Kinetik Holdings Inc

6. INTANGIBLE ASSETS, NET

Intangible assets, net are comprised of the following:

At December 31, 2024, the remaining customer contract amortization terms range fromone toseventeen years with weighted average amortization periods of approximately 7.87 years, and the right-of-way assets remaining amortization terms range fromone tofifteen years with weighted average amortization periods of approximately 6.53 years. The overall remaining weighted average amortization period for the intangible assets as of December 31, 2024 was approximately 7.63 years.

The Company recorded $140.1 million, $122.3 million and $120.7 million of amortization expense for the years ended December 31, 2024, 2023, and 2022, respectively. There wasno impairment recognized on intangible assets for the years ended December 31, 2024, 2023, and 2022, respectively.

Estimated aggregate amortization expense for the remaining unamortized balance in future years is as follows:

7. EQUITY METHOD INVESTMENTS

As of December 31, 2024, the Company owned investments in the following long-haul pipeline entities in the Permian Basin. These investments were accounted for using the equity method of accounting. For each EMI pipeline entity, the Company has the ability to exercise significant influence based on certain governance provisions and its participation in the significant activities and decisions that impact the management and economic performance of the EMI pipeline.

The table below presents the ownership percentages and investment balances held by the Company for each entity:

(1)As of December 31, 2023 and until the purchase of the 12.5% equity interest in EPIC in July 2024, the Company owned 15.0% of EPIC. However, no dollar value was assigned through the Altus Acquisition purchase price allocation as an adjustment was made to eliminate equity in losses of EPIC.

(2)The Company owned 16% of GCX as of December 31, 2023 and divested its entire ownership in June 2024.

During the third quarter 2024, the Company entered into an Equity Sale and Purchase Agreement with third parties to purchase a 12.5% equity interest in EPIC, increasing our total equity interest in EPIC to 27.5%. As the increase in ownership did not result in a controlling interest, and did not represent the funding of prior losses, the Company resumed accounting for its investment in EPIC using the equity method of accounting upon the closing of the acquisition of the additional interests during July 2024.

On June 4, 2024, the Company consummated the previously announced transaction contemplated by the Purchase and Sale Agreement dated as of May 9, 2024, to sell its 16% equity interest in GCX to GCX Pipeline, LLC (the "GCX Buyer") for an adjusted price of $524.4 million (the "GCX Sale"), including a $30.0 million earn out in cash upon the approval by the GCX Board of Directors of one or more capital projects that achieve certain capacity expansion criteria. The Company recognized a net gain of $89.8 million for the year ended December 31, 2024 in relation to this transaction.

As of December 31, 2024 and 2023, the unamortized net basis differences included in the EMI pipelines’ investment balances were $40.3 million and $349.3 million, respectively. These amounts represent differences in the Company’s contributions to date and the Company’s underlying equity in the separate net assets within the financial statements of the respective entities. Unamortized basis differences will be amortized or accreted into equity income over the useful lives of the underlying pipeline assets. There was capitalized interest of $23.9 million and $24.7 million as of December 31, 2024 and 2023, respectively. Capitalized interest is amortized on a straight-line basis into equity income.

The following table presents the activities in the Company’s EMIs:

(1)For the year ended December 31, 2024, net of amortization and accretion of basis differences and capitalized interests, which represents undistributed earnings, the amortization (accretion) was $7.9 million from PHP, $0.7 million from Breviloba, $2.7 million from GCX, and $(3.2) million from EPIC. For the year ended December 31, 2023, net of amortization of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $7.5 million from PHP, $0.7 million from Breviloba and $6.2 million from GCX.

Summarized Financial Information

The following represented selected income statement and balance sheet data for the Company’s EMI pipeline entities (on a 100 percent balance):

(1)Represented summarized financial information from GCX for thefive months period ended and as of May 31, 2024 as the Company sold all its equity interest in GCX on June 4, 2024.

8. DEBT AND FINANCING COSTS

Comprehensive Refinancing 2022

On June 8, 2022, the Partnership completed the private placement of $1.00 billion aggregate principal amount of 5.875% Senior Notes due 2030 (the “2030 Notes”), which are fully and unconditionally guaranteed by the Company. The 2030 Notes were issued under our Sustainability-Linked Financing Framework and include certain Sustainability Performance Targets (“SPT”) that the Company needs to meet from and including June 15, 2027.

In addition, the Partnership entered into the revolving credit agreement with Bank of America, N.A. as administrative agent, which provides for a $1.25 billion revolving credit facility (the “Revolving Credit Facility”) maturing on June 8, 2027, and the Term Loan with PNC Bank as administrative agent, which provided for a $2.00 billion senior unsecured term loan credit facility (“Term Loan”) maturing on June 8, 2025, which was amended on December 6, 2023 to extend the maturity date from June 8, 2025 to June 8, 2026, with an additional automaticsix-month extension of the amended maturity date to December 8, 2026, at such time as no more than $1.00 billion of an aggregate principal amount of loans under the Term Loan remain outstanding, subject to customary conditions. Both the Revolving Credit Facility and Term Loan include certain “Sustainability Adjustment” features that could result in an interest rate adjustment that depends on the Company meeting the sustainability targets defined in the respective agreement.

Proceeds from the Notes and the Term Loan were used to repay all outstanding borrowings under previous credit facilities and to pay fees and expenses related to the offering. The Company recorded a loss on debt extinguishment of $28.0 million for the year ended December 31, 2022.

December 2028 Sustainability-Linked Senior Notes

On December 6, 2023, the Partnership completed a private placement of $500.0 million aggregate principal amount of 6.625% Sustainability-Linked Senior Notes due 2028 (the “Original 2028 Notes”) at par. Further, on December 19, 2023, the Company completed an additional private placement of $300.0 million aggregate principal amount of 6.625% Sustainability-Linked Senior Notes due 2028 (the “Additional 2028 Notes”) at 100.50% of face amount (collectively, the “2028 Notes”). The Original 2028 Notes and the Additional 2028 Notes are treated as a single series of securities under the indenture governing the 2028 Notes, vote together as a single class, and have substantially identical terms, other than the issue date and issue price. The 2028 Notes are fully and unconditionally guaranteed by the Company and include certain Sustainability Performance Targets (“SPT”) that the Company needs to meet from and including June 15, 2027.

Interest on the 2028 Notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2024. The aggregate fees and expenses paid to obtain the 2028 Notes totaled $11.2 million and were capitalized as debt issuance cost and included in the Consolidated Balance Sheets as a direct deduction to the 2028 Notes. The $1.5 million premium was added to the 2028 Notes. The debt issuance cost is amortized and debt premium was accreted to interest expense over the term of the 2028 Notes using the effective interest method.

The Partnership may redeem in whole or in part, at a redemption price equal to the Make-Whole-Redemption Price, which is the greater of (1)100% of the principal amount of the 2028 notes to be redeemed or (2) the present value of the 2028 Notes to be redeemed at such redemption date, prior to December 15, 2025. On or after December 15, 2025, the Partnership may redeem in whole or in part at the redemption price set forth in the indenture agreement governing the 2028 Notes.

Term Loan Amendment 2023

On December 6, 2023, the Partnership, the Company, PNC Bank, and the banks and other financial institutions party thereto, as lenders, entered into a First amendment to Credit Agreement (the “First Amendment”), concurrently with the closing of its 2028 Notes discussed above.

The First Amendment (1) extended the maturity of the Term Loan to June 8, 2026 upon the prepayment of a principal amount of loans under the Term Loan of no less than $500.0 million; and (2) provided for an additional automaticsix-month extension of the amended maturity date to December 8, 2026, at such time as no more than $1.00 billion of an aggregate principal amount of loans under the Term Loan remain outstanding, subject to customary conditions. Pursuant to FASB ASC 470-50, Modifications and Extinguishments, the Company determined that the amendment of the maturity date is a modification of the original Term Loan. Fees paid directly to lenders in arranging the modification totaled $1.5 million and were recorded as an original debt discount and included in the Consolidated Balance Sheets as a direct deduction of the Term Loan and was amortized over the modified remaining life of the Term Loan using the effective interest method. Cost incurred with third parties directly related to the modification totaled $0.6 million and were expensed as incurred. Furthermore, the partial paydown of the principal under the Term Loan totaled $800.0 million, using proceeds from the 2028 Notes, resulting in the write off (loss extinguishment) of a proportional amount of the remaining unamortized debt issuance cost and original discount from the Term Loan immediately prior to the paydown. The Company recorded a $1.9 million loss on extinguishment from these write offs in the Consolidated Statements of Operations for the year ended December 31, 2023.

On April 2, 2024, Kinetik Receivables LLC (“Kinetik Receivables”), a bankruptcy remote special purpose entity formed as a direct subsidiary ofthe Partnership, which is a subsidiary of the Company, entered into an accounts receivable securitization facility with an initial facility limit of $150.0 million (“A/R Facility”) with PNC Bank, as the administrative agent, and certain purchasers party thereto from time to time, which has a scheduled termination date of April 1, 2025. The aggregate fees and expenses paid directly to third parties in obtaining the A/R Facility totaled $1.1 million and were capitalized as debt issuance costs and included in the Consolidated Balance Sheets as a current asset within “Prepaid and other current assets”, amortized over the term of the A/R Facility to interest expense using the effective-interest method. There were unamortized debt issuance costs related to the A/R Facility of $0.3 million as of December 31, 2024.

Pursuant to the A/R Facility, the Company and certain of its subsidiaries continuously transfer receivables to Kinetik Receivables and Kinetik Receivables transfers receivables that meet certain qualifying conditions to third-party purchasers in exchange for cash. These receivables are held by Kinetik Receivables and are pledged to secure the collectability of the sold receivables and are accounted for as secured borrowings. The amount available for borrowing at any one time under the A/R Facility is limited to an amount calculated based on the outstanding balance of eligible receivables sold to the purchasers, subject to certain reserves, concentration limits, and other limitations. Under the A/R Facility, the Company is subject to pay a yield to the purchasers equal to SOFR plus a spread adjustment of 0.10% and a drawn fee of 0.90%. The Company also pays a fee of 0.40% on the undrawn committed amount of the A/R Facility. Yield and fees payable by the Company under the AR Facility are due monthly. The effective interest rate on the A/R Facility was 5.55% as of December 31, 2024. As of December 31, 2024, eligible accounts receivable of $140.2 million were pledged to the A/R Facility as collateral.

The Partnership has continuing involvement with the receivables transferred by Kinetik Receivables to the third-party purchasers by providing collection services.

The net proceeds of the A/R Facility were used, together with cash on hand, to repay a portion of the outstanding borrowings under the existing Term Loan Credit Facility, lowering the remaining balance to $1.0 billion. As a result, the maturity of the Term Loan Credit Facility extended to December 8, 2026. The Company recognized a loss on debt extinguishment of $0.5 million for the partial payment made on the Term Loan Credit Facility.

Sustainability Performance Targets

The Partnership’s outstanding debts were 100% linked to sustainability performance targets as of December 31, 2024 and 2023, among which, the Partnership’s 2030 Notes and the 2028 Notes have SPTs that would result in interest rate adjustments starting on June 15, 2027, and the Partnership’s Term Loan, Revolving Credit Facility and A/R Facility have SPTs to be met for each calendar year starting in 2022 and onward.

In 2023, the Company met both SPTs under the Term Loan and Revolving Credit Facility. As a result of meeting both SPTs under the Term Loan and Revolving Credit Facility, the Company maintained the favorable rate adjustment for these facilities during 2024. The 2024 SPTs will be verified in 2025 for rate adjustment.

Compliance with our Covenants

Each of the revolving credit agreements with Bank of America, N.A. as administrative agent and the Term Loan Credit Facility, contain customary covenants and restrictive provisions which may, among other things, limit the Partnership’s ability to create liens, incur additional indebtedness and make restricted payments and the Partnership’s ability to liquidate, dissolve, consolidate with or merge into or with any other person. The 2030 Notes and the 2028 Notes also contain covenants and restrictive provisions, which may, among other things, limit the Partnership’s and its subsidiaries’ ability to create liens to secure indebtedness.

The A/R Facility contains covenants and restrictive provisions with respect to the Partnership and Kinetik Receivables that are customary for accounts receivable securitization facilities.

As of December 31, 2024, the Partnership is in compliance with all customary and financial covenants.

Fair Value of Financial Instruments

The fair value of the Company and its subsidiaries’ consolidated debt as of December 31, 2024 and 2023 was $3.52 billion and$3.57 billion, respectively. At December 31, 2024, the 2030 Notes and the 2028 Notes’ fair value was based on Level 1 inputs and the Term Loan and Revolving Credit Facility’s fair value was based on Level 3 inputs and the A/R Facility’s fair value approximates its carrying value due to its short term nature.

The following table summarizes the Company’s debt obligations:

(1)The effective interest rate was 6.25% and 7.06% as of December 31, 2024 and 2023, respectively.

(2)The weighted average effective interest rate was 6.43% and 7.06% as of December 31, 2024 and 2023, respectively.

(3)Excludes unamortized debt issuance cost related to the Revolving Credit Facility. Unamortized debt issuance cost associated with the Revolving Credit Facility was $3.8 million and $5.4 million as of December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, the current and non-current portion of the unamortized debt issuance costs related to the revolving credit facilities were included in the “Prepaid and other current assets” and “Deferred charges and other assets” of the Consolidated Balance Sheets, respectively.

Interest Income and Financing Costs, Net of Capitalized Interest

The table below presents the components of the Company’s financing costs, net of capitalized interest:

As of December 31, 2024 and 2023, unamortized debt issuance costs associated with the 2030 Notes, the 2028 Notes and the Term Loan Credit Facility were $26.2 million and $31.5 million, respectively, and unamortized debt premium and discount, net, associated with the 2028 Notes and Term Loan Credit Facility were $0.2 million and $0.3 million, respectively.

The following table reflects future maturities of our outstanding debt for each of the next five years and thereafter. These amounts exclude approximately $26.0 million in unamortized deferred financing costs, debt premium and discount, net: