QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | ☐ | ☒ | |||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||
Emerging growth company |
Number of shares of registrant’s Class A common stock, par value $0.0001 per share issued and outstanding as of April 30, 2022 | ||||||||||||||
Number of shares of registrant’s Class C common stock, par value $0.0001 per share issued and outstanding as of April 30, 2022 |
Item | Page | |||||||
PART I — FINANCIAL INFORMATION (UNAUDITED) | ||||||||
1. | ||||||||
2. | ||||||||
3. | ||||||||
4. | ||||||||
PART II — OTHER INFORMATION | ||||||||
1. | ||||||||
1A. | ||||||||
6. | ||||||||
Three Months Ended March 31,* | ||||||||||||||
2022 | 2021 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||
Operating revenues: | ||||||||||||||
Service revenue | $ | $ | ||||||||||||
Product revenue | ||||||||||||||
Other revenue | ||||||||||||||
Total operating revenues | ||||||||||||||
Operating costs and expenses: | ||||||||||||||
Costs of sales (exclusive of depreciation and amortization shown separately below) | ||||||||||||||
Operating expenses | ||||||||||||||
Ad valorem taxes | ||||||||||||||
General and administrative expenses | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Loss on disposal of assets | ||||||||||||||
Total operating costs and expenses | ||||||||||||||
Operating income | ||||||||||||||
Other income (expense): | ||||||||||||||
Interest and other income | ||||||||||||||
Gain on redemption of mandatorily redeemable Preferred Units | ||||||||||||||
Unrealized loss on embedded derivative | ( |
|||||||||||||
Interest expense | ( |
( |
||||||||||||
Equity in earnings of unconsolidated affiliates | ||||||||||||||
Total other income (expense), net | ( |
|||||||||||||
Income before income taxes | ||||||||||||||
Income tax expense | ||||||||||||||
Net income including noncontrolling interest | ||||||||||||||
Net income attributable to Preferred Unit limited partners | ||||||||||||||
Net Income attributable to common shareholders | ||||||||||||||
Net income attributable to Common Unit limited partners | ||||||||||||||
Net income attributable to Class A Common Shareholders | $ | $ | ||||||||||||
Net income attributable to Class A Common Shareholders, per share | ||||||||||||||
Basic | $ | $ | ||||||||||||
Diluted | $ | $ | ||||||||||||
Weighted average shares | ||||||||||||||
Basic | ||||||||||||||
Diluted |
March 31, | December 31, | |||||||||||||
2022 | 2021 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||
ASSETS | ||||||||||||||
CURRENT ASSETS: | ||||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Accounts receivable, net of allowance for credit losses of $ |
||||||||||||||
Derivative assets | ||||||||||||||
Prepaid and other current assets | ||||||||||||||
NONCURRENT ASSETS: | ||||||||||||||
Property, plant and equipment, net | ||||||||||||||
Intangible assets, net | ||||||||||||||
Derivative assets | ||||||||||||||
Operating lease right-of-use assets | ||||||||||||||
Deferred charges and other assets | ||||||||||||||
Investment in unconsolidated affiliates | ||||||||||||||
Goodwill | ||||||||||||||
Total assets | $ | $ | ||||||||||||
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY | ||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||
Accounts payable | $ | $ | ||||||||||||
Accrued expenses | ||||||||||||||
Distribution payable to Preferred Unit limited partners | ||||||||||||||
Derivative liabilities | ||||||||||||||
Mandatorily redeemable Preferred Units | ||||||||||||||
Current portion of operating lease liabilities | ||||||||||||||
Current portion of long-term debt, net | ||||||||||||||
Other current liabilities | ||||||||||||||
NONCURRENT LIABILITIES: | ||||||||||||||
Long-term debt, net | ||||||||||||||
Contingent liabilities | ||||||||||||||
Operating lease liabilities | ||||||||||||||
Contract liabilities | ||||||||||||||
Mandatorily redeemable Preferred Units | ||||||||||||||
Embedded derivative liabilities | ||||||||||||||
Derivative liabilities | ||||||||||||||
Deferred tax liabilities | ||||||||||||||
Other liabilities | ||||||||||||||
Total liabilities | ||||||||||||||
COMMITMENTS AND CONTINGENCIES (Note 8) | ||||||||||||||
Redeemable noncontrolling interest — Common Unit limited partners | ||||||||||||||
Redeemable noncontrolling interest — Preferred Unit limited partners | ||||||||||||||
EQUITY: | ||||||||||||||
Class A Common Stock: $ |
||||||||||||||
Class C Common Stock: $ |
||||||||||||||
Accumulated deficit | ( |
|||||||||||||
( |
||||||||||||||
Total liabilities, noncontrolling interests, and equity | $ | $ |
Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
(In thousands) | ||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||
Net income including noncontrolling interests | $ | $ | ||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
Depreciation and amortization expense | ||||||||||||||
Amortization of deferred financing costs | ||||||||||||||
Amortization of contract costs | ||||||||||||||
Distributions from unconsolidated affiliates | ||||||||||||||
Derivatives settlement | ( |
( |
||||||||||||
Derivatives fair value adjustment | ( |
|||||||||||||
Gain on redemption of mandatorily redeemable Preferred Units | ( |
|||||||||||||
Loss on disposal of assets | ||||||||||||||
Equity in (earnings) losses from unconsolidated affiliate | ( |
( |
||||||||||||
Loss (gain) on debt extinguishment | ( |
|||||||||||||
Share-based compensation | ||||||||||||||
Deferred income taxes | ||||||||||||||
Change in operating assets and liabilities: | ||||||||||||||
Accounts receivable | ( |
( |
||||||||||||
Other assets | ( |
( |
||||||||||||
Operating lease right-of-use assets | ||||||||||||||
Accounts payable | ( |
|||||||||||||
Accrued liabilities | ||||||||||||||
Operating lease liabilities | ( |
( |
||||||||||||
Net cash provided by operating activities | ||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||
Property, plant and equipment expenditures | ( |
( |
||||||||||||
Intangible assets expenditures | ( |
( |
||||||||||||
Investment in unconsolidated affiliates | ( |
|||||||||||||
Net cash acquired in acquisition | ||||||||||||||
Net cash used in investing activities | ( |
( |
||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||
Proceeds from issuance of long-term debt | ||||||||||||||
Principal payments on long-term debt | ( |
( |
||||||||||||
Proceeds from revolver | ||||||||||||||
Redemption of mandatorily redeemable Preferred Units | ( |
|||||||||||||
Payments of deferred financing costs | ( |
|||||||||||||
Equity contributions | ||||||||||||||
Equity distributions | ( |
|||||||||||||
Net cash (used in) provided by financing activities | ( |
|||||||||||||
Net change in cash | $ | ( |
$ | |||||||||||
CASH, BEGINNING OF PERIOD | $ | $ | ||||||||||||
CASH, END OF PERIOD | $ | $ | ||||||||||||
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES | ||||||||||||||
Cash paid for interest, net of amounts capitalized | $ | $ | ||||||||||||
Property and equipment and intangible accruals in accounts payable and accrued liabilities | $ | $ | ||||||||||||
Fair value of ALTM assets acquired | $ | $ | ||||||||||||
Class A Common Stock issued in exchange | ||||||||||||||
ALTM liabilities and mezzanine equity assumed | $ | $ |
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners(1) |
Redeemable Noncontrolling Interest — Common Unit Limited Partners | Class A Common Stock | Class C Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Quarter Ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Contribution | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Distribution paid to Common Unit limited partners | — | ( |
— | — | ( |
— | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2021 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
For the Quarter Ended March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | — | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
ALTM acquisition | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions payable to Preferred Unit limited partners | ( |
— | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Redemption of Common Units | — | ( |
( |
— | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Remeasurement of contingent consideration | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Change in redemption value of noncontrolling interests | — | — | — | — | — | ( |
( |
( |
||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | $ | $ | $ | $ | $ | $ | ( |
$ | ( |
(In thousands) | Amount | |||||||||||||
Cash and cash equivalent | $ | |||||||||||||
Accounts receivable | ||||||||||||||
Accounts receivable - affiliates | ||||||||||||||
Property, plant, and equipment, net | ||||||||||||||
Intangible assets, net | ||||||||||||||
Investments in unconsolidated affiliates | ||||||||||||||
Prepaid expense and other assets | ||||||||||||||
Goodwill | ||||||||||||||
Total assets acquired | ||||||||||||||
Accrued expenses and other accrued liabilities | ||||||||||||||
Long-term debt | ||||||||||||||
Embedded derivative liabilities | ||||||||||||||
Contract liabilities | ||||||||||||||
Mandatory redeemable Preferred Units | ||||||||||||||
Deferred tax liabilities | ||||||||||||||
Contingent liabilities | ||||||||||||||
Total liabilities assumed | ||||||||||||||
Redeemable noncontrolling interest - Preferred Unit limited partners | ||||||||||||||
Total consideration transferred | $ |
Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
(In thousands) | Pro forma | Pro forma | ||||||||||||
Revenues | $ | $ | ||||||||||||
Net income including noncontrolling interest | $ | $ | ||||||||||||
Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
(In thousands) | ||||||||||||||
Gathering and processing services | $ | $ | ||||||||||||
Natural gas, NGLs and condensate sales | ||||||||||||||
Other revenue | ||||||||||||||
Total revenues and other | $ | $ | ||||||||||||
Amount | |||||||||||||||||
Fiscal Year | (In thousands) | ||||||||||||||||
Remaining of 2022 | $ | ||||||||||||||||
2023 | |||||||||||||||||
2024 | |||||||||||||||||
2025 | |||||||||||||||||
2026 | |||||||||||||||||
Thereafter | |||||||||||||||||
$ | |||||||||||||||||
Amount | |||||||||||||||||
(In thousands) | |||||||||||||||||
Balance as of January 1, 2022 | $ | ||||||||||||||||
Reclassification of beginning contract liabilities to revenue as a result of performance obligation being satisfied | ( |
||||||||||||||||
Cash received and not recognized as revenue | |||||||||||||||||
Balance as of March 31, 2022 | |||||||||||||||||
Less: Current portion | |||||||||||||||||
Non-current portion | $ | ||||||||||||||||
Estimated Useful Life | |||||
Buildings | |||||
Gathering, processing and transmission systems and facilities | |||||
Furniture and fixtures | |||||
Vehicles | |||||
Computer hardware and software |
March 31, | December 31, | ||||||||||
2022 | 2021 | ||||||||||
(In thousands) | |||||||||||
Gathering, processing and transmission systems and facilities | $ | $ | |||||||||
Vehicles | |||||||||||
Computers and equipment | |||||||||||
Less: accumulated depreciation | ( |
( |
|||||||||
Total depreciable assets, net | |||||||||||
Construction in progress | |||||||||||
Land | |||||||||||
Total property, plant and equipment, net | $ | $ |
March 31, | December 31, | |||||||||||||||||||
2022 | 2021 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Customer contracts | $ | $ | ||||||||||||||||||
Right of way assets | ||||||||||||||||||||
Less accumulated amortization | ( |
( |
||||||||||||||||||
Total amortizable intangible assets, net | $ | $ | ||||||||||||||||||
March 31, | December 31, | |||||||||||||
2022 | 2021 | |||||||||||||
(In thousands) | ||||||||||||||
$ |
$ | $ | ||||||||||||
$ |
||||||||||||||
$ |
||||||||||||||
$ |
||||||||||||||
$ |
||||||||||||||
Total Long-term debt | ||||||||||||||
Less: Deferred financing costs, net | ( |
( |
||||||||||||
Less: Current portion, net | ( |
( |
||||||||||||
Long-term portion of debt and finance lease obligations, net | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
(In thousands) | |||||||||||
Capitalized interest | $ | $ | |||||||||
Deferred financing costs | |||||||||||
Interest expense | |||||||||||
Total financing costs, net of capitalized interest | $ | $ |
March 31, | December 31, | |||||||||||||
2022 | 2021 | |||||||||||||
(In thousands) | ||||||||||||||
Accrued product purchases | $ | $ | ||||||||||||
Accrued taxes | ||||||||||||||
Accrued salaries, vacation, and related benefits | ||||||||||||||
Accrued capital expenditures | ||||||||||||||
Accrued interest expenses | ||||||||||||||
Accrued expense due to related party | ||||||||||||||
Accrued other expenses | ||||||||||||||
Total accrued expenses | $ | $ |
March 31, | December 31, | |||||||||||||||||||
Ownership | 2022 | 2021 | ||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Gulf Coast Express Pipeline LLC | $ | $ | ||||||||||||||||||
Permian Highway Pipeline LLC(1) |
||||||||||||||||||||
Breviloba, LLC (Shin Oak) | ||||||||||||||||||||
$ | $ |
Gulf Coast Express Pipeline LLC | Permian Highway Pipeline LLC | Breviloba, LLC | ||||||||||||||||||||||||
Total(2) | ||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | $ | ||||||||||||||||||||||
Acquisitions | ||||||||||||||||||||||||||
Distributions | ( |
( |
( |
( |
||||||||||||||||||||||
Equity income, net(1) |
||||||||||||||||||||||||||
Balance at March 31, 2022 | $ | $ | $ | $ |
Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||||||||||||||
Gulf Coast Express Pipeline LLC | Permian Highway Pipeline LLC | Breviloba, LLC | Gulf Coast Express Pipeline LLC(1) |
Permian Highway Pipeline LLC(1) |
Breviloba, LLC(1) | |||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||
Revenues | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Operating income | ||||||||||||||||||||||||||||||||||||||
Net income | ||||||||||||||||||||||||||||||||||||||
Units Outstanding | Amount (3) | |||||||||||||
(In thousands, except for unit data) | ||||||||||||||
Redeemable noncontrolling interest — Preferred Units, immediately upon Closing Date of Transaction(1) |
$ | |||||||||||||
Distribution payable to Preferred Unit limited partners | — | ( |
||||||||||||
Allocation of net income | — | |||||||||||||
Redeemable noncontrolling interest — Preferred Units, as of March 31, 2022 | ||||||||||||||
Embedded derivative liability(2) |
||||||||||||||
$ |
Three Months Ended March 31, | |||||||||||||||||
2022 | 2021 | ||||||||||||||||
(In thousands) | |||||||||||||||||
Current tax expense: | |||||||||||||||||
Federal | $ | $ | |||||||||||||||
State and local | |||||||||||||||||
Total current tax expense | |||||||||||||||||
Deferred tax expense: | |||||||||||||||||
Federal | |||||||||||||||||
State and Local | |||||||||||||||||
Total deferred tax expense | |||||||||||||||||
Total income tax expense | $ | $ |
Three Months Ended | ||||||||||||||
March 31, 2022 | ||||||||||||||
U.S. statutory rate(1) |
% | |||||||||||||
Tax attributable to Noncontrolling interest - Common Units limited partners | ( |
% | ||||||||||||
Tax attributable to Noncontrolling interest - Preferred Units limited partners | ( |
% | ||||||||||||
State tax rate | % | |||||||||||||
Other | % | |||||||||||||
Valuation allowance | ( |
% | ||||||||||||
Effective rate | % | |||||||||||||
(In thousands) | Amount | |||||||||||||
Balance as of January 1, 2022 | $ | |||||||||||||
Increase related to ALTM acquisition | ||||||||||||||
Reduction related to current year activities | ( |
|||||||||||||
Balance as of March 31, 2022 | $ |
Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||
Income | Weighted-average shares | Per Share | Income | Weighted-average shares | Per Share | ||||||||||||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||||||||||||||
Basic: | |||||||||||||||||||||||||||||||||||
Net income attributable to Class A common shareholders | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||||||||||||||||
Replacement Awards | |||||||||||||||||||||||||||||||||||
Diluted(1)(2): |
|||||||||||||||||||||||||||||||||||
Net income attributable to Class A common shareholders | $ | $ | $ | $ |
March 31, 2022 | ||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Interest rate derivatives | $ | $ | $ | $ | ||||||||||||||||||||||
Total assets | ||||||||||||||||||||||||||
Mandatorily redeemable Preferred Units | ||||||||||||||||||||||||||
Embedded derivative | ||||||||||||||||||||||||||
Public warrants | ||||||||||||||||||||||||||
Private warrants | ||||||||||||||||||||||||||
Interest rate derivatives | ||||||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | ||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Commodity swaps | $ | $ | $ | $ | ||||||||||||||||||||||
Interest rate derivatives | ||||||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ |
Midstream Logistics | Pipeline Transportation | Corporate and Other(1) |
Consolidated(2) | ||||||||||||||||||||||||||
For the three months ended 3/31/2022 | (In thousands) | ||||||||||||||||||||||||||||
Segment net income (loss) including noncontrolling interests | $ | $ | $ | ( |
$ | ||||||||||||||||||||||||
Add back: | |||||||||||||||||||||||||||||
Interest expense (income) | ( |
||||||||||||||||||||||||||||
(Gain) on redemption of mandatorily redeemable Preferred units | ( |
( |
|||||||||||||||||||||||||||
Income tax expense (benefit) | ( |
||||||||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||||||||
Contract assets amortization | |||||||||||||||||||||||||||||
Proportionate EMI EBITDA | |||||||||||||||||||||||||||||
Share-based compensation | |||||||||||||||||||||||||||||
Loss on disposal of assets | |||||||||||||||||||||||||||||
Loss on debt extinguishment | |||||||||||||||||||||||||||||
Unrealized loss on derivatives | |||||||||||||||||||||||||||||
Integration costs | |||||||||||||||||||||||||||||
Acquisition transaction costs | |||||||||||||||||||||||||||||
Other one-time costs or amortization | |||||||||||||||||||||||||||||
Deduct: | |||||||||||||||||||||||||||||
Equity (income) from unconsolidated affiliates | |||||||||||||||||||||||||||||
Segment adjusted EBITDA | $ | $ | $ | ( |
$ | ||||||||||||||||||||||||
Midstream Logistics | Pipeline Transportation | Corporate and Other(1) |
Consolidated (2) | ||||||||||||||||||||||||||
For the three months ended 3/31/2021 | (In thousands) | ||||||||||||||||||||||||||||
Segment net income (loss) including noncontrolling interests | $ | $ | $ | ( |
$ | ||||||||||||||||||||||||
Add back: | |||||||||||||||||||||||||||||
Interest expense (income) | ( |
||||||||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||||||||
Contract assets amortization | |||||||||||||||||||||||||||||
Proportionate EMI EBITDA | |||||||||||||||||||||||||||||
Loss on disposal of assets | |||||||||||||||||||||||||||||
Gain on debt extinguishment | ( |
( |
|||||||||||||||||||||||||||
Derivatives loss due to Winter Storm Uri | |||||||||||||||||||||||||||||
Other one-time costs or amortization | ( |
||||||||||||||||||||||||||||
Deduct: | |||||||||||||||||||||||||||||
Interest and other income | |||||||||||||||||||||||||||||
Equity (income) from unconsolidated affiliates | |||||||||||||||||||||||||||||
Segment adjusted EBITDA | $ | $ | $ | ( |
$ | ||||||||||||||||||||||||
Midstream Logistics | Pipeline Transportation | Corporate and Other(1) |
Consolidated | ||||||||||||||||||||||||||
For the three months ended 3/31/2022 | (In thousands) | ||||||||||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||||||||
Other revenue | $ | ||||||||||||||||||||||||||||
Total segment operating revenue | $ | $ | $ | $ |
Midstream Logistics | Pipeline Transportation | Corporate and Other(1) |
Consolidated | ||||||||||||||||||||||||||
For the three months ended 3/31/2021 | (In thousands) | ||||||||||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||||||||
Other revenue | $ | ||||||||||||||||||||||||||||
Total segment operating revenue | $ | $ | $ | $ |
March 31, | December 31, | |||||||||||||
2022 | 2021 | |||||||||||||
(In thousands) | ||||||||||||||
Midstream Logistics | $ | $ | ||||||||||||
Pipeline Transportation | ||||||||||||||
Segment total assets | ||||||||||||||
Corporate and other | ||||||||||||||
Total assets | $ | $ | ||||||||||||
Three Months Ended March 31,* | Variance | ||||||||||||||||||||||
2022 | 2021 | $ | % | ||||||||||||||||||||
Reconciliation of net income including noncontrolling interests to Adjusted EBITDA | (In thousands) | ||||||||||||||||||||||
Net income including noncontrolling interests | $ | 21,389 | $ | 18,136 | $ | 3,253 | 18 | % | |||||||||||||||
Add back: | |||||||||||||||||||||||
Interest expense | 26,645 | 25,549 | 1,096 | 4 | % | ||||||||||||||||||
Gain on redemption of mandatorily redeemable Preferred Units | (4,493) | — | (4,493) | NM | |||||||||||||||||||
Income tax expense | 676 | — | 676 | NM | |||||||||||||||||||
Depreciation and amortization | 61,023 | 55,971 | 5,052 | 9 | % | ||||||||||||||||||
Amortization of contract costs | 448 | 448 | — | — | % | ||||||||||||||||||
Proportionate EMI EBITDA | 40,741 | 16,256 | 24,485 | 151 | % | ||||||||||||||||||
Share-based compensation | 6,132 | — | 6,132 | NM | |||||||||||||||||||
Loss on sale of assets | 110 | 32 | 78 | 244 | % | ||||||||||||||||||
Loss (gain) on debt extinguishment | 129 | (239) | 368 | (154) | % | ||||||||||||||||||
Unrealized loss on derivatives | 2,886 | — | 2,886 | NM | |||||||||||||||||||
Derivative loss due to Winter Storm Uri | — | 13,456 | (13,456) | (100) | % | ||||||||||||||||||
Integration Costs | 6,151 | — | 6,151 | NM | |||||||||||||||||||
Transaction Costs | 5,676 | — | 5,676 | NM | |||||||||||||||||||
Other one-time cost or amortization | 1,195 | 328 | 867 | 264 | % | ||||||||||||||||||
Deduct: | |||||||||||||||||||||||
Interest and other income | — | 16 | (16) | (100) | % | ||||||||||||||||||
Equity income from unconsolidated affiliates | 27,917 | 11,355 | 16,562 | 146 | % | ||||||||||||||||||
Adjusted EBITDA | $ | 140,791 | $ | 118,566 | $ | 22,225 | 19 | % |
Three Months Ended March 31,* | Variance | |||||||||||||||||||||||||
2022 | 2021 | $ | % | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Midstream Logistics | $ | 102,890 | $ | 105,800 | $ | (2,910) | (3) | % | ||||||||||||||||||
Pipeline Transportation | 40,437 | 15,322 | 25,115 | 164 | % | |||||||||||||||||||||
Corporate and Other(1) |
(2,536) | (2,556) | 20 | (1) | % | |||||||||||||||||||||
Total segment adjusted EBITDA | $ | 140,791 | $ | 118,566 | $ | 22,225 | 19 | % | ||||||||||||||||||
Three Months Ended March 31,* | Variance | ||||||||||||||||||||||
2022 | 2021 | $ | % | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Service revenue | $ | 80,445 | $ | 67,662 | $ | 12,783 | 19 | % | |||||||||||||||
Product revenue | 174,928 | 79,993 | 94,935 | 119 | % | ||||||||||||||||||
Other revenue | 1,876 | 448 | 1,428 | 319 | % | ||||||||||||||||||
Total revenues | 257,249 | 148,103 | 109,146 | 74 | % | ||||||||||||||||||
Operating costs and expenses: | |||||||||||||||||||||||
Costs of sales (exclusive of depreciation and amortization) | 120,275 | 37,005 | 83,270 | 225 | % | ||||||||||||||||||
Operating expense | 29,871 | 15,564 | 14,307 | 92 | % | ||||||||||||||||||
Ad valorem taxes | 4,153 | 2,351 | 1,802 | 77 | % | ||||||||||||||||||
General and administrative | 22,752 | 5,626 | 17,126 | 304 | % | ||||||||||||||||||
Depreciation and amortization | 61,023 | 55,971 | 5,052 | 9 | % | ||||||||||||||||||
Loss on disposal of assets | 110 | 32 | 78 | 244 | % | ||||||||||||||||||
Total operating costs and expenses | 238,184 | 116,549 | 121,635 | 104 | % | ||||||||||||||||||
Operating income | 19,065 | 31,554 | (12,489) | (40) | % | ||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||
Interest and other income | 250 | 537 | (287) | (53) | % | ||||||||||||||||||
Gain on Preferred Units redemption | 4,493 | — | 4,493 | NM | |||||||||||||||||||
Unrealized loss on derivatives | (2,886) | — | (2,886) | NM | |||||||||||||||||||
Interest expense | (26,774) | (25,310) | (1,464) | 6 | % | ||||||||||||||||||
Equity in earnings of unconsolidated affiliate | 27,917 | 11,355 | 16,562 | 146 | % | ||||||||||||||||||
Total other income (expense), net | 3,000 | (13,418) | 16,418 | (122) | % | ||||||||||||||||||
Income before income tax | 22,065 | 18,136 | 3,929 | 22 | % | ||||||||||||||||||
Current income tax expense | 676 | — | 676 | NM | |||||||||||||||||||
Net income including noncontrolling interests | $ | 21,389 | $ | 18,136 | $ | 3,253 | 18 | % | |||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
(In thousands) | ||||||||||||||
Cash provided by operating activities | $ | 98,393 | $ | 41,594 | ||||||||||
Cash used in investing activities | $ | (19,392) | $ | (41,057) | ||||||||||
Cash (used in) provided by financing activities | $ | (80,084) | $ | 10,795 | ||||||||||
March 31, | December 31, | |||||||||||||
2022 | 2021 | |||||||||||||
(In thousands) | ||||||||||||||
Cash and cash equivalents | $ | 17,646 | $ | 18,729 | ||||||||||
Total debt | $ | 2,948,349 | $ | 2,307,702 | ||||||||||
Available committed borrowing capacity | $ | 269,000 | $ | 133,000 |
* 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. |
KINETIK HOLDINGS INC. | |||||||||||
Dated: | May 10, 2022 | /s/ Jamie Welch | |||||||||
Jamie Welch | |||||||||||
Chief Executive Officer, President, Chief Financial Officer and Director | |||||||||||
(Principal Executive Officer) | |||||||||||
Dated: | May 10, 2022 | /s/ Steven Stellato | |||||||||
Steven Stellato | |||||||||||
Executive Vice President, Chief Accounting and Chief Administrative Operating Officer | |||||||||||
(Principal Financial Officer) |
Exhibit 10.4
KINETIK HOLDINGS INC.
2019 Omnibus Compensation Plan
Section 1
Introduction
1.1 Establishment. Kinetik Holdings Inc., a Delaware corporation (hereinafter referred to, together with its Affiliates (as defined below) as the Company except where the context otherwise requires), hereby establishes the Kinetik Holdings Inc. 2019 Omnibus Compensation Plan (as amended from time to time, the Plan).
1.2 Purpose. The purpose of the Plan is to provide Eligible Persons designated by the Committee for participation in the Plan with equity-based incentives to: (i) encourage such individuals to continue in the long-term service of the Company and its Affiliates, (ii) create in such individuals a more direct interest in the future success of the operations of the Company, (iii) attract outstanding individuals, and (iv) retain and motivate such individuals. The Plan is intended to provide eligible individuals with the opportunity to acquire an equity interest in the Company, thereby relating incentive compensation to increases in stockholder value and more closely aligning the compensation of such individuals with the interests of the Companys stockholders.
Accordingly, this Plan provides for the granting of Incentive Stock Options, Non-Qualified Stock Options, Performance Awards, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Cash-Based Awards, Dividend Equivalents or any combination of the foregoing, as the Committee determines is best suited to the circumstances of the particular individual as provided herein.
1.3 Effective Date. The Effective Date of the Plan (the Effective Date) was May 30, 2019 and the Plan was amended on May 10, 2022 to reflect the Companys name change and certain other non-material updates. This Plan and each Award granted hereunder are conditioned on and shall be of no force or effect until the Plan is approved by the stockholders of the Company. The Committee (or its delegate in accordance with Section 3.4(b) hereof) may grant Awards, the entitlement to which shall be expressly subject to the condition that the Plan shall have been approved by the stockholders of the Company.
Section 2
Definitions
2.1 Definitions. The following terms shall have the meanings set forth below:
(a) Administrative Agent means any designee or agent that may be appointed by the Committee pursuant to subsections 3.1(h) and 3.4 hereof.
(b) Affiliate means any entity other than the Company that is affiliated with the Company through stock or equity ownership or otherwise and is designated as an Affiliate for purposes of the Plan by the Committee; provided, however, that, notwithstanding any other provisions of the Plan to the contrary, for purposes of NQSOs and SARs, if an individual who otherwise qualifies as an Eligible Person provides services to such an entity and not to the Company, such entity may only be designated an Affiliate if the Company qualifies as a service recipient, within the meaning of Internal Revenue Code Section 409A, with respect to such individual; provided further that such definition of service recipient shall be determined by (a) applying Internal Revenue Code Section 1563(a)(1), (2), and (3), for purposes of determining a controlled group of corporations under Internal Revenue Code Section 414(b), using the language at least 50 percent instead of at least 80 percent each place it appears in Internal Revenue Code Section 1563(a)(1), (2), and (3), and by applying Treasury Regulations Section 1.414(c)-2, for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Internal Revenue Code Section 414(c), using the language at least 50 percent instead of at least 80 percent each place it appears in Treasury Regulations Section 1.414(c)-2 and (b) where the use of shares of Stock with respect to the grant of a NQSO or SAR to such an individual is based upon legitimate business criteria, by applying Internal Revenue Code Section 1563(a)(1), (2), and (3), for purposes of determining a controlled group of corporations under Internal Revenue Code Section 414(b), using the language at least 20 percent instead of at least 80 percent at each place it appears in Internal Revenue Code Section 1563(a)(1), (2), and (3), and by applying Treasury Regulations Section 1.414(c)-2, for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Internal Revenue Code Section 414(c), using the language at least 20 percent instead of at least 80 percent at each place it appears in Treasury Regulations Section 1.414(c)-2; provided, further that for purposes of ISOs, Affiliate shall mean any present or future corporation which is or would be a parent corporation or a subsidiary corporation of the Company as those terms are defined in Sections 424(e) and 424(f), respectively, of the Internal Revenue Code.
(c) Award means any Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent, Cash-Based Award or any other cash or stock-based award granted to a Participant under the Plan.
(d) Board means the Board of Directors of the Company.
(e) Cash-Based Award is an Award, denominated in cash, determined in accordance with subsection 10.1 of this Plan.
(f) Change of Control shall mean the occurrence of an event in which any one person or more than one person acting as a group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than a Stockholder (as defined in the Stockholders Agreement) or its Affiliate, acquires beneficial ownership of more than fifty percent (50%) of the voting power of the Companys outstanding capital stock. Notwithstanding anything in this definition of Change of Control to the contrary, in any event in which compensation payable pursuant to this Plan would be subject to the tax under Section 409A of the Internal Revenue Code when the foregoing definition is used, then Change of Control means an event that satisfies the requirements of a change in control event within the meaning of Treasury Regulations Section 1.409A-3(i)(5).
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(g) Committee means the Compensation Committee of the Company; provided, however, that in the event the Compensation Committee of the Company does not consist of at least two non-employee directors (as defined in Rule 16b-3 under the Exchange Act), then, with respect to Awards granted to Participants who are subject to the reporting requirements of Section 16 of the Exchange Act, Committee shall mean the full Board.
(h) Deferred Delivery Plan means the Companys Deferred Delivery Plan, as it has been or may be amended from time to time, or any successor plan.
(i) Dividend Equivalent means a right, granted to an Eligible Person to receive cash, Stock, other Awards, or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments.
(j) Eligible Persons mean those employees of the Company or of any Affiliates, members of the Board, and members of the board of directors of any Affiliates who, in all cases, are providing services to the Company and are designated as Eligible Persons by the Committee. Notwithstanding the foregoing, grants of Incentive Stock Options may not be granted to anyone who is not an employee of the Company or an Affiliate.
(k) Exchange Act means the Securities Exchange Act of 1934, as amended.
(l) Exercise Date means the date of exercise determined in accordance with subsection 6.2(g) hereof.
(m) Fair Market Value means the fair market value of a share of Stock as determined by the Committee by reasonable application of a reasonable valuation method, consistently applied, as the Committee deems appropriate; provided, however, that if the Committee has not made such determination, such fair market value shall be the per share closing price of the Stock as reported on the exchange on which the Stock is listed; provided further, however, that if on the date Fair Market Value is to be determined there are no transactions in the Stock, Fair Market Value shall be determined as of the immediately preceding date on which there were transactions in the Stock; provided further, however, that, with respect to ISOs, such Fair Market Value shall be determined subject to Section 422(c)(7) of the Internal Revenue Code. For purposes of the foregoing, a valuation prepared in accordance with any of the methods set forth in Treasury Regulation Section 1.409A-1(b)(5)(iv)(B)(2), consistently used, shall be rebuttably presumed to result in a reasonable valuation. This definition is intended to comply with the definition of fair market value contained in Treasury Regulation Section 1.409A-1(b)(5)(iv) and should be interpreted consistently therewith.
(n) Incentive Stock Option or ISO means any Option intended to be and designated as an incentive stock option and which satisfies the requirements of Section 422 of the Internal Revenue Code or any successor provision thereto.
3
(o) Internal Revenue Code or Code means the Internal Revenue Code of 1986, as it may be amended from time to time, and any successor thereto. Any reference to a section of the Internal Revenue Code or Treasury Regulation shall be treated as a reference to any successor section.
(p) Involuntary Termination means the termination of employment of the Participant by the Company or applicable Affiliate (or successor to either of the foregoing, as applicable) for any reason on or after a Change of Control; provided, that the termination does not result from an act of the Participant that constitutes common law fraud, a felony, or gross malfeasance of duty.
(q) Non-Qualified Stock Option or NQSO means any Option that is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code.
(r) Option means an option to purchase a number of shares of Stock granted pursuant to subsection 6.1.
(s) Option Price means the price at which shares of Stock subject to an Option may be purchased, determined in accordance with subsection 6.2(b) hereof.
(t) Participant means an Eligible Person designated by the Committee, from time to time during the term of the Plan, to receive one or more Awards under the Plan.
(u) Performance Award is a right to a payment in cash or a number of shares of Stock (Performance Shares) determined (in either case) in accordance with Section 9 of this Plan based on the extent to which the applicable Performance Goals are achieved. A Performance Share shall be of no value to a Participant unless and until earned in accordance with Section 9 hereof.
(v) Performance Goals are the performance conditions, if any, established pursuant to subsection 9.2 by the Committee in connection with an Award.
(w) Performance Period with respect to a Performance Award means one or more periods of time as the Committee may select, over which the attainment of one or more Performance Goals will be measured; provided, that, if that Committee does not select a period of less than a year, each such period shall not be less than one calendar year or one fiscal year of the Company, beginning not earlier than the year in which such Performance Award is granted, which may be referred to herein and by the Committee by use of the calendar of fiscal year in which a particular Performance Period commences.
(x) Restricted Stock means Stock granted to an Eligible Person under Section 8 hereof, that is subject to certain restrictions and to a risk of forfeiture.
(y) Restricted Stock Unit means a right, granted to an Eligible Person under Section 8 hereof, to receive Stock, cash, or a combination thereof at the end of a specified vesting period.
(z) Restriction Period shall have the meaning assigned to such term in subsection 8.1.
4
(aa) Stock means the $0.0001 par value, Class A common stock of the Company and or any security into which such common stock is converted or exchanged upon merger, consolidation, or any capital restructuring (within the meaning of Section 14) of the Company.
(bb) Stock Appreciation Right or SAR means a right granted to an Eligible Person to receive an amount in cash, Stock, or other property equal to the excess of the Fair Market Value as of the Exercise Date of one share of Stock over the SAR Price times the number of shares of Stock to which the Stock Appreciation Right relates. Stock Appreciation Rights may be granted in tandem with Options or other Awards or may be freestanding.
(cc) Stockholders Agreement means the Amended and Restated Stockholders Agreement, dated as of October 21, 2021, entered into by the Company and the other parties thereto, as amended from time to time.
(dd) SAR Price means the price at which the Stock Appreciation Right was granted, which shall be determined in the same manner as the Option Price of an Option in accordance with subsection 6.2 hereof.
(ee) Voluntary Termination with Cause occurs upon a Participants separation from service of his own volition and one or more of the following conditions occurs without the Participants consent on or after a Change of Control:
(i) There is a material diminution in the Participants base compensation, compared to his rate of base compensation on the date of the Change of Control.
(ii) There is a material diminution in the Participants authority, duties, or responsibilities.
(iii) There is a material diminution in the authority, duties, or responsibilities of the Participants supervisor, such as a requirement that the Participant (or his supervisor) report to a corporate officer or employee instead of reporting directly to the board of directors.
(iv) There is a material diminution in the budget over which the Participant retains authority.
(v) There is a material change in the geographic location at which the Participant must regularly perform his or her service, including, for example the assignment of the Participant to a regular workplace that is more than 50 miles from his or her regular workplace on the date of the Change of Control.
The Participant must notify the Company of the existence of one or more adverse conditions specified in clauses (i) through (iii) above within 90 days of the initial existence of the adverse condition. The notice must be provided in writing to the Companys Head of Human Resources or his/her delegate. The notice may be provided by personal delivery or it may be sent by email, inter-
5
office mail, regular mail (whether or not certified), fax, or any similar method. The Companys Head of Human Resources or his/her delegate shall acknowledge receipt of the notice within 5 business days; the acknowledgement shall be sent to the Participant by certified mail. Notwithstanding the foregoing provisions of this definition, if the Company remedies the adverse condition within 30 days of being notified of the adverse condition, no Voluntary Termination with Cause shall occur.
2.2 Headings; Gender and Number. The headings contained in the Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of the Plan. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definition of any term herein in the singular shall also include the plural.
Section 3
Plan Administration
3.1 Administration by the Committee. The Plan shall be administered by the Committee. In accordance with the provisions of the Plan, the Committee shall, in its sole discretion, adopt rules and regulations for carrying out the purposes of the Plan, including, without limitation, the authority to:
(a) Grant Awards;
(b) Select the Eligible Persons and the time or times at which Awards shall be granted;
(c) Determine the type and number of Awards to be granted, the number of shares of Stock to which an Award may relate and the terms, conditions, restrictions, and Performance Goals relating to any Award;
(d) Determine whether, to what extent, and under what circumstances an Award may be settled, canceled, forfeited, exchanged, or surrendered;
(e) Construe and interpret the Plan and any Award;
(f) Prescribe, amend, and rescind rules and procedures relating to the Plan;
(g) Determine the terms and provisions of Award agreements;
(h) Appoint designees or agents (who need not be members of the Committee or employees of the Company or of any Affiliate) to assist the Committee with the administration of the Plan;
(i) Communicate the material terms of each Award to its recipient within a relatively short period of time after approval; and
(j) Make all other determinations deemed necessary or advisable for the administration of the Plan and Award agreements.
6
3.2 Committee Discretion. The Committee shall, in its absolute discretion, and without amendment to the Plan, have the power to waive or modify, at any time, any term or condition of an Award that is not mandatory under this Plan. Further, the Committee shall have the power to accelerate an Award in the event of (i) the death or disability of a Participant, (ii) upon the occurrence of a Change of Control, or (iii) any other circumstances the Committee may determine. In the event of a Change of Control, the provisions of Section 13 hereof shall be mandatory and shall govern the vesting and exercisability schedule of any Award granted hereunder.
3.3 Indemnification. No member of the Committee shall be liable for any action, omission, or determination made in good faith. The Company shall indemnify (to the extent permitted under Delaware law) and hold harmless each member of the Committee and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any action, omission, or determination relating to the Plan, unless, in either case, such action, omission, or determination was taken or made by such member, director, or employee in bad faith and without reasonable belief that it was in the best interests of the Company. The determination, interpretations, and other actions of the Committee pursuant to the provisions of the Plan shall be binding and conclusive for all purposes and on all persons.
3.4 Committee Delegation.
(a) The Committee may from time to time adopt such rules and regulations for carrying out the purposes of the Plan as it may deem proper and in the best interests of the Company. The Committee may appoint an Administrative Agent, who need not be a member of the Committee or an employee of the Company, to assist the Committee in administration of the Plan and to whom it may delegate such powers as the Committee deems appropriate, except that the Committee shall determine any dispute. The Committee may correct any defect, supply any omission, or reconcile any inconsistency in the Plan, or in any Award agreement entered into hereunder, in the manner and to the extent it shall deem expedient, and it shall be the sole and final judge of such inconsistency.
(b) The Committee has delegated authority to the Chief Executive Officer of the Company to grant Awards to employees of the Company who are not the Companys executive officers (as such term is defined for purposes of Section 16 of the Exchange Act) and who are below the level of Senior Vice President; provided, that any such Awards may only be granted in accordance with guidelines established by the Committee.
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Section 4
Stock Subject to the Plan
4.1 Number of Shares. Subject to adjustments pursuant to Section 4.4 hereof, up to 561,969 shares of Stock are authorized for issuance under the Plan subject to such restrictions or other provisions as the Committee may from time to time deem necessary. Notwithstanding the foregoing, the number of aggregate shares of Stock available for issuance under the Plan at any given time shall be reduced by (i) 1.0 share for each share of Stock granted in the form of Stock Options or Stock Appreciation Rights or (ii) 1.0 shares for each share of Stock granted in the form of any Award that is not an Option or Stock Appreciation Right. During the duration of the Plan, no Eligible Person may be granted Options which in the aggregate cover in excess of 5 percent of the total shares of Stock authorized under the Plan. No Award may be granted under the Plan on or after the 10-year anniversary of the Effective Date. The foregoing to the contrary notwithstanding, within the aggregate limit described in the first sentence of this Section 4.1, up to 561,969 shares of Stock may be issued pursuant to ISOs granted under the Plan.
4.2 Availability of Shares Not Issued under Awards. If shares of Stock which may be issued pursuant to the terms of the Plan awarded hereunder are forfeited, cancelled, exchanged, or surrendered or if an Award otherwise terminates or expires without a distribution of shares to the holder of such Award, the shares of Stock with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination, or expiration, again be available for Awards under the Plan; provided, however, that in such case, the number of shares of Stock that may be issued under the Plan shall increase by 1.0 share for each share related to a Stock Option or a Stock Appreciation Right that is so forfeited, cancelled, exchanged, surrendered, or expired and by 1.0 shares for each such share which is not related to a Stock Option or a Stock Appreciation Right. The number of shares available shall not be increased by shares tendered, surrendered or withheld in connection with the exercise or settlement of an Award or the related tax withholding obligations. Furthermore, when a SAR is settled in shares, the number of shares subject to the SAR under the SAR Award agreement will be counted against the aggregate number of shares with respect to which Awards may be granted under the Plan as one share for every share subject to the SAR, regardless of the number of shares used to settle the SAR upon exercise.
4.3 Stock Offered. The Company shall at all times during the term of the Plan retain as authorized and unissued Stock and/or Stock in the Companys treasury, at least the number of shares from time to time require under the provisions of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder.
4.4 Adjustments for Stock Split, Stock Dividend, Etc. If the Company shall at any time increase or decrease the number of its outstanding shares of Stock or change in any way the rights and privileges of such shares by means of the payment of a Stock dividend or any other distribution upon such shares payable in Stock or rights to acquire Stock, or through a Stock split, reverse Stock split, subdivision, consolidation, combination, reclassification, or recapitalization involving the Stock (any of the foregoing being herein called a capital restructuring), then in relation to the Stock that is affected by one or more of the above events, the numbers, rights, and privileges of the following shall be, in each case, equitably and proportionally adjusted to take into account
8
the occurrence of any of the above events: (i) the number and kind of shares of Stock or other property (including cash) that may thereafter be issued pursuant to subsections 4.1 and 4.10, (ii) the number and kind of shares of Stock or other property (including cash) issued or issuable in respect of outstanding Awards, (iii) the exercise price, grant price, or purchase price relating to any Award, (iv) the Performance Goals, and (v) the individual limitations applicable to Awards, provided that, with respect to Incentive Stock Options, such adjustment in clauses (i), (ii), and (iii) shall be made in accordance with Section 424(h) of the Internal Revenue Code.
4.5 Other Changes in Stock. In the event there shall be any change, other than as specified in subsections 4.4 hereof, in the number or kind of outstanding shares of Stock or of any stock or other securities into which the Stock shall be changed or for which it shall have been exchanged, and if the Committee shall in its discretion determine that such change equitably requires an adjustment in the number or kind of shares subject to outstanding Awards or which have been reserved for issuance pursuant to the Plan but are not then subject to an Award, then such adjustments shall be made by the Committee and shall be effective for all purposes of the Plan and on each outstanding Award that involves the particular type of stock for which a change was effected.
4.6 Rights to Subscribe. If the Company shall at any time grant to the holders of its Stock rights to subscribe pro rata for additional shares thereof or for any other securities of the Company or of any other corporation, there shall be reserved with respect to the shares then under an outstanding Award to any Participant of the particular class of Stock involved the Stock or other securities which the Participant would have been entitled to subscribe for if immediately prior to such grant the Participant had exercised his entire Option. If, upon exercise of any such Option, the Participant subscribes for the additional shares or other securities, the aggregate Option Price shall be increased by the amount of the price that is payable by the Participant for such additional shares or other securities as if the Participant had exercised his entire Option immediately prior to the grant of such additional shares or other securities.
4.7 General Adjustment Rules. No adjustment or substitution provided for in this Section 4 shall require the Company to sell a fractional share of Stock under any Option, or otherwise issue a fractional share of Stock, and the total substitution or adjustment with respect to each Option shall be limited by deleting any fractional share. In the case of any such substitution or adjustment, the aggregate Option Price for the shares of Stock then subject to the Option shall remain unchanged but the Option Price per share under each such Option shall be equitably adjusted by the Committee to reflect the greater or lesser number of shares of Stock or other securities into which the Stock subject to the Option may have been changed.
4.8 Determination by the Committee, Etc. Adjustments under this Section 4 shall be made by the Committee, whose determinations with regard thereto shall be final and binding upon all parties.
4.9 Code Section 409A. For any Award that is not subject to Internal Revenue Code Section 409A before the adjustments identified in the preceding sections of this Section 4, no adjustment shall be made that would cause the Award to become subject to Internal Revenue Code Section 409A. For an Award that is subject to Internal Revenue Code Section 409A before the adjustments identified in the preceding sections of this Section 4, no adjustment shall cause the Award to violate Internal Revenue Code Section 409A, without the prior written consent of both the Participant and the Committee.
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4.10 Award Limits. The following limits shall apply to grants of all Awards under the Plan:
(a) Options: The maximum aggregate number of shares of Stock that may be subject to Options granted in any calendar year to any one Participant shall be 1,250,000 shares.
(b) SARs: The maximum aggregate number of shares that may be subject to Stock Appreciation Rights granted in any calendar year to any one Participant shall be 1,250,000 shares. Any shares covered by Options which include tandem SARs granted to one Participant in any calendar year shall reduce this limit on the number of shares subject to SARs that can be granted to such Participant in such calendar year.
(c) Restricted Stock or Restricted Stock Units: The maximum aggregate number of shares of Stock that may be subject to Awards of Restricted Stock or Restricted Stock Units granted in any calendar year to any one Participant shall be 500,000 shares.
(d) Performance Awards: The maximum aggregate grant with respect to Performance Awards granted in any calendar year to any one Participant shall be 500,000 shares (or SARs based on the value of such number of shares). If any Performance Award is settled in cash, the amount of such cash can be no more than the Fair Market Value of the Stock underlying such Performance Award.
(e) Cash Payment: The maximum aggregate amount of compensation that may be paid under all Cash-Based Awards (including the Fair Market Value of any shares of Stock paid in satisfaction of such Cash-Based Awards) granted in any calendar year to any one Participant shall be $15,000,000.
(f) Non-Employee Directors: In addition to any other limitations set forth in this Section 4.10, Awards granted in the aggregate under the Plan during any calendar year to any one Participant who is a non-employee director shall be limited to an aggregate number of shares of Stock having a Fair Market Value on the grant date, plus any Cash-Based Award, not to exceed $300,000.00 in the aggregate.
4.11 Repayment/Forfeiture/Claw-back of Awards. Each Participants Award (including any proceeds, gains, or other economic benefit actually or constructively received by a Participant upon any receipt or exercise of any Award) shall be conditioned on repayment, forfeiture, or claw-back in accordance with the Companys claw-back policy, if any, the Sarbanes-Oxley Act of 2002 and/or the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, if applicable, and any other applicable law and the related Award agreement shall reflect any such condition.
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4.12 Dividend Equivalents. The Committee (or, pursuant to Section 3.4(b), the Chief Executive Officer of the Company) is authorized to grant Dividend Equivalents to a Participant, entitling the Participant to receive cash, Stock, other Awards, or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles, and subject to risk of forfeiture, as the Committee may specify. Notwithstanding the foregoing, Dividend Equivalents shall not be granted in connection with the grant of any Options or Stock Appreciation Right.
Section 5
Granting of Awards to Participants
5.1 Participation. Participants in the Plan shall be those Eligible Persons who, in the judgment of the Committee (or, pursuant to Section 3.4(b), the Chief Executive Officer of the Company), are performing, or during the term of their incentive arrangement will perform, vital services in the management, operation, and development of the Company or an Affiliate, and significantly contribute, or are expected to significantly contribute, to the achievement of the Companys long-term corporate economic objectives. Participants may be granted from time to time one or more Awards; provided, however, that the grant of each such Award shall be separately approved by the Committee or granted in accordance with Section 3.4(b) hereof, and receipt of one such Award shall not result in automatic receipt of any other Award. Upon determination that an Award is to be granted to a Participant, as soon as practicable, written notice shall be given to such person, specifying the terms, conditions, rights, and duties related thereto. Each Participant shall, if required by the Committee, enter into an agreement with the Company, in such form as the Committee shall determine and which is consistent with the provisions of the Plan, specifying such terms, conditions, rights, and duties. Awards shall be deemed to be granted as of the date specified in the grant resolution of the Committee (or, in the case of grants made pursuant to Section 3.4(b), in accordance with the guidelines established by the Committee), which date shall be the date of any related agreement with the Participant. In the event of any inconsistency between the provisions of the Plan and any such agreement entered into hereunder, the provisions of the Plan shall govern.
5.2 Notification to Participants and Delivery of Documents. As soon as practicable after such determinations have been made, each Participant shall be notified of (a) his/her designation as a Participant, (b) the date of grant, (c) the number and type of Awards granted to the Participant, (d) in the case of Performance Awards, the Performance Period and Performance Goals, (e) in the case of Restricted Stock or Restricted Stock Units, the Restriction Period (as defined in subsection 8.1), and (f) any other terms or conditions imposed by the Committee with respect to the Award.
5.3 Delivery of Award Agreement. This requirement for delivery of a written Award agreement is satisfied by electronic delivery of such agreement provided that evidence of the Participants receipt of such electronic delivery is available to the Company and such delivery is not prohibited by applicable laws and regulations.
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Section 6
Stock Options
6.1 Grant of Stock Options. Coincident with or following designation for participation in the Plan, an Eligible Person may be granted one or more Options. Grants of Options under the Plan shall be made by the Committee or in accordance with Section 3.4(b). In no event shall the exercise of one Option affect the right to exercise any other Option or affect the number of shares of Stock for which any other Option may be exercised, except as provided in subsection 6.2(j) hereof. Options that are intended to comply with Treasury Regulation Section 1.409A-1(b)(5)(i)(A) may be granted only if the requirements of Treasury Regulation Section 1.409A-1(b)(5)(iii) are satisfied.
6.2 Stock Option Agreements. Each Option granted under the Plan shall be identified as either an Incentive Stock Option or a Non-Qualified Stock Option (or, if no such identification is made, then it shall be a Non-Qualified Stock Option) and evidenced by a written agreement which shall be entered into by the Company and the Participant to whom the Option is granted, and which shall contain the following terms and conditions set out in this subsection 6.2, as well as such other terms and conditions, not inconsistent therewith, as the Committee may consider appropriate.
(a) Number of Shares. Each Stock Option agreement shall state that it covers a specified number of shares of Stock, as determined by the Committee.
(b) Price. The price at which each share of Stock covered by an Option may be purchased, the Option Price, shall be determined in each case by the Committee and set forth in the Stock Option agreement. The price may vary according to a formula specified in the Stock Option agreement, but in no event shall the Option Price ever be less than the Fair Market Value of the Stock on the date the Option is granted.
(c) No Backdating. There shall be no backdating of Options, and each Option shall be dated the actual date that the Committee adopts the resolution awarding the grant of such Option.
(d) Limitations on Incentive Stock Options. No Incentive Stock Option may be granted to an individual if, at the time of the proposed grant, such individual owns (or is attributed to own by virtue of the Internal Revenue Code) Stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or any Affiliate unless (i) the exercise price of such Incentive Stock Option is at least 110 percent of the Fair Market Value of a share of Stock at the time such Incentive Stock Option is granted and (ii) such Incentive Stock Option is not exercisable after the expiration of five years from the date such Incentive Stock Option is granted.
To the extent that the aggregate Fair Market Value of Stock of the Company with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year under the Plan and any other option plan of the Company (or any Affiliate) shall exceed $100,000, such Options shall be treated as Non-Qualified Stock Options. Such Fair Market Value shall be determined as of the date on which each such Incentive Stock Option is granted.
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(e) Duration of Options. Each Stock Option agreement shall state the period of time, determined by the Committee, within which the Option may be exercised by the Participant (the Option Period). The Option Period must end, in all cases, not more than ten years from the date an Option is granted.
(f) Termination of Options. During the lifetime of a Participant to whom a Stock Option is granted, the Stock Option may be exercised only by such Participant or, in the case of disability (as determined pursuant to the Companys Long-Term Disability Plan or any successor plan) by the Participants designated legal representative, except to the extent such exercise would cause any Award intended to qualify as an ISO not to so qualify. Once a Participant to whom a Stock Option was granted dies, the Stock Option may be exercised only by the personal representative of the Participants estate or, with respect to Stock Options that are not Incentive Stock Options, as otherwise provided in Section 15.2. Unless the Stock Option agreement shall specify a longer or shorter period, at the discretion of the Committee, then the Participant (or representative, or, if applicable pursuant to Section 15.2, designated beneficiary) may exercise the Stock Option for a period of up to three months after such Participant terminates employment or ceases to be a member of the Board.
(g) Exercise, Payments, Etc.
(i) Each Stock Option agreement shall provide that the method for exercising the Option granted therein shall be by delivery to the Administrative Agent of written notice specifying the number of shares of Stock with respect to which such Option is exercised and payment to the Company of the aggregate Option Price. Such notice shall be in a form satisfactory to the Committee and shall specify the particular Options (or portions thereof) which are being exercised and the number of shares of Stock with respect to which the Options are being exercised. The Participants obligation to deliver written notice of exercise is satisfied by electronic delivery of such notice through means satisfactory to the Committee and prescribed by the Company. The exercise of the Option shall be deemed effective on the date such notice is received by the Administrative Agent and payment is made to the Company of the aggregate Option Price (the Exercise Date); however, if payment of the aggregate Option Price is made pursuant to a sale of shares of Stock as contemplated by subsection 6.2(g)(iv)(E) below, the Exercise Date shall be deemed to be the date of such sale. If requested by the Company, such notice shall contain the Participants representation that he or she is purchasing the Stock for investment purposes only and his or her agreement not to sell any Stock so purchased in any manner that is in violation of the Exchange Act or any applicable state law, and such restriction, or notice thereof, shall be placed on the certificates representing the Stock so purchased. The purchase of such Stock shall take place upon delivery of such notice to the Administrative Agent, at which time the aggregate Option Price shall be paid in full to the Company by any of the methods or any combination of the methods set forth in subsection 6.2(g)(iv) below.
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(ii) The shares of Stock to which the Participant is entitled as a result of the exercise of the Option shall be issued by the Company and either (A) delivered by electronic means to an account designated by the Participant or (B) delivered to the Participant in the form of a properly executed certificate or certificates representing such shares of Stock. If shares of Stock are used to pay all or part of the aggregate Option Price, the Company shall issue and deliver to the Participant the additional shares of Stock, in excess of the aggregate Option Price or portion thereof paid using shares of Stock, to which the Participant is entitled as a result of the Option exercise.
(iii) The Companys obligation to deliver the shares of Stock to which the Participant is entitled as a result of the exercise of the Option shall be subject to the payment in full to the Company by the Participant of the aggregate Option Price and the required tax withholding.
(iv) The aggregate Option Price shall be paid by any of the following methods or any combination of the following methods:
(A) in cash, including the wire transfer of funds in U.S. dollars to one of the Companys bank accounts located in the United States, with such bank account to be designated from time to time by the Company;
(B) by personal, certified, or cashiers check payable in U.S. dollars to the order of and acceptable to the Company;
(C) by delivery to the Company or the Administrative Agent of certificates representing a number of shares of Stock then owned by the Participant, the aggregate Fair Market Value of which (as of the Exercise Date) is equal to the aggregate Option Price of the Option being exercised, properly endorsed for transfer to the Company;
(D) by certification or attestation to the Company or the Administrative Agent of the Participants ownership (as of the Exercise Date) of a number of shares of Stock, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the aggregate Option Price of the Option being exercised; or
(E) by delivery to the Company or the Administrative Agent of a properly executed notice of exercise together with irrevocable instructions to a broker to promptly deliver to the Company, by wire transfer or check as noted in subsection 6.2(g)(iv)(A) and (B) above, the amount of the proceeds of the sale of all or a portion of the Stock or of a loan from the broker to the Participant necessary to pay the aggregate Option Price.
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(h) Tax Withholding. Each Stock Option agreement shall provide that, upon exercise of the Option, the Participant shall make appropriate arrangements with the Company to provide for not less than the minimum amount of tax withholding required by law, including without limitation Sections 3102 and 3402 or any successor section(s) of the Internal Revenue Code and applicable state and local income and other tax laws, by payment of such taxes in cash (including wire transfer), by check, or as provided in Section 12 hereof.
(i) Repricing Prohibited. Subject to Sections 4, 6, 13, 14, and 17, outstanding Stock Options granted under this Plan shall not be repriced without approval by the Companys stockholders. In particular, neither the Board nor the Committee may take any action: (1) to amend the terms of an outstanding Option or SAR to reduce the Option Price or grant price thereof, cancel an Option or SAR and replace it with a new Option or SAR with a lower Option Price or grant price, or take any other action (whether in the form of an amendment, cancellation or replacement grant, or a cash-out of underwater options) that has an economic effect that is the same as any such reduction or cancellation or (2) to cancel an outstanding Option or SAR having an Option Price or grant price above the then-current Fair Market Value of the Stock in exchange for the grant of another type of Award, without, in each such case, first obtaining approval of the stockholders of the Company of such action.
(j) Stockholder Privileges. No Participant shall have any rights as a stockholder with respect to any shares of Stock covered by an Option until the Participant becomes the holder of record of such Stock. Except as provided in Section 4 hereof, no adjustments shall be made for dividends or other distributions or other rights as to which there is a record date preceding the date on which such Participant becomes the holder of record of such Stock.
(k) Section 409A Avoidance. Once granted, no Stock Option shall be modified, extended, or renewed in any way that would cause the Stock Option to be subject to Internal Revenue Code Section 409A. The Option Period shall not be extended to any date that would cause the Stock Option to become subject to Internal Revenue Code Section 409A. The Option Price shall not be adjusted to reflect any dividends declared and paid on the Stock between the date of grant and the date the Stock Option is exercised.
(l) Vesting Period. Each Stock Option agreement shall state the vesting period (the period which ends as of a date that the Option is no longer restricted or subject to forfeiture) that applies to the specified number of shares of Stock granted pursuant thereto. In respect of the employees of the Company (including executive officers), such vesting period for the entire Option award shall in no event be less than three years following the grant date, and, subject to Sections 13 and 14 of the Plan, the Committee may not waive such minimum vesting period except in the case of the Participants death or disability.
Section 7
Stock Appreciation Rights
7.1 Stock Appreciation Rights. The Committee (or, if so provided pursuant to Section 3.4(b), the Chief Executive Officer of the Company) is authorized to grant SARs to Participants either alone (freestanding) or in tandem with other Awards, including Performance Awards, Options, and Restricted Stock. Stock Appreciation Rights granted in tandem with any Award must be granted at the same time as the Award is granted. Stock Appreciation Rights
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granted in tandem with Options shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Options. Options granted in tandem with Stock Appreciation Rights shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Appreciation Rights. The Committee shall establish the terms and conditions applicable to any Stock Appreciation Rights, which terms and conditions need not be uniform but may not be inconsistent with the terms of the Plan. Freestanding Stock Appreciation Rights shall generally be subject to terms and conditions substantially similar to those described in Section 4 and subsection 6.2 for Options, including, but not limited to, the requirements of subsections 6.2(b), (d), (i), and (l) and subsection 4.7 regarding general adjustment rules, minimum price, duration, and prohibition on repricing. SARs that are intended to comply with Treasury Regulation Section 1.409A-1 (b)(5)(i)(B) may be granted only if the requirements of Treasury Regulation Section 1.409A-1(b)(5)(iii) are satisfied.
7.2 Section 409A Avoidance. The SAR Price may be fixed on the date it is granted or the SAR Price may vary according to an objective formula specified by the Committee at the time of grant. However, the SAR Price can never be less than the Fair Market Value of the Stock on the date of grant. The SAR grant must specify the number of shares to which it applies, which must be fixed at the date of grant (subject to adjustment pursuant to Sections 4, 6, and 12). Once granted, no SAR shall be modified, extended, or renewed in any way that would cause the SAR to be subject to Internal Revenue Code Section 409A. The period during which the SAR may be exercised shall not be extended to any date that would cause the SAR to become subject to Internal Revenue Code Section 409A. The value of the SAR shall not be adjusted to reflect any dividends declared and paid on the Stock between the date of grant and the date the SAR is exercised.
Section 8
Restricted Stock and Restricted Stock Units
8.1 Restriction Period. At the time an Award of Restricted Stock or Restricted Stock Units is made, the Committee shall establish the terms and conditions applicable to such Award, including the period of time (the Restriction Period) and attainment of performance goals during which certain restrictions established by the Committee shall apply to the Award. In respect of the employees of the Company (including executive officers), such Restriction Period, the time ending as of the date upon which the entire Award of Restricted Stock or Restricted Stock Units is no longer restricted or subject to forfeiture provisions, shall in no event be less than three years following the initial grant date of the Award of Restricted Stock or Restricted Stock Units (such Restriction Period to include periods of time during which the achievement of specific performance goals or other performance is measured with respect to such Awards), and, subject to the other provisions of the Plan (including but not limited to Sections 11.4, 13 and 14 hereof), the Committee may not waive such minimum Restriction Period except in the case of the Participants death or disability. Awards of Restricted Stock or Restricted Stock Units may also be made in accordance with Section 3.4(b). Each such Award, and designated portions of the same Award, may have a different Restriction Period. Except as permitted or pursuant to the other provisions of the Plan (including but not limited to Sections 11.4, 13 and 14 hereof), the Restriction Period applicable to a particular Award shall not be changed. Restricted Stock or Restricted Stock Units may or may not be subject to Internal Revenue Code Section 409A. If they are subject to Internal
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Revenue Code Section 409A, the grant of the Restricted Stock or Restricted Stock Units must contain the provisions needed to comply with the requirements of Internal Revenue Code Section 409A, including but not limited to (i) the timing of any election to defer receipt of the Restricted Stock or Restricted Stock Units beyond the date of vesting, (ii) the timing of any payout election, and (iii) the timing of the settlement of Restricted Stock or a Restricted Stock Unit. Restricted Stock or Restricted Stock Units that are subject to Internal Revenue Code Section 409A may be adjusted to reflect any dividends declared and paid on the Stock between the date of grant and the date the Restricted Stock or Restricted Stock Unit vests, but only to the extent permitted in IRS guidance of general applicability.
8.2 Certificates for Stock. Restricted Stock shall be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock represented by a stock certificate registered in the name of the Participant.
8.3 Restricted Stock Terms and Conditions. Participants shall have the right to enjoy all shareholder rights during the Restriction Period with respect to Restricted Stock except that:
(a) The Participant shall not be entitled to delivery of the Stock certificate until the Restriction Period shall have expired.
(b) The Participant may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of the Stock during the Restriction Period.
(c) A breach of the terms and conditions established by the Committee with respect to the Restricted Stock shall cause a forfeiture of the Restricted Stock and any dividends withheld thereon.
8.4 Dividends and Splits. As a condition to the grant of an Award of Restricted Stock, the Committee may specify whether any cash dividends paid on a share of Restricted Stock be automatically reinvested in additional shares of Restricted Stock or applied to the purchase of additional Awards under this Plan. Unless otherwise determined by the Committee, Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed.
8.5 Restricted Stock Units. The Committee (or, if so provided pursuant to Section 3.4(b), the Chief Executive Officer of the Company) is authorized to grant Restricted Stock Units to Participants, which are rights to receive Stock at the end of a specified deferral period and which do not represent an equity interest in the Company, subject to the following terms and conditions:
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(a) Award and Restrictions. Settlement of an Award of Restricted Stock Units shall occur as specified for such Restricted Stock Unit by the Committee (or, if permitted by the Committee, as elected by the Participant pursuant to Section 8.5) in the related Award agreement. In addition, Restricted Stock Units shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at the expiration of the vesting or deferral period, as the case may be, or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, as the Committee may determine. Restricted Stock Units shall be satisfied by the delivery of cash or Stock in the amount equal to the Fair Market Value of the specified number of shares of Stock covered by the Restricted Stock Units, or a combination thereof, as determined by the Committee at the date of grant or thereafter.
8.6 Deferral of Receipt of Settlement Proceeds of Restricted Stock Units. With the consent of the Committee, a Participant who has been granted a Restricted Stock Unit may by compliance with the then applicable procedures under the Plan irrevocably elect in writing to defer receipt of all or any part of any distribution associated with that Restricted Stock Unit Award in accordance with either the terms and conditions of the Deferred Delivery Plan or the terms and conditions specified under the grant agreement and related documents. The terms and conditions of any such deferral, including, but not limited to, the period of time for, and form of, election; the manner and method of payout; and the use and form of Dividend Equivalents in respect of stock-based units resulting from such deferral, shall be as determined by the Committee. The Committee may, at any time and from time to time, but prospectively only except as hereinafter provided, amend, modify, change, suspend, or cancel any and all of the rights, procedures, mechanics, and timing parameters relating to such deferrals. In addition, the Committee may, in its sole discretion, accelerate the pay out of such deferrals (and any earnings thereon), or any portion thereof, either in a lump sum or in a series of payments, but only to the extent that the payment or the change in timing of the payment will not cause a violation of Internal Revenue Code Section 409A.
8.7 Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of obligations to pay cash or deliver other property under this Plan or under plans or compensatory arrangements, provided that, in the case of Participants subject to Section 16 of the Exchange Act, the amount of such grants remains within the discretion of the Committee to the extent necessary to ensure that acquisitions of Stock or other Awards are exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee. In the case of any grant of Stock to an officer of the Company or an Affiliate in lieu of salary or other cash compensation, the number of shares granted in place of such compensation shall be reasonable, as determined by the Committee.
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Section 9
Performance Awards
9.1 Establishment of Performance Goals for Company. Performance Goals applicable to a Performance Award shall be established by the Committee in its absolute discretion on or before the date of grant. Such Performance Goals may include or be based upon any of the following criteria, either in absolute amount or per share: pretax income or after tax income, earnings before interest, taxes, depreciation, and amortization (EBITDA), operating profit, distributed cash flow, return on equity, return on capital employed, total shareholder return, capital or investment, earnings, book value, increase in cash flow return, sales or revenues, operating expenses (including, but not limited to, lease operating expenses, severance taxes, gathering and transportation, general and administrative costs, and other components of operating expenses), stock price appreciation, implementation or completion of critical projects or processes, and/or corporate acquisition goals based on value of assets acquired or similar objective measures.
Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of a particular criteria or attaining a percentage increase or decrease in a particular criteria, and may be applied relative to internal goals or levels attained in prior years or related to other companies or indices or as ratios expressing relationship between Performance Goals, or any combination thereof, as determined by the Committee.
The Performance Goals may include a threshold level of performance below which no vesting will occur, levels of performance at which specified vesting will occur, and a maximum level of performance at which full vesting will occur.
The Committee may in its discretion classify Participants into as many groups as it determines, and as to any Participant relate his/her Performance Goals partially, or entirely, to the measured performance, either absolutely or relatively, of an identified subsidiary, division, operating company, test strategy, or new venture of the Company and/or its Affiliates.
The Committee shall determine the attainment of each Performance Goal. The Committee shall retain the discretion to increase (though not above the amount payable if the highest performance metric were achieved) or decrease the amount payable pursuant to such Awards above or below the amount that would otherwise be payable upon attainment of the applicable Performance Goal(s), either on a formula or discretionary basis or any combination, as the Committee determines. The Committee may determine with respect to any Award that an evaluation of performance may include or exclude the impact, if any, on reported financial results of any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) changes in tax laws, accounting principles, or other laws or provisions, (d) reorganization or restructuring programs, (e) acquisitions or divestitures, (f) foreign exchange gains and losses, (g) gains and losses that are treated as unusual or infrequent under Accounting Standards Codification Topic 225, (h) material change in capital budget, or (i) force majeure events.
9.2 Levels of Performance Required to Earn Performance Awards. At or about the same time that Performance Goals are established for a specific period, the Committee shall in its absolute discretion establish the percentage of the Award which shall be earned by the Participant for various levels of performance measured in relation to achievement of Performance Goals for such Performance Period. The Committee shall have the discretion to determine the Performance Period for any Participant, including any new hire Participant, which may be for a Performance Period of less than one year.
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9.3 Committee Discretion. In the event that applicable tax or securities laws change to permit Committee discretion to alter the governing performance measures or permit flexibility with respect to the terms of any Award without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. Performance Awards shall include any Awards using the criteria set forth in this Section 9, provided that, the Committee, in its sole discretion, may make Performance Awards based on any criteria or performance measures it determines to be appropriate and may increase or decrease the amount payable pursuant to such Awards as it subjectively determines.
9.4 Other Restrictions. The Committee shall determine the terms and conditions applicable to any Performance Award, which may include restrictions on the payment of cash or the delivery of Stock payable in connection with the Performance Award and restrictions that could result in the future forfeiture of all or part of any cash or Stock earned. The Committee may provide that shares of Stock issued in connection with a Performance Award be held in escrow and/or legended. Performance Awards may or may not be subject to Internal Revenue Code Section 409A. If a Performance Award is subject to Internal Revenue Code Section 409A, the Performance Award grant agreement shall contain the terms and conditions needed to comply with the requirements of Internal Revenue Code Section 409A, including but not limited to (i) the timing of any election to defer receipt of the Performance Award, (ii) the timing of any payout election, and (iii) the timing of the actual payment of the Performance Award. Performance Awards that are subject to Internal Revenue Code Section 409A may be adjusted to reflect any dividends declared and paid on the Stock between the date of grant and the date the Performance Award is paid, but only to the extent permitted in IRS guidance of general applicability.
9.5 Notification to Participants. Promptly after the Committee has established the Performance Goals with respect to a Performance Award, the Participant shall be provided with written notice of the Performance Goals so established.
9.6 Measurement of Performance against Performance Goals. The Committee shall, as soon as practicable after the close of a Performance Period, determine (a) the extent to which the Performance Goals for such Performance Period have been achieved and (b) the percentage of the Performance Awards earned as a result.
These determinations shall be absolute and final as to the facts and conclusions therein made and be binding on all parties. Promptly after the Committee has made the foregoing determination, each Participant who has earned Performance Awards shall be notified. For all purposes of this Plan, notice shall be deemed to have been given the date action is taken by the Committee making the determination. Participants may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of all or any portion of their Performance Awards during the Performance Period.
9.7 Treatment of Performance Awards Earned. Upon the Committees determination that a percentage of any Performance Award has been earned for a Performance Period, Participants to whom such earned Performance Awards have been granted and who have been in the employ of the Company or Affiliates continuously from the date of grant until the end of the Performance Period, subject to the exceptions set forth in the Performance Award agreement and in Sections 11 and 13 hereof, shall be entitled, subject to the other conditions of this Plan, to
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payment in accordance with the terms and conditions of the Performance Awards. Performance Awards shall under no circumstances become earned or have any value whatsoever for any Participant who is not in the employ of the Company or its Affiliates continuously during the entire Performance Period for which such Performance Award was granted, except as provided in Sections 11 and 13.
9.8 Payment of Performance Awards. Payment of a Performance Award for a Performance Period may be made in cash or Stock as determined by the Committee, in its sole discretion, or as provided in the Award agreement.
9.9 Subsequent Performance Award Grants. Following the grant of Performance Awards with respect to a Performance Period, additional Participants may be designated by the Committee (or, if so provided pursuant to Section 3.4(b), the Chief Executive Officer of the Company) for grant of Performance Awards for such Performance Period subject to the same terms and conditions set forth for the initial grants, except that the Committee, in its sole discretion, may reduce the value of the amounts to which subsequent Participants may become entitled, prorated according to reduced time spent during the Performance Period, and the applicable Performance Award agreement shall be modified to reflect such reduction.
9.10 Stockholder Privileges. No Participant shall have any rights as a stockholder with respect to any shares of Stock covered by a Performance Award until the Participant becomes the holder of record of such Stock.
Section 10
Cash-Based Awards
10.1 Grant of Cash-Based Awards. The Committee (or, if so provided pursuant to Section 3.4(b), the Chief Executive Officer of the Company) may grant Cash-Based Awards not otherwise described by the terms of the Plan to a Participant in such amounts and upon such terms and conditions as the Committee shall determine. The Committee, in its sole discretion, may designate a Cash-Based Award as a Performance Award.
10.2 Cash-Based Award Agreement. Each grant of Cash-Based Awards under the Plan shall be evidenced by a written agreement which shall be entered into by the Company and the Participant to whom the Cash-Based Award is granted (or, in the alternative, a written statement provided by the Company to the Participant). Such written agreement or statement shall set forth the terms and conditions applicable to each Cash-Based Award.
10.3 Vesting and Other Conditions. A Cash-Based Award may be subject to the completion of a service period, the achievement of one or more performance conditions or such other conditions and requirements as determined by the Committee, in its sole discretion. Each Cash-Based Award shall specify a potential payment amount or payment range as determined by the Committee. If the Committee exercises its discretion to subject the vesting of a Cash-Based Award to the achievement of one or more performance conditions, the amount of the Cash-Based Award that shall be paid to the Participant will depend on the extent to which such performance conditions are met and the satisfaction of any service-based payment conditions.
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10.4 Payment of Cash-Based Awards. Payment, if any, with respect to Cash-Based Awards shall be made in accordance with the terms of the applicable Award agreement or statement, as determined by the Committee, in its sole discretion. The timing and form of the payment of a Cash-Based Award shall be determined by the Committee and set forth in the applicable Award agreement or statement, unless the Committee chooses to provide in the applicable Award agreement or statement that a Participant may elect in accordance with such procedures and limitations as the Committee may specify, the timing and form of payout.
Section 11
Termination of Employment, Death, Disability, etc.
11.1 Termination of Employment. Except as provided herein, the treatment of an Award upon a termination of employment or any other service relationship by and between a Participant and the Company or an Affiliate shall be specified in the agreement controlling such Award. To the extent such Award is subject to Section 409A of the Code, such termination of employment or any other service relationship shall be a separation from service within the meaning of Treasury Regulation Section 1.409A-1(h) with respect to any Award intended to comply with Section 409A of the Internal Revenue Code; provided, that a separation from service shall occur only if both the Company and the Participant expect the Participants level of services to permanently drop by more than half. For the avoidance of doubt, the Participants employment shall be deemed to terminate on the last day of his active and actual employment with the Company or Affiliate, whether that date is chosen unilaterally by the Company or Affiliate or by mutual agreement and whether or not advance notice is given. No period of notice that is, or ought to be, given under applicable law shall be taken into account in determining entitlement to exercise or settlement of an Award under the Plan.
11.2 Termination for Cause. If the employment of the Participant by the Company is terminated for cause, as determined by the Committee, all Awards to such Participant shall thereafter be void for all purposes. As used in subsections 11.2, and 11.3 hereof, except as otherwise set forth in an Award agreement, cause shall mean an act of the Participant that constitutes common law fraud, a felony, or gross malfeasance of duty. The effect of this subsection 11.2 shall be limited to determining the consequences of a termination and that nothing in this subsection 11.2 shall restrict or otherwise interfere with the Companys discretion with respect to the termination of any employee.
11.3 Performance Awards. Except as set forth below, each Performance Award shall state that each such Award shall be subject to the condition that the Participant has remained an Eligible Person from the date of grant until the applicable vesting date as follows:
(a) If the Participant voluntarily leaves the employment of the Company or an Affiliate, or if the employment of the Participant is terminated by the Company for cause or otherwise, any Performance Award to such Participant not previously vested shall thereafter be void and forfeited for all purposes.
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(b) Unless otherwise provided in an Award agreement, a Participant shall become vested in all Performance Awards that have met the Performance Goals within the Performance Period on the date the Participant retires from employment with the Company or an Affiliate (as applicable) on or after attaining retirement age (which for all purposes of this Plan is determined to be age 65, unless otherwise designated by the Committee), on the date the Participant dies while employed by the Company or an Affiliate, or on the date the Participant terminates service with the Company and the Affiliates due to permanent disability (as determined pursuant to the Companys long-term disability plan (or analogous plan of an applicable Affiliate) or any successor plan), unless the Performance award is subject to Internal Revenue Code Section 409A, in which case permanent disability must also fall within the meaning specified in Internal Revenue Code Section 409A(a)(2)(C) or a more restrictive meaning established by the Committee) while employed by the Company or an Affiliate. Such Participant shall not become entitled to any payment which may arise due to the occurrence of a Performance Goal after the Participant dies, terminates service due to permanent disability, or retires. The amount of payment shall be determined under an Award agreement and such payment shall occur as soon as administratively convenient following the date the Participant dies, terminates service due to permanent disability, or retires, but in no event shall the payment occur later than March 15 in the calendar year immediately following the calendar year in which the Participant died, so terminates service, or retired. If the Participant dies before receiving payment, the payment shall be made to those entitled pursuant to Section 15.2 of this Plan.
11.4 Forfeiture Provisions. Subject to Sections 13 and 14, in the event a Participant terminates employment or other service with the Company and its Affiliates during a Restriction Period for the Participants Restricted Stock or Restricted Stock Units, such Awards will be forfeited; provided, however, that the Committee may provide for proration or full payout in the event of (a) death, (b) disability, or (c) any other circumstances the Committee may determine.
Section 12
Tax Withholding
12.1 Withholding Requirement. The Company and any Affiliate is authorized to withhold from any Award granted, or any payment relating to an Award under this Plan, including from a distribution of Stock, amounts of withholding and other taxes or social security payments due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax or social security obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof, in satisfaction of a Participants tax obligations, either on a mandatory or elective basis at the discretion of the Committee.
12.2 Withholding Requirement Stock Options and SARs. The Companys obligations to deliver shares of Stock upon the exercise of an Option or SAR shall be subject to the Participants satisfaction of all applicable federal, state, and local income and other tax and social security withholding requirements.
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12.3 At the time the Committee grants an Option, it may, in its sole discretion, grant the Participant an election to pay all such amounts of required tax withholding, or any part thereof:
(a) by the delivery to the Company or the Administrative Agent of a number of shares of Stock then owned by the Participant, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the amount required to be withheld;
(b) by certification or attestation to the Company or the Administrative Agent of the Participants ownership (as of the Exercise Date) of a number of shares of Stock, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the amount required to be withheld; or
(c) by the Company or the Administrative Agent withholding from the shares of Stock otherwise issuable to the Participant upon exercise of the Option, a number of shares of Stock, the aggregate Fair Market Value of which (as of the Exercise Date) is not greater than the amount required to be withheld. Any such elections by Participants to have shares of Stock withheld for this purpose will be subject to the following restrictions:
(i) all elections shall be made on or prior to the Exercise Date; and
(ii) all elections shall be irrevocable.
12.4 Section 16 Requirements. If the Participant is an officer or director of the Company within the meaning of Section 16 or any successor section(s) of the Exchange Act (Section 16), the Participant must satisfy the requirements of Section 16 and any applicable rules and regulations thereunder with respect to the use of shares of Stock to satisfy such tax withholding obligation. In addition, if approval by the Committee or the Board of use of shares of Stock by such Participant to satisfy such tax withholding obligations is necessary to meet the requirements of the exemption under Rule 16b-3(e) of the Exchange Act, then such withholding may not be effected without the approval of the Committee or the Board, which approval shall be within the sole discretion of the Committee or the Board.
12.5 Restricted Stock and Performance Award Payment and Tax Withholding. Each Restricted Stock and Performance Award agreement shall provide that, upon payment of any entitlement under such an Award, the Participant shall make appropriate arrangements with the Company to provide for the amount of minimum tax and social security withholding required by law, including without limitation Sections 3102 and 3402 or any successor section(s) of the Internal Revenue Code and applicable state and local income and other tax and social security laws. The withholding may be deducted from the Award. Any payment under such an Award shall be made in a proportion of cash and shares of Stock, determined by the Committee, such that the cash portion shall be sufficient to cover the withholding amount required by this Section. The cash portion of any payment shall be based on the Fair Market Value of the shares of Stock on the applicable date of vesting to which such tax withholding relates. Such cash portion shall be withheld by the Company to satisfy applicable tax and social security withholding requirements.
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Section 13
Change of Control
13.1 In General. In the event of the occurrence of a Change of Control and unless otherwise provided in an applicable Award Agreement:
(a) Without further action by the Committee or the Board, all outstanding Options shall fully vest upon the Participants Involuntary Termination or Voluntary Termination with Cause, in either case, occurring on or after a Change of Control. Such newly vested Options shall be fully exercisable as of the date of the Involuntary Termination or Voluntary Termination with Cause, in either case, on or after a Change of Control occurs.
(b) Without further action by the Committee or the Board, all unvested Restricted Stock Awards and Restricted Stock Units shall fully vest upon the Participants Involuntary Termination or Voluntary Termination with Cause occurring on or after a Change of Control. Such newly vested Restricted Stock Units shall be converted to Stock and the Participant shall be issued the requisite number of shares, after any withholding under Section 12, as soon as administratively practicable after the Involuntary Termination or Voluntary Termination with Cause on or after a Change of Control occurs, unless the Participant had elected to defer Restricted Stock Units to the Deferred Delivery Plan in which case the Participants account in the Deferred Delivery Plan shall be credited with deferred Restricted Stock Units as of the date of the Involuntary Termination or Voluntary Termination with Cause on or after the Change of Control occurs.
(c) Assuming the achievement of a Performance Goal, the entitlement to receive cash and Stock under any outstanding Performance Award grants shall vest automatically, without further action by the Committee or the Board, and shall become payable as follows:
(i) If such Change of Control occurs subsequent to the achievement of a Performance Goal, any remainder of such payout amount shall vest as of the date of the Participants Involuntary Termination or Voluntary Termination with Cause occurring on or after the date of such Change of Control and shall be paid by the Company to the Participant within thirty (30) days of the date of such Involuntary Termination or Voluntary Termination with Cause which occurs on or after the date of the Change of Control in the manner set out in subsection 13.1 hereof.
(ii) If such Change of Control occurs prior to the achievement of a Performance Goal, the applicable payout amount shall vest in full for which the Performance Period has not yet ended as of the date of the Participants Involuntary Termination or Voluntary Termination with Cause occurring on or after such Change of Control and shall be paid by the Company to the Participant within thirty (30) days after the later of (1) the date of the Participants Involuntary Termination or Voluntary
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Termination with Cause or (2) the date that the Performance Period ends. The payment will occur only if the Participant is employed at the time that the Performance Period ends or if the Performance Period ends after the Participants Involuntary Termination or Voluntary Termination with Cause occurring on or after the Change of Control. For purposes of this paragraph, the Committee shall determine whether, and to what extent, any such Performance Goal has been met as of the trading day immediately prior to the date of the Change of Control.
(iii) Notwithstanding the foregoing, upon the occurrence of a Change of Control, all Performance Awards will be governed by the Award agreement, including, but not limited to, the determination of the payment amount, vesting, and the timing of such payment.
(d) To the extent that any Award is subject to Internal Revenue Code Section 409A, the Award shall contain appropriate provisions to comply with Internal Revenue Code Section 409A, which shall supersede the provisions of subsections (a), (b), and (c).
Section 14
Reorganization or Liquidation
In the event that the Company is merged or consolidated with another corporation and the Company is not the surviving corporation, or if all or substantially all of the assets or more than fifty percent (50%) of the outstanding voting stock of the Company is acquired by any other corporation, business entity, or person, or in case of a reorganization (other than a reorganization under the United States Bankruptcy Code) or liquidation of the Company, then the Committee, or the board of directors of any corporation assuming the obligations of the Company, shall, as to the Plan and outstanding Awards make appropriate provision for the adoption and continuation of the Plan by the acquiring or successor corporation and for the protection of any holders of such outstanding Awards by the substitution on an equitable basis of appropriate stock of the Company or of the merged, consolidated, or otherwise reorganized corporation which will be issuable with respect to the Stock. Additionally, upon the occurrence of such an event and provided that a Performance Goal has occurred, upon written notice to the Participants, the Committee may accelerate the vesting and payment dates of the entitlement to receive cash and Stock under outstanding Awards so that all such existing entitlements are paid prior to any such event. If a Performance Goal has not yet been attained, the Committee in its discretion may make equitable payment or adjustment.
In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of an agreement applicable to any Award or by resolution adopted prior to the occurrence of a Change of Control or an event described in this Section 14, that any outstanding Award (or portion thereof) shall be converted into a right to receive cash, on or as soon as practicable following the closing date or expiration date of the transaction resulting in the Change of Control or such event in an amount equal to the highest value of the consideration to be received in connection with such transaction for one share of Stock, or, if higher, the highest Fair Market Value of a share of Stock during the thirty (30) consecutive business days immediately prior to the closing date or expiration date of such transaction, less the per-share Option Price or grant price of SARs, as applicable to the Award, multiplied by the number of shares subject to such Award, or the applicable portion thereof.
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Section 15
Rights of Employees and Participants
15.1 Employment. Neither anything contained in the Plan or any agreement nor the granting of any Award under the Plan shall confer upon any Participant any right with respect to the continuation of his or her employment by the Company or any Affiliate, or interfere in any way with the right of the Company or any Affiliate, at any time, to terminate such employment or to increase or decrease the level of the Participants compensation from the level in existence at the time of the Award.
An Eligible Person who has been granted an Award in one year shall not necessarily be entitled to be granted Awards in subsequent years.
15.2 Non-transferability. Except as otherwise determined at any time by the Committee as to any Awards other than ISOs, no right or interest of any Participant in an Award granted pursuant to the Plan shall be assignable or transferable during the lifetime of the Participant, either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation of law, or otherwise, including execution, levy, garnishment, attachment, pledge, bankruptcy, or court order; provided that the Committee may permit further transferability of Awards other than ISOs, on a general or a specific basis, and may impose conditions and limitations on any permitted transferability, subject to any applicable Restriction Period; provided further, however, that no Award may be transferred for value or other consideration without first obtaining approval thereof by the stockholders of the Company. In the event of a Participants death, a Participants rights and interests in any Award as set forth in an Award agreement, shall be transferable by divorce, testamentary will or the laws of descent and distribution, or, with respect to Awards other than Incentive Stock Options, a beneficiary designation that is in a form approved by the Committee and in compliance with the provisions of this Plan, applicable law, and the applicable Award agreement, and payment of any entitlements due under the Plan shall be made to the Participants designated beneficiary, legal representatives, heirs, or legatees, as applicable. If in the opinion of the Committee a person entitled to payments or to exercise rights with respect to the Plan is disabled from caring for his or her affairs because of mental condition, physical condition, or age, payment due such person may be made to, and such rights shall be exercised by, such persons guardian, conservator, or other legal personal representative upon furnishing the Committee with evidence satisfactory to the Committee of such status. If any individual entitled to payment or to exercise rights with respect to the Plan is a minor, the Committee shall cause the payment to be made to (or the right to be exercised by) the custodian or representative who, under the state law of the minors domicile, is authorized to act on behalf of the minor or is authorized to receive funds on behalf of the minor. With respect to those Awards, if any, that are permitted to be transferred to another individual, references in the Plan to exercise or payment related to such Awards by or to the Participant shall be deemed to include, as determined by the Committee, the Participants permitted transferee. A Participants unexercised Option or SAR, or amounts due but remaining
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unpaid to such Participant, at the Participants death, shall be exercised or paid as designated by the Participant by will or by the laws of descent and distribution, or, with respect to any unexercised Option or SAR other than an Incentive Stock Option, in accordance with the Participants beneficiary designation in a form approved by the Committee and in compliance with the provisions of this Plan, applicable law and the applicable Award agreement. In the event any Award is exercised by or otherwise paid to the executors, administrators, heirs, or distributees of the estate of a deceased Participant, or the transferee or designated beneficiary of an Award, in any such case, pursuant to the terms and conditions of the Plan and the applicable Award agreement and in accordance with such terms and conditions as may be specified from time to time by the Committee, the Company shall be under no obligation to issue shares of Stock thereunder unless and until the Company is satisfied, as determined in the discretion of the Committee, that the person or persons exercising such Award, or to receive such payment, are the duly appointed legal representative of the deceased Participants estate or the proper legatees or distributees thereof, or the valid transferee or designated beneficiary of such Award, as applicable. Any purported assignment, transfer, or encumbrance of an Award that does not comply with this Section 15.2 shall be void and unenforceable against the Company.
15.3 Noncompliance with Internal Revenue Code Section 409A. If an Award is subject to the requirements of Internal Revenue Code Section 409A, to the extent that the Company or an Affiliate takes any action that causes a violation of Internal Revenue Code Section 409A or fails to take reasonable actions required to comply with Internal Revenue Code Section 409A, in each case as determined by the Committee, the Company shall pay an additional amount to the Participant (or beneficiary) equal to the additional income tax imposed pursuant to Internal Revenue Code Section 409A on the Participant as a result of such violation, plus any taxes imposed on this additional payment.
Section 16
Other Employee Benefits
The amount of any income deemed to be received by a Participant as a result of the payment under an Award or exercise shall not constitute earnings or compensation with respect to which any other employee benefits of such Participant are determined, including without limitation benefits under any pension, profit sharing, life insurance, or salary continuation plan.
Section 17
Amendment, Modification, and Termination
The Committee or the Board may at any time terminate, and from time to time may amend or modify the Plan, and the Committee or the Board may, to the extent permitted by the Plan, from time to time amend or modify the terms of any Award theretofore granted, including any Award agreement, in each case, retroactively or prospectively; provided, however, that no amendment or modification of the Plan may become effective without approval of the amendment or modification by the Companys stockholders if stockholder approval is required to enable the Plan to satisfy an applicable statutory or regulatory requirements, unless the Company, on the advice of outside counsel, determines that stockholder approval is not necessary.
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Notwithstanding any other provision of this Plan, no amendment, modification, or termination of the Plan or any Award shall adversely affect the previously accrued material rights or benefits of a Participant under any outstanding Award theretofore awarded under the Plan, without the consent of such Participant holding such Award, except to the extent necessary to avoid a violation of Internal Revenue Code Section 409A or the Board or the Committee determines, on advice of outside counsel or the Companys independent accountants, that such amendment or modification is required for the Company, the Plan, or the Award to satisfy, comply with, or meet the requirements of any law, regulation, listing rule, or accounting standard applicable to the Company.
The Committee shall have the authority to adopt (without the necessity for further stockholder approval) such modifications, procedures, and subplans as may be necessary or desirable to comply with the provisions of the laws (including, but not limited to, tax laws and regulations) of countries other than the United States in which the Company may operate, so as to assure the viability of the benefits of the Plan to Participants employed in such countries.
Section 18
Requirements of Law
18.1 Requirements of Law. The issuance of Stock and the payment of cash pursuant to the Plan shall be subject to all applicable laws, rules, and regulations, including applicable federal and state securities laws. The Company may require a Participant, as a condition of receiving payment under an Award, to give written assurances in substance and form satisfactory to the Company and its counsel to such effect as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws. Notwithstanding any contrary provision of this Plan or an Award agreement to the contrary, if any one or more of the provisions (or any part thereof) of this Plan or any Award agreement shall be held invalid, illegal, or unenforceable in any respect, such provision shall, to the extent possible, be modified so as to make it valid, legal, and enforceable, and the validity, legality, and enforceability of the remaining provisions (or any part thereof) of this Plan or Award agreement, as applicable, shall not in any way be affected or impaired thereby.
18.2 Section 409A of the Code. It is intended that this Plan shall comply with the provisions of, or an exemption from, Internal Revenue Code Section 409A and the Treasury regulations relating thereto. Awards are intended to be exempt from Internal Revenue Code Section 409A to the extent possible. Any Award or payment that qualifies for an exemption shall be considered as the first payment(s) made under the Plan. For purposes of the limitations on nonqualified deferred compensation under Internal Revenue Code Section 409A, each payment of compensation under this Plan shall be treated as a separate payment of compensation for purposes of applying the deferral election rules and the exemption for certain short-term deferral amounts under Internal Revenue Code Section 409A. In no event may the Participant, directly or indirectly, designate the calendar year of any payment subject to Internal Revenue Code Section 409A under this Plan.
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18.3 Six-month Delay for Specified Participants. Notwithstanding any other provision of this Plan, to the extent that the right to any payment (including the provision of benefits) hereunder provides for the deferral of compensation within the meaning of Internal Revenue Code Section 409A(d)(1), the payment shall be paid (or provided) in accordance with the following: If the Participant is a Specified Employee within the meaning of Internal Revenue Code Section 409A(a)(2)(B)(i) on the date of the Participants Separation from Service (the Separation Date), and if an exemption from the six (6) month delay requirement of Internal Revenue Code Section 409A(a)(2)(B)(i) is not available, then no such payment shall be made or commence during the period beginning on the Separation Date and ending on the date that is six months following the Separation Date or, if earlier, on the date of the Participants death. The amount of any payment that would otherwise be paid to the Participant during this period shall instead be paid to the Participant on the first day of the first calendar month following the end of the period.
18.4 Prohibition on Acceleration. Unless a payment is exempt from Internal Revenue Code Section 409A, the date of payment may not be accelerated and any payment made pursuant to the termination and liquidation of the Plan shall not be accelerated except in compliance with Internal Revenue Code Section 409A generally and Treasury Regulation § 1.409A-3(j)(4)(ix) specifically.
18.5 Section 16 Requirements. If a Participant is an officer or director of the Company within the meaning of Section 16 of the Exchange Act, Awards granted hereunder shall be subject to all conditions required under Rule 16b-3, or any successor rule(s) promulgated under the Exchange Act, to qualify the Award for any exemption from the provisions of Section 16 available under such Rule. Such conditions are hereby incorporated herein by reference and shall be set forth in the agreement with the Participant, which describes the Award.
18.6 Governing Law. The Plan and all agreements hereunder shall be construed in accordance with and governed by the laws of the State of Texas.
Section 19
Duration of the Plan
The Plan shall terminate on the ten year anniversary of the Effective Date. No grants shall be awarded after such termination; however, the terms of the Plan shall continue to apply to all Awards outstanding when the Plan terminates.
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Dated: May 10, 2022.
KINETIK HOLDINGS INC. | ||
By: | /s/ Todd Carpenter | |
Todd Carpenter | ||
General Counsel |
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Exhibit 10.5
KINETIK HOLDINGS INC.
2019 OMNIBUS COMPENSATION PLAN
RESTRICTED STOCK UNIT GRANT NOTICE
Pursuant to the terms and conditions of the Kinetik Holdings Inc. 2019 Omnibus Compensation Plan, as amended from time to time (the Plan), Kinetik Holdings Inc. (the Company) hereby grants to the individual listed below (you or the Participant) the number of Restricted Stock Units (the RSUs) set forth below. This award of RSUs (this Award) is subject to the terms and conditions set forth herein and in the Restricted Stock Unit Agreement attached hereto as Exhibit A (the Agreement) and the Plan, each of which is incorporated herein by reference. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan or the Agreement, as applicable.
Participant: | [________________] | |
Date of Grant: | [________________] (the Date of Grant) | |
Total Number of RSUs: | [________________] | |
Vesting Commencement Date: | [________________] (the Vesting Commencement Date) | |
Vesting Schedule: | Subject to the Agreement, the Plan and the other terms and conditions set forth herein, the RSUs shall vest and be settled according to the following schedule:
|
Vesting Date |
RSUs Vesting | |||
provided, that you remain continuously employed by the Company or an Affiliate, as applicable, from the Date of Grant through each such vesting date. Shares will be issued with respect to the RSUs as set forth in Section 4 of the Agreement (which Shares when issued will be transferable and nonforfeitable).
| ||||
Change of Control |
Notwithstanding anything contained herein to the contrary, upon the occurrence of a Change of Control, provided, that you remain continuously employed by the Company or an Affiliate, as applicable, from the Date of Grant through the occurrence of such Change of Control, the following number of RSUs shall vest and be settled pursuant to Section 4: [________________]. |
Termination of Employment without Cause | Notwithstanding anything contained herein to the contrary, upon the termination of your employment with the Company or any of its Affiliates by the Company or such Affiliate without Cause, then, provided that you execute within the time provided to do so (and do not revoke within any time provided to do so) a release of all claims in a form acceptable to the Board, the following number of RSUs shall vest and be settled pursuant to Section 4: [________________]. | |
Death; Disability | Notwithstanding anything contained herein to the contrary, upon the termination of your employment with the Company or any of its Affiliates due to your death or Disability (as defined below), the following number of RSUs shall vest and be settled pursuant to Section 4: [________________]. | |
Definitions | As used in this Agreement, the following capitalized terms have the meanings set forth below: | |
Cause shall mean, with respect to you, in the absence of an employment or other service agreement between you and the Company or any of its Affiliates otherwise defining Cause, your (i) failure or refusal to comply with a directive of the Company Board consistent with your then-current position after the Company has provided you with both written notice that such failure or refusal will be deemed to be Cause and a reasonable opportunity to perform; (ii) drug or alcohol abuse adversely affecting your job performance; (iii) conviction of or plea of nolo contendere to a felony or a crime of moral turpitude; (iv) act of dishonesty adversely affecting the Company or any of its Affiliates; (v) material violation of a company policy of the Company that has been supplied to you in writing; and/or (vi) a material breach of this Agreement or any restrictive covenants with the Company or any of its Affiliates to which you are subject. In the event that there is an employment or other service agreement (including any equity award agreement) between you and the Company defining Cause, Cause shall have the meaning provided in such agreement. | ||
Disability means your inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. |
SIGNATURE PAGE TO
RESTRICTED STOCK UNIT GRANT NOTICE
By your signature below, you agree to be bound by the terms and conditions of the Plan, the Agreement and this Restricted Stock Unit Grant Notice (this Grant Notice). You acknowledge that you have reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understand all provisions of the Agreement, the Plan and this Grant Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee regarding any questions or determinations that arise under the Agreement, the Plan or this Grant Notice. This Grant Notice may be executed in one or more counterparts (including portable document format (.pdf) and facsimile counterparts), each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
[Signature Page Follows]
SIGNATURE PAGE TO
RESTRICTED STOCK UNIT GRANT NOTICE
IN WITNESS WHEREOF, the Company has caused this Grant Notice to be executed by an officer thereunto duly authorized, and the Participant has executed this Grant Notice, effective for all purposes as provided above.
KINETIK HOLDINGS INC. |
By: |
Name: | ||
Title: | ||
PARTICIPANT
| ||
Name: | [________________] |
SIGNATURE PAGE TO
RESTRICTED STOCK UNIT GRANT NOTICE
EXHIBIT A
RESTRICTED STOCK UNIT AGREEMENT
This Restricted Stock Unit Agreement (this Agreement) is made as of the Date of Grant by and between Kinetik Holdings Inc., a Delaware corporation (the Company), and Lindsay Ellis (the Participant). Capitalized terms used but not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.
1. Award. In consideration of the Participants past and/or continued employment with the Company or an Affiliate and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, effective as of the Date of Grant, the Company hereby grants to the Participant the number of RSUs set forth in the Grant Notice on the terms and conditions set forth in the Grant Notice, this Agreement and the Plan, which is incorporated herein by reference as a part of this Agreement. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. Vesting and settlement of the RSUs shall occur at the times and subject to the terms and conditions set forth in the Grant Notice, this Agreement and the Plan. Unless and until the RSUs have become vested in the manner set forth in the Grant Notice, the Participant will have no right to receive any Stock in respect of the RSUs. Prior to settlement of this Award, the RSUs and this Award represent an unsecured obligation of the Company, payable only from the general assets of the Company.
2. Vesting of RSUs.
Except as otherwise set forth in this Section 2 or the Plan, the RSUs shall vest in accordance with the vesting provisions set forth in the Grant Notice. Unless and until the RSUs have vested in accordance with such vesting schedule and been settled for shares of Stock, the Participant will have no right to receive any dividends or other distribution (or other rights of ownership) with respect to the shares of Stock underlying the RSUs; provided, however, nothing in this Section 2 is intended to alter the Participants right to receive dividend equivalents pursuant and subject to Section 3. In the event of the termination of the Participants employment with the Company or an Affiliate prior to the vesting of all of the RSUs (but after giving effect to any accelerated vesting pursuant to this Section 2 and the Plan), any unvested RSUs (and all rights arising from such RSUs and from being a holder thereof) will terminate automatically without any further action by the Company and will be forfeited without further notice and at no cost to the Company.
3. Dividend Equivalents. In the event that the Company declares and pays a dividend in respect of its outstanding shares of Stock and, on the record date for such dividend, the Participant holds RSUs granted pursuant to this Agreement that have not been settled, the Company shall pay to the Participant an amount in cash equal to the cash dividends the Participant would have received if the Participant was the holder of record, as of such record date, of a number of shares of Stock equal to the number of RSUs held by the Participant that have not been settled as of such record date, such payment to be made on or within __ days following the date on which such RSUs vest in accordance with Section 2; provided, however, the Participants receipt of such payment will be subject to the terms and conditions of the Reinvestment Agreement. Notwithstanding anything in the Reinvestment Agreement to the contrary, amounts subject to the Reinvestment Agreement will be net of any withholding obligation of the Company or an Affiliate as described in Section 5.
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4. Settlement of RSUs. As soon as administratively practicable following the vesting of the RSUs pursuant to Section 2, but in no event later than __ days after each such vesting date, the Company shall deliver to the Participant (or the Participants permitted transferee, if applicable) the number of shares of Stock subject to the RSUs that vested and are being settled. Any fractional RSU that becomes vested hereunder shall be rounded down at the time shares of Stock are issued in settlement of such RSU. No fractional shares of Stock, nor the cash value of any fractional shares of Stock, will be issuable or payable to the Participant pursuant to this Agreement. All shares of Stock issued hereunder, if any, shall be delivered either by delivering one or more certificates for such shares to the Participant or by entering such shares in book-entry form, as determined by the Committee in its sole discretion. The value of shares of Stock shall not bear any interest owing to the passage of time. Neither this Section 4 nor any action taken pursuant to or in accordance with this Agreement shall be construed to create a trust or a funded or secured obligation of any kind.
5. Tax Withholding. To the extent that the receipt, vesting or settlement of this Award results in compensation income or wages to the Participant for federal, state, local or foreign tax purposes, the Participant shall make arrangements satisfactory to the Company for the satisfaction of obligations for the payment of withholding taxes and other tax obligations relating to this Award, which arrangements may include, at the Companys election, the delivery of cash or cash equivalents, Stock (including previously owned Stock, net settlement, a broker-assisted sale, or other cashless withholding or reduction of the amount of cash or shares of Stock otherwise issuable or delivered pursuant to this Award), other property, or any other legal consideration the Committee deems appropriate. If such tax obligations are satisfied through the withholding of shares of Stock that are otherwise issuable to the Participant pursuant to this Award (or through the surrender of previously owned shares of Stock by the Participant to the Company), the maximum number of shares of Stock that may be so withheld (or surrendered) shall be the number of shares of Stock that have an aggregate Fair Market Value on the date of withholding or surrender equal to the aggregate amount of such tax liabilities, determined based on the greatest withholding rates for federal, state, local and foreign tax purposes, including payroll taxes, that may be utilized without creating adverse accounting treatment for the Company with respect to this Award, as determined by the Committee. For the avoidance of doubt, to the extent any cash payments are made to the Participant under this Agreement, taxes related thereto will be withheld from such payments. The Participant acknowledges that there may be adverse tax consequences upon the receipt, vesting or settlement of this Award or disposition of the underlying shares of Stock and the Participant has been advised, and hereby is advised, to consult a tax advisor. The Participant acknowledges and agrees that none of the Board, the Committee, the Company or any Affiliate have made any representation or warranty as to the tax consequences to the Participant as a result of the receipt of the RSUs, the vesting of the RSUs or the forfeiture of any of the RSUs. The Participant represents that the Participant is in no manner relying on the Board, the Committee, the Company or an Affiliate or any of their respective managers, directors, officers, employees or authorized representatives (including, without limitation, attorneys, accountants, consultants, bankers, lenders, prospective lenders and financial representatives) for tax advice or an assessment of such tax consequences.
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6. Non-Transferability. During the lifetime of the Participant, the RSUs may not be sold, pledged, assigned or transferred in any manner other than by will, divorce or the laws of descent and distribution, unless and until the shares of Stock underlying the RSUs have been issued, and all restrictions applicable to such shares have lapsed. Neither the RSUs nor any interest or right therein shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means, whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.
7. Compliance with Securities Law. Notwithstanding any provision of this Agreement to the contrary, the issuance of shares of Stock hereunder, if any, will be subject to compliance with all applicable requirements of applicable law with respect to such securities and with the requirements of any stock exchange or market system upon which the Stock may then be listed. No shares of Stock will be issued hereunder if such issuance would constitute a violation of any applicable law or regulation or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, shares of Stock will not be issued hereunder unless (a) a registration statement under the Securities Act is in effect at the time of such issuance with respect to the shares to be issued or (b) in the opinion of legal counsel to the Company, the shares to be issued are permitted to be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Companys legal counsel to be necessary for the lawful issuance and sale of any shares of Stock hereunder will relieve the Company of any liability in respect of the failure to issue such shares as to which such requisite authority has not been obtained. As a condition to any issuance of Stock hereunder, the Company may require the Participant to satisfy any requirements that may be necessary or appropriate to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect to such compliance as may be requested by the Company.
8. Legends. If a stock certificate is issued with respect to any shares of Stock delivered hereunder, such certificate shall bear such legend or legends as the Committee deems appropriate in order to reflect the restrictions set forth in this Agreement and to ensure compliance with the terms and provisions of this Agreement, the rules, regulations and other requirements of the SEC, any applicable laws or the requirements of any stock exchange on which the Stock is then listed. If the shares of Stock issued hereunder are held in book-entry form, then such entry will reflect that the shares are subject to the restrictions set forth in this Agreement.
9. Rights as a Stockholder. Neither the Participant nor any Person claiming under or through the Participant shall have rights as a stockholder of the Company with respect to any shares of Stock that may become deliverable hereunder unless and until the Participant has become the holder of record of such shares of Stock, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of any such shares of Stock, except as otherwise specifically provided for in the Plan or this Agreement.
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10. Execution of Receipts and Releases. Any payments of cash or any issuance or transfer of shares of Stock or other property to the Participant or the Participants legal representative, heir, legatee or distributee, in accordance with this Agreement shall be in full satisfaction of all claims of such Person hereunder. As a condition precedent to such payment or issuance, the Company may require the Participant or the Participants legal representative, heir, legatee or distributee to execute (and not revoke within any time provided to do so) a release and receipt therefor in such form as it shall determine appropriate; provided, however, that any review period under such release will not modify the date of settlement with respect to vested RSUs.
11. No Right to Continued Employment or Awards.
(a) For purposes of this Agreement, the Participant shall be considered to be employed by the Company as long as the Participant remains an employee of the Company or an Affiliate, or an employee of a corporation or other entity (or a parent or subsidiary of such corporation or other entity) assuming or substituting a new award for this Award. Without limiting the scope of the preceding sentence, it is specifically provided that the Participant shall be considered to have terminated his or her employment with the Company at the time of the termination of the Affiliate status of the entity or other organization that employs the Participant. Nothing in the adoption of the Plan, nor the award of the RSUs thereunder pursuant to the Grant Notice and this Agreement, shall confer upon the Participant the right to continued employment by the Company or any Affiliate, or any other entity, or affect in any way the right of the Company or any such Affiliate, or any other entity to terminate such employment at any time. Unless otherwise provided in a written employment agreement or by applicable law, the Participants employment by the Company, or any such Affiliate, or any other entity, shall be on an at-will basis, and the employment relationship may be terminated at any time by either the Participant or the Company, or any such Affiliate or any other entity for any reason whatsoever, with or without cause or notice. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee or its delegate, and such determination shall be final, conclusive and binding for all purposes.
(b) The grant of the RSUs is a one-time benefit and does not create any contractual or other right to receive a grant of Awards or benefits in lieu of Awards in the future. Any future Awards will be granted at the sole discretion of the Company.
12. Legal and Equitable Remedies. The Participant acknowledges that a violation or attempted breach of any of the Participants covenants and agreements in this Agreement will cause such damage as will be irreparable, the exact amount of which would be difficult to ascertain and for which there will be no adequate remedy at law, and accordingly, the parties hereto agree that the Company and its Affiliates shall be entitled as a matter of right to an injunction issued by any court of competent jurisdiction, restraining the Participant or the affiliates, partners or agents of the Participant from such breach or attempted violation of such covenants and agreements, as well as to recover from the Participant any and all costs and expenses sustained or incurred by the Company or any Affiliate in obtaining such an injunction, including, without limitation, reasonable attorneys fees. The parties to this Agreement agree that no bond or other security shall be required in connection with such injunction. Any exercise by either of the parties to this Agreement of its rights pursuant to this Section 12 shall be cumulative and in addition to any other remedies to which such party may be entitled.
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13. Notices. All notices and other communications under this Agreement shall be in writing and shall be delivered to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to the Company, unless otherwise designated by the Company in a written notice to the Participant (or other holder):
Kinetik Holdings Inc.
2700 Post Oak Blvd., Suite 300
Houston, Texas 77056
Attn: Director of Human Resources
If to the Participant, at the Participants last known address on file with the Company.
Any notice that is delivered personally or by overnight courier or telecopier in the manner provided herein shall be deemed to have been duly given to the Participant when it is mailed by the Company or, if such notice is not mailed to the Participant, upon receipt by the Participant. Any notice that is addressed and mailed in the manner herein provided shall be conclusively presumed to have been given to the party to whom it is addressed at the close of business, local time of the recipient, on the fourth day after the day it is so placed in the mail.
14. Consent to Electronic Delivery; Electronic Signature. In lieu of receiving documents in paper format, the Participant agrees, to the fullest extent permitted by law, to accept electronic delivery of any documents that the Company may be required to deliver (including, but not limited to, prospectuses, prospectus supplements, grant or award notifications and agreements, account statements, annual and quarterly reports and all other forms of communications) in connection with this and any other Award made or offered by the Company. Electronic delivery may be via a Company electronic mail system or by reference to a location on a Company intranet to which the Participant has access. The Participant hereby consents to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may be required to deliver, and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature.
15. Agreement to Furnish Information. The Participant agrees to furnish to the Company all information requested by the Company to enable it to comply with any reporting or other requirement imposed upon the Company by or under any applicable statute or regulation.
16. Entire Agreement; Amendment. This Agreement and the Reinvestment Agreement constitute the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to the RSUs granted hereby; provided, however, that the terms of this Agreement shall not modify and shall be subject to the terms and conditions of any employment agreement between the Participant and the Company (or an Affiliate or other entity) or a severance plan in which the Participant participates, in each case, in effect as of the date a determination is to be made under this Agreement. Without limiting the scope of the preceding sentence, except as
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provided therein, all prior understandings and agreements, if any, among the parties hereto relating to the subject matter hereof are hereby null and void and of no further force and effect. The Committee may, in its sole discretion, amend this Agreement from time to time in any manner that is not inconsistent with the Plan; provided, however, that except as otherwise provided in the Plan or this Agreement, any such amendment that materially reduces the rights of the Participant shall be effective only if it is in writing and signed by both the Participant and an authorized officer of the Company.
17. Severability and Waiver. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of such provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect. Waiver by any party of any breach of this Agreement or failure to exercise any right hereunder shall not be deemed to be a waiver of any other breach or right. The failure of any party to take action by reason of such breach or to exercise any such right shall not deprive the party of the right to take action at any time while or after such breach or condition giving rise to such rights continues.
18. Clawback. Notwithstanding any provision in the Grant Notice, this Agreement or the Plan to the contrary, to the extent required by (a) applicable law, including, without limitation, the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, any SEC rule or any applicable securities exchange listing standards and/or (b) any policy that may be adopted or amended by the Board from time to time, all cash or shares of Stock issued hereunder shall be subject to forfeiture, repurchase, recoupment and/or cancellation to the extent necessary to comply with such law(s) and/or policy.
19. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.
20. Successors and Assigns. The Company may assign any of its rights under this Agreement without the Participants consent. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein and in the Plan, this Agreement will be binding upon the Participant and the Participants beneficiaries, executors, administrators and the Person(s) to whom the RSUs may be transferred by will or the laws of descent or distribution.
21. Headings. Headings are for convenience only and are not deemed to be part of this Agreement.
22. Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic or digital signature, subject to applicable law, each of which shall be deemed an original and all of which together shall constitute one instrument. Delivery of an executed counterpart of the Grant Notice by facsimile or portable document format (.pdf) attachment to electronic mail shall be effective as delivery of a manually executed counterpart of the Grant Notice.
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23. Section 409A. Notwithstanding anything herein or in the Plan to the contrary, the RSUs granted pursuant to this Agreement are intended to be exempt from the applicable requirements of Section 409A of the Internal Revenue Code of 1986, as amended, including the guidance and regulations promulgated thereunder and successor provisions, guidance and regulations thereto (Section 409A) and shall be limited, construed and interpreted in accordance with such intent. Nevertheless, to the extent that the Committee determines that the RSUs may not be exempt from Section 409A, then, if the Participant is deemed to be a specified employee within the meaning of Section 409A, as determined by the Committee, at a time when the Participant becomes eligible for settlement of the RSUs upon his separation from service within the meaning of Section 409A, then to the extent necessary to prevent any accelerated or additional tax under Section 409A, such settlement will be delayed until the earlier of: (a) the date that is six months following the Participants separation from service and (b) the Participants death. Notwithstanding the foregoing, the Company and its Affiliates make no representations that the RSUs provided under this Agreement are exempt from or compliant with Section 409A and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Section 409A.
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Exhibit 10.6
[Kinetik Holdings Inc. letterhead]
[], 2022
[______________]
[______________]
[______________]
Dear [______________],
In recognition of your service as a director of Kinetik Holdings Inc. (the Company), the Company hereby grants you, as of the date hereof, an award (the Award) of [____] unrestricted shares of the Companys Class A common stock (the Stock) under the Kinetik Holdings Inc. 2019 Omnibus Compensation Plan (as amended from time to time, the Plan). Capitalized terms used in this letter but not defined herein shall have the meanings ascribed to such terms in the Plan, unless the context requires otherwise.
The Award is fully vested upon grant and is subject only to the terms and conditions generally applicable under the Plan, any rules and regulations adopted by the Committee, and this letter.
Please contact the Companys Director of Human Resources at your earliest convenience with appropriate instructions regarding how the Stock under this Award should be delivered to you.
Please be aware that you are responsible for the payment of any applicable taxes due as a result of the grant of the Award. The value of the Award will be reported on a Form 1099 issued to you at the end of the year; however, in the meantime you may want to consult your tax advisor to determine if you are required to make any quarterly estimated tax payments.
This grant is intended to fulfill the Plans purpose of promoting the interests of the Company by providing to employees and directors, such as yourself, incentive compensation awards that are based on Stock in order to encourage you to devote your best efforts to advance the business of the Company.
Sincerely, |
|
[Name] [Title] Kinetik Holdings Inc. |
EXHIBIT 31.1
CERTIFICATIONS
I, Jamie Welch, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Kinetik Holdings Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 10, 2022
/s/ Jamie Welch |
Jamie Welch |
Chief Executive Officer, President, Chief Financial Officer and Director |
EXHIBIT 31.2
CERTIFICATIONS
I, Steven Stellato, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Kinetik Holdings Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 10, 2022
/s/ Steven Stellato |
Steven Stellato |
Executive Vice President, Chief Accounting and Chief Administrative Operating Officer |
EXHIBIT 32.1
KINETIK HOLDINGS INC.
Certification of Principal Executive Officer
I, Jamie Welch, Chief Executive Officer, President, Chief Financial Officer and Director, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of Kinetik Holdings Inc. for the quarterly period ending March 31, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m or §78o (d)) and that information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Kinetik Holdings Inc.
Date: May 10, 2022
/s/ Jamie Welch |
Jamie Welch |
Chief Executive Officer, President, Chief Financial Officer and Director |
EXHIBIT 32.2
KINETIK HOLDINGS INC.
Certification of Principal Financial Officer
I, Steven Stellato, Executive Vice President, Chief Accounting and Chief Administrative Operating Officer, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of Kinetik Holdings Inc. for the quarterly period ending March 31, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m or §78o (d)) and that information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Kinetik Holdings Inc.
Date: May 10, 2022
/s/ Steven Stellato |
Steven Stellato |
Executive Vice President, Chief Accounting and Chief Administrative Operating Officer |
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 17,646 | $ 18,729 |
Accounts receivable, net of allowance for credit losses of $1,000 in 2022 and 2021 | 262,575 | 178,107 |
Derivative assets | 365 | 0 |
Prepaid and other current assets | 28,881 | 20,683 |
Total assets, current | 309,467 | 217,519 |
NONCURRENT ASSETS: | ||
Property, plant and equipment, net | 2,477,944 | 1,839,279 |
Intangible assets, net | 772,979 | 786,049 |
Derivative assets | 9,290 | 0 |
Operating lease right-of-use assets | 57,199 | 61,562 |
Deferred charges and other assets | 21,563 | 22,320 |
Investment in unconsolidated affiliates | 2,361,321 | 626,477 |
Goodwill | 3,894 | 0 |
Total assets, noncurrent | 5,704,190 | 3,335,687 |
Total assets | 6,013,657 | 3,553,206 |
CURRENT LIABILITIES: | ||
Accounts payable | 10,900 | 12,220 |
Accrued expenses | 210,355 | 135,643 |
Distribution payable to Preferred Unit limited partners | 6,937 | 0 |
Derivative liabilities | 7 | 2,667 |
Mandatorily redeemable Preferred Units | 67,173 | 0 |
Current portion of operating lease liabilities | 33,029 | 31,776 |
Current portion of long-term debt, net | 54,324 | 54,280 |
Other current liabilities | 5,912 | 4,339 |
Total current liabilities | 388,637 | 240,925 |
NONCURRENT LIABILITIES: | ||
Long-term debt, net | 2,894,025 | 2,253,422 |
Contingent liabilities | 839 | 839 |
Operating lease liabilities | 24,044 | 29,889 |
Contract liabilities | 22,342 | 11,674 |
Mandatorily redeemable Preferred Units | 68,897 | 0 |
Embedded derivative liabilities | 91,936 | 0 |
Derivative liabilities | 0 | 200 |
Deferred tax liabilities | 11,876 | 7,190 |
Other liabilities | 2,717 | 2,219 |
Total noncurrent liabilities | 3,116,676 | 2,305,433 |
Total liabilities | 3,505,313 | 2,546,358 |
COMMITMENTS AND CONTINGENCIES (Note 8) | ||
Redeemable noncontrolling interest — Common Unit limited partners | 3,185,431 | 1,006,843 |
Redeemable noncontrolling interest — Preferred Unit limited partners | 460,773 | 0 |
EQUITY: | ||
Accumulated deficit | (1,137,867) | 0 |
Total equity | (1,137,860) | 5 |
Total liabilities, noncontrolling interests, and equity | 6,013,657 | 3,553,206 |
Class A Common Stock | ||
EQUITY: | ||
Common stock | 2 | 0 |
Class C Common Stock | ||
EQUITY: | ||
Common stock | $ 5 | $ 5 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Accounts receivable, allowance for credit losses | $ 1,000 | $ 1,000 |
Class A Common Stock | ||
Common stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 1,500,000,000 | 1,500,000,000 |
Common stock, shares issued (in shares) | 18,986,460 | 0 |
Common stock, shares outstanding (in shares) | 18,986,460 | 0 |
Class C Common Stock | ||
Common stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 1,500,000,000 | 1,500,000,000 |
Common stock, shares issued (in shares) | 47,260,000 | 50,000,000 |
Common stock, shares outstanding (in shares) | 47,260,000 | 50,000,000 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Net income including noncontrolling interests | [1] | $ 21,389 | $ 18,136 | |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization expense | [1] | 61,023 | 55,971 | |
Amortization of deferred financing costs | 3,389 | 3,305 | ||
Amortization of contract costs | 448 | 448 | ||
Distributions from unconsolidated affiliates | 48,073 | 8,203 | ||
Derivatives settlement | (884) | (1,465) | ||
Derivatives fair value adjustment | (8,745) | 10,593 | ||
Gain on redemption of mandatorily redeemable Preferred Units | (4,493) | 0 | ||
Loss on disposal of assets | [1] | 110 | 32 | |
Equity in (earnings) losses from unconsolidated affiliate | [1] | (27,917) | (11,355) | |
Loss (gain) on debt extinguishment | 129 | (239) | ||
Share-based compensation | 6,132 | 0 | ||
Deferred income taxes | 676 | 0 | ||
Change in operating assets and liabilities: | ||||
Accounts receivable | (67,446) | (69,376) | ||
Other assets | (456) | (9,653) | ||
Operating lease right-of-use assets | 4,667 | 8,190 | ||
Accounts payable | (6,766) | 8,525 | ||
Accrued liabilities | 73,961 | 27,524 | ||
Operating lease liabilities | (4,897) | (7,245) | ||
Net cash provided by operating activities | 98,393 | 41,594 | ||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Property, plant and equipment expenditures | (29,234) | (19,753) | ||
Intangible assets expenditures | (3,559) | (782) | ||
Investment in unconsolidated affiliates | 0 | (20,522) | ||
Net cash acquired in acquisition | 13,401 | 0 | ||
Net cash used in investing activities | (19,392) | (41,057) | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Proceeds from issuance of long-term debt | 0 | 30,189 | ||
Principal payments on long-term debt | (26,382) | (12,443) | ||
Proceeds from revolver | 7,000 | 11,500 | ||
Redemption of mandatorily redeemable Preferred Units | (60,702) | 0 | ||
Payments of deferred financing costs | 0 | (3,152) | ||
Equity contributions | 0 | 14,890 | ||
Equity distributions | 0 | (30,189) | ||
Net cash (used in) provided by financing activities | (80,084) | 10,795 | ||
Net change in cash | (1,083) | 11,332 | ||
CASH, BEGINNING OF PERIOD | 18,729 | 19,591 | ||
CASH, END OF PERIOD | 17,646 | 30,923 | ||
SUPPLEMENTAL SCHEDULE OF INVESTING AND FINANCING ACTIVITIES | ||||
Cash paid for interest, net of amounts capitalized | 25,801 | 27,044 | ||
Property and equipment and intangible accruals in accounts payable and accrued liabilities | 14,340 | 3,410 | ||
Restructuring Cost and Reserve [Line Items] | ||||
Class A Common Stock issued in exchange | 1,013,745 | |||
Altus Midstream LP | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Fair value of ALTM assets acquired | 2,445,665 | 0 | ||
Class A Common Stock issued in exchange | 1,013,745 | 0 | ||
ALTM liabilities and mezzanine equity assumed | $ 1,431,920 | $ 0 | ||
|
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND NONCONTROLLING INTERESTS - USD ($) $ in Thousands |
Total |
Preferred Unit limited partners |
Apache limited partner |
Class A Common Stock |
Class C Common Stock |
Common Stock |
Common Stock
Class A Common Stock
|
Common Stock
Class C Common Stock
|
Additional Paid-in Capital |
Accumulated Deficit |
||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning balance at Dec. 31, 2020 | $ 0 | [1] | $ 1,041,660 | |||||||||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||||||||||||||
Contribution | 14,890 | |||||||||||||||
Distribution paid to Common Unit limited partners | (30,189) | |||||||||||||||
Net income | 18,136 | |||||||||||||||
Ending Balance at Mar. 31, 2021 | 0 | [1] | 1,044,497 | |||||||||||||
Beginning balance, shares (in shares) at Dec. 31, 2020 | 0 | 50,599,000 | ||||||||||||||
Beginning balance at Dec. 31, 2020 | $ 5 | $ 0 | $ 5 | $ 0 | $ 0 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
Contribution (in shares) | 246,000 | |||||||||||||||
Contribution | 0 | $ 0 | ||||||||||||||
Distribution paid to Common Unit limited partners (in shares) | (498,000) | |||||||||||||||
Distribution paid to Common Unit limited partners | 0 | $ 0 | ||||||||||||||
Share-based compensation | 0 | $ 0 | ||||||||||||||
Net income (loss) | [2] | 0 | ||||||||||||||
Ending balance, shares (in shares) at Mar. 31, 2021 | 0 | 50,347,000 | ||||||||||||||
Ending balance at Mar. 31, 2021 | 5 | $ 0 | $ 5 | 0 | 0 | |||||||||||
Beginning balance at Dec. 31, 2021 | 0 | [1] | 1,006,843 | |||||||||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||||||||||||||
ALTM acquisition | [1] | 462,717 | ||||||||||||||
Distributions payable to Preferred Unit limited partners | [1] | (6,937) | ||||||||||||||
Redemption of Common Units | (170,060) | |||||||||||||||
Net income | 4,993 | [1] | 12,531 | |||||||||||||
Change in redemption value of noncontrolling interests | 2,336,117 | |||||||||||||||
Ending Balance at Mar. 31, 2022 | 460,773 | [1] | 3,185,431 | |||||||||||||
Beginning balance, shares (in shares) at Dec. 31, 2021 | 0 | 50,000,000 | 50,000,000 | |||||||||||||
Beginning balance at Dec. 31, 2021 | 5 | $ 0 | $ 5 | 0 | 0 | |||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
ALTM acquisition (in shares) | 16,246,000 | |||||||||||||||
ALTM acquisition | 1,013,745 | $ 2 | 1,013,743 | |||||||||||||
Redemption of Common Units (in shares | 2,740,000 | 2,740,000 | 2,740,000 | |||||||||||||
Redemption of Common Units | (170,060) | $ 0 | $ 0 | (170,060) | ||||||||||||
Share-based compensation | 6,132 | $ 6,100 | 6,132 | |||||||||||||
Remeasurement of contingent consideration | 4,450 | 4,450 | ||||||||||||||
Net income (loss) | 3,865 | [2] | 3,865 | |||||||||||||
Change in redemption value of noncontrolling interests | (2,336,117) | (1,194,385) | (1,141,732) | |||||||||||||
Ending balance, shares (in shares) at Mar. 31, 2022 | 18,986,460 | 47,260,000 | 18,986,000 | 47,260,000 | ||||||||||||
Ending balance at Mar. 31, 2022 | $ (1,137,860) | $ 2 | $ 5 | 0 | (1,137,867) | |||||||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||||||||||||||
Distributions payable to Preferred Unit limited partners | (6,937) | |||||||||||||||
Ending Balance at Mar. 31, 2022 | $ 460,773 | [1] | $ 3,185,431 | |||||||||||||
Beginning balance, shares (in shares) at Feb. 22, 2022 | 66,200,000 | |||||||||||||||
Ending balance, shares (in shares) at Mar. 31, 2022 | 18,986,460 | 47,260,000 | 18,986,000 | 47,260,000 | ||||||||||||
Ending balance at Mar. 31, 2022 | $ (1,137,860) | $ 2 | $ 5 | $ 0 | $ (1,137,867) | |||||||||||
|
DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended |
---|---|
Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Transaction On February 22, 2022 (the “Closing Date”), Kinetik Holdings Inc., a Delaware corporation (formerly known as Altus Midstream Company), consummated the previously announced business combination transactions contemplated by the Contribution Agreement, dated as of October 21, 2021 (the “Contribution Agreement”), by and among the Company, Altus Midstream LP (now known as Kinetik Holdings LP), a Delaware limited partnership and subsidiary of Altus Midstream Company (the “Partnership”), New BCP Raptor Holdco, LLC, a Delaware limited liability company (“Contributor”), and BCP Raptor Holdco, LP, a Delaware limited partnership (“BCP”). The transactions are referred to herein as the “Transaction.” Pursuant to the Contribution Agreement, in connection with the closing of the Transaction (the “Closing”), (i) Contributor contributed all of the equity interests of BCP and BCP Raptor Holdco GP, LLC, a Delaware limited liability company and the general partner of BCP (“BCP GP” and, together with BCP, the “Contributed Entities”), to the Partnership; and (ii) in exchange for such contribution, the Partnership issued 50,000,000 common units representing limited partner interests in the Partnership (“Common Units”) and the Company issued 50,000,000 shares of the Company’s Class C common stock, par value $0.0001 per share (“Class C Common Stock”), to Contributor. The Company’s stockholders immediately prior to the Closing continued to hold their shares of the Company’s Class A Common Stock, par value $0.0001 per share (“Class A Common Stock,” and together with the Company’s Class C Common Stock, “Common Stock”). As a result of the Transaction, immediately following the Closing (i) Contributor held approximately 75% of the issued and outstanding Common Stock, (ii) Apache Midstream LLC, a Delaware limited liability company (“Apache Midstream”), held approximately 20% of the issued and outstanding Common Stock, and (iii) the Company’s remaining stockholders held approximately 5% of the issued and outstanding Common Stock. Following the Closing, there were approximately 66.2 million total shares of Common Stock outstanding. In connection with the Closing, the Company changed its name from “Altus Midstream Company” (ALTM) to “Kinetik Holdings Inc.” Unless the context otherwise requires, “ALTM” refers to the registrant prior to the Closing and “we,” “us,” “our,” and the “Company” refer to Kinetik Holdings Inc., the registrant and its subsidiaries following the Closing. 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 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 dehydration, and condensate separation, stabilization, and storage, crude oil gathering and storage, water gathering and disposal assets. ALTM was originally incorporated on December 12, 2016 in Delaware under the name Kayne Anderson Acquisition Corp. (“KAAC”) for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. KAAC completed its initial public offering in the second quarter of 2017. On August 3, 2018, Altus Midstream LP was formed in Delaware as a limited partnership and wholly-owned subsidiary of KAAC and entered into a contribution agreement with certain affiliates of Apache Corporation (“Apache” and such affiliates the “Altus Midstream Entities”), formed by Apache between May 2016 and January 2017, for the purpose of acquiring, developing, and operating midstream oil and gas assets in the Alpine High resource play and surrounding areas (“Alpine High”). On November 9, 2018, KAAC acquired all equity interests of the Altus Midstream Entities and changed its name to Altus Midstream Company. On February 22, 2022, upon the Closing, legacy BCP and its subsidiaries became wholly-owned subsidiaries of the legacy Altus Midstream Company. The Transaction was accounted for as a reverse merger pursuant to ASC 805 Business Combination (“ASC 805”), refer to Note 2—Business Combination in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for an additional discussion. Nature of Operations Through its consolidated subsidiaries, the Company provides comprehensive gathering, water disposal, transportation, compression, processing and treating services necessary to bring natural gas, NGLs and crude oil to market. Additionally, the Company owns equity interests in four separate Permian Basin egress pipeline entities that have access to various markets along the Texas Gulf Coast. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with GAAP. Certain reclassifications of prior year balances have been made to conform such amounts to current year presentation. These reclassifications have no impact on net income. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. All intercompany balances and transactions have been eliminated in consolidation. Prior to the Closing, the Company’s financial statements that were filed with the SEC were derived from ALTM’s accounting records. As the Transaction was determined to be a reverse merger, BCP was considered as the accounting acquirer and ALTM was the legal acquirer. The accompanying Condensed Consolidated Financial Statements herein include (1) BCP’s net assets carried at historical value, (2) BCP’s historical results of operations prior to the Transaction, (3) the ALTM’s net assets carried at fair value as of the Closing Date and (4) the combined results of operations with the Company’s results presented within the Condensed Consolidated Financial Statements from February 22, 2022 going forward. Refer to Note 2—Business Combination to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion. Variable Interest Entity The Company uses a qualitative approach in assessing the consolidation requirement for variable interest entities. The approach focuses on identifying which enterprise has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. In the event that the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity would be consolidated in our financial statements. The Company has determined that it has significant influence over the operating and financial policies of the four pipeline entities in which it is invested, but does not exercise control over them; and hence, it accounts for these investments using the equity method. Refer to Note 9—Equity Method Investments in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q. Redeemable Noncontrolling Interest — Common Units Limited Partners Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of the Contributed Entities to the Partnership; and (ii) in exchange for such contribution, the Partnership issued 50,000,000 common units representing limited partner interests in the Partnership and the Company issued 50,000,000 shares of the Company’s Class C common stock, par value $0.0001 per share, to Contributor. Please refer to the Transaction discussed above. The Common Units are redeemable at the option of unit holders and accounted for on the Company’s Condensed Consolidated Balance Sheet as a redeemable noncontrolling interest classified as temporary equity. The Company records the redeemable noncontrolling interest at the higher of (i) its initial value plus accumulated earnings/losses associated with the noncontrolling interest or (ii) the maximum redemption value as of the balance sheet date. The redemption value was determined based on a 5-day volume weighted average closing price of the Class A Common Stock. See discussion and additional details in Note 10—Equity and Warrants. Redeemable Noncontrolling Interest — Preferred Unit Limited Partners The Partnership issued Series A Cumulative Redeemable Preferred Units (“Preferred Units”) on June 12, 2019. As the Transaction was accounted for as a reverse merger, the Company assumed certain Preferred Units that were issued and outstanding were assumed at Closing for accounting purposes. The Preferred Units are exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company. The Preferred Units are accounted for on the Company’s Condensed Consolidated Balance Sheet as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units. Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value and are accounted for on the Company’s Condensed Consolidated Balance Sheet as a long-term liability embedded derivative. See discussion and additional detail in Note 11—Series A Cumulative Redeemable Preferred Units. Equity Method Investments The Company follows the equity method of accounting when it does not exercise control over its equity interests, but can exercise significant influence over the operating and financial policies of the entity. Under this method, the equity investments are carried originally at acquisition cost, increased by the Company’s proportionate share of the equity interest’s net income and contributions made, and decreased by the Company’s proportionate share of the equity interest’s net losses and distributions received. Please refer to Note 9—Equity Method Investments, for further details 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 Combination for purchase price allocation of the Transaction. Use of Estimates Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of its condensed financial statements, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include the valuation of derivatives, the valuation of tangible and intangible assets, the valuation of share-based compensation, the valuation of contingent liabilities, the valuation of mandatorily redeemable Preferred Units, and the valuation of noncontrolling interests. Inventory Other current assets include inventory that consists of condensate, and NGLs that are valued at the lower of cost or market. At the end of each reporting period, the Partnership 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 $4.8 million and $2.1 million as of March 31, 2022 and December 31, 2021, respectively. Impairment of Long-Lived Assets In accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 360, Property, Plant and Equipment, long-lived assets, excluding goodwill, to be held and used by the Company are reviewed for impairment annually or on an interim basis if events or circumstances indicate that the fair value of the assets have decreased below their carrying value. For long-lived assets to be held and used, the Company bases their evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. The Company’s 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 the excess, if any, of the property’s net book value over its estimated fair value. The Company did not recognize impairment losses for long-lived assets during the three months ended March 31, 2022 and 2021. Transactions with Affiliates The accounts receivable from or payable to affiliate represent the net result of the Company’s monthly revenue, capital and operating expenditures, and other miscellaneous transactions to be settled with Apache and its subsidiaries, who held equity shares that represented approximately 13.6% of the Company’s voting power as of April 22, 2022. Accounts receivable from affiliate was $24.7 million as of March 31, 2022. For the three months ended March 31, 2022, revenue from affiliate was $15.6 million. Accrued expense due to affiliate was $4.2 million as of March 31, 2022 and operating expenses for the three months ended March 31, 2022 were immaterial. Net Income Per Share Basic net income per share is calculated by dividing net income attributable to Class A common shareholders by the weighted average number of shares of Class A Common Stock outstanding during the period. Class C Common Stock is excluded from the weighted average shares outstanding for the calculation of basic net income per share, as holders of Class C Common Stock are not entitled to any dividends or liquidating distributions. The Company uses the “if-converted method” to determine the potential dilutive effect of (i) an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) for shares of Class A Common Stock, (ii) an assumed exercise of the outstanding public and private warrants for shares of Class A Common Stock and (iii) an assumed exchange of the outstanding Preferred Units for shares of Class A Common Stock. The dilutive effect of any earn-out consideration payable in shares is only included in periods for which the underlying conditions for the issuance are met. Recently Adopted Accounting Pronouncement Effective January 1, 2022, the Company adopted ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value. With adoption of ASU 2021-08, the Company assumed contract liabilities at carrying value of $9.1 million upon Closing. Recent Accounting Pronouncement Not Yet Adopted In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 was issued to ease the potential accounting burden expected when global capital markets move away from the London Interbank Offered Rate (“LIBOR”), the benchmark interest rate banks use to make short-term loans to each other. The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationship, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the effect that ASU 2020-04 will have on its Consolidated Financial Statements. In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method (“ASU 2022-01”). Current GAAP permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio. The amendments in ASU 2022-01 allow nonprepayable financial assets also to be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets, thereby allowing consistent accounting for similar hedges. The amendments in ASU 2022-01 also clarify the accounting for and promote consistency in the reporting of hedge basis adjustments applicable to both a single hedged layer and multiple hedged layers as follows: (1) an entity is required to maintain basis adjustments in an existing hedge on a closed portfolio basis (that is, not allocated to individual assets), (2) an entity is required to immediately recognize and present the basis adjustment associated with the amount of the designated layer that was breached in interest income. In addition, an entity is required to disclose that amount and the circumstances that led to the breach, (3) an entity is required to disclose the total amount of the basis adjustments in existing hedges as a reconciling amount if other areas of GAAP require the disaggregated disclosure of the amortized cost basis of assets included in the closed portfolio, and (4) an entity is prohibited from considering basis adjustments in an existing hedge when determining credit losses. The guidance is effective for public business entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of ASU 2022-01 for any entity that has adopted the amendments in 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.
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BUSINESS COMBINATION |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BUSINESS COMBINATION | 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 issued 50,000,000 common units representing limited partner interests in the Partnership and the Company issued 50,000,000 shares of the Company’s Class C common stock, par value $0.0001 per share, to Contributor. Please refer to the “Transaction” discussed above. The Transaction was accounted for as a business combination in accordance with ASC 805, among other things, requires assets acquired and liabilities assumed to be measured at their acquisition date fair value. The Company also adopted ASU 2021-08, effective as of January 1, 2022, to record contract liabilities at their carrying value as of the acquisition date. Although the Company was the legal acquirer, BCP and BCP GP were determined to be the accounting acquirer and legal acquiree. As a result, BCP and its subsidiaries’ net assets were carried at historical value, acquired net assets were measured at fair value except contract liabilities being recorded at carrying value at the acquisition date, and results of operations of ALTM and its subsidiaries were included in the Company’s Condensed Consolidated Financial Statements from the Closing Date going forward. The preliminary purchase price allocation is based on an assessment of the fair value of the assets acquired and liabilities assumed in the acquisition using inputs that are not observable in the market and thus level 3 inputs. The fair value of the processing plant, gathering system and related facilities and equipment are based on market and cost approaches. The goodwill of $3.9 million relates to operational synergies. The value of the Preferred Units and assumed contingent liability was determined through a probability-weighted analysis of the expected future cash flows and other applicable valuation techniques. See additional details for Preferred Units in Note 11—Series A Cumulative Redeemable Preferred Units and contingent liabilities in Note 8—Commitments and Contingencies in 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. The following table summarizes the preliminary estimated fair value of assets acquired and liabilities assumed in the Transaction in accordance with ASC 805:
The Company incurred acquisition-related costs of $5.7 million for the three months ended March 31, 2022. During the quarter ended March 31, 2022, the Company assumed additional revolver liabilities through the Transaction. There was no significant modification to the Company’s debt structure. Supplemental Pro Forma Information The unaudited supplemental pro forma financial for informational purposes only and is not indicative of future results. The results below for the three months ended March 31, 2022 and 2021 combine the results of the Company and the Partnership, giving effect to the Transaction as if it had been completed on January 1, 2021.
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REVENUE RECOGNITION |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE RECOGNITION | REVENUE RECOGNITION Disaggregation of Revenue The following table presents a disaggregation of the Company’s revenue.
There have been no significant changes to the Company’s contracts with customers during the three months ended March 31, 2022 and 2021. Contracts with customers acquired through the Transaction had similar structure as the Company’s existing contracts with customers. The Company recognized revenues from MVC deficiency payments of nil and $2.5 million for the three months ended March 31, 2022 and 2021, respectively. Remaining Performance Obligations The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenues as of March 31, 2022:
Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to customer contracts that have fixed pricing and fixed volume terms and conditions, generally including contracts with payment obligations associated with MVCs. Contract Liabilities The following table provides information about contract liabilities from contracts with customers as of March 31, 2022:
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 March 31, 2022 and December 31, 2021, the Company had contract acquisition cost assets of $17.9 million and $18.4 million, respectively. Current and noncurrent contract cost assets are included in “Prepaid and Other Current Assets” and “Deferred Charges and Other Assets”, respectively, of the Condensed Consolidated Balance Sheets. The Company amortizes these assets as cost of sales on a straight-line basis over the life of the associated long-term customer contract. For the three months ended March 31, 2022 and 2021, the Company recognized cost of sales associated with these assets of $0.4 million and $0.4 million, respectively.
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PROPERTY, PLANT AND EQUIPMENT |
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PROPERTY, PLANT AND EQUIPMENT | PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost or fair market value at the date of acquisition less accumulated depreciation. The cost basis of constructed assets includes materials, labor, and other direct costs. Major improvements or betterment are capitalized, while repairs that do not improve the life of the respective assets are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets as follows:
Property, plant and equipment, at carrying value, is as follows:
The cost of property classified as “Construction in progress” is excluded from capitalized costs being depreciated. These amounts represent property that is not yet available to be placed into productive service as of the respective reporting date. The Company recorded $30.8 million and $25.6 million of depreciation expense for the three months ended March 31, 2022 and 2021, respectively.
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GOODWILL AND INTANGIBLE ASSETS, NET |
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GOODWILL AND INTANGIBLE ASSETS, NET | GOODWILL AND INTANGIBLE ASSETS, NET Goodwill The Company closed a business combination transaction on February 22, 2022, refer to the Transaction in Note 2—Business Combination in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q. The Transaction was accounted for as business combination pursuant to ASC 805 Business Combination (“ASC 805”). In connection with the Transaction, the Company recorded excess of the purchase price over net assets acquired as goodwill. The Company recorded goodwill of $3.9 million upon Closing and as of March 31, 2022. Goodwill is tested at least annually as of December 31 of each year, or more frequently as events occur or circumstances change that would more-likely-than-not reduce fair value of a reporting unit below its carrying value. Company’s management assesses whether there has been event or circumstance that triggers the fair value of the reporting unit to be lower than its net carrying value since consummation of the Transaction, and concluded that goodwill was not impaired as of March 31, 2022. Intangible Assets Intangible assets, net are comprised of the following:
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 to 20 years. Right of way assets relate primarily to underground pipeline easements and have a useful life of ten years and are amortized using the straight-line method. The right of way agreements are generally for an initial term of ten years with an option to renew for an additional ten years at agreed upon renewal rates based on certain indices or up to 130% of the original consideration paid. The Company recorded $30.2 million and $30.4 million of amortization expense for the three months ended March 31, 2022 and 2021, respectively. There was no impairment recognized on intangible assets for the three months ended March 31, 2022 and 2021.
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DEBT AND FINANCING COSTS |
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DEBT AND FINANCING COSTS | DEBT AND FINANCING COSTS During the quarter ended March 31, 2022, the Company assumed additional revolver liabilities through the Transaction closed in February 2022. There was no significant modification to the Company’s debt structure. 2017 Credit Facility - BCP 1 On June 22, 2017, BCP Raptor, LLC (“BCP I”), a wholly owned subsidiary of BCP and the parent of EagleClaw Midstream Ventures, LLC (“EagleClaw”), entered into a credit agreement with its lenders and with Jefferies Finance LLC, as administrative agent, for a term loan in and initial aggregate principal amount of $1.25 billion with a tenor of seven years, maturing on June 22, 2024. Fixed principal payments equal to 0.25% of the initial principal amount are required to be paid quarterly. Interest is paid on the term loan periodically at a rate equal to 4.25% plus LIBOR subject to a floor of 1.0%. The Company paid scheduled principal payments on this term loan of $3.1 million for the three months ended March 31, 2022 and 2021. BCP I repurchased $2.9 million of the outstanding term loan during the first quarter of 2021. No repurchase was made for this term loan during the first quarter of 2022. In addition, contemporaneously with the credit agreement described above, BCP I entered into a super-priority revolving credit agreement with its lenders and with Jefferies Finance LLC, as administrative agent, in an initial aggregate principal amount of $100.0 million with a tenor of five years, maturing on June 22, 2022. On January 16, 2020, BCP I entered into an amendment to the revolving credit agreement that increased the revolving commitment in an aggregate principal amount of $25.0 million, thereby increasing the aggregate revolving credit commitments of all lenders to $125 million. On January 4, 2021, BCP I entered into an amendment to extend the maturity date from June 22, 2022 to November 3, 2023. Interest is paid on the revolver periodically at a rate equal to LIBOR (0% floor) plus 4.00%, which decreases to LIBOR (0% floor) plus 3.75% when BCP I’s consolidated net leverage ratio is no greater than 4.50 to 1.00. BCP I must pay commitment fees quarterly in an amount equal to 0.50% per annum, which decreases to 0.375% per annum when BCP I’s consolidated net leverage is no greater than 4.50 to 1.00, in each case on the unused portion of the commitment. As of March 31, 2022 and December 31, 2021, there were $59.0 million and $52.0 million in outstanding borrowings under the revolving credit facility, respectively. 2018 Credit Facilities - BCP II and Partnership In November 2018, the Partnership entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to two, one year extension options) (“Corporate Facility”). The agreement for this revolving credit facility 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. The Partnership may increase commitments up to an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders. As of March 31, 2022, there were $657.0 million of borrowings and $2.0 million of letters of credit outstanding under this facility. At the Partnership’s option, the interest rate per annum for borrowings under this facility is either a base rate, as defined, plus a margin, or LIBOR, plus a margin. The Partnership also pays quarterly a facility fee at a rate per annum on total commitments. At March 31, 2022, the base rate margin was 0.05%, the LIBOR margin was 1.05%, and the facility fee was 0.20%. In addition, a commission is payable quarterly to the lenders on the face amount of each outstanding letter of credit at a per annum rate equal to the LIBOR margin then in effect. Contemporaneous with the close of the CR Permian acquisition on November 1, 2018, BCP Raptor II, LLC (“BCP II”), a wholly owned subsidiary of BCP and the parent of CR Permian, entered into a credit agreement with its lenders and with Barclays Bank PLC, as administrative agent, for a term loan in an initial aggregate principal amount of $690.0 million with a tenor of seven years, maturing on November 3, 2025. Fixed principal payments equal to 0.25% of the initial principal amount are required to be paid quarterly. Interest is paid on the term loan periodically at a rate equal to 4.75% plus LIBOR (0% floor). BCP II paid scheduled principal payments on this term loan of $1.7 million for the three months ended March 31, 2022 and 2021. Additionally, during the three months ended March 31, 2022, BCP II voluntarily repurchased $9.9 million of the outstanding term on the open market. Similar open market repurchases totaling $4.7 million were made during the three months ended March 31, 2021. In addition, BCP II entered into a revolving credit facility in an initial aggregate principal amount of $50.0 million with a tenor of five years, maturing on November 3, 2023. On January 16, 2020, BCP II entered into an amendment to the revolving credit agreement that increased the revolving commitment in an aggregate principal amount of $10.0 million, thereby increasing the aggregate revolving credit commitments of all lenders to $60.0 million. Interest is paid on the revolver periodically at a rate equal to LIBOR plus the applicable margin of 4.50% subject to change based on our consolidated total leverage ratio. Any unpaid interest and principal are due at maturity. BCP II also pays quarterly commitment fees of 0.50% on the unused portion of the commitment. As of March 31, 2022 and December 31, 2021, there were no outstanding letters of credit under the revolving credit facility. 2019 Credit Facility - BCP PHP On September 18, 2019, BCP PHP, LLC (“BCP PHP”), a wholly owned subsidiary of BCP and the owner of a 26.67% interest in the Permian Highway Pipeline (“PHP”), entered into a credit agreement with its lenders for a term facility with an initial term commitment of $483.0 million and a conversion date term commitment of $30.2 million and a letter of credit facility up to $32.4 million. The maturity of the associated debt is due March 3, 2025 in accordance with the credit agreement. During the three months ended March 31, 2022 and 2021, BCP PHP paid its principal payments on this term loan totaling $11.6 million and nil, respectively. Fixed principal payments are required to be paid quarterly commencing with the first full quarter ending after the term conversion date, which was June 30, 2021. Interest is paid on the outstanding borrowings monthly at a rate equal to 1.625% plus adjusted LIBOR (subject to a 1% floor) for four years after the closing date and at a rate equal to 1.875% plus adjusted LIBOR (subject to a 1% floor) thereafter. BCP PHP must also pay quarterly commitment fees of 35% of the applicable margin then in effect on the undrawn portion of the available commitments. As of March 31, 2022 and 2021, there were no outstanding letters of credit. Our debt agreements contain various covenants or restriction provisions that, amongst other things limit or restrict the applicable subsidiary’s ability to incur certain liens on assets, property or revenue, engage in certain mergers, dissolutions, investments or acquisitions, incur indebtedness or guarantee debt, make certain dispositions, and enter into certain transactions with subsidiaries or affiliates that exceed a specified threshold. These agreements also contain defined financial covenants, including a debt service coverage ratio. As of March 31, 2022 and December 31, 2021, each applicable subsidiary was in compliance with all loan covenants. The fair value of the Company and its subsidiaries’ consolidated debt as of March 31, 2022 and December 31, 2021 was $2.98 billion and $2.34 billion, respectively. The carrying value of that debt was $2.98 billion and $2.35 billion, as of March 31, 2022 and December 31, 2021, respectively. All of the debt, except the Corporate Facility, is non-recourse to the Company and its assets, except its respective obligor (and associated subsidiaries) BCP I, BCP II and BCP PHP, as the case may be. The following table summarizes the Company’s debt obligations as of March 31, 2022 and December 31, 2021:
The table below presents the components of the Company’s financing costs, net of capitalized interest:
As of March 31, 2022 and December 31, 2021, deferred financing costs associated with the three term loans were $35.4 million and $38.5 million, respectively. Deferred financing costs associated with the revolvers were $1.9 million as of March 31, 2022 and $2.2 million as of December 31, 2021. The amortization of the deferred financing costs was charged to interest expense for the periods presented. The amount of deferred financing costs included in interest expense for the three months ended March 31, 2022 and 2021 was $3.4 million and $3.3 million, respectively.
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ACCRUED EXPENSES |
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ACCRUED EXPENSES | ACCRUED EXPENSES The following table provides detail of the Company’s accrued expenses at March 31, 2022 and December 31, 2021:
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COMMITMENTS AND CONTINGENCIES |
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Mar. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Accruals for loss contingencies arising from claims, assessments, litigation, environmental, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. As of March 31, 2022 and December 31, 2021, there were no accruals for loss contingencies. Litigation The Company is a party to various legal actions arising in the ordinary course of its businesses. In accordance with ASC 450, Contingencies, the Company accrues reserves for outstanding lawsuits, claims, and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more, than the amounts accrued. The Company has entered into litigation with two third parties to collect outstanding receivables totaling $19.7 million that remain outstanding from the Winter Storm Uri during February of 2021. Given the counterparties’ sufficient creditworthiness and the valid claims that we hold, no allowance has currently been established for these items as we have legally enforceable agreements with these parties. Contingent Liabilities As part of the acquisition of Permian Gas on June 11, 2019, consideration included a contingent liability arrangement with PDC. The arrangement requires additional monies to be paid by the Company to PDC on a per Mcf basis if the actual annual Mcf volume amounts exceed forecasted annual Mcf volume amounts starting in 2020 and continuing through 2029. The arrangement defines the incentive rate per Mcf for each qualifying year and the total monies paid under this arrangement are capped at $60.5 million. Amounts are payable on an annual basis over the earn-out period. The fair value of the contingent liability recognized on the acquisition date of $3.9 million was estimated utilizing the following key assumptions: (1) present value factors based on the Company’s weighted-average cost of capital, 2) a probability weighted payout based on an estimate of future volumes and (3) a discount period consistent with the arrangement’s life and the respective due dates of the potential future payments. Based on current forecasts and discussions with PDC, management revalued this contingent liability with updated assumptions at each reporting period. As of March 31, 2022 and December 31, 2021, the estimated fair value of the contingent consideration liability was $0.8 million and $0.8 million, respectively. As part of the Transaction, the Company assumed contingent liabilities of $4.5 million related to earn-out consideration of up to 1,250,000 shares of Class A Common Stock as follows: • 625,000 shares if the per share closing price of the Class A Common Stock as reported by Nasdaq during any 30-trading-day period ending prior to November 9, 2023 is equal to or greater than $280.00 for any 20 trading days within such 30-trading-day period. • 625,000 shares if the per share closing price of the Class A Common Stock as reported by Nasdaq during any 30-trading-day period ending prior to November 9, 2023 is equal to or greater than $320.00 for any 20 trading days within such 30-trading-day period. Pursuant to ASC 805, this earn-out consideration was a pre-existing contingency and accounted for as an assumed liability to the acquirer on acquisition date. Immediately subsequent to the Closing, the Company evaluated the earn-out consideration classification in accordance with ASC 480—Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815—Derivatives and Hedging (“ASC 815”). The Company determined the earn-out consideration to be classified as an equity based on the settlement provision. Environmental Matters As an owner of infrastructure assets and with rights to surface lands, the Company is subject to various local and federal laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the Company for the cost of pollution clean-up resulting from operations and subject the Company to liability for pollution damages. The Company is not aware of any environmental claims existing as of March 31, 2022, that have not been provided for or would otherwise have a material impact on its financial position, results of operations, or liquidity.
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EQUITY METHOD INVESTMENTS |
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Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY METHOD INVESTMENTS | EQUITY METHOD INVESTMENTS As of March 31, 2022, the Company owned investments in the following long-haul pipeline entities in the Permian Basin. These investments were accounted for using the equity method of accounting. For each equity method investment (“EMIs” or “EMI”) pipeline entity, the Company has the ability to exercise significant influence based on certain governance provisions and its participation in the significant activities and decisions that impact the management and economic performance of the EMI pipeline. The table below presents the ownership percentages and investment balances held by the Company for each entity:
(1) Ownership for Permian Highway Pipeline LLC was 53.3% and 26.7% as of March 31, 2022 and December 31, 2021, respectively. Additionally, as of March 31, 2022, the Company owned 15.0% of Epic Crude Holdings, LP (“EPIC”). However, no dollar value was assigned through the purchase price allocation as adjustment was made to eliminate equity in losses of EPIC. No additional contribution was made to EPIC and no distribution or equity income was received from EPIC during the three months ended March 31, 2022. As of March 31, 2022, the unamortized basis differences included in the EMI pipelines balances were $418.3 million. There was no unamortized basis difference as of December 31, 2021. These amounts represent differences in the Company’s contributions to date and the Company’s underlying equity in the separate net assets within the financial statements of the respective entities. Unamortized basis differences will be amortized into equity income over the useful lives of the underlying pipeline assets. There was capitalized interest of $12.3 million and $12.8 million as of March 31, 2022 and December 31, 2021, respectively. Capitalized interest is amortized on a straight-line basis into equity income. The following table presents the activity in the Company’s EMIs for the three months ended March 31, 2022:
(1)Net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $0.8 million from Gulf Cost Express, $1.3 million from Permian Highway Pipeline LLC and $0.1 million from Breviloba. (2)The EMIs acquired in the Transaction are included in the results from February 22, 2022 to March 31, 2022, and this is also the case for the additional 26.67% of PHP that was acquired in the Transaction. The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies, for further information on the Company’s basis of presentation. Refer to the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies, for further information on the Company’s financial statement consolidations. Summarized Financial Information The following table represents selected income statement data for the Company’s EMI pipelines (on a 100 percent basis) for the three months ended March 31, 2022.
(1) For the three months ended March 31, 2021, the Company only had equity interest in Permian Highway Pipeline LLC.
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EQUITY AND WARRANTS |
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EQUITY AND WARRANTS | EQUITY AND WARRANTS Redeemable Noncontrolling Interest — Common Unit Limited Partners 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 issued 50,000,000 common units representing limited partner interests in the Partnership and the Company issued 50,000,000 shares of the Company’s Class C common stock, par value $0.0001 per share, to Contributor. Please refer to the “Transaction” discussed above. The 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 three months ended March 31, 2022, 2,740,000 common units were redeemed on a one-for-one basis for shares of Class A Common Stock and a corresponding number of shares of Class C Common Stock were cancelled. There were 47,260,000 Common Units and an equal number of Class C Common Stock issued and outstanding as of March 31, 2022. The Common Units fair value was approximately $3.19 billion as of March 31, 2022. Redeemable Noncontrolling Interest — Preferred Unit Limited Partners Upon Closing, the Company assumed certain Preferred Units that were issued and outstanding on acquisition date. The Preferred Units will be exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company. Refer to Note 11—Series A Cumulative Redeemable Preferred Units for further discussion. Public Warrants As of March 31, 2022 there were 12,577,350 Public Warrants (as defined below) outstanding. Each whole public warrant entitles the holder to purchase one twentieth of a share of Class A Common Stock at a price of $230.00 per share (the “Public Warrants”). The Public Warrants will expire on November 9, 2023 or upon redemption or liquidation. The Company may call the Public Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant with not less than 30 days’ notice provided to the Public Warrant holders. However, this redemption right can only be exercised if the reported last sale price of the Class A Common Stock equals or exceeds $360.00 per share for any 20-trading days within a 30-trading day period ending three business days prior to sending the notice of redemption to the Public Warrant holders. Private Placement Warrants As of March 31, 2022, there were 6,364,281 Private Placement Warrants (as defined below) outstanding, of which Apache holds 3,182,140. The private placement warrants will expire on November 9, 2023 and are identical to the Public Warrants discussed above, except (i) they will not be redeemable by the Company so long as they are held by the initial holders or their respective permitted transferees and (ii) they may be exercised by the holders on a cashless basis (the “Private Placement Warrants” and, together with the Public Warrants, the “Warrants”). The Company recorded a fair value of $0.1 million for the Public Warrants and a fair value of $0.1 million for the Private Warrants as of March 31, 2022 on the Condensed Consolidated Balance Sheet in other non-current liabilities. Refer to Note 15—Fair Value Measurement in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding valuation of the Warrants. Dividend On February 22, 2022, the Company entered into a Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”) with selected parties including Blackstone, I Squared Capital, Management and Apache (“Reinvestment Holder”). The Reinvestment Agreement obligates each Reinvestment Holder to reinvest in shares of Class A Common Stock at least 20% of all distributions on Common Units or dividends on shares of Class A Common Stock held by such Reinvestment Holder. On February 22, 2022, the Audit Committee and subsequently the Board approved that for the calendar year 2022, 100% of all distributions or dividends received by the Reinvestment Holders would be reinvested in newly issued Class A shares. On April 4, 2022, the Company filed a Registration Statement on Form S-3 related to the Reinvestment Agreement and the establishment of the Dividend and Distribution Reinvestment Plan (the “Plan”) for all other holders. Refer to Note 18—Subsequent Events in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional details. On April 20, 2022, the Company’s Board of Directors (the “Board”) declared a cash dividend of $1.50 per share on the Company’s Class A Common Stock, which will be payable to stockholders on May 17, 2022. The Company, through its ownership of the general partner of the Partnership, also declared a distribution of $1.50 per Common Unit from the Partnership to the holders of Common Units. As described in these Condensed Consolidated Financial Statements, as the context requires, dividends paid to holders of Class A Common Stock and distributions paid to holders of Common Units may be referred to collectively as “dividends.” The Company anticipates 7.8 million of the Class A and Class C shares will receive a cash dividend with the balance receiving additional Class A shares under the Reinvestment Agreement (defined above). SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITSPrior to the merger close date, the Partnership had 625,000 Preferred Units issued and outstanding. Immediately prior to the Closing, on February 22, 2022, the Partnership redeemed for cash, 100,000 Preferred Units in an amount equal to approximately $120.1 million. The Company assumed the remaining 525,000 Preferred Units as well as 29,983 paid-in-kind (“PIK”) Preferred Units that were issued and outstanding at the close of the acquisition. 150,000 of these Preferred Units and a pro rata amount of the PIK units contain a mandatory redemption feature as further discussed below. Mandatorily Redeemable Preferred Units At the close of the Transaction, the Company effectuated the Third Amended and Restated Agreement of Limited Partnership of the Partnership (“Partnership LPA”), which among other things, provides for mandatory pro-rata redemptions by the Partnership of 50,000 Preferred Units at or prior to each of the six-, twelve- and eighteen-month anniversaries of the effectiveness of the Partnership LPA, for an aggregate of 150,000 Preferred Units over the eighteen-month period. Given this mandatory redemption feature and pursuant to ASC 480, liability classification is required for these 150,000 Preferred Units and the pro rata PIK units. The Company values the liability as of each reporting date and records the change in valuation in the “Other income (expenses)” in the Condensed Consolidated Statements of Operations. The Partnership consummated the first of such redemptions redeeming 50,000 units along with 2,856 PIK units on March 28, 2022 for an aggregate amount equal to $60.7 million. For the remaining 100,000 Preferred Units that contain the mandatory redemption feature, the Company recorded $67.2 million and $68.9 million in current and noncurrent liabilities, respectively, as of March 31, 2022. These 100,000 Preferred Units must be redeemed in 50,000 unit increments by February 22, 2023 and August 22, 2023, respectively. The Partnership LPA also provides the Partnership with an option to redeem Preferred Units early so long as at least 25,000 Preferred Units are redeemed in each redemption, without any dollar-value threshold. Redeemable Noncontrolling Interest Preferred Units The remaining 375,000 Preferred Units assumed on the Closing Date do not contain a mandatory redemption feature, and are accounted for on the Company’s Condensed Consolidated Balance Sheets as a redeemable noncontrolling interest classified as temporary equity in accordance with the terms of the Preferred Units, including the redemption rights with respect thereto. The Preferred Units are exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company. The Company applies a two-step approach to measure the redeemable noncontrolling interest related to the Preferred Units, by first allocating a portion of the Company’s net income in accordance with the terms of the Partnership LPA. After consideration of the foregoing, the Company records an additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end, if applicable. The amount of such adjustment is determined based upon the accreted value method to reflect the passage of time until the Preferred Units are exchangeable at the option of the holder. Pursuant to this method, the net transaction price is accreted using the effective interest method, to the Series A Redemption Price (as defined in the Partnership LPA) calculated at the seventh anniversary of the closing of the Preferred Unit Offering. The total adjustment is limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end is equal to the greater of (a) the sum of (i) the carrying amount of the Preferred Units determined in accordance with ASC 810, plus (ii) the fair value of the embedded derivative liability and (b) the accreted value of the net transaction price. Activities related to Preferred Units for the three months ended March 31, 2022 are as follows:
(1)Included 21,417 PIK units on a pro rata basis. (2)Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. Refer to Note 15—Fair Value Measurements for discussion of the fair value changes in the embedded derivative liability during the period. (3)As of March 31, 2022, the Redemption Price would have been based on an 11.1% percent internal rate of return, which would equate to a redemption value of $700.0 million.
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SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS | EQUITY AND WARRANTS Redeemable Noncontrolling Interest — Common Unit Limited Partners 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 issued 50,000,000 common units representing limited partner interests in the Partnership and the Company issued 50,000,000 shares of the Company’s Class C common stock, par value $0.0001 per share, to Contributor. Please refer to the “Transaction” discussed above. The 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 three months ended March 31, 2022, 2,740,000 common units were redeemed on a one-for-one basis for shares of Class A Common Stock and a corresponding number of shares of Class C Common Stock were cancelled. There were 47,260,000 Common Units and an equal number of Class C Common Stock issued and outstanding as of March 31, 2022. The Common Units fair value was approximately $3.19 billion as of March 31, 2022. Redeemable Noncontrolling Interest — Preferred Unit Limited Partners Upon Closing, the Company assumed certain Preferred Units that were issued and outstanding on acquisition date. The Preferred Units will be exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company. Refer to Note 11—Series A Cumulative Redeemable Preferred Units for further discussion. Public Warrants As of March 31, 2022 there were 12,577,350 Public Warrants (as defined below) outstanding. Each whole public warrant entitles the holder to purchase one twentieth of a share of Class A Common Stock at a price of $230.00 per share (the “Public Warrants”). The Public Warrants will expire on November 9, 2023 or upon redemption or liquidation. The Company may call the Public Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant with not less than 30 days’ notice provided to the Public Warrant holders. However, this redemption right can only be exercised if the reported last sale price of the Class A Common Stock equals or exceeds $360.00 per share for any 20-trading days within a 30-trading day period ending three business days prior to sending the notice of redemption to the Public Warrant holders. Private Placement Warrants As of March 31, 2022, there were 6,364,281 Private Placement Warrants (as defined below) outstanding, of which Apache holds 3,182,140. The private placement warrants will expire on November 9, 2023 and are identical to the Public Warrants discussed above, except (i) they will not be redeemable by the Company so long as they are held by the initial holders or their respective permitted transferees and (ii) they may be exercised by the holders on a cashless basis (the “Private Placement Warrants” and, together with the Public Warrants, the “Warrants”). The Company recorded a fair value of $0.1 million for the Public Warrants and a fair value of $0.1 million for the Private Warrants as of March 31, 2022 on the Condensed Consolidated Balance Sheet in other non-current liabilities. Refer to Note 15—Fair Value Measurement in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion regarding valuation of the Warrants. Dividend On February 22, 2022, the Company entered into a Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”) with selected parties including Blackstone, I Squared Capital, Management and Apache (“Reinvestment Holder”). The Reinvestment Agreement obligates each Reinvestment Holder to reinvest in shares of Class A Common Stock at least 20% of all distributions on Common Units or dividends on shares of Class A Common Stock held by such Reinvestment Holder. On February 22, 2022, the Audit Committee and subsequently the Board approved that for the calendar year 2022, 100% of all distributions or dividends received by the Reinvestment Holders would be reinvested in newly issued Class A shares. On April 4, 2022, the Company filed a Registration Statement on Form S-3 related to the Reinvestment Agreement and the establishment of the Dividend and Distribution Reinvestment Plan (the “Plan”) for all other holders. Refer to Note 18—Subsequent Events in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for additional details. On April 20, 2022, the Company’s Board of Directors (the “Board”) declared a cash dividend of $1.50 per share on the Company’s Class A Common Stock, which will be payable to stockholders on May 17, 2022. The Company, through its ownership of the general partner of the Partnership, also declared a distribution of $1.50 per Common Unit from the Partnership to the holders of Common Units. As described in these Condensed Consolidated Financial Statements, as the context requires, dividends paid to holders of Class A Common Stock and distributions paid to holders of Common Units may be referred to collectively as “dividends.” The Company anticipates 7.8 million of the Class A and Class C shares will receive a cash dividend with the balance receiving additional Class A shares under the Reinvestment Agreement (defined above). SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITSPrior to the merger close date, the Partnership had 625,000 Preferred Units issued and outstanding. Immediately prior to the Closing, on February 22, 2022, the Partnership redeemed for cash, 100,000 Preferred Units in an amount equal to approximately $120.1 million. The Company assumed the remaining 525,000 Preferred Units as well as 29,983 paid-in-kind (“PIK”) Preferred Units that were issued and outstanding at the close of the acquisition. 150,000 of these Preferred Units and a pro rata amount of the PIK units contain a mandatory redemption feature as further discussed below. Mandatorily Redeemable Preferred Units At the close of the Transaction, the Company effectuated the Third Amended and Restated Agreement of Limited Partnership of the Partnership (“Partnership LPA”), which among other things, provides for mandatory pro-rata redemptions by the Partnership of 50,000 Preferred Units at or prior to each of the six-, twelve- and eighteen-month anniversaries of the effectiveness of the Partnership LPA, for an aggregate of 150,000 Preferred Units over the eighteen-month period. Given this mandatory redemption feature and pursuant to ASC 480, liability classification is required for these 150,000 Preferred Units and the pro rata PIK units. The Company values the liability as of each reporting date and records the change in valuation in the “Other income (expenses)” in the Condensed Consolidated Statements of Operations. The Partnership consummated the first of such redemptions redeeming 50,000 units along with 2,856 PIK units on March 28, 2022 for an aggregate amount equal to $60.7 million. For the remaining 100,000 Preferred Units that contain the mandatory redemption feature, the Company recorded $67.2 million and $68.9 million in current and noncurrent liabilities, respectively, as of March 31, 2022. These 100,000 Preferred Units must be redeemed in 50,000 unit increments by February 22, 2023 and August 22, 2023, respectively. The Partnership LPA also provides the Partnership with an option to redeem Preferred Units early so long as at least 25,000 Preferred Units are redeemed in each redemption, without any dollar-value threshold. Redeemable Noncontrolling Interest Preferred Units The remaining 375,000 Preferred Units assumed on the Closing Date do not contain a mandatory redemption feature, and are accounted for on the Company’s Condensed Consolidated Balance Sheets as a redeemable noncontrolling interest classified as temporary equity in accordance with the terms of the Preferred Units, including the redemption rights with respect thereto. The Preferred Units are exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company. The Company applies a two-step approach to measure the redeemable noncontrolling interest related to the Preferred Units, by first allocating a portion of the Company’s net income in accordance with the terms of the Partnership LPA. After consideration of the foregoing, the Company records an additional adjustment to the carrying value of the Preferred Unit redeemable noncontrolling interest at each period end, if applicable. The amount of such adjustment is determined based upon the accreted value method to reflect the passage of time until the Preferred Units are exchangeable at the option of the holder. Pursuant to this method, the net transaction price is accreted using the effective interest method, to the Series A Redemption Price (as defined in the Partnership LPA) calculated at the seventh anniversary of the closing of the Preferred Unit Offering. The total adjustment is limited to an amount such that the carrying amount of the Preferred Unit redeemable noncontrolling interest at each period end is equal to the greater of (a) the sum of (i) the carrying amount of the Preferred Units determined in accordance with ASC 810, plus (ii) the fair value of the embedded derivative liability and (b) the accreted value of the net transaction price. Activities related to Preferred Units for the three months ended March 31, 2022 are as follows:
(1)Included 21,417 PIK units on a pro rata basis. (2)Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. Refer to Note 15—Fair Value Measurements for discussion of the fair value changes in the embedded derivative liability during the period. (3)As of March 31, 2022, the Redemption Price would have been based on an 11.1% percent internal rate of return, which would equate to a redemption value of $700.0 million.
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SHARE-BASED COMPENSATION |
3 Months Ended |
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Mar. 31, 2022 | |
Share-based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION The Company previously issued incentive units, which included performance and service conditions, to certain employees and board members. The units consisted of Class A-1, Class A-2, and Class A-3 units. These units derived value from the Company’s certain wholly owned subsidiaries. Class A-1 and A-2 units would have vested upon either (i) the date of consummation of a change in control or (ii) the date that is 1-year following the consummation of the initial public offering (“IPO”) of the Company (or its successor) (collectively “Exit Events”). Class A-3 units would have vested upon a change in control, if the participants were employed at the time of the event, or upon termination of the participant by the Company. Immediately upon Closing, all outstanding Class A-1 and Class A-2 units were cancelled and exchanged for 2,650,000 shares (the “Class A Shares”) of the Company’s Class A Common Stock. These Class A Shares are issued and outstanding as they were distributed pro rata to all holders of Class A-1 and Class A-2 units by the Common Unit limited partners from the 50,000,000 common units they received upon the Closing. Before distributing these Common Units, the Common Unit limited partners redeemed them for Class A Common Stock. The Class A Shares are held in escrow and will vest over three to four years. Similarly, the Class A-3 units were exchanged for approximately 163,000 Class C Common Stock and Common Units (the “Class C Shares”) and will vest over four years. The Company also issued approximately 38,000 replacement restricted share awards (“Replacement Awards”) to new employees that transitioned from ALTM as part of the merger. These changes for all three share types established a new measurement date. The Class A Shares, Class C Shares and Replacement Awards were valued based on the Company’s publicly quoted price on the measurement date, which was the Closing Date of the Transaction. With respect to these shares, the Company recorded compensation expenses of $6.1 million for the three months ended March 31, 2022, based on a straight line amortization of the associated awards’ fair value over the respective vesting life of the shares. With respect to the incentive units, no compensation expenses were recorded for the three months ended March 31, 2021, as the incentive units were considered non-vested prior to their cancellation and exchange for Class A or Class C Common Stock.
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INCOME TAXES |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES The Company is subject to U.S. federal income tax and the Texas margin tax. The Company’s income tax provision for the three months ended March 31, 2022 consists of following:
The Company records income taxes using an estimated annual effective tax rate and recognizes specific events discretely as they occur. The following table presents reconciliation of the U.S. statutory income tax rate to the estimated annual effective tax rate:
(1) Prior to the Closing on February 22, 2022, the Company was organized as limited partnership and was not subject to the U.S. federal income tax for the three months ended March 31, 2021. For state purposes, the Company records deferred tax assets and liabilities based on the differences between the carrying value and tax basis of assets and liabilities recorded on the consolidated balance sheets. The deferred tax liabilities recorded as of March 31, 2022 and December 31, 2021 relate to these differences. For federal purposes, the Company has a deferred tax asset related to our investment in the Partnership and net operating losses. The Company recorded a full allowance valuation on its deferred tax assets, as it has determined that more-likely-than-not that the benefit of the deferred tax assets will not be realized. Upon Closing, the Company assumed certain uncertain tax positions from ALTM. The Company accounts for income taxes in accordance with ASC 740—Income Taxes, which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements. Tax positions generally refer to a position taken in a previously filed income tax return or expected to be included in a tax return to be filed in the future that is reflected in the measurement of current and deferred income tax assets and liabilities. Reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:
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NET INCOME PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET INCOME PER SHARE | NET INCOME PER SHARE The computation of basic and diluted net income (loss) per share for the periods presented in the Condensed Consolidated Financial Statements is shown in the table below.
(1)The effect of an assumed exchange of the outstanding Preferred Units and outstanding public and private warrants for shares of Class A Common Stock would have been anti-dilutive for all periods presented in which the Preferred Units and public and private warrants were outstanding. (2)The effect of an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) would have been anti-dilutive for all periods presented in which the Common Units were outstanding.
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FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The Company’s financial assets and liabilities measured at fair value on a recurring basis include cash and cash equivalents, accrued receivables, accounts receivable, accounts receivable from affiliates, dividends and distributions payable, interest rate and commodity swap derivatives, and Company’s private and public warrants and an embedded derivative liability related to the issuance of Preferred Units. Topic 820 establishes a framework for measuring fair value in U.S. GAAP, clarifies the definition of fair value within that framework, and requires disclosures about the use of fair value measurements. Topic 820 defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Topic 820 provides a framework for measuring fair value, establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and requires consideration of the counterparty’s creditworthiness when valuing certain assets. Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1 inputs). The three levels of the fair value hierarchy under Topic 820 are described below: Level 1 inputs: Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 inputs: Inputs, other than quoted prices in active markets, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. Level 3 inputs: Prices or valuations that require unobservable inputs 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 March 31, 2022 and December 31, 2021:
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 Activities in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q for further discussion related to commodity swaps and interest rate derivatives. The Company bifurcated and recognized the embedded derivative associated with the Preferred Units related to the exchange option provided to the Preferred Unit holders under the terms of the Amended LPA. The valuation of the embedded derivative, (using an income approach), was based on expected future interest rates using the Black-Karasinski model, the Company’s imputed interest rate ranged from 7.32% to 11.58%, interest rate volatility of 39.79%, the expected timing of periodic cash distributions, the estimated timing for the potential exercise of the exchange option of 4.2 years and anticipated dividend yields of the Preferred Units. The Company recorded an unrealized loss of $2.9 million for the three months ended March 31, 2022, which was recorded as an “Unrealized loss on embedded derivative” in the Condensed Consolidated Statement of Operations. The Company has classified these recurring fair value measurements as Level 3 in the fair value hierarchy. The carrying value of the Company’s Public Warrants are recorded at fair value based on quoted market prices, a Level 1 fair value measurement. The carrying value of the Company’s Private Placement Warrants are recorded at fair value determined using an option pricing model, a Level 3 fair value measurement, which is calculated based on key assumptions related to expected volatility of the Company’s common stock, an expected dividend yield, the remaining term of the warrants outstanding and the risk-free rate based on the U.S. Treasury yield curve in effect at the time of the valuation. These assumptions are estimated utilizing historical trends of the Company’s common stock, Public Warrants and other factors. The Company has recorded a liability of $0.2 million as of March 31, 2022. There was no change in fair value of the warrants since closing of the Transaction through reporting date. The carrying amounts reported on the Condensed Consolidated Balance Sheet for the Company’s remaining financial assets and liabilities approximate fair value due to their short-term nature. The carrying amount of the revolving credit facility approximates fair value because the interest rate is variable and reflective of market rates. There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three months ended March 31, 2022.
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DERIVATIVES AND HEDGING ACTIVITIES |
3 Months Ended |
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Mar. 31, 2022 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVES AND HEDGING ACTIVITIES | DERIVATIVES AND HEDGING ACTIVITIES The Company is exposed to certain risks arising from both its business operations and economic conditions, and it enters into certain derivative contracts to manage exposure to these risks. The Company did not elect to apply hedge accounting to these derivative contracts and recorded fair value of the derivatives on the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021. Interest Rate Risk The Company manages market risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and by using derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high credit-rating counterparties. The Company’s objectives in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract. In September of 2019, BCP PHP entered into two interest rate swaps on 75.0% of the outstanding $513.0 million term loan. These instruments were effective September 30, 2019 and have a mandatory termination date on November 19, 2024. The notional amounts of these swaps float monthly such that 75.0% of the total outstanding term loan is covered by the notional of the two swaps over the life of the associated term facility. These swaps result in fixed LIBOR rates ranging from 1.76% to 1.78% for the respective notional amounts of our debt for the LIBOR component of our interest rate and are paid in monthly installments. The fair value or settlement value of the consolidated interest rate swaps outstanding are presented on a gross basis on the Condensed Consolidated Balance Sheets. Interest rate swap derivative liabilities were $7 thousand and $2.7 million as of March 31, 2022 and December 31, 2021, respectively. Interest rate swap derivative assets were $9.7 million as of March 31, 2022. BCP PHP recorded cash settlements on interest rate swap derivatives of $0.9 million and $0.6 million for the three months ended March 31, 2022 and 2021, respectively, in the “Interest Expense” of the Condensed Consolidated Statements of Operations. In addition, BCP PHP recorded unrealized gain of $11.6 million and unrealized loss of $10.6 million for the change in fair value of the interest rate swap derivatives for the three months ended March 31, 2022 and 2021, respectively, in the “Interest Expense” of the Condensed Consolidated Statements of Operations. Commodity Price Risk Similarly, in 2020 and 2021 the Company entered into WTI crude hedges at a specific notional that provides for a fixed price for crude in the Permian Basin. All of the Company’s commodity swaps had reached maturity as of December 31, 2021. The fair value or settlement value of the swaps outstanding are presented on a gross basis on the Condensed Consolidated Balance Sheet. Commodity swap derivative liability was nil and $0.2 million as of March 31, 2022 and December 31, 2021, respectively.
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SEGMENTS |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENTS | 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 to various points along the Texas Gulf Coast, and our Delaware Link Pipeline that is under construction. The current operating pipelines transport crude oil, natural gas and NGLs to the Texas Gulf Coast. Upon Closing, our CODM reviewed the Company and ALTM’s reporting segment activities. The Company then renamed its Gathering and Processing segment to Midstream Logistics and its Transmission segment to Pipeline Transportation. These name changes were made to better align segment activities with the name of respective segment. There was no change in segment composition or structure for the three months ended March 31, 2022. The following tables present the operating results and other key financial measures for the individual operating segment as of and for the three months ended March 31, 2022 and 2021:
(1) Corporate and Other represents those results that: (i) are not specifically attributable to a reportable segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items. (2) Results do not include legacy ALTM prior to February 22, 2022. Refer to the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies, for further information on the Company’s basis of presentation. The following tables present the revenue for individual operating segment for the three months ended March 31, 2022 and 2021:
(1) Corporate and Other represents those results that: (i) are not specifically attributable to a reportable segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items. The following table present total assets for individual operation segment as of March 31, 2022 and December 31, 2021:
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SUBSEQUENT EVENTS |
3 Months Ended |
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Mar. 31, 2022 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS On April 4, 2022, the Company filed a registration statement on Form S-3 with the SEC to reserve 15,000,000 shares of Class A Common Stock for issuance under the Plan, refer to Note—10 Equity and Warrants for additional information. On April 20, 2022, the Company’s Board of Directors declared a cash dividend of $1.50 per share on the Company’s Class A Common Stock which will be payable to stockholders on May 17, 2022. The Company, through its ownership of the general partner of the Partnership, declared a distribution of $1.50 per Common Unit from the Partnership to the holders of Common Units. Please refer to Note 10—Equity and Warrants for additional information. On May 10, 2022, the Company’s Board of Directors amended the Company’s 2019 Omnibus Compensation Plan (as amended from time to time, the “2019 Plan”), in order to reflect the Company’s name change and certain other non-material updates. Under the 2019 Plan, the Company is authorized to grant equity-based awards to its employees and directors. The foregoing description of the 2019 Plan is qualified in its entirety by reference to the 2019 Plan, a copy of which is attached as Exhibit 10.5 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.
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DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
3 Months Ended |
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Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of PresentationThe accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with GAAP. Certain reclassifications of prior year balances have been made to conform such amounts to current year presentation. These reclassifications have no impact on net income. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. All intercompany balances and transactions have been eliminated in consolidation. |
Principles of Consolidation | Prior to the Closing, the Company’s financial statements that were filed with the SEC were derived from ALTM’s accounting records. As the Transaction was determined to be a reverse merger, BCP was considered as the accounting acquirer and ALTM was the legal acquirer. The accompanying Condensed Consolidated Financial Statements herein include (1) BCP’s net assets carried at historical value, (2) BCP’s historical results of operations prior to the Transaction, (3) the ALTM’s net assets carried at fair value as of the Closing Date and (4) the combined results of operations with the Company’s results presented within the Condensed Consolidated Financial Statements from February 22, 2022 going forward. Refer to Note 2—Business Combination to our Condensed Consolidated Financial Statements in this Form 10-Q for additional discussion. |
Variable Interest Entity | Variable Interest Entity The Company uses a qualitative approach in assessing the consolidation requirement for variable interest entities. The approach focuses on identifying which enterprise has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. In the event that the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity would be consolidated in our financial statements. The Company has determined that it has significant influence over the operating and financial policies of the four pipeline entities in which it is invested, but does not exercise control over them; and hence, it accounts for these investments using the equity method. Refer to Note 9—Equity Method Investments in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q.
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Redeemable Noncontrolling Interest | Redeemable Noncontrolling Interest — Common Units Limited Partners Pursuant to the Contribution Agreement, in connection with the Closing, (i) Contributor contributed all of the equity interests of the Contributed Entities to the Partnership; and (ii) in exchange for such contribution, the Partnership issued 50,000,000 common units representing limited partner interests in the Partnership and the Company issued 50,000,000 shares of the Company’s Class C common stock, par value $0.0001 per share, to Contributor. Please refer to the Transaction discussed above. The Common Units are redeemable at the option of unit holders and accounted for on the Company’s Condensed Consolidated Balance Sheet as a redeemable noncontrolling interest classified as temporary equity. The Company records the redeemable noncontrolling interest at the higher of (i) its initial value plus accumulated earnings/losses associated with the noncontrolling interest or (ii) the maximum redemption value as of the balance sheet date. The redemption value was determined based on a 5-day volume weighted average closing price of the Class A Common Stock. See discussion and additional details in Note 10—Equity and Warrants. Redeemable Noncontrolling Interest — Preferred Unit Limited Partners The Partnership issued Series A Cumulative Redeemable Preferred Units (“Preferred Units”) on June 12, 2019. As the Transaction was accounted for as a reverse merger, the Company assumed certain Preferred Units that were issued and outstanding were assumed at Closing for accounting purposes. The Preferred Units are exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company. The Preferred Units are accounted for on the Company’s Condensed Consolidated Balance Sheet as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units. Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value and are accounted for on the Company’s Condensed Consolidated Balance Sheet as a long-term liability embedded derivative.
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Equity Method Interests | Equity Method InvestmentsThe Company follows the equity method of accounting when it does not exercise control over its equity interests, but can exercise significant influence over the operating and financial policies of the entity. Under this method, the equity investments are carried originally at acquisition cost, increased by the Company’s proportionate share of the equity interest’s net income and contributions made, and decreased by the Company’s proportionate share of the equity interest’s net losses and distributions received.Unamortized basis differences will be amortized into equity income over the useful lives of the underlying pipeline assets. |
Use of Estimates | Use of Estimates Preparation of financial statements in conformity with GAAP and disclosure of contingent assets and liabilities requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates its estimates and assumptions on a regular basis. Actual results may differ from these estimates and assumptions used in preparation of its condensed financial statements, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include the valuation of derivatives, the valuation of tangible and intangible assets, the valuation of share-based compensation, the valuation of contingent liabilities, the valuation of mandatorily redeemable Preferred Units, and the valuation of noncontrolling interests.
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Inventory | InventoryOther current assets include inventory that consists of condensate, and NGLs that are valued at the lower of cost or market. At the end of each reporting period, the Partnership assesses the carrying value of inventory and makes any adjustments necessary to reduce the carrying value to the applicable net realizable value. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets In accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 360, Property, Plant and Equipment, long-lived assets, excluding goodwill, to be held and used by the Company are reviewed for impairment annually or on an interim basis if events or circumstances indicate that the fair value of the assets have decreased below their carrying value. For long-lived assets to be held and used, the Company bases their evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. The Company’s 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 the excess, if any, of the property’s net book value over its estimated fair value.
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Transactions with Affiliates | Transactions with AffiliatesThe accounts receivable from or payable to affiliate represent the net result of the Company’s monthly revenue, capital and operating expenditures, and other miscellaneous transactions to be settled with Apache and its subsidiaries, who held equity shares that represented approximately 13.6% of the Company’s voting power as of April 22, 2022. |
Net Income per Share | Net Income Per Share Basic net income per share is calculated by dividing net income attributable to Class A common shareholders by the weighted average number of shares of Class A Common Stock outstanding during the period. Class C Common Stock is excluded from the weighted average shares outstanding for the calculation of basic net income per share, as holders of Class C Common Stock are not entitled to any dividends or liquidating distributions. The Company uses the “if-converted method” to determine the potential dilutive effect of (i) an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) for shares of Class A Common Stock, (ii) an assumed exercise of the outstanding public and private warrants for shares of Class A Common Stock and (iii) an assumed exchange of the outstanding Preferred Units for shares of Class A Common Stock. The dilutive effect of any earn-out consideration payable in shares is only included in periods for which the underlying conditions for the issuance are met.
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Recently Adopted Accounting Pronouncement and Recent Accounting Pronouncement Not Yet Adopted | Recently Adopted Accounting Pronouncement Effective January 1, 2022, the Company adopted ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value. With adoption of ASU 2021-08, the Company assumed contract liabilities at carrying value of $9.1 million upon Closing. Recent Accounting Pronouncement Not Yet Adopted In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 was issued to ease the potential accounting burden expected when global capital markets move away from the London Interbank Offered Rate (“LIBOR”), the benchmark interest rate banks use to make short-term loans to each other. The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationship, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the effect that ASU 2020-04 will have on its Consolidated Financial Statements. In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method (“ASU 2022-01”). Current GAAP permits only prepayable financial assets and one or more beneficial interests secured by a portfolio of prepayable financial instruments to be included in a last-of-layer closed portfolio. The amendments in ASU 2022-01 allow nonprepayable financial assets also to be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets, thereby allowing consistent accounting for similar hedges. The amendments in ASU 2022-01 also clarify the accounting for and promote consistency in the reporting of hedge basis adjustments applicable to both a single hedged layer and multiple hedged layers as follows: (1) an entity is required to maintain basis adjustments in an existing hedge on a closed portfolio basis (that is, not allocated to individual assets), (2) an entity is required to immediately recognize and present the basis adjustment associated with the amount of the designated layer that was breached in interest income. In addition, an entity is required to disclose that amount and the circumstances that led to the breach, (3) an entity is required to disclose the total amount of the basis adjustments in existing hedges as a reconciling amount if other areas of GAAP require the disaggregated disclosure of the amortized cost basis of assets included in the closed portfolio, and (4) an entity is prohibited from considering basis adjustments in an existing hedge when determining credit losses. The guidance is effective for public business entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of ASU 2022-01 for any entity that has adopted the amendments in 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.
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Business Combination | The Transaction was accounted for as a business combination in accordance with ASC 805, among other things, requires assets acquired and liabilities assumed to be measured at their acquisition date fair value. The Company also adopted ASU 2021-08, effective as of January 1, 2022, to record contract liabilities at their carrying value as of the acquisition date. Although the Company was the legal acquirer, BCP and BCP GP were determined to be the accounting acquirer and legal acquiree. As a result, BCP and its subsidiaries’ net assets were carried at historical value, acquired net assets were measured at fair value except contract liabilities being recorded at carrying value at the acquisition date, and results of operations of ALTM and its subsidiaries were included in the Company’s Condensed Consolidated Financial Statements from the Closing Date going forward. The preliminary purchase price allocation is based on an assessment of the fair value of the assets acquired and liabilities assumed in the acquisition using inputs that are not observable in the market and thus level 3 inputs. The fair value of the processing plant, gathering system and related facilities and equipment are based on market and cost approaches. The goodwill of $3.9 million relates to operational synergies. The value of the Preferred Units and assumed contingent liability was determined through a probability-weighted analysis of the expected future cash flows and other applicable valuation techniques. See additional details for Preferred Units in Note 11—Series A Cumulative Redeemable Preferred Units and contingent liabilities in Note 8—Commitments and Contingencies in the Notes to our Condensed Consolidated Financial Statements in this Form 10-Q. Certain data necessary to complete the purchase price allocation is not yet available, including, but not limited to, valuation of the underlying assets of the equity method investments and liabilities assumed. However, the Company is continuing its review of these matters during the measurement period, and if new information obtained about facts and circumstances that existed at the acquisition date identifies adjustments to the liabilities initially recognized, as well as any additional liabilities that existed at the acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to the provisional amounts initially recognized. The Company will finalize the purchase price allocation during the 12-month period following the acquisition date.
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Revenue Recognition | Current and noncurrent contract liabilities are included in “Other Current Liabilities” and “Contract Liabilities”, respectively, of the Condensed Consolidated Balance Sheets.Current and noncurrent contract cost assets are included in “Prepaid and Other Current Assets” and “Deferred Charges and Other Assets”, respectively, of the Condensed Consolidated Balance Sheets. |
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.The cost of property classified as “Construction in progress” is excluded from capitalized costs being depreciated. |
Goodwill | 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. |
Debt and Financing Cost | The amortization of the deferred financing costs was charged to interest expense for the periods presented. |
Commitments and Contingencies | Pursuant to ASC 805, this earn-out consideration was a pre-existing contingency and accounted for as an assumed liability to the acquirer on acquisition dateThe Company determined the earn-out consideration to be classified as an equity based on the settlement provision. |
Equity and Warrants | Therefore, the Common Unit is accounted for as redeemable noncontrolling interest and classified as temporary equity on the Company’s Condensed Consolidated Balance Sheet.The remaining 375,000 Preferred Units assumed on the Closing Date do not contain a mandatory redemption feature, and are accounted for on the Company’s Condensed Consolidated Balance Sheets as a redeemable noncontrolling interest classified as temporary equity in accordance with the terms of the Preferred Units, including the redemption rights with respect thereto. The Preferred Units are exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders upon the occurrence of specified events, unless otherwise redeemed by the Company. |
Share-Based Compensation | The Class A Shares, Class C Shares and Replacement Awards were valued based on the Company’s publicly quoted price on the measurement date, which was the Closing Date of the Transaction. With respect to these shares, the Company recorded compensation expenses of $6.1 million for the three months ended March 31, 2022, based on a straight line amortization of the associated awards’ fair value over the respective vesting life of the shares. |
Income Tax | The Company accounts for income taxes in accordance with ASC 740—Income Taxes, which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements. |
Fair Value Measurements | The Company’s financial assets and liabilities measured at fair value on a recurring basis include cash and cash equivalents, accrued receivables, accounts receivable, accounts receivable from affiliates, dividends and distributions payable, interest rate and commodity swap derivatives, and Company’s private and public warrants and an embedded derivative liability related to the issuance of Preferred Units. Topic 820 establishes a framework for measuring fair value in U.S. GAAP, clarifies the definition of fair value within that framework, and requires disclosures about the use of fair value measurements. Topic 820 defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Topic 820 provides a framework for measuring fair value, establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and requires consideration of the counterparty’s creditworthiness when valuing certain assets. Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1 inputs). The three levels of the fair value hierarchy under Topic 820 are described below: Level 1 inputs: Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 inputs: Inputs, other than quoted prices in active markets, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. Level 3 inputs: Prices or valuations that require unobservable inputs 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.
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BUSINESS COMBINATION (Tables) |
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Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the preliminary estimated fair value of assets acquired and liabilities assumed in the Transaction in accordance with ASC 805:
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Schedule of Pro Forma Information | The unaudited supplemental pro forma financial for informational purposes only and is not indicative of future results. The results below for the three months ended March 31, 2022 and 2021 combine the results of the Company and the Partnership, giving effect to the Transaction as if it had been completed on January 1, 2021.
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REVENUE RECOGNITION (Tables) |
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Disaggregation of Revenue | The following table presents a disaggregation of the Company’s revenue.
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Schedule of Remaining Performance Obligation, Expected Timing of Satisfaction | The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenues as of March 31, 2022:
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Schedule of Contract with Customer, Contract Liability | The following table provides information about contract liabilities from contracts with customers as of March 31, 2022:
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PROPERTY, PLANT AND EQUIPMENT (Tables) |
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property, Plant and Equipment | Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets as follows:
Property, plant and equipment, at carrying value, is as follows:
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GOODWILL AND INTANGIBLE ASSETS, NET (Tables) |
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Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets | Intangible assets, net are comprised of the following:
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DEBT AND FINANCING COSTS - (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt | The following table summarizes the Company’s debt obligations as of March 31, 2022 and December 31, 2021:
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Schedule of Financing Costs, Net | The table below presents the components of the Company’s financing costs, net of capitalized interest:
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ACCRUED EXPENSES (Tables) |
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Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accrued Expenses | The following table provides detail of the Company’s accrued expenses at March 31, 2022 and December 31, 2021:
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EQUITY METHOD INVESTMENTS (Tables) |
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Equity Method Investments | As of March 31, 2022, the Company owned investments in the following long-haul pipeline entities in the Permian Basin. These investments were accounted for using the equity method of accounting. For each equity method investment (“EMIs” or “EMI”) pipeline entity, the Company has the ability to exercise significant influence based on certain governance provisions and its participation in the significant activities and decisions that impact the management and economic performance of the EMI pipeline. The table below presents the ownership percentages and investment balances held by the Company for each entity:
(1) Ownership for Permian Highway Pipeline LLC was 53.3% and 26.7% as of March 31, 2022 and December 31, 2021, respectively. The following table presents the activity in the Company’s EMIs for the three months ended March 31, 2022:
(1)Net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $0.8 million from Gulf Cost Express, $1.3 million from Permian Highway Pipeline LLC and $0.1 million from Breviloba. (2)The EMIs acquired in the Transaction are included in the results from February 22, 2022 to March 31, 2022, and this is also the case for the additional 26.67% of PHP that was acquired in the Transaction. The results of the legacy ALTM business are not included in the Company’s consolidated financials prior to February 22, 2022. Refer to the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies, for further information on the Company’s basis of presentation. Refer to the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies, for further information on the Company’s financial statement consolidations.
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Schedule of Equity Method Investment, Summarized Financial Information | The following table represents selected income statement data for the Company’s EMI pipelines (on a 100 percent basis) for the three months ended March 31, 2022.
(1) For the three months ended March 31, 2021, the Company only had equity interest in Permian Highway Pipeline LLC.
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SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Preferred Units | Activities related to Preferred Units for the three months ended March 31, 2022 are as follows:
(1)Included 21,417 PIK units on a pro rata basis. (2)Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value. Refer to Note 15—Fair Value Measurements for discussion of the fair value changes in the embedded derivative liability during the period. (3)As of March 31, 2022, the Redemption Price would have been based on an 11.1% percent internal rate of return, which would equate to a redemption value of $700.0 million.
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INCOME TAXES (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Total Income Tax Provision (Benefit) | The Company is subject to U.S. federal income tax and the Texas margin tax. The Company’s income tax provision for the three months ended March 31, 2022 consists of following:
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Schedule of Reconciliation of Tax on Income (Loss) Before Income Taxes and Total Tax Expense (Benefit) | The Company records income taxes using an estimated annual effective tax rate and recognizes specific events discretely as they occur. The following table presents reconciliation of the U.S. statutory income tax rate to the estimated annual effective tax rate:
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Schedule of Unrecognized Tax Benefits | Reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:
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NET INCOME PER SHARE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net (Loss) Per Share | The computation of basic and diluted net income (loss) per share for the periods presented in the Condensed Consolidated Financial Statements is shown in the table below.
(1)The effect of an assumed exchange of the outstanding Preferred Units and outstanding public and private warrants for shares of Class A Common Stock would have been anti-dilutive for all periods presented in which the Preferred Units and public and private warrants were outstanding. (2)The effect of an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) would have been anti-dilutive for all periods presented in which the Common Units were outstanding.
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FAIR VALUE MEASUREMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021:
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SEGMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | The following tables present the operating results and other key financial measures for the individual operating segment as of and for the three months ended March 31, 2022 and 2021:
(1) Corporate and Other represents those results that: (i) are not specifically attributable to a reportable segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items. (2) Results do not include legacy ALTM prior to February 22, 2022. Refer to the Form 10-Q basis of presentation in Note 1—Description of the Organization and Summary of Significant Accounting Policies, for further information on the Company’s basis of presentation. The following tables present the revenue for individual operating segment for the three months ended March 31, 2022 and 2021:
(1) Corporate and Other represents those results that: (i) are not specifically attributable to a reportable segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items. The following table present total assets for individual operation segment as of March 31, 2022 and December 31, 2021:
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DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The Transaction (Details) - $ / shares |
Mar. 31, 2022 |
Feb. 23, 2022 |
Feb. 22, 2022 |
Dec. 31, 2021 |
---|---|---|---|---|
Schedule Of Organization [Line Items] | ||||
Percent of common stock, issued and outstanding, owned | 5.00% | |||
Common stock, shares outstanding (in shares) | 66,200,000 | |||
Class C Common Stock | ||||
Schedule Of Organization [Line Items] | ||||
Common stock, shares issued (in shares) | 47,260,000 | 50,000,000 | 50,000,000 | |
Common stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | |
Common stock, shares outstanding (in shares) | 47,260,000 | 50,000,000 | ||
Class A Common Stock | ||||
Schedule Of Organization [Line Items] | ||||
Common stock, shares issued (in shares) | 18,986,460 | 0 | ||
Common stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | |
Common stock, shares outstanding (in shares) | 18,986,460 | 0 | ||
Altus Midstream LP | ||||
Schedule Of Organization [Line Items] | ||||
Common stock, shares issued (in shares) | 50,000,000 | 50,000,000 | ||
BCP Raptor Holdco, LLC | ||||
Schedule Of Organization [Line Items] | ||||
Percent of common stock, issued and outstanding, owned | 75.00% | |||
Apache Midstream LLC | ||||
Schedule Of Organization [Line Items] | ||||
Percent of common stock, issued and outstanding, owned | 20.00% |
DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Redeemable noncontrolling interest (Details) - $ / shares |
Mar. 31, 2022 |
Feb. 23, 2022 |
Feb. 22, 2022 |
Dec. 31, 2021 |
---|---|---|---|---|
Class C Common Stock | ||||
Class of Stock [Line Items] | ||||
Common stock, shares issued (in shares) | 47,260,000 | 50,000,000 | 50,000,000 | |
Common stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | |
Altus Midstream LP | ||||
Class of Stock [Line Items] | ||||
Common stock, shares issued (in shares) | 50,000,000 | 50,000,000 |
DESCRIPTION OF THE ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Feb. 22, 2022 |
Dec. 31, 2021 |
|
Accounting Policies [Abstract] | ||||
Inventory | $ 4,800,000 | $ 2,100,000 | ||
Impairment of long-lived assets | 0 | $ 0 | ||
Accounts receivable, affiliates | 24,700,000 | |||
Revenue from affiliate | 15,600,000 | |||
Accrued expense due to affiliate | $ 4,247,000 | $ 0 | ||
Apache Midstream LLC | ||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||||
Ownership percentage by noncontrolling owners | 13.60% | |||
BCP and BCP GP | ||||
Business Acquisition [Line Items] | ||||
Contract liabilities | $ 9,102,000 |
BUSINESS COMBINATION - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Feb. 23, 2022 |
Feb. 22, 2022 |
Dec. 31, 2021 |
|
BCP and BCP GP | |||||
Business Acquisition [Line Items] | |||||
Acquisition-related transaction costs | $ 5.7 | $ 29.0 | |||
Reversal of acquisition related expenses | $ 18.7 | ||||
Class C Common Stock | |||||
Business Acquisition [Line Items] | |||||
Common stock, shares issued (in shares) | 47,260,000 | 50,000,000 | 50,000,000 | ||
Common stock, par value (in USD per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Altus Midstream LP | |||||
Business Acquisition [Line Items] | |||||
Common stock, shares issued (in shares) | 50,000,000 | 50,000,000 |
BUSINESS COMBINATION - Allocation of Acquisition Costs to Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Feb. 22, 2022 |
Dec. 31, 2021 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Goodwill | $ 3,894 | $ 0 | |
BCP and BCP GP | |||
Business Acquisition [Line Items] | |||
Cash and cash equivalent | $ 13,401 | ||
Accounts receivable | 1,341 | ||
Accounts receivable - affiliates | 15,681 | ||
Property, plant, and equipment, net | 634,923 | ||
Intangible assets, net | 13,200 | ||
Investments in unconsolidated affiliates | 1,755,000 | ||
Prepaid expense and other assets | 8,225 | ||
Goodwill | $ 3,900 | 3,894 | |
Total assets acquired | 2,445,665 | ||
Accrued expenses and other accrued liabilities | 4,923 | ||
Long-term debt | 657,000 | ||
Embedded derivative liabilities | 89,050 | ||
Contract liabilities | 9,102 | ||
Mandatory redeemable Preferred Units | 200,667 | ||
Deferred tax liabilities | 4,010 | ||
Contingent liabilities | 4,451 | ||
Total liabilities assumed | 969,203 | ||
Redeemable noncontrolling interest - Preferred Unit limited partners | 462,717 | ||
Total consideration transferred | $ 1,013,745 |
BUSINESS COMBINATION - Pro Forma (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Business Combination and Asset Acquisition [Abstract] | ||
Revenues | $ 284,102 | $ 182,249 |
Net income including noncontrolling interest | $ 13,468 | $ 16,802 |
REVENUE RECOGNITION - Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer | [1] | $ 257,249 | $ 148,103 | |
Gathering and processing services | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer | 80,445 | 67,662 | ||
Natural gas, NGLs and condensate sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer | 174,928 | 79,993 | ||
Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer | [1] | $ 1,876 | $ 448 | |
|
REVENUE RECOGNITION - Narrative (Details) - USD ($) |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|||
Disaggregation of Revenue [Line Items] | |||||
Revenue from contract with customer | [1] | $ 257,249,000 | $ 148,103,000 | ||
Capitalized contract cost | 17,900,000 | $ 18,400,000 | |||
Amortization of contract costs | 448,000 | 448,000 | |||
Minimum Volume Commitments | |||||
Disaggregation of Revenue [Line Items] | |||||
Revenue from contract with customer | $ 0 | $ 2,500,000 | |||
|
REVENUE RECOGNITION - Remaining Performance Obligations (Details) $ in Thousands |
Mar. 31, 2022
USD ($)
|
---|---|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations | $ 114,152 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations | $ 10,179 |
Expected timing of satisfaction, period | 9 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations | $ 11,626 |
Expected timing of satisfaction, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations | $ 8,102 |
Expected timing of satisfaction, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations | $ 6,227 |
Expected timing of satisfaction, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations | $ 5,066 |
Expected timing of satisfaction, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations | $ 72,952 |
Expected timing of satisfaction, period |
REVENUE RECOGNITION - Contract Liabilities (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
Contract with Customer, Liability [Roll Forward] | ||
Beginning balance | $ 14,756 | |
Reclassification of beginning contract liabilities to revenue as a result of performance obligation being satisfied | (1,328) | |
Cash received and not recognized as revenue | 13,908 | |
Ending balance | 27,336 | |
Less: Current portion | 4,994 | |
Non-current portion | $ 22,342 | $ 11,674 |
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
Property, Plant and Equipment [Line Items] | |||
Total depreciable assets, net | $ 2,414,055 | $ 1,794,765 | |
Less: accumulated depreciation | (367,629) | (337,030) | |
Total property, plant and equipment, net | 2,477,944 | 1,839,279 | |
Depreciation expense | $ 30,800 | $ 25,600 | |
Buildings | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 30 years | ||
Gathering, processing and transmission systems and facilities | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 20 years | ||
Total property, plant and equipment, gross | $ 2,770,137 | 2,121,434 | |
Furniture and fixtures | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 7 years | ||
Vehicles | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 5 years | ||
Total property, plant and equipment, gross | $ 7,055 | 6,090 | |
Computer hardware and software | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 3 years | ||
Total property, plant and equipment, gross | $ 4,492 | 4,271 | |
Construction in progress | |||
Property, Plant and Equipment [Line Items] | |||
Total property, plant and equipment, gross | 44,142 | 24,888 | |
Land | |||
Property, Plant and Equipment [Line Items] | |||
Total property, plant and equipment, gross | $ 19,747 | $ 19,626 |
GOODWILL AND INTANGIBLE ASSETS, NET - Narrative (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Goodwill | $ 3,894,000 | $ 0 | |
Finite-Lived Intangible Assets [Line Items] | |||
Initial term | 10 years | ||
Option to renewal | 10 years | ||
Percent of original consideration paid | 130.00% | ||
Amortization of intangible assets | $ 30,200,000 | $ 30,400,000 | |
Impairment of intangible assets | $ 0 | $ 0 | |
Right of way assets | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life | 10 years | ||
Minimum | |||
Finite-Lived Intangible Assets [Line Items] | |||
Remaining term | 1 year | ||
Maximum | |||
Finite-Lived Intangible Assets [Line Items] | |||
Remaining term | 20 years |
GOODWILL AND INTANGIBLE ASSETS, NET - Intangible Asset (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Less accumulated amortization | $ (479,455) | $ (449,259) |
Total amortizable intangible assets, net | 772,979 | 786,049 |
Customer contracts | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total amortizable intangible assets, gross | 1,135,963 | 1,135,963 |
Right of way assets | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total amortizable intangible assets, gross | $ 116,471 | $ 99,345 |
DEBT AND FINANCING COSTS - Additional Information (Details) |
1 Months Ended | 3 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Jan. 16, 2020
USD ($)
|
Sep. 18, 2019
USD ($)
|
Nov. 01, 2018
USD ($)
|
Jun. 22, 2017
USD ($)
|
Nov. 30, 2018
USD ($)
option
|
Mar. 31, 2022
USD ($)
|
Mar. 31, 2021
USD ($)
|
Feb. 22, 2022 |
Dec. 31, 2021
USD ($)
|
|
Debt Instrument [Line Items] | |||||||||
Debt, fair value | $ 2,980,000,000 | $ 2,340,000,000 | |||||||
Debt outstanding | 2,983,749,000 | 2,346,187,000 | |||||||
Deferred financing costs | 35,400,000 | 38,485,000 | |||||||
Amortization of deferred financing costs | 3,389,000 | $ 3,305,000 | |||||||
Permian Highway Pipeline (“PHP”) | |||||||||
Debt Instrument [Line Items] | |||||||||
Ownership percentage by noncontrolling owners | 26.67% | 26.67% | |||||||
2017 Credit Facility | Revolving Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Term | 5 years | ||||||||
Current borrowing capacity | $ 25,000,000 | $ 100,000,000 | |||||||
Debt maximum borrowing capacity | 125,000,000 | ||||||||
LIBOR floor | 0.00% | ||||||||
Debt facility fee percentage | 0.50% | ||||||||
Debt outstanding | 59,000,000.0 | 52,000,000 | |||||||
2017 Credit Facility | Revolving Credit Facility | Maximum | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt covenant term, leverage ratio | 4.50 | ||||||||
2017 Credit Facility | Revolving Credit Facility | If Consolidated Net Leverage Ratio is No Greater than 4.50 | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, basis spread on variable rate | 3.75% | ||||||||
Debt facility fee percentage | 0.375% | ||||||||
2017 Credit Facility | London Interbank Offered Rate (LIBOR) | Revolving Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, basis spread on variable rate | 4.00% | ||||||||
2017 Credit Facility | London Interbank Offered Rate (LIBOR) | Revolving Credit Facility | If Consolidated Net Leverage Ratio is No Greater than 4.50 | |||||||||
Debt Instrument [Line Items] | |||||||||
LIBOR floor | 0.00% | ||||||||
2018 Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Letters of credit outstanding | 2,000,000 | ||||||||
2018 Credit Facility | Revolving Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Term | 5 years | ||||||||
Debt maximum borrowing capacity | $ 60,000,000 | $ 50,000,000 | |||||||
Debt facility fee percentage | 0.50% | ||||||||
Debt outstanding | 657,000,000.0 | ||||||||
Increase in maximum borrowing capacity | $ 10,000,000 | ||||||||
2018 Credit Facility | Letter of Credit | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt outstanding | 0 | 0 | |||||||
2018 Credit Facility | London Interbank Offered Rate (LIBOR) | Revolving Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, basis spread on variable rate | 4.50% | ||||||||
2019 Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Periodic payment, principal | 0 | ||||||||
Term Loan | |||||||||
Debt Instrument [Line Items] | |||||||||
Deferred financing costs | 35,400,000 | 38,500,000 | |||||||
Term Loan | $1.25 billion term loan (BCP I) | |||||||||
Debt Instrument [Line Items] | |||||||||
Face amount | $ 1,250,000,000 | 1,250,000,000 | |||||||
Term | 7 years | ||||||||
Principal payment as percent of initial principal amount | 0.25% | ||||||||
Stated percentage | 4.25% | ||||||||
Periodic payment, principal | 3,100,000 | ||||||||
Extinguishment of debt | 0 | 2,900,000 | |||||||
Debt outstanding | 1,172,292,000 | 1,175,417,000 | |||||||
Term Loan | $1.25 billion term loan (BCP I) | London Interbank Offered Rate (LIBOR) | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, basis spread on variable rate | 1.00% | ||||||||
Term Loan | $690.0 million term loan | |||||||||
Debt Instrument [Line Items] | |||||||||
Face amount | $ 690,000,000 | ||||||||
Term | 7 years | ||||||||
Principal payment as percent of initial principal amount | 0.25% | ||||||||
Stated percentage | 4.75% | ||||||||
Periodic payment, principal | 1,700,000 | 1,700,000 | |||||||
Extinguishment of debt | 9,900,000 | $ 4,700,000 | |||||||
LIBOR floor | 0.00% | ||||||||
Term Loan | 2019 Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Face amount | $ 483,000,000 | ||||||||
Periodic payment, principal | 11,600,000 | ||||||||
Letters of credit outstanding | 0 | 0 | |||||||
Conversion date term commitments | $ 30,200,000 | ||||||||
Quarterly commitment fees as percent of applicable margin | 35.00% | ||||||||
Term Loan | 2019 Credit Facility | Firs Four Years | |||||||||
Debt Instrument [Line Items] | |||||||||
LIBOR floor | 1.00% | ||||||||
Effective percentage | 1.625% | ||||||||
Term Loan | 2019 Credit Facility | After Four Years | |||||||||
Debt Instrument [Line Items] | |||||||||
LIBOR floor | 1.00% | ||||||||
Effective percentage | 1.875% | ||||||||
Term Loan | 2019 Credit Facility | Letter of Credit | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt maximum borrowing capacity | $ 32,400,000 | ||||||||
Line of Credit | |||||||||
Debt Instrument [Line Items] | |||||||||
Deferred financing costs | $ 1,900,000 | $ 2,200,000 | |||||||
Line of Credit | Revolving Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Current borrowing capacity | 800,000,000 | ||||||||
Debt maximum borrowing capacity | $ 1,500,000,000 | ||||||||
Debt facility fee percentage | 0.20% | ||||||||
Number of extension options | option | 2 | ||||||||
Extended financing agreement term | 1 year | ||||||||
Line of Credit | Letter of Credit | |||||||||
Debt Instrument [Line Items] | |||||||||
Current borrowing capacity | $ 100,000,000 | ||||||||
Line of Credit | Swingline Loan Subfacility | |||||||||
Debt Instrument [Line Items] | |||||||||
Current borrowing capacity | $ 100,000,000 | ||||||||
Line of Credit | London Interbank Offered Rate (LIBOR) | Revolving Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, basis spread on variable rate | 1.05% | ||||||||
Line of Credit | Base Rate | Revolving Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, basis spread on variable rate | 0.05% |
DEBT AND FINANCING COSTS - Schedule of Long-Term Debt (Details) - USD ($) |
Mar. 31, 2022 |
Dec. 31, 2021 |
Jun. 22, 2017 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Total Long-term debt | $ 2,983,749,000 | $ 2,346,187,000 | |
Less: Deferred financing costs, net | (35,400,000) | (38,485,000) | |
Debt outstanding | 2,948,349,000 | 2,307,702,000 | |
Less: Current portion, net | (54,324,000) | (54,280,000) | |
Long-term debt, net | 2,894,025,000 | 2,253,422,000 | |
Term Loan | |||
Debt Instrument [Line Items] | |||
Less: Deferred financing costs, net | (35,400,000) | (38,500,000) | |
Term Loan | $1.25 billion term loan (BCP I) | |||
Debt Instrument [Line Items] | |||
Total Long-term debt | 1,172,292,000 | 1,175,417,000 | |
Face amount | 1,250,000,000 | $ 1,250,000,000 | |
Term Loan | $690 million term loan (BCP II) | |||
Debt Instrument [Line Items] | |||
Total Long-term debt | 627,695,000 | 639,393,000 | |
Face amount | 690,000,000 | ||
Term Loan | $513 million term loan (BCP PHP) | |||
Debt Instrument [Line Items] | |||
Total Long-term debt | 467,762,000 | 479,377,000 | |
Face amount | 513,000,000 | ||
Line of Credit | |||
Debt Instrument [Line Items] | |||
Less: Deferred financing costs, net | (1,900,000) | (2,200,000) | |
Line of Credit | $800 million revolving line of credit (Partnership) | |||
Debt Instrument [Line Items] | |||
Total Long-term debt | 657,000,000 | 0 | |
Debt maximum borrowing capacity | 800,000,000 | ||
Line of Credit | $125 million revolving line of credit (BCP I) | |||
Debt Instrument [Line Items] | |||
Total Long-term debt | 59,000,000 | $ 52,000,000 | |
Debt maximum borrowing capacity | $ 125,000,000 |
DEBT AND FINANCING COSTS - Schedule of Financing Costs, Net of Capitalized Interest (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Debt Disclosure [Abstract] | ||
Capitalized interest | $ 104 | $ 211 |
Deferred financing costs | 3,389 | 3,305 |
Interest expense | 23,281 | 21,794 |
Total financing costs, net of capitalized interest | $ 26,774 | $ 25,310 |
ACCRUED EXPENSES (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued product purchases | $ 168,324 | $ 118,364 |
Accrued taxes | 7,282 | 4,299 |
Accrued salaries, vacation, and related benefits | 3,657 | 2,113 |
Accrued capital expenditures | 4,608 | 2,995 |
Accrued interest expenses | 7,777 | 0 |
Accrued expense due to affiliate | 4,247 | 0 |
Accrued other expenses | 14,460 | 7,872 |
Accrued expenses | $ 210,355 | $ 135,643 |
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) |
Feb. 22, 2022 |
Jun. 11, 2019 |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|---|---|
Loss Contingencies [Line Items] | ||||
Loss contingency accrual | $ 0 | $ 0 | ||
Permian Gas | ||||
Loss Contingencies [Line Items] | ||||
Maximum annual amount to be paid | $ 60,500,000 | |||
Consideration transferred | $ 3,900,000 | |||
Contingent liabilities | 800,000 | |||
Altus Midstream LP | Class A Common Stock | ||||
Loss Contingencies [Line Items] | ||||
Contingent liabilities | $ 4,500,000 | |||
Equity interest issuable (in shares) | 1,250,000 | |||
Altus Midstream LP | Class A Common Stock | Price Option One | ||||
Loss Contingencies [Line Items] | ||||
Equity interest issuable (in shares) | 625,000 | |||
Trading period | 30 days | |||
Stock price trigger (in dollars per share) | $ 280.00 | |||
Threshold trading days | 20 days | |||
Altus Midstream LP | Class A Common Stock | Price Option Two | ||||
Loss Contingencies [Line Items] | ||||
Equity interest issuable (in shares) | 625,000 | |||
Trading period | 30 days | |||
Stock price trigger (in dollars per share) | $ 320.00 | |||
Threshold trading days | 20 days | |||
Winter Storm Uri | ||||
Loss Contingencies [Line Items] | ||||
Outstanding receivable | $ 19,700,000 |
EQUITY METHOD INVESTMENTS - Information of Equity Method Investments (Details) - USD ($) |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|||
Schedule of Equity Method Investments [Line Items] | |||||
Equity method interests | $ 2,361,321,000 | $ 626,477,000 | |||
Difference between carrying amount and underlying equity | 418,300,000 | 0 | |||
Capitalized interest | 12,300,000 | 12,800,000 | |||
Movement In Equity Method Interests [Roll Forward] | |||||
Balance at December 31, 2021 | 626,477,000 | ||||
Equity Method Investment, Acquisitions | 1,755,000,000 | ||||
Distributions | (48,073,000) | ||||
Equity income (loss), net | [1] | 27,917,000 | $ 11,355,000 | ||
Balance at March 31, 2022 | $ 2,361,321,000 | ||||
Gulf Coast Express Pipeline LLC | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Ownership percentage | 16.00% | ||||
Equity method interests | $ 465,028,000 | $ 0 | |||
Movement In Equity Method Interests [Roll Forward] | |||||
Balance at December 31, 2021 | 0 | ||||
Equity Method Investment, Acquisitions | 470,000,000 | ||||
Distributions | (8,412,000) | ||||
Equity income (loss), net | 3,440,000 | ||||
Balance at March 31, 2022 | 465,028,000 | ||||
Amortization | $ 800,000 | ||||
Permian Highway Pipeline LLC | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Ownership percentage | 53.30% | 26.70% | |||
Equity method interests | $ 1,426,736,000 | $ 626,477,000 | |||
Movement In Equity Method Interests [Roll Forward] | |||||
Balance at December 31, 2021 | 626,477,000 | ||||
Equity Method Investment, Acquisitions | 815,000,000 | ||||
Distributions | (35,998,000) | ||||
Equity income (loss), net | 21,257,000 | ||||
Balance at March 31, 2022 | 1,426,736,000 | ||||
Amortization | $ 1,300,000 | ||||
Breviloba, LLC (Shin Oak) | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Ownership percentage | 33.00% | ||||
Equity method interests | $ 469,557,000 | $ 0 | |||
Movement In Equity Method Interests [Roll Forward] | |||||
Balance at December 31, 2021 | 0 | ||||
Equity Method Investment, Acquisitions | 470,000,000 | ||||
Distributions | (3,663,000) | ||||
Equity income (loss), net | 3,220,000 | ||||
Balance at March 31, 2022 | 469,557,000 | ||||
Amortization | $ 100,000 | ||||
EPIC Crude Holdings, LP | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Ownership percentage | 15.00% | ||||
|
EQUITY METHOD INVESTMENTS - Summarized Financial Information of Equity Method Investments (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|||
Schedule of Equity Method Investments [Line Items] | ||||
Operating income | [1] | $ 19,065 | $ 31,554 | |
Net income | [1] | 21,389 | 18,136 | |
Equity Method Investment, Nonconsolidated Investee or Group of Investees | Gulf Coast Express Pipeline LLC | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Revenues | 89,973 | 88,369 | ||
Operating income | 63,443 | 60,108 | ||
Net income | 63,529 | 59,768 | ||
Equity Method Investment, Nonconsolidated Investee or Group of Investees | Permian Highway Pipeline LLC(1) | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Revenues | 97,856 | 97,848 | ||
Operating income | 59,476 | 42,580 | ||
Net income | 59,213 | 42,580 | ||
Equity Method Investment, Nonconsolidated Investee or Group of Investees | Breviloba, LLC | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Revenues | 48,521 | 34,529 | ||
Operating income | 26,314 | 17,300 | ||
Net income | $ 26,366 | $ 17,359 | ||
|
EQUITY AND WARRANTS (Details) |
1 Months Ended | 3 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Apr. 20, 2022
$ / shares
|
Mar. 31, 2022
USD ($)
$ / shares
shares
|
Mar. 31, 2022
USD ($)
$ / shares
shares
|
Feb. 23, 2022
shares
|
Feb. 22, 2022
$ / shares
shares
|
Dec. 31, 2021
USD ($)
$ / shares
shares
|
Mar. 31, 2021
USD ($)
shares
|
Dec. 31, 2020
USD ($)
shares
|
|
Class of Stock [Line Items] | ||||||||
Common stock, shares outstanding (in shares) | 66,200,000 | |||||||
Notice period to redeem warrants | 30 days | |||||||
Threshold trading days | 20 days | |||||||
Trading period | 30 days | |||||||
Derivatives fair value adjustment | $ | $ 0 | |||||||
Percent of distributions or dividends reinvested in newly issued Class A shares | 100.00% | |||||||
Number of shares receiving cash dividend (in shares) | 7,800,000 | 7,800,000 | ||||||
Common Units limited partners | ||||||||
Class of Stock [Line Items] | ||||||||
Equity, carrying amount | $ | $ 3,185,431,000 | $ 3,185,431,000 | $ 1,006,843,000 | $ 1,044,497,000 | $ 1,041,660,000 | |||
Class A Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, shares issued (in shares) | 18,986,460 | 18,986,460 | 0 | |||||
Common stock, par value (in USD per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Common stock, redemption ratio | 1 | |||||||
Common stock, shares outstanding (in shares) | 18,986,460 | 18,986,460 | 0 | |||||
Common stock | $ | $ 2,000 | $ 2,000 | $ 0 | |||||
Warrant exercise price (in USD per share) | $ / shares | $ 230.00 | $ 230.00 | ||||||
Percent of required investment | 20.00% | |||||||
Subsequent Event | Class A Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Dividends declared (in USD per share) | $ / shares | $ 1.50 | |||||||
Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Stock redeemed (in shares) | 2,740,000 | |||||||
Stock price trigger (in dollars per share) | $ / shares | $ 360.00 | $ 360.00 | ||||||
Common Stock | Class A Common Stock | ||||||||
Class of Stock [Line Items] | ||||||||
Stock redeemed (in shares) | 2,740,000 | |||||||
Common stock, shares outstanding (in shares) | 18,986,000 | 18,986,000 | 0 | 0 | ||||
Public Warrants | ||||||||
Class of Stock [Line Items] | ||||||||
Number of warrant outstanding (in shares) | 12,577,350 | 12,577,350 | ||||||
Redemption price of warrants (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | ||||||
Derivatives fair value adjustment | $ | $ 100,000 | |||||||
Private Placement Warrant | ||||||||
Class of Stock [Line Items] | ||||||||
Number of warrant outstanding (in shares) | 6,364,281 | 6,364,281 | ||||||
Derivatives fair value adjustment | $ | $ 100,000 | |||||||
Altus Midstream LP | ||||||||
Class of Stock [Line Items] | ||||||||
Common stock, shares issued (in shares) | 50,000,000 | 50,000,000 | ||||||
The Partnership | Subsequent Event | ||||||||
Class of Stock [Line Items] | ||||||||
Distribution declared (in dollars per share) | $ / shares | $ 1.50 | |||||||
Apache | Private Placement Warrant | ||||||||
Class of Stock [Line Items] | ||||||||
Number of warrant outstanding (in shares) | 3,182,140 | 3,182,140 |
SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 28, 2022 |
Feb. 22, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
|
Class of Stock [Line Items] | ||||
Stock redeemed value | $ (170,060) | |||
Current liabilities | 388,637 | $ 240,925 | ||
Noncurrent liabilities | 3,116,676 | $ 2,305,433 | ||
Mandatory Redemption Feature | ||||
Class of Stock [Line Items] | ||||
Stock redeemed (in shares) | 150,000 | |||
Prior to Eighteen-Month Period | ||||
Class of Stock [Line Items] | ||||
Stock redeemed (in shares) | 50,000 | |||
Over Eighteen-Month Period | ||||
Class of Stock [Line Items] | ||||
Stock redeemed (in shares) | 150,000 | |||
Without Mandatory Redemption Feature | ||||
Class of Stock [Line Items] | ||||
Temporary Equity, Shares Outstanding | 375,000 | |||
Preferred Unit limited partners | ||||
Class of Stock [Line Items] | ||||
Number of Preferred Units sold (in shares) | 625,000 | |||
Stock redeemed (in shares) | 50,000 | 100,000 | ||
Stock redeemed value | $ 60,700 | $ 120,100 | ||
Shares outstanding (in shares) | 525,000 | |||
Current liabilities | 67,200 | |||
Noncurrent liabilities | $ 68,900 | |||
Temporary Equity, Shares Outstanding | 396,417 | 396,417 | ||
Preferred Unit limited partners | Mandatory Redemption Feature | ||||
Class of Stock [Line Items] | ||||
Stock redeemed (in shares) | 100,000 | |||
Preferred Unit limited partners | Must be Redeemed by February 22, 2023 | ||||
Class of Stock [Line Items] | ||||
Stock redeemed (in shares) | 50,000 | |||
Preferred Unit limited partners | Without Any dollar-Value Threshold | ||||
Class of Stock [Line Items] | ||||
Stock redeemed (in shares) | 25,000 | |||
Paid-in-Kind Units | ||||
Class of Stock [Line Items] | ||||
Stock redeemed (in shares) | 2,856 | |||
Shares outstanding (in shares) | 29,983 |
SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS - Activity Related to Preferred Units (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Mar. 28, 2022 |
Feb. 22, 2022 |
Mar. 31, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
||||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||||||
Beginning balance | $ 0 | |||||||
Ending balance | $ 460,773 | 460,773 | ||||||
Embedded derivative liability | $ 91,936 | $ 91,936 | $ 0 | |||||
Paid-in-kind (in shares) | 21,417 | |||||||
Stock redeemed value | $ (170,060) | |||||||
With Initial Rate of Return | ||||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||||||
Stock redeemed value | $ 700,000 | |||||||
Preferred Unit limited partners | ||||||||
Movement In Preferred Units [Roll Forward] | ||||||||
Redeemable noncontrolling interest - Preferred Units: beginning of period (in shares) | 396,417 | |||||||
Redeemable noncontrolling interest - Preferred Units: end of period (in shares) | 396,417 | 396,417 | 396,417 | |||||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||||||
Beginning balance | $ 462,717 | |||||||
Distribution payable to Preferred Unit limited partners | (6,937) | $ (6,937) | [1] | |||||
Allocation of net income | 4,993 | |||||||
Ending balance | $ 462,717 | 460,773 | 460,773 | |||||
Embedded derivative liability | 91,936 | 91,936 | ||||||
Redeemable noncontrolling interest, including embedded derivative liability | $ 552,709 | $ 552,709 | ||||||
Redemption, internal rate of return | 11.10% | 11.10% | ||||||
Stock redeemed value | $ 60,700 | $ 120,100 | ||||||
|
SHARE-BASED COMPENSATION (Details) - USD ($) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Feb. 22, 2022 |
Mar. 31, 2022 |
Mar. 31, 2021 |
Feb. 23, 2022 |
Dec. 31, 2021 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Share-based compensation | $ (6,132) | $ 0 | |||
New Employees | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Issued (in shares) | 38,000 | ||||
Altus Midstream LP | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Common stock, shares issued (in shares) | 50,000,000 | 50,000,000 | |||
Class A Common Stock | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Common stock, shares issued (in shares) | 18,986,460 | 0 | |||
Share-based compensation | $ (6,100) | $ 0 | |||
Class A Common Stock | Class A-1 and Class A-2 Units | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock issued for exchange | 2,650,000 | ||||
Class A Common Stock | Class A-3 Units | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock issued for exchange | 163,000 |
INCOME TAXES - Total Provision (Benefit) for Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|||
Current tax expense: | ||||
Federal | $ 0 | $ 0 | ||
State and local | 0 | 0 | ||
Total current tax expense | 0 | 0 | ||
Deferred tax expense: | ||||
Federal | 0 | 0 | ||
State and Local | 676 | 0 | ||
Total deferred tax expense | 676 | 0 | ||
Total income tax expense | [1] | $ 676 | $ 0 | |
|
INCOME TAXES - Reconciliation of Tax of Income Before Income Taxes and Total Tax Expense (Details) |
3 Months Ended |
---|---|
Mar. 31, 2022 | |
Income Tax [Line Items] | |
U.S. statutory rate | 21.00% |
State tax rate | 3.10% |
Other | 0.20% |
Valuation allowance | (4.50%) |
Effective rate | 3.10% |
Common Units limited partners | |
Income Tax [Line Items] | |
Tax attributable to Noncontrolling interest | (11.60%) |
Preferred Unit limited partners | |
Income Tax [Line Items] | |
Tax attributable to Noncontrolling interest | (5.10%) |
INCOME TAXES - Reconciliation of Unrecognized Tax Benefits (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2022
USD ($)
| |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |
Balance as of January 1, 2022 | $ 0 |
Increase related to ALTM acquisition | 5,238 |
Reduction related to current year activities | (228) |
Balance as of March 31, 2022 | $ (5,010) |
NET INCOME PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|||
Basic: | ||||
Net income attributable to Class A common shareholders | [1] | $ 3,865 | $ 0 | |
Net income attributable to Class A common shareholders (in shares) | [1] | 18,696,000 | 0 | |
Net income attributable to Class A common shareholders (in USD per share) | [1] | $ 0.21 | $ 0 | |
Effect of dilutive securities: | ||||
Replacement Awards | $ 0 | $ 0 | ||
Replacement Awards (in shares) | 17,000 | 0 | ||
Replacement Awards (in dollars per share) | $ 0 | $ 0 | ||
Diluted: | ||||
Net income attributable to Class A Common Shareholders | $ 3,865 | $ 0 | ||
Net income (loss) attributable to Class A common shareholders (in shares) | [1] | 18,713,000 | 0 | |
Net income (loss) attributable to Class A common shareholders (in USD per share) | [1] | $ 0.21 | $ 0 | |
|
FAIR VALUE MEASUREMENTS - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Assets | ||
Total assets | $ 9,700 | |
Liabilities | ||
Total liabilities | 7 | $ 2,700 |
Mandatorily redeemable Preferred Units | 67,173 | 0 |
Embedded derivative liabilities | 91,936 | 0 |
Warrants outstanding, fair value | 200 | |
Fair Value, Measurements, Recurring | ||
Assets | ||
Total assets | 9,655 | |
Liabilities | ||
Total liabilities | 228,234 | 2,867 |
Fair Value, Measurements, Recurring | Public Warrants | ||
Liabilities | ||
Warrants outstanding, fair value | 126 | |
Fair Value, Measurements, Recurring | Private Placement Warrant | ||
Liabilities | ||
Warrants outstanding, fair value | 95 | |
Fair Value, Measurements, Recurring | Commodity swaps | ||
Liabilities | ||
Total liabilities | 205 | |
Fair Value, Measurements, Recurring | Interest rate derivatives | ||
Assets | ||
Total assets | 9,655 | |
Liabilities | ||
Total liabilities | 7 | 2,662 |
Fair Value, Measurements, Recurring | Mandatorily redeemable Preferred Units | ||
Liabilities | ||
Mandatorily redeemable Preferred Units | 136,070 | |
Fair Value, Measurements, Recurring | Embedded derivative | ||
Liabilities | ||
Embedded derivative liabilities | 91,936 | |
Fair Value, Measurements, Recurring | Level 1 | ||
Assets | ||
Total assets | 0 | |
Liabilities | ||
Total liabilities | 126 | 0 |
Fair Value, Measurements, Recurring | Level 1 | Public Warrants | ||
Liabilities | ||
Warrants outstanding, fair value | 126 | |
Fair Value, Measurements, Recurring | Level 1 | Private Placement Warrant | ||
Liabilities | ||
Warrants outstanding, fair value | 0 | |
Fair Value, Measurements, Recurring | Level 1 | Commodity swaps | ||
Liabilities | ||
Total liabilities | 0 | |
Fair Value, Measurements, Recurring | Level 1 | Interest rate derivatives | ||
Assets | ||
Total assets | 0 | |
Liabilities | ||
Total liabilities | 0 | 0 |
Fair Value, Measurements, Recurring | Level 1 | Mandatorily redeemable Preferred Units | ||
Liabilities | ||
Mandatorily redeemable Preferred Units | 0 | |
Fair Value, Measurements, Recurring | Level 1 | Embedded derivative | ||
Liabilities | ||
Embedded derivative liabilities | 0 | |
Fair Value, Measurements, Recurring | Level 2 | ||
Assets | ||
Total assets | 9,655 | |
Liabilities | ||
Total liabilities | 7 | 2,867 |
Fair Value, Measurements, Recurring | Level 2 | Public Warrants | ||
Liabilities | ||
Warrants outstanding, fair value | 0 | |
Fair Value, Measurements, Recurring | Level 2 | Private Placement Warrant | ||
Liabilities | ||
Warrants outstanding, fair value | 0 | |
Fair Value, Measurements, Recurring | Level 2 | Commodity swaps | ||
Liabilities | ||
Total liabilities | 205 | |
Fair Value, Measurements, Recurring | Level 2 | Interest rate derivatives | ||
Assets | ||
Total assets | 9,655 | |
Liabilities | ||
Total liabilities | 7 | 2,662 |
Fair Value, Measurements, Recurring | Level 2 | Mandatorily redeemable Preferred Units | ||
Liabilities | ||
Mandatorily redeemable Preferred Units | 0 | |
Fair Value, Measurements, Recurring | Level 2 | Embedded derivative | ||
Liabilities | ||
Embedded derivative liabilities | 0 | |
Fair Value, Measurements, Recurring | Level 3 | ||
Assets | ||
Total assets | 0 | |
Liabilities | ||
Total liabilities | 228,101 | 0 |
Fair Value, Measurements, Recurring | Level 3 | Public Warrants | ||
Liabilities | ||
Warrants outstanding, fair value | 0 | |
Fair Value, Measurements, Recurring | Level 3 | Private Placement Warrant | ||
Liabilities | ||
Warrants outstanding, fair value | 95 | |
Fair Value, Measurements, Recurring | Level 3 | Commodity swaps | ||
Liabilities | ||
Total liabilities | 0 | |
Fair Value, Measurements, Recurring | Level 3 | Interest rate derivatives | ||
Assets | ||
Total assets | 0 | |
Liabilities | ||
Total liabilities | 0 | $ 0 |
Fair Value, Measurements, Recurring | Level 3 | Mandatorily redeemable Preferred Units | ||
Liabilities | ||
Mandatorily redeemable Preferred Units | 136,070 | |
Fair Value, Measurements, Recurring | Level 3 | Embedded derivative | ||
Liabilities | ||
Embedded derivative liabilities | $ 91,936 |
FAIR VALUE MEASUREMENTS - Additional Information (Details) |
1 Months Ended | 3 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2022
USD ($)
|
Mar. 31, 2022
USD ($)
|
Mar. 31, 2021
USD ($)
|
|||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivatives settlement | [1] | $ 2,886,000 | $ 0 | ||
Warrants outstanding, fair value | $ 200,000 | $ 200,000 | |||
Change in fair value of warrants | $ 0 | ||||
Level 3 | Risk Free Interest Rate | Minimum | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Embedded derivative liability, measurement input | 0.0732 | 0.0732 | |||
Level 3 | Risk Free Interest Rate | Maximum | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Embedded derivative liability, measurement input | 0.1158 | 0.1158 | |||
Level 3 | Interest Rate Volatility | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Embedded derivative liability, measurement input | 0.3979 | 0.3979 | |||
Expected timing until exercise of exchange option | 4 years 2 months 12 days | ||||
|
DERIVATIVES AND HEDGING ACTIVITIES (Details) |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2022
USD ($)
|
Mar. 31, 2021
USD ($)
|
Dec. 31, 2021
USD ($)
|
Sep. 30, 2019
USD ($)
instrument
|
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Debt outstanding | $ 2,983,749,000 | $ 2,346,187,000 | ||
Derivative liability | 7,000 | 2,700,000 | ||
Derivative asset | 9,700,000 | |||
Derivative cash settlement | 884,000 | $ 1,465,000 | ||
Term Loan | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Debt outstanding | $ 513,000,000 | |||
Interest Rate Swap | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Number of instruments held | instrument | 2 | |||
Derivative cash settlement | 900,000 | 600,000 | ||
Unrealized gains | 11,600,000 | |||
Unrealized losses | $ (10,600,000) | |||
Interest Rate Swap | Minimum | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Basis spread on variable rate | 1.76% | |||
Interest Rate Swap | Maximum | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Basis spread on variable rate | 1.78% | |||
Interest Rate Swap | Term Loan | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Percent under notional amount | 75.00% | |||
Percent of debt outstanding covered by notional Amount | 75.00% | |||
Commodity Swap | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative liability | $ 0 | $ 200,000 |
SEGMENTS (Details) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2022
USD ($)
Segment
|
Mar. 31, 2021
USD ($)
|
Dec. 31, 2021
USD ($)
|
|||
Segment Reporting [Abstract] | |||||
Number of operating segments | Segment | 2 | ||||
Segment Reporting Information [Line Items] | |||||
Net income including noncontrolling interests | [1] | $ 21,389 | $ 18,136 | ||
Gain on redemption of mandatorily redeemable Preferred Units | [1] | 4,493 | 0 | ||
Income tax expense (benefit) | [1] | 676 | 0 | ||
Depreciation and amortization expense | [1] | 61,023 | 55,971 | ||
Share-based compensation | 6,132 | 0 | |||
Loss on disposal of assets | [1] | 110 | 32 | ||
Loss on debt extinguishment | 129 | (239) | |||
Derivatives settlement | [1] | 2,886 | 0 | ||
Interest and other income | [1] | 250 | 537 | ||
Equity in (earnings) losses from unconsolidated affiliate | [1] | (27,917) | (11,355) | ||
Assets | 6,013,657 | $ 3,553,206 | |||
Product and Service | |||||
Segment Reporting Information [Line Items] | |||||
Revenue from contract with customer | 255,373 | 147,655 | |||
Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Assets | 6,007,946 | 3,552,558 | |||
Operating Segments | Midstream Logistics | |||||
Segment Reporting Information [Line Items] | |||||
Net income including noncontrolling interests | 9,185 | 8,194 | |||
Interest expense (income) | 26,642 | 27,694 | |||
Gain on redemption of mandatorily redeemable Preferred Units | 0 | ||||
Income tax expense (benefit) | 457 | ||||
Depreciation and amortization expense | 60,893 | 55,842 | |||
Contract assets amortization | 448 | 448 | |||
Proportionate EMI EBITDA | 0 | 0 | |||
Share-based compensation | 0 | ||||
Loss on disposal of assets | 110 | 32 | |||
Loss on debt extinguishment | 129 | (239) | |||
Derivatives settlement | 0 | (13,456) | |||
Integration costs | 4,104 | ||||
Acquisition transaction costs | 4 | ||||
Other one-time costs or amortization | 918 | 389 | |||
Interest and other income | 16 | ||||
Equity in (earnings) losses from unconsolidated affiliate | 0 | 0 | |||
Segment adjusted EBITDA | 102,890 | 105,800 | |||
Revenue from contract with customer | 257,247 | 148,101 | |||
Assets | 3,624,556 | 2,916,774 | |||
Operating Segments | Midstream Logistics | Product and Service | |||||
Segment Reporting Information [Line Items] | |||||
Revenue from contract with customer | 255,373 | 147,655 | |||
Operating Segments | Midstream Logistics | Other | |||||
Segment Reporting Information [Line Items] | |||||
Revenue from contract with customer | 1,874 | 446 | |||
Operating Segments | Pipeline Transportation | |||||
Segment Reporting Information [Line Items] | |||||
Net income including noncontrolling interests | 29,136 | 12,429 | |||
Interest expense (income) | (1,614) | (2,145) | |||
Gain on redemption of mandatorily redeemable Preferred Units | 0 | ||||
Income tax expense (benefit) | (39) | ||||
Depreciation and amortization expense | 130 | 129 | |||
Contract assets amortization | 0 | 0 | |||
Proportionate EMI EBITDA | 40,741 | 16,256 | |||
Share-based compensation | 0 | ||||
Loss on disposal of assets | 0 | 0 | |||
Loss on debt extinguishment | 0 | 0 | |||
Derivatives settlement | 0 | 0 | |||
Integration costs | 0 | ||||
Acquisition transaction costs | 0 | ||||
Other one-time costs or amortization | 0 | 8 | |||
Interest and other income | 0 | ||||
Equity in (earnings) losses from unconsolidated affiliate | 27,917 | 11,355 | |||
Segment adjusted EBITDA | 40,437 | 15,322 | |||
Revenue from contract with customer | 2 | 2 | |||
Assets | 2,383,390 | 635,784 | |||
Operating Segments | Pipeline Transportation | Product and Service | |||||
Segment Reporting Information [Line Items] | |||||
Revenue from contract with customer | 0 | 0 | |||
Operating Segments | Pipeline Transportation | Other | |||||
Segment Reporting Information [Line Items] | |||||
Revenue from contract with customer | 2 | 2 | |||
Corporate and Other | |||||
Segment Reporting Information [Line Items] | |||||
Net income including noncontrolling interests | (16,932) | (2,487) | |||
Interest expense (income) | 1,617 | 0 | |||
Gain on redemption of mandatorily redeemable Preferred Units | (4,493) | ||||
Income tax expense (benefit) | 258 | ||||
Depreciation and amortization expense | 0 | 0 | |||
Contract assets amortization | 0 | 0 | |||
Proportionate EMI EBITDA | 0 | 0 | |||
Share-based compensation | 6,132 | ||||
Loss on disposal of assets | 0 | 0 | |||
Loss on debt extinguishment | 0 | 0 | |||
Derivatives settlement | 2,886 | 0 | |||
Integration costs | 2,047 | ||||
Acquisition transaction costs | 5,672 | ||||
Other one-time costs or amortization | 277 | (69) | |||
Interest and other income | 0 | ||||
Equity in (earnings) losses from unconsolidated affiliate | 0 | 0 | |||
Segment adjusted EBITDA | (2,536) | (2,556) | |||
Revenue from contract with customer | 0 | 0 | |||
Assets | 5,711 | $ 648 | |||
Corporate and Other | Product and Service | |||||
Segment Reporting Information [Line Items] | |||||
Revenue from contract with customer | 0 | 0 | |||
Corporate and Other | Other | |||||
Segment Reporting Information [Line Items] | |||||
Revenue from contract with customer | 0 | 0 | |||
Consolidated | |||||
Segment Reporting Information [Line Items] | |||||
Net income including noncontrolling interests | 21,389 | 18,136 | |||
Interest expense (income) | 26,645 | 25,549 | |||
Gain on redemption of mandatorily redeemable Preferred Units | (4,493) | ||||
Income tax expense (benefit) | 676 | ||||
Depreciation and amortization expense | 61,023 | 55,971 | |||
Contract assets amortization | 448 | 448 | |||
Proportionate EMI EBITDA | 40,741 | 16,256 | |||
Share-based compensation | 6,132 | ||||
Loss on disposal of assets | 110 | 32 | |||
Loss on debt extinguishment | 129 | (239) | |||
Derivatives settlement | 2,886 | (13,456) | |||
Integration costs | 6,151 | ||||
Acquisition transaction costs | 5,676 | ||||
Other one-time costs or amortization | 1,195 | 328 | |||
Interest and other income | 16 | ||||
Equity in (earnings) losses from unconsolidated affiliate | 27,917 | 11,355 | |||
Segment adjusted EBITDA | 140,791 | 118,566 | |||
Revenue from contract with customer | 257,249 | 148,103 | |||
Consolidated | Other | |||||
Segment Reporting Information [Line Items] | |||||
Revenue from contract with customer | $ 1,876 | $ 448 | |||
|
SUBSEQUENT EVENTS (Details) - Subsequent Event - $ / shares |
Apr. 20, 2022 |
Apr. 04, 2022 |
---|---|---|
The Partnership | ||
Subsequent Event [Line Items] | ||
Distribution declared (in dollars per share) | $ 1.50 | |
Class A Common Stock | ||
Subsequent Event [Line Items] | ||
Common stock reserved for future issuance, dividend reinvestment plan (in shares) | 15,000,000 | |
Dividends declared (in USD per share) | $ 1.50 |
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