Antero Midstream and AMGP Report Fourth Quarter and Full Year 2017 Financial and Operating Results - iCrowdNewswire
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Feb 14, 2018 6:40 AM ET

Antero Midstream and AMGP Report Fourth Quarter and Full Year 2017 Financial and Operating Results

Disclosure NewswireTM

iCrowdNewswire - Feb 14, 2018

DENVER,  — Antero Midstream Partners LP (NYSE: AM) (“Antero Midstream” or the “Partnership”) and Antero Midstream GP LP (NYSE: AMGP) (“AMGP”) today released their fourth quarter and full year 2017 financial and operating results.  The relevant consolidated financial statements are included in Antero Midstream’s and AMGP’s Annual Reports on Form 10-K for the year ended December 31, 2017, which have been filed with the Securities and Exchange Commission.

Antero Midstream GP LP Logo (PRNewsfoto/Antero Midstream GP LP)

 

Antero Midstream Fourth Quarter 2017 Highlights Include:

  • GAAP net income decreased by 13% to $64 million, or $0.22 per limited partner unit compared to the prior year quarter
  • Adjusted net income increased by 19% to $88 million, or $0.34 per limited partner unit compared to the prior year quarter
  • Adjusted EBITDA increased by 13% to $142 million compared to the prior year quarter
  • Distributable Cash Flow (“DCF”) increased by 14% to $117 million resulting in DCF coverage of 1.3x
  • Distributions were $0.365/unit, a 30% increase compared to the prior year quarter and the Partnership’s twelfth consecutive distribution increase since the November 2014 IPO
  • Antero Midstream’s corporate debt ratings have improved to Ba2/BB+/BBB- (Moody’s/S&P/Fitch)

Antero Midstream Full Year 2017 Highlights Include:

  • GAAP net income increased by 30% to $307 million, or $1.28 per limited partner unit compared to the prior year
  • Adjusted net income increased by 40% to $331 million, or $1.40 per limited partner unit compared to the prior year
  • Adjusted EBITDA increased by 31% to $529 million compared to the prior year
  • Distributable Cash Flow increased by 19% to $421 million resulting in DCF coverage of 1.3x
  • Debt to trailing twelve months Adjusted EBITDA was 2.3x with $1.0 billion of liquidity

Antero Midstream GP LP Fourth Quarter 2017 Highlights Include:

  • Distributions increased to $0.075/share, a 27% increase sequentially and the second consecutive distribution increase since the May 2017 IPO
  • Long-term distribution per share targets from 2018 through 2020 were increased by 20%, as compared to previously provided targets, due to the announced reduction in the U.S. federal corporate tax rate from 35% to 21%

Commenting on the 2017 results and outlook for Antero Midstream, Paul Rady, Chairman and CEO said, “Antero Midstream had another successful year executing its organic growth strategy and expanding its operations downstream into processing and fractionation.  We expect to continue this momentum into 2018 having recently brought online the Sherwood 9 processing plant, which expands the processing and fractionation Joint Venture’s total processing capacity to 600 MMcf/d.  This full midstream value chain strategy positions Antero Midstream to deliver on its attractive, peer-leading, long-term distribution growth targets supported by its five year organic project backlog of $2.7 billion.”

Mr. Rady further added, “Antero Midstream continues to benefit from the improving financial strength of Antero Resources, which has taken significant steps over the last year to improve its balance sheet and free cash flow profile.  Antero Resources is at an inflection point where going forward it is positioned to fully fund its five year development plan with operating cash flow, ultimately de-risking the growth profile of Antero Midstream.”

For a discussion of the non-GAAP financial measures adjusted net income, Adjusted EBITDA, Distributable Cash Flow, and net debt please see “Non-GAAP Financial Measures.”

Antero Midstream Fourth Quarter Financial Results

Low pressure gathering volumes for the fourth quarter of 2017 averaged 1,711 MMcf/d, a 12% increase as compared to the fourth quarter of 2016.  Low pressure gathering volumes were negatively impacted by lower than expected production in the Utica due to the delayed in-service date of the Rover Pipeline.  Compression volumes for the fourth quarter of 2017 averaged 1,355 MMcf/d, a 47% increase as compared to the fourth quarter of 2016 as a result of placing new compression stations in service throughout 2017 totaling approximately 600 MMcf/d of incremental capacity.  High pressure gathering volumes for the fourth quarter of 2017 averaged 1,842 MMcf/d, a 28% increase from the fourth quarter of 2016.  High pressure gathering volumes were in excess of low pressure gathering volumes due to Antero Resources’ temporary use of an Antero Midstream owned high pressure line to avoid downstream pipeline constraints. The increase in gathering and compression volumes was driven by production growth from Antero Resources in Antero Midstream’s area of dedication.  Fresh water delivery volumes averaged 149 MBbl/d during the quarter, in line with the fourth quarter of 2016.

Gross processing volumes from our processing and fractionation joint venture with MarkWest (a wholly-owned subsidiary of MPLX) (the “Joint Venture”), averaged 425 MMcf/d, for the fourth quarter of 2017, an increase of 16% compared to the third quarter of 2017.  Gross Joint Venture fractionation volumes averaged 9,096 Bbl/d, a 41% increase sequentially.

 

   

Three Months Ended

December 31,

   

Average Daily Volumes:

 

2016

 

2017

 

% Change

Low Pressure Gathering (MMcf/d)

 

1,522

 

1,711

 

12%

Compression (MMcf/d)

 

920

 

1,355

 

47%

High Pressure Gathering (MMcf/d)

 

1,437

 

1,842

 

28%

Fresh Water Delivery (MBbl/d)

 

150

 

149

 

(1)%

Gross Joint Venture Processing (MMcf/d)

 

 

425

 

*

Gross Joint Venture Fractionation (Bbl/d)

 

 

9,096

 

*

 

   

______________________________

*

Not applicable.  Antero Midstream has a 50% interest in the Joint Venture, which was formed in February 2017.

For the three months ended December 31, 2017, the Partnership reported revenues of $210 million, comprised of $106 million from the Gathering and Processing segment and $104 million from the Water Handling and Treatment segment. Revenues increased 26% compared to the prior year quarter, driven by growth in throughput volumes. Water Handling and Treatment segment revenues include $54 million from wastewater handling and high rate water transfer services provided to Antero Resources, which are billed at cost plus 3%. 

Direct operating expenses for the Gathering and Processing, and Water Handling and Treatment segments were $11 million and $59 million, respectively, for a total of $70 million compared to $37 million in direct operating expenses in the prior year quarter. Water Handling and Treatment direct operating expenses include $53 million from wastewater handling and high rate water transfer services.  General and administrative expenses including equity-based compensation were $15 million, a $1 million increase compared to the fourth quarter of 2016.  General and administrative expenses excluding equity-based compensation were $8 million during the fourth quarter of 2017, in line with the fourth quarter of 2016.  Total operating expenses were $143 million, including $31 million of depreciation, $23 million of impairment of property and equipment and $4 million of accretion of contingent acquisition consideration.

Net income for the fourth quarter of 2017 was $64 million, a 13% decrease compared to the prior year quarter. The decrease in net income was driven by a $23 million non-cash impairment expense of the condensate pipelines in the Utica that are not expected to be utilized in Antero Midstream’s high-graded infrastructure plan.  Net income per limited partner unit was $0.22 per unit, a 41% decrease compared to the prior year quarter. Adjusted net income was $88 million, a 19% increase compared to the prior year quarter.  Adjusted EBITDA was $142 million, a 13% increase compared to the prior year quarter. The increase in Adjusted EBITDA was primarily driven by increased natural gas throughput volumes and contribution from the Joint Venture. Adjusted EBITDA for the quarter included $10 million in distributions from Stonewall Gathering LLC and the processing and fractionation Joint Venture.  Cash interest paid was $4 million. Cash reserved for bond interest during the quarter increased $9 million and cash reserved for payment of income tax withholding upon vesting of Antero Midstream equity-based compensation awards was $1 million. Maintenance capital expenditures during the quarter totaled $12 million and Distributable Cash Flow was $117 million, resulting in a DCF coverage ratio of 1.3x.

The following table reconciles net income to adjusted net income, Adjusted EBITDA and Distributable Cash Flow as used in this release (in thousands):

 

 

Three months ended

 

Years ended

December 31,

 

December 31,

2016

 

2017

 

2016

 

2017

Net income

$

73,351

 

$

64,155

 

$

236,703

 

$

307,315

Impairment of property and equipment

 

   

23,431

   

   

23,431

Adjusted net income

$

73,351

 

$

87,586

 

$

236,703

 

$

330,746

Interest expense

 

9,008

   

10,395

   

21,893

   

37,557

Depreciation expense

 

25,761

   

30,958

   

99,861

   

119,562

Accretion of contingent acquisition consideration

 

6,105

   

3,804

   

16,489

   

13,476

Equity-based compensation

 

6,683

   

6,847

   

26,049

   

27,283

Equity in earnings of unconsolidated affiliates

 

1,542

   

(7,307)

   

(485)

   

(20,194)

Distributions from unconsolidated affiliates

 

7,702

   

10,075

   

7,702

   

20,195

Gain on asset sale

 

(3,859)

   

   

(3,859)

   

Adjusted EBITDA

$

126,293

 

$

142,358

 

$

404,353

 

$

528,625

Interest paid

 

(1,743)

   

(4,136)

   

(13,494)

   

(46,666)

Decrease (increase) in cash reserved for bond interest (1)

 

(10,481)

   

(8,734)

   

(10,481)

   

291

Income tax withholding upon vesting of Antero Midstream Partners LP equity-based compensation awards(2)

 

(2,636)

   

(514)

   

(5,636)

   

(5,945)

Cash distribution to be received from unconsolidated affiliate

 

(2,998)

   

   

   

Maintenance capital expenditures(3)

 

(5,466)

   

(12,063)

   

(21,622)

   

(55,159)

Distributable Cash Flow

$

102,969

 

$

116,911

 

$

353,120

 

$

421,146

                       

Distributions Declared to Antero Midstream Holders

                     

Limited Partners

 

50,090

   

68,231

   

182,559

   

247,132

Incentive distribution rights

 

7,543

   

23,772

   

16,945

   

69,720

Total Aggregate Distributions

$

57,633

 

$

92,003

 

$

199,504

 

$

316,852

                       

DCF coverage ratio

 

1.79x

   

1.27x

   

1.78x

   

1.33x

 

   

1)

Cash reserved for bond interest expense on Antero Midstream’s 5.375% senior notes outstanding during the period that is paid on a semi-annual basis on March 15th and September 15th of each year.

2)

Estimate of current period portion of expected cash payment for income tax withholding attributable to vesting of Midstream LTIP equity-based compensation awards to be paid in the fourth quarter.

3)

Maintenance capital expenditures represent the portion of our estimated capital expenditures associated with (i) the connection of new wells to our gathering and processing systems that we believe will be necessary to offset the natural production declines Antero Resources will experience on all of its wells over time, and (ii) water delivery to new wells necessary to maintain the average throughput volume on our systems.

Gathering and Processing — Antero Midstream expanded one of its Marcellus compression stations, adding an additional 25 MMcf/d of capacity during the fourth quarter of 2017. Antero Midstream’s total compression capacity at year-end 2017 was 1.7 Bcf/d in the Marcellus and Utica combined, with utilization averaging 81% during the fourth quarter.  Additionally, Antero Midstream connected 35 wells to its gathering system during the quarter.  Antero Resources is currently operating six drilling rigs on Antero Midstream dedicated acreage.

Water Handling and Treatment — Antero Midstream’s Marcellus and Utica fresh water delivery systems serviced 32 well completions during the fourth quarter of 2017, a 9% decrease from the prior year quarter.    Antero Resources is currently operating five completion crews on Antero Midstream dedicated acreage. Antero Midstream continued the commissioning process for the Antero Clearwater Facility during the fourth quarter of 2017.

Balance Sheet and Liquidity

As of December 31, 2017, Antero Midstream had $8 million in cash and $555 million drawn on its $1.5 billion bank credit facility, resulting in approximately $1.0 billion of liquidity.  Antero Midstream’s total debt and net debt to trailing twelve months Adjusted EBITDA was 2.3x as of December 31, 2017.  For a reconciliation of consolidated net debt to consolidated total debt, the most comparable GAAP measure, please read “Non-GAAP Financial Measures.”

Commenting on the balance sheet and credit strength, Michael Kennedy, CFO of Antero Midstream said, “Since its inception, Antero Midstream’s strategy has always been to maintain a conservative leverage profile and strong distribution coverage.  This is supported by the financial strength of our sponsor, long-term fee-based contracts and our just-in-time capital investment strategy.  Recently, both Antero Resources and Antero Midstream were recently given a BBB- investment grade rating from Fitch and received an upgrade to BB+ from S&P Global.  This further speaks to the Partnership’s conservative financial profile and the confidence around the new five year infrastructure plan.”   

Capital Investments

Capital expenditures, excluding investments in the processing and fractionation joint venture, were $143 million in the fourth quarter of 2017 as compared to $126 million in the fourth quarter of 2016.  Capital invested in gathering systems and related facilities was $91 million and capital invested in water handling and treatment assets was $52 million, including $26 million invested in the Antero Clearwater Facility.  Investments in unconsolidated affiliates for the Joint Venture were $18 million during the quarter.

AMGP Fourth Quarter 2017 Financial Results

AMGP’s equity in earnings from Antero Midstream Partners, which reflects the cash distributions from Antero Midstream, was $24 million for the fourth quarter of 2017.  Net income for the fourth quarter of 2017 was $6 million.  AMGP’s cash distributions from Antero Midstream were $23 million for fourth quarter of 2017, net of $1 million of cash reserved for distributions on Series B units. General and administrative expenses were $0.3 million, provision for income taxes was $9 million, and tax benefit of cash reserved for distributions to Series B units was $0.4 million, resulting in cash available for distribution of $14 million.

The following table reconciles cash distributions from Antero Midstream and AMGP cash distribution per common share as presented in this release (in thousands):

 

   

Three Months 
Ended 
December 31, 2017

Cash distributions from Antero Midstream Partners LP

 

$

23,772

Cash reserved for distributions to Series B units of IDR LLC

   

(963)

Cash distributions to Antero Midstream GP LP

 

$

22,809

General and administrative expenses

   

(279)

Provision for income taxes

   

(8,924)

Tax benefit of cash reserved for distributions to Series B units of IDR LLC

   

369

Cash available for distribution

 

$

13,975

       

DCF coverage ratio

   

1.0x

       

Common shares outstanding

   

186,182

       

Cash distribution per common share

 

$

0.075

Conference Call

A joint conference call for Antero Midstream and AMGP is scheduled on Wednesday, February 14, 2018 at 10:00 am MTto discuss the quarterly and full year results.  A brief Q&A session for security analysts will immediately follow the discussion of the results for the quarter.  To participate in the call, dial in at 1-888-347-8204 (U.S.), 1-855-669-9657 (Canada), or 1-412-902-4229 (International) and reference “Antero Midstream”.  A telephone replay of the call will be available until Wednesday, February 21, 2018 at 10:00 am MT at 1-844-512-2921 (U.S.) or 1-412-317-6671 (International) using the passcode 10114473.

Presentation

To access the live webcast and view the related earnings conference call presentation, visit Antero Midstream’s website at www.anteromidstream.com or AMGP’s website at www.anteromidstreamgp.com.  The webcast will be archived for replay on Antero Midstream’s website and AMGP’s website until Wednesday, February 21, 2018 at 10:00 am MT.  Information on Antero Midstream’s website and AMGP’s website does not constitute a portion of this press release.

Investor Access to 2017 10-K

Pursuant to Section 203.01 of the New York Stock Exchange Listed Company Manual, Antero Midstream and AMGP today announced that their respective Annual Reports on Form 10-K (the “10-Ks”) for the fiscal year ended December 31, 2017, were filed with the Securities and Exchange Commission on February 13, 2018. A copy of Antero Midstream’s 10-K, which includes the Partnership’s complete audited financial statements, may be found on Antero Midstream’s website, www.anteromidstream.com, by selecting the “Investor Relations” tab, then “SEC Filings.” A copy of AMGP’s 10-K, which includes AMGP’s complete audited financial statements, may be found on AMGP’s website, www.anteromidstreamgp.com, by selecting the “Investor Relations” tab, then “SEC Filings.” Antero Midstream unitholders may receive hard copies of these documents free of charge by sending a written request to Antero Midstream Partners LP, 1615 Wynkoop Street, Denver, Colorado, 80202 AMGP’s shareholders may receive hard copies of these documents free of charge by sending a written request to Antero Midstream GP LP, 1615 Wynkoop Street, Denver, Colorado, 80202.

Non-GAAP Financial Measures and Definitions

Antero Midstream views Adjusted EBITDA as an important indicator of the Partnership’s performance.  Antero Midstream defines Adjusted EBITDA as Net Income before interest expense, depreciation expense, impairment expense, accretion of contingent acquisition consideration, equity-based compensation expense, excluding equity in earnings of unconsolidated affiliates and including cash distributions from unconsolidated affiliates.

Antero Midstream uses Adjusted EBITDA to assess:

  • the financial performance of the Partnership’s assets, without regard to financing methods in the case of Adjusted EBITDA, capital structure or historical cost basis;
  • its operating performance and return on capital as compared to other publicly traded partnerships in the midstream energy sector, without regard to financing or capital structure; and
  • the viability of acquisitions and other capital expenditure projects.

The Partnership defines Distributable Cash Flow as Adjusted EBITDA less interest paid, income tax withholding payments and cash reserved for payments of income tax withholding upon vesting of equity-based compensation awards, cash reserved for bond interest and ongoing maintenance capital expenditures paid.  Antero Midstream uses Distributable Cash Flow as a performance metric to compare the cash generating performance of the Partnership from period to period and to compare the cash generating performance for specific periods to the cash distributions (if any) that are expected to be paid to unitholders.  Distributable Cash Flow does not reflect changes in working capital balances.

Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures.  The GAAP measure most directly comparable to Adjusted EBITDA and Distributable Cash Flow is Net Income.  The non-GAAP financial measures of Adjusted EBITDA and Distributable Cash Flow should not be considered as alternatives to the GAAP measure of Net Income.  Adjusted EBITDA and Distributable Cash Flow are not presentations made in accordance with GAAP and have important limitations as an analytical tool because they include some, but not all, items that affect Net Income and Adjusted EBITDA.  You should not consider Adjusted EBITDA and Distributable Cash Flow in isolation or as a substitute for analyses of results as reported under GAAP.  Antero Midstream’s definition of Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other partnerships.

The Partnership defines adjusted net income as net income plus impairment expense. The Partnership believes that adjusted net income is useful to investors in evaluating operational trends of the Partnership and its performance relative to other partnerships. Adjusted net income is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for net income as an indicator of financial performance.

The Partnership defines consolidated net debt as consolidated total debt less cash and cash equivalents. Antero Midstream views consolidated net debt as an important indicator in evaluating the Partnership’s financial leverage.

The following table reconciles consolidated total debt to consolidated net debt as used in this release (in thousands):

 

   

December 31,

   

2017

       

Bank credit facility

 

$

555,000

5.375% AM senior notes due 2024

   

650,000

Net unamortized debt issuance costs

   

(9,000)

Consolidated total debt

 

$

1,196,000

Cash and cash equivalents

   

(8,363)

Consolidated net debt

 

$

1,187,637

Antero Midstream is a limited partnership that owns, operates and develops midstream gathering, compression, processing and fractionation assets as well as integrated water assets that primarily service Antero Resources Corporation’s properties located in West Virginia and Ohio. Holders of Antero Midstream common units will receive a Schedule K-1 with respect to distributions received on the common units.

AMGP is a Delaware limited partnership that has elected to be classified as an entity taxable as a corporation for U.S. federal income tax purposes.  Holders of AMGP common shares will receive a Form 1099 with respect to distributions received on the common shares.  AMGP owns the general partner of Antero Midstream and indirectly owns the incentive distribution rights in Antero Midstream.

This release includes “forward-looking statements” within the meaning of federal securities laws.  Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Partnership’s and AMGP’s control.  All statements, other than historical facts included in this release, are forward-looking statements.  All forward-looking statements speak only as of the date of this release and are based upon a number of assumptions.  Although the Partnership and AMGP each believe that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that the assumptions underlying these forward-looking statements will be accurate or the plans, intentions or expectations expressed herein will be achieved.  For example, future acquisitions, dispositions or other strategic transactions may materially impact the forecasted or targeted results described in this release.  Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.  Nothing in this release is intended to constitute guidance with respect to Antero Resources.

Antero Midstream and AMGP caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the Partnership’s and AMGP’s control, incident to the gathering and processing and fresh water and waste water treatment businesses.  These risks include, but are not limited to, Antero Resources’ expected future growth, Antero Resources’ ability to meet its drilling and development plan, commodity price volatility, ability to execute the Partnership’s business strategy, competition and government regulations, actions taken by third-party producers, operators, processors and transporters, inflation, environmental risks, drilling and completion and other operating risks, regulatory changes, the uncertainty inherent in projecting future rates of production, cash flow and access to capital, the timing of development expenditures, and the other risks described under “Risk Factors” in Antero Midstream’s Annual Report on Form 10-K for the year ended December 31, 2017.

For more information, contact Michael Kennedy – CFO of Antero Midstream and AMGP at (303) 357-6782 or [email protected].

 

ANTERO MIDSTREAM PARTNERS LP

 

Consolidated Balance Sheets

 

December 31, 2016 and 2017

 

 (In thousands) 

 
   
   

December 31,

 
   

2016

 

2017

 

Assets

Current assets:

             

Cash and cash equivalents

 

$

14,042

   

8,363

 

Accounts receivable–Antero Resources

   

64,139

   

110,182

 

Accounts receivable–third party

   

1,240

   

1,170

 

Prepaid expenses

   

529

   

670

 

  Total current assets

   

79,950

   

120,385

 

Property and equipment, net

   

2,195,879

   

2,605,602

 

Investments in unconsolidated affiliates

   

68,299

   

303,302

 

Other assets, net

   

5,767

   

12,920

 

Total assets

 

$

2,349,895

   

3,042,209

 

 

Liabilities and Partners’ Capital

Current liabilities:

             

Accounts payable

 

$

16,979

   

8,642

 

Accounts payable–Antero Resources

   

3,193

   

6,459

 

Accrued liabilities

   

61,641

   

106,006

 

Other current liabilities

   

200

   

209

 

  Total current liabilities

   

82,013

   

121,316

 

Long-term liabilities:

             

Long-term debt

   

849,914

   

1,196,000

 

Contingent acquisition consideration

   

194,538

   

208,014

 

Other

   

620

   

410

 

  Total liabilities

   

1,127,085

   

1,525,740

 
               

Partners’ capital:

             

Common unitholders – public (70,020 units and 88,059 units issued and outstanding at December 31, 2016 and 2017, respectively)

   

1,458,410

   

1,708,379

 

Common unitholder – Antero Resources (32,929 units and 98,870 units issued and outstanding at December 31, 2016 and 2017, respectively)

   

26,820

   

(215,682)

 

Subordinated unitholder – Antero Resources (75,941 issued and outstanding at December 31, 2016)

   

(269,963)

   

 

General partner

   

7,543

   

23,772

 

  Total partners’ capital

   

1,222,810

   

1,516,469

 

  Total liabilities and partners’ capital

 

$

2,349,895

   

3,042,209

 

 

 

 

ANTERO MIDSTREAM PARTNERS LP

Consolidated Statements of Operations and Comprehensive Income

Three Months Ended December 31, 2016 and 2017

(In thousands, except per unit amounts)

               
       

Three Months Ended

December 31,

       

2016

   

2017

Revenue:

             

Gathering and compression–Antero Resources

 

$

 

84,312

   

105,527

Water handling and treatment–Antero Resources

     

78,517

   

104,805

Gathering and compression–third party

     

166

   

Gain on sale of assets

     

3,859

   

  Total revenue

     

166,854

   

210,332

Operating expenses:

             

Direct operating

     

36,636

   

69,646

General and administrative (including $6,683 and $6,847 of equity-based compensation in 2016 and 2017, respectively)

     

14,451

   

15,250

Impairment of property and equipment

     

   

23,431

Depreciation

     

25,761

   

30,958

Accretion of contingent acquisition consideration

     

6,105

   

3,804

  Total operating expenses

     

82,953

   

143,089

  Operating income

     

83,901

   

67,243

Interest expense, net

     

(9,008)

   

(10,395)

Equity in earnings of unconsolidated affiliates

     

(1,542)

   

7,307

Net income and comprehensive income

     

73,351

   

64,155

Net income attributable to incentive distribution rights

     

(7,557)

   

(23,772)

  Limited partners’ interest in net income

 

$

 

65,794

   

40,383

               

  Net income per limited partner unit – basic and diluted

 

$

 

0.37

   

0.22

               

  Weighted average limited partner units outstanding – basic

     

177,851

   

186,788

  Weighted average limited partner units outstanding – diluted

     

178,195

   

187,122

             

 

 

 

ANTERO MIDSTREAM PARTNERS LP

Consolidated Statements of Operations and Comprehensive Income

Year Ended December 31, 2016 and 2017

(In thousands, except per unit amounts)

 
   

Year Ended December 31,

       

2016

   

2017

Revenue:

             

Gathering and compression–Antero Resources

 

$

 

303,250

   

396,202

Water handling and treatment–Antero Resources

     

282,267

   

376,031

Gathering and compression–third party

     

835

   

264

Gain on sale of assets

     

3,859

   

  Total revenue

     

590,211

   

772,497

Operating expenses:

             

Direct operating

     

161,587

   

232,538

General and administrative (including $26,049 and $27,283 of equity-based compensation in 2016 and 2017, respectively)

     

54,163

   

58,812

Impairment of property and equipment

     

   

23,431

Depreciation

     

99,861

   

119,562

Accretion of contingent acquisition consideration

     

16,489

   

13,476

  Total operating expenses

     

332,100

   

447,819

  Operating income

     

258,111

   

324,678

Interest expense, net

     

(21,893)

   

(37,557)

Equity in earnings of unconsolidated affiliates

     

485

   

20,194

Net income and comprehensive income

     

236,703

   

307,315

Net income attributable to incentive distribution rights

     

(16,944)

   

(69,720)

  Limited partners’ interest in net income

 

$

 

219,759

   

237,595

               

  Net income per limited partner unit – basic and diluted

 

$

 

1.24

   

1.28

               

  Weighted average limited partner units outstanding – basic

     

176,647

   

185,630

  Weighted average limited partner units outstanding – diluted

     

176,801

   

186,083

             

 

ANTERO MIDSTREAM PARTNERS LP

Consolidated Results of Segment Operations

Three Months Ended December 31, 2016 and 2017

 (In thousands) 

             
         

Water

     
   

Gathering and

 

Handling and

 

Consolidated

   

Processing

 

Treatment

 

Total

Three months ended December 31, 2016

                 

Revenues:

                 

Revenue – Antero Resources

 

$

84,312

   

78,517

   

162,829

Revenue – third-party

   

166

   

   

166

Gain on sale of assets

   

3,859

   

   

3,859

Total revenues

   

88,337

   

78,517

   

166,854

                   

Operating expenses:

                 

Direct operating

   

7,531

   

29,105

   

36,636

General and administrative (before equity-based compensation)

   

5,265

   

2,503

   

7,768

Equity-based compensation

   

4,812

   

1,871

   

6,683

Depreciation

   

17,837

   

7,924

   

25,761

Accretion of contingent acquisition consideration

   

   

6,105

   

6,105

Total expenses

   

35,445

   

47,508

   

82,953

                   

Operating income

 

$

52,892

   

31,009

   

83,901

                   

Segment and consolidated Adjusted EBITDA

 

$

79,384

   

46,909

   

126,293

                   

Three months ended December 31, 2017

                 

Revenues:

                 

Revenue – Antero Resources

 

$

105,527

   

104,805

   

210,332

Total revenues

   

105,527

   

104,805

   

210,332

                   

Operating expenses:

                 

Direct operating

   

10,655

   

58,991

   

69,646

General and administrative (before equity-based compensation)

   

5,365

   

3,038

   

8,403

Equity-based compensation

   

4,793

   

2,054

   

6,847

Impairment of property and equipment

   

23,431

   

   

23,431

Depreciation

   

22,599

   

8,359

   

30,958

Accretion of contingent acquisition consideration

   

   

3,804

   

3,804

Total expenses

   

66,843

   

76,246

   

143,089

                   

Operating income

 

$

38,684

   

28,559

   

67,243

                   

Segment and consolidated Adjusted EBITDA

 

$

99,582

   

42,776

   

142,358

 

ANTERO MIDSTREAM PARTNERS LP

Consolidated Results of Segment Operations

Year Ended December 31, 2016 and 2017

 (In thousands) 

                   
         

Water

     
   

Gathering and

 

Handling and

 

Consolidated

   

Processing

 

Treatment

 

Total

Year ended December 31, 2016

                 

Revenues:

                 

Revenue – Antero Resources

 

$

303,250

   

282,267

   

585,517

Revenue – third-party

   

835

   

   

835

Gain on sale of assets

   

3,859

   

   

3,859

Total revenues

   

307,944

   

282,267

   

590,211

                   

Operating expenses:

                 

Direct operating

   

27,289

   

134,298

   

161,587

General and administrative (before equity-based compensation)

   

20,118

   

7,996

   

28,114

Equity-based compensation

   

19,714

   

6,335

   

26,049

Depreciation

   

69,962

   

29,899

   

99,861

Accretion of contingent acquisition consideration

   

   

16,489

   

16,489

Total expenses

   

137,083

   

195,017

   

332,100

                   

Operating income

 

$

170,861

   

87,250

   

258,111

                   

Segment and consolidated Adjusted EBITDA

 

$

264,380

   

139,973

   

404,353

                   

Year ended December 31, 2017

                 

Revenues:

                 

Revenue – Antero Resources

 

$

396,202

   

376,031

   

772,233

Revenue – third-party

   

264

   

   

264

Total revenues

   

396,466

   

376,031

   

772,497

                   

Operating expenses:

                 

Direct operating

   

39,251

   

193,287

   

232,538

General and administrative (before equity-based compensation)

   

20,607

   

10,922

   

31,529

Equity-based compensation

   

19,730

   

7,553

   

27,283

Impairment of property and equipment

   

23,431

   

   

23,431

Depreciation

   

86,372

   

33,190

   

119,562

Accretion of contingent acquisition consideration

   

   

13,476

   

13,476

Total expenses

   

189,391

   

258,428

   

447,819

                   

Operating income

 

$

207,075

   

117,603

   

324,678

                   

Segment and consolidated Adjusted EBITDA

 

$

356,803

   

171,822

   

528,625

 

ANTERO MIDSTREAM PARTNERS LP

Selected Operating Data

Three Months Ended December 31, 2016 and 2017

(In thousands)

                         
               

Amount of

     
   

Three Months Ended December 31,

 

Increase

 

Percentage

   

2016

 

2017

 

(Decrease)

 

Change

   

($ in thousands, except average realized fees)

     

Revenue:

                       

Revenue – Antero Resources

 

$

162,829

   

210,332

   

47,503

 

29

%

Revenue – third-party

   

166

   

   

(166)

 

*

 

Gain on sale of assets

   

3,859

   

   

(3,859)

 

*

 

Total revenue

   

166,854

   

210,332

   

43,478

 

26

%

Operating expenses:

                       

Direct operating

   

36,636

   

69,646

   

33,010

 

90

%

General and administrative (before equity-based compensation)

   

7,768

   

8,403

   

635

 

8

%

Equity-based compensation

   

6,683

   

6,847

   

164

 

2

%

Impairment of property and equipment

   

   

23,431

   

23,431

 

*

 

Depreciation

   

25,761

   

30,958

   

5,197

 

20

%

Accretion of contingent acquisition consideration

   

6,105

   

3,804

   

(2,301)

 

(38)

%

Total operating expenses

   

82,953

   

143,089

   

60,136

 

72

%

  Operating income

   

83,901

   

67,243

   

(16,658)

 

(20)

%

Interest expense

   

(9,008)

   

(10,395)

   

(1,387)

 

15

%

Equity in earnings of unconsolidated affiliates

   

(1,542)

   

7,307

   

8,849

 

574

%

  Net income

 

$

73,351

   

64,155

   

(9,196)

 

(13)

%

Adjusted EBITDA

 

$

126,293

   

142,358

   

16,065

 

13

%

Operating Data:

                       

Gathering—low pressure (MMcf)

   

140,052

   

157,373

   

17,321

 

12

%

Gathering—high pressure (MMcf)

   

132,206

   

169,464

   

37,258

 

28

%

Compression (MMcf)

   

84,654

   

124,654

   

40,000

 

47

%

Fresh water delivery (MBbl)

   

13,771

   

13,745

   

(26)

 

*

 

Wastewater handling (MBbl)

   

2,981

   

4,227

   

1,246

 

42

%

Wells serviced by fresh water delivery

   

35

   

32

   

(3)

 

(9)

%

Gathering—low pressure (MMcf/d)

   

1,522

   

1,711

   

189

 

12

%

Gathering—high pressure (MMcf/d)

   

1,437

   

1,842

   

405

 

28

%

Compression (MMcf/d)

   

920

   

1,355

   

435

 

47

%

Fresh water delivery (MBbl/d)

   

150

   

149

   

(1)

 

(1)

%

Wastewater handling (MBbl/d)

   

32

   

46

   

14

 

44

%

Average realized fees:

                       

Average gathering—low pressure fee ($/Mcf)

 

$

0.31

   

0.32

   

0.01

 

3

%

Average gathering—high pressure fee ($/Mcf)

 

$

0.19

   

0.19

   

 

*

 

Average compression fee ($/Mcf)

 

$

0.19

   

0.19

   

 

*

 

Average fresh water delivery fee ($/Bbl)

 

$

3.68

   

3.71

   

0.03

 

1

%

Joint Venture Operating Data:

                       

Processing – Joint Venture (MMcf)

   

   

39,124

   

39,124

 

*

 

Fractionation – Joint Venture (MBbl)

   

   

837

   

837

 

*

 

Processing – Joint Venture (MMcf/d)

   

   

425

   

425

 

*

 

Fractionation – Joint Venture (MBbl/d)

   

   

9

   

9

 

*

 

 

________________________

   

*

Not meaningful or applicable.

 

 

ANTERO MIDSTREAM PARTNERS LP

Selected Operating Data

Year Ended December 31, 2016 and 2017

(In thousands)

                         
               

Amount of

     
   

Year Ended December 31,

 

Increase

 

Percentage

   

2016

 

2017

 

(Decrease)

 

Change

   

($ in thousands, except average realized fees)

     

Revenue:

                       

Revenue – Antero Resources

 

$

585,517

   

772,233

   

186,716

 

32

%

Revenue – third-party

   

835

   

264

   

(571)

 

(68)

%

Gain on sale of assets

   

3,859

   

   

(3,859)

 

*

 

Total revenue

   

590,211

   

772,497

   

182,286

 

31

%

Operating expenses:

                       

Direct operating

   

161,587

   

232,538

   

70,951

 

44

%

General and administrative (before equity-based compensation)

   

28,114

   

31,529

   

3,415

 

12

%

Equity-based compensation

   

26,049

   

27,283

   

1,234

 

5

%

Impairment of property and equipment

   

   

23,431

   

23,431

 

*

 

Depreciation

   

99,861

   

119,562

   

19,701

 

20

%

Accretion of contingent acquisition consideration

   

16,489

   

13,476

   

(3,013)

 

(18)

%

Total operating expenses

   

332,100

   

447,819

   

115,719

 

35

%

  Operating income

   

258,111

   

324,678

   

66,567

 

26

%

Interest expense

   

(21,893)

   

(37,557)

   

(15,664)

 

72

%

Equity in earnings of unconsolidated affiliates

   

485

   

20,194

   

19,709

 

4,064

%

  Net income

 

$

236,703

   

307,315

   

70,612

 

30

%

Adjusted EBITDA

 

$

404,353

   

528,625

   

124,272

 

31

%

Operating Data:

                       

Gathering—low pressure (MMcf)

   

513,390

   

605,719

   

92,329

 

18

%

Gathering—high pressure (MMcf)

   

481,646

   

646,054

   

164,408

 

34

%

Compression (MMcf)

   

271,060

   

436,695

   

165,635

 

61

%

Fresh water delivery (MBbl)

   

45,112

   

55,892

   

10,780

 

24

%

Wastewater handling (MBbl)

   

10,602

   

14,549

   

3,947

 

37

%

Wells serviced by fresh water delivery

   

131

   

142

   

11

 

8

%

Gathering—low pressure (MMcf/d)

   

1,403

   

1,660

   

257

 

18

%

Gathering—high pressure (MMcf/d)

   

1,316

   

1,770

   

454

 

34

%

Compression (MMcf/d)

   

741

   

1,196

   

455

 

61

%

Fresh water delivery (MBbl/d)

   

123

   

153

   

30

 

24

%

Wastewater handling (MBbl/d)

   

29

   

40

   

11

 

37

%

Average realized fees:

                       

Average gathering—low pressure fee ($/Mcf)

 

$

0.31

   

0.32

   

0.01

 

3

%

Average gathering—high pressure fee ($/Mcf)

 

$

0.19

   

0.19

   

 

*

 

Average compression fee ($/Mcf)

 

$

0.19

   

0.19

   

 

*

 
                         

Average fresh water delivery fee ($/Bbl)

 

$

3.68

   

3.71

   

0.03

 

1

%

Joint Venture Operating Data:

                       

Processing – Joint Venture (MMcf)

   

   

97,276

   

97,276

 

*

 

Fractionation – Joint Venture (MBbl)

   

   

1,861

   

1,861

 

*

 

Processing – Joint Venture (MMcf/d)

   

   

267

   

267

 

*

 

Fractionation – Joint Venture (MBbl/d)

   

   

5

   

5

 

*

 

 

_________________________

   

*

Not meaningful or applicable.

 

ANTERO MIDSTREAM PARTNERS LP

Consolidated Statements of Cash Flows

Year Ended December 31, 2016 and 2017

 (In thousands)

                   
     
   

Year Ended December 31,

 
   

2016

 

2017

 

Cash flows provided by operating activities:

             

Net income

$

 

236,703

   

307,315

 

Adjustment to reconcile net income to net cash provided by operating activities:

             

  Depreciation

   

99,861

   

119,562

 

  Accretion of contingent acquisition consideration

   

16,489

   

13,476

 

  Impairment of property and equipment

   

   

23,431

 

  Equity-based compensation

   

26,049

   

27,283

 

  Equity in earnings of unconsolidated affiliates

   

(485)

   

(20,194)

 

  Distributions from unconsolidated affiliates

   

7,702

   

20,195

 

  Amortization of deferred financing costs

   

1,814

   

2,888

 

  Gain on sale of assets

   

(3,859)

   

 

  Changes in assets and liabilities:

             

  Accounts receivable–Antero Resources

   

1,573

   

(41,043)

 

  Accounts receivable–third party

   

1,467

   

70

 

  Prepaid expenses

   

(529)

   

(141)

 

  Accounts payable

   

95

   

3,003

 

  Accounts payable–Antero Resources

   

1,055

   

3,266

 

  Accrued liabilities

   

(9,328)

   

16,685

 

  Net cash provided by operating activities

$

 

378,607

   

475,796

 

Cash flows used in investing activities:

             

Additions to gathering systems and facilities

   

(228,100)

   

(346,217)

 

Additions to water handling and treatment systems

   

(188,220)

   

(195,162)

 

Investments in unconsolidated affiliates

   

(75,516)

   

(235,004)

 

Proceeds from sale of assets

   

10,000

   

 

Change in other assets

   

3,673

   

(3,435)

 

Net cash used in investing activities

$

 

(478,163)

   

(779,818)

 

Cash flows provided by (used in) financing activities:

             

Deemed distribution to Antero Resources, net

   

   

 

Distributions to Antero Resources

   

   

 

Distributions to unitholders

   

(182,446)

   

(283,950)

 

Issuance of senior notes

   

650,000

   

 

Borrowings (repayments) on bank credit facilities, net

   

(410,000)

   

345,000

 

Issuance of common units, net of offering costs

   

65,395

   

248,956

 

Payments of deferred financing costs

   

(10,435)

   

(5,520)

 

Employee tax withholding for settlement of equity compensation awards

   

(5,636)

   

(5,945)

 

Other

   

(163)

   

(198)

 

Net cash provided by (used in) financing activities

$

 

106,715

   

298,343

 

Net increase (decrease) in cash and cash equivalents

   

7,159

   

(5,679)

 

Cash and cash equivalents, beginning of period

   

6,883

   

14,042

 

Cash and cash equivalents, end of period

$

 

14,042

   

8,363

 

Supplemental disclosure of cash flow information:

             

Cash paid during the period for interest

   

13,494

   

46,666

 

Supplemental disclosure of noncash investing activities:

             

Increase (decrease) in accrued capital expenditures and accounts payable for property and equipment

   

(8,471)

   

16,338

 

 

Antero Midstream GP LP

Consolidated Balance Sheets

December 31, 2016 and 2017

 (In thousands, except number of shares and units)

             
   

December 31,

   

2016

 

2017

Assets

Current assets:

           

Cash

 

$

9,609

   

5,987

Accounts receivable – related party

   

217

   

  Total current assets

   

9,826

   

5,987

Investment in Antero Midstream Partners LP

   

7,543

   

23,772

  Total assets

 

$

17,369

   

29,759

             

Liabilities and Partners’ Capital

Current liabilities:

           

Accounts payable and accrued liabilities

   

426

   

293

Income taxes payable

   

6,674

   

13,858

  Total current liabilities

   

7,100

   

14,151

Partners’ capital:

           

Common shareholders – public (186,181,975 shares  issued and outstanding at December 31, 2017)

   

   

(19,866)

Antero Resources Midstream Management LLC members’ equity

   

10,269

   

IDR LLC Series B units (32,875 vested units issued and outstanding at December 31, 2017)

   

   

35,474

  Total partners’ capital

   

10,269

   

15,608

      Total liabilities and partners’ capital

 

$

17,369

   

29,759

 

Antero Midstream GP LP

Consolidated Statements of Operations and Comprehensive Income

Three Months Ended December 31, 2016 and 2017

 (In thousands, except per share amounts)

                 
 

Three Months Ended December 31,

 
 

2016

 

2017

 

Equity in earnings of Antero Midstream Partners LP

$

 

7,557

   

23,772

 

Total income

   

7,557

   

23,772

 

General and administrative expense

   

425

   

279

 

Equity-based compensation

   

   

8,662

 

Total expenses

   

425

   

8,941

 

  Income before income taxes

   

7,132

   

14,831

 

Provision for income taxes

   

(2,856)

   

(8,924)

 

  Net income and comprehensive income

$

 

4,276

   

5,907

 
               

Net income attributable to Antero Midstream GP LP subsequent to IPO

       

$

5,907

 

Net income attributable to Series B units

         

(784)

 

  Net income attributable to common shareholders

       

$

5,123

 
               

  Net income per common share – basic and diluted

       

$

0.03

 
               

  Weighted average number of common shares outstanding – basic and diluted

         

186,181

 
                         

 

Antero Midstream GP LP

Consolidated Statements of Operations and Comprehensive Income

Years Ended December 31, 2016 and 2017

 (In thousands, except per share amounts)

                 
 

Year Ended December 31,

 
 

2016

   

2017

 

Equity in earnings of Antero Midstream Partners LP

$

 

16,944

   

69,720

 

Total income

   

16,944

   

69,720

 

General and administrative expense

   

814

   

6,201

 

Equity-based compensation

   

   

34,933

 

Total expenses

   

814

   

41,134

 

  Income before income taxes

   

16,130

   

28,586

 

Provision for income taxes

   

(6,419)

   

(26,261)

 

  Net income and comprehensive income

$

 

9,711

   

2,325

 
               

Net income attributable to Antero Midstream GP LP subsequent to IPO

       

$

7,264

 

Net income attributable to Series B units

         

(784)

 

  Net income attributable to common shareholders

       

$

6,480

 
               

  Net income per common share – basic and diluted

       

$

0.03

 
               

  Weighted average number of common shares outstanding – basic and diluted

         

186,176

 
                       

 

Antero Midstream GP LP

Consolidated Statements of Cash Flows

Year Ended December 31, 2016 and 2017

 (In thousands)

                     
   

Year Ended December 31,

 
   

2016

 

2017

 

Cash flows provided by operating activities:

               

Net income

 

$

 

9,711

   

2,325

 

Adjustment to reconcile net income to net cash provided by operating activities:

               

  Equity in earnings of Antero Midstream Partners LP

     

(16,944)

   

(69,720)

 

  Distributions received from Antero Midstream Partners LP

     

10,370

   

53,491

 

  Equity-based compensation

     

   

34,933

 

  Deferred income taxes

     

(368)

   

 

Changes in current assets and liabilities:

               

  Accounts receivable – related party

     

(217)

   

 

  Accounts payable and accrued liabilities

     

426

   

(133)

 

  Income taxes payable

     

6,559

   

7,184

 

  Net cash provided by operating activities

     

9,537

   

28,080

 

Cash flows used in investing activities

     

   

 

Cash flows used in financing activities

               

Distributions to Antero Resources Investment LLC

     

   

(15,691)

 

Distributions to shareholders

     

   

(16,011)

 

  Net cash used in financing activities

     

   

(31,702)

 

Net increase (decrease) in cash

     

9,537

   

(3,622)

 

Cash, beginning of period

     

72

   

9,609

 

Cash, end of period

 

$

9,609

   

5,987

 
                             

 

Contact Information:

Antero Midstream Partners LP; Antero Midstream GP LP

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