8-K

 

 

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): May 1, 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 Item 2.02 of 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 May 6, 2020, Altus Midstream Company (the “Company”) issued a press release announcing financial and operating results for the fiscal quarter ended March 31, 2020. The full text of the press release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

In anticipation of receipt of written notice (the “Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for 30 consecutive business days, the closing bid price for the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”), has been below the $1.00 minimum requirement for continued inclusion on the Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Price Requirement”), the Company proposed an amendment to the Company’s Second Amended and Restated Certificate of Incorporation to effect a reverse stock split (the “Reverse Stock Split”) of all outstanding shares of the Company’s common stock (including the Class A Common Stock), by a ratio of one-for-twenty (the “Reverse Stock Split Proposal”) to be approved by the Company’s stockholders at the Company’s annual meeting of stockholders to be held on May 21, 2020. Apache Corporation has notified the Company of its intention to vote in favor of the Reverse Stock Split Proposal. The Reverse Stock Split Proposal provides that the Company’s Board of Directors shall have sole discretion pursuant to Section 242(c) of the Delaware General Corporation Law to elect, as it determines to be in the best interests of the Company and its stockholders, for the purpose of maintaining the listing of the Company’s Class A Common Stock on the Nasdaq, whether or not to effect the Reverse Stock Split on or before December 31, 2020. Additional information, including certain risks associated with the Reverse Stock Split, can be found in the Company’s proxy statement relating to its 2020 annual meeting of stockholders filed with the SEC.

As anticipated by the Company, on May 1, 2020, the Company received the Notice from Nasdaq. The Notice has no immediate effect on the listing or trading of the Company’s Class A Common Stock, and the Class A Common Stock will continue to trade on Nasdaq under the symbol “ALTM” at this time.

Due to the extraordinary market conditions caused by the ongoing COVID-19 pandemic and resulting governmental action, Nasdaq has tolled the Minimum Bid Price Requirement through June 30, 2020. As such, the Company has 180 days from July 1, 2020, or until December 28, 2020, to achieve compliance with the Minimum Bid Price Requirement. To regain compliance, the minimum bid price of the Company’s Class A Common Stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-day grace period. The Company intends to monitor the closing bid price of the Company’s Class A Common Stock and consider its available options to resolve the noncompliance with the Minimum Bid Price Requirement.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this Current Report on Form 8-K are “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. 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,” “should,” “would,” or similar terminology. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable under the circumstances, the Company 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, the risks and uncertainties associated with the COVID-19 pandemic and resulting governmental action, and the “Risk Factors” identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and its other periodic reports filed with the SEC. 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.


Item 9.01. Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit No.

  

Description

99.1    Press Release of Altus Midstream Company dated May 6, 2020.


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: May 7, 2020    

/s/ Ben C. Rodgers

    Ben C. Rodgers
    Chief Financial Officer and Treasurer
EX-99.1

Exhibit 99.1

 

LOGO   NEWS RELEASE

Altus Midstream Announces First-Quarter 2020 Results

 

   

Strong liquidity position through 2023 to execute capital investment program;

 

   

Three of four long-haul joint venture pipeline projects in service, with the Permian Highway Pipeline on schedule for early 2021; and

 

   

Continued strong operational performance with 15% reduction in operating costs.

HOUSTON, May 6, 2020 – Altus Midstream Company (Nasdaq: ALTM) today announced its results for the three-month period ending March 31, 2020.

The company reported a first-quarter 2020 net loss including noncontrolling interests of $26.8 million, which includes a $62 million non-cash unrealized loss related to an embedded derivative in the company’s preferred units. Excluding this and other items, adjusted EBITDA for the first quarter 2020 was approximately $46.5 million. Gathering and processing (G&P) throughput volumes for the period averaged 577 million cubic feet (MMcf) per day, approximately 75% of which was rich gas.

Capital investments during the quarter were approximately $90 million, which includes $7 million for G&P infrastructure and $83 million for the joint venture (JV) pipelines, comprising primarily capital calls for construction of EPIC’s crude oil line and the Permian Highway Pipeline (PHP).

CEO Comment

“Altus Midstream is in a good position to navigate the current market situation. We have a diverse cash flow stream from a portfolio of G&P and long-haul pipeline assets, no upcoming debt maturities, and ample liquidity to meet foreseeable investment needs with a revolver that extends through 2023,” said Clay Bretches, Altus Midstream CEO and president. “We continue to focus on operational excellence while lowering costs, as demonstrated by a 99% G&P uptime during the quarter and a 15% reduction in operating expenses from the fourth-quarter 2019 to the first-quarter 2020. We expect to be cash flow positive upon the start-up of Kinder Morgan’s PHP in early 2021.”

Infrastructure Update

Altus received cash distributions from Kinder Morgan’s Gulf Coast Express (GCX) natural gas pipeline and Enterprise Products’ Shin Oak Natural Gas Liquids pipeline through the first quarter. “Kinder Morgan highlighted GCX as a major contributor to its higher volumes in the first quarter, and the Shin Oak pipeline is providing customers the advantage of Y-grade delivery directly to fractionation and storage facilities at Mont Belvieu on the Gulf Coast,” continued Bretches.


ALTUS MIDSTREAM ANNOUNCES FIRST-QUARTER 2020 RESULTS

— PAGE 2 of 4

PHP, in which Altus holds an approximate 27% equity interest, remains on track to commence service in early 2021. This natural gas pipeline, operated by Kinder Morgan, will have a capacity of 2.1 billion cubic feet (Bcf) per day and is supported by minimum volume commitments.

The EPIC Crude Oil Pipeline (EPIC) went into full service on April 1 with a smooth start-up. Altus holds a 15% equity interest in EPIC.

“Oil volumes in the area remain challenged due to reduced drilling activity in the Permian basin; however, EPIC is aggressively sourcing business and has added incremental revenue from short-term storage and transport deals,” continued Bretches.

“I’m very thankful for our dedicated team. They have done a tremendous job keeping the business running safely during the COVID-19 pandemic,” concluded Bretches.

CFO Comment

“Following team and community safety, our priority in this challenging time is to maintain our strong liquidity position,” said Ben Rodgers, Altus Midstream chief financial officer. “The vast majority of our capital for the remainder of 2020 will be directed to the completion of PHP. With the startup of that pipeline in early 2021, all four of our JV pipeline projects will be in service and contributing to Altus’ earnings.”

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

Conference Call

Altus will host its first-quarter 2020 results conference call Thursday, May 7, 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 May 7 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 5785178.


ALTUS MIDSTREAM ANNOUNCES FIRST-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”) (NYSE, 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.


ALTUS MIDSTREAM ANNOUNCES FIRST-QUARTER 2020 RESULTS

— PAGE 4 of 4

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,” “guidance,” “outlook,” “should,” “would,” “will,” and similar 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 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 Phil West

Investors:     (281) 302-2286 Gary Clark

-end-


ALTUS MIDSTREAM COMPANY

STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited)

(In thousands)

 

     For the Quarter Ended
March 31,
 
     2020     2019  

REVENUES:

    

Midstream services revenue—affiliate

   $ 40,767     $  33,847  
  

 

 

   

 

 

 

Total revenues

     40,767       33,847  
  

 

 

   

 

 

 

COSTS AND EXPENSES:

    

Operations and maintenance

     10,591       16,399  

General and administrative

     4,178       2,991  

Depreciation and accretion

     3,914       7,651  

Taxes other than income

     3,443       2,575  
  

 

 

   

 

 

 

Total costs and expenses

     22,126       29,616  
  

 

 

   

 

 

 

OPERATING INCOME

     18,641       4,231  

OTHER INCOME (LOSS):

    

Unrealized derivative instrument loss

     (61,984     —    

Interest income

     7       2,161  

Income from equity method interests, net

     16,298       270  

Other

     (177     —    
  

 

 

   

 

 

 

Total other income (loss)

     (45,856     2,431  

Financing costs, net of capitalized interest

     273       508  
  

 

 

   

 

 

 

NET INCOME (LOSS) BEFORE INCOME TAXES

     (27,488     6,154  

Current income tax benefit

     (696     —    

Deferred income tax expense

     —         426  
  

 

 

   

 

 

 

NET INCOME (LOSS) INCLUDING NONCONTROLLING INTERESTS

     (26,792     5,728  

Net income attributable to Preferred Unit limited partners

     18,262       —    
  

 

 

   

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

     (45,054     5,728  

Net income (loss) attributable to Apache limited partner

     (35,201     4,628  
  

 

 

   

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS

   $ (9,853   $ 1,100  
  

 

 

   

 

 

 

 

Page 5


ALTUS MIDSTREAM COMPANY

SUPPLEMENTAL FINANCIAL INFORMATION AND OPERATING STATISTICS

(Unaudited)

(In thousands)

SUMMARY CASH FLOW INFORMATION

 

     For the Quarter Ended
March 31,
 
     2020     2019  

Net cash provided by operating activities

   $ 51,538     $ 10,054  

Net cash used in investing activities

     (97,615     (282,551

Net cash provided by financing activities

     59,395       —    

SUMMARY BALANCE SHEET INFORMATION

 

     March 31,
2020
     December 31,
2019
 

Cash and cash equivalents

   $ 19,301      $ 5,983  

Other current assets

     18,235        25,754  

Property, plant and equipment, net

     208,523        205,802  

Equity method interests

     1,336,810        1,258,048  

Other assets

     5,664        5,267  
  

 

 

    

 

 

 

Total assets

   $ 1,588,533      $ 1,500,854  
  

 

 

    

 

 

 

Current liabilities

   $ 12,728      $ 33,692  

Long-term debt

     468,000        396,000  

Deferred credits and other noncurrent liabilities

     232,257        167,638  

Redeemable noncontrolling interest—Apache limited partner

     231,178        701,000  

Redeemable noncontrolling interest—Preferred Unit limited partners

     573,861        555,599  

Shareholders’ equity (deficit)

     70,509        (353,075
  

 

 

    

 

 

 

Total liabilities, noncontrolling interests, and shareholders’ equity

   $ 1,588,533      $ 1,500,854  
  

 

 

    

 

 

 

Common shares outstanding at the end of the period:

     

Class A Common Stock, $0.0001 par value

     74,929        74,929  

Class C Common Stock, $0.0001 par value

     250,000        250,000  

SUMMARY OPERATING STATISTICS

 

     For the Quarter Ended
March 31,
 
     2020      2019  

Throughput volumes of natural gas (MMcf/d)

     

Rich wellhead gas

     430        300  

Lean wellhead gas

     147        264  
  

 

 

    

 

 

 

Total throughput

     577        564  

 

Page 6


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  
     March  31,
2020
    December  31,
2019
    March  31,
2019
 

Net income (loss) including noncontrolling interests

   $ (26,792   $ (1,330,943   $ 5,728  

Add:

      

Financing costs, net of capitalized interest

     273       284       508  

Income tax expense

     —         65,410       426  

Depreciation and accretion

     3,914       13,012       7,651  

Impairments

     —         1,291,381       —    

Unrealized derivative instrument loss

     61,984       4,701       —    

Equity method interests Adjusted EBITDA

     23,686       20,250       227  

Loss on sale of assets

     188       605       —    

Other

     290       32       —    

Less:

      

Interest income

     7       22       2,161  

Income from equity method interests, net

     16,298       18,532       270  

Income tax benefit

     696       —         —    
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (Non-GAAP)

   $ 46,542     $ 46,178     $ 12,109  
  

 

 

   

 

 

   

 

 

 

Other midstream activity

      

Cash distributions received from our equity method interests

   $ 22,537     $ 21,925     $ —    

 

Page 7


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  
     March  31,
2020
     December  31,
2019
    March  31,
2019
 

Costs incurred in midstream activity

       

Property, plant and equipment, gross

   $ 7,079      $ 57,432     $ 140,124  

Equity method interests

     82,827        163,940       118,033  
  

 

 

    

 

 

   

 

 

 

Total cost incurred in midstream activity

   $ 89,906      $ 221,372     $ 258,157  
  

 

 

    

 

 

   

 

 

 

Reconciliation of costs incurred to midstream capital investment:

       

Asset retirement obligations incurred and revisions

   $ —        $ (25,681   $ (483

Asset retirement obligations settled

     —          —         —    
  

 

 

    

 

 

   

 

 

 

Total capital investments

     89,906        195,691       257,674  

Equity method interest capital investments funded by project financing

     6,900        7,500       —    
  

 

 

    

 

 

   

 

 

 

Total growth capital investments

   $ 96,806      $ 203,191     $ 257,674  
  

 

 

    

 

 

   

 

 

 

 

Page 8