Altus Midstream Company (Nasdaq: ALTM) (“Altus”) announced today it
will combine with privately-owned BCP Raptor Holdco LP (“BCP”) in
an all-stock transaction. BCP is the parent company of EagleClaw
Midstream, which includes EagleClaw Midstream Ventures, the Caprock
Midstream and Pinnacle Midstream businesses, and a 26.7% interest
in the Permian Highway Pipeline.
As consideration for the transaction, Altus will issue 50
million Class C common shares (and its subsidiary, Altus Midstream
LP will issue corresponding common units) to BCP’s unitholders,
principally funds affiliated with Blackstone and I Squared
Capital, resulting in combined ownership of approximately 75% of
the pro forma company. The ownership by Apache Midstream LLC, a
subsidiary of Apache Corporation (“Apache”), will be reduced to
approximately 20%, and existing Altus public shareholders will own
approximately 5% of the combined company.
Apache, Blackstone and I Squared have agreed to customary
lock-up provisions of their respective holdings for 12 months
post-closing, with a limited exception permitting Apache to sell up
to 4 million shares until three-months post-closing provided it
invests the first $75 million of proceeds in Alpine High
development activity over 18 months.
The transaction is expected to close during the first quarter
2022, following completion of customary closing conditions,
including Altus shareholder approval and regulatory reviews. Apache
currently owns approximately 79% of Altus and has agreed to vote in
favor of the transaction. All material consents to the transaction
have been secured by Altus in connection with its joint venture
pipeline interests and bank credit facility lenders. Altus
preferred equity holders have executed waivers and amendments in
support of the transaction. There are no consents required for any
existing BCP related financings.
Jamie Welch, President and CEO of EagleClaw, said: “This
transaction is a transformative event for all parties and their
respective stakeholders. The combination creates the largest
pure-play midstream company in one of the world’s most prolific
hydrocarbon basins, providing the scale, operational capabilities,
and fully integrated service offerings necessary for long-term
success. The pro forma enterprise is well positioned to capitalize
on accelerating activity in the Delaware Basin with expanded
processing and transportation capabilities for all three streams
from the wellhead to end markets. The combined business will have a
more diversified asset profile and customer base, with a lower risk
profile than either entity on a stand-alone basis. Management is
committed to a strong balance sheet and continuing to execute on
our key ESG objectives laid out in our inaugural Sustainability
Report issued in June 2021.”
Leadership and Governance
The new management team will be led by current EagleClaw
Midstream President and CEO Jamie Welch. Apache field personnel
working at Altus Midstream facilities will be offered employment
with the pro forma enterprise.
Following closing, the new Board of Directors of the company
will comprise 11 members: the CEO, four independent directors,
three designees of Blackstone, two designees of I Squared, and
a designee of Apache.
The pro forma enterprise will maintain its headquarters in
Midland with corporate leadership in Houston and operate under a
new name, which will be finalized prior to closing.
Strategic Rationale
The pro forma enterprise will be an integrated midstream company
in the Texas Delaware Basin offering scale and reliability for
residue gas, NGLs, crude oil and water midstream services. The
combined operations include approximately 2 Bcf per day of
state-of-the-art natural gas processing capacity strategically
located near the Waha Hub in West Texas. As measured by processing
capacity, Altus will become the largest natural gas processor in
the Delaware Basin and third largest across the entire Permian
Basin.
The transaction benefits the commercial service offerings to
customers of both Altus and EagleClaw. The combined business
significantly expands Altus’ system footprint and breadth of
services and also broadens its customer base. EagleClaw’s customers
will benefit by adding another processing complex with Diamond
Cryo, offering customers enhanced reliability and flow assurance,
as well as the ability to utilize Altus’ excess amine treating
equipment to expand the gas quality range from producer customers
on the broader EagleClaw system. The pro forma enterprise will also
adopt EagleClaw Midstream’s market-leading sustainability standards
while also incorporating legacy Altus best practices.
Apache will continue as a natural gas gathering and processing
customer of the combined company and recently executed an amendment
to its commercial agreements with Altus that incentivizes activity
in the Delaware Basin. Apache believes that Alpine High offers
attractive returns in the current environment and is currently
assessing the addition of drilling and completion activity in its
2022 capital budget.
In addition, the pro forma company will hold a premier portfolio
of interests in four contracted Permian export pipelines, including
three of the five major non-crude, long-haul pipelines built in the
last five years to transport natural gas products out of the
Permian Basin. These include a 53% majority interest in the Permian
Highway Pipeline, a 16% interest in the Gulf Coast Express natural
gas pipeline, and a 33% interest in the Shin Oak NGL Pipeline.
Altus also holds a 15% interest in the EPIC Crude Pipeline, which
connects the Permian and Eagle Ford basins to Corpus Christi.
Clay Bretches, Altus Midstream President and CEO added: “The
Altus midstream assets and pipeline ownership interests complement
EagleClaw’s well-established, diversified customer base.
Importantly, the new management team is aligned with Altus’ core
objectives of returning capital to shareholders and operating in a
safe and environmentally responsible manner.”
“We are excited to partner with Apache, Altus and management in
this transformative merger. Maintaining safe and reliable access to
affordable natural gas is critical to every person in Texas and
indeed to supply America’s growing energy exports needed for the
global energy transition,” said David Foley, Senior Managing
Director and Global Head of Blackstone Energy Partners. “Blackstone
is also pleased to remain a significant and long-term shareholder
of the company.”
“This transaction marks the next step in EagleClaw’s strategic
mission and begins another exciting chapter in the company’s
story,” said Adil Rahmathulla, Managing Partner of I Squared
Capital. “Combining the two companies will help optimize and boost
critical infrastructure that is necessary for the success of energy
transition in the United States.”
John Christmann, President and CEO of APA Corporation (Nasdaq:
APA) commented, “This transaction builds scale and liquidity, which
will be important for Altus’ evolution as a publicly-traded
entity. The reduction of APA’s ownership in Altus is a logical
continuation of our ongoing work to streamline our portfolio and
unlock the value of our midstream infrastructure. We have great
confidence in the new management team and look forward to remaining
a key customer of Altus for many years to come.”
APA Corporation CFO Steve Riney added, “We evaluated a wide
range of strategic options to enhance the value proposition of
Altus. The combination with EagleClaw provides the right balance of
high-quality businesses and attractive growth
opportunities. Notably, the transaction is structured to
preserve the current dividend for all Class A common stockholders
and introduces compelling opportunities for future growth. Reducing
APA’s interest in Altus to a minority position will have a number
of benefits to APA shareholders, including simplification of our
financial reporting and enhanced comparability with our
upstream-only peers, which will further underscore APA’s attractive
valuation on a relative basis.”
Combined Business Structure, Synergies and Financial
Profile
The pro forma company will operate in two segments: 1) Midstream
Logistics (formerly the Gathering and Processing business) and 2)
Pipeline Transportation. The expected 2022 EBITDA split between the
two segments is approximately 65% Midstream Logistics and 35%
Pipeline Transportation.
The company expects to achieve at least $50 million of annual
EBITDA synergies, with total integration spend of less than $100
million spread over the next three years. Capital synergies from
combining the systems are estimated to be more than $175 million in
the five years post-closing. Beyond integration spend, future
growth capital expenditure needs are projected to be modest.
With minimal capital requirements for the combined operations
and significant infrastructure already in place, Altus expects to
be in a position to generate substantial free cash flow.
Altus’ current guidance for 2021 is unchanged. Formal and
detailed 2022 guidance will be provided nearer to the closing date
of the transaction. The enterprise value for the combined company
is estimated at $9.0 billion at signing, with estimated 2022 pro
forma combined adjusted EBITDA ranging from $800-850 million
(including run-rate synergies). Overall leverage based on combined,
full-year 2021 results (factoring in run-rate synergies) is
expected to be less than 4x Debt/EBITDA and approaching 3.5x by
2023.
Dividend Policy
For 2022 and 2023, Altus Class A common shareholders will
continue to receive an annualized cash dividend of $6 per share,
subject to regular quarterly Board approval. Based on anticipated
operating results, management intends to begin increasing the $6
per share dividend by at least 5% per year after
2023.
In conjunction with the transaction, the pro forma company will
establish a dividend reinvestment plan for newly issued Class A
shares in which all of the stockholders or unitholders of the
company may voluntarily participate. Apache, Blackstone and I
Squared, which represent almost all of the Class C common shares,
will also receive a $6 per share dividend but have committed
through 2023 to reinvest in that plan at least 20% and up to 100%
of their respective quarterly dividends. The pro forma cash
dividend coverage ratio for the combined company, is estimated to
be 1.75x for 2022.
Advisors
Credit Suisse Securities (USA) LLC is serving as financial
advisor and Bracewell LLP is serving as legal advisor to Altus
Midstream. Goldman Sachs is serving as financial advisor to Apache.
Barclays, Citi, Greenhill, Intrepid, and Jefferies are serving as
financial advisors to BCP, Blackstone and I Squared, and Vinson
& Elkins LLP and Sidley Austin are serving as legal
advisors.
Conference Call Webcast and Additional
Materials
Management from Altus Midstream and EagleClaw will discuss this
transaction on a conference call and webcast Friday, Oct. 22, 2021,
at 8:30 a.m. Central time. The conference call will be webcast from
Altus’ website at www.altusmidstream.com/investors, and the webcast
replay will be archived there as well. The conference call will
also be available for playback by telephone for one week beginning
at approximately 4 p.m. Central time Oct. 22. To access the
telephone playback, dial (855) 859-2056 or (404) 537-3406 for
international calls. The conference access code is 8286445.
About Altus Midstream Company
Altus Midstream Company is a pure-play, Permian-to-Gulf Coast
midstream C-corporation. Through its consolidated subsidiaries,
Altus owns gas gathering, processing and transmission assets
servicing production in the Delaware Basin and owns equity
interests in four Permian-to-Gulf Coast pipelines. Altus posts
announcements, operational updates, investor information and press
releases on its website, www.altusmidstream.com.
About APA
APA Corporation owns consolidated subsidiaries that explore for
and produce oil and gas in the United States, Egypt and the United
Kingdom and that explore for oil and gas offshore Suriname. APA
posts announcements, operational updates, investor information and
press releases on its website, www.apacorp.com. Specific
information concerning Suriname, ESG performance and other
investor-related topics are posted at investor.apacorp.com.
About BCP Raptor Holdco LP
BCP Raptor Holdco, LP (“BCP”) is a fully integrated, private
midstream company operating in the Delaware Basin. The company is
headquartered in Midland, Texas, and has a significant presence in
Houston. BCP provides comprehensive gathering, transportation,
compression, processing, and treating services for companies that
produce natural gas, natural gas liquids, crude oil and water. The
company is the leading private gas processor in the Delaware Basin,
with approximately 1.3 billion cubic feet per day of capacity and
more than 1,400 miles of operated pipelines. BCP has long-term
dedications for gas, crude and water midstream services from
approximately 30 successful and active producers in the Delaware
Basin. BCP is also a partner on the Permian Highway Pipeline
project. BCP posts announcements, updates and press releases on its
website, www.eagleclawmidstream.com.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE
SECIn connection with the proposed transaction, Altus
Midstream Company intends to file a proxy statement with the
Securities and Exchange Commission (“SEC”) and also plans to file
other relevant documents with the SEC regarding the proposed
transaction. INVESTORS ARE URGED TO READ THE PROXY STATEMENT
(INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may
obtain a free copy of the proxy statement (if and when it becomes
available) and other relevant documents filed by Altus Midstream
Company with the SEC at the SEC’s website at www.sec.gov. You may
also obtain Altus Midstream Company’s documents on its website at
www.altusmidstream.com.
PARTICIPANTS IN THE SOLICITATIONAltus Midstream
Company its directors and executive officers and other members of
management and employees may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction.
Information about Altus Midstream Company’s directors and executive
officers is available in Altus Midstream Company’s proxy statement
filed with the SEC on April 23, 2021, for its 2021 annual meeting
of stockholders. Other information regarding the participants in
the proxy solicitations and a description of their direct and
indirect interests, by security holdings or otherwise, will be
contained in the definitive proxy statement and other relevant
materials to be filed with the SEC regarding the proposed
transaction when they become available. Investors should read the
definitive proxy statement carefully when it becomes available
before making any voting or investment decisions. You may obtain
free copies of these documents using the sources indicated
above.
Forward-looking statementsThis news release
includes certain statements that may constitute “forward-looking
statements” for purposes of the federal securities laws.
Forward-looking statements include, but are not limited to,
statements that refer to projections, forecasts, or other
characterizations of future events or circumstances, including any
underlying assumptions. The words “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intends,” “may,”
“might,” “plan,” “seeks,” “possible,” “potential,” “predict,”
“project,” “prospects,” “guidance,” “outlook,” “should,” “would,”
“will,” and similar expressions may identify forward-looking
statements, but the absence of these words does not mean that a
statement is not forward-looking. These statements include, but are
not limited to, statements about Altus’ and BCP’s ability to effect
the transactions discussed in this news release; the expected
benefits of the transactions; future dividends; and future plans,
expectations, and objectives the combined company’s operations
after completion of the transactions, including statements about
strategy, synergies, future operations, financial position,
estimated revenues, projected costs, prospects, plans, and
objectives of management. While forward-looking statements are
based on assumptions and analyses made by us that we believe to be
reasonable under the circumstances, whether actual results and
developments will meet our expectations and predictions depend on a
number of risks and uncertainties which could cause our actual
results, performance, and financial condition to differ materially
from our expectations. See “Risk Factors” in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2020, and in our
Quarterly Reports on Form 10-Q, filed with the SEC for a discussion
of risk factors that affect our business. Any forward-looking
statement made by us in this news release speaks only as of the
date on which it is made. Factors or events that could cause our
actual results to differ may emerge from time to time, and it is
not possible for us to predict all of them. We undertake no
obligation to publicly update any forward-looking statement,
whether as a result of new information, future development, or
otherwise, except as may be required by law.
Contacts
Media: (713) 296-7276 Alexandra FranceschiInvestors: (281)
302-2286 Patrick
Cassidy Websites:
www.altusmidstream.com
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