[UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q](index=1&type=section&id=UNITED%20STATES%20SECURITIES%20AND%20EXCHANGE%20COMMISSION%20FORM%2010-Q) This section identifies the registrant, filing period, and key filer status information for the quarterly report - Registrant: Altus Midstream Company, Delaware, Commission File Number: **001-38048**[2](index=2&type=chunk) - Filing Period: Quarterly Report for the period ended **March 31, 2021**[2](index=2&type=chunk) Filer Status | Filer Status | | | | |---|---|---|---| | Large accelerated filer | ☐ | Accelerated filer | ☒ | | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | | Emerging growth company | ☒ | | | Shares Outstanding as of April 30, 2021 | Class of Stock | Shares Outstanding | |---|---| | Class A common stock | 3,746,460 | | Class C common stock | 12,500,000 | [TABLE OF CONTENTS](index=2&type=section&id=TABLE%20OF%20CONTENTS) This section outlines the main components of the 10-Q report, including financial statements and other disclosures - The table of contents lists the main sections of the 10-Q report, including financial information (Items 1-4) and other information (Items 1, 1A, 6)[7](index=7&type=chunk) [FORWARD-LOOKING STATEMENTS AND RISK](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS%20AND%20RISK) This section cautions that forward-looking statements are subject to risks, including the COVID-19 pandemic and market volatility, which may cause actual results to differ - The report contains forward-looking statements based on historical trends and forecasts, but actual results may differ due to various factors[9](index=9&type=chunk) - Key risk factors include the scope and duration of the **COVID-19 pandemic**, market prices of oil, natural gas, and NGLs, pipeline capacity, economic conditions, capital availability, and legislative/regulatory changes[10](index=10&type=chunk)[11](index=11&type=chunk) [GLOSSARY OF TERMS](index=5&type=section&id=GLOSSARY%20OF%20TERMS) This section provides definitions for key abbreviations and industry-specific terms used throughout the report - The glossary defines key abbreviations and terms used in the report and the oil and natural gas industry, such as **Bbl (barrel)**, **Bcf (billion cubic feet)**, **Btu (British thermal unit)**, and **NGLs (Natural gas liquids)**[13](index=13&type=chunk)[14](index=14&type=chunk) [PART I — FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This part contains the company's unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS](index=6&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements of Altus Midstream Company for the period ended March 31, 2021, compared to the prior year, along with detailed notes [STATEMENT OF CONSOLIDATED OPERATIONS](index=6&type=section&id=STATEMENT%20OF%20CONSOLIDATED%20OPERATIONS) This statement details the company's revenues, expenses, and net income (loss) for the three months ended March 31, 2021 and 2020 Key Financial Highlights (Three Months Ended March 31) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (YoY) (in thousands) | |---|---|---|---| | Total Revenues | $34,146 | $40,869 | -$6,723 | | Total Costs and Expenses | $21,099 | $22,217 | -$1,118 | | Operating Income | $13,047 | $18,652 | -$5,605 | | Unrealized derivative instrument loss | $(16,529) | $(61,984) | +$45,455 | | Income from equity method interests, net | $21,688 | $15,842 | +$5,846 | | Net Income (Loss) Before Income Taxes | $22,489 | $(26,067) | +$48,556 | | Net Income (Loss) Including Noncontrolling Interests | $22,489 | $(25,371) | +$47,860 | | Net Income (Loss) Attributable to Class A Common Shareholders | $180 | $(8,081) | +$8,261 | | Basic EPS | $0.05 | $(2.16) | +$2.21 | | Diluted EPS | $0.05 | $(2.69) | +$2.74 | - Net income (loss) attributable to Class A common shareholders improved significantly from a loss of **$8.081 million** in Q1 2020 to a gain of **$0.180 million** in Q1 2021[17](index=17&type=chunk) - The company's total revenues decreased by **$6.7 million**, while total costs and expenses decreased by **$1.1 million**[17](index=17&type=chunk) [STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)](index=7&type=section&id=STATEMENT%20OF%20CONSOLIDATED%20COMPREHENSIVE%20INCOME%20%28LOSS%29) This statement presents the company's comprehensive income (loss), including other comprehensive income (loss) from equity method interests, for the three months ended March 31, 2021 and 2020 Comprehensive Income (Loss) (Three Months Ended March 31) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (YoY) (in thousands) | |---|---|---|---| | Net Income (Loss) Including Noncontrolling Interests | $22,489 | $(25,371) | +$47,860 | | Share of equity method interests other comprehensive income (loss) | $630 | $(1,184) | +$1,814 | | Comprehensive Income (Loss) Including Noncontrolling Interests | $23,119 | $(26,555) | +$49,674 | | Comprehensive Income (Loss) Attributable to Class A Common Shareholders | $325 | $(8,354) | +$8,679 | - Comprehensive income attributable to Class A common shareholders improved from a loss of **$8.354 million** in Q1 2020 to an income of **$0.325 million** in Q1 2021[22](index=22&type=chunk) [CONSOLIDATED BALANCE SHEET](index=9&type=section&id=CONSOLIDATED%20BALANCE%20SHEET) This statement provides a snapshot of the company's assets, liabilities, and equity as of March 31, 2021, and December 31, 2020 Key Balance Sheet Items (As of March 31, 2021 vs. December 31, 2020) | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (in thousands) | |---|---|---|---| | Cash and cash equivalents | $51,306 | $24,188 | +$27,118 | | Total Current Assets | $76,194 | $42,769 | +$33,425 | | Property, Plant and Equipment, net | $193,416 | $195,836 | -$2,420 | | Equity method interests | $1,566,672 | $1,555,182 | +$11,490 | | Total Assets | $1,842,576 | $1,799,630 | +$42,946 | | Total Current Liabilities | $21,884 | $29,983 | -$8,099 | | Long-Term Debt | $657,000 | $624,000 | +$33,000 | | Embedded derivative | $155,538 | $139,009 | +$16,529 | | Total Liabilities | $906,429 | $863,478 | +$42,951 | | Redeemable noncontrolling interest — Apache limited partner | $662,432 | $575,125 | +$87,307 | | Redeemable noncontrolling interest — Preferred Unit limited partners | $604,749 | $608,381 | -$3,632 | | Total Equity | $(331,034) | $(247,354) | -$83,680 | - Cash and cash equivalents increased significantly by **$27.1 million**, from **$24.2 million** at year-end 2020 to **$51.3 million** at March 31, 2021[25](index=25&type=chunk) - Long-term debt increased by **$33.0 million**, and the embedded derivative liability increased by **$16.5 million**[25](index=25&type=chunk) [STATEMENT OF CONSOLIDATED CASH FLOWS](index=11&type=section&id=STATEMENT%20OF%20CONSOLIDATED%20CASH%20FLOWS) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2021 and 2020 Cash Flow Summary (Three Months Ended March 31) | Cash Flow Activity | 2021 (in thousands) | 2020 (in thousands) | Change (YoY) (in thousands) | |---|---|---|---| | Net Cash Provided by Operating Activities | $43,272 | $51,538 | -$8,266 | | Net Cash Used in Investing Activities | $(13,222) | $(97,615) | +$84,393 | | Net Cash Provided by (Used in) Financing Activities | $(2,932) | $59,395 | -$62,327 | | Increase in Cash and Cash Equivalents | $27,118 | $13,318 | +$13,800 | | Cash and Cash Equivalents at End of Period | $51,306 | $19,301 | +$32,005 | - Capital expenditures decreased substantially from **$19.1 million** in Q1 2020 to **$1.3 million** in Q1 2021[29](index=29&type=chunk) - Distributions paid to Preferred Unit limited partners and Apache limited partner totaled **$11.6 million** and **$18.8 million**, respectively, in Q1 2021, with no such payments in Q1 2020[29](index=29&type=chunk) [STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS](index=12&type=section&id=STATEMENT%20OF%20CONSOLIDATED%20CHANGES%20IN%20EQUITY%20AND%20NONCONTROLLING%20INTERESTS) This statement details the changes in the company's equity and noncontrolling interests for the three months ended March 31, 2021 Changes in Equity and Noncontrolling Interests (Three Months Ended March 31, 2021) | Item | Redeemable Noncontrolling Interest — Preferred Unit Limited Partners (in thousands) | Redeemable Noncontrolling Interest — Apache Limited Partner (in thousands) | Additional Paid-in Capital (in thousands) | Accumulated Deficit (in thousands) | Total Equity (in thousands) | |---|---|---|---|---|---| | Balance at Dec 31, 2020 (Revised) | $608,381 | $575,125 | $122,222 | $(369,433) | $(247,354) | | Distributions paid to Preferred Unit limited partners | $(11,562) | — | — | — | — | | Distributions payable to Preferred Unit limited partners | $(11,562) | — | — | — | — | | Net income | $19,492 | $2,817 | — | $180 | $180 | | Change in redemption value of noncontrolling interests | — | $84,005 | $(84,005) | — | $(84,005) | | Accumulated other comprehensive income | — | $485 | — | — | $145 | | Balance at March 31, 2021 | $604,749 | $662,432 | $38,217 | $(369,253) | $(331,034) | - Redeemable noncontrolling interest for Apache limited partner increased by **$87.3 million**, while additional paid-in capital decreased by **$84.0 million** due to changes in redemption value[32](index=32&type=chunk) - Total equity decreased from **$(247.3) million** at December 31, 2020, to **$(331.0) million** at March 31, 2021[32](index=32&type=chunk) [NOTES TO CONSOLIDATED FINANCIAL STATEMENTS](index=13&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures supporting the consolidated financial statements, including accounting policies and specific financial items [1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=14&type=section&id=1.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and methods used in preparing the consolidated financial statements [Basis of Presentation](index=14&type=section&id=Basis%20of%20Presentation) This section describes the framework for preparing the consolidated financial statements in accordance with GAAP - The consolidated financial statements are prepared in accordance with **accounting principles generally accepted in the United States (GAAP)**[43](index=43&type=chunk) [Principles of Consolidation](index=14&type=section&id=Principles%20of%20Consolidation) This section explains the criteria for including subsidiaries and other entities in the consolidated financial statements - The consolidated financial results of Altus Midstream are included in the Company's consolidated financial statements due to **100% ownership of Altus Midstream GP** and its control of Altus Midstream[44](index=44&type=chunk) [Variable Interest Entity](index=14&type=section&id=Variable%20Interest%20Entity) This section details the company's accounting for Altus Midstream as a variable interest entity and its role as primary beneficiary - Altus Midstream is a **variable interest entity (VIE)** because its partners lack power to direct activities that significantly impact economic performance[46](index=46&type=chunk) - The Company is the primary beneficiary of Altus Midstream and consolidates it, having the ability to direct activities and the right to receive benefits or absorb losses[47](index=47&type=chunk) [Redeemable Noncontrolling Interest — Apache Limited Partner](index=14&type=section&id=Redeemable%20Noncontrolling%20Interest%20%E2%80%94%20Apache%20Limited%20Partner) This section describes the accounting treatment for Apache's redeemable noncontrolling interest in Altus Midstream - The redeemable noncontrolling interest consists of Common Units in Altus Midstream held by Apache, equal to the number of Class C Common Stock shares held by Apache[48](index=48&type=chunk) - These Common Units may be redeemed at Apache's option for Class A Common Stock (one-for-one) or cash, with corresponding Class C Common Stock cancellation[49](index=49&type=chunk) - The redeemable noncontrolling interest is recorded at the higher of its initial fair value plus accumulated earnings/losses or its redemption value as of the balance sheet date[50](index=50&type=chunk) [Redeemable Noncontrolling Interest — Preferred Unit Limited Partners](index=15&type=section&id=Redeemable%20Noncontrolling%20Interest%20%E2%80%94%20Preferred%20Unit%20Limited%20Partners) This section explains the accounting for Preferred Units issued by Altus Midstream as a redeemable noncontrolling interest - Altus Midstream issued Preferred Units in a private offering on **June 12, 2019**, which are exchangeable for Class A Common Stock after seven years or upon specified events[52](index=52&type=chunk) - Preferred Units are accounted for as a **redeemable noncontrolling interest (temporary equity)** and certain embedded redemption features are bifurcated and measured at fair value as a long-term liability embedded derivative[53](index=53&type=chunk) [Equity Method Interests](index=15&type=section&id=Equity%20Method%20Interests) This section outlines the accounting policy for investments where the company exercises significant influence but not control - The Company uses the equity method for interests where it has significant influence but not control, carrying them at acquisition cost adjusted for proportionate share of net income/losses and distributions[55](index=55&type=chunk) [Use of Estimates](index=15&type=section&id=Use%20of%20Estimates) This section acknowledges that financial statement preparation involves management estimates and assumptions that may differ from actual results - Preparation of financial statements requires management to make estimates and assumptions, which are evaluated regularly, and actual results may differ[56](index=56&type=chunk) [Revision of Previously Issued Consolidated Financial Statements for Immaterial Adjustment](index=16&type=section&id=Revision%20of%20Previously%20Issued%20Consolidated%20Financial%20Statements%20for%20Immaterial%20Adjustment) This section details the revision of prior financial statements to correct an immaterial error in accounting for warrants as a derivative liability - The Company revised prior financial statements to account for warrants as a derivative liability under **ASC 815**, rather than equity, following SEC Staff guidance, correcting an immaterial error[58](index=58&type=chunk) Impact of Revision on Statement of Consolidated Operations (Three Months Ended March 31, 2020) | Item | As Reported (in thousands) | Change (in thousands) | As Revised (in thousands) | |---|---|---|---| | Income from equity method interests, net | $16,298 | $(456) | $15,842 | | Warrants valuation adjustment | — | $1,877 | $1,877 | | Net income (loss) attributable to Class A common shareholders | $(9,853) | $1,772 | $(8,081) | | Basic EPS | $(2.63) | $0.47 | $(2.16) | Impact of Revision on Consolidated Balance Sheet (December 31, 2020) | Item | As Reported (in thousands) | Change (in thousands) | As Revised (in thousands) | |---|---|---|---| | Other non-current liabilities | $5,539 | $885 | $6,424 | | Additional paid-in-capital | $144,716 | $(22,494) | $122,222 | | Accumulated equity (deficit) | $(391,042) | $21,609 | $(369,433) | [Fair Value Measurements](index=17&type=section&id=Fair%20Value%20Measurements) This section describes the fair value hierarchy used for financial assets and liabilities, including Level 3 valuations for embedded derivatives and private warrants - The Company uses a fair value hierarchy (**Level 1, 2, 3**) for financial assets and liabilities, with **Level 3 valuations** for embedded derivatives and private warrants based on unobservable inputs[63](index=63&type=chunk)[65](index=65&type=chunk) [Accounts Receivable From/Payable To Apache](index=17&type=section&id=Accounts%20Receivable%20From%2FPayable%20To%20Apache) This section explains the nature of receivables and payables with Apache arising from monthly revenue and expenditure settlements - These represent the net result of Altus Midstream's monthly revenue, capital, and operating expenditures with Apache under the COMA, typically settled in the month following processing[66](index=66&type=chunk) [Other Income](index=18&type=section&id=Other%20Income) This section details the recognition of other income, including a significant power contract credit earned in February 2021 - In February 2021, the Company earned an estimated credit of approximately **$7.2 million** from an electrical power contract due to increased power pricing and underutilization of fixed purchase volumes during the Texas freeze event[67](index=67&type=chunk) [2. TRANSACTIONS WITH AFFILIATES](index=18&type=section&id=2.%20TRANSACTIONS%20WITH%20AFFILIATES) This note describes the company's significant transactions with affiliated entities, primarily Apache Corporation [Revenues](index=18&type=section&id=Revenues) This section details revenues generated from midstream services provided to Apache under acreage dedications - The Company provides gas gathering, compression, processing, transmission, and NGL transmission services to Apache under acreage dedications in the Alpine High area, generating **'Midstream services revenue — affiliate'**[68](index=68&type=chunk)[69](index=69&type=chunk) [Cost and Expenses](index=18&type=section&id=Cost%20and%20Expenses) This section outlines operational, maintenance, and management expenses incurred from services provided by Apache - Apache provides operational, maintenance, and management services to Altus under the COMA. In Q1 2021, Altus incurred **$0.8 million** in O&M expenses and **$2.2 million** in G&A expenses from related parties[70](index=70&type=chunk) [Construction, Operations and Maintenance Agreement](index=18&type=section&id=Construction%2C%20Operations%20and%20Maintenance%20Agreement) This section describes the terms of the COMA under which Apache provides services for midstream asset development and maintenance - Under the COMA, Apache provides services for design, development, construction, operation, management, and maintenance of midstream assets, with Altus paying annual fees (**$7.0 million for 2021**, **$9.0 million annually thereafter**)[71](index=71&type=chunk) [Distributions to Apache](index=19&type=section&id=Distributions%20to%20Apache) This section reports the distributions paid to Apache based on its ownership of Altus Midstream Common Units - In Q1 2021, Altus Midstream paid **$18.8 million** in distributions to Apache due to its **76.9% ownership** of outstanding Common Units[75](index=75&type=chunk) [3. REVENUE RECOGNITION](index=19&type=section&id=3.%20REVENUE%20RECOGNITION) This note disaggregates the company's total revenues by type, highlighting affiliate midstream services and third-party product sales Revenue Disaggregation (Three Months Ended March 31) | Revenue Type | 2021 (in thousands) | 2020 (in thousands) | Change (YoY) (in thousands) | |---|---|---|---| | Midstream services revenue — affiliate | $31,529 | $40,767 | -$9,238 | | Product sales — third parties | $2,617 | $102 | +$2,515 | | Total revenues | $34,146 | $40,869 | -$6,723 | - Midstream services revenue from affiliate decreased by **$9.2 million** due to lower natural gas throughput volumes from Apache[77](index=77&type=chunk) - Product sales to third parties significantly increased by **$2.5 million**, driven by NGLs and condensates purchased and processed from a third party starting in March 2020[77](index=77&type=chunk)[161](index=161&type=chunk) [4. PROPERTY, PLANT AND EQUIPMENT](index=20&type=section&id=4.%20PROPERTY%2C%20PLANT%20AND%20EQUIPMENT) This note provides a breakdown of the company's property, plant, and equipment, including gathering systems and construction in progress Property, Plant and Equipment (As of March 31, 2021 vs. December 31, 2020) | Item | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (in thousands) | |---|---|---|---| | Gathering, processing and transmission systems and facilities | $206,044 | $204,643 | +$1,401 | | Construction in progress | $40 | $904 | -$864 | | Total property, plant and equipment, net | $193,416 | $195,836 | -$2,420 | - Construction in progress decreased substantially from **$0.9 million** to **$0.04 million**, indicating completion of projects[80](index=80&type=chunk) - Compressors under lease to Apache increased from **$6.2 million** to **$10.2 million**, net[80](index=80&type=chunk) [5. DEBT AND FINANCING COSTS](index=20&type=section&id=5.%20DEBT%20AND%20FINANCING%20COSTS) This note details the company's revolving credit facility, outstanding borrowings, compliance with covenants, and financing costs - Altus Midstream has an **$800.0 million revolving credit facility** maturing in November 2023[82](index=82&type=chunk) Revolving Credit Facility Status | Metric | March 31, 2021 (in millions) | December 31, 2020 (in millions) | |---|---|---| | Borrowings Outstanding | $657.0 | $624.0 | | Letter of Credit Outstanding | $2.0 | $0 | - The company was in compliance with its financial covenant, maintaining a **Leverage Ratio less than 4.00:1.00** as of March 31, 2021, well below the **5.00:1.00 limit**[86](index=86&type=chunk)[87](index=87&type=chunk)[89](index=89&type=chunk) Financing Costs, Net of Capitalized Interest (Three Months Ended March 31) | Item | 2021 (in thousands) | 2020 (in thousands) | Change (YoY) (in thousands) | |---|---|---|---| | Interest expense | $2,306 | $3,358 | -$1,052 | | Amortization of deferred facility fees | $292 | $273 | +$19 | | Capitalized interest | $0 | $(3,358) | +$3,358 | | Total Financing costs, net of capitalized interest | $2,598 | $273 | +$2,325 | [6. OTHER CURRENT LIABILITIES](index=21&type=section&id=6.%20OTHER%20CURRENT%20LIABILITIES) This note provides a detailed breakdown of other current liabilities, including accrued taxes, operations and maintenance, and incentive compensation Other Current Liabilities (As of March 31, 2021 vs. December 31, 2020) | Item | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (in thousands) | |---|---|---|---| | Accrued taxes other than income | $3,865 | $165 | +$3,700 | | Accrued operations and maintenance expense | $1,775 | $926 | +$849 | | Accrued capital costs | $576 | $360 | +$216 | | Accrued incentive compensation | $365 | $1,466 | -$1,101 | | Other | $3,381 | $2,275 | +$1,106 | | Total other current liabilities | $10,322 | $5,613 | +$4,709 | - Accrued taxes other than income saw a significant increase of **$3.7 million**[91](index=91&type=chunk) - Accrued incentive compensation decreased by **$1.1 million**[91](index=91&type=chunk) [7. COMMITMENTS AND CONTINGENCIES](index=22&type=section&id=7.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's contractual obligations and potential liabilities, including fee-based agreements and funding for equity method pipelines - No accruals for loss contingencies or material environmental claims existed as of **March 31, 2021**[92](index=92&type=chunk)[94](index=94&type=chunk) - Contractual obligations include fee-based midstream service agreements with Apache (no minimum volume commitments), management fees under the COMA, quarterly distributions to Preferred Unit holders, and pro-rata funding for equity method pipeline capital expenditures[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) [8. EQUITY METHOD INTERESTS](index=23&type=section&id=8.%20EQUITY%20METHOD%20INTERESTS) This note details the company's investments in unconsolidated affiliates, including ownership percentages and changes in their carrying values Equity Method Interests Ownership and Value | Entity | Ownership | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | |---|---|---|---| | Gulf Coast Express Pipeline LLC | 16.0% | $280,787 | $283,530 | | EPIC Crude Holdings, LP | 15.0% | $172,592 | $176,640 | | Permian Highway Pipeline LLC | 26.7% | $638,723 | $615,186 | | Breviloba, LLC | 33.0% | $474,570 | $479,826 | | Total | | $1,566,672 | $1,555,182 | Activity in Equity Method Interests (Three Months Ended March 31, 2021) | Item | Total (in thousands) | |---|---| | Balance at December 31, 2020 | $1,555,182 | | Contributions | $20,522 | | Distributions | $(31,350) | | Equity income (loss), net | $21,688 | | Accumulated other comprehensive income | $630 | | Balance at March 31, 2021 | $1,566,672 | - Permian Highway Pipeline LLC received **$20.5 million** in contributions and generated **$11.2 million** in equity income, while Gulf Coast Express Pipeline LLC and Breviloba, LLC had significant distributions[101](index=101&type=chunk) [9. EQUITY](index=24&type=section&id=9.%20EQUITY) This note describes the company's equity structure, including common stock, noncontrolling interests, and dividend declarations - A **one-for-twenty reverse stock split** for Class A and Class C Common Stock was effected on **June 30, 2020**, with all share amounts retroactively restated[103](index=103&type=chunk) - Apache owns **12.5 million Altus Midstream Common Units (76.9% of total)**, which are redeemable for Class A Common Stock or cash at Apache's option[104](index=104&type=chunk) Redeemable Noncontrolling Interest — Apache Limited Partner | Date | Redemption Value (in millions) | |---|---| | March 31, 2021 | $662.4 | | December 31, 2020 | $575.1 | - In Q1 2021, the Company paid a **$1.50 per share cash dividend** on Class A Common Stock, totaling **$5.6 million**, funded by a **$24.4 million distribution** from Altus Midstream to its common unitholders[108](index=108&type=chunk) [10. SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS](index=25&type=section&id=10.%20SERIES%20A%20CUMULATIVE%20REDEEMABLE%20PREFERRED%20UNITS) This note explains the issuance and accounting treatment of the Series A Cumulative Redeemable Preferred Units, including their classification as temporary equity - Altus Midstream issued **625,000 Preferred Units for $625.0 million** in June 2019, receiving **$611.2 million** in cash proceeds after transaction costs[110](index=110&type=chunk) - Preferred Units are classified as **redeemable noncontrolling interest (temporary equity)** and measured using an accreted value method[111](index=111&type=chunk)[113](index=113&type=chunk) Redeemable Noncontrolling Interest — Preferred Units (March 31, 2021) | Item | Amount (in thousands) | |---|---| | Redeemable noncontrolling interest — Preferred Units: at March 31, 2021 | $604,749 | | Embedded derivative liability | $155,538 | | Total | $760,287 | - The Redemption Price for Preferred Units as of March 31, 2021, was **$812.5 million**, based on a **1.3 times multiple of invested capital**[115](index=115&type=chunk) [11. INCOME TAXES](index=26&type=section&id=11.%20INCOME%20TAXES) This note outlines the company's income tax position, including its partnership status and the impact of valuation allowances on the effective tax rate - Altus Midstream LP is a partnership for federal income tax purposes, passing taxable income to its partners; the Company is subject to U.S. federal and Texas margin tax[117](index=117&type=chunk) - In Q1 2020, the Company recorded a **$0.7 million current income tax benefit** due to a net operating loss carryback claim under the **CARES Act**[118](index=118&type=chunk)[119](index=119&type=chunk) - The effective income tax rate in Q1 2021 was primarily impacted by a **decrease in valuation allowance**[119](index=119&type=chunk) [12. NET INCOME (LOSS) PER SHARE](index=27&type=section&id=12.%20NET%20INCOME%20%28LOSS%29%20PER%20SHARE) This note details the calculation of basic and diluted earnings per share, considering common units, warrants, and preferred units - Basic EPS is calculated using net income attributable to Class A common shareholders and weighted average Class A shares outstanding[122](index=122&type=chunk) - Diluted EPS uses the **'if-converted method'** for Common Units, warrants, and Preferred Units, but these were anti-dilutive for most periods presented[123](index=123&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) Net Income (Loss) Per Share (Three Months Ended March 31) | Metric | 2021 | 2020 | Change | |---|---|---|---| | Basic EPS | $0.05 | $(2.16) | +$2.21 | | Diluted EPS | $0.05 | $(2.69) | +$2.74 | [13. FAIR VALUE MEASUREMENTS](index=28&type=section&id=13.%20FAIR%20VALUE%20MEASUREMENTS) This note provides further details on fair value measurements, particularly for embedded derivatives and warrants, using various valuation techniques - The embedded derivative associated with Preferred Units is a **Level 3 fair value measurement**, valued using an income approach (**Black-Karasinski model**) based on expected future interest rates, volatility, and timing of exchange[130](index=130&type=chunk)[131](index=131&type=chunk) Unrealized Derivative Instrument Loss (Three Months Ended March 31) | Item | 2021 (in thousands) | 2020 (in thousands) | Change (YoY) (in thousands) | |---|---|---|---| | Unrealized derivative instrument loss | $(16,529) | $(61,984) | +$45,455 | - Public warrants are **Level 1** (quoted market prices), while private warrants are **Level 3** (option pricing model). Fair value changes for warrants resulted in **$0.7 million expense** in Q1 2021 and **$1.9 million income** in Q1 2020[133](index=133&type=chunk) [14. SUBSEQUENT EVENTS](index=29&type=section&id=14.%20SUBSEQUENT%20EVENTS) This note discloses significant events that occurred after the balance sheet date, including dividend declarations - On **May 4, 2021**, the Board declared a **$1.50 per share cash dividend** on Class A Common Stock (**$5.6 million total**), payable June 30, 2021[135](index=135&type=chunk) - The dividend will be funded by a **$24.4 million distribution** from Altus Midstream to its common unitholders[135](index=135&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=30&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on Altus Midstream Company's financial condition and operational results for the three months ended March 31, 2021, highlighting key metrics and liquidity [Overview](index=30&type=section&id=Overview) This section provides a high-level summary of Altus Midstream's assets, strategy, and financial outlook, including its Permian Basin operations and pipeline equity interests - Altus Midstream owns gas gathering, processing, and transmission assets in the Permian Basin, anchored by service agreements with Apache Corporation for its Alpine High resource play[138](index=138&type=chunk) - The company holds equity interests in four intrastate Permian Basin pipelines: **GCX (16%)**, **EPIC (15%)**, **PHP (26.7%)**, and **Shin Oak (33%)**[140](index=140&type=chunk) - PHP was placed in service in **January 2021** with a total capacity of **2.1 Bcf/d**, fully subscribed under long-term contracts[140](index=140&type=chunk) - Altus is projected to remain **cash flow positive** for the remainder of 2021, with minimal expected future capital requirements, and sufficient liquidity to fund capital expenditures and dividends[141](index=141&type=chunk) [Altus Midstream Operational Metrics](index=31&type=section&id=Altus%20Midstream%20Operational%20Metrics) This section details key operational drivers, including throughput volumes, cost components, and the reconciliation of Adjusted EBITDA [Throughput Volumes and Associated Revenues](index=31&type=section&id=Throughput%20Volumes%20and%20Associated%20Revenues) This section discusses how natural gas volumes gathered, processed, and transmitted primarily drive the company's operating results - Operating results are primarily driven by natural gas volumes gathered, processed, compressed, and/or transmitted, substantially all from **fee-based agreements with Apache**[143](index=143&type=chunk) - The company is actively pursuing new supplies of natural gas and processing arrangements with third parties to increase throughput volumes[144](index=144&type=chunk) [Costs and Expenses](index=31&type=section&id=Costs%20and%20Expenses) This section analyzes the components of costs and expenses, including product sales, operations and maintenance, and general and administrative fees - Costs of product sales represent purchases of NGLs from a third party, fluctuating with market conditions and product prices[145](index=145&type=chunk) - Operations and maintenance expenses are primarily direct labor, power, repair, and equipment rentals, impacted by commodity prices[146](index=146&type=chunk) - General and administrative expenses primarily comprise fixed fees under the **COMA with Apache**[148](index=148&type=chunk) [Adjusted EBITDA](index=32&type=section&id=Adjusted%20EBITDA) This section defines and reconciles Adjusted EBITDA, a non-GAAP measure used to evaluate the company's operating performance - Adjusted EBITDA is defined as net income (loss) including noncontrolling interests before financing costs, interest income, income taxes, depreciation, accretion, and adjustments for equity method interests, impairments, unrealized derivative gains/losses, and other items[150](index=150&type=chunk) - Adjusted EBITDA is a **non-GAAP measure** used to evaluate operating performance and compare results, but should not be considered an alternative to GAAP net income (loss)[150](index=150&type=chunk)[151](index=151&type=chunk) Reconciliation of Net Income (Loss) to Adjusted EBITDA (Three Months Ended March 31) | Item | 2021 (in thousands) | 2020 (in thousands) | |---|---|---| | Net income (loss) including noncontrolling interests | $22,489 | $(25,371) | | Financing costs, net of capitalized interest | $2,598 | $273 | | Depreciation and accretion | $4,000 | $3,914 | | Unrealized derivative instrument loss | $16,529 | $61,984 | | Equity method interests Adjusted EBITDA | $39,911 | $23,686 | | Adjusted EBITDA | $65,036 | $46,542 | [Results of Operations](index=34&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's revenues, costs, and other income (loss) for the reporting periods [Revenues](index=35&type=section&id=Revenues) This section analyzes the changes in midstream services revenue from affiliates and product sales to third parties Revenues (Three Months Ended March 31) | Revenue Type | 2021 (in thousands) | 2020 (in thousands) | |---|---|---| | Midstream services revenue — affiliate | $31,529 | $40,767 | | Product sales — third parties | $2,617 | $102 | | Total revenues | $34,146 | $40,869 | - Midstream services revenue from affiliate decreased by **$9.3 million** due to lower natural gas throughput volumes from Apache[160](index=160&type=chunk) - Product sales revenues increased by **$2.5 million**, driven by NGLs and condensates purchased and processed from a third party starting in March 2020[161](index=161&type=chunk) [Costs and Expenses](index=36&type=section&id=Costs%20and%20Expenses) This section examines the fluctuations in various cost categories, including operations and maintenance, general and administrative, and taxes Costs and Expenses (Three Months Ended March 31) | Item | 2021 (in thousands) | 2020 (in thousands) | |---|---|---| | Costs of product sales | $1,993 | $91 | | Operations and maintenance | $7,402 | $10,591 | | General and administrative | $3,455 | $4,178 | | Depreciation and accretion | $4,000 | $3,914 | | Impairments | $441 | — | | Taxes other than income | $3,808 | $3,443 | | Total costs and expenses | $21,099 | $22,217 | - Operations and maintenance expenses decreased by **$3.2 million** due to increased operational efficiency from transitioning to the Diamond cryogenic complex, resulting in lower employee-related costs, contract labor, and chemical expenses[165](index=165&type=chunk) - General and administrative expense decreased by **$0.7 million**, primarily due to lower professional fees, partially offset by higher COMA fees[166](index=166&type=chunk) - Taxes other than income increased by **$0.3 million** due to adjustments in estimated ad valorem tax assessments related to asset completion and utilization[167](index=167&type=chunk) [Other Income (Loss) and Financing Costs, Net of Capitalized Interest](index=37&type=section&id=Other%20Income%20%28Loss%29%20and%20Financing%20Costs%2C%20Net%20of%20Capitalized%20Interest) This section discusses the impact of unrealized derivative instrument losses, equity method income, and other income on overall financial results Other Income (Loss) and Financing Costs (Three Months Ended March 31) | Item | 2021 (in thousands) | 2020 (in thousands) | |---|---|---| | Unrealized derivative instrument loss | $(16,529) | $(61,984) | | Income from equity method interests, net | $21,688 | $15,842 | | Other income | $7,544 | $(188) | | Total other income (loss) | $12,040 | $(44,446) | | Total Financing costs, net of capitalized interest | $2,598 | $273 | - Unrealized derivative instrument loss decreased by **$45.5 million**, primarily due to changes in expected future interest rates and the estimated timing to exercise the exchange option for Preferred Units[170](index=170&type=chunk) - Income from equity method interests increased by **$5.9 million**, mainly due to the Permian Highway Pipeline being placed into service in **January 2021**, partially offset by impacts from the Texas freeze event[171](index=171&type=chunk) - Other income increased by **$7.7 million**, primarily from an estimated **$7.2 million power credit** earned in February 2021 due to increased power pricing and under-usage of contractual electricity volumes[172](index=172&type=chunk) [Capital Resources and Liquidity](index=38&type=section&id=Capital%20Resources%20and%20Liquidity) This section assesses the company's ability to fund its operations, capital expenditures, and distributions, including its revolving credit facility [Altus Midstream Capital Requirements](index=39&type=section&id=Altus%20Midstream%20Capital%20Requirements) This section details the company's capital spending for midstream assets and contributions to equity method interest pipelines - Capital spending for midstream infrastructure assets decreased significantly from **$19.1 million** in Q1 2020 to **$1.3 million** in Q1 2021[181](index=181&type=chunk) - Cash contributions to Equity Method Interest Pipelines totaled **$20.5 million** in Q1 2021, down from **$82.8 million** in Q1 2020[182](index=182&type=chunk) - The company estimates approximately **$10 million** of additional capital contributions for joint venture pipelines for the remainder of 2021[182](index=182&type=chunk) [Altus Midstream Class A Common Stock Dividend and Common Units Distributions](index=39&type=section&id=Altus%20Midstream%20Class%20A%20Common%20Stock%20Dividend%20and%20Common%20Units%20Distributions) This section outlines the company's dividend policy for Class A Common Stock and distributions to common unitholders - In Q1 2021, the Company paid **$24.4 million** related to its quarterly dividend program[183](index=183&type=chunk) - On **May 4, 2021**, a cash dividend of **$1.50 per share** (**$5.6 million total**) on Class A Common Stock was declared, to be funded by a **$24.4 million distribution** from Altus Midstream to its common unitholders[184](index=184&type=chunk) [Series A Cumulative Redeemable Preferred Units](index=39&type=section&id=Series%20A%20Cumulative%20Redeemable%20Preferred%20Units) This section describes the terms and distribution entitlements of the Series A Cumulative Redeemable Preferred Units - Altus Midstream issued **625,000 Preferred Units for $625.0 million** in June 2019[185](index=185&type=chunk) - Preferred Unit holders are entitled to quarterly distributions at **7% per annum**, increasing to **10%** after the fifth anniversary or specified events[186](index=186&type=chunk) [Sources and Uses of Cash](index=40&type=section&id=Sources%20and%20Uses%20of%20Cash) This section provides a detailed breakdown of the company's cash inflows and outflows from various activities, including debt and capital expenditures Sources and Uses of Cash (Three Months Ended March 31) | Item | 2021 (in thousands) | 2020 (in thousands) | Change (YoY) (in thousands) | |---|---|---|---| | Proceeds from revolving credit facility | $33,000 | $72,000 | -$39,000 | | Net cash provided by operating activities | $43,272 | $51,538 | -$8,266 | | Total Sources of Cash and Cash Equivalents | $84,902 | $131,186 | -$46,284 | | Capital expenditures | $(1,330) | $(19,096) | +$17,766 | | Contributions to equity method interests | $(20,522) | $(82,827) | +$62,305 | | Distributions paid to Preferred Unit limited partners | $(11,562) | $0 | -$11,562 | | Distributions paid to Apache limited partner | $(18,750) | $0 | -$18,750 | | Total Uses of Cash and Cash Equivalents | $(57,784) | $(117,868) | +$60,084 | | Increase in cash and Cash Equivalents | $27,118 | $13,318 | +$13,800 | - Capital expenditures decreased significantly from **$19.1 million** in Q1 2020 to **$1.3 million** in Q1 2021[189](index=189&type=chunk) - Contributions to equity method interests decreased substantially from **$82.8 million** in Q1 2020 to **$20.5 million** in Q1 2021[189](index=189&type=chunk) [Liquidity](index=40&type=section&id=Liquidity) This section evaluates the company's short-term financial health, including cash position, total debt, and available borrowing capacity Key Liquidity Indicators (As of March 31, 2021 vs. December 31, 2020) | Item | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | |---|---|---| | Cash and cash equivalents | $51,306 | $24,188 | | Total debt | $657,000 | $624,000 | | Available committed borrowing capacity | $141,000 | $176,000 | - Cash and cash equivalents increased by **$27.1 million** to **$51.3 million**[190](index=190&type=chunk)[191](index=191&type=chunk) - The revolving credit facility has **$657.0 million** in borrowings outstanding and **$141.0 million** in available capacity, with the company in compliance with all covenants[192](index=192&type=chunk)[198](index=198&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=43&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses Altus Midstream Company's exposure to various market risks, including commodity price risk, interest rate risk, and credit risk [Commodity Price Risk](index=43&type=section&id=Commodity%20Price%20Risk) This section explains the company's indirect exposure to commodity price fluctuations through customer production decisions - The Company's midstream service agreements are primarily **fee-based**, with no direct commodity price exposure to oil, natural gas, or NGLs[203](index=203&type=chunk) - Indirect exposure to commodity prices exists through Apache and third-party customers' decisions to develop and produce oil and natural gas, impacting Altus' revenues[203](index=203&type=chunk) [Interest Rate Risk](index=43&type=section&id=Interest%20Rate%20Risk) This section details the company's exposure to interest rate changes due to its variable-rate revolving credit facility - The Company is exposed to interest rate risk due to its **variable-rate revolving credit facility**, with **$657.0 million** drawn as of March 31, 2021[205](index=205&type=chunk) - A **1.0% increase in interest rates** would have increased annual consolidated interest expense by approximately **$1.6 million** for the quarter ended March 31, 2021[205](index=205&type=chunk) [Credit Risk](index=43&type=section&id=Credit%20Risk) This section addresses the risk of nonpayment or nonperformance by key customers and affiliates - The Company is subject to credit risk from nonpayment or nonperformance by, or insolvency of, Apache or third-party customers[206](index=206&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=44&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section reports a material weakness in Altus Midstream Company's disclosure controls and procedures related to warrant accounting, necessitating a revision of financial statements - A **material weakness** was identified in controls over accounting for public and private warrants, leading to an immaterial error in applying **ASC 815-40**[208](index=208&type=chunk)[209](index=209&type=chunk) - The company's internal control over financial reporting was deemed **not effective** as of March 31, 2021[209](index=209&type=chunk) - Remediation efforts include additional review procedures, training, and enhancements to accounting policies for equity and liability instruments[210](index=210&type=chunk) [PART II — OTHER INFORMATION](index=45&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, and a list of exhibits filed with the quarterly report [ITEM 1. LEGAL PROCEEDINGS](index=45&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section refers to Note 7 for legal proceedings information, stating no material pending or threatened legal actions - The company is not aware of any pending or threatened legal proceedings that would materially impact its financial position, results of operations, or liquidity[93](index=93&type=chunk)[214](index=214&type=chunk) [ITEM 1A. RISK FACTORS](index=45&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section directs readers to the comprehensive discussion of risk factors in the Company's Annual Report on Form 10-K for a full understanding of potential risks affecting the business - For a comprehensive list of risk factors, refer to Part I, Item 1A—Risk Factors of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020[215](index=215&type=chunk) [ITEM 6. EXHIBITS](index=45&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including various agreements, certificates, and XBRL financial statements - The exhibits include key corporate documents such as the **Contribution Agreement**, **Certificate of Incorporation**, and **Bylaws**[216](index=216&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer (**Rule 13a-14(a)** and **18 U.S.C. 1350**) are filed/furnished[216](index=216&type=chunk) - Financial statements for the quarter ended March 31, 2021, are provided in **Inline XBRL format**[216](index=216&type=chunk) [SIGNATURES](index=46&type=section&id=SIGNATURES) This section contains the official signatures of the company's principal executive and financial officers, certifying the accuracy of the report - The report is signed by **Ben C. Rodgers, Chief Financial Officer and Treasurer**, and **Rebecca A. Hoyt, Senior Vice President, Chief Accounting Officer, and Controller**, on **May 10, 2021**[222](index=222&type=chunk)

Altus Midstream Company (ALTM) Q1 2021 Earnings Conference Call May 6, 2021 2:00 PM ET Company Participants Patrick Cassidy - Director, IR Clay Bretches - CEO & President Ben Rodgers - CFO, Treasurer & Director Conference Call Participants James Carreker - U.S. Capital Advisors Operator Ladies and gentlemen, thank you for standing by, and welcome to the Altus Midstream Company First Quarter 2021 Earnings Call. [Operator Instructions]. I would now like to hand the conference over to your first speaker today, ...

Altus Midstream Co (ALTM) Q4 2020 Earnings Conference Call February 25, 2021 2:00 PM ET Company Participants Patrick Cassidy - Director, IR David Bretches - CEO, President & Director Ben Rodgers - CFO, Treasurer & Director Conference Call Participants Chad Bryant - Crédit Suisse James Carreker - U.S. Capital Advisors Operator Ladies and gentlemen, thank you for standing by, and welcome to the Altus Midstream Fourth Quarter and Full Year 2020 Earnings Results Call. [Operator Instructions]. I would now like t ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Altus Midstream Company Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 001-38048 Securities registered pursuant to section 12(g) of the Act: None (Exact name of regis ...

2020 Financial Performance - Altus Midstream's 2020 Adjusted EBITDA was $191.2 million, exceeding the guidance midpoint of $180 million by $11.2 million, a 6% increase[9] - Distributable Cash Flow (DCF) for 2020 reached $121.9 million, slightly above the guidance of $120 million, representing a 2% increase[9] - Growth Capital Investments in 2020 amounted to $361.6 million, surpassing the guidance of $345 million by $16.6 million, a 5% increase[9] - Net income including noncontrolling interests for FY20 was $80.5 million, with cash from operations totaling $164.3 million[8] 2021 Financial Objectives and Guidance - The company anticipates generating meaningful free cash flow in 2021, targeting approximately $140 million, representing a ~16% free cash flow yield[12] - Altus Midstream plans to fund a quarterly fixed dividend of $1.50 per share, resulting in an annualized dividend of $6.00 per share, equating to ~$97 million in annualized dividend payments[12, 13] - Adjusted EBITDA for 2021 is projected to be in the range of $230 million to $270 million, with 75% attributable to JV pipeline projects[13] - Distributable Cash Flow (DCF) for 2021 is expected to be between $160 million and $190 million[13] - Growth Capital Investments for 2021 are projected to be in the range of $30 million to $40 million, primarily attributable to PHP[13] Joint Venture Pipelines - Altus Midstream holds a 16% interest in Gulf Coast Express (GCX), which has a capacity of 2.0 Bcf/d and a total project cost of $1.75 billion[22, 24] - The company has a ~27% interest in Permian Highway Pipeline (PHP), with a capacity of 2.1 Bcf/d and a total project cost of ~$2.2 billion[22, 25] - Altus Midstream owns 33% of Shin Oak NGL Pipeline, which has a project cost of $1.5 billion[22, 26] - The company holds a 15% interest in EPIC Crude Pipeline, which has a project cost of $2.4-$2.5 billion[22, 23]

Financial Data and Key Metrics Changes - Altus reported third quarter net income of $29 million, including a $4 million unrealized embedded derivative loss [16] - Adjusted EBITDA for the third quarter was approximately $53 million, a 21% increase over the previous quarter [16][19] - Year-over-year operating expenses decreased by 33%, marking the fifth consecutive quarter of reduced operating expenses [13] Business Line Data and Key Metrics Changes - Gas volumes in the gathering and processing (G&P) segment increased by 22% from the second quarter, reflecting higher system uptime and returning curtailed volumes [11] - NGL volumes on the Shin Oak pipeline remained flat compared to the prior quarter, with a modest ramp expected in 2021 [10] - The EPIC Crude Oil Pipeline continues to be affected by reduced production in the Permian Basin, with gradual volume increases anticipated as drilling activity picks up [10] Market Data and Key Metrics Changes - The Permian Highway pipeline is over 97% mechanically complete and is expected to be in service in early 2021, designed to transport up to 2.1 billion cubic feet per day of natural gas [10] - The Gulf Coast Express pipeline is performing strongly, delivering results in line with forecasts [10] Company Strategy and Development Direction - The company has shifted its focus from gas gathering and processing to long-haul joint venture pipeline projects, adapting to a changing operating environment [8] - Altus plans to initiate a substantial dividend beginning in 2021, reflecting confidence in cash flows and limited future capital needs [15][22] - The company aims to leverage its competitive position in the Permian Basin and explore growth opportunities in third-party business and M&A [30] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the outlook for the fourth quarter and 2021, citing signs of stability and progress in commodity prices and production activity [6] - The company believes it is well-positioned to capitalize on growth opportunities in the G&P sector, particularly as market conditions improve [32] Other Important Information - Altus has a manageable leverage profile and expects to maintain a debt-to-adjusted EBITDA ratio of 2 to 3x through 2022 [21][23] - The company has ample funding sources and does not anticipate needing to access capital markets for growth financing [21] Q&A Session Summary Question: Why is the dividend set at $1.50 per share? - Management explained that the $1.50 quarterly dividend is manageable based on cash generation from underlying assets, with a coverage ratio of 1.8x for distributable cash flow [29] Question: How will the dividend impact future growth opportunities? - Management indicated that while the dividend will consume a portion of free cash flow, there are still growth opportunities in the G&P business and potential third-party deals [30][32] Question: What is the cash flow stability from joint ventures? - Management confirmed confidence in cash flows from joint ventures, particularly from the Permian Highway pipeline, which is expected to provide significant stability [36][38] Question: How does the political landscape affect operations? - Management stated that the company feels insulated from political changes and believes assets will perform well regardless of the administration [40] Question: What is the status of the preferred equity and refinancing? - Management noted that there are no immediate shifts in timing for preferred equity refinancing, and the current distribution rate is manageable [45]

ALTUS MIDSTREAM COMPANY | --- | --- | |-----------------------|--------------| | | | | | | | | | | Investor Presentation | | | November 2020 | Nasdaq: ALTM | Disclaimer FORWARD LOOKING STATEMENTS The information in this presentation and the oral statements made in connection therewith include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 001-38048 Altus Midstream Company (Exact name of registrant as specified in its charter) (State or other ju ...

Financial Data and Key Metrics Changes - Altus Midstream reported a second quarter net income of $18 million, which included an unrealized embedded derivative loss of approximately $11 million [20] - Adjusted EBITDA for the second quarter was approximately $44 million, down about 6% from the previous quarter, despite gathering volumes declining nearly 25% [20][21] - Operating costs during the second quarter decreased by approximately 10% from the preceding quarter and 23% compared to Q4 2019 [15] Business Line Data and Key Metrics Changes - Gathering volumes averaged 434 million cubic feet per day in Q2, down 25% compared to Q1, but recovered to approximately 560 million cubic feet per day in July [14] - The Shin Oak natural gas liquids pipeline experienced reduced throughput due to low NGL prices and production curtailments, but volumes rebounded in June and July [9] - Capital investment in midstream infrastructure during the quarter was approximately $74 million, primarily for the Permian Highway pipeline [21] Market Data and Key Metrics Changes - The Permian Basin remains short of takeaway capacity for natural gas, which has led to reduced flaring of associated gas and increased demand for pipeline capacity [12] - The company anticipates gathered volumes to increase in the current quarter as curtailed production at Alpine High comes back online [20] Company Strategy and Development Direction - Altus Midstream is focused on becoming free cash flow positive in early 2021 with the startup of the Permian Highway pipeline [28] - The company is pursuing additional third-party business and reducing costs through operational efficiencies, including the shift to electric-powered compression [16][40] - The company has sold approximately $22 million worth of idle assets over the past 18 months and is looking to generate additional cash flow from underutilized assets [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the COVID-19 pandemic but expressed confidence in the company's diversified cash flow streams and healthy balance sheet [18] - The outlook for 2021 includes expected adjusted EBITDA ranging from $220 million to $260 million, representing a 40% increase compared to 2020 [27] - Management emphasized the importance of maintaining manageable leverage levels and the potential for future financing alternatives for preferred shares [31][33] Other Important Information - The company executed two deals with Apache to lease and operate underutilized compression assets, which will generate revenue in the second half of the year [18] - A reverse stock split was approved by shareholders to comply with NASDAQ minimum price listing rules [28] Q&A Session Summary Question: Dividend commencement and debt pay down priorities - Management indicated that the situation is fluid and emphasized the importance of manageable leverage levels before considering dividends [31][33] Question: Fuel switching cost benefits - Management discussed the potential benefits of fuel switching, estimating operating cost reductions between 10% to 20% with electric-powered compression, but stated that quantification will occur in future calls [35][37]

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents Altus Midstream Company's unaudited consolidated financial statements and notes for the periods ended June 30, 2020 and 2019 [Statement of Consolidated Operations](index=6&type=section&id=STATEMENT%20OF%20CONSOLIDATED%20OPERATIONS) Q2 2020 net income was **$17.7 million**, a significant improvement, while the six-month period incurred a **$9.1 million** net loss due to derivative losses Consolidated Operations Highlights (Three Months Ended June 30) | Metric | 2020 (In thousands USD) | 2019 (In thousands USD) | Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | $31,616 | $24,139 | +31.0% | | **Operating Income (Loss)** | $11,711 | $(4,942) | N/A | | **Net Income (Loss) Including Noncontrolling Interests** | $17,662 | $(5,498) | N/A | | **Net Loss Attributable to Class A Common Shareholders** | $(255) | $(2,293) | +88.9% | | **Diluted EPS** | $(0.07) | $(0.61) | +88.5% | Consolidated Operations Highlights (Six Months Ended June 30) | Metric | 2020 (In thousands USD) | 2019 (In thousands USD) | Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | $72,383 | $57,985 | +24.8% | | **Operating Income (Loss)** | $30,352 | $(711) | N/A | | **Net Income (Loss) Including Noncontrolling Interests** | $(9,130) | $230 | N/A | | **Net Loss Attributable to Class A Common Shareholders** | $(10,108) | $(1,193) | -747.3% | | **Diluted EPS** | $(2.84) | $(0.32) | -787.5% | - A significant unrealized derivative instrument loss of **$72.6 million** was recorded in the first six months of 2020, which was the primary driver of the net loss for the period[19](index=19&type=chunk) [Consolidated Balance Sheet](index=9&type=section&id=CONSOLIDATED%20BALANCE%20SHEET) Total assets increased to **$1.64 billion** as of June 30, 2020, while liabilities rose to **$748.6 million** due to debt and derivatives Key Balance Sheet Items | Account | June 30, 2020 (In thousands USD) | Dec 31, 2019 (In thousands USD) | | :--- | :--- | :--- | | **Total Assets** | $1,642,243 | $1,500,854 | | Equity Method Interests | $1,408,479 | $1,258,048 | | **Total Liabilities** | $748,643 | $597,330 | | Long-Term Debt | $493,000 | $396,000 | | Embedded Derivative | $175,498 | $102,929 | | **Total Equity** | $70,344 | $(353,075) | [Statement of Consolidated Cash Flows](index=11&type=section&id=STATEMENT%20OF%20CONSOLIDATED%20CASH%20FLOWS) Operating cash flow significantly increased to **$86.8 million** for the six months ended June 30, 2020, while investing activities decreased to **$175.3 million** Cash Flow Summary (Six Months Ended June 30) | Activity | 2020 (In thousands USD) | 2019 (In thousands USD) | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $86,797 | $21,688 | | **Net Cash Used in Investing Activities** | $(175,295) | $(697,698) | | **Net Cash Provided by Financing Activities** | $84,395 | $602,995 | | **Decrease in Cash and Cash Equivalents** | $(4,103) | $(73,015) | - Capital expenditures dropped significantly to **$26.5 million** in the first half of 2020 from **$259.3 million** in the same period of 2019[29](index=29&type=chunk) [Notes to Consolidated Financial Statements](index=15&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes detail accounting policies, operations, affiliate transactions, revenue recognition, debt, equity interests, and derivative fair value measurements - The company's operations consist of one reportable segment focused on gas gathering, processing, and transmission assets in the Permian Basin, and equity interests in four Permian Basin pipeline entities[40](index=40&type=chunk) - For the periods presented, the company's only significant customer was its affiliate, Apache Corporation[67](index=67&type=chunk) - On June 30, 2020, the company effected a one-for-twenty reverse stock split of its Class A and Class C Common Stock. All share and per-share amounts have been retroactively restated[108](index=108&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and results, noting COVID-19 impacts, increased revenue, significant derivative losses, and expected cash flow positivity by early 2021 [Overview](index=30&type=section&id=Overview) Altus Midstream operates Permian Basin gas assets and pipeline equity interests, facing COVID-19 impacts but expecting cash flow positivity by early 2021 - The company's assets include 182 miles of gas gathering pipelines, three cryogenic processing trains with **200 MMcf/d** capacity each, and equity interests in the GCX, EPIC, PHP, and Shin Oak pipelines[137](index=137&type=chunk)[139](index=139&type=chunk) - Management is monitoring the impact of the COVID-19 pandemic on throughput volumes and capacity utilization, noting that the current market has slowed the pace of securing third-party processing opportunities[138](index=138&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q2 2020 revenues rose **31%** to **$31.6 million** with lower costs, yielding **$11.7 million** operating income, though a **$72.6 million** derivative loss impacted the six-month net loss Revenue Comparison (Three Months Ended June 30) | Metric | 2020 (In thousands USD) | 2019 (In thousands USD) | Change | | :--- | :--- | :--- | :--- | | **Midstream services revenue — affiliate** | $31,616 | $24,139 | +$7.5M | Costs and Expenses Comparison (Three Months Ended June 30) | Expense Category | 2020 (In thousands USD) | 2019 (In thousands USD) | Change | | :--- | :--- | :--- | :--- | | **Operations and maintenance** | $9,508 | $14,005 | -$4.5M | | **Depreciation and accretion** | $4,062 | $9,107 | -$5.0M | | **Total costs and expenses** | $19,905 | $29,081 | -$9.2M | - The decrease in operations and maintenance expense was primarily due to increased operational efficiency from transitioning to the centralized Diamond cryogenic complex from mechanical refrigeration units[158](index=158&type=chunk) - Income from equity method interests increased significantly by **$18.2 million** for the quarter and **$34.2 million** for the six months, driven by the GCX and Shin Oak pipelines coming into service[169](index=169&type=chunk) [Capital Resources and Liquidity](index=38&type=section&id=Capital%20Resources%20and%20Liquidity) Capital spending significantly decreased to **$26.5 million** in H1 2020, with **$493.0 million** total debt and **$307.0 million** available borrowing capacity as of June 30, 2020 - The company believes cash from operations, a reduced capital program, and distributions from equity method interests will generate operating cash flows in excess of capital expenditures by **Q1 2021**[178](index=178&type=chunk) Liquidity Summary | Metric | June 30, 2020 (In thousands USD) | Dec 31, 2019 (In thousands USD) | | :--- | :--- | :--- | | **Cash and cash equivalents** | $1,880 | $5,983 | | **Total debt** | $493,000 | $405,767 | | **Available committed borrowing capacity** | $307,000 | $404,000 | - The company's revolving credit facility matures in **November 2023** and has an aggregate commitment of **$800.0 million**, which can be increased to **$1.5 billion**[187](index=187&type=chunk) - The company was in compliance with its debt covenants as of June 30, 2020, with a Leverage Ratio of less than **4.00:1.00**[191](index=191&type=chunk)[193](index=193&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces indirect commodity price, interest rate, and credit risks, particularly from variable-rate debt and concentration with its primary customer - The company is indirectly exposed to commodity price risk, as adverse price changes can affect Apache's and other customers' decisions to develop and produce oil and gas[198](index=198&type=chunk) - As of June 30, 2020, the company had **$493.0 million** of variable-rate loans outstanding. A hypothetical **1.0%** increase in interest rates would have increased quarterly interest expense by approximately **$1.2 million**[200](index=200&type=chunk) - Credit risk is concentrated with its primary customer, Apache Corporation, and any potential future third-party customers[201](index=201&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[203](index=203&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, these controls[205](index=205&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company has no direct legal proceedings, but its minority interest in Permian Highway Pipeline LLC is involved in a lawsuit regarding environmental permits - The company is not aware of any direct pending or threatened legal proceedings against it[207](index=207&type=chunk) - Permian Highway Pipeline LLC, in which the company holds a minority equity interest, has intervened in a lawsuit filed by the Sierra Club to defend verifications issued by the Army Corps of Engineers[208](index=208&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) The COVID-19 pandemic has amplified existing risks, including commodity prices, economic conditions, and credit risk, with uncertain future impacts on the company - The COVID-19 pandemic has amplified previously identified risks, including those related to demand for oil and gas, economic conditions, availability of capital, and customer credit risk[210](index=210&type=chunk) - Management states that due to the uncertainty of the pandemic, there can be no assurance it will not materially and adversely affect the company's future business, financial condition, and results of operations[210](index=210&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) An amendment to the lease agreement with Apache Corporation allows for termination if the property is sold, facilitating Altus Midstream LP's vacating plans - Effective **July 27, 2020**, Altus Midstream LP and Apache Corporation entered into a First Amendment to their Lease Agreement for property in Reeves County, Texas[212](index=212&type=chunk) - The amendment facilitates Altus's desire to vacate the premises by allowing for lease termination if Apache sells the property, with a pro rata rent reduction for a partial sale[213](index=213&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate agreements, the amended lease, officer certifications, and XBRL financial statements