AM Antero Midstream Corporation

DENVER, Oct. 28, 2015 /PRNewswire/ -- Antero Midstream Partners LP (NYSE: AM) ("Antero Midstream" or the "Partnership") today released its third quarter 2015 financial and operating results.  The relevant financial statements are included in Antero Midstream's Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, which has been filed with the Securities and Exchange Commission.

Highlights for the Third Quarter of 2015:

• Adjusted EBITDA of $55.4 million, a 194% increase compared to the prior year quarter
• Distributable cash flow of $50.1 million resulting in DCF coverage of 1.38x
• Increased quarterly cash distribution to $0.205 per unit ($0.82/unit annualized), an 8% increase compared to the second quarter 2015 distribution and 21% increase over the minimum quarterly distribution
• Low pressure gathering volumes averaged 1,038 MMcf/d, a 95% increase compared to the prior year quarter and a 8% increase sequentially
• High pressure gathering volumes averaged 1,216 MMcf/d, a 129% increase compared to the prior year quarter and a 2% increase sequentially
• Compression volumes averaged 435 MMcf/d, a 275% increase compared to the prior year quarter and a 4% decrease sequentially
• Completed $1.05 billion acquisition of water business from Antero Resources
• Strong liquidity position of $1.0 billion

Recent Developments

Distribution for the Third Quarter of 2015

The Board of Directors of Antero Resources Midstream Management LLC, the general partner of the Partnership, declared a cash distribution of $0.205 per unit ($0.82 per unit annualized) for the third quarter of 2015.  The distribution represents an 8% increase quarter-over-quarter and the Partnership's third consecutive quarterly distribution increase since its initial public offering in November 2014.  The distribution will be payable on November 30, 2015 to unitholders of record as of November 11, 2015.

Water Business Acquisition Closed

On September 24, 2015, the Partnership announced the completion of the $1.05 billion water business acquisition from Antero Resources Corporation ("Antero Resources").  In connection with the transaction, the Partnership paid Antero Resources $552 million in cash and issued 23,886,421 common units.  The net proceeds of $242 million from the Partnership's private placement of 12,898,000 common units were also paid to Antero Resources and the 23,886,421 of common units initially issued to Antero Resources were reduced by the 12,898,000 common units issued in the private placement, reducing the common units issued to Antero Resources to 10,998,421.

Third Quarter 2015 Financial Results

The following reflects results for Antero Midstream for the three and nine months ended September 30, 2015, and predecessor results for the three and nine months ended September 30, 2014. In addition, Antero Midstream's recent acquisition of Antero Resources' integrated water business was accounted for as a transfer of entities under common control.  As a result, the Partnership recast its condensed combined consolidated financial statements to retrospectively reflect the integrated water business as if the assets and liabilities were owned for all past periods presented.  Beginning in the third quarter of 2015, and as a result of the acquisition, Antero Midstream will report its results through two business segments, Gathering and Compression and Water Handling.  To facilitate comparison and discussion for third quarter 2015 distributable cash flow the results below are only for the Gathering and Compression segment operations.  For a reconciliation of net income to Adjusted EBITDA and distributable cash flow, please read "Non-GAAP Financial Measures."  For operating results associated with the Water Handling segment and its contribution to the recast condensed combined consolidated financial statements contained in Antero Midstream's Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, please read "Non-GAAP Financial Measures."

Low pressure gathering volumes for the third quarter of 2015 averaged 1,038 MMcf/d, a 95% increase from the third quarter of 2014 and an 8% increase from the second quarter of 2015.  High pressure gathering volumes for the third quarter of 2015 averaged 1,216 MMcf/d, a 129% increase from the third quarter of 2014 and a 2% increase from the second quarter of 2015.  Compression volumes for the third quarter of 2015 averaged 435 MMcf/d, a 275% increase from the third quarter of 2014 and a 4% decrease from the second quarter of 2015.  Condensate gathering volumes averaged 2,856 Bbl/d during the quarter, a 143% increase from the third quarter of 2014 and in line with the second quarter of 2015.  Volumetric growth was driven by production growth from Antero Resources.

Gathering and Compression revenue for the third quarter of 2015 was $59.3 million as compared to $26.3 million for the prior year quarter, driven primarily by increased throughput volumes across Antero Midstream's systems.  Gathering and Compression direct operating expenses were a $3.2 million credit, driven by an $8.4 million reduction in the estimated property tax liability accrued for in prior periods and a slight decrease in other operating expenses during the quarter.  Gathering and Compression general and administrative expenses totaled $11.3 million, including $4.2 million of non-cash equity-based compensation.  Total cash and non-cash operating expenses were $23.2 million, including $15.1 million of depreciation.

Adjusted EBITDA of $55.4 million for the third quarter of 2015 was 194% higher than the prior year quarter, due to increased throughput and associated revenue.  Gathering and Compression cash interest expense was $1.0 million and maintenance capital expenditures totaled $4.2 million, resulting in distributable cash flow ("DCF") of $50.1 million.

Financial Guidance

As previously disclosed, Antero Midstream expects to generate Adjusted EBITDA of $180 million to $190 million and distributable cash flow of $160 million to $170 million during the year ending December 31, 2015, while delivering year over year distribution growth of 28% to 30%.  Financial guidance assumes contribution from the water business subsequent to the acquisition.

Third Quarter 2015 Capital Spending

During the three months ended September 30, 2015, capital expenditures associated with the Gathering and Compression segment totaled $83 million, including $55 million invested in the Marcellus and $28 million invested in the Utica.  Gathering and Compression capital expenditures were primarily related to the build-out of midstream infrastructure to support Antero Resources' development program.  Additionally, Antero Midstream invested $29 million in the acquired water delivery assets during the quarter⁽²⁾.  Antero Midstream expects to fund the remaining 2015 capital expenditures including those for its new Water Handling segment with borrowings under its credit facility.

Balance Sheet and Liquidity

As of September 30, 2015, Antero Midstream had $18 million of cash on its balance sheet and $525 million drawn on its $1.5 billion revolving credit facility, resulting in $1.0 billion of available liquidity.

Conference Call

Antero Midstream will hold a call on Thursday, October 29, 2015 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.  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 Friday, November 6, 2015 at 10:00 am MT at 877-870-5176 (U.S.) or 858-384-5517 (International) using the passcode 10072157.

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 Friday, November 6, 2015 at 10:00 am MT.

Presentation

An updated presentation will be posted to the Partnership's website before the October 29, 2015 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

As used in this news release, Adjusted EBITDA means net income plus interest expense, depreciation and amortization expense, income tax expense (if applicable), and non-cash equity-based compensation expense, less pre-acquisition income and expenses attributable to the parent.  As used in this news release, distributable cash flow means Adjusted EBITDA less cash interest paid and maintenance capital expenditures, during the period, excluding pre-acquisition amounts attributable to the parent.  Distributable cash flow should not be viewed as indicative of the actual amount of cash that the Partnership has available for distributions from operating surplus or that the Partnership plans to distribute.  Adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of the Partnership's consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, use to assess:

• the Partnership's operating performance as compared to other publicly traded partnerships in the midstream energy industry without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods;
• the ability of the Partnership's assets to generate sufficient cash flow to make distributions to the Partnership's unitholders;
• the Partnership's ability to incur and service debt and fund capital expenditures; and
• the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

The Partnership believes that Adjusted EBITDA and distributable cash flow provide useful information to investors in assessing the Partnership's results of operations.  Adjusted EBITDA and distributable cash flow should not be considered as alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.  Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some items that affect net income and net cash provided by operating activities.  Additionally, because Adjusted EBITDA and distributable cash flow may be defined differently by other partnerships in its industry, the Partnership's definition of Adjusted EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships, thereby diminishing their utility.

The partnership does not provide financial guidance for projected net income or changes in working capital, and, therefore, is unable to provide a reconciliation of its Adjusted EBITDA and distributable cash flow projections to net income, operating income, or net cash flow provided by operating activities, the most comparable financial measures calculated in accordance with GAAP.

The following table represents a reconciliation of our Adjusted EBITDA and distributable cash flow to the most directly comparable GAAP financial measures for the periods presented (in thousands):

Summarized financial information for the Gathering and Compression and Water Handling segments is shown for the periods indicated below:

Antero Midstream Partners LP is a limited partnership that owns, operates and develops midstream gathering and compression assets located in West Virginia, Ohio and Pennsylvania, as well as integrated water assets that primarily service Antero Resources' production located in the Appalachian Basin 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.  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 these plans, intentions or expectations will be achieved.  Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecasted in such statements. 

The Partnership 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 our control, incident to the gathering and compression and water handling business. 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, 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, 2014 and "Item 1A. Risk Factors" in Antero Midstream's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015.

For more information, contact Michael Kennedy – VP Finance, at (303) 357-6782 or mkennedy@anteroresources.com.

The following table sets forth selected operating data for the three months ended September 30, 2014 compared to the three months ended September 30, 2015: