Apache Corporation (NYSE, NASDAQ: APA) and Kayne Anderson
Acquisition Corp. (NASDAQ: KAAC, KAACU, KAACW) have announced an
agreement pursuant to which Apache will contribute its midstream
assets at Alpine High to Altus Midstream LP, a partnership jointly
owned by Apache and KAAC. At closing, KAAC will be renamed Altus
Midstream Company (together with Altus Midstream LP, “Altus
Midstream” or the “company”). Altus Midstream will be structured as
a C-corporation anchored by substantially all of Apache’s
gathering, processing and transportation assets at Alpine High, a
world-class, unconventional resource play in the Delaware Basin.
The company will also own options for equity participation in five
gas, NGL and crude oil pipeline projects from the Permian Basin to
various points along the Texas Gulf Coast.
“The transaction with Kayne Anderson Acquisition Corp. creates a
premier midstream enterprise to service Alpine High, an enormous,
highly economic upstream resource base in the Permian Basin, the
most active oil and gas region in the world. Alpine High contains
more than 5,000 feet of vertical hydrocarbon bearing formations
across approximately 340,000 contiguous net acres,” said John
Christmann IV, chief executive officer and president of Apache.
“For Apache, this is a very strategic transaction with a
world-class partner at an attractive valuation. Since our discovery
of Alpine High, we have invested nearly $1 billion in an extensive
network of fit-for-purpose infrastructure to meet the current and
future processing and transport needs of the play. Today’s
announcement is a strong endorsement of the quality of investment
we have made to date.
“This transaction facilitates the allocation of Apache’s capital
to the development of the vast Alpine High upstream resource base.
In turn, focused capital development in the upstream should bring
significant growth to Altus Midstream for many years to come,”
concluded Christmann.
Kevin McCarthy, chairman of the board of directors of KAAC,
stated, “We are very excited to partner with Apache to form Altus
Midstream. This transaction fits all the criteria we outlined at
the time of KAAC’s initial public offering and creates a pure-play,
Permian-focused midstream C-corp. We believe investors will
appreciate the clear alignment of interests between Altus Midstream
and Apache as well as the company’s investor-friendly structure.
Altus Midstream does not have incentive distribution rights and is
well positioned to execute on its growth plans. We look forward to
working with our partners to create value for Altus Midstream’s
shareholders.”
Brian Freed, Apache’s senior vice president, Midstream and
Marketing, who will become the chief executive officer of the new
company, said, “We are launching Altus Midstream with the support
and financial strength of Apache and Kayne Anderson, two highly
respected industry leaders. We have a strong growth platform at
Alpine High with a large, contiguous acreage dedication in a proven
play, infrastructure in-place to accommodate a significant ramp in
volume, and options for equity participation in five planned
pipelines that will provide connectivity from the Permian Basin to
the Texas Gulf Coast.
“Altus Midstream expects to have more than $900 million of cash
and no debt at closing and is projected to be free-cash-flow
positive by 2021. With this strong financial position, the company
will have substantial borrowing capacity to accommodate its growth
plans. We see great opportunities to expand our asset base in
Alpine High, in surrounding areas of the Delaware Basin, and
elsewhere in the Permian Basin. We will have the financial
capacity to expand our footprint both in terms of our physical
asset base as well as the ability to access volumes from
third-party operators outside of Alpine High,” concluded Freed.
Altus Midstream assets
The Altus Midstream assets include rich-gas processing plants
with inlet capacity of 380 million cubic feet (MMcf) per day,
lean-gas treating and compression plants with inlet capacity of 400
MMcf per day, 123 miles of gathering pipelines, and 55 miles of
processed gas pipelines with three market connections. By the end
of 2020, Altus Midstream plans to add 1 Bcf per day of cryogenic,
rich-gas processing.
Additionally, Altus Midstream will hold options to purchase
equity ownership in five planned pipelines, including:
- Gulf Coast Express: Option for up to 15
percent interest in a natural gas pipeline to Agua Dulce; operated
by Kinder Morgan, expected in-service date in October 2019.
- Salt Creek NGL Line: Option for 50 percent
interest in an NGL header from Alpine High to Waha; operated by
Salt Creek Midstream, expected in-service date in the first quarter
of 2019.
- EPIC Crude: Option for up to 15 percent
interest in a crude oil pipeline to Corpus Christi; operated by
EPIC Midstream Holdings, expected in-service date in the second
half of 2019.
- Shin Oak: Option for up to 33 percent interest
in a long-haul NGL line to Mont Belvieu; operated by Enterprise
Products Partners, expected in-service date in the second-quarter
2019.
- Permian Highway: Option for up to 33 percent
interest in a proposed natural gas pipeline to Katy / Agua Dulce
(subject to agreement on definitive documentation); to be operated
by Kinder Morgan, expected in-service date in late 2020.
Other transaction details
Altus Midstream will have an estimated market capitalization of
$3.5 billion at formation, assuming 354.4 million common shares
outstanding at a $10 share price. Apache will receive 251.9 million
shares and own 71.1 percent of Altus Midstream. KAAC will
contribute approximately $952 million in cash at formation, which
is composed of proceeds from KAAC’s initial public offering of $380
million and proceeds from the private placement of Class A shares
of $572 million. These proceeds (net of transaction expenses) will
be used to fund ongoing midstream investments. Apache will have the
ability to earn an additional 37.5 million shares if certain share
price and operational thresholds are met over the next five
years.
KAAC has entered into agreements to sell approximately 57.2
million shares of its Class A common stock at a price of $10 per
share in a private placement. This private placement was anchored
by accounts managed by Kayne Anderson Capital Advisors and other
leading institutional investors, including Advisory Research, Inc.;
certain funds managed or advised by Capital Research and Management
Company, Cushing Asset Management, LP; Magnetar Capital, Salient
Partners and Tortoise Capital Advisors, LLC. Directors, management
and employees of both Kayne Anderson and Apache are investing $28
million in the private placement.
Altus Midstream will be structured as a C-corp with no incentive
distribution rights. Cash-on-hand, additional follow-on funding,
and future internally generated cash will be used to fund the
ongoing build-out of midstream infrastructure at Alpine High and
potential investment in long-haul pipelines. With a planned
effective date of Oct. 1, 2018, the transaction funds Apache’s
projected fourth-quarter 2018 Alpine High midstream capital spend
of approximately $170 million and provides future midstream capital
funding for Apache at Alpine High.
Upon closing, Apache and Altus Midstream will enter into an
agreement pursuant to which Apache will provide construction,
operations and maintenance services for Altus Midstream.
The transaction is subject to approval by KAAC shareholders, as
well as other customary closing conditions. Closing is expected in
the fourth quarter of 2018, at which time KAAC will trade on the
NASDAQ under the name Altus Midstream Company with a new ticker
symbol to be determined.
Transaction advisors
Barclays Capital Inc. and Tudor, Pickering, Holt & Co. acted
as financial advisors and Bracewell LLP acted as legal advisor to
Apache on the transaction. Citigroup acted as financial advisor and
Latham & Watkins LLP acted as legal advisor to KAAC. Citigroup,
Barclays and Credit Suisse acted as placement agents on the private
placement of Class A shares.
Conference call and additional materials
Apache and KAAC will host a conference call to discuss the
transaction at 4 p.m. Central time, Wednesday, Aug. 8. The
conference call will be webcast from Apache's website at
www.apachecorp.com and investor.apachecorp.com and on KAAC’s
website at www.kaynespac.com. A replay of the conference call will
be available for seven days following the call. The number for the
replay is (855) 859-2056 or (404) 537-3406 for international calls.
The conference access code is 6678757. Sign up for email alerts to
be reminded of the webcast at
http://investor.apachecorp.com/alerts/email-alerts-subscription.
Additional materials including a supporting presentation for
Altus Midstream are also available for download on Apache’s website
at www.apachecorp.com and investor.apachecorp.com and on
KAAC’s website at www.kaynespac.com.
About Apache
Apache Corporation is an oil and gas exploration and production
company with operations in the United States, Egypt and the United
Kingdom. Apache posts announcements, operational updates, investor
information and press releases on its website, www.apachecorp.com,
and on its Media and Investor Center mobile application, which is
available for free download from the Apple App Store and the Google
Play store.
About Kayne Anderson Acquisition Corp.
Kayne Anderson Acquisition Corp. was formed by Kayne Anderson
Capital Advisors for the purpose of entering into a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses or
entities. For more information, please visit www.kaynespac.com.
About Kayne Anderson Capital Advisors, L.P.
Kayne Anderson, founded in 1984, is an alternative investment
management firm. As of June 30, 2018, Kayne Anderson had
approximately $28 billion under management, and of that amount, $17
billion was invested in energy companies. Kayne Anderson is a
leading investor in the midstream industry with a 20-year track
record of investments in MLPs and other midstream companies. For
more information, please visit www.kaynecapital.com.
Forward-looking statements
This 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,” “possible,” “potential,” “predict,”
“project,” “should,” “would” and similar expressions may identify
forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking. Forward-looking
statements may include, for example, statements about Apache’s and
KAAC’s ability to effect the transactions discussed in this news
release; the benefits of the transactions; the future financial
performance of Altus Midstream following the transactions; changes
in Altus Midstream’s or Apache’s strategy, future operations,
financial position, estimated revenues, and losses, projected
costs, prospects, plans and objectives of management. These
forward-looking statements are based on information available as of
the date of this news release, and current expectations, forecasts
and assumptions, and involve a number of judgments, risks and
uncertainties. Accordingly, forward-looking statements should not
be relied upon as representing Apache’s or KAAC’s views as of any
subsequent date, and neither Apache nor KAAC undertakes any
obligation to update forward-looking statements to reflect events
or circumstances after the date they were made, whether as a result
of new information, future events or otherwise, except as may be
required under applicable securities laws. You should not place
undue reliance on these forward-looking statements. As a result of
a number of known and unknown risks and uncertainties, Apache’s and
Altus Midstream’s actual results or performance may be materially
different from those expressed or implied by these forward-looking
statements. Some factors that could cause actual results to differ
include: (i) the occurrence of any event, change or other
circumstances that could delay the transactions or give rise to the
termination of the definitive agreements relating to the
transactions; (ii) the outcome of any legal proceedings that
may be instituted against Apache or KAAC following announcement of
the proposed transactions; (iii) the inability to complete the
transactions due to the failure to obtain approval of the
stockholders of KAAC, or other conditions to closing in the
definitive agreements relating to the transactions; (iv) the
risk that the proposed transactions disrupts current plans and
operations of KAAC or Apache as a result of the announcement and
consummation of the proposed transactions; (v) KAAC’s and
Apache’s ability to realize the anticipated benefits of the
transactions, which may be affected by, among other things,
competition and the ability of Altus Midstream to grow and manage
growth profitably following the transactions; (vi) costs
related to the transactions; (vii) changes in applicable laws
or regulations; and (viii) the possibility that Altus
Midstream or Apache may be adversely affected by other economic,
business, and/or competitive factors.
No offer or solicitation
This news release is for informational purposes only and shall
not constitute an offer to sell or the solicitation of an offer to
buy any securities pursuant to the proposed transactions or
otherwise, nor shall there be any sale of securities in any
jurisdiction in which the offer, solicitation or sale would be
unlawful prior to the registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Important information for investors and
stockholders
In connection with the proposed transaction, KAAC intends to
file a proxy statement with the SEC. The definitive proxy statement
and other relevant documents will be sent or given to the
stockholders of KAAC and will contain important information about
the proposed transaction and related matters. KAAC’s stockholders
and other interested persons are advised to read, when available,
the proxy statement in connection with KAAC’s solicitation of
proxies for the meeting of stockholders to be held to approve the
transaction because the proxy statement will contain important
information about the proposed transaction. When available, the
definitive proxy statement will be mailed to KAAC’s stockholders as
of a record date to be established for voting on the transaction.
Stockholders will also be able to obtain copies of the proxy
statement, without charge, once available, at the SEC’s website at
www.sec.gov.
Participants in the solicitation
KAAC and its directors and officers may be deemed participants
in the solicitation of proxies of KAAC’s stockholders in connection
with the proposed transaction. KAAC stockholders and other
interested persons may obtain, without charge, more detailed
information regarding the directors and officers of KAAC in its
Annual Report on Form 10-K for the year ended Dec. 31, 2017 filed
with the SEC on March 27, 2018. Additional information will be
available in the definitive proxy statement when it becomes
available.
Contacts
Apache Corp.Investor: (281) 302-2286
Gary ClarkMedia: (713) 296-7276
Castlen KennedyWebsite:
www.apachecorp.com
Kayne Anderson Acquisition Corp.Investor: (877)
657-3863Website: www.kaynespac.com
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