Altus Midstream (KNTK) is building out midstream infrastructure in the Permian Basin to support the growth of its oil and natural gas producing parent, Apache (APA 1.36%). The company is investing in long-haul pipelines as well as constructing new natural gas gathering systems and processing plants. This infrastructure will help move what Apache extracts to market centers along the Gulf Coast. As these assets enter service, they'll supply Altus with steady cash flow backed by long-term contracts with Apache and other customers.

Given the number of midstream assets Altus and its partners have under construction, the company is on track to significantly grow earnings over the next two years. That upcoming upside makes it one of the most compelling growth stocks in its sector.

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Quickly building out a meaningful midstream business

Apache formed Altus Midstream in 2018 to help build the infrastructure it needs to fully exploit its Alpine High discovery in Texas, and seeded it with the gathering and processing assets it had already built to support those operations. Altus is expanding that footprint with more natural gas gathering pipelines and processing capacity. It expects to have its second processing plant online this month, and a third operating by year's end.

Apache also gave Altus its options to acquire stakes in five long-haul pipelines that other infrastructure companies had under construction. Altus has since exercised three of those options. As a result, it owns a 16% interest in the Gulf Coast Express (GCX) and a 27% stake in Permian Highway (PHP), which are natural gas pipelines developed by Kinder Morgan (KMI 1.16%). Kinder Morgan has already placed a portion of GCX in service and expects it to begin full service in October. It anticipates completing PHP one year later. Altus also has a 15% stake in the private equity-backed EPIC crude oil pipeline. That pipeline should start interim service during the third quarter and be fully online in January.

The company also has options to buy a 33% interest in Enterprise Products Partners' (EPD 0.20%) Shin Oak natural gas liquids (NGLs) pipeline, and 50% of the private equity-backed Salt Creek NGL system. Enterprise Products Partners finished the last part of Shin Oak in June. Altus has until the end of August to exercise its option, which it expects to do. Meanwhile, the Salt Creek NGL pipeline is already in service; Altus has until January to decide if it will use that option.

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Nearing an inflection point

Altus forecasts that it will generate between $75 million and $95 million of adjusted EBIDTA this year. That would be significant growth for a company that produced just $12.1 million of adjusted EBITDA during the first quarter, but it will be fueled by the increasing volumes of oil and natural gas moving through its gathering and processing assets as Apache completes more wells. Altus will also benefit from the late-year completions of the GCX and EPIC pipelines and its likely exercise of its options for stakes in Shin Oak and Salt Creek.

As volumes ramp up on those newly built systems, they'll push earnings higher. In the company's view, it could generate between $260 million and $340 million of adjusted EBITDA next year. That factors in a further boost it anticipates late in the year when Kinder Morgan's PHP system is due to start up. The momentum will carry over into 2021, when the company forecasts producing between $400 million and $500 million of adjusted EBITDA.

Altus expects its adjusted EBITDA growth rate will slow down after 2021, but still rise by more than 10% in 2022 and beyond as it builds out gathering and processing infrastructure to support Apache's drilling program. However, the company could grow at a faster pace if it invests in other long-haul pipeline projects or makes acquisitions. Still, a double-digit-percentage annual growth rate would be above average for a midstream company.

Big time upside potential

Despite its fast growth rate, Altus Midstream's share price has plunged since Apache created it last year. Overall, its stock is down nearly 70% because Apache isn't growing as fast as expected due to lower natural gas prices. However, with its long-haul pipeline investments about to pay off, Altus' earnings should soar over the next two years. As that happens, the stock should begin bouncing back. That makes it an increasingly intriguing option for growth-focused investors.