KNTK

Business Context and Reporting Period

Company: Kinetik Holdings Inc. (formerly Altus Midstream Company)
Filing Date: February 22, 2022
Event: Consummation of a business combination transaction (the "Transaction") with BCP Raptor Holdco, LP ("BCP").
Corporate Actions: The Company changed its name from "Altus Midstream Company" to "Kinetik Holdings Inc." and adopted a new Charter and Bylaws.

Key Financial Metrics and Capital Structure

Equity Issuance and Ownership:

• Issued 50,000,000 Common Units and 50,000,000 shares of Class C Common Stock to the Contributor (New BCP Raptor Holdco, LLC).
• Total Common Stock outstanding post-closing: Approximately 66.2 million shares.
• Ownership Structure: Contributor owns ~75%; Apache Midstream LLC owns ~20%; Remaining stockholders own ~5%.

Debt Obligations Assumed (BCP Subsidiaries):

• 2017 Credit Facility: $1.25 billion term loan (maturing June 2024) and $125 million revolving credit facility (maturing November 2023).
• 2018 Credit Facility: $690 million term loan (maturing November 2025) and $60 million revolving credit facility (maturing November 2023).
• 2019 Credit Facility: Term facility with $483 million initial commitment and $30.2 million conversion commitment (maturing March 2025).

Cash Outflows at Closing:

• Redemption of 100,000 Series A Preferred Units: Approximately $120,072,000.
• Consent fee paid to Series A Preferred Unit holders: $2,625,000.

Dividend Policy:

• Quarterly dividend of $1.50 per share of Class A Common Stock commencing on the Closing Date through December 31, 2023.
• Mandatory dividend reinvestment of 100% for Reinvestment Holders (increased from 20% by Audit Committee approval on Closing Date).

Material Changes Versus Prior Period

Change in Control: The Transaction resulted in a change of control, with Contributor becoming the majority shareholder (75%).
Management and Board Overhaul:

• Resignations: All prior directors (including Mark Borer, Clay Bretches, etc.) and executive officers (including CEO Clay Bretches and CFO Ben C. Rodgers) resigned.
• Appointments: Jamie Welch appointed as CEO, President, and CFO. Seven new directors appointed to the Board.

Accounting Firm Change: KPMG LLP engaged as independent auditor, replacing Ernst & Young LLP.
Agreement Terminations: The Construction, Operations, and Maintenance Agreement (COMA) and Trademark License Agreements with Apache Corporation were terminated.

Guidance, Outlook, and Risks

Guidance: The Company issued financial guidance for 2022 on February 23, 2022 (details furnished in Exhibit 99.1, not explicitly detailed in the text body of this filing).
Financial Covenants: The assumed debt agreements require maintenance of specific leverage and coverage ratios (e.g., 1.10 to 1.00 debt service coverage ratio; Total Leverage Ratio limits of 4.5x prior to Jan 1, 2024, and 4.0x thereafter).
Restrictions:

• Lock-up: Major stockholders are subject to 12-month lock-up and transfer restrictions.
• Dividend Restrictions: Reduction or discontinuation of the $1.50 quarterly dividend requires consent from parties entitled to designate directors.
• Related Party Transactions: Require approval of 66% or more of disinterested directors.

Contingencies: The filing notes a previously reported material weakness in internal controls over financial reporting, which the Company determined was remediated as of September 30, 2021.

Investor Verification Checklist

• Pro Forma Financials: Review Exhibit 99.5 for unaudited pro forma condensed consolidated combined financial information as of December 31, 2021.
• Debt Covenants: Verify compliance with the new leverage ratios (4.5x/4.0x) and debt service coverage ratios required by the assumed BCP credit facilities.
• Dividend Sustainability: Assess the impact of the mandatory 100% reinvestment by major holders and the $1.50 quarterly dividend commitment on free cash flow.
• Management Transition: Evaluate the experience and track record of the new executive team (Jamie Welch, Matthew Wall, etc.) and the new Board composition.
• Series A Preferred Units: Monitor the scheduled mandatory redemptions of 150,000 Series A Preferred Units over the next 18 months and the increased distribution rate (10%) effective Q1 2024.