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 SeptemberJune 30, 20222023
OR
☐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)
Delaware81-4675947
(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 classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.0001 par valueKNTKNew 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 OctoberJuly 31, 2022202343,082,15751,973,472 
Number of shares of registrant’s Class C Common Stock, par value $0.0001 per share issued and outstanding as of OctoberJuly 31, 2022202394,270,00094,089,038 


TABLE OF CONTENTS
ItemPage
PART I — FINANCIAL INFORMATION (UNAUDITED)
1.
1
1
2
3
4
6
1.DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
6
2.BUSINESS COMBINATION
10
3.REVENUE RECOGNITION
12
4.PROPERTY, PLANT AND EQUIPMENT
13
5.GOODWILL 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.
31
3.
44
4.
45
PART II — OTHER INFORMATION
1.
46
1A.
46
5.
47
6.
48
49


ItemPage
PART I — FINANCIAL INFORMATION
1.
1
1
2
3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS - THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
4
7
1.DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
7
2.BUSINESS COMBINATIONS
9
3.REVENUE RECOGNITION
10
4.PROPERTY, PLANT AND EQUIPMENT
11
5.GOODWILL AND INTANGIBLE ASSETS, NET
11
6.EQUITY METHOD INVESTMENTS
12
7.DEBT AND FINANCING COSTS
14
8.ACCRUED EXPENSES
15
9.LEASE
15
10.EQUITY AND WARRANTS
15
11.FAIR VALUE MEASUREMENTS
17
12.DERIVATIVES AND HEDGING ACTIVITIES
18
13.SHARE-BASED COMPENSATION
19
14.INCOME TAXES
20
15.NET INCOME PER SHARE
21
16.COMMITMENTS AND CONTINGENCIES
21
17.SEGMENTS
22
18.SUBSEQUENT EVENTS
25
2.
26
3.
37
4.
38
PART II — OTHER INFORMATION
1.
40
1A.
40
2.
40
5.OTHER INFORMATION
40
6.
42
43
i

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.Fahrenheit
•CODM. Chief Operating Decision Maker.Maker
•Delaware Basin. Located on the western section of the Permian Basin. The Delaware Basin covers a 6.4M6.4 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.
ii

FORWARD-LOOKING STATEMENTS AND RISK
This Quarterly Report on Form10-QForm 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 theterminology. The absence of these words does not mean that a statement is not forward looking. Although we believe that the expectations reflected in such forward-looking statements are reasonable under the circumstances, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, assumptions about:
•our ability to integrate operations or realize any anticipated benefits, savings or growth of the Transaction (as defined herein). See Note 2 — Business Combination in the Notes to our Condensed Consolidated Financial Statements set forth in this Form 10-Q;
•the scope, duration, and reoccurrence of any epidemics or pandemics (including, specifically, the coronavirus disease 2019 (“COVID-19”) pandemic or any related variants) and the actions taken by third parties in response to such epidemics or pandemics;
•the market prices of oil, natural gas, NGLs and other products or services;
•pipelinecompetition 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 onattached-on electronic systems;
•our ability to successfully implement, execute and executeachieve our environmental, social and governance goals and initiatives and achieveinitiatives;
•our ability to successfully implement our share repurchase program;
•our ability to integrate operations or realize any anticipated benefits, savings or growth of the anticipated results of such initiatives;Transaction (as defined herein). See Note 2 – Business Combination in the Notes to Condensed Consolidated Financial Statements set forth in this Form 10-Q;
•general economic and political conditions, including the armed conflict in Ukraine, epidemics or pandemics and 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 changesliquidity risks and other factors; and other factors disclosed in monetary policy; and“Part I, Item 1A. — Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 7, 2023.
iii

•other factors disclosed in Part II, Item 1A — Risk Factors of the Company’s Quarterly Report on Form 10-Q for the first quarter of 2022, filed on May 10, 2022.
Other factors or events that could cause the Company’s actual results to differ materially from the Company’s expectations may emerge from time to time, and it is not possible for the Company to predict all such factors or events. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, the Company disclaims any obligation to update or revise its forward-looking statements, whether based on changes in internal estimates or expectations, new information, future developments or otherwise.
iv
Table of Contents
PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

KINETIK HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
202320222023
2022(1)
(In thousands, except per share data)
Operating revenues:
Service revenue$102,551 $102,080 $205,976 $182,525 
Product revenue191,430 229,651 365,254 404,579 
Other revenue2,222 3,841 6,013 5,717 
Total operating revenues(3)
296,203 335,572 577,243 592,821 
Operating costs and expenses:
Costs of sales (exclusive of depreciation and amortization)(4)
110,467 152,714 226,344 272,989 
Operating expenses39,906 35,280 75,879 65,151 
Ad valorem taxes3,889 5,880 9,347 10,033 
General and administrative expenses22,869 25,960 50,380 48,712 
Depreciation and amortization expenses69,482 66,581 138,336 127,604 
Loss on disposal of assets12,137 8,546 12,239 8,656 
Total operating costs and expenses258,750 294,961 512,525 533,145 
Operating income37,453 40,611 64,718 59,676 
Other income (expense):
Interest and other income1,042 — 1,336 250 
Gain on redemption of mandatorily redeemable Preferred Units— 5,087 — 9,580 
Loss on debt extinguishment— (27,975)— (27,975)
Gain on embedded derivative— 91,448 — 88,562 
Interest expense(16,126)(25,347)(85,434)(52,121)
Equity in earnings of unconsolidated affiliates49,610 47,786 96,074 75,703 
Total other income, net34,526 90,999 11,976 93,999 
Income before income taxes71,979 131,610 76,694 153,675 
Income tax expense311 162 727 838 
Net income including noncontrolling interest71,668 131,448 75,967 152,837 
Net income attributable to Preferred Unit limited partners— 109,502 — 114,495 
Net income attributable to common shareholders71,668 21,946 75,967 38,342 
Net income attributable to Common Unit limited partners46,654 15,508 49,517 28,039 
Net income attributable to Class A Common Stock Shareholders$25,014 $6,438 $26,450 $10,303 
Net income attributable to Class A Common Shareholders per share
Basic$0.41 $0.06 $0.36 $0.16 
Diluted$0.41 $0.06 $0.36 $0.16 
Weighted-average shares(2)
Basic50,553 39,297 48,980 38,766 
Diluted50,625 39,329 49,220 38,796 

(1)
 Three Months Ended
September 30,*		Nine Months Ended
September 30,*
 2022202120222021
(In thousands, except per share data)
Operating revenues:
Service revenue$107,597 $72,578 $290,122 $202,482 
Product revenue213,803 93,266 618,382 244,358 
Other revenue3,776 742 9,493 3,615 
Total operating revenues325,176 166,586 917,997 450,455 
Operating costs and expenses:
Costs of sales (exclusive of depreciation and amortization shown separately below)145,208 60,503 418,197 141,011 
Operating expenses35,845 22,731 100,996 63,575 
Ad valorem taxes5,903 3,238 15,936 9,003 
General and administrative expenses23,468 6,957 72,180 17,920 
Depreciation and amortization65,005 57,154 192,609 170,291 
Loss (gain) on disposal of assets3,946 (37)12,602 417 
Total operating costs and expenses279,375 150,546 812,520 402,217 
Operating income45,801 16,040 105,477 48,238 
Other income (expense):
Interest and other income— 3,578 250 4,141 
Gain on redemption of mandatorily redeemable Preferred Units— — 9,580 — 
Gain (loss) on debt extinguishment— (56)(27,975)4 
Gain on embedded derivative488 — 89,050 — 
Interest expense(40,464)(30,541)(92,585)(88,458)
Equity in earnings of unconsolidated affiliates45,003 16,826 120,706 44,692 
Total other income (expense), net5,027 (10,193)99,026 (39,621)
Income before income taxes50,828 5,847 204,503 8,617 
Income tax expense1,406 1,207 2,244 1,207 
Net income including noncontrolling interest49,422 4,640 202,259 7,410 
Net income attributable to Preferred Unit limited partners708 — 115,203 — 
Net Income attributable to common shareholders48,714 4,640 87,056 7,410 
Net income attributable to Common Unit limited partners33,778 4,640 61,817 7,410 
Net income attributable to Class A Common Shareholders$14,936 $— $25,239 $— 
Net income attributable to Class A Common Shareholders per share
Basic$1.04 $— $1.24 $— 
Diluted$1.04 $— $1.24 $— 
Weighted-average shares **
Basic41,816 — 40,042 — 
Diluted41,855 — 40,075 — 
* 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)Class A share and per share amounts have been retroactivelyretrospectively 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
(3)Note 10 – EquityIncludes amounts associated with related parties of $24.8 million and Warrants $30.5 million for the three months ended June 30, 2023 and 2022, respectively, and $50.1 million and $46.2 million for the six months ended June 30, 2023 and 2022, respectively.
(4)inIncludes amounts associated with related parties of $10.8 million and $3.4 million for the Notes to our Condensed Consolidated Financial Statements in this Form 10-Qthree months ended June 30, 2023 and 2022, respectively, and $25.4 million and $7.1 million for further information.the six months ended June 30, 2023 and 2022, respectively.
The accompanying Notesnotes are an integral part of the unaudited Condensed Consolidated Financial Statementscondensed consolidated financial statements.
1
Table of Contents
KINETIK HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30,December 31,June 30,December 31,
2022202120232022
(In thousands, except share amounts)(In thousands, except per share data)
ASSETSASSETSASSETS
CURRENT ASSETS:CURRENT ASSETS:CURRENT ASSETS:
Cash and cash equivalentsCash and cash equivalents$11,728 $18,729 Cash and cash equivalents$2,237 $6,394 
Accounts receivable, net of allowance for credit losses of $1,000 in 2022 and 2021269,634 178,107 
Accounts receivable, net of allowance for credit losses of $1,000 in 2023 and 2022(2)
Accounts receivable, net of allowance for credit losses of $1,000 in 2023 and 2022(2)
181,536 204,036 
Derivative assetsDerivative assets27,604 6,963 
Prepaid and other current assetsPrepaid and other current assets37,431 20,683 Prepaid and other current assets36,458 24,474 
318,793 217,519 247,835 241,867 
NONCURRENT ASSETS:NONCURRENT ASSETS:NONCURRENT ASSETS:
Property, plant and equipment, netProperty, plant and equipment, net2,528,659 1,839,279 Property, plant and equipment, net2,691,906 2,535,212 
Intangible assets, netIntangible assets, net722,391 786,049 Intangible assets, net649,897 695,389 
Operating lease right-of-use assetsOperating lease right-of-use assets34,677 61,562 Operating lease right-of-use assets58,581 28,551 
Deferred charges and other assetsDeferred charges and other assets25,505 22,320 Deferred charges and other assets83,513 32,275 
Investment in unconsolidated affiliates2,372,596 626,477 
Investments in unconsolidated affiliatesInvestments in unconsolidated affiliates2,490,112 2,381,340 
GoodwillGoodwill4,557 — Goodwill5,077 5,077 
5,688,385 3,335,687 5,979,086 5,677,844 
Total assetsTotal assets$6,007,178 $3,553,206 Total assets$6,226,921 $5,919,711 
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY
LIABILITIES, NONCONTROLLING INTEREST, AND EQUITYLIABILITIES, NONCONTROLLING INTEREST, AND EQUITY
CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:
Accounts payableAccounts payable$16,002 $12,220 Accounts payable$36,248 $17,899 
Accrued expensesAccrued expenses235,160 135,643 Accrued expenses112,086 173,914 
Derivative liabilitiesDerivative liabilities4,585 5,718 
Current portion of operating lease liabilitiesCurrent portion of operating lease liabilities37,826 22,810 
Derivative liabilities— 2,667 
Current portion of operating lease liabilities25,466 31,776 
Current portion of long-term debt, net— 54,280 
Other current liabilitiesOther current liabilities8,039 4,339 Other current liabilities8,605 7,487 
284,667 240,925 199,350 227,828 
NONCURRENT LIABILITIES:
Long-term debt, net3,447,513 2,253,422 
NONCURRENT LIABILITIESNONCURRENT LIABILITIES
Long term debt, netLong term debt, net3,625,799 3,368,510 
Contract liabilitiesContract liabilities22,707 11,674 Contract liabilities24,535 22,693 
Operating lease liabilitiesOperating lease liabilities9,033 29,889 Operating lease liabilities21,715 6,023 
Derivative liabilitiesDerivative liabilities— 200 Derivative liabilities3,761 8,328 
Other liabilitiesOther liabilities2,867 2,219 Other liabilities3,278 2,677 
Contingent liabilities— 839 
Deferred tax liabilitiesDeferred tax liabilities13,082 7,190 Deferred tax liabilities11,621 11,018 
3,690,709 3,419,249 
3,495,202 2,305,433 
Total liabilitiesTotal liabilities3,779,869 2,546,358 Total liabilities3,890,059 3,647,077 
COMMITMENTS AND CONTINGENCIES (Note 8)
COMMITMENTS AND CONTINGENCIES (Note 16)COMMITMENTS AND CONTINGENCIES (Note 16)
Redeemable noncontrolling interest — Common Unit limited partnersRedeemable noncontrolling interest — Common Unit limited partners3,061,861 1,006,838 Redeemable noncontrolling interest — Common Unit limited partners3,242,619 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, 52,085,784 shares issued 51,973,472 shares outstanding at June 30, 2023 and 45,679,447 shares issued and outstanding and December 31, 2022, respectively(1)
Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 52,085,784 shares issued 51,973,472 shares outstanding at June 30, 2023 and 45,679,447 shares issued and outstanding and December 31, 2022, respectively(1)
5 5 
Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 94,089,038 and 94,270,000 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively(1)
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 June 30, 2023 and December 31, 2022, respectively(1)
9 9 
Additional paid-in capitalAdditional paid-in capital107,182 — Additional paid-in capital— 118,840 
Accumulated deficitAccumulated deficit(941,747)— Accumulated deficit(902,446)(958,629)
(834,552)10 
Total liabilities, noncontrolling interests, and equity$6,007,178 $3,553,206 
Treasury stock, at cost (112,312 and nil shares as of June 30, 2023 and December 31, 2022, respectively)Treasury stock, at cost (112,312 and nil shares as of June 30, 2023 and December 31, 2022, respectively)(3,325)— 
Total equityTotal equity(905,757)(839,775)
Total liabilities, noncontrolling interest, and equityTotal liabilities, noncontrolling interest, and equity$6,226,921 $5,919,711 

(1)
* Share amounts have been retroactivelyretrospectively 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
(2)Note 10—EquityIncludes amounts of $16.9 million and Warrants in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.$17.6 million associated with related parties as of June 30, 2023 and December 31, 2022, respectively.
The accompanying Notesnotes are an integral part of the unaudited Condensed Consolidated Financial Statementscondensed consolidated financial statements.
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Table of Contents
KINETIK HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended September 30,
20222021
(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 expense192,609 170,291 
           Amortization of debt issuance costs8,053 9,991 
           Amortization of contract costs1,344 1,815 
           Contingent liabilities remeasurement(839)(377)
           Distributions from unconsolidated affiliates185,786 47,017 
           Derivatives settlement11,115 (17,959)
           Derivatives fair value adjustment(103,032)13,943 
           Gain on redemption of mandatorily redeemable Preferred Units(9,580)— 
           Loss on disposal of assets12,602 417 
           Equity in earnings from unconsolidated affiliates(120,706)(44,692)
           (Gain) loss on debt extinguishment27,975 (4)
           Share-based compensation30,966 — 
           Deferred income taxes1,882 1,207 
Change in operating assets and liabilities:
           Accounts receivable(73,927)(118,606)
           Other assets(9,583)(7,303)
           Accounts payable926 (2,141)
           Accrued liabilities95,675 96,347 
           Operating lease liabilities(281)1,994 
                 Net cash provided by operating activities453,244 159,350 
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 disposals190 3,541 
           Net cash acquired in acquisition13,401 — 
                 Net cash used in investing activities(216,418)(81,323)
CASH FLOWS FROM FINANCING ACTIVITIES
           Proceeds from issuance of long-term debt3,000,000 30,189 
           Principal payments on long-term debt(2,294,130)(80,177)
           Payment on debt issuance costs(36,873)(3,152)
           Proceeds from revolver537,000 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 exchange1,013,745 — 
           ALTM liabilities and mezzanine equity assumed$1,432,684 $— 
 Six Months Ended June 30,
20232022
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests$75,967 $152,837 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense138,336 127,604 
Amortization of deferred financing costs3,055 6,538 
Amortization of contract costs3,310 896 
Contingent liabilities remeasurement— (839)
Distributions from unconsolidated affiliates136,230 117,544 
Derivatives settlement10,270 11,115 
Derivative fair value adjustment(36,611)(102,544)
Warrants fair value adjustment(77)— 
Gain on redemption of mandatorily redeemable Preferred Units— (9,580)
Loss on disposal of assets12,239 8,656 
Equity in earnings from unconsolidated affiliates(96,074)(75,703)
Loss on debt extinguishment— 27,975 
Share-based compensation30,839 18,304 
Deferred income taxes603 613 
Changes in operating assets and liabilities:
Accounts receivable22,055 (100,511)
Other assets(7,298)(11,892)
Accounts payable2,909 (3,844)
Accrued liabilities(66,062)102,094 
Other non-current liabilities678 — 
Operating leases678 (345)
Net cash provided by operating activities231,047 268,918 
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures(160,167)(71,429)
Intangible assets expenditures(13,957)(8,516)
Investments in unconsolidated affiliates(154,721)(2,675)
Distributions from unconsolidated affiliate5,793 — 
Cash proceeds from disposals149 160 
Net cash (paid for) acquired in acquisitions(125,000)13,401 
Net cash used in investing activities(447,903)(69,059)
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— (37,042)
Proceeds from revolver563,000 7,000 
Payments on revolver(308,000)(716,000)
Redemption of mandatorily redeemable Preferred Units— (152,580)
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(36,196)(11,239)
Distribution paid to Class C Common Unit limited partners(348)(491)
Repurchase of Class A Common Stock(5,757)— 
Net cash provided by (used in) financing activities212,699 (213,269)
Net change in cash(4,157)(13,410)
CASH, BEGINNING OF PERIOD6,394 18,729 
CASH, END OF PERIOD$2,237 $5,319 
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES
Cash paid for interest, net of amounts capitalized$125,411 $52,982 
Property and equipment and intangible accruals in accounts payable and accrued liabilities$39,631 $20,344 
Class A Common Stock issued through dividend and distribution reinvestment plan$175,626 $87,697 
Fair value of ALTM assets acquired$— $2,446,430 
Class A Common Stock issued in exchange— 1,013,745 
ALTM liabilities and mezzanine equity assumed$— $1,432,685 
The accompanying Notesnotes are an integral part of the unaudited Condensed Consolidated Financial Statementscondensed consolidated financial statements.
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KINETIK HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS
(Unaudited)
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners*Redeemable Noncontrolling Interest — Common Unit Limited PartnersClass A Common StockClass C Common StockAdditional Paid-in CapitalAccumulated DeficitTotal Equity
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners(2)
Redeemable Noncontrolling Interest — Common Unit Limited PartnersClass A
Common Stock		Class C
Common Stock		Additional Paid-in CapitalAccumulated DeficitTreasury
Stock		Total
Equity
Shares**AmountShares**AmountTotal Equity
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners(2)
Redeemable Noncontrolling Interest — Common Unit Limited Partners
Shares(1)
Amount
Shares(1)
AmountAdditional Paid-in CapitalAccumulated DeficitTreasury
Stock		Total
Equity
(In thousands)(In thousands)
For the Quarter Ended June 30, 2022For the Quarter Ended June 30, 2022
Balance at March 31, 2022Balance at March 31, 2022$460,773 $3,185,431 37,973 $4 94,520 $9 $— $(1,137,873)$— $(1,137,860)
(In thousands)(In thousands)
For the Quarter Ended September 30, 2021
Balance at June 30, 2021$— $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)
Distributions payable to Preferred Unit limited partnersDistributions payable to Preferred Unit limited partners(6,937)— — — — — — — — — 
Redemption of Common UnitsRedemption of Common Units— (6,765)180 — (180)— 6,765 — 6,765 Redemption of Common Units— (2,499)70 — (70)— 2,499 — — 2,499 
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 planIssuance of Class A Common Stock through dividend and distribution reinvestment plan— — 2,351 — — — 87,756 — 87,756 Issuance of Class A Common Stock through dividend and distribution reinvestment plan— — 2,504 — — — 87,697 — — 87,697 
Share-based compensationShare-based compensation— — — — — — 12,661 — 12,661 Share-based compensation— — 4 — — — 12,173 — — 12,173 
Net incomeNet income708 33,778 — — — — — 14,936 14,936 Net income109,502 15,508 — — — — — 6,438 — 6,438 
Change in redemption value of noncontrolling interestsChange in redemption value of noncontrolling interests— (222,227)— — — — — 222,227 222,227 Change in redemption value of noncontrolling interests— 123,741 — — — — (102,369)(21,372)— (123,741)
Distributions paid to Common Unit limited partnersDistributions paid to Common Unit limited partners— (70,838)— — — — — — — Distributions paid to Common Unit limited partners— (70,891)— — — — — — — — 
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)
Cash dividends on Class A Common Stock ($0.75 per share)Cash dividends on Class A Common Stock ($0.75 per share)— — — — — — — (28,536)— (28,536)
Balance at June 30, 2022Balance at June 30, 2022$563,338 $3,251,290 40,551 $4 94,450 $9 $— $(1,181,343)$— $(1,181,330)
For the Quarter Ended June 30, 2023For the Quarter Ended June 30, 2023
Balance at March 31, 2023Balance at March 31, 2023$— $2,910,861 49,054 $5 94,089 $9 $229,672 $(863,452)$(2,432)$(636,198)
Issuance of common stock through dividend and distribution reinvestment planIssuance of common stock through dividend and distribution reinvestment plan— — 3,024 — — — 87,968 — — 87,968 
Retirement of treasury stockRetirement of treasury stock— — — — — — — (2,432)2,432 — 
Repurchase of Class A Common StockRepurchase of Class A Common Stock— — (112)— — — — — (3,325)(3,325)
Share-based compensationShare-based compensation— — 7 — — — 13,299 — — 13,299 
Net incomeNet income— 46,654 — — — — — 25,014 — 25,014 
Change in redemption value of noncontrolling interestsChange in redemption value of noncontrolling interests— 355,670 — — — — (330,939)(24,731)— (355,670)
Distribution paid to Common Units limited partnersDistribution paid to Common Units limited partners— (70,392)— — — — — — — — 
Cash dividends on Class A Common Stock ($0.75 per share)Cash dividends on Class A Common Stock ($0.75 per share)— (174)— — — — — (36,845)— (36,845)
Balance at June 30, 2023Balance at June 30, 2023$— $3,242,619 51,973 $5 94,089 $9 $— $(902,446)$(3,325)$(905,757)
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KINETIK HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS
(Unaudited)
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners(2)
Redeemable Noncontrolling Interest — Common Unit Limited PartnersClass A
Common Stock		Class C
Common Stock		Additional Paid-in CapitalAccumulated DeficitTreasury
Stock		Total
Equity
 
Shares(1)
Amount
Shares(1)
Amount
(In thousands)(In thousands)
For the Six Months Ended June 30, 2022
Balance at December 31, 2021$— $1,006,838 — $— 100,000 $10 $— $— $— $10 
ALTM acquisition462,717 — 32,493 3 — — 1,013,742 — — 1,013,745 
Distributions paid to Preferred Unit limited partners(6,937)— — — — — — — — — 
Distributions payable to Preferred Unit limited partners(6,937)— — — — — — — — — 
Redemption of Common Units— (172,559)5,550 1 (5,550)(1)172,559 — — 172,559 
Issuance of common stock through dividend and distribution reinvestment plan— — 2,504 — — — 87,697 — — 87,697 
Share-based compensation— — 4 — — — 18,304 — — 18,304 
Remeasurement of contingent consideration— — — — — — 4,451 — — 4,451 
Net income114,495 28,039 — — — — — 10,303 — 10,303 
Change in redemption value of noncontrolling interests— 2,459,863 — — — — (1,296,753)(1,163,110)— (2,459,863)
Distribution paid to Common Units limited partners— (70,891)— — — — — — — — 
Cash dividends on Class A Common Stock ($0.75 per share)— — — — — — — (28,536)— (28,536)
Balance at June 30, 2022$563,338 $3,251,290 40,551 $4 94,450 $9 $— $(1,181,343)$— $(1,181,330)
For the Six Months Ended June 30, 2023
Balance at December 31, 2022$— $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— — 6,095 — — — 175,626 — — 175,626 
Retirement of treasury stock— — — — — — — (2,432)2,432 — 
Repurchase of Class A Common Stock— — (194)— — — — — (5,757)(5,757)
Share-based compensation— — 212 — — — 30,839 — — 30,839 
Net income— 49,517 — — — — — 26,450 — 26,450 
Change in redemption value of noncontrolling interests— 227,459 — — — — (330,939)103,480 — (227,459)
Distribution paid to Common Units limited partners— (141,132)— — — — — — — — 
5

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 PartnersClass A
Common Stock		Class C
Common Stock		Additional Paid-in CapitalAccumulated DeficitTreasury
Stock		Total
Equity
 
Shares(1)
Amount
Shares(1)
Amount
(In thousands)(In thousands)
Cash dividends on Class A Common Stock ($0.75 per share)— — — — — — — (71,315)— (71,315)
Balance at June 30, 2023$— $3,242,619 51,973 $5 94,089 $9 $— $(902,446)$(3,325)$(905,757)
* (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 thisour Annual Report on Form 10-Q.
** Share amounts have been retroactively restated to reflect10-K for the Company’s Stock Split (as defined in Note 10—Equity and Warrants), which was effectedyear ended December 31, 2022 filed with the Commission 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.

March 7, 2023.


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

statements.
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KINETIK HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS - (Continued)
(Unaudited)
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners*Redeemable Noncontrolling Interest — Common Unit Limited PartnersClass A Common StockClass C Common StockAdditional Paid-in CapitalAccumulated DeficitTotal Equity
 Shares**AmountShares**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 acquisition462,717 — 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 income115,203 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
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KINETIK HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
These condensed consolidated financial statements have been prepared by Kinetik Holdings Inc. (formerly known as Altus Midstream Company) (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for interim periods, on a basis consistent with the annual audited financial statements, with the exception of recently adopted accounting pronouncements. All such adjustments are of a normal recurring nature. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10-Q should be read along with Kinetik Holdings Inc.’sthe Company’s audited financial statements and related notes thereto for the year ended December 31, 2021 filed as Exhibit 99.1 to2022 included in the Company’s CurrentAnnual Report on Form 8-K10-K filed with the SEC on July 5, 2022.March 7, 2023.

1.    DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The TransactionOrganization
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 amountspredecessor 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
BCPaccounting 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.
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ALTMAltus Midstream Company (“ALTM”) was originally incorporated on December 12, 2016 in Delaware under the name Kayne Anderson Acquisition Corp. (“KAAC”) for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. KAAC completed its initial public offering in the second quarter of 2017. On August 3, 2018, Altus Midstream LP was formed in Delaware as a limited partnership and wholly-owned subsidiary of KAAC and entered into a contribution agreement with certain affiliates of Apache Corporation (“Apache” and such affiliates the “Altus Midstream Entities”), formed by Apache between May 2016 and January 2017, for the purpose of acquiring, developing and operating midstream oil and gas assets in the Alpine High resource play and surrounding areas (“Alpine High”).areas. On November 9, 2018, KAAC acquired all equity interests of the Altus Midstream Entities and changed its name to Altus Midstream Company.
On February 22, 2022 upon(the “Closing Date”), Kinetik Holdings Inc., a Delaware corporation (formerly known as Altus Midstream Company), consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021 (the “Contribution Agreement”), by and among the Company, Altus Midstream LP (now known as Kinetik Holdings LP), a Delaware limited partnership and subsidiary of Altus Midstream Company (the “Partnership”), New BCP Raptor Holdco, LLC, a Delaware limited liability company (“Contributor”) and BCP. The transactions contemplated by the Contribution Agreement are referred to herein as the “Transaction.” In connection with the closing of the Transaction (the “Closing”), the Company changed its name from “Altus Midstream Company” to “Kinetik Holdings Inc.” Unless the context otherwise requires, “ALTM” refers to the registrant prior to the Closing BCPand “we,” “us,” “our” and the “Company” refer to Kinetik Holdings Inc., the registrant and its subsidiaries became wholly owned subsidiaries offollowing 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 OperationsClosing.
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.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statementscondensed 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
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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 Statementscondensed 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 Statementscondensed consolidated financial statements from February 22, 2022 going forward. Therefore, the results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to Note 2—Business Combination to our Condensed Consolidated Financial Statementscondensed consolidated financial statements in this Form 10-Q for additional discussion.
The Company completed a two-for-one Stock Split on June 8, 2022. All corresponding per-share and share amounts for periods prior to June 8, 2022 have been retroactivelyretrospectively restated in this Form 10-Q to reflect the two-for-one Stock Split, except for the number of Common Units and shares of Class C Common Stock described above in relation to the Transaction, which are presented at pre-Stock-Split amounts. This presentation election is consistent with our previous public filings and the terms of the Contribution Agreement.
UseSignificant Accounting Policies
The accounting policies that we follow are set forth in Note 2 – Summary of Estimates
Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the dateSignificant Accounting Policies of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of its condensed consolidated financial statements, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include the valuation of tangible and intangible assets, share-based compensation, contingent liabilities, warrants, and noncontrolling interests.
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Variable Interest Entity
The Company uses a qualitative approach in assessing the consolidation requirement for variable interest entities. The approach focuses on identifying which enterprise has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. In the event that the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity would be consolidated in our financial statements. The Company has determined that it has significant influence over the operating and financial policies of the four pipeline entities in which it is invested, but does not exercise control over them; and hence, it accounts for these investments using the equity method. Refer to Note 9—Equity Method Investmentsin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.
Redeemable Noncontrolling Interest — Common Units Limited Partners
Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of the Contributed Entities to the Partnership; and (ii) in exchange for such contribution, the Partnership 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 interestour Annual Report. There were no significant updates or (ii) the maximum redemption value as of the balance sheet date. The redemption value was determined based on a 5-day volume weighted-average closing price of the Class A Common Stock. See discussion and additional details in Note 10—Equity and Warrants in the Notesrevisions 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. Asaccounting policies during 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 ninesix months ended SeptemberJune 30, 2022, the Company redeemed all outstanding Preferred Units. See discussion and additional detail in 2023.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 Investmentsin 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.
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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$7.3 million and $2.1$4.8 million as of SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively.
Impairment of Long-Lived Assets
In accordance with Financial Accounting Standards Board (“FASB”) ASC 360, Property, Plant and Equipment, long-lived assets, excluding goodwill, to be held and used by the Company are reviewed for impairment annually or on an interim basis if events or circumstances indicate that the fair value of the assets have decreased below their carrying value. For long-lived assets to be held and used, the Company bases their evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present.
The Company’s management assesses whether there has been an impairment trigger, and if a trigger is identified, then the Company would perform an undiscounted cash flow test at the lowest level for which identifiable cash flows are independent of cash flows from other assets. If the sum of the undiscounted future net cash flows is less than the net book value of the property, an impairment loss is recognized for any excess of the property’s net book value over its estimated fair value. The Company did not recognize impairment losses for long-lived assets during the three and 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$16.9 million and $17.6 million as of SeptemberJune 30, 2022.2023 and December 31, 2022, respectively. Revenue from affiliates was $35.2$24.8 million and $81.4$30.5 million for the three and nine months ended SeptemberJune 30, 2023 and 2022, respectively, and $50.1 million and $46.2 million for the six months ended June 30, 2023 and 2022, respectively. Accrued expense due to affiliates was immaterial as of SeptemberJune 30, 2022,2023 and December 31, 2022. The Company incurred operating expenses werewith affiliates of $0.2 million and $0.5$0.1 million for the three and nine months ended SeptemberJune 30, 2023 and 2022, respectively, and $0.4 million and $0.2 million for the six months ended June 30, 2023 and 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 with an affiliate of $3.7$10.8 million and $10.8$3.4 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 SeptemberJune 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 Stock2023 and (ii) an assumed exercise of the outstanding public2022, respectively, 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$25.4 million and $7.1 million, for the issuance are met.
Recently Adopted Accounting Pronouncementsix months ended June 30, 2023 and 2022, respectively.
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.
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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,
2.    BUSINESS COMBINATIONS
As of June 30, 2023, our allocation of purchase price for acquisitions made during 2023 and 2022 are detailed below:
Acquisition DateAcquisitionConsiderations TransferredCurrent AssetsProperty Plant & EquipmentIntangible AssetsOther Long Term AssetsGoodwillLiabilitiesNoncontrolling 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 2022Altus 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 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$60 million paid related to the Company’sincentive and acceleration agreement.
Midstream Infrastructure Assets
In the 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 Term Loan20-year midstream service agreement. In addition, the Partnership entered into an incentive and Revolver borrowings resulting from the comprehensive refinance is basedacceleration agreement related to near term supplemental development activities on Secured Overnight Financing Rate (“SOFR”), which is a broad measureacreage dedicated for midstream services to affiliates of the costPartnership. Such development activities will begin in 2023 and are subject to semi-annual performance milestones and subject to refund with consequential monetary penalty if not satisfied. Consideration for the incentive and acceleration agreement of borrowing cash overnight collateralized by treasury securities. Refer to Note 6—Debt$60.0 million was capitalized as a contract asset in accordance with ASC 606, of which $4.7 million was included in “Prepaid and Financing CostsOther Current Assets” and $55.3 million was included in “Deferred Charges and Other Assets” in the Notescondensed consolidated balance sheet as of the date of acquisition. These transactions were accounted for as a business combination in accordance with ASC 805. Certain data necessary to our Condensed Consolidated Financial Statements of this Form 10-Q for discussion of SOFR applicablecomplete the purchase price allocation is not yet available, including, but not limited to, the Company’s debt structures.
Recent Accounting Pronouncement Not Yet Adopted
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). The amendments in ASU 2022-03 clarify that a contractual restriction on the sale of an equity security is not considered partcompletion of the unit of accountvaluation of the equity securityunderlying assets and therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendments also require the following disclosures for equity securities subject to contractual sale restrictions: (1) The fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet; (2) The nature and remaining duration of the restriction(s); (3) The circumstances that could cause a lapse in the restriction(s). This guidance is effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.liabilities assumed. The Company is currently evaluatingcontinuing its review of these matters during 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 accountingmeasurement period. Acquisition-related costs were immaterial 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 COMBINATIONthis transaction.
Altus Business CombinationMidstream Company
On February 22, 2022, the Company consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021.Transaction. Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of BCP and BCP Raptor Holdco GP, LLC, a Delaware limited liability company and the Contributed Entitiesgeneral 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” discussed above.
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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 ofDuring 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 valuerecorded goodwill of assets acquired and liabilities assumed in the Transaction in accordance with ASC 805:
(In thousands)Amount
Cash and cash equivalent$13,401 
Accounts receivable1,919 
Accounts receivable - affiliates15,681 
Property, plant, and equipment, net634,923 
Intangible assets, net13,200 
Investments in unconsolidated affiliates1,755,000 
Prepaid expense and other assets7,748 
Goodwill4,557 
Total assets acquired2,446,429 
Accrued expenses and other accrued liabilities5,687 
Long-term debt657,000 
Embedded derivative liabilities89,050 
Contract liabilities9,102 
Mandatory redeemable Preferred Units200,667 
Deferred tax liabilities4,010 
Contingent liabilities4,451 
Total liabilities assumed969,967 
Redeemable noncontrolling interest - Preferred Unit limited partners462,717 
Total consideration transferred$1,013,745 
$5.1 million as of December 31, 2022 related to operational synergies. The Company incurred acquisition-related costs of $0.1nil and $0.7 million for the three months ended June 30, 2023 and 2022, respectively, and nil and $6.4 million for the three and ninesix months ended SeptemberJune 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,
2022202120222021
(In thousands)Pro formaPro formaPro formaPro 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 June 30,Six Months Ended June 30,
20222021202220212023202220232022
(In thousands)(In thousands)
Gathering and processing servicesGathering and processing services$107,597 $72,578 $290,122 $202,482 Gathering and processing services$102,551 $102,080 $205,976 $182,525 
Natural gas, NGLs and condensate salesNatural gas, NGLs and condensate sales213,803 93,266 618,382 244,358 Natural gas, NGLs and condensate sales191,430 229,651 365,254 404,579 
Other revenueOther revenue3,776 742 9,493 3,615 Other revenue2,222 3,841 6,013 5,717 
Total revenues and otherTotal revenues and other$325,176 $166,586 $917,997 $450,455  Total revenues and other$296,203 $335,572 $577,243 $592,821 
There have been no significant changes to the Company’s contracts with customers during the three and ninesix months ended SeptemberJune 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$0.1 million and nil$0.3 million for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, and $1.0$1.2 million and $2.5$0.3 million for the ninesix months ended SeptemberJune 30, 20222023 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 SeptemberJune 30, 2022:2023:
Amount
Amount
Fiscal YearFiscal Year(In thousands)Fiscal Year(In thousands)
Remaining of 2022$2,151 
202344,597 
Remaining of 2023Remaining of 2023$18,586 
2024202440,247 202453,639 
2025202547,898 202574,147 
2026202634,631 202656,166 
2027202756,940 
ThereafterThereafter191,293 Thereafter243,352 
$360,817 $502,830 
Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to customer contracts that have fixed pricing and fixed volume terms and conditions, generally including contracts with payment obligations associated with MVCs.
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Contract Liabilities
The following table provides information about contract liabilities from contracts with customers as of SeptemberJune 30, 2022:2023:
Amount
(In thousands)
Balance at December 31, 20212022$14,75629,300 
Reclassification of beginning contract liabilities to revenue as a result of performance obligationobligations being satisfied(5,159)(4,331)
Cash received in advance and not recognized as revenue20,2686,872 
Balance at SeptemberJune 30, 2022202329,86531,841 
Less: Current portion7,1587,306 
Non-current portion$22,70724,535 
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 SeptemberJune 30, 20222023 and December 31, 2021,2022, the Company had contract acquisition cost assets of $15.3$74.5 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 SeptemberJune 30, 20222023 and 2021,2022, respectively, and $1.3$3.3 million and $1.8$0.9 million for the ninesix months ended SeptemberJune 30, 20222023 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:
June 30,December 31,
September 30, 2022December 31, 202120232022
(In thousands)(In thousands)
Gathering, processing and transmission systems and facilities$2,850,062 $2,121,434 
Gathering, processing, and transmission systems and facilitiesGathering, processing, and transmission systems and facilities$3,017,501 $2,904,084 
VehiclesVehicles8,026 6,090 Vehicles11,674 9,290
Computers and equipmentComputers and equipment4,255 4,271 Computers and equipment6,048 4,289
Less: accumulated depreciationLess: accumulated depreciation(437,049)(337,030)Less: accumulated depreciation(547,712)(474,258)
Total depreciable assets, netTotal depreciable assets, net2,425,294 1,794,765 Total depreciable assets, net2,487,511 2,443,405 
Construction in progressConstruction in progress82,834 24,888 Construction in progress182,348 70,325
LandLand20,531 19,626 Land22,047 21,482 
Total property, plant and equipment, net$2,528,659 $1,839,279 
Total property, plant, and equipment, netTotal property, plant, and equipment, net$2,691,906 $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$38.9 million and $26.8$36.6 million of depreciation expense for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, and $102.4$77.3 million and $79.0$67.5 million of depreciation expense for the ninesix months ended SeptemberJune 30, 2023 and 2022, respectively. There were no triggering events for property, plant and 2021, respectively.equipment during the three and six months ended June 30, 2023 and 2022.

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5.    GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
Goodwill totaled $5.1 million as of June 30, 2023 and December 31, 2022. The Company closed a business combination transaction on February 22, 2022, refergoodwill of $5.1 million is within the Midstream Logistics segment, and pertains to the Transaction in Note 2—Business Combination in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q. The Transaction was accounted for as a business combination pursuant to ASC 805. In connection with the Transaction, the Company recorded excess of the purchase price over net assets acquired as goodwill. The Company recorded goodwill of $4.6 million as of September 30, 2022.in connection with the Transaction.
Goodwill is tested at least annually as of December 31November 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 SeptemberJune 30, 2022.2023.
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Intangible Assets
Intangible assets, net, are comprised of the following:
June 30,December 31,
September 30, 2022December 31, 202120232022
(In thousands)(In thousands)
Customer contractsCustomer contracts$1,136,728 $1,135,963 Customer contracts$1,142,278 $1,137,831 
Right of way assetsRight of way assets125,164 99,345 Right of way assets138,660 127,539 
Less accumulated amortizationLess accumulated amortization(539,501)(449,259)Less accumulated amortization(631,041)(569,981)
Total amortizable intangible assets, netTotal amortizable intangible assets, net$722,391 $786,049 Total amortizable intangible assets, net$649,897 $695,389 
The fair value of acquired customer contracts was capitalized as a result of acquiring favorable customer contracts as of the closing dates of certain past acquisitions and is being amortized using a straight-line method over the remaining term of the customer contracts, which range from one to twenty years. Right of wayRight-of-way assets relate primarily to underground pipeline easements, and have a useful life of ten years and are amortized using the straight-line method. The right of way agreements are generally for an initial term of ten years with an option to renew for an additional ten years at agreed upon renewal rates based on certain indices or up to 130% of the original consideration paid.
On June 30, 2023, remaining weighted average amortization periods for customer contracts and right of way assets were approximately 7.20 years and 6.90 years, respectively. Overall remaining weighted average amortization period for the intangible assets as of June 30, 2023 was approximately 7.16 years.
The Company recorded $30.1$30.6 million and $30.4$30.0 million of amortization expense for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, and $90.2$61.1 million and $91.3$60.1 million of amortization expense for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. There was no impairment recognized on intangible assets for the three and ninesix months ended SeptemberJune 30, 20222023 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, 2022December 31, 2021
(In thousands)
$2.0 billion unsecured term loan$2,000,000 $— 
$1.0 billion 2030 senior unsecured Notes1,000,000 — 
$1.25 billion revolving credit facility475,000 — 
$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 debt3,475,000 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,
2022202120222021
(In thousands)
Capitalized interest$961 $226 $1,262 $712 
Debt issuance costs1,515 3,354 8,053 9,991 
Interest expense37,988 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, 2022December 31, 2021
(In thousands)
Accrued product purchases$175,575 $118,364 
Accrued taxes19,442 4,299 
Accrued salaries, vacation, and related benefits4,616 2,113 
Accrued capital expenditures8,713 2,995 
Accrued interest expenses19,120 — 
Accrued other expenses7,694 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 SeptemberJune 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:
OwnershipSeptember 30, 2022December 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 LLC16.0%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.
June 30,December 31,
Ownership20232022
(In thousands)
Permian Highway Pipeline LLC ("PHP")53.3%$1,603,140 $1,474,800 
Breviloba, LLC ("Breviloba")33.0%448,816 455,057 
Gulf Coast Express Pipeline LLC ("GCX")16.0%438,156 451,483 
$2,490,112 $2,381,340 
Additionally, as of SeptemberJune 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 ninesix months ended SeptemberJune 30, 2022.2023.
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As of September 30, 2022, theThe unamortized basis differences included in the EMI pipelinespipeline balances were $349.8 million. There was no unamortized basis difference$356.1 million and $363.2 million as of June 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$17.5 million and $12.8$13.4 million as of SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. Capitalized interest is amortized on a straight-line basis into equity income.
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The following table presents the activity in the Company’s EMIs for the ninesix months ended SeptemberJune 30, 2022:2023:
Permian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLC
Total(2)
Permian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLCTotal
Gulf Coast Express Pipeline LLCPermian Highway Pipeline LLC
(In thousands)
(In thousands)
Balance at December 31, 2021$626,477 $— $— $626,477 
Balance at December 31, 2022Balance at December 31, 2022$1,474,800 $455,057 $451,483 $2,381,340 
AcquisitionsAcquisitions815,000 470,000 470,000 1,755,000 Acquisitions— — — 
ContributionsContributions56,199 — — 56,199 Contributions150,331 — — 150,331 
DistributionsDistributions(125,526)(25,810)(34,450)(185,786)Distributions(88,395)(21,467)(32,161)(142,023)
Capitalized interestCapitalized interest4,390 — — 4,390 
Equity income, net(1)
Equity income, net(1)
86,946 18,501 15,259 120,706 
Equity income, net(1)
62,014 15,226 18,834 96,074 
Balance at September 30, 2022$1,459,096 $462,691 $450,809 $2,372,596 
Balance at June 30, 2023Balance at June 30, 2023$1,603,140 $448,816 $438,156 $2,490,112 
(1)For the ninesix months ended SeptemberJune 30, 2022,2023, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $5.3$3.7 million from Permian Highway Pipeline LLC, $0.5PHP, $0.3 million from Breviloba, LLC and $10.4$3.1 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 ninesix months ended SeptemberJune 30, 20222023 and 2021.2022.
Three Months Ended September 30,
20222021
Permian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLC
Permian Highway Pipeline LLC(1)
Breviloba, LLC(1)
Gulf Coast Express Pipeline LLC(1)
Three Months Ended June 30,
Permian Highway Pipeline LLC(1)
Gulf Coast Express Pipeline LLC(1)
20232022
Permian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLCPermian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLC
(In thousands)(In thousands)
RevenuesRevenues$100,114 $53,120 $91,800 $99,918 $45,054 $91,454 Revenues$99,095 $46,641 $90,860 $98,808 $50,091 $90,769 
Operating incomeOperating income69,851 22,205 70,870 61,987 26,796 65,482 Operating income63,507 22,547 66,256 61,294 25,359 64,816 
Net incomeNet income69,926 22,060 70,742 61,753 26,617 65,145 Net income64,342 22,651 66,400 61,307 25,284 64,461 
Nine Months Ended September 30,
20222021
Permian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLC
Permian Highway Pipeline LLC(1)
Breviloba, LLC(1)
Gulf Coast Express Pipeline LLC(1)
(In thousands)
Revenues$296,779 $151,732 272,542 $297,132 $127,030 $270,526 
Operating income190,620 73,877 199,130 167,01172,098186,356 
Net income190,446 73,711 198,732 166,66271,621185,464 
(1) For the three and nine months ended September 30, 2021, the Company only had equity interest in Permian Highway Pipeline LLC.
Six Months Ended June 30,
20232022
Permian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLCPermian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLC
(In thousands)
Revenues$191,935 $92,542 $180,608 $196,664 $98,612 $180,742 
Operating income120,312 44,496 131,472 120,770 51,672 128,259 
Net income124,032 44,863 137,491 120,520 51,651 127,990 

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7.    DEBT AND FINANCING COSTS
The following table summarizes the Company’s debt obligations as of June 30, 2023 and December 31, 2022:
June 30,December 31,
20232022
(In thousands)
$2.0 billion unsecured term loan$2,000,000 $2,000,000 
$1.0 billion 2030 senior unsecured notes1,000,000 1,000,000 
$1.25 billion revolving line of credit650,000 395,000 
Total long-term debt3,650,000 3,395,000 
Less: Debt issuance costs, net(1)
(24,201)(26,490)
Total long-term debt, net$3,625,799 $3,368,510 
Less: Current portion, net— — 
Long-term portion of debt, net$3,625,799 $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 $6.1 million and $6.9 million as of June 30, 2023 and December 31, 2022, respectively. The current and non-current portion of the unamortized debt issuance costs related to the revolving credit facilities were included in the “Prepaid and other current assets” and the “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets.
The table below presents the components of the Company’s financing costs, net of capitalized interest:
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
(In thousands)
Capitalized interest$(4,811)$(197)$(7,044)$(301)
Debt issuance costs1,534 3,149 3,055 6,538 
Interest expense19,403 22,395 89,423 45,884 
Total financing costs, net of capitalized interest$16,126 $25,347 $85,434 $52,121 
As of June 30, 2023 and December 31, 2022, unamortized debt issuance costs associated with the senior unsecured notes and the term loan were $24.2 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 June 30, 2023, the Partnership was in compliance with all customary and financial covenants.
Fair Value of Financial Instruments
The fair value of the Company and its subsidiaries’ consolidated debt as of June 30, 2023 and December 31, 2022 was $3.63 billion and $3.34 billion, respectively. On June 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.

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8.    ACCRUED EXPENSES
The following table provides detail of the Company’s current accrued expenses on June 30, 2023 and December 31, 2022:
June 30,December 31,
 20232022
(In thousands)
Accrued product purchases$77,943 $115,773 
Accrued taxes9,370 19,509 
Accrued salaries, vacation, and related benefits2,540 3,934 
Accrued capital expenditures11,625 3,892 
Accrued interest3,942 24,815 
Accrued other expenses6,666 5,991 
Total current accrued expenses$112,086 $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 June 30, 2023.

9.    LEASE
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 $11.8 million and $9.1 million for the three months ended June 30, 2023 and 2022, respectively, and $22.6 million and $18.3 million for the six months ended June 30, 2023 and 2022, respectively. Short-term lease costs were $1.0 million and $1.5 million for the three months ended June 30, 2023 and 2022, respectively, and $1.0 million and $4.0 million for the six months ended June 30, 2023 and 2022, respectively. Variable lease cost was immaterial for the three and six months ended June 30, 2023 and 2022.

The following table presents other supplemental lease information:

Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$11,739 $9,133 $22,371 $18,287 
Right-of-use assets obtained in exchange for new operating lease liabilities$4,915 $16,123 $4,978 $21,386 
Weighted-average remaining lease term — operating leases (in years)1.771.731.771.73
Weighted-average discount rate — operating leases8.82 %7.46 %8.82 %7.46 %

10.    EQUITY AND WARRANTS
Redeemable Noncontrolling Interest — Common Unit Limited Partners
On February 22, 2022, the Company consummated the Transaction. Pursuanta business combination with Altus pursuant to the Contribution Agreement, inAgreement. 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
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as redeemable noncontrolling interest and classified as temporary equity on the Company’s Condensed Consolidated Balance Sheet.Sheets. During the first ninethree and six months of 2022, 5,730,0002023, 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 94,270,00094,089,038 Common Units and an equal number of Class C Common Stock issued and outstanding as of SeptemberJune 30, 2022.2023. The Common Units fair value was approximately $3.06$3.24 billion as of SeptemberJune 30, 2022.2023.
Redeemable Noncontrolling Interest — Preferred Unit Limited PartnersCommon Stock
Upon Closing, the Company assumed certain Preferred Units thatAs of June 30, 2023, there were 51,973,472 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 SeptemberJune 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.
Private Placement Warrants
As of SeptemberJune 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$6 thousand for the Public Warrants and a fair value of $0.1 million$4 thousand for the Private Warrants as of SeptemberJune 30, 20222023 on the Condensed Consolidated Balance SheetSheets in other non-current liabilities. Refer to Note 15—11—Fair Value Measurement in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding valuation of the Warrants.
Share Repurchase Program
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TableIn February 2023, the Board of Contents
Dividend
On February 22, 2022, the Company entered intoDirectors (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 Committeeaggregate. 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 subsequentlymay be made pursuant to a trading plan meeting the Company’s Boardrequirements of Directors (the “Board”) resolved that forRule 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. For the three and six months ended June 30, 2023, the Company repurchased 112,312 shares at a total cost of all distributions or dividends received by each Reinvestment Holder would be reinvested in newly issued$3.3 million and 194,174 shares at a total cost of $5.8 million, respectively. During the three and six months ended June 30, 2023, the Company retired 81,861 shares of Class A Common Stock. As describedtreasury stock.
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 these Condensed Consolidated Financial Statements, as the context requires, dividends paid to holders of Class A Common Stock and distributions paid to holders of Common Units may be referred to collectively as “dividends.”this Quarterly Report on Form 10-Q.
During the nine months ended September 30, 2022,Dividend
On May 17, 2023 the Company made cash dividend payments of $25.3$19.4 million to holders of Class A Common Stock and Class C Common Units and $175.5$88.0 million was reinvested in shares of Class A Common Stock by Reinvestment Holders. Cash dividend payments to holders of Class A Common Stock and Class C Common Units totaled $36.5 million for the six months ended June 30, 2023, of which $175.6 million was reinvested in shares of Class A Common Stock by Reinvestment Holders.
On October 19, 2022, the Board declared a cash dividend of $0.75 per share on the Company’s Class A Common Stock and a distribution of $0.75 per Common Unit from the Partnership to the holders of Common Units. Dividends are payable on 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 shares of Class A Common Stock under the 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.
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Activities related to Preferred Units for the nine months ended September 30, 2022 are as follows:
Units OutstandingAmount
(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.

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.
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 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
11.    FAIR VALUE MEASUREMENTS
The Company is subject to U.S. federal income tax and the Texas margin tax. Income tax expense included in theCompany’s Condensed Consolidated Financial Statements in this Form 10-Q is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
20222022
(In thousands)
Income before income taxes$50,828 $204,503 
Income tax expense$1,406 $2,244 
Effective tax rate (1)
2.77 %1.10 %
(1) Prior to the Closing on February 22, 2022, BCP, the accounting acquirer, was organized as limited partnership and was not subject to the U.S. federal income taxBalance Sheets reflect a mixture of measurement methods for the three and nine months ended September 30, 2021.
The effective tax rate for the three and nine months ended September 30, 2022 was lower than the statutory rate mainly due to the impact of tax attributable to noncontrolling interests related to the Common Units and Preferred Units limited partners and valuation allowance.
Upon Closing, the Company assumed certain uncertain tax positions from ALTM. The Company accounts for income taxes in accordance with ASC 740—Income Taxes, which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements. Tax positions generally refer to a position taken in a previously filed income tax return or expected to be included in a tax return to be filed in the future that is reflected in the measurement of current and deferred income tax assets and liabilities. Reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:
(In thousands)Amount
Balance at December 31, 2021$— 
Increase related to ALTM acquisition5,238 
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,
20222021
Income
Weighted-average shares(3)
Per ShareIncome
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,
20222021
Income
Weighted-average shares(3)
Per ShareIncome
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 publicPublic 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 tocarrying value could vary significantly from fair value. See Note 10—Equity7—Debt and WarrantsFinancing 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:
Level 1 inputs: Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 inputs: Inputs, other than quoted prices in active markets, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 inputs: Prices or valuations that require unobservable inputs thatwhich 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 SeptemberJune 30, 20222023 and December 31, 2021:2022:
September 30, 2022
Level 1Level 2Level 3Total
(In thousands)
Public warrants$126 $— $— $126 
Private warrants— — 95 95 
Total liabilities$126 $— $95 $221 
December 31, 2021June 30, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
(In thousands)(In thousands)
Commodity swapCommodity swap$— $9,850 $— $9,850 
Interest rate derivativesInterest rate derivatives— 17,754 — 17,754 
Total assetsTotal assets$— $27,604 $— $27,604 
Commodity swapsCommodity swaps$— $205 $— $205 Commodity swaps$— $4,585 $— $4,585 
Interest rate derivativesInterest rate derivatives— 2,662 — 2,662 Interest rate derivatives— 3,761 — 3,761 
Contingent liabilities— — 839 839 
Public warrantsPublic warrants6 — — 6 
Private warrantsPrivate warrants— — 4 4 
Total liabilitiesTotal liabilities$— $2,867 $839 $3,706 Total liabilities$6 $8,346 $4 $8,356 
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The Company is exposed to certain risks arising from both its business operations and economic conditions, and the Company enters into certain
December 31, 2022
Level 1Level 2Level 3Total
(In thousands)
Commodity swap$— $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 warrants50 — — 50 
Private warrants— — 38 38 
Total liabilities$50 $14,046 $38 $14,134 
Our derivative contracts consist of interest rate swaps and commodity swaps. Valuation of these derivative contracts involved both observable publicly quoted prices and certain inputs to manage the exposures.credit valuation that may not be readily observable in the marketplace. As such our derivative contracts are classified as Level 2 in the hierarchy. Refer to Note 16—12—Derivatives and Hedging Activities in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further discussion related to commodity swaps and interest rate derivatives.
The Company bifurcated and recognized the embedded derivative associated with the Preferred Units related to the exchange option provided to the Preferred Unit holders under the terms of the Partnership LPA. The 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.
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 changeChange in fair value of the warrants since closing of the Transaction through reporting date.date was recorded in “Interest and other income” of the Condensed Consolidated Statements of Operations.
The carrying amounts reported on the Condensed Consolidated Balance Sheets for the Company’s remaining financial assets and liabilities approximate fair value due to their short-term nature. There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three and ninesix months ended SeptemberJune 30, 20222023 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 SeptemberJune 30, 20222023 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 JuneDuring November 2022 all of BCP PHP, LLC’s (“BCP PHP”) outstandingand 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 Costsswaps 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 NotesCompany pays a fixed rate ranging from 4.38% to our Condensed Consolidated Financial Statements4.49% for additional information about the refinancing transactions. respective notional amounts.
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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 liabilitiesassets were nil$17.8 million and $2.7 million as of SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. Interest rate swap derivative liabilities were $3.8 million and $8.3 million as of June 30, 2023 and December 31, 2022, respectively. The Company recorded cash settlements on interest rate swap derivatives of nil$2.4 million and $0.7$12.0 million for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, and $11.3$2.4 million and $2.2$11.3 million for the ninesix months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively, in “Interest Expense” of the Condensed Consolidated Statements of Operations.respectively. In addition, the Company recorded fair value adjustments of nil$39.3 million and $26 thousand$2.4 million for the change in fair value of the interest rate swap derivatives for the three months ended SeptemberJune 30, 2023 and 2022, respectively, and 2021, respectively,$22.1 million and $14.0 million and $3.1 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, in “Interest Expense”expense” of the Condensed Consolidated Statements of Operations.
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Commodity Price Risk

Similarly, in 2020The results of the Company’s operations may be affected by the market prices of oil, natural gas and 2021 BCP Raptor, LLC (“BCP I”)NGLs. A portion of the Company’s revenue is directly tied to local natural gas, natural gas liquids and BCP Raptor II, LLC (“BCP II”) had WTI crude hedges at a specific notional amount that provides for a fixed price for crudecondensate prices in the Permian Basin and the U.S. Gulf Coast. Fluctuations in commodity prices also impact operating cost elements both directly and indirectly. Management regularly reviews the Company’s potential exposure to commodity price risk and manages exposure of such risk through commodity hedge contracts.
During the past two quarters, the Company has entered into numerous commodity swap contracts based on the OPIS NGL Mont Belvieu prices for ethane, propane and butane, the Waha basis hub hedgesBasis index and the NYMEX WTI index. These contracts are on various notional quantities of gas that either provided for a fixed price differential ofNGLs, natural gas inand crude. Similarly, the Permian Basin relative to the NYMEXCompany has entered into various natural gas contract or provided for a fixedand crude basis spread swaps. These index swaps are effective over the next 1 to 12 months and are used to hedge against location price for natural gas in the Permian Basin.
Allrisk of the Company’srespective 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 maturityoutstanding as of December 31, 2021. June 30, 2023 (in thousands, except volumes):
June 30, 2023
CommodityInstrumentsUnitVolumeNet Fair Value
Natural GasCommodity SwapMMBtus2,130,000 $(470)
NGLCommodity SwapGallons98,101,500 2,669 
CrudeCommodity SwapBbl110,400 683 
Natural Gas Basis Spread SwapsCommodity SwapMMBtus33,510,000 2,155 
Crude Gas Basis Spread SwapsCommodity SwapBbl314,000 228 
$5,265 
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 nilassets were $9.9 million and $0.2$4.3 million as of SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. Commodity swap derivative liabilities were $4.6 million and $5.7 million as of June 30, 2023 and December 31, 2022, respectively. The Company recorded cash settlements on commodity swap derivatives of nil$6.9 million and $0.9 millionnil for the three months ended SeptemberJune 30, 2023 and 2022, respectively, and 2021, respectively,$7.9 million and $0.2 million and $15.8 million for the ninesix months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively, in “Other Revenue” of the Condensed Consolidated Statements of Operations.respectively. In addition, the Company recorded fair value adjustments of $0.6$9.1 million and $17.1nil for the three months ended June 30, 2023 and 2022, respectively, and $14.5 million and nil for the change in fair value of commodity swap derivatives for the three and ninesix months ended SeptemberJune 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.
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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.
With respect to the above shares, the Company recorded compensation expenses of $13.3 million and $12.2 million for the three months ended June 30, 2023 and 2022, respectively, and $30.8 million and $18.3 million for the six months ended June 30, 2023 and 2022, respectively, based on a straight-line amortization of the associated awards’ fair value adjustment recognizedover 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
June 30,		Six Months Ended
June 30,
2023202220232022
(In thousands)
Income before income taxes$71,979 $131,610 $76,694 $153,675 
Income tax expense$311 $162 $727 $838 
Effective tax rate0.43 %0.12 %0.95 %0.55 %
The effective tax rate for the three and ninesix months ended SeptemberJune 30, 2022 as no commodity swaps were outstanding.2023 was lower than the statutory rate mainly due to the impact of tax attributable to noncontrolling interests related to the Common Units limited partners and valuation allowance.

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15.    NET INCOME PER SHARE
The computation of basic and diluted net income per share for the periods presented in the condensed consolidated financial statements is shown in the tables below.
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
(In thousands, except per share amounts)
Net income attributable to Class A common shareholders$25,014 $6,438 $26,450 $10,303 
Less: Net income available to participating unvested restricted Class A common shareholders(1)
(4,426)(4,184)(8,582)(4,184)
Total net income attributable to Class A common shareholders$20,588 $2,254 $17,868 $6,119 
Weighted average shares outstanding - basic(2)
50,553 39,297 48,980 38,766 
Dilutive effect of unvested Class A common shares(3)(4)
72 32 240 30 
Weighted average shares outstanding - diluted50,625 39,329 49,220 38,796 
Net income (loss) available per common share - basic$0.41 $0.06 $0.36 $0.16 
Net income (loss) available per common share - diluted$0.41 $0.06 $0.36 $0.16 
(1)Represents dividends paid to unvested restricted Class A common shareholders.
(2)Share and per share amounts have been retrospectively restated to reflect the Company’s reverse stock split, which was effected June 8, 2022.
(3)The effect of an assumed exchange of the outstanding public and private warrants for shares of Class A Common Stock would have been anti-dilutive for all periods presented in which the public and private warrants were outstanding.
(4)The effect of an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) would have been anti-dilutive for all periods presented in which the Common Units were outstanding.
16.    COMMITMENTS AND CONTINGENCIES
Accruals for loss contingencies arising from claims, assessments, litigation, environmental and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. As of June 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 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 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 and federal laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the Company for the cost of pollution clean-up resulting from operations and subject the Company to liability for pollution damages. The Company is not aware of any environmental claims existing as of June 30,
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2023, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.
Contingent Liabilities
Permian Gas Acquisition
As part of the acquisition of Permian Gas on June 11, 2019, consideration included a contingent liability arrangement with PDC Permian, Inc. (“PDC”). The arrangement requires additional monies to be paid by the Company to PDC on a per Mcf basis if the actual annual Mcf volume amounts exceed forecasted annual Mcf volume amounts starting in 2020 and continuing through 2029. The total monies paid under this arrangement are capped at $60.5 million. Amounts are payable on an annual basis over the earn-out period. Based on current forecasts and discussions with PDC, management revalues this contingent liability with updated assumptions at each reporting period. PDC’s actual annual Mcf volume did not exceed the incentive rate during the past three years, and the Company did not expect PDC’s actual annual Mcf volume amounts to exceed forecasted amounts as of June 30, 2023; therefore, the estimated fair value of the contingent consideration liability was nil as of June 30, 2023 and December 31, 2022.
Original Altus Transaction
As part of the Transaction, the Company assumed contingent liabilities of $4.5 million related to earn-out consideration of up to 2,500,000 shares of Class A Common Stock, which was part of the original Altus transaction, as follows:
•    1,250,000 shares if the per share closing price of the Class A Common Stock as reported by the New York Stock Exchange (“NYSE”) during any 30-trading-day period ending prior to November 9, 2023 is equal to or greater than $140.00 for any 20 trading days within such 30-trading-day period.
•    1,250,000 shares if the per share closing price of the Class A Common Stock as reported by the NYSE during any 30-trading-day period ending prior to November 9, 2023 is equal to or greater than $160.00 for any 20 trading days within such 30-trading-day period.
Pursuant to ASC 805, this earn-out consideration was a pre-existing contingency and accounted for as an assumed liability to the acquirer on the acquisition date. Immediately subsequent to the Closing, the Company evaluated the earn-out consideration classification in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The Company determined the earn-out consideration to be classified as equity based on the settlement provision.
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 June 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, BrandywineKinetik NGL Pipeline and Delaware Link Pipeline that is under development.construction. 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 nameaccounts for more than 99% of the respective segment. There was no change inCompany’s operating revenues, cost of sales (excluding depreciation and amortization), operating expenses and ad valorem expenses. The Pipeline Transportation segment composition or structure for the three and nine months ended September 30, 2022.
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contains all of the Company’s equity method investments, which contribute more than 99% of the segment’s EBITDA. Corporate and Other contains the Company’s executive and administrative functions, including 85% of the Company’s general and administrative expenses and all of the Company’s debt service costs.
The following tables present the reconciliation of the segment profit measure as of and for the three and ninesix months periods ended SeptemberJune 30, 20222023 and 2021:2022:
Midstream LogisticsPipeline 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 expense7 — 40,457 40,464 
Income tax expense— — 1,406 1,406 
Depreciation and amortization64,655 345 5 65,005 
Contract assets amortization448 — — 448 
Proportionate EMI EBITDA— 78,357 — 78,357 
Share-based compensation— — 12,661 12,661 
Loss on disposal of assets3,946 — — 3,946 
Integration costs14 81 2,243 2,338 
Acquisition transaction costs5 — 57 62 
Other one-time costs or amortization2,945 162 645 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)$212,370 
Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated(2)
Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated
(In thousands)
For the three months ended September 30, 2021(In thousands)
For the Three Months Ended June 30, 2023For the Three Months Ended June 30, 2023
Segment net income (loss) including noncontrolling interestsSegment net income (loss) including noncontrolling interests$(6,210)$13,333 $(2,483)$4,640 Segment net income (loss) including noncontrolling interests$55,680 $49,493 $(33,505)$71,668 
Add back:Add back:Add back:
Interest expenseInterest expense27,682 2,859 — 30,541 Interest expense11 — 16,115 16,126 
Income tax expenseIncome tax expense1,207 — — 1,207 Income tax expense— — 311 311 
Depreciation and amortizationDepreciation and amortization57,026 128 — 57,154 Depreciation and amortization69,005 471 6 69,482 
Contract assets amortizationContract assets amortization448 — — 448 Contract assets amortization1,655 — — 1,655 
Proportionate EMI EBITDAProportionate EMI EBITDA— 21,704 — 21,704 Proportionate EMI EBITDA— 74,481 — 74,481 
Loss (gain) on disposal of assets(60)23 — (37)
Loss on debt extinguishment56 — — 56 
Share-based compensationShare-based compensation— — 13,299 13,299 
Loss on disposal of assetsLoss on disposal of assets12,137 — — 12,137 
Acquisition transaction costsAcquisition transaction costs2 — — 2 
Integration costsIntegration costs15 — 26 41 
Other one-time costs or amortizationOther one-time costs or amortization802 160 205 1,167 Other one-time costs or amortization743 — 361 1,104 
Deduct:Deduct:Deduct:
Interest and other income74 — — 74 
Warrant valuation adjustmentWarrant valuation adjustment— — 33 33 
Gain on redemption of mandatorily redeemable Preferred unitsGain on redemption of mandatorily redeemable Preferred units— — — — 
Unrealized gain on derivativesUnrealized gain on derivatives2,678 — — 2,678 
Equity income from unconsolidated affiliatesEquity income from unconsolidated affiliates— 16,826 — 16,826 Equity income from unconsolidated affiliates— 49,610 — 49,610 
Segment adjusted EBITDA$80,877 $21,381 $(2,278)$99,980 
Segment adjusted EBITDA(3)
Segment adjusted EBITDA(3)
$136,570 $74,835 $(3,420)$207,985 

Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated
(In thousands)
For the Three Months Ended June 30, 2022
Segment net income including noncontrolling interests$14,563 $46,277 $70,608 $131,448 
Add back:
Interest expense20,641 942 3,764 25,347 
Income tax expense162 — — 162 
Depreciation and amortization66,459 122 — 66,581 
Contract assets amortization448 — — 448 
Proportionate EMI EBITDA— 71,340 — 71,340 
Share-based compensation— — 12,173 12,173 
Loss on disposal of assets8,580 — (34)8,546 
Loss on debt extinguishment27,983 (8)— 27,975 
Integration costs579 — 4,707 5,286 
Acquisition transaction costs— — 674 674 
Other one-time costs or amortization1,239 — 1,020 2,259 
Deduct:
Gain on redemption of mandatorily redeemable Preferred units— — 5,087 5,087 
Gain on embedded derivative— — 91,448 91,448 
Equity income from unconsolidated affiliates— 47,786 — 47,786 
Segment adjusted EBITDA(3)
$140,654 $70,887 $(3,623)$207,918 
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Midstream LogisticsPipeline 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 expense47,411 (664)45,838 92,585 
Income tax expense (benefit)457 (39)1,826 2,244 
Depreciation and amortization192,007 597 5 192,609 
Contract assets amortization1,344 — — 1,344 
Proportionate EMI EBITDA— 190,438 — 190,438 
Share-based compensation— — 30,966 30,966 
Loss (gain) on disposal of assets12,636 — (34)12,602 
Loss (gain) on debt extinguishment27,983 (8)— 27,975 
Integration costs933 81 8,998 10,012 
Acquisition transaction costs9 — 6,403 6,412 
Other one-time costs or amortization8,865 162 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 LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated(2)
Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated
(In thousands)
For the nine months ended September 30, 2021(In thousands)
For the Six Months Ended June 30, 2023For the Six Months Ended June 30, 2023
Segment net income (loss) including noncontrolling interestsSegment net income (loss) including noncontrolling interests$(22,238)$37,072 $(7,424)$7,410 Segment net income (loss) including noncontrolling interests$107,211 $95,927 $(127,171)$75,967 
Add back:Add back:Add back:
Interest expenseInterest expense82,967 5,491 — 88,458 Interest expense21 — 85,413 85,434 
Income tax expenseIncome tax expense1,207 — — 1,207 Income tax expense— — 727 727 
Depreciation and amortizationDepreciation and amortization169,906 385 — 170,291 Depreciation and amortization137,398 926 12 138,336 
Contract assets amortizationContract assets amortization1,815 — — 1,815 Contract assets amortization3,310 — — 3,310 
Proportionate EMI EBITDAProportionate EMI EBITDA— 59,677 — 59,677 Proportionate EMI EBITDA— 146,348 — 146,348 
Share-based compensationShare-based compensation— — 30,839 30,839 
Loss on disposal of assetsLoss on disposal of assets394 23 — 417 Loss on disposal of assets12,239 — — 12,239 
Gain on debt extinguishment(4)— — (4)
Derivatives loss due to Winter Storm Uri13,456 — — 13,456 
Loss (gain) on debt extinguishmentLoss (gain) on debt extinguishment— — — — 
Integration costsIntegration costs— — 953 953 
Acquisition transaction costsAcquisition transaction costs33 — 237 270 
Other one-time costs or amortizationOther one-time costs or amortization1,675 182 153 2,010 Other one-time costs or amortization3,793 — 1,071 4,864 
Producer settlement6,827 — — 6,827 
Deduct:Deduct:Deduct:
Interest and other income115 — — 115 
Warrant valuation adjustmentWarrant valuation adjustment— — 77 77 
Unrealized gain on derivativesUnrealized gain on derivatives7,643 — — 7,643 
Gain on embedded derivativeGain on embedded derivative— — — — 
Equity income from unconsolidated affiliatesEquity income from unconsolidated affiliates— 44,692 — 44,692 Equity income from unconsolidated affiliates— 96,074 — 96,074 
Segment adjusted EBITDA$255,890 $58,138 $(7,271)$306,757 
Segment adjusted EBITDA(3)
Segment adjusted EBITDA(3)
$256,362 $147,127 $(7,996)$395,493 
Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated(2)
(In thousands)
For the Six Months Ended June 30, 2022
Segment net income including noncontrolling interests$23,749 $75,412 $53,676 $152,837 
Add back:
Interest expense (income)47,412 (672)5,381 52,121 
Income tax expense (benefit)457 (39)420 838 
Depreciation and amortization127,352 252 — 127,604 
Contract assets amortization896 — — 896 
Proportionate EMI EBITDA— 112,081 — 112,081 
Share-based compensation— — 18,304 18,304 
Loss (gain) on disposal of assets8,690 — (34)8,656 
Loss (gain) on debt extinguishment27,983 (8)— 27,975 
Integration costs4,683 — 6,755 11,438 
Acquisition transaction costs4 — 6,346 6,350 
Other one-time costs or amortization2,157 — 1,297 3,454 
Deduct:
Gain on redemption of mandatorily redeemable Preferred units— — 9,580 9,580 
Gain on embedded derivative— — 88,562 88,562 
Equity income from unconsolidated affiliates— 75,703 — 75,703 
Segment adjusted EBITDA(3)
$243,383 $111,323 $(5,997)$348,709 
(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 OperationsOperations” 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 individual operating segment for the three and nine monthssix month periods ended SeptemberJune 30, 20222023 and 2021:
Midstream LogisticsPipeline TransportationConsolidated
For the three months ended September 30, 2022(In thousands)
Revenue$320,667 $733 $321,400 
Other revenue3,774 2 3,776 
Total segment operating revenue$324,441 $735 $325,176 
2022:
Midstream LogisticsPipeline TransportationConsolidatedMidstream LogisticsPipeline TransportationConsolidated
For the three months ended September 30, 2021(In thousands)
(In thousands)
For the Three Months Ended June 30, 2023For the Three Months Ended June 30, 2023
RevenueRevenue$165,844 $— $165,844 Revenue$293,251 $730 $293,981 
Other revenueOther revenue740 2 742 Other revenue2,220 2 2,222 
Total segment operating revenueTotal segment operating revenue$166,584 $2 $166,586 Total segment operating revenue$295,471 $732 $296,203 
Midstream LogisticsPipeline TransportationConsolidatedMidstream LogisticsPipeline TransportationConsolidated
For the nine months ended September 30, 2022(In thousands)
(In thousands)
For the Three Months Ended June 30, 2022For the Three Months Ended June 30, 2022
RevenueRevenue$907,771 $733 $908,504 Revenue$331,731 $— $331,731 
Other revenueOther revenue9,487 6 9,493 Other revenue3,839 2 3,841 
Total segment operating revenueTotal segment operating revenue$917,258 $739 $917,997 Total segment operating revenue$335,570 $2 $335,572 
Midstream LogisticsPipeline TransportationConsolidatedMidstream LogisticsPipeline TransportationConsolidated
For the nine months ended September 30, 2021(In thousands)
(In thousands)
For the Six Months Ended June 30, 2023For the Six Months Ended June 30, 2023
RevenueRevenue$446,840 $— $446,840 Revenue$569,806 $1,424 $571,230 
Other revenueOther revenue3,609 6 3,615 Other revenue6,009 4 6,013 
Total segment operating revenueTotal segment operating revenue$450,449 $6 $450,455 Total segment operating revenue$575,815 $1,428 $577,243 
Midstream LogisticsPipeline TransportationConsolidated
(In thousands)
For the Six Months Ended June 30, 2022
Revenue$587,104 $— $587,104 
Other revenue5,713 4 5,717 
Total segment operating revenue$592,817 $4 $592,821 
The following table presents total assets for each operating segment as of SeptemberJune 30, 20222023 and December 31, 2021:2022:
June 30,December 31,
September 30, 2022December 31, 202120232022
(In thousands)(In thousands)
Midstream LogisticsMidstream Logistics$3,575,642 $2,916,774 Midstream Logistics$3,582,410 $3,486,948 
Pipeline Transportation(1)Pipeline Transportation(1)2,417,663 635,784 Pipeline Transportation(1)2,602,385 2,414,829 
Segment total assetsSegment total assets5,993,305 3,552,558 Segment total assets6,184,795 5,901,777 
Corporate and otherCorporate and other13,873 648 Corporate and other42,126 17,934 
Total assetsTotal assets$6,007,178 $3,553,206 Total assets$6,226,921 $5,919,711 

(1)Includes investment in unconsolidated affiliates of $2.49 billion and $2.38 billion as of June 30, 2023 and December 31, 2022, respectively.
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,July 20, 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 August 4, 2023 on November 17, 2022.August 16, 2023. The Company, through its ownership of the general partner of the Partnership, declared a distribution of $0.75 per Common Unit from the Partnership to the holders of Common Units. Please refer to Note 10—Equity and Warrants in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional information.Units, which will be payable on August 16, 2023..
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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 ninesix month periods ended SeptemberJune 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 mergerbusiness combination of ALTMAltus Midstream Company (“ALTM”) and BCP Raptor Holdco, LP (“BCP”) and their respective consolidated subsidiaries closed on February 22, 2022. As the Transactiontransaction 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’sKinetik 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 ninesix months ended SeptemberJune 30, 2022. The2022 and results of operations of ALTM is reflected within the Company’s Condensed Consolidated Financial Statements from the Closing Date (as defined below) through SeptemberJune 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 TransactionBusiness 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, ContributorAltus 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 allsubsidiary of the equity interests in BCP andAltus 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.” togetherIn connection with the Class C Common Stock, the “Common Stock”). As a resultclosing 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 issuedbusiness 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 broughtwas accounted for as a reverse merger pursuant to ASC 805 Business Combination (“ASC 805”).
Refer to Note 2—Business Combination in additional volume capacity from ALTMthe Notes to Condensed Consolidated Financial Statements for the Midstream Logistics segment, including 182 miles of in-service natural gas gathering pipelines, approximately 46 miles of residue gas pipelines with four market connections, and approximately 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.further information.
Overview
We are an integrated midstream energy company in the Permian Basin providing comprehensive gathering, transportation, compression, processing and treating services. Our core capabilities include a variety of service offerings across multiple streams, including natural gas gathering, transportation, compression, treating and processing; NGLs stabilization and transportation; produced water gathering and disposal; and crude oil gathering, stabilization, storage and transportation. We have approximately 2.0 Bcf/d cryogenic natural gas processing capacityThe 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 and Processing segment to Midstream Logistics and renamed its Transmission segment to Pipeline Transportation. These name changes were made to better align segment activities with the name of each respective segment. The Midstream Logistics segment operates under three service offerings, 1) gas gathering and processing, 2) crude oil gathering, stabilization and storage services and 3) produced water gathering and disposal. The Pipeline Transportation segment consists of four EMIequity method investment (“EMI”) pipelines originating in the Permian Basin with various access points to the Texas
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Gulf Coast, Kinetik NGL Pipeline and Delaware Link Pipeline that is under development. 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 1,200over 1,500 miles of low and high-pressure steel pipeline located throughout the Southern Delaware Basin. Gas processing assets are centralized at five processing complexes with total cryogenic processing capacity of approximately 2.0 Bcf/d: the East Toyah complex (460 MMcf/d), the Pecos Bend complex (540 MMcf/d), the Pecos complex (260 MMcf/d), the Sierra Grande complex (60 MMcf/d), and Diamond Cryogenic complex (600 MMcf/d). The Company plans to expand the Diamond Cryogenic complex to 720 MMcf/d by the endd.
26
Table 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.Contents
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 200220 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.
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 70over 360 miles of gathering pipeline and approximately 500,000760,000 barrels per day of permitted disposal capacity.
Pipeline Transportation
EMI pipelines. The Pipeline Transportation segment consists ofCompany 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 EPICEpic Crude oil pipelineHoldings, LP (“EPIC”), which is operated by EPIC Consolidated Operations, LLC. EPIC transports crude oil from Orla, Texas
Kinetik NGL Pipeline. Approximately 30 miles of 20-inch NGL pipelines connected to our Diamond Cryogenic complex.
Delaware Link Pipeline. The Company is currently building the Delaware Link Pipeline, which will provide additional transportation capacity to Waha when it is put into service. The project is expected to be complete in Northern Reeves Countythe fourth quarter of 2023. Upon completion, this pipeline is estimated to the Port of Corpus Christi, Texas. EPIC was placed in service early 2020, with initial throughputbe 40 miles and to have a capacity of approximately 600 MBbl/1.0 Bcf/d.
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Factors Affecting Our Business
The Significance of Crude Oil and Producer Volumes on Our Revenues, Cost of Sales and Gross Margin
The Company’s assets include approximately 1,700 miles of NGLs, natural gas, condensate, produced water, and crude oil pipelines as well as approximately 2 Bcf/d of natural gas processing capacity as of 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 toPart 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, uncertainty in global economic recovery from the impactaftereffects of China’s zero covid policy, the continued headwindsCOVID-19 pandemic and the armed conflict in Ukraine, and uncertainty from a stronger US dollar, both herethe 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. OurAlthough the armed conflict in Ukraine generated 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 environmentsenvironment and human and economic hardship resulting from the international political instabilityconflict 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 tomay 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 8.2%dropped slightly to 3.0% in SeptemberJune 2023 compared to 9.1% in June 2022, as measured by the Consumer Price Index. We expectIndex, which was the lowest since May 2021. However, the Federal Open Market Committee (“FOMC”) maintains its long run goals of maximum employment and inflation at the rate of 2.00%. In support of these goals, the FOMC raised the target range for the federal funds rate to 5.25% - 5.50% during its meeting in July 2023. FOMC has acknowledged the current stress on the banking system, stating that while the United States banking system is sound and resilient, recent developments are likely to result in tighter credit conditions for households and businesses and to affect economic activity, hiring and inflation. The extent of these effects is uncertain. There is uncertainty regarding whether inflation will continue to increase our operating costs andbe tamed by the overall cost of capital projects we undertake. In addition,FOMC’s effort or whether the Federal Reserve has continuedFOMC will continue to tighten its monetary policy by raising interest rates and Chairman Powell has indicated thatin the target Federal Funds Rate range will likely be approximately 4.5% by the end 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.next 12 months. Increased interest rates beyond the term of our hedges will increase our operating 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. The Company will continue to actively evaluate and analyze whether any form of interest rate hedging should be implemented 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.

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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 June 30,Six Months Ended June 30,
20222021% Change20222021% Change2023
2022*
% Change2023
2022*
% Change
(In thousands, except percentages)(In thousands, except percentages)
Revenues:Revenues:Revenues:
Service revenueService revenue$107,597 $72,578 48 %$290,122 $202,482 43 %Service revenue$102,551 $102,080 — %$205,976 $182,525 13 %
Product revenueProduct revenue213,803 93,266 129 %618,382 244,358 153 %Product revenue191,430 229,651 (17 %)365,254 404,579 (10 %)
Other revenueOther revenue3,776 742 409 %9,493 3,615 163 %Other revenue2,222 3,841 (42 %)6,013 5,717 5 %
Total revenuesTotal revenues325,176 166,586 95 %917,997 450,455 104 %Total revenues296,203 335,572 (12 %)577,243 592,821 (3 %)
Operating costs and expenses:Operating costs and expenses:Operating costs and expenses:
Cost of sales (exclusive of depreciation and amortization)Cost of sales (exclusive of depreciation and amortization)145,208 60,503 140 %418,197 141,011 197 %Cost of sales (exclusive of depreciation and amortization)110,467 152,714 (28 %)226,344 272,989 (17 %)
Operating expenseOperating expense35,845 22,731 58 %100,996 63,575 59 %Operating expense39,906 35,280 13 %75,879 65,151 16 %
Ad valorem taxesAd valorem taxes5,903 3,238 82 %15,936 9,003 77 %Ad valorem taxes3,889 5,880 (34 %)9,347 10,033 (7 %)
General and administrativeGeneral and administrative23,468 6,957 237 %72,180 17,920 303 %General and administrative22,869 25,960 (12 %)50,380 48,712 3 %
Depreciation and amortizationDepreciation and amortization65,005 57,154 14 %192,609 170,291 13 %Depreciation and amortization69,482 66,581 4 %138,336 127,604 8 %
Loss (gain) on disposal of assets3,946 (37)(10765)%12,602 417 2922 %
Loss on disposal of assetsLoss on disposal of assets12,137 8,546 42 %12,239 8,656 41 %
Total operating costs and expensesTotal operating costs and expenses279,375 150,546 86 %812,520 402,217 102 %Total operating costs and expenses258,750 294,961 (12 %)512,525 533,145 (4 %)
Operating incomeOperating income45,801 16,040 186 %105,477 48,238 119 %Operating income37,453 40,611 (8 %)64,718 59,676 8 %
Other income (expense):Other income (expense):Other income (expense):
Interest and other incomeInterest and other income— 3,578 (100)%250 4,141 (94)%Interest and other income1,042 — 100 %1,336 250 NM
Gain on Preferred Units redemption— — NM9,580 — NM
Gain (loss) on debt extinguishment— (56)(100)%(27,975)4 (699475)%
Gain on redemption of mandatorily redeemable Preferred UnitsGain on redemption of mandatorily redeemable Preferred Units— 5,087 (100 %)— 9,580 (100 %)
Loss on debt extinguishmentLoss on debt extinguishment— (27,975)(100 %)— (27,975)(100 %)
Gain on embedded derivativeGain on embedded derivative488 — NM89,050 — NMGain on embedded derivative— 91,448 (100 %)— 88,562 (100 %)
Interest expenseInterest expense(40,464)(30,541)32 %(92,585)(88,458)5 %Interest expense(16,126)(25,347)(36 %)(85,434)(52,121)64 %
Equity in earnings of unconsolidated affiliatesEquity in earnings of unconsolidated affiliates45,003 16,826 167 %120,706 44,692 170 %Equity in earnings of unconsolidated affiliates49,610 47,786 4 %96,074 75,703 27 %
Total other income (expense), net5,027 (10,193)(149)%99,026 (39,621)(350)%
Income before income tax50,828 5,847 769 %204,503 8,617 2273 %
Current income tax expense1,406 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, netTotal other income, net34,526 90,999 (62 %)11,976 93,999 (87 %)
Income before income taxesIncome before income taxes71,979 131,610 (45 %)76,694 153,675 (50 %)
Income tax expenseIncome tax expense311 162 92 %727 838 (13 %)
Net income including noncontrolling interestNet income including noncontrolling interest$71,668 $131,448 (45 %)$75,967 $152,837 (50 %)
*The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q, for further information.
NM - Not meaningful

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Three Months Ended SeptemberJune 30, 20222023 Compared to Three Months Ended SeptemberJune 30, 20212022
Revenues
For the three months ended SeptemberJune 30, 2022,2023, revenue increased $158.6decreased $39.4 million, or 95%12%, to $325.2$296.2 million, compared to $166.6$335.6 million for the same period in 2021.2022. The increasedecrease was primarily driven by periodperiod-to-period lower product revenues related to period higherdecreases in commodity prices, partially offset by increases in gathered and processed gas volumes, as well as similar increases in condensate and NGL volumes sold.
Service revenue
Service revenue consists of service fees paid to us by our customers for providing comprehensive gathering, treating, processing and produced water disposal services necessary to bring natural gas, NGLs and crude oil to market. Service revenue for the three months ended SeptemberJune 30, 2022,2023, increased by $35.0$0.5 million, or 48%less than 1%, to $107.6$102.6 million, compared to $72.6$102.1 million for the same period in 2021. This increase was primarily due to a period over period increase in2022. Period-over-period gathered and processed gas volumes of 585.4increased 296.9 Mcf per day and 541.5320.4 Mcf per day, respectively.respectively, but the contract mix driving the increase in volumes did not lead to a commensurate increase in service fees. Over 99% of service revenues are included in the Midstream Logistics segment.
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Product revenue
Product revenue consists of commodity sales (including condensate, natural gas residue and NGLs). Product revenue for the three months ended SeptemberJune 30, 2022, increased2023, decreased by $120.5$38.2 million, or 129%17%, to $213.8$191.4 million, compared to $93.3$229.7 million for the same period in 2021,2022, primarily due to period over period increasesdecreases in commodity prices. Period over period NGL prices decreased $21.54 per barrel, or 53%, condensate prices combined with increaseddecreased $36.71 per barrel or 35% and residue prices decreased $5.75 per MMBtu or 84%. These decreases were partially offset by increases in NGL and condensate sales volumes. Condensate prices increased $23.30 per barrel or 35%. NGL and condensate sales volumes increased 3.5sold of 2.8 million barrels, or 550%62%. Natural gas residue sales volumes decreased 10.4 million MMBtu, or 207%. The period over period increase in NGL and condensate sales volumes offset the decreased NGL prices of $5.77 per barrel, or 14%. This overall increaseand related decrease in NGL and condensate revenueresidue volumes was due topartially driven by running our plants being run in recovery for parts ofduring the three months ended SeptemberJune 30, 20222023 versus rejection for one month during the same period in 2021. For the same reason, natural gas residue sales volumes decreased by 1.9 million MMBtu, or 28%. Partially offsetting this decrease in volumes, natural gas prices increased period over period by $3.34 per MMBtu, or 86%.2022. Product revenues are included entirely in the Midstream Logistics segment.
Operating Costs and Expenses
Costs of sales (exclusive of depreciation and amortization)
Cost of sales (exclusive of depreciation and amortization) primarily consists of purchases of NGLs and natural gas from our producers at contracted market prices to support product sales to other third parties. For the three months ended SeptemberJune 30, 2022,2023, cost of sales increased $84.7decreased $42.2 million, or 140%28%, to $145.2$110.5 million, compared to $60.5$152.7 million for the same period in 2021.2022. The increasedecrease was primarily driven by the period toover period increasedecreases in commodity prices and increased NGL and condensate volumes.as discussed above. Cost of sales (exclusive of depreciation and amortization) are included entirely in the Midstream Logistics segment.
Operating expenses
Operating expenses increased by $13.1$4.6 million, or 58%13%, to $35.8$39.9 million for the three months ended SeptemberJune 30, 2022,2023, compared to $22.7$35.3 million for the same period in 2021.2022. Of the total increase, $7.7$4.3 million was driven by new operations acquired throughhigher leased compression and electricity expenses from the Transaction. The remaining increases were primarily driven by an increase in repairsincreased 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
General and administrative (“G&A”) expense increaseddecreased by $16.5$3.1 million, or 237%12%, to $23.5$22.9 million for the three months ended SeptemberJune 30, 2022,2023, compared to $7.0$26.0 million for the same period in 2021.2022. The increasesdecrease was driven by lower legal fees of $2.6 million that were primarily driven by recognitionrelated to the Transaction and associated integration. The remaining decrease relates primarily to lower labor costs that is also associated with the integration of share-based compensationthe Transaction.
Other Income (Expense)
Loss on debt extinguishment
For the three months ended June 30, 2022, the Company recognized a loss on debt extinguishment of $12.7$28.0 million acquisition and integration costs of $2.7 million incurred in relation to the Transaction, and an increase of $0.8 millioncomprehensive refinancing completed in insurance expenses.June 2022.
Other Income (Expense)
Equity in earnings of unconsolidated affiliates
Income from EMI pipelines increased by $28.2 million, or 167%, to $45.0 million for the three months ended September 30, 2022, compared to $16.8 million for the same period in 2021. The increase was primarily due to the acquisition of new EMI pipelines and additional equity interests in the Company’s existing EMI pipeline, PHP. Equity in earnings of unconsolidated affiliates is included entirely in the Pipeline Transportation segment.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
Revenues
For the nine months ended September 30, 2022, revenue increased $467.5 million, or 104%, to $918.0 million, compared to $450.5 million for the same period in 2021. The increase was primarily driven by period to period higher commodity prices, increases in gathered and processed gas volumes, as well as similar increases in condensate and NGL volumes sold.Unrealized gain on embedded derivative
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For the three months ended June 30, 2022, the Company recognized an unrealized gain on an embedded derivative of $91.4 million. The unrealized gain was a result of the decrease in fair value of the embedded derivative related to the redeemable noncontrolling interest Preferred Units. The substantial decrease in fair value of this derivative related to the comprehensive debt refinancing that achieved more favorable interest terms for the Company and the partial redemption of these Preferred Units on July 1, 2022, which was known as of the end of the second quarter.
Interest Expense
Interest expense decreased by $9.2 million, or 36%, to $16.1 million for the three months ended June 30, 2023, compared to $25.3 million for the same period in 2022. The decrease was primarily driven by interest rate swap valuation marks of $37.4 million when comparing the second quarter of 2023 to the same period in 2022. The decrease was partially offset by increased interest expense of $26.1 million related to 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 (as defined below) and Revolving Credit Facility (as defined below), which carried some variability. Refer to Note—12 Derivatives and Hedging Activities in the Notes to Condensed Consolidated Financial Statements regarding the Company’s strategy in managing interest rate risk.
Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
Revenues
For the six months ended June 30, 2023, revenue decreased $15.6 million, or 3%, to $577.2 million, compared to $592.8 million for the same period in 2022. The decrease was primarily driven by period-to-period lower product revenues related to decreases in commodity prices, offset by higher service revenues related to increases in gathered and processed gas volumes.
Service revenue
Service revenue consists of service fees paid to us by our customers for providing comprehensive gathering, treating, processing and water disposal services necessary to bring natural gas, NGLs and crude oil to market. Service revenue for the ninesix months ended SeptemberJune 30, 2022,2023, increased by $87.6$23.5 million, or 43%13%, to $290.1$206.0 million, compared to $202.5$182.5 million for the same period in 2021.2022. This increase was primarily due to a period over periodperiod-over-period increase in gathered and processed gas volumes of 559.9330.4 Mcf per day and 523.8339.7 Mcf per day, respectively. 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 ninesix months ended SeptemberJune 30, 2022, increased2023, decreased by $374.0$39.3 million, or 153%10%, to $618.4$365.3 million, compared to $244.4$404.6 million for the same period in 2021,2022, primarily due to period over period decreases in commodity prices. Period over period NGL prices decreased $21.71 per barrel, or 51%, condensate prices decreased $28.39 per barrel or 29% and residue prices decreased $4.37 per MMBtu, or 78%. The overall decrease was partially offset by increases in NGL and condensate prices combined with increasedvolumes sold of 6.6 million barrels, or 96%. Natural gas residue sales volumes of these liquids. NGL prices increased $6.60 per barrel,decreased 11.3 million MMBtu, or 20%, and condensate prices increased $35.69 per barrel, or 60%77%. The period over period increase in NGL and condensate sales volumes increased 8.2 million barrels, or 280%. This substantial increaseand related decrease in residue volumes was due topartially driven by running our plants being run in recovery for most ofduring the ninesix months ended SeptemberJune 30, 20222023 versus rejection for certain months during the same period in 2021. For the same reason, natural gas residue sales volumes decreased by 3.2 million MMBtu, or 17%. Partially offsetting this decrease in volumes, natural gas prices increased period over period by $2.61 per MMBtu, or 73%.2022. Product revenues are included entirely in the Midstream Logistics segment.
Operating Costs and Expenses
Costs of sales (exclusive of depreciation and amortization)
Cost of sales (exclusive of depreciation and amortization) primarily consists of purchases of NGLs and natural gas from our producers at contracted market prices to support product sales to other third parties. For the ninesix months ended SeptemberJune 30, 2022,2023, cost of sales increased $277.2decreased $46.6 million, or 197%17%, to $418.2$226.3 million, compared to $141.0$273.0 million for the same period in 2021.2022. The increasedecrease was primarily driven by thea period to period increasesdecrease in commodity prices, slightly offset by increases in condensate and NGL and condensate volumes discussed above.sold. Cost of sales (exclusive of depreciation and amortization) are included entirely in the Midstream Logistics segment.
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Operating expenses
Operating expenses increased by $37.4$10.7 million, or 59%16%, to $101.0$75.9 million for the ninesix months ended SeptemberJune 30, 2022,2023, compared to $63.6$65.2 million for the same period in 2021.2022. Of the total increase, $16.2$4.5 million was driven by the newinclusion of Altus operations acquired throughfor the Transaction.entire period, versus just over four months during the same period of 2022. The remaining increase wasis primarily driven bythe result of higher period over periodcompression and electricity costsexpenses from the increased gathered and processed volumes discussed above. Over 99% of $10.7 million, higher salaries and benefits 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 receivedoperating expenses are included in 2021 related to the extreme weather caused by Winter Storm Uri.Midstream Logistics segment.
General and administrative
General and administrative (“G&A”) expense increased by $54.3$1.7 million, or 303%3%, to $72.2$50.4 million for the ninesix months ended SeptemberJune 30, 2022,2023, compared to $17.9$48.7 million for the same period in 2021.2022. The increases were primarilyincrease was driven by recognizedhigher share-based compensation of $31.0$12.5 million acquisitionrelated to a full six months of stock compensation amortization during 2023 versus just over four months of amortization during the same period of 2022 and integration costsdue to certain members of $18.5management opting to receive their bonuses in the form of stock compensation during March 2023. This increase was partially offset by a decrease of $10.9 million incurred in relationlabor, professional fees and legal fees that were primarily related 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.its related integration.
Other Income (Expense)
Gain (loss)Loss on debt extinguishment
For the ninesix months ended SeptemberJune 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.
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GainUnrealized gain on embedded derivative
For the ninesix months ended SeptemberJune 30, 2022, the Company recognized aan unrealized gain on an embedded derivative of $89.1$88.6 million. The unrealized gain iswas a result of the decrease in fair value of the embedded derivative liability related to the redeemable noncontrolling interest Preferred Units, which was eliminated uponUnits. The substantial decrease in fair value of this derivative related to the ultimatecomprehensive debt refinancing that achieved more favorable interest terms for the Company and the partial redemption of these Preferred Units duringon July 1, 2022, which was known as of the end of the second quarter.
Interest Expense
Interest expense increased by $33.3 million, or 64%, to $85.4 million for the six months ended June 30, 2023, compared to $52.1 million for the same period in 2022. $42.7 million of 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 (as defined below) and Revolving Credit Facility (as defined below), which carried some variability. The increase was partially offset by higher interest rate swap valuation marks of $8.6 million when comparing the six months ended June 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$20.4 million, or 170%27%, to $120.7$96.1 million for the ninesix months ended SeptemberJune 30, 2022,2023, compared to $44.7$75.7 million for the same period in 2021.2022. The increase was primarily due to the acquisition of new EMI pipelines and additional equity interests in the Company’s existing EMI pipeline, PHP, through the Transaction, which closed in February 2022. Equity in earnings of unconsolidated affiliates is included entirely in the Pipeline Transportation segment.

Key Performance Metrics
Adjusted EBITDA
Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for interest, taxes, depreciation and amortization, impairment charges, asset write-offs, the proportionate EBITDA from our equity method investments, equity in earnings from investments recorded using the equity method, share-based compensation expense, extraordinary losses and unusual or non-recurring charges. Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance.
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We believe that Adjusted EBITDA provides a meaningful understanding of certain aspects of earnings before the impact of investing and financing charges and income taxes. Adjusted EBITDA is useful to an investor in evaluating our performance because this measure:
•Isis widely used by analysts, investors and competitors to measure a company’s operating performance;
•Isis a financial measurement that is used by rating agencies, lenders and other parties to evaluate our credit worthiness; and;and
•Isis used by our management for various purposes, including as a measure of performance and as a basis for strategic planning and forecasting.
Adjusted EBITDA is not defined in GAAP
The GAAP measure used by the Company that is most directly comparable to Adjusted EBITDA is net income including noncontrolling interests. Adjusted EBITDA should not be considered as an alternative to the GAAP measure of net income including noncontrolling interests or any other measure of financial performance presented in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool because it excludes some, but not all, items that affect net income including noncontrolling interests. Adjusted EBITDA should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. The Company’s definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies in the industry, thereby diminishing its utility.
Reconciliation of non-GAAP financial measure
Company management compensates for the limitations of Adjusted EBITDA as an analytical tool by reviewing the comparable GAAP measure, understanding the differences between Adjusted EBITDA as compared to net income including noncontrolling interests,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 interestsinterest to the non-GAAP financial measure of Adjusted EBITDA.

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Three Months Ended
September 30,*		Nine Months Ended
September 30,*		Three Months Ended June 30,Six Months Ended June 30,
20222021% Change20222021% Change20232022% Change2023
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 EBITDAReconciliation of net income including noncontrolling interest to Adjusted EBITDA(*)
Net income including noncontrolling interestNet income including noncontrolling interest71,668 131,448 (45)%$75,967 $152,837 (50)%
Add back:Add back:Add back:
Interest expenseInterest expense40,464 30,541 32 %92,585 88,458 5 %Interest expense16,126 25,347 (36)%85,434 52,121 64 %
Income tax expenseIncome tax expense1,406 1,207 16 %2,244 1,207 86 %Income tax expense311 162 92 %727 838 (13)%
Depreciation and amortizationDepreciation and amortization65,005 57,154 14 %192,609 170,291 13 %Depreciation and amortization69,482 66,581 4 %138,336 127,604 8 %
Amortization of contract costsAmortization of contract costs448 448 — %1,344 1,815 (26)%Amortization of contract costs1,655 448 NM3,310 896 NM
Proportionate EMI EBITDAProportionate EMI EBITDA78,357 21,704 261 %190,438 59,677 219 %Proportionate EMI EBITDA74,481 71,340 4 %146,348 112,081 31 %
Share-based compensationShare-based compensation12,661 — NM30,966 — NMShare-based compensation13,299 121739 %30,839 18,304 68 %
Loss (gain) on sale of assets3,946 (37)(10765)%12,602 417 2922 %
Loss (gain) on debt extinguishment— 56 (100)%27,975 (4)(699475)%
Loss on disposal of assetsLoss on disposal of assets12,137 8,546 42 %12,239 8,656 41 %
Loss on debt extinguishmentLoss on debt extinguishment— 27,975 (100)%— 27,975 (100)%
Derivative loss due to Winter Storm Uri— — NM— 13,456 (100)%
Integration CostsIntegration Costs2,338 — NM10,012 — NMIntegration Costs41 5,286 (99)%953 11,438 (92)%
Acquisition transaction Costs62 — NM6,412 — NM
Transaction CostsTransaction Costs2 674 (100)%270 6,350 (96)%
Other one-time cost or amortization Other one-time cost or amortization3,752 1,167 222 %10,969 2,010 446 %Other one-time cost or amortization1,104 2,259 (51)%4,864 3,454 41 %
Producer Settlement— — NM— 6,827 (100)%
Deduct:Deduct:Deduct:
Interest and other income— 74 (100)%— 115 (100)%
Unrealized gain on derivativesUnrealized gain on derivatives2,678 — 100 %7,643 — 100 %
Warrant valuation adjustmentWarrant valuation adjustment33 — 100 %77 — 100 %
Gain on redemption of mandatorily redeemable Preferred UnitsGain on redemption of mandatorily redeemable Preferred Units— — NM9,580 — NMGain on redemption of mandatorily redeemable Preferred Units— 5,087 (100)%— 9,580 (100)%
Gain on embedded derivativeGain on embedded derivative488 — NM89,050 — NMGain on embedded derivative— 91,448 (100)%— 88,562 (100)%
Equity income from unconsolidated affiliates45,003 16,826 167 %120,706 44,692 170 %
Equity income from EMI'sEquity income from EMI's49,610 47,786 4 %96,074 75,703 27 %
Adjusted EBITDAAdjusted EBITDA$212,370 $99,980 112 %$561,079 $306,757 83 %Adjusted EBITDA$207,985 $207,918 — %$395,493 $348,709 13 %
* The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to Note 1—Description of the Organization and Summary of Significant Accounting Policies for further information on the Company’s basis of presentation.
NM - not meaningful
Adjusted EBITDA increased by $112.4$0.1 million, or 112%0%, to $212.4$208.0 million for the three months ended SeptemberJune 30, 2022,2023, compared to $100.0$207.9 million for the same period in 2021.2022.
Adjusted EBITDA increased by $46.8 million, or 13%, to $395.5 million for the six months ended June 30, 2023, compared to $348.7 million for the same period in 2022. 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$34.3 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 resultsdue to the acquisition of new operations acquiredEMI pipelines and additional equity interests in the Company’s existing EMI pipeline, PHP, through the Transaction. The remaining increase in adjusted EBITDA was partially offset by increases in EMI pipelines equity income of $28.2 million, which wasis primarily due to owning the result of acquisitions of new EMI pipeline entities and additional PHP equity interests acquired.
Adjusted EBITDA increased by $254.3 million, or 83% to $561.1 millionlegacy Altus assets for the nineentire period during 2023 versus approximately four months ended September 30, 2022, compared to $306.8 million for the same period in 2021. The increase was primarily driven by an increase in net income including noncontrolling interest of $194.8 million, or 2630%, and increases in 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 million, depreciation and amortization expense of $22.3 million 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 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 due 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 ofduring 2022.
Segment Adjusted EBITDA
Segment Adjustedadjusted 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 adjustmentadjusted EBITDA for the three and nine monthssix month periods ended SeptemberJune 30,
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2022 2023 and 2021.2022. Also refer to Note 17—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,*
20222021% Change20222021% Change
(In thousands, except percentages)
Midstream Logistics$137,545 $80,877 70 %$380,919 $255,890 49 %
Pipeline Transportation78,692 21,381 268 %190,023 58,138 227 %
Corporate and Other**(3,867)(2,278)70 %(9,863)(7,271)36 %
Total segment adjusted EBITDA$212,370 $99,980 112 %$561,079 $306,757 83 %
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Three Months Ended June 30, 2023
20232022% Change
Midstream Logistics$136,570 $140,654 (3 %)
Pipeline Transportation74,835 70,887 6 %
Corporate and Other**(3,420)(3,622)(6 %)
Total segment adjusted EBITDA$207,985 $207,919 — %
Six Months Ended June 30,
2023
2022*
% Change
Midstream Logistics$256,362 $243,383 5 %
Pipeline Transportation147,127 111,323 32 %
Corporate and Other**(7,996)(5,997)33 %
Total segment adjusted EBITDA$395,493 $348,709 13 %
* The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to Note 1—Description of the Organization and Summary of Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for further information on the Company’s financial statement consolidation.
** 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 increaseddecreased by $56.7$4.1 million, or 70%3%, to $137.5$136.6 million for the three months ended SeptemberJune 30, 2022,2023, compared to $80.9$140.7 million for the same period in 2021.2022. The decrease was primarily driven by decrease in add backs related to interest expense of $20.6 million and loss on debt extinguishment of $28.0 million recognized in 2022, partially offset by an increase in segment net income including noncontrolling interests of $41.1 million and increase in add back related to loss on disposal of assets of $3.6 million.
Midstream Logistics segment adjusted EBITDA increased by $13.0 million, or 5%, to $256.4 million for the six months ended June 30, 2023, compared to $243.4 million for the same period in 2022. The increase was primarily driven by an increase in segment net income including noncontrolling interests of $71.7$83.5 million and increases in the add back related to depreciation and amortization expense of $7.6$10.0 million due to new operations acquired through the Transaction.
Midstream Logistics segmentTransaction and loss on disposal of assets of $3.5 million. The increase in adjusted EBITDA increasedwas partially offset by $125.0 million, or 49%, to $380.9 million for the nine months ended September 30, 2022, compared to $255.9 million for the same perioddecrease in 2021. The increase was primarily driven by an increase in segment net income including noncontrolling interests of $111.5 million and increases in the add back related to interest expense of $47.4 million, loss on debt extinguishment of $28.0 million as the Company completed its comprehensive refinancingrecognized in June 2022 depreciation and amortization expenseintegration and acquisition costs of $22.1 million due to new operations acquired through the Transaction.$4.7 million.
Pipeline Transportation segment adjusted EBITDA increased by $57.3$3.9 million, or 268%6%, to $78.7$74.8 million for the three months ended SeptemberJune 30, 2022,2023, compared to $21.4$70.9 million for the same period in 2021.2022. 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$35.8 million, or 227%32%, to $190.0$147.1 million for the ninesix months ended SeptemberJune 30, 2022,2023, compared to $58.1$111.3 million for the same period in 2021.2022. The increase was driven by investments in GCX, EPIC, Shin Oak and PHP, which were all acquired through the same factors driving the quarter over quarter increase disclosed above.Transaction closed in February 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.
Under certain of our transportation services agreements with third party pipelines to transport natural gas and NGLs, if we fail to ship a minimum throughput volume during any year, then we will pay a deficiency payment for transportation based on the volume shortfall up to the MVC amount. The Company has made no historical shortfall payments through June 30, 2023.

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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 unitsmidstream infrastructure acquisition and treating assets to the legacy BCP processing plants, organic growth and maintenanceother budgeted capital expenditures in the Midstream Logistic segment,for construction of gathering and processing assets and the Company’s contractual debt obligationsobligations. The Company will continue to have the Reinvestment Holders (as defined below) and the Company’s paymentmanagement reinvest 100% of quarterly cash dividend on itstheir 2023 distributions and dividends into shares of our Class A Common Stock and Class C Common Units as may be declared by itsStock. 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 ninesix months ended SeptemberJune 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 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-termCredit Facility with interest rate risk. Further, the Company entered into an interest rate swapswaps 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 are 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 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 for a $2.00 billion senior unsecured Term Loan Credit Facility maturing on June 8, 2025.2025 (the “Term Loan Credit Facility”). Proceeds from the Notes and the Term Loan Credit Facility were used to repay all outstanding borrowings under our existing credit facilities and to pay fees and expenses related to the offering. Refer toSee Note 6 — 8—Debt and Financing Costsin the Notes to our Condensed Consolidated Financial Statements in thisour Annual Report on Form 10-Q10-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 ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, capital spending for property, plant and equipment totaled $160.2 million and $71.4 million, respectively and intangible asset purchases of $14.0 million and $8.5 million, respectively. The first quarter of 2023 also included capital spend of $65 million for certain midstream infrastructure assets, totaled $160.5 million and $60.6 million, respectively. The current year capital spend includes $25 million for the purchase of Brandywine NGL Pipeline and $12.5 million for the ongoing construction of the Delaware Link Pipeline.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 ninesix months ended SeptemberJune 30, 2022,2023, the Company contributed $56.2$154.7 million to PHP for the 2022 Capacity Expansion Project, compared to $20.5 million contributedcapacity expansion project, which started in the same period of 2021.June 2022.
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 FlowsFlow
The following tables present cash flows from operating, investing and financing activities during the periods presented:
For the Nine Months Ended September 30,Six Months Ended June 30,
2022202120232022
(In thousands)(In thousands)
Cash provided by operating activitiesCash provided by operating activities$453,244 $159,350 Cash provided by operating activities$231,047 $268,918 
Cash used in investing activitiesCash used in investing activities$(216,418)$(81,323)Cash used in investing activities$(447,903)$(69,059)
Cash used in financing activities$(243,827)$(62,439)
Cash provided by (used in) financing activitiesCash provided by (used in) financing activities$212,699 $(213,269)
Operating Activitiesactivities. Net cash provided by operating activities increaseddecreased by $293.9$37.9 million for the ninesix months ended SeptemberJune 30, 20222023 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 $71.5 million, offset by decreases in working capital of $32.5 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$76.9 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 Activitiesactivities. Net cash used in investing activities increased by $135.1$378.8 million for the ninesix months ended SeptemberJune 30, 20222023 compared with the same period in 2021.2022. The increase was primarily driven by an increase in net cash (paid for) acquired in acquisition of $138.4 million related to the current year acquisition of midstream infrastructure assets, an increase in property, plant and equipment expenditures of $99.9$88.7 million, which includes the Brandywine asset acquisition, an increase in contributioncontributions made to unconsolidated affiliates of $35.7$152.0 million related to the PHP expansion project and an increase in intangible assets expenditure of $9.6$5.4 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 Activitiesactivities. Net cash provided by financing activities was $212.7 million for the six months ended June 30, 2023, which was comprised of net borrowings from the Company’s Revolving Credit Facility of $255.0 million, offset by cash dividends of $36.5 million and repurchase of Class A common stock of $5.8 million. Net cash used in financing activities increased by $181.4was $213.3 million for the ninesix months ended SeptemberJune 30, 2022, compared with the same period in 2021. The increasewhich was primarily due to increases in cash outflow forcomprised of redemption of mandatorily redeemable Preferred Units of $644.8$152.6 million, payments on debt issuance costs of $37.0 million, cash dividends paid to holders of Class A Common Stock of $24.4 million, cash distributions paid to holders of Preferred Units of $8.8$20.5 million and the increase in cash outflow was offset by net proceeds frompayments on the Company’s long-term debt and Revolving Credit Facilityoutstanding indebtedness of $482.1 million and a reduction of cash distributions paid to holders of Class C Common Units of $29.3$3.1 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, theThe 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 ninesix months of 2022,2023, the Company made cash dividend payments of $24.4$36.5 million to holders of Class A Common Stock and $175.5Class C Common Units and $175.6 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-onethe 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.
Dividend
On October 19, 2022,July 20, 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.August 16, 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, dividends paid to holdersAugust 16, 2023.
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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 paidup to holders of Common Units$100.0 million in the aggregate. Repurchases may be referredmade at management’s discretion from time to collectively as “dividends.”
Series A Cumulative Redeemable Preferred Unitstime, in accordance with applicable securities laws, on the open market or through privately negotiated transactions and may be made pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act. Privately negotiated repurchases from affiliates are also authorized under the Repurchase Program, subject to such affiliates’ interest and other limitations. The repurchases will depend on market conditions and may be discontinued at any time without prior notice. For the three and six months ended June 30, 2023, the Company repurchased 112,312 shares at a total cost of $3.3 million and 194,174 shares at a total cost of $5.8 million, respectively. 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 Partnership issued Preferred UnitsInflation Reduction Act of 2022 provides for, among other things, the imposition of a 1% U.S. federal excise tax (the “Stock Buyback Tax”) on June 12, 2019. Becausecertain repurchases of stock by publicly traded U.S. corporations such as us after December 31, 2022. Accordingly, the Transaction was accounted for as a reverse merger, certain Preferred Units that were issuedStock Buyback Tax will apply to our share repurchase program in 2023 and outstanding were assumed at Closing for accounting purposes.in subsequent taxable years. The Company assumed 525,000 Preferred Units as well as 29,983 paid-in-kind (“PIK”) Preferred Units immediately afterBiden Administration has proposed increasing the Closing.
Since the Closing, the Company redeemed all outstanding Preferred Units and PIK units for an aggregate redemption price of $644.8 million. The Company recognized a gain of $9.6 million on redemptionamount of the mandatorily redeemable Preferred Units and excess of carryingStock 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, 2022December 31, 2021June 30,December 31,
20232022
(In thousands) (In thousands)
Cash and cash equivalentsCash and cash equivalents$11,728 $18,729 Cash and cash equivalents$2,237 $6,394 
Total debt$3,447,513 $2,307,702 
Total debt, net of unamortized deferred financing costTotal debt, net of unamortized deferred financing cost$3,625,799 $3,368,510 
Available committed borrowing capacityAvailable committed borrowing capacity$775,000 $133,000 Available committed borrowing capacity$587,422 $855,000 
Cash and cash equivalents
As of SeptemberJune 30, 20222023 and December 31, 2021,2022, the Company had $11.7$2.2 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 Debtdebt and Availableavailable 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.
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, 2022.

Off-Balance Sheet Arrangements
As of SeptemberJune 30, 2022,2023, there were no off-balance sheet arrangements.

Critical Accounting Policies and Estimates
The Company’sThere have been no significant changes to our critical accounting policies describedand estimates from those disclosed on our Annual Report Form 10-K for the year ended December 31, 2022. Please refer to information regarding our critical accounting policies and estimates included in the Summary“Item 7. Management’s Discussion and Analysis of Significant Accounting Policies in Exhibit 99.1 to CurrentFinancial Condition and Results of Operations” of our Annual Report on Form 8-K10-K for the year ended December 31, 2022 filed with the Commission on July 5, 2022 and the Company’s Quarterly Report on Form 10-Q filed on May 10, 2022, are fundamental to understanding our results of operations and financial condition. There has been no significant change to the Company’s significant accounting policies subsequent to the Form 8-K filed on July 5, 2022. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been included in March 7, 2023.
Note 1—Description of the Organization and Summary of Significant Accounting Policies in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosure About Market Risk
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The Company is exposed to various market risks, including the effects of adverse changes in commodity prices and credit risk as described below. The Company continually monitors its market risk exposure, including the impact and developments related to the armed conflict in Ukraine, increase in interest rate and inflation trend, which introducedcontinued to have significant impact on volatility and uncertainties in the financial markets during 2022.the second quarter of 2023.
Commodity Price Risk
The results of the Company’s operations may be affected by the market prices of oil and natural gas. A portion of the Company’s revenue is directly tied to local crude, natural gas, NGLs and condensate prices in the Permian Basin. Fluctuations in commodity prices also impact operating cost elements both directly and indirectly. For example, commodity prices directly impact costs such as power and fuel, which are expenses that increase or decrease in line with changes in commodity prices. Commodity prices also affect industry activity and demand, thus indirectly impacting the cost of items such as labor and equipment rentals. Management regularly reviews the Company’s potential exposure to commodity price risk, and may periodically enter into financial or physical arrangements intended to mitigate potential volatility. Refer to Note 16—12—Derivatives and Hedging Activities in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding our hedging strategies and objectives.
Interest Rate Risk
The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. As of SeptemberJune 30, 2022,2023, the Company had interest bearing debt, net of deferred financing costs, with principal amount of $3.45$3.63 billion. The interest raterates for the revolvingRevolving Credit Facility and term loan credit facilitiesthe 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 June 30, 2023, $2.25 billion of floating rate debt (out of $2.65 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$126 million for the quarter ended SeptemberJune 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—Derivative12—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 June 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 SeptemberJune 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 SeptemberJune 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
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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 SeptemberJune 30, 2022,2023, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.


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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For further information regarding legal proceedings, refer to Note 8—16—Commitments and Contingencies in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Repurchase of Class A Common Stock
Period
Total Number of Shares Purchased(1)
Average Price per Share(2)
Total Number of Shares Purchased as Part of Publicly Announced Plan(1)
Maximum number (or approximate dollar value) of Shares that May Yet be Purchased under the Plans
April 1 to April 30, 2023— — — 97,567,798 
May 1 to May 31, 2023112,312 29.60 112,312 94,243,313 
June 1 to June 30, 2023— — — 94,243,313 
    Total112,312 $29.60 112,312 $94,243,313 
(1)On February 28, 2023, the Company announced that the Board had approved the Repurchase Program, authorizing discretionary purchases of the Company’s Quarterly Report Form 10-Q forClass A Common Stock up to $100 million in the first quarter of 2022 filed on May 10, 2022.aggregate.
(2)Average price paid per share included commission to repurchase shares.
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ITEM 5. OTHER INFORMATION
AmendedTrading Arrangements
During the three months ended June 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) 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 inSEC 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/governancegenerally 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 reflectedactivities 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 Codepreparation of Ethicsthe 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.
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We understand that BX disclosed the following in their most recent quarterly report on Form 10-Q, and as of August 8, 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 June 30, 2023 was less than €50,000. Mundys S.p.A. does not purporttrack 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.
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ITEM 6. EXHIBITS
EXHIBIT NO.EXHIBIT NO.DESCRIPTIONEXHIBIT NO.DESCRIPTION
2.1***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 (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on October 21, 2021).
3.13.1–
Third Amended and Restated Certificate of Incorporation of Kinetik Holdings Inc.
3.1–
Third Amended and Restated Certificate of Incorporation of Kinetik Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).
3.23.2–
Amended and Restated Bylaws of Kinetik Holdings Inc.
3.2–
Amended and Restated Bylaws of Kinetik Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).
3.33.3–
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).
4.14.1–
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–
Amended and Restated Stockholders Agreement, dated October 21, 2021, by and among APA Corporation, Apache Midstream LLC, Altus Midstream Company, New BCP Raptor Holdco, LLC, Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP, Buzzard Midstream LLC, and BCP Raptor Holdco, LP. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).
4.24.2–
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–
Second Amended and Restated Registration Rights Agreement, dated February 22, 2022, by and among Altus Midstream Company, Apache Midstream LLC, Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP, Buzzard Midstream LLC and the other holders party thereto. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).
4.34.3–
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).
4.44.4–
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–
10.110.1–
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 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022)..
14.1*–
Kinetik Holdings Inc. Code of Business Conduct, as amended November 9, 2022.
31.1*31.1*–
Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.1*–
Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
31.2*31.2*–
Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2*–
Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
32.1**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**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*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 June 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*101.SCH*–Inline XBRL Taxonomy Schema Document.101.SCH*–Inline XBRL Taxonomy Schema Document.
101.CAL*101.CAL*–Inline XBRL Calculation Linkbase Document.101.CAL*–Inline XBRL Calculation Linkbase Document.
101.DEF*101.DEF*–Inline XBRL Definition Linkbase Document.101.DEF*–Inline XBRL Definition Linkbase Document.
101.LAB*101.LAB*–Inline XBRL Label Linkbase Document.101.LAB*–Inline XBRL Label Linkbase Document.
101.PRE*101.PRE*–Inline XBRL Presentation Linkbase Document.101.PRE*–Inline XBRL Presentation Linkbase Document.
104*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, 2022August 8, 2023 /s/ Jamie Welch
 Jamie Welch
 Chief Executive Officer, President, Chief Financial Officer and Director
(Principal Executive Officer)
Dated:November 9, 2022August 8, 2023 /s/ Steven Stellato
 Steven Stellato
 Executive Vice President, Chief Accounting and Chief Administrative Officer
(Principal Financial Officer)

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