Kinetik Holdings Inc. · NYSE:KNTK
Kinetik — Kayne Anderson Acquisition — SPAC Merger (October 2018)
51 slides from Kinetik's SPAC merger presentation, Oct 17, 2018
Slide 1: Altus Midstream Company
October 2018 Altus Midstream Company Exhibit 99.1
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: Participants
Participants Brian Freed Altus Chief Executive Officer Altus Director SVP of Midstream & Marketing at Apache Selected previous experience: SVP of Western US Commercial Operations at Crestwood Midstream VP of Business Development at Rangeland Energy CEO of Energy Solutions International President & C
Slide 5: Anticipated Transaction Timeline
Anticipated Transaction Timeline Date Event Mid to Late October Investor Meetings November 6 Shareholder Meeting November 9 Close & Fund Transaction
Slide 6: Introduction to Altus Midstream Company
Introduction to Altus Midstream Company Gathering & Processing Leading independent E&P company with 64-year operating history and global footprint State of the art midstream system being built to facilitate development of Alpine High – a world-class resource play Joint Venture Pipelines Leading inve
Slide 7: Transaction Overview
Transaction Overview KAAC has entered into an agreement with Apache Corporation to create Altus Midstream Company (“Altus”, “Altus Midstream” or the “Company”)(1) Currently trades on NASDAQ under ticker “KAAC”, and ticker will change to “ALTM” post-closing Company will own Apache’s Alpine High relat
Slide 8: 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 with an alignment of interests Conservative balance sheet;
Slide 9: Altus Midstream Overview
Altus Midstream Overview
Slide 10: Investment Merits
Investment Merits Premier E&P Sponsor Independent E&P with 64-year operating history and global footprint Dedicated to long-term development plan for Alpine High Transaction achieves Apache’s desire to create a fully integrated midstream company Exposure to World-Class Resource at Alpine High ~340,0
Slide 11: Alpine High is a multi-decade growth platform for Apache
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 >$900 million on midstream infrastructure in Alpine High
Slide 12: Significant Scale in the Delaware Basin
Selected Private Midstream Companies Significant Scale In the Delaware Delaware Basin Processing Capacity (Including Planned Expansions) Selected Public Midstream Companies Selected Private Midstream Companies Only pure-play Permian midstream company that is publicly traded(2) Catalyst JV (MMcf/d) S
Slide 13: Gathering & Processing Overview
Gathering & Processing Overview Pipeline Map Current Asset Highlights Rich Gas Processing: 380 MMcf/d of capacity in service Lean Gas Treating / Compression: 400 MMcf/d of capacity in service Gathering Pipelines: 123 miles in service Primarily 20-30 inch pipe Residue Pipelines / Market Connections:
Slide 14: Altus Midstream Agreements with Apache
Altus Midstream Agreements with Apache Alpine High Acreage(2) Area of Dedication Boundary Reeves Jeff Davis Pecos The area of dedication encompasses a total of ~540,000 gross acres (as denoted by the red outline) Includes existing Apache acreage and future acreage acquired by Apache(1) Midstream ser
Slide 15: Joint Venture Pipelines Overview
Joint Venture Pipelines Overview Pipeline Map Commentary Altus will own options to participate in five joint venture pipelines 15%(1) of KMI’s Gulf Coast Express 33%(2) of KMI’s Permian Highway 33% of EPD’s Shin Oak 50% of Salt Creek NGL 15% of EPIC Crude All pipelines expected in service by end of
Slide 16: Altus Financial Forecast
Altus Financial Forecast Altus EBITDA Guidance Altus is well positioned to deliver “top-tier” growth well into the next decade ($ in millions) CAGR: 106%(1) Based on midpoint of guidance. Altus financial forecast is underpinned by identified sources of growth Majority of growth driven by JV pipeline
Slide 17: Additional Avenues for Growth
Additional Avenues for Growth Strategic Relationship with Apache Third Party Growth Altus has ROFO on water systems at Alpine High Altus has ROFO on any new long-haul pipelines / Gulf Coast assets Altus has ROFO to develop a crude oil gathering system Altus has right to participate in midstream oppo
Slide 18: Alpine High Overview
Alpine High Overview
Slide 19: Alpine High: A World-Class Resource Play
Alpine High: A World-Class Resource Play Alpine High Acreage Map(1) Reeves Jeff Davis Pecos Ward ~60 miles Acreage as of July 1, 2018. Scale Execution Economics Unprecedented hydrocarbon column >5,000 feet Vertically stacked oil, rich gas, and lean gas fairways ~340,000 contiguous net acres(1) 5,000
Slide 20: Stacked Pay From Landing Zones
Stacked Pay From 13 Landing Zones High frequency, rapidly rising and falling sea level environment Tranquil marine environment, gradually rising worldwide sea level conditions Parasequences Source Rock PENNSYLVANIAN BARNETT WOODFORD DEVONIAN UNCONFORMITY CARBONATE DEBRIS FLOW ORGANIC SHALE PARASEQUE
Slide 21: Superior to Established Resource Plays
Superior to Established Resource Plays Parameter Alpine High (Woodford/Barnett) SCOOP (Woodford) Marcellus (Rich Gas) Eagle Ford (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 22: 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 variations Short laterals Light proppant volumes Lots of room for improvement….by design Apache believes it can
Slide 23: Alpine High: Transitioning to Full-field Development
Alpine High: Transitioning to Full-field Development Apache’s long-term methodical approach to developing Alpine High Formulation of concept, concept testing and confirmation Areal and vertical delineation Focus on reducing costs, increasing efficiency and maximizing recovery Transition to full fiel
Slide 24: Alpine High: Significant Production Ramp Underway
Alpine High: Significant Production Ramp Underway Alpine High 2018 Wells Placed on Production Average Monthly Well Completions 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 20
Slide 25: Alpine High: Attractive Rich Gas Economics
Alpine High: Attractive Rich Gas Economics Typical Well Upper Range Well Single Well Economic Assumptions: Prices: $65 WTI / $3.00 Henry Hub / NGL($/GAL) C2: $0.28, C3: $0.83, C4: $0.94, C5: $1.42 $50 WTI / $2.50 Henry Hub / NGL($/GAL) C2: $0.28, C3: $0.75, C4: $0.90, C5: $1.22 Waha basis / Transpor
Slide 26: Alpine High: Premium Capital Efficiency
Alpine High: Premium Capital Efficiency Typical Well 433% recycle ratio $/BOE GAS NGL OIL Upper Range Well 580% recycle ratio Assumptions: Prices: $65 WTI; $3.00 Henry Hub; Waha basis / Transport to US Gulf Coast markets = ($0.50); NGL($/GAL) C2: $0.28, C3: $0.83, C4: $0.94, C5+: $1.42 Opex includes
Slide 27: Alpine High Evolution
Alpine High Evolution September 2016 September 2018 2020 (Est.) Rig Count 3 7 10 - 11 Total Wells Drilled 14 162 425 – 450 at year-end Total Wells on Production 9 111 350 – 375 at year-end Net Production (Mboe/d) Nm ~54 (July Exit Rate) 160 – 180 Location Count 2,000 – 3,000+ 5,000+ Ongoing Testing
Slide 28: Recent Results of Alpine High Strategic Testing
Recent Results of Alpine High Strategic Testing Pad / Well Description Results (gross) Strategic Implications Blackfoot(1) 12-well pad; Half-section spacing test of 3 Woodford landing zones Producing 102 MMcf/d and 200 Bopd Rates still rising on clean up ~1200 Btu gas Extrapolates to 24 wells per se
Slide 29: Northern Flank: Blackfoot State Unit
Northern Flank: Blackfoot State Unit (NOT TO SCALE) WELLBORES COLORED BY BATCH PAD To Be Drilled
Slide 30: Financial Overview
Financial Overview
Slide 31: 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 ~$920 million of cash on hand at closing Recently secured co
Slide 32: Financial Guidance: Volumes and Revenue per Mcf
Financial Guidance Altus Midstream Gathered Volumes(1) (MMcf/d) Altus Midstream Revenue per Mcf Altus volume forecast through 2020 includes Apache volume assumptions consistent with Apache’s public guidance for Alpine High production (average royalty interest is 25%). Altus volume expectation for Ap
Slide 33: Financial Guidance: Growth Capex and EBITDA
Financial Guidance Altus Midstream Growth Capex(1) Altus Midstream EBITDA(1) ($ in millions) ($ in millions) Assumes exercise of all five options for JV pipelines. % Attributable to JV Pipelines % Attributable to JV Pipelines $120 - $140 $240 - $300 $350 - $420 $475 - $550 $500 - $600 2019E Q4 2019E
Slide 34: Conservative Financial Plan
Conservative Financial Plan Altus Midstream will have no debt at closing Expect to have run-rate leverage ratio of less than 3x by year-end 2020(1) (assuming growth capex financed with operating cash flow and borrowings) Pipeline JV interests provide additional financing flexibility (asset level fin
Slide 35: 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, Altus
Slide 36: Valuation Overview
Overview Valuation Distributable cash flow per share CAGR that is unrivaled by peers Expect this to continue beyond guidance period Trades “cheaper” than peer averages on 2-year forward EV/EBITDA Trades at a modest premium 1-year forward Trades in line based on 2020 multiples EV / EBITDA: Altus vs.
Slide 37: Appendix
Appendix
Slide 38: Details on Joint Venture Pipelines
Details on Joint Venture Pipelines Gulf Coast Express Permian Highway Shin Oak Salt Creek NGL Line EPIC Crude Product Natural Gas Natural Gas NGL NGL Crude Operator Kinder Morgan Kinder Morgan Enterprise Products ARM EPIC Pipeline Cost $1.75 billion $2 billion Undisclosed(1) $100 million Undisclosed
Slide 39: Gulf Coast Express Pipeline (GCX) Overview
Gulf Coast Express Pipeline (GCX) Overview Pipeline Map Commentary Waha Area Receipt Points EPNG/KMTP Mendoza Trains EPNG Waha Header DCP/Atmos Waha Header ETC Trans-Pecos Header Atmos Enterprise Oasis Transwestern ONEOK Apache WhiteWater Midstream Northern Natural Gas Aqua Dulce Delivery Points KM
Slide 40: Permian Highway Pipeline (PHP) Overview
STX / Aqua Dulce Market Access Katy Market Access USGC Pipeline / LNG Market Access 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 approx
Slide 41: Shin Oak Pipeline Overview
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 pipeline
Slide 42: Salt Creek NGL Pipeline Overview
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 takeaway ou
Slide 43: EPIC Crude Pipeline Overview
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 upsized to 3
Slide 44: Potential Organic Growth from Water Infrastructure Drop-down
Potential organic growth opportunity from future drop-down of water businesses supporting Alpine High 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 capacit
Slide 45: 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) ~$920 million of cash and no borrowings at close Financing plan does not include future issuances of common equity No dividend expected to be paid t
Slide 46: Alpine High Takeaway
Alpine High Takeaway Apache has contracted takeaway capacity (through a combination of volume commitments and acreage/plant dedications) from Altus Midstream’s infrastructure Provides flow assurance to liquid markets at attractive netbacks 550 MDth/d volume commitment for residue gas takeaway on GCX
Slide 47: Transaction Sources & Uses / Capitalization
Sources ($ in millions) Ownership (shares in millions) Capitalization at Close ($ in millions, except per share) $377 million raised in IPO and an estimated ~$3 million interest earnings since KAAC’s IPO closing date. Net of 1.9 million shares transferred to APA as part of this Transaction. Includes
Slide 48: Equity Securities Outstanding at Close
Equity Securities Outstanding at Close Security Number Outstanding (in millions) Commentary Class A Shares 354.4 Altus will be structured using an Up-C. Class A share count includes 250 million Class C shares held by APA that are freely exchangeable into Class A shares at APA’s election at any time
Slide 49: Up-C Structure
Commentary Structure Chart(1) Up-C Structure Entity will be structured using Up-C format Operating assets will be held at Altus Midstream LP (“OpCo”) Management of OpCo and all governance will take place at Altus Midstream Company At closing, Apache receives an equal number of OpCo units and Class C
Slide 50: 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 exc
Slide 51: Illustrative Fully Diluted Share Count and Ownership
Illustrative Fully Diluted Share Count and Ownership Includes 25 million Earn-Out Shares that are based on Altus Midstream’s stock price ($14/share and $16/share). Includes 7.6 million Class B shares that will convert to Class A shares upon closing of the Transaction (net of 1.9 million Class B shar
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