Antero Midstream and AMGP Report Fourth Quarter and Full Year 2017 Financial and Operating Results

DENVER, Feb. 13, 2018 /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 2017 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, 2017, which have been filed with the Securities and Exchange Commission.

Antero Midstream Fourth Quarter 2017 Highlights Include:

• GAAP net income decreased by 13% to $64 million, or $0.22 per limited partner unit compared to the prior year quarter
• Adjusted net income increased by 19% to $88 million, or $0.34 per limited partner unit compared to the prior year quarter
• Adjusted EBITDA increased by 13% to $142 million compared to the prior year quarter
• Distributable Cash Flow ("DCF") increased by 14% to $117 million resulting in DCF coverage of 1.3x
• Distributions were $0.365/unit, a 30% increase compared to the prior year quarter and the Partnership's twelfth consecutive distribution increase since the November 2014 IPO
• Antero Midstream's corporate debt ratings have improved to Ba2/BB+/BBB- (Moody's/S&P/Fitch)

Antero Midstream Full Year 2017 Highlights Include:

• GAAP net income increased by 30% to $307 million, or $1.28 per limited partner unit compared to the prior year
• Adjusted net income increased by 40% to $331 million, or $1.40 per limited partner unit compared to the prior year
• Adjusted EBITDA increased by 31% to $529 million compared to the prior year
• Distributable Cash Flow increased by 19% to $421 million resulting in DCF coverage of 1.3x
• Debt to trailing twelve months Adjusted EBITDA was 2.3x with $1.0 billion of liquidity

Antero Midstream GP LP Fourth Quarter 2017 Highlights Include:

• Distributions increased to $0.075/share, a 27% increase sequentially and the second consecutive distribution increase since the May 2017 IPO
• Long-term distribution per share targets from 2018 through 2020 were increased by 20%, as compared to previously provided targets, due to the announced reduction in the U.S. federal corporate tax rate from 35% to 21%

Commenting on the 2017 results and outlook for Antero Midstream, Paul Rady, Chairman and CEO said, "Antero Midstream had another successful year executing its organic growth strategy and expanding its operations downstream into processing and fractionation.  We expect to continue this momentum into 2018 having recently brought online the Sherwood 9 processing plant, which expands the processing and fractionation Joint Venture's total processing capacity to 600 MMcf/d.  This full midstream value chain strategy positions Antero Midstream to deliver on its attractive, peer-leading, long-term distribution growth targets supported by its five year organic project backlog of $2.7 billion."

Mr. Rady further added, "Antero Midstream continues to benefit from the improving financial strength of Antero Resources, which has taken significant steps over the last year to improve its balance sheet and free cash flow profile.  Antero Resources is at an inflection point where going forward it is positioned to fully fund its five year development plan with operating cash flow, ultimately de-risking the growth profile of Antero Midstream."

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."

Antero Midstream Fourth Quarter Financial Results

Low pressure gathering volumes for the fourth quarter of 2017 averaged 1,711 MMcf/d, a 12% increase as compared to the fourth quarter of 2016.  Low pressure gathering volumes were negatively impacted by lower than expected production in the Utica due to the delayed in-service date of the Rover Pipeline.  Compression volumes for the fourth quarter of 2017 averaged 1,355 MMcf/d, a 47% increase as compared to the fourth quarter of 2016 as a result of placing new compression stations in service throughout 2017 totaling approximately 600 MMcf/d of incremental capacity.  High pressure gathering volumes for the fourth quarter of 2017 averaged 1,842 MMcf/d, a 28% increase from the fourth quarter of 2016.  High pressure gathering volumes were in excess of low pressure gathering volumes due to Antero Resources' temporary use of an Antero Midstream owned high pressure line to avoid downstream pipeline constraints. The increase in gathering and compression volumes was driven by production growth from Antero Resources in Antero Midstream's area of dedication.  Fresh water delivery volumes averaged 149 MBbl/d during the quarter, in line with the fourth quarter of 2016.

Gross processing volumes from our processing and fractionation joint venture with MarkWest (a wholly-owned subsidiary of MPLX) (the "Joint Venture"), averaged 425 MMcf/d, for the fourth quarter of 2017, an increase of 16% compared to the third quarter of 2017.  Gross Joint Venture fractionation volumes averaged 9,096 Bbl/d, a 41% increase sequentially.

For the three months ended December 31, 2017, the Partnership reported revenues of $210 million, comprised of $106 million from the Gathering and Processing segment and $104 million from the Water Handling and Treatment segment. Revenues increased 26% compared to the prior year quarter, driven by growth in throughput volumes. Water Handling and Treatment segment revenues include $54 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 $11 million and $59 million, respectively, for a total of $70 million compared to $37 million in direct operating expenses in the prior year quarter. Water Handling and Treatment direct operating expenses include $53 million from wastewater handling and high rate water transfer services.  General and administrative expenses including equity-based compensation were $15 million, a $1 million increase compared to the fourth quarter of 2016.  General and administrative expenses excluding equity-based compensation were $8 million during the fourth quarter of 2017, in line with the fourth quarter of 2016.  Total operating expenses were $143 million, including $31 million of depreciation, $23 million of impairment of property and equipment and $4 million of accretion of contingent acquisition consideration.

Net income for the fourth quarter of 2017 was $64 million, a 13% decrease compared to the prior year quarter. The decrease in net income was driven by a $23 million non-cash impairment expense of the condensate pipelines in the Utica that are not expected to be utilized in Antero Midstream's high-graded infrastructure plan.  Net income per limited partner unit was $0.22 per unit, a 41% decrease compared to the prior year quarter. Adjusted net income was $88 million, a 19% increase compared to the prior year quarter.  Adjusted EBITDA was $142 million, a 13% 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 $10 million in distributions from Stonewall Gathering LLC and the processing and fractionation Joint Venture.  Cash interest paid was $4 million. Cash reserved for bond interest during the quarter increased $9 million and cash reserved for payment of income tax withholding upon vesting of Antero Midstream equity-based compensation awards was $1 million. Maintenance capital expenditures during the quarter totaled $12 million and Distributable Cash Flow was $117 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):

Gathering and Processing — Antero Midstream expanded one of its Marcellus compression stations, adding an additional 25 MMcf/d of capacity during the fourth quarter of 2017. Antero Midstream's total compression capacity at year-end 2017 was 1.7 Bcf/d in the Marcellus and Utica combined, with utilization averaging 81% during the fourth quarter.  Additionally, Antero Midstream connected 35 wells to its gathering system during the quarter.  Antero Resources is currently operating six drilling rigs on Antero Midstream dedicated acreage.

Water Handling and Treatment — Antero Midstream's Marcellus and Utica fresh water delivery systems serviced 32 well completions during the fourth quarter of 2017, a 9% decrease from the prior year quarter.    Antero Resources is currently operating five completion crews on Antero Midstream dedicated acreage. Antero Midstream continued the commissioning process for the Antero Clearwater Facility during the fourth quarter of 2017.

Balance Sheet and Liquidity

As of December 31, 2017, Antero Midstream had $8 million in cash and $555 million drawn on its $1.5 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, 2017.  For a reconciliation of consolidated net debt to consolidated 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, "Since its inception, Antero Midstream's strategy has always been to maintain a conservative leverage profile and strong distribution coverage.  This is supported by the financial strength of our sponsor, long-term fee-based contracts and our just-in-time capital investment strategy.  Recently, both Antero Resources and Antero Midstream were recently given a BBB- investment grade rating from Fitch and received an upgrade to BB+ from S&P Global.  This further speaks to the Partnership's conservative financial profile and the confidence around the new five year infrastructure plan."   

Capital Investments

Capital expenditures, excluding investments in the processing and fractionation joint venture, were $143 million in the fourth quarter of 2017 as compared to $126 million in the fourth quarter of 2016.  Capital invested in gathering systems and related facilities was $91 million and capital invested in water handling and treatment assets was $52 million, including $26 million invested in the Antero Clearwater Facility.  Investments in unconsolidated affiliates for the Joint Venture were $18 million during the quarter.

AMGP Fourth Quarter 2017 Financial Results

AMGP's equity in earnings from Antero Midstream Partners, which reflects the cash distributions from Antero Midstream, was $24 million for the fourth quarter of 2017.  Net income for the fourth quarter of 2017 was $6 million.  AMGP's cash distributions from Antero Midstream were $23 million for fourth quarter of 2017, net of $1 million of cash reserved for distributions on Series B units. General and administrative expenses were $0.3 million, provision for income taxes was $9 million, and tax benefit of cash reserved for distributions to Series B units was $0.4 million, resulting in cash available for distribution of $14 million.

The following table reconciles cash distributions from Antero Midstream and AMGP cash distribution per common share as presented in this release (in thousands):

Conference Call

A joint conference call for Antero Midstream and AMGP is scheduled on Wednesday, February 14, 2018 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, 2018 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, 2018 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 2017 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, 2017, were filed with the Securities and Exchange Commission on February 13, 2018. 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 "Investor Relations" 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 "Investor Relations" 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, depreciation expense, impairment expense, accretion of contingent acquisition consideration, equity-based compensation expense, excluding equity in earnings of unconsolidated affiliates and including cash distributions from unconsolidated affiliates.

Antero Midstream uses Adjusted EBITDA to assess:

• the financial performance of the Partnership's assets, without regard to financing methods in the case of Adjusted EBITDA, capital structure or historical cost basis;
• its operating performance and return on capital as compared to other publicly traded partnerships in the midstream energy sector, without regard to financing or capital structure; and
• the viability of acquisitions and other capital expenditure projects.

The Partnership defines Distributable Cash Flow as Adjusted EBITDA less interest paid, 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. 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 consolidated net debt as consolidated total debt less cash and cash equivalents. Antero Midstream views consolidated net debt as an important indicator in evaluating the Partnership's financial leverage.

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

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.  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, 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, 2017.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Antero Midstream Partners LP; Antero Midstream GP LP