KINETIK HOLDINGS INC.
Information on our website
and any other website referenced herein is not incorporated by reference into, and does not constitute a part of, this proxy statement.
Proxy Statement
General
This proxy statement contains information
about the 2023 annual meeting of stockholders of Kinetik Holdings Inc., a Delaware corporation (“Kinetik,” the “Company,”
“our,” “us,” or “we”). This proxy statement and the enclosed proxy card are being made available
to you by the Company’s Board of Directors (the “Board”) starting on or about April 21,
2023.
Purpose of the Annual Meeting
At the Company’s annual meeting,
stockholders will vote on the following matters:
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Proposal
1: Election of the eleven directors named in this proxy statement; |
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Proposal
2: Approval of a non-binding resolution regarding the compensation of named executive officers (“NEOs”) for 2022 (say-on-pay); |
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Proposal
3: Approval of a non-binding resolution regarding the frequency of stockholder votes on the compensation of named executive officers
(say-on-frequency); |
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Proposal
4: Approval of an amendment to the Company’s Certificate of Incorporation to add a sunset provision for the supermajority vote
requirement for changes to Section 9.1; |
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Proposal
5: Approval of an amendment to the Company’s Certificate of Incorporation to limit the liability of certain officers of the
Company as permitted pursuant to recent amendments to the Delaware General Corporation Law (the “DGCL”); |
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Proposal
6: Ratification of the appointment of KPMG LLP (“KPMG”) as the Company’s independent auditor for fiscal year 2023;
and |
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Transaction
of any other business that properly comes before the meeting. As of the date of this proxy statement, the Company is not aware of any
other business to come before the meeting. |
Kinetik Holdings Inc. |
5 |
2023 Proxy Statement |
Summary of Board Recommendations
The Board recommends
that you vote as follows:
FOR
all nominees |
Proposal 1: Election of directors |
FOR |
Proposal 2: Approval of a non-binding resolution regarding the compensation of Kinetik’s named executive officers for 2022
(say-on-pay) |
ONE
YEAR |
Proposal 3: Approval of a non-binding resolution regarding the frequency of stockholder votes on the compensation of named executive
officers (say-on-frequency) |
FOR |
Proposal 4: Approval of an amendment to the Company’s Certificate of Incorporation to add a sunset provision for the supermajority
vote requirement for changes to Section 9.1 |
FOR |
Proposal 5: Approval of an amendment to the Company’s Certificate of Incorporation to limit the liability of certain officers of the
Company as permitted pursuant to recent amendments to the DGCL |
FOR |
Proposal 6: Ratification of the appointment of KPMG as the Company’s independent auditor |
Kinetik Holdings Inc. |
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2023 Proxy Statement |
Proposal 1.
Election of Directors
General Information
The current terms of directors Elizabeth P.
Cordia, Deborah L. Byers, David I. Foley, D. Mark Leland, Kevin S. McCarthy, John-Paul (JP) Munfa, Jesse Krynak, Ben C.
Rodgers, Ronald Schweizer, Laura A. Sugg and Jamie Welch will expire at the annual meeting. Each of the current directors has been
recommended by the Company’s Governance and Sustainability Committee (“Governance Committee”) and nominated by the
Board for election by the stockholders to a one-year term. If elected, all nominees will serve beginning upon their election until
their respective successors shall have been duly elected and qualified at the annual meeting of stockholders in 2024.
Pursuant to the amended and restated stockholders agreement (the “Stockholders Agreement”), dated as of October 21, 2021 and
effective as of February 22, 2022, with Altus Midstream Company (now known as the Company), APA Corporation (“APA”), Apache
Midstream LLC (“Apache Midstream”), New BCP Raptor Holdco, LLC (“Contributor”), BX Permian Pipeline Aggregator
LP (“BX Permian”), BCP Raptor Aggregator, LP (“BX Aggregator” and together with BX Permian, the “BX Holders”),
Buzzard Midstream LLC (“ISQ”), and for the limited purposes set forth therein, BCP Raptor Holdco, LP (“BCP”),
Apache (as defined in the Stockholders Agreement), Blackstone (as defined in the Stockholders Agreement), and I Squared (as defined
in the Stockholders Agreement) are each entitled to designate directors to the Board based on their and their affiliates ownership of
the Company’s outstanding shares of Class A common stock, par value $0.0001 per share (“Class A Common Stock”), and
Class C common stock, par value $0.0001 per share (“Class C Common Stock” and, together with Class A common stock, “Common
Stock”) as follows:
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Ownership Threshold |
Number of Directors |
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30% or more |
3 |
Blackstone |
20% or more (but less than 30%) |
2 |
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10% or more (but less than 20%) |
1 |
I Squared |
20% or more |
2 |
10% or more (but less than 20%) |
1 |
Apache |
10% or more |
1 |
In addition, the Stockholders Agreement provides Blackstone with the right to designate one of its director designees as
the non-executive chairperson of the Board until the earlier of December 31, 2024 and such time as Blackstone and its affiliates
are no longer entitled to designate directors under the Stockholders Agreement.
VOTE
The Board recommends that you vote “FOR
ALL NOMINEES” for the election of directors.
Kinetik Holdings Inc. |
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2023 Proxy Statement |
Apache and its affiliates own approximately 13.50
percent of our outstanding Common Stock. As such, Apache may nominate one director for election at the annual meeting, and it has nominated
Ben C. Rodgers. I Squared and its affiliates own approximately 20.94 percent of our outstanding Common Stock. As such, I Squared may
nominate two directors for election at the annual meeting, and it has nominated Jesse Krynak and Ronald Schweizer.
Blackstone and its affiliates own approximately 49.92 percent of our outstanding Common Stock. As such, Blackstone may nominate three
directors for election at the annual meeting, and it has nominated David I. Foley, JP Munfa and Elizabeth P. Cordia. In addition, our
Board has nominated each of Deborah L. Byers, D. Mark Leland, Kevin S. McCarthy, Laura A. Sugg and Jamie Welch for election at the annual
meeting.
Unless otherwise instructed,
all proxies will be voted in favor of these nominees. If one or more of the nominees is unwilling or unable to serve, the proxies
will be voted only for the remaining named nominees. Proxies cannot be voted for more than eleven nominees. Each director nominee
has consented to be named in this proxy statement, and the Board knows of no nominee for director who is unwilling or unable to
serve.
Nominees for Election as
Directors
Biographical information as
of April 14, 2023, including principal occupation and business experience during the last five years, of each nominee for director
is set forth below. Unless otherwise stated, the principal occupation of each nominee has been the same for the past five years.
In addition, each nominee’s experience, qualifications, attributes, or skills to serve on our Board are set forth below.
Deborah L.
Byers
AGE: 61
DIRECTOR SINCE: 2022
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Ms. Byers has served as a director since July 2022. She recently retired from EY following a 36-year career in public accounting while holding multiple leadership roles. From July 2018 until her
retirement in July 2022, Ms. Byers served as EY’s Americas Industry Leader overseeing the markets and growth strategy across its primary industry. Ms. Byers served as EY’s Houston Office Managing Partner and US Energy Leader from July 2013 to
July 2018 and Managing Partner of the Southwest Region Strategy & Transactions business unit from July 2008 to July 2013. In these roles, she was a leader in the global energy markets and worked with corporations and investment funds in
all phases of energy investment. Ms. Byers also serves as a director of Excelerate Energy, Inc. and Civitas Resources, Inc. Ms. Byers holds a BBA from Baylor University and is a Certified Public Accountant.
MS. BYERS IS WELL QUALIFIED TO SERVE ON OUR BOARD DUE TO HER SIGNIFICANT EXPERIENCE IN PUBLIC COMPANY ACCOUNTING, FINANCE AND FINANCIAL REPORTING.
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Elizabeth P.
Cordia
AGE: 30
DIRECTOR SINCE: 2022
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Ms. Cordia was appointed to our board of directors in February 2022. Ms. Cordia is a Principal in the Private Equity group at Blackstone and focuses on investments in the midstream, energy and
transportation sectors. Ms. Cordia also served as a director of BCP GP from March 2020 until February 2022. Before joining Blackstone, Ms. Cordia worked as an Investment Banking Analyst at Barclays in the Global Natural Resources group.
Ms. Cordia received an A.B. in Economics from Princeton University, where she graduated summa cum laude and Phi Beta Kappa.
MS. CORDIA IS WELL QUALIFIED TO SERVE ON OUR BOARD DUE TO HER ENERGY INVESTMENT EXPERIENCE.
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Kinetik Holdings Inc. |
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2023 Proxy Statement |
David I.
Foley
AGE: 55
DIRECTOR SINCE: 2022
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Mr. Foley was appointed to our board of directors and elected Chair of the Board in February 2022. Mr. Foley is a Senior Managing Director in the Private Equity group and Global Head of Blackstone.
Mr. Foley is responsible for overseeing Blackstone’s private equity investment activities in the energy sector on a global basis. Since joining Blackstone in 1995, Mr. Foley has been responsible for building the Blackstone energy practice and
has played an integral role in every energy-related private equity deal that the firm has made. Mr. Foley actively leads our investment activities and provides guidance and support to the other BEP senior investment professionals, who each
have primary responsibility for specific sectors. Before joining Blackstone, Mr. Foley worked with AEA Investors, and prior to that he worked as a management consultant for Monitor Company. Mr. Foley serves as a member of the board of
directors for several Blackstone investments, including Beacon Offshore Energy, Geosyntec, Kinetik, Olympus Energy, and Rover. Mr. Foley also served as a director of BCP GP from June 2017 until February 2022. He also serves as the Chair of
the Columbia University Medical Center Ophthalmology Board of Advisors. Mr. Foley received a B.A. and M.A. in Economics, with honors, Phi Beta Kappa, from Northwestern University and received an M.B.A. with distinction from Harvard Business
School.
MR. FOLEY BRINGS INDUSTRY EXPERTISE AND A UNIQUE FINANCIAL PERSPECTIVE TO OUR BOARD BASED ON HIS EXTENSIVE EXPERIENCE HAVING ACTIVELY MANAGED PRIVATE EQUITY INVESTMENTS FOR OVER 20 YEARS.
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Jesse
Krynak
AGE: 40
DIRECTOR SINCE: 2023
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Mr. Krynak was appointed to our board of directors in
March 2023. Mr. Krynak has been a Managing Director at I Squared Capital since 2022 and held investing and operating roles at I Squared
Capital since 2019. Prior to joining ISQ in 2019, Mr. Krynak was a Director at First Reserve on its private equity investment team, where
he was involved in numerous transactions across the energy value chain. Mr. Krynak also serves as a director of Hydrogen Technology Energy
Corporation (HTEC) and Whistler Pipeline. Mr. Krynak holds a B.S. in Finance from Pepperdine University and a M.A. in Economics
from the University of Southern California.
MR. KRYNAK IS WELL QUALIFIED TO SERVE ON OUR BOARD DUE TO HIS ENERGY,
INFRASTRUCTURE FINANCE AND INVESTMENT EXPERIENCE.
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Kinetik Holdings Inc. |
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2023 Proxy Statement |
D. Mark
Leland
AGE: 61
DIRECTOR SINCE: 2017
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Mr. Leland has served as a director since March 2017. He has served as a director of PotlatchDeltic Corporation since 2016 and served as Deltic Timber Corporation’s interim President and CEO from October
2016 to March 2017. Previously, Mr. Leland served as Executive Vice President and CFO of El Paso Corporation from 2005 to 2009 and President of El Paso’s midstream business unit from 2009 to 2012, and as director of El Paso Pipeline Partners,
L.P. from its formation in 2007 to 2012. He served as Senior Vice President and CFO of El Paso Exploration & Production Company from 2004 to 2005. Mr. Leland served as Vice President and COO of the general partner of GulfTerra Energy
Partners, L.P. in 2003, and as Vice President and Controller from 1997 to 2003. Mr. Leland currently serves as a director of Equitrans Midstream Corporation. Mr. Leland previously served as a director for the general partner of Oiltanking
Partners, L.P., the general partner of Rice Midstream Partners until its merger with EQM Midstream Partners, LP, and KiOR, Inc. Mr. Leland holds a Bachelor of Business Administration in finance and economics from the University of Puget
Sound.
MR. LELAND IS WELL QUALIFIED TO SERVE ON OUR BOARD DUE TO HIS EXTENSIVE OPERATIONAL AND FINANCIAL EXPERIENCE IN THE MIDSTREAM ENERGY INDUSTRY AND HIS EXPERIENCE ON THE BOARDS OF DIRECTORS OF NUMEROUS
PUBLICLY TRADED ENERGY COMPANIES.
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Kevin S.
McCarthy
AGE: 63
DIRECTOR SINCE: 2017
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Mr. McCarthy has served as a director since June 2017. He previously served as the
Company’s Chair from March 2017 until November 2018 and as its Chief Executive Officer from December 2016 (inception) until February
2017. Mr. McCarthy served as vice chair and a managing partner at Kayne Anderson Capital Advisors, L.P. until March 2023 where he co-founded
and oversaw the firm’s energy infrastructure activities. Prior to joining Kayne Anderson in 2004, Mr. McCarthy was global head of
energy at UBS Securities LLC and also previously held similar positions at Dean Witter Reynolds and then PaineWebber Incorporated. In
addition to his directorships at Kayne’s closed-end funds, he currently serves as a director of Chord Energy Inc. and Plains All
American Pipeline LP, and he previously served as a director of several publicly traded energy companies, including Whiting Petroleum,
Range Resources Corporation, ONEOK, Inc., Emerge Energy Services LP and K-Sea Transportation Partners LP. Mr. McCarthy earned a B.A. in
Economics and Geology from Amherst College in 1981 and an M.B.A. in Finance from the Wharton School at the University of Pennsylvania
in 1984.
MR. MCCARTHY IS WELL QUALIFIED TO SERVE AS A MEMBER OF OUR BOARD DUE TO HIS ENERGY FINANCE, ACCOUNTING AND INVESTMENT EXPERIENCE.
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Kinetik Holdings Inc. |
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2023 Proxy Statement |
John-Paul
(JP)
Munfa
AGE: 41
DIRECTOR SINCE: 2022
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Mr. Munfa was appointed to our board of directors in February 2022. Mr. Munfa is a Senior Managing Director in the Private Equity group at Blackstone. Since re-joining Blackstone in 2011, Mr. Munfa focuses
on investments in the midstream and transmission sectors. Mr Munfa has played an integral role in the execution of Blackstone’s investments in Cheniere, Cliff Swallow, Custom Truck One Source, EagleClaw Midstream, Grand Prix, Global Offshore
Wind, GridLiance, Permian Highway Pipeline, Rover and Sabre. Mr. Munfa serves as a director of Sabre and Custom Truck One Source. and previously served as a director of BCP GP from June 2017 until February 2022. From 2006 to 2009, Mr. Munfa
was an Analyst with Blackstone’s Private Equity group, where he was involved in the analysis and execution of private equity investments in energy and other industries. He began his career in 2004 as an Analyst in Blackstone’s Restructuring
& Reorganization group. Mr. Munfa received an A.B. in Economics from Harvard College and an M.B.A. from the Stanford Graduate School of Business, where he graduated as an Arjay Miller Scholar.
MR. MUNFA IS WELL QUALIFIED TO SERVE AS A MEMBER OF OUR BOARD DUE TO HIS ENERGY FINANCE AND INVESTMENT EXPERIENCE.
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Ben C.
Rodgers
AGE: 43
DIRECTOR SINCE: 2018
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Mr. Rodgers has served as a director since November 2018. He served as our Chief Financial Officer and Treasurer from November 2018 until February 2022. Mr. Rodgers also has served as Senior Vice
President and Treasurer of APA since January 2020, overseeing treasury, midstream and marketing, and market strategies, having previously served as Vice President and Treasurer since May 2018. Prior to joining APA, Mr. Rodgers served as
Senior Vice President of EIG Global Energy Partners from 2016 until 2018. Before that, he was with Concho Resources serving in a variety of leadership roles including Vice President of Commodities and Midstream and Vice President and
Treasurer from 2012 until 2016. From 2008 until 2012, he also held the role of Vice President, Syndicated and Leveraged Finance, in the Investment Banking Division of J.P. Morgan Securities. Before that, he was senior consultant in the
Advisory Services group at EY from 2002 until 2007. Mr. Rodgers holds a Master of Business Administration in finance from the University of Texas at Austin and a bachelor’s degree in finance from Texas A&M University.
MR. RODGERS IS WELL QUALIFIED TO SERVE AS A MEMBER OF OUR BOARD DUE TO HIS OPERATIONS, FINANCE, AND INVESTMENT EXPERIENCE IN THE ENERGY INDUSTRY.
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Kinetik Holdings Inc. |
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2023 Proxy Statement |
Ronald
Schweizer
AGE: 50
DIRECTOR SINCE: 2022
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Mr. Schweizer has served as a director since July 2022. Mr. Schweizer has served as the Chief Operating Officer of Americas portfolio at I Squared Capital since April 2022. Prior to assuming his current
role, Mr. Schweizer served as the global Chief Financial Officer of the firm, which included the oversight of the company’s administration, financial and risk management operations around the world. Before joining I Squared in 2013, Mr.
Schweizer served as Senior Vice President and Head of Alternative Investments Finance at PineBridge Investments. Before PineBridge, Mr. Schweizer was Controller at Strategic Value Partners. Earlier in his career, Mr. Schweizer worked at J.P.
Morgan Partners as a Vice President in its Funds Management and Tax Group and at Morgan Stanley as a Manager in its Venture Capital Group. Mr. Schweizer began his career at Ernst & Young LLP (“EY”). Mr. Schweizer holds a Bachelor of
Science in Accounting, Cum Laude, from University of Scranton.
RONALD SCHWEIZER IS WELL QUALIFIED TO SERVE ON OUR BOARD DUE TO HIS EXTENSIVE EXPERIENCE IN A NUMBER OF AREAS INCLUDING ACCOUNTING AND FINANCE.
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Laura A.
Sugg
AGE: 62
DIRECTOR SINCE: 2022
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Ms. Sugg was appointed to our board of directors in February 2022 and subsequently appointed as Lead Independent Director. Ms. Sugg is a retired executive of ConocoPhillips. Prior to her retirement in
2010, she held diverse global and domestic roles leading multiple divisions including the Australasia, Midstream, and Global Gas Divisions, as well as serving as the VP Human Resources Upstream. Additionally, she held management positions
across the company in Engineering and Operations, Corporate and Strategic Planning, Mergers and Acquisitions, Treasury, and Marketing. Ms. Sugg currently serves on two other public company boards, Public Service Enterprise Group and Murphy
Oil. Ms. Sugg served as a director of BCP GP from December 2020 until February 2022. She previously served as an independent director for The Williams Companies, Denbury Resources, and Mariner Energy. Ms. Sugg has a B.S. in Chemical
Engineering from Oklahoma State University and has completed numerous advanced management and board of director education programs. She is a member of G100 Board Excellence and National Association of Corporate Directors.
MS. SUGG’S BROAD BACKGROUND IN THE ENERGY INDUSTRY AND SERVICE AS A DIRECTOR ON VARIOUS PUBLIC COMPANY BOARDS BRINGS EXPERTISE IN THE ENERGY INDUSTRY, OPERATIONAL AND CORPORATE MATTERS. AMONG OTHER
QUALIFICATIONS, SHE BRINGS TO THE BOARD SPECIFIC EXPERIENCE IN SENIOR LEADERSHIP, HUMAN CAPITAL MANAGEMENT, REGULATORY AND FINANCIAL MATTERS.
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Kinetik Holdings Inc. |
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2023 Proxy Statement |
Jamie
Welch
AGE: 56
DIRECTOR SINCE: 2022
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Mr. Welch has served as our Chief Executive Officer, President and Chief Financial Officer and as a member of our board of directors since February
2022. Prior to February 2022, he served as President, Chief Executive Officer and Chief Financial Officer of BCP GP (as defined below),
a position he held since May 2021. From April 2019, he was President and CEO and before then was President and CFO. Prior to February
2022, he served as director of BCP Raptor Holdco GP, LLC, the general partner of BCP (“BCP GP”) since June 2017. Mr. Welch
has served as a Senior Advisor to Blackstone Energy Partners (“Blackstone”) since July 2016. Prior to joining Blackstone and
BCP GP, he was the Group Chief Financial Officer and Head of Business Development for the Energy Transfer Equity, L.P. (“ETE”)
family from June 2013 to February 2016. Mr. Welch also served on the board of directors of ETE, Energy Transfer Partners and Sunoco Logistics.
Before joining ETE, Mr. Welch was Head of the EMEA Investment Banking Department and Head of the Global Energy Group at Credit Suisse.
He was also a member of the Investment Banking Division Global Management Committee and the EMEA Operating Committee. Mr. Welch joined
Credit Suisse First Boston in 1997 from Lehman Brothers Inc. in New York, where he was a Senior Vice President in the global utilities
and project finance group. Prior to that he was an attorney in New York with Milbank, Tweed, Hadley & McCloy and a barrister and solicitor
with Minter Ellison in Melbourne, Australia. Mr. Welch received a Bachelor of Law and a Diploma of Legal Practice from Queensland University
of Technology.
MR. WELCH’S SERVICE AS A CEO, PRIOR PUBLIC COMPANY EXECUTIVE EXPERIENCE AND EXTENSIVE EXPERIENCE MANAGING AND OVERSEEING INVESTMENTS PROVIDES HIM WITH EXPERIENCE IN THE FINANCIAL AND OPERATIONAL RISKS OF AN
ENERGY COMPANY. HE IS WELL QUALIFIED TO SERVE ON OUR BOARD DUE TO THIS EXTENSIVE EXPERIENCE IN THE MIDSTREAM ENERGY INDUSTRY.
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VOTE
The Board recommends that you vote “FOR
ALL NOMINEES” for the election of directors.
Kinetik Holdings Inc. |
13 |
2023 Proxy Statement |
Board Diversity
Each year, our Governance Committee will review, with the Board,
the appropriate characteristics, skills and experience required for the Board as a whole and its individual members. In evaluating
the suitability of individual candidates, our Governance Committee will consider factors including, without limitation, an
individual’s judgment, skill, diversity, independence under applicable standards, experiences with businesses and other
organizations of comparable size, the interplay of the individual’s experiences with the experience of other directors, and
the extent to which the individual would be a desirable addition to the Board and any committees of the Board. While we have no
formal policy regarding board diversity for our Board as a whole nor for each individual member, the Governance Committee does
consider such factors as gender, race, ethnicity, age, experience and area of expertise, as well as other individual attributes that
contribute to the total diversity of viewpoints and experience represented on the Board.
The matrix below outlines the diverse set of skills and expertise
represented on the Company’s Board:
Knowledge, Skills and Experience |
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Public
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Senior Leadership Experience |
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M&A
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Finance / Capital Management |
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Accounting |
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Risk Management |
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Environmental / Sustainability |
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Industry Experience |
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Operations / Engineering |
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Human Capital |
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Investor Relations |
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Government Relations / Regulatory |
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Technology / Cybersecurity |
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Kinetik Holdings Inc. |
14 |
2023 Proxy Statement |
Independence
Gender Age Tenure
Director Service on Other
Boards
The Board believes that director service on other company boards
contributes valuable experience and perspective to the Kinetik Board. However, the Board also expects each director to devote
sufficient time to effectively fulfill such director’s duties as a director of Kinetik. In evaluating director nominees, our
Governance Committee considers, among other things, the number of other public company boards on which the nominee serves. The
Company’s Corporate Governance Guidelines provide that no director may serve on the board of directors of more than three
other public companies, unless otherwise determined by the Board upon review of a director’s commitments. Additionally, no
member of the Board’s Audit Committee may serve simultaneously on the audit committee of more than three public companies
(including the Company’s Audit Committee) without the Board’s prior approval. The Company’s Corporate Governance
Guidelines additionally provide that in advance of accepting an invitation to serve on another public company board, directors
should advise the Chair of the Board and the Chair of the Governance and Sustainability Committee to allow an assessment to be made
of, among other things, the potential impact of such service on the director’s time and availability, potential conflict of
interest issues and the director’s status as an independent director.
Director Independence
The majority of the members
of the Board at any given time must qualify as independent under New York Stock Exchange (“NYSE”) rules. The Board
has undertaken a review of the independence of each of our director nominees and has determined that each of D. Mark Leland, Kevin
S. McCarthy, Laura A. Sugg, Deborah L. Byers, David I. Foley, JP Munfa, Elizabeth P. Cordia, Ronald Schweizer and Jesse Krynak
are independent under the Company’s Corporate Governance Guidelines and the applicable NYSE listing standards and SEC rules.
The Board has also determined that all members of each of our Audit Committee, Compensation Committee, and Governance Committee are
independent and satisfy the relevant SEC and NYSE independence requirements for service on such committees.
Reporting of Concerns to
Independent Directors
Anyone who has concerns about the Company may communicate those concerns
to the independent directors, including our Lead Independent Director. Such communication should be mailed to the Company’s corporate
secretary at 2700 Post Oak Boulevard, Suite 300, Houston, Texas 77056-5748, and the corporate secretary will review these communications
and forward any such communications that they determine bear substantively on the business, management, or governance of the Company to
the independent directors.
Board Leadership Structure
and Role in Risk Oversight
Board Leadership Structure
The roles of Chair of the Board and Chief Executive Officer are currently
separated, which we believe aids in the Board’s oversight of management, supported by strong independent committee chairs. The Stockholders
Agreement provides Blackstone with the right to designate one of its director designees as the non-executive chairperson of the Board
until the earlier of December 31,
Kinetik Holdings Inc. |
15 |
2023 Proxy Statement |
2024 and such time as Blackstone and its affiliates are no longer entitled to designate directors under
the Stockholders Agreement. The Board believes it is in the best interests of the Company and its stockholders for the Board to have flexibility
in determining the Board leadership structure of the Company and believes the current structure enhances corporate governance and allows
each of our Chair and our Chief Executive Officer to remain focused on their distinct roles, which, for the Chair, primarily involves
Board and corporate governance and, for the Chief Executive Officer, primarily involves day-to-day management leadership and implementing
our corporate strategy. The Board regularly reviews all aspects of its governance profile, including the Board leadership structure, taking
into account the Company and its needs, legislative and regulatory developments, and corporate governance trends, among other things,
and will make changes as it deems appropriate.
Lead Independent Director
In 2022, the Board appointed Laura Sugg as Lead Independent Director in a newly created role. The Board believes that a strong Lead Independent
Director complements the role of the Chair and CEO, enhances the significant contributions of our directors not affiliated with Blackstone,
I Squared or Apache (the “Non-Affiliated Directors”) and promotes confidence in our governance structure. Our Lead Independent
Director is designated by the Board and such position’s duties include (i) meeting independently with the Non-Affiliated Directors,
as needed, (ii) consulting on meeting agendas for the Board and meeting schedules, as appropriate, and (iii) ensuring they are available
for consultation and direct communication with the Company’s major stockholders upon request.
Board Role in Risk Oversight
The full Board oversees the
Company’s risk management, while Company management is responsible for the day-to-day management of risk. To assist it in
this oversight role, the Board’s committees are primarily responsible for certain matters relating to the risks inherent
in the committees’ respective areas of oversight, with each committee regularly reporting and making recommendations to the
full Board. Risk oversight responsibilities for our Board and its committees are delegated as set forth below:
|
● |
Audit Committee: Reviews with management the guidelines and policies governing the process by which senior management of the Company assess and manage the Company’s
exposure to risk and discusses with management (and, if appropriate, the independent auditor) the Company’s major financial risk exposures and cybersecurity risks and the steps management has taken to monitor and control such exposures.
Resolves potential conflicts of interest, in connection with certain related-party transactions, including transactions between the Company or any of its subsidiaries, on the one hand, and Blackstone, I Squared or Apache or their respective
subsidiaries, on the other hand, in accordance with the related-party transaction policies adopted by our Board. |
|
● |
Compensation Committee: To the extent the Company may directly employ and compensate executives, reviews the executive compensation program to ensure it does not encourage
excessive risk-taking; reviews and discusses, at least annually, the relationship between risk management policies and practices, corporate strategy and ESG priorities and the Company’s compensation arrangements; and reviews our executive
compensation and incentive compensation plans to ensure we have appropriate practices in place to support the retention and development of the talent necessary to achieve our business goals and objectives. |
|
● |
Governance and Sustainability Committee: Develops and recommends to the Board a code of conduct and ethics for the Company’s directors, officers, and employees (if any)
dealing with such matters as the ethical conduct of the Company’s business and the prohibition of conflicts of interest for directors, officers, and employees. The Committee is also responsible for ensuring refreshment of Board members
who have the appropriate skills and experiences, including with regard to risk management issues. Further, the Committee was recently
renamed in 2023 and its remit was expanded to include review and provide oversight of risks related to the Company’s strategy, initiatives,
policies and practices on corporate governance, environmental, health and safety, corporate social responsibility, sustainability, and
other related environmental, social or governance policy matters that are significant to the Company. |
Kinetik Holdings Inc. |
16 |
2023 Proxy Statement |
Our Board receives regular updates and recommendations from the
committees about these activities, and reviews additional risks not specifically within the purview of any particular committee and
risks of a more strategic nature, including operational risks and those relating to health, environment, safety, and security,
including risks relating to climate change and human capital management.
In addition to the oversight
provided by our full Board, its committees, executive officers, and the members of our management team, our independent directors
hold regularly-scheduled executive sessions as often as they deem appropriate. These executive sessions provide an additional avenue
through which the Board monitors the Company’s risk exposure and policies regarding risk management.
The Company believes that this
structure and division of responsibility is the most effective way to monitor and control risk.
Sustainability and ESG
At Kinetik, we believe that integrating environmental, safety, governance and community
considerations into our business decisions is essential to creating value for our stakeholders, including our stockholders, lenders, customers,
employees, business partners, regulators and citizens in the communities where we live and work. Operational safety and environmental
protection are top priorities at Kinetik and we require a commitment from all employees and business partners to operate in a safe, reliable
and environmentally sound manner.
We released our second environmental, social and governance report in July
2022, which provides a comprehensive review of Kinetik’s progress towards advancing a safer, cleaner and more reliable energy future,
building a more diverse and inclusive culture, and investing in the communities in which we operate. We are committed to communicating
with transparency, and our report follows best practice in ESG reporting and was prepared in reference to the Global Reporting Initiative
(GRI) Standards, the Sustainability Accounting Standards Board (SASB) and the Energy Infrastructure Council (EIC) / GPA Midstream Association.
Please visit https://www.kinetik.com/sustainability for more information and a link to our most recent ESG report for a detailed disclosure
on our sustainability and ESG performance. Additional context on Kinetik’s sustainability strategy, targets, and results for fiscal
year 2022 will be detailed in our 2022 ESG Report, expected to be published mid-year. Some highlights of our sustainability and ESG efforts appear below.
Environmental |
|
|
Commitment to Reducing Emissions |
● |
Reduced Kinetik’s Scope 1 and 2 absolute greenhouse gas emissions between 2020 and 2021. |
● |
Sourced 100% of BCP’s purchased electric power used in operations from renewable sources beginning in April 2021, resulting in a reduction in
Kinetik’s Scope 2 greenhouse gas emissions between 2020 and 2021. |
● |
In 2022, partnered with Tachyus to implement Aurion, a software platform used to estimate, model, forecast and report our greenhouse gas
emissions. |
● |
Employed a robust LDAR program in 2022 enabling Kinetik to proactively identify and rectify any potential methane and volatile organic compound
(VOC) emissions from our operations. |
● |
In 2022, implemented voluntary enhanced leak detection and repair measures designed to minimize methane leaks from our operations through the
installation of OGI cameras at certain facilities and by conducting six LIDAR flyovers of our facilities. |
● |
Expanded use of electric compression across the Company’s system to reduce Scope 1 greenhouse gas emissions from our operations. |
● |
Incorporated sustainability performance targets relating to greenhouse gas emissions in 100% of our debt capital financings. |
● |
In 2023, we continue to focus on exploring and implementing new technologies and best
practices to achieve further reductions in our greenhouse gas emissions. |
Kinetik Holdings Inc. |
17 |
2023 Proxy Statement |
Environmental |
|
|
Environmental Stewardship |
● |
Incurred zero environmental fines in 2021 and 2022 |
● |
Continued focus on the buildout of an ESG-focused team, including 2022 appointment of a VP of Sustainability to provide oversight and coordinate
the Company’s ESG-reporting and sustainability efforts. |
|
|
|
Social |
|
|
Focus on Safety |
● |
Awarded GPA Midstream’s Perfect Record Award in 2022 for no lost time incidents in 2021. |
● |
Achieved over 4,700 hours of EHS focused training for field employees in 2021. |
● |
Maintain field level and corporate response plans, conduct drills to test those plans, and use automated communication systems to improve
incident response times. |
● |
Recently established the Kinetik Safety Committee, an empowered, employee-based safety committee to assist in enhancing our safety performance
and culture. |
● |
Incorporated strategically aligned ESG-related metrics into Kinetik’s executive
compensation program. |
Support For Our Employees and Communities |
●
● |
In 2021, completed first full year of employee volunteer program resulting in 182 hours volunteered.
In 2021, contributed over $260,000 to local community causes and charitable organizations.
|
● |
Supported Kinetik Cares Foundation to provide support to company employees impacted by unexpected life events. |
● |
Increased local sourcing and procurement spend to 75% in 2021. |
|
|
Governance |
|
|
Engaged in Strong Corporate Governance Practices |
● |
All of our directors are elected on an annual basis. |
● |
Our Corporate
Governance Guidelines limit the number of other public company boards on which our directors may serve and require directors to notify the Governance Committee before accepting an invitation to serve on additional public company boards. |
● |
We do not have any super-voting shares, meaning each share of our Class A and Class C Common
Stock is entitled to one vote. |
● |
Our bylaws allow stockholders to
act by written consent and for stockholders beneficially owning at least 10% of the Company’s stock to call a special meeting. |
● |
We regularly refresh our Board committee charters, Corporate Governance Guidelines, Code of
Business Conduct, and other governance documents. |
● |
The Board and its committees conduct annual self-evaluations. |
● |
We have adopted insider trading, anti-hedging, and anti-pledging policies and have implemented
significant stock ownership guidelines for our directors. |
● |
We hold regular, frequent meetings of independent directors in executive session without
management present. |
● |
Our
Governance Committee regularly assesses the skills, composition and evolving needs of the Board and seeks to balance the membership as a part of its annual nomination process. |
Focus on Diversity and Independence |
● |
Nine of our eleven Board members (or 82% of our Board) are independent under NYSE rules. All
members of our Board committees are independent directors. |
● |
Separate Chair, CEO and Lead Independent Directors with clearly defined roles. |
● |
Board leadership is diverse: Two of our three Board committees are chaired by women. |
● |
Three of our directors are women and two directors identify as members of racially/ethnically
diverse groups. |
● |
Increased female representation in corporate
officer positions from 7% in 2021 to 17.6% in 2022, with a goal of 20% by year end 2026. |
The Board and its committees, namely the Governance and Sustainability Committee, maintain oversight over our ESG policies and practices,
which may include, but is not limited to, responsibility for policies and practices on environmental, health and safety, including climate-change
related matters, evaluating ESG goals, monitoring legislative and regulatory developments, social responsibility issues, philanthropy,
and overseeing the preparation of our sustainability reports. Our executive committees help
Kinetik Holdings Inc. |
18 |
2023 Proxy Statement |
to provide strategic development of our ESG goals and programs and include our CEO Oversight Committee and an Executive Oversight Committee.
Our Vice President of Sustainability provides coordination of ESG Initiatives within the Company, and our ESG Working Committee leads
the day-to-day implementation of our ESG program and its targets.
Anti-Hedging and Pledging
Policy
All of our directors, officers,
employees and consultants that are aware of certain material, non-public information are subject to our Insider Trading Policy.
Our Insider Trading Policy, among other things, discourages all hedging or monetization transactions, whether direct or indirect,
involving the Company’s securities, as well as all transactions involving derivative securities, whether or not entered into
for hedging or monetization purposes. Furthermore, under our Insider Trading Policy, any person who receives material, non-public
information cannot enter into a corresponding or hedging transaction, or alter an existing corresponding or hedging position with
respect to the securities to be bought or sold under a Rule 10b5-1 Plan. Directors, officers, employees and consultants are also
prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan, without
obtaining preclearance from the General Counsel.
Standing Committees and
Meetings of the Board
The standing committees of our Board
include an Audit Committee, a Compensation Committee, and a Governance and Sustainability Committee. Actions taken by these
committees are reported to our Board at the next Board meeting. During 2022, the Board held 7 meetings, and each of the
Company’s continuing directors who was then-serving attended or participated in at least 75 percent of all regularly
scheduled meetings of our Board and committees of which he was a member. Our Corporate Governance Guidelines provide that directors
are encouraged to attend our annual stockholder meetings, and approximately one-third of our directors attended our 2022 Annual
Meeting of Stockholders.
|
|
|
Committees |
|
Name |
Board |
Audit |
Compensation |
Governance |
Deborah L. Byers |
|
● |
|
● |
Elizabeth P. Cordia |
|
|
|
|
David I. Foley |
|
|
● |
|
D. Mark Leland |
|
● |
|
● |
Kevin S. McCarthy |
|
● |
● |
|
John-Paul (JP) Munfa |
|
|
|
|
Jesse Krynak |
|
|
|
|
Ben C. Rodgers |
|
|
|
|
Ronald Schweizer |
|
|
|
|
Laura A. Sugg |
|
● |
● |
● |
Jamie Welch |
|
|
|
|
● |
- Chairperson |
● |
- Committee Member |
Kinetik Holdings Inc. |
19 |
2023 Proxy Statement |
Audit Committee
The Audit Committee assists the
Board in fulfilling its oversight responsibility relating to:
|
● |
the integrity of the Company’s financial statements, accounting and financial reporting processes, and systems of internal controls over accounting and financial reporting; |
|
● |
the Company’s compliance with legal and regulatory requirements; |
|
● |
the independent auditor’s qualifications, independence, and performance, including having sole authority for appointment, compensation, oversight, evaluation, and termination; |
|
● |
the performance of the Company’s internal audit function; |
|
● |
the report of the Audit Committee required by the rules of the Securities and Exchange Commission (“SEC”), as included in this proxy statement; |
|
● |
the overall dividend reinvestment plan percentage for the core stockholders (including Blackstone, I Squared and Apache); and |
|
● |
the fulfillment of the other responsibilities set out in its charter. |
As described
more fully above in “Board Leadership Structure and Role in Risk Oversight—Board Role in Risk Oversight,” the Audit
Committee is also tasked with reviewing the guidelines and policies governing the process by which both the senior management and the
relevant departments of the Company assess and manage the Company’s exposure to risk. In addition, the Audit Committee oversees
the Company’s major financial risk exposures and cybersecurity risks and the steps management has taken to monitor and control
such exposures.
As described more fully below in
“Policies with Respect to Related Party Transactions,” the Audit Committee also resolves potential conflicts of interest
in connection with certain related-party transactions, including transactions between the Company or any of its subsidiaries, on the
one hand, and the BX Holders, ISQ or Apache or their respective subsidiaries, on the other hand.
During the year ended December
31, 2022, the Audit Committee held 5 meetings. The Board has determined that each of Deborah L. Byers, chairperson of the Audit
Committee, and D. Mark Leland qualify as an audit committee financial expert, as defined under SEC rules. The Board has determined
that each of Deborah L. Byers, D. Mark Leland, Laura A. Sugg and Kevin S. McCarthy is “independent” under the SEC and
NYSE rules. Joe C. Frana and Mark Borer also served on the Audit Committee from January 1, 2022 until the closing of the business
combination transactions on February 22, 2022, contemplated by the Contribution Agreement, dated as of October 21, 2021, by and
among the Company, Altus Midstream LP, a Delaware limited partnership and subsidiary of the Company (by name change, now known as
Kinetik Holdings LP and defined herein as the “Partnership”), Contributor, and BCP. The transactions contemplated by the
Contribution Agreement are referred to herein as the “Transactions.”
Compensation Committee
The Compensation Committee’s
principal functions include:
|
● |
reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, if any is paid by us, evaluating our Chief
Executive Officer’s performance in light of such goals and objectives, and determining and recommending to the Board for approval the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
|
● |
reviewing and recommending to the Board for approval on an annual basis the compensation, if any is paid by us, of all of our other officers; |
|
● |
reviewing on an annual basis our executive compensation policies and plans; |
|
● |
reviewing and approving any new hire, severance or termination arrangements to be made with any executive officer; |
|
● |
assisting management in complying with our proxy statement and annual report disclosure requirements; |
Kinetik Holdings Inc. |
20 |
2023 Proxy Statement |
|
● |
approving all special perquisites, special cash payments, and other special compensation and benefit arrangements for our officers and employees; |
|
● |
if required, producing a report on executive compensation to be included in our annual proxy statement; and |
|
● |
reviewing, evaluating, and recommending changes, if appropriate, to the remuneration for directors. |
The Compensation Committee charter
also provides that the Compensation Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant,
legal counsel, or other adviser and will have sole authority over the appointment, compensation, and oversight of the work of any such
adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel, or any other adviser, the
Compensation Committee will consider the independence of each such adviser, including the factors required by NYSE and the SEC.
The Compensation Committee may form
subcommittees for any purpose that the Compensation Committee deems appropriate and may delegate to such subcommittees such power and
authority as the Compensation Committee deems appropriate; provided, however, that no subcommittee shall consist of fewer than two members;
and provided further that the Compensation Committee shall not delegate to a subcommittee any power or authority required by any law,
regulation, or listing standard to be exercised by the Compensation Committee as a whole.
The Chief Executive
Officer may make, and the Compensation Committee may consider, recommendations to the Compensation Committee regarding the Company’s
compensation and employee benefit plans and practices, including its executive compensation plans, its incentive-compensation and equity-based
plans with respect to executive officers (other than the Chief Executive Officer), and the Company’s director compensation arrangements.
During the year ended December 31, 2022, the Compensation Committee held 3 meetings. The Compensation Committee consists solely of
independent directors as defined under and required by the NYSE rules and “non-employee directors” under Section 16 of the Exchange Act. From January 1, 2022 until the consummation of the Transactions on February 22, 2022, Staci Burns,
Robert S. Purgason and Jon W. Sauer also served on the Compensation Committee.
Governance and Sustainability Committee
The Governance Committee is responsible
for, among other things:
|
● |
establishing criteria for the selection of potential directors; |
|
● |
recommending to the Board the slate of director nominees submitted to the stockholders for election at each annual meeting and proposing qualified candidates to fill vacancies on
the Board; |
|
● |
overseeing the annual evaluation of the Board, its committees and management; |
|
● |
recommending committee membership, including a chairperson, for each committee; |
|
● |
preparing and recommending to the Board the appropriate corporate governance guidelines and Code of Business Conduct and overseeing the Company’s overall corporate governance; and |
|
● |
reviewing the Company’s strategy, initiatives, policies, and practices on corporate governance, environmental, health and safety, corporate social responsibility, sustainability, and other related policy
matters. |
The Governance Committee considers
director nominee recommendations from executive officers of the Company, independent members of the Board, and stockholders of the Company,
as well as recommendations from other interested parties. The Governance Committee may also retain an outside search firm to assist it
in finding appropriate nominee candidates. The Governance Committee will consider recommendations of potential director candidates from
stockholders based on the same criteria as a candidate identified by the any other source. Stockholders may submit such a recommendation
by sending a letter to the Company’s corporate secretary (at the address for submitting stockholder proposals and nominations set
forth under the heading Future Stockholder Proposals and
Kinetik Holdings Inc. |
21 |
2023 Proxy Statement |
Director Nominations below). Stockholder
recommendations for director nominees received by the Company’s corporate secretary are forwarded to the Governance Committee for
consideration.
Our Corporate Governance Guidelines
contain criteria that apply to nominees recommended by the Governance Committee for positions on our Board. Under these criteria, the
Governance Committee considers the following, among other things, in recommending new nominees or the re-election of directors to the
Company’s Board and its committees members of our Board:
|
● |
High personal and professional ethics, integrity and values; |
|
● |
Commitment to representing the long-term interests of the Company and its stockholders; |
|
● |
Expertise and perspective needed to govern the business and strengthen and support senior management; |
|
● |
Diversity of background, skills and experiences that will balance our Board and provide appropriate oversight of our business and strategy; |
|
● |
Willingness to commit the required time to serve as a Board member, including service on other public company boards pursuant to the Company’s
Corporate Governance Guidelines; |
|
● |
Ability to constructively participate in discussions, with the capacity to quickly understand and evaluate complex and diverse issues; |
|
● |
Dedication to the highest health, safety, governance and environmental standards; |
|
● |
Supportive of management, but independent, objective, and willing to question and challenge both openly and in private exchanges; and |
|
● |
Represent the interests of all stockholders. |
Subject
to the Stockholders Agreement, all decisions to recommend the nomination of a new nominee for election to the Board or for the re-election
of a director are within the sole discretion of the Governance Committee. All director candidates are evaluated, and the decision of
whether or not to nominate a particular candidate is made, based solely on Company- and work-related factors.
For information regarding the experiences,
qualifications, attributes, and skills of the current members of our Board, please see “Proposal 1. Election of Directors—Board
Diversity.”
During the year ended December 31,
2022, the Governance Committee held 3 meetings. From January 1, 2022 until the consummation of the Transactions on February 22, 2022, Christopher J. Monk and Stephen Noe also served
on the Governance Committee.
Committee Charters
Charters for the Audit, Compensation
and Governance Committees of the Board, along with the Corporate Governance Guidelines, each as amended from time to time, are available
on the Company’s website, www.kinetik.com. Our Code of Business Conduct, which meets the requirements of a code of ethics
under applicable SEC regulations and NYSE corporate governance requirements, also is available on the Company’s website.
You may request printed copies of any of these documents by writing to the Company’s corporate secretary at 2700 Post Oak
Boulevard, Suite 300, Houston, Texas 77056-5748.
Board and Committee Evaluations
Our Board recognizes that a
thorough evaluation process is an important element of corporate governance and enhances our Board’s effectiveness. Therefore,
each year, the Board Chair and the Chair of each standing committee request that the directors provide their assessment of the
effectiveness of the full Board and each of the committees on which they serve. The responses are organized and summarized and
provided to each Chair for review and discussion at the next scheduled meeting. Each year the Governance Committee also evaluates
the adequacy of the evaluation process.
Kinetik Holdings Inc. |
22 |
2023 Proxy Statement |
Report of the Audit Committee
The following report of the Audit
Committee of the Company shall not be deemed to be “soliciting material” or to be “filed” with the Securities
and Exchange Commission, nor shall this report be incorporated by reference into any filing made by the Company under the Securities
Act or the Securities and Exchange Act of 1934, as amended.
The Audit Committee has reviewed
and discussed the audited financial statements for the fiscal year ended December 31, 2022 with management of the Company. The Audit
Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the applicable
requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The Audit Committee has also received
the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of
the PCAOB regarding the independent accountants’ communications with the Audit Committee concerning independence, and has discussed
with the independent registered public accounting firm the accounting firm’s independence. Based on the foregoing, the Audit Committee
has recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2022.
Members
of the Audit Committee
Deborah
L. Byers
D.
Mark Leland
Kevin
S. McCarthy
Laura
A. Sugg
Securities Ownership
and Principal Holders
The
following table sets forth, as of April 14, 2023, the beneficial ownership of the Company’s Class A Common Stock and Class C Common
Stock of (i) each director of the Company, (ii) the Company’s named executive officers for fiscal year 2022, as defined herein,
(iii) all directors and executive officers of the Company as a group and (iv) each person known to us to be the beneficial owner of more
than 5% of our outstanding Common Stock. The table also sets forth the combined voting power of each of the foregoing based on the number
of shares of Class A Common Stock and Class C Common Stock held by such person as of April 14, 2023. All ownership information is based
upon filings made by those persons with the SEC and upon information provided to the Company.
Beneficial
ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security
if he, she, or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently
exercisable or exercisable within 60 days. Unless otherwise indicated, we believe that all persons named in the table below have sole
voting and investment power with respect to all shares of voting Common Stock beneficially owned by them.
As
of April 14, 2023, there were 49,054,411 shares of our Class A Common Stock and 94,089,038 shares of our Class C Common Stock outstanding.
Unless otherwise noted, the business address of each of the directors and executive officers in this table is 2700 Post Oak Boulevard,
Suite 300, Houston, Texas 77056.
|
|
Class A Common Stock |
|
Class C Common Stock |
|
Combined Voting Power(6) |
Name |
|
Number |
|
% |
|
Number |
|
% |
|
Number |
|
% |
5% Stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
APA
Corporation |
|
19,643,402 |
(1) |
40.04% |
|
— |
|
— |
|
19,325,188 |
|
13.50% |
Blackstone Inc.(2) |
|
9,779,692 |
|
19.94% |
|
65,542,472 |
|
69.66% |
|
71,458,978 |
|
49.92% |
I Squared Capital(3) |
|
4,087,085 |
|
8.33% |
|
27,489,164 |
|
29.22% |
|
29,968,706 |
|
20.94% |
Kinetik Holdings Inc. |
23 |
2023 Proxy Statement |
|
|
Class A Common Stock |
|
Class C Common Stock |
|
Combined Voting Power(7) |
Name |
|
Number |
|
% |
|
Number |
|
% |
|
Number |
|
% |
Directors and Named Executive Officers: |
|
|
|
|
|
|
|
|
|
|
|
|
Jamie Welch(4) |
|
3,142,661 |
|
6.41% |
|
798,320 |
|
* |
|
3,916,493 |
|
2.74% |
Elizabeth P. Cordia |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
David I. Foley |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Deborah L. Byers |
|
3,191 |
|
* |
|
— |
|
— |
|
3,191 |
|
* |
John-Paul (JP) Munfa |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Jesse Krynak
|
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Laura A. Sugg |
|
47,677 |
|
* |
|
— |
|
— |
|
47,677 |
|
* |
D. Mark Leland |
|
17,060(6) |
|
* |
|
— |
|
— |
|
11,378 |
|
* |
Kevin S. McCarthy |
|
103,008(6) |
|
* |
|
— |
|
— |
|
64,120 |
|
* |
Ronald Schweizer |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Ben C. Rodgers |
|
500 |
|
* |
|
— |
|
— |
|
500 |
|
* |
Clay Bretches |
|
24,970 |
|
* |
|
— |
|
— |
|
24,970 |
|
* |
All
directors and executive officers as a group (15 persons)(5) |
|
4,385,252 |
|
8.94% |
|
798,320 |
|
* |
|
5,114,514 |
|
3.57% |
* |
Less than 1%. |
(1) |
Consists of (i) 19,325,188 shares of Class A Common Stock and (ii) 318,214 shares of Class A Common Stock issuable upon exercise of warrants
beneficially owned by APA (NASDAQ: APA). The address of APA is 2000 Post Oak Blvd., Suite 100, Houston, TX 77056. Each whole warrant entitles the holder to purchase one tenth of a share of Class A Common Stock at a price of $115.00 per
share and will
expire on November 9, 2023 or upon redemption or liquidation. |
(2) |
Consists of (i) 5,089,245 shares of Class A
Common Stock, 56,421,146 shares of Class C Common Stock and 3,326,025 shares of Class A Common Stock issuable upon settlement of rights to receive re-issued shares pursuant to the Consideration Allocation Rights Agreement, dated as of
February 22, 2022, with BCP Aggregator, BX Permian, ISQ and certain other parties listed on the signature pages thereto (“Consideration Allocation Rights”) held by BX Aggregator and (ii) 822,748 shares of Class A Common Stock, 9,121,326
shares of Class C Common Stock and 537,161 shares of Class A Common Stock issuable upon settlement of Consideration Allocation Rights held by BX Permian and (iii) 4,513 shares of Class A Common Stock held by Harvest Fund Advisors LLC, an
indirect subsidiary of Blackstone (“HFA”), which shares are held by funds and accounts managed by HFA in the ordinary course of its business. BCP VII/BEP II Holdings Manager L.L.C. (“Holdings Manager”) is the general partner of each of BX
Aggregator and BX Permian. Blackstone Energy Management Associates II L.L.C. and Blackstone Management Associates VII L.L.C. are the managing members of Holdings Manager. Blackstone EMA II L.L.C. is the sole member of Blackstone Energy
Management Associates II L.L.C. BMA VII L.L.C. is the sole member of Blackstone Management Associates VII L.L.C. Blackstone Holdings III L.P. is the managing member of each of BMA VII L.L.C. and Blackstone EMA II L.L.C. Blackstone Holdings
III GP L.P. is the general partner of Blackstone Holdings III L.P. Blackstone Holdings III GP Management L.L.C. is the general partner of Blackstone Holdings III GP L.P. Blackstone is the sole member of Blackstone Holdings III GP Management
L.L.C. and indirectly controls HFA, an indirect subsidiary of Blackstone, through one or more subsidiaries. The sole holder of the Series II preferred stock of Blackstone is Blackstone Group Management L.L.C. Blackstone Group Management
L.L.C. is wholly owned by Blackstone’s senior managing directors and controlled by its founder, Stephen A. Schwarzman. The address of the principal business office of each of the entities described in this footnote is c/o Blackstone Inc.,
345 Park Avenue, New York, NY 10154. |
(3) |
Consists of (i) 2,479,542 shares of Class A Common Stock, (ii) 27,489,164 shares of Class C
Common Stock and (iii) 1,607,543 shares of Class A Common Stock issuable upon settlement of Consideration Allocation Rights held by ISQ. ISQ Global Fund II GP, LLC (“Fund II GP”) is the general partner of the members of the
indirect owners of ISQ and, in such capacity, exercises voting and investment power over the securities directly held by ISQ. I Squared Capital, LLC is the sole member of Fund II GP. ISQ Holdings, LLC is the managing member of I Squared
Capital, LLC. Each of Sadek Magdi Wahba, Gautam Bhandari and Adil Rahmathulla is a member of ISQ Holdings, LLC but, in reliance on the “rule of three”, disclaim beneficial ownership over the shares of Class A Common Stock reported as
beneficially owned by Fund II GP, I Squared Capital, LLC and ISQ Holdings, LLC. The address of the principal business office of each of the entities describes in this footnote is c/o ISQ Global Fund II GP, LLC, 600 Brickell Avenue,
Penthouse, Miami, Florida 33131. |
(4) |
Includes 3,116,038 shares of Class A Common Stock and 24,488 shares of Class A Common Stock issuable upon settlement of
Consideration Allocation Rights held by Jamie Welch, 1,310 shares of Class A Common Stock held in Jamie Welch’s spouse’s individual retirement account and 825 shares of Class A Common Stock held in Jamie
Welch’s 401(k) account. |
(5) |
Includes current directors and executive officers as of April 14, 2023. |
(6) |
Includes the following number of shares of Class A Common Stock issuable upon the exercise of warrants: Mr. Leland –
5,682 and Mr. McCarthy – 38,888; and all directors and executive officers as a group – 44,570. Each whole warrant entitles the holder to purchase one-tenth of a share of Class A Common Stock at a price of $115.00 per share and will expire
on November 9, 2023 or upon redemption or liquidation. |
(7) |
This
column reflects the combined voting power of the Class A Common Stock and Class C Common Stock held by each identified stockholder as
of April 14, 2023. Consideration Allocation Rights represent the right to receive shares of Class A Common Stock held by certain employees
of the Company that may be forfeited back to the Company in certain circumstances and reallocated among the holders of the Consideration
Allocation Rights. The holders of the Consideration Allocation |
Kinetik Holdings Inc. |
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2023 Proxy Statement |
|
Rights are not entitled to vote or dispose of the Class A Common Stock
underlying such rights unless such Class A Common Stock is forfeited back to the Company and reallocated among the holders of the Consideration
Allocation Rights. Because the holders of the Consideration Allocation Rights are not entitled to vote or dispose of the shares of Class
A Common Stock underlying such rights, such shares were not included when calculating a holder’s combined voting power. |
Securities Authorized for
Issuance Under Equity Compensation Plans
The following table summarizes
information as of December 31, 2022, relating to the Company’s equity compensation plans, under which grants of stock, stock
options, restricted stock units, or other rights to acquire shares of Class A Common Stock may be granted
from time to time.
Plan Category |
Number of Securities to be
Issued Upon Exercise of
Outstanding Options, Warrants,
and Rights
(#)(a) |
Weighted-Average Exercise
Price of Outstanding Options,
Warrants, and Rights
($)(b) |
Number of Securities Remaining
Available for Future Issuance
Under Equity Compensation Plans
(Excluding Securities Reflected in
Column (a))
(#)(c) |
|
Equity compensation plans approved by securities holders(1) |
121,245 |
— |
999,066(2) |
|
Equity compensation plans not approved by security holders |
— |
— |
— |
|
Total |
121,245 |
— |
999,066 |
|
(1) |
The Company’s 2019 Omnibus Compensation Plan (“2019 Plan”), which was approved by the Company’s stockholders on May 30, 2019, was approved by the Company’s security holders
and is the only equity compensation plan maintained by the Company. |
(2) |
Reflects the number of shares of Class A Common Stock remaining available for issuance under the 2019 Plan. The amount shown gives effect to the Company’s one-for-twenty reverse stock
split, which was effected June 30, 2020, and the two-for-one stock split, in the form of a stock dividend, which was effected on June 8, 2022. |
Kinetik Holdings Inc. |
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2023 Proxy Statement |
Policies with Respect to
Related Party Transactions
Related Persons Transactions Policy
Under the Company’s Related
Persons Transactions Policy adopted by our Board in 2022, management, with the assistance of Kinetik’s Legal Department,
is responsible for determining whether a transaction between the Company and a Related Person (as defined below) constitutes an
Interested Transaction (as defined below). This determination is based on a review of all facts and circumstances regarding the
transaction. Upon determination that a transaction is an Interested Transaction that has not been approved by the full Board, the
material facts regarding the transaction are reported to the Audit Committee for its review. The Audit Committee then determines
whether to approve, revise, reject, or take other action with respect to the Related Person Transaction.
An “Interested Transaction”
under the Company’s Related Persons Transactions Policy is generally a transaction in which the Company or a subsidiary is
a participant, the amount involved exceeds $120,000, and a Related Person has a direct or indirect material interest. A “Related
Person” is generally any person who is a director or executive officer of the Company, any nominee for director, any stockholder
known to the Company to be the beneficial owner of more than 5% of any class of the Company’s voting securities, and any
immediate family member (as defined by the SEC) of any of the foregoing persons. Transactions involving Apache or its subsidiaries
are addressed by the Company’s Apache Corporation Related Party Transaction Policy described below.
Apache Corporation Related Party Transaction
Policy
In 2022, our Board adopted the Apache
Corporation Related Party Transaction Policy (the “Apache RPT Policy”) based upon a policy originally adopted by our Board
in connection with the initial business combination. Under the Company’s Apache RPT Policy, our management team is required to
present the following transactions with Apache to the Audit Committee for review and approval:
|
● |
related-party transactions that are not pre-approved under the Apache RPT Policy and involve an aggregate amount paid to or by the Company or its subsidiaries of more than $20
million over the life of the transaction or more than $5 million per calendar year (a “Material Amount”); |
|
● |
any amendment of, or waiver of any right or remedy under, certain agreements involving the Company, the Company’s subsidiaries, Apache, Apache’s subsidiaries, or certain third
parties by the Company or its subsidiaries or any related party acting on behalf of such persons (as opposed to a related party acting on its own behalf), which amendment or waiver involves a Material Amount or, if the amount involved cannot
be quantified, could reasonably be expected to have a material and adverse effect to the Company and its subsidiaries, taken as a whole; |
|
● |
the enforcement, or the failure to enforce, by the Company or its subsidiaries or a related party acting on behalf of the Company or its subsidiaries (as opposed to a related
party acting on its own behalf) of any rights or remedies of the Company or its subsidiaries against a related party under any of the agreements described in the immediately preceding bullet that involves a Material Amount or, if the amount
involved cannot be quantified, would be material and adverse to the Company and its subsidiaries, taken as a whole; provided that budgeting, contracting, and other operational matters under any such agreements will not be subject to the
provisions of this bullet and the immediately preceding bullet; and |
|
● |
the entry into any gas processing agreement or gas gathering agreement between the Company or any of its subsidiaries and any person other than a related party, or the amendment of any such agreement, that
causes a related party to have a right to cause certain amendments to our gas gathering agreement with Apache, the effect of which would involve a reduction in the amounts payable by such related party to the Company or its subsidiaries under
such gas gathering agreement, respectively, by a Material Amount. |
The Apache RPT
Policy will automatically terminate upon Apache no longer qualifying as a Related Person as defined under the Company’s Related
Persons Transactions Policy. In connection with each regularly scheduled meeting of the Audit Committee, a summary of each new transaction
with Apache or its subsidiaries is provided to the Audit Committee, regardless of whether approval is required under the Apache RPT Policy.
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2023 Proxy Statement |
Neither the Company’s
Related Persons Transactions Policy nor the Apache RPT Policy limits or affects the application of the Company’s Code of Business
Conduct and related policies, which require directors and executive officers to avoid engaging in any activity or relationship
that may interfere, or have the appearance of interfering, with the performance of the directors’ or executive officers’
duties to the Company. Such policies require all directors and executive officers to report and fully disclose the nature of any
proposed conduct or transaction that involves, or could involve, a conflict of interest and to obtain approval before any action
is undertaken.
Certain Business Relationships
and Transactions
The Company’s Board has adopted
a Code of Business Conduct, which was last revised in November 2022. The Code of Business Conduct prohibits any direct or indirect conflict
of interest between any of our directors, officers, or employees and the Company, unless the Company grants its consent. The Code of
Business Conduct requires our directors, officers, and employees to inform the Company of any transaction that involves related parties
and that may give rise to a conflict of interest. Pursuant to the Amended and Restated Stockholders’ Agreement, dated October 21,
2021, for so long as such agreement remains in effect, certain transactions between the Company and the stockholders specified therein
or their affiliates will require prior approval of 66% or more of the disinterested directors of the Board. The Board reviews transactions
to determine whether a transaction impairs the independence of a director, and such determination is documented in the Board’s
minutes. The Code of Business Conduct is available on the Company’s website, www.kinetik.com.
Additionally, in accordance with
the Related Persons Transactions Policy and the Apache RPT Policy adopted by our Board, our management team is required to present certain
transactions to the Audit Committee for review and approval. For more information, see “Policies with Respect to Related Party
Transactions” above.
Transactions Entered Into
in Connection With the Transactions
On October 21, 2021, the Company
and the Partnership entered into a Contribution Agreement with Contributor and, solely for the purposes set forth therein, BCP.
On February 22, 2022, pursuant to the Contribution Agreement, Contributor contributed all of the equity interests of BCP and BCP
Raptor Holdco GP, LLC, a Delaware limited liability company, the general partner of BCP, to the Partnership in exchange for 50,000,000
Common Units and 50,000,000 shares of Class C Common Stock. In connection with the consummation of the Transactions, the Company and the Partnership changed
their names to Kinetik Holdings Inc. and Kinetik Holdings LP, respectively. The Company also entered into several agreements in
connection with the Transactions which are described further below.
Amended and Restated Stockholders Agreement
In connection with the closing
of the Transactions, the Company entered into the Amended and Restated Stockholders Agreement with APA, Apache Midstream, Contributor,
the BX Holders,
ISQ, and for the limited purposes set forth therein, BCP. For a description of the Stockholders Agreement, please see the “General
Information” section above.
Second Amended and Restated Registration Rights Agreement
In connection with the closing
of the Transactions, we entered into a Second Amended and Restated Registration Rights Agreement (as amended and restated, the
“Registration Rights Agreement”) with Apache Midstream, the BX Holders, ISQ, and Contributor (collectively, with their
respective permitted transferees, the “Principal Holders”) and certain individual holders party thereto (the “Existing
Holders” and, together with the Principal Holders, the “Holders”).
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2023 Proxy Statement |
The Registration Rights Agreement amended and
restated the existing Amended and Restated Registration Rights Agreement, dated November 9, 2018, among Altus Midstream Company
(“Altus”), Kayne Anderson Sponsor, LLC, and Apache Midstream, and will require the Company to register for resale
(i) the private placement warrants (including any shares of Class A Common Stock issued or issuable upon the exercise of
such private placement warrants) held by any Existing Holders, (ii) any outstanding shares of Class A Common Stock or any
other equity security (including the shares of Class A Common Stock issued or issuable upon the exercise of any other equity
security) of the Company owned by any Holder as of the date of the Registration Rights Agreement, (iii) the shares of
Class A Common Stock issued or issuable upon the redemption or exchange of any common units representing limited partnership
interests (“Common Units”) of the Partnership, and Class C Common Stock owned by any Holder, in each case in
accordance with the terms of the Partnership’s partnership agreement, (iv) any shares of Class A Common Stock issued
or issuable upon the exercise of any warrants held by Apache Midstream, (v) any other equity security of the Company issued or
issuable with respect to any registrable security by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation, or reorganization, (vi) the shares of Common Stock, if any, issued to Apache
Midstream in connection with the earn-out consideration pursuant to the Contribution Agreement dated August 8, 2018
among Altus, the Partnership, Apache Midstream, and the other parties thereto, and (vii) any shares of Class A Common
Stock issued to any Holder in connection with the Reinvestment Agreement (as defined below).
Dividend and Distribution Reinvestment Agreement
In connection with the closing of
the Transactions, we entered into a Dividend and Distribution Reinvestment Agreement (the “Reinvestment Agreement”) with
the Partnership, APA, Apache Midstream, ISQ, the BX Holders, Contributor, and certain other individuals associated with Contributor (collectively,
the “Reinvestment Holders”).
The Reinvestment Agreement obligates
each Reinvestment Holder to reinvest in shares of Class A Common Stock at least 20% of all distributions on Common Units or dividends
on shares of Class A Common Stock held by such Reinvestment Holder immediately after the Closing, including shares of Class A
Common Stock received at a later date in exchange for Common Units held immediately after Closing. The Reinvestment Agreement provides
the audit committee of the Board with the authority to at any time increase the percentage of the mandatory dividend reinvestment to
up to 100% of such distributions or dividends or decrease such percentage to not less than 20%. The mandatory obligations of each Reinvestment
Holder will continue from Closing until the earliest of (i) March 31, 2024, (ii) the date dividends and distributions are paid
by the Company and the Partnership, respectively, in respect of the quarter ending December 31, 2023, and (iii) such other
date determined by the audit committee of the Board. All shares of Class A Common Stock issued pursuant to the Dividend and Distribution
Reinvestment Agreement will be issued at a 3% discount to the volume-weighted average price of the Class A Common Stock for the
five trading days immediately preceding, but excluding, the dividend or distribution payment date. For the year ending December 31, 2022,
the Reinvestment Holders have agreed to reinvest 100% of the distributions received with respect to their Common Units and dividends
received with respect to any shares of Class A Common Stock owned by them.
On April 4, 2022, the Company filed
a Registration Statement on Form S-3 registering 15,000,000 shares of Class A Common Stock reserved for issuance under the Company’s
Dividend Reinvestment Plan (the “Plan”), which provides all other holders of Class A Common Stock the optional right
to reinvest all or part of any dividends on shares of Class A Common Stock held by such holder on substantially the same terms as
the Reinvestment Holders.
Application of NYSE Corporate
Governance Listing Standards
Although Kinetik currently
is not considered to be a “controlled company” within the meaning of the NYSE corporate governance rules, it may in
the future become a controlled company if more than 50% of the Company’s voting power is held by an individual, group, or
another company. The BX Holders currently own approximately 49.92 percent of our outstanding Common Stock and, pursuant to the
Reinvestment Agreement, are obligated to reinvest in shares of Class A Common Stock. Consequently, the BX Holders are projected to
Kinetik Holdings Inc. |
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2023 Proxy Statement |
own more than 50% of our Common Stock following
the payment of the Company’s first quarter 2023 dividend. For more information, see “Transactions Entered Into
in Connection With the Transactions—Dividend and Distribution Reinvestment Agreement.” Under the NYSE listing standards,
a controlled company may elect to not comply with certain NYSE corporate governance standards, including the requirements that (i) a
majority of the board of directors consist of independent directors, (ii) it maintain a nominating and corporate governance committee
that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities,
(iii) it maintain a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s
purpose and responsibilities, and (iv) the requirement for an annual performance evaluation of the nominating and corporate governance
and compensation committees. If the BX Holders own more than 50% of our Common Stock, we may utilize any of these exemptions and others
afforded to controlled companies. Consequently, you may not have the same protections afforded to stockholders of companies that are
subject to all of the NYSE corporate governance rules and requirements. Our status as a controlled company could make our common stock
less attractive to some investors or otherwise harm our stock price.
Transactions with Apache
Midstream Service Agreements
The Company contracted to
provide gas gathering, compression, processing, transmission, and natural gas liquids transmission services pursuant to acreage
dedications provided by Apache. In accordance with the terms of these agreements, the Company receives prescribed fees and may
receive excess recovery volumes based on the type and volume of product for which the services are provided. Additionally, beginning
in 2020, the Company entered into three agreements to provide operating and maintenance services for Apache’s compressors in
exchange for a fixed monthly fee per compressor serviced.
Apache also agreed that any gas
produced from Apache-operated wells located within the dedication area that is owned by other working interest owners and royalty
owners is dedicated to us, so long as Apache has the right to market such gas. The agreements, with the exception of the Gas
Processing Agreement, are effective for primary terms beginning on July 1, 2018 and ending March 31, 2032. The primary term will
automatically extend for two five-year periods unless Apache provides at least nine months’ prior written notice of its
election not to extend the primary term. The covenants under the agreements are intended to run with the land and will be binding on
any transferee of the interests within the dedicated area. The Company entered into a new Gas Processing Agreement with Apache with
an effective date of September 1, 2021, which superseded the prior agreement. The prior referenced contractual periods, except the
effective date of the new Gas Processing Agreement, remain unchanged. For the year ended December 31, 2022, Kinetik received $98.6
million from Apache related to the midstream service agreements.
Construction, Operations and Maintenance
Agreement
In connection with the closing
of Altus’s initial business combination, Altus entered into the Construction, Operations and Maintenance Agreement (the
“COMA”) with Apache, pursuant to which Apache provided certain services related to the design, development,
construction, operation, management, and maintenance of Altus’s assets, on its behalf. In 2021, Altus did not have any
employees and, pursuant to the COMA, relied on Apache’s employees for the conduct of its business and operations. Apache may
be reimbursed for certain internal costs and third-party costs incurred in connection with its role as service provider under the
COMA.
On February 22, 2022, in connection
with the closing of the Transactions, the COMA and the April 23, 2019 letter from Apache Corporation to the Company regarding Waiver of Direct
General and Administrative costs under the COMA were each terminated. Kinetik did not pay anything to Apache for the services under the COMA for the year ending on December 31, 2022.
Kinetik Holdings Inc. |
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2023 Proxy Statement |
Lease Agreements
In connection with the closing
of Altus’s initial business combination, Altus entered into an operating lease agreement with Apache, relating to the use of
certain office buildings, warehouse, and storage facilities located in Reeves County, Texas (the “Lease Agreement”).
Under the terms of the Lease Agreement, the Company pays to Apache on a monthly basis the sum of (i) a base rental charge of $44,500
and (ii) an amount based on Apache’s estimate of the annual costs it shall incur in connection with the ownership, operation,
repair, and/or maintenance of the facilities. Unpaid amounts accrue interest until settled. The initial term of the Lease Agreement
is four years and may be extended by the Company for three additional, consecutive periods of twenty-four months, subject to
Apache’s termination rights. To accommodate the Company’s desire to vacate the leased premises, the Lease Agreement was
amended in July 2020 to provide for its termination with respect to all or any portion of the leased premises which Apache may sell,
with a pro rata rent reduction if Apache sells less than all of the leased premises. In September 2022, Kinetik executed the second
amendment to the Lease Agreement. The amendment extended the term of the Lease Agreement through March 31, 2023 and amended the base
rent to be $19,300 per month. Kinetik incurred total expenses of $0.6 million for the year ended December 31, 2022.
In 2020 and 2021, the Company entered
into various operating lease agreements with Apache related to the use of certain compressors. Under the terms of the agreement, Apache
pays fixed monthly lease payments, in addition to a monthly fee to operate and maintain the compressors under lease. Each of these lease
agreements has an initial term of thirty months and automatically extends on a month-to-month basis unless either party cancels the agreement.
Kinetik recorded income related to
these agreements of $4.3 million for the year ended December 31, 2022.
Information About Our Executive
Officers
The following individuals currently
serve as executive officers of the Company:
Name |
Position |
Jamie Welch |
Chief Executive Officer, President and Chief Financial Officer |
Matthew Wall |
EVP, Chief Operating Officer |
Steven Stellato |
EVP, Chief Accounting and Administrative Operating Officer |
Todd Carpenter |
General Counsel, Assistant Secretary and Chief Compliance Officer |
Anne Psencik |
Chief Strategy Officer |
Biographical information for
Mr. Welch is set forth above under the “Proposal 1. Election of Directors—Nominees for Election as Directors”
section.
Matthew Wall, 40, has
served as our Chief Operating Officer since February 2022. Prior to the Transactions, he served as Chief Operating Officer of BCP GP
since May 2019 and Vice President, Operations from July 2017 until May 2019. His industry experience has focused on midstream gas
gathering and processing design and commissioning, as well as on operational support engineering. He is responsible for the safe,
reliable and efficient operation of BCP GP’s measurement, gathering and processing facilities. Prior to joining BCP GP,
Mr. Wall served as Manager of Engineering at Aka Energy Group LLC from April 2014 to June 2017. Prior to Aka Energy,
Mr. Wall was a Sr. Process Engineer at BCCK Engineering, responsible for process design and commissioning for the
company’s EPC projects. His career in midstream began as a Project Engineer at Southern Union Gas Services,
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2023 Proxy Statement |
where he performed
design engineering and project management for expansion and operational projects. He also worked closely with commercial gas supply
to provide various engineering evaluations for system expansions. Mr. Wall received a B.S. in Chemical Engineering from Texas
Tech University.
Steven Stellato,
48, has served as our Executive Vice President, Chief Administrative Officer and Chief Accounting Officer since February 2022.
Prior to February 2022, Mr. Stellato served as Executive Vice President, Chief Administrative Officer and Chief Accounting
Officer of BCP GP. In this capacity, he oversees numerous functions including our ESG, Corporate Communications, Human Resources,
IT and Insurance/Risk Management functions. He has significant experience leading teams in accounting, finance, treasury, tax and
mergers and acquisitions. Prior to joining BCP GP in July 2017, Mr. Stellato served as Vice President and Chief Accounting
Officer of CST Brands and CrossAmerica Partners from June 2015 to June 2017. He also served as Vice President and Controller of
Energy Transfer Partners, LP for six years. Prior to joining Energy Transfer, he was a Senior Manager with the public accounting
firm KPMG, where he focused on clients in the energy industry. Mr. Stellato is a Certified Public Accountant and holds the
CGMA designation, as well as a B.B.A. in Accounting from the University of Texas at San Antonio.
Todd Carpenter, 62, has served as our General
Counsel, Assistant Secretary and Chief Compliance Officer since February 2022. Prior to February 2022, he served as General Counsel
of BCP GP, a position he has held since November 2017. He has more than 25 years’ experience in all phases of commercial and
international law, with representation in the energy, manufacturing and real estate industries. Prior to joining BCP GP,
Mr. Carpenter held several roles for the Energy Transfer group from April 2008 to November 2017, including Associate General
Counsel for Energy Transfer Partners, General Counsel for Regency Energy Partners and PennTex Midstream, and Manager of Energy
Transfer Partners’ liquefied natural gas business. He also previously served as Associate General Counsel for Southern Union
Company, Senior Counsel for Cooper Industries, and General Counsel for a private real estate and finance company in Tokyo.
Mr. Carpenter holds a B.B.A. in Finance and a J.D., both from the University of Texas at Austin.
Anne Psencik,
60, has served as our Chief Strategy Officer since February 2022. Prior to February 2022, she served as the Chief Strategy Officer
of BCP GP, a position she has held since July 2019. With over 30 years of experience in the oil and gas industry, Ms. Psencik
has a proven track record of management and leadership in midstream business development, trading, and engineering and construction.
Prior to joining BCP GP, Ms. Psencik ran her own consulting business from May 2016 to July 2019 providing strategic development
on midstream projects for Crestwood Equity Partners, Momentum Midstream and BCP GP with primary focus in the Permian Basin. Prior
to her role as owner in Psencik Consulting, she started the Marketing and Midstream business at AEP-LP in Oklahoma
City, where she negotiated over $3 billion in non-operated equity interest in midstream assets for AEP-LP. These midstream
assets are currently known as Traverse Midstream. She also was a part of the executive team at TEJAS NGL, LLC, which negotiated
the original conveyance of Shell midstream assets to Enterprise Products, LP. She has held positions as SVP Midstream Business
Development for Continuum Energy, LLC, Director of Midstream and Marketing for AEP-LP, Manager of Business Development
for Harvest Pipeline, VP Commercial Development for Buckeye Pipeline Partners, VP of Gulf Coast Trading for Aquila, VP of Risk
Management Natural Gas for Enterprise Products, LP, and VP of Marketing and Trading for TEJAS NGL, LLC. Early in her career, Ms. Psencik
served as a Field Supervisor for Schlumberger in well logging, cementing and stimulation work, as well as designing and constructing
pipelines at ConocoPhillips. Ms. Psencik graduated from The University of Texas at Austin (1986) with a B.S. in Petroleum
Engineering.
VOTE
The Board recommends that you vote FOR
ALL NOMINEES for the election of directors.
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2023 Proxy Statement |
Executive Compensation
Compensation Discussion and Analysis
This Compensation Discussion and Analysis reviews
the compensation policies and programs for our Chief Executive Officer and Chief Financial Officer, and our three next most highly paid
executive officers during 2022 as determined under the rules of the SEC, as well as the individuals who served as our Chief Executive
Officer and our Chief Financial Officer until February 22, 2022. These individuals are collectively referred to as our “named executive
officers” or “NEOs.”
The narrative discussion set forth in this Compensation
Discussion and Analysis is intended to provide additional information related to the data presented in the compensation-related tables
included throughout the “Executive Compensation” section of this proxy statement and is largely divided into two sections
– the first describing the compensation decisions and program following the closing of the Transactions and the second describing
the compensation program that was in place from January 1, 2022 to February 22, 2022.
Executive Summary
2022 Named Executive Officers and Management Transition
During 2022, our named executive officers were:
Named Executive Officer |
Position |
Jamie Welch |
President, Chief Executive Officer and Chief Financial Officer |
Matthew Wall |
Executive Vice President and Chief Operating Officer |
Steven Stellato |
Executive Vice President, Chief Administrative Officer and Chief Accounting Officer |
R. Todd Carpenter |
General Counsel, Assistant Secretary and Chief Compliance Officer |
Anne Psencik |
Chief Strategy Officer |
Clay Bretches |
Former Chief Executive Officer and President |
Ben C. Rodgers |
Former Chief Financial Officer and Treasurer |
On February 22, 2022, (i) Clay Bretches, who
prior to such date was serving as the Chief Executive Officer and President of Altus and (ii) Ben C. Rodgers, who prior to such date
was serving as the Chief Financial Officer and Treasurer of Altus, in each case, resigned from employment with Altus as a result of
the consummation of the Transactions. On that same date, Jamie Welch, Matthew Wall, Steven Stellato, R. Todd Carpenter, and Anne
Psencik began serving as the executive officers of the Company as a result of the consummation of the Transactions. In accordance
with the SEC’s executive compensation disclosure rules, the following disclosures relate to the year ended December 31, 2022.
Hence, the executive compensation disclosures contained herein reflect the compensation earned or paid
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2023 Proxy Statement |
to Messrs. Bretches and
Rodgers (the “Pre-Transaction NEOs”) by Apache for the period of time prior to February 22, 2022 and reflect the
compensation paid or earned by Messrs. Welch, Wall, Stellato and Carpenter and Ms. Psencik (the “Post-Transaction
NEOs”) following the Transactions.
Compensation Objectives
For 2022, the Pre-Transaction NEOs were compensated
by Apache, a subsidiary of APA, under the terms of the COMA (as defined and described below under “—Pre-Transaction NEO Compensation”),
the compensation program and objectives for the Pre-Transaction NEOs were generally consistent with those for APA’s named executive
officers.
The objectives of the compensation program for the
Post-Transaction NEOs are to attract, motivate and retain talented individuals who are committed to achieving our long-term strategic
objectives and creating stockholder value. Our compensation program is not only designed to align the incentives of our executives with
our stockholders’ interests, but also to promote the achievement of key corporate performance measures as determined by the Compensation
Committee each year.
Summary of Post-Transaction Executive Compensation Practices
We strive to maintain judicious governance standards
and compensation practices by regularly reviewing best practices. We incorporated many best practices when forming our 2022 compensation
program for the Post-Transaction NEOs, including the following:
What We Do
|
ü |
Align our executive compensation with long-term performance |
|
ü |
Align executives’ interests with those of stockholders |
|
ü |
Engage an independent compensation consultant, Meridian Compensation Partners (“Meridian”), to assess our practices |
|
ü |
The vast majority of NEO compensation is at risk and variable in the form of annual incentive and long-term incentive
compensation |
|
ü |
Require that all annual equity awards have a minimum of three years before any initial vesting |
|
ü |
Maintain trading policies that: |
|
● |
Prohibit all employees from short selling our securities, entering into any derivative transactions with respect to our
securities, or otherwise hedging the risk and rewards of our securities |
|
● |
Prohibit Section 16 officers and directors from pledging our securities |
|
ü |
Recommend an annual advisory vote on executive compensation in order to provide stockholders with a frequent opportunity to
give feedback on compensation programs |
|
ü |
Review the independence of the Compensation Committee’s independent compensation consultant annually |
|
ü |
Provide for limited perquisites for Post-Transaction NEOs |
What We Don’t Do
|
û |
Automatically increase salaries each year or make lock-step changes in compensation based on peer group compensation levels
or metrics |
|
û |
Pay guaranteed or multi-year cash bonuses |
|
û |
Provide significant perquisites |
|
û |
Provide tax gross-ups |
|
û |
Provide single-trigger cash payments upon a change in control |
Kinetik Holdings Inc. |
33 |
2023 Proxy Statement |
Pay-for-Performance Compensation Structure
The components of our 2022 compensation program
for our Post-Transaction NEOs consisted primarily of the following:
Component |
Performance Period |
Objective |
Performance Measurement Methodology for 2022 |
Base Salary |
Annual |
Recognizes an individual’s role and responsibilities and
serves as an important retention vehicle |
Reviewed annually and set based on competitive
and internal considerations |
Annual Cash Incentive
Awards |
Annual |
Rewards achievement of annual financial and other
objectives, subject to meeting individual performance expectations |
Based on performance objectives established by the
Compensation Committee immediately following
the Transactions |
Equity Awards |
Long-Term |
Designed to align compensation with
long-term retention goals |
Annual grants that vest in full three or four years
after grant |
To help retain and motivate our Post-Transaction
NEOs, our Compensation Committee aims to offer competitive compensation packages through a mix of cash (including variable, performance-based
cash awards) and long-term, equity-based incentives. The Compensation Committee does not have any formal policies for allocating total
compensation among the various components. Instead, the Compensation Committee uses its judgment, in consultation with Meridian, to establish
an appropriate balance of short-term and long-term compensation for each NEO. The balance may change from year to year based on corporate
strategy, financial performance and non-financial objectives, among other considerations.
Pre-Transaction, as a private equity-backed company, BCP’s
compensation strategy differed from that of public companies, notably in terms of the modest levels of cash-based compensation provided
and equity-like grants that were in the form of profits interests. The value of BCP’s profits interests were dependent on the ultimate
value realized by BCP’s equity sponsors. Pursuant to the terms of the New BCP Raptor Holdco limited liability company agreement,
dated October 21, 2021, BCP determined that it would be appropriate to award the Post-Transaction NEOs and other employees with equity
based on such profits interests in part reflecting the work and effort of the Post-Transaction NEOs and BCP’s employee base as a
private company since 2017 and the implied value (based on the Transaction) created for the equity sponsors. To that end, in connection
with the closing of the Transactions in February 2022, the BCP awards held by each of the Post-Transaction NEOs and employees were cancelled
and exchanged for shares of the Company’s Class A Common Stock (the “Class A Shares”) and Class C Common Stock and Common
Units (collectively, the “Class C Shares”). Together, the Class A Shares and Class C Shares are referred to herein as the
“Consideration Allocation Shares.” The share issuance and requirement that such shares be subject to the Company’s Dividend
Reinvestment Plan creates alignment with the Company’s shareholders, including Blackstone, I Squared and Apache.
As a result, for 2022, our Post-Transaction NEOs may appear
to have received large equity awards in connection with the Transactions, but the Consideration Allocation Shares granted to the Post-Transaction
NEOs are not considered compensatory as they were granted in exchange for the cancelled BCP awards previously held by each of the Post-Transaction
NEOs. Time-based Consideration Allocation Shares are subject to a three-year cliff vesting schedule for all Post-Transaction NEOs (except
Mr. Welch, whose Consideration Allocation Shares are subject to a four-year cliff vesting schedule) in order to assist with post-Transaction
retention. Performance-based Consideration Allocation Shares are additionally subject to a multiple on invested capital (“MOIC”)
performance threshold. The Consideration Allocation Shares contributed to lower salary and bonus targets for 2022 and 2023 for the Post-Transaction
NEOs. To account for the significant equity awards and ensure executives were not overcompensated, the Post-Transaction NEOs received
base salaries and bonus targets that were below the median level of comparable positions, particularly in the case of Mr. Welch. In addition,
with the exception of Ms. Psencik, the Compensation Committee did not grant such individuals additional equity awards for 2022. The compensation
levels determined by the Compensation Committee allowed the Company to offset the significant equity awards that are typical of a private
equity backed company, while still providing the Post-Transaction NEOs with competitive compensation packages.
For more information regarding the Consideration Allocation
Shares, see “—2022 Post-Transaction NEO Compensation—Equity Awards—Consideration Allocation Shares.” While
such awards are not considered compensatory under the SEC rules for purposes of the compensation-related tables that follow, they do require
continued employment to vest, and the Compensation Committee considered them when determining the portion of each Post-Transaction NEO’s
compensation that is “at-risk.”
Kinetik Holdings Inc. |
34 |
2023 Proxy Statement |
Process for Determining 2022 Post-Transaction NEO Compensation
Role of the Compensation Committee
The Compensation Committee oversees our executive
compensation and employee benefit programs, and reviews and approves all compensation decisions relating to our Post-Transaction NEOs.
The Compensation Committee also approves its report for inclusion in this proxy statement and has reviewed and discussed this Compensation
Discussion and Analysis with management.
Upon the recommendation of the Compensation Committee,
the Board will review and approve Post-Transaction NEO base salaries annually. The Compensation Committee will recommend the adjustment
of each Post-Transaction NEO’s base salary based on factors that may include general competitiveness with peer and industry base
salaries, any material increases in responsibilities, and adjustments consistent with those made for all employees.
Immediately following the Transactions, the Compensation
Committee recommended, and the Board approved, the quantitative and qualitative criteria that it used to determine the amount of the individual
Post-Transaction NEO awards for 2022. The Compensation Committee recommended, and the Board certified, performance achieved with respect
thereto and made final decisions regarding short-term incentive awards during the first quarter of 2023, with input from the Chief Executive
Officer. Each year, the Compensation Committee will continue to (i) review and set applicable performance goals for the short-term incentive
award program at the beginning of the applicable year, subject to approval by the Board with respect to the Post-Transaction NEOs, (ii) review and set the Post-Transaction NEOs’ target annual incentive award at the beginning of the applicable year,
subject to approval
by the Board, and (iii) certify performance and review and approve the annual incentive awards actually achieved at the end of the applicable
year.
The Compensation Committee also recommends, and
the Board approves, all equity awards made pursuant to the 2019 Plan.
Role of Independent Compensation Consultant
Shortly following the Transactions, the Compensation
Committee engaged Meridian as its independent compensation consultant to assist the committee with its responsibilities related to our
executive officer and director compensation programs. A representative of Meridian attends Compensation Committee meetings as requested
and communicates with the Chair of the Compensation Committee between meetings. Meridian provides no services to management or the Compensation
Committee that are unrelated to the duties and responsibilities of the Compensation Committee, and the Compensation Committee makes all
decisions regarding the compensation of our named executive officers and directors. Meridian reports directly to the Compensation Committee,
and all work conducted by Meridian for us is on behalf of the Compensation Committee.
Role of our Chief Executive Officer and Senior Management
Our Chief Executive Officer, Chief Accounting and
Administrative Officer, and General Counsel regularly interact with the Compensation Committee and its Chair to suggest and discuss executive
compensation structures and programs. Following the Transactions, our Chief Executive Officer made recommendations for the annual cash
and equity incentive awards for the Post-Transaction NEOs and other personnel (other than himself), and he will continue to do so annually
going forward.
Competitive Benchmarking and Peer Group
Each component of executive compensation is compared,
measured, and evaluated against a peer group of companies. The Compensation Committee approves the peer group and periodically reviews
and updates the companies included in that group.
The most recent executive compensation peer group
was approved by the Compensation Committee in early 2022. That peer group, which is applicable for 2022, consists of the companies listed
below. The peer group consists primarily of midstream oil and natural gas companies, selected based on size, complexity, and the quality
of publicly available data with respect to these companies. The Compensation Committee reviews the peer group data when making compensation
decisions relating to the Post-Transaction NEOs and the Company’s mix of compensation components.
Western Midstream Partners, LP |
DCP Midstream, LP |
Antero Midstream Corporation |
Magellan Midstream Partners, L.P. |
EnLink Midstream, LLC |
NuStar Energy L.P. |
Equitrans Midstream Corporation |
DT
Midstream, Inc. |
Crestwood Equity Partners LP |
Kinetik Holdings Inc. |
35 |
2023 Proxy Statement |
Risk Assessment of Compensation Plans for Post-Transaction NEOs
We believe that our compensation program does not
encourage excessive or unnecessary risk taking. This is primarily due to the fact that our compensation programs are designed to encourage
our named executive officers and other employees to focus on both short-term and long-term strategic goals, thereby creating an ownership
culture and helping to align the interests of our employees and our stockholders. Accordingly, our compensation program is balanced between
short-term and long-term incentive compensation. Short-term incentive compensation is paid annually in cash, but is dependent on satisfying
quantitative and qualitative factors established by the Compensation Committee each year.
Overall, we believe that the balance within our
compensation program results in an appropriate compensation structure for the Company, and that the program does not pose risks that could
have a material adverse effect on our business or financial performance.
2022 Post-Transaction NEO Compensation
Base Salaries
Base salaries serve to provide fixed cash compensation
to our NEOs for performing their ongoing responsibilities. The Compensation Committee reviewed our input from Meridian and the considerations
outlined above to determine each Post-Transaction NEO’s base salary for 2022. In May 2022, following consultation with Meridian,
the Compensation Committee ratified and approved raises with an effective date of April 3, 2022 for each of the Post-Transaction NEOs
based upon its desire to bring pay levels closer to competitive market levels.
Named Executive Officer |
|
2022 Initial Post-Transaction
Annual Base Salary |
|
April 2022 Annual
Base Salary |
|
Percentage
Increase |
Jamie Welch |
|
$515,000 |
|
$650,000 |
|
26.21% |
Matthew Wall |
|
$386,250 |
|
$400,000 |
|
3.55% |
Steven Stellato |
|
$386,250 |
|
$400,000 |
|
3.55% |
R. Todd Carpenter |
|
$386,250 |
|
$400,000 |
|
3.55% |
Anne Psencik |
|
$386,250 |
|
$400,000 |
|
3.55% |
Annual Cash Incentive Awards
The Compensation Committee approved a framework
for the year-end incentive compensation intended to reward achievement relative to annual financial, operational and individual performance
objectives. The Compensation Committee reviews and approves the annual cash incentive awards for each Post-Transaction NEO based upon
performance achievements established by the Compensation Committee at the beginning of the year. The Compensation Committee established
the following target 2022 annual cash incentive awards for the Post-Transaction NEOs based on the level of responsibility and ability
to impact our overall results, as well as consideration of market pay practices:
Post-Transaction NEO |
|
2022 Target Annual Incentive
(% of Base Salary)* |
Jamie Welch |
|
100% |
Matthew Wall |
|
90% |
Steven Stellato |
|
90% |
R. Todd Carpenter |
|
90% |
Anne Psencik |
|
90% |
Kinetik Holdings Inc. |
36 |
2023 Proxy Statement |
Our 2022 target annual cash incentive awards are
calculated off of the base salaries in place following the raises approved by the Compensation Committee in April 2022.
If less than target performance is achieved with
respect to the 2022 annual cash incentive awards, then 0% of the target annual incentive awards will be earned by the Post-Transaction
NEOs, and if maximum performance is achieved with respect to the annual incentive awards, then 200% of the target annual incentive awards
will be earned by the Post-Transaction NEOs.
For the 2022 annual cash incentive awards, the Compensation
Committee selected the following metrics, which are based on fully consolidated Company results for each of our Post-Transaction NEOs:
|
● |
Adjusted EBITDA (as defined below) and merger synergies, which represents 60% of each Post-Transaction NEO’s potential
award; |
|
● |
Environmental, social and governance (“ESG”) factors, including goals with respect to Scope 1 and Scope 2 greenhouse gas
(“GHG”) intensity ratio, methane intensity ratio, management diversity, total recordable incident rate (“TRIR”) and motor vehicle incident rate (“MVIR”), which represents 20% of each Post-Transaction NEO’s potential award; and |
|
● |
Strategic individual achievements with respect to factors such as equity research coverage, stock performance, refinancing,
commercial successes and credit rating and integration, among other factors, which represents 20% of each Post-Transaction NEO’s potential award. |
The following table sets forth target and
maximum performance goals established by the Compensation Committee with respect to the Company-wide Adjusted EBITDA and ESG
metrics, as well as our actual achievement with respect to those performance metrics, as certified by the Compensation Committee
during the first quarter of 2023.
|
Target
(100% Payout) |
Maximum (200% Payout) |
2022 Actual Performance |
Percent of Target Metric Earned |
Weight |
|
Percent of
Target Bonus
Earned |
Financial Metrics |
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
$800M |
$900M |
$822M |
122% |
60% |
= |
73% |
Merger Synergies |
$25M |
— |
$30M |
ESG Metrics |
|
|
|
|
|
|
|
Scope
1 and Scope 2
GHG Intensity Ratio
|
0.00367 |
— |
GHG – 0.00362
Methane
0.0521%
Diversity – 17.6%
TRIR – 3.7
MVIR – 2.01
|
50% |
20% |
= |
10% |
Methane Intensity Ratio |
0.0565% |
Management Diversity |
9.7% |
TRIR |
<1 |
MVIR |
<1.25 |
Strategic Individual Achievements |
— |
— |
— |
109% |
20% |
|
22% |
|
|
|
|
|
|
|
105% |
(1) |
“Adjusted EBITDA” is defined as net income including noncontrolling interests adjusted for interest, taxes, depreciation and amortization, impairment charges, asset
write-offs, the proportionate earnings before interest, taxes, depreciation and amortization from our equity method investments, equity in earnings from investments recorded using the equity method, share-based compensation expense,
extraordinary losses and unusual or non-recurring charges. Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our
core operating performance. |
The Compensation Committee determined the amount of the annual cash
incentive
awards earned by our Post-Transaction NEOs based upon an evaluation of the level of achievement for financial and ESG metrics described
above. They also considered strong performance relative to corporate strategic objectives within the categories described above, including
with respect to equity research coverage, refinancing, commercial successes, and integration. The Compensation Committee evaluated the
overall performance of each individual Post-Transaction NEO prior to certifying the amount of the annual cash incentive award earned by
Kinetik Holdings Inc. |
37 |
2023 Proxy Statement |
each Post-Transaction NEO, and reserved the ability to adjust such earned
amount upwards or downwards in light of such individual performance.
For 2022, the amount of the annual cash incentive award earned by each Post-Transaction NEO remained unchanged following the evaluation.
Equity Awards
Consideration Allocation Shares
As discussed above under “—Executive Summary—Pay-for-Performance
Compensation Structure,” prior to the closing of the Transactions, BCP issued incentive units, which included performance and service
conditions, to each of the Post-Transaction NEOs. The units consisted of Class A-1, Class A-2, and Class A-3 units. These units derived
value from certain of the Company’s wholly owned subsidiaries. Class A-1 and A-2 units would have vested upon either (i) the date
of consummation of a change in control or (ii) the date that is 1-year following the consummation of the initial public offering of the
Company (or its successor). Class A-3 units would have vested upon a change in control, if the participants were employed at the time
of the event, or upon termination of the participant by the Company.
Immediately upon the closing of the Transactions, all outstanding
Class A-1 and Class A-2 units held by the Post-Transaction NEOs were cancelled and exchanged for Class A Shares. The Class A Shares are
held in escrow and are subject to a three-year cliff vesting schedule for all Post-Transaction NEOs (except Mr. Welch, whose Class A Shares
are subject to a four-year cliff vesting schedule) in order to assist with post-Transaction retention. Performance-based Class A Shares
are additionally subject to a MOIC performance threshold. Similarly, the Class A-3 units were cancelled and exchanged and are subject to
a four-year cliff vesting schedule. Once vested, the Class C Shares may be redeemed and cancelled in exchange for shares of our Class
A Common Stock (or an equivalent amount of cash). Collectively, the Class A Shares and Class C Shares are referred to herein as “Consideration
Allocation Shares” and are not considered compensatory because they were granted to the Post-Transaction NEOs as consideration for
the BCP awards such NEOs forfeited in connection with the Transactions.
2019 Plan Awards
In November 2022, the Company also granted Ms. Psencik
an award of 24,200 restricted stock units (“RSUs”) under the 2019 Plan, which generally vests in a single installment on November
30, 2025, subject to her continued employment through such date (the “2022 Psencik Award”). The 2022 Psencik Award was intended
to serve as an additional retention incentive for Ms. Psencik as recognition for her performance in 2021 and is not intended to be awarded
annually. No other Post-Transaction NEOs received awards as the Compensation Committee deemed the BCP incentive units that were cancelled
and exchanged for Class A Shares, as described above under “—Consideration Allocation Shares,” adequately rewarded
their 2021 performance.
Severance and Change of Control Benefits for Post-Transaction NEOs
Our Post-Transaction NEOs are not party to employment,
severance or change in control agreements. However, each of our Post-Transaction NEOs may be entitled to certain benefits upon a termination
of employment under the terms of their respective equity award agreements, as described in further detail below. The description of the
relevant terms of such award agreements set forth below does not purport to be a complete description of all of the provisions of any
such agreements and is qualified in its entirety by reference to the forms of award agreements previously filed.
Consideration Allocation Shares
Restrictions on the Class A Shares and Class C
Shares received by Messrs. Welch, Wall, Stellato, and Carpenter and Ms. Psencik as consideration for the forfeiture of their BCP
awards will lapse and such shares shall become fully vested (and, for Mr. Welch’s performance-based Class A Shares, the
performance condition will be deemed to have been met) in the event of a “Change of Control” or upon the NEO’s
termination of employment (i) by the Company without “Cause,” (ii) due to the NEO’s resignation for “Good
Reason,” or (iii) due to the NEO’s death or “Disability.”
For purposes of the restricted Class A Shares and
Class C Shares, “Cause,” “Change of Control,” “Disability” and “Good Reason” are generally
defined as set forth below under “—Potential Payments Upon Termination or Change in Control.”
Kinetik Holdings Inc. |
38 |
2023 Proxy Statement |
2019 Plan Awards
Under Ms. Psencik’s RSU award agreement, if
Ms. Psencik’s employment is terminated by the Company without “Cause” or due to her death or “Disability,”
or upon a “Change of Control,” subject to execution and non-revocation of a release, all outstanding unvested RSUs will become
vested as of such termination of employment or Change of Control, as applicable. For purposes of
Ms. Psencik’s RSUs, “Cause,” “Disability,” and “Change of Control” are generally defined as
set forth below under “—Potential Payments Upon Termination or Change in Control.”
Other Benefits for Post-Transaction NEOs
We offer a comprehensive array of benefits to our
employees, including our named executive officers. These benefits are offered in order to attract and retain employees. Subject to the
terms of any applicable plans, policies or programs, each NEO is entitled to receive employee benefits, including any and all vacation,
retirement, disability, group life, accident and health insurance as we may provide from time to time to salaried employees generally,
and such other benefits as the Compensation Committee may from time to time establish for the Post-Transaction NEOs.
We currently maintain a retirement plan intended
to provide benefits under section 401(k) of the Internal Revenue Code whereby employees, including our Post-Transaction NEOs, are allowed
to contribute a portion of their base salaries to a tax-qualified retirement account. We provide a non-elective contribution of 5% to
401(k) plan participants. The contributions made on behalf of our Post-Transaction NEOs for fiscal 2022 are disclosed in the notes to
the Summary Compensation Table.
2022 Pre-Transaction NEO Compensation
Overview
Altus was managed by Apache until February 22, 2022,
and all of the Pre-Transaction NEOs were employees of Apache and performed responsibilities for Apache and its affiliates, including its
parent holding company, APA, that were unrelated to Altus’s business. Because the Pre-Transaction NEOs were employed by Apache or
its affiliates, compensation of the Pre-Transaction NEOs was set and paid by Apache under its compensation programs, including the compensation
programs of APA.
While Apache was not party to any employment agreements
with the Pre-Transaction NEOs, in connection with the closing of Altus’s initial business combination, Altus entered into the COMA with Apache, pursuant to which, among other matters:
|
● |
Apache made available to Altus the services of the Apache employees who acted as Altus’s executive officers; |
|
● |
Altus reimbursed Apache for the costs associated with the salary, benefits, and other compensation of those Apache
employees who allocated substantially all or a proportional part of their time to the management and operation of Altus’s business and assets; and |
|
● |
Altus paid Apache an escalating annual fee to cover the services provided to Altus by Apache’s employees who provided
services to or on behalf of Altus, which included an allocation of overhead costs, including an allocation of salary, benefits, and all other forms of compensation of Apache’s employees who are not included in the reimbursement described in
the bullet point above. |
Except with respect to any awards that may have
been granted from time to time under the 2019 Plan and the Company’s RSU Plan, the Pre-Transaction
NEOs did not receive any additional compensation directly from Altus for the services they provide to Altus.
Once Apache established the total amount to be paid
or awarded to a Pre-Transaction NEO regarding services rendered to both Altus and Apache and its affiliates, such total amount was multiplied
by a percentage (an “Allocation Percentage”) based on a periodic, good-faith estimate made by Apache’s management of
the amount of time that each Pre-Transaction NEO devoted to the business of Altus relative to the total time that he or she devoted to
the businesses of Altus and Apache and its affiliates for the applicable year.
Kinetik Holdings Inc. |
39 |
2023 Proxy Statement |
The results of such calculations are presented in this
proxy as the executive officers’ compensation, even though the escalating annual fee described above includes the compensation of
our executive officers. During the fiscal year ended December 31, 2022, the costs associated with the salary, benefits, and other compensation
of Messrs. Bretches and Rodgers were included in the escalating annual fee and were not separately reimbursed to Apache.
The following table sets forth each applicable NEO’s
Allocation Percentage for 2022, 2021 and 2020:
NEOs
|
2022
Allocation Percentage*
|
2021
Allocation Percentage
|
2020
Allocation Percentage
|
|
Clay Bretches |
7% |
50% |
50% |
|
Ben C. Rodgers |
7% |
50% |
50% |
|
|
* |
Each applicable NEO’s Allocation Percentage for
2022 is based on a base percentage of 50%, prorated for the portion of 2022 preceding the closing of the Transactions on February 22, 2022, which resulted in the Allocation Percentage indicated. |
Pre-Transaction NEO Compensation Program and Objectives
Given
that, for 2022, the Pre-Transaction NEOs were compensated by Apache, a subsidiary of APA, under the terms of the COMA as described above,
the compensation program and objectives for the NEOs were generally consistent with those for APA’s named executive officers. The
following material elements of APA’s compensation program are based on information provided to Altus by APA and do not purport
to be a complete discussion and analysis of APA’s compensation objectives, programs, or practices. For a more complete analysis
of the compensation programs at APA, please review the Compensation Discussion and Analysis section in APA’s proxy statement
for its 2023 annual meeting of stockholders, which was filed with the SEC on April 11,
2023.
The elements of compensation discussed below and
APA’s decisions with respect to the amounts paid or awarded to the Pre-Transaction NEOs were not subject to approval by the Board
or the Compensation Committee. For 2022, the compensation program for the Pre-Transaction NEOs primarily includes the following elements:
|
● |
Base salaries are established to provide market-competitive base pay, reflective of an executive officer’s role,
responsibilities, and individual performance in order to attract and retain top talent, and are reviewed annually based on market data, internal equity, job responsibilities, and individual performance. |
|
● |
Annual incentive compensation is designed to motivate and reward executive officers to achieve key business
objectives that support a long-term strategy, with achievement measured against annual goals and objectives established at the beginning of each year. |
|
● |
Long-term incentive compensation aligns executive officers’ awards to the long-term interests
of stockholders and a long-term strategy, with awards generally comprised
of 60% performance shares and 40% RSUs, incorporating relative and absolute metrics, to provide a balanced assessment of long-term performance. |
NEOs also received health, welfare, retirement,
and similar benefits applicable to other employees of Apache.
Other Compensation Practices and Policies
Anti-Hedging and Pledging Policies
Our Insider Trading Policy prohibits our NEOs from
engaging in speculative transactions involving our common stock, including buying or selling puts or calls, short sales, purchasing
securities on margin, or otherwise hedging the risk of ownership of such securities. The Insider Trading Policy also prohibits our
NEOs from pledging shares of such securities as collateral.
Kinetik Holdings Inc. |
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2023 Proxy Statement |
Say on Pay Vote
Since we are no longer considered an emerging growth
company, we will be holding our first non-binding advisory vote on the compensation of our named executive officers at our 2023 Annual
Meeting on May 31, 2023. We value the opinions of our stockholders, and the Compensation Committee and Board will consider the outcome
of future stockholder advisory votes, including the vote which will take place at our 2023 Annual Meeting, when we make compensation decisions
for our named executive officers.
Report of the Compensation Committee
The Compensation Committee has reviewed and discussed
the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and based on such review and discussions
the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee
David Foley
Laura Sugg
Kevin McCarthy
Summary Compensation Table
The table below summarizes the compensation
for the NEOs for all services rendered to the Company and its subsidiaries during fiscal years 2022, 2021 and 2020. For each of
Messrs. Welch, Wall, Stellato, and Carpenter and Ms. Psencik, the amounts specified in the table set forth compensation earned by
each such NEO from February 22, 2022 (the date of the closing of the Transactions and each such NEO’s appointment as an
officer of the Company) to December 31, 2022, and for each of Messrs. Bretches and Rodgers, the amounts specified in the table for
2022 set forth compensation earned by each such NEO from January 1, 2022 to February 22, 2022 (the date of the closing of the
Transactions and each such NEO’s termination of service with Altus). As described above, because Altus did not directly employ
or compensate any of its executive officers, the amounts specified in the table for each of Messrs. Bretches and Rodgers reflect the
applicable Allocation Percentage applied to such NEO’s compensation from Apache for the years 2022, 2021 and 2020.
Name and Principal Position |
Year |
Salary
($)(2) |
Stock
Awards
($)(3) |
Non-Equity Incentive Plan Compensation
($)(4) |
All Other Compensation
($)(5) |
Total
($) |
Jamie Welch |
2022 |
534,423 |
— |
644,337 |
6,100 |
1,184,860 |
President,
Chief Executive Officer and Chief Financial Officer |
|
|
|
|
|
|
Matthew Wall |
2022 |
336,875 |
— |
374,502 |
6,683 |
718,060 |
Executive Vice President and Chief Operating Officer |
|
|
|
|
|
|
Steven Stellato |
2022 |
336,875 |
— |
374,502 |
6,679 |
718,056 |
Executive Vice President, Chief Administrative Officer and Chief Accounting Officer |
|
|
|
|
|
|
R. Todd Carpenter |
2022 |
336,875 |
— |
374,502 |
6,658 |
718,035 |
General Counsel and Chief Compliance Officer |
|
|
|
|
|
|
Anne Psencik |
2022 |
336,875 |
817,718 |
374,502 |
6,663 |
1,535,758 |
Chief Strategy Officer |
|
|
|
|
|
|
Clay Bretches(1) |
2022 |
47,813 |
212,028 |
64,618 |
19,147 |
343,606 |
Former Chief Executive Officer and President |
2021 |
337,500 |
1,507,456 |
505,575 |
125,868 |
2,476,399 |
|
2020 |
337,500 |
1,434,927 |
462,375 |
99,811 |
2,334,613 |
Ben C. Rodgers(1) |
2022 |
31,875 |
98,945 |
37,858 |
9,769 |
178,447 |
Former Chief Financial Officer and Treasurer |
2021 |
225,000 |
703,441 |
253,125 |
67,259 |
1,248,825 |
|
2020 |
225,000 |
669,653 |
242,007 |
47,460 |
1,184,121 |
|
(1) |
On February 22, 2022, each of Messrs. Bretches and Rodgers
resigned as executive officers of the Company in connection with closing of the Transactions. |
Kinetik Holdings Inc. |
41 |
2023 Proxy Statement |
|
(2) |
The amounts included in this column for each NEO reflect
the pro-rated salary earned by such NEO based on such partial year of service with the Company. |
|
(3) |
For Messrs. Bretches and Rodgers, these amounts reflect the value of RSU awards made during the fiscal year, based upon the aggregate grant date fair value determined in accordance with FASB ASC
Topic 718. Such RSU awards were granted pursuant to APA’s 2016 Omnibus Compensation Plan. The discussion of the assumptions used in calculating the aggregate grant date fair value of the RSU awards can be found in Note 14 of the Notes to
Consolidated Financial Statements included in APA’s Annual Report on Form 10-K for the year ended December 31, 2022 (which is not and shall not be deemed to be incorporated by reference herein). Messrs. Welch, Wall, Stellato and Carpenter
were not granted any equity awards during 2022 outside the merger consideration described above under “Compensation Discussion and Analysis—2022 Post-Transaction NEO Compensation—Equity Awards—Consideration Allocation Shares.” For Ms.
Psencik, the amount in this column reflects the value of an RSU award made during the 2022 fiscal year, based on the aggregate grant date fair value determined in accordance with FASB ASC Topic 718. Such RSU awards were granted pursuant to
the 2019 Plan. The discussion of the assumptions used in calculating the aggregate grant date fair value of the RSU awards can be found in Note 15 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2022 (which is not and shall not be deemed to be incorporated by reference herein).
|
|
(4) |
The amounts included in this column reflect the amount of the 2022 annual incentive awards earned by each of Messrs. Welch, Wall, Stellato and Carpenter and Ms. Psencik based upon the Company’s achievement of objective performance metrics.
Each of Messrs. Welch, Wall, Stellato and Carpenter and Ms. Psencik elected to receive their 2022 annual incentive awards in the form of fully vested shares of Class A Common Stock rather than cash. |
|
(5) |
Amounts reported in the “All Other Compensation” column for Messrs. Welch, Wall, Stellato and Carpenter and Ms. Psencik include non-elective contributions to each such NEO’s 401(k) plan account. |
Grants of Plan-Based Awards for the 2022 Fiscal Year
The following table includes information about awards
granted to our NEOs during 2022. As described above, because Altus did not directly employ or compensate Messrs. Bretches or Rodgers,
the amounts specified in the table below reflect the 2022 Allocation Percentage applied to such NEOs’ grants of stock-based awards
from APA.
|
|
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(1), 9 |
Estimated Possible Payouts
Under Equity Incentive Plan
Awards(2) |
All Other
Stock Awards:
Number of
Shares of Stock
or Units
(#)(3) |
Grant Date Fair
Value of Stock
and Option
Awards
($)(4) |
Name |
Grant Date |
Threshold
($) |
Target
($) |
Maximum
($) |
Threshold
(#) |
Target
(#) |
Maximum
(#) |
Jamie
Welch |
— |
$306,827 |
$613,654 |
$1,227,308 |
|
|
|
|
|
Matthew Wall |
— |
$178,334 |
$356,668 |
$ 713,337 |
|
|
|
|
|
Steven Stellato |
— |
$178,334 |
$356,668 |
$ 713,337 |
|
|
|
|
|
R. Todd Carpenter |
— |
$178,334 |
$356,668 |
$ 713,337 |
|
|
|
|
|
Anne Psencik |
— |
$178,334 |
$356,668 |
$ 713,337 |
|
|
|
|
|
|
11/30/2022 |
|
|
|
|
|
|
24,200 |
$ 817,718 |
Clay Bretches |
— |
$ 32,309 |
$ 64,618 |
$ 129,234 |
|
|
|
|
|
|
01/04/2022 |
|
|
|
1,925 |
3,850 |
7,700 |
|
$ 136,432 |
|
01/04/2022 |
|
|
|
|
|
|
1,540 |
$ 45,358 |
|
01/04/2022 |
|
|
|
|
|
|
1,026 |
$
30,238 |
Ben C. Rodgers |
— |
$ 18,929 |
$ 37,858 |
$ 75,716 |
|
|
|
|
|
|
01/04/2022 |
|
|
|
898 |
1,796 |
3,592 |
|
$ 63,667 |
|
01/04/2022 |
|
|
|
|
|
|
718 |
$ 21,166 |
|
01/04/2022 |
|
|
|
|
|
|
479 |
$ 14,112 |
|
(1) |
Amounts in these columns represent the threshold, target and maximum possible values for 2022 annual incentive awards for each of Messrs. Welch, Wall, Stellato and Carpenter and Ms. Psencik, as well as the allocated percent of the 2022
annual incentive awards for each of Messrs. Bretches and Rodgers. The actual value of 2022 annual incentive awards paid to our NEOs can be found in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. |
|
(2) |
This column includes the number of RSUs granted to Ms.
Psencik during 2022 under the 2019 Plan, as well as the allocated percent of the number of RSUs granted to Messrs. Bretches and Rodgers
pursuant to APA’s 2016 Omnibus Compensation Plan during 2022. See “Compensation Discussion & Analysis—2022 Post-Transaction NEO Compensation—Equity Awards—2019 Plan.” |
|
(3) |
Amounts in these columns represent the allocated
percent of the threshold, target and maximum possible values for performance shares granted to each of Messrs. Bretches and Rodgers pursuant
to APA’s 2016 Omnibus Compensation Plan during 2022. |
Kinetik Holdings Inc. |
42 |
2023 Proxy Statement |
|
(4) |
The amounts set forth in this column represent the grant date fair value of each equity award computed in accordance with FASB ASC Topic 718. Please see Note 15 of the Notes to Consolidated Financial Statements included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2022 for more information regarding assumptions underlying the value of Ms. Psencik’s equity award, and Note 14 of the Notes to Consolidated Financial Statements included in APA’s
Annual Report on Form 10-K for the year ended December 31, 2022 (which is not and shall not be deemed to be incorporated by reference herein) for more information regarding assumptions underlying the value of the equity awards granted to each
of Messrs. Bretches and Rodgers. |
Outstanding Equity Awards at Fiscal Year-End
The table below provides supplemental
information relating to the stock-based awards for each NEO as of December 31, 2022. As described above, because Altus did not
directly employ or compensate Messrs. Bretches or Rodgers during fiscal years 2022, 2021 and 2020, the amounts specified in the
table below for Messrs. Bretches and Rodgers reflect the applicable Allocation Percentage for the year of grant applied to the
NEOs’ grants of stock-based awards from APA for the applicable fiscal year. Messrs. Welch, Wall, Stellato and Carpenter and
Ms. Psencik hold Class A Shares (and, in the case of Mr. Welch, Class C Shares) that they received as consideration for their BCP
awards that were cancelled effective as of the closing of the Transactions. As of December 31, 2022, only Ms. Psencik held an
outstanding awards under our 2019 Plan.
|
Stock Awards |
|
Name |
Number of
Shares or Units
of Stock That
Have Not Vested
(#) |
|
Market Value of
Shares of Units of
Stock That Have Not
Vested
($)(1) |
|
Equity Incentive Plan
Awards: Number of
Unearned Shares,
Units, or Other
Rights That Have
Not Vested
(#) |
|
Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares,
Units, or Other
Rights That Have Not
Vested
($)(1) |
|
Jamie Welch |
325,566(2) |
|
10,769,723 |
|
|
|
|
|
|
2,319,646(3) |
|
76,733,890 |
|
|
|
|
|
|
|
|
|
|
395,416(5) |
|
13,080,361 |
|
Matthew Wall |
412,424(3) |
|
13,642,986 |
|
|
|
|
|
Steven Stellato |
234,134(3) |
|
7,745,153 |
|
|
|
|
|
R. Todd Carpenter |
179,154(3) |
|
5,926,414 |
|
|
|
|
|
Anne Psencik |
153,546(3) |
|
5,079,302 |
|
|
|
|
|
|
24,200(4) |
|
800,536 |
|
|
|
|
|
Clay Bretches |
301,343 |
|
14,066,689 |
|
153,791 |
|
7,178,985 |
|
Ben C. Rodgers |
142,088 |
|
6,632,655 |
|
71,948 |
|
3,358,553 |
|
|
(1) |
With respect to Messrs. Welch, Wall, Stellato and Carpenter and Ms. Psencik, reflects the market value of our Class A Common Stock underlying each NEO’s equity awards, computed based on the closing price of our Class A Common Stock on
December 30, 2022 (the last trading day of 2022), which was $33.08 per share. Since the Class C Shares held by Mr. Welch, once vested, may be redeemed and cancelled in exchange for shares of our Class A Common Stock, the market value reported
with respect to such Class C Shares is also computed based on the closing price of our Class A Common Stock on December 30, 2022 (the last trading day of 2022), which was $33.08 per share. With respect to Messrs. Bretches and Rodgers,
reflects the market value of APA’s common stock underlying each NEO’s equity awards, computed based on the closing price of APA’s common stock on December 30, 2022 (the last trading day of 2022), which was $46.68 per share. |
|
(2) |
Reflects the number of Class C Shares received by Mr.
Welch on February 25, 2022 as consideration for certain of his BCP awards that were forfeited in connection with the closing of the Transactions.
Such shares vest in full on February 25, 2026, subject to his continued employment with the Company through such date. |
|
(3) |
Reflects the number of Class A Shares received by Messrs. Welch, Wall, Stellato and Carpenter and Ms. Psencik on February 25, 2022 as consideration for certain of their BCP awards that were forfeited in connection with the closing of the
Transactions. Such shares vest in full on February 25, 2026, subject to the NEOs’ continued employment with the Company through such date. |
|
(4) |
Reflects the number of RSUs granted to Ms. Psencik on
November 30, 2022 under the 2019 Plan as consideration for services rendered to the Company. Such RSUs will vest in full on November
30, 2025, subject to her continued employment with the Company through such date. |
|
(5) |
Reflects the number of performance-based Class A Shares
received by Mr. Welch on February 25, 2022 as consideration for certain of his performance-based BCP awards that were forfeited in connection
with the closing of the Transactions. Such shares will become vested on February 25, 2026 if the performance goals relating to MOIC have been met as of such date or the date following February 25, 2026 on which such performance goals are met,
subject
to continued employment through such applicable date. The performance-based shares will either become earned or forfeited. There is no
threshold, target or maximum value associated with such shares. |
Kinetik Holdings Inc. |
43 |
2023 Proxy Statement |
Option Exercises and Stock Vested in the 2022 Fiscal Year
The following table provides information, on an aggregate basis, about
the NEOs’ awards that vested during the fiscal year ended December 31, 2022. As described above, because Altus did not directly
employ or compensate Messrs. Bretches or Rodgers during fiscal year 2022, the amounts specified in the table below for Messrs. Bretches
and Rodgers reflect the applicable Allocation Percentage for the year of grant applied to the NEOs’ grants of stock-based awards
from APA for the applicable fiscal year. None of our NEOs hold any stock option awards.
Name |
Stock Awards |
Number of Shares Acquired on Vesting (#)(1) |
Value Realized on Vesting
($)(2) |
Jamie Welch |
228,574 |
$8,648,069 |
Matthew Wall |
22,039 |
$ 809,191 |
Steven Stellato |
12,512 |
$ 459,398 |
R. Todd Carpenter |
9,573 |
$ 351,499 |
Anne Psencik |
9,780 |
$ 370,602 |
Clay Bretches |
31,677 |
$1,087,093 |
Ben C. Rodgers |
16,845 |
$ 538,463 |
|
(1) |
This column reflects the number of Class
A Common Stock earned by the Post-Transaction NEOs pursuant to dividend reinvestment rights on their Class A Shares and Class C Shares,
as applicable, during 2022 or, with respect to Messrs. Bretches and Rodgers, the number of shares of APA’s common stock earned
during 2022. |
|
(2) |
For Messrs. Welch, Wall, Stellato and Carpenter
and Ms. Psencik, the amounts reported in this column equal the number of shares of Class A Common Stock earned multiplied by the closing
price of our Class A Common Stock on the applicable date earned, or, if the date on which such shares were earned was not a trading day,
the last trading day immediately prior to such date. With respect to Messrs. Bretches and Rodgers, this column reflects the market value
of APA’s common stock underlying each NEO’s equity awards, computed based on the closing price of APA’s common stock
on the applicable date earned or, if the date on which such shares were earned was not a trading day, the last trading day immediately
prior to such date. |
Pension Benefits and Nonqualified Deferred Compensation
We have not maintained, and do not currently maintain,
a defined benefit pension plan or a nonqualified deferred compensation plan providing for retirement benefits.
Potential Payments Upon Termination or a Change in Control
None of our NEOs are party to an employment, severance
or change in control agreement. However, each of our NEOs may be entitled to certain benefits upon a termination of employment under the
terms of their respective equity award agreements, as described in further detail below. The description of the relevant terms of such
award agreements set forth below does not purport to be a complete description of all of the provisions of any such agreements and is
qualified in its entirety by reference to the forms of award agreements previously filed.
Consideration Allocation Shares
Restrictions on the Class A Shares and Class C Shares received by Messrs.
Welch, Wall, Stellato and Carpenter and Ms. Psencik as consideration for the forfeiture of their BCP awards will lapse and such shares
shall become fully vested (and, for Mr. Welch’s performance-based Class A Shares, the performance condition will be deemed to have
been met) in the event of a “Change of Control” or upon the NEO’s termination of employment (a) by the Company without
“Cause,” (b) due to the NEO’s resignation for “Good Reason,” or (c) due to the NEO’s death or “Disability.”
Kinetik Holdings Inc. |
44 |
2023 Proxy Statement |
For purposes of the restricted Class A Shares and
Class C Shares, “Cause,” “Change of Control,” “Disability” and “Good Reason” generally
have the following definitions:
|
● |
“Cause”
generally means that the NEO has: (a) failed or refused to comply with a directive of the Board consistent with such NEO’s then-current position, after the
Company has provided such NEO with both written notice and an opportunity to perform, (b) abused drugs or alcohol such that it has adversely
impacted such NEO’s job performance, (c) been convicted of |
|
|
or pled nolo contendere to a felony or a crime of moral turpitude, (d) committed an act of dishonesty that adversely
impacted the Company or any of its affiliates, (e) materially violated any Company policy provided to such NEO in writing or (f) violated the terms of the equity award agreement or any restrictive covenant agreement between the NEO and the
Company; |
|
● |
“Change of Control” generally means (a) the sale of more than 50% of the Company’s assets, outstanding Common Units or
voting securities, (b) the acquisition by any one person or more than one person acting as a group of beneficial ownership of more than 50% of the voting power of the Company or the Kinetik Holdings GP LLC, (c) the Company or certain of its
affiliates becoming subject to registration as an investment company pursuant to the Investment Company Act, (d) the Company ceases to directly own at least 1% of the common units of Altus Midstream LP, (e) any transfer, directly or
indirectly, of the common units of Altus Midstream LP, unless such transfer would not result in the Company owning less than 50% of such outstanding units, (f) the Class A Common Stock no longer being listed or admitted to trading on a
National Securities Exchange, or (g) any dissolution, liquidation or winding-up of Kinetik Holdings LP or Kinetik Holdings GP LLC; |
|
● |
“Disability” generally means that the NEO is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than 12 months; and |
|
● |
“Good Reason” generally means the (a) material diminution in the NEO’s title and responsibilities, (b) a material reduction
in the NEO’s base salary or bonus opportunity, other than a pro rata reduction applicable to all similarly situated employees, or (c) a change in the principal location of the NEO’s services outside of the principal location of your services
as of the date of the agreement, in each case, without the NEO’s prior written approval. The NEO must provide the Company with written objection to an action constituting “Good Reason” within 30 days of such action and allow the Company 30
days following such notice to cure such action or obtain the NEO’s written consent to such action. |
2019 Plan Awards
Under Ms. Psencik’s RSU award agreement, if
Ms. Psencik’s employment is terminated by the Company without “Cause” or due to her death or “Disability,”
or upon a “Change of Control,” subject to execution and non-revocation of a release, all outstanding unvested RSUs will become
vested as of such termination of employment or Change of Control, as applicable.
For purposes of the 2019 Plan and Ms. Psencik’s
RSU agreement thereunder, “Cause” and “Disability” generally have the same definitions set forth above under “—Consideration
Allocation Shares,” and “Change of Control” generally means the acquisition by any one person or more than one person
acting as a group of beneficial ownership of more than 50% of the voting power of the Company’s outstanding capital stock.
The table below discloses the amount of compensation
and/or other benefits due to the NEOs in the event of their termination of employment, including, but not limited to, in connection with
a Change of Control, assuming the termination occurred on December 31, 2022. None of Messrs. Bretches or Rodgers received any severance
payments or benefits in connection with their resignation from employment with Altus as a result of the consummation of the Transactions
and hence Messrs. Bretches and Rodgers are not included in the table below.
Kinetik Holdings Inc. |
45 |
2023 Proxy Statement |
Name |
Change in Control |
Termination
without Cause or
Resignation for
Good Reason(1) |
Death or
Disability |
Jamie Welch |
|
|
|
Equity Acceleration(2) |
$ |
116,222,677 |
$ |
116,222,677 |
$ |
116,222,677 |
TOTAL |
$ |
116,222,677 |
$ |
116,222,677 |
$ |
116,222,677 |
Matthew Wall |
|
|
|
Equity Acceleration(2) |
$ |
13,642,986 |
$ |
13,642,986 |
$ |
13,642,986 |
TOTAL |
$ |
13,642,986 |
$ |
13,642,986 |
$ |
13,642,986 |
Steven Stellato |
|
|
|
Equity Acceleration(2) |
$ |
7,745,153 |
$ |
7,745,153 |
$ |
7,745,153 |
TOTAL |
$ |
7,745,153 |
$ |
7,745,153 |
$ |
7,745,153 |
R. Todd Carpenter |
|
|
|
Equity Acceleration(2) |
$ |
5,926,414 |
$ |
5,926,414 |
$ |
5,926,414 |
TOTAL |
$ |
5,926,414 |
$ |
5,926,414 |
$ |
5,926,414 |
Anne Psencik |
|
|
|
Equity Acceleration(2) |
$ |
5,879,838 |
$ |
5,879,838 |
$ |
5,879,838 |
TOTAL |
$ |
5,879,838 |
$ |
5,879,838 |
$ |
5,879,838 |
|
(1) |
For purposes of this table, the value of Ms. Psencik’s
RSUs is included in this column, despite the fact that such RSUs would not accelerate upon her resignation for any reason, with or with
good reason. |
|
(2) |
The amounts reported in this row were calculated
by multiplying the number of Class A Shares and Class C Shares (and, in the case of Ms. Psencik, RSUs) that would accelerate under the
applicable termination scenario by $33.08, the closing price of our Class A Common Stock on December 30, 2022 (the last trading day of
2022). |
Director Compensation
How Our Directors Are Compensated
In 2022, the Compensation Committee engaged
Meridian to develop our non-employee director compensation policy. In light of the non-employee directors’ roles and
responsibilities and after considering director compensation at relevant peer group companies and recommendations by Meridian, our
Board adopted a new non-employee director compensation policy for the 2022 calendar year. The policy is designed to provide
competitive compensation necessary to attract and retain high quality non-employee directors and to encourage ownership of Company
stock to further align their interests with those of its stockholders. No compensation is paid to employee directors or directors
designated by Blackstone, I Squared and Apache. During fiscal year 2022, our non-employee director compensation
consisted of the following:
Type of Compensation |
Value of Compensation(1) |
Annual Cash Retainer |
$ |
100,000 |
|
Lead Director Annual Cash Retainer |
$ |
30,000 |
|
Audit Committee Chair Annual Cash Retainer |
$ |
35,000 |
|
Compensation Committee Chair Annual Cash Retainer |
$ |
20,000 |
|
Governance and Sustainability Committee Chair Annual Cash Retainer |
$ |
15,000 |
|
Annual Equity Compensation(2) |
$ |
125,000 |
|
|
(1) |
All annual cash retainer amounts are paid in installments
on a quarterly basis. |
|
(2) |
The Company grants to each non-employee director, on an
annual basis, restricted stock units under the 2019 Plan. Newly elected non-employee directors are generally expected to receive an equity
grant upon joining the Board equal to the pro-rata amount of the then applicable annual grant. |
Kinetik Holdings Inc. |
46 |
2023 Proxy Statement |
Non-employee directors also receive
reimbursement for out-of-pocket expenses they incur in connection with attending meetings of our Board of Directors or its
committees. Non-employee directors are permitted, at their election, to defer settlement of their annual equity compensation or
payment of their cash retainers to a future date or event. Each director is indemnified for such director’s actions associated with being a director to
the fullest extent permitted under Delaware law.
Stock Ownership Requirements
To further align the interests of non-employee directors
with those of stockholders, in May 2022, the Company adopted stock ownership requirements in its director compensation policy, which provide
that non-employee directors are required to own common stock of the Company equal in value to at least five times their annual
cash retainer. Share equivalents (including restricted stock units and deferred stock units) are counted for purposes of meeting the stock
ownership requirement. Non-employee directors must attain such ownership within five years of the date that the requirement was adopted.
2022 Compensation
The following table sets forth information concerning
the compensation paid by us to our directors for the year ended December 31, 2022.
Name
(a)(1) |
|
Fees Earned
or Paid in
Cash
($)(b) |
|
Stock
Awards
($)(c)(2) |
|
Option
Awards
($)(d) |
|
Non-Equity
Incentive Plan
Compensation
($)(e) |
|
Nonqualified
Deferred
Compensation
Earnings
($)(f) |
|
All Other
Compensation
($)(g) |
|
Total
($)(h) |
|
Deborah L. Byers(3) |
|
60,163 |
(4) |
114,169 |
|
— |
|
— |
|
— |
|
— |
|
174,332 |
|
Mark Borer |
|
10,306 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
10,306 |
|
Joe C. Frana |
|
10,306 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
10,306 |
|
D. Mark Leland(4) |
|
95,863 |
|
123,826 |
|
— |
|
— |
|
— |
|
— |
|
219,689 |
|
Kevin S. McCarthy(4) |
|
85,306 |
|
123,826 |
|
— |
|
— |
|
— |
|
— |
|
209,132 |
|
Robert S. Purgason |
|
10,306 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
10,306 |
|
Laura A. Sugg |
|
108,750 |
|
123,826 |
|
— |
|
— |
|
— |
|
— |
|
232,576 |
|
|
(1) |
Officers,
employees, and designees of Blackstone, Apache and I Squared who also served as members of the Board did not receive additional
compensation for the services they provided as members of the Board. Effective as of February 22, 2022, the following non-employee directors
of Altus resigned from the Board: Mark Borer, Joe C. Frana and Robert S. Purgason. |
|
(2) |
Grant date fair value, as computed in accordance with
FASB ASC Topic 718, of fully vested RSUs granted during 2022 to each non-employee director based on the per-share closing price of our
Class A Common Stock on the applicable date of grant. None of the directors held any unvested RSUs as of December 31, 2022. |
|
(3) |
Ms. Byers was appointed to the Board effective July 20, 2022. |
|
(4) |
The amount reported for each of Messrs. Leland and McCarthy includes $10,306 earned for Board Service from January 1, 2022 to February
22, 2022, which was paid pursuant to the prior Altus director compensation program. |
|
(5) |
The amount shown was paid to Ms. Byers in the form of deferred stock units (“DSUs”) in lieu of cash compensation. Ms. Byers received 1,723 DSUs, of which 756 vested on October
1, 2022 and 967 were unvested as of December 31, 2022 (but later vested on January 1, 2023). |
Kinetik Holdings Inc. |
47 |
2023 Proxy Statement |