DENVER, Jan. 8, 2019 /PRNewswire/ -- Antero
Midstream Partners LP (NYSE: AM) ("Antero Midstream Partners"
or "the Partnership") today announced its 2019 capital budget and
guidance. The dividend and DCF coverage ratio guidance included in
this release assumes the simplification transaction between Antero
Midstream Partners and Antero Midstream GP LP (NYSE: AMGP)
("AMGP"), pursuant to which Antero Midstream Partners will become
an indirect, wholly owned subsidiary of Antero Midstream
Corporation ("New AM" or "Antero Midstream"), closes during the
first quarter of 2019, consistent with prior expectations.
New AM will be the surviving publicly-traded midstream vehicle and
will be listed on the New York Stock Exchange under the ticker
symbol "AM".
New AM 2019 Capital Budget and Guidance Highlights:
- Forecasting net income of $475
million to $525 million in
2019
- Forecasting Adjusted EBITDA of $870 to $920
million in 2019
- Forecasting distributable cash flow of $680 to $730
million, resulting in 1.1x to 1.2x annual DCF
coverage
- 2019 dividend of $1.23 to
$1.25 per share, representing 36% to
38% growth compared to status quo Antero Midstream Partners 2018
distribution guidance, assuming AM unitholders receive 100% equity
in the simplification transaction, based on current trading levels
(1)
-
- Represents 128% to 131% growth compared to AMGP 2018
distribution guidance
- Capital budget of $750 to
$800 million, including $710 million of expansion capital and
$65 million of maintenance capital at
the midpoint of the range
- Flexible just-in-time organic project backlog of
$2.0 billion through 2022
- No equity issuance needed to fund capital expenditures from
2019 through 2022
- Guidance supported by Antero Resources' 2019 consolidated
drilling and completion capital budget of $1.1 to $1.25
billion, resulting in net production growth guidance of 17%
to 20% with approximately 115 to 120 completions
- Targeting DCF growth at compound annual growth rates of 18%
to 25% from 2020 to 2022
(1) Based on the agreed
exchange ratio of 1.635 shares of AMGP and $3.415 cash consideration per AM public unit.
Assuming a mixed election, cash consideration is assumed to be
reinvested into New AM shares at AMGP's closing price of
$13.01 per share as of January 7, 2019.
Commenting on Antero Midstream's guidance, Paul Rady, Antero Midstream's CEO, said, "As a
result of Antero Resources' double digit production growth guidance
in 2019 and the assumed closing of our midstream simplification
transaction, Antero Midstream expects to deliver peer-leading
dividend growth of 37% in 2019 while maintaining DCF coverage in
the 1.1x to 1.2x range. Antero Midstream will continue to invest
"just-in-time" capital generating attractive rates of return and
supporting the continued production growth of Antero
Resources."
For a discussion of the non-GAAP financial measures Adjusted
EBITDA and Distributable Cash Flow, please see "Non-GAAP Financial
Measures."
The guidance and long-term outlook outlined herein reflects
changes, and in some cases reductions, from information previously
provided by the Partnership and AMGP in connection with the
proposed simplification transaction to reflect the effects of
changes in Antero Resources' 2019 drilling and completion capital
budget in response to recent oil and NGL price declines and AR's
long-term outlook.
2019 Guidance
Antero Midstream expects net income of $475 million to $525
million, Adjusted EBITDA of $870
million to $920 million and
Distributable Cash Flow of $680
million to $730 million for
2019. New AM's 2019 guidance includes approximately $90 million of distributions from its interests
in the processing and fractionation joint venture with an affiliate
of MPLX, LP (the "Joint Venture") and in Stonewall Gathering
LLC. As a result of the delay of full in-service capabilities
at the Antero Clearwater Facility, Antero Midstream has risked the
Adjusted EBITDA contribution from the Antero Clearwater Facility to
$15 to $20
million in 2019 based on the assumption of treating
approximately 25,000 Bbl/d in early 2019 increasing to 40,000 Bbl/d
throughout the year.
New AM is forecasting a dividend of $1.23 to $1.25 per
share in 2019, resulting in a DCF coverage ratio of 1.1x to 1.2x on
an annual basis. This dividend per share range reflects
growth of 128% to 131% from the midpoint of AMGP's 2018
distribution guidance and 36% to 38% growth compared to the
midpoint of Antero Midstream Partners' 2018 distribution guidance,
assuming AM unitholders receive 100% equity in the simplification
transaction or unitholders receive mixed consideration and reinvest
their cash in New AM units. Antero Midstream's 2019 guidance
excludes any impact from potential third-party volumes or
transactions, consistent with prior guidance.
Below is a summary of Antero Midstream's 2019 guidance:
|
|
2019
|
|
|
|
Low
|
|
High
|
|
Net Income
($MM)
|
|
$475
|
—
|
$525
|
|
Adjusted EBITDA
($MM)
|
|
$870
|
—
|
$920
|
|
Distributable Cash
Flow ($MM)
|
|
$680
|
—
|
$730
|
|
Dividend Per
Share
|
|
$1.23
|
—
|
$1.25
|
|
DCF Coverage
Ratio
|
|
1.1x
|
—
|
1.2x
|
|
Antero Midstream 2019 Capital Budget
During 2019, Antero Midstream plans to expand its existing
Marcellus and Ohio Utica Shale gathering, compression and fresh
water delivery systems, and the processing and fractionation
capabilities of the Joint Venture, to accommodate Antero Resources'
development program. Today in a separate news release, Antero
Resources announced its 2019 consolidated drilling and completion
capital budget of $1.1 to
$1.25 billion, which is forecast to
generate production growth of approximately 17% to 20% over 2018
production guidance. Antero Resources' release can be found
at www.anteroresources.com.
Antero Midstream has budgeted a 2019 capital investment of
$750 million to $800 million, including $710 million in expansion capital and
$65 million in maintenance capital,
respectively, at the midpoint of the range. The capital
budget includes approximately $400
million of investment in gathering and compression
infrastructure primarily in the Marcellus Shale in West Virginia to support production growth in
the liquids-rich regime. Antero Midstream has budgeted an
investment of $135 million for fresh
water delivery infrastructure, including expansion capital for an
additional withdrawal point and associated trunklines to support
Antero Resources' development in Tyler and Wetzel Counties, West Virginia.
Also included in the budget is an investment of $200 million for its 50% interest in the Joint
Venture, primarily for the construction of two additional
processing plants adding an additional 400 MMcf/d of processing
capacity. The 2019 Joint Venture budget also includes the election
to participate in the Hopedale 4 Fractionation Plant adding an
additional 20,000 Bbl/d of capacity, originally budgeted
for 2018. Antero Midstream's budget also includes
approximately $35 million for the
final milestone payments related to the completion of Antero
Clearwater Facility initially budgeted for 2018. Antero
Midstream expects to fund all 2019 capital expenditures through
cash flow from operations and available borrowing capacity under
its existing $2.0 billion bank credit
facility.
Antero Midstream Long-term Outlook
Antero Resources intends to continue to focus its development on
Antero Midstream-dedicated acreage and has a clear path to compound
annual production growth ("CAGR") of 10% to 15% from 2020 to 2023.
Antero Resources' activity level and production growth will vary on
an annual basis depending on natural gas, oil and NGL prices with
the objective of maintaining stand-alone drilling and completion
capital spending within stand-alone adjusted operating cash flow
and maintaining a strong balance sheet. The strength of
Antero Resources will ultimately support growth at New AM following
the completion of the simplification transaction. Assuming flat
$50 per barrel WTI oil prices and
$2.85 per MMBtu NYMEX natural gas
prices from 2020 through 2023, Antero Resources expects to grow
production at the lower end of the production growth range.
Assuming Wall Street analyst consensus commodity pricing of flat
$65 per barrel WTI oil and
$3.15 per MMBtu NYMEX natural gas
prices from 2020 through 2023, Antero Resources expects to grow
production at the high end of its production growth
range.
Based on Antero Resources' long-term outlook, New AM is
targeting DCF growth at a CAGR range of 18% to 25% from 2020 to
2022. In addition, New AM expects a declining leverage profile into
the mid 2x Net Debt to Adjusted EBITDA range by 2022. To the extent
Antero's production growth is at the higher end of its long-term
outlook, New AM's DCF CAGR is expected to be at the higher end of
this range. Conversely, to the extent Antero's production
growth is at the lower end of its long-term outlook, New AM's DCF
CAGR is expected to be at the lower end of this range. This
DCF growth and declining leverage profile has the ability to
support the dividend growth targets previously communicated by
Antero Midstream at the announcement of the simplification
transaction, with reduced DCF coverage in the range of 1.0x to 1.2x
over the corresponding period based on the DCF ranges. The
actual DCF coverage and amount of future midstream dividends will
be determined by New AM's board of directors based on market
conditions and Antero Resources' development plan at that time.
Non-GAAP Financial Measures and Definitions
Antero Midstream uses Adjusted EBITDA as an important indicator
of performance. Antero Midstream defines Adjusted EBITDA as
net income before interest expense, impairment expense, gain on
sale of assets, depreciation expense, accretion, 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 its assets, without regard to
financing methods, 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.
Antero Midstream 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 Antero Midstream 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.
Antero Midstream has not included a reconciliation of Adjusted
EBITDA and Distributable Cash Flow to the nearest GAAP financial
measure for 2019 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
Ending
December 31, 2019
|
|
Low
|
|
High
|
|
Depreciation
expense
|
$
|
180,000
|
—
|
$
|
185,000
|
|
Equity based
compensation expense
|
|
48,000
|
—
|
|
52,000
|
|
Equity in earnings of
unconsolidated affiliates
|
|
68,000
|
—
|
|
73,000
|
|
Distributions from
unconsolidated affiliates
|
|
87,000
|
|
|
92,000
|
|
Antero Midstream 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 it is driven by a number of factors that will
be determined in the future and are beyond Antero Midstream's
control.
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 Antero Midstream'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 simplification transaction, if at
all, statements regarding the transaction, future earnings,
Adjusted EBITDA, dividends, DCF and future capital spending plans
and expectations around the Antero Clearwater
facility. Although Antero Midstream 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. Antero Midstream and AMGP disclaim any
obligation to and do not intend to publicly update or revise any
forward-looking statements, including statements set forth in
guidance. Nothing in this release is intended to constitute
guidance with respect to Antero Resources. To the extent a
forward-looking statement contained in this release speaks as of a
period covered by prior guidance, the information in this release
is intended to supersede, and investors should not rely on, such
prior guidance.
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 Antero Midstream'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
simplification, 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
Antero Midstream'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 and subsequent Quarterly Reports on Form 10-Q.
No Offer or Solicitation
This communication discusses a previously announced 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's unitholders and AMGP's
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 has not been declared
effective by the SEC, and the definitive joint proxy
statement/prospectus has not yet been delivered to the shareholders
of AMGP and unitholders of Antero Midstream. This communication 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 WHEN IT BECOMES AVAILABLE 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 will be able to obtain free
copies of the registration statement and the joint proxy
statement/prospectus (when available) 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 75219,
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 75219, Tel. No. (303) 357-7310.
Participants In The Solicitation
Antero Resources, AMGP, Antero Midstream and the directors
and executive officers of AMGP and Antero Midstream's respective
general partners and of Antero Resources may be deemed to be
participants in the solicitation of proxies in respect to the
proposed transaction.
Information regarding the directors and executive officers of
Antero Midstream's general partner is contained in Antero
Midstream's 2018 Annual Report on Form 10-K filed with the SEC on
February 13, 2018, and certain of its
Current Reports on Form 8-K. You can obtain a free copy of this
document at the SEC's website
at http://www.sec.gov or by accessing Antero
Midstream's website at http://www.anteromidstream.com.
Information regarding the executive officers and directors of
AMGP's general partner is contained in AMGP's 2018 Annual Report on
Form 10-K filed with the SEC on February 13,
2018 and certain of its Current Reports on Form 8-K. You can
obtain a free copy of this document at the SEC's website
at www.sec.gov or by accessing AMGP's website
at http://www.anteromidstream.com. Information
regarding the executive officers and directors of Antero Resources
is contained in Antero Resources' 2018 Annual Report on Form 10-K
filed with the SEC on February 13,
2018 and certain of its Current Reports on Form 8-K. You can
obtain a free copy of this document at the SEC's website
at www.sec.gov or by accessing Antero Resources'
website at http://www.anteroresources.com.
Investors may obtain additional information regarding the
interests of those persons and other persons who may be deemed
participants in the proposed transaction by reading the joint proxy
statement/prospectus regarding the proposed transaction when it
becomes available. You may obtain free copies of this document as
described above.
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