Kinetik Holdings Inc

16. NET INCOME PER SHARE

EPS is computed by dividing net income attributable to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed by dividing net income attributable to the Company by the weighted average number of shares of common stock outstanding and the assumed issuance of all potentially dilutive securities. Each issue of potential common shares is evaluated separately in sequence from the most dilutive to the least dilutive. The dilutive effect of share-based payment awards and stock options is calculated using the treasury stock method, which assumes share purchases are calculated using the average share price of the Company’s common stock during the applicable period. The Company uses the if-converted method to compute potential common shares exchanged from potentially dilutive Common Units. Under the if-converted method, dilutive Common Units are assumed to be exchanged from the date of the issuance and the resulting shares of Class A Common Stock are included in the denominator of the diluted EPS calculation for the period being presented.

The following table sets forth a reconciliation of net income and weighted average shares outstanding used in computing basic and diluted net income per common share:

(1)Represents dividends paid to unvested Class A and Class C Shares, RSUs and PSUs.

(2)Represented excess of carrying value of redeemable noncontrolling interest Preferred Units over redemption price at redemption.

(3)The effect of an assumed exchange of outstanding Common Units (and the cancellation of a corresponding number of shares of outstanding Class C Common Stock) would have been anti-dilutive for the years ended December 31, 2024 and 2022.

(4)Share amounts have been retrospectively restated to reflect the Company’stwo-for-one Stock Split. Refer to Note 11—Equity and Warrants in the Notes to our Consolidated Financial Statements in this Annual Report for further information.

(5)Includes dilutive effect from both RSUs and PSUs on unvested Class A common shares.

17. COMMITMENTS AND CONTINGENCIES

Accruals for loss contingencies arising from claims, assessments, litigation, environmental, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. As of December 31, 2024 and 2023, there wereno accruals for loss contingencies.

Litigation

The Company is a party to various legal actions arising in the ordinary course of its business. In accordance with ASC 450, Contingencies, the Company accrues reserves for outstanding lawsuits, claims, and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more, than the amounts accrued.

The Company has entered into litigation with a third party to collect receivables totaling $11.6 million and is waiting on settlement of $8.0 million in outstanding vendor credits from another counterparty related to prior litigation the Company had previously entered into and subsequently dropped. These amounts remain outstanding from the Winter Storm Uri during February of 2021. Given the counterparties’ sufficient creditworthiness and the valid claims that we hold, no allowance has currently been established for these items as we have legally enforceable agreements with these parties.

Environmental Matters

The Company is subject to various local, state, and federal laws and regulations relating to various environmental matters during the ordinary course of business. Although we believe our operations are in substantial compliance with applicable environmental laws and relations, risks of additional costs and liabilities are inherent in our operations. Moreover, changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly requirements could require the Company to make significant expenditures to attain and maintain compliance or may otherwise have a material adverse effect on its operations, competitive position, or financial condition.

As of the Durango Closing Date, the Company became a potential responsible party to certain potential civil penalties related to excess emission violations of certain gas plants and compressor stations acquired. The Company estimated a liability of $24.0 million based on information related to the alleged violations available as of the Durango Closing Date and December 31, 2024.

Contingent Liabilities

On June 24, 2024, the Company consummated the previously announced Durango Acquisition. Pursuant to the Durango MIPA, Durango Seller is entitled to an earn out of up to $75.0 million in cash contingent upon the completion of the Kings Landing Project and placing it into service in Eddy County, New Mexico. This earn out is subject to reduction based on actual capital costs associated with the Kings Landing Project.

Upon Closing, the Company evaluated the earn-out consideration classification in accordance with ASC 480. The Company determined the earn-out consideration to be classified as a liability based on the settlement provision. As of Closing, the Company recorded an initial contingent liability of $64.0 million and further reduced such contingent liability through a measurement period adjustment of $59.5 million, based on information available as of the Durango Acquisition Date, but obtained subsequent thereto. The earn-out liability is a function of the present value of projected spend as evaluated using a weighted probability model. Pursuant to ASC 805, the Company also recorded a fair value adjustment of $0.2 million within “Costs of sales (exclusive of depreciation and amortization)” of the Consolidated Statement of Operations for the year ended December 31, 2024. The contingent liability associated with the Kings Landing Project of $4.7 million was included in “Other current liabilities” of the Consolidated Balance Sheet as of December 31, 2024.

2019 PDC Acquisition

As part of the acquisition of Permian Gas on June 11, 2019, consideration included a contingent liability arrangement with PDC Permian, Inc. (“PDC”). The arrangement requires additional monies to be paid by the Company to PDC on a per Mcf basis if the actual annual Mcf volume amounts exceed forecasted annual Mcf volume amounts starting in 2020 and continuing through 2029. The total monies paid under this arrangement are capped at $60.5 million and are payable on an annual basis over the earn-out period. PDC’s actual annual Mcf volume did not exceed the incentive forecast volume during the past five years and is not expected to over the next five years; therefore, the estimated fair value of the contingent consideration liability was nil as of December 31, 2024 and 2023.

Letters of Credit

Our Revolving Credit Facility maturing on June 8, 2027, can be used for letters of credit. Our obligations with respect to related letters of credit totaled $12.6 million and $12.6 million as of December 31, 2024 and 2023, respectively.

18. RELATED PARTY TRANSACTIONS

Transactions between related parties are considered to be related party transactions even though they may not be given accounting recognition. FASB ASC 850, Related Party Transactions (“Topic 850”), requires that transactions with related parties that would make a difference in decision making shall be disclosed so that users of the financial statements can evaluate their significance.

Upon closing of the Altus Acquisition, the Company had the following shareholders that owned more than 10% of the Company’s issued and outstanding Common Stock: BCP Raptor Aggregator, LP, Blackstone Management Partners, LLC, BX Permian Pipeline Aggregator LP, Buzzard Midstream LLC and Apache Midstream LLC (“Apache”). Out of these affiliates, the Company has product and service revenue contracts and operating expense contracts with Apache Midstream. In addition, Apache acquired Titus Oil and Gas, LLC (“Titus”) in October 2022, at which time Titus became a related party. Through secondary offerings completed in December 2023 and March 2024, Apache sold all of the Company’s Class A Common Stock it owned. Pursuant to ASC 850, Apache was no longer a related party after the completion of its secondary offering in December 2023 as it owned less than 10% of the Company’s common stock. Pursuant to Regulation S-K, Item 404(a), Apache ceased to be a related party as of March 18, 2024 as it no longer owned any of the Company’s common stock.

The Company also has equity interests in PHP, Breviloba and EPIC as of December 31, 2024. Investments in these EMIs are accounted for using the equity investment method and are considered unconsolidated affiliates. The Company makes contributions, receives distributions and records equity in earnings or losses from these EMIs. See Note 7—Equity Method Investments in the Notes to our Consolidated Financial Statements in this Annual Report for further information. In addition to equity investment activities, the Company pays a demand fee to PHP and a capacity fee to Breviloba for certain volumes transported on the Shin Oak pipeline.

The following table summarizes transactions with the above unconsolidated affiliates. Investment contributions, distributions and equity in earnings from EMIs are detailed in Note 7—Equity Method Investments in the Notes to our Consolidated Financial Statements in this Annual Report, thus, not included in the table below.

(1)Included activities from Apache for the period ended March 18, 2024, on which date Apache ceased to be a related party.

As of December 31, 2024, the Company hadno accounts receivable or accounts payable due from or to related parties. As of December 31, 2023, accounts receivable from Apache Midstream and Titus totaled $15.8 million and immaterial accounts payable were due to Apache Midstream and Titus.

19. SEGMENTS

Ourtwo operating segments represent the Company’s segments for which discrete financial information is available and is utilized on a regular basis by our CODM to make key operating decisions, assess performance and allocate resources. These segments represent strategic business units with differing products and services. No operating segments have been aggregated to form the reportable segments. Therefore, ourtwo operating segments represent our reportable segments. The activities of each of our reportable segments from which the Company earns revenues and incurs expenses are described below:

•Midstream Logistics: The Midstream Logistics segment operates under three streams, 1) gas gathering and processing, 2) crude oil gathering, stabilization and storage services and 3) produced water gathering and disposal.

•Pipeline Transportation: The Pipeline Transportation segment consists of equity investment interests inthree Permian Basin pipelines that access various points along the U.S. Gulf Coast, Kinetik NGL Pipeline and Delaware Link Pipeline. The current operating pipelines transport crude oil, natural gas and NGLs.

Our Chief Executive Officer, who is the CODM, uses segment net income or loss including noncontrolling interests adjusted for taxes, depreciation and amortization, gain or loss on disposal of assets, the proportionate EBITDA from our EMI pipelines, equity income and gain from sale of investments recorded using the equity method, noncash increases and decreases related to hedging activities, fair value adjustments for contingent liabilities, integration and transaction costs and extraordinary losses and unusual or non-recurring charges (“Segment Adjusted EBITDA”) to access performance of each operating segment. For both segments, the CODM uses Segment Adjusted EBITDA to allocate resources. The CODM considers budget-to-actual and forecast-to-actual variances on a monthly basis for both measures when making decisions about allocating capital and personnel to the segments.

The Midstream Logistics segment accounts for more than 98% of the Company’s operating revenues, cost of sales (excluding depreciation and amortization), operating expenses and ad valorem expenses. The Pipeline Transportation segment contains all of the Company’s equity method investments, which contribute more than 91% of the Segment’s Adjusted EBITDA. Corporate and Other contains the Company’s executive and administrative functions, including 84% of the Company’s general and administrative expenses and all of the Company’s stock compensation and debt service costs.

The Company regularly provides management reports to the CODM that include cost of sales, operating expenses, and general and administrative expenses related to the segments, which are all considered to be significant.

The following tables present the Segment Adjusted EBITDA of the Company’s reportable segments and reconciliations of the segment profits to consolidated income before income tax expenses for the years ended December 31, 2024, 2023 and 2022:

(1)Corporate and Other represents those results that: (i) are not specifically attributable to an operating segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items. Items included here to reconcile operating segments profit and loss with the Company’s consolidated profit and loss.

(2)The Company accounts for intersegment sales at market prices, while it accounts for asset transfers at book value. Intersegment revenue is eliminated at consolidation.

(3)Operating expenses includes ad valorem taxes.

(4)Other segment items include other income related to sales tax refund, proceeds from insurance claims and legal settlements, and warrants fair value adjustments, share-based compensation, and one-time or nonrecurring cost adjustments related to amortization of contract costs, commodity hedging unrealized (gain)/loss, contingent liabilities fair value adjustment, integration costs, acquisition transaction costs and other one-time cost or amortization.

(5)Segment adjusted EBITDA is a non-GAAP measure; please see Key Performance Metrics in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report, for a definition and reconciliation to the GAAP measure.

(6)Results do not include legacy ALTM prior to February 22, 2022. Refer to Note 1 —Description of Business and Basis of Presentation in the Notes to our Consolidated Financial Statements in this Annual Report, for further information on the Company’s basis of presentation.

The following tables present supplemental segment information that are not included in the segment profit measurements above for the years ended December 31, 2024, 2023 and 2022:

(1)Corporate and Other represents those results that: (i) are not specifically attributable to an operating segment; (ii) are not individually reportable or (iii) have not been allocated to a reportable segment for the purpose of evaluating their performance, including certain general and administrative expense items.

(2)Pipeline Transportation includes investment in unconsolidated affiliates of $2.12 billion, $2.54 billion and $2.38 billion as of December 31, 2024, 2023 and 2022, respectively.

(3)Excludes contributions, acquisition and divestiture of equity interest in the Company’s EMIs included in Pipeline Transportation segment assets. See Note 7—Equity Method Invest ments in the Notes to our Consolidated Financial Statements in this Annual Report for additional information.