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 September 30, ~~2022~~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

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 October 31, ~~2022~~2023

~~43,082,157~~54,522,697

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

~~94,270,000~~94,089,038

TABLE OF CONTENTS

Item Page
PART I — FINANCIAL INFORMATION (UNAUDITED)
1.
FINANCIAL STATEMENTS
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
1
CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6
1.D ESCRIPTION OF THE ORGA NIZATION AND SUMMARY OF SIGN IFICANT ACCOUNTING POLICIES
6
2.BUSINESS COMBINATION
10
3.REVENUE RECOGNITION
12
4.PROPERTY, PLANT AND EQUIPMENT
13
5.GOO DWILL AND INTANGIBLE ASSETS, NET
14
6.DEBT AND FINANCING COSTS
14
7.ACCRUED EXPENSES
17
8.COMMITMENTS AND CONTINGENCIES
17
9.EQUITY METHOD INVESTMENTS
18
10.EQUITY AND WARRANTS
20
11.SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS
21
12.SHARE-BASED COMPENSATION
22
13.INCOME TAXES
23
14.NET INCOME PER SHARE
24
15.FAIR VALUE MEASUREMENTS
25
16.DERIVATIVES AND HEDGING ACTIVITIES
26
17.SEGMENTS
27
18.SUBSEQUENT EVENTS
30
2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
31
3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
44
4.
CONTROLS AND PROCEDURES
45
PART II — OTHER INFORMATION
1.
LEGAL PROCEEDINGS
46
1A.
RISK FACTORS
46
5.
OTHER INFORMATION
47
6.
EXHIBITS
48
SIGNATURES
49


Item		Page
	PART I — FINANCIAL INFORMATION

1.	FINANCIAL STATEMENTS (UNAUDITED)	1

	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022	2

	CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022	3

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022	4

	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS - THREE AND NINE MONTHS ENDED SEP TEMBER 30, 2023 AND 2022	5

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8

	1.DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	8

	2.BUSINESS COMBINATIONS	10

	3.REVENUE RECOGNITION	11

	4.PROPERTY, PLANT AND EQUIPMENT	12

	5.GOODWILL AND INTANGIBLE ASSETS, NET	12

	6.EQUITY METHOD INVESTMENTS	13

	7.DEBT AND FINANCING COSTS	14

	8.ACCRUED EXPENSES	15

	9.LEASE	16

	10.EQUITY AND WARRANTS	16

	11.FAIR VALUE MEASUREMENTS	17

	12.DERIVATIVES AND HEDGING ACTIVITIES	19

	13.SHARE-BASED COMPENSATION	20

	14.INCOME TAXES	21

	15.NET INCOME PER SHARE	21

	16.COMMITMENTS AND CONTINGENCIES	22

	17.SEGMENTS	23

	18.SUBSEQUENT EVENTS	27

2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28

3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41

4.	CONTROLS AND PROCEDURES	42

	PART II — OTHER INFORMATION

1.	LEGAL PROCEEDINGS	43

1A.	RISK FACTORS	43

2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	43

5.	OTHER INFORMATION	43

6.	EXHIBITS	44
	SIGNATURES	45

GLOSSARY OF TERMS

The following are abbreviations and definitions of certain terms which may be 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 natural gas ~~liquids.~~liquids

•Bcf. One billion cubic feet

•Bcf/d. One 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.~~one-degree Fahrenheit

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

•Delaware Basin. Located on the western section of the Permian Basin. The Delaware Basin covers a ~~6.4M~~6.4 million 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.~~day

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

•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. 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~~terminology. 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~~Key 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 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, terrorist attack or other event that materially impacts project construction and our operations, including cyber or other ~~attached on~~attached-on electronic systems;

•our ability to successfully implement, execute and ~~execute~~achieve our environmental, social and governance goals and ~~initiatives~~initiatives;

•our ability to successfully implement our share repurchase program;

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

•the realizability and ~~achieve the anticipated results~~valuation allowance assessment of ~~such initiatives;~~our net deferred tax asset position;

•general economic and political conditions, including the armed ~~conflict~~conflicts in Ukraine, Israel and the Gaza Strip, epidemics or pandemics and 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 in monetary policy;~~liquidity risks and

~~iii~~

• other factors; and other factors disclosed in ~~Part II,~~“Part I, Item 1A1A. — Risk ~~Factors~~Factors” of the Company’s ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~first quarter of~~year ended December 31, 2022, filed on ~~May 10, 2022.~~March 7, 2023.

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.

iviii

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended September 30,*				Nine Months Ended September 30,*					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022(1)

		(In thousands, except per share data)									(In thousands, except per share data)
Operating revenues:	Operating revenues:									Operating revenues:
Service revenue	Service revenue	$	107,597	$	72,578	$	290,122	$	202,482	Service revenue	$	104,349	$	107,597	$	310,325	$	290,122
Product revenue	Product revenue	213,803		93,266		618,382		244,358		Product revenue	221,280		213,803		586,534		618,382
Other revenue	Other revenue	3,776		742		9,493		3,615		Other revenue	4,672		3,776		10,685		9,493
Total operating revenues(2)	Total operating revenues(2)	325,176		166,586		917,997		450,455		Total operating revenues(2)	330,301		325,176		907,544		917,997
Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Costs of sales (exclusive of depreciation and amortization shown separately below)		145,208		60,503		418,197		141,011
Costs of sales (exclusive of depreciation and amortization)(3) (4)										Costs of sales (exclusive of depreciation and amortization)(3) (4)	147,756		145,208		374,100		418,197
Operating expenses	Operating expenses	35,845		22,731		100,996		63,575		Operating expenses	42,925		35,845		118,804		100,996
Ad valorem taxes	Ad valorem taxes	5,903		3,238		15,936		9,003		Ad valorem taxes	5,607		5,903		14,954		15,936
General and administrative expenses	General and administrative expenses	23,468		6,957		72,180		17,920		General and administrative expenses	22,751		23,468		73,131		72,180
Depreciation and amortization		65,005		57,154		192,609		170,291
Loss (gain) on disposal of assets		3,946		(37)		12,602		417
Depreciation and amortization expenses										Depreciation and amortization expenses	69,935		65,005		208,271		192,609
Loss on disposal of assets										Loss on disposal of assets	2,927		3,946		15,166		12,602

Total operating costs and expenses	Total operating costs and expenses	279,375		150,546		812,520		402,217		Total operating costs and expenses	291,901		279,375		804,426		812,520
Operating income	Operating income	45,801		16,040		105,477		48,238		Operating income	38,400		45,801		103,118		105,477
Other income (expense):	Other income (expense):									Other income (expense):
Interest and other income	Interest and other income	—		3,578		250		4,141		Interest and other income	289		—		1,625		250
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	—		—		—		9,580
Gain (loss) on debt extinguishment		—		(56)		(27,975)		4
Loss on debt extinguishment										Loss on debt extinguishment	—		—		—		(27,975)
Gain on embedded derivative	Gain on embedded derivative	488		—		89,050		—		Gain on embedded derivative	—		488		—		89,050
Interest expense	Interest expense	(40,464)		(30,541)		(92,585)		(88,458)		Interest expense	(45,009)		(40,464)		(130,443)		(92,585)
Equity in earnings of unconsolidated affiliates	Equity in earnings of unconsolidated affiliates	45,003		16,826		120,706		44,692		Equity in earnings of unconsolidated affiliates	50,754		45,003		146,828		120,706
Total other income (expense), net		5,027		(10,193)		99,026		(39,621)

Total other income, net										Total other income, net	6,034		5,027		18,010		99,026
Income before income taxes	Income before income taxes	50,828		5,847		204,503		8,617		Income before income taxes	44,434		50,828		121,128		204,503
Income tax expense	Income tax expense	1,406		1,207		2,244		1,207		Income tax expense	1,303		1,406		2,030		2,244

Net income including noncontrolling interest	Net income including noncontrolling interest	49,422		4,640		202,259		7,410		Net income including noncontrolling interest	43,131		49,422		119,098		202,259
Net income attributable to Preferred Unit limited partners	Net income attributable to Preferred Unit limited partners	708		—		115,203		—		Net income attributable to Preferred Unit limited partners	—		708		—		115,203
Net Income attributable to common shareholders		48,714		4,640		87,056		7,410
Net income attributable to common shareholders										Net income attributable to common shareholders	43,131		48,714		119,098		87,056
Net income attributable to Common Unit limited partners	Net income attributable to Common Unit limited partners	33,778		4,640		61,817		7,410		Net income attributable to Common Unit limited partners	27,551		33,778		77,068		61,817
Net income attributable to Class A Common Shareholders		$	14,936	$	—	$	25,239	$	—

Net income attributable to Class A Common Stock Shareholders										Net income attributable to Class A Common Stock Shareholders	$	15,580	$	14,936	$	42,030	$	25,239

Net income attributable to Class A Common Shareholders per share	Net income attributable to Class A Common Shareholders per share									Net income attributable to Class A Common Shareholders per share
Basic	Basic	$	1.04	$	—	$	1.24	$	—	Basic	$	0.21	$	1.04	$	0.58	$	1.24
Diluted	Diluted	$	1.04	$	—	$	1.24	$	—	Diluted	$	0.21	$	1.04	$	0.57	$	1.24
Weighted-average shares **
Weighted-average shares(5)										Weighted-average shares(5)
Basic	Basic	41,816		—		40,042		—		Basic	53,340		41,816		50,464		40,042
Diluted	Diluted	41,855		—		40,075		—		Diluted	53,463		41,855		50,719		40,075

* (1)The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to the 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(2)Includes amounts associated with related parties of $13.3 million and $19.9 million for the three months ended September 30, 2023 and 2022, respectively, and $34.5 million and $59.4 million for the nine months ended September 30, 2023 and 2022, respectively.

(3)Includes amounts associated with related parties of $8.7 million and $3.1 million for the three months ended September 30, 2023 and 2022, respectively, and $14.2 million and $16.3 million for the nine months ended September 30, 2023 and 2022, respectively.

(4)Cost of sales (exclusive of depreciation and amortization) is net of gas service revenues totaling $38.6 million and $17.1 million for the three months ended September 30, 2023 and 2022, respectively, and $107.1 million and $51.1 million for the nine months ended September 30, 2023 and 2022, respectively, for certain volumes where we act as principal.

(5)Class A share and per share amounts have been ~~retroactively~~retrospectively restated to reflect the Company’s ~~Stock Split (as defined in~~ ~~Note 10~~—~~Equity and Warrants~~),reverse 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.~~

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

Table of Contents

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


		September 30,		December 31,			September 30,		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	$	11,728	$	18,729	Cash and cash equivalents	$	68	$	6,394
Accounts receivable, net of allowance for credit losses of $1,000 in 2022 and 2021		269,634		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)	230,572		204,036
Derivative assets						Derivative assets	21,635		6,963
Prepaid and other current assets	Prepaid and other current assets	37,431		20,683		Prepaid and other current assets	36,193		24,474
		318,793		217,519			288,468		241,867
NONCURRENT ASSETS:	NONCURRENT ASSETS:					NONCURRENT ASSETS:
Property, plant and equipment, net	Property, plant and equipment, net	2,528,659		1,839,279		Property, plant and equipment, net	2,720,447		2,535,212
Intangible assets, net	Intangible assets, net	722,391		786,049		Intangible assets, net	620,790		695,389

Derivative asset, non-current						Derivative asset, non-current	2,444		—
Operating lease right-of-use assets	Operating lease right-of-use assets	34,677		61,562		Operating lease right-of-use assets	48,102		28,551
Deferred charges and other assets	Deferred charges and other assets	25,505		22,320		Deferred charges and other assets	81,475		32,275
Investment in unconsolidated affiliates		2,372,596		626,477

Investments in unconsolidated affiliates						Investments in unconsolidated affiliates	2,519,213		2,381,340
Goodwill	Goodwill	4,557		—		Goodwill	5,077		5,077
		5,688,385		3,335,687			5,997,548		5,677,844
Total assets	Total assets	$	6,007,178	$	3,553,206	Total assets	$	6,286,016	$	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	$	16,002	$	12,220	Accounts payable	$	17,624	$	17,899
Accrued expenses	Accrued expenses	235,160		135,643		Accrued expenses	188,062		173,914
Derivative liabilities						Derivative liabilities	4,863		5,718
Current portion of operating lease liabilities						Current portion of operating lease liabilities	33,434		22,810

Derivative liabilities		—		2,667

Current portion of operating lease liabilities		25,466		31,776
Current portion of long-term debt, net		—		54,280
Other current liabilities	Other current liabilities	8,039		4,339		Other current liabilities	7,106		7,487
		284,667		240,925			251,089		227,828
NONCURRENT LIABILITIES:
Long-term debt, net		3,447,513		2,253,422
NONCURRENT LIABILITIES						NONCURRENT LIABILITIES
Long term debt, net						Long term debt, net	3,606,962		3,368,510
Contract liabilities	Contract liabilities	22,707		11,674		Contract liabilities	25,500		22,693
Operating lease liabilities	Operating lease liabilities	9,033		29,889		Operating lease liabilities	15,633		6,023

Derivative liabilities	Derivative liabilities	—		200		Derivative liabilities	382		8,328
Other liabilities	Other liabilities	2,867		2,219		Other liabilities	3,272		2,677
Contingent liabilities		—		839

Deferred tax liabilities	Deferred tax liabilities	13,082		7,190		Deferred tax liabilities	12,693		11,018
							3,664,442		3,419,249

		3,495,202		2,305,433
Total liabilities	Total liabilities	3,779,869		2,546,358		Total liabilities	3,915,531		3,647,077

COMMITMENTS AND CONTINGENCIES (Note 8)

COMMITMENTS AND CONTINGENCIES (Note 16)						COMMITMENTS AND CONTINGENCIES (Note 16)
Redeemable noncontrolling interest — Common Unit limited partners	Redeemable noncontrolling interest — Common Unit limited partners	3,061,861		1,006,838		Redeemable noncontrolling interest — Common Unit limited partners	3,208,501		3,112,409

EQUITY:	EQUITY:					EQUITY:

Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 43,082,157 and nil shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively*		4		—
Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 94,270,000 and 100,000,000 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively*		9		10
Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 54,519,658 and 45,679,447 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively(2)						Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 54,519,658 and 45,679,447 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively(2)	6		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 September 30, 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 September 30, 2023 and December 31, 2022, respectively(2)	9		9
Additional paid-in capital	Additional paid-in capital	107,182		—		Additional paid-in capital	91,747		118,840
Accumulated deficit	Accumulated deficit	(941,747)		—		Accumulated deficit	(929,778)		(958,629)

		(834,552)		10
Total liabilities, noncontrolling interests, and equity		$	6,007,178	$	3,553,206
Total equity						Total equity	(838,016)		(839,775)
Total liabilities, noncontrolling interest, and equity						Total liabilities, noncontrolling interest, and equity	$	6,286,016	$	5,919,711

(1)Includes amounts of $15.0 million and $17.6 million associated with related parties as of September 30, 2023 and December 31, 2022, respectively.

* (2)Share amounts have been ~~retroactively~~retrospectively restated to reflect the Company’s ~~Stock Split (as defined in~~ ~~Note 10—Equity and Warrants~~),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.~~

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

Table of Contents

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30,
2022 2021
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income including noncontrolling interests $ 202,259 $ 7,410
Adjustments to reconcile net income to net cash provided by operating activities:
           Depreciation and amortization expense 192,609 170,291
           Amortization of debt issuance costs 8,053 9,991
           Amortization of contract costs 1,344 1,815
           Contingent liabilities remeasurement (839) (377)
           Distributions from unconsolidated affiliates 185,786 47,017
           Derivatives settlement 11,115 (17,959)
           Derivatives fair value adjustment (103,032) 13,943
           Gain on redemption of mandatorily redeemable Preferred Units (9,580) —
           Loss on disposal of assets 12,602 417
           Equity in earnings from unconsolidated affiliates (120,706) (44,692)
           (Gain) loss on debt extinguishment 27,975 (4)
           Share-based compensation 30,966 —
           Deferred income taxes 1,882 1,207
Change in operating assets and liabilities:
           Accounts receivable (73,927) (118,606)
           Other assets (9,583) (7,303)
           Accounts payable 926 (2,141)
           Accrued liabilities 95,675 96,347
           Operating lease liabilities (281) 1,994
                 Net cash provided by operating activities 453,244 159,350
CASH FLOWS FROM INVESTING ACTIVITIES
           Property, plant and equipment expenditures (160,478) (60,609)
           Intangible assets expenditures (13,332) (3,733)
           Investment in unconsolidated affiliates (56,199) (20,522)
           Cash proceeds from disposals 190 3,541
           Net cash acquired in acquisition 13,401 —
                 Net cash used in investing activities (216,418) (81,323)
CASH FLOWS FROM FINANCING ACTIVITIES
           Proceeds from issuance of long-term debt 3,000,000 30,189
           Principal payments on long-term debt (2,294,130) (80,177)
           Payment on debt issuance costs (36,873) (3,152)
           Proceeds from revolver 537,000 33,000
           Payment on revolver (771,000) (27,000)
           Redemption of mandatorily redeemable Preferred Units (183,297) —
           Redemption of redeemable noncontrolling interest Preferred Units (461,460) —
           Distributions paid to mandatorily redeemable Preferred Units holders (1,850) —
           Distributions paid to redeemable noncontrolling interest Preferred Units limited partners (6,937) —
           Cash dividends paid to Class A Common Stock shareholders (24,351) —
           Distributions paid to Class C Common Units limited partners (929) (30,189)
           Equity contributions — 14,890
                 Net cash used in financing activities (243,827) (62,439)
                 Net change in cash $ (7,001) $ 15,588
CASH, BEGINNING OF PERIOD $ 18,729 $ 19,591
CASH, END OF PERIOD $ 11,728 $ 35,179
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES
           Cash paid for interest, net of amounts capitalized $ 76,592 $ 81,521
           Property and equipment and intangible accruals in accounts payable and accrued liabilities $ 17,717 $ 9,357
           Class A Common Stock issued through dividend and distribution reinvestment plan $ 175,453 $ —
           Fair value of ALTM assets acquired $ 2,446,429 $ —
           Class A Common Stock issued in exchange 1,013,745 —
           ALTM liabilities and mezzanine equity assumed $ 1,432,684 $ —


	Nine Months Ended September 30,
	2023		2022

	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests	$	119,098	$	202,259
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	208,271		192,609
Amortization of deferred financing costs	4,601		8,053
Amortization of contract costs	4,965		1,344
Contingent liabilities remeasurement	—		(839)
Distributions from unconsolidated affiliates	205,891		185,786
Derivatives settlement	15,111		11,115
Derivative fair value adjustment	(41,028)		(103,032)
Warrants fair value adjustment	(73)		—
Gain on redemption of mandatorily redeemable Preferred Units	—		(9,580)
Loss on disposal of assets	15,166		12,602
Equity in earnings from unconsolidated affiliates	(146,828)		(120,706)
Loss on debt extinguishment	—		27,975
Share-based compensation	43,340		30,966
Deferred income taxes	1,675		1,882

Changes in operating assets and liabilities:
Accounts receivable	(26,982)		(73,927)
Other assets	(7,033)		(9,583)
Accounts payable	(780)		926
Accrued liabilities	8,840		95,675
Other non-current liabilities	668		—
Operating leases	683		(281)
Net cash provided by operating activities	405,585		453,244
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures	(245,798)		(160,478)
Intangible assets expenditures	(15,079)		(13,332)
Investments in unconsolidated affiliates	(202,729)		(56,199)
Distributions from unconsolidated affiliate	5,793		—
Cash proceeds from disposals	213		190
Net cash (paid for) acquired in acquisitions	(125,000)		13,401
Net cash used in investing activities	(582,600)		(216,418)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt	—		3,000,000
Principal payments on long-term debt	—		(2,294,130)
Payments on debt issuance cost	—		(36,873)
Proceeds from revolver	673,000		537,000
Payments on revolver	(438,000)		(771,000)
Redemption of mandatorily redeemable Preferred Units	—		(183,297)
Redemption of redeemable noncontrolling interest Preferred Units	—		(461,460)
Distributions paid to mandatorily redeemable Preferred Unit holders	—		(1,850)
Distributions paid to redeemable noncontrolling interest Preferred Unit limited partners	—		(6,937)
Cash dividends paid to Class A Common Stock shareholders	(58,030)		(24,351)
Distributions paid to Class C Common Unit limited partners	(524)		(929)

Repurchase of Class A Common Stock	(5,757)		—
Net cash provided by (used in) financing activities	170,689		(243,827)
Net change in cash	(6,326)		(7,001)
CASH, BEGINNING OF PERIOD	6,394		18,729
CASH, END OF PERIOD	$	68	$	11,728
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES
Cash paid for interest, net of amounts capitalized	$	165,877	$	76,592
Property and equipment and intangible accruals in accounts payable and accrued liabilities	$	25,237	$	17,717
Class A Common Stock issued through dividend and distribution reinvestment plan	$	263,771	$	175,453

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

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

~~Table of Contents~~

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 September 30, 2021
Balance at June 30, 2021 $ — $ 1,029,126 — $ — 100,694 $ 10 $ — $ — $ 10
Net income — 4,640 — — — — — — —
Balance at September 30, 2021 $ — $ 1,033,766 — $ — 100,694 $ 10 $ — $ — $ 10
For the Quarter Ended September 30, 2022
Balance at June 30, 2022 $ 563,338 $ 3,251,290 40,551 $ 4 94,450 $ 9 $ — $ (1,181,343) $ (1,181,330)
Redemption of Common Units — (6,765) 180 — (180) — 6,765 — 6,765
Redemption of Preferred Units (461,460) — — — — — — — —
Excess of carrying amount over Preferred Units redemption price (102,586) 76,623 — — — — — 32,900 32,900
Issuance of Class A Common Stock through dividend and distribution reinvestment plan — — 2,351 — — — 87,756 — 87,756
Share-based compensation — — — — — — 12,661 — 12,661
Net income 708 33,778 — — — — — 14,936 14,936
Change in redemption value of noncontrolling interests — (222,227) — — — — — 222,227 222,227
Distributions paid to Common Unit limited partners — (70,838) — — — — — — —
Dividends on Class A Common Stock ($0.75 per share) — — — — — — — (30,467) (30,467)
Balance at September 30, 2022 $ — $ 3,061,861 43,082 $ 4 94,270 $ 9 $ 107,182 $ (941,747) $ (834,552)


	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 Quarter Ended September 30, 2022
Balance at June 30, 2022	$	563,338	$	3,251,290	40,551	$	4	94,450	$	9	$	—	$	(1,181,343)	$	—	$	(1,181,330)


Redemption of Common Units	—		(6,765)		180	—		(180)	—		6,765		—		—		6,765
Redemption of Preferred Units	(461,460)		—		—	—		—	—		—		—		—		—
Excess of carrying amount over Preferred Units redemption price	(102,586)		76,623.00		—	—		—	—		—		32,900		—		32,900
Issuance of Class A Common Stock through dividend and distribution reinvestment plan	—		—		2,351	—		—	—		87,756		—		—		87,756
Share-based compensation	—		—		—	—		—	—		12,661		—		—		12,661
Net income	708		33,778		—	—		—	—		—		14,936		—		14,936
Change in redemption value of noncontrolling interests	—		(222,227)		—	—		—	—		—		222,227		—		222,227
Distributions paid to Common Unit limited partners	—		(70,838)		—	—		—	—		—		—		—		—
Cash dividends on Class A Common Stock ($0.75 per share)	—		—		—	—		—	—		—		(30,467)		—		(30,467)
Balance at September 30, 2022	$	—	$	3,061,861	43,082	$	4	94,270	$	9	$	107,182	$	(941,747)	$	—	$	(834,552)


For the Quarter Ended September 30, 2023
Balance at June 30, 2023	$	—	$	3,242,619	51,973	$	5	94,089	$	9	$	—	$	(902,446)	$	(3,325)	$	(905,757)

Issuance of common stock through dividend and distribution reinvestment plan	—		—		2,546	1		—	—		88,144				—		88,145
Retirement of treasury stock	—		—		—	—		—	—		—		(3,325)		3,325		—

Share-based compensation	—		—		1	—		—	—		12,502		—		—		12,502
Net income	—		27,551		—	—		—	—		—		15,580		—		15,580
Change in redemption value of noncontrolling interests	—		8,899		—	—		—	—		(8,899)		—		—		(8,899)
Distribution paid to Common Unit limited partners	—		(70,568)		—	—		—	—		—		—		—		—
Cash dividends on Class A Common Stock ($0.75 per share)	—		—		—	—		—	—		—		(39,587)		—		(39,587)
Balance at September 30, 2023	$	—	$	3,208,501	54,520	$	6	94,089	$	9	$	91,747	$	(929,778)	$	—	$	(838,016)

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

(Unaudited)


	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 Nine Months Ended September 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)		—		—	—		—	—		—		—		—		—

Redemption of Common Units	—		(179,323)		5,730	1		(5,730)	(1)		179,323		—		—		179,323
Redemption of Preferred Units	(461,460)		—		—	—		—	—		—		—		—		—
Excess of carrying amount over Preferred Units redemption price	(109,523)		76,623		—	—		—	—		—		32,900		—		32,900
Issuance of common stock through dividend and distribution reinvestment plan	—		—		4,855	—		—	—		175,453		—		—		175,453
Share-based compensation	—		—		4	—		—	—		30,966		—		—		30,966
Remeasurement of contingent consideration	—		—		—	—		—	—		4,451		—		—		4,451
Net income	115,203		61,817		—	—		—	—		—		25,239		—		25,239
Change in redemption value of noncontrolling interests	—		2,237,635		—	—		—	—		(1,296,753)		(940,882)		—		(2,237,635)
Distribution paid to Common Unit limited partners	—		(141,729)		—	—		—	—		—		—		—		—
Cash dividends on Class A Common Stock ($1.50 per share)	—		—		—	—		—	—		—		(59,004)		—		(59,004)
Balance at September 30, 2022	$	—	$	3,061,861	43,082	$	4	94,270	$	9	$	107,182	$	(941,747)	$	—	$	(834,552)

KINETIK HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS

(Unaudited)


	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 Nine Months Ended September 30, 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	—		—		8,641	1		—	—		263,771		—		—		263,772
Retirement of treasury stock	—		—		—	—		—	—		—		(5,757)		5,757		—
Repurchase of Class A Common Stock	—		—		(194)	—		—	—		—		—		(5,757)		(5,757)
Share-based compensation	—		—		213	—		—	—		43,340		—		—		43,340
Net income	—		77,068		—	—		—	—		—		42,030		—		42,030
Change in redemption value of noncontrolling interests	—		236,358		—	—		—	—		(339,838)		103,480		—		(236,358)
Distribution paid to Common Unit limited partners	—		(211,700)		—	—		—	—		—		—		—		—
Cash dividends on Class A Common Stock ($2.25 per share)	—		—		—	—		—	—		—		(110,902)		—		(110,902)
Balance at September 30, 2023	$	—	$	3,208,501	54,520	$	6	94,089	$	9	$	91,747	$	(929,778)	$	—	$	(838,016)

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

(2)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 ~~our Condensed~~ Consolidated Financial Statements in ~~this~~our Annual Report on Form ~~10-Q.~~10-K for the year ended December 31, 2022 filed with the Commission on March 7, 2023. All outstanding Preferred Units were redeemed in 2022.

~~Share amounts have been retroactively restated to reflect the Company’s~~

~~tock Split (as defined in~~

~~Note 10~~

—~~Equity and Warrants), which was effected on June 8, 2022. Refer to~~ ~~Note 10—Equity and Warrantsin 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 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 Nine Months Ended September 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 — 7,410 — — — — — — —
Balance at September 30, 2021 $ — $ 1,033,766 — $ — 100,694 $ 10 $ — $ — $ 10
For the Nine Months Ended September 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) — — — — — — — —
Redemption of Common Units — (179,323) 5,730 1 (5,730) (1) 179,323 — 179,323
Redemption of Preferred Units (461,460) — — — — — — — —
Excess of carrying amount over Preferred Units redemption price (109,523) 76,623 — — — — — 32,900 32,900
Issuance of common stock through dividend and distribution reinvestment plan — — 4,855 — — — 175,453 — 175,453
Share-based compensation — — 4 — — — 30,966 — 30,966
Remeasurement of contingent consideration — — — — — — 4,451 — 4,451
Net income 115,203 61,817 — — — — — 25,239 25,239
Change in redemption value of noncontrolling interests — 2,237,635 — — — — (1,296,753) (940,882) (2,237,635)
Distributions paid to Common Units limited partners — (141,729) — — — — — — —
Dividends on Class A Common Stock ($1.50 per share) — — — — — — — (59,004) (59,004)
Balance at September 30, 2022 $ — $ 3,061,861 43,082 $ 4 94,270 $ 9 $ 107,182 $ (941,747) $ (834,552)

* 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 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 Warrantsin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.~~

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

Table of Contents

KINETIK HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

These ~~condensed consolidated financial statements~~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~~the Company’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.~~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 transferred to Contributor 50,000,000 common units representing limited partner interests in the Partnership (“Common Units”) and t 50,000,000 shares of the Company’s ~~Class C Common Stock, par value $0.0001 per share (“Class C Common Stock”).~~

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 two-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~~ ~~two-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 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.

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

~~Table of Contents~~

~~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 business combination transactions contemplated by that certain 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 further information.~~

~~Nature of Operations~~Closing.

Through its consolidated subsidiaries, the Company provides comprehensive gathering, produced 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.

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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 Condensed Consolidated Financial Statements in conjunction with our 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 were not included in the Company’s consolidated financials prior to February 22, 2022. Refer to Note 2—Business Combinations to our Condensed Consolidated Financial Statements ~~in this Form 10-Q~~herein 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~~retrospectively 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 and herein 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~~Significant Accounting Policies of the Notes to consolidated financial statements in ~~conformity with GAAP~~our Annual Report. There were no significant updates or revisions to our accounting policies during the nine months ended September 30, 2023.

Inventory

Other current assets include condensate, residue gas and ~~disclosure of contingent assets and liabilities requires management to make estimates and assumptions~~NGLs inventories that ~~affect reported amounts of assets and liabilities~~are valued at the ~~date~~lower cost or net realizable value. Inventory was valued at $9.1 million and $4.8 million as of September 30, 2023 and December 31, 2022, respectively.

Transactions with Affiliates

The Company has revenue contracts and incurs cost of sales and operating expenses with Apache, which is considered the Company’s affiliate as it owns more than 10% of the ~~condensed consolidated financial statements~~Company’s common stock. Accounts receivable from this affiliate was $15.0 million and $17.6 million as of September 30, 2023 and December 31, 2022, respectively. Revenue from Apache was $13.3 million and $19.9 million for the ~~reported amounts~~three months ended September 30, 2023 and 2022, respectively, and $34.5 million and $59.4 million for the nine months ended September 30, 2023 and 2022, respectively. Accounts payable and accrued expense due to this affiliate was immaterial as of ~~revenues~~September 30, 2023 and ~~expenses during the reporting period.~~December 31, 2022. The Company ~~bases~~incurred immaterial operating expenses with Apache for the three and nine months ended September 30, 2023.

In addition, the Company incurs cost of sales with two of its ~~estimates on historical experience~~equity method investment (“EMI”) pipeline entities, Permian Highway Pipeline LLC (“PHP”) 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.Breviloba, LLC (“Breviloba”). The Company ~~evaluates its estimates~~pays a demand fee to PHP and ~~assumptions~~pays a capacity fee to Breviloba for certain volumes moving on ~~a regular basis. Actual results may differ from~~the Shin Oak NGL Pipeline. For the three months ended September 30, 2023 and 2022, the Company recorded cost of sales of $2.4 million and $3.7 million, respectively, and $6.4 million and $10.8 million, for the nine months ended September 30, 2023 and 2022, respectively, with 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 tangible and intangible assets, share-based compensation, contingent liabilities, warrants, and noncontrolling interests.affiliates.

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~~Variable Interest Entity~~

~~The Company uses a qualitative approach in assessing~~

2. BUSINESS COMBINATIONS

As of September 30, 2023, our allocation of purchase price for acquisitions made during 2023 and 2022 are detailed below:


	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)

(a)Consideration includes $65 million paid for certain midstream assets and the ~~consolidation requirement for variable interest entities. The approach focuses on identifying which enterprise has~~$60 million paid related to the ~~power to direct the activities that most significantly impact the variable interest entity’s economic performance~~incentive and ~~which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity.~~ acceleration agreement.

Midstream Infrastructure Assets

In the ~~event that~~first quarter of 2023, the Partnership closed on a purchase and sale agreement for certain midstream assets for $65.0 million together with a new 20-year midstream service agreement. Midstream assets acquired consisted of water gathering and disposal assets and intangible right-of-way assets. As the net book value of the acquired assets were approximate to their fair market value, consideration was allocated to property, plant and equipment and intangibles based on the ratio of historical long-lived assets and intangible assets acquired. In addition, the Partnership entered into an incentive and acceleration agreement related to near term supplemental development activities on acreage dedicated for midstream services to affiliates of the Partnership. Such development activities began in October 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 $60.0 million was capitalized as a contract asset in accordance with ASC 606, of which $4.7 million was included in “Prepaid and Other Current Assets” and $55.3 million was included in “Deferred Charges and Other Assets” in the Condensed Consolidated Balance Sheet as of the date of acquisition. These transactions were accounted for as a business combination in accordance with ASC 805. Acquisition-related costs were immaterial for this transaction. Acquired net assets from this business combination were included in the Midstream Logistic segment.

Altus Midstream Company

On February 22, 2022, the Company isconsummated 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~~

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 transferred to Contributor 50,000,000 common units representing limited partner interests in the Partnership and 50,000,000 shares of the Company’s Class C Common Stock, par value $0.0001 per share. ~~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 interest 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 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 the Transaction was accounted for as a reverse merger, the Company assumed certain Preferred Units that were issued and outstanding at Closing for accounting purposes.

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 required 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. During the nine months ended September 30, 2022, the Company redeemed all outstanding Preferred Units. 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. The Company determines whether distributions are a return on or a return of the investment based on the nature of the distribution approach, under which the Company classifies distributions from an investee by evaluating the facts, circumstances and nature of each distribution. As distributions from the Company’s equity method investment (“EMI”) pipeline entities are generated from their respective normal course of business, the Company classifies the distributions as return on investments and as cash flow from operating activities. Please refer to ~~Note 9—Equity Method Investments~~in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q, for further information 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.~~

~~Table of Contents~~

~~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 Company 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 $13.1 million and $2.1 million as of September 30, 2022 and December 31, 2021, 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 nine months ended September 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 $24.1 million as of September 30, 2022. Revenue from affiliates was $35.2 million and $81.4 million for the three and nine months ended September 30, 2022, respectively. Accrued expense due to affiliates was immaterial as of September 30, 2022, and operating expenses were $0.2 million and $0.5 million for the three and nine months ended September 30, 2022, respectively.

In addition, the Company incurred cost of sales with two of its EMI pipeline entities, Permian Highway Pipeline LLC (“PHP”) and Breviloba, LLC (“Breviloba”). The Company paid a demand fee to PHP and paid a capacity fee to Breviloba for certain volumes moving on the Shin Oak NGL Pipeline. For the three and nine months ended September 30, 2022, the Company recorded cost of sales of $3.7 million and $10.8 million, respectively, with these affiliates.

~~Net Income Per Share~~

Basic net income per share is calculated by dividing net income attributable to Class A common shareholders by 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 for the three and nine months ended September 30, 2021, as no Class A Common Stock was outstanding with respect to BCP as the accounting acquirer as of September 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 and (ii) an assumed exercise of the outstanding public and private warrants 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, Business Combinations (Topic 805), Accounting for Contract Assets 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.~~

~~Table of Contents~~

~~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.~~

~~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 reference rate reform if certain criteria are met. Interest rate applied to the Company’s new Term Loan and Revolver borrowings resulting from the comprehensive refinance is based on Secured Overnight Financing Rate (“SOFR”), which is a broad measure of the cost of borrowing cash overnight collateralized by treasury securities. Refer to ~~Note 6—Debt and Financing Costs~~ ~~in the Notes to our Condensed Consolidated Financial Statements of this Form 10-Q for discussion of SOFR applicable 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 of the unit of account of the equity security 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. The Company is currently evaluating the effect that ASU 2022-03 will have on its Consolidated Financial Statements.

~~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. The Company is currently evaluating the effect that ASU 2022-01 will have on its Consolidated Financial Statements.

~~2. BUSINESS COMBINATION~~

~~Altus 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. 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 transferred to Contributor 50,000,000 common units representing limited partner interests in the Partnership and 50,000,000 shares of the Company’s Class C Common Stock, par value $0.0001 per share. Please refer to “The Transaction” discussed above.

~~Table of Contents~~

The Transaction was accounted as a 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.~~

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 $4.6 million relatesCompany made necessary adjustments as information became available to operational synergies and is included in the Midstream Logistics segment. The value of the Preferred Units and assumed contingent liability is 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~~$5.1 million as of December 31, 2022 related to operational synergies. Goodwill was included 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~~

~~7,748~~

~~Goodwill~~

~~4,557~~

~~Total assets acquired~~

~~2,446,429~~

~~Accrued expenses and other accrued liabilities~~

~~5,687~~

~~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~~

~~969,967~~

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

~~462,717~~

~~Total consideration transferred~~

~~1,013,745~~

Midstream Logistics segment. The Company incurred acquisition-related costs of nil and $0.1 million for the three months ended September 30, 2023 and 2022, respectively, and nil and $6.4 million for the ~~three and~~ nine months ended September 30, 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 nine months ended September 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.~~Transaction.

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Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(In thousands) Pro forma Pro forma Pro forma Pro forma
Revenues $ 325,176 $ 201,134 $ 944,850 $ 554,742
Net income including noncontrolling interest $ 46,968 $ 28,518 $ 193,083 $ 64,165

Given the assumed pro forma transaction date of January 1, 2021, we removed $1.5 million and $21.0 million of acquisition-related expenses for the three and nine months ended September 30, 2022, respectively, and recognized $0.1 million and $31.2 million of total acquisition-related expenses for the three and nine months ended September 30, 2021, respectively.

3. REVENUE RECOGNITION

Disaggregation of Revenue

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022

		(In thousands)									(In thousands)
Gathering and processing services	Gathering and processing services	$	107,597	$	72,578	$	290,122	$	202,482	Gathering and processing services	$	104,349	$	107,597	$	310,325	$	290,122
Natural gas, NGLs and condensate sales	Natural gas, NGLs and condensate sales	213,803		93,266		618,382		244,358		Natural gas, NGLs and condensate sales	221,280		213,803		586,534		618,382
Other revenue	Other revenue	3,776		742		9,493		3,615		Other revenue	4,672		3,776		10,685		9,493

Total revenues and other	Total revenues and other	$	325,176	$	166,586	$	917,997	$	450,455	Total revenues and other	$	330,301	$	325,176	$	907,544	$	917,997

There have been no significant changes to the Company’s contracts with customers during the three and nine months ended September 30, ~~2022. Contracts with customers acquired through the Transaction had similar structures as the Company’s existing contracts with customers.~~2023. The Company recognized revenues from minimum volume commitment (“MVC”) deficiency payments of ~~$0.7~~$0.4 million and ~~nil~~$0.7 million for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$1.0~~$1.6 million and ~~$2.5~~$1.0 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, 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 September 30, ~~2022:~~2023:


					Amount
		Amount
Fiscal Year	Fiscal Year	(In thousands)		Fiscal Year	(In thousands)
Remaining of 2022		$	2,151
2023		44,597
Remaining of 2023				Remaining of 2023	$	4,990
2024	2024	40,247		2024	56,346
2025	2025	47,898		2025	74,384
2026	2026	34,631		2026	60,220
2027				2027	57,558
Thereafter	Thereafter	191,293		Thereafter	249,826
		$	360,817		$	503,324

Our contractually committed revenue, for the 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.

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Contract Liabilities

The following table provides information about contract liabilities from contracts with customers as of September 30, ~~2022:~~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

~~(5,159)~~(5,819)

Cash received in advance and not recognized as revenue

~~20,268~~7,826

Balance at September 30, ~~2022~~2023

~~29,865~~31,307

Less: Current portion

~~7,158~~5,807

Non-current portion

~~22,707~~25,500

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.

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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.~~otherwise. These costs are recovered through the net cash flows of the associated contract. As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had contract acquisition cost assets of ~~$15.3~~$72.8 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 September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$1.3~~$5.0 million and ~~$1.8~~$1.3 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

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:


							September 30,		December 31,
		September 30, 2022		December 31, 2021			2023		2022

		(In thousands)					(In thousands)
Gathering, processing and transmission systems and facilities		$	2,850,062	$	2,121,434
Gathering, processing, and transmission systems and facilities						Gathering, processing, and transmission systems and facilities	$	3,187,438	$	2,904,084
Vehicles	Vehicles	8,026		6,090		Vehicles	11,486		9,290
Computers and equipment	Computers and equipment	4,255		4,271		Computers and equipment	6,031		4,289
Less: accumulated depreciation	Less: accumulated depreciation	(437,049)		(337,030)		Less: accumulated depreciation	(586,290)		(474,258)
Total depreciable assets, net	Total depreciable assets, net	2,425,294		1,794,765		Total depreciable assets, net	2,618,665		2,443,405
Construction in progress	Construction in progress	82,834		24,888		Construction in progress	78,133		70,325
Land	Land	20,531		19,626		Land	23,649		21,482
Total property, plant and equipment, net		$	2,528,659	$	1,839,279
Total property, plant, and equipment, net						Total property, plant, and equipment, net	$	2,720,447	$	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 ~~$34.9~~$39.4 million and ~~$26.8~~$34.9 million of depreciation expense for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$102.4~~$116.6 million and ~~$79.0~~$102.4 million of depreciation expense for the nine months ended September 30, 2023 and 2022, respectively. There were no triggering events for property, plant and ~~2021, respectively.~~equipment during the three and nine months ended September 30, 2023 and 2022.

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5. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

~~The Company closed a business combination transaction on February 22, 2022, refer 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 $4.6 million as of September 30, 2022.

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 the 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 September 30, ~~2022.~~2023.

Intangible Assets

Intangible assets, net, are comprised of the following:


							September 30,		December 31,
		September 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	125,164		99,345		Right of way assets	140,130		127,539
Less accumulated amortization	Less accumulated amortization	(539,501)		(449,259)		Less accumulated amortization	(661,618)		(569,981)
Total amortizable intangible assets, net	Total amortizable intangible assets, net	$	722,391	$	786,049	Total amortizable intangible assets, net	$	620,790	$	695,389

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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~~typically 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.

On September 30, 2023, the remaining weighted average amortization periods for customer contracts and right of way assets were approximately 7.08 years and 6.86 years, respectively. The overall remaining weighted average amortization period for the intangible assets as of September 30, 2023 was approximately 7.05 years.

The Company recorded ~~$30.1~~$30.6 million and ~~$30.4~~$30.1 million of amortization expense for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$90.2~~$91.6 million and ~~$91.3~~$90.2 million of amortization expense for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. There was no impairment recognized on intangible assets for the three and nine months ended September 30, ~~2022~~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 $21.5 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”) as defined in the indenture governing the Notes related to 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.

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~~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.~~

~~Revolving Credit Facility~~

On June 8, 2022, the Partnership entered into a revolving credit agreement (the “RCA”) among Bank of America, N.A., as administrative agent (“Bank of America”), and the banks and other financial institutions party thereto, as lenders. The RCA 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 RCA are fully and unconditionally guaranteed by the Company.

The RCA 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 RCA, the Partnership incurred fees and expenses totaling $7.8 million, which was capitalized and included in the Condensed Consolidated Balance Sheets as “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.

~~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 a direct deduction to the Term Loan Credit Facility.

Both the RCA and the TLA contain a “Sustainability Adjustments” feature that could result in a 0.05% increase or reduction to the effective interest rate, dependent upon the Company’s meeting 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 defined in the RCA and TLA) 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; 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.

“Sustainability Performance Targets” in the RCA 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)

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~~the Methane Emissions KPI, the percentage reduction in methane gas emissions intensity relative to the baseline year for such calendar year.~~

Both the RCA 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 September 30, 2022, the Partnership was 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 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 nine months ended September 30, 2022.

The fair value of the Company and its subsidiaries’ consolidated debt as of September 30, 2022 and December 31, 2021 was $3.02 billion and $2.34 billion, respectively. At September 30, 2022, the Notes’ fair value was based on Level 1 inputs and the Term Loan Credit Facility and Revolver Credit Facility’s fair value was based on Level 3 inputs.

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

September 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 revolving credit facility 475,000 —
$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 3,475,000 2,346,187
Less: Debt issuance costs, net(1)
(27,487) (38,485)
3,447,513 2,307,702
Less: Current portion, net — (54,280)
Long-term portion of debt and finance lease obligations, net $ 3,447,513 $ 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 $7.3 million and $2.2 million as of September 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 September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(In thousands)
Capitalized interest $ 961 $ 226 $ 1,262 $ 712
Debt issuance costs 1,515 3,354 8,053 9,991
Interest expense 37,988 26,961 83,270 77,755
Total financing costs, net of capitalized interest $ 40,464 $ 30,541 $ 92,585 $ 88,458

~~As of September 30, 2022 and December 31, 2021, unamortized debt issuance costs associated with the Notes and the Term Loan Credit Facility were $27.5 million and $38.5 million, respectively.~~

As of September 30, 2022 and December 31, 2021, unamortized debt issuance costs associated with the new and existing revolving credit facilities were $7.3 million and $2.2 million, respectively. As of September 30, 2022, the unamortized debt issuance costs associated with the new revolving credit facilities were included in the “Deferred charges and other assets” of the

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Condensed Consolidated Balance Sheets. 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 $1.5 million and $3.4 million for the three months ended September 30, 2022 and 2021, respectively, and $8.1 million and $10.0 million for the nine months ended September 30, 2022 and 2021, respectively.

~~7. ACCRUED EXPENSES~~

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

September 30, 2022 December 31, 2021
(In thousands)
Accrued product purchases $ 175,575 $ 118,364
Accrued taxes 19,442 4,299
Accrued salaries, vacation, and related benefits 4,616 2,113
Accrued capital expenditures 8,713 2,995
Accrued interest expenses 19,120 —
Accrued other expenses 7,694 7,872
Total accrued expenses $ 235,160 $ 135,643

~~Accrued product purchases mainly consisted of accrued gas estimates as of September 30, 2022.~~

~~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 September 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 September 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 September 30, 2022; therefore, the estimated fair value of the contingent consideration liability was nil as of September 30, 2022. The estimated fair value of the contingent consideration liability related to this acquisition was $0.8 million as of December 31, 2021.

~~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.~~

9. EQUITY METHOD INVESTMENTS

As of September 30, ~~2022,~~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 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 September 30, 2022 December 31, 2021
(In thousands)
Permian Highway Pipeline LLC(1)
53.3% $ 1,459,096 $ 626,477
Breviloba, LLC (Shin Oak) 33.0% 462,691 —
Gulf Coast Express Pipeline LLC 16.0% 450,809 —
$ 2,372,596 $ 626,477

~~(1) Ownership for PHP was 53.3% and 26.7% as of September 30, 2022 and December 31, 2021, respectively.~~


		September 30,		December 31,
	Ownership	2023		2022

		(In thousands)
PHP	53.3%	$	1,638,319	$	1,474,800
Breviloba	33.0%	446,314		455,057
GCX	16.0%	434,580		451,483
		$	2,519,213	$	2,381,340

Additionally, as of September 30, ~~2022,~~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 nine months ended September 30, ~~2022.~~2023.

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~~As of September 30, 2022, the~~The unamortized basis differences included in the EMI ~~pipelines~~pipeline balances were ~~$349.8 million. There was no unamortized basis difference~~$352.8 million and $363.2 million as of September 30, 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 ~~$12.5~~$21.6 million and ~~$12.8~~$13.4 million as of September 30, ~~2022~~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 nine months ended September 30, ~~2022:~~2023:

Permian Highway Pipeline LLC Breviloba, LLC Gulf Coast Express Pipeline LLC
Total(2)
(In thousands)
Balance at December 31, 2021 $ 626,477 $ — $ — $ 626,477
Acquisitions 815,000 470,000 470,000 1,755,000
Contributions 56,199 — — 56,199
Distributions (125,526) (25,810) (34,450) (185,786)
Equity income, net(1)
86,946 18,501 15,259 120,706
Balance at September 30, 2022 $ 1,459,096 $ 462,691 $ 450,809 $ 2,372,596


	Permian Highway Pipeline LLC		Breviloba, LLC		Gulf Coast Express Pipeline LLC		Total


	(In thousands)
Balance at December 31, 2022	$	1,474,800	$	455,057	$	451,483	$	2,381,340

Contributions	194,124		—		—		194,124
Distributions(1)	(134,095)		(32,515)		(45,074)		(211,684)
Capitalized interest	8,605		—		—		8,605
Equity income, net(2)	94,885		23,772		28,171		146,828

Balance at September 30, 2023	$	1,638,319	$	446,314	$	434,580	$	2,519,213

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(1)Distributions consisted of distributions from a return on investment of $205.9 million, which was included in cash flow from operating activities and distribution from a return of investment of $5.8 million, which was included in cash flow from investing activities.

(2)For the nine months ended September 30, ~~2022,~~2023, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was ~~$5.3~~$5.6 million from ~~Permian Highway Pipeline LLC,~~PHP, $0.5 million from Breviloba, LLC and ~~$10.4~~$4.7 million from ~~Gulf Coast Express Pipeline, LLC.~~

~~(2)~~The EMIs acquired in the Transaction are included in the results from February 22, 2022 to September 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~~.GCX.

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 nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022.


		Three Months Ended September 30,
		2022											2021
																								Three Months Ended September 30,
		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	$	100,114		$	53,120				$	91,800							$	99,918						$	45,054			$	91,454	Revenues				$	99,923				$	51,002			$	91,901			$	100,114	$	53,120	$	91,800
Operating income	Operating income	69,851			22,205		70,870						61,987			26,796				65,482		Operating income				65,549				25,170				68,531					69,851				22,205				70,870
Net income	Net income	69,926			22,060		70,742						61,753		26,617			65,145			Net income			66,630				25,223				68,327					69,926					22,060				70,742


		Nine Months Ended September 30,
		2022										2021
																							Nine Months Ended September 30,
		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	$	296,779		$	151,732				272,542							$	297,132						$	127,030				$	270,526		Revenues				$	291,859				$	143,544			$	272,509			$	296,779	$	151,732	$	272,542
Operating income	Operating income	190,620			73,877		199,130					167,011			72,098				186,356		Operating income				185,862				69,666						200,004					190,620				73,877				199,130
Net income	Net income	190,446			73,711		198,732					166,662		71,621			185,464			Net income			190,662				70,086						205,818					190,446					73,711				198,732

~~(1) For~~

7. DEBT AND FINANCING COSTS

The following table summarizes the ~~three and nine months ended~~Company’s debt obligations as of September 30, ~~2021,~~2023 and December 31, 2022:


	September 30,		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	630,000		395,000
Total long-term debt	3,630,000		3,395,000
Less: Debt issuance costs, net(1)	(23,038)		(26,490)
Total long-term debt, net	$	3,606,962	$	3,368,510

(1)Excluded unamortized debt issuance cost related to the revolving line of credit. Unamortized debt issuance cost associated with the revolving line of credit was $5.7 million and $6.9 million as of September 30, 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.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(In thousands)
Capitalized interest	$	(6,731)	$	(961)	$	(13,775)	$	(1,262)
Debt issuance costs	1,546		1,515		4,601		8,053
Interest expense	50,194		39,910		139,617		85,794
Total financing costs, net of capitalized interest	$	45,009	$	40,464	$	130,443	$	92,585

As of September 30, 2023 and December 31, 2022, unamortized debt issuance costs associated with the senior unsecured notes and the term loan were $23.0 million and $26.5 million, 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, which may, among other things, limit the Partnership’s and its subsidiaries’ ability to create liens to secure indebtedness and the Partnership’s ability to consolidate or combine with or merge into any other person.

As of September 30, 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 in Permian Highway Pipeline LLC.~~and its subsidiaries’ consolidated debt as of September 30, 2023 and December 31, 2022 was $3.54 billion and $3.34 billion, respectively. On September 30, 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 September 30, 2023 and December 31, 2022:


	September 30,		December 31,
	2023		2022

	(In thousands)
Accrued product purchases	$	129,237	$	115,773
Accrued taxes	14,577		19,509
Accrued salaries, vacation, and related benefits	3,807		3,934
Accrued capital expenditures	12,209		3,892
Accrued interest	19,425		24,815
Accrued other expenses	8,807		5,991
Total current accrued expenses	$	188,062	$	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 September 30, 2023.

1915

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9. LEASES

Components of lease costs are included in 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 $11.7 million and $9.9 million for the three months ended September 30, 2023 and 2022, respectively, and $34.3 million and $28.2 million for the nine months ended September 30, 2023 and 2022, respectively. Short-term lease costs were $1.0 million and $1.0 million for the three months ended September 30, 2023 and 2022, respectively, and $2.0 million and $5.1 million for the nine months ended September 30, 2023 and 2022, respectively. Variable lease cost was immaterial for the three and nine months ended September 30, 2023 and 2022.

The following table presents other supplemental lease information:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022

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

Operating cash flows from operating leases	$	11,721		$	9,510		$	34,092		$	27,797

Right-of-use assets obtained in exchange for new operating lease liabilities	$	211		$	—		$	5,189		$	21,386
Weighted-average remaining lease term — operating leases (in years)	1.62			1.73			1.62			1.73
Weighted-average discount rate — operating leases	8.81		%	7.01		%	8.81		%	7.01		%

10. EQUITY AND WARRANTS

Redeemable Noncontrolling Interest — Common Unit Limited Partners

On February 22, 2022, the Company consummated ~~the Transaction. Pursuant~~a business combination 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 transferred to Contributor 50,000,000 common units representing limited partner interests in the Partnership and 50,000,000 shares of the Company’s Class C Common Stock, par value $0.0001 per 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 nine months of ~~2022, 5,730,000~~2023, 180,962 common units were redeemed on a 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 ~~94,270,000~~94,089,038 Common Units and an equal number of Class C Common Stock issued and outstanding as of September 30, ~~2022.~~2023. The Common Units fair value was approximately ~~$3.06~~$3.21 billion as of September 30, ~~2022.~~2023.

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

~~Upon Closing, the Company assumed certain Preferred Units that~~As of September 30, 2023, there were 54,519,658 and 94,089,038 shares, respectively, of Class A Common Stock and Class C Common Stock issued and outstanding ~~on acquisition date. The Company has redeemed all assumed Preferred Units since the Closing. Refer to~~ ~~Note 11—Series A Cumulative Redeemable Preferred Units~~ ~~for further discussion.~~(collectively, “Common Stock”).

Public Warrants

As of September 30, ~~2022,~~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.

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Private Placement Warrants

As of September 30, ~~2022,~~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~~$9 thousand for the Public Warrants and a fair value of ~~$0.1 million~~$6 thousand for the Private Warrants as of September 30, ~~2022~~2023 on the Condensed Consolidated Balance ~~Sheet~~Sheets in ~~other non-current liabilities.~~“Other 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.

Share Repurchase Program

~~Table~~In February 2023, the Board of ~~Contents~~

~~Dividend~~

~~On February 22, 2022, the Company entered into~~Directors (the “Board”) approved a ~~Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”~~share repurchase program (“Repurchase Program”) 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%, authorizing discretionary purchases of ~~all distributions on Common Units or dividends on shares of Class A Common Stock in~~ the Company’s Class A Common ~~Stock. Additionally,~~Stock up to $100.0 million in the ~~Audit Committee~~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 ~~subsequently~~may be made pursuant to a trading plan meeting the ~~Company’s Board~~requirements of ~~Directors (the “Board”) resolved that for~~Rule 10b5-1 under the ~~calendar year 2022, 100%~~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.

During the quarter ended September 30, 2023, the Company did not repurchase any 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 ofits Class A Common Stock ~~and distributions paid to holders of Common Units may be referred to collectively as “dividends.”~~

under the Repurchase Program. During the ~~nine months ended~~first half of 2023, the Company repurchased 194,174 of its Class A Common Stock at a total cost of $5.8 million. The Company retired all treasury stock as of September 30, ~~2022,~~2023.

For more information regarding the 1% U.S. federal excise tax imposed on certain repurchases of stock by publicly traded U.S. corporations, please refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Share Repurchase Program,” included in this Quarterly Report on Form 10-Q.

Dividend

On August 16, 2023, the Company made cash dividend payments of ~~$25.3~~$22.0 million to holders of Class A Common Stock and Class C Common Units and ~~$175.5~~$88.1 million was reinvested in shares of Class A Common Stock by Reinvestment Holders.

~~On October 19, 2022, the Board declared a cash~~ 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~~payments to ~~the holders of Common Units. Dividends are payable on November 17, 2022. Certain~~ holders of Class A Common Stock and Class C Common ~~Stock will receive a cash dividend with the balance receiving additional~~Units totaled $58.6 million and $263.8 million was reinvested in shares of Class A Common Stock ~~under the~~by Reinvestment ~~Agreement.~~

~~Stock Split~~

On May 19, 2022, the Company announced that its Board approved and declared 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.

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

~~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 closing of the Transaction. At the close, 150,000 preferred units and 8,567 associated PIK units became mandatorily redeemable and liability classified with the balance of preferred units remaining unchanged and classified as redeemable noncontrolling interest. The Company redeemed 125,000 mandatorily redeemable preferred units during the first two quarters of 2022 with the balance of mandatorily redeemable preferred units being redeemed during July for $30.7 million.

In July 2022, the Company redeemed all outstanding redeemable noncontrolling interest Preferred Units for an aggregate $461.5 million. The excess of the carrying amount of the redeemable noncontrolling interest Preferred units immediately prior to redemption over redemption price was included in “Retained Earnings” in the Condensed Consolidated Balance Sheets.

~~Table of Contents~~

~~Activities related to Preferred Units~~Holders for the nine months ended September 30, ~~2022 are as follows:~~

Units Outstanding Amount
(In thousands, except for unit data)
Redeemable noncontrolling interest — Preferred Units, immediately upon Closing of Transaction(1)
396,417 $ 462,717
Redemption, including PIK units (396,417) (461,460)
Cash distribution paid to Preferred Unit limited partners — (6,937)
Allocation of net income — 18,128
Accreted redemption value adjustment — 97,075
Excess of carrying amount over redemption price — (109,523)
Redeemable noncontrolling interest — Preferred Units, as of September 30, 2022 — $ —

~~(1)Included 21,417 PIK units on a pro rata basis.~~2023.

~~12. 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 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.11. FAIR VALUE MEASUREMENTS

~~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~~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 2022, pursuant to the Company’s 2019 Omnibus Compensation Plan, as amended from time to time (the “Plan”)~~, the Company granted a total of 13,941 restricted stock units (“RSUs”) to certain members of the Board, which were vested immediately on grant date, and granted a total of 14,144 RSUs to new employees, which are subject to a vesting period between ~~one~~ ~~and three years.~~

With respect to the above shares, the Company recorded compensation expenses of $12.7 million and $31.0 million for the three and nine months ended September 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 above incentive units, no compensation expenses were recorded for the three and nine months ended September 30, 2021, as the incentive units were considered non-vested prior to their cancellation and exchange for Class A or Class C Common Stock, and no RSUs were granted during 2021.

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~~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 September 30, Nine Months Ended September 30,
2022 2022
(In thousands)
Income before income taxes $ 50,828 $ 204,503
Income tax expense $ 1,406 $ 2,244
Effective tax rate (1)
2.77 % 1.10 %

~~(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~~Balance Sheets reflect a mixture of measurement methods for ~~the three and nine months ended September 30, 2021.~~

The effective tax rate for the three and nine months ended September 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~~

~~(5,238)~~

~~Balance at September 30, 2022~~

—

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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 September 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 $ 14,936 41,816 $ 0.36 $ — — $ —
Less: Net income available to participating unvested restricted Class A common shareholders(4)
(4,174) — $ — — — $ —
Excess preferred carrying amount over consideration paid(5)
32,900 — $ — — — $ —
Total net income attributable to Class A common shareholders $ 43,662 41,816 $ 1.04 $ — — $ —
Effect of dilutive securities:
Unvested Class A common shares — 39 $ — — — $ —
Diluted(1)(2):
Net income attributable to Class A common shareholders $ 43,662 41,855 $ 1.04 $ — — $ —

Nine Months Ended September 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 $ 25,239 40,042 $ 0.63 $ — — $ —
Less: Net income available to participating unvested restricted Class A common shareholders(4)
(8,358) — $ — — — $ —
Excess preferred carrying amount over consideration paid(5)
32,900 — $ — — — $ —
Total net income attributable to Class A common shareholders $ 49,781 40,042 $ 1.24 $ — — $ —
Effect of dilutive securities:
Unvested Class A common shares — 33 $ — — — $ —
Diluted(1)(2):
Net income attributable to Class A common shareholders $ 49,781 40,075 $ 1.24 $ — — $ —

~~(1)The effect of an assumed exchange of the outstanding public~~Public and private warrants, contingent liabilities and derivative financial instruments are reported at fair value. 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 ~~shares of Class A Common Stock would have been anti-dilutive for all periods presented in~~ which ~~the 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~~ ~~two-for-one~~ ~~Stock Split. Refer to~~carrying value could vary significantly from fair value. See Note ~~10—Equity~~7—Debt 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.~~

~~(5)Represented excess of carrying value of redeemable noncontrolling interest Preferred Units over redemption price at redemption.~~

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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:

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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~~a 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~~which 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 September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		September 30, 2022									September 30, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total

		(In thousands)									(In thousands)
Commodity swap										Commodity swap	$	—	$	2,252	$	—	$	2,252
Interest rate derivatives										Interest rate derivatives	—		21,827		—		21,827
Total assets										Total assets	$	—	$	24,079	$	—	$	24,079

Commodity swaps										Commodity swaps	$	—	$	5,245	$	—	$	5,245

Public warrants	Public warrants	$	126	$	—	$	—	$	126	Public warrants	9		—		—		9
Private warrants	Private warrants	—		—		95		95		Private warrants	—		—		6		6

Total liabilities	Total liabilities	$	126	$	—	$	95	$	221	Total liabilities	$	9	$	5,245	$	6	$	5,260

December 31, 2021
Level 1 Level 2 Level 3 Total
(In thousands)
Commodity swaps $ — $ 205 $ — $ 205
Interest rate derivatives — 2,662 — 2,662
Contingent liabilities — — 839 839
Total liabilities $ — $ 2,867 $ 839 $ 3,706

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	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

~~The Company is exposed to certain risks arising from both its business operations and economic conditions, and the Company enters into certain~~Our derivative contracts consist of interest rate swaps and commodity swaps. Valuation of these derivative contracts involves 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~~

Table of the Partnership LPA. The Company redeemed all outstanding Preferred Units in July 2022 and wrote off related embedded derivative liabilities as of September 30, 2022. The Company recorded gains of $0.5 million and $89.1 million for the three and nine months ended September 30, 2022, which was recorded as a “Gain on embedded derivative” in the Condensed Consolidated Statement of Operations.Contents

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 September 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 are of 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~~ nine months ended September 30, ~~2022~~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 September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

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 ~~and Term SOFR elections, (able to fix up to six months forward SOFR), granted under the company’s debt agreements~~ 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~~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.~~ 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~~$21.8 million and $2.7 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Interest rate swap derivative liabilities were nil and $8.3 million as of September 30, 2023 and December 31, 2022, respectively. The Company recorded cash settlements on interest rate swap derivatives of ~~nil~~$4.7 million and ~~$0.7 million~~nil for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$11.3~~$7.1 million and ~~$2.2~~$11.3 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, in “Interest ~~Expense”~~expense” of the Condensed Consolidated Statements of Operations. In addition, the Company recorded fair value adjustments of ~~nil~~$12.5 million and ~~$26 thousand~~nil for the change in fair value of the interest rate swap derivatives for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$14.0~~$34.6 million and ~~$3.1~~$14.0 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, in “Interest ~~Expense”~~expense” of the Condensed Consolidated Statements of Operations.

Commodity Price Risk

The results of the Company’s operations may be affected by the market prices of oil, natural gas and NGLs. A portion of the Company’s revenue is directly tied to local natural gas, natural gas liquids and 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.

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~~Commodity Price Risk~~

~~Similarly, in 2020~~

During the past twelve months, the Company entered into multiple commodity swap contracts based on the OPIS NGL Mont Belvieu prices for ethane, propane and ~~2021 BCP Raptor, LLC (“BCP I”)~~butane, the Waha Basis index and ~~BCP Raptor II, LLC (“BCP II”) had~~the NYMEX WTI ~~crude hedges at a specific notional amount that provides for a fixed price for crude in the Permian Basin and Waha basis hub hedges~~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 17 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 31, 2021.~~ September 30, 2023 (in thousands, except volumes):

September 30, 2023

Commodity

Instruments

Unit

Volume

Net Fair Value

Natural Gas

Commodity Swap

MMBtus

3,010,000

NGL

Commodity Swap

Gallons

124,179,300

(1,358)

Crude

Commodity Swap

Bbl

171,900

(1,341)

Crude Collar

Commodity Swap

Bbl

109,600

(537)

Natural Gas Basis Spread Swaps

Commodity Swap

MMBtus

203,200

138

Crude Gas Basis Spread Swaps

Commodity Swap

Bbl

24,395,000

(2,993)

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 $2.3 million and ~~$0.2~~$4.3 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Commodity swap derivative liabilities were $5.2 million and $5.7 million as of September 30, 2023 and December 31, 2022, respectively. The Company recorded cash settlements on commodity swap derivatives of ~~nil~~$0.2 million and ~~$0.9 million~~nil for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$0.2~~$8.0 million and ~~$15.8~~$0.2 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, in ~~“Other Revenue”~~“Product revenue” of the Condensed Consolidated Statements of Operations. In addition, the Company recorded fair value adjustments of ~~$0.6~~$8.1 million and ~~$17.1~~nil for the three months ended September 30, 2023 and 2022, respectively, and $6.5 million and nil for the change in fair value of commodity swap derivatives for the ~~three and~~ nine months ended September 30, ~~2021,~~2023 and 2022, respectively, in ~~“Other Revenue”~~“Product revenue” of the Condensed Consolidated Statements of Operations. No

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 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 of the Company (or its successor). 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 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 that vested immediately were granted to employees who received their bonus in Company stock in lieu of cash bonus awards. During the second quarter of 2023, the Company granted approximately 16,000 RSUs to certain members of the Board and vested immediately on grant date.

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With respect to the above grants, the Company recorded compensation expenses of $12.5 million and $12.7 million for the three months ended September 30, 2023 and 2022, respectively, and $43.3 million and $31.0 million for the nine months ended September 30, 2023 and 2022, respectively, based on a straight-line amortization of the associated awards’ fair value ~~adjustment recognized~~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 September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022

	(In thousands)
Income before income taxes	$	44,434		$	50,828		$	121,128		$	204,503
Income tax expense	$	1,303		$	1,406		$	2,030		$	2,244
Effective tax rate	2.93		%	2.77		%	1.68		%	1.10		%

The effective tax rate for the three and nine months ended September 30, ~~2022 as no commodity swaps~~2023 was lower than the statutory rate mainly due to the impact of tax attributable to noncontrolling interests related to the Common Unit limited partners and valuation allowance.

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(In thousands, except per share amounts)
Net income attributable to Class A common shareholders	$	15,580	$	14,936	$	42,030	$	25,239
Less: Net income available to participating unvested restricted Class A common shareholders(1)	(4,414)		(4,174)		(12,996)		(8,358)
Excess preferred carrying amount over consideration paid(2)	—		32,900		—		32,900
Total net income attributable to Class A common shareholders	$	11,166	$	43,662	$	29,034	$	49,781

Weighted average shares outstanding - basic(3)	53,340		41,816		50,464		40,042
Dilutive effect of unvested Class A common shares(4)(5)	123		39		255		33
Weighted average shares outstanding - diluted	53,463		41,855		50,719		40,075

Net income available per common share - basic	$	0.21	$	1.04	$	0.58	$	1.24
Net income available per common share - diluted	$	0.21	$	1.04	$	0.57	$	1.24

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

(2)Represented excess of carrying value of redeemable noncontrolling interest Preferred Units over redemption price at redemption. For further detail, refer to Note 12—Series A Cumulative Redeemable Preferred Units in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

(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 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.

(5)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.

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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 September 30, 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 business. 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 different than the amounts accrued.

The Company has entered into litigation with two third parties to collect 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, state 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 September 30, 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

Original Altus Transaction

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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.

Letters of Credit

Our $1.25 billion senior unsecured Revolving Credit Facility maturing on June 8, 2027 can be used for letters of credit. Our obligations with respect to related letters of credit totaled $12.6 million and nil as of September 30, 2023 and December 31, 2022, respectively.

17. SEGMENTS

Our two 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 two 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 three streams, 1) gas gathering and processing, 2) crude oil gathering, stabilization and storage services and 3) produced water gathering and disposal.

•Pipeline Transportation: The Pipeline Transportation segment consists of equity investment interests in four Permian Basin pipelines that access various points along the Texas Gulf Coast, ~~Brandywine~~Kinetik NGL Pipeline and Delaware Link ~~Pipeline that is under development.~~Pipeline. The current operating pipelines transport crude oil, natural gas and 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 ~~nine months ended September 30, 2022.~~Other contains the Company’s executive and administrative functions, including 81% of the Company’s general and administrative expenses and all of the Company’s debt service costs.

2723

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The following tables present the reconciliation of the segment profit measure as of and for the three and nine months periods ended September 30, ~~2022~~2023 and ~~2021:~~2022:

Midstream Logistics Pipeline Transportation
Corporate and Other(1)
Consolidated(2)
For the three months ended September 30, 2022 (In thousands)
Segment net income (loss) including noncontrolling interests $ 65,525 $ 44,750 $ (60,853) $ 49,422
Add back:
Interest expense 7 — 40,457 40,464
Income tax expense — — 1,406 1,406
Depreciation and amortization 64,655 345 5 65,005
Contract assets amortization 448 — — 448
Proportionate EMI EBITDA — 78,357 — 78,357
Share-based compensation — — 12,661 12,661
Loss on disposal of assets 3,946 — — 3,946
Integration costs 14 81 2,243 2,338
Acquisition transaction costs 5 — 57 62
Other one-time costs or amortization 2,945 162 645 3,752
Deduct:
Gain on embedded derivative — — 488 488
Equity income from unconsolidated affiliates — 45,003 — 45,003
Segment adjusted EBITDA $ 137,545 $ 78,692 $ (3,867) $ 212,370


		Midstream Logistics		Pipeline Transportation		Corporate and Other(1)		Consolidated(2)			Midstream Logistics		Pipeline Transportation		Corporate and Other(1)		Consolidated
											(In thousands)
For the three months ended September 30, 2021		(In thousands)

For the Three Months Ended September 30, 2023										For the Three Months Ended September 30, 2023
Segment net income (loss) including noncontrolling interests	Segment net income (loss) including noncontrolling interests	$	(6,210)	$	13,333	$	(2,483)	$	4,640	Segment net income (loss) including noncontrolling interests	$	56,583	$	50,598	$	(64,050)	$	43,131
Add back:	Add back:									Add back:
Interest expense	Interest expense	27,682		2,859		—		30,541		Interest expense	12		—		44,997		45,009

Income tax expense	Income tax expense	1,207		—		—		1,207		Income tax expense	1		—		1,302		1,303
Depreciation and amortization	Depreciation and amortization	57,026		128		—		57,154		Depreciation and amortization	69,456		473		6		69,935
Contract assets amortization	Contract assets amortization	448		—		—		448		Contract assets amortization	1,655		—		—		1,655
Proportionate EMI EBITDA	Proportionate EMI EBITDA	—		21,704		—		21,704		Proportionate EMI EBITDA	—		78,585		—		78,585
Share-based compensation										Share-based compensation	—		—		12,502		12,502
Loss on disposal of assets										Loss on disposal of assets	2,927		—		—		2,927
Unrealized loss on derivatives										Unrealized loss on derivatives	8,259		—		—		8,259
Integration costs										Integration costs	21		—		—		21
Acquisition transaction costs										Acquisition transaction costs	—		—		378		378
Other one-time costs or amortization										Other one-time costs or amortization	1,529		—		1,133		2,662
Warrant valuation adjustment										Warrant valuation adjustment	—		—		4		4
Deduct:										Deduct:

Loss (gain) on disposal of assets		(60)		23		—		(37)
Loss on debt extinguishment		56		—		—		56
Interest income										Interest income	—		—		293		293

Other one-time costs or amortization		802		160		205		1,167

Deduct:
Interest and other income		74		—		—		74
Equity income from unconsolidated affiliates	Equity income from unconsolidated affiliates	—		16,826		—		16,826		Equity income from unconsolidated affiliates	—		50,754		—		50,754

Segment adjusted EBITDA		$	80,877	$	21,381	$	(2,278)	$	99,980

Segment adjusted EBITDA(3)										Segment adjusted EBITDA(3)	$	140,443	$	78,902	$	(4,021)	$	215,324


	Midstream Logistics		Pipeline Transportation		Corporate and Other(1)		Consolidated

	(In thousands)
For the Three Months Ended September 30, 2022
Segment net income (loss) including noncontrolling interests	$	65,525	$	44,750	$	(60,853)	$	49,422
Add back:
Interest expense	7		—		40,457		40,464
Income tax expense	—		—		1,406		1,406
Depreciation and amortization	64,655		345		5		65,005
Contract assets amortization	448		—		—		448
Proportionate EMI EBITDA	—		78,357		—		78,357
Share-based compensation	—		—		12,661		12,661
Loss on disposal of assets	3,946		—		—		3,946

Integration costs	14		81		2,243		2,338
Acquisition transaction costs	5		—		57		62
Other one-time costs or amortization	2,945		162		645		3,752
Deduct:

Gain on embedded derivative	—		—		488		488
Equity income from unconsolidated affiliates	—		45,003		—		45,003
Segment adjusted EBITDA(3)	$	137,545	$	78,692	$	(3,867)	$	212,370

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Midstream Logistics Pipeline Transportation
Corporate and Other(1)
Consolidated(2)
For the nine months ended September 30, 2022 (In thousands)
Segment net income (loss) including noncontrolling interests $ 89,274 $ 120,162 $ (7,177) $ 202,259
Add back:
Interest expense 47,411 (664) 45,838 92,585
Income tax expense (benefit) 457 (39) 1,826 2,244
Depreciation and amortization 192,007 597 5 192,609
Contract assets amortization 1,344 — — 1,344
Proportionate EMI EBITDA — 190,438 — 190,438
Share-based compensation — — 30,966 30,966
Loss (gain) on disposal of assets 12,636 — (34) 12,602
Loss (gain) on debt extinguishment 27,983 (8) — 27,975
Integration costs 933 81 8,998 10,012
Acquisition transaction costs 9 — 6,403 6,412
Other one-time costs or amortization 8,865 162 1,942 10,969
Deduct:
Gain on redemption of mandatorily redeemable Preferred units — — 9,580 9,580
Gain on embedded derivative — — 89,050 89,050
Equity income from unconsolidated affiliates — 120,706 — 120,706
Segment adjusted EBITDA $ 380,919 $ 190,023 $ (9,863) $ 561,079


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

For the nine months ended September 30, 2021		(In thousands)

											Midstream Logistics			Pipeline Transportation			Corporate and Other(1)			Consolidated

												(In thousands)

For the Nine Months Ended September 30, 2023										For the Nine Months Ended September 30, 2023
Segment net income (loss) including noncontrolling interests	Segment net income (loss) including noncontrolling interests	$	(22,238)	$	37,072	$	(7,424)	$	7,410	Segment net income (loss) including noncontrolling interests		$	163,794		$	146,524		$	(191,220)		$	119,098
Add back:	Add back:									Add back:											—
Interest expense	Interest expense	82,967		5,491		—		88,458		Interest expense		32			—			130,411			130,443

Income tax expense	Income tax expense	1,207		—		—		1,207		Income tax expense		—			—			2,030			2,030
Depreciation and amortization	Depreciation and amortization	169,906		385		—		170,291		Depreciation and amortization		206,855			1,398			18			208,271
Contract assets amortization	Contract assets amortization	1,815		—		—		1,815		Contract assets amortization		4,965			—			—			4,965

Proportionate EMI EBITDA	Proportionate EMI EBITDA	—		59,677		—		59,677		Proportionate EMI EBITDA		—			224,933			—			224,933
Share-based compensation										Share-based compensation		—			—			43,340			43,340
Loss on disposal of assets										Loss on disposal of assets		15,166			—			—			15,166
Unrealized loss on derivatives										Unrealized loss on derivatives		616			—			—			616
Integration costs										Integration costs		29			—			956			985
Acquisition transaction costs										Acquisition transaction costs		33			—			615			648
Other one-time costs or amortization										Other one-time costs or amortization		5,310			—			2,235			7,545

Loss on disposal of assets		394		23		—		417
Gain on debt extinguishment		(4)		—		—		(4)

Derivatives loss due to Winter Storm Uri		13,456		—		—		13,456
Deduct:										Deduct:
Interest income										Interest income		—			—			314			314
Warrant valuation adjustment										Warrant valuation adjustment		—			—			73			73

Other one-time costs or amortization		1,675		182		153		2,010
Producer settlement		6,827		—		—		6,827
Deduct:
Interest and other income		115		—		—		115
Equity income from unconsolidated affiliates	Equity income from unconsolidated affiliates	—		44,692		—		44,692		Equity income from unconsolidated affiliates		—			146,828			—			146,828

Segment adjusted EBITDA		$	255,890	$	58,138	$	(7,271)	$	306,757
Segment adjusted EBITDA(3)										Segment adjusted EBITDA(3)		$	396,800		$	226,027		$	(12,002)		$	610,825


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

	(In thousands)
For the Nine Months Ended September 30, 2022
Segment net income (loss) including noncontrolling interests	$	89,274	$	120,162	$	(7,177)	$	202,259
Add back:
Interest expense (income)	47,411		(664)		45,838		92,585
Income tax expense (benefit)	457		(39)		1,826		2,244
Depreciation and amortization	192,007		597		5		192,609
Contract assets amortization	1,344		—		—		1,344
Proportionate EMI EBITDA	—		190,438		—		190,438
Share-based compensation	—		—		30,966		30,966
Loss (gain) on disposal of assets	12,636		—		(34)		12,602
Loss (gain) on debt extinguishment	27,983		(8)		—		27,975
Integration costs	933		81		8,998		10,012
Acquisition transaction costs	9		—		6,403		6,412
Other one-time costs or amortization	8,865		162		1,942		10,969
Deduct:

Gain on redemption of mandatorily redeemable Preferred units	—		—		9,580		9,580
Gain on embedded derivative	—		—		89,050		89,050
Equity income from unconsolidated affiliates	—		120,706		—		120,706
Segment adjusted EBITDA(3)	$	380,919	$	190,023	$	(9,863)	$	561,079

(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 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 most directly comparable GAAP measure.

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The following tables present the revenue for the individual operating ~~segment~~segments for the three and nine ~~months~~month periods ended September 30, ~~2022~~2023 and ~~2021:~~
Midstream Logistics Pipeline Transportation Consolidated
For the three months ended September 30, 2022 (In thousands)
Revenue $ 320,667 $ 733 $ 321,400
Other revenue 3,774 2 3,776
Total segment operating revenue $ 324,441 $ 735 $ 325,176
2022:


		Midstream Logistics		Pipeline Transportation		Consolidated			Midstream Logistics		Pipeline Transportation		Consolidated

For the three months ended September 30, 2021		(In thousands)
									(In thousands)
For the Three Months Ended September 30, 2023								For the Three Months Ended September 30, 2023
Revenue	Revenue	$	165,844	$	—	$	165,844	Revenue	$	324,863	$	766	$	325,629
Other revenue	Other revenue	740		2		742		Other revenue	4,670		2		4,672
Total segment operating revenue	Total segment operating revenue	$	166,584	$	2	$	166,586	Total segment operating revenue	$	329,533	$	768	$	330,301


		Midstream Logistics		Pipeline Transportation		Consolidated			Midstream Logistics		Pipeline Transportation		Consolidated

For the nine months ended September 30, 2022		(In thousands)
									(In thousands)
Three Months Ended September 30, 2022								Three Months Ended September 30, 2022
Revenue	Revenue	$	907,771	$	733	$	908,504	Revenue	$	320,667	$	733	$	321,400
Other revenue	Other revenue	9,487		6		9,493		Other revenue	3,774		2		3,776
Total segment operating revenue	Total segment operating revenue	$	917,258	$	739	$	917,997	Total segment operating revenue	$	324,441	$	735	$	325,176


		Midstream Logistics		Pipeline Transportation		Consolidated			Midstream Logistics		Pipeline Transportation		Consolidated

For the nine months ended September 30, 2021		(In thousands)
									(In thousands)
For the Nine Months Ended September 30, 2023								For the Nine Months Ended September 30, 2023
Revenue	Revenue	$	446,840	$	—	$	446,840	Revenue	$	894,669	$	2,190	$	896,859
Other revenue	Other revenue	3,609		6		3,615		Other revenue	10,679		6		10,685
Total segment operating revenue	Total segment operating revenue	$	450,449	$	6	$	450,455	Total segment operating revenue	$	905,348	$	2,196	$	907,544


	Midstream Logistics		Pipeline Transportation		Consolidated

	(In thousands)
For the Nine Months Ended September 30, 2022
Revenue	$	907,771	$	733	$	908,504
Other revenue	9,487		6		9,493
Total segment operating revenue	$	917,258	$	739	$	917,997

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


							September 30,			December 31,
		September 30, 2022		December 31, 2021			2023			2022

		(In thousands)					(In thousands)
Midstream Logistics	Midstream Logistics	$	3,575,642	$	2,916,774	Midstream Logistics	$	3,610,231		$	3,486,948
Pipeline Transportation(1)	Pipeline Transportation(1)	2,417,663		635,784		Pipeline Transportation(1)			2,641,792			2,414,829
Segment total assets	Segment total assets	5,993,305		3,552,558		Segment total assets	6,252,023			5,901,777
Corporate and other	Corporate and other	13,873		648		Corporate and other	33,993			17,934
Total assets	Total assets	$	6,007,178	$	3,553,206	Total assets	$	6,286,016		$	5,919,711

(1)Includes investment in unconsolidated affiliates of $2.52 billion and $2.38 billion as of September 30, 2023 and December 31, 2022, respectively.

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18. SUBSEQUENT EVENTS

On October 10, 2022, the Company announced the transfer of its Class A Common Stock to the New York Stock Exchange (“NYSE”) from the Nasdaq Global Select Market (“Nasdaq”). The Company’s Class A Common Stock began trading on the NYSE under its current ticker symbol, “KNTK”, at the open of trading on Monday, October 24, 2022.

~~On October 19, 2022,~~November 1, 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 November 13, 2023 on November ~~17, 2022.~~22, 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~~Units, which will be payable on November 22, 2023. Core Shareholders will reinvest 100% of dividends received on Class C Common Units based on the Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”).

On November 9, 2023, all of the Company’s 12,577,350 Public Warrants and 6,364,281 Private Placement Warrants expired. No warrant was exercised prior to ~~Note 10—Equity and Warrants~~ ~~in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional information.~~expiration.

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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 nine month periods ended September 30, ~~2022,~~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~~Altus Midstream Company (“ALTM”) and BCP Raptor Holdco, LP (“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~~Kinetik Holdings Inc.’s (the “Company”) historical financial statements and the comparable period presented herein reflects the results of operations of BCP for the three and nine months ended September 30, ~~2022. The~~2022 and results of operations of ALTM ~~is reflected within the Company’s Condensed Consolidated Financial Statements~~ from the Closing Date (as defined below) through September 30, 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 ~~BCP. Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all~~subsidiary of ~~the equity interests in BCP and~~Altus Midstream Company (the “Partnership”), New BCP Raptor Holdco, ~~GP,~~ LLC, a Delaware limited liability company, and BCP. The transactions contemplated by the ~~general partner of BCP (“BCP GP”),~~Contribution Agreement are referred to herein as the Partnership; and (ii) in exchange for such contribution, the Partnership transferred to Contributor 50,000,000 Common Units and 50,000,000 shares of the Company’s Class C common stock, par value $0.0001 per share (“Class C Common Stock”).

~~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,~~“Transaction.” ~~together~~In connection with the ~~Class C Common Stock, the “Common Stock”). As a result~~closing of the Transaction ~~immediately following~~(the “Closing”), the ~~Closing (i) Contributor owns approximately 75%~~Company changed its name from “Altus Midstream Company” to “Kinetik Holdings Inc.” Upon closing of the ~~issued~~business combination, BCP and ~~outstanding Common Stock, (ii) Apache Midstream owns approximately 20%~~its subsidiaries became wholly owned subsidiaries 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 Combinations in ~~additional volume capacity from ALTM~~the Notes to Condensed Consolidated Financial Statements for further information regarding 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 66 miles of NGLs pipelines. The increased volume capacity has contributed to the increase in operating revenue for the three and nine months ended September 30, 2022 compared to the same periods in 2021.Transaction.

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 Bcf/d cryogenic natural gas processing capacity~~The Company’s corporate office is located in Houston, Texas and our operations are strategically located ~~near the Waha Hub in West Texas. As measured by processing capacity, we are the second largest natural gas processor~~ in the heart of the Delaware ~~Basin and the 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~~We have two reportable segments which are strategic business units with various products 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.services. The Midstream Logistics segment operates under three service offerings, 1) gas gathering and processing, 2) crude oil gathering, stabilization and storage services and 3) produced 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

~~Table of Contents~~

Gulf Coast, Kinetik NGL Pipeline and Delaware Link ~~Pipeline that is under development.~~Pipeline. The pipelines transport crude oil, natural gas and NGLs within the Permian Basin and to the Texas Gulf Coast.

Midstream Logistics

Gas Gathering and ~~Processing~~

Processing. The Midstream Logistics segment provides gas gathering and processing services with ~~approximately 1,200~~over 1,600 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, Brandywine NGL Pipeline and the Delaware Link Pipeline, which is currently under development. EMI pipelines include the following:~~

•AnCoast: 1) an approximate 53.3% equity interest in 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 remainder by Kinder Morgan. As a result, post the in service of the expansion, Kinetik’s ownership interest in PHP will increase approximately 56.0%.

•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 in Northern Reeves County~~

Kinetik NGL Pipeline. The Kinetik NGL Pipeline consists of approximately 30 miles of 20-inch NGL pipelines connected to ~~the Port~~our Diamond Cryogenic complex.

Delaware Link Pipeline. The Delaware Link Pipeline consists of ~~Corpus Christi, Texas. EPIC was placed in service early 2020,~~approximately 40 miles of pipeline with ~~initial throughput~~a capacity of approximately ~~600 MBbl/d.~~1.0 Bcf/d that provides additional transportation capacity to Waha. The project reached commercial in-service in October 2023.

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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 September 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 $98.39/Bbl during the first nine months 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 $6.66/MMBtu during the first nine months 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~~

~~Transfer to the New York Stock Exchange~~

On October 10, 2022, the Company notified the Nasdaq Global Select Market (“Nasdaq”) that it would voluntarily transfer the listing of its Class A Common Stock from Nasdaq to the New York Stock Exchange (the “NYSE”). The listing and trading of the Common Stock on Nasdaq ended at market close on October 21, 2022, and trading commenced on the NYSE at market open on October 24, 2022. The Class A Common Stock continues to trade under the current stock symbol “KNTK”.

~~Brandywine NGL Acquisition~~

In September 2022, the Company acquired approximately 30 miles of 20 inch NGL pipelines connected to Diamond Cryo called the Brandywine NGL Pipeline (“Brandywine”) for approximately $25 million. Brandywine is a strategic intrabasin natural gas liquids pipeline, affording Kinetik greater control over its system’s NGLs and providing interconnectivity to Shin Oak.

~~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 “RCA”), 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.

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~~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, the ~~impact of China’s zero covid policy,~~current armed conflict in Israel and the ~~continued headwinds~~Gaza Strip, the ongoing armed conflict in Ukraine, and uncertainty from ~~a stronger US dollar, both here~~the recent banking turmoil and ~~abroad,~~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, completion and other investment decisions by producers and ultimately supply to our systems. ~~Our~~Although ongoing armed conflicts might generate commodity price upward pressure, and our operations could benefit in an environment of higher natural gas, NGLs and condensate prices, the instability of the international political ~~environments~~environment and human and economic hardship resulting from the ~~international political instability~~conflicts 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 the first half of 2022, oil and natural gas prices have moderated from their peaks during the past twelve months. The Company continues to monitor commodity prices closely and ~~is likely to~~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~~was 3.7% in September 2023 compared to 8.2% in September 2022, as measured by the Consumer Price ~~Index. We expect~~Index, which was the lowest since April 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 maintained the target range for the federal funds rate to 5.25% - 5.50% during its meeting in November 2023. During the meeting, the FOMC acknowledged that ~~inflation will continue to increase our operating costs~~the economic activity expanded at a strong pace in the third quarter and the ~~overall cost~~U.S. banking system is sound and resilient. However, tighter financial and credit conditions for households and businesses are likely to weigh on economic activities, hiring and inflation. As the extent of ~~capital projects we undertake. In addition,~~these effects remains uncertain, the ~~Federal Reserve has continued~~FOMC remains highly attentive to ~~tighten~~inflation risks and is strongly committed to returning inflation to its ~~monetary policy by raising interest rates and Chairman Powell has indicated that the target Federal Funds Rate range will likely be approximately 4.5% by the end~~goal of 2022. 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.2.00%. Increased interest rates beyond the term of our hedges will increase our financing costs and 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.

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Income Tax Provision

The Company was at a net deferred tax asset position as of September 30, 2023 and December 31, 2022 before any valuation allowance assessment. Based on all available positive and negative evidence, including projections of future taxable income, we believed it was more likely than not that our deferred tax assets would not be realized. As such, a full valuation allowance was recorded against our net deferred tax asset position for federal purposes as of September 30, 2023 and December 31, 2022. To arrive at this assessment, a significant piece of objectively verifiable negative evidence the Company used was the cumulative loss incurred throughout the last several years.

The Company also anticipates a net deferred tax asset position for the year ended December 31, 2023. In evaluating the realizability of the deferred tax assets, the Company believes it will achieve a three-year cumulative level of profitability for the year ended December 31, 2023, which may allow management to conclude that it is more likely than not that the deferred tax assets would be realized and support a release of substantially all or a portion of the valuation allowance. If the Company releases all or a portion of the valuation allowance, the Company will have a significant deferred income tax benefit in such period. The Company will continue to ~~actively~~ evaluate ~~and analyze~~ whether ~~any form of interest rate hedging should be implemented~~the valuation allowance is needed in each reporting period based on information available to ~~mitigate interest rate exposure.~~

~~Supply Chain Considerations~~

~~During 2021 and 2022, challenging supply chain issues have emerged that will continue at least through~~ the remainder of 2022. 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 European Union has taken steps to reduce imports of Russian oil and natural gas. The principal supply issues facing our industry for the next twelve months include: raw materials availability, finished good inventory, rising freight costs, delays due to port congestion and continued labor shortages.

All bidding will require the risk of shipping costs and delays to be factored into proposals. Trucking availability and pricing will impact North American opportunities while sea-freight costs will impact sales 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 result in further supply disruption.

Company.

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Results of Operations

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


		Three Months Ended September 30,*						Nine Months Ended September 30,*							Three Months Ended September 30,						Nine Months Ended September 30,
		2022		2021		% Change		2022		2021		% Change			2023		2022		% Change		2023		2022 (1)		% Change

		(In thousands, except percentages)													(In thousands, except percentages)
Revenues:	Revenues:													Revenues:
Service revenue	Service revenue	$	107,597	$	72,578	48	%	$	290,122	$	202,482	43	%	Service revenue	$	104,349	$	107,597	(3	%)	$	310,325	$	290,122	7	%
Product revenue	Product revenue	213,803		93,266		129	%	618,382		244,358		153	%	Product revenue	221,280		213,803		3	%	586,534		618,382		(5	%)
Other revenue	Other revenue	3,776		742		409	%	9,493		3,615		163	%	Other revenue	4,672		3,776		24	%	10,685		9,493		13	%
Total revenues	Total revenues	325,176		166,586		95	%	917,997		450,455		104	%	Total revenues	330,301		325,176		2	%	907,544		917,997		(1	%)
Operating costs and expenses:	Operating costs and expenses:													Operating costs and expenses:
Cost of sales (exclusive of depreciation and amortization)(2)	Cost of sales (exclusive of depreciation and amortization)(2)	145,208		60,503		140	%	418,197		141,011		197	%	Cost of sales (exclusive of depreciation and amortization)(2)	147,756		145,208		2	%	374,100		418,197		(11	%)
Operating expense	Operating expense	35,845		22,731		58	%	100,996		63,575		59	%	Operating expense	42,925		35,845		20	%	118,804		100,996		18	%
Ad valorem taxes	Ad valorem taxes	5,903		3,238		82	%	15,936		9,003		77	%	Ad valorem taxes	5,607		5,903		(5	%)	14,954		15,936		(6	%)
General and administrative	General and administrative	23,468		6,957		237	%	72,180		17,920		303	%	General and administrative	22,751		23,468		(3	%)	73,131		72,180		1	%
Depreciation and amortization	Depreciation and amortization	65,005		57,154		14	%	192,609		170,291		13	%	Depreciation and amortization	69,935		65,005		8	%	208,271		192,609		8	%
Loss (gain) on disposal of assets		3,946		(37)		(10765)	%	12,602		417		2922	%
Loss on disposal of assets														Loss on disposal of assets	2,927		3,946		(26	%)	15,166		12,602		20	%
Total operating costs and expenses	Total operating costs and expenses	279,375		150,546		86	%	812,520		402,217		102	%	Total operating costs and expenses	291,901		279,375		4	%	804,426		812,520		(1	%)
Operating income	Operating income	45,801		16,040		186	%	105,477		48,238		119	%	Operating income	38,400		45,801		(16	%)	103,118		105,477		(2	%)
Other income (expense):	Other income (expense):													Other income (expense):
Interest and other income	Interest and other income	—		3,578		(100)	%	250		4,141		(94)	%	Interest and other income	289		—		100	%	1,625		250		NM
Gain on Preferred Units redemption		—		—		NM		9,580		—		NM
Gain (loss) on debt extinguishment		—		(56)		(100)	%	(27,975)		4		(699475)	%
Gain on redemption of mandatorily redeemable Preferred Units														Gain on redemption of mandatorily redeemable Preferred Units	—		—		—	%	—		9,580		(100	%)
Loss on debt extinguishment														Loss on debt extinguishment	—		—		—	%	—		(27,975)		(100	%)
Gain on embedded derivative	Gain on embedded derivative	488		—		NM		89,050		—		NM		Gain on embedded derivative	—		488		(100	%)	—		89,050		(100	%)
Interest expense	Interest expense	(40,464)		(30,541)		32	%	(92,585)		(88,458)		5	%	Interest expense	(45,009)		(40,464)		11	%	(130,443)		(92,585)		41	%
Equity in earnings of unconsolidated affiliates	Equity in earnings of unconsolidated affiliates	45,003		16,826		167	%	120,706		44,692		170	%	Equity in earnings of unconsolidated affiliates	50,754		45,003		13	%	146,828		120,706		22	%

Total other income (expense), net		5,027		(10,193)		(149)	%	99,026		(39,621)		(350)	%

Income before income tax		50,828		5,847		769	%	204,503		8,617		2273	%
Current income tax expense		1,406		1,207		16	%	2,244		1,207		86	%

Net income including noncontrolling interests		$	49,422	$	4,640	965	%	$	202,259	$	7,410	2630	%

Total other income, net														Total other income, net	6,034		5,027		20	%	18,010		99,026		(82	%)
Income before income taxes														Income before income taxes	44,434		50,828		(13	%)	121,128		204,503		(41	%)
Income tax expense														Income tax expense	1,303		1,406		(7	%)	2,030		2,244		(10	%)
Net income including noncontrolling interest														Net income including noncontrolling interest	$	43,131	$	49,422	(13	%)	$	119,098	$	202,259	(41	%)

*(1) 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.

(2) Cost of sales (exclusive of depreciation and amortization) is net of gas service revenues totaling $38.6 million and $17.1 million for the three months ended September 30, 2023 and 2022, respectively, and $107.1 million and $51.1 million for the nine months ended September 30, 2023 and 2022, respectively, for certain volumes where we act as principal

NM - Not meaningful

Table of Contents

Three Months Ended September 30, ~~2022~~2023 Compared to Three Months Ended September 30, ~~2021~~2022

Revenues

For the three months ended September 30, ~~2022,~~2023, revenue increased ~~$158.6~~$5.1 million, or ~~95%~~2%, to ~~$325.2~~$330.3 million, compared to ~~$166.6~~$325.2 million for the same period in ~~2021.~~2022. The increase was primarily driven by ~~period~~an increased product revenue related to ~~period higher commodity prices, increases in gathered~~increased NGL and ~~processed gas~~condensate volumes ~~as well as similar increases in condensate and NGL volumes sold.~~sold, partially offset by period-to-period lower service revenues.

Service revenue

Service revenue consists of service fees paid to us by our customers for providing comprehensive gathering, treating, processing and produced water disposal services necessary to bring natural gas, NGLs and crude oil to market. Service revenue for the three months ended September 30, ~~2022, increased~~2023, decreased by ~~$35.0~~$3.2 million, or ~~48%~~3%, to ~~$107.6~~$104.3 million, compared to ~~$72.6~~$107.6 million for the same period in ~~2021. This increase was primarily due to a period over period increase in~~2022. Period-over-period gathered and processed gas volumes ~~of 585.4~~increased by 246.9 Mcf per day, or 18% and ~~541.5~~by 272.1 Mcf per day, or 22%, respectively. However, the total gathered and processed gas volumes where we function as the agent decreased period over period, which lead to the $3.2 million decrease in service fees presented. Additionally, period over period water gathering and disposal revenues were up $8.3 million primarily related to the new water gathering assets acquired during the first quarter of 2023, but the increase was overshadowed by the decrease in agent related gathered and processed gas volumes. Over 99% of service revenues are included in the Midstream Logistics segment.

~~Table of Contents~~

Product revenue

Product revenue consists of commodity sales (including condensate, natural gas residue and NGLs). Product revenue for the three months ended September 30, ~~2022,~~2023, increased by ~~$120.5~~$7.5 million, or ~~129%~~3%, to ~~$213.8~~$221.3 million, compared to ~~$93.3~~$213.8 million for the same period in ~~2021,~~2022, primarily due to ~~period over period~~ increases ~~in condensate prices combined with increased NGL and condensate sales volumes. Condensate prices increased $23.30 per barrel or 35%. NGL and condensate sales volumes increased 3.5 million barrels, or 550%. The increase~~ in NGL and condensate ~~sales~~ volumes sold, partially offset ~~the decreased~~by lower commodity prices. Period over period NGL and condensate volumes sold increased 3.8 million barrels, or 86%. These increases were partially offset by period over period decreases in NGL prices of ~~$5.77~~$13.06 per barrel, or ~~14%~~37%, condensate prices of $12.07 per barrel or 13% and residue prices of $4.94 per MMBtu or 68%. This overall increase in NGL and condensate revenue was due to our plants being run in recovery for parts of the three months ended September 30, 2022 versus rejection during the same period in 2021. For the same reason, naturalNatural gas residue sales volumes also decreased ~~by 1.9 million~~ 0.8 MMBtu, or ~~28%. Partially offsetting this decrease in volumes, natural gas prices increased period over period by $3.34 per MMBtu, or 86%~~14%. Product revenues are included entirely in the Midstream Logistics segment.

Operating Costs and Expenses

Costs of sales ~~(exclusive~~(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 September 30, ~~2022,~~2023, cost of sales increased ~~$84.7~~$2.5 million, or ~~140%~~2%, to ~~$145.2~~$147.8 million, compared to ~~$60.5~~$145.2 million for the same period in ~~2021.~~2022. The increase was primarily driven by ~~the~~aforementioned period toover period increase in ~~commodity prices and increased~~ NGL ~~and condensate volumes.~~volumes sold. Cost of sales (exclusive of depreciation and amortization) are included entirely in the Midstream Logistics segment.

Operating expenses

Operating expenses increased by ~~$13.1~~$7.1 million, or ~~58%~~20%, to ~~$35.8~~$42.9 million for the three months ended September 30, ~~2022,~~2023, compared to ~~$22.7~~$35.8 million for the same period in ~~2021.~~2022. Of the total increase, ~~$7.7~~$2.2 million relates to increased operating expenses from our water operations primarily in relation to the new midstream infrastructure assets acquired during the first quarter of 2023. The remaining increase was driven by ~~new operations acquired through~~higher leased compression and electricity expenses from the ~~Transaction. The remaining increases were primarily driven by an increase in repairs~~increased gathered and ~~maintenance costs of $1.2 million, higher contract labor costs of $1.2 million, and higher safety and environmental expenditures of $0.8 million.~~processed volumes discussed above.

~~General and administrative~~Other Income (Expense)

~~General and administrative (“G&A”)~~Interest Expense

Interest expense increased by ~~$16.5~~$4.5 million, or ~~237%~~11%, to ~~$23.5~~$45.0 million for the three months ended September 30, ~~2022,~~2023, compared to ~~$7.0~~$40.5 million for the same period in ~~2021.~~2022. The ~~increases were~~increase was primarily driven by ~~recognition~~higher average debt obligations during the quarter, 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. The increase was partially offset by realized gains and favorable valuation marks on our interest rate swaps totaling $12.5 million for the period. Refer to Note—12 Derivatives and Hedging Activities in the Notes to Condensed Consolidated Financial Statements regarding the Company’s strategy in managing interest rate risk.

Table of ~~share-based compensation of $12.7 million, acquisition and integration costs of $2.7 million incurred in relation to the Transaction, and an increase of $0.8 million in insurance expenses.~~Contents

~~Other Income (Expense)~~

Equity in earnings of unconsolidated affiliates

Income from EMI pipelines increased by ~~$28.2~~$5.8 million, or ~~167%~~13%, to ~~$45.0~~$50.8 million for the three months ended September 30, ~~2022,~~2023, compared to ~~$16.8~~$45.0 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~~reflected higher profitability by the Company’s ~~existing EMI pipeline, PHP. Equity in earnings of unconsolidated affiliates is included entirely in the Pipeline Transportation segment.~~EMIs.

Nine Months Ended September 30, ~~2022~~2023 Compared to Nine Months Ended September 30, ~~2021~~2022

Revenues

For the nine months ended September 30, ~~2022,~~2023, revenue ~~increased $467.5~~decreased $10.5 million, or ~~104%~~1%, to ~~$918.0~~$907.5 million, compared to ~~$450.5~~$918.0 million for the same period in ~~2021.~~2022. The ~~increase~~decrease was primarily driven by ~~period~~period-to-period lower product revenues due to ~~period~~decreases in commodity prices, partially offset by higher ~~commodity prices,~~service revenues related to increases in gathered and processed gas ~~volumes, as well as similar increases in condensate and NGL volumes sold.~~

~~Table of Contents~~

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 nine months ended September 30, ~~2022,~~2023, increased by ~~$87.6~~$20.2 million, or ~~43%~~7%, to ~~$290.1~~$310.3 million, compared to ~~$202.5~~$290.1 million for the same period in ~~2021.~~2022. This increase was ~~primarily~~ due to a ~~period over period~~period-over-period increase in water gathering and disposal revenues totaling $21.7 million primarily related to the new water gathering assets acquired during the first quarter of 2023. Additionally, total gathered and processed gas volumes ~~of 559.9~~increased 302.3 Mcf per day, or 24% and ~~523.8~~316.9 Mcf per day, or 27%, respectively. However, the total gathered and processed gas volumes where we function as the agent slightly decreased period over period. Over 99% of service revenues are included in the Midstream Logistics segment.

Product revenue

Product revenue consists of commodity sales (including condensate, natural gas residue and NGLs). Product revenue for the nine months ended September 30, ~~2022, increased~~2023, decreased by ~~$374.0~~$31.8 million, or ~~153%~~5%, to ~~$618.4~~$586.5 million, compared to ~~$244.4~~$618.4 million for the same period in ~~2021,~~2022, primarily due to period over period decreases in commodity prices. Period over period NGL prices decreased $18.31 per barrel, or 46%, condensate prices decreased $22.40 per barrel or 23% and residue prices decreased $4.49 per MMBtu, or 73%. The overall decrease was partially offset by increases in NGL and condensate ~~prices combined with increased sales~~ volumes sold of ~~these liquids. NGL prices increased $6.60 per barrel, or 20%, and condensate prices increased $35.69 per barrel, or 60%.~~ ~~NGL and condensate sales volumes increased 8.2~~10.9 million barrels, or ~~280%~~91%. ~~This substantial increase was due to our plants being run in recovery for most of the nine months ended September 30, 2022 versus rejection during the same period in 2021. For the same reason, natural~~Natural gas residue sales volumes decreased ~~by 3.2~~4.1 million MMBtu, or ~~17%. Partially offsetting this decrease in volumes, natural gas prices increased period over period by $2.61 per MMBtu, or 73%~~20%. Product revenues are included entirely in the Midstream Logistics segment.

Operating Costs and Expenses

Costs of sales ~~(exclusive~~(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 nine months ended September 30, ~~2022,~~2023, cost of sales ~~increased $277.2~~decreased $44.1 million, or ~~197%~~11%, to ~~$418.2~~$374.1 million, compared to ~~$141.0~~$418.2 million for the same period in ~~2021.~~2022. The ~~increase~~decrease was primarily driven by ~~the~~a period to period ~~increases~~decrease in commodity prices, ~~and~~slightly offset by increases in NGL ~~and condensate~~ volumes ~~discussed above.~~sold. Cost of sales (exclusive of depreciation and amortization) are included entirely in the Midstream Logistics segment.

Operating expenses

Operating expenses increased by ~~$37.4~~$17.8 million, or ~~59%~~18%, to ~~$101.0~~$118.8 million for the nine months ended September 30, ~~2022,~~2023, compared to ~~$63.6~~$101.0 million for the same period in ~~2021.~~2022. Of the total increase, ~~$16.2~~$4.5 million was driven by the ~~new~~inclusion of Altus operations for the entire period, versus just over four months during the same period of 2022 and $3.7 million relates to increased operating expenses from our water operations predominantly related to the newly acquired ~~through the Transaction.~~midstream infrastructure assets. The remaining increase ~~was~~is primarily ~~driven by~~the result of higher ~~period over period~~compression and electricity costs from the increased gathered and processed volumes discussed above. Over 99% of ~~$10.7 million, higher salaries and benefits~~operating expenses are included in the Midstream Logistics segment.

Table of $3.7 million, higher repairs and maintenance costs of $2.9 million and higher contract labor costs of $2.8 million. The higher electricity costs were primarily due to electricity credits received in 2021 related to the extreme weather caused by Winter Storm Uri.Contents

~~General and administrative~~

General and administrative (“G&A”) expense increased by $54.3 million, or 303%, to $72.2 million for the nine months ended September 30, 2022, compared to $17.9 million for the same period in 2021. The increases were primarily driven by recognized share-based compensation of $31.0 million, acquisition and integration costs of $18.5 million incurred in relation to the Transaction and an increase in insurance expenses of $2.2 million.

~~Depreciation and amortization~~

Depreciation and amortization expense increased by $22.3 million, or 13%, to $192.6 million for the nine months ended September 30, 2022, compared to $170.3 million for the same period in 2021. The increase was primarily driven by the new assets acquired through the Transaction.

Other Income (Expense)

~~Gain (loss)~~Loss on debt extinguishment

For the nine months ended September 30, 2022, the Company recognized a loss on debt extinguishment of $28.0 million ~~compared with a gain of $4 thousand 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. We did not recognize any loss on debt extinguishment for the nine months ended September 30, 2023.

~~Table of Contents~~

~~Gain~~Unrealized gain on embedded derivative

For the nine months ended September 30, 2022, the Company recognized aan unrealized gain on an embedded derivative of $89.1 million. The unrealized gain iswas a result of the ~~decrease in fair value~~redemption of ~~the embedded derivative liability related to~~ the redeemable noncontrolling interest Preferred ~~Units, which was eliminated upon the ultimate redemption of these~~Units. All redeemable noncontrolling interest Preferred Units were redeemed in 2022; as such, no unrealized gain or loss was recognized during ~~July~~2023.

Interest Expense

Interest expense increased by $37.9 million, or 41%, to $130.4 million for the nine months ended September 30, 2023, compared to $92.6 million for the same period in 2022. The increase was driven by higher debt obligations from the comprehensive refinancing completed in June 2022, as well as an overall increase in interest rates associated with the Term Loan Credit Facility and Revolving Credit Facility, which carried some variability. The increase was partially offset by higher realized gains and favorable valuation marks on interest rate swaps of $21.1 million when comparing the nine months ended September 30, 2023 to the same period in 2022. Refer to Note—12 Derivatives and Hedging Activities in the Notes to Condensed Consolidated Financial Statements regarding the Company’s strategy in managing interest rate risk.

Equity in earnings of unconsolidated affiliates

Income from EMI pipelines increased by ~~$76.0~~$26.1 million, or ~~170%~~22%, to ~~$120.7~~$146.8 million for the nine months ended September 30, ~~2022,~~2023, compared to ~~$44.7~~$120.7 million for the same period in ~~2021.~~2022. The increase was ~~primarily~~ due to the ~~acquisition~~recognition of ~~new EMI pipelines and additional equity interests in~~nine months of operations from the Company’s ~~existing EMI pipeline, PHP, through~~EMIs in 2023 compared to the recognition of seven months of operations in 2022 since the closing of the Transaction ~~closed~~ in February 2022. ~~Equity in earnings of unconsolidated affiliates is included entirely in~~The increase also reflected higher profitability by the ~~Pipeline Transportation segment.~~EMIs.

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, noncash increases and decreases related to trading and hedging agreements, 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.

Table of Contents

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,~~interest, 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.

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

~~Table of Contents~~


		Three Months Ended September 30,*						Nine Months Ended September 30,*							Three Months Ended September 30,						Nine Months Ended September 30,
		2022		2021		% Change		2022		2021		% Change			2023		2022		% Change		2023		2022*		% Change

													(In thousands, except percentages)
Reconciliation of net income including noncontrolling interests to Adjusted EBITDA		(In thousands, except percentages)
Net income including noncontrolling interests		$	49,422	$	4,640	965	%	$	202,259	$	7,410	2630	%
Reconciliation of net income including noncontrolling interest to Adjusted EBITDA														Reconciliation of net income including noncontrolling interest to Adjusted EBITDA
Net income including noncontrolling interest														Net income including noncontrolling interest	$	43,131	$	49,422	(13	%)	$	119,098	$	202,259	(41	%)
Add back:	Add back:													Add back:
Interest expense	Interest expense	40,464		30,541		32	%	92,585		88,458		5	%	Interest expense	45,009		40,464		11	%	130,443		92,585		41	%

Income tax expense	Income tax expense	1,406		1,207		16	%	2,244		1,207		86	%	Income tax expense	1,303		1,406		(7	%)	2,030		2,244		(10	%)
Depreciation and amortization	Depreciation and amortization	65,005		57,154		14	%	192,609		170,291		13	%	Depreciation and amortization	69,935		65,005		8	%	208,271		192,609		8	%
Amortization of contract costs	Amortization of contract costs	448		448		—	%	1,344		1,815		(26)	%	Amortization of contract costs	1,655		448		NM		4,965		1,344		NM
Proportionate EMI EBITDA	Proportionate EMI EBITDA	78,357		21,704		261	%	190,438		59,677		219	%	Proportionate EMI EBITDA	78,585		78,357		—	%	224,933		190,438		18	%
Share-based compensation	Share-based compensation	12,661		—		NM		30,966		—		NM		Share-based compensation	12,502		12,661		(1	%)	43,340		30,966		40	%
Loss (gain) on sale of assets		3,946		(37)		(10765)	%	12,602		417		2922	%
Loss (gain) on debt extinguishment		—		56		(100)	%	27,975		(4)		(699475)	%
Loss on disposal of assets														Loss on disposal of assets	2,927		3,946		(26	%)	15,166		12,602		20	%
Loss on debt extinguishment														Loss on debt extinguishment	—		—		—	%	—		27,975		(100	%)
Unrealized loss on derivatives														Unrealized loss on derivatives	8,259		—		100	%	616		—		100	%
Integration Costs														Integration Costs	21		2,338		(99	%)	985		10,012		(90	%)
Transaction Costs														Transaction Costs	378		62		NM		648		6,412		(90	%)
Other one-time cost or amortization														Other one-time cost or amortization	2,662		3,752		(29	%)	7,545		10,969		(31	%)

Derivative loss due to Winter Storm Uri		—		—		NM		—		13,456		(100)	%
Integration Costs		2,338		—		NM		10,012		—		NM
Acquisition transaction Costs		62		—		NM		6,412		—		NM
Other one-time cost or amortization		3,752		1,167		222	%	10,969		2,010		446	%
Producer Settlement		—		—		NM		—		6,827		(100)	%
Warrant valuation adjustment														Warrant valuation adjustment	4		—		100	%					—	%
Deduct:	Deduct:													Deduct:
Interest and other income		—		74		(100)	%	—		115		(100)	%
Interest income														Interest income	293		—		100	%	314		—		100	%
Warrant valuation adjustment														Warrant valuation adjustment	—		—		—	%	73		—		100	%
Gain on redemption of mandatorily redeemable Preferred Units	Gain on redemption of mandatorily redeemable Preferred Units	—		—		NM		9,580		—		NM		Gain on redemption of mandatorily redeemable Preferred Units	—		—		—	%	—		9,580		(100	%)

Gain on embedded derivative	Gain on embedded derivative	488		—		NM		89,050		—		NM		Gain on embedded derivative	—		488		(100	%)	—		89,050		(100	%)
Equity income from unconsolidated affiliates		45,003		16,826		167	%	120,706		44,692		170	%

Equity income from EMI's														Equity income from EMI's	50,754		45,003		13	%	146,828		120,706		22	%
Adjusted EBITDA	Adjusted EBITDA	$	212,370	$	99,980	112	%	$	561,079	$	306,757	83	%	Adjusted EBITDA	$	215,324	$	212,370	1	%	$	610,825	$	561,079	9	%

NM - not meaningful

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Adjusted EBITDA increased by ~~$112.4~~$3.0 million, or ~~112%~~1%, to ~~$212.4~~$215.3 million for the three months ended September 30, ~~2022,~~2023, compared to ~~$100.0~~$212.4 million for the same period in 2021. The increase was primarily driven by an increase in net income including noncontrolling interest of $44.8 million, or 965%, and increases in add back related to the Company’s proportionate share of its EMI pipelines’ EBITDA of $56.7 million, or 261%, share-based compensation of $12.7 million, interest expense of $9.9 million and depreciation and amortization expense of $7.9 million, which are results of new operations acquired through the Transaction. The increase in adjusted EBITDA was partially offset by increases in EMI pipelines equity income of $28.2 million, which was the result of acquisitions of new EMI pipeline entities and additional PHP equity interests acquired.2022.

Adjusted EBITDA increased by ~~$254.3~~$49.7 million, or ~~83%~~9%, to ~~$561.1~~$610.8 million for the nine months ended September 30, ~~2022,~~2023, compared to ~~$306.8~~$561.1 million for the same period in ~~2021.~~2022. As discussed in the Item 2. Management ’s Discussion and Analysis of Financial Condition and Results of Operations —R esults of O perations to this Quarterly Report Form 10-Q, $15.9 million of the increase was due to lower cost of sales (exclusive of depreciation and amortization) of $44.1 million, partially offset by decreased total operating revenues of $10.5 million and increased operating expenses of $17.8 million. The increase was ~~primarily~~also driven by (i) higher proportionate EMI EBITDA of $34.5 million due to owning the EMI investments acquired through the Transaction for a full nine months during 2023 and (ii) an increase in ~~net income including noncontrolling interest of $194.8 million, or 2630%, and increases in~~the add back related to ~~the Company’s proportionate share of its EMI pipelines’ EBITDA of $130.8 million, or 219%,~~ share-based compensation of ~~$31.0~~$12.4 million ~~depreciation and~~due primarily to a full nine months of amortization ~~expense of $22.3 million~~for the Class A Shares versus only seven months in the prior period. These increases were partially offset by decreases in the add backs related to transaction and integration costs ~~of $10.0 million. The increase in add back was also due to increase in loss on debt extinguishment of $28.0~~totaling $14.8 million as the Company completed its comprehensive refinancing in June 2022. The increase in adjusted EBITDA was partially offset by increases in gain on embedded derivatives of $89.1 million, EMI pipelines equity income of $76.0 million and the derivative loss add back duerelated to the ~~Winter Storm Uri of $13.5 million.~~

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 continue to be recognized over the course ofTransaction from 2022.

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 nine ~~months~~month periods ended September 30,

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~~2022~~ 2023 and ~~2021.~~2022. Also refer to Note 17—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.~~interest.


		Three Months Ended September 30,*						Nine Months Ended September 30,*							Three Months Ended September 30,						Nine Months Ended September 30,
		2022		2021		% Change		2022		2021		% Change			2023		2022		% Change		2023		2022*		% Change

		(In thousands, except percentages)													(In thousands, except percentages)
Midstream Logistics	Midstream Logistics	$	137,545	$	80,877	70	%	$	380,919	$	255,890	49	%	Midstream Logistics	$	140,443	$	137,545	2	%	$	396,800	$	380,919	4	%
Pipeline Transportation	Pipeline Transportation	78,692		21,381		268	%	190,023		58,138		227	%	Pipeline Transportation	78,902		78,692		—	%	226,027		190,023		19	%
Corporate and Other**		(3,867)		(2,278)		70	%	(9,863)		(7,271)		36	%
Corporate and Other**														Corporate and Other**	(4,021)		(3,867)		4	%	(12,002)		(9,863)		22	%
Total segment adjusted EBITDA	Total segment adjusted EBITDA	$	212,370	$	99,980	112	%	$	561,079	$	306,757	83	%	Total segment adjusted EBITDA	$	215,324	$	212,370	1	%	$	610,825	$	561,079	9	%

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

** 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 ~~$56.7~~$2.9 million, or ~~70%~~2%, to ~~$137.5~~$140.4 million for the three months ended September 30, ~~2022,~~2023, compared to ~~$80.9~~$137.5 million for the same period in 2021. The increase was primarily driven by an increase in segment net income including noncontrolling interests of $71.7 million and increases in the add back related to depreciation and amortization expense of $7.6 million due to new operations acquired through the Transaction.2022.

Midstream Logistics segment adjusted EBITDA increased by ~~$125.0~~$15.9 million, or ~~49%~~4%, to ~~$380.9~~$396.8 million for the nine months ended September 30, ~~2022,~~2023, compared to ~~$255.9~~$380.9 million for the same period in ~~2021.~~2022. The increase was primarily ~~driven~~due to the lower cost of sales (exclusive of depreciation and amortization) of $44.1 million, partially offset by ~~an increase in segment net income including noncontrolling interests~~decreased total operating revenues of ~~$111.5~~$11.9 million and ~~increases~~increased operating expenses of $18.0 million. The reasons for the fluctuations are discussed in the ~~add back related~~ Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations to loss on debt extinguishment of $28.0 million as the Company completed its comprehensive refinancing in June 2022, depreciation and amortization expense of $22.1 million due to new operations acquired through the Transaction.this Quarterly Report Form 10-Q,

Pipeline Transportation segment adjusted EBITDA increased by ~~$57.3~~$0.2 million ~~or 268%,~~ to ~~$78.7~~$78.9 million for the three months ended September 30, ~~2022,~~2023, compared to ~~$21.4~~$78.7 million for the same period in ~~2021. The increase was driven by investments in GCX, EPIC and Shin Oak and 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 September 30, 2021, the Company only held a 26.67% interest in PHP.~~

Pipeline Transportation segment adjusted EBITDA increased by ~~$131.9~~$36.0 million, or ~~227%~~19%, to ~~$190.0~~$226.0 million for the nine months ended September 30, ~~2022,~~2023, compared to ~~$58.1~~$190.0 million for the same period in ~~2021.~~2022. The increase was primarily driven by increases in the ~~same factors driving~~Company’s proportionate share of its EMIs’ EBITDA of $34.5 million due to owning the ~~quarter over quarter increase disclosed above.~~EMI investments acquired through the Transaction for a full nine months during 2023 versus approximately seven months during 2022.

Contractual Obligations

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

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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 September 30, 2023.

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 the PHP expansion project, ~~integration of~~ the ~~Alpine High gathering system with the legacy BCP system, certain integration related synergies including the relocation of compression units~~midstream infrastructure acquisition and ~~treating assets to the legacy BCP processing plants, organic growth and maintenance~~other budgeted capital expenditures ~~in the Midstream Logistic segment,~~for construction of gathering and processing assets, the Company’s contractual debt obligations and ~~the Company’s payment of~~ quarterly cash ~~dividend on its Class A Common Stock and Class C Common Units as may be declared by its~~dividends. In addition, the Board of Directors (the “Board”).

has approved the Repurchase Program (as defined below) authorizing discretionary purchases of the Company’s Class A Common Stock up to $100 million in aggregate.

During the nine months ended September 30, ~~2022,~~2023, the Company’s primary sources of cash were distributions from the EMI pipelines, borrowings under the ~~Term Loan and~~ 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 and distributions from the EMI pipelines, and remaining borrowing capacity on our credit facilities will generate cash flows in excess of capital expenditures and the amount required to fund the Company’s planned quarterly dividend over the next 12 months. Additionally, the Company has locked in the floating base rate on its Term Loan ~~A through April 2023 to reduce short-term~~Credit Facility with interest rate ~~risk. Further, the Company entered into an interest rate swap~~swaps with a $1$2.25 billion notional that isare effective ~~from May 1, 2023~~ through May 31, 2025 swapping floating SOFR for a fixed swap rate ~~of 4.46%~~between 4.38% and 4.49%.

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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 were issued under our Sustainability-Linked Financing Framework and include sustainability-linked features. In addition, the Partnership entered into the ~~new RCA,~~revolving credit agreement with Bank of America, N.A. as administrative agent, which provides for a $1.25 billion senior unsecured ~~Revolving Credit Facility~~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, which ~~provides~~provided for a $2.00 billion senior unsecured ~~Term Loan Credit Facility~~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~~See Note ~~6 —~~ 8—Debt and Financing Costsin the Notes to ~~our Condensed~~ 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 nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, capital spending for property, plant and equipment totaled $245.8 million and $160.5 million, respectively, and intangible asset purchases totaled $15.1 million and $13.3 million, respectively. In addition to contributing to the PHP expansion, the Company also acquired certain midstream infrastructure assets ~~totaled $160.5~~totaling $65.0 million ~~and $60.6 million, respectively. The current year capital spend includes $25 million for~~in the ~~purchase~~first quarter of ~~Brandywine NGL Pipeline and $12.5 million for the ongoing construction of the Delaware Link Pipeline.~~2023, 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 nine months ended September 30, 2022, the Company contributed $56.2 million to PHP, for the 2022 Capacity Expansion Project, compared to $20.5 million contributed in the same period of 2021.

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 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.

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Cash ~~Flows~~Flow

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


		For the Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021					2023		2022

		(In thousands)				(In thousands)
Cash provided by operating activities	Cash provided by operating activities	$	453,244	$	159,350			Cash provided by operating activities	$	405,585	$	453,244
Cash used in investing activities	Cash used in investing activities	$	(216,418)	$	(81,323)			Cash used in investing activities	$	(582,600)	$	(216,418)
Cash used in financing activities		$	(243,827)	$	(62,439)

Cash provided by (used in) financing activities								Cash provided by (used in) financing activities	$	170,689	$	(243,827)

Operating ~~Activities~~activities. Net cash provided by operating activities ~~increased~~decreased by ~~$293.9~~$47.7 million for the nine months ended September 30, ~~2022~~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 $72.9 million, which was mainly driven by increases in fair value adjustment for derivatives of $62.0 million and share-based compensation of $12.4 million. The increase was partially offset by a decrease in working capital of $37.4 million and a decrease in net income including noncontrolling interests of ~~$194.8 million, adjustments related to non-cash items of $56.5 million and cash provided by changes in working capital of $42.5~~$83.2 million. Period over period increase in cash provided by operating activities was primarily driven by the new operations acquired through the Transaction, including distributions received from EMI pipelines acquired through the Transaction. The increase was partially offset by non-cash adjustment related to derivative fair value adjustment recognized during 2022.

Investing ~~Activities~~activities. Net cash used in investing activities increased by ~~$135.1~~$366.2 million for the nine months ended September 30, 2023 compared with the same period in 2022. The increase was primarily driven by an increase in cash used in a business acquisition of $138.4 million for certain midstream assets, an increase in property, plant and equipment expenditures of $85.3 million and an increase in contributions made to unconsolidated affiliates of $146.5 million related to the PHP expansion project.

Financing activities. Net cash provided by financing activities was $170.7 million for the nine months ended September 30, 2023, which was comprised of net proceeds from the Company’s Revolving Credit Facility of $235.0 million, offset by cash dividends of $58.6 million and repurchase of Class A common stock of $5.8 million. Net cash used in financing activities was $243.8 million for the nine months ended September 30, 2022, ~~compared with the same period in 2021. The increase~~which was ~~primarily driven by an increase in property, plant and equipment expenditures~~comprised of ~~$99.9 million, which includes the Brandywine asset acquisition, an increase in contribution made to unconsolidated affiliates~~redemption of $35.7 million and an increase in intangible assets expenditure of $9.6 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.

~~Financing Activities~~. Net cash used in financing activities increased by $181.4 million for the nine months ended September 30, 2022 compared with the same period in 2021. The increase was primarily due to increases in cash outflow for redemption ofmandatorily redeemable Preferred Units of ~~$644.8~~$183.3 million, payments on debt issuance costs of $36.9 million and cash dividends ~~paid to holders~~ of ~~Class A Common Stock of $24.4~~$34.1 million, ~~cash distributions paid to holders of Preferred Units of $8.8 million and the increase in cash outflow was~~ offset by net proceeds ~~from~~on the Company’s ~~long-term debt and Revolving Credit Facility~~outstanding indebtedness of ~~$482.1 million and a reduction of cash distributions paid to holders of Class C Common Units of $29.3~~$471.9 million.

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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.

During the first nine months of ~~2022,~~2023, the Company made cash dividend payments of ~~$24.4~~$58.6 million to holders of Class A Common Stock and ~~$175.5~~Class C Common Units and $263.8 million was reinvested in shares of Class A Common Stock by the Reinvestment 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 ~~October 19, 2022,~~November 1, 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 November ~~17, 2022.~~13, 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 November ~~17, 2022. As context requires,~~22, 2023. Core Shareholders have agreed to reinvest 100% of dividends ~~paid to holders~~received on Class C Common Units based on the Reinvestment Agreement.

Share Repurchase Program

In February 2023, the Board approved a share repurchase program (the “Repurchase Program”), authorizing discretionary purchases of the Company’s Class A Common Stock ~~and distributions paid~~up to ~~holders of Common Units~~$100.0 million in the aggregate. Repurchases may be ~~referred~~made at management’s discretion from time to ~~collectively as “dividends.”~~

~~Series A Cumulative Redeemable Preferred Units~~

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 ~~Partnership issued Preferred Units~~repurchases will depend on ~~June 12, 2019. Because the Transaction was accounted for as a reverse merger, certain Preferred Units that were issued~~market conditions and ~~outstanding were assumed~~may be discontinued at ~~Closing for accounting purposes.~~any time without prior notice. The Company ~~assumed 525,000 Preferred Units as well as 29,983 paid-in-kind (“PIK”) Preferred Units immediately after~~did not repurchase any outstanding shares during the ~~Closing.~~

~~Since~~three months ended September 30, 2023. For the ~~Closing,~~nine months ended September 30, 2023, the Company ~~redeemed all outstanding Preferred Units and PIK units for an aggregate redemption price~~repurchased 194,174 shares at a total cost of ~~$644.8~~$5.8 million. The Company ~~recognized~~retired all treasury stock as of September 30, 2023. For 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.

The Inflation Reduction Act of 2022 provides for, among other things, the imposition of a ~~gain~~1% non-deductible U.S. federal excise tax (the “Stock Buyback Tax”) on certain repurchases of ~~$9.6 million on redemption~~stock by publicly traded U.S. corporations such as us after December 31, 2022. Accordingly, the Stock Buyback Tax will apply to our share repurchase program in 2023 and in subsequent taxable years, provided, that the amount of share repurchases in the relevant taxable year subject to the Stock Buyback Tax is reduced by the fair market value of any stock issued by us during such taxable year, including the fair market value of any stock issued or provided to our employees or specified affiliates. The Biden Administration has proposed increasing the amount of the ~~mandatorily redeemable Preferred Units and excess of carrying~~Stock Buyback Tax from 1% to 4%; however, it is unclear whether such a change in the amount ~~over redemption price of $109.5 million on redemption~~ of the ~~redeemable noncontrolling interest Preferred Units. Refer to~~ ~~Note 11—Series A Cumulative Redeemable Preferred Unitsin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.~~Stock Buyback Tax will be enacted and, if enacted, how soon any such change could take effect.

Liquidity

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


		September 30, 2022		December 31, 2021			September 30,		December 31,
							2023		2022
		(In thousands)					(In thousands)
Cash and cash equivalents	Cash and cash equivalents	$	11,728	$	18,729	Cash and cash equivalents	$	68	$	6,394
Total debt		$	3,447,513	$	2,307,702
Total debt, net of unamortized deferred financing cost						Total debt, net of unamortized deferred financing cost	$	3,606,962	$	3,368,510
Available committed borrowing capacity	Available committed borrowing capacity	$	775,000	$	133,000	Available committed borrowing capacity	$	620,000	$	855,000

Cash and cash equivalents

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had ~~$11.7~~$0.1 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.~~

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Total ~~Debt~~debt and ~~Available~~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. See~~ ~~Note 6—Debt and Financing Costsin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.~~

Off-Balance Sheet Arrangements

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

~~Critical Accounting Policies~~

~~The Company’s significant accounting policies, described in the~~ ~~Summary of Significant Accounting Policie~~s in Exhibit 99.1 to 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, 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 ~~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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Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies 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 “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Commission on March 7, 2023.

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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~~conflicts in Ukraine and Israel, 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 third 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—Derivative~~12—Deriva tive s 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 September 30, ~~2022,~~2023, the Company had interest bearing debt, net of deferred financing costs, with principal amount of ~~$3.45~~$3.61 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. As of September 30, 2023, $2.25 billion of floating rate debt (out of $2.63 billion) has been hedged until June 2025. If interest rates increase by ~~1.0%~~10.0%, the Company’s consolidated interest expense would have increased by approximately ~~$6.3~~$194.1 million for the ~~quarter~~nine months ended September 30, ~~2022.~~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—Derivative~~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 will 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 were dependent upon the Company meeting certain sustainability targets during 2022, which were subject to the completion of certain attestation procedures, which have been successfully completed as of September 30, 2023.

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.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of September 30, ~~2022,~~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 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)~~13a-15(r) 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 September 30, ~~2022.~~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 September 30, ~~2022,~~2023, that have materially affected, or ~~are~~is 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 of~~Factors” in the Company’s ~~Quarterly~~Annual Report Form ~~10-Q~~10-K for the ~~first quarter of~~year ended December 31, 2022 filed on ~~May 10, 2022.~~March 7, 2023.

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

There was no unregistered sale of equity securities or repurchase activities during the three months ended September 30, 2023.

~~Table of Contents~~

ITEM 5. OTHER INFORMATION

~~Amended~~Trading Arrangements

During the three months ended September 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted, terminated or modified a “Rule 10b5-1 trading arrangement” or non-Rule 10b5-1 trading arrangement (as each term is defined in Item 408 of Regulation S-K).

Disclosure Pursuant to Section 13(r) of 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 ~~Restated Code of Business Conduct~~

On November 9, 2022, our Board of Directors adopted an amended and restated Code of Business Conduct (the “Code of Ethics”). The Code of Ethics includes, among other things, updates to reflect the Company’s transition from the Nasdaqquarterly reports to the ~~NYSE. The Code of Ethics took effect upon adoption by our Board of Directors and did not result in~~SEC whether we or any ~~waiver, explicit or implicit, of any provision~~ of our ~~previous Code of Ethics.~~

~~The Code of Ethics~~“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 ~~available on our website at~~ ~~www.ir.kinetik.com/governance~~generally required even where the 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 ~~foregoing~~ description of the ~~amendments reflected~~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 Mundys S.p.A (formerly Atlantia S.p.A). Mundys 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 Mundys 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 ~~Code~~preparation of ~~Ethics~~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 quarterly report on Form 10-Q, and as of November 9, 2023, the Company is unaware of any changes to the relationship status between BX and Mundys 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 Blackstone first invested in Mundys 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 Mundys S.p.A., pursuant to which such funds obtained a minority non-controlling interest in Mundys S.p.A. Mundys 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 September 30, 2023 was less than €65,000. Mundys S.p.A. does not ~~purport~~track profits specifically attributable to ~~be complete and is qualified in its entirety by reference to the Code of Ethics, attached as Exhibit 14.1 hereto and incorporated herein by reference.~~these activities.

4743

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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

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.

3.1

–

Third Amended and Restated Certificate of Incorporation of Kinetik Holdings Inc.

3.1

–

Third Amended and Restated Certificate of Incorporation of Kinetik Holdings Inc.

3.2

–

Amended and Restated Bylaws of Kinetik Holdings Inc.

3.2

–

Amended and Restated Bylaws of Kinetik Holdings Inc.

3.3

–

Certificate of Amendment to the 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 June 2, 2023).

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.

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.

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., as parent, Kinetik Holdings LP, as issuer, 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% Senior Notes Due 2030 (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.

10.1

–

Third Amended and Restated Agreement of Limited Partnership of Altus Midstream LP, dated as of October 22, 2021

14.1*

–

Kinetik Holdings Inc. Code of Business Conduct, as amended November 9, 2022.

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).

31.1**

–

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

31.2**

–

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

32.1**

–

Certification of the Principal Executive Officer 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 September 30, 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 September 30, 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:	November 9, ~~2022~~2023	/s/ Jamie Welch
		Jamie Welch
		Chief Executive Officer, President ~~Chief Financial Officer~~ and Director
		(Principal Executive Officer)

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

4945


Item		Page
	PART I — FINANCIAL INFORMATION (UNAUDITED)

1.	FINANCIAL STATEMENTS	1

	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021	1



	CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021	2

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021	3

	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021	4

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	6

	1.D ESCRIPTION OF THE ORGA NIZATION AND SUMMARY OF SIGN IFICANT ACCOUNTING POLICIES	6

	2.BUSINESS COMBINATION	10

	3.REVENUE RECOGNITION	12

	4.PROPERTY, PLANT AND EQUIPMENT	13

	5.GOO DWILL AND INTANGIBLE ASSETS, NET	14

	6.DEBT AND FINANCING COSTS	14

	7.ACCRUED EXPENSES	17

	8.COMMITMENTS AND CONTINGENCIES	17

	9.EQUITY METHOD INVESTMENTS	18

	10.EQUITY AND WARRANTS	20

	11.SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS	21

	12.SHARE-BASED COMPENSATION	22

	13.INCOME TAXES	23

	14.NET INCOME PER SHARE	24

	15.FAIR VALUE MEASUREMENTS	25

	16.DERIVATIVES AND HEDGING ACTIVITIES	26

	17.SEGMENTS	27

	18.SUBSEQUENT EVENTS	30

2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31

3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	44

4.	CONTROLS AND PROCEDURES	45

	PART II — OTHER INFORMATION

1.	LEGAL PROCEEDINGS	46

1A.	RISK FACTORS	46



5.	OTHER INFORMATION	47

6.	EXHIBITS	48
	SIGNATURES	49


	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 September 30, 2021
Balance at June 30, 2021	$	—	$	1,029,126	—	$	—	100,694	$	10	$	—	$	—	$	10


Net income	—		4,640		—	—		—	—		—		—		—



Balance at September 30, 2021	$	—	$	1,033,766	—	$	—	100,694	$	10	$	—	$	—	$	10

For the Quarter Ended September 30, 2022
Balance at June 30, 2022	$	563,338	$	3,251,290	40,551	$	4	94,450	$	9	$	—	$	(1,181,343)	$	(1,181,330)



Redemption of Common Units	—		(6,765)		180	—		(180)	—		6,765		—		6,765
Redemption of Preferred Units	(461,460)		—		—	—		—	—		—		—		—
Excess of carrying amount over Preferred Units redemption price	(102,586)		76,623		—	—		—	—		—		32,900		32,900
Issuance of Class A Common Stock through dividend and distribution reinvestment plan	—		—		2,351	—		—	—		87,756		—		87,756
Share-based compensation	—		—		—	—		—	—		12,661		—		12,661

Net income	708		33,778		—	—		—	—		—		14,936		14,936
Change in redemption value of noncontrolling interests	—		(222,227)		—	—		—	—		—		222,227		222,227
Distributions paid to Common Unit limited partners	—		(70,838)		—	—		—	—		—		—		—
Dividends on Class A Common Stock ($0.75 per share)	—		—		—	—		—	—		—		(30,467)		(30,467)
Balance at September 30, 2022	$	—	$	3,061,861	43,082	$	4	94,270	$	9	$	107,182	$	(941,747)	$	(834,552)


	Units Outstanding	Amount

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

Redemption, including PIK units	(396,417)	(461,460)

Cash distribution paid to Preferred Unit limited partners	—	(6,937)

Allocation of net income	—	18,128
Accreted redemption value adjustment	—	97,075
Excess of carrying amount over redemption price	—	(109,523)
Redeemable noncontrolling interest — Preferred Units, as of September 30, 2022	—	$	—