Le Lézard
Classified in: Oil industry, Business
Subjects: ERN, CCA

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

Antero Midstream Fourth Quarter 2018 Highlights Include:

Antero Midstream Full Year 2018 Highlights Include:

Antero Midstream GP LP Fourth Quarter 2018 Highlights Include:

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


%
Change


2017


2018


%
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 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
Increase


Percentage


($ 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
Increase


Percentage


($ 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)


 

Antero Midstream GP LP Logo (PRNewsfoto/Antero Midstream GP LP)

SOURCE Antero Midstream Partners LP; Antero Midstream GP LP


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