DENVER, Jan. 17, 2018 /PRNewswire/ -- Antero Midstream
Partners LP (NYSE: AM) ("Antero Midstream" or the
"Partnership") and Antero Midstream GP LP (NYSE: AMGP)
("AMGP") today announced their 2018 guidance and extended their
long-term targets through 2022. In addition, Antero Midstream
provided a fourth quarter 2017 update and its 2018 capital
budget. Antero Midstream and AGMP will also host an analyst
day tomorrow, January 18, 2018 in
New York City. The event will be
webcast live beginning at 9:00 am ET
and interested parties may access the live audio webcast and
related presentation materials on the investor relations website at
www.anteromidstream.com or www.anteromidstreamgp.com.
Antero Midstream Highlights Include:
- Announced a fourth quarter 2017 distribution of $0.365/unit, a 30% increase as compared to the
prior year quarter
- Distribution growth guidance of 28% to 30% in 2018 as
compared to 2017 distributions of $1.325/unit
- Reaffirmed 28% to 30% annual distribution growth from 2018
to 2020 and initiated distribution growth targets of 20% in each of
2021 and 2022
- Capital budget for 2018 is $650
million, a decrease of 19% from 2017, including $585 million in expansion capital and
$65 million in maintenance capital
funded through cash flow from operations and credit facility
borrowings
- Net income for 2018 is forecast to be $435 million to $480
million
- Adjusted EBITDA for 2018 is forecast to be $705 million to $755
million
- Distributable Cash Flow for 2018 is forecast to be
$575 million to $625 million with DCF coverage of 1.25x to
1.35x
- Expect to generate Free Cash Flow before distributions in
2018 for the first time since the partnership's inception
- High-graded 5-year organic project inventory of $2.7 billion, a $500
million reduction from the prior year's plan due to expected
capital efficiencies from sponsor's new 5-year plan including
longer laterals and increased well recoveries, resulting in fewer
pads spread farther apart
AMGP Highlights Include:
- Announced a fourth quarter 2017 distribution of $0.075/share, a 27% increase
sequentially
- Distribution guidance of $0.52
to $0.55 per share in 2018,
representing 154% to 172% year over year growth as compared to full
year 2017 distributions, respectively, including a 20% increase in
2018 guidance as a result of the reduction in federal corporate tax
rates to 21%
- Reaffirmed distribution growth targets of 63% to 65% in 2019
and 51% to 53% in 2020
- Initiated distribution growth targets of 29% to 31% in 2021
and 27% to 29% in 2022
For a discussion of the non-GAAP financial measures Adjusted
EBITDA, Distributable Cash Flow, and Free Cash Flow please see
"Non-GAAP Financial Measures."
Commenting on the Antero Midstream and AMGP's long-term outlook,
Michael Kennedy, Antero Midstream's
CFO, said, "Due to our significant visibility into Antero Resources
Corporation's (NYSE: AR) ("Antero Resources") long-term development
plan, Antero Midstream and AMGP have the ability to extend our
top-tier distribution growth targets through 2022. These
distribution growth targets are supported by a high-graded organic
project backlog of $2.7 billion
servicing Antero Resources' internally funded development program
over the next five years. The significant opportunity set, along
with Antero Midstream's just-in-time capital investment philosophy,
allows Antero Midstream to internally fund its organic
infrastructure plan with cash flow from operations and revolving
credit facility borrowings while generating attractive Partnership
wide Return on Invested Capital in the 15% to 20% range."
Antero Midstream and AMGP Long Term Targets
Antero Midstream continues to target annual distribution growth
of 28% to 30% through 2020 while maintaining a Distributable Cash
Flow ("DCF") coverage ratio averaging 1.25x. In addition, Antero
Midstream is initiating targets for 20% distribution growth in 2021
and 2022 while maintaining a DCF coverage ratio of 1.1x to 1.2x.
Coinciding with Antero Midstream's distribution targets, following
a previously announced 20% across the board increase in targets as
a result of corporate tax reform, AMGP continues to target
distribution growth of 154% to 172% in 2018, 63% to 65% in 2019 and
51% to 53% in 2020 while maintaining its DCF coverage ratio of
1.0x. In addition, AMGP initiated distribution growth targets of
29% to 31% in 2021 and 27% to 29% in 2022. Antero Midstream
and AMGP distribution targets are supported by Antero Midstream's
organic growth strategy supporting Antero Resources' development
program. Antero Midstream and AMGP's long-term targets
exclude the potential impact of third party revenues, acquisitions
or divestitures and common equity issuances, consistent with
historical practice.
Antero Midstream 2018 Capital Budget
During 2018, Antero Midstream plans to expand its existing
Marcellus and Ohio Utica Shale gathering, compression, fresh water
delivery systems, and its processing and fractionation joint
venture ("Joint Venture") to accommodate Antero Resources
development program. Today in a separate news release, Antero
Resources announced its 2018 consolidated drilling and completion
capital budget of $1.3 billion, which
is forecast to generate production growth of 20%. In addition,
Antero Resources reaffirmed that it is targeting a 20% compound
annual growth rate for net production for the years 2018 through
2020 and introduced 15% annual production growth targets for both
2021 and 2022. Antero Resources' release can be found at
www.anteroresources.com.
Commenting on the Antero Resources long-term outlook, along with
its impact on Antero Midstream's growth, Paul Rady, Chairman and CEO of Antero Resources
and Antero Midstream, said, "Antero Resources' development plan
focuses on high margin liquids-rich locations on Antero Midstream
dedicated acreage over the next five years. We expect our
development plan to generate peer leading growth and approximately
$1.6 billion in E&P standalone
free cash flow, resulting in a self-funded business model and
deleveraging balance sheet. This attractive profile puts Antero
Resources in an elite group of E&P's and also provides Antero
Midstream with a high level of confidence in its long term
throughput and distribution growth targets."
Antero Midstream has budgeted an investment of $585 million and $65
million in expansion and maintenance capital, respectively,
resulting in a total Antero Midstream capital budget of
$650 million in 2018. This
capital budget includes $385 million
of capital for gathering and compression infrastructure, resulting
in 840 MMcf/d of incremental compression capacity and over 51 miles
of incremental gathering pipelines in the Marcellus and Ohio Utica
Shales combined. Approximately 90% of the gathering and
compression capital is planned to be invested in the Marcellus
Shale and the remaining 10% invested in the Ohio Utica Shale.
This mix is driven by Antero Resources' development program
focus on Marcellus Shale liquids rich drilling on Antero Midstream
dedicated acreage.
In addition to capital expenditures for gathering and
compression, Antero Midstream has budgeted an investment of
$35 million for water infrastructure
facilities to construct 25 miles of additional fresh water
trunklines and surface pipelines to support Antero's completion
activities. Approximately 85% of the water infrastructure budget
will be allocated to the Marcellus Shale and the remaining 15% will
be allocated to the Ohio Utica Shale. This excludes approximately
$15 million of capital for the final
completion milestone payments for the Antero Clearwater Facility
after delays in the commissioning schedule due to process
improvements. The Antero Clearwater Facility is expected to be
placed into full commercial service during the first quarter of
2018.
Antero Midstream has budgeted an investment of $215 million for its 50% interest in the Joint
Venture with MPLX, LP. During 2018, the Joint Venture expects
to place online three additional processing plants, Sherwood 9, 10
and 11, bringing the Joint Venture's total processing capacity to
five plants, or 1.0 Bcf/d. Sherwood 9 was placed online earlier
this month. Sherwood 10 is expected to be placed online in
the third quarter of 2018 and Sherwood 11 is expected to be placed
online during the fourth quarter of 2018. In addition, the budget
includes the Joint Venture's option to purchase an additional
20,000 Bbls/d of capacity at the Hopedale 4 fractionation plant,
which is expected to be placed online during the fourth quarter of
2018.
Antero Midstream expects to fund all 2018 capital expenditures
through cash flow from operations and available borrowing capacity
within Antero Midstream's existing $1.5
billion bank credit facility. As of September 30, 2017, Antero Midstream had
approximately $1.0 billion of
liquidity under its credit facility to fund organic growth
opportunities.
Below is a comparison of the 2018 capital budget to the 2017
capital budget:
|
|
Year Ended
December 31,
|
|
|
Capital Comparison
($MM)
|
|
2017
|
|
2018
|
|
%
Change
|
Gathering and
Compression Infrastructure
|
|
$350
|
|
$385
|
|
10%
|
Fresh Water
Infrastructure
|
|
75
|
|
35
|
|
(53)%
|
Advanced Wastewater
Treatment Facility
|
|
100
|
|
15
|
|
(85)%
|
Processing and
Fractionation Joint Venture
|
|
275
|
|
215
|
|
(22)%
|
Total
Capital
|
|
$800
|
|
$650
|
|
(19)%
|
|
|
|
|
|
|
|
Expansion
Capital
|
|
$735
|
|
$585
|
|
(20)%
|
Maintenance
Capital
|
|
65
|
|
65
|
|
-
|
Total
Capital
|
|
$800
|
|
$650
|
|
(19)%
|
Antero Midstream 2018 Guidance
Antero Midstream is forecasting net income of $435 million to $480
million, Adjusted EBITDA of $705
million to $755 million and
Distributable Cash Flow of $575
million to $625 million for
2018. Antero Midstream's 2018 guidance includes $10 to $15 million
of distributions from its 15% interest in the Stonewall Gathering
Pipeline and $30 to $35 million of distributions from its 50%
interest in the Joint Venture. Additionally, Antero Midstream
is forecasting annual distribution growth of 28% to 30% as compared
to 2017, resulting in an average DCF coverage ratio of 1.25x to
1.35x on an annual basis. Antero Midstream's 2018 guidance
excludes any impact from potential third party volumes or
transactions.
Below is a comparison of the 2018 guidance to 2017 guidance.
|
2017
|
|
2018
|
|
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
%
Change
|
Net Income
($MM)
|
$305
|
—
|
$345
|
|
$435
|
—
|
$480
|
|
41%
|
Adjusted EBITDA
($MM)
|
$520
|
—
|
$560
|
|
$705
|
—
|
$755
|
|
35%
|
Distributable Cash
Flow ($MM)
|
$405
|
—
|
$445
|
|
$575
|
—
|
$625
|
|
41%
|
Year-Over-Year
Distribution Growth
|
29%
|
|
28%
|
—
|
30%
|
|
—
|
AMGP 2018 Guidance
|
2017
|
|
|
|
|
2018(1)
|
|
Actual
|
|
|
|
Low
|
|
High
|
Distributions Per
Share
|
$0.16
|
|
|
|
$0.52
|
—
|
$0.55
|
Year-Over-Year
Distribution Growth
|
—
|
|
|
|
|
154%
|
—
|
172%
|
|
|
|
|
|
|
|
|
|
|
1)
|
2018 represents
year-over-year growth compared to full-year 2017 distributions.
2017 actual distributions include pro-rated distributions for the
second quarter of 2017 for the period following the initial public
offering through June 30, 2017.
|
Antero Midstream Fourth Quarter 2017 Operating
Update
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 Antero Resources production in the
Utica than budgeted 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. 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 the Joint Venture for the fourth
quarter of 2017 averaged 425 MMcf/d, 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, driven
by increased rich gas volumes processed by MPLX and the Joint
Venture.
|
|
Three Months
Ended
December
31,
|
|
|
Average Daily
Volumes:
|
|
2016
|
|
2017
|
|
%
Change
|
Low Pressure Gathering
(MMcf/d)
|
|
1,522
|
|
1,711
|
|
12%
|
Compression
(MMcf/d)
|
|
920
|
|
1,355
|
|
47%
|
High Pressure
Gathering (MMcf/d)
|
|
1,437
|
|
1,842
|
|
28%
|
Fresh Water Delivery
(MBbl/d)
|
|
150
|
|
149
|
|
(1)%
|
Gross Joint Venture
Processing (MMcf/d)
|
|
—
|
|
425
|
|
*
|
Gross Joint Venture
Fractionation (Bbl/d)
|
|
—
|
|
9,096
|
|
*
|
Antero Midstream Preliminary Fourth Quarter 2017 Financial
Results
Based on preliminary analysis of the financial results for the
three months ended December 31, 2017,
the Partnership expects net income to be between $61 million and $67
million and Adjusted EBITDA to be between $136 million and $148
million, respectively.
The following reconciles net income to Adjusted EBITDA based on
these preliminary financial results for the three months ended
December 31, 2017 (in thousands):
|
Three months
ended
|
December 31,
2017
|
Low
|
|
High
|
Net
income
|
$
|
60,500
|
—
|
$
|
66,500
|
Interest
expense
|
|
9,500
|
—
|
|
11,000
|
Depreciation
expense
|
|
29,000
|
—
|
|
33,000
|
Impairment
expense
|
|
23,000
|
—
|
|
24,000
|
Accretion of contingent
acquisition consideration
|
|
3,500
|
—
|
|
4,000
|
Equity-based
compensation
|
|
6,500
|
—
|
|
7,500
|
Equity in earnings of
unconsolidated affiliates
|
|
(5,500)
|
—
|
|
(8,500)
|
Distributions from
unconsolidated affiliates
|
|
9,500
|
—
|
|
10,500
|
Adjusted
EBITDA
|
$
|
136,000
|
—
|
$
|
148,000
|
|
|
|
|
|
|
|
The information presented above is based upon information
available to the Partnership as of January
17, 2018 and is not a comprehensive statement of the
Partnership's financial results. These are preliminary unaudited
financial results. The Partnership's completed results to be
reported for the three months ended December 31, 2017 may
differ materially from these preliminary results. During the course
of the preparation of the Partnership's consolidated financial
statements and related notes to be included in the Partnership's
Annual Report on Form 10-K for the year ended
December 31, 2017, additional adjustments to the preliminary
financial information presented below may be identified. Any such
adjustments may be material.
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.
The Partnership defines Free Cash Flow as cash flow from
operating activities before changes in working capital less capital
expenditures. Management believes that Free Cash Flow is a useful
indicator of the Partnership's ability to internally fund
infrastructure investments, service or incur additional debt, and
assess the company's financial performance and its ability to
generate excess cash from its operations. Management believes that
changes in operating assets and liabilities relate to the timing of
cash receipts and disbursements and therefore may not relate to the
period in which the operating activities occurred.
The Partnership defines Return on Invested Capital as net income
plus interest expense divided by average total liabilities and
partners' capital, excluding current liabilities. Management
believes that Return on Invested Capital is a useful indicator of
the Partnership's return on its infrastructure investments.
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.
Antero Midstream has not included a reconciliation of Adjusted
EBITDA and Distributable Cash Flow to the nearest GAAP financial
measure for 2018 because it cannot do so without unreasonable
effort and any attempt to do so would be inherently imprecise.
Antero Midstream is able to forecast the following reconciling
items between Adjusted EBITDA and Distributable Cash Flow and net
income (in thousands):
|
Twelve months
ended
|
December 31,
2018
|
Low
|
|
High
|
Depreciation
expense
|
$
|
160,000
|
—
|
$
|
170,000
|
Equity based
compensation expense
|
|
25,000
|
—
|
|
35,000
|
Accretion of contingent
acquisition consideration
|
|
15,000
|
—
|
|
20,000
|
Equity in earnings of
unconsolidated affiliates
|
|
30,000
|
—
|
|
40,000
|
Distributions from
unconsolidated affiliates
|
|
40,000
|
—
|
|
50,000
|
|
|
|
|
|
|
The Partnership cannot forecast interest expense due to the
timing and uncertainty of debt issuances and associated interest
rates. Additionally, Antero Midstream cannot reasonably forecast
impairment expense as the impairment is driven by a number of
factors that will be determined in the future and are beyond Antero
Midstream's control currently.
Free Cash Flow and Return on Invested Capital are non-GAAP
financial measures. The GAAP measures most directly comparable to
Free Cash Flow and Return on Invested Capital are cash flow from
operating activities and net income plus interest expense divided
by average total liabilities and partners' capital, respectively.
The non-GAAP financial measures of Free Cash Flow and Return on
Invested Capital should not be considered as alternatives to the
GAAP measure of cash flow from operating activities. Free
Cash Flow and Return on Invested Capital 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 Free Cash Flow and Return on Invested Capital. You
should not consider Free Cash Flow and Return on Invested Capital
in isolation or as a substitute for analyses of results as reported
under GAAP. Antero Midstream's definition of Free Cash Flow
and Return on Invested Capital may not be comparable to similarly
titled measures of other partnerships.
Antero Midstream has not included reconciliations of Free Cash
Flow and Return on Invested Capital to their nearest GAAP financial
measures for 2018 because it would be impractical to forecast
changes in current assets and liabilities. Antero Midstream is able
to forecast capital expenditures, which is a reconciling item
between Free Cash Flow and Return on Invested capital to their most
comparable GAAP financial measure. For the 2018 to 2022 period,
Antero forecasts cumulative capital expenditures of $2.7 billion.
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, 2016.
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; Antero Midstream GP LP