8-K: Kinetik Holdings Announces Secondary Offering of Class A Common Stock by Apache Midstream

Kinetik Holdings Inc. announced a secondary offering of 11,373,801 shares of its Class A common stock by Apache Midstream LLC, with an option for underwriters to purchase an additional 1,706,070 shares.

Summary

• Kinetik Holdings Inc. is not selling any shares in this offering and will not receive any proceeds.
• Apache Midstream LLC, a subsidiary of Apache Corporation, is the selling stockholder.
• The offering involves 11,373,801 shares of Class A common stock.
• Underwriters have a 30-day option to purchase an additional 1,706,070 shares.
• The offering is priced at $33.75 per share.
• The company's CEO has agreed to purchase 14,814 shares at the offering price.
• Goldman Sachs & Co. LLC, BofA Securities, J.P. Morgan, and Mizuho are acting as joint lead book-running managers.
• The offering is expected to close on March 18, 2024.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company doesn't directly benefit financially, the offering provides liquidity for a major shareholder and the CEO's participation signals confidence. However, the potential for short-term price volatility is a concern.

Positives

• The offering provides liquidity for a major shareholder, Apache Midstream LLC.
• The CEO's participation in the offering signals confidence in the company.
• The involvement of multiple major investment banks as underwriters indicates strong market interest.

Negatives

• The company will not receive any proceeds from the offering, limiting its direct financial benefit.
• The secondary offering could potentially create downward pressure on the stock price due to increased supply.

Risks

• The offering is subject to market conditions, which could affect its completion.
• The sale of a large block of shares by a major shareholder could lead to short-term price volatility.
• There is no guarantee that the underwriters will exercise their option to purchase additional shares.

Future Outlook

The offering is expected to close on March 18, 2024, subject to customary closing conditions. The company will continue to operate as a fully integrated midstream C-corporation.

Management Comments

• The company's CEO has agreed to purchase 14,814 shares of Class A common stock from the underwriters at the public offering price.

Industry Context

This secondary offering is a common method for large shareholders to monetize their investments in publicly traded companies. The midstream sector is currently experiencing significant activity due to increased energy production in the Permian Basin.

Comparison to Industry Standards

• Secondary offerings are a standard practice for companies with large institutional shareholders.
• The size of the offering is relatively large, indicating a significant divestment by Apache Midstream.
• The involvement of multiple major investment banks is typical for offerings of this size and nature.
• The pricing of the offering at $33.75 per share is within the expected range for a company of Kinetik's size and market position.
• Comparable companies in the midstream sector, such as Energy Transfer and Kinder Morgan, have also conducted secondary offerings to manage their capital structure.

Related Party Transactions

• Apache Midstream LLC, the selling stockholder, is a subsidiary of Apache Corporation.

Stakeholder Impact

• Shareholders may experience short-term price volatility due to the increased supply of shares.
• Employees are unlikely to be directly impacted by this transaction.
• Customers and suppliers will not be directly impacted by this transaction.
• Creditors are unlikely to be directly impacted by this transaction.

Next Steps

• The offering is expected to close on March 18, 2024.
• The underwriters will distribute the shares to investors.
• The company will continue to operate its midstream business.

Key Dates

Keywords

secondary offering, common stock, Kinetik Holdings, Apache Midstream, underwriting, equity offering, midstream, Permian Basin