Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On June 4, 2024, Kinetik Holdings Inc. (the “Company” or “Kinetik”) completed the previously announced transaction contemplated by the Purchase and Sale Agreement (the "GCX Purchase Agreement") to sell its 16% equity interest in Gulf Coast Express Pipeline LLC ("GCX") through its wholly owned subsidiary Kinetik GCX Pipe LLC to GCX Pipeline, LLC (the "GCX Buyer") for a total purchase price of $540 million (the "GCX Sale"), consisting of $510.0 million of cash, less certain customary closing adjustments, and an additional $30.0 million earn out in cash upon approval by the GCX Board of Directors of one or more capital projects that achieve certain capacity expansion criteria. Net cash proceeds of $494.4 million were received from the GCX Buyer on June 4, 2024.
The unaudited pro forma condensed consolidated balance sheet as of March 31, 2024 gives effect to the GCX Sale as if it was completed on March 31, 2024. The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2024, and for the year ended December 31, 2023, give effect to the GCX Sale as if it was completed on January 1, 2023.
The unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X. The historical consolidated financial statements have been adjusted in the accompanying unaudited pro forma condensed consolidated financial statements to give effect to pro forma events that are (i) directly attributable to the GCX Sale and (ii) factually supportable. The unaudited pro forma condensed consolidated financial statements do not purport to be indicative of the results of operations or financial position which would have actually resulted if the GCX Sale had been completed on the date indicated. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma condensed consolidated financial statements do not reflect the realization of any expected cost savings, synergies, or dis-synergies as a result of the GCX Sale.
The unaudited pro forma financial information has been prepared by the Company based upon assumptions deemed appropriate by the Company's management. Explanations of certain assumptions is set forth under the notes to the unaudited pro forma condensed consolidated financial statements.
The unaudited pro forma condensed consolidated financial statements and accompanying notes should be read in conjunction with the historical audited consolidated financial statements of Kinetik as of and for the year ended December 31, 2023, which were included in Kinetik’s Annual Report on Form 10-K, filed with the Security Exchange Commission ("SEC") on March 5, 2024, and the unaudited condensed consolidated financial statements of Kinetik as of and for the three months ended March 31, 2024, which were included in Kinetik's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 9, 2024.
KINETIK HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
| | Kinetik Historical | | GCX Sale | | | | | | Pro Forma |
| | | | | | | | | | |
| | (In thousands, except share data) |
| ASSETS | | | | | | | | | | |
| CURRENT ASSETS: | | | | | | | | | | |
| Cash and cash equivalents | | $ | 9,756 | | | $ | 490,640 | | (a) | | | | | $ | 500,396 | |
| Accounts receivable, net of allowance for credit losses of $1,000 in 2024 | | 209,878 | | | — | | | | | | | 209,878 | |
| Derivative assets | | 10,264 | | | — | | | | | | | 10,264 | |
| Prepaid and other current assets | | 27,391 | | | — | | | | | | | 27,391 | |
| | 257,289 | | | 490,640 | | | | | | | 747,929 | |
| NONCURRENT ASSETS: | | | | | | | | | | |
| Property, plant and equipment, net | | 2,747,483 | | | — | | | | | | | 2,747,483 | |
| Intangible assets, net | | 562,837 | | | — | | | | | | | 562,837 | |
| Derivative asset, non-current | | 134 | | | — | | | | | | | 134 | |
| Operating lease right-of-use assets | | 27,015 | | | — | | | | | | | 27,015 | |
| Deferred tax asset | | 238,258 | | | (4,781) | | (e) | | | | | 233,477 | |
| Deferred charges and other assets | | 83,213 | | | — | | | | | | | 83,213 | |
| Investments in unconsolidated affiliates | | 2,526,278 | | | (430,489) | | (b) | | | | | 2,095,789 | |
| Goodwill | | 5,077 | | | — | | | | | | | 5,077 | |
| | 6,190,295 | | | (435,270) | | | | | | | 5,755,025 | |
| Total assets | | $ | 6,447,584 | | | $ | 55,370 | | | | | | | $ | 6,502,954 | |
| LIABILITIES, NONCONTROLLING INTEREST, AND EQUITY | | | | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | | | | |
| Accounts payable | | $ | 16,467 | | | $ | — | | | | | | | $ | 16,467 | |
| Accrued expenses | | 170,075 | | | 317 | | (e) | | | | | 170,392 | |
| Derivative liabilities | | 14,811 | | | — | | | | | | | 14,811 | |
| Current portion of operating lease liabilities | | 24,987 | | | — | | | | | | | 24,987 | |
| | | | | | | | | | |
| Other current liabilities | | 7,611 | | | — | | | | | | | 7,611 | |
| | 233,951 | | | 317 | | | | | | | 234,268 | |
| NONCURRENT LIABILITIES | | | | | | | | | | |
| Long term debt, net | | 3,517,115 | | | — | | | | | | | 3,517,115 | |
| Contract liabilities | | 24,837 | | | — | | | | | | | 24,837 | |
| Operating lease liabilities | | 3,014 | | | — | | | | | | | 3,014 | |
| | | | | | | | | | |
| Derivative liabilities | | 418 | | | — | | | | | | | 418 | |
| Other liabilities | | 3,230 | | | — | | | | | | | 3,230 | |
| | | | | | | | | | |
| Deferred tax liabilities | | 13,785 | | | 429 | | (e) | | | | | 14,214 | |
| | 3,562,399 | | | 429 | | | | | | | 3,562,828 | |
| Total liabilities | | 3,796,350 | | | 746 | | | | | | | 3,797,096 | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | | | | |
| Redeemable noncontrolling interest — Common Unit limited partners | | 3,624,670 | | | 36,319 | | (c) | | | | | 3,660,989 | |
| EQUITY: | | | | | | | | | | |
| Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 59,712,487 and 57,096,538 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | | 6 | | | — | | | | | | | 6 | |
| Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 93,942,788 and 94,089,038 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | | 9 | | | — | | | | | | | 9 | |
| Additional paid-in capital | | — | | | — | | | | | | | — | |
| Accumulated deficit | | (973,451) | | | 18,305 | | (c) | | | | | (955,146) | |
| | | | | | | | | | |
| Total equity | | (973,436) | | | 18,305 | | | | | | | (955,131) | |
| Total liabilities, noncontrolling interest, and equity | | $ | 6,447,584 | | | $ | 55,370 | | | | | | | $ | 6,502,954 | |
The accompanying notes are an integral part of the unaudited pro forma Condensed Consolidated Financial Statements.
KINETIK HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2024 |
| | Kinetik Historical | | GCX Sale | | | Adjustments | | | Pro Forma |
| | | | | | | | | | |
| | (In thousands, except per share data) |
| Operating revenues: | | | | | | | | | | |
| Service revenue | | $ | 102,195 | | | $ | — | | | | $ | — | | | | $ | 102,195 | |
| Product revenue | | 236,567 | | | — | | | | — | | | | 236,567 | |
| Other revenue | | 2,632 | | | — | | | | — | | | | 2,632 | |
| Total operating revenues | | 341,394 | | | — | | | | — | | | | 341,394 | |
| Operating costs and expenses: | | | | | | | | | | |
| Costs of sales (exclusive of depreciation and amortization) | | 153,687 | | | — | | | | — | | | | 153,687 | |
| Operating expenses | | 43,406 | | | — | | | | — | | | | 43,406 | |
| Ad valorem taxes | | 6,292 | | | — | | | | — | | | | 6,292 | |
| General and administrative expenses | | 34,136 | | | — | | | | — | | | | 34,136 | |
| Depreciation and amortization expenses | | 73,606 | | | — | | | | — | | | | 73,606 | |
| Loss on disposal of assets | | 4,166 | | | — | | | | — | | | | 4,166 | |
| | | | | | | | | | |
| Total operating costs and expenses | | 315,293 | | | — | | | | — | | | | 315,293 | |
| Operating income | | 26,101 | | | — | | | | — | | | | 26,101 | |
| Other income (expense): | | | | | | | | | | |
| Interest and other income | | 91 | | | — | | | | — | | | | 91 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Interest expense | | (47,467) | | | — | | | | — | | | | (47,467) | |
| Equity in earnings of unconsolidated affiliates | | 60,469 | | | | | | (9,031) | | (d) | | 51,438 | |
| | | | | | | | | | |
| Total other income, net | | 13,093 | | | — | | | | (9,031) | | | | 4,062 | |
| Income before income taxes | | 39,194 | | | — | | | | (9,031) | | | | 30,163 | |
| Income tax expense | | 3,787 | | | — | | | | 2,789 | | (e) | | 6,576 | |
| Net income including noncontrolling interest | | 35,407 | | | — | | | | (11,820) | | | | 23,587 | |
| | | | | | | | | | |
| | | | | | | | | | |
| Net income attributable to Common Unit limited partners | | 23,857 | | | | | | (5,864) | | (f) | | 17,993 | |
| Net income attributable to Class A Common Stock Shareholders | | $ | 11,550 | | | $ | — | | | | $ | (5,956) | | | | $ | 5,594 | |
| | | | | | | | | | |
| Net income attributable to Class A Common Shareholders per share | | | | | | | | | | |
| Basic | | $ | 0.12 | | | $ | — | | | | $ | (0.10) | | | | $ | 0.02 | |
| Diluted | | $ | 0.12 | | | $ | — | | | | $ | (0.10) | | | | $ | 0.02 | |
| Weighted-average shares | | | | | | | | | | |
| Basic | | 57,869 | | | — | | | | — | | | | 57,869 | |
| Diluted | | 58,392 | | | — | | | | — | | | | 58,392 | |
| | | | | | | | | | |
| | | | | | | | | | |
The accompanying notes are an integral part of the unaudited pro forma Condensed Consolidated Financial Statements.
KINETIK HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Twelve Months Ended December 31, 2023 |
| | Kinetik Historical | | GCX Sale | | | Adjustments | | | Pro Forma |
| | | | | | | | | | |
| | (In thousands, except per share data) |
| Operating revenues: | | | | | | | | | | |
| Service revenue | | $ | 417,751 | | | $ | — | | | | $ | — | | | | $ | 417,751 | |
| Product revenue | | 822,410 | | | — | | | | — | | | | 822,410 | |
| Other revenue | | 16,251 | | | — | | | | — | | | | 16,251 | |
| Total operating revenues | | 1,256,412 | | | — | | | | — | | | | 1,256,412 | |
| Operating costs and expenses: | | | | | | | | | | |
| Costs of sales (exclusive of depreciation and amortization) | | 515,721 | | | — | | | | — | | | | 515,721 | |
| Operating expenses | | 161,520 | | | — | | | | — | | | | 161,520 | |
| Ad valorem taxes | | 21,622 | | | — | | | | — | | | | 21,622 | |
| General and administrative expenses | | 97,906 | | | — | | | | — | | | | 97,906 | |
| Depreciation and amortization expenses | | 280,986 | | | — | | | | — | | | | 280,986 | |
| (Gain) Loss on disposal of assets | | 19,402 | | | — | | | | — | | | | 19,402 | |
| | | | | | | | | | |
| Total operating costs and expenses | | 1,097,157 | | | — | | | | — | | | | 1,097,157 | |
| Operating income | | 159,255 | | | — | | | | — | | | | 159,255 | |
| Other income (expense): | | | | | | | | | | |
| Interest and other income | | 2,004 | | | — | | | | — | | | | 2,004 | |
| | | | | | | | | | |
| Loss on debt extinguishment | | (1,876) | | | — | | | | — | | | | (1,876) | |
| Gain on sale of equity method investment | | — | | | 39,157 | | (g) | | — | | | | 39,157 | |
| Interest expense | | (205,854) | | | — | | | | — | | | | (205,854) | |
| Equity in earnings of unconsolidated affiliates | | 200,015 | | | — | | | | (37,484) | | (d) | | 162,531 | |
| | | | | | | | | | |
| Total other expense, net | | (5,711) | | | 39,157 | | | | (37,484) | | | | (4,038) | |
| Income before income taxes | | 153,544 | | | 39,157 | | | | (37,484) | | | | 155,217 | |
| Income tax expense | | (232,908) | | | (52) | | (e) | | — | | | | (232,960) | |
| Net income including noncontrolling interest | | 386,452 | | | 39,209 | | | | (37,484) | | | | 388,177 | |
| Net income attributable to Common Unit limited partners | | 97,010 | | | 26,448 | | (f) | | (24,224) | | (f) | | 99,234 | |
| Net income attributable to Class A Common Stock Shareholders | | $ | 289,442 | | | $ | 12,761 | | | | $ | (13,260) | | | | $ | 288,943 | |
| | | | | | | | | | |
| Net income attributable to Class A Common Shareholders per share | | | | | | | | | | |
| Basic | | $ | 5.25 | | | $ | 0.25 | | | | $ | (0.26) | | | | $ | 5.24 | |
| Diluted | | $ | 2.52 | | | $ | 0.27 | | | | $ | (0.26) | | | | $ | 2.54 | |
| Weighted-average shares | | | | | | | | | | |
| Basic | | 51,823 | | | — | | | | — | | | | 51,823 | |
| Diluted | | 146,197 | | | — | | | | — | | | | 146,197 | |
The accompanying notes are an integral part of the unaudited pro forma Condensed Consolidated Financial Statements.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and for the year ended December 31, 2023 have been derived from and should be read in conjunction with the historical audited consolidated financial statements of Kinetik as of and for the year ended December 31, 2023, included in Kinetik’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 5, 2024, and the historical unaudited condensed consolidated financial statements of Kinetik as of and for the three months ended March 31, 2024, included in Kinetik's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 9, 2024, and the assumptions outlined in Note 2 herein.
An unaudited pro forma condensed consolidated balance sheet as of March 31, 2024 and the unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2024 and for the year ended December 31, 2023, are presented herein in accordance with Rule 11-02(c)(2)(ii) of Regulation S-X.
The following unaudited pro forma adjustments have been prepared as if the GCX Sale occurred on March 31, 2024, for the unaudited pro forma condensed consolidated balance sheet, and as of January 1, 2023, for the unaudited pro forma condensed consolidated statements of operations. The pro forma adjustments are based on currently available information and certain estimates and assumptions, and therefore the actual effects of the transaction will differ from the pro forma adjustments.
2. UNAUDITED PRO FORMA ADJUSTMENTS
(a) Represents the sales proceeds, net of estimated closing costs and working capital adjustments. The cash proceeds were calculated based on management's current estimates and as defined in the GCX Purchase Agreement.
| | | | | | | | |
| | Amount |
| | |
| | (In thousands) |
| Cash proceeds | | $ | 510,000 | |
| Working capital adjustment | | (15,610) | |
| Transaction costs incurred | | (3,750) | |
| Net cash from GCX Sale | | $ | 490,640 | |
(b) Represents the disposition of the assets that are being transferred as part of the GCX Sale.
(c) Represents the proportionate increase of redeemable noncontrolling interest - Common Unit limited partners and accumulated deficit related to the GCX Sale and its associated tax effects based upon the relevant issued and outstanding Class A Common Stock of the Company and Class C Common Stock of the Company and related common units representing limited partnership interests in Kinetik LP ("Common Units") as of March 31, 2024.
(d) Represents the elimination of the equity in earnings of unconsolidated affiliates related to the Company's investment in GCX for the applicable period presented.
(e) Represents the income tax effects of the pro forma adjustments at the applicable estimated effective tax rates for the respective periods presented.
(f) Represents the proportionate increase or decrease in net income attributable to Common Unit limited partners based upon the relevant issued and outstanding Class A Common Stock of the Company and Class C Common Stock of the Company and related Common Units for the applicable periods presented.
(g) Represents the estimated pro forma gain on the GCX Sale assuming an effective date of January 1, 2023.
| | | | | | | | |
| | Amount |
| | |
| | (In thousands) |
| Cash proceeds | | $ | 510,000 | |
| Working capital adjustment | | (15,610) | |
| Transaction costs incurred | | (3,750) | |
| Net cash from GCX Sale | | 490,640 | |
| | |
| Less: Investment in GCX | | (451,483) | |
| Gain on sale of GCX | | $ | 39,157 | |
3. EARNING PER SHARE
The pro forma basic and diluted weighted average shares outstanding have been calculated as if the GCX Sale was completed on January 1, 2023. There was no effect on the basic and weighted average shares outstanding in relation to the transaction, however, the net income attributable to Class A Common Stock Shareholders would change given the effects of the transaction.
