Kayne Anderson and Apache Corporation to Create Altus Midstream Company

Kayne Anderson Acquisition Corp. and Apache Corporatation announced an agreement late this afternoon to create Altus Midstream Company, a $3.5 bilion pure-play, Permian Basin Midstream C-Corp.

Apache will contribute its midstream assets at Alpine High to Altus Midstream LP, a partnership jointly owned by Apache and KAAC. At closing, KAAC will be renamed Altus Midstream Company. Altus Midstream will be structured as a C-corporation anchored by substantially all of Apache’s gathering, processing and transportation assets at Alpine High, an unconventional resource play in the Delaware Basin. The company will also own options for equity participation in five gas, NGL and crude oil pipeline projects from the Permian Basin to various points along the Texas Gulf Coast.

Altus Midstream expects to have more than $900 million of cash and no debt at closing and is projected to be free-cash-flow positive by 2021.

Additionally, Apache will own approximately 71 percent of Altus Midstream with the ability to increase to approximately 74 percent subject to performance earn outs.

Altus Midstream assets

The Altus Midstream assets include rich-gas processing plants with inlet capacity of 380 million cubic feet (MMcf) per day, lean-gastreating and compression plants with inlet capacity of 400 MMcf per day, 123 miles of gathering pipelines, and 55 miles of processed gas pipelines with three market connections. By the end of 2020, Altus Midstream plans to add 1 Bcf per day of cryogenic, rich-gas processing.

Additionally, Altus Midstream will hold options to purchase equity ownership in five planned pipelines, including:

• Gulf Coast Express: Option for up to 15 percent interest in a natural gas pipeline to Agua Dulce; operated by Kinder Morgan, expected in-service date in October 2019.
• Salt Creek NGL Line: Option for 50 percent interest in an NGL header from Alpine High to Waha; operated by Salt Creek Midstream, expected in-service date in the first quarter of 2019.
• EPIC Crude: Option for up to 15 percent interest in a crude oil pipeline to Corpus Christi; operated by EPIC Midstream Holdings, expected in-service date in the second half of 2019.
• Shin Oak: Option for up to 33 percent interest in a long-haul NGL line to Mont Belvieu; operated by Enterprise Products Partners, expected in-service date in the second-quarter 2019.
• Permian Highway: Option for up to 33 percent interest in a proposed natural gas pipeline to Katy / Agua Dulce (subject to agreement on definitive documentation); to be operated by Kinder Morgan, expected in-service date in late 2020.

TRANSACTION DETAILS

Cash Contribution

• Kayne Anderson Acquisition Corp. is contributing $952 million in cash, which comprises $380 million in proceeds raised in its initial public offering and $572 million in proceeds raised in a private placement of Class A shares.

Equity Component

Apache will receive:

• 250,000,000 Common Units
• 1,862,606 newly-issued shares of Class A Common Stock
• “Assigned Shares” Newly-issued shares of Class A Common Stock equal to the product of (i) the number of public shares of Class A Common Stock redeemed for cash at the closing of the business combination minus 2,000,000 and (ii) 26.6% (provided that such number of shares of Class A Common Stock will not be less than zero or greater than 5,450,422).  Subject to forfeitures of Founders Shares (as defined below) by the Company’s sponsor, Kayne Anderson Sponsor, LLC
• 3,182,140 warrants exercisable for shares of Class A Common Stock (the “Warrants”), with such amount of Warrants corresponding to certain forfeitures of Warrants by KAAC Sponsor
• If the closing of the business combination occurs after September 30, 2018, cash consideration in an amount equal to the capital expenditures incurred by or on behalf of the Alpine High Entities from and including October 1, 2018 through and including the closing date of the business combination (the “Closing Date”)
• The right to receive earn-out consideration of up to 37,500,000 shares of Class A Common Stock (see 8-K here for earnout schedule)
• In addition, the Company will issue to Apache Contributor newly issued shares of non-economic capital stock of the Company, designated as Class C common stock, par value $0.0001 per share (the “Class C Common Stock”), corresponding to the number of Common Units received by the Apache Contributor at the Closing.

Private Placement

• 57,234,023 shares of Class A Common Stock at $10.00 to investors for aggregate consideration of approximately $572.3 million
  • To certain qualified institutional buyers and accredited investors, including certain funds and accounts managed by Kayne Anderson Capital Advisors, L.P.,

Sponsor Forfeiture

KAAC Sponsor will at the Closing:

• Forfeit 1,862,606 Founders Shares
• Forfeit 3,182,140 of the Sponsor Private Placement Warrants
• Forfeit a number of Founders Shares equal to the number of “Assigned Shares“

Advisors

• Barclays Capital Inc. and Tudor, Pickering, Holt & Co. acted as financial advisors to Apache
• Bracewell LLP acted as legal advisor to Apache on the transaction.
• Citigroup acted as financial advisor to KAAC
• Latham & Watkins LLP acted as legal advisor to KAAC.
• Citigroup, Barclays and Credit Suisse acted as placement agents on the private placement of Class A shares.