors (the “Board”) and cash payment upon redemption of remaining mandatorily redeemable Preferred Units.~~

up to $100 million in aggregate.

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, the Company’s primary sources of cash were distributions from the EMI pipelines, borrowings under the ~~Term Loan~~Revolving Credit Facility ~~proceeds from the offering of the Notes,~~ and cash generated from operations. Based on the Company’s current financial plan and related assumptions including the Reinvestment Agreement (as defined below), the Company believes that cash from operations ~~a reduced capital program for its midstream infrastructure,~~ and distributions from the EMI pipelines will generate cash flows in excess of capital expenditures and the amount required to fund the Company’s planned quarterly ~~dividend.~~

~~Given recent crude oil price volatility and economic uncertainty resulting from inflation, increased interest rates,~~dividend over the ~~armed conflict in Ukraine and related governmental actions,~~next 12 months. Additionally, the Company ~~continues to monitor expected natural gas throughput volumes~~has locked in the floating base rate on its Term Loan Credit Facility with interest rate swaps with a $2.25 billion notional that are effective through May 31, 2025 swapping floating SOFR for a fixed swap rate between 4.38% and ~~capacity utilization of the EMI pipelines.~~4.49%.

Comprehensive Refinancing

On June 8, 2022, the Partnership completed the private placement of $1.00 billion aggregate principal amount of 5.875% ~~Sustainability-Linked~~ Senior Notes due 2030, which are fully and unconditionally guaranteed by the Company. The Notes are issued under our Sustainability-Linked Financing Framework and include sustainability-linked features. In addition, the Partnership entered into ~~a new Revolving~~the revolving credit agreement with Bank of America, N.A., as administrative agent (the “Revolving Credit ~~Agreement,~~Agreement”), which provides for a $1.25 billion senior unsecured Revolving Credit Facility maturing on June 8, 2027 (the “Revolving Credit Facility”), and ~~a new TLA,~~the term loan credit agreement with PNC Bank as administrative agent (the “TLA”), which provides for a $2.00 billion senior unsecured Term Loan Credit Facility maturing on June 8, ~~2025.~~2025 (the “Term Loan Credit Facility”). Proceeds from the Notes and the Term Loan Credit Facility were used to repay all outstanding borrowings under our existing credit facilities and to pay fees and expenses related to the offering. ~~Refer to~~ Note ~~6 —~~ 8—Debt and Financing Costsin the Notes to ~~our Condensed~~the Consolidated Financial Statements in ~~this~~our Annual Report on Form ~~10-Q~~10-K for further information.

Capital Requirements and Expenditures

Our operations can be capital intensive, requiring investments to expand, upgrade, maintain or enhance existing operations and to meet environmental and operational regulations. During the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ capital spending for property, plant and equipment totaled $56.7 million and $29.2 million, respectively and intangible asset purchases of $9.8 million and $3.6 million, respectively. The first quarter of 2023 also included capital spend of $65 million for certain midstream infrastructure assets, ~~totaled $71.4 million and $39.4 million, respectively.~~as discussed in Note 2 - Business Combinations. Management believes its existing gathering, processing and transmission infrastructure capacity is capable of fulfilling its midstream contracts to service its customers. During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, the Company contributed ~~$2.7~~$58.7 million to ~~one~~PHP, for the Capacity Expansion Project, which started in June 2022.

Table of ~~its EMI pipelines compared to $20.5 million contributed in the same period of 2021.~~Contents

The Company anticipates its existing capital resources will be sufficient to fund the future capital expenditures for EMI pipelines and the Company’s existing infrastructure ~~assets.~~assets over the next 12 months. For further information on EMIs, refer to Note 9—6—Equity Method Investments in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.

Cash ~~Flows~~Flow

The following tables present cash flows from operating, investing, and financing activities during the periods presented:

For the Six Months Ended June 30,
2022 2021
(In thousands)
Cash provided by operating activities $ 268,918 $ 94,210
Cash used in investing activities $ (69,059) $ (62,517)
Cash used in financing activities $ (213,269) $ (32,242)

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	Three Months Ended March 31,
	2023		2022

	(In thousands)
Cash provided by operating activities	$	119,591	$	98,393
Cash used in investing activities	$	(246,468)	$	(19,392)
Cash provided by (used in) financing activities	$	122,467	$	(80,084)

Operating Activities. Net cash provided by operating activities increased by ~~$174.7~~$21.2 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 compared with the same period in ~~2021.~~2022. The change in the operating cash flows reflected increases in adjustments related to non-cash items of $46.1 million, offset by decreases in working capital of $7.8 million and decreases in net income including noncontrolling interests of ~~$150.1 million, adjustments related to non-cash items of $12.4 million and cash provided by changes in working capital of $12.3~~$17.1 million. Period over period increase in cash provided by operating activities was primarily driven by the new operations acquired through the Transaction, including three EMI pipelines and additional equity interests of the Company’s existing EMI pipeline acquired through the Transaction. The increase was also due to the increase in loss on debt extinguishment, which was a result of the comprehensive refinancing completed in June 2022. The increase was offset by derivative fair value adjustment recognized during the first half of 2022.

Investing Activities. Net cash used in investing activities increased by ~~$6.5~~$227.1 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 compared with the same period in ~~2021.~~2022. The increase was primarily driven by an increase in net cash (paid for) acquired in acquisition of $138.4 million, an increase in property, plant and equipment ~~expenditure~~expenditures of ~~$32.1~~$29.6 million, ~~and intangible assets expenditure of $5.8 million. The increase in cash outflow was offset by~~ an increase in ~~cash inflow of $13.4 million acquired through the acquisition closed in February 2022 and reduction of investments~~contributions made to unconsolidated affiliates of ~~$17.8~~$58.7 million related to the PHP expansion project and an increase in intangible assets expenditure of $6.2 million.

Financing Activities. Net cash provided by financing activities was $122.5 million for the three months ended March 31, 2023, which was comprised of net borrowings from the Company’s Revolving Credit Facility of $142.0 million, offset by cash dividends of $17.1 million and repurchase of Class A common stock of $2.4 million. Net cash used in financing activities ~~increased by $181.0~~was $80.1 million for the ~~six~~three months ended ~~June 30,~~March 31, 2022, ~~compared with the same period in 2021. The increase~~which was ~~primarily due to increases in cash outflow for~~comprised of redemption of mandatorily redeemable Preferred Units of ~~$152.6~~$60.7 million and net payments toon the Company’s ~~outstanding debts~~long-term debt and Revolving Credit Facility of $23.2 million, cash dividends paid to holders of Class A Common Stock of $11.2 million, cash distributions paid to holders of Preferred Units of $8.8 million and reduction of equity contribution receipt of $14.9 million. The increase in cash outflow was offset by a reduction of cash distributions paid to holders of Class C Common Units of $29.7$19.4 million.

Dividend and Distribution Reinvestment Agreement

On February 22, 2022, the Company entered into a Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”) with certain stockholders including BCP Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP, Buzzard Midstream LLC, APA Corporation Apache Midstream LLC, and certain individuals (each, a “Reinvestment Holder”). Under the Reinvestment Agreement, each Reinvestment Holder is obligated to reinvest at least 20% of all distributions on Common Units or dividends on shares of Class A Common Stock in the Company’s Class A Common Stock. ~~Additionally, the~~The Audit Committee ~~and subsequently the Board~~ resolved that for the calendar year ~~2022,~~2023, 100% of all distributions or dividends received by each Reinvestment Holder would be reinvested in ~~newly issued~~ shares of Class A Common Stock.

~~On May 17, 2022,~~During the first three months of 2023, the Company made cash dividend payments of ~~$11.7~~$17.1 million to holders of Class A Common Stock and Class C Common Units and ~~$87.7~~$87.9 million was reinvested in shares of Class A Common Stock by ~~each~~the Reinvestment ~~Holder.~~Holders.

Stock Split

On May 19, 2022, the Company announced ~~a two-for-one~~the Stock Split with respect to its Class A Common Stock and Class C Common Stock in the form of a stock dividend. The Stock Split was accomplished by distributing one additional share of Class A Common Stock for each share of Class A Common Stock outstanding and one additional share of Class C Common Stock for each share of Class C Common Stock outstanding. The additional shares of Common Stock were issued on June 8, 2022 to holders of record at the close of business on May 31, 2022.

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Dividend

On ~~July 20, 2022,~~April 19, 2023, the Board declared a cash dividend of $0.75 per share on the Company’s Class A Common Stock which will be payable to stockholders on ~~August~~May 17, ~~2022. On July 20, 2022, the~~2023. The Company, through its ownership of the general partner of the Partnership, ~~also~~ declared a distribution of $0.75 per Common Unit from the Partnership to the holders of Common Units, which will be payable on ~~August~~May 17, ~~2022. As context requires, dividends paid to holders of Class A Common~~ 2023.

Stock ~~and distributions paid to holders of Common Units may be referred to collectively as “dividends.”~~Repurchase Program

~~Series A Cumulative Redeemable Preferred Units~~

~~The Partnership issued Preferred Units on June 12, 2019. Because~~In February 2023, the Transaction was accounted for as a reverse merger, certain Preferred Units that were issued and outstanding were assumed at Closing for accounting purposes. The Preferred Units are exchangeable for sharesBoard approved the Repurchase Program, authorizing discretionary purchases of the Company’s Class A Common Stock up to $100.0 million in the aggregate. Repurchases may be made at management’s discretion from time to time, in accordance with applicable securities laws, on the ~~option~~open market or through privately negotiated transactions and may be made pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the ~~Preferred Unit holders upon~~Exchange Act. Privately negotiated repurchases from affiliates are also authorized under the ~~occurrence of specified events, unless otherwise redeemed by~~Repurchase Program, subject to such affiliates’ interest and other limitations. The repurchases will depend on market conditions and may be discontinued at any time without prior notice. For the ~~Company.~~

~~Table of Contents~~

~~The Preferred Units entitle~~three months ended March 31, 2023, the ~~holders to receive quarterly distributions~~Company repurchased 81,862 shares at a ~~rate~~total cost of 7% per annum, commencing with the quarter ended June 30, 2019. The rate increases to 10% per annum upon the occurrence of specified events. There were 396,417 redeemable noncontrolling interest Preferred Units outstanding as of June 30, 2022.

On the Closing Date of the Transaction, the Company effectuated the Third Amended and Restated Agreement of Limited Partnership of the Partnership (“Partnership LPA”), which, among other things, provides for mandatory redemptions by the Partnership of 50,000 Preferred Units at or prior to each of the six-, twelve- and eighteen-month anniversaries of the effectiveness from the Partnership LPA, for an aggregate of 150,000 Preferred Units over such eighteen-month period. There were 26,428 mandatory redeemable Preferred Units outstanding as of June 30, 2022.

~~In July 2022, the Company redeemed the remaining 400,000 Preferred Units along with 22,845 PIK units for an aggregate redemption price of $492.2~~$2.4 million. For ~~further~~additional information regarding the Repurchase Program, see “Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” in this Quarterly Report on Form 10-Q. For more information regarding the ~~Preferred Units,~~1% U.S. federal excise tax imposed on certain repurchases of stock by publicly traded U.S. corporations, please refer to ~~Note 11—Series A Cumulative Redeemable Preferred Unitsin the Notes to our Condensed Consolidated~~“Item 2. Management’s Discussion and Analysis of Financial ~~Statements~~Condition and Results of Operations—Factors Affecting Our Business—Share Repurchase Program,” included in this Quarterly Report on Form 10-Q.

Liquidity

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


		June 30, 2022		December 31, 2021			March 31,		December 31,
							2023		2022
		(In thousands)					(In thousands)
Cash and cash equivalents	Cash and cash equivalents	$	5,319	$	18,729	Cash and cash equivalents	$	1,984	$	6,394
Total debt		$	2,971,270	$	2,307,702
Total debt, net of unamortized deferred financing cost						Total debt, net of unamortized deferred financing cost	$	3,511,648	$	3,368,510
Available committed borrowing capacity	Available committed borrowing capacity	$	1,250,000	$	133,000	Available committed borrowing capacity	$	713,000	$	855,000

Cash and cash equivalents

As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had ~~$5.3~~$2.0 million and ~~$18.7~~$6.4 million, respectively, in cash and cash equivalents. ~~The majority of the cash is invested in highly liquid, investment-grade instruments with maturities of three months or less at the time of purchase.~~

Total Debt and Available credit facilities

There is no assurance that the financial condition of banks with lending commitments to the Company will not deteriorate. The Company closely monitors the ratings of the banks in the Company’s 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.

~~Guarantor Information~~

In June 2022, the Company completed the comprehensive refinancing, which included the issuance of the Notes and entry into the TLA and the Revolving Credit Agreement by the Partnership. These debt obligations are fully and unconditionally guaranteed by the Company. The guarantee of the Notes is subject to certain customary release, including the exercise of legal defeasance or covenant defeasance options, the satisfaction and discharge of the indentures governing the Notes, and the release of the guarantor from its guarantee of the Notes in accordance to the indentures governing the Notes.

Contractual Obligations

We have contractual obligations for principal and interest payments on our ~~term loan credit facility.~~Term Loan Credit Facility. See Note 6—7—Debt and Financing Costs in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.

Under certain of our transportation services agreements with third party pipelines to transport natural gas and NGLs, if we fail to ship a minimum throughput volume during any year, then we will pay a deficiency payment for transportation based on the volume shortfall up to the MVC amount. The Company has made no historical shortfall payments through ~~June 30, 2022.~~March 31, 2023.

Off-Balance Sheet Arrangements

As of ~~June 30, 2022,~~March 31, 2023, there were no off-balance sheet arrangements.

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Critical Accounting Policies and Estimates

~~The Company’s~~There have been no significant changes to our critical accounting policies ~~described~~and estimates from those disclosed on our Annual Report Form 10-K for the year ended December 31, 2022. Please refer to information regarding our critical accounting policies and estimates included in ~~the~~ ~~Summary~~“Item 7. Management’s Discussion and Analysis of ~~Significant Accounting Policies in Exhibit 99.1 to Current~~Financial Condition and Results of Operations” of our Annual Report on Form ~~8-K~~10-K for the year ended December 31, 2022 filed with the Commission on July 5, 2022 and the Company’s Quarterly Report on Form 10-Q filed on May 10, 2022 are fundamental to understanding our results of operations and financial condition. There has been no significant change to the Company’s significant accounting policies subsequent to the Form 8-K filed on July 5, 2022. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been included in March 7, 2023.

~~Note 1—Description of the Organization and Summary of Significant Accounting~~ ~~Policies~~ ~~in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.~~

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosure About Market Risk

The Company is exposed to various market risks, including the effects of adverse changes in commodity prices and credit risk as described below. The Company continually monitors its market risk exposure, including the impact and developments related to the armed conflict in Ukraine, increase in interest rate and inflation trend, which ~~introduced~~continued to have significant impact on volatility and uncertainties in the financial markets during ~~2022.~~the first quarter of 2023.

Commodity Price Risk

The results of the Company’s operations may be affected by the market prices of oil and natural gas. A portion of the Company’s revenue is directly tied to local crude, natural gas, NGLs and condensate prices in the Permian Basin. 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 cost of items such as labor and equipment rentals. Management regularly reviews the Company’s potential exposure to commodity price risk, and may periodically enter into financial or physical arrangements intended to mitigate potential volatility. Refer to Note ~~16—~~12—Derivatives and Hedging Activities in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding our hedging strategies and objectives.

Interest Rate Risk

The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. As of ~~June 30, 2022,~~March 31, 2023, the Company had interest bearing debt, net of deferred financing costs, with principal amount of ~~$2.97~~$3.51 billion. The interest ~~rate~~rates for the ~~revolving~~Revolving Credit Facility and ~~term loan credit facilities~~the Term Loan Credit Facility are variable, which exposes the Company to the risk of increased interest expense in the event of increases to short-term interest rates. Accordingly, results of operations, cash flows, financial condition, and the ability to make cash distributions could be adversely affected by significant increases in interest rates. If interest rates increase by ~~1.0%~~10.0%, the Company’s consolidated interest expense would have increased by approximately ~~$5.1~~$60.8 million for the quarter ended ~~June 30, 2022 on a pro forma basis giving effect of the Company’s comprehensive refinance completed at the beginning of the second quarter 2022.~~March 31, 2023. The Company may periodically enter into interest rate derivatives to add stability to interest expense and to manage its exposure to interest rate movements. Refer to Note ~~16—~~12—Derivatives and Hedging Activities in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding our hedging strategies and objectives. The Company also expects to realize 0.05% reductions to the effective interest rates of both the Revolving Credit Facility and the Term Loan Credit Facility during 2023 in relation to sustainability adjustment features embedded in these facilities. The rate reductions are dependent upon the Company meeting certain sustainability targets after 2022, which are currently subject to the completion of certain attestation procedures.

Credit Risk

The Company is subject to credit risk resulting from nonpayment or nonperformance by, or the insolvency or liquidation of, third-party customers. Any increase in the nonpayment and nonperformance by, or the insolvency or liquidation of, the Company’s customers could adversely affect the Company’s results of operations.

~~Table of Contents~~

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of ~~June 30, 2022,~~March 31, 2023, pursuant to Rule 13a-15(b) of the Exchange Act, the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief

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Accounting and Administrative Operating Officer, who serves as the principal accounting officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Accounting and Administrative Operating Officer, concluded that the Company’s disclosure controls and procedures were effective as of ~~June 30, 2022.~~March 31, 2023.

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that the Company files under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Accounting and Administrative Operating Officer, as appropriate, to allow timely decisions regarding required disclosure.

Change in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended ~~June 30, 2022,~~March 31, 2023, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For further information regarding legal proceedings, refer to Note 8—16—Commitments and Contingencies in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.

ITEM 1A. RISK FACTORS

Please refer to ~~Part~~“Part II, Item 1A — Risk ~~Factors~~Factors” in the Company’s Annual Report Form 10-K for the year ended December 31, 2022 filed on March 7, 2023.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Repurchase of Class A Common Stock


Period	Total Number of Shares Purchased(1)	Average Price per Share(2)		Total Number of Shares Purchased as Part of Publicly Announced Plan(1)	Maximum number (or approximate dollar value) of Shares that May Yet be Purchased under the Plans
January 1 to January 31, 2023	—	$	—	—	$	100,000,000
February 1 to February 28, 2023	—	—		—	100,000,000
March 1 to March 31, 2023	81,862	29.71		81,862	97,567,798
Total	81,862	$	29.71	81,862	$	97,567,798

(1)On February 28, 2023, the Company announced that the Board had approved a share repurchase program (“Repurchase Program”), authorizing discretionary purchases of the Company’s ~~Quarterly Report Form 10-Q for~~Class A Common Stock up to $100 million in the ~~first quarter~~aggregate.

(2)Average price paid per share included commission to repurchase shares.

ITEM 5. OTHER INFORMATION

Disclosure pursuant to Section 13(r) of ~~2022 filed on May 10, 2022.~~the Securities Exchange Act of 1934

Pursuant to Section 13(r) of the Exchange Act, we may be required to disclose in our annual and quarterly reports to the SEC whether we or any of our “affiliates” knowingly engaged in certain activities, transactions or dealings relating to Iran or with certain individuals or entities targeted by US economic sanctions. Disclosure is generally required even where the

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activities, transactions or dealings were conducted in compliance with applicable law. Because the SEC defines the term “affiliate” broadly, it includes any entity under common “control” with us (and the term “control” is also construed broadly by the SEC).

The description of the activities below has been provided to us by Blackstone Inc. (“BX”), affiliates of which: (i) beneficially own more than 10% of our outstanding common stock and are members of our board of directors, and (ii) hold a minority non-controlling interest in Atlantia S.p.A. Atlantia S.p.A. may therefore be deemed to be under common “control” with us; however, this statement is not meant to be an admission that common control exists.

The disclosure below relates solely to activities conducted by Atlantia S.p.A. The disclosure does not relate to any activities conducted by us or by BX and does not involve our or BX’s management. Neither we nor BX has had any involvement in or control over the disclosed activities, and neither we nor BX has independently verified or participated in the preparation of the disclosure. Neither we nor BX is representing as to the accuracy or completeness of the disclosure nor do we or BX undertake any obligation to correct or update it.

We understand that BX disclosed the following in their most recent annual report on Form 10-K, and as of May 4, 2023, the company is unaware of any changes to the relationship status between BX and Atlantia S.p.A, therefore, the Company included BX’s disclosure of certain activities, transactions or dealings between BX and Iran.

Disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934. Funds affiliated with BX first invested in Atlantia S.p.A. on November 18, 2022 in connection with the voluntary public tender offer by Schema Alfa S.p.A. for all of the shares of Atlantia S.p.A., pursuant to which such funds obtained a minority non-controlling interest in Atlantia S.p.A. Atlantia S.p.A. owns and controls Aeroporti di Roma S.p.A. (“ADR”), an operator of airports in Italy including Leonardo da Vinci-Fiumicino Airport. Iran Air has historically operated periodic flights to and from Leonardo da Vinci-Fiumicino Airport as authorized, from time to time, by an aviation-related bilateral agreement between Italy and Iran, scheduled in compliance with European Regulation 95/93, and approved by the Italian Civil Aviation Authority. ADR, as airport operator, is under a mandatory obligation to provide airport services to all air carriers (including Iran Air) authorized by the applicable Italian authority. The relevant turnover attributable to these activities (whose consideration is calculated on the basis of general tariffs determined by such independent Italian authority) in the quarter ended March 31, 2023 was less than €30,000. Atlantia S.p.A. does not track profits specifically attributable to these activities.

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ITEM 6. EXHIBITS

EXHIBIT NO.

DESCRIPTION

EXHIBIT NO.

DESCRIPTION

2.1***

–

Contribution Agreement, dated October 21, 2021, by and among Altus Midstream Company, Altus Midstream LP, New BCP Raptor Holdco, LLC, and BCP Raptor Holdco, LP (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on October 21, 2021).

2.1***

–

3.1

–

Third Amended and Restated Certificate of Incorporation of Kinetik Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).

3.1

–

3.2

–

Amended and Restated Bylaws of Kinetik Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).

3.2

–

Amended and Restated Bylaws of Kinetik Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).

4.1

–

Amended and Restated Stockholders Agreement, dated October 21, 2021, by and among APA Corporation, Apache Midstream LLC, Altus Midstream Company, New BCP Raptor Holdco, LLC, Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP, Buzzard Midstream LLC, and BCP Raptor Holdco, LP. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).

4.1

–

4.2

–

Second Amended and Restated Registration Rights Agreement, dated February 22, 2022, by and among Altus Midstream Company, Apache Midstream LLC, Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP, Buzzard Midstream LLC and the other holders party thereto. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).

4.2

–

4.3

–

Indenture, dated June 8, 2022, by and among Kinetik Holdings Inc., Kinetik Holdings LP and U.S. Bank Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on June 14, 2022).

4.3

–

Indenture, dated June 8, 2022, by and among Kinetik Holdings Inc., Kinetik Holdings LP, and U.S. Bank Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on June 14, 2022).

4.4

–

Form of 5.875% Sustainability-Linked Senior Notes (included in Exhibit 4.3) (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on June 14, 2022).

4.4

–

Form of 5.875% Sustainability-Linked Senior Notes (included in Exhibit 4.3) (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on June 14, 2022).

10.1

–

Third Amended and Restated Agreement of Limited Partnership of Altus Midstream LP, dated as of October 22, 2021. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).

10.1

–

Third Amended and Restated Agreement of Limited Partnership of Altus Midstream LP, dated as of October 22, 2021 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022)..

10.2*

–

Form of Restricted Stock Unit Agreement (Directors).

10.2*

–

KNTK - 2019 Omnibus Compensation Plan - Form RSU Agreement (2023 Form )

10.3*

–

Form of Deferred Stock Unit Agreement (Directors).

10.3*

–

KNTK - 2019 Omnibus Compensation Plan - Form RSU Agreement (Director Form)

10.4

–

Purchase Agreement dated June 1, 2022 by and among Kinetik Holdings Inc., Kinetik Holdings LP and J.P. Morgan Securities LLC, as representative of the Initial Purchasers named therein (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 3, 2022).

10.5***

–

Revolving Credit Agreement, dated June 8, 2022, by and among Kinetik Holdings LP and Bank of America, N.A., as administrative agent, and the banks and other financial institutions party thereto, as lenders (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 14, 2022).

10.6***

–

Loan Credit Agreement, dated June 8, 2022, by and among Kinetik Holdings LP and PNC Bank, National Association, as administrative agent, and the banks and other financial institutions party thereto, as lenders (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on June 14, 2022).

31.1*

–

Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).

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).

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 required by Rule 13a-14(a) or Rule 15d-14(b) and 18 U.S.C. 1350.

32.1**

–

Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(b) and 18 U.S.C. 1350

32.2**

–

Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(b) and 18 U.S.C. 1350.

32.2**

–

Certification of the 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 March 31, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Changes in Equity and Noncontrolling Interests and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

101*

–

The following financial statements from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Changes in Equity and Noncontrolling Interests and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

101.SCH*

–

Inline XBRL Taxonomy Schema Document.

101.SCH*

–

Inline XBRL Taxonomy Schema Document.

101.CAL*

–

Inline XBRL Calculation Linkbase Document.

101.CAL*

–

Inline XBRL Calculation Linkbase Document.

101.DEF*

–

Inline XBRL Definition Linkbase Document.

101.DEF*

–

Inline XBRL Definition Linkbase Document.

101.LAB*

–

Inline XBRL Label Linkbase Document.

101.LAB*

–

Inline XBRL Label Linkbase Document.

101.PRE*

–

Inline XBRL Presentation Linkbase Document.

101.PRE*

–

Inline XBRL Presentation Linkbase Document.

104*

–

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

104*

–

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


* Filed herewith.
** 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.

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SIGNATURES

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 hereunto duly authorized.


		KINETIK HOLDINGS INC.

Dated:	~~August 9, 2022~~May 4, 2023	/s/ Jamie Welch
		Jamie Welch
		Chief Executive Officer, President, Chief Financial Officer and Director
		(Principal Executive Officer)

Dated:	~~August 9, 2022~~May 4, 2023	/s/ Steven Stellato
		Steven Stellato
		Executive Vice President, Chief Accounting and Chief Administrative ~~Operating~~ Officer
		(Principal Financial Officer)

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	Units Outstanding	Amount (3)

	(In thousands, except for unit data)
Redeemable noncontrolling interest — Preferred Units, immediately upon Closing Date of Transaction(1)	396,417	$	462,717



Cash distribution paid to Preferred Unit limited partners	—	(6,937)
Distribution payable to Preferred Unit limited partners		(6,937)
Allocation of net income	—	17,420
Accreted redemption value adjustment	—	97,075
Redeemable noncontrolling interest — Preferred Units, as of June 30, 2022	396,417	563,338
Embedded derivative liability(2)		488
		$	563,826


	For the Six Months Ended June 30,
	2022		2021

	(In thousands)
Cash provided by operating activities	$	268,918	$	94,210
Cash used in investing activities	$	(69,059)	$	(62,517)
Cash used in financing activities	$	(213,269)	$	(32,242)