Energy pipeline sector newcomer Altus Midstream Co. is struggling to find its footing amid senior executive turnover and slumping stock prices as parent Apache Corp. cut production estimates for the Permian Basin play that feeds its midstream spinoff's assets.
Since the close of Altus Midstream's first trading day on the Nasdaq Nov. 12, 2018 — following Apache and Kayne Anderson Acquisition Corp.'s formation of the public company — its stock price has tanked 53% to settle at $4.68 per unit on June 4. Investors appear to be avoiding the midstream firm, which relies on Apache's Alpine High drilling program in West Texas, after Altus Midstream slashed its 2019 EBITDA guidance from a span of $120 million to $140 million down to a range of $75 million to $95 million just months after going public.
The pipeline company has also seen two changes at the top since November including the exit of CEO Brian Freed, who continues to serve as Altus' senior vice president for midstream and marketing, and COO Craig Collins' recent decision to step down after just one month on the job to accept a senior midstream job at an unnamed exploration and production company.
Executives were optimistic at the outset that Altus Midstream's rejection of the master limited partnership model in favor of a more shareholder-friendly C-corp structure would be more appealing to markets, but that strategy has not been enough to overcome commodity price volatility.
Apache in February announced that it will decrease its shale drilling activity to five rigs from the previous seven to eight in the Alpine High for 2019 due to plummeting Waha natural gas prices, prompting an Altus Midstream sell-off that the company has yet to recover from. Its gas gathering, processing and transportation assets remain exposed to uncertainty. Credit Suisse midstream analysts expected a $625 million preferred equity offering announced May 8 to lift "the largest overhang on the stock" and expected a "positive reaction," but that slight share price boost did not last.
Waha prices are expected to gain ground once the Kinder Morgan Inc.-led Gulf Coast Express pipeline, which will carry 1.98 Bcf/d of gas from points in the Permian Basin to the Agua Dulce Hub near the Gulf Coast, begins service in 2019. Even though Waha gas could find itself in negative territory again until additional long-haul transportation capacity comes online, Altus Midstream is not seriously concerned about future Alpine High production deferrals.
"It's [a] low risk for us. ... I think it's fair to say that we're going to be in a good position," Ben Rodgers, Altus' CFO, treasurer and director, said during a May 2 earnings conference call.
In addition to its 15% stake in Gulf Coast Express, Altus Midstream has acquired ownership in Kinder Morgan's joint venture Permian Highway gas pipeline and Epic Midstream Holdings LP's crude oil pipeline.