Apache and KAAC sign deal to create $3.5bn company

Apache and Kayne Anderson Acquisition (KAAC) have signed an agreement to create Altus Midstream, a $3.5bn pure-play, Permian basin midstream company.

Pursuant to the agreement, Apache will contribute its midstream assets at Alpine High to Altus Midstream, which is jointly owned by Apache and KAAC.

KAAC will be renamed Altus Midstream Company at closing.

Apache CEO and president John Christmann IV said: “Alpine High contains more than 5,000ft of vertical hydrocarbon bearing formations across approximately 340,000 contiguous net acres.”

“Since our discovery of Alpine High, we have invested nearly $1bn in an extensive network of fit-for-purpose infrastructure to meet the current and future processing and transport needs of the play.”

Altus Midstream will be anchored by substantially all of Apache’s gathering, processing and transportation assets at unconventional resource play Alpine High located in the Delaware Basin.

The company will own options for equity participation in five gas, NGL and crude oil pipeline projects from the Permian Basin to various points along the Texas Gulf Coast.

Apache midstream and marketing senior vice-president Brian Freed said that Altus Midstream, which expects to have more than $900m of cash and no debt at closing, is projected to be free-cash-flow positive by 2021.

The Altus Midstream assets include 380 million cubic feet per day (MMcf/d) rich-gas processing plants, lean-gas treating and compression plants with an inlet capacity of 400 MMcf/d, 123 miles of gathering pipelines, and 55 miles of processed gas pipelines with three market connections.

The company plans to add 1Bcf/d of cryogenic, rich-gas processing by 2020-end.

It will also hold options to purchase equity ownership in Gulf Coast Express, Salt Creek NGL Line, EPIC Crude, Shin Oak and Permian Highway pipelines.

The transaction has a planned effective date of 1 October this year and will fund Apache’s projected fourth-quarter 2018 Alpine High midstream capital expenditure of $170m.

Upon closing, Apache will sign an agreement to provide construction, operations and maintenance services for Altus Midstream.

Subject to approval by KAAC shareholders, as well as other customary closing conditions, the transaction is expected to close in the fourth quarter of this year.