Business Context and Reporting Period
Company: Altus Midstream Company (formerly Kayne Anderson Acquisition Corp. or "KAAC")
Date: November 9, 2018
Event: Consummation of a Business Combination with Alpine High Midstream assets and Apache Midstream LLC ("Apache Contributor").
Operational Status: The Company ceased to be a shell company and is now a holding company operating through Altus Midstream LP and its subsidiaries, including Alpine High Gathering, Pipeline, Processing, and NGL entities. The Company changed its name from Kayne Anderson Acquisition Corp. to Altus Midstream Company.
Key Financial Metrics and Capital Structure
Capital Raised and Cash Flow:
- Private Placement: Issued 57,234,023 shares of Class A Common Stock at $10.00 per share, raising approximately $572.3 million.
- Trust Account: Utilized proceeds from the IPO trust account (net of taxes) to fund the transaction.
- Total Cash Contribution: Contributed $628.1 million in cash to Altus Midstream.
- Capital Expenditures: Paid $84.0 million to Apache Contributor for capital expenditures incurred by Alpine High Entities from October 1, 2018, through the Closing Date.
- Credit Facility: Entered into a five-year revolving credit facility with an initial aggregate commitment of $450 million.
- Expansion: Commitments increase to $800 million after the "Initial Period" (defined as three consecutive months of $175 million annualized EBITDA and $250 million of additional capital raised).
- Maximum Capacity: Commitments may be increased up to $1.5 billion with lender consent.
- Subfacilities: Includes up to $100 million for letters of credit and $100 million for swingline loans.
- Maturity: November 9, 2023, with two optional one-year extensions.
- Class A Common Stock: 74,929,305 shares outstanding.
- Class C Common Stock: 250,000,000 shares issued to Apache Contributor (exchangeable for Class A on a 1-for-1 basis).
- Warrants: 18,941,651 warrants outstanding (including 3,182,140 Contribution Warrants).
- Apache Contributor: Holds ~76.9% voting interest (via Class C) and ~9.8% economic interest (via Class A).
- Public Stockholders: Hold ~20.2% voting interest and ~87.4% economic interest.
- Former Founder Shares: Converted to Class A; Sponsor forfeited 7,313,028 founder shares and 3,182,140 Private Placement Warrants.
Material Changes and Agreements
Acquisition Details:
The Company acquired 100% equity interests in the Alpine High Entities and options to acquire equity in five third-party pipelines (Gulf Coast Express, EPIC Crude, Salt Creek NGL, Shin Oak, and Permian Highway Pipeline Project).
Material Agreements Entered:
- Stockholders Agreement: Grants Apache Contributor board nomination rights based on ownership thresholds (up to 7 directors if owning 50%+). Sponsor retains right to nominate 2 directors until ownership drops below 1% or two years post-closing.
- Construction, Operations and Maintenance Agreement (COMA): Apache will provide design, construction, and operational services for midstream assets.
- Purchase Rights and Restrictive Covenants: Apache grants Altus Midstream a first right to pursue midstream opportunities in a 1.7 million-acre area in Texas for five years.
- Earn-Out Consideration: Apache Contributor may receive up to 37,500,000 additional shares of Class A Common Stock based on gas gathering volumes in 2021 or stock price milestones ($14.00 and $16.00) within five years.
Guidance, Outlook, and Risks
Dividend Policy:
The Board expects to institute a dividend policy during 2021. Prior to that, internally generated cash flow will be used to fund capital expenditures.
Financial Covenants:
- Initial Period: Debt-to-capital ratio must not exceed 30%.
- Post-Initial Period: Leverage ratio (Indebtedness/EBITDA) must not exceed 5.00:1.00 (5.50:1.00 allowed for one year following a qualified acquisition).
Risks and Contingencies:
- Controlled Company Status: Apache affiliates control a majority of voting power, allowing the Company to elect exemptions from certain NASDAQ corporate governance requirements (e.g., majority independent directors).
- Forward-Looking Statements: Risks include disruption of operations, competition, regulatory changes, and the ability to exercise pipeline options.
- Legal Proceedings: No pending or threatened legal proceedings were reported as of the filing date.
Investor Verification Checklist
- Debt Capacity: Verify the conditions required to increase the credit facility from $450 million to $800 million (EBITDA thresholds and capital raises).
- Earn-Out Potential: Assess the likelihood of Apache Contributor receiving up to 37.5 million additional shares based on 2021 gas volumes and stock price targets.
- Ownership Dynamics: Confirm the voting power disparity where Apache holds ~77% of voting rights despite holding a minority of the economic interest.
- Related Party Transactions: Review the terms of the COMA and Purchase Rights agreements with Apache, which govern future operational services and asset expansion opportunities.
- Financial Covenants: Monitor the debt-to-capital ratio (30% cap) during the initial period to ensure compliance with the Credit Agreement.