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 March 31, 20212022
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
Altus Midstream CompanyKINETIK 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.)
One2700 Post Oak Central, 2000 Post Oak Boulevard,Blvd, Suite 100, 300
Houston, Texas, 77056-440077056
(Address of principal executive offices) (Zip
(Zip Code)

(713) 296-6000621-7330
(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 valueALTMKNTKNasdaq Global Market
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 April 30, 202120223,746,46018,986,460 
Number of shares of registrant’s Class C common stock, par value $0.0001 per share issued and outstanding as of April 30, 2021202212,500,00047,260,000 



TABLE OF CONTENTS
 
ItemItemPageItemPage
PART I — FINANCIAL INFORMATIONPART I — FINANCIAL INFORMATION (UNAUDITED)
1.1.
1
1.
1
1
1
2
3
2
4
3
5
4
6
5
2.2.
23
2.
29
3.3.
36
3.
41
4.4.
37
4.
42
PART II — OTHER INFORMATIONPART II — OTHER INFORMATION
1.1.
38
1.
43
1A.1A.
38
1A.
43
6.6.
38
6.
54
55
 

i

GLOSSARY OF TERMS
The following are abbreviations and definitions of certain terms used in this Quarterly Report on Form 10-Q and certain terms which are commonly used in the exploration, production and midstream sectors of the oil and natural gas industry:
•ASC. Accounting Standards Codification.
•ASU. Accounting Standards Update.
•Bbl. One stock tank barrel of 42 United States (U.S.) gallons liquid volume used herein in reference to crude oil, condensate or NGLs.
•Bbl/d. One Bbl per day.
•Bcf. One billion cubic feet of natural gas.
•Bcf/d. One Bcf per 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.
•Delaware basin. Located on the western section of the Permian Basin, the Delaware Basin covers a 6.4M acre area.
•EPA. U.S. Environmental Protection Agency.
•FASB. Financial Accounting Standards Board.
•FERC. U.S. Federal Energy Regulatory Commission.
•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.
•GAAP. United States Generally Accepted Accounting Principles.
•GHG. Greenhouse gas.
•LIBOR. London Interbank Offered Rate.
•MBbl. One thousand barrels of crude oil, condensate or NGLs.
•MBbl/d. One MBbl per day.
•Mcf. One thousand cubic feet of natural gas.
•Mcf/d. One Mcf per day.
•MMBbl. One million barrels of crude oil, condensate or NGLs.
•MMBtu. One million British thermal units.
•MMcf. One million cubic feet of natural gas.
•MMcf/d. One MMcf per day.
•MVC. Minimum volume commitments.
•NGA. Natural Gas Act of 1938.
•NGLs. Natural gas liquids. Hydrocarbons found in natural gas, which may be extracted as liquefied petroleum gas and natural 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.
•SEC. U.S. Securities and Exchange Commission.
•WTI. West Texas Intermediate crude oil.
ii

FORWARD-LOOKING STATEMENTS AND RISK
This Quarterly Report on Form 10-QForm10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended.amended (the 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 the Company’sour future financial position, business strategy, budgets, projected revenues, projected costs and plans, and objectives of management for future operations, are forward-looking statements. Such forward-looking statements are based on the Company’s examination of historical operating trends, production and growth forecasts of Apache Corporation’s Alpine High field development and other data in the Company’s possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “plan,” “believe,” “continue,” “seek,” “guidance,” “might,” “outlook,” “possibly,” “potential,” “prospect,” “should,” “would,” or similar terminology, but the absence of these words does not mean that a statement is not forward looking. Although the Company believeswe believe that the expectations reflected in such forward-looking statements are reasonable under the circumstances, itwe can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’sour expectations include, but are not limited to, its assumptions about:
•our ability to integrate operations or realize any anticipated benefits savings or growth of the scope, duration, and reoccurrence of any epidemics or pandemics (including, specificallyacquisition closed on February 22, 2022. See Note 2— Business Combination in the coronavirus disease 2019 (COVID-19) pandemic) and the actions taken by third parties, including, but not limitedNotes to governmental authorities, customers, contractors, and suppliers,Condensed Consolidated Financial Statements set forth in response to such epidemics or pandemics;
•the availability and effectiveness of any vaccine programs or other therapeutics related to the treatment of COVID-19;this Form 10-Q;
•the market prices of oil, natural gas, natural gas liquids (NGLs)(“NGLs” or “NGL”), and other products or services;
•pipeline and gathering system capacity and availability;
•production rates, throughput volumes, reserve levels, and development success of dedicated oil and gas fields;
•economicour future financial condition, results of operations, liquidity, compliance with debt covenants and competitive conditions;position;
•our future revenues, cash flows, and expenses;
•our future business strategy and other plans and objectives for future operations;
•the availabilityamount, nature, and timing of capital;our future capital expenditures, including future development costs;
•cash flowour ability to access the capital and the timing ofcredit markets to fund capital and other expenditures;
•capital expenditures andthe risks associated with potential acquisitions, divestitures, new joint ventures or other contractual obligations;
•weather conditions;
•inflation rates;strategic opportunities;
•the availabilityrecruitment and retention of goodsour officers and services;
•legislative, regulatory, or policy changes;
•terrorism or cyberattacks;
•occurrence of property acquisitions or divestitures;personnel;
•the integrationlikelihood of acquisitions;success of and impact of litigation and other proceedings, including regulatory proceedings;
•a decline in oil, natural gas, and NGL production,our assessment of our counterparty risk and the impactability of general economic conditions on the demand for oil, natural gas, and NGLs;our counterparties to perform their future obligations;
•the impact of federal, state, and local political, regulatory, and environmental health and safety, and other governmental regulations and of current or pending legislation;
•environmental risks;developments where we conduct our business operations;
•the effectsoccurrence of competition;an extreme weather event such as Winter Storm Uri, terrorist attack or other event that materially impacts project construction and our operations, including cyber or other attached on electronic systems;
•our ability to successfully implement and execute our environmental, social and governance goals and initiatives and achieve the retentionanticipated results of key members of senior management and key technical personnel;
ii

•increases in interest rates;such initiatives;
•general economic and political conditions, including the effectiveness of the Company’s business strategy;
•changesarmed conflict in technology;
•market-related risks, such as general credit, liquidity,Ukraine; and interest-rate risks;
•the timing, amount, and terms of the Company’s future issuances of equity and debt securities;
•other factors disclosed under Item 1A—Risk Factors, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7A—Quantitative and Qualitative Disclosures About Market Risk and elsewhere in the Company’s most recently filed Annual Report on Form 10-K;
•other risks and uncertainties disclosed in the Company’s first-quarter 2021 earnings release;
•other factors disclosed under Part II, Item 1A—1A. Risk Factors ofin this Quarterly Report on Form 10-Q; and
•any other factors disclosed in the other filings that the Company makes with the Securities and Exchange Commission (SEC).10-Q.
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.


iii

GLOSSARY OF TERMS
The following are abbreviations and definitionsTable of certain terms used in this Quarterly Report on Form 10-Q and certain terms which are commonly used in the exploration, production and midstream sectors of the oil and natural gas industry:
•Bbl. One stock tank barrel of 42 United States (U.S.) gallons liquid volume used herein in reference to crude oil, condensate or NGLs.
•Bbl/d. One Bbl per day.
•Bcf. One billion cubic feet of natural gas.
•Bcf/d. One Bcf per 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.
•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.
•MBbl. One thousand barrels of crude oil, condensate or NGLs.
•MBbl/d. One MBbl per day.
•Mcf. One thousand cubic feet of natural gas.
•Mcf/d. One Mcf per day.
•MMBbl. One million barrels of crude oil, condensate or NGLs.
•MMBtu. One million British thermal units.
•MMcf. One million cubic feet of natural gas.
•MMcf/d. One MMcf per day.
•NGLs. Natural gas liquids. Hydrocarbons found in natural gas, which may be extracted as liquefied petroleum gas and natural gasoline.
References to “Altus,” “ALTM,” and the “Company” mean Altus Midstream Company and its consolidated subsidiaries, unless otherwise specifically stated. References to “Apache” mean Apache Corporation and its consolidated subsidiaries. All references to the Company’s Class A common stock, $0.0001 par value (Class A Common Stock), and Class C common stock, $0.0001 par value (Class C Common Stock), reflect such share amounts as retrospectively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020.
iv

Contents
PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

ALTUS MIDSTREAM COMPANYKINETIK HOLDINGS INC.
STATEMENTCONDENSED CONSOLIDATED STATEMENTS OF CONSOLIDATED OPERATIONS
(Unaudited)
 Three Months Ended March 31,
 2021
2020(1)
(In thousands, except per share data)
REVENUES:
Midstream services revenue — affiliate (Note 2)$31,529 $40,767 
Product sales — third parties
2,617 102 
Total revenues34,146 40,869 
COSTS AND EXPENSES:
Costs of product sales1,993 91 
Operations and maintenance(2)
7,402 10,591 
General and administrative(3)
3,455 4,178 
Depreciation and accretion4,000 3,914 
Impairments441 0 
Taxes other than income3,808 3,443 
Total costs and expenses21,099 22,217 
OPERATING INCOME13,047 18,652 
Unrealized derivative instrument loss(16,529)(61,984)
Interest income1 7 
Income from equity method interests, net21,688 15,842 
Warrants valuation adjustment(664)1,877 
Other7,544 (188)
Total other income (loss)12,040 (44,446)
Financing costs, net of capitalized interest2,598 273 
NET INCOME (LOSS) BEFORE INCOME TAXES22,489 (26,067)
Current income tax benefit0 (696)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS22,489 (25,371)
Net income attributable to Preferred Unit limited partners19,492 18,262 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS2,997 (43,633)
Net income (loss) attributable to Apache limited partner2,817 (35,552)
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS$180 $(8,081)
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS, PER SHARE(4)
Basic$0.05 $(2.16)
Diluted$0.05 $(2.69)
WEIGHTED AVERAGE SHARES(4)
Basic3,7463,746
Diluted3,74616,246
 Three Months Ended March 31,*
 20222021
(In thousands, except per share data)
Operating revenues:
Service revenue$80,445 $67,662 
Product revenue174,928 79,993 
Other revenue1,876 448 
Total operating revenues257,249 148,103 
Operating costs and expenses:
Costs of sales (exclusive of depreciation and amortization shown separately below)120,275 37,005 
Operating expenses29,871 15,564 
Ad valorem taxes4,153 2,351 
General and administrative expenses22,752 5,626 
Depreciation and amortization61,023 55,971 
Loss on disposal of assets110 32 
Total operating costs and expenses238,184 116,549 
Operating income19,065 31,554 
Other income (expense):
Interest and other income250 537 
Gain on redemption of mandatorily redeemable Preferred Units4,493 — 
Unrealized loss on embedded derivative(2,886)— 
Interest expense(26,774)(25,310)
Equity in earnings of unconsolidated affiliates27,917 11,355 
Total other income (expense), net3,000 (13,418)
Income before income taxes22,065 18,136 
Income tax expense676 — 
Net income including noncontrolling interest21,389 18,136 
Net income attributable to Preferred Unit limited partners4,993 — 
Net Income attributable to common shareholders16,396 18,136 
Net income attributable to Common Unit limited partners12,531 18,136 
Net income attributable to Class A Common Shareholders$3,865 $— 
Net income attributable to Class A Common Shareholders, per share
Basic$0.21 $— 
Diluted$0.21 $— 
Weighted average shares
Basic18,696 — 
Diluted18,713 — 
(1)This period presented has been revised to reflect* The results of the legacy ALTM business are not included in the Company’s fair value change of its underlying warrants. consolidated financials prior to February 22, 2022.Refer to the Form 10-Q basis of presentation in Note 1—Summary1—Description of Significant Accounting Policies, see the section titled Revision of Previously Issued Consolidated Financial Statements for Immaterial AdjustmentOrganization and for further information.
(2)Includes amounts of $0.8 million and $1.4 million associated with related parties for the three months ended March 31, 2021 and 2020, respectively. Refer to Note 2—Transactions with Affiliates.
(3)Includes amounts of $2.2 million and $2.0 million associated with related parties for the three months ended March 31, 2021 and 2020, respectively. Refer to Note 2—Transactions with Affiliates.
(4)Share and per share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020. Refer to Note 9—Equity for further information.




The accompanying notes to consolidated financial statements are an integral part of this statement.
1

ALTUS MIDSTREAM COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended March 31,
2021
2020(1)
(In thousands)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS$22,489 $(25,371)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Share of equity method interests other comprehensive income (loss)630 (1,184)
COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS23,119 (26,555)
Comprehensive income attributable to Preferred Unit limited partners19,492 18,262 
Comprehensive income (loss) attributable to Apache limited partner3,302 (36,463)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS$325 $(8,354)
(1)This period presented has been revised to reflect the Company’s fair value change of its underlying warrants. Refer to Note 1—Summary of Significant Accounting Policies,, see the section titled Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment for further information.








































information on the Company’s basis of presentation.





The accompanying notes to consolidated financial statements are an integral part of this statement.the unaudited Condensed Consolidated Financial Statements
1
Table of Contents
KINETIK HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31,December 31,
20222021
(In thousands, except per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$17,646 $18,729 
Accounts receivable, net of allowance for credit losses of $1,000 in 2022 and 2021262,575 178,107 
Derivative assets365 — 
Prepaid and other current assets28,881 20,683 
309,467 217,519 
NONCURRENT ASSETS:
Property, plant and equipment, net2,477,944 1,839,279 
Intangible assets, net772,979 786,049 
Derivative assets9,290 — 
Operating lease right-of-use assets57,199 61,562 
Deferred charges and other assets21,563 22,320 
Investment in unconsolidated affiliates2,361,321 626,477 
Goodwill3,894 — 
5,704,190 3,335,687 
Total assets$6,013,657 $3,553,206 
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY
CURRENT LIABILITIES:
Accounts payable$10,900 $12,220 
Accrued expenses210,355 135,643 
Distribution payable to Preferred Unit limited partners6,937 — 
Derivative liabilities7 2,667 
Mandatorily redeemable Preferred Units67,173 — 
Current portion of operating lease liabilities33,029 31,776 
Current portion of long-term debt, net54,324 54,280 
Other current liabilities5,912 4,339 
388,637 240,925 
NONCURRENT LIABILITIES:
Long-term debt, net2,894,025 2,253,422 
Contingent liabilities839 839 
Operating lease liabilities24,044 29,889 
Contract liabilities22,342 11,674 
Mandatorily redeemable Preferred Units68,897 — 
Embedded derivative liabilities91,936 — 
Derivative liabilities— 200 
Deferred tax liabilities11,876 7,190 
Other liabilities2,717 2,219 
3,116,676 2,305,433 
Total liabilities3,505,313 2,546,358 
COMMITMENTS AND CONTINGENCIES (Note 8)00
Redeemable noncontrolling interest — Common Unit limited partners3,185,431 1,006,843 
Redeemable noncontrolling interest — Preferred Unit limited partners460,773 — 
EQUITY:
Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 18,986,460 and nil shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively2 — 
Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 47,260,000 and 50,000,000 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively5 5 
Accumulated deficit(1,137,867)— 
(1,137,860)5 
Total liabilities, noncontrolling interests, and equity$6,013,657 $3,553,206 
The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements
2

Table of Contents
ALTUS MIDSTREAM COMPANYKINETIK HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETSTATEMENTS OF CASH FLOWS
(Unaudited)
March 31,December 31,
 2021
2020(1)
(In thousands, except per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$51,306 $24,188 
Accounts receivable1,259 1,033 
Accounts receivable from Apache Corporation (Note 1)799 446 
Revenue receivables (Note 3)11,152 11,378 
Inventories3,891 3,597 
Prepaid assets and other7,787 2,127 
76,194 42,769 
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment209,323 208,870 
Less: Accumulated depreciation and accretion(15,907)(13,034)
193,416 195,836 
OTHER ASSETS:
Equity method interests1,566,672 1,555,182 
Deferred charges and other6,294 5,843 
1,572,966 1,561,025 
Total assets$1,842,576 $1,799,630 
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY
CURRENT LIABILITIES:
Distributions payable to Preferred Unit limited partners$11,562 $0 
Dividends payable0 5,620 
Distributions payable to Apache Corporation0 18,750 
Other current liabilities (Note 6)10,322 5,613 
21,884 29,983 
LONG-TERM DEBT657,000 624,000 
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Asset retirement obligation65,100 64,062 
Embedded derivative155,538 139,009 
Other noncurrent liabilities6,907 6,424 
227,545 209,495 
Total liabilities906,429 863,478 
COMMITMENTS AND CONTINGENCIES (Note 7)00
Redeemable noncontrolling interest — Apache limited partner662,432 575,125 
Redeemable noncontrolling interest — Preferred Unit limited partners604,749 608,381 
EQUITY:
Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 3,746,460 shares issued and outstanding at March 31, 2021 and December 31, 2020(2)
1 1 
Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 12,500,000 shares issued and outstanding at March 31, 2021 and December 31, 2020(2)
1 1 
Additional paid-in capital38,217 122,222 
Accumulated deficit(369,253)(369,433)
Accumulated other comprehensive loss0 (145)
(331,034)(247,354)
Total liabilities, noncontrolling interests, and equity$1,842,576 $1,799,630 
(1)The Consolidated Balance Sheet as of December 31, 2020 has been derived from the audited consolidated financial statements, revised to reflect the Company’s fair value change of its underlying warrants. Refer to Note 1—Summary of Significant Accounting Policies, see the section titled Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment for further information.
(2)Share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020. Refer to Note 9—Equity for further information.




 Three Months Ended March 31,
20222021
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income including noncontrolling interests$21,389 $18,136 
Adjustments to reconcile net income to net cash provided by operating activities:
           Depreciation and amortization expense61,023 55,971 
           Amortization of deferred financing costs3,389 3,305 
           Amortization of contract costs448 448 
           Distributions from unconsolidated affiliates48,073 8,203 
           Derivatives settlement(884)(1,465)
           Derivatives fair value adjustment(8,745)10,593 
           Gain on redemption of mandatorily redeemable Preferred Units(4,493)— 
           Loss on disposal of assets110 32 
           Equity in (earnings) losses from unconsolidated affiliate(27,917)(11,355)
           Loss (gain) on debt extinguishment129 (239)
           Share-based compensation6,132 — 
           Deferred income taxes676 — 
Change in operating assets and liabilities:
           Accounts receivable(67,446)(69,376)
           Other assets(456)(9,653)
           Operating lease right-of-use assets4,667 8,190 
           Accounts payable(6,766)8,525 
           Accrued liabilities73,961 27,524 
           Operating lease liabilities(4,897)(7,245)
                 Net cash provided by operating activities98,393 41,594 
CASH FLOWS FROM INVESTING ACTIVITIES
           Property, plant and equipment expenditures(29,234)(19,753)
           Intangible assets expenditures(3,559)(782)
           Investment in unconsolidated affiliates— (20,522)
           Net cash acquired in acquisition13,401 — 
                 Net cash used in investing activities(19,392)(41,057)
CASH FLOWS FROM FINANCING ACTIVITIES
           Proceeds from issuance of long-term debt— 30,189 
           Principal payments on long-term debt(26,382)(12,443)
           Proceeds from revolver7,000 11,500 
           Redemption of mandatorily redeemable Preferred Units(60,702)— 
           Payments of deferred financing costs— (3,152)
           Equity contributions— 14,890 
           Equity distributions— (30,189)
                Net cash (used in) provided by financing activities(80,084)10,795 
                Net change in cash$(1,083)$11,332 
CASH, BEGINNING OF PERIOD$18,729 $19,591 
CASH, END OF PERIOD$17,646 $30,923 
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES
           Cash paid for interest, net of amounts capitalized$25,801 $27,044 
           Property and equipment and intangible accruals in accounts payable and accrued liabilities$14,340 $3,410 
           Fair value of ALTM assets acquired$2,445,665 $— 
           Class A Common Stock issued in exchange1,013,745 — 
           ALTM liabilities and mezzanine equity assumed$1,431,920 $— 
The accompanying notes to consolidated financial statements are an integral part of this statement.the unaudited Condensed Consolidated Financial Statements
3

Table of Contents
ALTUS MIDSTREAM COMPANYKINETIK HOLDINGS INC.
STATEMENTCONDENSED CONSOLIDATED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
 Three Months Ended March 31,
 2021
2020(1)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) including noncontrolling interests$22,489 $(25,371)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Unrealized derivative instrument loss16,529 61,984 
Depreciation and accretion4,000 3,914 
Income from equity method interests, net(21,688)(15,842)
Distributions from equity method interests23,810 20,985 
Impairments441 0 
Other income(7,205)0 
Warrants valuation adjustment664 (1,877)
Other217 461 
Changes in operating assets and liabilities:
Increase in inventories(294)(182)
(Increase) decrease in prepaid assets and other544 (79)
Increase in accounts receivable(226)(101)
Decrease in revenue receivables (Note 2)226 3,752 
(Increase) decrease in account receivables from/payable to affiliate279 (948)
Increase in accrued expenses4,491 3,017 
Increase (decrease) in deferred charges, deferred credits, and other noncurrent liabilities(1,005)1,825 
NET CASH PROVIDED BY OPERATING ACTIVITIES43,272 51,538 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(1,330)(19,096)
Proceeds from sale of assets1,090 6,096 
Contributions to equity method interests(20,522)(82,827)
Distributions from equity method interests7,540 1,552 
Capitalized interest paid0 (3,340)
NET CASH USED IN INVESTING ACTIVITIES(13,222)(97,615)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to Preferred Unit limited partners(11,562)0 
Distributions paid to Apache limited partner(18,750)0 
Dividends paid(5,620)0 
Proceeds from revolving credit facility33,000 72,000 
Finance lease0 (11,789)
Deferred facility fees0 (816)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES(2,932)59,395 
INCREASE IN CASH AND CASH EQUIVALENTS27,118 13,318 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR24,188 5,983 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$51,306 $19,301 
SUPPLEMENTAL CASH FLOW DATA:
Accrued capital expenditures(2)
$305 $6,557 
Interest paid, net of capitalized interest2,328 0 
(1)This period presented has been revised to reflect the Company’s fair value change of its underlying warrants. Refer to Note 1—Summary of Significant Accounting Policies, see the section titled Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment for further information.
(2)Includes $0.3 million due from Apache and $1.7 million due to Apache for the three months ended March 31, 2021 and 2020, respectively, pursuant to the terms of the COMA (as defined herein). Refer to Note 2—Transactions with Affiliates for more information.




The accompanying notes to consolidated financial statements are an integral part of this statement.
4

ALTUS MIDSTREAM COMPANY
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS
(Unaudited)
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners(2)
Redeemable Noncontrolling Interest — Apache Limited PartnerClass A Common StockClass C Common StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive Income (Loss)Total Equity
 
Shares(3)
Amount
Shares(3)
Amount
(In thousands)(In thousands)
For the Quarter Ended March 31, 2020(1)
Balance at December 31, 2019 (Revised)$555,599 $701,000 3,746 $1 12,500 $1 $17,327 $(372,224)$(266)$(355,161)
Net income (loss)18,262 (35,552)— — — — — (8,081)— (8,081)
Change in redemption value of noncontrolling interests— (433,710)— — — — 433,710 — — 433,710 
Accumulated other comprehensive loss— (911)— — — — — — (273)(273)
Balance at March 31, 2020 (Revised)$573,861 $230,827 3,746 $1 12,500 $1 $451,037 $(380,305)$(539)$70,195 
For the Quarter Ended March 31, 2021
Balance at December 31, 2020 (Revised)$608,381 $575,125 3,746 $1 12,500 $1 $122,222 $(369,433)$(145)$(247,354)
Distributions paid to Preferred Unit limited partners(11,562)— — — — — — — — — 
Distributions payable to Preferred Unit limited partners(11,562)— — — — — — — — — 
Net income19,492 2,817 — — — — — 180 — 180 
Change in redemption value of noncontrolling interests— 84,005 — — — — (84,005)— — (84,005)
Accumulated other comprehensive income— 485 — — — — — — 145 145 
Balance at March 31, 2021$604,749 $662,432 3,746 $1 12,500 $1 $38,217 $(369,253)$0 $(331,034)
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners(1)
Redeemable Noncontrolling Interest — Common Unit Limited PartnersClass A Common StockClass C Common StockAdditional Paid-in CapitalAccumulated DeficitTotal Equity
 SharesAmountSharesAmount
(In thousands)(In thousands)
For the Quarter Ended March 31, 2021
Balance at December 31, 2020$— $1,041,660 — $— 50,599 $5 $— $— $5 
Contribution— 14,890 — — 246 — — — — 
Distribution paid to Common Unit limited partners— (30,189)— — (498)— — — — 
Net income— 18,136 — — — — — — — 
Balance at March 31, 2021$— $1,044,497 — $— 50,347 $5 $— $— $5 
For the Quarter Ended March 31, 2022
Balance at December 31, 2021$— $1,006,843 — $— 50,000 $5 $— $— $5 
ALTM acquisition462,717 — 16,246 2 — — 1,013,743 — 1,013,745 
Distributions payable to Preferred Unit limited partners(6,937)— — — — — — — — 
Redemption of Common Units— (170,060)2,740 — (2,740)— 170,060 — 170,060 
Share-based compensation— — — — — — 6,132 — 6,132 
Remeasurement of contingent consideration— — — — — — 4,450 — 4,450 
Net income4,993 12,531 — — — — — 3,865 3,865 
Change in redemption value of noncontrolling interests— 2,336,117 — — — — (1,194,385)(1,141,732)(2,336,117)
Balance at March 31, 2022$460,773 $3,185,431 18,986 $2 47,260 $5 $— $(1,137,867)$(1,137,860)
(1)This period presented has been revised to reflect the Company’s fair value change of its underlying warrants. Refer to Note 1—Summary of Significant Accounting Policies, see the section titled Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment 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 10—11—Series A Cumulative Redeemable Preferred Units.
(3)Share amounts have been retroactively restated in the Notes to reflect the Company’s reverse stock split, which was effected June 30, 2020. Refer to Note 9—Equity for further information.



Condensed Consolidated Financial Statements.






The accompanying notes to consolidated financial statements are an integral part of this statement.the unaudited condensed consolidated financial statements
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ALTUS MIDSTREAM COMPANYKINETIK 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 CompanyCompany) (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC)(“SEC”). They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods, on a basis consistent with the annual audited financial statements, with the exception of recently adopted accounting pronouncements. 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)(“GAAP”) have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10-Q should be read along with Altus Midstream Company’s Annual Report on Form 10-KKinetik Holdings Inc.’s audited financial statements and related notes thereto for the fiscal year ended December 31, 2020 (Form 10-K), which contains a summary of2021 filed as Exhibit 99.4 to the Company’s significant accounting policies and other disclosures.Current Report on Form 8-K filed on February 28, 2022. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the audited financial statements for the year ended December 31, 2021 filed as Exhibit 99.4 to the Company’s Current Report on Form 10-K.8-K filed on February 28, 2022

1. DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Transaction
On February 22, 2022 (the “Closing Date”), Kinetik Holdings Inc., a Delaware corporation (formerly known as Altus Midstream Company), consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021 (the “Contribution Agreement”), by and among the Company, Altus Midstream LP (now known as Kinetik Holdings LP), a Delaware limited partnership and subsidiary of Altus Midstream Company (the “Partnership”), New BCP Raptor Holdco, LLC, a Delaware limited liability company (“Contributor”), and BCP Raptor Holdco, LP, a Delaware limited partnership (“BCP”). The transactions are referred to herein as the “Transaction.”
Pursuant to the Contribution Agreement, in connection with the closing of the Transaction (the “Closing”), (i) Contributor contributed all of the equity interests of BCP and BCP Raptor Holdco GP, LLC, a Delaware limited liability company and the general partner of BCP (“BCP GP” and, together with BCP, the “Contributed Entities”), to the Partnership; and (ii) in exchange for such contribution, the Partnership issued 50,000,000 common units representing limited partner interests in the Partnership (“Common Units”) and the Company issued 50,000,000 shares of the Company’s Class C common stock, par value $0.0001 per share (“Class C Common Stock”), to Contributor.
The Company’s stockholders immediately prior to the Closing continued to hold their shares of the Company’s Class A Common Stock, par value $0.0001 per share (“Class A Common Stock,” and together with the Company’s Class C Common Stock, “Common Stock”). As a result of the Transaction, immediately following the Closing (i) Contributor held approximately 75% of the issued and outstanding Common Stock, (ii) Apache Midstream LLC, a Delaware limited liability company (“Apache Midstream”), held approximately 20% of the issued and outstanding Common Stock, and (iii) the Company’s remaining stockholders held approximately 5% of the issued and outstanding Common Stock. Following the Closing, there were approximately 66.2 million total shares of Common Stock outstanding.
In connection with the Closing, the Company changed its name from “Altus Midstream Company” (ALTM) to “Kinetik Holdings Inc.” Unless the context otherwise requires, the “Company,” “ALTM” and “Altus” refers to Altus Midstream Companythe registrant prior to the Closing and “we,” “us,” “our,” and the “Company” refer to Kinetik Holdings Inc., the registrant and its consolidated subsidiaries. “Altus Midstream” referssubsidiaries following the Closing.
Organization
BCP was formed on April 25, 2017 as a Delaware limited partnership to Altus Midstream LPacquire and its consolidated subsidiaries. “Apache” refersdevelop midstream oil and gas assets. BCP’s primary operating subsidiaries are EagleClaw and CR Permian Holdings, LLC (“CR Permian”). Both subsidiaries were formed to Apache Corporationdesign, engineer, install, own and its consolidated subsidiaries. All references to the Company’s Class A common stock, $0.0001 par value (Class A Common Stock),operate facilities and Class C common stock, $0.0001 par value (Class C Common Stock), reflect such share amounts as retrospectively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020. Refer to Note—9 Equityprovide services for further information.
Nature of Operations
    Through its consolidated subsidiaries, the Company ownsproduced natural gas gathering, compression, processing, treating and transmission assets in the Permian Basin of West Texas. Construction on the assets began in the fourth quarter of 2016,dehydration, and operations commenced in the second quarter of 2017. Additionally, the Company owns equity interests in 4 separate Permian Basin pipeline entities that have access to various points along the Texas Gulf Coast. The Company’s operations consist of 1 reportable segment.condensate separation, stabilization, and storage, crude oil gathering and storage, water gathering and disposal assets.
Organization
The CompanyALTM was originally incorporated on December 12, 2016 in Delaware under the name Kayne Anderson Acquisition Corp. (KAAC)(“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
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Table of 2017.Contents
of 2017. On August 3, 2018, Altus Midstream LP was formed in Delaware as a limited partnership and wholly-owned subsidiary of KAAC. On August 8, 2018, KAAC and Altus Midstream LP entered into a contribution agreement (the Contribution Agreement) with certain wholly-owned subsidiariesaffiliates of Apache including 4 Delaware limited partnerships (collectively, AltusCorporation (“Apache” and such affiliates the “Altus Midstream Operating) and their general partner (Altus Midstream Subsidiary GP LLC, a Delaware limited liability company, and together with Altus Midstream Operating, the Altus Midstream Entities). The Altus Midstream Entities wereEntities”), 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)(“Alpine High”).
On November 9, 2018, (the Closing Date) and pursuant to the terms of the Contribution Agreement, KAAC acquired from Apache the entireall equity interests of the Altus Midstream Entities and options to acquire equity interests in five separate third-party pipeline projects (the Pipeline Options). The acquisition of the entities and the Pipeline Options is referred to herein as the Business Combination. In exchange, the consideration provided to Apache included economic voting and non-economic voting shares in KAAC and common partnership units representing limited partner interests in Altus Midstream LP (Common Units). Following the Closing Date and in connection with the completion of the Business Combination, KAAC changed its name to Altus Midstream Company.

6

Ownership of Altus Midstream LP
As of and followingOn February 22, 2022, upon the Closing, Date and in connection with the completion of the Business Combination, the Company’s wholly-owned subsidiary, Altus Midstream GP LLC, a Delaware limited liability company (Altus Midstream GP), is the sole general partner of Altus Midstream LP. The Company operates its business through Altus Midstream LPlegacy BCP and its subsidiaries which includebecame wholly-owned subsidiaries of the legacy Altus Midstream Operating.Company. 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 in this Form 10-Q for an additional discussion.
Nature of Operations
Through its consolidated subsidiaries, the Company holds approximately 23.1 percent ofprovides comprehensive gathering, water disposal, transportation, compression, processing and treating services necessary to bring natural gas, NGLs and crude oil to market. Additionally, the outstanding Common Units, and a controlling interest,Company owns equity interests in Altus Midstream, while Apache holdsfour separate Permian Basin egress pipeline entities that have access to various markets along the remaining 76.9 percent.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESTexas Gulf Coast.
Basis of Presentation
The consolidated financial statementsaccompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).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.
Principles All adjustments that, in the opinion of Consolidation
The consolidated financialmanagement, are necessary for a fair presentation of the results of Altus Midstreamoperations for the interim periods have been made and are includedof a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. All intercompany balances and transactions have been eliminated in consolidation.
Prior to the Closing, the Company’s consolidated financial statements duethat were filed with the SEC were derived from ALTM’s accounting records. As the Transaction was determined to be a reverse merger, BCP was considered as the accounting acquirer and ALTM was the legal acquirer. The accompanying Condensed Consolidated Financial Statements herein include (1) BCP’s net assets carried at historical value, (2) BCP’s historical results of operations prior to the Company’s 100 percent ownership interest in Altus Midstream GP,Transaction, (3) the ALTM’s net assets carried at fair value as of the Closing Date and Altus Midstream GP’s control(4) the combined results of Altus Midstream.
The Company has no independent operations or material assets other than its partnership interests in Altus Midstream, which constitutes all of its business. Additionally,with the Company’s balance sheet reflectsresults presented within the presentation of noncontrolling interest ownership attributable to the limited partner interests in Altus Midstream held by Apache and the holders of Series A Cumulative Redeemable Preferred Units (the Preferred Units).Condensed Consolidated Financial Statements from February 22, 2022 going forward. Refer to Note 9—Equity2—Business Combination and Note 10—Series A Cumulative Redeemable Preferred Unitsto our Condensed Consolidated Financial Statements in this Form 10-Q for further information.additional discussion.
Variable Interest Entity
Altus Midstream isThe Company uses a qualitative approach in assessing the consolidation requirement for variable interest entity (VIE) becauseentities. The approach focuses on identifying which enterprise has the partners in Altus Midstream with equity at risk lack the power through voting or similar rights, to direct the activities that most significantly impact Altus Midstream’s economic performance.
A reporting entity that concludes it has athe variable interest in a VIE must evaluate whether itentity’s economic performance and which enterprise has a controlling financialthe obligation to absorb losses or the right to receive benefits from the variable interest inentity. In the VIE, suchevent that it is the VIE’s primary beneficiary and should consolidate. The Company is the primary beneficiary of Altus Midstream,a variable interest entity, the assets, liabilities, and therefore should consolidate Altus Midstream because (i)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 abilityoperating 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 directNote 9—Equity Method Investmentsin the activities of Altus Midstream that most significantly affect its economic performance, and (ii) the Company has the rightNotes to receive benefits or the obligation to absorb losses that could be potentially significant to Altus Midstream.our Condensed Consolidated Financial Statements in this Form 10-Q.
Redeemable Noncontrolling Interest — ApacheCommon Units Limited PartnerPartners
The Company’s redeemable noncontrolling interest presentedPursuant to the Contribution Agreement, in connection with the consolidated financial statements consistsClosing, (i) Contributor contributed all of Common Unitsthe equity interests of the Contributed Entities to the Partnership; and (ii) in exchange for such contribution, the Partnership issued 50,000,000 common units representing limited partner interests in Altus Midstream held by Apache. Pursuant to certain provisions of the partnership agreement of Altus Midstream (as amended in connection withPartnership and the Business Combination, and subsequent issuance of Preferred Units, the Amended LPA), the limited partner interests held by Apache are equal to the number ofCompany issued 50,000,000 shares of the Company’s Class C Common Stock, held by Apache.common stock, par value $0.0001 per share, to Contributor. Please refer to the Transaction discussed above.
The Common Units are redeemable at the option of unit holders and accounted for on the Company’s Condensed Consolidated Balance Sheet as a redeemable noncontrolling interest classified as temporary equity. The Company initially recordedrecords the redeemable noncontrolling interest upon the issuance of the Common Units to Apache as part of the Business Combination and based on the recapitalization value ascribed at the Closing Date to the limited partner interest. All or a portion of these Common Units may be redeemed at Apache’s option. The Company has the ability to settle the redemption option either (i) in shares of Class A Common Stock, on a 1-for-one basis, or (ii) in cash (based on the fair market value of the Class A Common Stock as determined pursuant to the Contribution Agreement), subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications. Upon the future redemption or exchange of Common Units held by Apache, a corresponding number of shares of Class C Common Stock will be cancelled.
The Company’s policy is to record the redeemable noncontrolling interest represented by the Common Units held by Apache at the higher of (i) its initial fair value plus accumulated earnings/losses associated with the noncontrolling interest or (ii) the maximum redemption value as of the balance sheet date. The redemption value was
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determined based on a 5-day volume weighted average closing price of the Class A Common Stock. See discussion and additional detail further discusseddetails in Note 9—10—Equity and Warrants..
7

Redeemable Noncontrolling Interest — Preferred Unit Limited Partners
OnThe Partnership issued Series A Cumulative Redeemable Preferred Units (“Preferred Units”) on June 12, 2019, Altus Midstream2019. As the Transaction was accounted for as a reverse merger, the Company assumed certain Preferred Units that were issued and sold the Preferred Units in a private offering, and the purchasers of the Preferred Unitsoutstanding were admitted as limited partners of Altus Midstream.assumed at Closing for accounting purposes. The Preferred Units will beare exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders after the seventh anniversary of the closing of the Preferred Unit offering or upon the occurrence of specified events, unless otherwise redeemed by Altus Midstream.the Company.
The Preferred Units are accounted for on the Company’s consolidated balance sheetCondensed Consolidated Balance Sheet as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units. Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value and are accounted for on the Company’s consolidated balance sheetCondensed Consolidated Balance Sheet as a long-term liability embedded derivative.
See discussion and additional detail further discussed in Note 10—11—Series A Cumulative Redeemable Preferred Units.
Equity Method InterestsInvestments
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 interestsinvestments are carried originally at acquisition cost, increased by Altus’the Company’s proportionate share of the equity interest’s net income and contributions made, by Altus, and decreased by Altus’the Company’s proportionate share of the equity interest’s net losses and distributions received by Altus.received. Please refer to Note 8—9—Equity Method InterestsInvestments, for further details of the Company’s equity method interests.investments. Equity method investments acquired in the Transaction were recorded at fair value upon Closing. See discussion and additional detail in Note 2—Business Combination for purchase price allocation of the Transaction.
Use 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 date of the condensed 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 financial statements, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include the valuation of derivatives, the valuation of tangible and intangible assets, the valuation of share-based compensation, the valuation of contingent liabilities, the valuation of mandatorily redeemable Preferred Units, and the valuation of noncontrolling interests.

Inventory
8

RevisionOther current assets include inventory that consists of Previously Issued Consolidated Financial Statements for Immaterial Adjustment
Warrants
On April 12, 2021,condensate, and NGLs that are valued at the SEC Staff issued a Staff Statement on Accountinglower of cost or market. At the end of each reporting period, the Partnership assesses the carrying value of inventory and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (SPACs) (the SEC Staff Statement). The SEC Staff Statement addresses certain accounting and reporting considerations relatedmakes any adjustments necessary to warrants of a kind similarreduce the carrying value to the applicable net realizable value. Inventory was valued at $4.8 million and $2.1 million as of March 31, 2022 and December 31, 2021, respectively.
Impairment of Long-Lived Assets
In accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 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 publicmanagement assesses whether there has been an impairment trigger, and private warrants outstandingif a trigger is identified, then the Company would perform an undiscounted cash flow test at the timelowest level for which identifiable cash flows are independent of cash flows from other assets. If the sum of the Business Combination. The SEC determined that certain featuresundiscounted future net cash flows is less than the net book value of warrants issued in SPAC transactions common across many entities, such as those outstandingthe property, an impairment loss is recognized for the Company, should be recorded as a derivative liability under ASC 815 “Derivatives and Hedges” withexcess, if any, changes inof the property’s net book value over its estimated fair value being recorded as a gain or loss in the Company’s Statement of Consolidated Operations.value. The Company has historically accounteddid not recognize impairment losses for its warrants as equity, with no change in fair value being recorded in the applicable period. The Company has concluded that the previous accounting policy to account for its warrants as equity rather than as a liability was an immaterial error. The Company has corrected this immaterial error by revising its consolidated financial statements as of and for the year ended December 31, 2020 and as of and forlong-lived assets during the three months ended March 31, 20202022 and related notes included herein to include the effect of accounting for the warrants as a liability from the date of the Business Combination. Note12—Net Income (Loss) Per Share and Note 13—Fair Value Measurements have also been updated to reflect this revision. In addition, management has also corrected previously identified immaterial errors related to income from its equity method interests unrelated to the SEC Staff Statement.
The impacts of this adjustment in fiscal year 2020, as presented in the accompanying financial statements, are as follows:
Statement of Consolidated Operations:
Three Months Ended March 31, 2020
As Reported
Change(1)
As Revised
(In thousands)
Income from equity method interests, net$16,298 $(456)$15,842 
Warrants valuation adjustment0 1,877 1,877 
Total other income (loss)(45,867)1,421 (44,446)
Net income (loss) before income taxes(27,488)1,421 (26,067)
Net income (loss) including noncontrolling interests(26,792)1,421 (25,371)
Net income (loss) attributable to common shareholders(45,054)1,421 (43,633)
Net income (loss) attributable to Apache limited partner(35,201)(351)(35,552)
Net income (loss) attributable to Class A common shareholders(9,853)1,772 (8,081)
Net Income (Loss) Attributable To Class A Common Shareholders, Per Share
Basic$(2.63)$0.47 $(2.16)
Diluted$(2.77)$0.08 $(2.69)
(1)All changes related to Income from equity method interests, net above relate to an immaterial prior period adjustment unrelated to the SEC Staff Statement.
Statement of Consolidated Comprehensive Income (Loss):
Three Months Ended March 31, 2020
As Reported
Change(1)
As Revised
(In thousands)
Net income (loss) including noncontrolling interests$(26,792)$1,421 $(25,371)
Comprehensive income (loss) including noncontrolling interests(27,976)1,421 (26,555)
Comprehensive income (loss) attributable to Apache limited partner(36,112)(351)(36,463)
Comprehensive income (loss) attributable to Class A Common Shareholders(10,126)1,772 (8,354)
(1)All changes related to Income from equity method interests, net relate to an immaterial prior period adjustment unrelated to the SEC Staff Statement.2021.
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Consolidated Balance Sheet:Transactions with Affiliates
December 31, 2020
As ReportedChangeAs Revised
(In thousands)
Other non-current liabilities$5,539 $885 $6,424 
Total liabilities862,593 885 863,478 
Additional paid-in-capital144,716 (22,494)122,222 
Accumulated equity (deficit)(391,042)21,609 (369,433)
Statement of Consolidated Cash Flows:
Three Months Ended March 31, 2020
As Reported
Change(1)
As Revised
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITY:
Net income (loss) including noncontrolling interests$(26,792)$1,421 $(25,371)
Income from equity method interests, net(16,298)456 (15,842)
Warrants valuation adjustment0 (1,877)(1,877)
Net Cash Provided by Operating Activities51,538 0 51,538 
(1)All changes related to Income from equity method interests, net above relate to an immaterial prior period adjustment unrelated to the SEC Staff Statement.
Fair Value Measurements
Accounting Standards Codification (ASC) 820-10-35, “Fair Value Measurement” (ASC 820), provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in active markets. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs that are significant and unobservable; hence, these valuations have the lowest priority.
The valuation techniques that may be used to measure fair value include a market approach, an income approach and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models, and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).
Embedded features identified within the Company’s agreements are bifurcated and measured at fair value at the end of each period on the Company’s consolidated balance sheet. Such recurring fair value measurements are presented in further detail in Note 13—Fair Value Measurements. When required the Company also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment.
Accounts Receivable From/Payable To Apache
The accounts receivable from or payable to Apacheaffiliate represent the net result of Altus Midstream’sthe Company’s monthly revenue, capital and operating expenditures, and other miscellaneous transactions to be settled with Apache as provided under the Construction, Operations and Maintenance Agreement (COMA) between the two entities. Generally, cash in this amount will be transferred to Apache in the month afterits subsidiaries, who held equity shares that represented approximately 13.6% of the Company’s transactions are processed and the net resultsvoting power as of operations are determined. However,April 22, 2022. Accounts receivable from time to time, the Company may estimate and transfer the cash settlement amount in the month the transactions are processed, in order to minimize related-party working capital balances. See discussion and additional detail in Note 2—Transactions with Affiliates.
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Other Income
In 2020, the Company entered into a contract with a provider to supply the Company with electrical power. If the Company does not utilize all of its fixed purchase volumes under this contract, then it will receive a credit based on a market rate for the related underutilization. In February 2021, in conjunction with increased power pricing due to the Texas freeze event and under usage of contractual electricity volumes, the Company earned an estimated credit of approximately $7.2 million. This amount is recorded on the statement of consolidation operations in Other income and is recorded in Prepaid assets and other on the consolidated balance sheet. NaN credits were recorded for the three month period ending March 31, 2020. The Company has no remaining performance obligations related to these creditsaffiliate was $24.7 million as of March 31, 2021.2022. For the three months ended March 31, 2022, revenue from affiliate was $15.6 million. Accrued expense due to affiliate was $4.2 million as of March 31, 2022 and operating expenses for the three months ended March 31, 2022 were immaterial.
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.
The Company uses the “if-converted method” to determine the potential dilutive effect of (i) an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) for shares of Class A Common Stock, (ii) an assumed exercise of the outstanding public and private warrants for shares of Class A Common Stock and (iii) an assumed exchange of the outstanding Preferred Units for shares of Class A Common Stock. The dilutive effect of any earn-out consideration payable in shares is only included in periods for which the underlying conditions for the issuance are met.
Recently Adopted Accounting Pronouncement
Effective January 1, 2022, the Company adopted ASU 2021-08, 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. 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.
Recent Accounting Pronouncement Not Yet Adopted
In March 2020, the FASB issued 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 the London Interbank Offered Rate (“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. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the effect that ASU 2020-04 will have on its Consolidated Financial Statements.
In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method (“ASU 2022-01”). Current GAAP permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio. The amendments in ASU 2022-01 allow nonprepayable financial assets also to be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets, thereby allowing consistent accounting for similar hedges. The amendments in ASU 2022-01 also clarify the accounting for and promote consistency in the reporting of hedge basis adjustments applicable to both a single hedged layer and multiple hedged layers as follows: (1) an entity is required to maintain basis adjustments in an existing hedge on a closed portfolio basis (that is, not allocated to individual assets), (2) an entity is required to immediately recognize and present the basis adjustment associated with the amount of the designated layer that was breached in interest income. In addition, an entity is required to disclose that amount and the circumstances that led to the breach, (3) an entity is required to disclose the total amount of the basis adjustments in existing hedges as a reconciling amount if other areas of GAAP require the disaggregated disclosure of the amortized cost basis of assets included in the closed portfolio, and (4) an entity is prohibited from considering basis adjustments in an existing hedge when determining credit losses. The guidance is effective for public business entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of ASU 2022-01 for any entity that has adopted the amendments in
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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.    TRANSACTIONS WITH AFFILIATESBUSINESS COMBINATION
RevenuesOn February 22, 2022, the Company consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021. Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of the Contributed Entities to the Partnership; and (ii) in exchange for such contribution, the Partnership issued 50,000,000 common units representing limited partner interests in the Partnership and the Company issued 50,000,000 shares of the Company’s Class C common stock, par value $0.0001 per share, to Contributor. Please refer to the “Transaction” discussed above.
The Transaction was accounted for as a business combination in accordance with ASC 805, among other things, requires assets acquired and liabilities assumed to be measured at their acquisition date fair value. The Company also adopted ASU 2021-08, effective as of January 1, 2022, to record contract liabilities at their carrying value as of the acquisition date. Although the Company was the legal acquirer, BCP and BCP GP were 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 at 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 $3.9 million relates to operational synergies. The value of the Preferred Units and assumed contingent liability was determined through a probability-weighted analysis of the expected future cash flows and other applicable valuation techniques. See additional details for Preferred Units in Note 11—Series A Cumulative Redeemable Preferred Unitsand contingent liabilities inNote 8—Commitments and Contingenciesin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q. Certain data necessary to complete the purchase price allocation is not yet available, including, but not limited to, 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. The Company will finalize the purchase price allocation during the 12-month period following the acquisition date.
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The following table summarizes the preliminary estimated fair value of assets acquired and liabilities assumed in the Transaction in accordance with ASC 805:
(In thousands)Amount
Cash and cash equivalent$13,401 
Accounts receivable1,341 
Accounts receivable - affiliates15,681 
Property, plant, and equipment, net634,923 
Intangible assets, net13,200 
Investments in unconsolidated affiliates1,755,000 
Prepaid expense and other assets8,225 
Goodwill3,894 
Total assets acquired2,445,665 
Accrued expenses and other accrued liabilities4,923 
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 assumed969,203 
Redeemable noncontrolling interest - Preferred Unit limited partners462,717 
Total consideration transferred$1,013,745 
The Company has contracted to provide services including gas gathering, compression, processing, transmission, and NGL transmission, pursuant to acreage dedications provided by Apache, comprising the entire Alpine High acreage. In accordance with the termsincurred acquisition-related costs of these agreements, the Company receives prescribed fees based on the type and volume of product for which the services are provided. Additionally, beginning in 2020, Altus Midstream entered into 3 agreements to provide operating and maintenance services for Apache’s compressors in exchange for a fixed monthly fee per compressor serviced.
Revenues generated under these agreements are presented on the Company’s statement of consolidated operations as “Midstream services revenue — affiliate.” Revenues earned that have not yet been invoiced to Apache are presented on the Company’s consolidated balance sheet as “Revenue receivables.” Refer to Note 3—Revenue Recognition for further discussion.
Cost and Expenses
The Company has no employees and receives certain operational, maintenance, and management services from Apache under the COMA. Under the COMA, the Company incurred operations and maintenance expenses of $0.8 million and $1.4$5.7 million for the three months ended March 31, 20212022. During the quarter ended March 31, 2022, the Company assumed additional revolver liabilities through the Transaction. There was no significant modification to the Company’s debt structure.
Supplemental Pro Forma Information
The unaudited supplemental pro forma financial for informational purposes only and 2020, respectively.is not indicative of future results. The Company incurred general and administrative expenses of $2.2 million and $2.0 millionresults below for the three months ended March 31, 2022 and 2021 combine the results of the Company and 2020, respectively, including expenses relatedthe Partnership, giving effect to the COMA. Further informationTransaction as if it had been completed on this related-party agreement in place during the period is provided below.
Construction, Operations and Maintenance Agreement
At the closing of the Business Combination, the Company entered into the COMA with Apache. Under the terms of the COMA, Apache provides certain services related to the design, development, construction, operation, management, and maintenance of certain gathering, processing and other midstream assets, on behalf of the Company. In return, the Company paid or will pay fees to Apache of (i) $5.0 million for the period of January 1, 2020 through December 31, 2020, (ii) $7.0 million for2021.
Three Months Ended March 31,
20222021
(In thousands)Pro formaPro forma
Revenues$284,102 $182,249 
Net income including noncontrolling interest$13,468 $16,802 
Given the periodassumed pro forma transaction date of January 1, 2021, through December 31, 2021 and (iii) $9.0we removed $18.7 million annually thereafter, adjusted based on actual internal overhead and general and administrative costs incurred, until terminated. The annual fee was negotiated as part of the Business Combination to reimburse Apache for indirect costs of performing administrative corporate functionsacquisition-related expenses for the Company, including servicesthree months ended March 31, 2022 and recognized $29.0 million of total acquisition-related expenses for information technology, risk management, corporate planning, accounting, cash management, and others.
In addition, Apache may be reimbursed for certain internal costs and third-party costs incurred in connection with its role as service provider under the COMA. Costs incurred by Apache directly associated with midstream activity, where substantially all the services are rendered for Altus Midstream, are charged to Altus Midstream on a monthly basis.
The COMA stipulates that the Company shall provide reimbursement of amounts owing to Apache attributable to a particular month by no later than the last day of the immediately following month. Unpaid amounts accrue interest until settled.
The COMA will continue to be effective until terminated (i) upon the mutual consent of Altus and Apache, (ii) by either of Altus and Apache, at its option, upon 30 days’ prior written notice in the event Apache or an affiliate no longer owns a direct or indirect interest in at least 50 percent of the voting or other equity securities of Altus, or (iii) by Altus if Apache fails to perform any of its covenants or obligations due to willful misconduct of certain key personnel and such failure has a material adverse financial impact on Altus.three months ended March 31, 2021.
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Distributions to Apache
In December 2020, the Company’s Board of Directors declared a cash dividend of $1.50 per share on the Company’s Class A Common Stock, totaling $5.6 million, which was paid to stockholders in the first quarter of 2021. This payment included a payment of approximately $0.5 million to Apache due to its 9.8 percent ownership of the Company’s Class A Common Stock. The Class A Common Stock dividend was funded by a distribution from Altus Midstream to its common unitholders of $1.50 per Common Unit, totaling $24.4 million, of which $5.6 million, as noted above, was paid to the Company to fund the cash dividend payment, and the balance of $18.8 million was paid to Apache due to its 76.9 percent ownership of outstanding Common Units. Please refer to Note 9—Equity for further information.
3.    REVENUE RECOGNITION
Disaggregation of Revenue
The following table presents a disaggregation of the Company’s revenue.
Three Months Ended March 31,
20212020
Gas gathering and compression$4,335 $5,720 
Gas processing23,195 29,896 
Transmission3,157 4,175 
NGL transmission528 826 
Other314 150 
Midstream services revenue — affiliate31,529 40,767 
Product sales — third parties
2,617 102 
Total revenues$34,146 $40,869 
Three Months Ended March 31,
20222021
(In thousands)
Gathering and processing services$80,445 $67,662 
Natural gas, NGLs and condensate sales174,928 79,993 
Other revenue1,876 448 
Total revenues and other$257,249 $148,103 
There have been no significant changes to the Company’s contracts with customers during the three months ended March 31, 2022 and 2021. Contracts with customers acquired through the Transaction had similar structure as the Company’s existing contracts with customers. The Company recognized revenues from MVC deficiency payments of nil and $2.5 million for the three months ended March 31, 2022 and 2021, and 2020.respectively.
Payments with all
Remaining Performance Obligations
The following table presents our estimated revenue from contracts with customers are typically due one month after physical delivery of the product or servicefor remaining performance obligations that has not yet been rendered. Revenue receivables from the Company’s contracts with Apache totaled $11.2 million and $11.4 millionrecognized, representing our contractually committed revenues as of March 31, 20212022:
Amount
Fiscal Year(In thousands)
Remaining of 2022$10,179 
202311,626 
20248,102 
20256,227 
20265,066 
Thereafter72,952 
$114,152 
Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to customer contracts that have fixed pricing and December 31, 2020, respectively, as presented on the Company’s consolidated balance sheet. Sales revenue receivables from the Company’sfixed volume terms and conditions, generally including contracts with third parties totaled $1.3 million and $1.0 millionpayment obligations associated with MVCs.
Contract Liabilities
The following table provides information about contract liabilities from contracts with customers as of March 31, 20212022:
Amount
(In thousands)
Balance as of January 1, 2022$14,756 
Reclassification of beginning contract liabilities to revenue as a result of performance obligation being satisfied(1,328)
Cash received and not recognized as revenue13,908 
Balance as of March 31, 202227,336 
Less: Current portion4,994 
Non-current portion$22,342 
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. These costs are recovered through the net cash flows of the associated contract. As of March 31, 2022 and December 31, 2020, respectively, as presented on the Company’s consolidated balance sheet.
In accordance with the provisions of ASC Topic 606, “Revenue from Contracts with Customers,” variable market prices for each short-term sale are allocated entirely to each performance obligation as the terms of payment relate specifically to the Company’s efforts to satisfy its obligations. As such,2021, the Company has elected the practical expedients available under the standard to not disclose the aggregate transaction price allocated to unsatisfied, or partially unsatisfied, performance obligations ashad contract acquisition cost assets of $17.9 million and $18.4 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 endCondensed Consolidated Balance Sheets. The Company amortizes these assets as cost of sales on a straight-line basis over the life of the reporting period.
associated long-term customer contract. For the three months ended March 31, 2022 and 2021, the Company recognized cost of sales associated with these assets of $0.4 million and $0.4 million, respectively.


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4.    PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost or fair market value at the date of acquisition less accumulated depreciation. The cost basis of constructed assets includes materials, labor, and other direct costs. Major improvements or betterment are capitalized, while repairs that do not improve the life of the respective assets are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets as follows:
Estimated Useful Life
Buildings30 years
Gathering, processing and transmission systems and facilities20 years
Furniture and fixtures7 years
Vehicles5 years
Computer hardware and software3 years

Property, plant and equipment, at carrying value, is as follows:
March 31,December 31,
20212020
(In thousands)
Gathering, processing and transmission systems and facilities(1)
$206,044 $204,643 
Construction in progress40 904 
Other property and equipment3,239 3,323 
Total property, plant and equipment209,323 208,870 
Less: accumulated depreciation and amortization(15,907)(13,034)
Total property, plant and equipment, net$193,416 $195,836 
(1)Included in gathering, processing, and transmissions systems and facilities are compressors under lease to Apache totaling $10.2 million and $6.2 million, net as of March 31, 2021 and December 31, 2020, respectively.
March 31,December 31,
20222021
(In thousands)
Gathering, processing and transmission systems and facilities$2,770,137 $2,121,434 
Vehicles7,055 6,090 
Computers and equipment4,492 4,271 
Less: accumulated depreciation(367,629)(337,030)
Total depreciable assets, net2,414,055 1,794,765 
Construction in progress44,142 24,888 
Land19,747 19,626 
Total property, plant and equipment, net$2,477,944 $1,839,279 
The cost of property classified as “Construction in progress” is excluded from capitalized costs being depreciated. These amounts represent property that is not yet available to be placed into productive service as of the respective balance sheetreporting date. The Company recorded $30.8 million and $25.6 million of depreciation expense for the three months ended March 31, 2022 and 2021, respectively.

5.    GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
The Company closed a business combination transaction on February 22, 2022, refer to the Transaction in Note 2—Business Combination in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q. The Transaction was accounted for as business combination pursuant to ASC 805 Business Combination (“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 $3.9 million upon Closing and as of March 31, 2022.
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Goodwill is tested at least annually as of December 31 of each year, or more frequently as events occur or circumstances change that would more-likely-than-not reduce fair value of a reporting unit below its carrying value. Company’s management assesses whether there has been event or circumstance that triggers 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 March 31, 2022.
Intangible Assets
Intangible assets, net are comprised of the following:
March 31,December 31,
20222021
(In thousands)
Customer contracts$1,135,963 $1,135,963 
Right of way assets116,471 99,345 
Less accumulated amortization(479,455)(449,259)
Total amortizable intangible assets, net$772,979 $786,049 
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 20 years. Right of way assets relate primarily to underground pipeline easements and have a useful life of ten years and are amortized using the straight-line method. The right of way agreements are generally for an initial term of ten years with an option to renew for an additional ten years at agreed upon renewal rates based on certain indices or up to 130% of the original consideration paid.
The Company recorded $30.2 million and $30.4 million of amortization expense for the three months ended March 31, 2022 and 2021, respectively. There was no impairment recognized on intangible assets for the three months ended March 31, 2022 and 2021.

6.    DEBT AND FINANCING COSTS
During the quarter ended March 31, 2022, the Company assumed additional revolver liabilities through the Transaction closed in February 2022. There was no significant modification to the Company’s debt structure.
2017 Credit Facility - BCP 1
On June 22, 2017, BCP Raptor, LLC (“BCP I”), a wholly owned subsidiary of BCP and the parent of EagleClaw Midstream Ventures, LLC (“EagleClaw”), entered into a credit agreement with its lenders and with Jefferies Finance LLC, as administrative agent, for a term loan in and initial aggregate principal amount of $1.25 billion with a tenor of seven years, maturing on June 22, 2024. Fixed principal payments equal to 0.25% of the initial principal amount are required to be paid quarterly. Interest is paid on the term loan periodically at a rate equal to 4.25% plus LIBOR subject to a floor of 1.0%.The Company paid scheduled principal payments on this term loan of $3.1 million for the three months ended March 31, 2022 and 2021. BCP I repurchased $2.9 million of the outstanding term loan during the first quarter of 2021. No repurchase was made for this term loan during the first quarter of 2022.
In addition, contemporaneously with the credit agreement described above, BCP I entered into a super-priority revolving credit agreement with its lenders and with Jefferies Finance LLC, as administrative agent, in an initial aggregate principal amount of $100.0 million with a tenor of five years, maturing on June 22, 2022. On January 16, 2020, BCP I entered into an amendment to the revolving credit agreement that increased the revolving commitment in an aggregate principal amount of $25.0 million, thereby increasing the aggregate revolving credit commitments of all lenders to $125 million. On January 4, 2021, BCP I entered into an amendment to extend the maturity date from June 22, 2022 to November 3, 2023.
Interest is paid on the revolver periodically at a rate equal to LIBOR (0% floor) plus 4.00%, which decreases to LIBOR (0% floor) plus 3.75% when BCP I’s consolidated net leverage ratio is no greater than 4.50 to 1.00. BCP I must pay commitment fees quarterly in an amount equal to 0.50% per annum, which decreases to 0.375% per annum when BCP I’s consolidated net leverage is no greater than 4.50 to 1.00, in each case on the unused portion of the commitment. As of March 31, 2022 and December 31, 2021, there were $59.0 million and $52.0 million in outstanding borrowings under the revolving credit facility, respectively.
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2018 Credit Facilities - BCP II and Partnership
In November 2018, Altus Midstreamthe Partnership entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream’s 2, one year extension options) (“Corporate Facility”). The agreement for this revolving credit facility as amended (the Amended Credit Agreement), provides aggregate commitments from a syndicate of banks of $800.0 million. The aggregate commitments include a letter of credit subfacility of up to $100.0 million and a swingline loan subfacility of up to $100.0 million. Altus MidstreamThe Partnership may increase commitments up to an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders. As of March 31, 2021,2022, there were $657.0 million of borrowings and a $2.0 million of letterletters of credit outstanding under this facility. As of December 31, 2020, there were $624.0 million of borrowings and 0 letters of credit were outstanding under this facility.
Altus Midstream’s revolving credit facility is unsecured and is not guaranteed by the Company, Apache, APA Corporation or any of their respective subsidiaries.
At Altus Midstream’sthe Partnership’s option, the interest rate per annum for borrowings under this facility is either a base rate, as defined, plus a margin, or the London Interbank Offered Rate (LIBOR),LIBOR, plus a margin. Altus MidstreamThe Partnership also pays quarterly a facility fee at a rate per annum on total commitments. The margins and the facility fee vary based upon (i) the Leverage Ratio (as defined below) until Altus Midstream has a senior long-term debt rating and (ii) such senior long-term debt rating once it exists. The Leverage Ratio is the ratio of (1) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries to (2) EBITDA (as defined in the Amended Credit Agreement) of Altus Midstream and its restricted subsidiaries for the 12-month period ending immediately before the determination date. At March 31, 2021,2022, the base rate margin was 0.05 percent,0.05%, the LIBOR margin was 1.05 percent,1.05%, and the facility fee was 0.20 percent.0.20%. In addition, a commission is payable quarterly to the lenders on the face amount of each outstanding letter of credit at a per annum rate equal to the LIBOR margin then in effect. Customary
Contemporaneous with the close of the CR Permian acquisition on November 1, 2018, BCP Raptor II, LLC (“BCP II”), a wholly owned subsidiary of BCP and the parent of CR Permian, entered into a credit agreement with its lenders and with Barclays Bank PLC, as administrative agent, for a term loan in an initial aggregate principal amount of $690.0 million with a tenor of seven years, maturing on November 3, 2025. Fixed principal payments equal to 0.25% of the initial principal amount are required to be paid quarterly. Interest is paid on the term loan periodically at a rate equal to 4.75% plus LIBOR (0% floor). BCP II paid scheduled principal payments on this term loan of $1.7 million for the three months ended March 31, 2022 and 2021. Additionally, during the three months ended March 31, 2022, BCP II voluntarily repurchased $9.9 million of the outstanding term on the open market. Similar open market repurchases totaling $4.7 million were made during the three months ended March 31, 2021.
In addition, BCP II entered into a revolving credit facility in an initial aggregate principal amount of $50.0 million with a tenor of five years, maturing on November 3, 2023. On January 16, 2020, BCP II entered into an amendment to the revolving credit agreement that increased the revolving commitment in an aggregate principal amount of $10.0 million, thereby increasing the aggregate revolving credit commitments of all lenders to $60.0 million. Interest is paid on the revolver periodically at a rate equal to LIBOR plus the applicable margin of 4.50% subject to change based on our consolidated total leverage ratio. Any unpaid interest and principal are due at maturity. BCP II also pays quarterly commitment fees of 0.50% on the unused portion of the commitment. As of March 31, 2022 and December 31, 2021, there were no outstanding letters of credit under the revolving credit facility.
2019 Credit Facility - BCP PHP
On September 18, 2019, BCP PHP, LLC (“BCP PHP”), a wholly owned subsidiary of BCP and the owner of a 26.67% interest in the Permian Highway Pipeline (“PHP”), entered into a credit agreement with its lenders for a term facility with an initial term commitment of $483.0 million and a conversion date term commitment of $30.2 million and a letter of credit frontingfacility up to $32.4 million. The maturity of the associated debt is due March 3, 2025 in accordance with the credit agreement. During the three months ended March 31, 2022 and 2021, BCP PHP paid its principal payments on this term loan totaling $11.6 million and nil, respectively.
Fixed principal payments are required to be paid quarterly commencing with the first full quarter ending after the term conversion date, which was June 30, 2021.Interest is paid on the outstanding borrowings monthly at a rate equal to 1.625% plus adjusted LIBOR (subject to a 1% floor) for four years after the closing date and at a rate equal to 1.875% plus adjusted LIBOR (subject to a 1% floor) thereafter.
BCP PHP must also pay quarterly commitment fees of 35% of the applicable margin then in effect on the undrawn portion of the available commitments. As of March 31, 2022 and other charges are payable to issuing banks.2021, there were no outstanding letters of credit.
The Amended Credit Agreement contains restrictiveOur debt agreements contain various covenants or restriction provisions that, may limit the ability of Altus Midstream and its restricted subsidiaries to, amongamongst other things limit or restrict the applicable subsidiary’s ability to incur additional indebtedness or guaranty indebtedness, sell assets, make investments in unrestricted subsidiaries, enter into mergers, make certain payments and distributions, incur liens on certainassets, property securing indebtedness, andor revenue, engage in certain othermergers, dissolutions, investments or acquisitions, incur indebtedness or guarantee debt, make certain dispositions, and enter into certain transactions without the prior consentwith subsidiaries or affiliates that exceed a specified threshold. These agreements also contain defined financial covenants, including a debt service coverage ratio. As of the lenders.
Altus Midstream also is subject to a financial covenant under the Amended Credit Agreement, which requires it to maintain a Leverage Ratio not exceeding 5.00:1.00 at the end of any fiscal quarter, starting with the quarter endedMarch 31, 2022 and December 31, 2019, except that during the period of up to one year following a qualified acquisition, the Leverage Ratio cannot exceed 5.50:1.00 at the end of any fiscal quarter. Unless the Leverage Ratio is less than or equal to 4.00:1.00, the Amended Credit Agreement limits distributions2021, each applicable subsidiary was in respect of Altus Midstream LP’s capital to $30 million per calendar year until either (i) the consolidated net income of Altus Midstream LP and its restricted subsidiaries, as adjusted pursuant to the Amended Credit Agreement, for three consecutive calendar months equals or exceeds $350.0 million on an annualized basis or (ii) Altus Midstream LP has a specified senior long-term debt rating; in addition, before the occurrence of one of those events, the Leverage Ratio must be less than or equal to 5.00:1.00. In no event can any distribution be made that would, after giving effectcompliance with all loan covenants.
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to it on a pro forma basis, result in a Leverage Ratio greater than (i) 5.00:1.00 or (ii) for a specified period after a qualifying acquisition, 5.50:1.00. The Leverage Ratiofair value of the Company and its subsidiaries’ consolidated debt as of March 31, 2022 and December 31, 2021 was less than 4.00:1.00.
$2.98 billion and $2.34 billion, respectively. The termscarrying value of Altus Midstream’s Preferred Units also contain certain restrictions on distributions on Altus Midstream LP’s Common Units, including the Common Units held by the Company,that debt was $2.98 billion and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation. Refer to Note 10—Series A Cumulative Redeemable Preferred Units for further information. In addition, the amount of any cash distributions to Altus Midstream LP by any entity in which it has an interest accounted for by the equity method is subject to such entity’s compliance with the terms of any debt or other agreements by which it may be bound, which in turn may impact the amount of funds available for distribution by Altus Midstream LP to its partners.
There are no clauses in the Amended Credit Agreement that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes. The Amended Credit Agreement has no drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, the agreement allows the lenders to accelerate payment maturity and terminate lending and issuance commitments for nonpayment and other breaches, and if Altus Midstream or any of its restricted subsidiaries defaults on other indebtedness in excess of the stated threshold, is insolvent, or has any unpaid, non-appealable judgment against it for payment of money in excess of the stated threshold. Lenders may also accelerate payment maturity and terminate lending and issuance commitments if Altus Midstream undergoes a specified change in control or has specified pension plan liabilities in excess of the stated threshold. Altus Midstream was in compliance with the terms of the Amended Credit Agreement$2.35 billion, as of March 31, 2021.2022 and December 31, 2021, respectively. All of the debt, except the Corporate Facility, is non-recourse to the Company and its assets, except its respective obligor (and associated subsidiaries) BCP I, BCP II and BCP PHP, as the case may be.
Financing Costs, Net of Capitalized Interest
The following table summarizes the Company’s debt obligations as of March 31, 2022 and December 31, 2021:

March 31,December 31,
20222021
(In thousands)
$1.25 billion term loan (BCP I)$1,172,292 $1,175,417 
$690 million term loan (BCP II)627,695 639,393 
$513 million term loan (BCP PHP)467,762 479,377 
$800 million revolving line of credit (Partnership)657,000 — 
$125 million revolving line of credit (BCP I)59,000 52,000 
       Total Long-term debt2,983,749 2,346,187 
Less: Deferred financing costs, net(35,400)(38,485)
2,948,349 2,307,702 
Less: Current portion, net(54,324)(54,280)
        Long-term portion of debt and finance lease obligations, net$2,894,025 $2,253,422 
The table below presents the components of Altus Midstream’sthe Company’s financing costs, net of capitalized interest:
Three Months Ended March 31,Three Months Ended March 31,
2021202020222021
(In thousands)(In thousands)
Capitalized interestCapitalized interest$104 $211 
Deferred financing costsDeferred financing costs3,389 3,305 
Interest expenseInterest expense$2,306 $3,358 Interest expense23,281 21,794 
Amortization of deferred facility fees292 273 
Capitalized interest0 (3,358)
Financing costs, net of capitalized interest$2,598 $273 
Total financing costs, net of capitalized interestTotal financing costs, net of capitalized interest$26,774 $25,310 
As of March 31, 2022 and December 31, 2021, deferred financing costs associated with the three term loans were $35.4 million and $38.5 million, respectively.
Deferred financing costs associated with the revolvers were $1.9 million as of March 31, 2022 and $2.2 million as of December 31, 2021.
The amortization of the deferred financing costs was charged to interest expense for the periods presented. The amount of deferred financing costs included in interest expense for the three months ended March 31, 2022 and 2021 was $3.4 million and $3.3 million, respectively.

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6.    OTHER CURRENT LIABILITIES
Table of Contents
7.    ACCRUED EXPENSES
The following table provides detail of the Company’s other current liabilitiesaccrued expenses at March 31, 20212022 and December 31, 2020:2021:
March 31,December 31,
 20212020
(In thousands)
Accrued taxes other than income$3,865 $165 
Accrued operations and maintenance expense1,775 926 
Accrued capital costs576 360 
Accrued incentive compensation365 1,466 
Accrued professional and consulting fees360 421 
Other3,381 2,275 
Total other current liabilities$10,322 $5,613 
March 31,December 31,
 20222021
(In thousands)
Accrued product purchases$168,324 $118,364 
Accrued taxes7,282 4,299 
Accrued salaries, vacation, and related benefits3,657 2,113 
Accrued capital expenditures4,608 2,995 
Accrued interest expenses7,777 — 
Accrued expense due to related party4,247 — 
Accrued other expenses14,460 7,872 
Total accrued expenses$210,355 $135,643 

14

7.8.    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 March 31, 20212022 and December 31, 2020,2021, there were 0no accruals for loss contingencies.
Litigation
The Company is subjecta party to governmental and regulatory controlsvarious legal actions arising in the ordinary course of business.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 is not awareestimates the amount of any pending or threatenedloss contingencies using current available information from legal proceedings, against it atadvice from legal counsel and available insurance coverage. Due to the timeinherent subjectivity of the filingassessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this Quarterly Reportaggregate 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 $19.7 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.
Contingent Liabilities
As part of the acquisition of Permian Gas on Form 10-Q that would haveJune 11, 2019, consideration included a material impactcontingent liability arrangement with PDC. The arrangement requires additional monies to be paid by the Company to PDC on its financial position, resultsa 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 operations,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. As of March 31, 2022 and December 31, 2021, the estimated fair value of the contingent consideration liability was $0.8 million and $0.8 million, respectively.
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As part of the Transaction, the Company assumed contingent liabilities of $4.5 million related to earn-out consideration of up to 1,250,000 shares of Class A Common Stock as follows:
• 625,000 shares if the per share closing price of the Class A Common Stock as reported by Nasdaq during any 30-trading-day period ending prior to November 9, 2023 is equal to or liquidity.greater than $280.00 for any 20 trading days within such 30-trading-day period.
• 625,000 shares if the per share closing price of the Class A Common Stock as reported by Nasdaq during any 30-trading-day period ending prior to November 9, 2023 is equal to or greater than $320.00 for any 20 trading days within such 30-trading-day period.
Pursuant to ASC 805, this earn-out consideration was a pre-existing contingency and accounted for as an assumed liability to the acquirer on acquisition date. Immediately subsequent to the Closing, the Company evaluated the earn-out consideration classification in accordance with ASC 480—Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815—Derivatives and Hedging (“ASC 815”). The Company determined the earn-out consideration to be classified as an equity based on the settlement provision.
Environmental Matters
As an owner of infrastructure assets and 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. In some instances, Altus Midstream may be directed to suspend or cease operations. The Company maintains insurance coverage, which management believes is customary in the industry, although insurance does not fully cover against all environmental risks. Additionally, there can be no assurance that current regulatory requirements will not change or past non-compliance with environmental laws will not be discovered. The Company is not aware of any environmental claims existing as of March 31, 2021,2022, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.
Contractual Obligations
Altus Midstream’s existing fee-based midstream services agreements, which have no minimum volume commitments or firm transportation commitments, are underpinned by acreage dedications covering Alpine High. Pursuant to these agreements, Altus Midstream is obligated to perform low and high pressure gathering, processing, dehydration, compression, treating, conditioning, and transportation on all volumes produced from the dedicated acreage, so long as Apache has the right to market such gas.
At the closing of the Business Combination, the Company entered into the COMA with Apache, which includes contractual obligations for the Company to pay certain management fees to Apache over the term of the agreement. Refer to Note 2—Transactions with Affiliates for further discussion of the COMA.
In the second quarter of 2019, Altus Midstream issued and sold the Preferred Units. Under the terms of the Amended LPA, the Preferred Unit holders are entitled to receive quarterly distributions until such time as the Preferred Units are redeemed or exchanged. Refer to Note 10—Series A Cumulative Redeemable Preferred Units for further discussion regarding the terms of the Preferred Units and the rights of the holders thereof.
Additionally, the Company is required to fund its pro-rata portion of any future capital expenditures for the development of the pipeline projects as referenced in Note 8—Equity Method Interests.
At March 31, 2021 and December 31, 2020, there were no other material contractual obligations related to the entities included in the consolidated financial statements other than the performance of asset retirement obligations and required credit facility fees discussed in Note 5—Debt and Financing Costs.
15

8.9.    EQUITY METHOD INTERESTSINVESTMENTS
As of March 31, 2021,2022, the Company owned investments in the following equity method interests in Permian Basin long-haul pipeline entities. For each ofentities in the Permian Basin. These investments were accounted for using the equity method interests,of accounting. For each equity method investment (“EMIs” or “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 equity method interests.EMI pipeline. The table below presents the ownership percentagepercentages and investment balances held by the Company for each entity:
March 31, 2021December 31, 2020March 31,December 31,
OwnershipAmountAmountOwnership20222021
(In thousands)(In thousands)
Gulf Coast Express Pipeline LLCGulf Coast Express Pipeline LLC16.0%$280,787 $283,530 Gulf Coast Express Pipeline LLC16.0%$465,028 $— 
EPIC Crude Holdings, LP15.0%172,592 176,640 
Permian Highway Pipeline LLC(1)Permian Highway Pipeline LLC(1)26.7%638,723 615,186 Permian Highway Pipeline LLC(1)53.3%1,426,736 626,477 
Breviloba, LLC33.0%474,570 479,826 
Breviloba, LLC (Shin Oak)Breviloba, LLC (Shin Oak)33.0%469,557 — 
$1,566,672 $1,555,182 $2,361,321 $626,477 
(1) Ownership for Permian Highway Pipeline LLC was 53.3% and 26.7% as of March 31, 2022 and December 31, 2021, respectively.
Additionally, as of March 31, 2022, the Company owned 15.0% of Epic Crude Holdings, LP (“EPIC”). However, no dollar value was assigned through the purchase price allocation as 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 months ended March 31, 2022.
As of March 31, 2021 and December 31, 2020,2022, the unamortized basis differences included in the equity method interestEMI pipelines balances were $37.4 million and $37.7 million, respectively.$418.3 million. There was no unamortized basis difference as of December 31, 2021. 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 netequity income over the useful lives of the underlying pipeline assets. There was capitalized interest of $12.3 million and $12.8 million as of March 31, 2022 and December 31, 2021, 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 equity method interestsEMIs for the three months ended March 31, 2021:2022:
Gulf Coast Express Pipeline LLCEPIC Crude Holdings, LPPermian Highway Pipeline LLCBreviloba, LLC
Total
(In thousands)
Balance at December 31, 2020$283,530 $176,640 $615,186 $479,826 $1,555,182 
Contributions0 0 20,522 0 20,522 
Distributions(12,257)0 (8,203)(10,890)(31,350)
Equity income (loss), net(1)
9,514 (4,678)11,218 5,634 21,688 
Accumulated other comprehensive income0 630 0 0 630 
Balance at March 31, 2021$280,787 $172,592 $638,723 $474,570 $1,566,672 
Gulf Coast Express Pipeline LLCPermian Highway Pipeline LLCBreviloba, LLC
Total(2)
(In thousands)
Balance at December 31, 2021$— $626,477 $— $626,477 
Acquisitions470,000 815,000 470,000 1,755,000 
Distributions(8,412)(35,998)(3,663)(48,073)
Equity income, net(1)
3,440 21,257 3,220 27,917 
Balance at March 31, 2022$465,028 $1,426,736 $469,557 $2,361,321 
(1)As of March 31, 2021, the amount of consolidated earnings, netNet of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $3.2$0.8 million from Gulf Cost Express, $1.3 million from Permian Highway Pipeline LLC.LLC and $0.1 million from Breviloba.
(2)The EMIs acquired in the Transaction are included in the results from February 22, 2022 to March 31, 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 the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies, for further information on the Company’s basis of presentation. Refer to the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies, for further information on the Company’s financial statement consolidations.
Summarized Financial Information
The following table represents aggregated selected income statement data for the Company’s equity method interestsEMI pipelines (on a 100 percent basis): for the three months ended March 31, 2022.
Three Months Ended March 31,
20212020
Gulf Coast Express Pipeline LLCEPIC Crude Holdings, LPPermian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLCEPIC Crude Holdings, LPPermian Highway Pipeline LLCBreviloba, LLC
(In thousands)
Revenues$88,369 $33,206 $97,848 $34,529 $92,205 $40,759 $0 $42,818 
Operating income (loss)60,108 (8,384)42,580 17,300 65,706 (5,671)(23)25,589 
Net income (loss)59,768 (31,039)42,580 17,359 65,658 (13,984)425 22,184 
Other comprehensive income (loss)0 4,197 0 0 0 (7,887)0 0 
Three Months Ended March 31,
20222021
Gulf Coast Express Pipeline LLCPermian Highway Pipeline LLCBreviloba, LLC
Gulf Coast Express Pipeline LLC(1)
Permian Highway Pipeline LLC(1)
Breviloba, LLC(1)
(In thousands)
Revenues$89,973 $97,856 $48,521 $88,369 $97,848 $34,529 
Operating income63,443 59,476 26,314 60,108 42,580 17,300 
Net income63,529 59,213 26,366 59,768 42,580 17,359 
16(1) For the three months ended March 31, 2021, the Company only had equity interest in Permian Highway Pipeline LLC.

9.10. EQUITY
Reverse Stock Split
On June 30, 2020, the Company effected a reverse stock split of the Company’s Class A Common Stock and Class C Common Stock by a ratio of one-for-twenty. The par value and number of authorized shares of common stock and preferred stock were not affected by the reverse stock split. A corresponding number of Altus Midstream Common Units were also restated as part of the reverse stock split. All corresponding per-share and share amounts have been retroactively restated in this Quarterly Report on Form 10-Q for all periods presented to reflect the reverse stock split. AND WARRANTS
Redeemable Noncontrolling Interest — ApacheCommon Unit Limited PartnerPartners
In conjunctionOn February 22, 2022, the Company consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021. Pursuant to the Contribution Agreement, in connection with its ownershipthe Closing, (i) Contributor contributed all of the Class C Common Stock, Apache owns 12,500,000 Altus Midstream Common Units, representing approximately 76.9 percentequity interests of the total Common UnitsContributed Entities to the Partnership; and (ii) in exchange for such contribution, the Partnership issued and outstanding. The financial results of Altus Midstream and its subsidiaries are included50,000,000 common units representing limited partner interests in the Company’s consolidated financial statements as detailed in Note 1—Summary of Significant Accounting Policies, underPartnership and the section titled “Principles of Consolidation.”
Apache has the right, at any time, to cause Altus Midstream to redeem all or a portion of the Common UnitsCompany issued to Apache, in exchange for50,000,000 shares of the Company’s Class AC common stock, par value $0.0001 per share, to Contributor. Please refer to the “Transaction” discussed above.
The redemption option of the Common StockUnit is not legally detachable or separately exercisable from the instrument and is non-transferable, and the Common Unit is redeemable at the option of the holder. Therefore, the Common Unit is accounted for as redeemable noncontrolling interest and classified as temporary equity on the Company’s Condensed Consolidated Balance Sheet. During the three months ended March 31, 2022, 2,740,000 common units were redeemed on a 1-for-one basis or, at Altus Midstream’s option, an equivalent amountfor shares of cash; provided that the Company may, at its option, effect a direct exchange of cash or Class A Common Stock for such Common Units in lieu of such a redemption by Altus Midstream. Upon the future redemption or exchange of Common Units held by Apache,and a corresponding number of shares of Class C Common Stock held by Apache will bewere cancelled.
Apache’s limited partner interest associated with the There were 47,260,000 Common Units issued with theand an equal number of Class C Common Stock is reflectedissued and outstanding as a redeemable noncontrolling interest in the Company.of March 31, 2022. The redeemable noncontrolling interest is recognized at the higher of (i) its initialCommon Units fair value plus accumulated earnings/losses associated with the noncontrolling interest and (ii) the maximum redemption valuewas approximately $3.19 billion as of the balance sheet date. The redemption value is determined based on a 5-day volume weighted average closing price of the Class A Common Stock (5-day VWAP) as defined in the Amended LPA, a Level 1 non-recurring fair value measurement. At March 31, 2021 and December 31, 2020, the redeemable noncontrolling interest was recorded based on the redemption value as2022.
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Table of the balance sheet date of $662.4 million and $575.1 million, respectively .
For further discussion of Apache’s right to receive additional shares of Class A Common Stock, and other outstanding equity instruments that may impact ownership interests and the limited partner interests of Altus Midstream in future periods, see Note 12—Net Income (Loss) Per ShareContents.
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners
On June 12, 2019, Altus MidstreamUpon Closing, the Company assumed certain Preferred Units that were issued and sold the Preferred Units in a private offering, and the purchasers of the Preferred Units were admitted as limited partners of Altus Midstream.outstanding on acquisition date. The Preferred Units will be exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders after the seventh anniversary of Closing (as defined below) or upon the occurrence of specified events, unless otherwise redeemed by Altus Midstream.the Company. Refer to Note 10—11—Series A Cumulative Redeemable Preferred Units for further discussion.
Public Warrants
As of March 31, 2022 there were 12,577,350 Public Warrants (as defined below) outstanding. Each whole public warrant entitles the holder to purchase one twentieth of a share of Class A Common Stock at a price of $230.00 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 $360.00 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 March 31, 2022, 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 for the Public Warrants and a fair value of $0.1 million for the Private Warrants as of March 31, 2022 on the Condensed Consolidated Balance Sheet in other non-current liabilities. Refer to Note 15—Fair Value Measurementin the Notesto our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding valuation of the Warrants.
Dividend
In December 2020,On February 22, 2022, the Company entered into a Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”) with selected parties including Blackstone, I Squared Capital, Management and Apache (“Reinvestment Holder”). The Reinvestment Agreement obligates each Reinvestment Holder to reinvest in shares of Class A Common Stock at least 20% of all distributions on Common Units or dividends on shares of Class A Common Stock held by such Reinvestment Holder. On February 22, 2022, the Audit Committee and subsequently the Board approved that for the calendar year 2022, 100% of all distributions or dividends received by the Reinvestment Holders would be reinvested in newly issued Class A shares. On April 4, 2022, the Company filed a Registration Statement on Form S-3 related to the Reinvestment Agreement and the establishment of the Dividend and Distribution Reinvestment Plan (the “Plan”) for all other holders. Refer to Note 18—Subsequent Eventsin the Notesto our Condensed Consolidated Financial Statements in this Form 10-Q for additional details.
On April 20, 2022, the Company’s Board of Directors (the “Board”) declared a cash dividend of $1.50 per share on the Company’s Class A Common Stock, totaling $5.6 million, which was paidwill be payable to stockholders in the first quarter of 2021. This payment included a payment of approximately $0.5 million to Apache due toon May 17, 2022. The Company, through its 9.8 percent ownership of the Company’s Class Ageneral partner of the Partnership, also declared a distribution of $1.50 per Common Stock. TheUnit from the Partnership to the holders of Common Units. As described in these Condensed Consolidated Financial Statements, as the context requires, dividends paid to holders of Class A Common Stock dividend was funded by a distribution from Altus Midstreamand distributions paid to its common unitholdersholders of $1.50 per Common Unit. ReferUnits may be referred to Note 2—Transactions with Affiliates for further discussioncollectively as “dividends.” The Company anticipates 7.8 million of the Common Unit distribution.


Class A and Class C shares will receive a cash dividend with the balance receiving additional Class A shares under the Reinvestment Agreement (defined above).

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10.11.    SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS
On June 12, 2019, Altus MidstreamPrior to the merger close date, the Partnership had 625,000 Preferred Units issued and soldoutstanding. Immediately prior to the Closing, on February 22, 2022, the Partnership redeemed for cash, 100,000 Preferred Units in a private offering exempt froman amount equal to approximately $120.1 million. The Company assumed the registration requirementsremaining 525,000 Preferred Units as well as 29,983 paid-in-kind (“PIK”) Preferred Units that were issued and outstanding at the close of the Securities Actacquisition. 150,000 of 1933,these Preferred Units and a pro rata amount of the PIK units contain a mandatory redemption feature as amended (the Closing). The Closing occurred pursuant to afurther discussed below.
Mandatorily Redeemable Preferred Unit Purchase Agreement among Altus Midstream,Units
At the close of the Transaction, the Company effectuated the Third Amended and Restated Agreement of Limited Partnership of the purchasers party thereto, dated asPartnership (“Partnership LPA”), which among other things, provides for mandatory pro-rata redemptions by the Partnership of May 8, 2019. A total of 625,00050,000 Preferred Units were sold at a priceor prior to each of $1,000 per Preferred Unit,the six-, twelve- and eighteen-month anniversaries of the effectiveness of the Partnership LPA, for an aggregate issue price of $625.0150,000 Preferred Units over the eighteen-month period. Given this mandatory redemption feature and pursuant to ASC 480, liability classification is required for these 150,000 Preferred Units and the pro rata PIK units. The Company values the liability as of each reporting date and records the change in valuation in the “Other income (expenses)” in the Condensed Consolidated Statements of Operations.
The Partnership consummated the first of such redemptions redeeming 50,000 units along with 2,856 PIK units on March 28, 2022 for an aggregate amount equal to $60.7 million. Altus Midstream received approximately $611.2For the remaining 100,000 Preferred Units that contain the mandatory redemption feature, the Company recorded $67.2 million and $68.9 million in cash proceeds fromcurrent and noncurrent liabilities, respectively, as of March 31, 2022. These 100,000 Preferred Units must be redeemed in 50,000 unit increments by February 22, 2023 and August 22, 2023, respectively. The Partnership LPA also provides the sale after deducting transaction costs and discountsPartnership with an option to certain purchasers.redeem Preferred Units early so long as at least 25,000 Preferred Units are redeemed in each redemption, without any dollar-value threshold.
Accounting for theRedeemable Noncontrolling Interest Preferred Units
Classification
The remaining 375,000 Preferred Units assumed on the Closing Date do not contain a mandatory redemption feature, and are accounted for on the Company’s consolidated balance sheetCondensed Consolidated Balance Sheets as a redeemable noncontrolling interest classified as temporary equity based onin accordance with the terms of the Preferred Units, including the redemption rights with respect thereto.
Measurement The Preferred Units are exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company.
The Company applies a two-step approach to measure the redeemable noncontrolling interest related to the Preferred Units, by first allocating a portion of the Company’s net income of Altus Midstream in accordance with the terms of the Amended LPA described above.Partnership LPA.
After consideration of the foregoing, the Company records an additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end, if applicable. The amount of such adjustment is determined based upon the accreted value method to reflect the passage of time until the Preferred Units are exchangeable at the option of the holder. Pursuant to this method, the net transaction price is accreted using the effective interest method, to the Series A Redemption Price (as defined in the Partnership LPA) calculated at the seventh anniversary of Closing.the closing of the Preferred Unit Offering. The total adjustment is limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end is equal to the greater of (a) the sum of (i) the carrying amount of the Preferred Units determined in accordance with ASC 810, plus (ii) the fair value of the embedded derivative liability and (b) the accreted value of the net transaction price.
Activity

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Activities related to the Preferred Units for the year ended December 31, 2020 and three months ended March 31, 2021 is2022 are as follows:
Units Outstanding
Financial Position(2)
(In thousands, except for unit data)
Redeemable noncontrolling interest — Preferred Units: at December 31, 2019638,163 $555,599 
Distribution of in-kind additional Preferred Units22,531 — 
Cash distributions paid to Preferred Unit limited partners— (23,124)
Allocation of Altus Midstream net incomeN/A75,906 
Redeemable noncontrolling interest — Preferred Units: at December 31, 2020660,694 608,381 
Cash distributions paid to Preferred Unit limited partners— (11,562)
Distributions payable to Preferred Unit limited partners— (11,562)
Allocation of Altus Midstream net incomeN/A19,492 
Redeemable noncontrolling interest — Preferred Units: at March 31, 2021660,694 $604,749 
Embedded derivative liability(1)
155,538 
$760,287 
Units Outstanding
Amount (3)
(In thousands, except for unit data)
Redeemable noncontrolling interest — Preferred Units, immediately upon Closing Date of Transaction(1)
396,417 $462,717 
Distribution payable to Preferred Unit limited partners— (6,937)
Allocation of net income— 4,993 
Redeemable noncontrolling interest — Preferred Units, as of March 31, 2022396,417 460,773 
Embedded derivative liability(2)
91,936 
$552,709 
(1)Included 21,417 PIK units on a pro rata basis.
(2)Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. See Refer toNote 13—15—Fair Value Measurementsfor discussion of the fair value changes in the embedded derivative liability during the period.
(2)(3)The Preferred Units are redeemable at Altus Midstream’s option at a redemption price (the Redemption Price), which as of March 31, 2021 is calculated as the greater of (i) an 11.5 percent internal rate of return and (ii) a 1.3 times multiple of invested capital. As of March 31, 2021,2022, the Redemption Price would have been based on a 1.3 times multiple of invested capital, which was $812.5 million. This was greater than using an 11.511.1% percent internal rate of return, which would equate to a redemption value of $713.0$700.0 million.
N/
12. SHARE-BASED COMPENSATION
The Company previously 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 2,650,000 shares (the “Class A - not applicable.Shares”) 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 they received upon the Closing. Before distributing these Common Units, the Common Unit limited partners redeemed them for Class A Common Stock. 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 163,000 Class C Common Stock and Common Units (the “Class C Shares”) and will vest over four years. The Company also issued approximately 38,000 replacement restricted share awards (“Replacement Awards”) to new employees that transitioned from ALTM as part of the merger. These changes for all three share types established a new measurement date. The Class A Shares, Class C Shares and Replacement Awards were valued based on the Company’s publicly quoted price on the measurement date, which was the Closing Date of the Transaction. With respect to these shares, the Company recorded compensation expenses of $6.1 million for the three months ended March 31, 2022, based on a straight line amortization of the associated awards’ fair value over the respective vesting life of the shares. With respect to the incentive units, no compensation expenses were recorded for the three months ended March 31, 2021, as the incentive units were considered non-vested prior to their cancellation and exchange for Class A or Class C Common Stock.
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11.13. INCOME TAXES
The Company is subject to U.S. federal income tax and the Texas margin tax. Altus Midstream LP is a partnership for federalThe Company’s income tax purposes and passes through its taxable income to its partners, the Company, Apache, and the Preferred Unit holders. Thus, Altus Midstream LP does not record a federal income tax provision. Altus Midstream LP is subject to the Texas margin tax and as such, records a state income tax provision.
On March 27, 2020, the President signed into law the Coronavirus Aid, Relief and Economic Security Act (CARES Act) in response to the COVID-19 pandemic. Under the CARES Act, 100 percent of net operating losses arising in tax years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five preceding tax years of such loss. In the first quarter of 2020, the Company recorded a current income tax benefit of $0.7 million associated with a net operating loss carryback claim.
Duringprovision for the three months ended March 31, 2021,2022 consists of following:
Three Months Ended March 31,
20222021
(In thousands)
Current tax expense:
Federal$— $— 
State and local— — 
Total current tax expense— — 
Deferred tax expense:
Federal— — 
State and Local676 — 
Total deferred tax expense676 — 
Total income tax expense$676 $— 
The Company records income taxes using an estimated annual effective tax rate and recognizes specific events discretely as they occur. The following table presents reconciliation of the Company’s effectiveU.S. statutory income tax rate to the estimated annual effective tax rate:
Three Months Ended
March 31, 2022
U.S. statutory rate(1)
21.0 %
Tax attributable to Noncontrolling interest - Common Units limited partners(11.6)%
Tax attributable to Noncontrolling interest - Preferred Units limited partners(5.1)%
State tax rate3.1 %
Other0.2 %
Valuation allowance(4.5)%
Effective rate3.1 %
(1) Prior to the Closing on February 22, 2022, the Company was primarily impacted by a decrease in valuation allowance. Duringorganized as limited partnership and was not subject to the U.S. federal income tax for the three months ended March 31, 2020,2021.
For state purposes, the Company’s effective incomeCompany records deferred tax rate was primarily impacted byassets and liabilities based on the differences between the carrying value and tax basis of assets and liabilities recorded on the consolidated balance sheets. The deferred tax liabilities recorded as of March 31, 2022 and December 31, 2021 relate to these differences.
For federal purposes, the Company has a deferred tax asset related to our investment in the Partnership and net operating loss carryback claim underlosses. The Company recorded a full allowance valuation on its deferred tax assets, as it has determined that more-likely-than-not that the CARES Act and an increase in valuation allowance.benefit of the deferred tax assets will not be realized.
Upon Closing, the Company assumed certain uncertain tax positions from ALTM. The Company accounts for income taxes in accordance with ASC Topic 740, “Income740—Income Taxes”, which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements. Each quarter,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 Company assessesfuture that is reflected in the recognition amountmeasurement of current and as a result, may increase (expense) or reduce (benefit)deferred income tax assets and liabilities. Reconciliation of the beginning and ending amount of interest and penalties. Interest and penalties are recordedunrecognized tax benefit is as a component of income tax expense. The contributor of Altus Midstream’s operating assets, Apache, is currently under IRS audit for the 2014-2017 tax years as part of its normal course of business.follows:
(In thousands)Amount
Balance as of January 1, 2022$— 
Increase related to ALTM acquisition5,238 
Reduction related to current year activities(228)
Balance as of March 31, 2022$5,010 
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12.14.    NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is calculated by dividing net income (loss) 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 (loss) per share, as holders of Class C Common Stock are not entitled to any dividends or liquidating distributions.
The Company uses the “if-converted method” to determine the potential dilutive effect of (i) an assumed exchange of outstanding Common Units of Altus Midstream (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) for shares of Class A Common Stock, (ii) an assumed exercise of the outstanding public and private warrants for shares of Class A Common Stock and (iii) an assumed exchange of the outstanding Preferred Units of Altus Midstream for shares of Class A Common Stock. The dilutive effect of any earn-out consideration payable in shares is only included in periods for which the underlying conditions for the issuance are met.
The computation of basic and diluted net income (loss) per share for the periods presented in the consolidated financial statementsCondensed Consolidated Financial Statements is shown in the table below.
Three Months Ended March 31,
2021
2020(1)
IncomeSharesPer ShareLoss
Shares(2)
Per Share(2)
(In thousands, except per share data)
Basic:
Net income (loss) attributable to Class A common shareholders$180 3,746 $0.05 $(8,081)3,746 $(2.16)
Effect of dilutive securities:
Redeemable noncontrolling interest — Apache limited partner$0 0 $(35,552)12,500 
Diluted(3)(4)(5):
Net income (loss) attributable to Class A common shareholders$180 3,746$0.05 $(43,633)16,246 $(2.69)
Three Months Ended March 31,
20222021
IncomeWeighted-average sharesPer ShareIncomeWeighted-average sharesPer Share
(In thousands, except per share data)
Basic:
Net income attributable to Class A common shareholders$3,865 18,696 $0.21 $— — $— 
Effect of dilutive securities:
Replacement Awards— 17 — — — — 
Diluted(1)(2):
Net income attributable to Class A common shareholders$3,865 18,713$0.21 $— — $— 
(1)This period presented has been revised to reflect the Company’s fair value change of its underlying warrants. Refer to Note 1—Summary of Significant Accounting Policies, see the section titled Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment for further information.
(2)Share and per share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020. Refer to Note 9—Equity for further information.
(3)The effect of an assumed exchange of the outstanding Preferred Units of Altus Midstreamand outstanding public and private warrants for shares of Class A Common Stock would have been anti-dilutive for all periods presented in which the Preferred SharesUnits and public and private warrants were outstanding.
(4)(2)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.
(5)The effect of the exchange of outstanding Common Units of Altus Midstream (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 three month period ended March 31, 2021.Common Units were outstanding.
Further discussion of the Preferred Units and associated embedded features can be found in Note 10—Series A Cumulative Redeemable Preferred Units and Note 13—Fair Value Measurements, respectively. Earn-out consideration granting Apache the right to receive additional shares of Class A Common Stock is not included in the earnings per share calculation above, as the conditions for issuance were not satisfied as of March 31, 2021.
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13.15. FAIR VALUE MEASUREMENTS
The Company’s financial assets and liabilities measured at fair value on a recurring basis consist of:include cash and cash equivalents; revenue receivables; accounts receivable;equivalents, accrued receivables, accounts receivable, from/payable to Apache;accounts receivable from affiliates, dividends and distributions payable; thepayable, interest rate and commodity swap derivatives, and Company’s private and public warrants and an embedded derivative liability related to the issuance of Preferred Units.
Topic 820 establishes a framework for measuring fair value in U.S. GAAP, clarifies the definition of fair value within that framework, and requires disclosures about the use of fair value measurements. Topic 820 defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Topic 820 provides a framework for measuring fair value, establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and requires consideration of the counterparty’s creditworthiness when valuing certain assets.
Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1 inputs). The three levels of the fair value hierarchy under Topic 820 are described below:
Level 1 inputs: Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 inputs: Inputs, other than quoted prices in active markets, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 inputs: Prices or valuations that require unobservable inputs that are both significant to the fair value measurement and unobservable. Valuation under Level 3 generally involves a significant degree of judgment from management.
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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 March 31, 2022 and December 31, 2021:
March 31, 2022
Level 1Level 2Level 3Total
(In thousands)
Interest rate derivatives$— $9,655 $— $9,655 
Total assets— 9,655 — 9,655 
Mandatorily redeemable Preferred Units— — 136,070 136,070 
Embedded derivative— — 91,936 91,936 
Public warrants126 — — 126 
Private warrants— — 95 95 
Interest rate derivatives— 7 — 7 
Total liabilities$126 $7 $228,101 $228,234 
December 31, 2021
Level 1Level 2Level 3Total
(In thousands)
Commodity swaps$— $205 $— $205 
Interest rate derivatives— 2,662 — 2,662 
Total liabilities$— $2,867 $— $2,867 
The Company is exposed to certain risks arising from both its business operations and economic conditions, and the Company enters into certain derivative contracts to manage the exposures. Refer to Note 16—Derivatives and Hedging Activitiesin 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 Amended LPA. The valuation of the embedded derivative, (using an income approach), was based on a range of factors, including expected future interest rates using the Black-Karasinski model, the Company’s imputed interest rate ranged from 7.32% to 11.58%, interest rate volatility of 39.79%, the expected timing of periodic cash distributions, the estimated timing for the potential exercise of the exchange option of 4.2 years and anticipated dividend yields of the Preferred Units. The Company recorded an unrealized loss of $16.5 million and $62.0$2.9 million for the three months ended March 31, 2021 and 2020, respectively,2022, which arewas recorded inas an “Unrealized derivative instrument loss”loss on embedded derivative” in the statementCondensed Consolidated Statement of consolidated operations. AltusOperations. The Company has classified these recurring fair value measurements as Level 3 in the fair value hierarchy.
As of the March 31, 2021 valuation date, the Company used the forward B-rated Energy Bond Yield curve to develop the following key unobservable inputs used to value this embedded derivative:
Quantitative Information About Level 3 Fair Value Measurements
Fair Value at March 31, 2021Valuation TechniqueSignificant Unobservable InputsRange/Value
(In thousands)
Preferred Units Embedded Derivative$155,538 Option ModelAltus Midstream Company’s Imputed Interest Rate7.15-12.51%
Interest Rate Volatility38.75%
A one percent increase in the imputed interest rate assumption would significantly increase the value of the embedded derivative liability at March 31, 2021, while a one percent decrease would lead to a similar decrease in value as of March 31, 2021. The assumed expected timing until exercise of the exchange option at March 31, 2021 was 5.20 years.
The Company has additional embedded derivatives in the Preferred Units related to the exchange option and redemption features that are accounted for separately from the Preferred Units. Level 3 valuations of the embedded derivatives are based on a range of factors, including the likelihood of the event occurring, and these factors are assessed quarterly. There was no value associated with these additional identified embedded derivatives for any applicable period presented.
The carrying value of the Company’s public warrantsPublic 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 warrantsPrivate 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 warrantsPublic Warrants and other factors. The Company has recorded a liability of $1.5 million and $0.9$0.2 million as of March 31, 2021 and December 31, 2020, respectively,2022. There was no change in “Other noncurrent liabilities” included in its consolidated balance sheet and approximately $0.7 million of expense and $1.9 million of income reflected as “Total other income (loss)” in its statement of consolidated operations related to the fair value changes of the underlying warrants insince closing of the first quartersTransaction through reporting date.
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Table of 2021 and 2020, respectively.Contents
The carrying amounts reported on the consolidated balance sheetCondensed Consolidated Balance Sheet for the Company’s remaining financial assets and liabilities approximate fair value due to their short-term nature. The carrying amount of Altus Midstream’sthe revolving credit facility approximates fair value because the interest rate is variable and reflective of market rates. There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three months ended March 31, 2021 or year ended2022.


16.    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. The Company did not elect to apply hedge accounting to these derivative contracts and recorded fair value of the derivatives on the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2020.2021.
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 is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract.
In September of 2019, BCP PHP entered into 2 interest rate swaps on 75.0% of the outstanding $513.0 million term loan. These instruments were effective September 30, 2019 and have a mandatory termination date on November 19, 2024. The notional amounts of these swaps float monthly such that 75.0% of the total outstanding term loan is covered by the notional of the 2 swaps over the life of the associated term facility. These swaps result in fixed LIBOR rates ranging from 1.76% to 1.78% for the respective notional amounts of our debt for the LIBOR component of our interest rate and are paid in monthly installments.
The fair value or settlement value of the consolidated interest rate swaps outstanding are presented on a gross basis on the Condensed Consolidated Balance Sheets. Interest rate swap derivative liabilities were $7 thousand and $2.7 million as of March 31, 2022 and December 31, 2021, respectively. Interest rate swap derivative assets were $9.7 million as of March 31, 2022. BCP PHP recorded cash settlements on interest rate swap derivatives of $0.9 million and $0.6 million for the three months ended March 31, 2022 and 2021, respectively, in the “Interest Expense” of the Condensed Consolidated Statements of Operations. In addition, BCP PHP recorded unrealized gain of $11.6 million and unrealized loss of $10.6 million for the change in fair value of the interest rate swap derivatives for the three months ended March 31, 2022 and 2021, respectively, in the “Interest Expense” of the Condensed Consolidated Statements of Operations.
Commodity Price Risk
Similarly, in 2020 and 2021 the Company entered into WTI crude hedges at a specific notional that provides for a fixed price for crude in the Permian Basin.
All of the Company’s commodity swaps had reached maturity as of December 31, 2021. The fair value or settlement value of the swaps outstanding are presented on a gross basis on the Condensed Consolidated Balance Sheet. Commodity swap derivative liability was nil and $0.2 million as of March 31, 2022 and December 31, 2021, respectively.

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14.17.    SEGMENTS
Our 2 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 2 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) water gathering and disposal.

•Pipeline Transportation: The Pipeline Transportation segment consists of equity investment interests in four Permian Basin pipelines that access to various points along the Texas Gulf Coast, and our Delaware Link Pipeline that is under construction. The current operating pipelines transport crude oil, natural gas and NGLs to the Texas Gulf Coast.
Upon Closing, our CODM reviewed the Company and ALTM’s reporting segment activities. The Company then renamed its Gathering and Processing segment to Midstream Logistics and its Transmission segment to Pipeline Transportation. These name changes were made to better align segment activities with the name of respective segment. There was no change in segment composition or structure for the three months ended March 31, 2022.
The following tables present the operating results and other key financial measures for the individual operating segment as of and for the three months ended March 31, 2022 and 2021:
Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated(2)
For the three months ended 3/31/2022(In thousands)
Segment net income (loss) including noncontrolling interests$9,185 $29,136 $(16,932)$21,389 
Add back:
Interest expense (income)26,642 (1,614)1,617 26,645 
(Gain) on redemption of mandatorily redeemable Preferred units— — (4,493)(4,493)
Income tax expense (benefit)457 (39)258 676 
Depreciation and amortization60,893 130 — 61,023 
Contract assets amortization448 — — 448 
Proportionate EMI EBITDA— 40,741 — 40,741 
Share-based compensation— — 6,132 6,132 
Loss on disposal of assets110 — — 110 
Loss on debt extinguishment129 — — 129 
Unrealized loss on derivatives— — 2,886 2,886 
Integration costs4,104 — 2,047 6,151 
Acquisition transaction costs4 — 5,672 5,676 
Other one-time costs or amortization918 — 277 1,195 
Deduct:
Equity (income) from unconsolidated affiliates— 27,917 — 27,917 
Segment adjusted EBITDA$102,890 $40,437 $(2,536)$140,791 
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Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated (2)
For the three months ended 3/31/2021(In thousands)
Segment net income (loss) including noncontrolling interests$8,194 $12,429 $(2,487)$18,136 
Add back:
Interest expense (income)27,694 (2,145)— 25,549 
Depreciation and amortization55,842 129 — 55,971 
Contract assets amortization448 — — 448 
Proportionate EMI EBITDA— 16,256 — 16,256 
Loss on disposal of assets32 — — 32 
Gain on debt extinguishment(239)— — (239)
Derivatives loss due to Winter Storm Uri13,456 — — 13,456 
Other one-time costs or amortization389 8 (69)328 
Deduct:
Interest and other income16 — — 16 
Equity (income) from unconsolidated affiliates— 11,355 — 11,355 
 Segment adjusted EBITDA$105,800 $15,322 $(2,556)$118,566 
(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 the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies, for further information on the Company’s basis of presentation.
The following tables present the revenue for individual operating segment for the three months ended March 31, 2022 and 2021:
Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated
For the three months ended 3/31/2022(In thousands)
Revenue$255,373 $— $— $255,373 
Other revenue1,874 2 — $1,876 
Total segment operating revenue$257,247 $2 $— $257,249 
Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated
For the three months ended 3/31/2021(In thousands)
Revenue$147,655 $— $— $147,655 
Other revenue446 2 — $448 
Total segment operating revenue$148,101 $2 $— $148,103 
(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.
The following table present total assets for individual operation segment as of March 31, 2022 and December 31, 2021:
March 31,December 31,
20222021
(In thousands)
Midstream Logistics$3,624,556 $2,916,774 
Pipeline Transportation2,383,390 635,784 
Segment total assets6,007,946 3,552,558 
Corporate and other5,711 648 
Total assets$6,013,657 $3,553,206 

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18.    SUBSEQUENT EVENTS
On April 4, 2022, the Company filed a registration statement on Form S-3 with the SEC to reserve 15,000,000 shares of Class A Common Stock Dividendfor issuance under the Plan, refer to Note—10 Equity and Warrants for additional information.
On May 4, 2021,April 20, 2022, the Company’s Board of Directors declared a cash dividend of $1.50 per share on the Company’s Class A Common Stock totaling $5.6 million, towhich will be paid on June 30, 2021,payable to stockholders of record ason May 17, 2022. The Company, through its ownership of the closegeneral partner of business on May 28, 2021. The common stock dividend will be funded bythe Partnership, declared a distribution from Altus Midstream to its common unitholders of $1.50 per Common Unit totaling $24.4 million,from the Partnership to the holders of Common Units. Please refer to Note 10—Equity and Warrants for additional information.
On May 10, 2022, the Company’s Board of Directors amended the Company’s 2019 Omnibus Compensation Plan (as amended from time to time, the “2019 Plan”), in order to reflect the Company’s name change and certain other non-material updates. Under the 2019 Plan, the Company is authorized to grant equity-based awards to its employees and directors. The foregoing description of the 2019 Plan is qualified in its entirety by reference to the 2019 Plan, a copy of which $5.6 million is payableattached as Exhibit 10.5 to the Companythis Quarterly Report on Form 10-Q and the balance is payable to Apache.incorporated herein by reference.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis shouldaddresses the results of our operations for the three month period ended March 31, 2022, as compared to our results of operations for the three month period ended March 31, 2021. In addition, the discussion and analysis addresses our liquidity, financial condition and other matters for these periods. The previously announced merger of ALTM and BCP and their respective consolidated subsidiaries closed on February 22, 2022. As the Transaction was determined to be read together witha reverse merger, BCP was considered the accounting acquirer and ALTM was considered the legal acquirer. Therefore, BCP’s net assets, carrying at historical value, were presented as the predecessor to the Company’s consolidatedhistorical financial statements and accompanying notes included under Part I, Item 1, “Consolidated Financial Statements”the comparable period presented herein reflects the results of this Quarterly Report on Form 10-Q, as well asoperations of BCP for the three months ended March 31, 2021. The results of operations of ALTM is reflected within the Company’s Condensed Consolidated Financial Statements from the Closing Date through March 31, 2022.
Unless otherwise noted or the context requires otherwise, references herein to Kinetik Holdings Inc.,“the Company”, “us”, “our”, “we” or similar terms, with respect to time periods prior to February 22, 2022 include BCP and its consolidated financial statements, accompanying notessubsidiaries and Management’s Discussiondo not include ALTM and Analysisits consolidated subsidiaries, while references herein to Kinetik Holdings Inc. with respect to time periods from and after February 22, 2022 include ALTM and its consolidated subsidiaries.
The Transaction
On February 22, 2022, the Company consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of Financial ConditionOctober 21, 2021, by and Resultsamong the Company, the Partnership, Contributor and BCP. Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of Operations includedthe equity interests in BCP and its consolidated subsidiaries, to the Partnership; and (ii) in exchange for such contribution, the Partnership issued 50,000,000 Common Units and the Company issued 50,000,000 shares of the Company’s Annual Report on Form 10-K forClass C Common Stock to Contributor.
The Company’s stockholders immediately prior to the fiscal year ended December 31, 2020 (Form 10-K). Capitalized terms used but not defined herein shall haveClosing continued to hold their shares of the meaning ascribedCompany’s Class A Common Stock. As a result of the Transaction, immediately following the Closing (i) Contributor owns approximately 75% of the issued and outstanding Common Stock, (ii) Apache Midstream owns approximately 20% of the issued and outstanding Common Stock, and (iii) the Company’s remaining stockholders own approximately 5% of the issued and outstanding Common Stock. Upon close of the Transaction, the Company’s Pipeline Transportation segment expanded to such terms in the Form 10-K.
Overview
Altus Midstream Company (the Company or Altus), throughinclude three additional EMI pipelines and to increase its ownership interest in Altus Midstream LP (Altus Midstream), owns gas gathering, processing, and transmission assets in the Permian BasinPHP. Further note that a secondary offering of West Texas, anchored by midstream service agreements4 million Apache shares was closed during March of 2022, reducing Apache’s ownership to service Apache Corporation’s (Apache) production from its Alpine High resource play and surrounding areas (Alpine High). Additionally, the Company owns equity interests in four intrastate Permian Basin pipelines (the Equity Method Interest Pipelines) that have access to various points along the Texas Gulf Coast. The Company’s operations consist of one reportable segment.
The Company has no independent operations or material assets outside its ownership interest in Altus Midstream, which is reported on a consolidated basis. As13% as of March 31, 2021, Altus Midstream’s assets included approximately2022.
The Transaction also brought in additional volume capacity from ALTM for the Midstream Logistic segment, including 182 miles of in-service natural gas gathering pipelines, approximately 46 miles of residue gas pipelines with four market connections, and approximately 38 miles of NGLNGLs pipelines. Three cryogenic processing trains, each with nameplateThe increase volume capacity of 200 MMcf/d, were placed into service during 2019. Other assets include an NGL truck loading terminal with six Lease Automatic Custody Transfer units and eight NGL bullet tanks with 90,000 gallon capacity per tank. has contributed to the increase in operating revenue for the three months ended March 31, 2022 compared to the same period in 2021.
Overview
The Company’s existingCompany, through its subsidiaries, owns gas gathering, processing, and transmission infrastructure is expected to provide capacity levels capableassets in the Permian Basin of fulfilling its midstream contracts toWest Texas and provides comprehensive gathering, transportation, compression, processing, and treating services for companies that produce NGLs, natural gas, crude, and water.
Our core capabilities serve a variety of service Apache’s production from Alpine Highofferings across multiple streams, including natural gas gathering, transportation, compression, treating and potential third-party customers.processing; NGLs stabilization and transportation; produced water gathering and disposal; and crude oil gathering, stabilization, storage and transportation. We have four plant sites in operation across more than 1,300 miles of pipeline in the ground in four counties in the Southern Delaware Basin.
As of March 31, 2021,Our Operations
Upon Closing, the Company ownsevaluated the following Equity Method Interest Pipelines:
•A 16 percent equity interestCompany and ALTM’s respective reporting segment activities and then 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 respective segment. The Midstream Logistics segment operates under three service offerings, 1) gas gathering and processing, 2) crude oil gathering, stabilization, and storage services, and 3) water gathering and disposal. The Pipeline Transportation segment consists of four EMI pipelines in the Gulf Coast Express Pipeline Project (GCX), which is owned and operated by Kinder Morgan Texas Pipeline, LLC (Kinder Morgan). GCX transports natural gas from the Waha area in West TexasPermian Basin with various access points 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 subscribedCoast and our Delaware Link Pipeline, which is currently under long-term contracts.
•A 15 percent equity interest in the EPICcommercialization. The pipelines transport crude oil, natural gas, and NGLs along the Texas Gulf Coast.
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Midstream Logistics
Natural Gas
The Midstream Logistics segment provides gas gathering and processing services with approximately 1,200 miles of low and high-pressure steel pipeline (EPIC), which is operated by EPIC Consolidated Operations, LLC. EPIC transports crude oil from Orla, Texas in Northern Reeves County tolocated throughout the Port of Corpus Christi, Texas. EPIC was placed in service early 2020,Southern Delaware Basin. Gas processing assets are centralized at five processing complexes with initial throughputtotal cryogenic processing capacity of approximately 600 MBbl/d.2 billion cubic feet per day (“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). Current residue gas outlets include the El Paso Natural Gas Pipeline, Energy Transfer Comanche Trail Pipeline, ONEOK Roadrunner Pipeline, and Energy Transfer Oasis Pipeline. NGLs outlets include Energy Transfer’s Lone Star NGL Pipeline, Targa’s Grand Prix NGL Pipeline, and Enterprise’s Shin Oak NGL Pipeline.
Crude
The Midstream Logistics segment also includes crude oil gathering, stabilization, and storage services throughout the Texas Delaware Basin. Crude gathering assets are centralized at the Caprock Stampede Terminal and the Pinnacle Sierra Grande Terminal. The system includes approximately 200 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
In addition, this segment includes water gathering and disposal assets located in northern Reeves County, Texas which are included in the Midstream Logistics segment. The system includes approximately 70 miles of gathering pipeline and approximately 500,000 barrels per day of permitted disposal capacity at 16 active and permitted disposal wells.
Pipeline Transportation
The Pipeline Transportation segment consists of four EMI pipelines in the Permian Basin with access to various points along the Texas Gulf Coast and the Delaware Link Pipeline, which is currently under construction. EMI pipelines include the following:
•An approximate 26.7 percent53.3% equity interest in the Permian Highway Pipeline (PHP),PHP, which is also owned and operated by 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.
•A 33 percent16% equity interest in the Gulf Coast Express Pipeline (“GCX”), which is owned and operated by Kinder Morgan Texas Pipeline, LLC (“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.
•A 33% equity interest in the Shin Oak NGL Pipeline (Shin Oak)(“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.
•A 15% equity interest in the EPIC Crude oil pipeline (“EPIC”), which is operated by EPIC Consolidated Operations, LLC. EPIC transports crude oil from Orla, Texas in Northern Reeves County to the Port of Corpus Christi, Texas. EPIC was placed in service early 2020, with initial throughput capacity of approximately 600 MBbl/d.
Factors Affecting Our Business
The global economySignificance of Crude Oil and Producer Volumes on Our Revenues, Cost of Sales and Gross Margin
The Company’s assets include more than 1,300 miles of NGLs, natural gas, condensate, produced water, and crude oil pipelines as well as 2 Bcf/d of natural gas processing capacity as of March 31, 2022. Most of the energy industry have been deeply impactedgas gathered and processed by the effects of the coronavirus disease 2019 (COVID-19) pandemic and related governmental actions. UncertaintyCompany is associated gas included in the oil marketsstream, making producers’ oil break-even prices the primary driver of activity. The average price of WTI crude oil was $95.01/bbl during the first quarter 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 negative demand implications of the COVID-19 pandemic continue to impact oil supply and demand. Altus management continues to monitor natural gas throughput volumes from Apache and capacity utilization of the Equity Method Interest Pipelines. The Company remains focused on increasing third-party processing opportunities in addition to Alpine High; however, the current market situation has slowed the pace of this activity. Altus has no upcoming debt maturities, and the term of its revolving credit facility extends through November of 2023.Company’s Pipeline Transportation segment provides NGLs
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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 Company is projected to remain cash flow positive foraverage natural gas price was $4.59/MMBtu during the remainderfirst quarter of 2021 following the start-up of PHP in January of 2021, with minimal expected future capital requirements. As such, the Company believes it has sufficient operating cash flows and liquidity to fund its future capital expenditures and its quarterly dividend program.
The current crisis, however, is still evolving and may become more severe and complex. The ultimate impact and the extent to which the COVID-19 pandemic will continue to2022. For additional risk factors that affect the Company’s business, results of operation,please refer toItem 1A -Risk Factors.
Recent Developments
Commodity Price Volatility
There has been, and financial condition is difficultwe believe there will continue to predictbe, volatility in commodity prices and depends on numerous evolving factors outside Altus’ control, includingin the durationrelationships among NGLs, crude oil and scope of the pandemic, new and continuing government, social, business, and other actions taken in response to the pandemic, any additional waves of the virus, the availability and ultimate efficacy of the vaccines on new variants of the virus, and the effect of the pandemic on short- and long-term general economic conditions.natural gas prices. As a result of uncertainty around global commodity supply and demand, uncertainty in global economic recovery from COVID-19 pandemics and the COVID-19 pandemic may still materiallyarmed conflict in Ukraine, global oil and adversely affect Altus’ results in a manner that is either not currently known or that the Company does not currently considernatural gas commodity prices continue to be a significant risk to its business. For additional information about the business risks relating to the COVID-19 pandemic, please refer to Part I, Item 1A—Risk Factors of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Altus Midstream Operational Metrics
remain volatile. The Company uses a variety of financialvolatility and operational metrics to assess the performance of its operations and growth compared to expected plan estimates. These metrics include:
•Throughput volumes and associated revenues;
•Costs and expenses; and
•Adjusted EBITDA (as defined below).
Throughput Volumes and Associated Revenues
The Company’s operating results are driven primarily by the volumeuncertainty of natural gas, gathered, processed, compressed, and/or transmitted. Forcrude oil and NGL prices impact drilling, completion and other investment decisions by producers and ultimately supply to our systems. Although the periods presented, substantially all revenues werearmed conflict in Ukraine generated through fee-based agreements with Apache, a related party. The volumescommodity price upward pressure, and our operation could benefit in an environment of higher natural gas, that Altus gathers or processes in future periods will dependNGLs and condensate prices, the instability of international political environment and human and economic hardship result from the conflict would have a highly uncertain impact on the production level of Apache’s assetsU.S. economy, which in areas Altus servicesturn, might affect our business and any additional third-party service contracts.operations adversely. The Company’s assets were initially constructedCompany continues to serve Apache’s anticipated development of Alpine Highmonitor commodity price closely and its surrounding areas. As such,may enter into commodity price hedge from time to time as necessary to mitigate the amount and pace of upstream development activity by Apache will directly impact Altus’ aggregate gathering and processing volumes because the productionvolatility risk.
Inflation
The annual rate of natural gas wells declines over time.
The Company remains focused on increasing third-party processing opportunities in addition to Alpine High, and other producers are developing oil and gas plays in surrounding areas that may provide Altus opportunities to enter into third-party processing and gathering agreements. Producers’ willingness to engage in new drilling is determined by a number of factors, all of which are affected by the COVID-19 pandemic, the most important of which are the prevailing and projected prices of oil, natural gas, and NGLs, the cost to drill and operate a well, the availability and cost of capital, and environmental and government regulations. Company management believes that its midstream assets are positioned in one of the most active regions for oil and gas exploration and development activitiesinflation in the United States hit 8.5% in March 2022, the highest in more than three decades, as measured by the Consumer Price Index. We expect that inflation in 2022 will modestly increase our operating costs and the Company is actively pursuing new suppliesoverall cost of natural gascapital projects we undertake. Inflation, combined with other economic factors has caused drilling and processing arrangements with third partiescompletion costs to increase throughput volumesover 20% from the prior year, which affects our customers and the wells they bring on line. In addition, the Federal Reserve has tightened its monetary policy by approving a half-percentage-point interest rate hike in its systems.
Costs and Expenses
CostsMay 2022 to maintain the federal funds rate in a target range of product sales
Costs of product sales represent purchases of NGLs from a third party, which0.75% - 1.0%. Furthermore, the Company then owns, controls and processes, prior to ultimate sale to customers. These costs are directly associated with the volume and amount of third-party contracts entered into and could fluctuate depending on market conditions and product prices.
Operations and maintenance
Operations and maintenance expenses primarily comprise those costs that are directly associated with the operationsChairman of the Company’s assets. The most significant of these costs are associated with direct laborFederal Reserve signaled that the Federal Reserve would continue to take necessary action to bring inflation down and supervision, power, repair and maintenance expenses, and equipment rentals. Fluctuations in commodity pricesto ensure price stability, including continued rate increases. Increased interest rates will have a negative 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.
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Depreciation and accretion
Depreciation on the capitalized costs incurred to acquire and develop the Company’s midstream assets is computed based on estimated useful lives and estimated salvage values. Also included within this expense is the accretion associated with estimated asset retirement obligations (ARO). Depreciation and accretion expense would be expected to increase during future periods in-line with additional infrastructure costs incurred; however, any future asset sales or long-lived asset impairments would decrease expected depreciation expense to commensurate levels.
General and administrative
General and administrative (G&A) expense represents indirect costs and overhead expenditures incurred by the Company associated with managing the midstream assets. These expenses primarily comprise fixed fees set forth in the Construction,Operations and Maintenance Agreement (COMA) entered into with Apache. Refer to Note 2—Transactions with Affiliates in the Notes to Consolidated Financial Statements set forth in Part I of this Quarterly Report on Form 10-Q for further information.
Taxes other than income
Taxes other than income are primarily related to ad valorem taxes on the Company’s midstream assets.ability to meet its contractual debt obligations and to fund its operating expenses, capital expenditures, dividends and distributions.
Supply Chain Considerations
During 2021 and the first quarter of 2022 challenging supply chain issues have emerged that will continue at least through the balance of 2022. Supply chains generally are being strained given the pick up in economic activity as the global economy reemerges from the COVID-19 pandemic. 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 overall 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.
Comprehensive Refinancing

During the second quarter of 2022, the Company plans to enter into transactions to comprehensively refinance our long term debt and minimize ongoing exposure to the Federal Reserve’s decision to raise interest rates to combat the impacts of inflation and the market instability caused by the Russian conflict with Ukraine.

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Key Performance Metrics
Adjusted EBITDA
The Company defines Adjusted EBITDA is defined as net income (loss) including noncontrolling interests before financing costs (net of capitalized interest),adjusted for interest, income, income taxes, depreciation and accretionamortization, impairment charges, asset write-offs, the proportionate EBITDA from our equity method investment, equity in earnings from investments recorded using the equity method, stock-based compensation expense, extraordinary losses and adjusts suchunusual or non-recurring charges. Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items as applicable, fromthat we do not believe are indicative of our core operating performance.
We believe that Adjusted EBITDA provides a meaningful understanding of certain aspects of earnings before the impact of investing and financing charges and income from the Equity Method Interest Pipelines. Altus also excludes (when applicable) impairments, unrealized gains or losses on derivative instruments, and other items affecting comparability of results to peers. Company management believestaxes. Adjusted EBITDA is useful to an investor in evaluating our performance because this measure:
•Is widely used by analysts, investors and competitors to measure a company’s operating performance;
•Is a financial measurement that is used by rating agencies, lenders, and other parties to evaluate our credit worthiness; and;
•Is used by our management for evaluating operatingvarious purposes, including as a measure of performance and comparing results of operations from period-to-periodas a basis for strategic planning and against peers without regard to financing or capital structure. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) including noncontrolling interests or any other measure determined in accordance with accounting principles generally accepted in the United States (GAAP) or as an indicator of the Company’s operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing Altus’ financial performance, such as cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. The presentation of Adjusted EBITDA should not be construed as an inference that the Company’s results will be unaffected by unusual or non-recurring items. Additionally, the Company’s computation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.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 (loss) including noncontrolling interests. Adjusted EBITDA should not be considered as an alternative to the GAAP measure of net income (loss) including noncontrolling interests or any other measure of financial performance presented in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool because it excludes some, but not all, items that affect net income (loss) including noncontrolling interests. Adjusted EBITDA should not be considered in isolation or as a 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 (loss) including noncontrolling interests, and incorporating this knowledge into its decision-making processes. Management believes that investors benefit from having access to the same financial measure that the Company uses in evaluating operating results.

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The following table presents a reconciliation of the GAAP financial measure of net income (loss) including noncontrolling interests to the non-GAAP financial measure of Adjusted EBITDA.
Three Months Ended March 31,
2021
2020(1)
Reconciliation of net income (loss) including noncontrolling interests to Adjusted EBITDA
Net income (loss) including noncontrolling interests$22,489 $(25,371)
Add:
Financing costs, net of capitalized interest2,598 273 
  Depreciation and accretion4,000 3,914 
Impairments441 — 
Unrealized derivative instrument loss16,529 61,984 
Equity method interests Adjusted EBITDA39,911 23,686 
Warrants valuation adjustment664 (1,877)
Loss on sale of assets— 188 
Other169 290 
Less:
Gain on sale of assets76 — 
 Interest income1 7 
Income from equity method interests, net21,688 15,842 
Income tax benefit— 696 
Adjusted EBITDA$65,036 $46,542 
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Three Months Ended March 31,*Variance
20222021$%
Reconciliation of net income including noncontrolling interests to Adjusted EBITDA(In thousands)
Net income including noncontrolling interests$21,389 $18,136 $3,253 18 %
Add back:
Interest expense26,645 25,549 1,096 4 %
Gain on redemption of mandatorily redeemable Preferred Units(4,493)— (4,493)NM
Income tax expense676 — 676 NM
Depreciation and amortization61,023 55,971 5,052 9 %
Amortization of contract costs448 448 — — %
Proportionate EMI EBITDA40,741 16,256 24,485 151 %
Share-based compensation6,132 — 6,132 NM
Loss on sale of assets110 32 78 244 %
Loss (gain) on debt extinguishment129 (239)368 (154)%
Unrealized loss on derivatives2,886 — 2,886 NM
Derivative loss due to Winter Storm Uri— 13,456 (13,456)(100)%
Integration Costs6,151 — 6,151 NM
Transaction Costs5,676 — 5,676 NM
   Other one-time cost or amortization1,195 328 867 264 %
Deduct:
Interest and other income— 16 (16)(100)%
Equity income from unconsolidated affiliates27,917 11,355 16,562 146 %
Adjusted EBITDA$140,791 $118,566 $22,225 19 %
(1)This period presented has been revised to reflect* The results of the legacy ALTM business are not included in the Company’s fair value change of its underlying warrants.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, for further information on the Company’s basis of presentation.
NM - not meaningful
Adjusted EBITDA increased by $22.2 million, or 19%, to $140.8 million for the three months ended March 31, 2022, compared to $118.6 million for the same period in 2021. The increase was primarily driven by an increase in net income including noncontrolling interest of $3.3 million and increases in add back related to the Company’s proportionate share of its EMI pipelines’ EBITDA, integration costs, share-based compensation, transaction costs, depreciation and amortization expense and interest expense, as a result of the Transaction closed in February 2022. The increase was partially offset by an increase in EMI pipelines income of $16.6 million, resulting from the three additional EMI pipelines entities through the Transaction, as well as a decrease in add back related to derivative loss due to Winter Storm Uri of $13.5 million as there was no add back related to extreme weather in the first quarter of 2022, nor was there elevated pricing which also resulted from Winter Storm Uri. The 2022 Adjusted EBITDA presented in the above table does not include any expected synergies including ad valorem taxes, operating expenses and corporate G&A, which will be recognized over the course of 2022.
Segment Adjusted EBITDA
Segment Adjusted EBITDA is defined as segment net earnings adjusted to exclude interest expense, income tax expense, depreciation and amortization, the proportionate effect of these same items for our equity method investments and other non-recurring items. Following table presents segment adjustment EBITDA for the three months ended March 31, 2022 and 2021. Also refer to Note 17—Segments, see in the section titled Revision of Previously IssuedNotes to our Condensed Consolidated Financial Statements in this Form 10-Q for Immaterial Adjustmentreconciliation of segment adjusted EBITDA to net income including noncontrolling interests.
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Three Months Ended March 31,*Variance
20222021$%
(In thousands)
Midstream Logistics$102,890 $105,800 $(2,910)(3)%
Pipeline Transportation40,437 15,322 25,115 164 %
Corporate and Other(1)
(2,536)(2,556)20 (1)%
Total segment adjusted EBITDA$140,791 $118,566 $22,225 19 %

* 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, for further information.information on the Company’s financial statement consolidation.
(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.
Midstream Logistics segment adjusted EBITDA decreased by $2.9 million, or 3%, to $102.9 million for the three months ended March 31, 2022, compared to $105.8 million for the same period in 2021. The decrease was primarily driven by no similar Winter Storm Uri event in the first quarter of 2022. For example, derivative loss due to Winter Storm Uri of $13.5 million was added back to segment adjusted EBITDA for first quarter of 2021, but no similar add back recorded in the first quarter of 2022. The decrease was partially offset by an increase in segment net income including noncontrolling interests of $1.0 million and increases in depreciation and amortization expense, integration cost and income tax expense add backs of $5.1 million, $4.1 million and $0.5 million, respectively, in relation to the Transaction closed in February 2022.
Pipeline Transportation segment adjusted EBITDA increased by $25.1 million, or 164%, to $40.4 million for the three months ended March 31, 2022, compared to $15.3 million for the same period in 2021. The increase was driven by investments in GCX and Shin Oak and a 100% increase in the Company’s investment in PHP, which were all acquired through the Transaction in February 2022. During the three months ended March 31, 2021, the Company only held a 26.67% interest in PHP.
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Results of Operations
The following table presents the Company’s results of operations for the periods presented:
Three Months Ended March 31,
2021
2020(1)
(In thousands)
REVENUES:
Midstream services revenue — affiliate$31,529 $40,767 
Product sales — third parties2,617 102 
Total revenues34,146 40,869 
COSTS AND EXPENSES:
Costs of product sales1,993 91 
Operations and maintenance7,402 10,591 
General and administrative3,455 4,178 
Depreciation and accretion4,000 3,914 
Impairments441 — 
Taxes other than income3,808 3,443 
Total costs and expenses21,099 22,217 
OPERATING INCOME13,047 18,652 
Unrealized derivative instrument loss(16,529)(61,984)
Interest income1 7 
Income from equity method interests, net21,688 15,842 
Warrants valuation adjustment(664)1,877 
Other7,544 (188)
Total other income (loss)12,040 (44,446)
Financing costs, net of capitalized interest2,598 273 
NET INCOME (LOSS) BEFORE INCOME TAXES22,489 (26,067)
Current income tax benefit— (696)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS22,489 (25,371)
Net income attributable to Preferred Unit limited partners19,492 18,262 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS2,997 (43,633)
Net income (loss) attributable to Apache limited partner2,817 (35,552)
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS$180 $(8,081)
KEY PERFORMANCE METRICS:
Adjusted EBITDA(2)
$65,036 $46,542 
OPERATING DATA:
Average throughput volumes of natural gas
(MMcf/d)		436 577 
Three Months Ended March 31,*Variance
20222021$%
(In thousands)
Revenues:
Service revenue$80,445 $67,662 $12,783 19 %
Product revenue174,928 79,993 94,935 119 %
Other revenue1,876 448 1,428 319 %
Total revenues257,249 148,103 109,146 74 %
Operating costs and expenses:
Costs of sales (exclusive of depreciation and amortization)120,275 37,005 83,270 225 %
Operating expense29,871 15,564 14,307 92 %
Ad valorem taxes4,153 2,351 1,802 77 %
General and administrative22,752 5,626 17,126 304 %
Depreciation and amortization61,023 55,971 5,052 9 %
Loss on disposal of assets110 32 78 244 %
Total operating costs and expenses238,184 116,549 121,635 104 %
Operating income19,065 31,554 (12,489)(40)%
Other income (expense):
Interest and other income250 537 (287)(53)%
Gain on Preferred Units redemption4,493 — 4,493 NM
Unrealized loss on derivatives(2,886)— (2,886)NM
Interest expense(26,774)(25,310)(1,464)6 %
Equity in earnings of unconsolidated affiliate27,917 11,355 16,562 146 %
Total other income (expense), net3,000 (13,418)16,418 (122)%
Income before income tax22,065 18,136 3,929 22 %
Current income tax expense676 — 676 NM
Net income including noncontrolling interests$21,389 $18,136 $3,253 18 %
(1)* This period presented has been revised to reflectThe results of the legacy ALTM business are not included in the Company’s fair value change of its underlying warrants.consolidated financials prior to February 22, 2022. Refer to the Form 10-Q basis of presentation in Note 1—Description of the Organization andSummary of Significant Accounting Policies,, see the section titled Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment for further information.information on the Company’s presentation.
(2)Adjusted EBITDA is not defined by GAAP and should not be considered an alternative to, or moreNM - Not meaningful than, net income (loss), operating income (loss), net cash provided by (used in) operating activities or any other measures prepared under GAAP.
Revenues
For the definitionthree months ended March 31, 2022, revenue increased $109.1 million, or 74%, to $257.2 million, compared to $148.1 million for the same period in 2021. The increase was primarily driven by period to period increases in gathered and reconciliationprocessed volumes, as well as similar increases in residue, condensate and NGL volumes sold.
Service revenue
Service revenue consists of Adjusted EBITDAservice fees paid to its most directly comparable GAAP measure, seeus 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 section titled Altusthree months ended March 31, 2022, increased by $12.8 million, or 19%, to $80.4 million, compared to $67.7 million for the same period in 2021. This increase is primarily due to a period over period increase in gathered and processed gas volumes of 280.0 Mcf per day and 280.5 Mcf per day, respectively, of which 164.0 Mcf per day and 124.3 Mcf per day are a result of new operations acquired through the Transaction. Service revenues are included entirely in the Midstream Operational Metrics—Adjusted EBITDA above.Logistics segment.
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Since the Company commenced operations in the second quarterProduct revenue
Product revenue consists of 2017, its most significant customer has been Apache. Altus Midstream is pursuing similar long-term commercial service contracts with third-parties that could be accommodated by existing capacity. Altus’ midstream service agreements with Apache contain no minimum volume commitmentscommodity sales (including condensate, natural gas residue, and as such, future results of operations may be materially impacted by Apache’s production volumes from Alpine High and Altus’ ability to contract third-party business. Refer to Part I, Item 1A—Risk Factors of the Company’s Annual Report on Form 10-KNGLs). Product revenue for the fiscal yearthree months ended DecemberMarch 31, 2020, and Part I, Item 3—Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q, for further discussion.
Revenues
The following table summarizes the Company’s revenues2022, increased by $94.9 million, or 119%, to $174.9 million, compared to $80.0 million for the periods presented:
Three Months Ended March 31,
20212020
(In thousands)
REVENUES:
Midstream services revenue — affiliate$31,529 $40,767 
Product sales — third parties2,617 102 
Total revenues$34,146 $40,869 
Midstream services revenue wassame period in 2021, primarily generated from fee-based midstream services provided under the termsdue to period over period increases in NGL and condensate prices combined with increased sales volumes of separate commercial midstream service agreements with Apache for the gas gathering, processing, and transmission of volumes from the dedicated area in the Alpine High field. Altus receives a per-unit fee based on the quantity of natural gasthese liquids and natural gas liquidresidue. NGL prices increased $18.27 per barrel or 64% and condensate prices increased $35.18 per barrel or 95%. NGL and condensate sales volumes that flow through its systems. During the periods presented, Altus did not ownincreased 1.8 million barrels or take title to the affiliate27%. Similarly, natural gas residue sales volumes that were processed through its systems. For more details, please refer to Note 3—Revenue Recognitionincreased 1.8 million MMBtu or 25%. Partially offsetting these increases was a period over period decrease in natural gas prices of $0.35 per MMBtu or 7%. Product revenues are included entirely in the NotesMidstream 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 Consolidated Financial Statements set forthsupport product sales to other third parties. For the three months ended March 31, 2022, cost of sales increased $83.3 million, or 225%, to $120.3 million, compared to $37.0 million for the same period in Part I2021. The increase was primarily driven by the period to period increase in NGL prices and NGL and natural gas volumes discussed above. Cost of this Quarterly Report on Form 10-Q for further information.sales (exclusive of depreciation and amortization) are included entirely in the Midstream Logistics segment.
Midstream services revenue from affiliate decreasedOperating expenses
Operating expenses increased by $9.3$14.3 million, or 92%, to $31.529.9 million for the three months ended March 31, 2021, as2022, compared to $40.815.6 million for the same period in 2021. Of the total increase, $3.5 million was driven by the new operations acquired through the Transaction. The remaining increase was primarily driven by higher period over period electricity costs of $9.4 million and merger integration costs of $1.4 million. The higher electricity costs were due to electricity credits received from one of our primary electricity providers during the month of February 2021 related to the extreme weather caused by Winter Storm Uri.
General and administrative
General and administrative (“G&A”) expense increased by $17.1 million, or 304%, to $22.8 million for the three months ended March 31, 2020.2022, compared to $5.6 million for the same period in 2021. The decreaseincrease was primarily driven by lower throughputacquisition and integration costs of natural gas volumes$10.4 million incurred in relation to the Transaction closed in February 2022 and share-based compensation recognized of $6.1 million, both of which are in connection with the Transaction and are non-recurring expenses.
Other Income (Expense)
Equity in earnings of unconsolidated affiliate
Income from Apache.
Product sales revenuesEMI pipelines increased by $2.5$16.6 million, or 146% to $2.6$27.9 million for the three months ended March 31, 2021, as2022, compared to $0.1$11.4 million for the three months ended March 31, 2020. Startingsame period in March of 2020 product sales revenues were generated from NGLs and condensates purchased and processed by Altus from a third party and subsequently sold to non-affiliated customers.

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Costs and Expenses
The following table summarizes the Company’s costs and expenses for the periods presented:
Three Months Ended March 31,
20212020
(In thousands)
Costs of product sales$1,993 $91 
Operations and maintenance7,402 10,591 
General and administrative3,455 4,178 
Depreciation and accretion4,000 3,914 
Impairments441 — 
Taxes other than income3,808 3,443 
Total costs and expenses$21,099 $22,217 
Costs of product sales
The $1.9 million increase in costs of product sales represent purchases of NGLs from a third-party starting in the first quarter of 2020, which were used to support the product sales to third parties discussed above.
Operations and maintenance
Operations and maintenance expenses decreased by approximately $3.2 million to $7.4 million for the three months ended March 31, 2021, as compared to $10.6 million for the three months ended March 31, 2020, primarily driven by increased operational efficiency as a result of transitioning from mechanical refrigeration units to the Company’s centralized Diamond cryogenic complex. Work related to this transition was still being completed in the first quarter of 2020. The transition resulted in decreases in employee-related costs, contract labor, lower chemical expenses, and lower equipment rentals. These savings are coupled with an overall decrease in Company labor from headcount reductions, partially offset by higher electricity power usage and repair and maintenance expenses.
General and administrative
G&A expense decreased by $0.7 million to $3.5 million for the three months ended March 31, 2021, as compared to $4.2 million for the three months ended March 31, 2020, primarily driven by lower professional fees, offset by higher fees paid under the COMA, which escalate on an annual basis per the terms of the agreement. Refer to Note 2—Transactions with Affiliates in the Notes to Consolidated Financial Statements set forth in Part I of this Quarterly Report on Form 10-Q for further information.
Taxes other than income
The increase in taxes other than income was driven by changes related to ad valorem taxes, which increased by $0.3 million to $3.7 million for the three months ended March 31, 2021, as compared to $3.4 million for the three months ended March 31, 2020. The $0.3 million increase reflects adjustments in estimated tax assessments related to the completion of construction and capacity utilization of certain assets.
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Other Income (Loss) and Financing Costs, Net of Capitalized Interest
The components of other income, other loss and financing costs, net of capitalized interest are presented below:
Three Months Ended March 31,
2021
2020(1)
(In thousands)
Unrealized derivative instrument loss$(16,529)$(61,984)
Interest income1 7 
Income from equity method interests, net21,688 15,842 
Warrants valuation adjustment(664)1,877 
Other7,544 (188)
Total other income (loss)$12,040 $(44,446)
Interest expense$2,306 $3,358 
Amortization of deferred facility fees292 273 
Capitalized interest— (3,358)
Total Financing costs, net of capitalized interest$2,598 $273 
(1)This period presented has been revised to reflect the Company’s fair value change of its underlying warrants. Refer to Note 1—Summary of Significant Accounting Policies, see the section titled Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment for further information.
Unrealized derivative instrument loss
During the three months ended March 31, 2021, the Company recognized an unrealized derivative instrument loss of $16.5 million in relation to an embedded exchange option identified upon the issuance and sale of Series A Cumulative Redeemable Preferred Units (the Preferred Units) in the second quarter of 2019. The unrealized loss related to this embedded feature was $62.0 million for the three months ended March 31, 2020. The associated derivative liability is recorded on the consolidated balance sheet at fair value. The fair value of the embedded derivative is determined (using an income approach) by a range of factors, including expected future interest rates using the Black-Karasinski model, interest rate volatility, the Company’s imputed interest rate, the expected timing of periodic cash distributions, the estimated timing for the potential exercise of the exchange option, and anticipated dividend yields of the Preferred Units. The value of the derivative during the three months ended March 31, 2021 was primarily impacted by an increase in expected future interest rates and by the decrease in the expected timing to exercise the exchange option feature. Refer to Note 13—Fair Value Measurements within Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q for further discussion.
Income from equity method interests, net
Income from equity method interests increased $5.9 million to $21.7 million for the three months ended March 31, 2021, as compared to $15.8 million for the three months ended March 31, 2020.2021. The increase was primarily due to the Company’s 26.7 percent shareacquisition of net income from the Permian Highway Pipeline being placed into service in January 2021,new EMI pipelines and was partially offset by an overall decrease in income from Equity Method Interest Pipelines, as a result of a significant winter freeze event in Texas during February 2021.
Other Income
In 2020, the Company entered into a contract with a provider to supply the Company with electrical power. If the Company does not utilize all of its fixed purchase volumes under this contract, then it will receive a credit based on a market rate for the related underutilization. In February 2021, in conjunction with increased power pricing due to the Texas freeze event and under usage of contractual electricity volumes, the Company earned an estimated credit of approximately $7.2 million. No such credit was earned in the first quarter of 2020.
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Financing costs, net of capitalized interest
Financing costs incurred, net of capitalized interest, includes increases in interest expense not eligible to have interest capitalized related to balances drawn on Altus Midstream’s credit facility throughout the current quarter. Decreases to gross interest expense were primarily driven by decreases to the variable interest rate on the credit facility. For the three months ended March 31, 2020, all of the interest expense on the credit facility was eligible to have interest capitalized.
Provisions for income taxes
During the three months ended March 31, 2021, the Company recognized a current income tax benefit of nil as compared to $0.7 million for the three months ended March 31, 2020.
The Company recorded no deferred income tax expense during the three months ended March 31, 2021, and for the three months ended March 31, 2020.
Key Performance Metric—EBITDA
Net income before income taxes was $22.5 million for the three months ended March 31, 2021, an increase of $48.6 million from a net loss before income taxes of $26.1 million for the three months ended March 31, 2020. The increase in net income before income taxes was primarily driven by a $45.5 million decrease to expense related to the fair value measurement of an embedded derivative at March 31, 2021, a $7.7 million increase of other income primarily related to a power credit, a $5.9 million increase in income from the Equity Method Interest Pipelines, and a $3.2 million decrease in operations and maintenance expenses. The increases to net income were offset by a $6.7 million decrease in total revenue, a $2.3 million increase in interest expense, and a $4.6 million increase of various other costs.
Adjusted EBITDA increased by $18.5 million for the three months ended March 31, 2021 compared to the prior year period. Adjusted EBITDA, which excludes the impacts of depreciation, accretion, impairments, and the changes to the embedded derivative noted above, benefited from an incremental $10.4 million increase related to excluding depreciation andadditional equity interest in the Company’s proportionate share of EBITDA from its Equity Method Interest Pipelines.existing EMI pipeline, PHP, through the Transaction closed in February 2022 and due to higher earnings.
For additional information, see the section titled Altus Midstream Operational Metrics—Adjusted EBITDA above.
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 Equity Method Interest PipelinesEMI pipelines and associated subsequent construction costs. For 2021,2022, the Company’s primary capital spending requirements are anticipated to be related to equity contributions associatedintegration of the Alpine High gathering system with its proportionate sharethe legacy BCP system, certain integration related synergies including the relocation of remaining construction, commissioning,compression units and maintenance costs relatingtreating assets to the Equity Method Interest Pipelines, andlegacy BCP processing plants, the Company’s contractual debt obligation, the Company’s payment of a quarterly cash dividend on its Class A common stockCommon Stock and Common Units as may be declared by its Board of Directors.Directors and cash payment upon redemption of remaining mandatorily redeemable Preferred Units.
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During the three months ended March 31, 2021,2022, the Company’s primary sources of cash were distributions from the Equity Method Interest Pipelines,EMI pipelines, borrowings under the revolving credit facility, and cash generated from operations. Based on Altus’the Company’s current financial plan and related assumptions including the Reinvestment Agreement, the Company believes that cash from operations, a reduced capital program for its midstream infrastructure, and distributions from the Equity Method Interest PipelinesEMI pipelines will generate cash flows in excess of capital expenditures and the amount required to fund the Company’s planned quarterly dividend and redemption of mandatorily redeemable Preferred Units during 2021.2022.
Given recent crude oil price volatility and uncertain economic activity resulting from inflation, increased interest rates, the COVID-19 pandemicarmed conflict in Ukraine and related governmental actions, the Company continues to monitor expected natural gas throughput volumes from Apache and capacity utilization of the Equity Method Interest Pipelines. Projections for 2021 remain dynamic. Altus' results, including projections relatedEMI pipelines.
Capital Requirements and Expenditures
Our operations can be capital intensive, requiring investments to capital resourcesexpand, upgrade, maintain or enhance existing operations and liquidity, could be materially affected by the continuing COVID-19 pandemic.
Altus Midstream Capital Requirements
to meet environmental and operational regulations. During the three months ended March 31, 20212022 and 2020,2021, capital spending for midstream infrastructure assets totaled $1.3$29.2 million and $19.1$19.8 million, respectively. Management believes its existing gathering, processing, and transmission infrastructure capacity is capable of fulfilling its midstream contracts to service Apache’s production from Alpine High and any third-partyits customers. As such, the Company expects remaining capital requirements for its existing infrastructure assets during 2021 to be minimal.
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Additionally, duringDuring the three months ended March 31, 2021 and 2020,2022, the Company made no cash contributions totalingto its EMI pipelines compared to $20.5 million and $82.8 million, respectively,contributed to an EMI pipeline in the Equity Method Interest Pipelines, which includes the following equity interest ownership stakes:same period of 2021.
•a 16.0 percent interest in GCX;
•a 15.0 percent interest in EPIC;
•an approximate 26.7 percent interest in PHP; and
•a 33.0 percent interest in Shin Oak.
The Company estimates it will incur approximately $10 million of additional capital contributions during the remainder of 2021 for its equity interest associated with construction on these joint venture pipelines. The Company anticipates its existing capital resources will be sufficient to fund the Company’s future capital expenditures for the Equity Method Interest PipelinesEMI pipelines and the Company’Company’s existing infrastructure assets. For further information on the Equity Method Interest Pipelines,EMIs, refer to Note 8—9—Equity Method InterestsInvestmentsin the Notes to our Condensed Consolidated Financial Statements set forth in Part Ithis Form 10-Q.
Cash Flows
The following tables present cash flows from operating, investing, and financing activities during the periods presented:
For the Three Months Ended March 31,
20222021
(In thousands)
Cash provided by operating activities$98,393 $41,594 
Cash used in investing activities$(19,392)$(41,057)
Cash (used in) provided by financing activities$(80,084)$10,795 
Operating Activities. Net cash provided by operating activities increased by $56.8 million for the three months ended March 31, 2022 compared with the same period in 2021. The change in the operating cash flows reflected an increase in net income including noncontrolling interests of $3.3 million, an increase of adjustments related to non-cash items of $12.4 million and an increase in cash provided by changes in working capital of $41.1 million. Period over period increase in cash provided by operating activities was primarily driven by new operation acquired through the Transaction.
Investing Activities. Net cash used in investing activities decreased by $21.7 million for the three months ended March 31, 2022 compared with the same period in 2021 as the Company did not make any contribution to the EMI pipelines during first quarter of 2022. The decrease was also driven by the cash inflow of $13.4 million acquired through the acquisition closed in February 2022. The decrease was partially offset by an increase in cash outflows of $9.5 million for higher capital expenditures on gathering, processing and transmission systems expansion.
Financing Activities. Net cash used in financing activities increased by $90.9 million for the three months ended March 31, 2022 compared with the same period in 2021. The change was primarily due to redemption of mandatorily redeemable Preferred Units of $60.7 million, an increase of $13.9 million in principal payments on long-term debt and a reduction in equity contribution received of $14.9 million.
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Dividend and Distribution Reinvestment Agreement
On February 22, 2022, the Company entered into a Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”) with the Partnership, APA Corporation, Apache Midstream, Buzzard Midstream LLC, a Delaware limited liability company and controlled affiliate of ISQ Global Infrastructure Fund II L.P., BCP Raptor Aggregator, LP, a Delaware limited partnership and controlled affiliate of Blackstone Capital Partners VII L.P. and Blackstone Energy Partners II L.P., BC Permian Pipeline Aggregator LP, BX Permian Pipeline Aggregator LP, a Delaware limited partnership and controlled affiliate of Blackstone Capital Partners VII L.P. and Blackstone Energy Partners II L.P., Contributor, and certain other individuals associated with Contributor (collectively, the “Reinvestment Holders”).
The Reinvestment Agreement obligates each Reinvestment Holder to reinvest in shares of Class A Common Stock at least 20% of all distributions on Common Units or dividends on shares of Class A Common Stock held by such Reinvestment Holder immediately after the Closing, including shares of Class A Common Stock received at a later date in exchange for Common Units held immediately after Closing. The Reinvestment Agreement provides the audit committee of the Board with the authority to at any time increase the percentage of the mandatory dividend reinvestment to up to 100% of such distributions or dividends or decrease such percentage to not less than 20%. The mandatory obligations of each Reinvestment Holder will continue from Closing until the earliest of (i) March 31, 2024, (ii) the date dividends and distributions are paid by the Company and the Partnership, respectively, in respect of the quarter ending December 31, 2023, and (iii) such other date determined by the audit committee of the Board. All shares of Class A Common Stock issued pursuant to the Reinvestment Agreement will be issued at a 3% discount to the volume-weighted average price of the Class A Common Stock for the five trading days immediately preceding, but excluding, the dividend or distribution payment date.
The Reinvestment Agreement also provides an obligation for the Company to establish a dividend reinvestment plan that provides all other holders of Class A Common Stock the optional right to reinvest all or part of any dividends on shares of Class A Common Stock held by such holder on substantially the same terms as the Reinvestment Holders. On April 4, 2022, the Company filed a Registration Statement on Form S-3 related to the Reinvestment Agreement and the establishment of the Plan for all other holders.
On Feb 22, 2022, the audit committee recommended to the Board of the Company and the Board approved that the dividends to be paid on shares held by the Reinvestment Holders will be paid in newly issued Class A shares for each quarterly dividend for the calendar year 2022.
The foregoing description of the Reinvestment Agreement is a summary only and is qualified in its entirety by reference to the Reinvestment Agreement, a copy of which is attached as Exhibit 10.2 to this Quarterly Report on Form 10-Q.10-Q and is incorporated herein by reference.
Altus Midstream Class A Common Stock Dividend and Common Units Distributions
In the first quarter of 2021, the Company paid $24.4 million related to its quarterly dividend program. For more information please refer to Note 2—Transactions with Affiliates and Note 9—Equity in the Notes to Consolidated Financial Statements set forth in Part I, of this Quarterly Report on Form 10-Q.
On May 4, 2021,April 19, 2022, the Company’s Board of Directors declared a cash dividend of $1.50 per share on the Company’s Class A Common Stock totaling $5.6 million, towhich will be paid on June 30, 2021,payable to stockholders of record ason May 17, 2022. Please refer to Note 10—Equity and Warrants for additional information.
Common Units Distribution
Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the closeequity interests of businessthe Contributed Entities to the Partnership; and (ii) in exchange for such contribution, the Partnership issued 50,000,000 common units representing limited partner interests in the Partnership and the Company issued 50,000,000 shares of the Company’s Class C common stock, par value $0.0001 per share, to Contributor. For further information on May 28, 2021. The Class A Common Stock dividend will be funded bythe Preferred Units, refer to Note 10—Equity and Warrantsin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.
In the first quarter of 2022, the Company, through its ownership of the general partner of the Partnership, declared a distribution from Altus Midstream to its common unitholders of $1.50 per Common Unit totaling $24.4 million, of which $5.6 million is payablefrom the Partnership to the Companyholders of Common Units. Please refer to Note 10—Equity and the balance is payable to Apache.Warrants for additional information.
Series A Cumulative Redeemable Preferred Units
OnThe Partnership issued Preferred Units on June 12, 2019, Altus Midstream2019. Because the Transaction was accounted for as a reverse merger, certain Preferred Units that were issued and soldoutstanding were assumed at Closing for accounting purposes. The Preferred Units are exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Units in a private offering exempt fromUnit holders upon the registration requirementsoccurrence of specified events, unless otherwise redeemed by the Securities ActCompany.
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Table of 1933, as amended (the Closing). The Closing occurred pursuant to a Preferred Unit Purchase Agreement among Altus Midstream, the Company, and the purchasers party thereto, dated as of May 8, 2019. A total of 625,000 Preferred Units were sold at a price of $1,000 per Preferred Unit, for an aggregate issue price of $625.0 million.Contents
The Preferred Units entitle the holders thereof to receive quarterly distributions at a rate of 7seven percent per annum, commencing with the quarter ended June 30, 2019. The rate increases to 10 percent per annum after the fifth anniversary of Closing and upon the occurrence of specified events. For any quarter ending on
On the Closing Date of the Transaction, the Company effectuated the Third Amended and Restated Agreement of Limited Partnership of the Partnership (“Partnership LPA”), which among other things, provides for mandatory redemptions by the Partnership of 50,000 Preferred Units at or prior to December 31, 2020, Altus Midstream could electeach of the six-, twelve- and eighteen-month anniversaries of the effectiveness from the Partnership LPA, for an aggregate of 150,000 Preferred Units over such eighteen-month period.
The Company intends to pay distributions in-kind and did so in respect of quarters ended on and before March 31, 2020.redeem the Preferred Units by year end 2022. For further information on the Preferred Units, refer to Note 10—11—Series A Cumulative Redeemable Preferred Unitsin the Notes to our Condensed Consolidated Financial Statements set forth in Part I, of this Quarterly Report on Form 10-Q.

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Sources and Uses of Cash
The following table presents the sources and uses of the Company’s cash and cash equivalents for the periods presented.
 For the Three Months Ended
March 31,
 20212020
 (In thousands)
Sources of cash and cash equivalents:
Proceeds from revolving credit facility$33,000 $72,000 
Proceeds from sale of assets1,090 6,096 
Capital distributions from equity method interests7,540 1,552 
Net cash provided by operating activities43,272 51,538 
Total Sources of Cash and Cash Equivalents84,902 131,186 
Uses of cash and cash equivalents:
Capital expenditures(1)
(1,330)(19,096)
Distributions paid to Preferred Unit limited partners(11,562)— 
Distributions paid to Apache limited partner(18,750)— 
Dividends paid(5,620)— 
Contributions to equity method interests(20,522)(82,827)
Finance lease payments— (11,789)
Deferred facility fees— (816)
Capitalized interest paid— (3,340)
Total Uses of Cash and Cash Equivalents(57,784)(117,868)
Increase in cash and cash equivalents$27,118 $13,318 
(1)The table presents capital expenditures on a cash basis; therefore, the amounts may differ from those discussed elsewhere in this document, which include accruals.
Liquidity
The following table presents a summary of the Company’s key financial indicators at the dates presented:
March 31,December 31,
March 31, 2021December 31, 202020222021
(In thousands) (In thousands)
Cash and cash equivalentsCash and cash equivalents$51,306 $24,188 Cash and cash equivalents$17,646 $18,729 
Total debtTotal debt657,000 624,000 Total debt$2,948,349 $2,307,702 
Available committed borrowing capacityAvailable committed borrowing capacity141,000 176,000 Available committed borrowing capacity$269,000 $133,000 
Cash and cash equivalents
As of March 31, 20212022 and December 31, 2020,2021, the Company had $51.3$17.6 million and $24.2$18.7 million, respectively, in cash and cash equivalents. The majority of the cash is invested in highly liquid, investment-grade instruments with maturities of three months or less at the time of purchase.


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Total Debt and Available credit facilities
In November 2018, Altus Midstream entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream’s two, one-year extension options). The agreement for this revolving credit facility, as amended (the Amended Credit Agreement), provides aggregate commitments from a syndicate of banks of $800.0 million. The aggregate commitments include a letter of credit subfacility of up to $100.0 million and a swingline loan subfacility of up to $100.0 million. Altus Midstream may increase commitments up to an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders. As of March 31, 2021, there were $657.0 million of borrowings and a $2.0 million of letter of credit outstanding under this facility. As of December 31, 2020, there were $624.0 million of borrowings and no letters of credit were outstanding under this facility.
Altus Midstream’s revolving credit facility is unsecured and is not guaranteed by the Company, Apache, APA Corporation or any of their respective subsidiaries.
At Altus Midstream’s option, the interest rate per annum for borrowings under this amended credit facility is either a base rate, as defined, plus a margin, or the London Interbank Offered Rate (LIBOR), plus a margin. Altus Midstream also pays quarterly a facility fee at a rate per annum on total commitments. The margins and the facility fee vary based upon (i) the Leverage Ratio (as defined below) until Altus Midstream has a senior long-term debt rating and (ii) such senior long-term debt rating once it exists. The Leverage Ratio is the ratio of (1) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries to (2) EBITDA (as defined in the Amended Credit Agreement) of Altus Midstream and its restricted subsidiaries for the 12-month period ending immediately before the determination date. At March 31, 2021, the base rate margin was 0.05 percent, the LIBOR margin was 1.05 percent, and the facility fee was 0.20 percent. In addition a commission is payable quarterly to the lenders on the face amount of each outstanding letter of credit at a per annum rate equal to the LIBOR margin then in effect. Customary letter of credit fronting fees and other charges are payable to issuing banks.
The Amended Credit Agreement contains restrictive covenants that may limit the ability of Altus Midstream and its restricted subsidiaries to, among other things, incur additional indebtedness or guaranty indebtedness, sell assets, make investments in unrestricted subsidiaries, enter into mergers, make certain payments and distributions, incur liens on certain property securing indebtedness, and engage in certain other transactions without the prior consent of the lenders.
Altus Midstream also is subject to a financial covenant under the Amended Credit Agreement, which requires it to maintain a Leverage Ratio not exceeding 5.00:1.00 at the end of any fiscal quarter, starting with the quarter ended December 31, 2019, except that during the period of up to one year following a qualified acquisition, the Leverage Ratio cannot exceed 5.50:1.00 at the end of any fiscal quarter. Unless the Leverage Ratio is less than or equal to 4.00:1.00, the Amended Credit Agreement limits distributions in respect of Altus Midstream LP’s capital to $30 million per calendar year until either (i) the consolidated net income of Altus Midstream LP and its restricted subsidiaries, as adjusted pursuant to the Amended Credit Agreement, for three consecutive calendar months equals or exceeds $350.0 million on an annualized basis or (ii) Altus Midstream LP has a specified senior long-term debt rating; in addition, before the occurrence of one of those two events, the Leverage Ratio must be less than or equal to 5.00:1.00. In no event can any distribution be made that would, after giving effect to it on a pro forma basis, result in a Leverage Ratio greater than (i) 5.00:1.00 or (ii) for a specified period after a qualifying acquisition, 5.50:1.00. The Leverage Ratio as of March 31, 2021 was less than 4.00:1.00.
The terms of Altus Midstream’s Preferred Units also contain certain restrictions on distributions on Altus Midstream LP’s Common Units, including the Common Units held by the Company, and any other units that rank junior to the Preferred Units with respect to distributions or distributions upon liquidation. Refer to Note 10—Series A Cumulative Redeemable Preferred Units in the Notes to Consolidated Financial Statements set forth in Part I of this Quarterly Report on Form 10-Q for further information. In addition, the amount of any cash distributions to Altus Midstream LP by any entity in which it has an interest accounted for by the equity method is subject to such entity’s compliance with the terms of any debt or other agreements by which it may be bound, which in turn may impact the amount of funds available for distribution by Altus Midstream LP to its partners.
There are no clauses in the Amended Credit Agreement that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes. The Amended Credit Agreement has no drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, the agreement allows the lenders to accelerate payment maturity and terminate lending and issuance commitments for nonpayment and other breaches, and if Altus Midstream or any of its restricted subsidiaries defaults on other indebtedness in excess of the stated threshold, is insolvent, or has any unpaid, non-appealable judgment against it for payment of money in excess of the stated threshold. Lenders may also accelerate payment maturity and terminate lending and issuance commitments if Altus Midstream undergoes a specified change in control or has specified pension plan liabilities in excess of the stated threshold. Altus Midstream was in compliance with the terms of the Amended Credit Agreement as of March 31, 2021.
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There is no assurance that the financial condition of banks with lending commitments to Altus MidstreamCompany will not deteriorate. AltusThe 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.

Contractual Obligations
Long-term debt obligation and related interest payments. We have contractual obligations for principal and interest payments on our term loans. See Note 6—Debt and Financing Costsin the Notes our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Under certain of our transportation services agreements with third party pipelines to transport natural gas and NGLs with current contract terms from 2021 to 2031, 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 March 31, 2022.

Off-Balance Sheet Arrangements
Other than the arrangements described in Exhibit 99.6 to the Company’s AnnualCurrent Report on Form 10-K for the fiscal year ended December 31, 2020,8-K filed on February 28, 2022, the Company has not entered into any transactions, agreements, or other contractual arrangements with unconsolidated entities that are reasonably likely to materially affect the Company’s liquidity or capital resource positions.

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Critical Accounting Policies
The Company’s significant accounting policies (refer to Summary of Significant Accounting Policies in Exhibit 99.4 to the Company’s Current Report on Form 8-K filed on February 28, 2022) are fundamental to understanding our results of operations and financial condition. Some accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments and may require significant judgments in applying complex accounting principles to individual transactions, where actual results could differ materially from the Company’s estimates. The Company has procedures and processes in place to facilitate making these judgments. In addition, certain accounting policies are more likely than others to have a critical effect on the Company’s Condensed Consolidated Financial Statements, and may apply to areas of relatively greater business importance. The following accounting policies are critical to the Company’s Condensed Consolidated Financial Statements:
•Revenue recognition,
•Use of estimates,
•Business combination,
•Fair value measurement, and
•Impairment of long-lived assets.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosure About Market Risk
The Company is exposed to various market risks, including the effects of adverse changes in commodity prices and credit risk as described below. The Company continually monitors its market risk exposure, including the impact and developments related to the COVID-19 pandemic,armed conflict in Ukraine, increase in interest rate and inflation trend, which introduced significant volatility and uncertainties in the financial markets during 2020 and 2021.2022.
Commodity Price Risk
Currently, essentially allThe results of the Company’s midstream service agreements are fee-based, with no direct commodity price exposure tooperations may be affected by the market prices of oil and natural gas, or NGLs, and only an immaterialgas. A portion of the agreements are based on the underlying value of a commodity. However, the CompanyCompany’s revenue is indirectly exposeddirectly tied to adverse changes in commodity prices through Apache and potential third-party customers’ economic decisions to develop and produce oil andlocal natural gas, from which Altus receives revenues for providing gathering, processing,NGLs and transmission services.
condensate prices in the Permian Basin. Fluctuations in commodity prices also impact operating cost elements both directly and indirectly. For example, commodity prices directly impact costs such as power and fuel, which are expenses that increase or decrease in line with changes in commodity prices. Commodity prices also affect industry activity and demand, thus indirectly impacting the cost of items such as labor and equipment rentals. Management regularly reviews the Company’s potential exposure to commodity price risk, and may periodically enter into financial or physical arrangements intended to mitigate potential volatility. Refer to Note 16—Derivative and Hedging Activitiesin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Qfor additional discussion regarding our hedging strategies and objectives.
Interest Rate Risk
AtThe market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. As of March 31, 2021, Altus Midstream2022, the Company had $657.0 millioninterest bearing debt, net of proceeds drawn on its revolving credit facility.deferred financing costs, with principal amount of $2.95 billion. The interest rate for the facility is variable, which exposes the Company to the risk of increased interest expense in the event of increases to short-term interest rates. If interest rates increased by 1.0 percent, the Company’s annual consolidated interest expense would have increased by approximately $1.6 million for the quarter ended March 31, 2021. 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. Altus currently has noIf interest rate derivative instruments outstanding, butrates increase by 1.0%, the Company’s consolidated interest expense would have increased by approximately $6.5 million for the quarter ended March 31, 2022. The Company continues to monitor its interest rate exposure and may periodically enter into interest rate derivative instruments derivatives to add stability to interest expense and to manage its exposure to interest rate movements. Refer to Note 16—Derivative and Hedging Activitiesin the future if it determines that it is necessaryNotes to investour Condensed Consolidated Financial Statements in such instruments in order to mitigate its interest rate risk.this Form 10-Q for additional discussion regarding our hedging strategies and objectives.
Credit Risk
The Company is subject to credit risk resulting from nonpayment or nonperformance by, or the insolvency or liquidation of Apache or 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
TheDisclosure Controls and Procedures
As of March 31, 2022, 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 President, in his capacityChief Accounting and Administrative Operating Officer, who serves as the principal executiveaccounting officer, and the Company’s Chief Financial Officer and Treasurer, in his capacity as principal financial officer, evaluatedof the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2021, the end(as defined in Rule 13a-15(e) of the period covered by this Quarterly Report on Form 10-Q.Exchange Act). Based onupon that evaluation, the Company’s Chief Executive Officer and as of the date of that evaluation, these officersChief Accounting and Administrative Operating Officer, concluded that there was a material weakness in the Company’s disclosure controls and procedures in connection with the immaterial revision discussed in Note 1—Summary of Significant Accounting Policies—Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment within Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The Company identified a material weakness in its controls over the accounting for the public and private warrants outstanding at the time of the Business Combination. The Company’s controls to evaluate the accounting for complex financial instruments, such as the warrants, did not operate effectively to appropriately apply the provisions of ASC 815-40. This material weakness resulted in an immaterial error in the Company’s accounting for the warrants as more fully described in Note 1—Summary of Significant Accounting Policies—Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment within Part I, Item 1—Financial Statements of this Quarterly Report on Form 10-Q. Based on the Company’s assessment, management now concludes that,were effective as of March 31, 2021, its internal control2022.
The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that the Company files under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Accounting and Administrative Operating Officer, as appropriate, to allow timely decisions regarding required disclosure.
Change in Internal Control over financial reporting was not effective.Financial Reporting
To remediate the material weaknessThere were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Company implemented additional review procedures, additional training, and enhancementsExchange Act) during the quarter ended March 31, 2022, that have materially affected or are reasonably likely to materially affect the accounting policy related to the accounting for equity and liability instruments (including those with warrants) to determine proper accounting in accordance with GAAP.Company’s internal control over financial reporting.
The Company’s remediation plan has been implemented. The material weakness cannot be considered remediated until the controls operate for a sufficient period and management has concluded, through testing, that its internal controls are operating effectively. While management believes that the remedial efforts will resolve the identified material weakness, there is no assurance that management’s remedial efforts conducted to date will be sufficient or that additional remedial actions will not be necessary.



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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For further information regarding legal proceedings, refer to Note 7—8—Commitments and Contingencies in the Notes to Our Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS 
Please referRisks Related to Part I, Item 1A—Risk FactorsOur Business
The Company’s operating assets are currently located exclusively in the Permian Basin in Texas, making it vulnerable to risks associated with operating in a single geographic area.
The Company’s wholly-owned midstream assets are currently located exclusively in the Delaware Basin in Texas which is part of the broader Permian Basin. As a result of this concentration, the Company will be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, obtaining rights of way, market limitations, water shortages or restrictions, drought related conditions, or other weather-related conditions or interruption of the processing or transportation of crude oil, natural gas, and water. If any of these factors were to impact the Permian Basin more than other producing regions, the Company’s business, financial condition, and results of operations could be adversely affected relative to other midstream companies that have a more geographically diversified asset portfolio.

Because of the natural decline in hydrocarbon production from existing wells, the Company’s success depends, in part, on its ability to maintain or increase hydrocarbon throughput volumes on its midstream systems, which depends on its customers’ levels of development and completion activity on its dedicated acreage.

The level of crude oil and natural gas volumes handled by the Company’s midstream systems depends on the level of production from crude oil and natural gas wells dedicated to its midstream systems, which may be less than expected and which will naturally decline over time. To maintain or increase throughput levels on its midstream systems, the Company must obtain production from wells completed by customers on acreage dedicated to its midstream systems or execute agreements with other third parties in its areas of operation.

The Company has no control over producers’ levels of development and completion activity in its areas of operation, the amount of reserves associated with wells connected to its systems, or the rate at which production from a well declines. In addition, the Company has no control over producers or their exploration and development decisions, which may be affected by, among other things:
•the availability and cost of capital;
•prevailing and projected crude oil, natural gas, and NGL prices;
•demand for crude oil, natural gas, and NGLs;
•political and economic conditions and events in foreign oil, natural gas and NGL producing countries, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, the armed conflict in Ukraine and associated economic sanctions on Russia;
•increase in interest rate and inflation trend;
•levels of reserves;
•geologic considerations;
•changes in the strategic importance customers assign to development in the Delaware Basin as opposed to other potential future operations they may acquire, which could adversely affect the financial and operational resources such customers are willing to devote to development of their acreage in the Permian Basin;
•increased levels of taxation related to the exploration and production of crude oil, natural gas, and NGLs in its areas of operation;
•environmental or other governmental regulations, including the availability of permits, the regulation of hydraulic fracturing, and a governmental determination that multiple facilities are to be treated as a single source for air permitting purposes; and
•the costs of producing and ability to produce crude oil, natural gas, and NGLs and the availability and costs of drilling rigs and other equipment.

Due to these and other factors, even if reserves are known to exist in areas served by the Company’s midstream assets, producers may choose not to develop those reserves. If producers choose not to develop their reserves or they choose to slow their development rate in the Company’s areas of operation, utilization of its midstream systems will be below anticipated levels. Reductions in development activity, coupled with the natural decline in production from its current dedicated acreage,
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would result in the Company’s inability to maintain the then-current levels of utilization of its midstream assets, which could materially adversely affect its business, financial condition, results of operations, and cash flow.

Dedicated acreage may be lost as a result of title defects in the properties in which the Company’s customers invest.

It is the practice of certain of the Company’s Annualcustomers in acquiring oil and natural gas leases or interests not to incur the expense of retaining lawyers to examine the title to the mineral interests. Rather, certain customers rely on the judgement of oil and gas lease brokers or landmen who perform the fieldwork in examining records in the appropriate governmental office before attempting to acquire a lease in a specific mineral interest. The existence of a material title deficiency can render a lease worthless. If any of the Company’s customers fail to cure any title defects, such customers may be delayed or prevented from utilizing the associated mineral interest which could result in a decrease in the volumes on the Company’s systems and an associated decrease in its revenues.

We own interests in certain pipeline projects and other joint ventures, and we may in the future enter into additional joint ventures, and our control of such entities is limited by provisions of the limited partnership and limited liability company agreements of such entities and by our percentage ownership in such entities.

We have ownership interests in several joint ventures, including the PHP, GCX, Breviloba and EPIC joint ventures, and we may enter into other joint venture arrangements in the future. While we own equity interests and have certain voting rights with respect to our joint ventures, we do not act as operator of or control our joint ventures, each of which is operated by another joint venture partner. We have limited ability to influence the business decisions of these entities, and it may therefore be difficult or impossible for us to cause the joint venture to take actions that we believe would be in our or the relevant joint venture’s best interests. Moreover, joint venture arrangements involve various risks and uncertainties, such as committing us to fund operating and/or capital expenditures, the timing and amount of which we may not control, and which could adversely affect our cash flow.
We also will likely be unable to control the amount of cash we will receive from the operation of these entities, which could further adversely affect our cash flow. Joint venture arrangements may also restrict our operational and organizational flexibility and our ability to manage risk, which could have a material and adverse effect on our business, cash flow and results of operations.

If the third-party pipelines interconnected, or at some future point expected to be interconnected, to the Company’s pipelines become unavailable to transport or store crude oil, NGLs or natural gas, the Company’s revenue and available cash could be adversely affected.

The Company depends upon third-party downstream pipelines and associated operations to provide delivery options from its processing system. Because the Company does not control these pipelines and associated operations, their continuing operation is not within its control. If any pipeline were to become unavailable for current or future volumes due to repairs, damage to the facility, lack of capacity, shut in by regulators, failure to meet quality requirements or any other reason, the Company’s ability to operate efficiently and continue shipping crude oil, natural gas and refined products to major demand centers could be restricted, thereby reducing revenue. Any temporary or permanent interruption at these pipelines could have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flow.

The Company cannot predict the pace at which its customers will develop their dedicated acreage or the areas they will decide to develop.

Our acreage dedications cover midstream services in a number of areas that are in varying stages of development. The pace of customers development of these areas and the number of wells that it will ultimately develop in each area is uncertain. Certain of the Company’s customers own acreage in areas that are not dedicated to the Company. We cannot predict which of these areas these customers will determine to develop and at what time. Our customers may decide to explore and develop areas in which we have a smaller operating interest in the midstream assets that service that area, or where the acreage is not dedicated to us, rather than areas in which we have a larger operating interest in the midstream assets that service that area. These customers’ decisions to develop acreage that is not dedicated to the Company may adversely affect its business, financial condition, results of operations, and cash flow.

The Company’s customers may suspend, reduce, or terminate their obligations under the Company’s commercial agreements with them in certain circumstances, which could have a material adverse effect on the Company’s financial condition, results of operations, and cash flow.

The Company has entered into gas gathering, compression and processing agreements, crude oil gathering agreements, and produced water gathering and disposal agreements with its customers, which include provisions that permit the customer to suspend, reduce, or terminate its obligations under each agreement if certain events occur. These events include non-performance by the Company and force majeure events which are out of the Company’s control. The customers have the
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discretion to make such decisions notwithstanding the fact that they may significantly and adversely affect the Company. Any such reduction, suspension, or termination of these customers’ obligations under their commercial agreements would have a material adverse effect on the Company’s financial condition, results of operations and cash flow.

Increased competition from other companies that provide midstream services, or from alternative fuel sources, could have a negative impact on the demand for the Company’s services, which could adversely affect its financial results.

The Company’s systems will compete for third party customers primarily with other crude oil and natural gas gathering systems and produced water service providers. Some of its competitors may now, or in the future, have access to greater supplies of crude oil, natural gas and produced water than the Company does. Some of these competitors may expand or construct gathering systems that would create additional competition for the services the Company would provide to third party customers. In addition, potential third party customers may develop their own gathering systems instead of using the Company’s systems.

Further, hydrocarbon fuels compete with other forms of energy available to end-users, including renewable electricity and coal. Increased demand for such other forms of energy at the expense of hydrocarbons could lead to a reduction in demand for the Company’s services.

All of these competitive pressures could make it more difficult for the Company to attract new customers as it seeks to expand its business, which could have a material adverse effect on its business, financial condition, and results of operations. In addition, competition could intensify the negative impact of factors that decrease demand for crude oil, natural gas, and produced water services in the markets served by its systems, such as adverse economic conditions, weather, higher fuel costs, and taxes or other governmental or regulatory actions that directly or indirectly increase the cost or reduce demand for its services.

The Company’s exposure to commodity price risk may change over time and the Company cannot guarantee the terms of any existing or future agreements for its midstream services with its customers.

The Company currently generates revenues pursuant to a variety of different contractual arrangements, including fee-based agreements based on volumetric fees, percent-of-proceeds arrangements based on a percent of the proceeds from the sale of gathering and processing outputs on behalf of a producer and percent-of-products arrangements in which the Company is assigned a portion of the natural gas it gathers and processes as partial compensation. Consequently, the Company’s existing operations and cash flow have limited direct exposure to commodity price risk. However, the Company’s customers are exposed to commodity price risk, and extended reduction in commodity prices could reduce the production volumes available for the Company’s midstream services in the future below expected levels. In addition, in the past, excess capacity has created a highly competitive environment that has decreased commodity price differentials between the Permian Basin and end markets, which has reduced the demand for the Company's services resulting in decreases in volumes transported and lower rates the Company is able to charge to its customers. Although the Company intends to maintain these pricing terms on both new contracts and existing contracts for which prices have not yet been set, its efforts to negotiate such terms may not be successful, which could have a materially adverse effect on its business.

The Company’s business involves many hazards and operational risks, some of which may not be fully covered by insurance. The occurrence of a significant accident or other event that is not fully insured could curtail its operations and have a material adverse effect on its cash flow.

The Company’s operations are subject to all of the hazards inherent in the gathering of crude oil, natural gas, and produced water, including:

•damage to pipelines, compressor stations, centralized gathering facilities, pump stations, storage terminals, related equipment, and surrounding properties caused by design, installation, construction materials, or operational flaws, natural disasters, acts of terrorism, or acts of third parties;
•leaks of crude oil, natural gas, or NGLs or losses of crude oil, natural gas, or NGLs as a result of the malfunction of, or other disruptions associated with, equipment, facilities or pipelines;
•fires, ruptures, and explosions; and
•other hazards that could also result in personal injury and loss of life, pollution, and suspension of operations.

The Company may elect not to obtain insurance for any or all of these risks if it believes that the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flow.

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A shortage of equipment and skilled labor could reduce equipment availability and labor productivity and increase labor and equipment costs, which could have a material adverse effect on the Company’s business and results of operations.

The Company’s gathering and other midstream services require special equipment and laborers who are skilled in multiple disciplines, such as equipment operators, mechanics, and engineers, among others. If the Company experiences shortages of necessary equipment or skilled labor in the future, its labor and equipment costs and overall productivity could be materially and adversely affected. If the Company’s equipment or labor prices increase or if the Company experiences materially increased health and benefit costs for employees, its business and results of operations could be materially and adversely affected.

The loss of key personnel could adversely affect the Company’s ability to operate.

The Company relies heavily on its management team. The Company does not maintain, nor does it plan to obtain, any insurance against the loss of any of these individuals. The loss of the services of any key individuals who represent the Company’s senior management or any other critical personnel could have a material adverse effect on its business, financial condition, results of operations, and cash flow.

A terrorist attack, cyber-attack, or armed conflict could harm the Company’s business.

Terrorist activities, cyber-attacks, anti-terrorist efforts, and other armed conflicts involving the United States or other countries may adversely affect the United States and global economies and could prevent the Company from meeting its financial and other obligations. For example, on February 24, 2022, Russia launched a large-scale invasion of Ukraine. As a result, the United States, the United Kingdom, the member states of the European Union and other public and private actors have levied severe sanctions on Russia. The geopolitical and macroeconomic consequences of this invasion and associated sanctions cannot be predicted, and such events, or any further hostilities in Ukraine or elsewhere, could severely impact the world economy. If any of these events occur, the resulting political instability and societal disruption could reduce overall demand for crude oil and natural gas, potentially putting downward pressure on demand for the Company’s services and causing a reduction in its revenues. Crude oil and natural gas related facilities could be direct targets of terrorist attacks, and the Company’s operations could be adversely impacted if infrastructure integral to its operations is destroyed or damaged. Costs for insurance and other security may increase as a result of these threats, and some insurance coverage may become more difficult to obtain, if available at all.

A cyber incident could result in information theft, data corruption, operational disruption, and/or financial loss.

The oil and gas industry has become increasingly dependent on digital technologies to conduct day-to-day operations including certain midstream activities. For example, software programs are used to manage gathering and transportation systems and for compliance reporting. The use of mobile communication devices has increased rapidly. Industrial control systems such as SCADA (supervisory control and data acquisition) now control large scale processes that can include multiple sites and long distances, such as crude oil and natural gas pipelines.

The Company depends on digital technology, including information systems and related infrastructure as well as cloud applications and services, to process and record financial and operating data and to communicate with its employees and business service providers. The Company’s business service providers, including vendors and financial institutions, are also dependent on digital technology. The technologies needed to conduct midstream activities make certain information the target of theft or misappropriation.

The Company’s technologies, systems, networks, and those of its business partners may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, or destruction of proprietary and other information, or other disruption of its business operations. In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period.

A cyber incident involving the Company’s information systems and related infrastructure, or that of its business service providers, could disrupt its business plans and negatively impact its operations in the following ways, among others:

•a cyber-attack on a vendor or other service provider could result in supply chain disruptions, which could delay or halt development of additional infrastructure, effectively delaying the start of cash flow from the project;
•a cyber-attack on downstream pipelines could prevent the Company from delivering product at the tailgate of its facilities, resulting in a loss of revenues;
•a cyber-attack on a communications network or power grid could cause operational disruption resulting in loss of revenues;
•a deliberate corruption of its financial or operational data could result in events of non-compliance which could lead to regulatory fines or penalties; and
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•business interruptions could result in expensive remediation efforts, distraction of management, damage to its reputation, or a negative impact on cash flow.

The Company’s implementation of various controls and processes, including globally incorporating a risk-based cyber security framework, to monitor and mitigate security threats and to increase security for its information, facilities, and infrastructure is costly and labor intensive. Moreover, there can be no assurance that such measures will be sufficient to prevent security breaches from occurring. As cyber threats continue to evolve, the Company may be required to expend significant additional resources to continue to modify or enhance its protective measures or to investigate and remediate any information security vulnerabilities. Any such breakdowns or breaches, or resulting access, disclosure, or other loss of information, could significantly disrupt the Company’s business and result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to its reputation, any of which could have a material adverse effect on its business, financial position, results of operations, or cash flows.

The COVID-19 pandemic has and may continue to adversely impact the Company’s business, financial condition, and results of operations, the global economy, and the demand for and prices of oil, natural gas, and NGLs. The situation makes it impossible for the Company to identify all potential risks related to the pandemic or estimate the ultimate adverse impact that the pandemic may have on its business.

The COVID-19 pandemic and the actions taken by third parties, including, but not limited to, governmental authorities, businesses, and consumers, in response to the pandemic have adversely impacted the global economy and created significant volatility in the global financial markets and the demand for and the prices of oil, natural gas and NGLs.

The Company’s operations rely on its workforce being able to access its various facilities. If a significant portion of its workforce cannot effectively perform their responsibilities, whether resulting from a lack of physical or virtual access, quarantines, illnesses, governmental actions or restrictions, information technology or telecommunication failures, or other restrictions or adverse impacts resulting from the pandemic, the Company’s business, financial condition, cash flows, and results of operations may be materially adversely affected. The unprecedented nature of the current situation resulting from the COVID-19 pandemic makes it impossible for the Company to identify all potential risks related to the pandemic or estimate the ultimate adverse impact that the pandemic may have on its business, financial condition, cash flows, or results of operations. The COVID-19 pandemic and its unprecedented consequences have amplified, and may continue to amplify, the other risks identified in this Quarterly Report on Form 10-K10-Q.

Environmental and Regulatory Risk Factors Related to the Company

The Company’s construction of new midstream assets may be subject to new or additional regulatory, environmental, political, contractual, legal, and economic risks, which could adversely affect its cash flow, results of operations, and financial condition.

The construction of additions or modifications to the Company’s existing systems and the expansion into new production areas to service its customers involve numerous regulatory, environmental, political, and legal uncertainties beyond the Company’s control and may require the expenditure of significant amounts of capital, and the Company may not be able to construct in certain locations due to setback requirements or expand certain facilities that are deemed to be part of a single source. Regulations clarifying how crude oil and natural gas production facility emissions must be aggregated under the federal Clean Air Act permitting program were finalized in June 2016. This action clarified certain permitting requirements, yet could still impact permitting and compliance costs. As the Company builds infrastructure to meet its customers’ needs, it may not be able to complete such projects on schedule, at the budgeted cost, or at all.

The Company’s revenues may not increase immediately (or at all) upon the expenditure of funds on a particular project. For instance, if the Company builds additional gathering assets, the construction may occur over an extended period of time and it may not receive any material increases in revenues until the project is completed or at all. The Company may construct facilities to capture anticipated future production growth from its customers in an area where such growth does not materialize. As a result, new midstream assets may not be able to attract enough throughput to achieve its expected investment return, which could adversely affect its business, financial condition, results of operations, and cash flow.

The construction of additions to the Company’s existing assets may require it to obtain new rights-of-way, surface use agreements, or other real estate agreements prior to constructing new pipelines or facilities. The Company may be unable to timely obtain such rights-of-way to connect new crude oil, natural gas, and water sources to its existing infrastructure or capitalize on other attractive expansion opportunities. Additionally, it may become more expensive for the Company to obtain new rights-of-way or to expand or renew existing rights-of-way, leases, or other agreements, and its fees may only be increased above the annual year-over-year increase by mutual agreement between the Company and its customers. If the cost of renewing or obtaining new agreements increases, the Company’s cash flow could be adversely affected.

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The Company is subject to regulation by multiple governmental agencies, which could adversely impact its business, results of operations, and financial condition.

The Company is subject to regulation by multiple federal, state, and local governmental agencies. Proposals and proceedings that affect the midstream industry are regularly considered by Congress, as well as by state legislatures and federal and state regulatory commissions, agencies, and courts. The Company cannot predict when or whether any such proposals or proceedings may become effective or the magnitude of the impact changes in laws and regulations may have on its business. However, additions to the regulatory burden on the midstream industry can increase the Company’s cost of doing business and affect its profitability.

Rate regulation, challenges by shippers to the rates we charge on our pipelines, or changes in the jurisdictional characterization of some of the Company’s assets by federal, state, or local regulatory agencies or a change in policy by those agencies may result in increased regulation of its assets, which may cause its operating expenses to increase, limit the rates it charges for certain services and decrease the amount of cash flow.

Natural gas and crude oil gathering may receive greater regulatory scrutiny at the state level; therefore, the Company’s natural gas and crude oil gathering operations could be adversely affected should they become subject to the application of state regulation of rates and services. The Company’s gathering operations could also be subject to safety and operational regulations relating to the design, construction, testing, operation, replacement, and maintenance of gathering facilities. The Company cannot predict what effect, if any, such changes might have on its operations, but it could be required to incur additional capital expenditures and increased operating costs depending on future legislative and regulatory changes.

Federal and state legislative and regulatory initiatives relating to pipeline safety, which are often subject to change, may result in more stringent regulations or enforcement and could subject the Company to increased operational costs, increased capital costs, and potential operational delays.

Some of the Company’s pipelines are subject to regulation by the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) pursuant to the Natural Gas Pipeline Safety Act of 1968 (“NGPSA”), with respect to natural gas, and the Hazardous Liquids Pipeline Safety Act of 1979 (“HLPSA”), with respect to crude oil and NGLs. Both the NGPSA and the HLPSA were amended by the Pipeline Safety Act of 1992, the Accountable Pipeline Safety and Partnership Act of 1996, the Pipeline Safety Improvement Act of 2002 (“PSIA”), as reauthorized and amended by the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006, and the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011. The NGPSA and HLPSA regulate safety requirements in the design, construction, operation, and maintenance of natural gas, crude oil, and NGL pipeline facilities, while the PSIA establishes mandatory inspections for all U.S. crude oil, NGL, and natural gas transmission pipelines in high-consequence areas (“HCAs”).

PHMSA has developed regulations that require pipeline operators to implement integrity management programs, including more frequent inspections and other measures to ensure pipeline safety in HCAs. The regulations require operators, including the Company, to:

•perform ongoing assessments of pipeline integrity;
•identify and characterize applicable threats to pipeline segments that could impact an HCA;
•improve data collection, integration, and analysis;
•repair and remediate pipelines as necessary; and
•implement preventive and mitigating actions.

PHMSA may revise these standards from time-to-time. For example, in October 2019, PHMSA published three final rules that create or expand reporting, inspection, maintenance, and other pipeline safety obligations. PHMSA is also working on two additional rules related to gas pipeline safety that are expected to modify pipeline repair criteria and extend regulatory safety requirements to certain gathering lines in rural areas. Additional future regulatory action expanding PHMSA’s jurisdiction and imposing stricter integrity management requirements is possible. For instance, following the passage of Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2020, operators of jurisdictional pipelines were required to update their inspection and maintenance plans to identify procedures to prevent and mitigate both vented and fugitive pipeline methane emission by the end of 2021. Separately, the U.S. Congress reauthorized PHMSA through 2023 as part of the Consolidated Appropriations Act of 2021 and directed the agency to move forward with several regulatory actions. These include, but are not limited to, the issuance of final regulations to require operators of non-rural gas gathering lines and new and existing transmission and distribution pipeline facilities to conduct leak detection and repair programs and to require facility inspection and maintenance plans to align with those regulations. In November 2021, PHMSA released a final rule that expands the definition of regulated gathering pipelines and imposes safety measures on certain previously unrelated gathering pipelines. The final rule also imposes reporting requirements on all gathering pipelines, and specifically requires operators to report safety information to PHMSA The adoption of laws or regulations that apply more comprehensive or stringent safety standards could require the Company to install new or modified safety controls, pursue new capital projects, or conduct maintenance programs on an accelerated basis, all of which could require the Company to incur increasing operating costs that may be significant.
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Further, should the Company fail to comply with PHMSA or comparable state regulations, it could be subject to substantial fines and penalties.

Increased regulation of hydraulic fracturing could result in reductions or delays in crude oil and natural gas production by the Company’s customers, which could reduce the throughput on its gathering and other midstream systems, which could adversely impact its revenues.

The Company does not conduct hydraulic fracturing operations, but substantially all of the crude oil and natural gas production of its customers is developed from unconventional sources that require hydraulic fracturing as part of the completion process. Hydraulic fracturing is a well stimulation process that utilizes large volumes of water and sand combined with fracturing chemical additives that are pumped at high pressure to crack open previously impenetrable rock to release hydrocarbons. There has been increasing public controversy regarding hydraulic fracturing with regard to the use of fracturing fluids, induced seismic activity, impacts on drinking water supplies, use of water, and the potential for impacts to surface water, groundwater, and the environment generally.

Hydraulic fracturing is typically regulated by state oil and gas commissions and similar agencies. Some states and local governments, including those in which the Company operates, have adopted, and other states are considering adopting, regulations that could impose more stringent disclosure or well construction requirements on hydraulic fracturing operations. In addition, several states and local governments have banned or significantly restricted hydraulic fracturing and, over the past several years, federal agencies such as the U.S. Environmental Protection Agency (“EPA”) have sought to assert jurisdiction over the process. While the EPA has previously sought to relax environmental regulation and reduce enforcement efforts, including with respect to energy developed from unconventional sources, environmental groups and states have filed lawsuits challenging the EPA’s recent actions. The Company cannot predict the results of these or future lawsuits, or how such lawsuits will affect the regulation of hydraulic fracturing operations. Certain environmental groups have also suggested that additional laws at the federal, state, and local levels of government may be needed to more closely and uniformly regulate the hydraulic fracturing process. The Company cannot predict whether any such legislation will be enacted and if so, what its provisions would be. While the Company does not currently service production from federal lands, government actions to cease or delay new oil and gas leasing and drilling permits or hydraulic fracturing on federal lands, could impact the oil and gas industry and the Company's future potential growth in such areas. Additional levels of regulation and permits required through the adoption of new laws and regulations at the federal, state or local level could lead to delays, increased operating costs, and process prohibitions that could reduce the volumes of crude oil and natural gas that move through the Company’s gathering systems and decrease demand for its water services, which in turn could materially adversely impact its revenues.

In recent history, public concern surrounding increased seismicity has heightened focus on the oil and gas industry’s use of water in operations, which may cause increased costs, regulations or environmental initiatives impacting the use or disposal of water. The adoption of federal, state and local legislation and regulations intended to address induced seismicity in the areas in which the Company operates could restrict drilling and production activities, as well as the Company's ability to dispose of produced water gathered from such activities, and could result in increased costs and additional operating restrictions or delays, that could, in turn, materially impact the Company's business and results of operations.

The Company may incur significant liability under, or costs and expenditures to comply with, health, safety, and environmental laws and regulations, which are complex and subject to frequent change.

The Company is subject to various stringent and complex federal, state, and local laws and regulations governing health and safety aspects of its operations, the discharge of materials into the environment, and the protection of the environment and natural resources (including endangered or threatened species). These laws and regulations may impose on the Company’s operations numerous requirements, including the acquisition of permits, approvals, and certificates before conducting regulated activities; restrictions on the types, quantities, and concentration of materials that may be released into the environment; the application of specific health and safety criteria to protect the public or workers; and the responsibility for cleaning up pollution resulting from operations. Moreover, many of the permits required for the construction and operation of the Company’s assets may be subject to challenge by third parties, resulting in project delays or the imposition of stringent environmental controls as a precondition to issuing such permits. The Company may incur substantial costs in order to maintain compliance with these existing laws and regulations and the permits and other approvals thereunder. Additionally, the Company’s costs of compliance may increase or operational delays may occur if existing laws and regulations are revised or reinterpreted, or if new laws and regulations apply to its operations. Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued thereunder, oftentimes requiring difficult and costly response actions. Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil, and criminal penalties; the imposition of investigatory, remedial, or corrective action obligations; the incurrence of capital expenditures, the occurrence of delays in the permitting, development, or expansion of projects, and enjoining some or all of the Company’s future operations in a particular area. Compliance with more stringent standards and other environmental regulations could prohibit the Company’s ability to obtain permits for operations or require it to install additional equipment, the costs of which could be significant.

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Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly requirements could require the Company to make significant expenditures to attain and maintain compliance or may otherwise have a material adverse effect on its operations, competitive position, or financial condition.

Public interest in the protection of the environment has increased dramatically in recent years. The trend of more expansive and stringent environmental legislation and regulations applied to the oil and natural gas industry could continue, resulting in increased costs of doing business and, consequently, affecting profitability. Additionally, fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas, and technological advances in fuel economy and energy generation devices, could all reduce demand for oil and natural gas and consequently reduce demand for the midstream services the Company provides. The impact of this changing demand may have a material and adverse effect on the Company’s business, operations, and cash flows.

Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the crude oil and natural gas the Company gathers, while potential physical effects of climate change could disrupt the Company’s operations and cause it to incur significant costs in preparing for or responding to those effects.

Climate change continues to attract considerable public and scientific attention. There is a broad consensus of scientific opinion that human-caused emissions of GHGs are linked to climate change. Climate change and the costs that may be associated with its impacts and the regulation of GHGs have the potential to materially affect the Company’s business in many ways, to include negatively impacting the costs the Company incurs in providing its products and the demand for and consumption of its products.

The EPA adopted regulations requiring the reporting of GHG emissions from specific categories of higher GHG emitting sources in the United States, including certain oil and natural gas facilities, which include certain of the Company’s operations. Information in such reporting may form the basis for further GHG regulation. The EPA has also continued with its comprehensive strategy for further reducing methane and volatile organic compound (“VOC”) emissions from oil and gas operations, with a final rule issued in May 2016 that established specific new requirements regarding emissions from production-related wet seal and reciprocating compressors, and from pneumatic controllers and storage vessels. Additionally, the regulations placed new requirements to detect and repair VOC and methane leaks at certain well sites and compressor stations. However, in September 2020, the EPA finalized a rule removing transportation and storage activities from the purview of the rules, thereby rescinding the VOC and methane emissions limits applicable to such activities. On January 20, 2021, the President signed an executive order calling for the suspension, revision, or rescission of the September 2020 rule, and the reinstatement or issuance of methane emissions standards for new, modified, and existing oil and gas facilities, including transmission and storage facilities. In April 2021, the U.S. Senate approved a resolution under the Congressional Review Act to repeal the September 2020 revisions, which was approved by the U.S. House of Representatives and signed into law by the President in June 2021. The passage of the resolution effectively vacated the September 2020 rule and reinstated the prior standards under the May 2016 rule. In November 2021, as required by the President’s executive order, the EPA proposed new regulations to establish comprehensive standards of performance and emission guidelines for methane and VOC emissions from new and existing operations in the oil and gas sector, including the exploration and production, transmission, processing, and storage segments. The EPA plans to issue a supplemental proposal enhancing the proposed rulemaking in 2022 that will contain proposed rule text, which was not included in the November 2021 proposed rule, and anticipates a final rule by the end of 2022. Compliance with these and other emissions rules could adversely affect the Company’s operations and restrict or delay its ability to obtain applicable permits, approvals, or certificates for new or modified facilities.

Climate change remains a priority for the current administration, which could lead to additional regulations or restrictions on oil and gas development. In February 2021, the administration recommitted the United States to the Paris Agreement, a framework for parties to the agreement to cooperate and report actions to reduce GHG emissions. The Paris Agreement calls for parties to undertake “ambitious efforts” to limit the average global temperature, and to conserve and enhance sinks and reservoirs of GHGs. The current administration, in April 2021, announced a target for the United States to achieve a 50% – 52% reduction from 2005 levels in economy-wide net GHG pollution in 2030. This target builds upon the President’s goals to create a carbon pollution-free power sector by 2035 and a net zero emissions economy by 2050. In November 2021, the international community gathered again in Glasgow at the 26th Conference to the Parties on the UN Framework Convention on Climate Change (“COP26”), during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-carbon dioxide GHGs. Relatedly, the United States and European Union jointly announced the launch of the “Global Methane Pledge,” which aims to cut global methane pollution at least 30% by 2030 relative to 2020 levels, including “all feasible reductions” in the energy sector. Meeting these goals may require further regulations that could adversely impact the Company’s operations and financial performance or otherwise reduce demand for the products it stores, processes, and transports.

The adoption of legislation or regulatory programs to reduce emissions of GHGs could require the Company to incur increased operating costs, such as costs to purchase and operate emissions and vapor control systems or to comply with new regulatory or reporting requirements. If the Company is unable to recover or pass through a significant level of its costs related
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to complying with climate change regulatory requirements imposed on it, it could have a material adverse effect on the Company’s results of operations and financial condition. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the natural gas the Company stores, processes, and transports. Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on the Company’s business, financial condition, and results of operations. Moreover, incentives to conserve energy or use alternative energy sources as a means of addressing climate change could reduce demand for the Company’s products.

In addition, parties concerned about the potential effects of climate change have directed their attention at sources of funding for energy companies, which has resulted in certain financial institutions, funds, and other sources of capital restricting or eliminating their investment in oil and natural gas activities. Financial institutions may adopt policies that have the effect of reducing the funding provided to the fossil fuel sector. For example, in late 2020, the Federal Reserve recently announced that it has joined the Network for Greening the Financial System (“NGFS”), a consortium of financial regulators focused on addressing climate-related risks in the financial sector. Subsequently, in November 2021, the Federal Reserve issued a statement in support of the efforts of the NGFS to identify key issues and potential solutions for the climate-related challenges most relevant to central banks and supervisory authorities. While the Company cannot predict what policies may result from this, a material reduction in the capital available to the fossil fuel industry could make it more difficult to secure funding for exploration, development, production, transportation, and processing activities, which could result in decreased demand for the Company’s midstream services. Additionally, the Securities and Exchange Commission announced its intention to promulgate rules requiring climate disclosures. Although the form and substance of these requirements is not yet known, this may result in additional costs to comply with any such disclosure requirements.

Finally, it should be noted that there are increasing risks to the Company’s operations resulting from the potential physical impacts of climate change, such as drought, wildfires, damage to infrastructure and resources from flooding, storms, and other natural disasters, and other physical disruptions. One or more of these developments could have a material and adverse effect on the Company’s business, financial condition, and results of operation.

Increasing attention to ESG matters and conservation measures may adversely impact the Company’s business.

Increasing attention to climate change, societal expectations on companies to address climate change, investor and societal expectations regarding voluntary ESG disclosures, and consumer demand for alternative forms of energy, may result in increased costs, reduced demand for the Company’s products, reduced profits, increased investigations and litigation, and negative impacts on the Company’s access to capital markets. Increasing attention to climate change and environmental conservation, for example, may result in demand shifts for oil and natural gas products and additional governmental investigations, and private litigation against the Company or its customers. To the extent that societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to the Company’s causation of or contribution to the asserted damage, or to other mitigating factors. While we may participate in various voluntary frameworks and certification programs to improve the ESG profile of our operations and services, we cannot guarantee that such participation or certification will have the intended results on our ESG profile.

Moreover, while we may create and publish voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures will be based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith. Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuring, and reporting on many ESG matters. Additionally, while we may also announce various voluntary ESG targets, such targets are aspirational. We may not be able to meet such targets in the manner or on such a timeline as initially contemplated including, but not limited to, as a result of unforeseen or increased costs associated therewith. To the extent that we do meet such targets, it may be achieved through various contractual arrangements, including the purchase of various credits or offsets that may be deemed to mitigate our ESG impact instead of actual changes in our ESG performance. Also, despite these goals, we may receive pressure from investors, lenders, or other groups to adopt more aggressive climate or other ESG-related goals, but we cannot guarantee that we will be able to implement such goals because of potential costs or technical or operational obstacles.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions. Unfavorable ESG ratings and recent activism directed at shifting funding away from companies with energy-related assets could lead to increased negative investor sentiment toward the Company, its customers, and its industry and to the diversion of investment to other industries, which could have a negative impact on business and the Company’s access to and costs of capital. Also, institutional lenders may decide not to provide funding for fossil fuel energy companies or the corresponding infrastructure projects based on climate change related concerns, which could affect the Company’s access to capital for potential growth projects.

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Proposed changes to U.S. federal, state, and local tax laws, if enacted, could have a material adverse effect on our business and profitability.

Currently, the Company does not believe that it will be a federal tax payer for at least the next 5 years. However, new or amended U.S. federal, state, or local tax laws may be enacted in the future and such laws could materially impact our current or future tax planning and effective tax rates. For example, the White House and Congress have set forth proposals that would, if enacted, make significant changes to U.S. federal income tax laws applicable to domestic corporations. Such proposals include, but are not limited to, (1) an increase in the U.S. federal income tax rate applicable to corporations and (2) a minimum book income tax applicable to certain large corporations. It is uncertain whether these proposals, or similar proposals, will be enacted into law and, if enacted into law, when such laws would take effect. The passage of any legislation as a result of these proposals and other similar changes in U.S. federal income or other tax laws could materially and adversely affect our business, cash flows, and future profitability.

The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act, and the requirements of the Sarbanes-Oxley Act of 2002, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company, we will need to comply with new laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, related regulations of the SEC and the requirements of the Nasdaq Global Market. Complying with these statutes, regulations and requirements will occupy a significant amount of time of our board of directors and management and will increase the Company’s costs and expenses. We will need to:

•institute a more comprehensive compliance function;
•comply with rules promulgated by the Nasdaq Global Market;
•continue to prepare and distribute periodic public reports in compliance with its obligations under the federal securities laws;
•establish new internal policies, such as those relating to insider trading; and
•involve and retain to a greater degree outside counsel and accountants in the above activities.

Risks Related to Ownership of Our Common Stock

Entities controlled by Blackstone and I Squared Capital, and Apache Midstream own a majority of the Company’s outstanding voting shares and thus strongly influence all of the Company’s corporate actions.

As long as Blackstone, I Squared, Apache Midstream and their respective affiliates own or control a significant percentage of the Company’s outstanding voting power, they will have the ability to strongly influence all corporate actions, including stockholder approval of the election of and removal of directors. The interests of Blackstone, I Squared Capital or Apache Midstream may not align with the interests of the Company’s other stockholders.

The Company’s ability to pay dividends depends on its ability to generate sufficient cash flow, which it may not be able to accomplish.

The Company’s ability to pay dividends principally depends upon the amount of cash it generates from its operations, which will fluctuate from quarter to quarter based on, among other things, income from the Pipeline Transportation JVs, the volumes of natural gas and NGLs it gathers and processes, commodity prices, and other factors impacting the Company’s financial condition, some of which are beyond its control. In addition, under Delaware law, dividends on the Company’s capital stock may only be paid from “surplus,” which is the amount by which the fair value of the Company’s total assets exceeds the sum of its total liabilities, including contingent liabilities, and the amount of its capital; if there is no surplus, cash dividends on capital stock may only be paid from the Company’s net profits for the then-current and/or the preceding fiscal year ended December 31, 2020.year.

Holders of the Partnership’s Preferred Units have rights, preferences, and privileges that are not held by, and are preferential to the rights of, holders of Common Units, and could dilute or otherwise adversely affect the holders of Common Units.

The Partnership’s Preferred Units rank senior to the Common Units in distribution and liquidation rights, and holders of Preferred Units will be entitled to receive a liquidation preference that incorporates an agreed return on the holders’ investment.
The Company depends on the Partnership for distributions, loans, and other payments to generate the funds necessary to meet the Company’s financial obligations or to pay any dividends with respect to its Class A common stock. Obligations of the Partnership in respect of the Preferred Units may restrict, reduce, or render unavailable funds that otherwise may be available to be distributed, loaned, or paid to the Company by the Partnership or loaned to, or invested in, the Partnership by third parties.

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The Company’s charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers, employees, or agents.

The charter provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (Court of Chancery) will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for any derivative action or proceeding brought on the Company’s behalf; any action asserting a claim of breach of a fiduciary duty owed by any of the Company’s directors, officers, or other employees to it or its stockholders; any action asserting a claim against the Company or any of its directors, officers, or employees arising pursuant to any provision of the DGCL, the charter, or the Company’s bylaws; or any action asserting a claim against the Company or any of its directors, officers, or other employees that is governed by the internal affairs doctrine.

The above does not apply for such claims as to which the Court of Chancery determines that it does not have personal jurisdiction over an indispensable party, exclusive jurisdiction is vested in a court or forum other than the Court of Chancery, or the Court of Chancery does not have subject matter jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of the Company’s capital stock will be deemed to have notice of, and consented to, the provisions of the Company’s charter described in the preceding sentence. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes with the Company or its directors, officers, or other employees, which may discourage such lawsuits against the Company and such persons. Alternatively, if a court were to find these provisions of the Company’s charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, the Company may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect its business, financial condition, or results of operations.
The Company’s charter provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Accordingly, the charter provides that the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act, the Securities Act, or any other claim for which the federal courts have exclusive jurisdiction.

If the Company fails to maintain an effective system of internal controls, it may not be able to report accurately its financial results or prevent fraud. As a result, current and potential holders of the Company’s equity could lose confidence in its financial reporting, which would harm its business and cost of capital.

Effective internal controls are necessary for the Company to provide reliable financial reports, prevent fraud, and operate successfully as a public company. The Company cannot be certain that its efforts to maintain its internal controls will be successful, that it will be able to maintain adequate controls over its financial processes and reporting in the future, or that it will be able to continue to comply with its obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to maintain effective internal controls or to implement or improve the Company’s internal controls could harm its operating results or cause it to fail to meet its reporting obligations. Ineffective internal controls could also cause investors to lose confidence in the Company’s reported financial information, which would likely have a negative effect on the trading price of its equity interests.

If the performance of the Company does not meet the expectations of investors, stockholders, or financial analysts, the market price of the Company’s securities may decline.

The price of the Company’s securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond the Company’s control, and such fluctuations could contribute to the loss of all or part of a stockholder’s investment. Fluctuations or changes in the Company’s quarterly financial results, changes in or failure to meet market or financial analysts’ expectations about the Company, changes in laws and regulations, commencement of or involvement in litigation, changes in the Company’s capital structure, and general economic and political conditions could have a material adverse effect on a stockholder’s investment in the Company’s securities, and its securities may trade at prices significantly below the price paid for them. In such circumstances, the trading price of the Company’s securities may not recover and may experience a further decline.

Broad market and industry factors may materially harm the market price of the Company’s securities irrespective of the Company’s operating performance. The stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks and of the Company’s securities may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to the Company could depress the Company’s stock price regardless of its business, prospects, financial conditions, or results of operations.


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ITEM 6. EXHIBITS
EXHIBIT NO.EXHIBIT NO.DESCRIPTIONEXHIBIT NO.DESCRIPTION
2.1***2.1***–
Contribution Agreement, dated as of August 8, 2018, by and among Kayne Anderson Acquisition Corp., Altus Midstream LP, Apache Midstream LLC, Alpine High Gathering LP, Alpine High Pipeline LP, Alpine High Processing LP, Alpine High NGL Pipeline LP and Alpine High Subsidiary GP LLC (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 8, 2018, SEC File No. 001-38048).
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–
Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 13, 2018, SEC File No. 001-38048).
3.1–
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–
First Amendment to Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed July 1, 2020, SEC File No. 001-38048).
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).
3.3–
Bylaws (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1 filed on March 7, 2017, SEC File No. 333-216514).
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. (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. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).
10.110.1–
Third Amended and Restated Agreement of Limited Partnership of Altus Midstream LP, dated as of October 22, 2021. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).
10.210.2–
Dividend and Distribution Reinvestment Agreement, dated February 22, 2022, by and among Altus Midstream Company, Altus Midstream LP, APA Corporation, Apache Midstream LLC, Buzzard Midstream LLC, Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP and each of the other parties set forth on the signature pages thereto. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).
10.310.3–
Form of Indemnification Agreement. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2022).
10.4*10.4*–Kinetik Holdings Inc. 2019 Omnibus Compensation Plan
10.5*10.5*–Form of Restricted Stock Unit Agreement
10.6*10.6*–Form of Stock Award Grant letter
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 and Principal Financial 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.
101*101*–The following financial statements from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL: (i) Statement of Consolidated Operations, (ii) Statement of Consolidated Comprehensive Income (Loss), (iii) Consolidated Balance Sheet, (iv) Statement of Consolidated Cash Flows, (v) Statement of Consolidated Changes in Equity and Noncontrolling Interests and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.101*–The following financial statements from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Changes in Equity and Noncontrolling Interests and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
101.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.
    
 ALTUS MIDSTREAM COMPANYKINETIK HOLDINGS INC.
Dated:May 10, 20212022 /s/ Ben C. RodgersJamie Welch
 Ben C. RodgersJamie Welch
 Chief Executive Officer, President, Chief Financial Officer and TreasurerDirector
(Principal FinancialExecutive Officer)
Dated:May 10, 20212022 /s/ Rebecca A. Hoyt    Steven Stellato
 Rebecca A. HoytSteven Stellato
 SeniorExecutive Vice President, Chief Accounting Officer, and ControllerChief Administrative Operating Officer
(Principal AccountingFinancial Officer)

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