Antero Midstream Reports First Quarter 2017 Financial and Operational Results

DENVER, May 8, 2017 /PRNewswire/ -- Antero Midstream Partners LP (NYSE: AM) ("Antero Midstream" or the "Partnership") today released its first quarter 2017 financial and operational results.  The relevant condensed consolidated financial statements are included in Antero Midstream's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, which has been filed with the Securities and Exchange Commission.

First Quarter Highlights Include:

• Net income of $75 million, or $0.35 per limited partner unit, representing a per unit increase of 52% compared to the prior year quarter
• Adjusted EBITDA of $119 million, a 49% increase compared to the prior year quarter
• Distributable cash flow of $91 million, resulting in DCF coverage of 1.4x
• Consolidated net debt to trailing twelve months EBITDA of 1.9x as of March 31, 2017
• Declared $0.30 per unit cash distribution for the first quarter of 2017, a 28% increase compared to the prior year quarter and a 7% increase sequentially

Recent Developments

Distribution for the First Quarter of 2017

The Board of Directors of the general partner of the Partnership, declared a cash distribution of $0.30 per unit ($1.20 per unit annualized) for the first quarter of 2017. The distribution represents a 28% increase compared to the prior year quarter and a 7% increase sequentially.  The distribution is the Partnership's ninth consecutive quarterly distribution increase since its initial public offering in November 2014 and will be paid on May 10, 2017 to unitholders of record as of May 3, 2017.  Cash distributions to be paid on incentive distribution rights for the first quarter of 2017 totaled $12 million.

Commenting on the outlook for Antero Midstream, Paul Rady, Chairman and CEO said, "Antero Midstream continues to build momentum in expanding its operations across the midstream value chain, further supported by Antero Resources' recently announced commitment to Sherwood Plants 10 and 11, which will be owned by the joint venture between Antero Midstream and MarkWest.  We continue to see significant opportunities for expansion in Appalachia both on our organic development program and opportunities that present themselves as a result of Antero Resources' leadership in NGL production and liquids-rich drilling inventory in Appalachia."

First Quarter 2017 Financial Results

Low pressure gathering volumes for the first quarter of 2017 averaged 1,659 MMcf/d, a 26% increase from the first quarter of 2016 and a 9% increase sequentially.  Compression volumes for the first quarter of 2017 averaged 1,028 MMcf/d, a 68% increase from the first quarter of 2016 and a 12% increase sequentially. High pressure gathering volumes for the first quarter of 2017 averaged 1,581 MMcf/d, a 28% increase from the first quarter of 2016 and a 12% increase sequentially.  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 148 MBbl/d during the quarter, a 51% increase compared to the prior year quarter and a 1% decrease sequentially.

For the three months ended March 31, 2017, the Partnership reported revenues of $175 million, comprised of $92 million from the Gathering and Processing segment and $83 million from the Water Handling and Treatment segment. Revenues increased 28% compared to the prior year quarter, primarily driven by growth in throughput volumes and fresh water delivery volumes. Water Handling and Treatment segment revenues include $33 million from produced water handling and high rate water transfer services provided to Antero Resources, which is billed at cost plus 3%. 

Direct operating expenses for the Gathering and Processing and Water Handling and Treatment segments were $8 million and $40 million, respectively, for a total of $48 million compared to $49 million in direct operating expenses in the prior year quarter. Water Handling and Treatment direct operating expenses include $32 million from produced water handling and high rate water transfer services.  General and administrative expenses including equity-based compensation were $14 million, a $1 million increase compared to the first quarter of 2016.  General and administrative expenses excluding equity-based compensation were $8 million during the first quarter of 2017, a 15% increase compared to the first quarter of 2016. The increase in general and administrative expenses was primarily driven by non-recurring legal expenses incurred from the processing and fractionation joint venture. Total operating expenses were $93 million, including $28 million of depreciation and $4 million of accretion of contingent acquisition consideration.

Net income for the first quarter of 2017 was $75 million, a 75% increase compared to the prior year quarter. Net income per limited partner unit was $0.35 per unit, a 52% increase compared to the prior year quarter. Adjusted EBITDA was $119 million, a 49% increase compared to the prior year quarter. The increase in net income and Adjusted EBITDA is primarily driven by increased throughput volumes and fresh water delivery volumes.  Adjusted EBITDA during the quarter did not include cash distributions from unconsolidated affiliates related to Stonewall Gathering LLC ("Stonewall") and the joint venture with MarkWest Energy Partners, L.P. ("MarkWest"), a wholly owned subsidiary of MPLX, due to the timing of the declaration of the distributions.  The Partnership estimates cash distributions from unconsolidated affiliates for the full year 2017 to be approximately $18 million to $22 million, consistent with previously provided 2017 guidance.  Cash interest paid, net of cash previously reserved for bond interest, was $9 million. Cash reserved for bond interest during the quarter was $2 million and cash reserved for payment of income tax withholding upon vesting of Antero Midstream equity-based compensation awards was $2 million. Maintenance capital expenditures during the quarter totaled $16 million and distributable cash flow was $91 million, resulting in a DCF coverage ratio of 1.4x.

Commenting on Antero Midstream's quarterly results, Michael Kennedy, CFO of Antero Midstream said, "Antero Midstream continued to execute on its organically driven business plan in the first quarter of 2017, reporting a 49% year-over-year increase in adjusted EBITDA and peer-leading distribution growth of 28%. Importantly, the first quarter places Antero Midstream on track to achieve its previously provided 2017 adjusted EBITDA, distributable cash flow, distribution growth and coverage guidance."

The following table reconciles net income to adjusted EBITDA and distributable cash flow as used in this release (in thousands):

Gathering and Processing — During the first quarter, Antero Midstream added a total of 305 MMcf/d of compression capacity by placing in service two compressor stations in the Marcellus Shale.  Antero's current compression capacity is approximately 1.4 Bcf/d in the Marcellus and Utica combined and compression capacity was over 82% utilized on average in the first quarter. Additionally, Antero Midstream connected 21 wells to its Marcellus gathering system during the quarter.  Antero Resources is currently operating seven drilling rigs on Antero Midstream dedicated acreage.

Water Handling and Treatment — Antero Midstream's Marcellus and Utica fresh water delivery systems serviced 34 well completions during the first quarter of 2017, a 13% increase from the first quarter of 2016 and 3% decrease sequentially.  Antero Resources is currently operating six completion crews on Antero Midstream dedicated acreage. During the quarter Antero Midstream continued construction on the Antero Clearwater Facility, which is expected to be placed into service in the fourth quarter of 2017.

Balance Sheet and Liquidity

As of March 31, 2017, Antero Midstream had $200 million drawn on its $1.5 billion bank credit facility, resulting in approximately $1.3 billion in available credit facility capacity.  Antero Midstream's net debt to trailing twelve months adjusted EBITDA was 1.9x as of March 31, 2017.  For a reconciliation of consolidated net debt to consolidated total debt, the most comparable GAAP measure, please read "Non-GAAP Financial Measures."

Capital Spending

Capital expenditures, excluding investments in the processing and fractionation joint venture were $104 million in the first quarter of 2017 as compared to $86 million in the first quarter of 2016.  Capital invested in gathering systems and facilities was $67 million and capital invested in water handling and treatment assets was $37 million, including $19 million invested in the Antero Clearwater Facility. Capital invested in the MarkWest joint venture was $160 million during the quarter.

Conference Call

Antero Midstream will hold a call on Tuesday, May 9, 2017 at 10:00 am MT to discuss the 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 888-347-8204  (U.S.), 855-669-9657  (Canada), or 412-902-4229  (International) and reference "Antero Midstream".  A telephone replay of the call will be available until Wednesday, May 17, 2017 at 10:00 am MT at 844-512-2921 (U.S.) or 412-317-6671 (International) using the passcode 10103995.

To access the live webcast and view the related earnings conference call presentation, visit Antero Midstream's website at www.anteromidstream.com.  The webcast will be archived for replay on the Partnership's website until Wednesday, May 17, 2017 at 10:00 am MT.

Presentation

An updated presentation will be posted to the Partnership's website before the May 9, 2017 conference call. The presentation can be found at www.anteromidstream.com on the homepage.  Information on the Partnership's website does not constitute a portion of this press release.

Non-GAAP Financial Measures

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, 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, cash reserved for income tax withholding payments 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 following table reconciles consolidated total debt to consolidated net debt as used in this release (in thousands):

The following table reconciles net income to adjusted EBITDA for the twelve months ended March 31, 2017 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 located in West Virginia and Ohio, as well as integrated water assets that primarily service Antero Resources' properties located in West Virginia and Ohio.

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 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 believes 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 cautions 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 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, 2016.

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

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SOURCE Antero Midstream Partners LP