Antero Midstream Reports Second Quarter 2020 Results and Announces Updated 2020 Capital Budget & Guidance

DENVER, July 29, 2020 /PRNewswire/ -- Antero Midstream Corporation (NYSE: AM) ("Antero Midstream" or the "Company") today released its second quarter 2020 financial and operating results. In addition, Antero Midstream announced a reduction of its 2020 capital budget and increase in its Free Cash Flow guidance. The relevant consolidated financial statements are included in Antero Midstream's quarterly report on Form 10-Q for the three months ended June 30, 2020.

Second Quarter 2020 Highlights:

    --  Net income was $88 million, or $0.19 per share, a 36% increase compared
        to the prior year quarter
    --  Adjusted Net Income was $106 million, or $0.22 per share, a 36% increase
        compared to the prior year quarter (non-GAAP measure)
    --  Adjusted EBITDA was $201 million, a 2% decline compared to the prior
        year quarter (non-GAAP measure)
    --  Distributable Cash Flow was $152 million, resulting in 1.0x DCF coverage
        on the previously declared dividend of $0.3075 per share (non-GAAP
        measure)
    --  Capital expenditures were $59 million, a 63% decrease compared to the
        prior year quarter
    --  Free Cash Flow before return of capital and changes in working capital
        was $108 million compared to $15 million in the prior year quarter
        (non-GAAP measure)
    --  Received $39 million of the $55 million tax refund related to net
        operating losses in prior tax years under the CARES Act; remaining $16
        million expected to be received by year-end 2020
    --  Repurchased 3.2 million shares at an average price of $2.77 per share
        for approximately $8.9 million
    --  Total debt as of June 30, 2020 was $3.1 billion, unchanged from March
        31, 2020

Updated 2020 Capital Budget & Free Cash Flow Guidance:

    --  Further decreased capital budget to a range of $200 to $215 million from
        the original budget of $300 to $325 million and previously revised
        budget of $215 to $240 million
        --  A 67% decrease compared to 2019 capital expenditures
    --  Increased Free Cash Flow guidance (before return of capital and changes
        in working capital) to $445 to $475 million from the original guidance
        of $375 to $425 million and previously revised guidance of $420 to $450
        million
        --  Increase driven by capital budget reduction with no change to
            previously provided Adjusted EBITDA guidance of $800 to $830 million

Paul Rady, Chairman and CEO said, "Antero Midstream delivered a strong quarter with no material volume curtailments due to the coordinated efforts and planning of Antero Midstream and Antero Resources. As a result, Antero Midstream's gathering and compression volumes increased 8% year-over-year and 6% sequentially during the second quarter. We are incredibly proud of all of our employees who have safely delivered these results despite the ongoing uncertainty and challenges surrounding the COVID-19 pandemic. This operational excellence, combined with our continued reduction in capital expenditures, resulted in Free Cash Flow of $108 million compared to $15 million the second quarter of 2019."

Mr. Rady further added, "Due to the just-in-time nature of our capital investments with no long-term major capital projects, Antero Midstream has been able to reduce its capital budget by over $100 million in 2020. This has in-turn improved our Free Cash Flow guidance by $60 million in 2020 compared to our original guidance and allows Antero Midstream to maintain a strong balance sheet with significant liquidity and financial flexibility."

For a discussion of the non-GAAP financial measures including Adjusted EBITDA, Adjusted Net Income, Distributable Cash Flow, Free Cash Flow and Net Debt, please see "Non-GAAP Financial Measures."

Antero Resources Developments

On June 15, 2020, Antero Resources announced the closing of a $402 million overriding royalty interest ("ORRI") transaction. In addition, Antero Resources announced that in July of 2020 it monetized excess 2021 natural gas hedges as a result of the ORRI transaction for proceeds of approximately $29 million. Antero Resources disclosed that, pro forma for the hedge monetization, it expects to be 100% hedged on its 2021 natural gas production at a price of $2.77/MMBtu. The hedge monetization brings Antero Resources' total asset sale proceeds to $531 million, inclusive of up to $102 million of contingent consideration relating to the ORRI transaction that may be earned through 2021, compared to a stated asset sale target of $750 million to $1.0 billion. Since the commencement of Antero Resources' debt repurchase program in the fourth quarter of 2019, Antero Resources has repurchased $888 million of notional debt at a 19% weighted average discount, reducing total indebtedness by $171 million and net interest expense by $24 million on an annualized basis. Antero Resources has stated that pro forma for the hedge monetization, its liquidity position as of June 30, 2020 was approximately $1.0 billion and that the par value of its 2021 and 2022 maturities outstanding has been reduced from $1.0 billion and $1.1 billion at issuance to $503 million and $756 million, respectively, each as of July 24, 2020.

COVID-19 Pandemic Developments

As a midstream energy company, Antero Midstream is recognized as an essential business under various federal, state and local regulations related to the COVID-19 pandemic. Antero Midstream has continued to operate as permitted under these regulations while taking steps to protect the health and safety of its workers. Antero Midstream has implemented protocols to reduce the risk of an outbreak within its field operations, and these protocols have not reduced Antero Resources' production or Antero Midstream's throughput in a significant manner. A substantial portion of the Company's non-field level employees continue to operate in remote work from home arrangements, and Antero Midstream has been able to maintain a consistent level of effectiveness through these arrangements, including maintaining day-to-day operations, its financial reporting systems and its internal control over financial reporting. For more information, please see Antero Midstream's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.

Updated Capital Budget and Free Cash Flow Guidance

Antero Midstream announced a reduction in its 2020 capital budget to a range of $200 to $215 million from the original budget of $300 to $325 million and previously revised budget of $215 to $240 million. The capital budget assumes a sequential reduction in capital expenditures in the second half of 2020 as compared to the first half of 2020 and contemplates a 2021 Antero Resources development plan that maintains flat year-over-year net production. As a result of the capital budget reduction, Antero Midstream is increasing Free Cash Flow guidance (before return of capital and changes in working capital) to $445 to $475 million from the original guidance of $375 to $425 million and previously revised guidance of $420 to $450 million. All guidance not discussed in this release, including Antero Midstream's Net Loss, Adjusted Net Income, Adjusted EBITDA and Distributable Cash Flow guidance, is unchanged from previously stated guidance.

Second Quarter 2020 Financial Results

Low pressure gathering volumes for the second quarter of 2020 averaged 2,869 MMcf/d, an 8% increase as compared to the prior year quarter. Low pressure gathering volumes were in excess of the second quarter 2020 growth incentive fee threshold of 2,700 MMcf/d, resulting in a $12 million rebate to Antero Resources. Compression volumes for the second quarter of 2020 averaged 2,712 MMcf/d, a 13% increase as compared to the second quarter of 2019. High pressure gathering volumes for the second quarter of 2020 averaged 2,839 MMcf/d, an 8% increase compared to the second quarter of 2019. Fresh water delivery volumes averaged 102 MBbl/d during the quarter, a 16% decrease compared to the second quarter of 2019.

Gross processing volumes from the 50/50 processing and fractionation joint venture with MarkWest (a wholly owned subsidiary of MPLX) (the "Joint Venture") averaged 1,404 MMcf/d for the second quarter of 2020, a 42% increase compared to the prior year quarter. Joint Venture processing capacity was 100% utilized during the quarter. Gross Joint Venture fractionation volumes averaged 33 MBbl/d, a 22% increase compared to the prior year quarter.


                                                       Three Months Ended

                                                                June 30,




     
              Average Daily Volumes:           2019          2020           %

                                                                          Change




     Low Pressure Gathering (MMcf/d)            2,662         2,869            8%



     Compression (MMcf/d)                       2,396         2,712           13%



     High Pressure Gathering (MMcf/d)           2,620         2,839            8%



     Fresh Water Delivery (MBbl/d)                122           102         (16)%



     Gross Joint Venture Processing (MMcf/d)      986         1,404           42%



     Gross Joint Venture Fractionation (MBbl/d)    27            33           22%

For the three months ended June 30, 2020, revenues were $220 million, comprised of $174 million from the Gathering and Processing segment and $63 million from the Water Handling segment, net of $18 million of amortization of customer relationships. Water Handling revenues include $26 million from wastewater handling and high rate water transfer services.

Direct operating expenses for the Gathering and Processing and Water Handling segments were $14 million and $28 million, respectively, for a total of $42 million, compared to $64 million in total direct operating expenses in the prior year quarter. Water Handling operating expenses include $26 million from wastewater handling and high rate water transfer services. The decrease in direct operating expenses was driven by lower per unit gathering and fresh water delivery operating expenses as well as lower costs associated with flowback and produced water. General and administrative expenses excluding equity-based compensation were $10 million during the second quarter of 2020. Total operating expenses included $3 million of equity compensation expense, and $28 million of depreciation.

Net income was $88 million, or $0.19 per share, representing a 36% increase compared to the prior year quarter. Net income adjusted for amortization of customer relationships, or Adjusted Net Income, was $106 million. Adjusted Net Income per share was $0.22 per share, representing a 36% increase compared to the prior year quarter. Adjusted EBITDA was $201 million, a 2% decrease compared to the prior year quarter. Antero Midstream only received two monthly Joint Venture distributions during the quarter compared to three monthly distributions received in prior quarters, resulting in a $(7) million reduction in Adjusted EBITDA. Adjusted EBITDA also included $2 million of Antero Clearwater Facility idling costs during the second quarter. Cash interest paid was $7 million. The increase in cash reserved for bond interest during the quarter was $27 million. Maintenance capital expenditures during the quarter totaled $15 million and distributable cash flow was $152 million. Based on the previously declared dividend of $0.3075 per share, Antero Midstream's Distributable Cash Flow coverage ratio was approximately 1.0x.

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
                                                                                                              June 30,



                                                                                                             2019           2020




     
                Net income                                                                $
      
             69,274         88,441



     Amortization of customer relationships                                                                8,534         17,606



     Impairment expense                                                                                      594



     
                Adjusted Net Income                                                                     78,402        106,047






     
                Net Income                                                                              69,274         88,441




     Interest expense                                                                                     31,521         35,311



     Provision for income tax expense                                                                     30,419         31,921



     Amortization of customer relationships                                                                8,534         17,606



     Depreciation expense                                                                                 36,447         27,745



     Impairment expense                                                                                      594



     Accretion and change in fair value of contingent acquisition consideration                            2,366             61



     Equity-based compensation                                                                            21,543          2,697



     Loss on asset sale                                                                                                    240



     Equity in earnings of unconsolidated affiliates                                                    (13,623)      (20,947)



     Distributions from unconsolidated affiliates                                                         19,085         18,200



     
                Adjusted EBITDA                                                                        206,160        201,275



     Interest paid                                                                                      (11,896)       (7,056)



     Increase in cash reserved for bond interest (1)                                                    (18,390)      (27,422)



     Maintenance capital expenditures (2)                                                               (17,909)      (14,907)



     Employee tax withholding for settlement of equity compensation awards                               (1,827)         (366)




     
                Distributable Cash Flow                                                  $
      
             156,138        151,524






     
                Total Aggregate Dividends Declared                                       $
      
             154,093        146,554






     
                Distributable Cash Flow Coverage Ratio                                                 1.0x                   1.0x





     
                Adjusted EBITDA                                                          $
      
             206,160        201,275




     Interest paid                                                                                      (11,896)       (7,056)



     Increase in cash reserved for bond interest (1)                                                    (18,390)      (27,422)



     Total capital expenditures                                                                        (160,378)      (59,001)



                   Free Cash Flow (before return of capital and changes in working capital)  $
      
             15,496        107,796

               1)               Cash reserved for bond interest
                                 expense on Antero Midstream's
                                 senior notes outstanding during
                                 the period that is paid on a
                                 semi-annual basis.


               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 -- During the second quarter of 2020, Antero Midstream connected 44 wells to its gathering system. In addition, Antero Midstream added 240 MMcf/d of compression capacity in the Marcellus during the quarter bringing its total compression capacity to 3.1 Bcf/d. Antero Midstream's compression capacity was approximately 91% utilized during the quarter.

Water Handling-- Antero Midstream's Marcellus water delivery systems serviced 22 well completions during the second quarter of 2020, a 12% decrease from the prior year quarter.

Balance Sheet and Liquidity

As of June 30, 2020, Antero Midstream had approximately $1.16 billion drawn on its $2.13 billion bank credit facility, resulting in approximately $970 million of liquidity. Antero Midstream's Net Debt to trailing twelve months pro forma Adjusted EBITDA ("Leverage") was 3.7x as of June 30, 2020.

Capital Investments

Total capital expenditures including investments in the Joint Venture were $59 million during the second quarter of 2020. Gathering, compression, and water infrastructure capital investments totaled $49 million and investments in unconsolidated affiliates for the Joint Venture were $10 million. Of the $49 million invested in gathering, compression, and water infrastructure, $43 million was in gathering and compression assets and $6 million was in water the handling assets.

Michael Kennedy, CFO of Antero Midstream, said, "The 63% year-over-year reduction in capital expenditures highlights our just-in-time capital investment philosophy that quickly adapts to changes in Antero Resources development plan. This allowed Antero Midstream to generate $108 million of Free Cash Flow before return of capital and changes in working capital. Importantly, after the $156 million of return of capital to shareholders and $39 million tax reimbursement, Antero Midstream's Net Debt and Leverage were flat quarter-over-quarter at $3.1 billion and 3.7x, respectively."

Conference Call

A conference call for Antero Midstream is scheduled on Thursday, July 30, 2020 at 10:00 am MT to discuss the financial and operational 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 877-407-9126 (U.S.), or 201-493-6751 (International) and reference "Antero Midstream". A telephone replay of the call will be available until Thursday, August 6, 2020 at 10:00 am MT at 877-660-6853 (U.S.) or 201-612-7415 (International) using the conference ID: 13703839. 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 until Thursday, August 6, 2020 at 10:00 am MT.

Non-GAAP Financial Measures and Definitions

Antero Midstream uses certain non-GAAP financial measures. Antero Midstream defines Adjusted Net Income as net income plus amortization of customer contracts and impairment expenses. Antero Midstream uses Adjusted Net Income to assess the operating performance of its assets. Antero Midstream defines Adjusted EBITDA as net income before amortization of customer relationships, impairment expense, interest expense, provision for income tax expense, loss on asset sale, depreciation expense, accretion, 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 Antero Midstream's assets, without regard
        to financing methods, capital structure or historical cost basis;
    --  its operating performance and return on capital as compared to other
        publicly traded companies in the midstream energy sector, without regard
        to financing or capital structure; and
    --  the viability of acquisitions and other capital expenditure projects.

Antero Midstream defines Free Cash Flow as Adjusted EBITDA less interest paid, decrease in cash reserved for bond interest and capital expenditures. Free Cash Flow is before dividend payments, share repurchases and changes in working capital. Antero Midstream uses Free Cash Flow as a performance metric to compare the cash generating performance of Antero Midstream from period to period.

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

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

Antero Midstream defines Net Debt as consolidated total debt less cash and cash equivalents. Antero Midstream views Net Debt as an important indicator in evaluating Antero Midstream's financial leverage.

Antero Midstream has not included a reconciliation of Free Cash Flow to the nearest GAAP financial measure for 2020 because it cannot do so without unreasonable effort and any attempt to do so would be inherently imprecise. Antero Midstream is able to forecast the following reconciling items between such measures and Net Income (in thousands):


                                             Twelve Months Ending

                                               December 31, 2020



       
              
                Low           High

                   ---


     Depreciation expense                          $
              110 $
     120


      Equity-based compensation expense                          10     15



     Interest expense                                          150    160


      Amortization of customer relationships                     70     75


      Distributions from unconsolidated
       affiliates                                                90    100

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




                                             June 30,
                                                2020



     Bank credit facility                 $1,155,000


      5.375% senior notes due 2024            652,600


      5.75% senior notes due 2027             653,250


      5.75% senior notes due 2028             650,000


      Net unamortized debt issuance costs    (22,065)



                   Consolidated total debt $3,088,785


      Cash and cash equivalents               (2,997)



                   Consolidated net debt   $3,085,788

The following table reconciles cash paid for capital expenditures and accrued capital expenditures during the period (in thousands):




                               Three months ended June 30,



                                                      2019                2020



     Capital
     expenditures
     (as
     reported
     on
     a
     cash
     basis)                                                    $
     162,865        65,729


     Change
     in
     accrued
     capital
     costs                                                        (2,487)      (6,728)



                  Capital
                  expenditures
                  (accrual
                  basis)                                   $
     
       160,378        59,001

The following table reconciles net loss to Adjusted EBITDA for the last twelve months as used in this release (in thousands):






                                                                                                  12 months ended
                                                                                                             June 30, 2020




     
                Net Loss                                                      
     
     $  (735,903)



     Amortization of customer relationships                                              70,545



     Impairment expense                                                               1,425,910



     Interest expense                                                                   145,606



     Provision for income tax benefit                                                  (242,496)



     Depreciation expense                                                               112,621



     Accretion and change in fair value of contingent acquisition consideration           4,941



     Equity-based compensation                                                           46,586



     Loss on asset sale                                                                     240



     Equity in earnings of unconsolidated affiliates                                    (73,080)



     Distributions from unconsolidated affiliates                                        82,288



     Conflicts committee legal & advisory fees                                            2,278



     
                Adjusted EBITDA                                               
     
     $   839,536

Antero Midstream Corporation is a Delaware corporation 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 Corporation's properties. The Company's website is located at www.anteromidstream.com.

This release includes "forward-looking statements." Such forward-looking statements are subject to a number of risks and uncertainties, many of which are not under Antero Midstream's control. All statements, except for statements of historical fact, made in this release regarding activities, events or developments Antero Midstream expects, believes or anticipates will or may occur in the future, such as Antero Midstream's ability to execute its business plan and return capital to its shareholders, information regarding potential incremental flowback and produced water services, information regarding long-term financial and operating outlooks for Antero Midstream and Antero Resources and information regarding Antero Resources' expected future growth and its ability to meet its drilling and development plan are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All forward-looking statements speak only as of the date of this release. Although Antero Midstream 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. Except as required by law, Antero Midstream expressly disclaims any obligation to and does not intend to publicly update or revise any forward-looking statements.

Antero Midstream cautions you that these forward-looking statements are subject to all of the risks and uncertainties incident to our business, most of which are difficult to predict and many of which are beyond Antero Midstream's control. These risks include, but are not limited to, commodity price volatility, inflation, environmental risks, Antero Resources' drilling and completion and other operating risks, regulatory changes, the uncertainty inherent in projecting Antero Resources' future rates of production, cash flows and access to capital, the timing of development expenditures, impacts of world events, including the COVID-19 pandemic, potential shut-ins of production by producers due to lack of downstream demand or storage capacity, and the other risks described under the heading "Item 1A. Risk Factors" in Antero Midstream's Annual Report on Form 10-K for the year ended December 31, 2019 and its subsequently filed Quarterly Reports on Form 10-Q.


                                                        
         
                ANTERO MIDSTREAM CORPORATION
                                                           Condensed Consolidated Balance Sheets
                                                            December 31, 2019 and June 30, 2020
                                                                      (In thousands)


                                                                                                                  (Unaudited)


                                                                             December 31,                           June 30,


                                                                                     2019                                 2020



                                                              
              
                Assets



     Cash and cash equivalents                                                                 $
              1,235                   2,997



     Accounts receivable-Antero Resources                                                                101,029                  76,088



     Accounts receivable-third party                                                                       4,574                   3,392



     Income tax receivable                                                                                                       17,547



     Other current assets                                                                                  1,720                     645




     Total current assets                                                                                108,558                 100,669



     Property and equipment, net                                                                       3,273,410               3,249,643


      Investments in unconsolidated affiliates                                                            709,639                 729,823



     Deferred tax asset                                                                                  103,231                 160,579



     Customer relationships                                                                            1,498,119               1,462,908



     Goodwill                                                                                            575,461



     Other assets, net                                                                                    14,460                  11,433




     Total assets                                                                          $
              6,282,878               5,715,055





                                                      
       
                Liabilities and Stockholders' Equity



     Current liabilities:



     Accounts payable-Antero Resources                                                         $
              3,146                   2,714



     Accounts payable-third party                                                                          6,645                  19,822



     Accrued liabilities                                                                                 104,188                  72,284



     Contingent acquisition consideration                                                                125,000



     Other current liabilities                                                                             3,105                   3,325




     Total current liabilities                                                                           242,084                  98,145



     Long-term liabilities:



     Long-term debt                                                                                    2,892,249               3,088,785



     Other                                                                                                 5,131                   4,943




     Total liabilities                                                                                 3,139,464               3,191,873






     Stockholders' Equity:


      Preferred stock, $0.01 par value: 100,000
       authorized at December 31, 2019 and June 30,
       2020, respectively


      Series A non-voting perpetual preferred stock;
       12 designated and 10 issued and outstanding at
       both December 31, 2019 and June 30, 2020


      Common stock, $0.01 par value; 2,000,000
       authorized; 484,042 and 476,486 issued and
       outstanding at December 31, 2019 and June 30,
       2020, respectively                                                                                   4,840                   4,765



     Additional paid-in capital                                                                        3,480,139               3,164,474



     Accumulated loss                                                                                  (341,565)              (646,057)




     Total stockholders' equity                                                                        3,143,414               2,523,182



      Total liabilities and stockholders' equity                                            $
              6,282,878               5,715,055


                                                                         
              
                ANTERO MIDSTREAM CORPORATION
                                                               Condensed Consolidated Statements of Operations and Comprehensive Income
                                                                               Three Months Ended June 30, 2019 and 2020
                                                                               (In thousands, except per share amounts)
                                                                                              (Unaudited)




                                                                                                  Three Months Ended June 30,



                                                                                                                         2019                       2020




     Revenue:



     Gathering and compression-Antero Resources                                                                                     $
         168,925        173,991



     Water handling-Antero Resources                                                                                                        95,181         63,351



     Water handling and treatment-third party                                                                                                   46



     Amortization of customer relationships                                                                                                (8,534)      (17,606)




     Total revenue                                                                                                                         255,618        219,736




     Operating expenses:



     Direct operating                                                                                                                       63,998         42,067


      General and administrative (including $21,543 and $2,697 of
       equity-based compensation in 2019 and 2020, respectively)                                                                             34,622         12,422



     Facility idling                                                                                                                                       2,475



     Impairment of property and equipment                                                                                                      594



     Depreciation                                                                                                                           36,447         27,745


      Accretion and change in fair value of contingent acquisition
       consideration                                                                                                                          2,297



     Accretion of asset retirement obligations                                                                                                  69             61



     Loss on asset sale                                                                                                                                      240




     Total operating expenses                                                                                                              138,027         85,010




     Operating income                                                                                                                      117,591        134,726



     Interest expense, net                                                                                                                (31,521)      (35,311)



     Equity in earnings of unconsolidated affiliates                                                                                        13,623         20,947




     Income before income taxes                                                                                                             99,693        120,362



     Provision for income tax expense                                                                                                     (30,419)      (31,921)




     Net income and comprehensive income                                                                                             $
         69,274         88,441






     Net income per share-basic                                                                                                        $
         0.14           0.19



     Net income per share-diluted                                                                                                      $
         0.14           0.18





     Weighted average common shares outstanding:



     Basic                                                                                                                                 506,816        476,836



     Diluted                                                                                                                               507,767        478,837


                                                                                               
          
                ANTERO MIDSTREAM CORPORATION
                                                                                                          Selected Operating Data
                                                                                                 Three Months Ended June 30, 2019 and 2020
                                                                                                                (Unaudited)




                                                        Three Months Ended June 30,                                  Amount of
                                                                                                                      Increase                  Percentage



                                                                               2019                                        2020                   or Decrease Change




     Operating Data:


      Gathering-low pressure (MMcf)                                                    242,266                                                       261,039           18,773       8

                                                                                                                                                                                 %


      Gathering-high pressure (MMcf)                                                   238,406                                                       258,380           19,974       8

                                                                                                                                                                                 %



     Compression (MMcf)                                                               218,020                                                       246,790           28,770      13

                                                                                                                                                                                 %



     Fresh water delivery (MBbl)                                                       11,147                                                         9,318          (1,829)   (16)

                                                                                                                                                                                 %



     Treated water (MBbl)                                                               2,658                                                                       (2,658)  
     *



     Other fluid handling (MBbl)                                                        5,086                                                         5,433              347       7

                                                                                                                                                                                 %


      Wells serviced by fresh water delivery                                                25                                                            22              (3)   (12)

                                                                                                                                                                                 %


      Gathering-low pressure (MMcf/d)                                                    2,662                                                         2,869              207       8

                                                                                                                                                                                 %


      Gathering-high pressure (MMcf/d)                                                   2,620                                                         2,839              219       8

                                                                                                                                                                                 %



     Compression (MMcf/d)                                                               2,396                                                         2,712              316      13

                                                                                                                                                                                 %


      Fresh water delivery (MBbl/d)                                                        122                                                           102             (20)   (16)

                                                                                                                                                                                 %



     Treated water (MBbl/d)                                                                29                                                                          (29)  
     *


      Other fluid handling (MBbl/d)                                                         56                                                            60                4       7

                                                                                                                                                                                 %



     Average realized fees:


      Average gathering-low pressure fee
       ($/Mcf)                                                                      $
        0.33                                                          0.33                          %


      Average gathering-high pressure fee
       ($/Mcf)                                                                      $
        0.20                                                          0.20                          %


      Average compression fee ($/Mcf)                                               $
        0.19                                                          0.20             0.01       5

                                                                                                                                                                                 %


      Average fresh water delivery fee                                              $
        3.90                                                          3.96             0.06       2
       ($/Bbl)
                                                                                                                                                                                 %


      Average treatment fee ($/Bbl)                                                 $
        4.50                                                                        (4.50)  
     *


      Joint Venture Operating Data:


      Processing-Joint Venture (MMcf)                                                   89,770                                                       127,791           38,021      42

                                                                                                                                                                                 %


      Fractionation-Joint Venture (MBbl)                                                 2,470                                                         3,014              544      22

                                                                                                                                                                                 %


      Processing-Joint Venture (MMcf/d)                                                    986                                                         1,404              418      42

                                                                                                                                                                                 %


      Fractionation-Joint Venture (MBbl/d)                                                  27                                                            33                6      22

                                                                                                                                                                                 %





     
                *      Not meaningful or applicable.


                                                                                     
              
                ANTERO MIDSTREAM CORPORATION
                                                                                     Condensed Consolidated Results of Segment Operations
                                                                                               Three Months Ended June 30, 2020
                                                                                                         (Unaudited)
                                                                                                        (In thousands)




                                                                       Gathering and                                                 Water               Consolidated


                                                                         Processing                                                Handling Unallocated      Total




     
                Three months ended June 30, 2020



     Revenues:



     Revenue-Antero Resources                                                       $
              185,991                                          63,351                               249,342



     Gathering-low pressure rebate                                                             (12,000)                                                                            (12,000)



     Amortization of customer relationships                                                     (9,239)                                        (8,367)                             (17,606)




     Total revenues                                                                             164,752                                          54,984                               219,736






     Operating expenses:



     Direct operating                                                                            14,059                                          28,008                                42,067



     General and administrative (excluding equity-based compensation)                             5,440                                           2,694                   1,591          9,725



     Facility idling                                                                                                                             2,475                                 2,475



     Equity-based compensation                                                                    2,266                                             431                                 2,697



     Depreciation                                                                                14,406                                          13,339                                27,745



     Accretion of asset retirement obligations                                                                                                      61                                    61



     Loss on asset sale                                                                                                                            240                                   240




     Total expenses                                                                              36,171                                          47,248                   1,591         85,010




     Operating income                                                                           128,581                                           7,736                 (1,591)       134,726




     Other income (expenses):



     Interest expense, net                                                                                                                                           (35,311)      (35,311)



     Equity in earnings of unconsolidated affiliates                                             20,947                                                                               20,947




     Income before taxes                                                                        149,528                                           7,736                (36,902)       120,362



     Provision for income tax expense                                                                                                                                (31,921)      (31,921)




     Net income and comprehensive income                                            $
              149,528                                           7,736                (68,823)        88,441






     Adjusted EBITDA                                                                                                                                                            $
      201,275


                                                         
             
                ANTERO MIDSTREAM CORPORATION
                                                           Condensed Consolidated Statements of Cash Flows
                                                               Six Months Ended June 30, 2019 and 2020
                                                                           (In thousands)
                                                                             (Unaudited)




                                                                           Six Months Ended June 30,



                                                                                                2019                         2020



      Cash flows provided by (used in) operating
       activities:



     Net income (loss)                                                                                        $
         78,922       (304,492)


      Adjustments to reconcile net income (loss) to net
       cash provided by operating activities:


      Distributions from Antero Midstream Partners LP,
       prior to the Transactions                                                                                      43,492



     Depreciation                                                                                                    44,097          55,088


      Payment of contingent consideration in excess of
       acquisition date fair value                                                                                                 (34,342)


      Accretion and change in fair value of contingent
       acquisition consideration                                                                                       3,425             103



     Impairment                                                                                                         594         664,544



     Deferred income taxes                                                                                           28,042        (56,408)



     Equity-based compensation                                                                                       32,966           6,035


      Equity in earnings of unconsolidated affiliates                                                               (16,503)       (40,024)


      Distributions from unconsolidated affiliates                                                                    23,860          41,828



     Amortization of customer relationships                                                                          10,315          35,211


      Amortization of deferred financing costs                                                                         1,102           2,190


      Settlement of asset retirement obligations                                                                                      (601)



     Loss on asset sale                                                                                                                240



     Changes in assets and liabilities:



     Accounts receivable-Antero Resources                                                                            38,414          24,941



     Accounts receivable-third party                                                                                      9           1,089



     Income tax receivable                                                                                                        (17,547)



     Other current assets                                                                                           (1,867)            930



     Accounts payable-Antero Resources                                                                                  973           (432)



     Accounts payable-third party                                                                                   (4,629)          5,495



     Income taxes payable                                                                                          (15,370)



     Accrued liabilities                                                                                           (15,678)       (21,701)



      Net cash provided by operating activities                                                                      252,164         362,147



      Cash flows provided by (used in) investing
       activities:


      Additions to gathering systems and facilities                                                                 (89,206)      (103,937)



     Additions to water handling systems                                                                           (51,984)       (19,477)


      Investments in unconsolidated affiliates                                                                     (103,409)       (21,988)


      Cash received on acquisition of Antero Midstream
       Partners LP                                                                                                   619,532


      Cash consideration paid to Antero Midstream
       Partners LP unitholders                                                                                     (598,709)



     Cash received in asset sale                                                                                                       123



     Change in other assets                                                                                           2,375           1,938




     Net cash used in investing activities                                                                        (221,401)      (143,341)



      Cash flows provided by (used in) financing
       activities:


      Distributions to unitholders and dividends to
       stockholders                                                                                                (182,625)      (296,395)



     Distributions to Series B unitholders                                                                          (3,720)



     Distributions to preferred stockholders                                                                           (98)          (275)



     Repurchases of common stock                                                                                                  (24,713)



     Issuance of senior notes                                                                                       650,000



     Payments of deferred financing costs                                                                           (6,952)


      Borrowings (repayments) on bank credit facilities,
       net                                                                                                         (480,500)        195,500


      Payment for contingent acquisition consideration                                                                             (90,658)


      Employee tax withholding for settlement of equity
       compensation awards                                                                                           (1,828)          (392)



     Other                                                                                                             (71)          (111)




     Net cash used in financing activities                                                                         (25,794)      (217,044)



      Net increase in cash and cash equivalents                                                                        4,969           1,762


      Cash and cash equivalents, beginning of period                                                                   2,822           1,235



      Cash and cash equivalents, end of period                                                                  $
         7,791           2,997



      Supplemental disclosure of cash flow information:


      Cash paid during the period for interest                                                                 $
         31,147          74,665


      Cash refund received (paid) during the period for
       income taxes                                                                                          $
         (16,001)         38,910


      Increase (decrease) in accrued capital
       expenditures and accounts payable for property
       and equipment                                                                                            $
         9,447         (3,461)

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SOURCE Antero Midstream Corporation