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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)
Delaware
81-4675947
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
One Post Oak Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400
(Address of principal executive offices) (Zip Code)
(713296-6000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
  
Trading Symbol(s)
 
Name of each exchange on which registered
Class A common stock, $0.0001 par value
  
ALTM
 
Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Number of shares of registrant’s Class A common stock, par value $0.0001 per share issued and outstanding as of October 31, 2020
3,746,460

Number of shares of registrant’s Class C common stock, par value $0.0001 per share issued and outstanding as of October 31, 2020
12,500,000





TABLE OF CONTENTS
 
Item
 
Page
 
PART I — FINANCIAL INFORMATION
 
 
 
 
1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.
 
 
 
3.
 
 
 
4.
 
 
 
 
PART II — OTHER INFORMATION
 
 
 
 
1.
 
 
 
1A.
 
 
 
6.
 


i


FORWARD-LOOKING STATEMENTS AND RISK
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding the Company’s future financial position, business strategy, budgets, projected revenues, projected costs and plans, and objectives of management for future operations, are forward-looking statements. Such forward-looking statements are based on the Company’s examination of historical operating trends, production and growth forecasts of Apache Corporation’s Alpine High field development and other data in the Company’s possession or available from third parties. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “plan,” “believe,” “continue,” “seek,” “guidance,” “might,” “outlook,” “possibly,” “potential,” “prospect,” “should,” “would,” or similar terminology, but the absence of these words does not mean that a statement is not forward looking. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable under the circumstances, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, its assumptions about:
the scope, duration, and reoccurrence of any epidemics or pandemics (including specifically the coronavirus disease 2019 (COVID-19) pandemic) and the actions taken by third parties, including, but not limited to, governmental authorities, customers, contractors, and suppliers, in response to such epidemics or pandemics;
the market prices of oil, natural gas, natural gas liquids (NGLs), and other products or services;
pipeline and gathering system capacity and availability;
production rates, throughput volumes, reserve levels and development success of dedicated oil and gas fields;
economic and competitive conditions;
the availability of capital;
cash flow and the timing of expenditures;
capital expenditures and other contractual obligations;
weather conditions;
inflation rates;
the availability of goods and services;
legislative, regulatory, or policy changes;
terrorism or cyberattacks;
occurrence of property acquisitions or divestitures;
the integration of acquisitions;
a decline in oil, natural gas, and NGL production, and the impact of general economic conditions on the demand for oil, natural gas, and NGLs;
the impact of environmental, health and safety, and other governmental regulations and of current or pending legislation;
environmental risks;
the effects of competition;
the retention of key members of senior management and key technical personnel;
increases in interest rates;

ii


the effectiveness of the Company’s business strategy;
changes in technology;
market-related risks, such as general credit, liquidity and interest-rate risks;
the timing, amount and terms of the Company’s future issuances of equity and debt securities;
other factors disclosed under Item 1A—Risk Factors, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7A—Quantitative and Qualitative Disclosures About Market Risk and elsewhere in the Company’s most recently filed Annual Report on Form 10-K;
other risks and uncertainties disclosed in the Company’s third-quarter 2020 earnings release;
other factors disclosed under Part II, Item 1A-Risk Factors in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020;
other factors disclosed under Part II, Item 1A—Risk Factors of this Quarterly Report on Form 10-Q; and
any other factors disclosed in the other filings that the Company makes with the Securities and Exchange Commission (SEC).
Other factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, the Company assumes no duty to update or revise its forward-looking statements, whether based on changes in internal estimates or expectations, new information, future developments, or otherwise.



iii


GLOSSARY OF TERMS

The following are abbreviations and definitions of certain terms used in this Quarterly Report on Form 10-Q and certain terms which are commonly used in the exploration, production and midstream sectors of the oil and natural gas industry:
Bbl. One stock tank barrel of 42 United States (U.S.) gallons liquid volume used herein in reference to crude oil, condensate or NGLs.
Bbl/d. One Bbl per day.
Bcf. One billion cubic feet of natural gas.
Bcf/d. One Bcf per day.
Btu. One British thermal unit, which is the quantity of heat required to raise the temperature of a one-pound mass of water by one degree Fahrenheit.
Field. An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.
Formation. A layer of rock which has distinct characteristics that differs from nearby rock.
MBbl. One thousand barrels of crude oil, condensate or NGLs.
MBbl/d. One MBbl per day.
Mcf. One thousand cubic feet of natural gas.
Mcf/d. One Mcf per day.
MMBbl. One million barrels of crude oil, condensate or NGLs.
MMBtu. One million British thermal units.
MMcf. One million cubic feet of natural gas.
MMcf/d. One MMcf per day.
NGLs. Natural gas liquids. Hydrocarbons found in natural gas, which may be extracted as liquefied petroleum gas and natural gasoline.

Effective February 14, 2019, each of the Altus Midstream Entities’ (as defined herein) names were changed to replace “Alpine High” in each name with “Altus Midstream.”

References to “Altus” and the “Company” include Altus Midstream Company and its consolidated subsidiaries, unless otherwise specifically stated.



iv


PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALTUS MIDSTREAM COMPANY
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
 
 
(In thousands, except per share data)
REVENUES:
 
 
 
 
 
 
 
 
Midstream services revenue — affiliate (Note 2)
 
$
38,869

 
$
34,009

 
$
111,252

 
$
91,994

Product sales  third parties
 
1,303

 

 
1,900

 

Total revenues
 
40,172

 
34,009

 
113,152

 
91,994

COSTS AND EXPENSES:
 
 
 
 
 
 
 
 
Costs of product sales
 
1,177

 

 
1,693

 

Operations and maintenance(1)
 
8,960

 
13,063

 
29,059

 
43,466

General and administrative(2)
 
2,936

 
3,242

 
10,102

 
8,314

Depreciation and accretion
 
4,008

 
11,710

 
11,984


28,468

Impairments
 

 
9,338

 

 
9,338

Taxes other than income
 
4,143

 
3,239

 
10,933

 
9,702

Total costs and expenses
 
21,224

 
40,592

 
63,771

 
99,288

OPERATING INCOME (LOSS)
 
18,948

 
(6,583
)
 
49,381

 
(7,294
)
OTHER INCOME (LOSS):
 
 
 
 
 
 
 
 
Unrealized derivative instrument loss
 
(3,533
)
 
(3,769
)
 
(76,102
)
 
(3,769
)
Interest income
 

 
617

 
9


3,584

Income from equity method interests, net
 
14,320

 
1,564

 
47,541


536

Other
 

 

 
(355
)
 
(17
)
Total other income (loss)
 
10,787

 
(1,588
)
 
(28,907
)
 
334

Financing costs, net of capitalized interest
 
413

 
522

 
978


1,508

NET INCOME (LOSS) BEFORE INCOME TAXES
 
29,322

 
(8,693
)
 
19,496

 
(8,468
)
Current income tax benefit
 

 

 
(696
)
 

Deferred income tax benefit
 

 
(505
)
 


(510
)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS
 
29,322

 
(8,188
)
 
20,192


(7,958
)
Net income attributable to Preferred Unit limited partners
 
19,332

 
17,480

 
56,358

 
21,623

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS
 
9,990

 
(25,668
)
 
(36,166
)
 
(29,581
)
Net income (loss) attributable to Apache limited partner
 
7,687

 
(20,804
)
 
(28,361
)
 
(23,524
)
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS
 
$
2,303

 
$
(4,864
)
 
$
(7,805
)
 
$
(6,057
)
 
 
 
 
 
 
 
 
 
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS, PER SHARE(3)
 
 
 
 
 
 
 
 
Basic
 
$
0.61

 
$
(1.30
)
 
$
(2.08
)
 
$
(1.62
)
Diluted
 
$
0.30

 
$
(1.48
)
 
$
(2.23
)
 
$
(1.72
)
WEIGHTED AVERAGE SHARES(3)
 
 
 
 
 
 
 
 
Basic
 
3,746

 
3,746

 
3,746

 
3,746

Diluted
 
97,355

 
16,246

 
16,246

 
16,246


(1)
Includes amounts of $1.2 million and $2.2 million associated with related parties for the three months ended September 30, 2020 and 2019, respectively, and $4.0 million and $7.1 million for the nine months ended September 30, 2020 and 2019, respectively. Refer to Note 2—Transactions with Affiliates.
(2)
Includes amounts of $1.6 million and $2.1 million associated with related parties for the three months ended September 30, 2020 and 2019, respectively, and $5.1 million and $4.7 million for the nine months ended September 30, 2020 and 2019, respectively. Refer to Note 2—Transactions with Affiliates.
(3)
Share and per share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020. Refer to Note 9—Equity for further information.

The accompanying notes to consolidated financial statements are an integral part of this statement.

1



ALTUS MIDSTREAM COMPANY
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS
 
$
29,322

 
$
(8,188
)
 
$
20,192

 
$
(7,958
)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
 
 
 
 
 
 
 
 
Share of equity method interests other comprehensive income (loss)
 
681

 
(591
)
 
(113
)
 
(1,634
)
COMPREHENSIVE INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS
 
30,003

 
(8,779
)
 
20,079

 
(9,592
)
Comprehensive income attributable to Preferred Unit limited partners
 
19,332

 
17,480

 
56,358

 
21,623

Comprehensive income (loss) attributable to Apache limited partner
 
8,211

 
(21,282
)
 
(28,448
)
 
(24,845
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS
 
$
2,460

 
$
(4,977
)
 
$
(7,831
)
 
$
(6,370
)













































The accompanying notes to consolidated financial statements are an integral part of this statement.

2



ALTUS MIDSTREAM COMPANY
CONSOLIDATED BALANCE SHEET
(Unaudited)
 
 
September 30,
 
December 31,
 
 
2020
 
2019
 
 
 
 
 
 
 
(In thousands)
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$
1,983

 
$
5,983

Accounts receivable
 
556

 

Accounts receivable from Apache Corporation (Note 1)
 
1,213

 
5,195

Revenue receivables (Note 3)
 
11,975

 
15,461

Inventories
 
3,661

 
4,027

Prepaid assets and other
 
999

 
1,071

 
 
20,387

 
31,737

PROPERTY, PLANT AND EQUIPMENT:
 
 
 
 
Property, plant and equipment
 
215,402

 
207,270

Less: Accumulated depreciation and amortization
 
(10,092
)
 
(1,468
)
 
 
205,310

 
205,802

OTHER ASSETS:
 
 
 
 
Equity method interests
 
1,524,410

 
1,258,048

Deferred charges and other
 
6,263

 
5,267

 
 
1,530,673

 
1,263,315

Total assets
 
$
1,756,370

 
$
1,500,854

 
 
 
 
 
LIABILITIES, NONCONTROLLING INTERESTS, AND EQUITY
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Current debt (Note 5)
 
$

 
$
9,767

Other current liabilities (Note 6)
 
16,544

 
23,925

 
 
16,544

 
33,692

LONG-TERM DEBT
 
580,000

 
396,000

DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
 
 
 
 
Asset retirement obligation
 
63,043

 
60,095

Embedded derivative
 
179,031

 
102,929

Other non-current liabilities
 
5,711

 
4,614

 
 
247,785

 
167,638

Total liabilities
 
844,329

 
597,330

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES (Note 7)
 

 

 
 
 
 
 
Redeemable noncontrolling interest — Apache limited partner
 
238,842

 
701,000

Redeemable noncontrolling interest — Preferred Unit limited partners
 
600,395

 
555,599

 
 
 
 
 
EQUITY:
 
 
 
 
Class A Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 3,746,460 shares issued and outstanding at September 30, 2020 and December 31, 2019(1)
 
1

 
1

Class C Common Stock: $0.0001 par, 1,500,000,000 shares authorized, 12,500,000 shares issued and outstanding at September 30, 2020 and December 31, 2019(1)
 
1

 
1

Additional paid-in capital
 
473,532

 
39,822

Accumulated deficit
 
(400,438
)
 
(392,633
)
Accumulated other comprehensive loss
 
(292
)
 
(266
)
 
 
72,804

 
(353,075
)
Total liabilities, noncontrolling interests, and equity
 
$
1,756,370

 
$
1,500,854


(1)
Share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020. Refer to Note 9—Equity for further information.
The accompanying notes to consolidated financial statements are an integral part of this statement.

3



ALTUS MIDSTREAM COMPANY
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
 
 
Nine Months Ended September 30,
 
 
2020
 
2019
 
 
 
 
 
 
 
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income (loss) including noncontrolling interests
 
$
20,192

 
$
(7,958
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Unrealized derivative instrument loss
 
76,102

 
3,769

Depreciation and accretion
 
11,984

 
28,468

Deferred income tax benefit
 

 
(510
)
Income from equity method interests, net
 
(47,541
)
 
(536
)
Distributions from equity method interests
 
60,435

 
3,391

Impairments
 

 
9,338

Other
 
781

 
666

Changes in operating assets and liabilities:
 
 
 
 
(Increase) decrease in inventories
 
366

 
(676
)
Decrease in prepaid assets and other
 
72

 
237

Increase in accounts receivable
 
(556
)
 

(Increase) decrease in revenue receivables (Note 2)
 
3,486

 
(798
)
(Increase) decrease in account receivables from/payable to affiliate
 
917

 
(5,011
)
Increase in accrued expenses
 
11,145

 
9,056

Increase in deferred charges, deferred credits, and other noncurrent liabilities
 
64

 

NET CASH PROVIDED BY OPERATING ACTIVITIES
 
137,447

 
39,436

 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Capital expenditures(1)
 
(29,540
)
 
(307,010
)
Proceeds from sale of assets
 
7,629

 

Contributions to equity method interests
 
(286,227
)
 
(337,412
)
Distributions from equity method interests
 
14,235

 

Acquisition of equity method interests
 

 
(670,625
)
Capitalized interest paid
 
(7,377
)
 

NET CASH USED IN INVESTING ACTIVITIES
 
(301,280
)
 
(1,315,047
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Redeemable noncontrolling interest  Preferred Unit limited partners, net
 

 
611,249

Distributions paid to Preferred Unit limited partners
 
(11,562
)
 

Proceeds from revolving credit facility
 
184,000

 
235,000

Finance lease
 
(11,789
)
 
(17,187
)
Deferred facility fees
 
(816
)
 
(792
)
NET CASH PROVIDED BY FINANCING ACTIVITIES
 
159,833

 
828,270

 
 
 
 
 
DECREASE IN CASH AND CASH EQUIVALENTS
 
(4,000
)
 
(447,341
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
 
5,983

 
449,935

CASH AND CASH EQUIVALENTS AT END OF PERIOD
 
$
1,983


$
2,594

SUPPLEMENTAL CASH FLOW DATA:
 
 
 
 
Accrued capital expenditures(2)
 
$
256

 
$
24,306

Finance lease liability(3)
 

 
29,000

Interest paid, net of capitalized interest
 
94

 
685

Cash received for income tax refunds
 
696

 


(1)
Following the Business Combination (as defined herein), capital expenditure amounts represent the portion of the total settlements with Apache in the period that are capital in nature, pursuant to the terms of the Construction, Operations and Maintenance Agreement (COMA). Refer to Note 1—Summary of Significant Accounting Policies and Note 2—Transactions with Affiliates for more information.
(2)
Includes $0.3 million and $0.6 million due from Apache as of September 30, 2020 and 2019, respectively, pursuant to the terms of the COMA. Refer to Note 2—Transactions with Affiliates for more information.
(3)
The Company entered into a finance lease in the first quarter of 2019 for power generators, which ended during the first quarter of 2020. The Company then exercised its option to purchase the generators.

The accompanying notes to consolidated financial statements are an integral part of this statement.

4



ALTUS MIDSTREAM COMPANY
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS
(Unaudited)
 
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners(1)
 
Redeemable Noncontrolling Interest — Apache Limited Partner
 
 
Class A Common Stock
 
Class C Common Stock
 
Additional Paid-in Capital
 
Retained Earnings (Accumulated Deficit)
 
Accumulated Other Comprehensive Income (Loss)
 
Total Equity
 
 
 
 
Shares(2)
 
Amount
 
Shares(2)
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Quarter Ended September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2019
$
520,933

 
$
1,272,652

 
 
3,746

 
$
1

 
12,500

 
$
1

 
$
473,532

 
$
(24,156
)
 
$
(200
)
 
$
449,178

Net income (loss)
17,480

 
(20,804
)
 
 

 

 

 

 

 
(4,864
)
 

 
(4,864
)
Accumulated other comprehensive loss

 
(478
)
 
 

 

 

 

 

 

 
(113
)
 
(113
)
Balance at September 30, 2019
$
538,413

 
$
1,251,370

 
 
3,746

 
$
1

 
12,500

 
$
1

 
$
473,532

 
$
(29,020
)
 
$
(313
)
 
$
444,201

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Quarter Ended September 30, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2020
$
592,625

 
$
230,631

 
 
3,746

 
$
1

 
12,500

 
$
1

 
$
473,532

 
$
(402,741
)
 
$
(449
)
 
$
70,344

Distributions paid to Preferred Unit limited partners
(11,562
)
 

 
 

 

 

 

 

 

 

 

Net income
19,332

 
7,687

 
 

 

 

 

 

 
2,303

 

 
2,303

Accumulated other comprehensive income

 
524

 
 

 

 

 

 

 

 
157

 
157

Balance at September 30, 2020
$
600,395

 
$
238,842

 
 
3,746

 
$
1

 
12,500

 
$
1

 
$
473,532

 
$
(400,438
)
 
$
(292
)
 
$
72,804

(1)
Certain redemption features embedded within the Preferred Units require bifurcation and measurement at fair value. For further detail, refer to Note 10—Series A Cumulative Redeemable Preferred Units.
(2)
Share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020. Refer to Note 9—Equity for further information.
















The accompanying notes to consolidated financial statements are an integral part of this statement.

5



ALTUS MIDSTREAM COMPANY
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY AND NONCONTROLLING INTERESTS — (Continued)
(Unaudited)
 
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners(1)
 
Redeemable Noncontrolling Interest — Apache Limited Partner
 
 
Class A Common Stock
 
Class C Common Stock
 
Additional Paid-in Capital
 
Retained Earnings (Accumulated Deficit)
 
Accumulated Other Comprehensive Income (Loss)
 
Total Equity
 
 
 
 
Shares(2)
 
Amount
 
Shares(2)
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
$

 
$
1,940,500

 
 
3,746

 
$
1

 
12,500

 
$
1

 
$
30

 
$
(213,746
)
 
$

 
$
(213,714
)
Issuance of Series A Cumulative Redeemable Preferred Units
516,790

 

 
 

 

 

 

 

 

 

 

Net income (loss)
21,623

 
(23,524
)
 
 

 

 

 

 

 
(6,057
)
 

 
(6,057
)
Change in redemption value of noncontrolling interests

 
(664,285
)
 
 

 

 

 

 
473,502

 
190,783

 

 
664,285

Accumulated other comprehensive loss

 
(1,321
)
 
 

 

 

 

 

 

 
(313
)
 
(313
)
Balance at September 30, 2019
$
538,413

 
$
1,251,370

 
 
3,746

 
$
1

 
12,500

 
$
1

 
$
473,532

 
$
(29,020
)
 
$
(313
)
 
$
444,201

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended September 30, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2019
$
555,599

 
$
701,000

 
 
3,746

 
$
1

 
12,500

 
$
1

 
$
39,822

 
$
(392,633
)
 
$
(266
)
 
$
(353,075
)
Distributions paid to Preferred Unit limited partners
(11,562
)
 

 
 

 

 

 

 

 

 

 

Net income (loss)
56,358

 
(28,361
)
 
 

 

 

 

 

 
(7,805
)
 

 
(7,805
)
Change in redemption value of noncontrolling interests

 
(433,710
)
 
 

 

 

 

 
433,710

 

 

 
433,710

Accumulated other comprehensive loss

 
(87
)
 
 

 

 

 

 

 

 
(26
)
 
(26
)
Balance at September 30, 2020
$
600,395

 
$
238,842

 
 
3,746

 
$
1

 
12,500

 
$
1

 
$
473,532

 
$
(400,438
)
 
$
(292
)
 
$
72,804

(1)
Certain redemption features embedded within the Preferred Units require bifurcation and measurement at fair value. For further detail, refer to Note 10—Series A Cumulative Redeemable Preferred Units.
(2)
Share amounts have been retroactively restated to reflect the Company’s reverse stock split, which was effected June 30, 2020. Refer to Note 9—Equity for further information.









The accompanying notes to consolidated financial statements are an integral part of this statement.

6



ALTUS MIDSTREAM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
These consolidated financial statements have been prepared by Altus Midstream Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). They reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods, on a basis consistent with the annual audited financial statements, with the exception of recently adopted accounting pronouncements discussed below. All such adjustments are of a normal recurring nature. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10-Q should be read along with Altus Midstream Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (Form 10-K), which contains a summary of the Company’s significant accounting policies and other disclosures. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Form 10-K.
Unless the context otherwise requires, the “Company,” “ALTM” and “Altus” refers to Altus Midstream Company and its consolidated subsidiaries. “Altus Midstream” refers to Altus Midstream LP and its consolidated subsidiaries. “Apache” refers to Apache Corporation and its consolidated subsidiaries.
Nature of Operations
    
Through its consolidated subsidiaries, the Company owns gas gathering, processing and transmission assets in the Permian Basin of West Texas. Construction on the assets began in the fourth quarter of 2016, and operations commenced in the second quarter of 2017. Additionally, the Company owns equity interests in four separate Permian Basin pipeline entities that have or will have access to various points along the Texas Gulf Coast. The Company’s operations consist of one reportable segment.  
Organization
The Company 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. On August 8, 2018, KAAC and Altus Midstream LP entered into a contribution agreement (the Contribution Agreement) with certain wholly-owned subsidiaries of Apache, including the Altus Midstream Entities. The Altus Midstream Entities comprise four Delaware limited partnerships (collectively, Altus Midstream Operating) and their general partner (Altus Midstream Subsidiary GP LLC, a Delaware limited liability company), 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 (the Closing Date) and pursuant to the terms of the Contribution Agreement, KAAC acquired from Apache the entire equity interests of the Altus Midstream Entities and options to acquire equity interests in five separate third-party pipeline projects (the Pipeline Options). The acquisition of the entities and the Pipeline Options is referred to herein as the Business Combination. In exchange, the consideration provided to Apache included economic voting and non-economic voting shares in KAAC and common units representing limited partner interests in Altus Midstream LP (Common Units). Following the Closing Date and in connection with the completion of the Business Combination, KAAC changed its name to Altus Midstream Company.
Ownership of Altus Midstream LP
Following the Closing Date and in connection with the completion of the Business Combination, the Company’s wholly-owned subsidiary, Altus Midstream GP LLC, a Delaware limited liability company (Altus Midstream GP), is the sole general partner of Altus Midstream LP. The Company operates its business through Altus Midstream LP and its subsidiaries, which include Altus Midstream Operating. The Company holds approximately 23.1 percent of the outstanding Common Units, and a controlling interest in Altus Midstream, while Apache holds the remaining 76.9 percent.


7



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).
Principles of Consolidation
The consolidated financial results of Altus Midstream are included in the Company’s consolidated financial statements due to the Company’s 100 percent ownership interest in Altus Midstream GP, and Altus Midstream GP’s control of Altus Midstream.
The Company has no independent operations or material assets other than its partnership interests in Altus Midstream, which constitutes all of its business. Additionally, the Company’s balance sheet reflects the presentation of noncontrolling interest ownership attributable to the limited partner interests in Altus Midstream held by Apache and the Series A Cumulative Redeemable Preferred Units holders (the Preferred Units). Refer to Note 9—Equity and Note 10—Series A Cumulative Redeemable Preferred Units for further information.
Variable Interest Entity
Altus Midstream is a variable interest entity (VIE) because the partners in Altus Midstream with equity at risk lack the power, through voting or similar rights, to direct the activities that most significantly impact Altus Midstream’s economic performance.
A reporting entity that concludes it has a variable interest in a VIE must evaluate whether it has a controlling financial interest in the VIE, such that it is the VIE’s primary beneficiary and should consolidate. The Company is the primary beneficiary of Altus Midstream, and therefore should consolidate Altus Midstream because (i) the Company has the ability to direct the activities of Altus Midstream that most significantly affect its economic performance, and (ii) the Company has the right to receive benefits or the obligation to absorb losses that could be potentially significant to Altus Midstream.
Redeemable Noncontrolling Interest — Apache Limited Partner
The Company’s redeemable noncontrolling interest presented in the consolidated financial statements consists of Common Units representing limited partner interests in Altus Midstream held by Apache. Pursuant to certain provisions of the partnership agreement of Altus Midstream (as amended in connection with the Business Combination, and subsequent issuance of Preferred Units, the Amended LPA), the limited partner interests held by Apache are equal to the number of shares of the Company’s Class C common stock, $0.0001 par value (Class C Common Stock), held by Apache.
The Company initially recorded the redeemable noncontrolling interest upon the issuance of the Common Units to Apache as part of the Business Combination and based on the recapitalization value ascribed at the Closing Date to the limited partner interest. All or a portion of these Common Units may be redeemed at Apache’s option. The Company has the ability to settle the redemption option either (i) in shares of Class A common stock, $0.0001 par value (Class A Common Stock), on a one-for-one basis or (ii) in cash (based on the fair market value of the Class A Common Stock as determined pursuant to the Contribution Agreement), subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications. Upon the future redemption or exchange of Common Units held by Apache, a corresponding number of shares of Class C Common Stock will be cancelled.
The Company’s policy is to record the redeemable noncontrolling interest represented by the Common Units held by Apache at the higher of (i) its initial fair value plus accumulated earnings/losses associated with the noncontrolling interest or (ii) the redemption value as of the balance sheet date.
See discussion and additional detail further discussed in Note 9—Equity.
Redeemable Noncontrolling Interest — Preferred Unit Limited Partners
On June 12, 2019, Altus Midstream issued and sold the Preferred Units in a private offering, and the purchasers of the Preferred Units were admitted as limited partners of Altus Midstream. The Preferred Units will be exchangeable for shares of the Company’s Class A Common Stock at the option of the Preferred Unit holders after the seventh anniversary of Closing or upon the occurrence of specified events, unless otherwise redeemed by Altus Midstream.

8



The Preferred Units are accounted for on the Company’s consolidated balance sheets as a redeemable noncontrolling interest classified as temporary equity based on the terms of the Preferred Units. Certain redemption features embedded within the terms of the Preferred Units require bifurcation and measurement at fair value and are accounted for on the Company’s consolidated balance sheet as a long-term liability embedded derivative.
See discussion and additional detail further discussed in Note 10—Series A Cumulative Redeemable Preferred Units.
Equity Method Interests
The Company follows the equity method of accounting when it does not exercise control over its equity interests, but can exercise significant influence over the operating and financial policies of the entity. Under this method, the equity interests are carried originally at acquisition cost, increased by Altus’ proportionate share of the equity interest’s net income and contributions made by Altus, and decreased by Altus’ proportionate share of the equity interest’s net losses and distributions received by Altus. Please refer to Note 8—Equity Method Interests, for further details of the Company’s equity method interests.
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 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 financial statements, and changes in these estimates are recorded when known.
Fair Value Measurements
Accounting Standards Codification (ASC) 820-10-35, “Fair Value Measurement” (ASC 820), provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in active markets. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs that are significant and unobservable; hence, these valuations have the lowest priority.
The valuation techniques that may be used to measure fair value include a market approach, an income approach and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models, and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).
Embedded features identified within the Company’s agreements are bifurcated and measured at fair value at the end of each period on the Company’s consolidated balance sheet. Such recurring fair value measurements are presented in further detail in Note 13—Fair Value Measurements. The Company also uses fair value measurements on a nonrecurring basis when certain qualitative assessments of its assets indicate a potential impairment.
Accounts Receivable From/Payable To Apache
The accounts receivable from or payable to Apache represent the net result of Altus Midstream’s monthly revenue, capital and operating expenditures, and other miscellaneous transactions to be settled with Apache as provided under the COMA between the two entities. Generally, cash in this amount will be transferred to or from Apache in the month after the Company’s transactions are processed and the net results of operations are determined. However, from time to time, the Company may estimate and transfer the cash settlement amount in the month the transactions are processed, in order to minimize related-party working capital balances. See discussion and additional detail in Note 2—Transactions with Affiliates.
Change in Accounting Policy
Historically, the Company reported income and loss from equity method interests on a one-month reporting lag. Effective October 1, 2019, the Company eliminated this one-month reporting lag. In accordance with ASC 810-10-45-13, “A Change in the Fiscal Year-End Lag Between Subsidiary and Parent” (ASC 810), the elimination of this previously existing reporting lag is considered a voluntary change in accounting principle in accordance with ASC 250-10-50, “Change in Accounting Principle.” The Company believes that this change in accounting principle is preferable as it provides the Company with the ability to present the results of its equity method interests for the same period as all other consolidated results of the Company, which improves

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overall financial reporting to investors by providing the most current information available. The Company has not retrospectively applied the change in accounting principle since its impact to the consolidated balance sheet and related statements of operations and cash flows was immaterial for all periods. For more information on equity method interests owned by the Company, please refer to Note 8—Equity Method Interests.
Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, “Financial Instruments-Credit Losses.” The standard changes the impairment model for trade receivables, held-to-maturity debt securities, net investments in leases, loans, and other financial assets measured at amortized cost. This ASU requires the use of a new forward-looking “expected loss” model compared to the current “incurred loss” model, resulting in accelerated recognition of credit losses. The Company adopted this standard in the first quarter of 2020 with no material impact on its financial statements.
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This pronouncement is part of the Simplification Initiative and simplifies the accounting for income taxes by removing certain exceptions to the general principles of ASC Topic 740 “Income Taxes.” In addition, the amendment improves consistent application of and simplifies GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. This update is effective for the Company beginning in the first quarter of 2021, with early adoption permitted. The Company early adopted this standard in the first quarter of 2020 with no material impact on its financial statements.
New Pronouncements Issued But Not Yet Adopted
In August 2020, the FASB issued ASU 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)” to improve financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. This update is effective for Altus beginning in the first quarter of 2022, with early adoption permitted, using either the modified or fully retrospective method with a cumulative effect adjustment to the opening balance of retained earnings. The Company is evaluating the effect of adoption of the ASU and does not believe it will have a material impact on its financial statements.
2.    TRANSACTIONS WITH AFFILIATES
Revenues
The Company has contracted to provide services including gas gathering, compression, processing, transmission, and NGL transmission, pursuant to acreage dedications provided by Apache, comprising the entire Alpine High acreage. In accordance with the terms of these agreements, the Company receives prescribed fees based on the type and volume of product for which the services are provided.
Revenues generated under these agreements are presented on the Company’s statement of consolidated operations as “Midstream services revenue — affiliate.” Revenues earned that have not yet been invoiced to Apache are presented on the Company’s consolidated balance sheet as “Revenue receivables.” Refer to Note 3—Revenue Recognition for further discussion.
Cost and Expenses
The Company has no employees, and prior to the Business Combination, the Company had no banking or cash management facilities. As such, the Company has contracted with Apache to receive certain operational, maintenance, and management services. In accordance with the terms of these agreements, the Company incurred operations and maintenance expenses of $1.2 million and $2.2 million for the three months ended September 30, 2020 and 2019, respectively, and $4.0 million and $7.1 million for the nine months ended September 30, 2020 and 2019, respectively. The Company incurred general and administrative (G&A) expenses of $1.6 million and $2.1 million for the three months ended September 30, 2020 and 2019, respectively, and $5.1 million and $4.7 million for the nine months ended September 30, 2020 and 2019, respectively, including expenses related to the operational services agreement and the COMA as further described below. Further information on the related-party operating lease agreement in place during the period is also provided below.

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Construction, Operations and Maintenance Agreement
At the closing of the Business Combination, the Company entered into the COMA with Apache. Under the terms of the COMA, Apache provides certain services related to the design, development, construction, operation, management and maintenance of certain gathering, processing and other midstream assets, on behalf of the Company. In return, the Company paid or will pay fees to Apache of (i) $3.0 million for the period beginning on the execution of the COMA at the closing of the Business Combination through December 31, 2019, (ii) $5.0 million for the period of January 1, 2020 through December 31, 2020, (iii) $7.0 million for the period of January 1, 2021 through December 31, 2021 and (iv) $9.0 million annually thereafter, adjusted based on actual internal overhead and general and administrative costs incurred, until terminated. The annual fee was negotiated as part of the Business Combination to reimburse Apache for indirect costs of performing administrative corporate functions for the Company, including services for information technology, risk management, corporate planning, accounting, cash management, and others.
In addition, Apache may be reimbursed for certain internal costs and third-party costs incurred in connection with its role as service provider under the COMA. Costs incurred by Apache directly associated with midstream activity, where substantially all the services are rendered for Altus Midstream, are charged to Altus Midstream on a monthly basis.
The COMA stipulates that the Company shall provide reimbursement of amounts owing to Apache attributable to a particular month by no later than the last day of the immediately following month. Unpaid amounts accrue interest until settled.
The COMA will continue to be effective until terminated (i) upon the mutual consent of Altus and Apache, (ii) by either of Altus and Apache, at its option, upon 30 days’ prior written notice in the event Apache or an affiliate no longer owns a direct or indirect interest in at least 50 percent of the voting or other equity securities of Altus, or (iii) by Altus if Apache fails to perform any of its covenants or obligations due to willful misconduct of certain key personnel and such failure has a material adverse financial impact on Altus.
Lease Agreement
Concurrent with the closing of the Business Combination, Altus Midstream entered into an operating lease agreement with Apache (the Lease Agreement) relating to the use of certain office buildings, warehouse and storage facilities located in Reeves County, Texas. Under the terms of the Lease Agreement, Altus Midstream shall pay to Apache on a monthly basis the sum of (i) a base rental charge of $44,500 and (ii) an amount based on Apache’s estimate of the annual costs it expects to incur in connection with the ownership, operation, repair, and/or maintenance of the facilities. The Company incurred total expenses of $0.2 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively, and $0.7 million and $0.8 million for the nine months ended September 30, 2020 and 2019, respectively, in relation to the Lease Agreement, which are included within operations and maintenance expenses. Unpaid amounts accrue interest until settled. The initial term of the Lease Agreement is four years and may be extended by Altus Midstream for three additional, consecutive periods of twenty-four months. To accommodate Altus Midstream’s desire to vacate the leased premises, the Lease Agreement was amended in July 2020 to provide for its termination  with respect to all or any portion of the leased premises which Apache may sell, with a pro rata rent reduction if Apache sells less than all of the leased premises.



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3.    REVENUE RECOGNITION
The following table presents a disaggregation of the Company’s revenue.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
(In thousands)
Gas gathering and compression
$
5,352

 
$
4,604

 
$
15,466

 
$
10,914

Gas processing
28,533

 
25,315

 
81,613

 
68,994

Transmission
3,861

 
3,388

 
11,262

 
11,219

NGL transmission
708

 
702

 
2,121

 
867

Other
415

 

 
790

 

Midstream services revenue — affiliate
38,869

 
34,009

 
111,252

 
91,994

Product sales  third parties
1,303

 

 
1,900

 

Total revenues
$
40,172

 
$
34,009

 
$
113,152

 
$
91,994


The Company primarily generates revenue from its contracts with customers for the gathering, compression, processing, and transmission, and sale of natural gas and NGLs in exchange for a fee per unit of volumes processed or delivered during a given month.
Midstream Services Revenue — Affiliate
Midstream services revenue is attributable to services performed for Apache pursuant to separate long-term commercial midstream agreements. As part of these agreements, substantially all of Apache’s natural gas production from its existing and future owned or controlled properties within the dedicated area of its entire Alpine High resource play is provided to the Company, so long as Apache has the right to market such product. Providing the related service on each volumetric unit represents a single, distinct performance obligation that is satisfied over time as services are rendered. The Company does not own or take title to the volumes it services under these agreements. Altus Midstream, in return for its performance, receives a fee per volumetric unit serviced during a given month. The related service fee charged per unit is set forth for each contract year, subject to yearly fee escalation recalculations.
As the amount of volumes serviced are not subject to minimum commitments and each midstream service agreement contains provisions for fee recalculations, substantially all of the transaction price is variable at inception of each contract term. Revenue is measured using the output method based on the amount of volumes serviced each month and the applicable service fee and recognized over time in the amount to which Altus Midstream has the right to invoice, as performance completed to date corresponds directly with the value to its customers. The transaction price is not constrained as variability is resolved prior to the recognition of revenue.
Product Sales Revenue
Product sales revenues are attributable to the sale of purchased and processed NGL volumes with third party customers. As part of these agreements, Altus Midstream purchases volumes from a third party, which it then owns, controls and services, prior to ultimate sale to the customer. The physical delivery of each unit of quantity represents a single, distinct performance obligation that is satisfied at a point in time when control transfers to the customer, generally determined as the point of delivery. Prices are determined based on market-indexed values, adjusted for quality and other market-reflective differentials. As there are no provisions for minimum volume commitments and pricing is variable based on index values, revenue is measured by allocating an entirely variable market price to each performance obligation and recognized at a point in time when control is transferred to the customer. The transaction price is not constrained as variability is resolved prior to the recognition of revenue.
Sales revenues and associated expenses related to such third-party purchases are recorded as “Product sales — third parties” and “Costs of product sales,” respectively, in the Company’s statement of consolidated operations.



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Payment Terms and Contract Balances
Payments are due the month immediately following the month of service. Amounts settled with Apache each month are based on the net amount owed to either party. Revenue receivables from the Company’s contracts with Apache totaled $12.0 million and $15.5 million as of September 30, 2020 and December 31, 2019, respectively, as presented on the Company’s consolidated balance sheet. Sales revenue receivables from the Company’s contracts with third parties totaled $0.6 million as of September 30, 2020 as presented on the Company’s consolidated balance sheet.
In accordance with the provisions of ASC Topic 606, “Revenue from Contracts with Customers,” a variable transaction price for each short-term sale is allocated to each performance obligation as the terms of payment relate specifically to the Company’s efforts to satisfy its obligations. As such, the Company has elected the practical expedients available under the standard to not disclose the aggregate transaction price allocated to unsatisfied, or partially unsatisfied, performance obligations as of the end of the reporting period.
4.    PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, at carrying value, is as follows:
 
 
September 30,
 
December 31,
 
 
2020
 
2019
 
 
 
 
 
 
 
(In thousands)
Gathering, processing and transmission systems and facilities
 
$
211,975

 
$
198,133

Construction in progress(1)
 
104

 
5,443

Other property and equipment
 
3,323

 
3,694

Total property, plant and equipment
 
215,402

 
207,270

Less: accumulated depreciation and amortization
 
(10,092
)
 
(1,468
)
Total property, plant and equipment, net
 
$
205,310

 
$
205,802

(1)
Included in construction in progress was capitalized interest of $0.6 million at December 31, 2019. There was no capitalized interest included in construction in progress as of September 30, 2020.

The cost of property classified as “Construction in progress” is excluded from capitalized costs being depreciated. These amounts represent property that is not yet available to be placed into productive service as of the respective balance sheet date.
Property, plant, and equipment are evaluated for potential impairment when events or changes in circumstances indicate a possible significant deterioration in future cash flows expected to be generated by an asset group. In conjunction with Apache’s decision in the fourth quarter of 2019 to materially reduce funding to Alpine High, Altus management assessed its long-lived infrastructure assets for impairment given the expected reduction to future throughput volumes. As a result of this assessment, Altus recorded impairments totaling $1.3 billion on its gathering, processing, and transmission assets in the fourth quarter of 2019. The fair values of the impaired assets were determined to be $203.6 million as of the time of the impairment and were estimated using the income approach. Altus has classified these nonrecurring fair value measurements as Level 3 in the fair value hierarchy.
The Company also elected to cancel construction on a compressor station in the third quarter of 2019, and as a result certain of its components were marketed for sale. Accordingly, Altus management reclassified these assets to current assets held for sale, and they were measured at fair value less costs to sell. The Company recorded an impairment of $9.3 million on these assets, which were written down to their fair value of $18.2 million. The fair value of the assets was determined using the market approach based on estimated sales proceeds, classified as Level 1 inputs in the fair value hierarchy. No impairments were recorded for the nine months ended September 30, 2020.

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5.    DEBT AND FINANCING COSTS
In November 2018, Altus Midstream entered into a revolving credit facility for general corporate purposes that matures in November 2023 (subject to Altus Midstream’s two, one year extension options). The agreement for this revolving credit facility, as amended (the Amended Credit Agreement), provides aggregate commitments from a syndicate of banks of $800.0 million. The aggregate commitments include a letter of credit subfacility of up to $100.0 million and a swingline loan subfacility of up to $100.0 million. Altus Midstream may increase commitments up to an aggregate $1.5 billion by adding new lenders or obtaining the consent of any increasing existing lenders. As of September 30, 2020 and December 31, 2019, total outstanding borrowings were $580.0 million and $396.0 million, respectively, and no letters of credit were outstanding under this facility.
Altus Midstream’s revolving credit facility is unsecured and is not guaranteed by the Company, Apache, or any of their respective subsidiaries.
At Altus Midstream’s option, the interest rate per annum for borrowings under this facility is either a base rate, as defined, plus a margin, or the London Interbank Offered Rate (LIBOR), plus a margin. Altus Midstream also pays quarterly a facility fee at a rate per annum on total commitments. The margins and the facility fee vary based upon (i) the Leverage Ratio (as defined below) until Altus Midstream has a senior long-term debt rating and (ii) such senior long-term debt rating once it exists. The Leverage Ratio is the ratio of (1) the consolidated indebtedness of Altus Midstream and its restricted subsidiaries to (2) EBITDA (as defined in the Amended Credit Agreement) of Altus Midstream and its restricted subsidiaries for the 12-month period ending immediately before the determination date. At September 30, 2020, the base rate margin was 0.05 percent, the LIBOR margin was 1.05 percent, and the facility fee was 0.20 percent. In addition, a commission is payable quarterly to the lenders on the face amount of each outstanding letter of credit at a per annum rate equal to the LIBOR margin then in effect. Customary letter of credit fronting fees and other charges are payable to issuing banks.
The Amended Credit Agreement contains restrictive covenants that may limit the ability of Altus Midstream and its restricted subsidiaries to, among other things, incur additional indebtedness or guaranty indebtedness, sell assets, make investments in unrestricted subsidiaries, enter into mergers, make certain payments and distributions, incur liens on certain property securing indebtedness, and engage in certain other transactions without the prior consent of the lenders. Altus Midstream also is subject to a financial covenant under the Amended Credit Agreement, which requires it to maintain a Leverage Ratio not exceeding 5.00