8-K
Altus Midstream Co false 0001692787 0001692787 2020-11-04 2020-11-04

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 4, 2020

 

 

Altus Midstream Company

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-38048   81-4675947

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

One Post Oak Central, 2000 Post Oak Boulevard, Suite 100

Houston, Texas 77056-4400

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (713) 296-6000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.  

 

 

 


The information in this Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of Section 18, and shall not be incorporated by reference in any filing under the Securities Act or the Exchange Act, except as set forth by specific reference in such filing.

 

Item 2.02.

Results of Operations and Financial Condition.

On November 4, 2020, Altus Midstream Company issued a press release announcing financial and operating results for the fiscal quarter ended September 30, 2020. The full text of the press release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

 

Item 9.01.

Financial Statements and Exhibits.

(d)    Exhibits.

 

Exhibit
No.
   Description
99.1    Press Release of Altus Midstream Company dated November 4, 2020.
104    Cover Page Interactive Data File (embedded within the Inline XBRL document).


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      ALTUS MIDSTREAM COMPANY
Date: November 5, 2020      

/s/ Rebecca A. Hoyt

      Rebecca A. Hoyt
      Senior Vice President, Chief Accounting Officer, and Controller (Principal Accounting Officer)
EX-99.1

Exhibit 99.1

 

   NEWS RELEASE

Altus Midstream Announces Third-Quarter 2020 Results

 

   

JV pipelines and improvement in G&P business drive results;

 

   

Continued focus on costs leads to fifth consecutive quarter of lower operating expenses; and

 

   

Plan to recommend to the board of directors a quarterly dividend of $1.50 per share beginning in March 2021.

HOUSTON, Nov. 4, 2020 – Altus Midstream Company (Nasdaq: ALTM) today announced its results for the three-month period ending Sept. 30, 2020.

The company reported third-quarter 2020 net income, including noncontrolling interests, of $29 million. Adjusted EBITDA for the third quarter 2020 was approximately $53 million, a 21% increase over the preceding quarter. Gathering and processing (G&P) throughput volumes for the period averaged 531 million cubic feet (MMcf) per day, 71% of which was rich gas.

Capital investments during the quarter were approximately $134 million, including $119 million for the Permian Highway Pipeline (PHP). Altus expects growth capital investments for the full-year 2020 to range between $330 million and $360 million.

CEO Comment

“Altus Midstream delivered another good quarter as commodity prices improved and operators began returning curtailed volumes to production and increasing activity in the Permian,” said Clay Bretches, Altus Midstream CEO and president. “The startup of the Permian Highway Pipeline in early 2021 will complete our plan to establish Altus as a diversified midstream company with a mix of long-haul pipeline equity ownership and state-of-the-art processing facilities. Expected earnings from our joint venture pipelines and our relentless focus on cost reduction give us a positive financial outlook for the year ahead.

“Following an extensive review of strategic alternatives and with increased confidence in forecasted cash flows, we believe a dividend is the best option to generate shareholder value. Later this year, we plan to recommend to the board of directors a quarterly dividend of $1.50 per share beginning in March 2021.”


ALTUS MIDSTREAM ANNOUNCES THIRD-QUARTER 2020 RESULTS

— PAGE 2 of 4

 

Infrastructure Update

PHP is more than 97% mechanically complete and is on schedule to be placed into service early in the first quarter of 2021. The pipeline is fully subscribed under long-term, binding agreements.

The Gulf Coast Express pipeline continued its strong and steady performance during the third quarter, delivering results in line with company forecasts.

As drilling begins to recover in the Permian Basin, Altus expects volumes to gradually ramp up during 2021 for both the Shin Oak NGL pipeline and the EPIC crude oil pipeline.

CFO Comment

“We expect capital spending to decline significantly now that PHP is moving into the final phase of project completion,” said Ben Rodgers, Altus Midstream chief financial officer. “With the improved outlook across our portfolio, we are raising the midpoint of our 2020 and 2021 Adjusted EBITDA guidance levels. Should the board approve a quarterly dividend, we will continue to have a sound balance sheet, manageable leverage profile and ample liquidity to address expected capital needs.”

For updated financial guidance, please refer to the investor presentation released today at www.altusmidstream.com/investors.

Conference Call

Altus will host its third-quarter 2020 results conference call Thursday, Nov. 5, 2020, at 1 p.m. Central time. The conference call will be webcast from Altus’ website at www.altusmidstream.com/investors, and the webcast replay will be archived there as well. The conference call will also be available for playback by telephone for one week beginning Nov. 5 at approximately 6 p.m. Central time. To access the telephone playback, dial (855) 859-2056 or (404) 537-3406 for international calls. The conference access code is 3645066.


ALTUS MIDSTREAM ANNOUNCES THIRD-QUARTER 2020 RESULTS

— PAGE 3 of 4

 

About Altus Midstream Company

Altus Midstream Company is a pure-play, Permian-to-Gulf Coast midstream C-corporation. Through its consolidated subsidiaries, Altus owns substantially all the gas gathering, processing and transmission assets servicing production from Apache Corporation (“Apache”) (Nasdaq: APA) in the Alpine High play in the Delaware Basin and owns equity interests in four Permian-to-Gulf Coast pipelines. Altus posts announcements, operational updates, investor information and press releases on its website, www.altusmidstream.com.

Additional information

Additional information follows, including a reconciliation of Adjusted EBITDA, Capital Investments and Growth Capital Investments (non-GAAP financial measures) to the GAAP measures.

Non-GAAP financial measures

Altus’ financial information includes information prepared in conformity with generally accepted accounting principles (GAAP) as well as non-GAAP financial information. It is management’s intent to provide non-GAAP financial information to enhance understanding of our consolidated financial information as prepared in accordance with GAAP. Adjusted EBITDA, Capital Investments and Growth Capital Investments are non-GAAP measures. This non-GAAP information should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Wherever a non-GAAP financial measure is disclosed in this earnings release, the non-GAAP measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure.

Forward-looking statements

This news release includes certain statements that may constitute “forward-looking statements” for purposes of the federal securities laws. Forward-looking statements include, but are not limited to, statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “seeks,” “possible,” “potential,” “predict,” “project,” “prospects,” “guidance,” “outlook,” “should,” “would,” “will,” and similar


ALTUS MIDSTREAM ANNOUNCES THIRD-QUARTER 2020 RESULTS

— PAGE 4 of 4

 

expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements include, but are not limited to, statements about future plans, expectations, and objectives for Altus Midstream’s and Apache’s operations, including statements about our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, and objectives of management. While forward-looking statements are based on assumptions and analyses made by us that we believe to be reasonable under the circumstances, whether actual results and developments will meet our expectations and predictions depend on a number of risks and uncertainties which could cause our actual results, performance, and financial condition to differ materially from our expectations. See “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and in our Quarterly Reports on Form 10-Q, filed with the Securities and Exchange Commission for a discussion of risk factors that affect our business. Any forward-looking statement made by us in this news release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future development or otherwise, except as may be required by law.

Contacts

Media:        (713) 296-7276 Alexandra Franceschi

Investors:    (281) 302-2286 Patrick Cassidy

Click here for the full release with quarterly financial statements.

-end-


ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

(In thousands)

 

     For the Quarter Ended     For the Nine Months Ended  
     September 30,     September 30,  
     2020     2019     2020     2019  

REVENUES:

        

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  
  

 

 

   

 

 

   

 

 

   

 

 

 

COSTS AND EXPENSES:

        

Costs of product sales

     1,177       —         1,693       —    

Operations and maintenance

     8,960       13,063       29,059       43,466  

General and administrative

     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
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 1


ALTUS MIDSTREAM COMPANY

SUPPLEMENTAL FINANCIAL INFORMATION AND OPERATING STATISTICS

(Unaudited)

(In thousands)

SUMMARY CASH FLOW INFORMATION

 

     For the Quarter Ended     For the Nine Months Ended  
     September 30,     September 30,  
     2020     2019     2020     2019  

Net cash provided by operating activities

   $ 50,650     $ 17,748     $ 137,447     $ 39,436  

Net cash used in investing activities

     (125,985     (617,349     (301,280     (1,315,047

Net cash provided by financing activities

     75,438       225,275       159,833       828,270  

SUMMARY BALANCE SHEET INFORMATION

 

     September 30,
2020
     Decemeber 31,
2019
 

Cash and cash equivalents

   $ 1,983      $ 5,983  

Other current assets

     18,404        25,754  

Property, plant and equipment, net

     205,310        205,802  

Equity method interests

     1,524,410        1,258,048  

Deferred charges and other

     6,263        5,267  
  

 

 

    

 

 

 

Total assets

   $ 1,756,370      $ 1,500,854  
  

 

 

    

 

 

 

Current liabilities

   $ 16,544      $ 33,692  

Long-term debt

     580,000        396,000  

Deferred credits and other noncurrent liabilities

     247,785        167,638  

Redeemable noncontrolling interest - Apache limited partner

     238,842        701,000  

Redeemable noncontrolling interest - Preferred Unit limited partners

     600,395        555,599  

Shareholders’ equity (deficit)

     72,804        (353,075
  

 

 

    

 

 

 

Total liabilities, noncontrolling interests, and shareholders’ equity

   $ 1,756,370      $ 1,500,854  
  

 

 

    

 

 

 

Common shares outstanding at the end of the period(a):

     

Class A Common Stock, $0.0001 par value

     3,746        3,746  

Class C Common Stock, $0.0001 par value

     12,500        12,500  

 

(a)

Share amounts have been retroactively restated to reflect the Company’s reverse stock split which was effected June 30, 2020.

SUMMARY OPERATING STATISTICS

 

     For the Quarter Ended      For the Nine Months Ended  
     September 30,      September 30,  
     2020      2019      2020      2019  

Throughput volumes of natural gas (MMcf/d)

           

Rich wellhead gas

     378        340        377        292  

Lean wellhead gas

     153        127        137        172  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total throughput

     531        467        514        464  

 

Page 2


ALTUS MIDSTREAM COMPANY

NON-GAAP FINANCIAL MEASURES

(Unaudited)

(In thousands)

Reconciliation of net income (loss) including noncontrolling interest to Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) including noncontrolling interests before financing costs (net of capitalized interest), interest income, income taxes, depreciation and accretion and adjust such equivalent items from our income from equity method interests. We also exclude (when applicable) impairments, unrealized gains or losses on derivative instruments, and other items affecting comparability of results to peers. Our management believes Adjusted EBITDA is useful for evaluating our operating performance and comparing results of our operations from period-to-period and against peers without regard to financing or capital structure. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) including noncontrolling interests or any other measure determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing our financial performance, such as our cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. The presentation of Adjusted EBITDA should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Additionally, our computation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

The GAAP measure used by the Company that is most directly comparable to Adjusted EBITDA is net income (loss) including noncontrolling interests. Adjusted EBITDA should not be considered as an alternative to the GAAP measure of net income (loss) including noncontrolling interests or any other measure of financial performance presented in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool because it excludes some, but not all, items that affect net income (loss) including noncontrolling interests. Adjusted EBITDA should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Our definitions of Adjusted EBITDA may not be comparable to similarly titled measures of other companies in our industry, thereby diminishing its utility.

Our management compensates for the limitations of Adjusted EBITDA as an analytical tool, by reviewing the comparable GAAP measure, understanding the differences between Adjusted EBITDA as compared to net income (loss) including noncontrolling interests and incorporating this knowledge into its decision-making processes. Our management believes that investors benefit from having access to the same financial measures that the Company uses in evaluating operating results.

 

     For the Quarter Ended     For the Nine Months Ended  
     September 30,      June 30,      September 30,     September 30,      September 30,  
     2020      2020      2019     2020      2019  

Net income (loss) including noncontrolling interests

   $ 29,322      $ 17,662      $ (8,188   $ 20,192      $ (7,958

Add:

             

Financing costs, net of capitalized interest

     413        292        522       978        1,508  

Depreciation and accretion

     4,008        4,062        11,710       11,984        28,468  

Impairments

     —          —          9,338       —          9,338  

Unrealized derivative instrument loss

     3,533        10,585        3,769       76,102        3,769  

Equity method interests Adjusted EBITDA

     29,952        28,231        2,707       81,869        2,873  

Other

     —          —          644       290        644  

Less:

             

Gain on asset sales, net

     —          264        —         76        —    

Interest income

     —          2        617       9        3,584  

Income from equity method interests, net

     14,320        16,923        1,564       47,541        536  

Income tax benefit

     —          —          505       696        510  

Other

     —          2        —         2        —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Adjusted EBITDA (Non-GAAP)

   $ 52,908      $ 43,641      $ 17,816     $ 143,091      $ 34,012  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Other midstream actvity

             

Cash distributions received from our equity method interests

   $ 32,923      $ 19,210      $ 3,391     $ 74,670      $ 3,391  

 

Page 3


ALTUS MIDSTREAM COMPANY

TOTAL GROWTH CAPITAL INVESTMENTS

(Unaudited)

(In thousands)

Reconciliation of costs incurred in midstream activity to capital investments and growth capital investments

Management believes the presentation of capital investments and growth capital investments is useful for investors to assess Altus’ expenditures related to our midstream capital activity. We define capital investments as costs incurred in midstream activities, adjusted to exclude asset retirement obligation revisions and liabilities incurred, while including amounts paid during the period for abandonment and decommissioning expenditures given the uncertainty and timing of when the actual abandonment activity will occur. Management also believes that including our proportionate share of capital in relation to equity method interests funded by cash contributions and the partner’s project financing is useful for investors to assess Altus’ total growth capital investments. Management believes total growth capital investments provides a more accurate reflection of Altus’ current-period expenditures related to midstream capital activity and is consistent with how we plan our capital budget.

 

     For the Quarter Ended     For the Nine Months Ended  
     September 30,      June 30,      September 30,     September 30,      September 30,  
     2020      2020      2019     2020      2019  

Costs incurred in midstream activity

             

Property, plant and equipment, gross

   $ 1,868      $ 2,276      $ 41,242     $ 11,223      $ 279,665  

Equity method interests

     131,840        71,560        569,634       286,227        1,008,037  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total cost incurred in midstream activity

   $ 133,708      $ 73,836      $ 610,876     $ 297,450      $ 1,287,702  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Reconciliation of costs incurred to midstream capital investment:

             

Asset retirement obligations incurred and revisions

   $ —        $ —        $ (904   $ —        $ (3,406

Asset retirement obligations settled

     —          —          —         —          —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total capital investments

     133,708        73,836        609,972       297,450        1,284,296  

Equity method interest capital investments funded by project financing

     —          15,191        71,250       22,091        142,500  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total growth capital investments

   $ 133,708      $ 89,027      $ 681,222     $ 319,541      $ 1,426,796  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

Page 4

v3.20.2
Document and Entity Information
Nov. 04, 2020
Cover [Abstract]  
Entity Registrant Name Altus Midstream Co
Amendment Flag false
Entity Central Index Key 0001692787
Document Type 8-K
Document Period End Date Nov. 04, 2020
Entity Incorporation State Country Code DE
Entity File Number 001-38048
Entity Tax Identification Number 81-4675947
Entity Address, Address Line One One Post Oak Central
Entity Address, Address Line Two 2000 Post Oak Boulevard
Entity Address, Address Line Three Suite 100
Entity Address, City or Town Houston
Entity Address, State or Province TX
Entity Address, Postal Zip Code 77056-4400
City Area Code (713)
Local Phone Number 296-6000
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Security 12b Title Class A common stock, $0.0001 par value
Trading Symbol ALTM
Security Exchange Name NASDAQ
Entity Emerging Growth Company true
Entity Ex Transition Period false