Kinetik Holdings Inc. · NYSE:KNTK
Kinetik — Kayne Anderson Acquisition — SPAC Merger (October 2018)
69 slides from Kinetik's SPAC merger presentation, Oct 9, 2018
Slide 1: Altus Midstream Company October 2018
Altus Midstream Company October 2018
Slide 2: Disclaimer: Forward Looking Statements
Disclaimer FORWARD LOOKING STATEMENTS The information in this presentation and the oral statements made in connection therewith include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities E
Slide 3: Disclaimer: Use of Non-GAAP Financial Measures
Disclaimer USE OF NON-GAAP FINANCIAL MEASURES This presentation includes non-GAAP financial measures, including EBITDA and distributable cash flow of KAAC. KAAC believes EBITDA and distributable cash flow are useful because they allow KAAC to more effectively evaluate its operating performance and c
Slide 4: Introduction
Introduction 4 Introduction 4
Slide 5: Altus Midstream Summary Overview
Altus Midstream Summary Overview Commentary Simplified Structure at Closing ► Kayne Anderson and Apache Corporation Public are forming a new, publicly-traded (Including Kayne Anderson, Advisory Research, Apache Corporation Capital Research, Cushing, Magnetar, Salient midstream C-corp – Altus Midstre
Slide 6: New Way to Invest in Midstream…and it's in the Permian!
New Way to Invest in Midstream…and it’s in the Permian! Sponsor controls production & development Super-system with large contiguous acreage dedication Pure-play Permian Integrated Permian to Gulf Coast midstream value chain JV pipelines provide diversity and long term contracts C-corp structure wit
Slide 7: Altus Executive Officers
Altus Executive Officers Brian Freed – Chief Executive Officer Ben Rodgers – Chief Financial Officer ► SVP of Midstream & Marketing at Apache ► VP & Treasurer at Apache ► Selected previous experience: ► Selected previous experience: § SVP of Western US Commercial Operations at § SVP at EIG Global En
Slide 8: Other Presenters / Key Team Members
Other Presenters / Key Team Members ► Member of the Advisory Board at EV Private Equity Navneet Behl ► Member of team for all exploration completions for all unconventional plays within EOG from 2005 to 2014 th Apache VP of Operations of NAM ► Alpine High is the 4 unconventional play start-up, previ
Slide 9: Apache's Vision for Alpine High
Apache’s Vision for Alpine High ► Alpine High is a multi-decade growth platform for Apache § Resource in place (as of September 2016) of ~3 billion barrels of oil and ~75 Tcf of gas in Barnett and Woodford formations alone § Apache has invested >$1.6 billion on E&P activities and >$900 million on mi
Slide 10: World-Class, Wellhead-to-Water Midstream Company
World-Class, Wellhead-to-Water Midstream Company ► Growing G&P business with fixed fee, market-based rates and acreage dedication contract terms § 1 Bcf/d of cryogenic processing capacity expected to be in place by the end of 2020 ► Equity interests in five JV pipelines (GCX, Permian Highway, Shin O
Slide 11: Significant Scale In the Delaware Basin
Significant Scale In the Delaware Delaware Basin Planned Processing Capacity (MMcf/d) Selected Public Selected Private Midstream Companies Midstream Companies (MMcf/d) Only pure-play 1,500 (1) Permian midstream 1,380 company that is (2) publicly traded Selected Private Midstream Companies Catalyst J
Slide 12: Altus EBITDA Composition & Growth Profile
Altus EBITDA Composition & Growth Profile EBITDA ($ in millions) Growth profile based on Alpine High G&P G&P JV Pipelines assets and JV pipelines $500 - $600 $350 - $420 $120 - $140 2019E 2020E 2021E Additional Avenues for Growth Strategic Relationship with Apache Third Party Growth ► Altus has ROFO
Slide 13: Investment Merits
Investment Merits ► Independent E&P with 64-year operating history and global footprint Premier E&P ► Dedicated to long-term development plan for Alpine High Sponsor ► Transaction achieves Apache’s desire to create a fully integrated midstream company (1) ► ~340,000 contiguous net acres; multi-decad
Slide 14: Questions?
Questions? 14 Questions? 14
Slide 15: Altus Midstream Overview – Gathering & Processing
Altus Midstream Overview – Gathering & Processing 15 Altus Midstream Overview – Gathering & Processing 15
Slide 16: Gathering & Processing Summary Overview
Gathering & Processing Summary Overview Pipeline Map Commentary ► Rich Processing: 380 MMcf/d in service today; ~1 Bcf/d of cryogenic processing expected in service by end of 2020 ► Lean Treating / Compression: 400 MMcf/d of lean gas treating and compression ► Gathering Pipelines: 123 miles in servi
Slide 17: Altus Midstream Agreements with Apache
Altus Midstream Agreements with Apache ► The area of dedication encompasses a total of ~540,000 gross acres (as denoted by the red outline) Reeves § Existing Apache acreage and future acreage acquired by Apache within the area of dedication will be dedicated (unless such acreage has been committed t
Slide 18: World-Class G&P Super System
World-Class G&P Super System Ward 50% interest in Salt Creek Midstream NGL Pipeline to Waha (1) Diamond Cryo Complex 5 cryos with 1.0 Bcf/d by 2020 NGL Loading Station Jeff Davis (2) 18 (1) Diamond Cryo Complex can accommodate 6 cryos. Cryos beyond 6 will be in a different location. (2) Acreage foot
Slide 19: Diamond Cryo Complex Overview
Diamond Cryo Complex Overview Summary Diamond Cryo Complex Layout ► Centrally located to handle volumes gathered from all areas of Alpine High ► Full section owned by Apache and solely dedicated to the Diamond Cryo Complex and associated infrastructure Oil NGL § Large footprint capable of accommodat
Slide 20: Diamond Cryo Complex: Cryo Train #1
Diamond Cryo Complex: Cryo Train #1 Amine Unit Cryo Unit Area Refrigeration Dehy Unit Compression Hot Oil Pumps Hot Oil Heaters Thermal Oxidizer Instrument Air Pkg MCC Bldgs Main N/S Rack 20 Diamond Cryo Complex: Cryo Train #1 Amine Unit Cryo Unit Area Refrigeration Dehy Unit Compression Hot Oil Pum
Slide 21: State of the Art Cryogenic Processing – SRX Technology
State of the Art Cryogenic Processing – SRX Technology GSP process is not designed for ethane rejection; SRX is the most effective cryo choice for rejection u Altus is building SRX cryogenic facilities to capitalize on better ethane recovery and rejection u SRX further maximizes processing economics
Slide 22: ROFO: Water Infrastructure
ROFO: Water Infrastructure Water Infrastructure Summary Existing & Planned Pipeline ►15 brackish / freshwater pits with 4.9 MMbbls capacity ►6 active water recycling facilities with 6.4 MMbbls capacity ►46 miles of permanent gathering and water distribution lines expected to be in-service by year- e
Slide 23: Other ROFO Opportunities
Other ROFO Opportunities ► Altus will have a right of first offer on additional equity options ► Altus will have a right of first offer to develop a crude oil gathering system § Firm space on EPIC through acreage dedication with Saragosa terminal near Alpine High ► ~1.7 million acre area of mutual i
Slide 24: Alpine High Takeaway
Alpine High Takeaway ► Apache has contracted takeaway capacity (through a combination of volume commitments and acreage/plant dedications) from Altus Midstream’s infrastructure § Provides flow assurance to liquid markets at attractive netbacks ► 550 MDth/d volume commitment for residue gas takeaway
Slide 25: Questions?
Questions? 25 Questions? 25
Slide 26: Altus Midstream Overview – JV Pipelines
Altus Midstream Overview – JV Pipelines 26 Altus Midstream Overview – JV Pipelines 26
Slide 27: Joint Venture Pipelines Summary Overview
Joint Venture Pipelines Summary Overview Pipeline Map Commentary ► Altus will own options to participate in five joint venture pipelines (1) § 15% of KMI’s Gulf Coast Express (Natural Gas) (2) § 33% of KMI’s Permian Highway (Natural Gas) § 33% of EPD’s Shin Oak (NGLs) Katy Market Access § 50% of Sal
Slide 28: Details on Joint Venture Pipelines
Details on Joint Venture Pipelines Gulf Coast Permian Salt Creek Shin Oak EPIC Crude Express Highway NGL Line Product Natural Gas Natural Gas NGL NGL Crude Operator Kinder Morgan Kinder Morgan Enterprise Products ARM EPIC (1) Pipeline Cost $1.75 billion $2 billion Undisclosed $100 million Undisclose
Slide 29: Gulf Coast Express Pipeline (GCX)
Gulf Coast Express Pipeline (GCX) Overview Pipeline Map Commentary ► Altus will have an option to acquire 15% of GCX through 12/31/2018 § Potential to acquire an additional 1% of GCX (total ownership of 16%) subject to certain conditions precedent (including ultimate ownership % of Permian Highway l
Slide 30: Permian Highway Pipeline (PHP)
Permian Highway Pipeline (PHP) Overview Pipeline Map Commentary ► Altus will have an option to acquire 33% of Permian Highway Pipeline through 9/4/2019 § Altus’ ownership percentage may be reduced (to a minimum of approximately 27%) in the event that other options to acquire equity in PHP held by th
Slide 31: Shin Oak Pipeline
Shin Oak Pipeline Overview Pipeline Map Commentary ► Altus will have an option to acquire 33% of Shin Oak Pipeline exercisable during a 60-day period commencing on the in-service date of the pipeline ► Shin Oak will be operated and constructed by Enterprise and consists of 658 miles of 24-inch pipel
Slide 32: Salt Creek NGL Pipeline
Salt Creek NGL Pipeline Overview Pipeline Map Commentary ► Salt Creek Midstream is constructing an NGL line originating at the tailgate of the Diamond Cryo Complex, transporting NGLs produced out Alpine High to Waha § Will connect to Shin Oak at Waha § Waha provides point of liquidity to other takea
Slide 33: EPIC Crude Pipeline
EPIC Crude Pipeline Overview Pipeline Map Commentary ► Altus will have an option to acquire 15% of EPIC Crude through 2/1/2019 ► The project consists of 730 miles of pipeline connecting the Permian and Eagle Ford Basins to Corpus Christi ► Based on recent commercial success, pipeline is being upsize
Slide 34: Questions?
Questions? 34 Questions? 34
Slide 35: Alpine High Overview
Alpine High Overview 35 Alpine High Overview 35
Slide 36: Alpine High: A World-Class Resource Play
Alpine High: A World-Class Resource Play (1) Alpine High Acreage Map ► Unprecedented hydrocarbon column >5,000 feet ► Vertically stacked oil, rich gas, and lean gas Ward fairways Scale (1) ► ~340,000 contiguous net acres ► 5,000+ locations identified as of October Reeves 2017 ► 3 billion bbls / 75 T
Slide 37: Paleographic Reconstruction: Woodford Time
Paleographic Reconstruction: Woodford Time ► Major Devonian sea incursions ► Thick, organic rich deposits in transgressive sequences of Devonian through Pennsylvanian 37 Paleographic Reconstruction: Woodford Time ► Major Devonian sea incursions ► Thick, organic rich deposits in transgressive sequenc
Slide 38: Alpine High: Middle Permian Paleostructure Map
Alpine High: Middle Permian Paleostructure Map Critical Aspects ► Regional anomaly ► Stable Devonian shelf (low clay) ► Subsiding eastern limb ► Later thrust of Davis Mountains 10 MILES 38 Alpine High: Middle Permian Paleostructure Map Critical Aspects ► Regional anomaly ► Stable Devonian shelf (low
Slide 39: Stacked Pay From Landing Zones
Stacked Pay From 13 Landing Zones rd 3 BONE SPRINGS High frequency, rapidly rising and falling sea level 13 environment landing WOLFCAMP zones so far; PENNSYLVANIAN UNCONFORMITY >5,000 vertical feet BARNETT Tranquil marine environment, gradually rising worldwide sea WOODFORD level conditions ORGANIC
Slide 40: Giant Resource Play
Giant Resource Play (1) ► Alpine High has 3 billion barrels of oil and 75 TCF of gas (Woodford and Barnett formations) 65 MILES NW EVAPORITES TRANSGRESSIVE PARASEQUENCES OIL WET GAS TRANSGRESSIVE SOURCE INTERVAL DRY GAS DEVONIAN HIGH STAND TRAP: PERMEABILITY BARRIERS RESERVOIR: SOURCE INTERVALS SEAL
Slide 41: Giant Fields – Vertical Scale Comparison
Giant Fields – Vertical Scale Comparison 305 FEET ALPINE HIGH EAST TEXAS PRUDHOE BAY EAGLE FORD DELAWARE BASIN AXIS 41 FIELD THICKNESS Giant Fields – Vertical Scale Comparison 305 FEET ALPINE HIGH EAST TEXAS PRUDHOE BAY EAGLE FORD DELAWARE BASIN AXIS 41 FIELD THICKNESS
Slide 42: Superior to Established Resource Plays
Superior to Established Resource Plays Alpine High SCOOP Marcellus Eagle Ford Parameter (Woodford/Barnett) (Woodford) (Rich Gas) (Condensate) TOC (weight %) 4%-10% 4%-10% 1%-5% 1%-7% Primary Mineralogy Silicate Silicate Silicate Carbonate Clay Content 10%-20% 20%-35% 20%-35% 10%-40% Total Porosity 8
Slide 43: Measured Approach to Optimization
Measured Approach to Optimization ► Apache has taken a very methodical approach so far § Focus on delineation, not optimization § Delineation phase completion design allows isolation of geologic Delineation / variations Science • Short laterals • Light proppant volumes • Lots of room for improvement
Slide 44: Alpine High: Transitioning to Full-field Development
Alpine High: Transitioning to Full-field Development ► Apache’s long-term methodical approach to developing Alpine High 2014 - 2016 2016 - 2017 2018 and Beyond Formulation of concept, Transition to full field development Areal and vertical concept testing and § Optimized Spacing, Patterns & delineat
Slide 45: Alpine High Evolution
Alpine High Evolution September 2016 September 2018 2020 (Est.) 3 7 10 - 11 Rig Count Total Wells 14 162 425 – 450 at year-end Drilled Total Wells on 9 111 350 – 375 at year-end Production Net Nm ~54 (July Exit Rate) 160 – 180 Production (Mboe/d) Location 2,000 – 3,000+ 5,000+ Ongoing Testing Count
Slide 46: Alpine High Cost Progress
Alpine High Cost Progress Average Well ($/Foot) Cost ($mm) $2,200 $10.0 Lateral Length 4,500 ft 4,696 ft 4,787 ft 5,044 ft 6,445 ft 6,711 ft 7,028 ft 7,154 ft 8,052 ft $2,000 $9.0 $8.2 $1,800 $7.6 $8.0 $7.4 $7.3 $7.2 $7.1 $6.9 $1,600 $6.8 $7.0 $6.2 $1,400 $6.0 $1,380/ft $1,200 $5.0 $1,000 $4.0 $800
Slide 47: Alpine High: Attractive Rich Gas Economics
Alpine High: Attractive Rich Gas Economics ► Representative fully burdened economics for rich gas wells in a development scenario (4,400’ lateral) Typical Well Upper Range Well EUR (Bcfe) 9 - 15 EUR (Bcfe) 16 - 21 Well Cost ($MM) $4 - $6 Well Cost ($MM) $4 - $6 Product Mix Product Mix % Oil 3% - 15%
Slide 48: Alpine High: Premium Capital Efficiency
Alpine High: Premium Capital Efficiency Typical Well Upper Range Well $/BOE Top-tier recycle ratios highlight APA’s ability to generate cash and re-invest 30 30 580% recycle ratio 24.78 433% 10.49 25 25 recycle ratio 21.16 OIL $62.75 9.79 20 20 $62.75 14.29 15 15 $21.51 NGL $24.33 11.37 10 10 5 5 3.
Slide 49: Alpine High: Significant Production Ramp Underway
Alpine High: Significant Production Ramp Underway Key Statistics ► Averaged 8 rigs and ~2 frac crews in 2Q 2018 ► ~92 wells expected to be placed on production in 2018 § Total during 2018 is nearly double the amount placed online in 2016 and 2017 ► Net production averaged ~32 MBoe/d in 2Q 2018, up m
Slide 50: Recent Results of Alpine High Strategic Testing
Recent Results of Alpine High Strategic Testing Pad / Well Description Results (gross) Strategic Implications • Recent production of 102 12-well pad; Half-section (1) MMcf/d and 200 Bopd spacing test of 3 Woodford Extrapolates to 24 wells per section Blackfoot • Rates still rising on clean up landin
Slide 51: Northern Flank: Blackfoot State Unit
Northern Flank: Blackfoot State Unit (NOT TO SCALE) To Be Drilled WELLBORES COLORED BY BATCH PAD 51 Northern Flank: Blackfoot State Unit (NOT TO SCALE) To Be Drilled WELLBORES COLORED BY BATCH PAD 51
Slide 52: Northern Flank: Dogwood State
Northern Flank: Dogwood State (NOT TO SCALE) WELLBORES COLORED BY BATCH PAD 52 Northern Flank: Dogwood State (NOT TO SCALE) WELLBORES COLORED BY BATCH PAD 52
Slide 53: Questions?
Questions? 53 Questions? 53
Slide 54: Financial Overview
Financial Overview 54 Financial Overview 54
Slide 55: Financial Philosophy
Financial Philosophy ► Altus Midstream’s simple structure is a key point of differentiation vs. its midstream peers § No debt at closing and undrawn revolver provide strong liquidity § No incentive distribution rights ► The Company expects to have ~$920 million of cash on hand at closing § Recently
Slide 56: Financial Guidance
Financial Guidance (1) Altus Midstream Gathered Volumes Altus Midstream Revenue per Mcf (MMcf/d) ($/Mcf) 1,470 - 1,800 $0.93 $0.91 $0.86 1,030 - 1,260 $0.44 $0.43 $0.43 600 - 730 2019E 2020E 2021E 2019E 2020E 2021E Rich Gas Lean Gas 56 (1) Altus volume forecast through 2020 includes Apache volume as
Slide 57: Financial Guidance
Financial Guidance (1) (1) Altus Midstream EBITDA Altus Midstream Growth Capex ($ in millions) ($ in millions) % Attributable to JV Pipelines % Attributable to JV Pipelines 30% - 35% 40% - 45% 45% - 50% 45% - 50% 45% - 50% 35% - 40% 75% - 85% 40% - 50% 0% $500 - $600 $475 - $550 $1,450 - $1,750 $350
Slide 58: Conservative Financial Plan
Conservative Financial Plan ► Altus Midstream will have no debt at closing and is expected to have a run-rate leverage ratio of less than 3x by year-end 2020 (assuming growth capex financed with free cash flow and borrowings) § Pipeline JV interests provide additional financing flexibility (asset le
Slide 59: Recent Developments
Recent Developments ► Since transaction announcement in August, there have been several recent developments that we expect to positively impact the Altus financial projections: § Now expecting PHP ownership to be ~27% • Had assumed ~24% when developing guidance; now that the project has reached FID,
Slide 60: Valuation Overview
Valuation Overview Calculation of Forward EV / EBITDA ► Distributable cash flow per share CAGR that is unrivaled by Day 1 Equity Value $3,544 peers Plus: Debt -- § Expect this to continue beyond guidance period Less: Cash (920) Day 1 Enterprise Value $2,624 ► Trades “cheaper” than peer averages on 2
Slide 61: Questions?
Questions? 61 Questions? 61
Slide 62: Appendix
Appendix 62 Appendix 62
Slide 63: Forecast Key Assumptions
Forecast Key Assumptions ► “Effective Date” for transaction closing of September 30, 2018 (actual closing date currently expected to be in November 2018) ► ~$920 million of cash and no borrowings at close ► Financing plan does not include future issuances of common equity ► No dividend expected to b
Slide 64: Anticipated Transaction Timeline
Anticipated Transaction Timeline Date Event August 8 ► Transaction announced August 27 ► Preliminary proxy materials filed with the SEC September 28 ► Re-filed preliminary proxy in response to SEC review ► Additional SEC review and mail final proxy materials to October shareholders November ► Hold s
Slide 65: Transaction Sources & Uses / Capitalization
Transaction Sources & Uses / Capitalization Sources ($ in millions) Ownership (shares in millions) Sources At Close Ownership At Close Equity to Apache $2,519 Public Investors 95 (1) KAAC Cash in Trust 380 Apache 252 PIPE Issuance Cash Proceeds 572 Kayne Sponsor 8 (2) Kayne Sponsor Shares 76 Total 3
Slide 66: Equity Securities Outstanding at Close
Equity Securities Outstanding at Close Number Outstanding Security Commentary (in millions) Altus will be structured using an Up-C (see page 67). Class A share count includes 250 million Class C shares held by Class A Shares 354.4 APA that are freely exchangeable into Class A shares at APA’s electio
Slide 67: Up-C Structure
Up-C Structure (1) Commentary Structure Chart ► Entity will be structured using Up-C format Kayne KAAC IPO PIPE Apache Sponsor Investors Investors Corp. (2) § Operating assets will be held at Altus Shares Midstream LP (“OpCo”) 29% 71% § Management of OpCo and all governance (Class A) (Class C) will
Slide 68: Description of Earn-Out Consideration
Description of Earn-Out Consideration ► In addition to the 252 million shares issued to Apache at closing, Apache can potentially be issued 37.5 million additional shares in Altus if certain thresholds are met (the “Earn-Out Shares”) ► 12.5 million shares when Altus Midstream’s share price equals or
Slide 69: Illustrative Fully Diluted Share Count and Ownership
Illustrative Fully Diluted Share Count and Ownership Illustrative Altus Midstream Company Share Price $10.00 $11.00 $12.00 $13.00 $14.00 $15.00 $16.00 $17.00 $18.00 IPO Shares 37.7 37.7 37.7 37.7 37.7 37.7 37.7 37.7 37.7 Apache Shares 251.9 251.9 251.9 251.9 251.9 251.9 251.9 251.9 251.9 (1) Apache
Kayne Anderson Acquisition — SPAC Merger (October 2018) on 6ix