Press Release Details

August 2, 2016

Antero Midstream Reports Second Quarter 2016 Financial Results

DENVER, Aug. 2, 2016 /PRNewswire/ -- Antero Midstream Partners LP (NYSE: AM) ("Antero Midstream" or the "Partnership") today released its second quarter 2016 financial results.  The relevant condensed combined consolidated financial statements are included in Antero Midstream's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, which has been filed with the Securities and Exchange Commission.

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Highlights Include:

  • Net income of $50 million, or $0.27 per unit, representing a per unit increase of 108% compared to the prior year quarter
  • Adjusted EBITDA of $88 million, a 36% increase compared to the prior year quarter
  • Net cash provided by operating activities was $86 million and distributable cash flow was $78 million, resulting in DCF coverage of 1.7x
  • Declared a cash distribution of $0.25 per unit for the second quarter of 2016, a 32% increase compared to the prior year quarter and a 6% increase sequentially
  • Exercised option to acquire a 15% equity interest in the Stonewall Gathering Pipeline for $45 million
  • Increased acreage dedication from Antero Resources by approximately 20%, pro forma for Antero Resources' recently announced Marcellus core acreage acquisition which is expected to close in the third quarter of 2016

Recent Developments

Distribution for the Second Quarter of 2016

The Board of Directors of Antero Resources Midstream Management LLC, the general partner of the Partnership, declared a cash distribution of $0.25 per unit ($1.00 per unit annualized) for the second quarter of 2016. The distribution represents a 32% increase compared to the prior year quarter and a 6% increase sequentially.  The distribution is the Partnership's sixth consecutive quarterly distribution increase since its initial public offering in November 2014 and will be payable on August 24, 2016 to unitholders of record as of August 10, 2016.

Exercise of Option to Acquire Stonewall Gathering Pipeline

On May 26, 2016, Antero Midstream exercised its option to acquire a 15% non-operated equity interest in the Stonewall Gathering Pipeline for $45 million. The 1.4 Bcf/d pipeline was placed into service on November 30, 2015 and is currently gathering approximately 1.0 Bcf/d.  Antero Resources is an anchor shipper on the Stonewall Gathering Pipeline, with a minimum volume commitment of 900 MMcf/d.  The pipeline connects Antero Resources' Marcellus production with an interconnect that feeds a firm sales agreement as well as additional firm transportation to current favorably priced markets.  The transaction was financed with borrowings on Antero Midstream's revolving credit facility and had an effective date of May 26, 2016.

Second Quarter 2016 Financial Results

Antero Midstream's acquisition of Antero Resources' integrated water business in 2015 was accounted for as a transfer of entities under common control.  As a result, the Partnership recast its condensed 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 second quarter 2016 and second 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, please read "Non-GAAP Financial Measures". 

Low pressure gathering volumes for the second quarter of 2016 averaged 1,353 MMcf/d, a 40% increase from the second quarter of 2015 and a 4% increase sequentially.  High pressure gathering volumes for the second quarter of 2016 averaged 1,253 MMcf/d, a 5% increase from the second quarter of 2015 and a 3% increase sequentially.  Compression volumes for the second quarter of 2016 averaged 658 MMcf/d, a 45% increase from the second quarter of 2015 and a 9% increase sequentially.  The increase in gathering and compression volumes was due to production growth from Antero Resources in Antero Midstream's area of dedication.  Condensate gathering volumes averaged 1,983 Bbl/d during the quarter, a 34% decrease compared to the prior year quarter and a 33% decrease sequentially. The sequential decrease in condensate gathering volumes was driven by Antero shifting Ohio Utica Shale development from its Highly-Rich Gas/Condensate area to higher rate of return drilling in the Highly-Rich Gas area, as well as the shifting of Antero Resources' development program to the Marcellus Shale from the Utica Shale, due to the firm transportation constraints to favorable markets in the Utica Shale.  Fresh water delivery volumes averaged 105,379 Bbl/d during the quarter, an 11% increase compared to the prior year quarter and an 8% increase sequentially.  The increase in volumes was driven by accelerated Marcellus completions and an increase in the average water used per foot in completions to 41 barrels, a 25% increase as compared to 2015 and 11% increase compared to the first quarter of 2016. 

 



Three Months Ended

June 30,




Average Daily Throughput:


2015


2016


% Change


Low Pressure Gathering (MMcf/d)


965


1,353


40%


Compression (MMcf/d)


454


658


45%


High Pressure Gathering (MMcf/d)


1,197


1,253


5%


Condensate Gathering (Bbl/d)


2,989


1,983


(34)%









Average Daily Volumes:







Fresh Water Delivery (Bbl/d)


95,228


105,379


11%


 

For the three months ended June 30, 2016, the Partnership reported revenues of $137 million, comprised of $72 million in revenues from the Gathering and Compression segment and $65 million in revenues from the Water Handling and Treatment segment. Revenues increased 55% compared to the prior year quarter, primarily driven by the startup of produced water handling and high rate transfer services in the first quarter of 2016. Water Handling and Treatment segment revenues include $30 million from produced water handling and high rate water transfer services provided 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 $35 million, respectively, for a total of $43 million. Water Handling and Treatment direct operating expenses include $29 million from produced water handling and high rate water transfer services. Direct operating expenses increased 138% 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 second quarter of 2016, an increase of 17% compared to the second quarter of 2015. Total cash and non-cash operating expenses were $84 million, including $24 million of depreciation, $7 million of equity-based compensation, and $3 million of accretion of contingent acquisition consideration.

Net income for the second quarter of 2016 was $50 million, a 42% increase compared to the prior year quarter. Adjusted EBITDA was $88 million, a 36% increase compared to the prior year quarter. The increase in net income and Adjusted EBITDA is due to increased gathering and compression volumes and fresh water delivery volumes.  Cash interest expense and cash reserved for payment of income tax withholding upon vesting of Antero Midstream equity-based compensation awards were $4 million and $1 million, respectively. Maintenance capital expenditures during the quarter totaled $6 million and distributable cash flow was $78 million, resulting in a DCF coverage ratio of 1.7x.


 


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

Three months ended

June 30,


2015


2016

Net income

$

35,124


$

49,912

Add:






    Interest expense


1,636



3,879

    Depreciation expense


21,253



24,140

    Accretion of contingent acquisition consideration




3,461

    Equity-based compensation


6,597



6,793

Less:






    Equity in earnings of unconsolidated affiliate




484

Adjusted EBITDA

$

64,610


$

87,701







Less:






    Pre-water acquisition net income attributed to parent


15,674



    Pre-water acquisition depreciation expense attributed to parent


6,162



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


1,209



    Pre-water acquisition interest expense attributed to parent


793



Adjusted EBITDA attributable to the Partnership

$

40,772


$

87,701

Less:






Cash interest paid, net - attributable to the Partnership


598



4,264

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




1,000

Maintenance capital expenditures


3,379



5,710

Add:






Cash distribution to be received from unconsolidated affiliate(2)




778

Distributable cash flow

$

36,795


$

77,505







Total distributions declared

$

28,858


$

46,775







DCF coverage ratio


1.28x



1.66x









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.

2)

Based on management estimate from exercise date of May 26, 2016 through June 30, 2016.

 

Balance Sheet and Liquidity

As of June 30, 2016, Antero Midstream had $9 million of cash on its balance sheet and $760 million drawn on its $1.5 billion bank credit facility, resulting in $749 million in available liquidity. 

Capital Spending

Capital expenditures, excluding acquisitions, were $90 million in the second quarter of 2016 as compared to $86 million in the second quarter of 2015.  Capital invested in gathering and compression assets was $48 million and capital invested in water handling and treatment assets was $42 million, including $33 million invested in the Antero Clearwater Facility.  Additionally, Antero Midstream's capital investment for acquiring a 15% interest in the Stonewall Gathering Pipeline was $45 million during the quarter. 

Conference Call

Antero Midstream will hold a call on Wednesday, August 3, 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, August 12, 2016 at 10:00 am MT at 877-870-5176 (U.S.) or 858-384-5517 (International) using the passcode 10086426.

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, August 12, 2016 at 10:00 am MT.

Presentation

An updated presentation will be posted to the Partnership's website before the August 3, 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

Antero Midstream views Adjusted EBITDA as an important indicator of the Partnership's performance.  Antero Midstream defines Adjusted EBITDA as net income before equity-based compensation expense, interest expense, depreciation expense, accretion of contingent acquisition consideration, excluding pre-acquisition income and expenses attributable to the parent and equity in earnings of unconsolidated affiliate.

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 cash interest paid, income tax withholding payments and cash reserved for payments upon vesting of equity-based compensation awards and ongoing maintenance capital expenditures paid, excluding pre-acquisition amounts attributable to the parent plus cash distribution to be received from unconsolidated affiliate.  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.

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 June 30, 2016

(Unaudited)

(In thousands)










December 31,


June 30,



2015


2016

Assets

Current assets:







Cash and cash equivalents


$

6,883


$

8,684

Accounts receivable–Antero



65,712



54,794

Accounts receivable–third party



2,707



1,259

Prepaid expenses





106

  Total current assets



75,302



64,843

Property and equipment:







Gathering and compressions systems



1,485,835



1,579,568

Water handling and treatment systems



565,616



655,251




2,051,451



2,234,819

Less accumulated depreciation



(157,625)



(205,588)

Property and equipment, net



1,893,826



2,029,231

Investment in unconsolidated affiliate





45,528

Other assets, net



10,904



13,268

  Total assets


$

1,980,032


$

2,152,870

Liabilities and partners' capital

Current liabilities:







Accounts payable


$

10,941


$

19,206

Accounts payable–Antero



2,138



2,142

Accrued capital expenditures



50,022



54,043

Accrued ad valorem taxes



7,195



9,737

Accrued liabilities



28,168



16,789

Other current liabilities



150



158

  Total current liabilities



98,614



102,075

Long-term liabilities:







Long-term debt



620,000



760,000

Contingent acquisition consideration



178,049



184,906

Other



624



543

  Total liabilities



897,287



1,047,524








Partners' capital:







Common unitholders - public (59,286 units and 67,302 units issued and outstanding at December 31, 2015 and June 30, 2016, respectively)



1,351,317



1,364,766

Common unitholder - Antero (40,929 units and 32,929 units issued and outstanding at December 31, 2015 and June 30, 2016, respectively)



30,186



29,799

Subordinated unitholder - Antero (75,941 units issued and outstanding at December 31, 2015 and June 30, 2016)



(299,727)



(291,950)

General partner



969



2,731

  Total partners' capital



1,082,745



1,105,346

  Total liabilities and partners' capital


$

1,980,032


$

2,152,870

 

ANTERO MIDSTREAM PARTNERS LP

Condensed Combined Consolidated Statements of Operations and Comprehensive Income

Three Months Ended June 30, 2015, and 2016

(Unaudited)

(In thousands, except per unit amounts)










Three months ended June 30,



2015


2016




Revenue:







Gathering and compression–Antero


$

56,593


$

71,715

Water handling and treatment–Antero



31,500



64,893

Gathering and compression–third party





202

  Total revenue



88,093



136,810

Operating expenses:







  Direct operating



17,921



42,597

  General and administrative (including $6,597 and $6,793 of equity-based compensation in 2015 and 2016, respectively)



12,159



13,305

  Depreciation



21,253



24,140

  Accretion of contingent acquisition consideration





3,461

  Total operating expenses



51,333



83,503

  Operating income



36,760



53,307

Interest expense, net



(1,636)



(3,879)

Equity in earnings of unconsolidated affiliate





484

Net income and comprehensive income



35,124



49,912

Pre-water acquisition net income attributed to parent



(15,674)



General partner interest in net income attributable to incentive distribution rights





(2,731)

  Limited partners' interest in net income


$

19,450


$

47,181

Net income per limited partner unit:







Basic:







  Common units


$

0.13


$

0.27

  Subordinated units


$

0.13


$

0.27

Diluted:







  Common units


$

0.13


$

0.27

  Subordinated units


$

0.13


$

0.27

Weighted average number of limited partner units outstanding:







Basic:







  Common units



75,941



100,231

  Subordinated units



75,941



75,941

Diluted:







  Common units



75,958



100,285

  Subordinated units



75,941



75,941

 



ANTERO MIDSTREAM PARTNERS LP

Condensed Combined Consolidated Statements of Operations and Comprehensive Income

Six Months Ended June 30, 2015, and 2016

(Unaudited)

(In thousands, except per unit amounts)










Six months ended June 30,



2015


2016




Revenue:







Gathering and compression–Antero


$

108,836


$

141,066

Water handling and treatment–Antero



64,941



131,339

Gathering and compression–third party





477

Water handling and treatment–third party



151



  Total revenue



173,928



272,882

Operating expenses:







Direct operating



37,222



91,738

General and administrative (including $12,376 and $12,766 of equity-based compensation in 2015 and 2016, respectively)



24,078



26,397

Depreciation



41,955



47,963

Accretion of contingent acquisition consideration





6,857

  Total operating expenses



103,255



172,955

  Operating income



70,673



99,927

Interest expense, net



(3,222)



(7,582)

Equity in earnings of unconsolidated affiliate





484

Net income and comprehensive income



67,451



92,829

Pre-Water Acquisition net income attributed to parent



(32,353)



General partner interest in net income attributable to incentive distribution rights





(4,581)

  Limited partners' interest in net income


$

35,098


$

88,248

Net income per limited partner unit:







Basic:







  Common units


$

0.23


$

0.50

  Subordinated units


$

0.23


$

0.50

Diluted:







  Common units


$

0.23


$

0.50

  Subordinated units


$

0.23


$

0.50

Weighted average number of limited partner units outstanding:







Basic:







  Common units



75,941



100,226

  Subordinated units



75,941



75,941

Diluted:







  Common units



75,956



100,262

  Subordinated units



75,941



75,941

 


ANTERO MIDSTREAM PARTNERS LP

Combined Consolidated Results of Segment Operations

Three Months Ended June 30, 2015, and 2016

 (Unaudited)

(In thousands)
















Water






Gathering and


Handling and


Consolidated



Compression


Treatment


Total

Three months ended June 30, 2015










Revenues:










Revenue - Antero


$

56,593


$

31,500


$

88,093











Operating expenses:










Direct operating



11,292



6,629



17,921

General and administrative (before equity-based compensation)



4,529



1,033



5,562

Equity-based compensation



5,388



1,209



6,597

Depreciation



15,091



6,162



21,253

Total expenses



36,300



15,033



51,333



$

20,293


$

16,467


$

36,760

Operating income














Total assets


$

1,392,898


$

416,909


$

1,809,807

Additions to property and equipment


$

74,061


$

11,950


$

86,011











Three months ended June 30, 2016










Revenues:










Revenue - Antero


$

71,715


$

64,893


$

136,608

Revenue - third-party



202





202

Total revenues



71,917



64,893



136,810











Operating expenses:










Direct operating



7,447



35,150



42,597

General and administrative (before equity-based compensation)



4,837



1,675



6,512

Equity-based compensation



5,301



1,492



6,793

Depreciation



16,964



7,176



24,140

Contingent acquisition consideration accretion



-



3,461



3,461

Total expenses



34,549



48,954



83,503



$

37,368





53,307

Operating income



$

15,939


$










Total assets


$

1,583,246


$

569,624


$

2,152,870

Additions to property and equipment


$

48,283


$

41,589


$

89,872

 


ANTERO MIDSTREAM PARTNERS LP

Combined Consolidated Results of Segment Operations

Six Months Ended June 30, 2015, and 2016

 (Unaudited)

(In thousands)
















Water






Gathering and


Handling and


Consolidated



Compression


Treatment


Total

Six months ended June 30, 2015










Revenues:










Revenue - Antero


$

108,836


$

64,941


$

173,777

Revenue - third-party





151



151

Total revenues



108,836



65,092



173,928











Operating expenses:










Direct operating



22,981



14,241



37,222

General and administrative (before equity-based compensation)



9,407



2,295



11,702

Equity-based compensation



10,011



2,365



12,376

Depreciation



29,673



12,282



41,955

Total expenses



72,072



31,183



103,255



$

36,764


$

33,909


$

70,673

Operating income














Total assets


$

1,392,898


$

416,909


$

1,809,807

Additions to property and equipment


$

159,798


$

33,265


$

193,063











Six months ended June 30, 2016










Revenues:










Revenue - Antero


$

141,066


$

131,339


$

272,405

Revenue - third-party



477





477

Total revenues



141,543



131,339



272,882











Operating expenses:










Direct operating



15,066



76,672



91,738

General and administrative (before equity-based compensation)



9,785



3,846



13,631

Equity-based compensation



9,688



3,078



12,766

Depreciation



33,826



14,137



47,963

Accretion of contingent acquisition consideration





6,857



6,857

Total expenses



68,365



104,590



172,955



$

73,178


$

26,749


$

99,927

Operating income














Total assets


$

1,583,246


$

569,624


$

2,152,870

Additions to property and equipment


$

96,969


$

78,625


$

175,594

 

ANTERO MIDSTREAM PARTNERS LP

Condensed Combined Consolidated Statements of Cash Flows

Six Months Ended June 30, 2015, and 2016

(Unaudited)

(In thousands)











Six months ended June 30,




2015


2016


Cash flows provided by operating activities:








Net income


$

67,451


$

92,829


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








Depreciation



41,955



47,963


Accretion of contingent acquisition consideration





6,857


Equity-based compensation



12,376



12,766


Equity in earnings of unconsolidated affiliate





(484)


Amortization of deferred financing costs



489



726


Changes in assets and liabilities:








Accounts receivable–Antero



6,375



10,918


Accounts receivable–third party



5,574



1,448


Prepaid expenses



309



(106)


Accounts payable



1,103



4,515


Accounts payable–Antero



50



4


Accrued ad valorem tax



9,517



2,542


Accrued liabilities



(107)



(11,379)


Net cash provided by operating activities



145,092



168,599


Cash flows used in investing activities:








Additions to gathering and compression systems



(159,798)



(96,969)


Additions to water handling and treatment systems



(33,265)



(78,625)


Investment in unconsolidated affiliate





(45,044)


Change in other assets



(126)



(3,090)


Net cash used in investing activities



(193,189)



(223,728)


Cash flows provided by (used in) financing activities:








Deemed distribution to Antero, net



(65,385)




Distributions to unitholders



(41,660)



(82,977)


Borrowings on bank credit facilities, net



38,000



140,000


Payments of deferred financing costs



(19)




Other



(164)



(93)


Net cash provided by (used in) financing activities



(69,228)



56,930


Net increase (decrease) in cash and cash equivalents



(117,325)



1,801


Cash and cash equivalents, beginning of period



230,192



6,883


Cash and cash equivalents, end of period


$

112,867


$

8,684


Supplemental disclosure of cash flow information:








Cash paid during the period for interest


$

2,784


$

7,708


Supplemental disclosure of noncash investing activities:








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


$

(27,984)


$

7,770


 

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SOURCE Antero Midstream Partners LP

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