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Apache, Kayne Anderson join forces to create $3.5B Permian midstream company

The independent oil and gas driller Apache Corp. and Kayne Anderson Acquisition Corp. are launching a publicly traded company initially valued at about $3.5 billion in West Texas' Permian Basin to house Apache midstream assets.

Altus Midstream LP will include Apache's gathering, processing and transportation infrastructure in the Alpine High play, which Apache is nearly alone in exploring. Kayne Anderson will contribute $952 million in cash, including $380 million in proceeds raised in its initial public offering and $572 million in proceeds from a private placement of class A shares, while Apache will initially own about 71% of Altus Midstream. The transaction is expected to close during the fourth quarter, upon which Altus Midstream will be structured as a C corporation.

"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," Apache CEO John Christmann IV said in an Aug. 8 statement. "Today's announcement is a strong endorsement of the quality of investment we have made to date."

Altus Midstream is expected to produce approximately 100,000 barrels per day of NGLs by the end of 2020. It will also own options for equity stakes in five gas, NGL and crude oil pipeline projects from the Permian Basin to the Gulf Coast, including the Kinder Morgan Inc.-led Gulf Coast Express and Permian Highway pipelines.

Barclays Capital Inc. and Tudor Pickering Holt & Co. are financial advisers and Bracewell LLP is legal adviser to Apache on the transaction. Citigroup is financial adviser and Latham & Watkins LLP is legal adviser to Kayne Anderson. Citigroup, Barclays and Credit Suisse are placement agents on the private placement of class A shares.