Press Release Details

April 27, 2016

Antero Midstream Reports First Quarter 2016 Financial Results and Increases Guidance

DENVER, April 27, 2016 /PRNewswire/ -- Antero Midstream Partners LP (NYSE: AM) ("Antero Midstream" or the "Partnership") today released its first quarter 2016 financial results and announced increased guidance.  The relevant condensed combined consolidated financial statements are included in Antero Midstream's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, which has been filed with the Securities and Exchange Commission.

Antero Midstream Partners, LP Logo (PRNewsFoto/Antero Midstream Partners, LP)

Highlights for the First Quarter of 2016:

  • Adjusted EBITDA of $80 million, a 32% increase compared to the prior year quarter
  • Distributable cash flow of $69 million resulting in DCF coverage of 1.6x
  • Increased 2016 adjusted EBITDA guidance by $25 million to a range of $325 - $350 million
  • Increased 2016 distributable cash flow guidance by $25 million to a range of $275 - $300 million
  • Increased year over year distribution growth guidance in 2016 to 30% while maintaining DCF coverage in excess of the Partnership's 1.1x to 1.2x target
  • Declared a cash distribution of $0.235 per unit for the first quarter of 2016, a 31% increase compared to the prior year quarter and a 7% increase sequentially

Recent Developments

Increased 2016 Guidance

Antero Midstream is forecasting 2016 adjusted EBITDA of $325 million to $350 million, which represents a $25 million increase as compared to the previous 2016 adjusted EBITDA guidance. The Partnership is forecasting distributable cash flow of $275 million to $300 million, a $25 million increase compared to the previous 2016 distributable cash flow guidance. Driven by the increase in adjusted EBITDA and distributable cash flow guidance, the Partnership expects year over year distribution growth in 2016 of 30%, at the top end of the Partnership's previous distribution growth guidance range, while still maintaining DCF coverage in excess of the Partnership's 1.1x to 1.2x target.



Full Year 2016





Updated Guidance


Prior Guidance


Increase

Adjusted EBITDA ($MM)


$325 – $350


$300 – $325


$25

Distributable Cash Flow ($MM)


$275 – $300


$250 – $275


$25

Year over Year Distribution Growth


30%


28% – 30%


  0% – 2%

DCF Coverage Ratio


>1.1x – 1.2x


>1.1x – 1.2x


Commenting on increased guidance, Paul Rady, Chairman of the Board and CEO said, "The increase in adjusted EBITDA guidance is primarily driven by an increase in expected fresh water delivery volumes, as Antero Resources plans to utilize approximately 25% higher water volumes in its completions in 2016 compared to 2015 completion designs.  Early well results from the new completion designs are encouraging.  Higher EURs and production per well would also benefit Antero Midstream's gathering and compression business. The increased volumetric throughput further highlights the benefit of being a full cycle value chain midstream provider."

Commenting on first quarter results and the outlook for the remainder of 2016, Michael Kennedy, Chief Financial Officer of Antero Midstream said, "Antero Midstream's strong first quarter puts us on track to deliver 30% year over year distribution growth in 2016, while continuing to maintain significant excess DCF coverage. Looking ahead to the second quarter, we expect cash flows to be relatively in line with the first quarter results as an increase in gathering and compression volumes from recently completed wells is offset by a modest decline in fresh water delivery volumes as a result of reduced completion activity by Antero Resources. In the second half of 2016, Antero Resources plans to reaccelerate completion activities similar to its completion and production profile in 2015. The acceleration in completion activity in the second half of 2016 is expected to drive an increase in fresh water delivery volumes, gathering volumes and cash flow."

Distribution for the First Quarter of 2016

The Board of Directors of Antero Resources Midstream Management LLC, the general partner of the Partnership, declared a cash distribution of $0.235 per unit ($0.94 per unit annualized) for the first quarter of 2016. The distribution represents a 31% increase compared to the prior year quarter and a 7% increase sequentially.  The distribution represents the Partnership's fifth consecutive quarterly distribution increase since its initial public offering in November 2014. The distribution will be payable on May 25, 2016 to unitholders of record as of May 11, 2016.

First Quarter 2016 Financial Results

Antero Midstream's acquisition of Antero Resources' integrated water business was accounted for as a transfer of entities under common control.  As a result, the Partnership recast its combined consolidated financial statements to retrospectively reflect the integrated water business as if the assets and liabilities were owned for all past periods presented.  Beginning in the third quarter of 2015, and as a result of the acquisition, Antero Midstream began reporting its results through two business segments, Gathering and Compression and Water Handling and Treatment.  To facilitate year over year comparison and discussion, the first quarter 2016 and first quarter 2015 results discussed below include both the Gathering and Compression and Water Handling and Treatment segment operations.

The term "Adjusted EBITDA" discussed below reflects the Gathering and Compression and Water Handling and Treatment segments on a recast combined basis, while the term "Adjusted EBITDA attributable to the Partnership" reflects contribution from the Water Handling and Treatment segments only after the third quarter of 2015 based on the actual timing of the acquired assets.  For a reconciliation of net income to Adjusted EBITDA and distributable cash flow, please read "Non-GAAP Financial Measures

Low pressure gathering volumes for the first quarter of 2016 averaged 1,303 MMcf/d, a 39% increase from the first quarter of 2015 and a 16% increase sequentially.  High pressure gathering volumes for the first quarter of 2016 averaged 1,222 MMcf/d, an 8% increase from the first quarter of 2015 and a 2% increase sequentially.  Compression volumes for the first quarter of 2016 averaged 606 MMcf/d, a 69% increase from the first quarter of 2015 and a 27% increase sequentially.  Year over year volumetric throughput growth was driven by production growth from Antero Resources.  Condensate gathering volumes averaged 2,965 Bbl/d during the quarter, a 23% increase from the first quarter of 2015 and 25% decrease sequentially. The sequential decrease was driven by Antero Resources shifting Ohio Utica Shale development from its Highly-Rich Gas / Condensate area to estimated higher rate of return locations in the Highly-Rich Gas area. Fresh water delivery volumes averaged 97,331 Bbl/d during the first quarter of 2016, a 7% decrease from the first quarter of 2015 and 19% decrease sequentially. The year over year and sequential decrease in fresh water delivery volumes was driven by reduced completion activity by Antero Resources. 



Three Months Ended

March 31,



Average Daily Throughput:


2015


2016


% Change

Low Pressure Gathering (MMcf/d)


935


1,303


39%

High Pressure Gathering (MMcf/d)


1,134


1,222


8%

Compression (MMcf/d)


358


606


69%

Condensate Gathering (Bbl/d)


2,407


2,965


23%








Average Daily Volumes:







Fresh Water Delivery (Bbl/d)


104,781


97,331


(7)%

For the three months ended March 31, 2016, the Partnership reported revenues of $136 million, comprised of $69 million in revenues from the Gathering and Compression segment and $67 million in revenues from the Water Handling and Treatment segment. Revenues increased 58% compared to the prior year quarter, primarily driven by the startup of produced water handling and high rate transfer services in the fourth quarter of 2015. Water Handling and Treatment segment revenues include $34 million from produced water handling and high rate water transfer services Antero Midstream provides to Antero Resources billed at cost plus 3%. 

Direct operating expenses for the Gathering and Compression and Water Handling and Treatment segments were $8 million and $41 million, respectively, for a total of $49 million in direct operating expenses. Water Handling and Treatment direct operating expenses include $33 million from produced water handling and high rate water transfer services. Direct operating expenses increased 155% year over year, driven primarily by the inclusion of produced water handling and high rate water transfer services, as well as the expansion of the Partnership's gathering and compression and fresh water delivery assets to support the production growth of Antero Resources.  General and administrative expenses were $7 million during the first quarter of 2016. General and administrative expenses increased $1 million, or 16%, as compared to the first quarter of 2015. Total cash and non-cash operating expenses increased by 72% year over year totaling $89 million, including $24 million of depreciation.

Adjusted EBITDA for the first quarter of 2016 was $80 million, a 32% increase compared to the prior year quarter due to increased gathering and compression volumes and associated revenue.  Cash interest expense and cash reserved for payment of income tax withholding upon vesting of Antero Midstream equity-based compensation awards were $3 million and $1 million, respectively. Maintenance capital expenditures during the quarter totaled $6 million and distributable cash flow was $69 million, resulting in a DCF coverage ratio of 1.6x.

Reconciliation of Net Income to Adjusted EBITDA and DCF (Dollars in thousands):

Three months ended

March 31,


2015


2016

Net income

$

32,327


$

42,918


Add:







    Interest expense


1,586



3,461


    Depreciation expense


20,702



23,823


    Contingent acquisition consideration accretion




3,396


    Equity-based compensation


5,779



5,972


Adjusted EBITDA

$

60,394


$

79,570









Less:







    Pre-water acquisition net income attributed to parent


(16,679)




    Pre-water acquisition depreciation expense attributed to parent


(6,120)




    Pre-water acquisition equity-based compensation expense attributed to parent


(1,156)




    Pre-water acquisition interest expense attributed to parent


(763)



Adjusted EBITDA attributable to the Partnership

$

35,676


$

79,570

Less:






Cash interest paid - attributable to Partnership


(579)



(3,444)

Cash reserved for payment of income tax withholding upon vesting of Antero Midstream  equity-based compensation awards(1)




(1,000)

Maintenance capital expenditures


(2,408)



(5,808)

Distributable cash flow

$

32,689


$

69,318







 Total distributions declared

$

27,338


$

43,252







DCF coverage ratio


1.2x



1.6x










1)

Estimate of current period portion of expected cash payment for income tax withholding attributable to vesting of Antero Midstream LTIP equity-based compensation awards to be paid in the fourth quarter of 2016.

Balance Sheet and Liquidity

As of March 31, 2016, Antero Midstream had $14 million of cash on its balance sheet and $680 million drawn on its $1.5 billion bank credit facility, resulting in $834 million in available liquidity.  Antero Midstream expects to fund all 2016 capital expenditures with internally generated operating cash flow and available borrowing capacity.

Capital Spending

Capital expenditures were $86 million in the first quarter of 2016 as compared to $107 million in the first quarter of 2015.  Capital invested in gathering and compression assets was $49 million and capital invested in the fresh water delivery business and the Antero Clearwater Facility was $37 million.

Conference Call

Antero Midstream will hold a call on Thursday, April 28, 2016 at 10:00 am MT to discuss the results.  A brief Q&A session for security analysts will immediately follow the discussion of the results.  To participate in the call, dial in at 888-347-8204 (U.S.), 855-669-9657 (Canada), or 412-902-4229 (International) and reference "Antero Midstream".  A telephone replay of the call will be available until Friday, May 6, 2016 at 10:00 am MT at 877-870-5176 (U.S.) or 858-384-5517 (International) using the passcode 10083150.

To access the live webcast and view the related earnings conference call presentation, visit Antero Midstream's website at www.anteromidstream.com.  The webcast will be archived for replay on the Partnership's website until Friday, May 6, 2016 at 10:00 am MT.

Presentation

An updated presentation will be posted to the Partnership's website before the April 28, 2016 conference call. The presentation can be found at www.anteromidstream.com on the homepage.  Information on the Partnership's website does not constitute a portion of this press release.

Non-GAAP Financial Measures

As used in this news release, adjusted EBITDA means net income plus interest expense, depreciation expense, contingent acquisition consideration accretion, income tax expense (if applicable), and non-cash stock compensation expense.  As used in this news release, distributable cash flow means adjusted EBITDA less cash interest expense, cash reserved for payment of income tax withholding upon vesting of Antero Midstream LP equity-based compensation awards and maintenance capital expenditures.  Distributable cash flow should not be viewed as indicative of the actual amount of cash that the Partnership has available for distributions from operating surplus or that the Partnership plans to distribute. Adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of the Partnership's consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, use to assess:

  • the Partnership's operating performance as compared to other publicly traded partnerships in the midstream energy industry without regard to historical cost basis or, in the case of adjusted EBITDA, financing methods;
  • the ability of the Partnership's assets to generate sufficient cash flow to make distributions to the Partnership's unitholders;
  • the Partnership's ability to incur and service debt and fund capital expenditures; and
  • the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

The Partnership believes that adjusted EBITDA and distributable cash flow provide useful information to investors in assessing the Partnership's financial condition and results of operations. Adjusted EBITDA and distributable cash flow should not be considered as alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some, but not all, items that affect net income and net cash provided by operating activities. Additionally, because adjusted EBITDA and distributable cash flow may be defined differently by other partnerships in its industry, the partnership's definition of adjusted EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships, thereby diminishing their utility.

The partnership does not provide financial guidance for projected net income or changes in working capital, and, therefore, is unable to provide a reconciliation of its adjusted EBITDA and distributable cash flow guidance to net income, operating income, or net cash flow provided by operating activities, the most comparable financial measures calculated in accordance with GAAP.

Reconciliation of Adjusted EBITDA to Cash Provided by Operating Activities (Dollars in thousands):




Three months ended

March 31,



2015


2016

Adjusted EBITDA


$

60,394


$

79,570


Add:








Amortization of deferred financing costs   Interest expense



244



366










Less:








Interest expense  Interest expense



(1,586)



(3,461)


Changes in operating assets and liabilities



11,020



5,873

Net cash provided by operating activities


$

70,072


$

82,348










Antero Midstream Partners LP is a limited partnership that owns, operates and develops midstream gathering and compression assets located in West Virginia, Ohio and Pennsylvania, as well as integrated water assets that primarily service Antero Resources' properties located in West Virginia and Ohio.

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 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.  Although the Partnership believes that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved.  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 cautions 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 control, incident to the gathering and compression and water handling and treatment business. 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 quarter ended December 31, 2015.

For more information, contact Michael Kennedy – CFO of Antero Midstream at (303) 357-6782 or mkennedy@anteroresources.com.


 

ANTERO MIDSTREAM PARTNERS LP

Condensed Combined Consolidated Balance Sheets

December 31, 2015 and March 31, 2016

(Unaudited)

(In thousands, except unit counts)








December 31,


March 31,


2015


2016

Assets

Current assets:






Cash and cash equivalents

$

6,883


$

14,478

Accounts receivable–Antero


65,712



63,445

Accounts receivable–third party


2,707



1,292

Prepaid expenses




336

Total current assets


75,302



79,551

Property and equipment






Gathering and compressions systems


1,485,835



1,527,205

Water handling and treatment systems


565,616



582,331

Less accumulated depreciation


(157,625)



(181,448)

Property and equipment, net


1,893,826



1,928,088

Other assets, net


10,904



19,807

Total assets

$

1,980,032


$

2,027,446

Liabilities and Partners' Capital 

Current liabilities:






Accounts payable

$

10,941


$

11,338

Accounts payable–Antero


2,138



3,736

Accrued capital expenditures


50,022



22,101

Accrued ad valorem tax


7,195



8,454

Accrued liabilities


28,168



27,722

Other current liabilities


150



156

Total current liabilities


98,614



73,507

Long-term liabilities






Long-term debt


620,000



680,000

Contingent acquisition consideration


178,049



181,445

Other


624



584

Total liabilities


897,287



935,536







Partners' capital:






Common unitholders - public (59,286,451 units and 67,292,931 units issued and outstanding at December 31, 2015 and March 31, 2016, respectively)


1,351,317



1,360,212

Common unitholder - Antero (40,929,378 units and 32,929,378 units issued and outstanding at December 31, 2015 and March 31, 2016, respectively)


30,186



26,611

Subordinated unitholder - Antero (75,940,957 units issued and outstanding at December 31, 2015 and March 31, 2016)


(299,727)



(296,763)

General partner


969



1,850

Total partners' capital


1,082,745



1,091,910

Total liabilities and partners' capital

$

1,980,032


$

2,027,446

 

ANTERO MIDSTREAM PARTNERS LP

Condensed Combined Consolidated Results of Operations

March 31, 2015 and 2016

(Unaudited)

($ in thousands, except average realized fees)








Amount of




Three months ended March 31,


Increase


Percentage


2015


2016


(Decrease)


Change






Revenue:












Revenue - Antero

$

85,684


$

135,555


$

49,871


58

%

Revenue - third-party


151



275



124


82

%

Total revenue


85,835



135,830



49,995


58

%

Operating expenses:












Direct operating


19,301



49,141



29,840


155

%

General and administrative (before equity-based compensation)


6,140



7,119



979


16

%

Equity-based compensation


5,779



5,972



193


3

%

Depreciation


20,702



23,823



3,121


15

%

Contingent acquisition consideration accretion




3,396



3,396


*


Total operating expenses


51,922



89,451



37,529


72

%

Operating income


33,913



46,379



12,466


37

%

Interest expense


1,586



3,461



1,875


118

%

Net income

$

32,327


$

42,918


$

10,591


33

%

Adjusted EBITDA

$

60,394


$

79,570


$

19,176


32

%

Operating Data:












Gathering—low pressure (MMcf)


84,168



118,597



34,429


41

%

Gathering—high pressure (MMcf)


102,080



111,162



9,082


9

%

Compression (MMcf)


32,201



55,102



22,901


71

%

Condensate gathering (MBbl)


217



270



53


24

%

Fresh water distribution (MBbl)


9,430



8,857



(573)


(6)

%

Waste water handling and treatment (MBbl)




2,206



2,206


*


Wells serviced by fresh water distribution


40



30



(10)


(25)

%

Gathering—low pressure (MMcf/d)


935



1,303



368


41

%

Gathering—high pressure (MMcf/d)


1,134



1,222



88


9

%

Compression (MMcf/d)


358



606



248


71

%

Condensate gathering (MBbl/d)


2



3



1


24

%

Fresh water distribution (MBbl/d)


105



97



(8)


(6)

%

Waste water handling and treatment (MBbl/d)




24



24


*


Average realized fees:












Average gathering—low pressure fee ($/Mcf)

$

0.31


$

0.31


$

0.00


2

%

Average gathering—high pressure fee ($/Mcf)

$

0.19


$

0.19


$

0.00


2

%

Average compression fee ($/Mcf)

$

0.19


$

0.19


$

0.00


2

%

Average gathering—condensate fee ($/Bbl)

$

4.16


$

4.17


$

0.01


2

%

Average fresh water distribution fee - Antero ($/Bbl)

$

3.64


$

3.67


$

0.03


1

%


* Not meaningful or applicable

 


ANTERO MIDSTREAM PARTNERS LP

Combined Consolidated Results of Segment Operations

March 31, 2015 and 2016

(Unaudited)

(In thousands)














Water





Gathering and


Handling and


Consolidated


Compression


Treatment


Total

Three months ended March 31, 2015









Revenues:









Revenue - Antero

$

52,243


$

33,441


$

85,684

Revenue - third-party




151



151

Total revenues


52,243



33,592



85,835










Operating expenses:









Direct operating


11,689



7,612



19,301

General and administrative (before equity-based compensation)


4,878



1,262



6,140

Equity-based compensation


4,623



1,156



5,779

Depreciation


14,582



6,120



20,702

Total expenses


35,772



16,150



51,922










Operating income

$

16,471


$

17,442


$

33,913










Total assets

$

1,394,349


$

420,481


$

1,814,830

Additions to property and equipment

$

85,737


$

21,315


$

107,052










Three months ended March 31, 2016









Revenues:









Revenue - Antero

$

69,116


$

66,439


$

135,555

Revenue - third-party


275





275

Total revenues


69,391



66,439



135,830










Operating expenses:









Direct operating


7,619



41,522



49,141

General and administrative (before equity-based compensation)


4,949



2,170



7,119

Equity-based compensation


4,386



1,586



5,972

Depreciation


16,861



6,962



23,823

Contingent acquisition consideration accretion


-



3,396



3,396

Total expenses


33,815



55,636



89,451










Operating income

$

35,576


$

10,803


$

46,379










Total assets

$

1,503,098


$

524,348


$

2,027,446

Additions to property and equipment

$

48,686


$

37,036


$

85,722

 

ANTERO MIDSTREAM PARTNERS LP

Condensed Combined Consolidated Statements of Cash Flows

Three Months Ended March 31, 2015, and 2016

(Unaudited)

(In thousands)









Three months ended March 31,



2015


2016


Cash flows provided by operating activities:







Net income

$

32,327


$

42,918


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







Depreciation


20,702



23,823


Accretion of contingent acquisition consideration




3,396


Equity-based compensation


5,779



5,972


Amortization of deferred financing costs


244



366


Changes in assets and liabilities:







Accounts receivable–Antero


1,880



2,267


Accounts receivable–third party


4,458



1,415


Prepaid expenses


162



(336)


Accounts payable


577



116


Accounts payable–Antero


641



1,598


Accrued ad valorem tax




1,259


Accrued liabilities


3,302



(446)


Net cash provided by operating activities


70,072



82,348


Cash flows used in investing activities:







Additions to gathering and compression systems


(85,737)



(48,686)


Additions to water handling and treatment systems


(21,315)



(37,036)


Change in other assets


(7,515)



(9,270)


Net cash used in investing activities


(114,567)



(94,992)


Cash flows provided by (used in) financing activities:







Deemed distribution to Antero, net


(28,937)




Distributions to unitholders


(14,322)



(39,725)


Borrowings on bank credit facilities, net


20,000



60,000


Payments of deferred financing costs


(14)




Other


(85)



(36)


Net cash provided by (used in) financing activities


(23,358)



20,239


Net increase (decrease) in cash and cash equivalents


(67,853)



7,595


Cash and cash equivalents, beginning of period


230,192



6,883


Cash and cash equivalents, end of period

$

162,339


$

14,478


Supplemental disclosure of cash flow information:







Cash paid during the period for interest

$

1,393


$

3,686


Supplemental disclosure of noncash investing activities:







Decrease in accrued capital expenditures and accounts payable for property and equipment

$

(21,062)


$

(27,640)


 

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SOURCE Antero Midstream Partners LP

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