Antero Midstream and AMGP Report Fourth Quarter and Full Year 2018 Financial and Operating Results
DENVER, Feb. 13, 2019 /PRNewswire/ -- 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 2018 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, 2018, which have been filed with the Securities and Exchange Commission.
Antero Midstream Fourth Quarter 2018 Highlights Include:
-- Net income increased to $249 million, or $1.10 per limited partner unit
-- Adjusted net income increased by 63% to $143 million compared to the
prior year quarter (non-GAAP measure)
-- Adjusted EBITDA increased by 36% to $194 million compared to the prior
year quarter (non-GAAP measure)
-- Distributable Cash Flow increased by 43% to $167 million resulting in
DCF coverage of 1.3x (non-GAAP measure)
-- Distributions increased by 29% to $0.47 per unit compared to the prior
year quarter and represented the Partnership's sixteenth consecutive
distribution increase since the November 2014 IPO
Antero Midstream Full Year 2018 Highlights Include:
-- Announced midstream simplification transaction where AMGP will convert
to a C-Corp and acquire all outstanding AM common units in a stock and
cash transaction resulting in the elimination of the IDRs, expected to
close in March of 2019
-- Net income increased to $586 million, or $2.37 per limited partner unit
-- Adjusted net income increased by 47% to $485 million compared to the
prior year (non-GAAP measure)
-- Adjusted EBITDA increased by 36% to $717 million compared to the prior
year (non-GAAP measure)
-- Distributable Cash Flow increased by 42% to $596 million resulting in
DCF coverage of 1.3x (non-GAAP measure)
-- Debt to trailing twelve months Adjusted EBITDA was 2.3x at year-end
2018, with $1.0 billion of liquidity
Antero Midstream GP LP Fourth Quarter 2018 Highlights Include:
-- Distributions increased to $0.164 per common share, a 119% increase
compared to the prior year quarter and the sixth consecutive
distribution increase since the May 2017 IPO
Commenting on the 2018 results and outlook for Antero Midstream, Paul Rady, Chairman and CEO said, "Antero Midstream delivered another successful year in 2018, achieving record gathering, compression, processing, fractionation, and fresh water delivery volumes. These record volumes drove a 36% year over year increase in Adjusted EBITDA and a 42% year-over-year increase in Distributable Cash Flow, resulting in strong DCF coverage of 1.3x."
Mr. Rady further added, "We also had a successful year in terms of infrastructure buildout, adding 760 MMcf/d of compression capacity and 600 MMcf/d of processing capacity, respectively. The significant capacity and throughput growth during the fourth quarter provides tremendous momentum to deliver on our 2019 organic infrastructure plan, in turn supporting Antero Resources' development."
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."
Recent Developments
Antero Midstream and AMGP previously announced that AMGP's Registration Statement on Form S-4 relating to the simplification transaction between the two companies and certain of their affiliates has become effective under the Securities Act of 1933 as of January 30, 2019. AMGP and Antero Midstream have each filed a definitive proxy statement with the U.S. Securities and Exchange Commission ("SEC") for the separate special meetings of the AMGP shareholders and Antero Midstream unitholders to vote on the transaction on March 8, 2019. The special meeting of AMGP shareholders will be held on March 8, 2019, at 9:00 a.m. local time, at 1615 Wynkoop Street, Denver, Colorado 80202. The special meeting of Antero Midstream unitholders will be held on March 8, 2019, at 10:00 a.m. local time, at 1615 Wynkoop Street, Denver, Colorado 80202. All AMGP shareholders and Antero Midstream unitholders of record as of the close of business on January 11, 2019, which is the record date for the special meetings, will be entitled to vote the AMGP common shares and Antero Midstream common units, respectively, owned by them on the record date.
Under the terms of the documents governing the simplification transaction, each Antero Midstream unitholder, other than Antero Resources, has the opportunity to receive as consideration for each Antero Midstream common unit owned, at its election and subject to proration, one of (i) $3.415 in cash without interest and 1.6350 shares of New AM common stock, (ii) 1.6350 shares of New AM common stock plus an additional number of shares of New AM common stock equal to the quotient of (A) $3.415 and (B) the average of the 20-day volume-weighted average price per AMGP share prior to the Election Deadline (the "AMGP VWAP") or (iii) $3.415 in cash without interest plus an additional amount of cash without interest equal to the product of (A) 1.6350 and (B) the AMGP VWAP. In order for an election to be properly made and effective, American Stock Transfer & Trust Company, LLC (the exchange agent in connection with the transaction) must receive a completed and signed election form and I.R.S. Form W-9 (or Form W-8, as applicable) no later than 5:00 p.m., New York City time, on March 4, 2019 (the "Election Deadline").
Antero Midstream Fourth Quarter Financial Results
Low pressure gathering volumes for the fourth quarter of 2018 averaged 2,602 MMcf/d, a 52% increase as compared to the fourth quarter of 2017 and a 20% increase sequentially. Compression volumes for the fourth quarter of 2018 averaged 2,215 MMcf/d, a 63% increase as compared to the fourth quarter of 2017 and 26% increase sequentially. Compression capacity was 93% utilized during the fourth quarter of 2018. High pressure gathering volumes for the fourth quarter of 2018 averaged 2,569 MMcf/d, a 39% increase from the fourth quarter of 2017 and 18% increase sequentially. The increase in gathering and compression volume was driven by Antero Midstream connecting 73 wells and 38 wells to the gathering system in the third and fourth quarter of 2018, respectively. Low pressure gathering, compression, and high pressure gathering volumes for the fourth quarter of 2018 all were Antero Midstream records. Fresh water delivery volumes averaged 136 MBbl/d during the quarter, a 9% decrease as compared to the fourth quarter of 2017 due to fewer completions during the quarter as anticipated.
Gross processing volumes from our processing and fractionation joint venture with MarkWest (a wholly-owned subsidiary of MPLX) (the "Joint Venture"), averaged 796 MMcf/d, for the fourth quarter of 2018, an increase of 87% compared to the fourth quarter of 2017 and 31% increase sequentially. Gross Joint Venture fractionation volumes averaged 18,672 Bbl/d, a 105% increase compared to the fourth quarter of 2017 and 8% increase sequentially.
Average Daily Volumes:
Three months ended
Years ended
December 31,
December 31,
---
2017 2018
% 2017 2018
%
Change Change
---
Low Pressure Gathering (MMcf/d) 1,711 2,602 52% 1,660 2,148 29%
Compression (MMcf/d) 1,355 2,215 63% 1,196 1,738 45%
High Pressure Gathering (MMcf/d) 1,842 2,569 39% 1,770 2,112 19%
Fresh Water Delivery (MBbl/d) 149 136 (9)% 153 195 27%
Clearwater Treatment Volumes (MBbl/d) 9
* 7
*
Gross Joint Venture Processing (MMcf/
d) 425 796 87% 267 622 133%
Gross Joint Venture Fractionation
(Bbl/d) 9,096 18,672 105% 5,099 13,107 157%
________________________
* Not meaningful or applicable.
For the three months ended December 31, 2018, the Partnership reported revenues of $282 million, comprised of $161 million from the Gathering and Processing segment and $121 million from the Water Handling and Treatment segment. Revenues increased 34% compared to the prior year quarter, driven by growth in throughput volumes. Water Handling and Treatment segment revenues include $70 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 $13 million and $79 million, respectively, for a total of $92 million compared to $70 million in direct operating expenses in the prior year quarter. The increase in operating expenses was driven primarily by an increase in throughput volumes. Water Handling and Treatment direct operating expenses include $67 million from wastewater handling and high rate water transfer services. General and administrative expenses including equity-based compensation were $17 million, a $2 million increase compared to the fourth quarter of 2017. General and administrative expenses excluding equity-based compensation were $12 million during the fourth quarter of 2018, a $4 million increase as compared to the fourth quarter of 2017. The increase in general and administrative expenses was driven primarily by financial and legal fees incurred during the fourth quarter of 2018 related to the midstream simplification transaction. Total operating expenses were $27 million, including $23 million of depreciation, $106 million decrease from the change in fair value of contingent acquisition consideration related to the second earn-out payment, and $1 million of accretion of contingent acquisition consideration. Depreciation decreased by $8 million as compared to the fourth quarter of 2017 driven by a change in the estimated useful lives of the gathering systems and facilities. The change in fair value of contingent acquisition consideration is related to the second freshwater earn-out payment not anticipated to be achieved based on Antero Resource's current development plan.
Net income for the fourth quarter of 2018 was $249 million. The increase in net income was driven by an increase in natural gas gathering and compression volumes and a $105 million non-cash change in fair value of the contingent acquisition consideration related to the water drop-down transaction. Net income was $1.09 per diluted limited partner unit. Adjusted net income excluding the impact from the non-cash change in fair value of the contingent acquisition consideration was $143 million, a 63% increase compared to the prior year quarter. Adjusted EBITDA was $194 million, a 36% 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 $17 million in distributions from Stonewall Gathering LLC and the processing and fractionation Joint Venture. Cash interest paid was $9 million. Cash reserved for bond interest during the quarter increased $9 million and income tax withholding upon vesting of Antero Midstream equity-based compensation awards was $1 million. Maintenance capital expenditures during the quarter totaled $8 million and Distributable Cash Flow was $167 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,
---
2017 2018 2017 2018
---
Net income $
64,155 $
248,609 $
307,315 $
585,944
Impairment of property and equipment 23,431 23,431 5,771
Change in fair value of contingent
acquisition consideration (105,872) (105,872)
Adjusted Net Income $
87,586 $
142,737 $
330,746 $
485,843
---
Interest expense, net 10,395 18,993 37,557 61,906
Depreciation 30,958 22,692 119,562 130,013
Accretion of contingent acquisition
consideration 3,804 1,012 13,476 12,853
Accretion of asset retirement
obligation 34 135
Equity-based compensation 6,847 4,467 27,283 21,073
Equity in earnings of unconsolidated
affiliates (7,307) (12,448) (20,194) (40,280)
Distributions from unconsolidated
affiliates 10,075 16,755 20,195 46,415
Gain on sale of assets - Antero
Resources (583)
Adjusted EBITDA $
142,358 $
194,242 $
528,625 $
717,375
---
Interest paid (4,136) (9,268) (46,666) (62,844)
Decrease (increase) in cash reserved
for bond interest (1) (8,734) (8,734) 291
Income tax withholding upon vesting
of Antero Midstream Partners LP
equity-based compensation awards (514) (1,029) (5,945) (5,529)
Maintenance capital expenditures(2) (12,063) (7,988) (55,159) (52,729)
Distributable Cash Flow $
116,911 $
167,223 $
421,146 $
596,273
===
Distributions Declared to Antero
Midstream Holders
Limited partners 68,231 88,045 247,132 320,915
Incentive distribution rights 23,772 43,492 69,720 142,906
Total Aggregate
Distributions $
92,003 $
131,537 $
316,852 $
463,821
---
DCF coverage ratio 1.27x 1.27x 1.33x 1.29x
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) 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 placed online the 240 MMcf/d East Mountain compressor station in the Marcellus during the fourth quarter of 2018. For the full year 2018, Antero Midstream increased its compression capacity by 760 MMcf/d to a total of 2.5 Bcf/d in the Marcellus and Utica combined. Antero Midstream connected 38 wells to its gathering system during the fourth quarter of 2018 and 168 wells during the full year. Antero Resources is currently operating five drilling rigs on Antero Midstream dedicated acreage.
Water Handling and Treatment -- Antero Midstream's Marcellus and Utica fresh water delivery systems serviced 30 well completions during the fourth quarter of 2018, a 7% decrease from the prior year quarter. Antero Resources is currently operating four completion crews on Antero Midstream dedicated acreage.
Balance Sheet and Liquidity
As of December 31, 2018, Antero Midstream had $990 million drawn on its $2.0 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, 2018. For a reconciliation of net debt to 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, "Antero Midstream's organic growth investments continued to generate peer leading Distributable Cash Flow growth and resulted in 1.3x DCF coverage for the fourth quarter and full year 2018. In addition, Antero Midstream's strong balance sheet with debt to trailing twelve months Adjusted EBITDA of 2.3x at year-end 2018 positions it to deliver on its organic growth investment opportunity set without the need for external equity financing."
Capital Investments
Capital expenditures, excluding investments in the processing and fractionation joint venture, were $129 million in the fourth quarter of 2018 as compared to $143 million in the fourth quarter of 2017. Capital invested in gathering systems and related facilities was $109 million and capital invested in water handling and treatment assets was $20 million. Investments in unconsolidated affiliates for the Joint Venture were $45 million during the quarter.
AMGP Fourth Quarter 2018 Financial Results
AMGP's equity in earnings from Antero Midstream, which reflects the cash distributions from Antero Midstream, was $43 million for the fourth quarter of 2018. Net income for the quarter was $21 million. AMGP's cash distributions from Antero Midstream were $41 million, net of $2 million of total cash reserved for and distributed to holders of Series B units of Antero IDR Holdings LLC. General and administrative expenses were $3 million, including $3 million of special committee and legal advisory fees. The provision and reserve for income taxes was $10 million, resulting in cash available for distribution of $31 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, 2018
Cash distributions from Antero Midstream Partners LP $
43,492
Cash reserved for distributions to unvested Series B units of IDR LLC (710)
Cash distribution to vested Series B units of IDR LLC (1,419)
Cash distributions to Antero Midstream GP LP $
41,363
General and administrative expenses (3,184)
Interest expense, net (55)
Provision and reserve for income taxes (10,240)
Conflicts committee legal and advisory fees included in G&A expense(1) 2,753
Cash available for distribution $
30,637
DCF coverage ratio
1.0x
Common shares outstanding 186,236
Cash distribution per common share $
0.164
1. Represents non-recurring
accrued legal and advisory
fees associated with the
ongoing conflicts committee
process as disclosed on
February 26, 2018.
Conference Call
A joint conference call for Antero Midstream and AMGP is scheduled on Thursday, February 14, 2019 at 10:00 am MT to 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, 2019 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, 2019 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 2018 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, 2018, were filed with the Securities and Exchange Commission on February 13, 2019. 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 "Investors" 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 "Investors" 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, gain on sale of assets, depreciation expense, impairment expense, accretion and change in fair value of contingent acquisition consideration, accretion of asset retirement obligations, 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 and change in fair value of contingent acquisition consideration. 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 net debt as total debt less cash and cash equivalents. Antero Midstream views net debt as an important indicator in evaluating the Partnership's financial leverage.
The following table reconciles consolidated total debt to net debt as used in this release (in thousands):
December 31,
2018
Bank credit facility $
990,000
5.375% AM senior notes due 2024 650,000
Net unamortized debt issuance costs (7,853)
Total debt $
1,632,147
Cash and cash equivalents
Net debt $
1,632,147
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. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the timing of consummation of the proposed simplification transaction, if at all, and statements regarding the transaction. 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, the expected timing and likelihood of completion of the proposed simplification transaction, including the ability to obtain requisite unitholder and shareholder approval and the satisfaction of the other conditions to the consummation of the proposed transaction, risks that the proposed transaction may not be consummated or the benefits contemplated therefrom may not be realized, the cost savings, tax benefits and any other synergies from the transaction may not be fully realized or may take longer to realize than expected, 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, 2018.
No Offer or Solicitation
This communication includes a discussion of a proposed business combination transaction between Antero Midstream and AMGP. This communication is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, in any jurisdiction, pursuant to the transaction or otherwise, nor shall there be any sale, issuance, exchange or transfer of the securities referred to in this document in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Additional Information And Where To Find It
In connection with the transaction, AMGP has filed with the U.S. Securities and Exchange Commission ("SEC") a registration statement on Form S-4, that includes a joint proxy statement of Antero Midstream and AMGP and a prospectus of AMGP. The transaction will be submitted to Antero Midstream unitholders and AMGP shareholders for their consideration. Antero Midstream and AMGP may also file other documents with the SEC regarding the transaction. The registration statement on Form S-4 became effective on January 30, 2019, and the definitive joint proxy statement/prospectus is being sent to the shareholders of AMGP and unitholders of Antero Midstream of record as of January 11, 2019. This document is not a substitute for the registration statement and joint proxy statement/prospectus that has been filed with the SEC or any other documents that AMGP or Antero Midstream may file with the SEC or send to shareholders of AMGP or unitholders of Antero Midstream in connection with the transaction. INVESTORS AND SECURITY HOLDERS OF ANTERO MIDSTREAM AND AMGP ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE TRANSACTION AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION AND RELATED MATTERS.
Investors and security holders are able to obtain free copies of the registration statement and the joint proxy statement/prospectus and all other documents filed or that will be filed with the SEC by AMGP or Antero Midstream through the website maintained by the SEC at http://www.sec.gov. Copies of documents filed with the SEC by Antero Midstream will be made available free of charge on Antero Midstream's website at http://investors.anteromidstream.com/investor-relations/AM, under the heading "SEC Filings," or by directing a request to Investor Relations, Antero Midstream Partners LP, 1615 Wynkoop Street, Denver, Colorado 80202, Tel. No. (303) 357-7310. Copies of documents filed with the SEC by AMGP will be made available free of charge on AMGP's website at http://investors.anteromidstreamgp.com/Investor-Relations/AMGP or by directing a request to Investor Relations, Antero Midstream GP LP, 1615 Wynkoop Street, Denver, Colorado 80202, Tel. No. (303) 357-7310.
ANTERO MIDSTREAM PARTNERS LP
Consolidated Balance Sheets
December 31, 2017 and 2018
(In thousands)
December 31,
2017 2018
Assets
Current assets:
Cash and cash equivalents $
8,363
Accounts receivable-Antero Resources 110,182 115,378
Accounts receivable-third party 1,170 1,544
Other current assets 670 21,513
Total current assets 120,385 138,435
Property and equipment, net 2,605,602 2,958,415
Investments in unconsolidated affiliates 303,302 433,642
Other assets, net 12,920 15,925
Total assets $
3,042,209 3,546,417
Liabilities and Partners' Capital
Current liabilities:
Accounts payable-Antero Resources $
6,459 4,141
Accounts payable-third party 8,642 21,372
Accrued liabilities 106,006 72,121
Asset retirement obligations 1,817
Other current liabilities 209 235
Total current liabilities 121,316 99,686
Long-term liabilities:
Long-term debt 1,196,000 1,632,147
Contingent acquisition consideration 208,014 114,995
Asset retirement obligations 5,791
Other 410 2,290
Total liabilities 1,525,740 1,854,909
Partners' capital:
Common unitholders-public (88,059 and 88,452 units issued and outstanding at December 31,
2017 and 2018 respectively) 1,708,379 1,792,011
Common unitholder-Antero Resources (98,870 units issued and outstanding at December 31, 2017
and 2018) (215,682) (143,995)
General partner 23,772 43,492
Total partners' capital 1,516,469 1,691,508
Total liabilities and partners' capital $
3,042,209 3,546,417
ANTERO MIDSTREAM PARTNERS LP
Consolidated Statements of Operations and Comprehensive Income
Three Months Ended December 31, 2017 and 2018
(In thousands, except per unit amounts
)
Three months ended December 31,
2017 2018
Revenue:
Gathering and compression-Antero Resources $
105,527 161,051
Water handling and treatment-Antero Resources 104,805 120,431
Water handling and treatment-third party 269
Total revenue 210,332 281,751
Operating expenses:
Direct operating 69,646 92,069
General and administrative (including $6,847 and $4,467 of equity-based compensation in 2017 and 2018,
respectively) 15,250 16,662
Impairment of property and equipment 23,431
Depreciation 30,958 22,692
Accretion and change in fair value of contingent acquisition consideration 3,804 (104,860)
Accretion of asset retirement obligations 34
Total operating expenses 143,089 26,597
Operating income 67,243 255,154
Interest expense, net (10,395) (18,993)
Equity in earnings of unconsolidated affiliates 7,307 12,448
Net income and comprehensive income 64,155 248,609
Net income attributable to incentive distribution rights (23,772) (43,492)
Limited partners' interest in net income $
40,383 205,117
Net income per limited partner unit-basic $
0.22 1.10
Net income per limited partner unit-diluted $
0.22 1.09
Weighted average limited partner units outstanding:
Basic 186,788 187,194
Diluted 187,122 187,525
ANTERO MIDSTREAM PARTNERS LP
Consolidated Statements of Operations and Comprehensive Income
Years Ended December 31, 2017 and 2018
(In thousands, except per unit amounts
)
Year Ended December 31,
2017 2018
Revenue:
Gathering and compression-Antero Resources $
396,202 520,566
Water handling and treatment-Antero Resources 376,031 506,449
Gathering and compression-third party 264
Water handling and treatment-third party 924
Gain on sale of assets-Antero Resources 583
Total revenue 772,497 1,028,522
Operating expenses:
Direct operating 232,538 316,423
General and administrative (including $27,283 and $21,073 of equity-based compensation in 2017 and 2018,
respectively) 58,812 61,629
Impairment of property and equipment 23,431 5,771
Depreciation 119,562 130,013
Accretion and change in fair value of contingent acquisition consideration 13,476 (93,019)
Accretion of asset retirement obligations 135
Total operating expenses 447,819 420,952
Operating income 324,678 607,570
Interest expense, net (37,557) (61,906)
Equity in earnings of unconsolidated affiliates 20,194 40,280
Net income and comprehensive income 307,315 585,944
Net income attributable to incentive distribution rights (69,720) (142,906)
Limited partners' interest in net income $
237,595 443,038
Net income per limited partner unit-basic $
1.28 2.37
Net income per limited partner unit-diluted $
1.28 2.36
Weighted average limited partner units outstanding:
Basic 185,630 187,048
Diluted 186,083 187,398
ANTERO MIDSTREAM PARTNERS LP
Consolidated Results of Segment Operations
Three Months Ended
December 31, 2017 and 2018
(In thousands)
Water
Gathering and Handling and Consolidated
(in thousands) Processing Treatment Total
---
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 (excluding 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 and change in fair value 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
Three months ended December 31, 2018
Revenues:
Revenue-Antero Resources $
161,051 120,431 281,482
Revenue-third-party 269 269
Total revenues 161,051 120,700 281,751
Operating expenses:
Direct operating 13,153 78,916 92,069
General and administrative (excluding equity-based compensation) 9,029 3,166 12,195
Equity-based compensation 3,440 1,027 4,467
Depreciation 9,748 12,944 22,692
Accretion and change in fair value of contingent acquisition consideration (104,860) (104,860)
Accretion of asset retirement obligations 34 34
Total expenses 35,370 (8,773) 26,597
Operating income $
125,681 129,473 255,154
Segment and consolidated Adjusted EBITDA $
155,624 38,618 194,242
ANTERO MIDSTREAM PARTNERS LP
Consolidated Results of Segment Operations
Years Ended
December 31, 2017 and 2018
(In thousands)
Water
Gathering and Handling and Consolidated
(in thousands) Processing Treatment Total
---
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 (excluding 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 and change in fair value 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
Year ended December 31, 2018
Revenues:
Revenue-Antero Resources $
520,566 506,449 1,027,015
Revenue-third-party 924 924
Gain on sale of assets-Antero Resources 583 583
Total revenues 521,149 507,373 1,028,522
Operating expenses:
Direct operating 49,256 267,167 316,423
General and administrative (excluding equity-based compensation) 30,091 10,465 40,556
Equity-based compensation 16,518 4,555 21,073
Impairment of property and equipment 5,771 5,771
Depreciation 83,250 46,763 130,013
Accretion and change in fair value of contingent acquisition consideration (93,019) (93,019)
Accretion of asset retirement obligations 135 135
Total expenses 184,886 236,066 420,952
Operating income $
336,263 271,307 607,570
Segment and consolidated Adjusted EBITDA $
487,634 229,741 717,375
ANTERO MIDSTREAM PARTNERS LP
Selected Operating Data
Three Months Ended December 31, 2017 and 2018
(In thousands)
Three Months Ended December 31, Amount of Percentage
Increase
($ in thousands, except realized fees) 2017 2018 or Decrease Change
---
Revenue:
Revenue-Antero Resources $
210,332 281,482 71,150 34
%
Revenue-third-party 269 269
*
Total revenue 210,332 281,751 71,419 34
%
Operating expenses:
Direct operating 69,646 92,069 22,423 32
%
General and administrative (excluding equity-based compensation) 8,403 12,195 3,792 45
%
Equity-based compensation 6,847 4,467 (2,380) (35)
%
Impairment of property and equipment 23,431 (23,431)
*
Depreciation 30,958 22,692 (8,266) (27)
%
Accretion and change in fair value of contingent acquisition consideration 3,804 (104,860) (108,664)
*
Accretion of asset retirement obligations 34 34
*
Total operating expenses 143,089 26,597 (116,492) (81)
%
Operating income 67,243 255,154 187,911 279
%
Interest expense (10,395) (18,993) (8,598) 83
%
Equity in earnings of unconsolidated affiliates 7,307 12,448 5,141 70
%
Net income $
64,155 248,609 184,454 288
%
Adjusted EBITDA $
142,358 194,242 51,884 36
%
Operating Data:
Gathering-low pressure (MMcf) 157,373 239,392 82,019 52
%
Gathering-high pressure (MMcf) 169,464 236,332 66,868 39
%
Compression (MMcf) 124,654 203,740 79,086 63
%
Fresh water delivery (MBbl) 13,745 12,514 (1,231) (9)
%
Treated water (MBbl) 782 782
*
Other fluid handling (MBbl) 4,227 5,406 1,179 28
%
Wells serviced by fresh water delivery 32 30 (2) (6)
%
Gathering-low pressure (MMcf/d) 1,711 2,602 891 52
%
Gathering-high pressure (MMcf/d) 1,842 2,569 727 39
%
Compression (MMcf/d) 1,355 2,215 860 63
%
Fresh water delivery (MBbl/d) 149 136 (13) (9)
%
Treated water (MBbl/d) 9 9
*
Other fluid handling (MBbl/d) 46 59 13 28
%
Average realized fees:
Average gathering-low pressure fee ($/Mcf) $
0.32 0.32
%
Average gathering-high pressure fee ($/Mcf) $
0.19 0.19
%
Average compression fee ($/Mcf) $
0.19 0.19
%
Average fresh water delivery fee ($/Bbl) $
3.71 3.78
%
Average treated water fee ($/Bbl)
$ 4.64 4.64
*
Joint Venture Operating Data:
Processing-Joint Venture (MMcf) 39,124 73,260 34,136 87
%
Fractionation-Joint Venture (MBbl) 837 1,718 881 105
%
Processing-Joint Venture (MMcf/d) 425 796 371 87
%
Fractionation-Joint Venture (MBbl/d) 9 19 10 111
%
_________________________
* Not meaningful or applicable.
ANTERO MIDSTREAM PARTNERS LP
Selected Operating Data
Years Ended December 31, 2017 and 2018
(In thousands)
Year Ended December 31, Amount of Percentage
Increase
($ in thousands, except realized fees) 2017 2018 or Decrease Change
---
Revenue:
Revenue-Antero Resources $
772,233 1,027,015 254,782 33
%
Revenue-third-party 264 924 660 250
%
Gain on sale of assets-Antero Resources 583 583
*
Total revenue 772,497 1,028,522 256,025 33
%
Operating expenses:
Direct operating 232,538 316,423 83,885 36
%
General and administrative (excluding equity-based compensation) 31,529 40,556 9,027 29
%
Equity-based compensation 27,283 21,073 (6,210) (23)
%
Impairment of property and equipment 23,431 5,771 (17,660) (75)
%
Depreciation 119,562 130,013 10,451 9
%
Accretion and change in fair value of contingent acquisition consideration 13,476 (93,019) (106,495)
*
Accretion of asset retirement obligations 135 135
*
Total operating expenses 447,819 420,952 (26,867) (6)
%
Operating income 324,678 607,570 282,892 87
%
Interest expense (37,557) (61,906) (24,349) 65
%
Equity in earnings of unconsolidated affiliates 20,194 40,280 20,086 99
%
Net income $
307,315 585,944 278,629 91
%
Adjusted EBITDA(1) $
528,625 717,375 188,750 36
%
Operating Data:
Gathering-low pressure (MMcf) 605,719 784,079 178,360 29
%
Gathering-high pressure (MMcf) 646,054 770,910 124,856 19
%
Compression (MMcf) 436,695 634,303 197,608 45
%
Fresh water delivery (MBbl) 55,892 71,180 15,288 27
%
Treated water (MBbl) 2,544 2,544
*
Other fluid handling (MBbl) 14,549 18,848 4,299 30
%
Wells serviced by fresh water delivery 142 162 20 14
%
Gathering-low pressure (MMcf/d) 1,660 2,148 488 29
%
Gathering-high pressure (MMcf/d) 1,770 2,112 342 19
%
Compression (MMcf/d) 1,196 1,738 542 45
%
Fresh water delivery (MBbl/d) 153 195 42 27
%
Treated water (MBbl/d) 7 7
*
Other fluid handling (MBbl/d) 40 52 12 30
%
Average realized fees:
Average gathering-low pressure fee ($/Mcf) $
0.32 0.32
%
Average gathering-high pressure fee ($/Mcf) $
0.19 0.19
%
Average compression fee ($/Mcf) $
0.19 0.19
%
Average fresh water delivery fee ($/Bbl) $
3.71 3.78 0.07 2
%
Average treated water fee ($/Bbl)
$ 4.72 4.72
*
Joint Venture Operating Data:
Processing-Joint Venture (MMcf) 97,276 227,113 129,837 133
%
Fractionation-Joint Venture (MBbl) 1,861 4,784 2,923 157
%
Processing-Joint Venture (MMcf/d) 267 622 355 133
%
Fractionation-Joint Venture (MBbl/d) 5 13 8 160
%
________________________
* Not meaningful or applicable.
ANTERO MIDSTREAM PARTNERS LP
Consolidated Statements of Cash Flows
Years Ended December 31, 2017 and 2018
(In thousands)
Year Ended December 31,
2017 2018
Cash flows provided by operating activities:
Net income $
307,315 585,944
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 119,562 130,013
Accretion and change in fair value of
contingent acquisition consideration 13,476 (93,019)
Accretion of asset retirement obligations 135
Impairment of property and equipment 23,431 5,771
Equity-based compensation 27,283 21,073
Equity in earnings of unconsolidated
affiliates (20,194) (40,280)
Distributions from unconsolidated affiliates 20,195 46,415
Amortization of deferred financing costs 2,888 2,879
Gain on sale of assets-Antero Resources (583)
Gain on sale of assets-third-party
Changes in assets and liabilities:
Accounts receivable-Antero Resources (41,043) (10,196)
Accounts receivable-third party 70 648
Prepaid expenses (141) (153)
Accounts payable-Antero Resources 3,266 (1,804)
Accounts payable-third party 3,003 7,670
Accrued liabilities 16,685 3,047
Net cash provided by operating activities 475,796 657,560
Cash flows used in investing activities:
Additions to gathering systems and facilities (346,217) (446,270)
Additions to water handling and treatment
systems (195,162) (88,674)
Investments in unconsolidated affiliates (235,004) (136,475)
Proceeds from sale of assets-Antero Resources 4,470
Proceeds from sale of assets-third party 1,680
Change in other assets (3,435) (3,591)
Change in other liabilities 2,273
Net cash used in investing activities (779,818) (666,587)
Cash flows provided by financing activities:
Distributions to unitholders (283,950) (426,452)
Issuance of senior notes
Borrowings on bank credit facilities, net 345,000 435,000
Issuance of common units, net of offering
costs 248,956
Payments of deferred financing costs (5,520) (2,169)
Employee tax withholding for settlement of
equity compensation awards (5,945) (5,529)
Other (198) (186)
Net cash provided by financing activities 298,343 664
Net (decrease) in cash and cash equivalents (5,679) (8,363)
Cash and cash equivalents, beginning of
period 14,042 8,363
Cash and cash equivalents, end of period $
8,363
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest $
46,666 62,844
Increase (decrease) in accrued capital
expenditures and accounts payable for
property and equipment $
16,338 (32,563)
ANTERO MIDSTREAM GP LP
Consolidated Balance Sheets
December 31, 2017 and 2018
(In thousands, except number of shares and units)
December 31,
2017 2018
Assets
Current assets:
Cash $
5,987 2,822
Prepaid expenses and other current assets 87
Total current assets 5,987 2,909
Investment in Antero Midstream Partners LP 23,772 43,492
Deferred tax asset 1,304
Total assets $
29,759 47,705
Liabilities and Partners' Capital
Current liabilities:
Accounts payable-affiliate 57 731
Accounts payable and accrued liabilities 236 435
Taxes payable 13,858 15,678
Total current liabilities 14,151 16,844
Partners' capital:
Common shareholders-public (186,181,975 shares and 186,219,438 shares issued and outstanding at
December 31, 2017 and 2018, respectively) (19,866) (41,969)
IDR LLC Series B units (32,875 and 65,745 units vested at December 31, 2017 and 2018, respectively) 35,474 72,830
Total partners' capital 15,608 30,861
Total liabilities and partners' capital $
29,759 47,705
ANTERO MIDSTREAM GP LP
Consolidated Statements of Operations and Comprehensive Income
Three Months Ended December 31, 2017 and 2018
(In thousands, except per share amounts)
Three Months Ended December 31,
2017 2018
Equity in earnings of Antero Midstream Partners LP $
23,772 43,492
Total income 23,772 43,492
General and administrative expense 279 3,183
Equity-based compensation 8,662 8,792
Total operating expenses 8,941 11,975
Operating income 14,831 31,517
Interest expense, net (54)
Income before income taxes 14,831 31,463
Provision for income taxes (8,924) (10,075)
Net income and comprehensive income 5,907 21,388
Net income attributable to vested Series B units (784) (3,719)
Net income attributable to common shareholders $
5,123 17,669
Net income per common share-basic $
0.03 0.10
Weighted average number of common shares outstanding-basic and diluted 186,181 186,218
ANTERO MIDSTREAM GP LP
Consolidated Statements of Operations and Comprehensive Income
Years Ended December 31, 2017 and 2018
(In thousands, except per share amounts)
Years ended December 31,
2017 2018
Equity in earnings of Antero Midstream Partners LP $
69,720 142,906
Total income 69,720 142,906
General and administrative expense 6,201 8,740
Equity-based compensation 34,933 35,111
Total operating expenses 41,134 43,851
Operating income 28,586 99,055
Interest expense, net (136)
Income before income taxes 28,586 98,919
Provision for income taxes (26,261) (32,311)
Net income and comprehensive income 2,325 66,608
Net income attributable to vested Series B units (784) (5,236)
Pre-IPO net income attributed to parent 4,939
Net income attributable to common shareholders $
6,480 61,372
Net income per common share-basic and diluted $
0.03 0.33
Weighted average number of common shares outstanding-basic and diluted 186,176 186,203
ANTERO MIDSTREAM GP LP
Consolidated Statements of Cash Flows
Years Ended December 31, 2017 and 2018
(In thousands)
Years Ended December 31,
2017 2018
Cash flows provided by operating
activities:
Net income $
2,325 66,608
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in earnings of Antero Midstream
Partners LP (69,720) (142,906)
Distributions received from Antero
Midstream Partners LP 53,491 123,186
Amortization of deferred financing costs 148
Equity-based compensation 34,933 35,111
Deferred income taxes (1,304)
Changes in current assets and liabilities:
Prepaid expenses and other current assets (5)
Accounts payable-affiliate 57 674
Accounts payable and accrued liabilities (190) 199
Taxes payable 7,184 1,820
Net cash provided by operating activities 28,080 83,531
Cash flows from investing activities
Net cash used in investing activities
Cash flows used in financing activities
Distributions to Antero Resources
Investment LLC (15,691)
Distributions to shareholders (16,011) (84,166)
Distributions to Series B unitholders (2,300)
Payments of deferred financing costs (230)
Net cash used in financing activities (31,702) (86,696)
Net increase (decrease) in cash (3,622) (3,165)
Cash, beginning of period 9,609 5,987
Cash, end of period $
5,987 2,822
Supplemental disclosure of cash flow
information:
Cash paid during the period for taxes $
(19,077) $
(31,795)
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SOURCE Antero Midstream Partners LP; Antero Midstream GP LP
