Press Release Details

May 8, 2017

Antero Midstream Reports First Quarter 2017 Financial and Operational Results

DENVER, May 8, 2017 /PRNewswire/ -- Antero Midstream Partners LP (NYSE: AM) ("Antero Midstream" or the "Partnership") today released its first quarter 2017 financial and operational results.  The relevant condensed consolidated financial statements are included in Antero Midstream's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, which has been filed with the Securities and Exchange Commission.

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

First Quarter Highlights Include:

  • Net income of $75 million, or $0.35 per limited partner unit, representing a per unit increase of 52% compared to the prior year quarter
  • Adjusted EBITDA of $119 million, a 49% increase compared to the prior year quarter
  • Distributable cash flow of $91 million, resulting in DCF coverage of 1.4x
  • Consolidated net debt to trailing twelve months EBITDA of 1.9x as of March 31, 2017
  • Declared $0.30 per unit cash distribution for the first quarter of 2017, a 28% increase compared to the prior year quarter and a 7% increase sequentially

Recent Developments

Distribution for the First Quarter of 2017

The Board of Directors of the general partner of the Partnership, declared a cash distribution of $0.30 per unit ($1.20 per unit annualized) for the first quarter of 2017. The distribution represents a 28% increase compared to the prior year quarter and a 7% increase sequentially.  The distribution is the Partnership's ninth consecutive quarterly distribution increase since its initial public offering in November 2014 and will be paid on May 10, 2017 to unitholders of record as of May 3, 2017.  Cash distributions to be paid on incentive distribution rights for the first quarter of 2017 totaled $12 million.

Commenting on the outlook for Antero Midstream, Paul Rady, Chairman and CEO said, "Antero Midstream continues to build momentum in expanding its operations across the midstream value chain, further supported by Antero Resources' recently announced commitment to Sherwood Plants 10 and 11, which will be owned by the joint venture between Antero Midstream and MarkWest.  We continue to see significant opportunities for expansion in Appalachia both on our organic development program and opportunities that present themselves as a result of Antero Resources' leadership in NGL production and liquids-rich drilling inventory in Appalachia."

First Quarter 2017 Financial Results

Low pressure gathering volumes for the first quarter of 2017 averaged 1,659 MMcf/d, a 26% increase from the first quarter of 2016 and a 9% increase sequentially.  Compression volumes for the first quarter of 2017 averaged 1,028 MMcf/d, a 68% increase from the first quarter of 2016 and a 12% increase sequentially. High pressure gathering volumes for the first quarter of 2017 averaged 1,581 MMcf/d, a 28% increase from the first quarter of 2016 and a 12% increase sequentially.  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 148 MBbl/d during the quarter, a 51% increase compared to the prior year quarter and a 1% decrease sequentially.



Three Months Ended

March 31,




Average Daily Throughput:


2016


2017


%
Change


Low Pressure Gathering (MMcf/d)


1,303


1,659


26%


Compression (MMcf/d)


606


1,028


68%


High Pressure Gathering (MMcf/d)


1,222


1,581


28%









Average Daily Volumes:







Fresh Water Delivery (MBbl/d)


97


148


51%


For the three months ended March 31, 2017, the Partnership reported revenues of $175 million, comprised of $92 million from the Gathering and Processing segment and $83 million from the Water Handling and Treatment segment. Revenues increased 28% compared to the prior year quarter, primarily driven by growth in throughput volumes and fresh water delivery volumes. Water Handling and Treatment segment revenues include $33 million from produced water handling and high rate water transfer services provided to Antero Resources, which is billed at cost plus 3%. 

Direct operating expenses for the Gathering and Processing and Water Handling and Treatment segments were $8 million and $40 million, respectively, for a total of $48 million compared to $49 million in direct operating expenses in the prior year quarter. Water Handling and Treatment direct operating expenses include $32 million from produced water handling and high rate water transfer services.  General and administrative expenses including equity-based compensation were $14 million, a $1 million increase compared to the first quarter of 2016.  General and administrative expenses excluding equity-based compensation were $8 million during the first quarter of 2017, a 15% increase compared to the first quarter of 2016. The increase in general and administrative expenses was primarily driven by non-recurring legal expenses incurred from the processing and fractionation joint venture. Total operating expenses were $93 million, including $28 million of depreciation and $4 million of accretion of contingent acquisition consideration.

Net income for the first quarter of 2017 was $75 million, a 75% increase compared to the prior year quarter. Net income per limited partner unit was $0.35 per unit, a 52% increase compared to the prior year quarter. Adjusted EBITDA was $119 million, a 49% increase compared to the prior year quarter. The increase in net income and Adjusted EBITDA is primarily driven by increased throughput volumes and fresh water delivery volumes.  Adjusted EBITDA during the quarter did not include cash distributions from unconsolidated affiliates related to Stonewall Gathering LLC ("Stonewall") and the joint venture with MarkWest Energy Partners, L.P. ("MarkWest"), a wholly owned subsidiary of MPLX, due to the timing of the declaration of the distributions.  The Partnership estimates cash distributions from unconsolidated affiliates for the full year 2017 to be approximately $18 million to $22 million, consistent with previously provided 2017 guidance.  Cash interest paid, net of cash previously reserved for bond interest, was $9 million. Cash reserved for bond interest during the quarter was $2 million and cash reserved for payment of income tax withholding upon vesting of Antero Midstream equity-based compensation awards was $2 million. Maintenance capital expenditures during the quarter totaled $16 million and distributable cash flow was $91 million, resulting in a DCF coverage ratio of 1.4x.

Commenting on Antero Midstream's quarterly results, Michael Kennedy, CFO of Antero Midstream said, "Antero Midstream continued to execute on its organically driven business plan in the first quarter of 2017, reporting a 49% year-over-year increase in adjusted EBITDA and peer-leading distribution growth of 28%. Importantly, the first quarter places Antero Midstream on track to achieve its previously provided 2017 adjusted EBITDA, distributable cash flow, distribution growth and coverage guidance."

The following table reconciles net income to adjusted EBITDA and distributable cash flow as used in this release (in thousands):


Three months ended

March 31,

2016


2017

Net income

$

42,918


$

75,091

Interest expense


3,704



8,836

Depreciation expense


23,823



27,536

Accretion of contingent acquisition consideration


3,396



3,526

Equity-based compensation


5,972



6,286

Equity in earnings of unconsolidated affiliates




(2,231)

Distributions from unconsolidated affiliates




Adjusted EBITDA

$

79,813


$

119,044

Interest paid(1)


(3,444)



(9,187)

Cash reserved for payment of income tax withholding upon vesting of Antero Midstream Partners LP equity-based compensation awards(2)


(1,000)



(1,500)

Cash reserved for bond interest (3)




(1,552)

Maintenance capital expenditures(4)


(5,808)



(15,903)

Distributable cash flow

$

69,561


$

90,902







Total distributions declared

$

43,252


$

67,306







DCF coverage ratio


1.6x



1.4x



1)

Interest for the three months ended March 31, 2017 includes $20 million of cash interest paid, partially offset by $11 million of cash reserved for bond interest in the fourth quarter of 2016.

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)

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.

4)

Maintenance capital expenditures represent that portion of our estimated capital expenditures associated with (i) the connection of new wells to our gathering and compression 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 distribution to new wells necessary to maintain the average throughput volume on our systems.

Gathering and Processing During the first quarter, Antero Midstream added a total of 305 MMcf/d of compression capacity by placing in service two compressor stations in the Marcellus Shale.  Antero's current compression capacity is approximately 1.4 Bcf/d in the Marcellus and Utica combined and compression capacity was over 82% utilized on average in the first quarter. Additionally, Antero Midstream connected 21 wells to its Marcellus gathering system during the quarter.  Antero Resources is currently operating seven drilling rigs on Antero Midstream dedicated acreage.

Water Handling and Treatment Antero Midstream's Marcellus and Utica fresh water delivery systems serviced 34 well completions during the first quarter of 2017, a 13% increase from the first quarter of 2016 and 3% decrease sequentially.  Antero Resources is currently operating six completion crews on Antero Midstream dedicated acreage. During the quarter Antero Midstream continued construction on the Antero Clearwater Facility, which is expected to be placed into service in the fourth quarter of 2017.

Balance Sheet and Liquidity

As of March 31, 2017, Antero Midstream had $200 million drawn on its $1.5 billion bank credit facility, resulting in approximately $1.3 billion in available credit facility capacity.  Antero Midstream's net debt to trailing twelve months adjusted EBITDA was 1.9x as of March 31, 2017.  For a reconciliation of consolidated net debt to consolidated total debt, the most comparable GAAP measure, please read "Non-GAAP Financial Measures."

Capital Spending

Capital expenditures, excluding investments in the processing and fractionation joint venture were $104 million in the first quarter of 2017 as compared to $86 million in the first quarter of 2016.  Capital invested in gathering systems and facilities was $67 million and capital invested in water handling and treatment assets was $37 million, including $19 million invested in the Antero Clearwater Facility. Capital invested in the MarkWest joint venture was $160 million during the quarter.

Conference Call

Antero Midstream will hold a call on Tuesday, May 9, 2017 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 for the quarter.  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 Wednesday, May 17, 2017 at 10:00 am MT at 844-512-2921 (U.S.) or 412-317-6671 (International) using the passcode 10103995.

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 Wednesday, May 17, 2017 at 10:00 am MT.

Presentation

An updated presentation will be posted to the Partnership's website before the May 9, 2017 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 interest expense, depreciation 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, cash reserved for income tax withholding payments 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 following table reconciles consolidated total debt to consolidated net debt as used in this release (in thousands):



March 31,



2017





Bank credit facility


$

200,000

5.375% AM senior notes due 2024



650,000

Net unamortized debt issuance costs



(9,821)

Consolidated total debt


$

840,179

Cash and cash equivalents



Consolidated net debt


$

840,179

The following table reconciles net income to adjusted EBITDA for the twelve months ended March 31, 2017 as used in this release (in thousands):



Twelve Months
Ended

March 31,



2017




Net income

$

268,877

Add:



    Interest expense


27,026

    Depreciation expense


103,574

Accretion of contingent acquisition consideration


16,619

    Equity-based compensation


26,361

    Equity in (earnings) of unconsolidated affiliate


(2,716)

Distributions from unconsolidated affiliates


7,702

Gain on asset sale


(3,859)

Adjusted EBITDA

$

443,584

Antero Midstream is a limited partnership that owns, operates and develops midstream gathering, compression, processing and fractionation assets located in West Virginia and Ohio, 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 and are based upon a number of assumptions.  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 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 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 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, 2016.

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

ANTERO MIDSTREAM PARTNERS LP

Condensed Consolidated Balance Sheets

December 31, 2016 and March 31, 2017

(Unaudited)

(In thousands) 











December 31, 2016


March 31, 2017

Assets

Current assets:







Cash and cash equivalents


$

14,042



Accounts receivable–Antero Resources



64,139



71,500

Accounts receivable–third party



1,240



1,200

Prepaid expenses



529



498

   Total current assets



79,950



73,198

Property and equipment:







Gathering systems and facilities



1,705,839



1,767,741

Water handling and treatment systems



744,682



771,239




2,450,521



2,538,980

Less accumulated depreciation



(254,642)



(282,178)

Property and equipment, net



2,195,879



2,256,802

Investment in unconsolidated affiliates



68,299



230,419

Other assets, net



5,767



11,274

   Total assets


$

2,349,895



2,571,693

Liabilities and Partners' Capital

Current liabilities:







Accounts payable


$

16,979



13,512

Accounts payable–Antero Resources



3,193



2,428

Accrued liabilities



61,641



47,083

Other current liabilities



200



187

Total current liabilities



82,013



63,210

Long-term liabilities:







Long-term debt



849,914



840,179

Contingent acquisition consideration



194,538



198,064

Other



620



567

   Total liabilities



1,127,085



1,102,020








Partners' capital:







Common unitholders - public (70,020 units and 76,924 units issued and outstanding at December 31, 2016 and March 31, 2017, respectively)



1,458,410



1,689,681

Common unitholder - Antero Resources (32,929 units and 108,870 units issued and outstanding at December 31, 2016 and March 31, 2017, respectively)



26,820



(231,561)

Subordinated unitholder - Antero Resources (75,941 and zero units issued and outstanding at December 31, 2016 and March 31, 2017, respectively)



(269,963)



General partner



7,543



11,553

   Total partners' capital



1,222,810



1,469,673

   Total liabilities and partners' capital


$

2,349,895



2,571,693








 

ANTERO MIDSTREAM PARTNERS LP

Condensed Consolidated Statements of Operations and Comprehensive Income

Three Months Ended March 31, 2016, and 2017

(Unaudited)

(In thousands, except per unit amounts) 










Three Months Ended March 31,



2016


2017




Revenue:







Gathering and compression–Antero Resources


$

69,359



91,524

Water handling and treatment–Antero Resources



66,439



83,110

Gathering and compression–third party



275



135

   Total revenue



136,073



174,769

Operating expenses:







Direct operating



49,141



47,554

General and administrative (including $5,972 and $6,286 of equity-based compensation in 2016 and 2017, respectively)



13,091



14,457

Depreciation



23,823



27,536

Accretion of contingent acquisition consideration



3,396



3,526

   Total operating expenses



89,451



93,073

   Operating income



46,622



81,696

Interest expense, net



(3,704)



(8,836)

Equity in earnings of unconsolidated affiliates





2,231

Net income and comprehensive income



42,918



75,091

Net income attributable to incentive distribution rights



(1,850)



(11,553)

   Limited partners' interest in net income


$

41,068



63,538








   Net income per limited partner unit - basic and diluted


$

0.23



0.35








   Weighted average limited partner units outstanding - basic



176,154



183,033

   Weighted average limited partner units outstanding - diluted



176,160



183,447

 

ANTERO MIDSTREAM PARTNERS LP

Consolidated Results of Segment Operations

Three Months Ended March 31, 2016, and 2017

(Unaudited)

(In thousands)
















Water






Gathering and


Handling and


Consolidated



Processing


Treatment


Total

Three months ended March 31, 2016










Revenues:










Revenue - Antero Resources


$

69,359



66,439



135,798

Revenue – third party



275





275

Total revenues



69,634



66,439



136,073











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

Accretion of contingent acquisition consideration





3,396



3,396

Total expenses



33,815



55,636



89,451

Operating income


$

35,819



10,803



46,622











Segment and consolidated Adjusted EBITDA


$

57,066



22,747



79,813











Three months ended March 31, 2017










Revenues:










Revenue - Antero Resources


$

91,524



83,110



174,634

Revenue – third party



135





135

Total revenues



91,659



83,110



174,769











Operating expenses:










Direct operating



8,114



39,440



47,554

General and administrative (before equity-based compensation)



5,549



2,622



8,171

Equity-based compensation



4,589



1,697



6,286

Depreciation



19,700



7,836



27,536

Accretion of contingent acquisition consideration





3,526



3,526

Total expenses



37,952



55,121



93,073

Operating income


$

53,707



27,989



81,696











Segment and consolidated Adjusted EBITDA


$

77,996



41,048



119,044

 

ANTERO MIDSTREAM PARTNERS LP

Selected Operating Data

Three Months Ended March 31, 2016, and 2017

(Unaudited)

(In thousands) 






















Amount of






Three months ended March 31,


Increase


Percentage



2016


2017


(Decrease)


Change

Revenue:













Revenue - Antero Resources


$

135,798



174,634



38,836


29

%

Revenue – third party



275



135



(140)


(51)

%

Total revenue



136,073



174,769



38,696


28

%

Operating expenses:













Direct operating



49,141



47,554



(1,587)


(3)

%

General and administrative (before equity-based compensation)



7,119



8,171



1,052


15

%

Equity-based compensation



5,972



6,286



314


5

%

Depreciation



23,823



27,536



3,713


16

%

Accretion of contingent acquisition consideration



3,396



3,526



130


4

%

Total operating expenses



89,451



93,073



3,622


4

%

   Operating income



46,622



81,696



35,074


75

%

Interest expense



(3,704)



(8,836)



(5,132)


139

%

Equity in earnings of unconsolidated affiliates





2,231



2,231


*


   Net income


$

42,918



75,091



32,173


75

%

Adjusted EBITDA


$

79,813



119,044



39,231


49

%

Operating Data:













Gathering—low pressure (MMcf)



118,597



149,268



30,671


26

%

Gathering—high pressure (MMcf)



111,162



142,313



31,151


28

%

Compression (MMcf)



55,102



92,521



37,419


68

%

Condensate gathering (MBbl)



270



15



(255)


(94)

%

Fresh water delivery (MBbl)



8,857



13,363



4,506


51

%

Wastewater handling (MBbl)



2,304



3,199



895


39

%

Wells serviced by fresh water delivery



30



34



4


13

%

Gathering—low pressure (MMcf/d)



1,303



1,659



356


26

%

Gathering—high pressure (MMcf/d)



1,222



1,581



359


28

%

Compression (MMcf/d)



606



1,028



422


68

%

Condensate gathering (MBbl/d)



3





(3)


*


Fresh water delivery (MBbl/d)



97



148



51


51

%

Wastewater handling (MBbl/d)



25



36



11


39

%

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 gathering—condensate fee ($/Bbl)


$

4.17



4.20



0.03


1

%

Average fresh water delivery fee—Antero Resources($/Bbl)


$

3.67



3.72



0.05


1

%

 

ANTERO MIDSTREAM PARTNERS LP

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2016, and 2017

(Unaudited)

(In thousands) 








  Three months ended March 31,


2016


2017

Cash flows from operating activities:






Net income

$

42,918



75,091

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






Depreciation


23,823



27,536

Accretion of contingent acquisition consideration


3,396



3,526

Equity-based compensation


5,972



6,286

Equity in earnings of unconsolidated affiliates




(2,231)

Amortization of deferred financing costs


366



631

Changes in assets and liabilities:






Accounts receivable–Antero Resources


2,267



(7,360)

Accounts receivable–third party


1,415



41

Prepaid expenses


(336)



31

Accounts payable


116



2,504

Accounts payable–Antero Resources


1,598



(765)

Accrued liabilities


813



(5,542)

Net cash provided by operating activities


82,348



99,748

Cash flows used in investing activities:






Additions to gathering systems and facilities


(48,686)



(66,559)

Additions to water handling and treatment systems


(37,036)



(36,954)

Investment in unconsolidated affiliates




(159,889)

Change in other assets


(9,270)



(5,874)

Net cash used in investing activities


(94,992)



(269,276)

Cash flows provided by financing activities:






Distributions to unitholders


(39,725)



(57,633)

Borrowings (repayments) on bank credit facilities, net


60,000



(10,000)

Issuance of common units, net of offering costs




223,119

Other


(36)



Net cash provided by financing activities


20,239



155,486

Net increase (decrease) in cash and cash equivalents


7,595



(14,042)

Cash and cash equivalents, beginning of period


6,883



14,042

Cash and cash equivalents, end of period

$

14,478



Supplemental disclosure of cash flow information:






Cash paid during the period for interest

$

3,686



19,668

Supplemental disclosure of noncash investing activities:






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

$

27,640



14,989








 

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SOURCE Antero Midstream Partners LP

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