Exhibit 99.1

 

 

 

 

Antero Midstream and AMGP Report Fourth Quarter and Full Year 2018 Financial and Operating Results

 

Denver, Colorado, February 13, 2019—Antero Midstream Partners LP (NYSE: AM) (“Antero Midstream” or the “Partnership”) and Antero Midstream GP LP (NYSE: AMGP) (“AMGP”) today released their fourth quarter and full year 2018 financial and operating results.  The relevant consolidated financial statements are included in Antero Midstream’s and AMGP’s Annual Reports on Form 10-K for the year ended December 31, 2018, which have been filed with the Securities and Exchange Commission.

 

Antero Midstream Fourth Quarter 2018 Highlights Include:

 

·                  Net income increased to $249 million, or $1.10 per limited partner unit

·                  Adjusted net income increased by 63% to $143 million compared to the prior year quarter (non-GAAP measure)

·                  Adjusted EBITDA increased by 36% to $194 million compared to the prior year quarter (non-GAAP measure)

·                  Distributable Cash Flow increased by 43% to $167 million resulting in DCF coverage of 1.3x (non-GAAP measure)

·                  Distributions increased by 29% to $0.47 per unit compared to the prior year quarter and represented the Partnership’s sixteenth consecutive distribution increase since the November 2014 IPO

 

Antero Midstream Full Year 2018 Highlights Include:

 

·                  Announced midstream simplification transaction where AMGP will convert to a C-Corp and acquire all outstanding AM common units in a stock and cash transaction resulting in the elimination of the IDRs, expected to close in March of 2019

·                  Net income increased to $586 million, or $2.37  per limited partner unit

·                  Adjusted net income increased by 47% to $485 million compared to the prior year (non-GAAP measure)

·                  Adjusted EBITDA increased by 36% to $717 million compared to the prior year (non-GAAP measure)

·                  Distributable Cash Flow increased by 42% to $596 million resulting in DCF coverage of 1.3x (non-GAAP measure)

·                  Debt to trailing twelve months Adjusted EBITDA was 2.3x at year-end 2018, with $1.0 billion of liquidity

 

Antero Midstream GP LP Fourth Quarter 2018 Highlights Include:

 

·                  Distributions increased to $0.164 per common share, a 119% increase compared to the prior year quarter and the sixth consecutive distribution increase since the May 2017 IPO

 

Commenting on the 2018 results and outlook for Antero Midstream, Paul Rady, Chairman and CEO said, “Antero Midstream delivered another successful year in 2018, achieving record gathering, compression, processing, fractionation, and fresh water delivery volumes.  These record volumes drove a 36% year over year increase in Adjusted EBITDA and a 42% year-over-year increase in Distributable Cash Flow, resulting in strong DCF coverage of 1.3x.”

 

Mr. Rady further added, “We also had a successful year in terms of infrastructure buildout, adding 760 MMcf/d of compression capacity and 600 MMcf/d of processing capacity, respectively. The significant capacity and throughput growth during the fourth quarter provides tremendous momentum to deliver on our 2019 organic infrastructure plan, in turn supporting Antero Resources’ development.”

 

For a discussion of the non-GAAP financial measures adjusted net income, Adjusted EBITDA, Distributable Cash Flow, and net debt please see “Non-GAAP Financial Measures.”

 

Recent Developments

 

Antero Midstream and AMGP previously announced that AMGP’s Registration Statement on Form S-4 relating to the simplification transaction between the two companies and certain of their affiliates has become effective under the Securities Act of 1933 as of January 30, 2019. AMGP and Antero Midstream have each filed a definitive proxy statement with the U.S. Securities and Exchange Commission (“SEC”) for the separate special meetings of the AMGP shareholders and Antero Midstream unitholders to vote on the

 

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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.

 

		Three months ended						Years ended
		December 31,						December 31,
Average Daily Volumes:		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

 

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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		1.27		x	1.27		x	1.33		x	1.29		x

 

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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):

 

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		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		1.0		x
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.

 

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Antero Midstream uses Adjusted EBITDA to assess:

 

·                  the financial performance of the Partnership’s assets, without regard to financing methods in the case of Adjusted EBITDA, capital structure or historical cost basis;

 

·                  its operating performance and return on capital as compared to other publicly traded partnerships in the midstream energy sector, without regard to financing or capital structure; and

 

·                  the viability of acquisitions and other capital expenditure projects.

 

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

 

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

 

The Partnership defines adjusted net income as net income plus impairment expense and change in fair value of contingent acquisition consideration. The Partnership believes that adjusted net income is useful to investors in evaluating operational trends of the Partnership and its performance relative to other partnerships. Adjusted net income is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for net income as an indicator of financial performance.

 

The Partnership defines net debt as total debt less cash and cash equivalents. Antero Midstream views net debt as an important indicator in evaluating the Partnership’s financial leverage.

 

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

 

		December 31,
		2018
Bank credit facility		$	990,000
5.375% AM senior notes due 2024		650,000
Net unamortized debt issuance costs		(7,853		)
Total debt		$	1,632,147
Cash and cash equivalents		—
Net debt		$	1,632,147

 

Antero Midstream is a limited partnership that owns, operates and develops midstream gathering, compression, processing and fractionation assets as well as integrated water assets that primarily service Antero Resources Corporation’s properties located in West Virginia and Ohio. Holders of Antero Midstream common units will receive a Schedule K-1 with respect to distributions received on the common units.

 

AMGP is a Delaware limited partnership that has elected to be classified as an entity taxable as a corporation for U.S. federal income tax purposes.  Holders of AMGP common shares will receive a Form 1099 with respect to distributions received on the common shares.  AMGP owns the general partner of Antero Midstream and indirectly owns the incentive distribution rights in Antero Midstream.

 

This release includes “forward-looking statements” within the meaning of federal securities laws.  Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Partnership’s and AMGP’s control.  All statements, other than historical facts included in this release, are forward-looking statements.  All forward-looking statements speak only as of the date of this release and are based upon a number of assumptions.  Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the timing of consummation of the proposed simplification transaction, if at all, and statements regarding the transaction. Although the Partnership and AMGP each believe that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that the assumptions underlying these forward-looking statements will be accurate or the plans, intentions or expectations expressed herein will be achieved.  For example, future acquisitions, dispositions or other strategic transactions may materially impact the forecasted or targeted results described in this release.  Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.  Nothing in this release is intended to constitute guidance with respect to Antero Resources.

 

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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.

 

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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

 

8

 

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

 

9

 

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

 

10

 

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

 

11

 

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

 

12

 

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.

 

13

 

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.

 

14