UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 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 MarketNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer ☒
Non-accelerated filer☐Smaller reporting company ☐
Emerging growth company☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of registrant’s Class A common stock,Common Stock, par value $0.0001 per share issued and outstanding as of October 31, 202120223,746,46043,082,157 
Number of shares of registrant’s Class C common stock,Common Stock, par value $0.0001 per share issued and outstanding as of October 31, 2021202212,500,00094,270,000 



TABLE OF CONTENTS
 
ItemItemPageItemPage
PART I — FINANCIAL INFORMATIONPART I — FINANCIAL INFORMATION (UNAUDITED)
1.1.
1
1.
1
1
2
3
4
6
1.DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
6
2.BUSINESS COMBINATION
10
3.REVENUE RECOGNITION
12
4.PROPERTY, PLANT AND EQUIPMENT
13
5.GOODWILL AND INTANGIBLE ASSETS, NET
14
6.DEBT AND FINANCING COSTS
14
7.ACCRUED EXPENSES
17
8.COMMITMENTS AND CONTINGENCIES
17
9.EQUITY METHOD INVESTMENTS
18
10.EQUITY AND WARRANTS
20
11.SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS
21
12.SHARE-BASED COMPENSATION
22
1
13.INCOME TAXES
23
2
14.NET INCOME PER SHARE
24
3
15.FAIR VALUE MEASUREMENTS
25
4
16.DERIVATIVES AND HEDGING ACTIVITIES
26
5
17.SEGMENTS
27
7
18.SUBSEQUENT EVENTS
30
2.2.
25
2.
31
3.3.
38
3.
44
4.4.
39
4.
45
PART II — OTHER INFORMATIONPART II — OTHER INFORMATION
1.1.
40
1.
46
1A.1A.
40
1A.
46
5.5.
47
6.6.
40
6.
48
49
 

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 natural gas liquids.
•Bcf. One billion cubic feet
•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.
•CODM. Chief Operating Decision Maker.
•Delaware Basin. Located on the western section of the Permian Basin. The Delaware Basin covers a 6.4M acre area.
•FASB. Financial Accounting Standards Board.
•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.
•MMBtu. One million British thermal units.
•MMcf. One million cubic feet of natural gas.
•MMcf/d. One MMcf per day.
•MVC. Minimum volume commitments.
•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. United States Securities and Exchange Commission.
•SOFR. Secured Overnight Financing Rate.
•WTI. West Texas Intermediate crude oil.
All references to the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”), and Class C common stock, par value $0.0001 per share (“Class C Common Stock”), reflect such share amounts as retrospectively restated to reflect the Company’s two-for-one stock split, which was effected via stock dividend on June 8, 2022.
ii

FORWARD-LOOKING STATEMENTS AND RISK
This Quarterly Report on 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 Transaction (as defined herein). See Note 2 — Business Combination in the Notes to our Condensed Consolidated Financial Statements set forth in this Form 10-Q;
•the scope, duration, and reoccurrence of any epidemics or pandemics (including, specifically, the coronavirus disease 2019 (COVID-19)(“COVID-19”) pandemic andor any related variants) and the actions taken by third parties including, but not limited to, governmental authorities, customers, contractors, and suppliers, in response to such epidemics or pandemics;
•the mandate, availability, and effectiveness of any vaccine programs or other therapeutics related to the treatment of COVID-19;
•the market prices of oil, natural gas, natural gas liquids (NGLs),NGLs, 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 access to capital and our anticipated liquidity;
•our future business strategy and other plans and objectives for future operations;
•the availability of capital;
•cash flowamount, nature and the timing of expenditures;
•our future capital expenditures, and other contractual obligations;
•weather conditions;
•inflation rates;including future development costs;
•the availability of goods and services;
•legislative, regulatory,risks associated with potential acquisitions, divestitures, new joint ventures or policy changes;
•terrorism or cyberattacks;
•occurrence of property acquisitions or divestitures;other strategic opportunities;
•the integrationrecruitment and retention of acquisitions;our officers and personnel;
•a decline in oil, natural gas,the likelihood of success of and NGL production,impact of litigation and other proceedings, including regulatory proceedings;
•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, including initiatives addressing the impact of global climate change;
•environmental risks;developments where we conduct our business operations;
•the effectsoccurrence of competition;an extreme weather event, terrorist attack or other event that materially impacts project construction and our operations, including cyber or other attached on electronic systems;
•our ability to successfully implement and execute our environmental, social and governance goals and initiatives and achieve the anticipated results of such initiatives;
•general economic and political conditions, including the armed conflict in Ukraine and the impact of continued inflation and associated changes in monetary policy; and
iiiii

•the retention of key members of senior management and key technical personnel;
•increasesother factors disclosed in interest rates;
•the effectivenessPart II, Item 1A — Risk Factors of the Company’s business strategy;
•changes in technology;
•market-related risks, such as general credit, liquidity, 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 third-quarter 2021 earnings release;
•other factors disclosed under Part II, Item 1A—Risk Factors of this Quarterly Report on Form 10-Q; and
•any other factors disclosed in10-Q for the other filings that the Company makes with the Securities and Exchange Commission (SEC).first quarter of 2022, filed on May 10, 2022.
Other factors or events that could cause the Company’s actual results to differ materially from the Company’s expectations may emerge from time to time, and it is not possible for the Company to predict all such factors or events. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, the Company disclaims any obligation to update or revise its forward-looking statements, whether based on changes in internal estimates or expectations, new information, future developments or otherwise.


iii

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:
•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

Table of 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 September 30,Nine Months Ended September 30,
 2021
2020(1)
2021
2020(1)
(In thousands, except per share data)
REVENUES:
Midstream services revenue — affiliate (Note 2)$34,548 $38,869 $98,544 $111,252 
Product sales — third parties
— 1,303 5,743 1,900 
Total revenues34,548 40,172 104,287 113,152 
COSTS AND EXPENSES:
Costs of product sales— 1,177 5,344 1,693 
Operations and maintenance(2)
9,642 8,960 24,384 29,059 
General and administrative(3)
3,420 2,936 10,350 10,102 
Depreciation and accretion4,085 4,008 12,094 11,984 
Impairments— — 441 — 
Taxes other than income2,811 4,143 10,431 10,933 
Total costs and expenses19,958 21,224 63,044 63,771 
OPERATING INCOME14,590 18,948 41,243 49,381 
Unrealized derivative instrument gain (loss)4,010 (3,533)18,487 (76,102)
Income from equity method interests, net32,479 15,987 82,633 47,541 
Warrants valuation adjustment664 209 222 1,668 
Other620 — 11,321 (346)
Total other income (loss)37,773 12,663 112,663 (27,239)
Financing costs, net of capitalized interest2,674 413 7,887 978 
NET INCOME BEFORE INCOME TAXES49,689 31,198 146,019 21,164 
Current income tax benefit— — — (696)
NET INCOME INCLUDING NONCONTROLLING INTERESTS49,689 31,198 146,019 21,860 
Net income attributable to Preferred Unit limited partners29,166 19,332 72,662 56,358 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS20,523 11,866 73,357 (34,498)
Net income (loss) attributable to Apache limited partner15,279 8,970 56,270 (28,361)
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS$5,244 $2,896 $17,087 $(6,137)
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS, PER SHARE
Basic$1.40 $0.77 $4.56 $(1.64)
Diluted$1.26 $0.32 $3.83 $(2.12)
WEIGHTED AVERAGE SHARES
Basic3,7463,7463,7463,746
Diluted16,246109,85533,32216,246
(1)
 Three Months Ended
September 30,*		Nine Months Ended
September 30,*
 2022202120222021
(In thousands, except per share data)
Operating revenues:
Service revenue$107,597 $72,578 $290,122 $202,482 
Product revenue213,803 93,266 618,382 244,358 
Other revenue3,776 742 9,493 3,615 
Total operating revenues325,176 166,586 917,997 450,455 
Operating costs and expenses:
Costs of sales (exclusive of depreciation and amortization shown separately below)145,208 60,503 418,197 141,011 
Operating expenses35,845 22,731 100,996 63,575 
Ad valorem taxes5,903 3,238 15,936 9,003 
General and administrative expenses23,468 6,957 72,180 17,920 
Depreciation and amortization65,005 57,154 192,609 170,291 
Loss (gain) on disposal of assets3,946 (37)12,602 417 
Total operating costs and expenses279,375 150,546 812,520 402,217 
Operating income45,801 16,040 105,477 48,238 
Other income (expense):
Interest and other income— 3,578 250 4,141 
Gain on redemption of mandatorily redeemable Preferred Units— — 9,580 — 
Gain (loss) on debt extinguishment— (56)(27,975)4 
Gain on embedded derivative488 — 89,050 — 
Interest expense(40,464)(30,541)(92,585)(88,458)
Equity in earnings of unconsolidated affiliates45,003 16,826 120,706 44,692 
Total other income (expense), net5,027 (10,193)99,026 (39,621)
Income before income taxes50,828 5,847 204,503 8,617 
Income tax expense1,406 1,207 2,244 1,207 
Net income including noncontrolling interest49,422 4,640 202,259 7,410 
Net income attributable to Preferred Unit limited partners708 — 115,203 — 
Net Income attributable to common shareholders48,714 4,640 87,056 7,410 
Net income attributable to Common Unit limited partners33,778 4,640 61,817 7,410 
Net income attributable to Class A Common Shareholders$14,936 $— $25,239 $— 
Net income attributable to Class A Common Shareholders per share
Basic$1.04 $— $1.24 $— 
Diluted$1.04 $— $1.24 $— 
Weighted-average shares **
Basic41,816 — 40,042 — 
Diluted41,855 — 40,075 — 
This period presented has been revised to reflect* The results of the legacy ALTM business are not included in the Company’s fair value changeconsolidated financials prior to February 22, 2022. Refer to the basis of its underlying warrants. Refer topresentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies, see in the section titled Revision of Previously IssuedNotes to our Condensed Consolidated Financial Statements for Immaterial Adjustmentin this Form 10-Q for further information.
(2)** Share amounts have been retroactively restated to reflect the Company’s Stock Split (as defined in Includes amounts of $1.5 millionNote 10—Equity and $1.2 million associated with related parties for the three months ended September 30, 2021 and 2020, respectively, and $3.8 million and $4.0 million for the nine months ended September 30, 2021 and 2020, respectively.Warrants), which was effected on June 8, 2022. Refer to Note 2—Transactions with Affiliates10 – Equity and Warrants .
(3)Includes amounts of $2.2 million and $1.6 million associated with related partiesin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for the three months ended September 30, 2021 and 2020, respectively, and $6.8 million and $5.1 million associated with related parties for the nine months ended September 30, 2021 and 2020, respectively. Refer to Note 2—Transactions with Affiliates.



further information.
The accompanying notes to consolidated financial statementsNotes are an integral part of this statement.the unaudited Condensed Consolidated Financial Statements
1

Table of Contents
ALTUS MIDSTREAM COMPANYKINETIK HOLDINGS INC.
STATEMENT OFCONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS)BALANCE SHEETS
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2021
2020(1)
2021
2020(1)
(In thousands)
NET INCOME INCLUDING NONCONTROLLING INTERESTS$49,689 $31,198 $146,019 $21,860 
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Share of equity method interests other comprehensive income (loss)— 681 630 (113)
COMPREHENSIVE INCOME INCLUDING NONCONTROLLING INTERESTS49,689 31,879 146,649 21,747 
Comprehensive income attributable to Preferred Unit limited partners29,166 19,332 72,662 56,358 
Comprehensive income (loss) attributable to Apache limited partner15,279 9,494 56,755 (28,448)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS$5,244 $3,053 $17,232 $(6,163)
September 30,December 31,
20222021
(In thousands, except share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$11,728 $18,729 
Accounts receivable, net of allowance for credit losses of $1,000 in 2022 and 2021269,634 178,107 
Prepaid and other current assets37,431 20,683 
318,793 217,519 
NONCURRENT ASSETS:
Property, plant and equipment, net2,528,659 1,839,279 
Intangible assets, net722,391 786,049 
Operating lease right-of-use assets34,677 61,562 
Deferred charges and other assets25,505 22,320 
Investment in unconsolidated affiliates2,372,596 626,477 
Goodwill4,557 — 
5,688,385 3,335,687 
Total assets$6,007,178 $3,553,206 
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY
CURRENT LIABILITIES:
Accounts payable$16,002 $12,220 
Accrued expenses235,160 135,643 
Derivative liabilities— 2,667 
Current portion of operating lease liabilities25,466 31,776 
Current portion of long-term debt, net— 54,280 
Other current liabilities8,039 4,339 
284,667 240,925 
NONCURRENT LIABILITIES:
Long-term debt, net3,447,513 2,253,422 
Contract liabilities22,707 11,674 
Operating lease liabilities9,033 29,889 
Derivative liabilities— 200 
Other liabilities2,867 2,219 
Contingent liabilities— 839 
Deferred tax liabilities13,082 7,190 
3,495,202 2,305,433 
Total liabilities3,779,869 2,546,358 
COMMITMENTS AND CONTINGENCIES (Note 8)
Redeemable noncontrolling interest — Common Unit limited partners3,061,861 1,006,838 
EQUITY:
Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 43,082,157 and nil shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively*
4 — 
Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 94,270,000 and 100,000,000 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively*
9 10 
Additional paid-in capital107,182 — 
Accumulated deficit(941,747)— 
(834,552)10 
Total liabilities, noncontrolling interests, and equity$6,007,178 $3,553,206 
(1)
This period presented has* Share amounts have been revisedretroactively restated to reflect the Company’s fair value change of its underlying warrants.Stock Split (as defined in Note 10—Equity and Warrants), which was effected on June 8, 2022. Refer to Note 1—Summary of Significant Accounting Policies10—Equity and Warrants, see in the section titled Revision of Previously IssuedNotes to our Condensed Consolidated Financial Statements for Immaterial Adjustmentin this Form 10-Q for further information.











































The accompanying notes to consolidated financial statementsNotes are an integral part of this statement.the unaudited Condensed Consolidated Financial Statements
2

Table of Contents
ALTUS MIDSTREAM COMPANYKINETIK HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETSTATEMENTS OF CASH FLOWS
(Unaudited)
September 30,December 31,
 2021
2020(1)
(In thousands, except per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$108,988 $24,188 
Accounts receivable— 1,033 
Accounts receivable from Apache Corporation (Note 1)1,018 446 
Revenue receivables (Note 3)10,981 11,378 
Inventories3,286 3,597 
Prepaid assets and other6,030 2,127 
130,303 42,769 
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment211,231 208,870 
Less: Accumulated depreciation and accretion(21,848)(13,034)
189,383 195,836 
OTHER ASSETS:
Equity method interests1,537,907 1,555,182 
Deferred charges and other8,341 5,843 
1,546,248 1,561,025 
Total assets$1,865,934 $1,799,630 
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY
CURRENT LIABILITIES:
Distributions payable to Preferred Unit limited partners$11,562 $— 
Dividends payable— 5,620 
Distributions payable to Apache Corporation— 18,750 
Other current liabilities (Note 6)15,907 5,613 
27,469 29,983 
LONG-TERM DEBT657,000 624,000 
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Asset retirement obligation67,234 64,062 
Embedded derivative120,522 139,009 
Other noncurrent liabilities5,896 6,424 
193,652 209,495 
Total liabilities878,121 863,478 
COMMITMENTS AND CONTINGENCIES (Note 7)00
Redeemable noncontrolling interest — Apache limited partner837,158 575,125 
Redeemable noncontrolling interest — Preferred Unit limited partners634,795 608,381 
EQUITY:
Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 3,746,460 shares issued and outstanding at September 30, 2021 and December 31, 20201 1 
Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 12,500,000 shares issued and outstanding at September 30, 2021 and December 31, 20201 1 
Additional paid-in capital— 122,222 
Accumulated deficit(484,142)(369,433)
Accumulated other comprehensive loss— (145)
(484,140)(247,354)
Total liabilities, noncontrolling interests, and equity$1,865,934 $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.





 Nine Months Ended September 30,
20222021
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income including noncontrolling interests$202,259 $7,410 
Adjustments to reconcile net income to net cash provided by operating activities:
           Depreciation and amortization expense192,609 170,291 
           Amortization of debt issuance costs8,053 9,991 
           Amortization of contract costs1,344 1,815 
           Contingent liabilities remeasurement(839)(377)
           Distributions from unconsolidated affiliates185,786 47,017 
           Derivatives settlement11,115 (17,959)
           Derivatives fair value adjustment(103,032)13,943 
           Gain on redemption of mandatorily redeemable Preferred Units(9,580)— 
           Loss on disposal of assets12,602 417 
           Equity in earnings from unconsolidated affiliates(120,706)(44,692)
           (Gain) loss on debt extinguishment27,975 (4)
           Share-based compensation30,966 — 
           Deferred income taxes1,882 1,207 
Change in operating assets and liabilities:
           Accounts receivable(73,927)(118,606)
           Other assets(9,583)(7,303)
           Accounts payable926 (2,141)
           Accrued liabilities95,675 96,347 
           Operating lease liabilities(281)1,994 
                 Net cash provided by operating activities453,244 159,350 
CASH FLOWS FROM INVESTING ACTIVITIES
           Property, plant and equipment expenditures(160,478)(60,609)
           Intangible assets expenditures(13,332)(3,733)
           Investment in unconsolidated affiliates(56,199)(20,522)
           Cash proceeds from disposals190 3,541 
           Net cash acquired in acquisition13,401 — 
                 Net cash used in investing activities(216,418)(81,323)
CASH FLOWS FROM FINANCING ACTIVITIES
           Proceeds from issuance of long-term debt3,000,000 30,189 
           Principal payments on long-term debt(2,294,130)(80,177)
           Payment on debt issuance costs(36,873)(3,152)
           Proceeds from revolver537,000 33,000 
           Payment on revolver(771,000)(27,000)
           Redemption of mandatorily redeemable Preferred Units(183,297)— 
           Redemption of redeemable noncontrolling interest Preferred Units(461,460)— 
           Distributions paid to mandatorily redeemable Preferred Units holders(1,850)— 
           Distributions paid to redeemable noncontrolling interest Preferred Units limited partners(6,937)— 
           Cash dividends paid to Class A Common Stock shareholders(24,351)— 
           Distributions paid to Class C Common Units limited partners(929)(30,189)
           Equity contributions— 14,890 
                 Net cash used in financing activities(243,827)(62,439)
                 Net change in cash$(7,001)$15,588 
CASH, BEGINNING OF PERIOD$18,729 $19,591 
CASH, END OF PERIOD$11,728 $35,179 
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES
           Cash paid for interest, net of amounts capitalized$76,592 $81,521 
           Property and equipment and intangible accruals in accounts payable and accrued liabilities$17,717 $9,357 
           Class A Common Stock issued through dividend and distribution reinvestment plan$175,453 $— 
           Fair value of ALTM assets acquired$2,446,429 $— 
           Class A Common Stock issued in exchange1,013,745 — 
           ALTM liabilities and mezzanine equity assumed$1,432,684 $— 
The accompanying notes to consolidated financial statementsNotes are an integral part of this statement.the unaudited Condensed Consolidated Financial Statements
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ALTUS MIDSTREAM COMPANYKINETIK HOLDINGS INC.
STATEMENTCONDENSED CONSOLIDATED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
 Nine Months Ended September 30,
 2021
2020(1)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests$146,019 $21,860 
Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized derivative instrument (gain) loss(18,487)76,102 
Depreciation and accretion12,094 11,984 
Income from equity method interests, net(82,633)(47,541)
Distributions from equity method interests97,757 60,435 
Impairments441 — 
Power credit, net(7,047)— 
Warrants valuation adjustment(222)(1,668)
Other406 781 
Changes in operating assets and liabilities:
Decrease in inventories256 366 
(Increase) decrease in prepaid assets and other(47)72 
(Increase) decrease in accounts receivable1,033 (556)
Decrease in revenue receivables (Note 2)397 3,486 
Decrease in account receivables from/payable to affiliate580 917 
Increase in accrued expenses9,425 11,145 
Increase (decrease) in deferred charges and other noncurrent liabilities(1,577)64 
NET CASH PROVIDED BY OPERATING ACTIVITIES158,395 137,447 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(3,268)(29,540)
Proceeds from sale of assets1,687 7,629 
Contributions to equity method interests(27,270)(286,227)
Distributions from equity method interests30,051 14,235 
Capitalized interest paid— (7,377)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES1,200 (301,280)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to Preferred Unit limited partners(34,686)(11,562)
Distributions paid to Apache limited partner(56,250)— 
Dividends paid(16,859)— 
Proceeds from revolving credit facility33,000 184,000 
Finance lease— (11,789)
Deferred facility fees— (816)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES(74,795)159,833 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS84,800 (4,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR24,188 5,983 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$108,988 $1,983 
SUPPLEMENTAL CASH FLOW DATA:
Accrued capital expenditures(2)
$312 $256 
Interest paid, net of capitalized interest7,042 94 
Cash received for income tax refunds— 696 
(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 $0.8 million and $0.3 million due from Apache for the nine months ended September 30, 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 September 30, 2020(1)
Balance at June 30, 2020 (Revised)$592,625 $229,348 3,746 $1 12,500 $1 $451,037 $(381,257)$(449)$69,333 
Distributions paid to Preferred Unit limited partners(11,562)— — — — — — — — — 
Net income19,332 8,970 — — — — — 2,896 — 2,896 
Accumulated other comprehensive income— 524 — — — — — — 157 157 
Balance at September 30, 2020 (Revised)$600,395 $238,842 3,746 $1 12,500 $1 $451,037 $(378,361)$(292)$72,386 
For the Quarter Ended September 30, 2021
Balance at June 30, 2021$617,191 $863,063 3,746 $1 12,500 $1 $— $(506,200)$— $(506,198)
Distributions payable to Preferred Unit limited partners(11,562)— — — — — — — — — 
Distributions to Apache limited partner— (18,750)— — — — — — — — 
Common Dividends ($1.50 per share)— — — — — — (5,620)— — (5,620)
Net income29,166 15,279 — — — — — 5,244 — 5,244 
Change in redemption value of noncontrolling interests— (22,434)— — — — 5,620 16,814 — 22,434 
Balance at September 30, 2021$634,795 $837,158 3,746 $1 12,500 $1 $— $(484,142)$— $(484,140)
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners*Redeemable Noncontrolling Interest — Common Unit Limited PartnersClass A Common StockClass C Common StockAdditional Paid-in CapitalAccumulated DeficitTotal Equity
 Shares**AmountShares**Amount
(In thousands)(In thousands)
For the Quarter Ended September 30, 2021
Balance at June 30, 2021$— $1,029,126 — $— 100,694 $10 $— $— $10 
Net income— 4,640 — — — — — — — 
Balance at September 30, 2021$— $1,033,766 — $— 100,694 $10 $— $— $10 
For the Quarter Ended September 30, 2022
Balance at June 30, 2022$563,338 $3,251,290 40,551 $4 94,450 $9 $— $(1,181,343)$(1,181,330)
Redemption of Common Units— (6,765)180 — (180)— 6,765 — 6,765 
Redemption of Preferred Units(461,460)— — — — — — — — 
Excess of carrying amount over Preferred Units redemption price(102,586)76,623 — — — — — 32,900 32,900 
Issuance of Class A Common Stock through dividend and distribution reinvestment plan— — 2,351 — — — 87,756 — 87,756 
Share-based compensation— — — — — — 12,661 — 12,661 
Net income708 33,778 — — — — — 14,936 14,936 
Change in redemption value of noncontrolling interests— (222,227)— — — — — 222,227 222,227 
Distributions paid to Common Unit limited partners— (70,838)— — — — — — — 
Dividends on Class A Common Stock ($0.75 per share)— — — — — — — (30,467)(30,467)
Balance at September 30, 2022$— $3,061,861 43,082 $4 94,270 $9 $107,182 $(941,747)$(834,552)
(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. in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.
(3)** Share amounts have been retroactively restated to reflect the Company’s reverse stock split,Stock Split (as defined in Note 10—Equity and Warrants), which was effected on June 30, 2020.8, 2022. Refer to Note 9—10—Equity and Warrantsin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.








The accompanying notes to consolidated financial statementsNotes are an integral part of this statement.the unaudited condensed consolidated financial statements

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ALTUS MIDSTREAM COMPANYKINETIK HOLDINGS INC.
STATEMENTCONDENSED CONSOLIDATED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS —- (Continued)
(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 Nine Months Ended September 30, 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)
Distributions paid to Preferred Unit limited partners(11,562)— — — — — — — — — 
Net income (loss)56,358 (28,361)— — — — — (6,137)— (6,137)
Change in redemption value of noncontrolling interests— (433,710)— — — — 433,710 — — 433,710 
Accumulated other comprehensive loss— (87)— — — — — — (26)(26)
Balance at September 30, 2020 (Revised)$600,395 $238,842 3,746 $1 12,500 $1 $451,037 $(378,361)$(292)$72,386 
For the Nine Months Ended September 30, 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(34,686)— — — — — — — — — 
Distributions payable to Preferred Unit limited partners(11,562)— — — — — — — — — 
Distributions to Apache limited partner— (37,500)— — — — — — — — 
Common Dividends ($1.50 per share)— — — — — — (11,240)— — (11,240)
Net income72,662 56,270 — — — — — 17,087 — 17,087 
Change in redemption value of noncontrolling interests— 242,778 — — — — (110,982)(131,796)— (242,778)
Accumulated other comprehensive income— 485 — — — — — — 145 145 
Balance at September 30, 2021$634,795 $837,158 3,746 $1 12,500 $1 $— $(484,142)$— $(484,140)
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners*Redeemable Noncontrolling Interest — Common Unit Limited PartnersClass A Common StockClass C Common StockAdditional Paid-in CapitalAccumulated DeficitTotal Equity
 Shares**AmountShares**Amount
(In thousands)(In thousands)
For the Nine Months Ended September 30, 2021
Balance at December 31, 2020$— $1,041,655 — $— 101,198 $10 $— $— $10 
Contribution— 14,890 — — 492 — — — — 
Distribution paid to Common Unit limited partners— (30,189)— — (996)— — — — 
Net income— 7,410 — — — — — — — 
Balance at September 30, 2021$— $1,033,766 — $— 100,694 $10 $— $— $10 
For the Nine Months Ended September 30, 2022
Balance at December 31, 2021$— $1,006,838 — $— 100,000 $10 $— $— $10 
ALTM acquisition462,717 — 32,493 3 — — 1,013,742 — 1,013,745 
Distributions paid to Preferred Unit limited partners(6,937)— — — — — — — — 
Redemption of Common Units— (179,323)5,730 1 (5,730)(1)179,323 — 179,323 
Redemption of Preferred Units(461,460)— — — — — — — — 
Excess of carrying amount over Preferred Units redemption price(109,523)76,623 — — — — — 32,900 32,900 
Issuance of common stock through dividend and distribution reinvestment plan— — 4,855 — — — 175,453 — 175,453 
Share-based compensation— — 4 — — — 30,966 — 30,966 
Remeasurement of contingent consideration— — — — — — 4,451 — 4,451 
Net income115,203 61,817 — — — — — 25,239 25,239 
Change in redemption value of noncontrolling interests— 2,237,635 — — — — (1,296,753)(940,882)(2,237,635)
Distributions paid to Common Units limited partners— (141,729)— — — — — — — 
Dividends on Class A Common Stock ($1.50 per share)— — — — — — — (59,004)(59,004)
Balance at September 30, 2022$— $3,061,861 43,082 $4 94,270 $9 $107,182 $(941,747)$(834,552)
(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. in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.
(3)** Share amounts have been retroactively restated to reflect the Company’s reverse stock split,Stock Split (as defined in Note 10—Equity and Warrants), which was effected on June 30, 2020.8, 2022. Refer to Note 9—10—Equity and Warrantsin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.



The accompanying notes to consolidated financial statementsNotes 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)2021 filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on July 5, 2022.
1. DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Transaction
On February 22, 2022 (the “Closing Date”), which containsKinetik Holdings Inc., a summaryDelaware corporation (formerly known as Altus Midstream Company), consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021 (the “Contribution Agreement”), by and among the Company, Altus Midstream LP (now known as Kinetik Holdings LP), a Delaware limited partnership and subsidiary of Altus Midstream Company (the “Partnership”), New BCP Raptor Holdco, LLC, a Delaware limited liability company (“Contributor”), and BCP Raptor Holdco, LP, a Delaware limited partnership (“BCP”). The transactions are referred to herein as the “Transaction.”
Pursuant to the Contribution Agreement, in connection with the closing of the Transaction (the “Closing”), (i) Contributor contributed all of the equity interests of BCP and BCP Raptor Holdco GP, LLC, a Delaware limited liability company and the general partner of BCP (“BCP GP” and, together with BCP, the “Contributed Entities”), to the Partnership; and (ii) in exchange for such contribution, the Partnership transferred to Contributor 50,000,000 common units representing limited partner interests in the Partnership (“Common Units”) and t 50,000,000 shares of the Company’s significant accounting policies and other disclosures. Capitalized terms used but not defined herein shall haveClass C Common Stock, par value $0.0001 per share (“Class C Common Stock”).
The Company’s stockholders immediately prior to the meaning ascribedClosing continued to such terms in the Form 10-K.
Unless the context otherwise requires, the “Company,” “ALTM” and “Altus” refers to Altus Midstream Company and its consolidated subsidiaries. “Altus Midstream” refers to Altus Midstream LP and its consolidated subsidiaries. “Apache” refers to Apache Corporation and its consolidated subsidiaries. All references tohold their shares of the Company’s Class A common stock, $0.0001Common Stock, par value (Class$0.0001 per share (“Class A Common Stock),Stock,” and together with the Company’s Class C commonCommon Stock, “Common Stock”). As a result of the Transaction, immediately following the Closing (i) Contributor held approximately 75% of the issued and outstanding Common Stock, (ii) Apache Midstream LLC, a Delaware limited liability company (“Apache Midstream”), held approximately 20% of the issued and outstanding Common Stock, and (iii) the Company’s remaining stockholders held approximately 5% of the issued and outstanding Common Stock.
The Company completed a two-for-one Stock Split in the form of a stock $0.0001 par value (Class C Common Stock), reflect suchdividend on June 8, 2022. All corresponding per-share and share amounts as retrospectivelyfor periods prior to June 8, 2022 have been retroactively restated elsewhere in this Form 10-Q to reflect the Company’s reverse stock split, which was effected June 30, 2020. Refertwo-for-one Stock Split. However, the number of Common Units and shares of Class C Common Stock described in this Form 10-Q in relation to Note—9 Equity for further information.the Transaction are presented at pre-Stock-Split amounts to be consistent with our previous public filings and the terms of the Contribution Agreement.
Nature of Operations
ThroughIn connection with the Closing, the Company changed its name from “Altus Midstream Company” (“ALTM”) to “Kinetik Holdings Inc.” Unless otherwise noted or the context requires otherwise, references herein to Kinetik Holdings Inc. “the Company”, “us”, “our”, “we” or similar terms, with respect to time periods prior to February 22, 2022, include BCP and its consolidated subsidiaries the Company ownsand do not include ALTM and its consolidated subsidiaries, while references herein to Kinetik Holdings Inc. with respect to time periods from and after February 22, 2022, include ALTM and its consolidated subsidiaries.
Organization
BCP was formed on April 25, 2017 as a Delaware limited partnership to acquire and develop midstream oil and gas assets. BCP’s primary operating subsidiaries are EagleClaw Midstream Ventures, LLC (“EagleClaw”) and CR Permian Holdings, LLC (“CR Permian”). Both subsidiaries were formed to design, engineer, install, own and operate facilities and provide services for produced natural gas gathering, compression, processing, treating and transmission assets in the Permian Basindehydration, and condensate separation, stabilization, and storage, crude oil gathering and storage, water gathering and disposal assets.
6
Table of West Texas. Construction on the assets began in the fourth quarter of 2016, 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.Contents
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 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 5 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.

7

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 LPBCP and its subsidiaries which include Altus Midstream Operating. The Company holds approximately 23.1 percentbecame wholly owned subsidiaries of the outstanding Common Units,Partnership. The Transaction was accounted for as a reverse merger pursuant to ASC 805 Business Combination (“ASC 805”). Refer to Note 2—Business Combination in the Notes to our Condensed Consolidated Financial Statements for further information.
Nature of Operations
Through its consolidated subsidiaries, the Company provides comprehensive gathering, water disposal, transportation, compression, processing and a controlling interest,treating services necessary to bring natural gas, NGLs and crude oil to market. Additionally, the Company owns equity interests in Altus Midstream, while Apache holdsfour separate Permian Basin 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 acceptedGAAP. Certain reclassifications of prior year balances have been made to conform such amounts to current year presentation. These reclassifications have no impact on net income. All adjustments that, in the United States (GAAP).
The consolidated financialopinion of management, 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 is a variable interest entity (VIE) because 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 a variable interest in a VIE must evaluate whether it has a controlling financial interest in the VIE, such that it is the VIE’s primary beneficiary and should consolidate. The Company iscompleted a two-for-one Stock Split on June 8, 2022. All corresponding per-share and share amounts for periods prior to June 8, 2022 have been retroactively restated in this Form 10-Q to reflect the primary beneficiary of Altus Midstream, and therefore should consolidate Altus Midstream because (i)two-for-one Stock Split, except for the Company has the ability to direct the activities of Altus Midstream that most significantly affect its economic performance, and (ii) the Company has the right to receive benefits or the obligation to absorb losses that could be potentially significant to Altus Midstream.
Redeemable Noncontrolling Interest — Apache Limited Partner
The Company’s redeemable noncontrolling interest presented in the consolidated financial statements consistsnumber of 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 with the Business Combination, and subsequent issuance of Preferred Units, the Amended LPA), the limited partner interests held by Apache are equal to the number of shares of the Company’s Class C Common Stock, held by Apache.
The Company initially recorded 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 policydescribed above in relation to the Transaction, which are presented at pre-Stock-Split amounts. This presentation election 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 associatedconsistent with the noncontrolling interest or (ii) the redemption value as of the balance sheet date.
See discussionour previous public filings and additional detail further discussed in Note 9—Equity.
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Redeemable Noncontrolling Interest — Preferred Unit Limited Partners
On June 12, 2019, Altus Midstream 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. 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 the closing of the Preferred Unit offering or upon the occurrence of specified events, unless otherwise redeemed by Altus Midstream.
The Preferred Units are accounted for on the Company’s 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 sheet as a long-term liability embedded derivative.
See discussion and additional detail further discussed in Note 10—Series A Cumulative Redeemable Preferred Units.
Equity Method Interests
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 interests are carried originally at acquisition cost, increased by Altus’ proportionate share of the equity interest’s net income and contributions made by Altus, and decreased by Altus’ proportionate share of the equity interest’s net losses and distributions received by Altus. Please refer to Note 8—Equity Method Interests, for further details of the Company’s equity method interests.Contribution Agreement.
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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of its condensed consolidated financial statements, and changes in these estimates are recorded when known.

 Significant items subject to such estimates and assumptions include the valuation of tangible and intangible assets, share-based compensation, contingent liabilities, warrants, and noncontrolling interests.
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RevisionVariable Interest Entity
The Company uses a qualitative approach in assessing the consolidation requirement for variable interest entities. The approach focuses on identifying which enterprise has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. In the event that the Company is the primary beneficiary of Previously Issueda variable interest entity, the assets, liabilities, and results of operations of the variable interest entity would be consolidated in our financial statements. The Company has determined that it has significant influence over the operating and financial policies of the four pipeline entities in which it is invested, but does not exercise control over them; and hence, it accounts for these investments using the equity method. Refer to Note 9—Equity Method Investmentsin the Notes to our Condensed Consolidated Financial Statements for Immaterial Adjustmentin this Form 10-Q.
WarrantsRedeemable Noncontrolling Interest — Common Units Limited Partners
On April 12, 2021, the SEC Staff issued a Staff Statement on Accounting 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 related to warrants of a kind similarPursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of the Contributed Entities to the Partnership; and (ii) in exchange for such contribution, the Partnership transferred to Contributor 50,000,000 common units representing limited partner interests in the Partnership and 50,000,000 shares of the Company’s public and private warrants outstandingClass C Common Stock, par value $0.0001 per share. Please refer to “The Transaction” above.
The Common Units are redeemable at the timeoption of the Business Combination. The SEC determined that certain features of warrants issued in SPAC transactions common across many entities, such as those outstandingunit holders and accounted for the Company, should be recorded as a derivative liability under ASC 815 “Derivatives and Hedges” with any changes in fair value being recorded as a gain or loss in the Company’s Statement ofCondensed Consolidated Operations.Balance Sheet as a redeemable noncontrolling interest classified as temporary equity. The Company has historicallyrecords the redeemable noncontrolling interest at the higher of (i) its initial value plus accumulated earnings/losses associated with the noncontrolling interest or (ii) the maximum redemption value as of the balance sheet date. The redemption value was determined based on a 5-day volume weighted-average closing price of the Class A Common Stock. See discussion and additional details in Note 10—Equity and Warrants in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners
The Partnership issued Series A Cumulative Redeemable Preferred Units (“Preferred Units”) on June 12, 2019. As the Transaction was accounted for its warrants as a reverse merger, the Company assumed certain Preferred Units that were issued and outstanding at Closing for accounting purposes.
The Preferred Units are accounted for on the Company’s Condensed Consolidated Balance Sheet as a redeemable noncontrolling interest classified as temporary equity with no change inbased on the terms of the Preferred Units. Certain redemption features embedded within the terms of the Preferred Units required bifurcation and measurement at fair value being recorded and are accounted for on the Company’s Condensed Consolidated Balance Sheet as a long-term liability embedded derivative. During the nine months ended September 30, 2022, the Company redeemed all outstanding Preferred Units. See discussion and additional detail in Note 11—Series A Cumulative Redeemable Preferred Unitsin the applicable period. Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.
Equity Method Investments
The Company has concludedfollows the equity method of accounting when it does not exercise control over its equity interests, but can exercise significant influence over the operating and financial policies of the entity. Under this method, the equity investments are carried originally at acquisition cost, increased by the Company’s proportionate share of the equity interest’s net income and contributions made, and decreased by the Company’s proportionate share of the equity interest’s net losses and distributions received. The Company determines whether distributions are a return on or a return of the investment based on the nature of the distribution approach, under which the Company classifies distributions from an investee by evaluating the facts, circumstances and nature of each distribution. As distributions from the Company’s equity method investment (“EMI”) pipeline entities are generated from their respective normal course of business, the Company classifies the distributions as return on investments and as cash flow from operating activities. Please refer to Note 9—Equity Method Investmentsin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q, for further information of the Company’s equity method investments. Equity method investments acquired in the Transaction were recorded at fair value upon Closing. See discussion and additional detail in Note 2—Business Combinationin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for purchase price allocation of the Transaction.
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Inventory
Other current assets include condensate, residue gas and NGLs inventories that are valued at the lower of cost or market. At the end of each reporting period, the Company assesses the carrying value of inventory and makes any adjustments necessary to reduce the carrying value to the applicable net realizable value. Inventory was valued at $13.1 million and $2.1 million as of September 30, 2022 and December 31, 2021, respectively.
Impairment of Long-Lived Assets
In accordance with Financial Accounting Standards Board (“FASB”) ASC 360, Property, Plant and Equipment, long-lived assets, excluding goodwill, to be held and used by the Company are reviewed for impairment annually or on an interim basis if events or circumstances indicate that the previous accounting policyfair value of the assets have decreased below their carrying value. For long-lived assets to accountbe held and used, the Company bases their evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present.
The Company’s management assesses whether there has been an impairment trigger, and if a trigger is identified, then the Company would perform an undiscounted cash flow test at the lowest level for which identifiable cash flows are independent of cash flows from other assets. If the sum of the undiscounted future net cash flows is less than the net book value of the property, an impairment loss is recognized for any excess of the property’s net book value over its warrants as equity rather than as a liability was an immaterial error.estimated fair value. The Company has corrected this immaterial error by revising its consolidated financial statements as of anddid not recognize impairment losses for the year ended December 31, 2020 and as of and forlong-lived assets during the three and nine months ended September 30, 20202022 and the related notes included herein to include the effect of accounting for the warrants as a liability from the date of the Business Combination. Note 12—Net Income (Loss) Per Share and Note 13—Fair Value Measurements have also been updated to reflect this revision. In addition, management has corrected previously identified immaterial errors related to income from its equity method interests, net unrelated to the SEC Staff Statement.2021.
The impacts of this adjustment in fiscal year 2020, as presented in the accompanying financial statements, are as follows:Transactions with Affiliates
Statement of Consolidated Operations:
Three Months Ended September 30, 2020
As Reported
Change(1)
As Revised
(In thousands)
Income from equity method interests, net$14,320 $1,667 $15,987 
Warrants valuation adjustment— 209 209 
Total other income (loss)10,787 1,876 12,663 
Net income (loss) before income taxes29,322 1,876 31,198 
Net income (loss) including noncontrolling interests29,322 1,876 31,198 
Net income (loss) attributable to common shareholders9,990 1,876 11,866 
Net income (loss) attributable to Apache limited partner7,687 1,283 8,970 
Net income (loss) attributable to Class A common shareholders2,303 593 2,896 
Net Income (Loss) Attributable To Class A Common Shareholders, Per Share
Basic$0.61 $0.16 $0.77 
Diluted$0.30 $0.02 $0.32 
(1)All changes related to Income from equity method interests, net above relate to an immaterial prior period adjustment unrelated to the SEC Staff Statement.
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Nine Months Ended September 30, 2020
As ReportedChangeAs Revised
(In thousands)
Warrants valuation adjustment$— $1,668 $1,668 
Total other income (loss)(28,907)1,668 (27,239)
Net income (loss) before income taxes19,496 1,668 21,164 
Net income (loss) including noncontrolling interests20,192 1,668 21,860 
Net income (loss) attributable to common shareholders(36,166)1,668 (34,498)
Net income (loss) attributable to Class A common shareholders(7,805)1,668 (6,137)
Net Income (Loss) Attributable To Class A Common Shareholders, Per Share
Basic$(2.08)$0.44 $(1.64)
Diluted$(2.23)$0.11 $(2.12)
Statement of Consolidated Comprehensive Income (Loss):
Three Months Ended September 30, 2020
As Reported
Change(1)
As Revised
(In thousands)
Net income (loss) including noncontrolling interests$29,322 $1,876 $31,198 
Comprehensive income (loss) including noncontrolling interests30,003 1,876 31,879 
Comprehensive income (loss) attributable to Apache limited partner8,211 1,283 9,494 
Comprehensive income (loss) attributable to Class A Common Shareholders2,460 593 3,053 
(1)All changes related to Income from equity method interests, net relate to an immaterial prior period adjustment unrelated to the SEC Staff Statement.
Nine Months Ended September 30, 2020
As ReportedChangeAs Revised
(In thousands)
Net income (loss) including noncontrolling interests$20,192 $1,668 $21,860 
Comprehensive income (loss) including noncontrolling interests20,079 1,668 21,747 
Comprehensive income (loss) attributable to Class A Common Shareholders(7,831)1,668 (6,163)
Consolidated Balance Sheet:
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)
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Statement of Consolidated Cash Flows:
Nine Months Ended September 30, 2020
As ReportedChangeAs Revised
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) including noncontrolling interests$20,192 $1,668 $21,860 
Warrants valuation adjustment— (1,668)(1,668)
Net Cash Provided by Operating Activities137,447 — 137,447 
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 Apacheaffiliates 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 after the Company’s transactions are processed and the net results of operations are determined. However, from time to time,its subsidiaries, who controlled 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.
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 conjunction with increased power pricing dueprior to the Texas freeze event and underutilizationTransaction. Accounts receivable from affiliates was $24.1 million as of contractual electricity volumes, the Company recognized an estimated total credit of approximately $9.7 million for the six months ended June 30, 2021. The Company did not recognize any additional credit during the three months ended September 30, 2021. These amounts are recorded on the statement of consolidated operations in “Other income.” The related power credit will offset the Company’s future monthly power payments2022. Revenue from affiliates was $35.2 million and is recorded in “Prepaid assets and other” for the current portion and “Deferred charges and other” for the long-term portion on the consolidated balance sheet. No credits were recorded$81.4 million for the three and nine months ended September 30, 2020.2022, respectively. Accrued expense due to affiliates was immaterial as of September 30, 2022, and operating expenses were $0.2 million and $0.5 million for the three and nine months ended September 30, 2022, respectively.
In addition, the Company incurred cost of sales with two of its EMI pipeline entities, Permian Highway Pipeline LLC (“PHP”) and Breviloba, LLC (“Breviloba”). The Company haspaid a demand fee to PHP and paid a capacity fee to Breviloba for certain volumes moving on the Shin Oak NGL Pipeline. For the three and nine months ended September 30, 2022, the Company recorded cost of sales of $3.7 million and $10.8 million, respectively, with these affiliates.
Net Income Per Share
Basic net income per share is calculated by dividing net income attributable to Class A common shareholders by the weighted-average number of shares of Class A Common Stock outstanding during the period. Class C Common Stock is excluded from the weighted-average shares outstanding for the calculation of basic net income per share, as holders of Class C Common Stock are not entitled to any dividends or liquidating distributions. No net income per share was computed for the three and nine months ended September 30, 2021, as no remaining performance obligations relatedClass A Common Stock was outstanding with respect to these creditsBCP as the accounting acquirer as of September 30, 2021.
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2.    TRANSACTIONS WITH AFFILIATES
Revenues
The Company has contracteduses the “if-converted method” to provide services including gas gathering, compression, processing, transmission,determine the potential dilutive effect of (i) an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) for shares of Class A Common Stock and NGL transmission, pursuant to acreage dedications provided by Apache, comprising(ii) an assumed exercise of the entire Alpine High acreage. In accordance with the termsoutstanding public and private warrants for shares of these agreements, the Company receives prescribed fees based on the type and volumeClass A Common Stock. The dilutive effect of productany earn-out consideration payable in shares is only included in periods for which the servicesunderlying conditions for the issuance are provided. Additionally, beginningmet.
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 2020, Altus Midstream entered into 3 agreementsa business combination to provide operatingbe recognized and maintenance services for Apache’s compressors in exchange for a fixed monthly fee per compressor serviced.
Revenues generated under these agreements are presentedmeasured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.
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Historically, such amounts were recognized by the acquirer at fair value. With adoption of ASU 2021-08, the Company assumed contract liabilities at carrying value of $9.1 million upon Closing.
Effective January 1, 2022, the Company adopted ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 was issued to ease the potential accounting burden expected when global capital markets move away from LIBOR, the benchmark interest rate banks use to make short-term loans to each other. The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationship, and other transactions affected by reference rate reform if certain criteria are met. Interest rate applied to the Company’s statementnew Term Loan and Revolver borrowings resulting from the comprehensive refinance is based on Secured Overnight Financing Rate (“SOFR”), which is a broad measure of consolidated operationsthe cost of borrowing cash overnight collateralized by treasury securities. Refer to Note 6—Debt and Financing Costs in the Notes to our Condensed Consolidated Financial Statements of this Form 10-Q for discussion of SOFR applicable to the Company’s debt structures.
Recent Accounting Pronouncement Not Yet Adopted
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). The amendments in ASU 2022-03 clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as “Midstream services revenue — affiliate.” Revenues earneda separate unit of account, recognize and measure a contractual sale restriction. The amendments also require the following disclosures for equity securities subject to contractual sale restrictions: (1) The fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet; (2) The nature and remaining duration of the restriction(s); (3) The circumstances that could cause a lapse in the restriction(s). This guidance is effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been invoicedissued or made available for issuance. The Company is currently evaluating the effect that ASU 2022-03 will have on its Consolidated Financial Statements.
In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method (“ASU 2022-01”). Current GAAP permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to Apache are presentedbe included in a last-of-layer closed portfolio. The amendments in ASU 2022-01 allow nonprepayable financial assets also to be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets, thereby allowing consistent accounting for similar hedges. The amendments in ASU 2022-01 also clarify the accounting for and promote consistency in the reporting of hedge basis adjustments applicable to both a single hedged layer and multiple hedged layers as follows: (1) an entity is required to maintain basis adjustments in an existing hedge on a closed portfolio basis (that is, not allocated to individual assets), (2) an entity is required to immediately recognize and present the basis adjustment associated with the amount of the designated layer that was breached in interest income. In addition, an entity is required to disclose that amount and the circumstances that led to the breach, (3) an entity is required to disclose the total amount of the basis adjustments in existing hedges as a reconciling amount if other areas of GAAP require the disaggregated disclosure of the amortized cost basis of assets included in the closed portfolio, and (4) an entity is prohibited from considering basis adjustments in an existing hedge when determining credit losses. The guidance is effective for public business entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of ASU 2022-01 for any entity that has adopted the amendments in ASU 2017-02 for the corresponding period. The Company is currently evaluating the effect that ASU 2022-01 will have on its Consolidated Financial Statements.

2.    BUSINESS COMBINATION
Altus Business Combination
On February 22, 2022, the Company consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021. Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of the Contributed Entities to the Partnership; and (ii) in exchange for such contribution, the Partnership transferred to Contributor 50,000,000 common units representing limited partner interests in the Partnership and 50,000,000 shares of the Company’s consolidated balance sheetClass C Common Stock, par value $0.0001 per share. Please refer to “The Transaction” discussed above.
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The Transaction was accounted as “Revenue receivables.” Refera reverse merger in accordance with ASC 805, which, among other things, requires assets acquired and liabilities assumed to be measured at their acquisition date fair value. The Company also adopted ASU 2021-08, effective as of January 1, 2022, to record contract liabilities at their carrying value as of the acquisition date. Although the Company was the legal acquirer, BCP was determined to be the accounting acquirer and legal acquiree. As a result, BCP and its subsidiaries’ net assets were carried at historical value, acquired net assets were measured at fair value except contract liabilities being recorded at carrying value 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 $4.6 million relates to operational synergies and is included in the Midstream Logistics segment. The value of the Preferred Units and assumed contingent liability is determined through a probability-weighted analysis of the expected future cash flows and other applicable valuation techniques. See additional details for Preferred Units in Note 3—Revenue Recognition11—Series A Cumulative Redeemable Preferred Unitsand contingent liabilities in for further discussion.Note 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.
CostThe following table summarizes the preliminary estimated fair value of assets acquired and Expensesliabilities assumed in the Transaction in accordance with ASC 805:
(In thousands)Amount
Cash and cash equivalent$13,401 
Accounts receivable1,919 
Accounts receivable - affiliates15,681 
Property, plant, and equipment, net634,923 
Intangible assets, net13,200 
Investments in unconsolidated affiliates1,755,000 
Prepaid expense and other assets7,748 
Goodwill4,557 
Total assets acquired2,446,429 
Accrued expenses and other accrued liabilities5,687 
Long-term debt657,000 
Embedded derivative liabilities89,050 
Contract liabilities9,102 
Mandatory redeemable Preferred Units200,667 
Deferred tax liabilities4,010 
Contingent liabilities4,451 
Total liabilities assumed969,967 
Redeemable noncontrolling interest - Preferred Unit limited partners462,717 
Total consideration transferred$1,013,745 
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 expensesacquisition-related costs of $1.5$0.1 million and $1.2$6.4 million for the three and nine months ended September 30, 2022, respectively.
Supplemental Pro Forma Information
The unaudited supplemental pro forma financials are for informational purposes only and are not indicative of future results. The results below for the three and nine months ended September 30, 2022 and 2021 combine the results of the Company and 2020,the Partnership, giving effect to the Transaction as if it had been completed on January 1, 2021.
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Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(In thousands)Pro formaPro formaPro formaPro forma
Revenues$325,176 $201,134 $944,850 $554,742 
Net income including noncontrolling interest$46,968 $28,518 $193,083 $64,165 
Given the assumed pro forma transaction date of January 1, 2021, we removed $1.5 million and $21.0 million of acquisition-related expenses for the three and nine months ended September 30, 2022, respectively, and $3.8recognized $0.1 million and $4.0$31.2 million of total acquisition-related expenses for the three and nine months ended September 30, 2021, and 2020, respectively. The Company incurred general and administrative expenses from affiliates of $2.2 million and $1.6 million for the three months ended September 30, 2021 and 2020, respectively, and $6.8 million and $5.1 million for the nine months ended September 30, 2021 and 2020, respectively. These costs were primarily related to expenses associated with the COMA. Additional information regarding the COMA 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 for the period of January 1, 2021 through December 31, 2021 and (iii) $9.0 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 functions for the Company, including services 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.
Distributions to Apache
In December 2020, May 2021, and August 2021, the Company’s Board of Directors declared a cash dividend of $1.50 per share on the Company’s Class A Common Stock, with each dividend declared totaling $5.6 million. The dividends were paid to stockholders during the first, second and third quarters of 2021. Each dividend included 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 dividends were funded by distributions from Altus Midstream to its common unitholders of $1.50 per Common Unit, totaling $24.4 million for each of the first, second and third quarters of 2021. For each distribution, $5.6 million, as noted above, was paid to the Company to fund the cash dividend payments to Class A Common stockholders, 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.
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3.    REVENUE RECOGNITION
Disaggregation of Revenue
The following table presents a disaggregation of the Company’s revenue.revenue:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(In thousands)
Gas gathering and compression$4,797 $5,352 $13,645 $15,466 
Gas processing25,422 28,533 72,361 81,613 
Transmission3,229 3,861 9,513 11,262 
NGL transmission671 708 1,793 2,121 
Other429 415 1,232 790 
Midstream services revenue — affiliate34,548 38,869 98,544 111,252 
Product sales — third parties
— 1,303 5,743 1,900 
Total revenues$34,548 $40,172 $104,287 $113,152 
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(In thousands)
Gathering and processing services$107,597 $72,578 $290,122 $202,482 
Natural gas, NGLs and condensate sales213,803 93,266 618,382 244,358 
Other revenue3,776 742 9,493 3,615 
Total revenues and other$325,176 $166,586 $917,997 $450,455 
There werehave been no significant changes to the Company’s contracts with customers during the three and nine months ended September 30, 2020, except that2022. Contracts with customers acquired through the Transaction had similar structures as the Company’s existing contracts with customers. The Company entered into a new Gas Processing Agreement with Apache in Octoberrecognized revenues from minimum volume commitment (“MVC”) deficiency payments of $0.7 million and nil for the three months ended September 30, 2022 and 2021, which supersededrespectively, and $1.0 million and $2.5 million for the prior agreement.nine months ended September 30, 2022 and 2021, respectively.
Payments under 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 $11.0 million and $11.4 millionrecognized, representing our contractually committed revenues as of September 30, 20212022:
Amount
Fiscal Year(In thousands)
Remaining of 2022$2,151 
202344,597 
202440,247 
202547,898 
202634,631 
Thereafter191,293 
$360,817 
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. Accounts receivable from the Company’sfixed volume terms and conditions, generally including contracts with third parties totaled nil and $1.0 millionpayment obligations associated with MVCs.
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Contract Liabilities
The following table provides information about contract liabilities from contracts with customers as of September 30, 2022:
Amount
(In thousands)
Balance at December 31, 2021$14,756 
Reclassification of beginning contract liabilities to revenue as a result of performance obligation being satisfied(5,159)
Cash received and not recognized as revenue20,268 
Balance at September 30, 202229,865 
Less: Current portion7,158 
Non-current portion$22,707 
Contract liabilities relate to payments received in advance of satisfying performance obligations under a contract, which result from contribution in aid of construction payments. Current and noncurrent contract liabilities are included in “Other Current Liabilities” and “Contract Liabilities,” respectively, of the Condensed Consolidated Balance Sheets.
Contract Cost Assets
The Company has capitalized certain costs incurred to obtain a contract that would not have been incurred if the contract had not been obtained. These costs are recovered through the net cash flows of the associated contract. As of September 30, 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 $15.3 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. The Company recognized cost of sales associated with these assets of $0.4 million and $0.4 million for the three months ended September 30, 2022 and 2021, respectively, and $1.3 million and $1.8 million for the nine months ended September 30, 2022 and 2021, respectively.


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4.    PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost or fair market value at the date of acquisition less accumulated depreciation. The cost basis of constructed assets includes materials, labor, and other direct costs. Major improvements or betterment are capitalized, while repairs that do not improve the life of the respective assets are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets.
Property, plant and equipment, at carrying value, is as follows:
September 30,December 31,
20212020
(In thousands)
Gathering, processing and transmission systems and facilities(1)
$207,481 $204,643 
Construction in progress537 904 
Other property and equipment3,213 3,323 
Total property, plant and equipment211,231 208,870 
Less: accumulated depreciation and amortization(21,848)(13,034)
Total property, plant and equipment, net$189,383 $195,836 
(1)Included in Gathering, processing, and transmissions systems and facilities are compressors under lease to Apache totaling $10.1 million and $6.2 million, net as of September 30, 2021 and December 31, 2020, respectively.
September 30, 2022December 31, 2021
(In thousands)
Gathering, processing and transmission systems and facilities$2,850,062 $2,121,434 
Vehicles8,026 6,090 
Computers and equipment4,255 4,271 
Less: accumulated depreciation(437,049)(337,030)
Total depreciable assets, net2,425,294 1,794,765 
Construction in progress82,834 24,888 
Land20,531 19,626 
Total property, plant and equipment, net$2,528,659 $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 $34.9 million and $26.8 million of depreciation expense for the three months ended September 30, 2022 and 2021, respectively, and $102.4 million and $79.0 million of depreciation expense for the nine months ended September 30, 2022 and 2021, respectively.

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5.    GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
The Company closed a business combination transaction on February 22, 2022, refer to the Transaction in Note 2—Business Combination in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q. The Transaction was accounted for as a business combination pursuant to ASC 805. In connection with the Transaction, the Company recorded excess of the purchase price over net assets acquired as goodwill. The Company recorded goodwill of $4.6 million as of September 30, 2022.
Goodwill is tested at least annually as of December 31 of each year, or more frequently as events occur or circumstances change that would more-likely-than-not reduce fair value of a reporting unit below its carrying value. Company’s management assesses whether there have been events or circumstances that trigger the fair value of the reporting unit to be lower than its net carrying value since consummation of the Transaction and concluded that goodwill was not impaired as of September 30, 2022.
Intangible Assets
Intangible assets, net are comprised of the following:
September 30, 2022December 31, 2021
(In thousands)
Customer contracts$1,136,728 $1,135,963 
Right of way assets125,164 99,345 
Less accumulated amortization(539,501)(449,259)
Total amortizable intangible assets, net$722,391 $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 twenty 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 $30.1 million and $30.4 million of amortization expense for the three months ended September 30, 2022 and 2021, respectively, and $90.2 million and $91.3 million of amortization expense for the nine months ended September 30, 2022 and 2021, respectively. There was no impairment recognized on intangible assets for the three and nine months ended September 30, 2022 and 2021.

5.6.    DEBT AND FINANCING COSTS
In November 2018, Altus MidstreamJune 2030 Senior Notes
On June 8, 2022, the Partnership completed a private placement of $1.00 billion aggregate principal amount of its 5.875% Sustainability-Linked Senior Notes due 2030 (the “Notes”), which are fully and unconditionally guaranteed by the Company.
The Notes were issued at 99.588% of their face amount and will mature on June 15, 2030. Interest accrues from June 8, 2022 and is payable semi-annually on June 15 and December 15 of each year, commencing December 15, 2022. The aggregate fees, expenses, and original issue discount paid to obtain the Notes totaled $21.5 million and were capitalized as debt issuance cost and included in the Condensed Consolidated Balance Sheets as a direct deduction to the Notes as the Notes were transferred to third-party investors that pay the stated principal amount without deduction for the initial purchasers’ discount.
On or after June 15, 2027, the interest rate accruing on the Notes will be increased by an additional 0.250% per annum unless the Partnership satisfies, and an independent external verifier confirms satisfaction of the Sustainability Performance Targets (“SPT”) as defined in the indenture governing the Notes related to the three key performance indicators outlined in the Sustainability-Linked Financing Framework published by the Company on May 16, 2022: 1) Scope 1 and Scope 2 greenhouse gas emissions intensity, 2) Scope 1 and Scope 2 methane gas emissions intensity and 3) female representation in corporate officer positions. The interest rate accruing on the Notes will be increased by an additional 0.083% per annum for each SPT which has not been satisfied and externally verified.
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The Partnership may redeem some or all of the Notes at any time or from time to time prior to maturity based on terms prescribed in the Notes.
Revolving Credit Facility
On June 8, 2022, the Partnership entered into a revolving credit facilityagreement (the “RCA”) among Bank of America, N.A., as administrative agent (“Bank of America”), and the banks and other financial institutions party thereto, as lenders. The RCA provides for general corporate purposes that matures in November 2023 (subject to Altus Midstream’s 2, one year extension options). The agreement for thisa $1.25 billion senior unsecured revolving credit facility as amended (the Amended“Revolving Credit Agreement)Facility”).
The Partnership may prepay borrowings under the Revolving Credit Facility at any time without premium or penalty (other than customary SOFR breakage costs), provides aggregate commitments from a syndicate of banks of $800.0 million.subject to certain notice requirements. All borrowings under the Revolving Credit Facility mature on June 8, 2027. The aggregate commitments include a letter of credit subfacility of up to $100.0 millionobligations under the RCA are fully 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 September 30, 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 notunconditionally guaranteed by the Company, Apache, APA Corporation or any of their respective subsidiaries.Company.
At Altus Midstream’s option, the interest rate per annumThe RCA provides for borrowings under this facility isof either, aat the Partnership’s option, base rate as defined, plus a margin,loans or the London Interbank Offered Rate (LIBOR), plus a margin. Altus Midstream also pays quarterly a facility feeterm SOFR loans. Base rate loans bear interest at a rate per annum equal to the greatest of (a) the prime rate as announced from time to time by Bank of America, (b) the greater of (i) the federal funds effective rate and (ii) the overnight bank funding rate, plus 1/2 of 1.00% and (c) the adjusted term SOFR rate for an interest period of one month plus 1.00%, plus a margin that ranges between 0.25% and 1.00%, depending on total commitments. The marginsthe credit rating of the Partnership. SOFR loans bear interest at a rate per annum equal to the term SOFR rate for such interest periods plus 0.10%, plus a margin that ranges between 1.25% and 2.00%, depending on the credit rating of the Partnership. In obtaining the RCA, the Partnership incurred fees and expenses totaling $7.8 million, which was capitalized and included in the Condensed Consolidated Balance Sheets as “Deferred charges and other assets.”
In addition, the Partnership is required to pay to each lender a commitment fee on the daily unfunded amount of such lender’s revolving commitment, which accrues at a rate that ranges between 0.15% and 0.35% depending on the credit rating of the Partnership.
Term Loan Credit Facility
On June 8, 2022, concurrently with the closing of the Revolving Credit Facility, the Partnership entered into a term loan credit agreement (the “TLA”) among PNC Bank, National Association, as administrative agent (“PNC Bank”), and the banks and other financial institutions party thereto, as lenders. The TLA provides for a $2.00 billion senior unsecured term loan credit facility fee vary based upon(the “Term Loan Credit Facility”). The TLA matures on June 8, 2025. The obligations under the TLA are fully and unconditionally guaranteed by the Company.
The TLA provides for borrowings of either, at the Partnership’s option, base rate loans or term SOFR loans. Base rate loans bear interest at a rate per annum equal to the greatest of (a) the prime rate as announced from time to time by PNC Bank, (b) the greater of (i) the Leverage Ratio (as defined below) until Altus Midstream has a senior long-term debt ratingfederal funds effective rate and (ii) the overnight bank funding rate, plus 1/2 of 1.00% and (c) the adjusted term SOFR rate for an interest period of one month plus 1.00%, plus a margin that ranges between 0.25% and 1.0%, depending on the credit rating of the Partnership. SOFR loans bear interest at a rate per annum equal to the term SOFR rate for such senior long-terminterest periods plus 0.10%, that if the plus a margin that ranges between 1.25% and 2.0%, depending on the credit rating of the Partnership. In obtaining the TLA, the Partnership incurred fee and expenses totaled $7.6 million, which was capitalized as debt rating once it exists. The Leverage Ratio isissuance cost and included in the ratioCondensed Consolidated Balance Sheets as a direct deduction to the Term Loan Credit Facility.
Both the RCA and the TLA contain a “Sustainability Adjustments” feature that could result in a 0.05% increase or reduction to the effective interest rate, dependent upon the Company’s meeting certain sustainability targets after 2022. “Sustainability Rate Adjustment” means, with respect to any KPI Metrics Report, for any period between Sustainability Pricing Adjustment Dates, (a) positive 0.05%, if neither of (1) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries to (2) EBITDASustainability Performance Targets (as defined in the Amended Credit Agreement) of Altus MidstreamRCA and its restricted subsidiariesTLA) as set forth in the KPI Metrics Report have been satisfied for the 12-month period ending immediately beforerelevant calendar year, (b) 0.00% if only one of the determination date. At September 30, 2021,Sustainability Performance Targets as set forth in the base rate margin was 0.05 percent,KPI Metrics Report has been satisfied for the LIBOR margin was 1.05 percent,relevant calendar year and (c) negative 0.05% if both of the facility fee was 0.20 percent. In addition,Sustainability Performance Targets as set forth in the KPI Metrics Report have been satisfied for the relevant calendar year; provided that, in each case, if the Partnership subsequently issues a commission is payable quarterlysustainability-linked debt instrument linked 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 feessame KPI Metric 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 peran observation date for such calendar year, until either (i)but with a higher percentage of representation or reduction, as the consolidated net incomecase may be, the relevant Sustainability Performance Target shall be automatically adjusted upward to equal the percentage of Altus Midstream LPrepresentation or reduction, as applicable, required by such subsequent sustainability-linked debt instrument.
“Sustainability Performance Targets” in the RCA and its restricted subsidiaries, as adjusted pursuantTLA mean, for any calendar year, with respect to (a) the Amended Credit Agreement,Female Representation KPI, the target percentage of female representation in corporate officer positions for three consecutivesuch 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 effectyear and (b)
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the Methane Emissions KPI, the percentage reduction in methane gas emissions intensity relative to itthe baseline year for such calendar year.
Both the RCA and the TLA contain customary covenants and restrictive provisions which may, among other things, limit Partnership’s ability to create liens, incur additional indebtedness, make restricted payments, or liquidate, dissolve, consolidate with, or merge into or with any other person. As of September 30, 2022, the Partnership was in compliance with all customary and financial covenants.
Repayment of Existing Credit Facilities
In June 2022, the Company used the net proceeds from the Notes, together with cash on hand and proceeds from the Term Loan Credit Facility, to repay all outstanding borrowings under its existing credit facilities and to pay certain related fees and expenses. In conjunction with the extinguishment of existing outstanding borrowings, the Company recognized a pro forma basis, resultloss on extinguishment of debt of approximately $28.0 million. In addition, the unamortized debt issuance costs related to the existing outstanding borrowings were fully amortized and included in a Leverage Ratio greater than (i) 5.00:1.00 or (ii)the loss on debt extinguishment calculation for a specified period after a qualifying acquisition, 5.50:1.00. the three and nine months ended September 30, 2022.
The Leverage Ratiofair value of the Company and its subsidiaries’ consolidated debt as of September 30, 2022 and December 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$3.02 billion and $2.34 billion, respectively. At September 30, 2022, 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 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 lendNotes’ fair value was based on unspecified material adverse changes. Level 1 inputs and the Term Loan Credit Facility and Revolver Credit Facility’s fair value was based on Level 3 inputs.
The Amended Credit Agreement has no drawdown restrictions or prepaymentfollowing table summarizes the Company’s debt 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 September 30, 2021.2022 and December 31, 2021:
Financing Costs, Net
September 30, 2022December 31, 2021
(In thousands)
$2.0 billion unsecured term loan$2,000,000 $— 
$1.0 billion 2030 senior unsecured Notes1,000,000 — 
$1.25 billion revolving credit facility475,000 — 
$1.25 billion term loan— 1,175,417 
$690 million term loan— 639,393 
$513 million term loan— 479,377 
$125 million revolving line of credit— 52,000 
        Total Long-term debt3,475,000 2,346,187 
Less: Debt issuance costs, net(1)
(27,487)(38,485)
3,447,513 2,307,702 
Less: Current portion, net— (54,280)
        Long-term portion of debt and finance lease obligations, net$3,447,513 $2,253,422 
(1) Excluded unamortized debt issuance cost related to the Revolving Credit Facility. Unamortized debt issuance cost associated with the Revolving Credit Facility was $7.3 million and $2.2 million as of Capitalized InterestSeptember 30, 2022 and December 31, 2021, respectively, and were included in the “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets.
The following table below presents the components of Altus Midstream’sthe Company’s financing costs, net of capitalized interest:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
20212020202120202022202120222021
(In thousands)(In thousands)
Capitalized interestCapitalized interest$961 $226 $1,262 $712 
Debt issuance costsDebt issuance costs1,515 3,354 8,053 9,991 
Interest expenseInterest expense$2,382 $2,133 $7,012 $7,498 Interest expense37,988 26,961 83,270 77,755 
Amortization of deferred facility fees292 292 875 857 
Capitalized interest— (2,012)— (7,377)
Financing costs, net of capitalized interest$2,674 $413 $7,887 $978 
Total financing costs, net of capitalized interest Total financing costs, net of capitalized interest$40,464 $30,541 $92,585 $88,458 
As of September 30, 2022 and December 31, 2021, unamortized debt issuance costs associated with the Notes and the Term Loan Credit Facility were $27.5 million and $38.5 million, respectively.
As of September 30, 2022 and December 31, 2021, unamortized debt issuance costs associated with the new and existing revolving credit facilities were $7.3 million and $2.2 million, respectively. As of September 30, 2022, the unamortized debt issuance costs associated with the new revolving credit facilities were included in the “Deferred charges and other assets” of the
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Condensed Consolidated Balance Sheets. As of December 31, 2021, the current and non-current portion of the unamortized debt issuance costs were included in the “Other non-current assets” and “Deferred charges and other assets” of the Condensed Consolidated Balance Sheets.
The amortization of the debt issuance costs was charged to interest expense for the periods presented. The amount of debt issuance costs included in interest expense was $1.5 million and $3.4 million for the three months ended September 30, 2022 and 2021, respectively, and $8.1 million and $10.0 million for the nine months ended September 30, 2022 and 2021, respectively.

6.    OTHER CURRENT LIABILITIES7.    ACCRUED EXPENSES
The following table provides detail of the Company’s other current liabilitiesaccrued expenses at September 30, 20212022 and December 31, 2020:2021:
September 30,December 31,
 20212020
(In thousands)
Accrued taxes other than income$10,263 $165 
Accrued operations and maintenance expense1,558 926 
Accrued incentive compensation1,102 1,466 
Accrued capital costs1,093 360 
Other1,891 2,696 
Total other current liabilities$15,907 $5,613 
 September 30, 2022December 31, 2021
(In thousands)
Accrued product purchases$175,575 $118,364 
Accrued taxes19,442 4,299 
Accrued salaries, vacation, and related benefits4,616 2,113 
Accrued capital expenditures8,713 2,995 
Accrued interest expenses19,120 — 
Accrued other expenses7,694 7,872 
Total accrued expenses$235,160 $135,643 

16Accrued product purchases mainly consisted of accrued gas estimates as of September 30, 2022.

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 September 30, 20212022 and December 31, 2020,2021, there were no 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 Report on Form 10-Qaggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more, than the amounts accrued.
The Company has entered into litigation with two third parties to collect outstanding receivables totaling $19.6 million that wouldremain 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 a material impact on its financial position, results of operations, or liquidity.legally enforceable agreements with these parties.
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, including the potential impacts of climate change.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 September 30, 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
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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.Contingent Liabilities
At the closingPermian Gas Acquisition
As part of the Business Combination, the Company entered into the COMAacquisition of Permian Gas on June 11, 2019, consideration included a contingent liability arrangement with Apache, which includes contractual obligations forPDC Permian, Inc. (“PDC”). The arrangement requires additional monies to be paid by the Company to pay certain management fees to ApachePDC on a per Mcf basis if the actual annual Mcf volume amounts exceed forecasted annual Mcf volume amounts starting in 2020 and continuing through 2029. The arrangement defines the incentive rate per Mcf for each qualifying year and the total monies paid under this arrangement are capped at $60.5 million. Amounts are payable on an annual basis over the termearn-out period. The fair value of the agreement. Refer to Note 2—Transactionscontingent 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 Affiliates for further discussionthe arrangement’s life and the respective due dates of the COMA.
Inpotential future payments. Based on current forecasts and discussions with PDC, management revalued this contingent liability with updated assumptions at each reporting period. The Company did not expect PDC’s actual annual Mcf volume amounts to exceed forecasted amounts as of September 30, 2022; therefore, the second quarter of 2019, Altus Midstream issued and sold the Preferred Units. Under the termsestimated fair value of the Amended LPA, the Preferred Unit holders are entitled to receive quarterly distributions until such timecontingent consideration liability was nil as the Preferred Units are redeemed or exchanged. Refer to Note 10—Series A Cumulative Redeemable Preferred Units for further discussion regarding the termsof September 30, 2022. The estimated fair value of the Preferred Units and the rightscontingent consideration liability related to this acquisition was $0.8 million as of December 31, 2021.
Original Altus Transaction
As part of the holders thereof.
Additionally,Transaction, the Company is requiredassumed contingent liabilities of $4.5 million related to fund its pro-rata portionearn-out consideration of any future capital expenditures for the developmentup to 2,500,000 shares of Class A Common Stock, which was part of the pipeline projectsoriginal Altus transaction, as referenced in Note 8—Equity Method Interests.follows:
• 1,250,000 shares if the per share closing price of the Class A Common Stock as reported by the New York Stock Exchange (“NYSE”) during any 30-trading-day period ending prior to November 9, 2023 is equal to or greater than $140.00 for any 20 trading days within such 30-trading-day period.
• 1,250,000 shares if the per share closing price of the Class A Common Stock as reported by the NYSE during any 30-trading-day period ending prior to November 9, 2023 is equal to or greater than $160.00 for any 20 trading days within such 30-trading-day period.
At September 30, 2021Pursuant to ASC 805, this earn-out consideration was a pre-existing contingency and December 31, 2020, there were no other material contractual obligations relatedaccounted for as an assumed liability to the entities includedacquirer on the acquisition date. Immediately subsequent to the Closing, the Company evaluated the earn-out consideration classification in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The Company determined the consolidated financial statements other thanearn-out consideration to be classified as equity based on the performance of asset retirement obligations and required credit facility fees discussed in Note 5—Debt and Financing Costs.settlement provision.
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8.9.    EQUITY METHOD INTERESTSINVESTMENTS
As of September 30, 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 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:
September 30, 2021December 31, 2020
OwnershipAmountAmount
(In thousands)
Gulf Coast Express Pipeline LLC16.0%$276,093 $283,530 
EPIC Crude Holdings, LP15.0%164,497 176,640 
Permian Highway Pipeline LLC26.7%632,720 615,186 
Breviloba, LLC33.0%464,597 479,826 
$1,537,907 $1,555,182 
OwnershipSeptember 30, 2022December 31, 2021
(In thousands)
Permian Highway Pipeline LLC(1)
53.3%$1,459,096 $626,477 
Breviloba, LLC (Shin Oak)33.0%462,691 — 
Gulf Coast Express Pipeline LLC16.0%450,809 — 
$2,372,596 $626,477 
(1) Ownership for PHP was 53.3% and 26.7% as of September 30, 2022 and December 31, 2021, respectively.
Additionally, as of September 30, 2022, the Company also 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 and nine months ended September 30, 2022.
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As of September 30, 2021 and December 31, 2020,2022, the unamortized basis differences included in the equity method interestEMI pipelines balances were $36.8 million and $37.7 million, respectively.$349.8 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 $12.5 million and $12.8 million as of September 30, 2022 and December 31, 2021, respectively. Capitalized interest is amortized on a straight-line basis into equity income.
The following table presents the activity in the Company’s equity method interestsEMIs for the nine months ended September 30, 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 
Contributions314 1,500 25,456 — 27,270 
Distributions(37,277)— (51,950)(38,581)(127,808)
Equity income (loss), net29,526 (14,273)44,028 23,352 82,633 
Accumulated other comprehensive income— 630 — — 630 
Balance at September 30, 2021$276,093 $164,497 $632,720 $464,597 $1,537,907 
Permian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLC
Total(2)
(In thousands)
Balance at December 31, 2021$626,477 $— $— $626,477 
Acquisitions815,000 470,000 470,000 1,755,000 
Contributions56,199 — — 56,199 
Distributions(125,526)(25,810)(34,450)(185,786)
Equity income, net(1)
86,946 18,501 15,259 120,706 
Balance at September 30, 2022$1,459,096 $462,691 $450,809 $2,372,596 
(1)For the nine months ended September 30, 2022, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $5.3 million from Permian Highway Pipeline LLC, $0.5 million from Breviloba, LLC and $10.4 million from Gulf Coast Express Pipeline, LLC.
(2)The EMIs acquired in the Transaction are included in the results from February 22, 2022 to September 30, 2022, and this is also the case for the additional 26.67% of PHP that was acquired in the Transaction. The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to Note 1—Description of the Organization and Summary of Significant Accounting Policiesin the Notes to our Condensed Consolidated Financial Statements of this Form 10-Q, for further information on the Company’s basis of presentation.
Summarized Financial Information
The following table represents aggregatedtables represent selected income statement of operations data for the Company’s equity method interestsEMI pipelines (on a 100 percent basis): for the three and nine months ended September 30, 2022 and 2021.
Nine Months Ended September 30,
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$270,526 $117,107 $297,132 $127,030 $273,760 $128,837 $— $128,727 
Operating income (loss)186,356 (24,232)167,011 72,098 196,154 (10,108)(69)80,747 
Net income (loss)185,464 (83,940)166,662 71,621 195,460 (53,048)587 74,188 
Other comprehensive income (loss)— 4,197 — — — (752)— — 
Three Months Ended September 30,
20222021
Permian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLC
Permian Highway Pipeline LLC(1)
Breviloba, LLC(1)
Gulf Coast Express Pipeline LLC(1)
(In thousands)
Revenues$100,114 $53,120 $91,800 $99,918 $45,054 $91,454 
Operating income69,851 22,205 70,870 61,987 26,796 65,482 
Net income69,926 22,060 70,742 61,753 26,617 65,145 
Nine Months Ended September 30,
20222021
Permian Highway Pipeline LLCBreviloba, LLCGulf Coast Express Pipeline LLC
Permian Highway Pipeline LLC(1)
Breviloba, LLC(1)
Gulf Coast Express Pipeline LLC(1)
(In thousands)
Revenues$296,779 $151,732 272,542 $297,132 $127,030 $270,526 
Operating income190,620 73,877 199,130 167,01172,098186,356 
Net income190,446 73,711 198,732 166,66271,621185,464 
(1) For the three and nine months ended September 30, 2021, the Company only had equity interest in Permian Highway Pipeline LLC.

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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 for periods prior to June 30, 2020 have been retroactively restated in this Quarterly Report on Form 10-Q to reflect the reverse stock split. AND WARRANTS
Redeemable Noncontrolling Interest — ApacheCommon Unit Limited PartnerPartners
In conjunctionOn February 22, 2022, the Company consummated the Transaction. 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 Units issuedContributed Entities to the Partnership; and outstanding. The financial results of Altus Midstream and its subsidiaries are included(ii) in exchange for such contribution, the Partnership transferred to Contributor 50,000,000 common units representing limited partner interests in the Company’s consolidated financial statements as detailed in Note 1—Summary of Significant Accounting Policies, under 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 Units issued to Apache, in exchange forPartnership and 50,000,000 shares of the Company’s Class AC Common Stock, par value $0.0001 per share. Please refer to “The Transaction” above.
The redemption option of the Common Unit is not legally detachable or separately exercisable from the instrument and is non-transferable, and the Common Unit is redeemable at the option of the holder. Therefore, the Common Unit is accounted for as redeemable noncontrolling interest and classified as temporary equity on the Company’s Condensed Consolidated Balance Sheet. During the first nine months of 2022, 5,730,000 common units were redeemed on a 1-for-oneone-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 94,270,000 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 September 30, 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 $3.06 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 September 30, 2021 and December 31, 2020, the redeemable noncontrolling interest was recorded based on the redemption value as of the balance sheet date of $837.2 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 Share.2022.
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 theoutstanding on acquisition date. The Company has redeemed all assumed Preferred Units in a private offering, andsince the purchasers of the Preferred Units were admitted as limited partners of Altus Midstream. 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.Closing. Refer to Note 10—11—Series A Cumulative Redeemable Preferred Units for further discussion.
Public Warrants
As of September 30, 2022, there were 12,577,350 Public Warrants (as defined below) outstanding. Each whole public warrant entitles the holder to purchase one tenth of a share of Class A Common Stock at a price of $115.00 per share (the “Public Warrants”). The Public Warrants will expire on November 9, 2023 or upon redemption or liquidation. The Company may call the Public Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant with not less than 30 days’ notice provided to the Public Warrant holders. However, this redemption right can only be exercised if the reported last sale price of the Class A Common Stock equals or exceeds $180.00 per share for any 20-trading days within a 30-trading day period ending three business days prior to sending the notice of redemption to the Public Warrant holders.
Private Placement Warrants
As of September 30, 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 September 30, 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.
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Dividend
In December 2020, May 2021,On February 22, 2022, the Company entered into a Dividend and August 2021,Distribution Reinvestment Agreement (the “Reinvestment Agreement”) with certain stockholders including BCP Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP, Buzzard Midstream LLC, APA Corporation Apache Midstream LLC, and certain individuals (each, a “Reinvestment Holder”). Under the Reinvestment Agreement, each Reinvestment Holder is obligated to reinvest at least 20% of all distributions on Common Units or dividends on shares of Class A Common Stock in the Company’s Class A Common Stock. Additionally, the Audit Committee and subsequently the Company’s Board of Directors (the “Board”) resolved that for the calendar year 2022, 100% of all distributions or dividends received by each Reinvestment Holder would be reinvested in newly issued shares of Class A Common Stock. As described in these Condensed Consolidated Financial Statements, as the context requires, dividends paid to holders of Class A Common Stock and distributions paid to holders of Common Units may be referred to collectively as “dividends.”
During the nine months ended September 30, 2022, the Company made cash dividend payments of $25.3 million to holders of Class A Common Stock and Common Units and $175.5 million was reinvested in shares of Class A Common Stock by Reinvestment Holders.
On October 19, 2022, the Board declared a cash dividend of $1.50$0.75 per share on the Company’s Class A Common Stock and a distribution of $0.75 per Common Unit from the Partnership to the holders of Common Units. Dividends are payable on November 17, 2022. Certain holders of Class A Common Stock and Class C Common Stock will receive a cash dividend with the balance receiving additional shares of Class A Common Stock under the Reinvestment Agreement.
Stock Split
On May 19, 2022, the Company announced that its Board approved and declared a two-for-one stock split with respect to its Class A Common Stock and Class C Common Stock, in the form of a stock dividend (the “Stock Split”). The Stock Split was accomplished by distributing one additional share of Class A Common Stock for each dividend declared totaling $5.6share of Class A Common Stock outstanding and one additional share of Class C Common Stock for each share of Class C Common Stock outstanding. The additional shares of Common Stock were issued on June 8, 2022 to holders of record at the close of business on May 31, 2022.
All corresponding per-share and share amounts, excluding the Transaction, for periods prior to June 8, 2022 have been retroactively restated in this Form 10-Q to reflect the Stock Split.

11.    SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS
Prior to the Closing Date of the Transaction, the Partnership had 625,000 Preferred Units issued and outstanding. Immediately prior to the Closing, on February 22, 2022, the Partnership redeemed for cash, 100,000 Preferred Units in an amount equal to approximately $120.1 million. The dividendsCompany assumed the remaining 525,000 Preferred Units as well as 29,983 paid-in-kind (“PIK”) Preferred Units that were paid to stockholdersissued and outstanding at the closing of the Transaction. At the close, 150,000 preferred units and 8,567 associated PIK units became mandatorily redeemable and liability classified with the balance of preferred units remaining unchanged and classified as redeemable noncontrolling interest. The Company redeemed 125,000 mandatorily redeemable preferred units during the first second and thirdtwo quarters of 2021. Each dividend2022 with the balance of mandatorily redeemable preferred units being redeemed during July for $30.7 million.
In July 2022, the Company redeemed all outstanding redeemable noncontrolling interest Preferred Units for an aggregate $461.5 million. The excess of the carrying amount of the redeemable noncontrolling interest Preferred units immediately prior to redemption over redemption price was included paymentin “Retained Earnings” in the Condensed Consolidated Balance Sheets.
21
Table of approximately $0.5 millionContents
Activities related to Apache duePreferred Units for the nine months ended September 30, 2022 are as follows:
Units OutstandingAmount
(In thousands, except for unit data)
Redeemable noncontrolling interest — Preferred Units, immediately upon Closing of Transaction(1)
396,417 $462,717 
Redemption, including PIK units(396,417)(461,460)
Cash distribution paid to Preferred Unit limited partners— (6,937)
Allocation of net income— 18,128 
Accreted redemption value adjustment— 97,075 
Excess of carrying amount over redemption price— (109,523)
Redeemable noncontrolling interest — Preferred Units, as of September 30, 2022— $— 
(1)Included 21,417 PIK units on a pro rata basis.

12. SHARE-BASED COMPENSATION
Prior to the Closing, the Company issued incentive units, which included performance and service conditions, to certain employees and board members. The units consisted of Class A-1, Class A-2, and Class A-3 units. These units derived value from the Company’s certain wholly owned subsidiaries. Class A-1 and A-2 units would have vested upon either (i) the date of consummation of a change in control or (ii) the date that is 1-year following the consummation of the initial public offering (“IPO”) of the Company (or its 9.8 percent ownershipsuccessor) (collectively “Exit Events”). Class A-3 units would have vested upon a change in control, if the participants were employed at the time of the event, or upon termination of the participant by the Company.
Immediately upon Closing, all outstanding Class A-1 and Class A-2 units were cancelled and exchanged for 5,300,000 shares (the “Class A Shares”), post-Stock Split, of the Company’s Class A Common Stock. These Class A Shares are issued and outstanding as they were distributed pro rata to all holders of Class A-1 and Class A-2 units by the Common Unit limited partners from the 50,000,000 common units, pre-Stock-Split, that such limited partners received upon the Closing. The Common Unit limited partners redeemed Common Units needed for the Class A shares distribution upon the Closing. The Class A Shares are held in escrow and will vest over three to four years. Similarly, the Class A-3 units were exchanged for approximately 326,000, post Stock Split, Class C Common Stock dividends were funded by distributionsand Common Units (the “Class C Shares”) and will vest over four years. The Company also issued approximately 76,000, post Stock Split, replacement restricted share awards (“Replacement Awards”) to new employees that transitioned from Altus Midstream to its common unitholders of $1.50 per Common Unit, totaling $24.4 million for eachALTM as part of the first, second and third quarters of 2021. For each distribution, $5.6 million, as noted above, was paid to the Company to fund the cash dividend payments toTransaction. These changes for all three share types established a new measurement date. The Class A Common stockholders,Shares, Class C Shares and the balance of $18.8 million was paid to Apache due to its 76.9 percent ownership of outstanding Common Units.


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10.    SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS
On June 12, 2019, Altus Midstream issued and sold the Preferred Units in a private offering exempt from the registration requirements of the Securities Act 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 UnitsReplacement Awards were sold at a price of $1,000 per Preferred Unit, for an aggregate issue price of $625.0 million. Altus Midstream received approximately $611.2 million in cash proceeds from the sale after deducting transaction costs and discounts to certain purchasers.
Accounting for the Preferred Units
Classification
The Preferred Units are accounted forvalued based on the Company’s consolidated balance sheetpublicly quoted stock price on the measurement date, which was the Closing Date of the Transaction.
During 2022, pursuant to the Company’s 2019 Omnibus Compensation Plan, as amended from time to time (the “Plan”), the Company granted a redeemable noncontrolling interest classified as temporary equitytotal of 13,941 restricted stock units (“RSUs”) to certain members of the Board, which were vested immediately on grant date, and granted a total of 14,144 RSUs to new employees, which are subject to a vesting period between one and three years.
With respect to the above shares, the Company recorded compensation expenses of $12.7 million and $31.0 million for the three and nine months ended September 30, 2022, respectively, based on the termsa straight line amortization of the Preferred Units, includingassociated awards’ fair value over the redemption rights withrespective vesting life of the shares. With respect thereto.
Measurement
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 net income of Altus Midstream. 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 Redemption Price calculated at the seventh anniversary of Closing. 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 related to the Preferred Unitsabove incentive units, no compensation expenses were recorded for the year ended December 31, 2020three and nine months ended September 30, 2021, is 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— (34,686)
Distributions payable to Preferred Unit limited partners— (11,562)
Allocation of Altus Midstream net incomeN/A59,475 
Accreted redemption value adjustmentN/A13,187 
Redeemable noncontrolling interest — Preferred Units: at September 30, 2021660,694 $634,795 
Embedded derivative liability(1)
120,522 
$755,317 
(1)Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. See Note 13—Fair Value Measurements for discussion of the fair value changes in the embedded derivative liability during the period.
(2)The Preferred Units are redeemable at Altus Midstream’s option at a redemption price (the Redemption Price), which as of September 30, 2021 is calculated as the greater of (i) an 11.5 percent internal rate of returnincentive units were considered non-vested prior to their cancellation and (ii) a 1.3 times multiple of invested capital. As of September 30, 2021, the Redemption Price would have been based on a 1.3 times multiple of invested capital, which was $812.5 million, less certain cash distributions. This was greater than using an 11.5 percent internal rate of return, which would equate to a redemption value of $729.8 million.exchange for Class A or Class C Common Stock, and no RSUs were granted during 2021.
N/A - not applicable.
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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 LPIncome tax expense included in the Condensed Consolidated Financial Statements in this Form 10-Q is aas follows:
Three Months Ended September 30,Nine Months Ended September 30,
20222022
(In thousands)
Income before income taxes$50,828 $204,503 
Income tax expense$1,406 $2,244 
Effective tax rate (1)
2.77 %1.10 %
(1) Prior to the Closing on February 22, 2022, BCP, the accounting acquirer, was organized as limited partnership forand was not subject to the U.S. federal 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 $0.7 million associated with a net operating loss carryback claim.
Duringfor the three and nine months ended September 30, 2021, the Company’s2021.
The effective income tax rate was primarily impacted by a decrease in valuation allowance. Duringfor the three and nine months ended September 30, 2020,2022 was lower than the Company’s effective incomestatutory rate mainly due to the impact of tax rate was primarily impacted byattributable to noncontrolling interests related to the net operating loss carryback claim under the CARES ActCommon Units and an increase inPreferred Units limited partners and valuation allowance.
Upon Closing, the Company assumed certain uncertain tax positions from ALTM. The Company accounts for income taxes in accordance with ASC Topic 740, “Income740—Income Taxes”, which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements. Each quarter,Tax positions generally refer to a position taken in a previously filed income tax return or expected to be included in a tax return to be filed in the Company assessesfuture that is reflected in the recognition amountmeasurement of current and as a result, may increase (expense) or reduce (benefit)deferred income tax assets and liabilities. Reconciliation of the beginning and ending amount of interest and penalties. Interest and penalties are recordedunrecognized tax benefit is as a component of income tax expense. The contributor of Altus Midstream’s operating assets, Apache, is currently under IRS audit for the 2014-2017 tax years as part of its normal course of business.follows:
(In thousands)Amount
Balance at December 31, 2021$— 
Increase related to ALTM acquisition5,238 
Reduction related to current year activities(5,238)
Balance at September 30, 2022$— 

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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 of shares 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 tabletables below.
Three Months Ended September 30,
Three Months Ended September 30,20222021
2021
2020(1)
IncomeSharesPer ShareIncomeSharesPer ShareIncome
Weighted-average shares(3)
Per ShareIncome
Weighted-average shares(3)
Per Share
(In thousands, except per share data)(In thousands, except per share data)
Basic:Basic:Basic:
Net income attributable to Class A common shareholdersNet income attributable to Class A common shareholders$5,244 3,746 $1.40 $2,896 3,746 $0.77 Net income attributable to Class A common shareholders$14,936 41,816 $0.36 $— — $— 
Less: Net income available to participating unvested restricted Class A common shareholders(4)
Less: Net income available to participating unvested restricted Class A common shareholders(4)
(4,174)— $— — — $— 
Excess preferred carrying amount over consideration paid(5)
Excess preferred carrying amount over consideration paid(5)
32,900 — $— — — $— 
Total net income attributable to Class A common shareholders Total net income attributable to Class A common shareholders$43,662 41,816 $1.04 $— — $— 
Effect of dilutive securities:Effect of dilutive securities:Effect of dilutive securities:
Redeemable noncontrolling interest — Apache limited partner$15,279 12,500 $3,928 12,500 
Redeemable noncontrolling interest — Preferred Unit limited partners$— — $27,906 93,609 
Unvested Class A common sharesUnvested Class A common shares— 39 $— — — $— 
Diluted(2)(3):
Diluted(1)(2):
Diluted(1)(2):
Net income attributable to Class A common shareholdersNet income attributable to Class A common shareholders$20,523 16,246$1.26 $34,730 109,855 $0.32 Net income attributable to Class A common shareholders$43,662 41,855$1.04 $— — $— 
Nine Months Ended September 30,
2021
2020(1)
IncomeSharesPer ShareLossSharesPer Share
(In thousands, except per share data)
Basic:
Net income (loss) attributable to Class A common shareholders$17,087 3,746 $4.56 $(6,137)3,746 $(1.64)
Effect of dilutive securities:
Redeemable noncontrolling interest — Apache limited partner$47,757 12,500 $(28,361)12,500 
Redeemable noncontrolling interest — Preferred Unit limited partners$62,688 17,076 $— — 
Diluted(2)(3):
Net income (loss) attributable to Class A common shareholders$127,532 33,322$3.83 $(34,498)16,246 $(2.12)

Nine Months Ended September 30,
20222021
Income
Weighted-average shares(3)
Per ShareIncome
Weighted-average share (3)
Per Share
(In thousands, except per share data)
Basic:
Net income attributable to Class A common shareholders$25,239 40,042 $0.63 $— — $— 
Less: Net income available to participating unvested restricted Class A common shareholders(4)
(8,358)— $— — — $— 
Excess preferred carrying amount over consideration paid(5)
32,900 — $— — — $— 
        Total net income attributable to Class A common shareholders$49,781 40,042 $1.24 $— — $— 
Effect of dilutive securities:
Unvested Class A common shares— 33 $— — — $— 
Diluted(1)(2):
Net income attributable to Class A common shareholders$49,781 40,075 $1.24 $— — $— 
(1)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)The effect of an assumed exchange of the outstanding Preferred Units of Altus Midstream for shares of Class A Common Stock would have been anti-dilutive for the three months ended September 30, 2021 and the nine months ended September 30, 2020.
(3)The effect of an assumed exchange of the outstanding public and private warrants for shares of Class A Common Stock would have been anti-dilutive for all periods presented.presented in which the public and private warrants were outstanding.
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(2)
The effect of an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) would have been anti-dilutive for all periods presented in which the Common Units were outstanding.
Further discussion of(3)Share amounts have been retroactively restated to reflect the Preferred Units and associated embedded features can be found inCompany’s two-for-one Stock Split. Refer to Note 10—Series A Cumulative Redeemable Preferred UnitsEquity and Warrants and in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.
(4)Note 13—Fair Value Measurements, respectively. Earn-out consideration granting Apache the rightRepresents dividends paid to receive additional shares ofunvested restricted Class A Common Stock is not included in the earnings per share calculation above, as the conditions for issuance were not satisfied for anycommon shareholders.
(5)Represented excess of the periods presented.carrying value of redeemable noncontrolling interest Preferred Units over redemption price at redemption.

13.
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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.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Where available, fair value is based on observable market prices or inventory parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instrument’s complexity.
The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021:
September 30, 2022
Level 1Level 2Level 3Total
(In thousands)
Public warrants$126 $— $— $126 
Private warrants— — 95 95 
Total liabilities$126 $— $95 $221 
December 31, 2021
Level 1Level 2Level 3Total
(In thousands)
Commodity swaps$— $205 $— $205 
Interest rate derivatives— 2,662 — 2,662 
Contingent liabilities— — 839 839 
Total liabilities$— $2,867 $839 $3,706 
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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 anthe embedded derivative associated with the Preferred Units related to the exchange option provided to the Preferred Unit holders under the terms of the AmendedPartnership LPA. The valuation of theCompany redeemed all outstanding Preferred Units in July 2022 and wrote off related embedded derivative (using an income approach) is based on a rangeliabilities as of factors, including expected future interest rates using the Black-Karasinski model, the Company’s imputed interest rate, interest rate volatility, 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.September 30, 2022. The Company recorded an unrealized gaingains of $4.0$0.5 million and an unrealized loss of $3.5$89.1 million for the three months ended September 30, 2021 and 2020, respectively, and an unrealized gain of $18.5 million and an unrealized loss of $76.1 million for the nine months ended September 30, 2021 and 2020, respectively,2022, which arewas recorded in “Unrealized derivative instrument gain (loss)”as a “Gain on embedded derivative” in the statementCondensed Consolidated Statement of consolidated operations. Altus has classified these recurring fair value measurements as Level 3 in the fair value hierarchy.
As of the September 30, 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 September 30, 2021Valuation TechniqueSignificant Unobservable InputsRange/Value
(In thousands)
Preferred Units Embedded Derivative$120,522 Option ModelAltus Midstream Company’s Imputed Interest Rate5.53-11.54%
Interest Rate Volatility38.03%
A one percent increase in the imputed interest rate assumption would significantly increase the value of the embedded derivative liability at September 30, 2021, while a one percent decrease would lead to a similar decrease in value as of September 30, 2021. The assumed expected timing until exercise of the exchange option at September 30, 2021 was 4.70 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.Operations.
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 $0.7 million and $0.9$0.2 million as of September 30, 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 and $0.2 million of income for the three months ended September 30, 2021 and 2020, respectively, and $0.2 million and $1.7 million of income for the nine months ended September 30, 2021 and 2020, respectively, reflected as “Total other income (loss)” in its statement of consolidated operations related to the fair value changes of the underlying warrants.
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warrants since closing of the Transaction through reporting date.
The carrying amounts reported on the consolidated balance sheetCondensed Consolidated Balance Sheets for the Company’s remaining financial assets and liabilities approximate fair value due to their short-term nature. The carrying amount of Altus Midstream’s 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 and nine months ended September 30, 2022 and 2021.

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 September 30, 2022 and December 31, 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 and Term SOFR elections, (able to fix up to six months forward SOFR), granted under the company’s debt agreements as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract.
In June 2022, all of BCP PHP, LLC’s (“BCP PHP”) outstanding interest rate swaps were terminated as BCP PHP’s outstanding term loan credit facility was extinguished on June 8, 2022. Refer to Note 6—Debt and Financing Costs in the Notes to our Condensed Consolidated Financial Statements for additional information about the refinancing transactions.
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 nil and $2.7 million as of September 30, 2022 and December 31, 2021, respectively. The Company recorded cash settlements on interest rate swap derivatives of nil and $0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $11.3 and $2.2 million for the nine months ended September 30, 2022 and 2021, respectively, in “Interest Expense” of the Condensed Consolidated Statements of Operations. In addition, the Company recorded fair value adjustments of nil and $26 thousand for the change in fair value of the interest rate swap derivatives for the three months ended September 30, 2022 and 2021, respectively, and $14.0 million and $3.1 million for the nine months ended September 30, 2022 and 2021, respectively, in “Interest Expense” of the Condensed Consolidated Statements of Operations.
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Commodity Price Risk

Similarly, in 2020 and 2021 BCP Raptor, LLC (“BCP I”) and BCP Raptor II, LLC (“BCP II”) had WTI crude hedges at a specific notional amount that provides for a fixed price for crude in the Permian Basin and Waha basis hub hedgeson various notional quantities of gas that either provided for a fixed price differential of natural gas in the Permian Basin relative to the NYMEX natural gas contract or provided for a fixed price for natural gas 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 September 30, 2022 and December 31, 2021, respectively. The Company recorded cash settlements on commodity swap derivatives of nil and $0.9 million for the three months ended September 30, 2022 and 2021, respectively, and $0.2 million and $15.8 million for the nine months ended September 30, 2022 and 2021, respectively, in “Other Revenue” of the Condensed Consolidated Statements of Operations. In addition, the Company recorded fair value adjustments of $0.6 million and $17.1 million for the change in fair value of commodity swap derivatives for the three and nine months ended September 30, 2021, respectively, in “Other Revenue” of the Condensed Consolidated Statements of Operations. No fair value adjustment recognized for the three and nine months ended September 30, 2022 as no commodity swaps were outstanding.

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

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

•Pipeline Transportation: The Pipeline Transportation segment consists of equity investment interests in four Permian Basin pipelines that access various points along the Texas Gulf Coast, Brandywine NGL Pipeline and Delaware Link Pipeline that is under development. The current operating pipelines transport crude oil, natural gas and NGLs.
Upon Closing, our CODM reviewed the Company and ALTM’s reporting segment activities. The Company then renamed its Gathering and Processing segment to Midstream Logistics and its Transmission segment to Pipeline Transportation. These name changes were made to better align segment activities with the name of the respective segment. There was no change in segment composition or yearstructure for the three and nine months ended September 30, 2022.
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The following tables present the reconciliation of the segment profit measure as of and for the three and nine months ended September 30, 2022 and 2021:
Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated(2)
For the three months ended September 30, 2022(In thousands)
Segment net income (loss) including noncontrolling interests$65,525 $44,750 $(60,853)$49,422 
Add back:
Interest expense7 — 40,457 40,464 
Income tax expense— — 1,406 1,406 
Depreciation and amortization64,655 345 5 65,005 
Contract assets amortization448 — — 448 
Proportionate EMI EBITDA— 78,357 — 78,357 
Share-based compensation— — 12,661 12,661 
Loss on disposal of assets3,946 — — 3,946 
Integration costs14 81 2,243 2,338 
Acquisition transaction costs5 — 57 62 
Other one-time costs or amortization2,945 162 645 3,752 
Deduct:
Gain on embedded derivative— — 488 488 
Equity income from unconsolidated affiliates— 45,003 — 45,003 
Segment adjusted EBITDA$137,545 $78,692 $(3,867)$212,370 
Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated(2)
For the three months ended September 30, 2021(In thousands)
Segment net income (loss) including noncontrolling interests$(6,210)$13,333 $(2,483)$4,640 
Add back:
Interest expense27,682 2,859 — 30,541 
Income tax expense1,207 — — 1,207 
Depreciation and amortization57,026 128 — 57,154 
Contract assets amortization448 — — 448 
Proportionate EMI EBITDA— 21,704 — 21,704 
Loss (gain) on disposal of assets(60)23 — (37)
Loss on debt extinguishment56 — — 56 
Other one-time costs or amortization802 160 205 1,167 
Deduct:
Interest and other income74 — — 74 
Equity income from unconsolidated affiliates— 16,826 — 16,826 
 Segment adjusted EBITDA$80,877 $21,381 $(2,278)$99,980 

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Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated(2)
For the nine months ended September 30, 2022(In thousands)
Segment net income (loss) including noncontrolling interests$89,274 $120,162 $(7,177)$202,259 
Add back:
Interest expense47,411 (664)45,838 92,585 
Income tax expense (benefit)457 (39)1,826 2,244 
Depreciation and amortization192,007 597 5 192,609 
Contract assets amortization1,344 — — 1,344 
Proportionate EMI EBITDA— 190,438 — 190,438 
Share-based compensation— — 30,966 30,966 
Loss (gain) on disposal of assets12,636 — (34)12,602 
Loss (gain) on debt extinguishment27,983 (8)— 27,975 
Integration costs933 81 8,998 10,012 
Acquisition transaction costs9 — 6,403 6,412 
Other one-time costs or amortization8,865 162 1,942 10,969 
Deduct:
Gain on redemption of mandatorily redeemable Preferred units— — 9,580 9,580 
Gain on embedded derivative— — 89,050 89,050 
Equity income from unconsolidated affiliates— 120,706 — 120,706 
Segment adjusted EBITDA$380,919 $190,023 $(9,863)$561,079 
Midstream LogisticsPipeline Transportation
Corporate and Other(1)
Consolidated(2)
For the nine months ended September 30, 2021(In thousands)
Segment net income (loss) including noncontrolling interests$(22,238)$37,072 $(7,424)$7,410 
Add back:
Interest expense82,967 5,491 — 88,458 
Income tax expense1,207 — — 1,207 
Depreciation and amortization169,906 385 — 170,291 
Contract assets amortization1,815 — — 1,815 
Proportionate EMI EBITDA— 59,677 — 59,677 
Loss on disposal of assets394 23 — 417 
Gain on debt extinguishment(4)— — (4)
Derivatives loss due to Winter Storm Uri13,456 — — 13,456 
Other one-time costs or amortization1,675 182 153 2,010 
    Producer settlement6,827 — — 6,827 
Deduct:
Interest and other income115 — — 115 
Equity income from unconsolidated affiliates— 44,692 — 44,692 
 Segment adjusted EBITDA$255,890 $58,138 $(7,271)$306,757 
(1) Corporate and Other represents those results that: (i) are not specifically attributable to a reportable segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items.
(2) Results do not include legacy ALTM prior to February 22, 2022. Refer to Note 1 —Description of the Organization and Summary of Significant Accounting Policies in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q, for further information on the Company’s basis of presentation. Adjusted EBITDA is a non-GAAP measure; please see Key Performance Metrics in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-Q, for a definition and reconciliation to the GAAP measure.
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The following tables present the revenue for individual operating segment for the three and nine months ended September 30, 2022 and 2021:
Midstream LogisticsPipeline TransportationConsolidated
For the three months ended September 30, 2022(In thousands)
Revenue$320,667 $733 $321,400 
Other revenue3,774 2 3,776 
Total segment operating revenue$324,441 $735 $325,176 
Midstream LogisticsPipeline TransportationConsolidated
For the three months ended September 30, 2021(In thousands)
Revenue$165,844 $— $165,844 
Other revenue740 2 742 
Total segment operating revenue$166,584 $2 $166,586 
Midstream LogisticsPipeline TransportationConsolidated
For the nine months ended September 30, 2022(In thousands)
Revenue$907,771 $733 $908,504 
Other revenue9,487 6 9,493 
Total segment operating revenue$917,258 $739 $917,997 
Midstream LogisticsPipeline TransportationConsolidated
For the nine months ended September 30, 2021(In thousands)
Revenue$446,840 $— $446,840 
Other revenue3,609 6 3,615 
Total segment operating revenue$450,449 $6 $450,455 
The following table presents total assets for each operating segment as of September 30, 2022 and December 31, 2020.2021:
September 30, 2022December 31, 2021
(In thousands)
Midstream Logistics$3,575,642 $2,916,774 
Pipeline Transportation2,417,663 635,784 
Segment total assets5,993,305 3,552,558 
Corporate and other13,873 648 
Total assets$6,007,178 $3,553,206 

14.18.    SUBSEQUENT EVENTS
On October 10, 2022, the Company announced the transfer of its Class A Common Stock Dividendto the New York Stock Exchange (“NYSE”) from the Nasdaq Global Select Market (“Nasdaq”). The Company’s Class A Common Stock began trading on the NYSE under its current ticker symbol, “KNTK”, at the open of trading on Monday, October 24, 2022.
On November 2, 2021,October 19, 2022, the Company’s Board of Directors declared a cash dividend of $1.50$0.75 per share on the Company’s Class A Common Stock totaling $5.6 million, towhich will be paid on December 30, 2021,payable to stockholders of record ason November 17, 2022. The Company, through its ownership of the closegeneral partner of business on November 30, 2021. The common stock dividend will be funded bythe Partnership, declared a distribution from Altus Midstream to its common unitholders of $1.50$0.75 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.
Altus Midstream Company and BCP Raptor Holdco LP Business Combination
On October 21, 2021, the Company announced that it will combine with privately-owned BCP Raptor Holdco LP (BCP) in an all-stock transaction, pursuant to the Contribution Agreement dated as of that same date and entered into by and among ALTM, Altus Midstream, New BCP Raptor Holdco, LLC (the Contributor), and BCP (the Contribution Agreement). BCP is the parent company of EagleClaw Midstream, which includes EagleClaw Midstream Ventures, the Caprock Midstream and Pinnacle Midstream businesses, and a 26.7% interestWarrants in the Permian Highway Pipeline.
As considerationNotes to our Condensed Consolidated Financial Statements in this Form 10-Q for the transaction, the Company will issue 50 million Class C common shares (and Altus Midstream will issue corresponding Common Units) to BCP’s unitholders, which are principally funds affiliated with Blackstone and I Squared Capital. The transaction is expected to close during the first quarter 2022 following completion of customary closing conditions, including approval by the Company’s shareholders and regulatory reviews.

additional information.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis shouldaddresses the results of our operations for the three and nine month periods ended September 30, 2022, as compared to our results of operations for the same periods in 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 reada reverse merger, BCP was considered the accounting acquirer and ALTM was considered the legal acquirer. Therefore, BCP’s net assets, carried at historical value, were presented as the predecessor to the Company’s historical financial statements and the comparable period presented herein reflects the results of operations of BCP for the three and nine months ended September 30, 2022. The results of operations of ALTM is reflected within the Company’s Condensed Consolidated Financial Statements from the Closing Date through September 30, 2022.
Unless otherwise noted or the context requires otherwise, references herein to Kinetik Holdings Inc. “the Company”, “us”, “our”, “we” or similar terms, with respect to time periods prior to February 22, 2022, include BCP and its consolidated subsidiaries and do not include ALTM and its consolidated subsidiaries, while references herein to Kinetik Holdings Inc. with respect to time periods from and after February 22, 2022, include ALTM and its consolidated subsidiaries.
The Transaction
On February 22, 2022, the Company consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021, by and among the Company, the Partnership, Contributor and BCP. Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests in BCP and BCP Raptor Holdco GP, LLC, a Delaware limited liability company and the general partner of BCP (“BCP GP”), to the Partnership; and (ii) in exchange for such contribution, the Partnership transferred to Contributor 50,000,000 Common Units and 50,000,000 shares of the Company’s Class C common stock, par value $0.0001 per share (“Class C Common Stock”).
The Company’s stockholders immediately prior to the Closing continued to hold their shares of the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock,” together with the Company’s consolidated financial statementsClass C Common Stock, the “Common Stock”). As a result of the Transaction, immediately following the Closing (i) Contributor owns approximately 75% of the issued and accompanying notes included under Part I, Item 1, “Consolidated Financial Statements”outstanding Common Stock, (ii) Apache Midstream owns approximately 20% of this Quarterly Report on Form 10-Q, as well asthe issued and outstanding Common Stock, and (iii) the Company’s consolidated financial statements, accompanying notesremaining stockholders own approximately 5% of the issued and Management’s Discussion and Analysisoutstanding Common Stock. Upon close of Financial Condition and Results of Operations included inthe Transaction, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (Form 10-K). Capitalized terms used but not defined herein shall have the meaning ascribedPipeline 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 further reducing Apache’s ownership to service Apache Corporation’s (Apache) production from its Alpine High resource play and surrounding areas (Alpine High)approximately 13%. 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 interestTransaction also brought in Altusadditional volume capacity from ALTM for the Midstream which is reported on a consolidated basis. As of September 30, 2021, Altus Midstream’s assets included approximatelyLogistics segment, including 182 miles of in-service natural gas gathering pipelines, approximately 46 miles of residue gas pipelines with four market connections, and approximately 3866 miles of NGLs pipelines. The increased volume capacity has contributed to the increase in operating revenue for the three and nine months ended September 30, 2022 compared to the same periods in 2021.
Overview
We are an integrated midstream energy company in the Permian Basin providing comprehensive gathering, transportation, compression, processing, and treating services. Our core capabilities include a variety of service offerings across multiple streams, including natural gas gathering, transportation, compression, treating and processing; NGLs stabilization and transportation; produced water gathering and disposal; and crude oil gathering, stabilization, storage and transportation. We have approximately 2.0 Bcf/d cryogenic natural gas processing capacity strategically located near the Waha Hub in West Texas. As measured by processing capacity, we are the second largest natural gas processor in the Delaware Basin and the fourth largest across the entire Permian Basin. In addition, we have interests in four long-term contracted pipelines transporting natural gas, NGLs, and crude oil from the Permian Basin to the Gulf Coast.
Our Operations
Upon Closing, the Company renamed its Gathering and Processing segment to Midstream Logistics and renamed its Transmission segment to Pipeline Transportation. These name changes were made to better align segment activities with the name of each respective segment. The Midstream Logistics segment operates under three service offerings, 1) gas gathering and processing, 2) crude oil gathering, stabilization, and storage services, and 3) water gathering and disposal. The Pipeline Transportation segment consists of four EMI pipelines originating in the Permian Basin with various access points to the Texas
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Gulf Coast, Kinetik NGL pipelines. ThreePipeline and Delaware Link Pipeline that is under development. The pipelines transport crude oil, natural gas, and NGLs within the Permian Basin and to the Texas Gulf Coast.
Midstream Logistics
Gas Gathering and Processing
The Midstream Logistics segment provides gas gathering and processing services with approximately 1,200 miles of low and high-pressure steel pipeline located throughout the Southern Delaware Basin. Gas processing assets are centralized at five processing complexes with total cryogenic processing trains, each with nameplate capacity of 200approximately 2.0 Bcf/d: the East Toyah complex (460 MMcf/d), the Pecos Bend complex (540 MMcf/d), the Pecos complex (260 MMcf/d), the Sierra Grande complex (60 MMcf/d), and Diamond Cryogenic complex (600 MMcf/d). The Company plans to expand the Diamond Cryogenic complex to 720 MMcf/d were placedby the end of the first quarter of 2023. Current and under construction residue gas outlets include the El Paso Natural Gas Pipeline, Energy Transfer Comanche Trail Pipeline, ONEOK Roadrunner Pipeline, Energy Transfer Oasis Pipeline, and Whitewater Aqua Blanca Pipeline. NGLs outlets include Energy Transfer’s Lone Star NGL Pipeline, Targa’s Grand Prix NGL Pipeline, and Enterprise’s Shin Oak NGL Pipeline.
Crude Oil Gathering, Stabilization, and Storage Services
The Midstream Logistics segment also includes crude oil gathering, stabilization, and storage services throughout the Texas Delaware Basin. 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 service during 2019. OtherPlains’ 285 Central Station and State Line and Oryx’s Orla & Central Mentone facilities.
Water Gathering and Disposal
In addition, this segment includes water gathering and disposal assets located in northern Reeves County, Texas which are included in the Midstream Logistics segment. The system includes approximately 70 miles of gathering pipeline and approximately 500,000 barrels per day of permitted disposal capacity.
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, Brandywine NGL Pipeline and the Delaware Link Pipeline, which is currently under development. EMI pipelines 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. The Company’s existing gathering, processing, and transmission infrastructure is expected to provide capacity levels capable of fulfilling its midstream contracts to service Apache’s production from Alpine High and potential third-party customers.
As of September 30, 2021, the Company owns the following Equity Method Interest Pipelines:following:
•A 16 percentAn approximate 53.3% equity interest in the Gulf Coast ExpressPermian Highway Pipeline Project (GCX)LLC (“PHP”), which is also owned and operated by Kinder Morgan Texas Pipeline, LLC (Kinder Morgan). GCX transports natural gas from the Waha area 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 15 percent 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.
•An approximate 26.7 percent equity interest in the Permian Highway Pipeline (PHP), which is also owned and operated by (“Kinder Morgan.Morgan”). PHP transports natural gas from the Waha area in northern Pecos County, Texas to the Katy, Texas area with connections to Texas Gulf Coast and Mexico markets. PHP was placed in service January 2021, with the total capacity of 2.1 Bcf/d fully subscribed under long-term contracts. In June 2022, PHP announced a final investment decision to proceed with its expansion project to increase total capacity to 2.65 Bcf/d fully subscribed under 10 year take or pay contracts. The project will increase PHP’s capacity by nearly 550 MMcf/d with target in-service date in November 2023. The funding for the expansion is 67% by the Company and the remainder by Kinder Morgan. As a result, post the in service of the expansion, Kinetik’s ownership interest in PHP will increase approximately 56.0%.
•A 33 percent16% equity interest in the Gulf Coast Express Pipeline (“GCX”), which is owned and operated by Kinder Morgan. GCX transports natural gas from the Permian Basin in West Texas to Agua Dulce near the Texas Gulf Coast. GCX was placed in service during 2019, with the total capacity of 2.0 Bcf/d fully subscribed under long-term contracts.
•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.
On October 21, 2021, the Company announced that it will combine with privately-owned BCP in an all-stock transaction. BCP is the parent company of EagleClaw Midstream, which includes EagleClaw Midstream Ventures, the Caprock Midstream and Pinnacle Midstream businesses, and a 26.7%•A 15% equity interest in the Permian Highway Pipeline.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.
As consideration for
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Factors Affecting Our Business
The Significance of Crude Oil and Producer Volumes on Our Revenues, Cost of Sales and Gross Margin
The Company’s assets include approximately 1,700 miles of NGLs, natural gas, condensate, produced water, and crude oil pipelines as well as approximately 2 Bcf/d of natural gas processing capacity as of September 30, 2022. Most of the transaction,gas gathered and processed by the Company will issue 50 million Class C common shares (and Altus Midstream will issue corresponding Common Units) to BCP’s unitholders, which are principally funds affiliated with Blackstone and I Squared Capital.is associated gas included in the oil stream, making producers’ oil break-even prices the primary driver of activity. The transaction is expected to closeaverage price of WTI crude oil was $98.39/Bbl during the first quarter 2022 following completionnine months of customary closing conditions, including approval by2022. If crude prices were to fall below producers’ break-even prices for a prolonged period of time, drilling activity and volumes might decline and might have a negative impact on our business. In addition, because the Company’s shareholdersPipeline Transportation segment provides NGLs transmission service through its EMI pipelines, a decrease in natural gas and regulatory reviews.
The global economy andNGL price will have an adverse impact on the energy industry have been deeply impacted by the effectsCompany’s results of the coronavirus disease 2019 (COVID-19) pandemic and related governmental actions. Uncertainty in the oil markets and the negative demand implications of the COVID-19 pandemic continueoperations as it may lead to impact oil supply and demand. Altus management continues to monitorlower natural gas
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throughput production and thus lower volumes from Apache and capacity utilization of NGLs transported. The average natural gas price was $6.66/MMBtu during the Equity Method Interest Pipelines. Altus has no upcoming debt maturities, and the termfirst nine months of its revolving credit facility extends through November of 2023.
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, and financial condition is difficult to predict and depends on numerous evolving factors outside Altus’ control, including the duration 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 mandate, 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. As a result, the COVID-19 pandemic may still materially and adversely affect Altus’ results in a manner that is either not currently known or that the Company does not currently consider to be a significant risk to its business. For additional information about the business risks relating to the COVID-19 pandemic, please refer toPart I,II, Item 1A—1A — Risk Factors of the Company’s AnnualQuarterly Report on Form 10-K10-Q for the fiscal yearfirst quarter of 2022 filed on May 10, 2022.
Recent Developments
Transfer to the New York Stock Exchange
On October 10, 2022, the Company notified the Nasdaq Global Select Market (“Nasdaq”) that it would voluntarily transfer the listing of its Class A Common Stock from Nasdaq to the New York Stock Exchange (the “NYSE”). The listing and trading of the Common Stock on Nasdaq ended December 31, 2020.at market close on October 21, 2022, and trading commenced on the NYSE at market open on October 24, 2022. The Class A Common Stock continues to trade under the current stock symbol “KNTK”.

Altus Midstream Operational MetricsBrandywine NGL Acquisition
TheIn September 2022, the Company usesacquired approximately 30 miles of 20 inch NGL pipelines connected to Diamond Cryo called the Brandywine NGL Pipeline (“Brandywine”) for approximately $25 million. Brandywine is a varietystrategic intrabasin natural gas liquids pipeline, affording Kinetik greater control over its system’s NGLs and providing interconnectivity to Shin Oak.
Comprehensive Refinancing
On June 8, 2022, the Partnership, completed a private placement of financial and operational metrics to assess the performance$1.00 billion aggregate principal amount of its operations5.875% Sustainability-Linked Senior Notes due 2030 (the “Notes”), which are fully 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 primarilyunconditionally guaranteed by the volume of natural gas gathered, processed, compressed, and/or transmitted. ForCompany. In addition, the periods presented, substantially all revenues were generated through fee-based agreements with Apache, a related party. The volumes of natural gas that Altus gathers or processes in future periods will depend on the production level of Apache’s assets in areas Altus services and any additional third-party service contracts or incremental use of Altus Midstream infrastructure resulting from the potential close of the business combination transaction with BCP discussed above. The Company’s assets were initially constructed to serve Apache’s anticipated development of Alpine High and its surrounding areas. As such, the amount and pace of upstream development activity by Apache could directly impact Altus’ aggregate gathering and processing volumes because the production rate of natural gas wells declines over time.
The CompanyPartnership entered into a new Gas Processing Agreement with Apache in October 2021,revolving credit agreement (the “RCA”), which supersededprovides for a $1.25 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”) maturing on June 8, 2027, and a new term loan agreement (the “TLA”), which provides for a $2.00 billion senior unsecured term loan credit facility (the “Term Loan Credit Facility”) maturing on June 8, 2025. Proceeds from the prior agreement. The updated processing agreement contains modified gas processing fees for new volumes from future Apache drilling activities at Alpine High that are more consistent with current market practices. The circumstances that existed when the original agreement was signed have changed dramatically,Notes and the updated terms may helpTerm Loan Credit Facility were used to attract new business from both Apache,repay all outstanding borrowings under our existing customer,credit facilities and third-party producersto pay fees and midstream companies.
The Company remains focused on increasing third-party processing opportunities in additionexpenses related 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 activities in the United States. The Company has actively pursued strategic alternatives for future growth, which culminated in the recently announced business combination with BCP, a midstream company that has existing commitments with various third-party customers.
Costs and Expenses
Costs of product sales
Costs of product sales represent purchases of NGLs from a third party, which 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.

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Operations and maintenance
Operations and maintenance expenses primarily comprise those costs that are directly associated with the operations of the Company’s assets. The most significant of these costs are associated with direct labor and supervision, power, repair and maintenance expenses, and equipment rentals. Fluctuations in commodity prices 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.
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.offering. Refer to Note 2—Transactions with Affiliates6 — Debt and Financing Costs in the Notes to our Condensed Consolidated Financial Statements set forth in Part I of this Quarterly Report on Form 10-Q for further information.
TaxesSustainability-linked Financing Framework
On May 16, 2022, we published our Sustainability Framework, which we developed in alignment with the five components outlined in the International Capital Markets Association Sustainability-Linked Bond Principles as of June 2020 and the Loan Syndications and Trading Association Sustainability-Linked Loan Principles as of July 2021 (each as referred to in our Sustainability-Linked Financing Framework), and corresponding Second Party Opinion provided by ISS ESG.
This framework establishes key-performance indicators (“KPIs”) that will be used to measure our progress against sustainability performance targets (“SPTs”). Under this framework, our KPIs are Scope 1 and Scope 2 greenhouse gas emissions intensity, Scope 1 and Scope 2 methane gas emissions intensity and female representation in corporate officer positions and our SPTs are (1) reducing the intensity of all Scope 1 and Scope 2 greenhouse gas emissions from our operations by 35% by 2030 from a 2021 Baseline Year (as defined in the Sustainability Framework), (2) reducing the intensity of Scope 1 and Scope 2 methane gas emissions from our operations by 30% by 2030 from a 2021 Baseline Year, and (3) increasing female representation in corporate officer positions of Vice President and above to 20% by year-end 2026.
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Stock Split
On May 19, 2022, the Company announced a two-for-one stock split with respect to its Class A Common Stock and Class C Common Stock in the form of a stock dividend (the “Stock Split”). The Stock Split was accomplished by distributing one additional share of Class A Common Stock for each share of Class A Common Stock outstanding and one additional share of Class C Common Stock for each share of Class C Common Stock outstanding. The additional shares of Common Stock were issued on June 8, 2022 to holders of record at the close of business on May 31, 2022.
Commodity Price Volatility
There has been, and we believe there will continue to be, volatility in commodity prices and in the relationships among NGLs, crude oil and natural gas prices. As a result of uncertainty around global commodity supply and demand, the impact of China’s zero covid policy, the continued headwinds from a stronger US dollar, both here and abroad, global oil and natural gas commodity prices continue to remain volatile. The volatility and uncertainty of natural gas, crude oil and NGL prices impact drilling, completion and other than incomeinvestment decisions by producers and ultimately supply to our systems. Our operations benefit in an environment of higher natural gas, NGLs and condensate prices, the instability of international political environments and human and economic hardship resulting from the international political instability would have a uncertain impact on the U.S. economy, which in turn, might affect our business and operations adversely. The Company continues to monitor commodity prices closely and is likely to enter into commodity price hedges from time to time as necessary to mitigate the volatility risk.
Taxes other than income are primarily relatedInflation and Interest Rates
The annual rate of inflation in the United States hit 8.2% in September 2022, as measured by the Consumer Price Index. We expect that inflation will continue to ad valorem taxesincrease our operating costs and the overall cost of capital projects we undertake. In addition, the Federal Reserve has continued to tighten its monetary policy by raising interest rates and Chairman Powell has indicated that the target Federal Funds Rate range will likely be approximately 4.5% by the end of 2022. Furthermore, the Chairman of the Federal Reserve signaled that the Federal Reserve would continue to take necessary action to bring inflation down and to ensure price stability, including continued rate increases. Increased interest rates will have a negative impact on the Company’s midstream assets.ability to meet its contractual debt obligations and to fund its operating expenses, capital expenditures, dividends and distributions. The Company will continue to actively evaluate and analyze whether any form of interest rate hedging should be implemented to mitigate interest rate exposure.
Supply Chain Considerations
During 2021 and 2022, challenging supply chain issues have emerged that will continue at least through the remainder of 2022. Geopolitical events have further disrupted global supply chains and caused volatile commodity prices for natural gas, NGLs and crude oil. The United States has banned the import of Russian oil, NGLs and other energy commodities and European Union has taken steps to reduce imports of Russian oil and natural gas. The principal supply issues facing our industry for the next twelve months include: raw materials availability, finished good inventory, rising freight costs, delays due to port congestion and continued labor shortages.

All bidding will require the risk of shipping costs and delays to be factored into proposals. Trucking availability and pricing will impact North American opportunities while sea-freight costs will impact sales of North American manufactured goods being delivered internationally for the foreseeable future. The import of raw materials from China will also incur price increases. To that end, accelerating tensions between China and the U.S. could also result in further supply disruption.

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Results of Operations
The following table presents the Company’s results of operations for the periods presented:
Three Months Ended
September 30,*		Nine Months Ended
September 30,*
20222021% Change20222021% Change
(In thousands, except percentages)
Revenues:
Service revenue$107,597 $72,578 48 %$290,122 $202,482 43 %
Product revenue213,803 93,266 129 %618,382 244,358 153 %
Other revenue3,776 742 409 %9,493 3,615 163 %
Total revenues325,176 166,586 95 %917,997 450,455 104 %
Operating costs and expenses:
Cost of sales (exclusive of depreciation and amortization)145,208 60,503 140 %418,197 141,011 197 %
Operating expense35,845 22,731 58 %100,996 63,575 59 %
Ad valorem taxes5,903 3,238 82 %15,936 9,003 77 %
General and administrative23,468 6,957 237 %72,180 17,920 303 %
Depreciation and amortization65,005 57,154 14 %192,609 170,291 13 %
Loss (gain) on disposal of assets3,946 (37)(10765)%12,602 417 2922 %
Total operating costs and expenses279,375 150,546 86 %812,520 402,217 102 %
Operating income45,801 16,040 186 %105,477 48,238 119 %
Other income (expense):
Interest and other income— 3,578 (100)%250 4,141 (94)%
Gain on Preferred Units redemption— — NM9,580 — NM
Gain (loss) on debt extinguishment— (56)(100)%(27,975)4 (699475)%
Gain on embedded derivative488 — NM89,050 — NM
Interest expense(40,464)(30,541)32 %(92,585)(88,458)5 %
Equity in earnings of unconsolidated affiliates45,003 16,826 167 %120,706 44,692 170 %
Total other income (expense), net5,027 (10,193)(149)%99,026 (39,621)(350)%
Income before income tax50,828 5,847 769 %204,503 8,617 2273 %
Current income tax expense1,406 1,207 16 %2,244 1,207 86 %
Net income including noncontrolling interests$49,422 $4,640 965 %$202,259 $7,410 2630 %
*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 Policiesin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q, for further information.
NM - Not meaningful
Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021
Revenues
For the three months ended September 30, 2022, revenue increased $158.6 million, or 95%, to $325.2 million, compared to $166.6 million for the same period in 2021. The increase was primarily driven by period to period higher commodity prices, increases in gathered and processed gas volumes, as well as similar increases in condensate and NGL volumes sold.
Service revenue
Service revenue consists of service fees paid to us by our customers for providing comprehensive gathering, treating, processing and water disposal services necessary to bring natural gas, NGLs and crude oil to market. Service revenue for the three months ended September 30, 2022, increased by $35.0 million, or 48%, to $107.6 million, compared to $72.6 million for the same period in 2021. This increase was primarily due to a period over period increase in gathered and processed gas volumes of 585.4 Mcf per day and 541.5 Mcf per day, respectively. Over 99% of service revenues are included in the Midstream Logistics segment.
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Product revenue
Product revenue consists of commodity sales (including condensate, natural gas residue, and NGLs). Product revenue for the three months ended September 30, 2022, increased by $120.5 million, or 129%, to $213.8 million, compared to $93.3 million for the same period in 2021, primarily due to period over period increases in condensate prices combined with increased NGL and condensate sales volumes. Condensate prices increased $23.30 per barrel or 35%. NGL and condensate sales volumes increased 3.5 million barrels, or 550%. The increase in NGL and condensate sales volumes offset the decreased NGL prices of $5.77 per barrel, or 14%. This overall increase in NGL and condensate revenue was due to our plants being run in recovery for parts of the three months ended September 30, 2022 versus rejection during the same period in 2021. For the same reason, natural gas residue sales volumes decreased by 1.9 million MMBtu, or 28%. Partially offsetting this decrease in volumes, natural gas prices increased period over period by $3.34 per MMBtu, or 86%. Product revenues are included entirely in the Midstream Logistics segment.
Operating Costs and Expenses
Costs of sales (exclusive of depreciation and amortization)
Cost of sales (exclusive of depreciation and amortization) primarily consists of purchases of NGLs and natural gas from our producers at contracted market prices to support product sales to other third parties. For the three months ended September 30, 2022, cost of sales increased $84.7 million, or 140%, to $145.2 million, compared to $60.5 million for the same period in 2021. The increase was primarily driven by the period to period increase in commodity prices and increased NGL and condensate volumes. Cost of sales (exclusive of depreciation and amortization) are included entirely in the Midstream Logistics segment.
Operating expenses
Operating expenses increased by $13.1 million, or 58%, to $35.8 million for the three months ended September 30, 2022, compared to $22.7 million for the same period in 2021. Of the total increase, $7.7 million was driven by new operations acquired through the Transaction. The remaining increases were primarily driven by an increase in repairs and maintenance costs of $1.2 million, higher contract labor costs of $1.2 million, and higher safety and environmental expenditures of $0.8 million.
General and administrative
General and administrative (“G&A”) expense increased by $16.5 million, or 237%, to $23.5 million for the three months ended September 30, 2022, compared to $7.0 million for the same period in 2021. The increases were primarily driven by recognition of share-based compensation of $12.7 million, acquisition and integration costs of $2.7 million incurred in relation to the Transaction, and an increase of $0.8 million in insurance expenses.
Other Income (Expense)
Equity in earnings of unconsolidated affiliates
Income from EMI pipelines increased by $28.2 million, or 167%, to $45.0 million for the three months ended September 30, 2022, compared to $16.8 million for the same period in 2021. The increase was primarily due to the acquisition of new EMI pipelines and additional equity interests in the Company’s existing EMI pipeline, PHP. Equity in earnings of unconsolidated affiliates is included entirely in the Pipeline Transportation segment.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
Revenues
For the nine months ended September 30, 2022, revenue increased $467.5 million, or 104%, to $918.0 million, compared to $450.5 million for the same period in 2021. The increase was primarily driven by period to period higher commodity prices, increases in gathered and processed gas volumes, as well as similar increases in condensate and NGL volumes sold.
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Service revenue
Service revenue consists of service fees paid to us by our customers for providing comprehensive gathering, treating, processing and water disposal services necessary to bring natural gas, NGLs and crude oil to market. Service revenue for the nine months ended September 30, 2022, increased by $87.6 million, or 43%, to $290.1 million, compared to $202.5 million for the same period in 2021. This increase was primarily due to a period over period increase in gathered and processed gas volumes of 559.9 Mcf per day and 523.8 Mcf per day, respectively. Over 99% of service revenues are included in the Midstream Logistics segment.
Product revenue
Product revenue consists of commodity sales (including condensate, natural gas residue, and NGLs). Product revenue for the nine months ended September 30, 2022, increased by $374.0 million, or 153%, to $618.4 million, compared to $244.4 million for the same period in 2021, primarily due to period over period increases in NGL and condensate prices combined with increased sales volumes of these liquids. NGL prices increased $6.60 per barrel, or 20%, and condensate prices increased $35.69 per barrel, or 60%. NGL and condensate sales volumes increased 8.2 million barrels, or 280%. This substantial increase was due to our plants being run in recovery for most of the nine months ended September 30, 2022 versus rejection during the same period in 2021. For the same reason, natural gas residue sales volumes decreased by 3.2 million MMBtu, or 17%. Partially offsetting this decrease in volumes, natural gas prices increased period over period by $2.61 per MMBtu, or 73%. Product revenues are included entirely in the Midstream Logistics segment.
Operating Costs and Expenses
Costs of sales (exclusive of depreciation and amortization)
Cost of sales (exclusive of depreciation and amortization) primarily consists of purchases of NGLs and natural gas from our producers at contracted market prices to support product sales to other third parties. For the nine months ended September 30, 2022, cost of sales increased $277.2 million, or 197%, to $418.2 million, compared to $141.0 million for the same period in 2021. The increase was primarily driven by the period to period increases in commodity prices and NGL and condensate volumes discussed above. Cost of sales (exclusive of depreciation and amortization) are included entirely in the Midstream Logistics segment.
Operating expenses
Operating expenses increased by $37.4 million, or 59%, to $101.0 million for the nine months ended September 30, 2022, compared to $63.6 million for the same period in 2021. Of the total increase, $16.2 million was driven by the new operations acquired through the Transaction. The remaining increase was primarily driven by higher period over period electricity costs of $10.7 million, higher salaries and benefits of $3.7 million, higher repairs and maintenance costs of $2.9 million and higher contract labor costs of $2.8 million. The higher electricity costs were primarily due to electricity credits received in 2021 related to the extreme weather caused by Winter Storm Uri.
General and administrative
General and administrative (“G&A”) expense increased by $54.3 million, or 303%, to $72.2 million for the nine months ended September 30, 2022, compared to $17.9 million for the same period in 2021. The increases were primarily driven by recognized share-based compensation of $31.0 million, acquisition and integration costs of $18.5 million incurred in relation to the Transaction and an increase in insurance expenses of $2.2 million.
Depreciation and amortization
Depreciation and amortization expense increased by $22.3 million, or 13%, to $192.6 million for the nine months ended September 30, 2022, compared to $170.3 million for the same period in 2021. The increase was primarily driven by the new assets acquired through the Transaction.
Other Income (Expense)
Gain (loss) on debt extinguishment
For the nine months ended September 30, 2022, the Company recognized a loss on debt extinguishment of $28.0 million, compared with a gain of $4 thousand for the same period in 2021. The change reflected the loss on debt extinguishment recognized in relation to the comprehensive refinancing completed in June 2022.
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Gain on embedded derivative
For the nine months ended September 30, 2022, the Company recognized a gain on embedded derivative of $89.1 million. The gain is a result of the decrease in fair value of the embedded derivative liability related to the redeemable noncontrolling interest Preferred Units, which was eliminated upon the ultimate redemption of these Preferred Units during July of 2022.
Equity in earnings of unconsolidated affiliates
Income from EMI pipelines increased by $76.0 million, or 170% to $120.7 million for the nine months ended September 30, 2022, compared to $44.7 million for the same period in 2021. The increase was primarily due to the acquisition of new EMI pipelines and additional equity interests in the Company’s existing EMI pipeline, PHP, through the Transaction closed in February 2022. Equity in earnings of unconsolidated affiliates is included entirely in the Pipeline Transportation segment.

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 investments, equity in earnings from investments recorded using the equity method, share-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 September 30,Nine Months Ended September 30,
2021
2020(1)
2021
2020(1)
(In thousands)
Reconciliation of net income including noncontrolling interests to Adjusted EBITDA
Net income including noncontrolling interests$49,689 $31,198 $146,019 $21,860 
Add:
Financing costs, net of capitalized interest2,674 413 7,887 978 
 Depreciation and accretion4,085 4,008 12,094 11,984 
Impairments— — 441 — 
Unrealized derivative instrument loss— 3,533 — 76,102 
Equity method interests Adjusted EBITDA50,109 29,952 138,405 81,869 
Other325 — 781 290 
Less:
Gain on sale of assets194 — 470 76 
Unrealized derivative instrument gain4,010 — 18,487 — 
Income from equity method interests, net32,479 15,987 82,633 47,541 
Warrants valuation adjustment664 209 222 1,668 
Income tax benefit— — — 696 
Other1 — 3 11 
Adjusted EBITDA$69,534 $52,908 $203,812 $143,091 
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Three Months Ended
September 30,*		Nine Months Ended
September 30,*
20222021% Change20222021% Change
Reconciliation of net income including noncontrolling interests to Adjusted EBITDA(In thousands, except percentages)
Net income including noncontrolling interests$49,422 $4,640 965 %$202,259 $7,410 2630 %
Add back:
Interest expense40,464 30,541 32 %92,585 88,458 5 %
Income tax expense1,406 1,207 16 %2,244 1,207 86 %
Depreciation and amortization65,005 57,154 14 %192,609 170,291 13 %
Amortization of contract costs448 448 — %1,344 1,815 (26)%
Proportionate EMI EBITDA78,357 21,704 261 %190,438 59,677 219 %
Share-based compensation12,661 — NM30,966 — NM
Loss (gain) on sale of assets3,946 (37)(10765)%12,602 417 2922 %
Loss (gain) on debt extinguishment— 56 (100)%27,975 (4)(699475)%
Derivative loss due to Winter Storm Uri— — NM— 13,456 (100)%
Integration Costs2,338 — NM10,012 — NM
Acquisition transaction Costs62 — NM6,412 — NM
   Other one-time cost or amortization3,752 1,167 222 %10,969 2,010 446 %
   Producer Settlement— — NM— 6,827 (100)%
Deduct:
Interest and other income— 74 (100)%— 115 (100)%
Gain on redemption of mandatorily redeemable Preferred Units— — NM9,580 — NM
Gain on embedded derivative488 — NM89,050 — NM
Equity income from unconsolidated affiliates45,003 16,826 167 %120,706 44,692 170 %
Adjusted EBITDA$212,370 $99,980 112 %$561,079 $306,757 83 %
(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 Note 1—Description of the Organization and Summary of Significant Accounting Policies, see the section titled Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment for further information.
28

Results of Operations
The following table presentsinformation on the Company’s resultsbasis of operations for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
2021
2020(1)
2021
2020(1)
(In thousands)
REVENUES:
Midstream services revenue — affiliate$34,548 $38,869 $98,544 $111,252 
Product sales — third parties— 1,303 5,743 1,900 
Total revenues34,548 40,172 104,287 113,152 
COSTS AND EXPENSES:
Costs of product sales— 1,177 5,344 1,693 
Operations and maintenance9,642 8,960 24,384 29,059 
General and administrative3,420 2,936 10,350 10,102 
Depreciation and accretion4,085 4,008 12,094 11,984 
Impairments— — 441 — 
Taxes other than income2,811 4,143 10,431 10,933 
Total costs and expenses19,958 21,224 63,044 63,771 
OPERATING INCOME14,590 18,948 41,243 49,381 
Unrealized derivative instrument gain (loss)4,010 (3,533)18,487 (76,102)
Income from equity method interests, net32,479 15,987 82,633 47,541 
Warrants valuation adjustment664 209 222 1,668 
Other620 — 11,321 (346)
Total other income (loss)37,773 12,663 112,663 (27,239)
Financing costs, net of capitalized interest2,674 413 7,887 978 
NET INCOME BEFORE INCOME TAXES49,689 31,198 146,019 21,164 
Current income tax benefit— — — (696)
NET INCOME INCLUDING NONCONTROLLING INTERESTS49,689 31,198 146,019 21,860 
Net income attributable to Preferred Unit limited partners29,166 19,332 72,662 56,358 
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS20,523 11,866 73,357 (34,498)
Net income (loss) attributable to Apache limited partner15,279 8,970 56,270 (28,361)
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS$5,244 $2,896 $17,087 $(6,137)
KEY PERFORMANCE METRICS:
Adjusted EBITDA(2)
$69,534 $52,908 $203,812 $143,091 
OPERATING DATA:
Average throughput volumes of natural gas (MMcf/d)452 531 447 514 
(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.presentation.
(2)NM - not meaningful
Adjusted EBITDA is not definedincreased by GAAP and should not be considered an alternative$112.4 million, or 112%, to or more meaningful than, net income (loss), operating income (loss), net cash provided by (used in) operating activities or any other measures prepared under GAAP. For the definition and reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, see the section titled Altus Midstream Operational Metrics—Adjusted EBITDA above.
Since the Company commenced operations in the second quarter 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 commitments 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-K for the fiscal year ended December 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.
29

Revenues
The following table summarizes the Company’s revenues for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(In thousands)
REVENUES:
Midstream services revenue — affiliate$34,548 $38,869 $98,544 $111,252 
Product sales — third parties— 1,303 5,743 1,900 
Total revenues$34,548 $40,172 $104,287 $113,152 
Midstream services revenue was primarily generated from fee-based midstream services provided under the terms 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 gas and natural gas liquid volumes that flow through its systems. During the periods presented, Altus did not own or take title to the affiliate volumes that were processed through its systems. For more details, please refer to Note 3—Revenue Recognition in the Notes to Consolidated Financial Statements set forth in Part I of this Quarterly Report on Form 10-Q for further information.
Three months ended September 30, 2021 as compared to three months ended September 30, 2020
Midstream services revenue from affiliate decreased by $4.4 million to $34.5$212.4 million for the three months ended September 30, 2021, as2022, compared to $38.9$100.0 million for the same period in 2021. The increase was primarily driven by an increase in net income including noncontrolling interest of $44.8 million, or 965%, and increases in add back related to the Company’s proportionate share of its EMI pipelines’ EBITDA of $56.7 million, or 261%, share-based compensation of $12.7 million, interest expense of $9.9 million and depreciation and amortization expense of $7.9 million, which are results of new operations acquired through the Transaction. The increase in adjusted EBITDA was partially offset by increases in EMI pipelines equity income of $28.2 million, which was the result of acquisitions of new EMI pipeline entities and additional PHP equity interests acquired.
Adjusted EBITDA increased by $254.3 million, or 83% to $561.1 million for the nine months ended September 30, 2022, compared to $306.8 million for the same period in 2021. The increase was primarily driven by an increase in net income including noncontrolling interest of $194.8 million, or 2630%, and increases in add back related to the Company’s proportionate share of its EMI pipelines’ EBITDA of $130.8 million, or 219%, share-based compensation of $31.0 million, depreciation and amortization expense of $22.3 million and integration costs of $10.0 million. The increase in add back was also due to increase in loss on debt extinguishment of $28.0 million as the Company completed its comprehensive refinancing in June 2022. The increase in adjusted EBITDA was partially offset by increases in gain on embedded derivatives of $89.1 million, EMI pipelines equity income of $76.0 million and the derivative loss add back due to the Winter Storm Uri of $13.5 million.
The 2022 Adjusted EBITDA presented in the above table does not include any expected synergies including ad valorem taxes, operating expenses and corporate G&A, which continue to be recognized over the course 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. The following table presents segment adjustment EBITDA for the three and nine months ended September 30,
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2022 and 2021. Also refer to Note 17—Segments in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for reconciliation of segment adjusted EBITDA to net income including noncontrolling interests.
Three Months Ended September 30,*Nine Months Ended September 30,*
20222021% Change20222021% Change
(In thousands, except percentages)
Midstream Logistics$137,545 $80,877 70 %$380,919 $255,890 49 %
Pipeline Transportation78,692 21,381 268 %190,023 58,138 227 %
Corporate and Other**(3,867)(2,278)70 %(9,863)(7,271)36 %
Total segment adjusted EBITDA$212,370 $99,980 112 %$561,079 $306,757 83 %
* The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to Note 1—Description of the Organization and Summary of Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for further information on the Company’s financial statement consolidation.
** Corporate and Other represents those results that: (i) are not specifically attributable to a reportable segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items.
Midstream Logistics segment adjusted EBITDA increased by $56.7 million, or 70%, to $137.5 million for the three months ended September 30, 2020.2022, compared to $80.9 million for the same period in 2021. The decreaseincrease was primarily driven by lower throughputan increase in segment net income including noncontrolling interests of natural gas volumes from Apache.
The $1.3$71.7 million and increases in product sales revenues during the three months ended September 30, 2020 were generated from NGLsadd back related to depreciation and condensates purchased and processed by Altus from a third party and subsequently soldamortization expense of $7.6 million due to non-affiliated customers. No revenues from such sales occurred duringnew operations acquired through the three months ended September 30, 2021.
Nine months ended September 30, 2021 as compared to nine months ended September 30, 2020Transaction.
Midstream services revenue from affiliate decreasedLogistics segment adjusted EBITDA increased by $12.8$125.0 million, or 49%, to $98.5$380.9 million for the nine months ended September 30, 2021, as2022, compared to $111.3$255.9 million for the same period in 2021. The increase was primarily driven by an increase in segment net income including noncontrolling interests of $111.5 million and increases in the add back related to loss on debt extinguishment of $28.0 million as the Company completed its comprehensive refinancing in June 2022, depreciation and amortization expense of $22.1 million due to new operations acquired through the Transaction.
Pipeline Transportation segment adjusted EBITDA increased by $57.3 million, or 268%, to $78.7 million for the three months ended September 30, 2022, compared to $21.4 million for the same period in 2021. The increase was driven by investments in GCX, EPIC and Shin Oak and a 100% increase in the Company’s investment in PHP, which were all acquired through the Transaction closed in February 2022. During the three months ended September 30, 2021, the Company only held a 26.67% interest in PHP.
Pipeline Transportation segment adjusted EBITDA increased by $131.9 million, or 227%, to $190.0 million for the nine months ended September 30, 2020. The decrease was primarily driven by lower throughput of natural gas volumes from Apache.
The $3.8 million increase in product sales revenues during the nine months ended September 30, 2021, as2022, compared to $58.1 million for the nine months ended September 30, 2020,same period in 2021. The increase was driven by higher volumes of NGLs and condensates purchased and processed by Altus from a third party and subsequently sold to non-affiliated customers.the same factors driving the quarter over quarter increase disclosed above.

30

Costs and Expenses
The following table summarizes the Company’s costs and expenses for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(In thousands)
Costs of product sales$— $1,177 $5,344 $1,693 
Operations and maintenance9,642 8,960 24,384 29,059 
General and administrative3,420 2,936 10,350 10,102 
Depreciation and accretion4,085 4,008 12,094 11,984 
Impairments— — 441 — 
Taxes other than income2,811 4,143 10,431 10,933 
Total costs and expenses$19,958 $21,224 $63,044 $63,771 
Three months ended September 30, 2021 as compared to three months ended September 30, 2020
Costs of product sales
The $1.2 million in costs of product sales during the three months ended September 30, 2020 represent purchases of NGLs from a third-party, which were used to support the product sales to third parties discussed above. No costs of product sales were incurred during the three months ended September 30, 2021.
Operations and maintenance
Operations and maintenance expenses were consistent period over period, increasing by approximately $0.6 million to $9.6 million for the three months ended September 30, 2021, as compared to $9.0 million for the three months ended September 30, 2020.
General and administrative
G&A expense was consistent period over period, increasing by $0.5 million to $3.4 million for the three months ended September 30, 2021, as compared to $2.9 million for the three months ended September 30, 2020.
Taxes other than income
The decrease in taxes other than income was driven by ad valorem taxes, which decreased by $1.3 million to $2.7 million for the three months ended September 30, 2021, as compared to $4.1 million for the three months ended September 30, 2020. The $1.3 million overall decrease is primarily related to a decrease in tax assessed value for the Company’s property, plant, and equipment.
Nine months ended September 30, 2021 as compared to nine months ended September 30, 2020
Costs of product sales
The $3.7 million increase in costs of product sales during the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was driven by higher volumes of purchases of NGLs from a third-party, which were used to support the product sales to third parties discussed above.
Operations and maintenance
Operations and maintenance expenses decreased by $4.7 million to $24.4 million for the nine months ended September 30, 2021, as compared to $29.1 million for the nine months ended September 30, 2020. This decrease was 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 half of 2020. The transition resulted in decreases in various costs, the most significant being contract labor, equipment rentals, and chemical expenses. These savings were partially offset by higher power costs and higher repair and maintenance expenses.
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General and administrative
G&A expense was consistent period over period, increasing by $0.3 million to $10.4 million for the nine months ended September 30, 2021, as compared to $10.1 million for the nine months ended September 30, 2020.
Taxes other than income
The $0.5 million decrease in taxes other than income for the comparative periods was driven by ad valorem taxes, which decreased by $0.5 million to $10.2 million for the nine months ended September 30, 2021, as compared to $10.7 million for the nine months ended September 30, 2020.

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 September 30,Nine Months Ended September 30,
2021
2020(1)
2021
2020(1)
(In thousands)
Unrealized derivative instrument gain (loss)$4,010 $(3,533)$18,487 $(76,102)
Income from equity method interests, net32,479 15,987 82,633 47,541 
Warrants valuation adjustment664 209 222 1,668 
Other620 — 11,321 (346)
Total other income (loss)$37,773 $12,663 $112,663 $(27,239)
Interest expense$2,382 $2,133 $7,012 $7,498 
Amortization of deferred facility fees292 292 875 857 
Capitalized interest— (2,012)— (7,377)
Total Financing costs, net of capitalized interest$2,674 $413 $7,887 $978 
(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 gain (loss)
During the three and nine months ended September 30, 2021, the Company recognized an unrealized derivative instrument gain of $4.0 million and $18.5 million, respectively, in relation to an embedded exchange option identified upon the issuance and sale of Series A Cumulative Redeemable Preferred Units (the Preferred Units). The unrealized loss related to this embedded feature was $3.5 million and $76.1 million for the three and nine months ended September 30, 2020, respectively. 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 and nine months ended September 30, 2021 was primarily impacted by expected future interest rates. 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 $16.5 million and $35.1 million for the three and nine months ended September 30, 2021, respectively, as compared to the three and nine months ended September 30, 2020. The increase was primarily due to the Company’s 26.7 percent share of net income from the Permian Highway Pipeline which commenced service in January 2021.
32

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 underutilization of contractual electricity volumes, the Company recognized an estimated credit of approximately $9.7 million for the nine months ended September 30, 2021. No credits were recognized for the three months ended September 30, 2021 or for the three and nine months ended September 30, 2020.
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. The changes to gross interest expense for the periods presented was insignificant.
Key Performance Metric—EBITDA
Three months ended September 30, 2021 as compared to three months ended September 30, 2020
Net income before income taxes was $49.7 million for the three months ended September 30, 2021, an increase of $18.5 million from net income before income taxes of $31.2 million for the three months ended September 30, 2020. The increase in net income before income taxes was primarily driven by a $16.5 million increase in income from the Equity Method Interest Pipelines, a $7.5 million decrease to expense related to the fair value measurement of an embedded derivative at September 30, 2021, and a $2.4 million net decrease of various other individually insignificant costs. The increases to net income were offset by a $5.6 million decrease in total revenues and a $2.3 million increase in interest expense.
Adjusted EBITDA increased by $16.6 million for the three months ended September 30, 2021 compared to the prior year period. Adjusted EBITDA, which excludes the impacts of depreciation, accretion, impairments, interest expense, and the changes to the embedded derivative noted above, benefited from an incremental $3.7 million increase, primarily driven by Permian Highway Pipeline being placed in service in January 2021.
Nine months ended September 30, 2021 as compared to nine months ended September 30, 2020
Net income before income taxes was $146.0 million for the nine months ended September 30, 2021, an increase of $124.8 million from net income before income taxes of $21.2 million for the nine months ended September 30, 2020. The increase in net income before income taxes was primarily driven by a $94.6 million decrease to expense related to the fair value measurement of an embedded derivative at September 30, 2021, a $35.1 million increase in income from the Equity Method Interest Pipelines, an $11.8 million increase of other income primarily related to a power credit, and a $4.7 million decrease in operations and maintenance expenses. The increases to net income were offset by an $8.9 million decrease in total revenue, a $3.7 million increase in costs of product of sales, a $6.9 million increase in interest expense, and a $1.8 million net increase of various other costs.
Adjusted EBITDA increased by $60.7 million for the nine months ended September 30, 2021 compared to the prior year period. Adjusted EBITDA, which excludes the impacts of depreciation, accretion, impairments, interest expense, and the changes to the embedded derivative noted above, benefited from an incremental $21.4 million increase, primarily due to Permian Highway Pipeline being placed in service in January 2021. This amount was further benefited by an insignificant decrease, in the aggregate, of $1.6 million of various other costs of the Company.
For additional information, see the section titled Altus Midstream Operational Metrics—Adjusted EBITDA above.

33

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 Pipelines and associated subsequent construction costs. For 2021,2022, the Company’s primary capital spending requirements are anticipated to be related to equity contributions associatedthe PHP expansion project, integration of the Alpine High gathering system with its proportionate sharethe legacy BCP system, certain integration related synergies including the relocation of capital calls relatingcompression units and treating assets to the Equity Method Interest Pipelines,legacy BCP processing plants, organic growth and maintenance capital expenditures in the Midstream Logistic segment, the Company’s contractual debt obligations and the Company’s payment of a quarterly cash dividend on its Class A common stockCommon Stock and Class C Common Units as may be declared by its Board of Directors.Directors (the “Board”).

During the nine months ended September 30, 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,Term Loan and Revolving Credit Facility, proceeds from the offering of the Notes, and cash generated from operations. Based on Altus’the Company’s current financial plan and related assumptions including the Reinvestment Agreement (as defined below), the Company believes that cash from operations a reduced capital program for its midstream infrastructure, and distributions from the 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 during 2021.over the next 12 months. Additionally, the Company has locked in the floating base rate on its Term Loan A through April 2023 to reduce short-term interest rate risk. Further, the Company entered into an interest rate swap with a $1 billion notional that is effective from May 1, 2023 through May 31, 2025 swapping floating SOFR for a fixed swap rate of 4.46%.
Given recent crude oil price volatility
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Comprehensive Refinancing
On June 8, 2022, the Partnership completed the private placement of $1.00 billion aggregate principal amount of 5.875% Sustainability-Linked Senior Notes due 2030, which are fully and uncertain economic activity resultingunconditionally guaranteed by the Company. In addition, the Partnership entered into the new RCA, which provides for a $1.25 billion senior unsecured Revolving Credit Facility maturing on June 8, 2027, and a new TLA, which provides for a $2.00 billion senior unsecured Term Loan Credit Facility maturing on June 8, 2025. Proceeds from the COVID-19 pandemicNotes and related governmental actions, the Company continuesTerm Loan Credit Facility were used to monitor expected natural gas throughput volumes from Apacherepay all outstanding borrowings under our existing credit facilities and capacity utilization of the Equity Method Interest Pipelines. Further, as noted above, the Company recently announced approval of a business combination with BCP. Given pending business combination, together with the recent price volatilityto pay fees and continuing economic uncertaintyexpenses related to COVID-19, future projections remain dynamic. Altus’ results, including projections relatedthe offering. Refer to capital resourcesNote 6 — Debt and liquidity, could be materially affected byFinancing Costs in the continuing COVID-19 pandemic and the effects of the business combination if closed.Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further information.
Altus Midstream Capital Requirements and Expenditures
Our operations can be capital intensive, requiring investments to expand, upgrade, maintain or enhance existing operations and to meet environmental and operational regulations. During the nine months ended September 30, 20212022 and 2020,2021, capital spending for midstream infrastructure assets totaled $3.3$160.5 million and $29.5$60.6 million, respectively. The current year capital spend includes $25 million for the purchase of Brandywine NGL Pipeline and $12.5 million for the ongoing construction of the Delaware Link Pipeline. 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 additional third-partyits customers. As such, the Company expects remaining capital requirements for its existing infrastructure assets during 2021 to be minimal.
Additionally, duringDuring the nine months ended September 30, 2021 and 2020,2022, the Company made cash contributions totaling $27.3 million and $286.2 million, respectively, to the Equity Method Interest Pipelines, which includes the following equity interest ownership stakes:
•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 minimal capital contributions of between $2contributed $56.2 million to $4 million for its equity interest in these joint venture pipelinesPHP, for the remainder2022 Capacity Expansion Project, compared to $20.5 million contributed in the same period of 2021.
The Company anticipates its existing capital resources will be sufficient to fund the Company’s future capital expenditures for the Equity Method Interest PipelinesEMI pipelines and the Company’Company’s existing infrastructure assets.assets over the next 12 months. 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 I of this Quarterly Report on Form 10-Q.
Altus MidstreamCash Flows
The following tables present cash flows from operating, investing, and financing activities during the periods presented:
For the Nine Months Ended September 30,
20222021
(In thousands)
Cash provided by operating activities$453,244 $159,350 
Cash used in investing activities$(216,418)$(81,323)
Cash used in financing activities$(243,827)$(62,439)
Operating Activities. Net cash provided by operating activities increased by $293.9 million for the nine months ended September 30, 2022 compared with the same period in 2021. The change in the operating cash flows reflected increases in net income including noncontrolling interests of $194.8 million, adjustments related to non-cash items of $56.5 million and cash provided by changes in working capital of $42.5 million. Period over period increase in cash provided by operating activities was primarily driven by the new operations acquired through the Transaction, including distributions received from EMI pipelines acquired through the Transaction. The increase was partially offset by non-cash adjustment related to derivative fair value adjustment recognized during 2022.
Investing Activities. Net cash used in investing activities increased by $135.1 million for the nine months ended September 30, 2022 compared with the same period in 2021. The increase was primarily driven by an increase in property, plant and equipment expenditures of $99.9 million, which includes the Brandywine asset acquisition, an increase in contribution made to unconsolidated affiliates of $35.7 million and an increase in intangible assets expenditure of $9.6 million. The increase in cash outflow was offset by an increase in cash inflow of $13.4 million acquired through the acquisition closed in February 2022.
Financing Activities. Net cash used in financing activities increased by $181.4 million for the nine months ended September 30, 2022 compared with the same period in 2021. The increase was primarily due to increases in cash outflow for redemption of Preferred Units of $644.8 million, cash dividends paid to holders of Class A Common Stock of $24.4 million, cash distributions paid to holders of Preferred Units of $8.8 million and the increase in cash outflow was offset by net proceeds from the Company’s long-term debt and Revolving Credit Facility of $482.1 million and a reduction of cash distributions paid to holders of Class C Common Units of $29.3 million.
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Dividend and Distribution Reinvestment Agreement
On February 22, 2022, the Company entered into a Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”) with certain stockholders including BCP Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP, Buzzard Midstream LLC, APA Corporation Apache Midstream LLC, and certain individuals (each, a “Reinvestment Holder”). Under the Reinvestment Agreement, each Reinvestment Holder is obligated to reinvest at least 20% of all distributions on Common Units Distributionsor dividends on shares of Class A Common Stock in the Company’s Class A Common Stock. Additionally, the Audit Committee and subsequently the Board resolved that for the calendar year 2022, 100% of all distributions or dividends received by each Reinvestment Holder would be reinvested in newly issued shares of Class A Common Stock.
InDuring the first second, and third quartersnine months of 2021,2022, the Company made cash dividend payments of $24.4 million per quarter, relatedto holders of Class A Common Stock and $175.5 million was reinvested in shares of Class A Common Stock by the Reinvestment Holders.
Stock Split
On May 19, 2022, the Company announced a two-for-one Stock Split with respect to its quarterly dividend program. For more information please refer to Note 2—Transactions with AffiliatesClass A Common Stock and Note 9—EquityClass C Common Stock in the Notesform of a stock dividend. The Stock Split was accomplished by distributing one additional share of Class A Common Stock for each share of Class A Common Stock outstanding and one additional share of Class C Common Stock for each share of Class C Common Stock outstanding. The additional shares of Common Stock were issued on June 8, 2022 to Consolidated Financial Statements set forth in Part I,holders of this Quarterly Reportrecord at the close of business on Form 10-Q.May 31, 2022.
Dividend
On November 2, 2021,October 19, 2022, the Company’s Board of Directors declared a cash dividend of $1.50$0.75 per share on the Company’s Class A Common Stock, totaling $5.6 million, towhich will be paidpayable on December 30, 2021, to stockholders of record asNovember 17, 2022. The Company, through its ownership of the closegeneral partner of businessthe Partnership, also declared a distribution of $0.75 per Common Unit from the Partnership to the holders of Common Units, which will be payable on November 30, 2021. The17, 2022. As context requires, dividends paid to holders of Class A Common Stock dividend willand distributions paid to holders of Common Units may be funded by a distribution from Altus Midstreamreferred to its common unitholders of $1.50 per Common Unit, totaling $24.4 million, of which $5.6 million is payable to the Company and the balance is payable to Apache.
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collectively as “dividends.”
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 sold theoutstanding were assumed at Closing for accounting purposes. The Company assumed 525,000 Preferred Units in a private offering exempt fromas well as 29,983 paid-in-kind (“PIK”) Preferred Units immediately after the registration requirements ofClosing.
Since the Securities Act 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 625,000redeemed all outstanding Preferred Units were sold at a price of $1,000 per Preferred Unit,and PIK units for an aggregate issueredemption price of $625.0$644.8 million.
The Company recognized a gain of $9.6 million on redemption of the mandatorily redeemable Preferred Units entitleand excess of carrying amount over redemption price of $109.5 million on redemption of the holders thereof to receive quarterly distributions at a rate of 7 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 or prior to December 31, 2020, Altus Midstream could elect to pay distributions in-kind and did so in respect of quarters ended on and before March 31, 2020. For further information on theredeemable noncontrolling interest Preferred Units, referUnits. 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.

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 Nine Months Ended
September 30,
 20212020
 (In thousands)
Sources of cash and cash equivalents:
Proceeds from revolving credit facility$33,000 $184,000 
Proceeds from sale of assets1,687 7,629 
Capital distributions from equity method interests30,051 14,235 
Net cash provided by operating activities158,395 137,447 
Total Sources of Cash and Cash Equivalents223,133 343,311 
Uses of cash and cash equivalents:
Capital expenditures(1)
(3,268)(29,540)
Distributions paid to Preferred Unit limited partners(34,686)(11,562)
Distributions paid to Apache limited partner(56,250)— 
Dividends paid(16,859)— 
Contributions to equity method interests(27,270)(286,227)
Finance lease payments— (11,789)
Deferred facility fees— (816)
Capitalized interest paid— (7,377)
Total Uses of Cash and Cash Equivalents(138,333)(347,311)
Increase (decrease) in cash and cash equivalents$84,800 $(4,000)
(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 financialliquidity indicators at the dates presented:
September 30, 2021December 31, 2020September 30, 2022December 31, 2021
(In thousands) (In thousands)
Cash and cash equivalentsCash and cash equivalents$108,988 $24,188 Cash and cash equivalents$11,728 $18,729 
Total debtTotal debt657,000 624,000 Total debt$3,447,513 $2,307,702 
Available committed borrowing capacityAvailable committed borrowing capacity141,000 176,000 Available committed borrowing capacity$775,000 $133,000 
Cash and cash equivalents
As of September 30, 20212022 and December 31, 2020,2021, the Company had $109.0$11.7 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 September 30, 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 September 30, 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 September 30, 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 September 30, 2021.
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There is no assurance that the financial condition of banks with lending commitments to Altus Midstreamthe Company 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.
Guarantor Information
In June 2022, the Company completed the comprehensive refinancing, which included the issuance of the Notes and entry into the TLA and the Revolving Credit Agreement by the Partnership. These debt obligations are fully and unconditionally guaranteed by the Company. The guarantee of the Notes is subject to certain customary release, including the exercise of legal defeasance or covenant defeasance options, the satisfaction and discharge of the indentures governing the Notes, and the release of the guarantor from its guarantee of the Notes in accordance to the indentures governing the Notes.

Contractual Obligations
We have contractual obligations for principal and interest payments on our term loan credit facility. See Note 6—Debt and Financing Costsin the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.
Under certain of our transportation services agreements with third party pipelines to transport natural gas and NGLs, if we fail to ship a minimum throughput volume during any year, then we will pay a deficiency payment for transportation based on the volume shortfall up to the MVC amount. The Company has made no historical shortfall payments through September 30, 2022.

Off-Balance Sheet Arrangements
Other than the arrangementsAs of September 30, 2022, there were no off-balance sheet arrangements.

Critical Accounting Policies
The Company’s significant accounting policies, described in the Company’s AnnualSummary of Significant Accounting Policies in Exhibit 99.1 to Current Report on Form 10-K for the fiscal year ended December 31, 2020, the Company has not entered into any transactions, agreements, or other contractual arrangements with unconsolidated entities that are reasonably likely to materially affect8-K filed on July 5, 2022 and the Company’s liquidityQuarterly Report on Form 10-Q filed on May 10, 2022, are fundamental to understanding our results of operations and financial condition. There has been no significant change to the Company’s significant accounting policies subsequent to the Form 8-K filed on July 5, 2022. Any new accounting policies or capital resource positions.updates to existing accounting policies as a result of new accounting pronouncements have been included in Note 1—Description of the Organization and Summary of Significant Accounting Policies in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.
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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 September 30, 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 $3.45 billion. The interest rate for the facility isrevolving and term loan credit facilities are 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 $1.7 million for the quarter ended September 30, 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 $6.3 million for the quarter ended September 30, 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 September 30, 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 September 30, 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 the Company’s disclosure controls and procedures were effective providing effective meansas of September 30, 2022.
The Company’s disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Company is required to disclosein the reports that the Company files or submits under applicable laws and regulationsthe Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s 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 its principal executive officerthe Chief Executive Officer and principal financial officer,Chief Accounting and Administrative Operating Officer, as appropriate, to allow timely decisions regarding required disclosure.
The Company periodically reviewsChange in Internal Control over Financial Reporting
There were no changes in the design and effectiveness of its disclosure controls, including compliance with various laws and regulations that apply to operations. The Company makes modifications to improve the design and effectiveness of its disclosure controls, and may take other corrective action, if the Company’s reviews identify deficiencies or weaknesses in its controls.
To address the previously reported material weakness in internal control over financial reporting as disclosed(as defined in Part I, Item 4Rule 13a-15(f) of the Company’s Quarterly Reports on Form 10-Q forExchange Act) during the quartersquarter ended March 31, 2021 and June 30, 2021 and as described in Note 1—Summary of Significant Accounting Policies—Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment in the Notes to Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q, the Company implemented additional review procedures, additional training, and enhancements to the accounting policy related to the accounting for equity and liability instruments (including those with warrants) to determine proper accounting in accordance with GAAP. Based on the actions taken, as well as the evaluation of the design of the new controls, the Company determined that the material weakness has been remediated as of September 30, 2021.2022, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.




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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For further information regarding legal proceedings, refer to Note 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 refer to Part I,II, Item 1A—1A — Risk Factors of the Company’s AnnualQuarterly Report on Form 10-K10-Q for the fiscal year ended December 31, 2020.first quarter of 2022 filed on May 10, 2022.
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ITEM 5. OTHER INFORMATION
Amended and Restated Code of Business Conduct
On November 9, 2022, our Board of Directors adopted an amended and restated Code of Business Conduct (the “Code of Ethics”). The Code of Ethics includes, among other things, updates to reflect the Company’s transition from the Nasdaq to the NYSE. The Code of Ethics took effect upon adoption by our Board of Directors and did not result in any waiver, explicit or implicit, of any provision of our previous Code of Ethics.

Risks Related to the Transactions Contemplated by the Contribution Agreement
Failure to complete, or significant delays in completing, the transactions could negatively affect the trading priceThe Code of the Company’s Class A Common Stock and its future business and financial results.
Completion of the transactionsEthics is not assured and is subject to risks, including the risks that approval of the issuance of the equity consideration by the Company’s stockholders or approval of the transactions by governmental agencies is not obtained or that other closing conditions are not satisfied. If the transactions are not completed, or if there are significant delays in completing the transactions, the trading price of the Company’s Class A Common Stock and its future business and financial results could be negatively affected, and the Company will be subject to several risks, including the following:
•available on our website at the Company may be liable for damages to Contributor under the terms of the Contribution Agreement;
•www.ir.kinetik.com/governancenegative reactions from the financial markets, including a decline in the trading price of the Company’s Class A Common Stock due to the fact that current prices may reflect a market assumption that the transactions will be completed;.
•having to pay certain significant costs relating to the transactions, including, in certain circumstances, a termination fee to Contributor; and
•the attention of the Company’s management will have been diverted to the transactions rather than the Company’s own operations and pursuit of other opportunities that could have been beneficial to it.
The pendency of the transactions could materially adversely affect the Company’s future business and operations or result in a loss of personnel.
Uncertainty about the effect of the transactions on personnel, customers, and suppliers may have an adverse effect on the Company’s business. These uncertainties may impair the ability to attract, retain, and motivate key personnel of Apache providing services to Altus pursuant to the COMA until the transactions are consummated and for a period of time thereafter, and could cause customers, suppliers, and others who deal with the Company to change their existing business relationships, which could negatively affect the Company’s revenues, earnings, and cash flows, as well as the market price of the Company’s Class A Common Stock, regardless of whether the transactions are completed. Retention of personnel may be particularly challenging during the pendency of the transactions because personnel may experience uncertainty about their future roles with the combined company. If, despite retention efforts, key personnel depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with or join the combined company, the Company’s business could be seriously harmed. Similar risks could affect BCP and, therefore, the combined company if the transactions are completed.
The Contribution Agreement includes restrictions relating to the conduct of the Company’s business while the transactions are pending, which could adversely affect the Company’s business and operations.
Under the terms of the Contribution Agreement, the Company is subject to certain restrictions on the conduct of its business prior to completing the transactions, which may adversely affect its ability to execute certain of its business strategies, including, subject to certain exceptions, restrictions on the acquisition or disposition of assets, the incurrence capital expenditures, the entry into contracts, the incurrence of indebtedness, or the settlement of claims and lawsuits, unless the Company obtains the prior written consent of Contributor. Such limitations could negatively affect the Company’s business and operations prior to the completion of the transactions.

The foregoing description of the amendments reflected in the Code of Ethics does not purport to be complete and is qualified in its entirety by reference to the Code of Ethics, attached as Exhibit 14.1 hereto and incorporated herein by reference.
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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
2.2†
–
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 Company’s Current Report on Form 8-K filed on October 21, 2021, SEC File No. 001-38048).
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.
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.
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).
10.1†‡
–
Gas Processing Agreement, dated effective September 1, 2021, by and between Apache Corporation and Altus Midstream Processing LP (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 14, 2021, SEC File No. 001-38048).
4.14.1–
Amended and Restated Stockholders Agreement, dated October 21, 2021, by and among APA Corporation, Apache Midstream LLC, Altus Midstream Company, New BCP Raptor Holdco, LLC, Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP, Buzzard Midstream LLC, and BCP Raptor Holdco, LP.
4.24.2–
Second Amended and Restated Registration Rights Agreement, dated February 22, 2022, by and among Altus Midstream Company, Apache Midstream LLC, Raptor Aggregator, LP, BX Permian Pipeline Aggregator, LP, Buzzard Midstream LLC and the other holders party thereto.
4.34.3–
Indenture, dated June 8, 2022, by and among Kinetik Holdings Inc., Kinetik Holdings LP and U.S. Bank Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on June 14, 2022).
4.44.4–
Form of 5.875% Sustainability-Linked Senior Notes (included in Exhibit 4.3) (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on June 14, 2022).
10.110.1–
Third Amended and Restated Agreement of Limited Partnership of Altus Midstream LP, dated as of October 22, 2021.
14.1*14.1*–
Kinetik Holdings Inc. Code of Business Conduct, as amended November 9, 2022.
31.1*31.1*–
Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.1*–
Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2*31.2*–
Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2*–
Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1**32.1**–
Certification of the Principal Executive Officer 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 September 30, 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 September 30, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Changes in Equity and Noncontrolling Interests and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
101.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.
† Portions of this Exhibit have been omitted, pursuant to Regulation S-K Item 601(b)(10)(iv), because the omitted information is both not material and is the type that the Company treats as private or confidential. Schedules and exhibits to this Exhibit have been omitted, pursuant to Regulation S-K Item 601(a)(5). The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.
‡Portions of this Exhibit have been omitted, pursuant to Regulation S-K Item 601(b)(10)(iv), because the omitted information is both not material and is the type that the Company treats as private or confidential.
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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:November 4, 20219, 2022 /s/ Ben C. RodgersJamie Welch
 Ben C. RodgersJamie Welch
 Chief Executive Officer, President, Chief Financial Officer and TreasurerDirector
(Principal FinancialExecutive Officer)
Dated:November 4, 20219, 2022 /s/ Rebecca A. Hoyt    Steven Stellato
 Rebecca A. HoytSteven Stellato
 SeniorExecutive Vice President, Chief Accounting Officer, and ControllerChief Administrative Officer
(Principal AccountingFinancial Officer)

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