Antero Midstream Announces Fourth Quarter 2020 Financial Results and 2021 Capital Budget and Guidance

DENVER, Feb. 17, 2021 /PRNewswire/ -- Antero Midstream Corporation (NYSE: AM) ("Antero Midstream" or the "Company") today announced its fourth quarter 2020 financial and operational results, 2021 capital budget and guidance based on Antero Resources recently announced 2021 development plan and drilling partnership, and return of capital policy.  

Antero Midstream Logo (PRNewsfoto/Antero Midstream)

Fourth Quarter 2020 Earnings Highlights:

  • Net income was $76 million, or $0.16 per share, compared to a $(0.29) per share net loss in the prior year quarter
  • Adjusted Net Income was $98 million, or $0.21 per share, a 5% increase compared to the prior year quarter (non-GAAP measure)
  • Adjusted EBITDA was $203 million, in line with the prior year quarter (non-GAAP measure)
  • Capital expenditures were $29 million, a 77% decrease compared to the prior year quarter
  • Free Cash Flow before dividends was $135 million, a 223% increase compared to the prior year quarter (non-GAAP measure)
  • Net Debt at quarter end was $3.1 billion and Net Debt to last twelve months Adjusted EBITDA was 3.7x, both consistent with September 30, 2020 (non-GAAP measure)

Full Year 2020 Earnings Highlights:

  • Net loss was $123 million, or $(0.26) per share, compared to a $(0.80) per share net loss in the prior year
  • Adjusted EBITDA was $850 million, $10 million above the midpoint of the guidance range of $840 million (non-GAAP measure)
  • Capital expenditures were $208 million, in line with previous guidance
  • Free Cash Flow before dividends was $498 million, $8 million above the midpoint of Antero Midstream's guidance range of $490 million (non-GAAP measure)
  • Generated a return on invested capital of 17% in 2020 (non-GAAP measure)

2021 Guidance Highlights and Forecasts:

  • Pro forma for the drilling partnership, Antero Resources' 2021 development program includes 65 to 70 well completions with an average lateral length of 13,150 feet
  • Net income of $325 to $365 million, representing GAAP earnings of $0.68 to $0.77 per share
  • Adjusted Net Income of $380 to $420 million, representing adjusted earnings of $0.80 to $0.88 per share (non-GAAP measure)
  • Adjusted EBITDA of $840 to $880 million (non-GAAP measure)
  • Capital budget of $240 to $260 million
  • Free Cash Flow before dividends of $415 to $455 million (non-GAAP measure)
  • Dividends of $0.90 per share on an annualized basis in 2021 (subject to quarterly Board approval)
  • Extended share repurchase program through June 30, 2023 with $150 million of remaining capacity

Paul Rady, Chairman and CEO said, "In a separate release, Antero Resources announced the formation of a drilling partnership through 2024 that is expected to result in incremental throughput and fresh water volume growth on Antero Midstream dedicated acreage. As a result, Antero Midstream is forecasting a 2021 capital budget of $240 to $260 million, reflecting approximately $65 million of incremental capital that has been accelerated into 2021 above the previous maintenance capital program. To fund this acceleration, Antero Midstream expects to reallocate a portion of its dividend payments to fund the associated infrastructure projects supporting the increased volumes and water usage anticipated due to the drilling partnership. This reallocation is expected to allow Antero Midstream to internally fund these attractive rate of return projects without adding leverage or total debt.

Glen Warren, President said, "Antero Resources announced that it expects the drilling partnership to result in incremental gross gas production that is estimated to add $400 million of incremental free cash flow to Antero Resources through 2025 assuming current strip prices. In addition, Antero Resources announced that it expects a decreasing leverage profile from the 3.1x at year-end 2020 to below 2-times by year-end 2021 assuming current strip prices. Similarly, we expect the drilling partnership to result in an incremental $200 million of free cash flow after dividends through 2025 for Antero Midstream and result in a declining leverage profile to 3-times or less over that period."

Antero Resources Drilling Partnership Announcement

In a separate release, Antero Resources announced the formation of a drilling partnership with QL Capital Partners ("QL"), an affiliate of Quantum Energy Partners. Antero Resources noted that it is uniquely positioned to bring on a drilling partner due to its unutilized firm transportation portfolio and deep liquids-rich inventory. Under the terms of the agreement, QL is expected to fund 20% of total development capital spending in 2021 and between 15% and 20% of total development capital on an annual basis from 2022 through 2024 in exchange for a proportionate working interest percentage in each well spud.  In addition, QL will pay a drilling carry to Antero Resources if certain return thresholds are achieved. Assuming QL's full participation through 2024, the partnership will enable the drilling and completion of approximately 60 incremental wells relative to Antero's prior base case of maintenance level capital. The drilling partnership is effective immediately and includes all wells spud since January 1, 2021. 

Based on Antero Resources' current development plan and commodity pricing, this plan is expected to result in approximately 5 incremental completions in 2021 and 60 additional completions from 2021 through 2024. The increase in gross gas production is expected to drive annual low single digit throughput growth at Antero Midstream in 2022 through 2025. In addition, the approximate 20% increase in wells completed over this time frame is expected to drive a proportionate increase in fresh water delivery volumes for the Company.  The tables and outlook below illustrate the impact of QL's full participation in the drilling partnership from 2021 through 2024.





Pro Forma For



AR 2021 Base Plan vs Drilling Partnership


Base Plan


Drilling Partnership


Incremental



Low


High


Low


High


Wells

Drilled Wells


65


70


80


85


15

Completed Wells

60

65

65

70

5








AR 2021 – 2024 Base Plan vs Drilling Partnership


Base Plan


Pro Forma For
Drilling Partnership


Incremental

Wells

Drilled Wells


250


310


60

Completed Wells


255


315


60


Note: Base plan assumes AR maintenance capital program that results in approximately flat net production through 2025.

Return of Capital Reallocation & Revised Outlook through 2025

Antero Midstream is budgeting capital expenditures of $240 to $260 million in 2021. The capital budget includes approximately $65 million of additional growth capital supporting the increased development on Antero Midstream dedicated acreage from the drilling partnership, in addition to the capital budgeted for Antero Resources' previously disclosed maintenance capital program for 2021. Antero Midstream has an organic project backlog of $1.05 to $1.15 billion from 2021 through 2025.

$ in Millions


Base Plan


Pro Forma For

Drilling Partnership


Incremental



Low


High


Low


High


Capex

Capital Expenditures in 2021


$175


$195


$240


$260


$65

Organic Project Backlog from 2021-2025

$875

$975

$1,050

$1,150

$175


Note: Base plan assumes AR maintenance capital program that results in approximately flat net production through 2025.

In order to internally fund these organic growth projects and maintain a strong balance sheet, Antero Midstream is reallocating capital through a forecasted reduction in its 2021 dividend to $0.90 per share on an annualized basis beginning with the first quarter of 2021, subject to Board approval.  Based on Antero Resource's development program with the drilling partnership and anticipated low single digit annual throughput growth through 2025, Antero Midstream is forecasting Free Cash Flow after dividends of $(15) to $25 million in 2021 and targeting $450 to $550 million of cumulative Free Cash Flow after dividends from 2021 through 2025. Antero Midstream expects to use excess Free Cash Flow after dividends for debt reduction and opportunistic share repurchases. Assuming the $0.90 per share dividend is held flat and Free Cash Flow after dividends is prioritized for debt reduction, Antero Midstream's Leverage is expected to decline to 3-times or less by year-end 2025.

$ in Millions


Base Plan


Pro Forma For
Drilling Partnership





Low


High


Low


High


Change

Free Cash Flow After Dividends in 2021


$25


$65


$(15)


$25


$(40)

Cumulative Free Cash Flow After Dividends 2021-2025


$250


$300


$450


$500


$200

Leverage by Year-end 2025


3.1x


3.5x


2.6x


3.0x


(0.5)x


Note: Both plans assume annual dividend per share of $0.90 through 2025 (subject to quarterly Board approval) and Free Cash Flow after dividends is prioritized for debt reduction.

Antero Midstream currently has $150 million of share repurchase capacity remaining under its $300 million authorized share repurchase program. On February 11, 2021, the Board of Directors approved a two year extension of the share repurchase program authorization from June 30, 2021 to June 30, 2023. Antero Midstream has repurchased approximately $150 million of shares at an average price of $4.88 per share since the share repurchase program was authorized in 2019.

2021 Guidance and Capital Budget

Antero Midstream is forecasting net income of $325 to $365 million and Adjusted Net Income (adjusted for amortization of customer relationships) of $380 to $420 million. The Company is forecasting Adjusted EBITDA of $840 to $880 million and a capital budget of $240 to $260 million. This results in Free Cash Flow before dividends of $415 to $455 million and Free Cash Flow after dividends of $(15) to $25 million for 2021, assuming an annualized dividend of $0.90 per share. Antero Midstream's 2021 guidance includes approximately $110 to $115 million of distributions from its interests in the processing and fractionation joint venture with MPLX, LP (the "Joint Venture") and in Stonewall Gathering LLC.  Antero Midstream does not expect or forecast any federal or state cash income tax expense in 2021 in its financial guidance. 

Beginning with 2021 results, Antero Midstream will no longer report MLP-specific metrics such as distributable cash flow, instead prioritizing traditional C-Corp metrics including earnings per share (EPS), Free Cash Flow before and after dividends, and return on invested capital (ROIC).

During 2021, Antero Midstream plans to expand its existing Marcellus and Utica Shale gathering, compression and fresh water delivery systems.  The midpoint of the capital budget includes approximately $195 million of investment in gathering and compression infrastructure primarily in the Marcellus Shale to expand the system further into Tyler and Wetzel Counties in West Virginia to support production growth in the liquids-rich production areas.  Antero Midstream has budgeted an investment of $55 million for fresh water delivery and wastewater blending and pipeline infrastructure.  Approximately 95% of Antero Midstream's 2021 capital budget is focused in the Marcellus Shale and remaining 5% is focused in the Utica Shale. The Company is forecasting an immaterial capital investment in the Joint Venture in 2021. Antero Midstream expects to fund all 2021 capital expenditures through cash flow from operations and does not require borrowings under its revolving credit facility.

Michael Kennedy, CFO of Antero Midstream, said, "Our transition to a business model that funds both its future capital programs and dividends with internally generated cash flow from operations significantly de-risks Antero Midstream's business model. This prudent measure is expected to result in a declining leverage target to 3-times or less, supported by volumetric and free cash flow growth over the next several years."

The following is a summary of Antero Midstream's 2021 guidance ($ in millions, except per share amounts):


2021


Low


High

Net Income

$

325

$

365

Adjusted Net Income


380


420

Adjusted EBITDA


840


880

Capital Expenditures


240


260

Interest Expense


170


180

Free Cash Flow Before Dividends


415


455

Dividends (assuming $0.90 per share)


428


428

Free Cash Flow After Dividends


(15)


25

Fourth Quarter 2020 Financial Results

Low pressure gathering volumes for the fourth quarter of 2020 averaged 3,053 MMcf/d, a 16% increase as compared to the prior year quarter.  Low pressure gathering volumes were in excess of the fourth quarter 2020 growth incentive fee threshold of 2,900 MMcf/d, resulting in a $12 million rebate to Antero Resources. Compression volumes for the fourth quarter of 2020 averaged 2,851 MMcf/d, an 18% increase as compared to the fourth quarter of 2019.  High pressure gathering volumes for the fourth quarter of 2020 averaged 3,017 MMcf/d, a 15% increase compared to the fourth quarter of 2019. Fresh water delivery volumes averaged 43 MBbl/d during the quarter, a 71% decrease compared to the fourth quarter of 2019, due to a decrease in completion activities by Antero Resources.

Gross processing volumes from the Joint Venture averaged 1,510 MMcf/d for the fourth quarter of 2020, a 26% increase compared to the prior year quarter.  Joint Venture processing capacity was 108% utilized during the quarter based on nameplate processing capacity of 1.4 Bcf/d.  Gross Joint Venture fractionation volumes averaged 40 MBbl/d, a 29% increase compared to the prior year quarter.



Three Months Ended

December 31,


Average Daily Volumes:


2019


2020


%
Change

Low Pressure Gathering (MMcf/d)


2,639


3,053


16%

Compression (MMcf/d)


2,414


2,851


18%

High Pressure Gathering (MMcf/d)


2,613


3,017


15%

Fresh Water Delivery (MBbl/d)


148


43


(71)%

Gross Joint Venture Processing (MMcf/d)


1,202


1,510


26%

Gross Joint Venture Fractionation (MBbl/d)


31


40


29%

For the three months ended December 31, 2020, revenues were $204 million comprised of $184 million from the Gathering and Processing segment and $38 million from the Water Handling segment, net of $18 million of amortization of customer relationships.  Water Handling revenues include $22 million from wastewater handling and high rate water transfer services.

Direct operating expenses for the Gathering and Processing and Water Handling segments were $13 million and $24 million, respectively, for a total of $37 million, compared to $55 million in total direct operating expenses in the prior year quarter. Water Handling operating expenses include $21 million from wastewater handling and high rate water transfer services. The decrease in direct operating expenses was driven by lower per unit gathering and fresh water delivery operating expenses as well as lower costs associated with flowback and produced water due to Antero Midstream's blending operations. General and administrative expenses excluding equity-based compensation were $10 million during the fourth quarter of 2020.  Total operating expenses during the fourth quarter of 2020 included $3 million of equity compensation expense, $8 million impairment and $27 million of depreciation.  

Net income was $76 million, or $0.16 per share.  Net income adjusted for amortization of customer relationships, impairment expense and loss on asset sale, or Adjusted Net Income, was $98 million. Adjusted Net Income per share was $0.21 per share, a 5% increase compared to the prior year quarter.  Adjusted EBITDA was $203 million, in line with the prior year quarter. Cash interest paid was $5 million. The increase in cash reserved for bond interest during the quarter was $34 million. Maintenance capital expenditures during the quarter totaled $5 million and Distributable Cash Flow was $159 million (Non-GAAP measure). Based on the previously declared dividend of $0.3075 per share, Antero Midstream's Distributable Cash Flow coverage ratio was approximately 1.1x. Free Cash Flow before dividends was $135 million, a $93 million increase compared to the prior year quarter due to the significant reduction in capital expenditures.

The following table reconciles Net Income (Loss) to Adjusted Net Income, Adjusted EBITDA, Distributable Cash Flow and Free Cash Flow as used in this release (in thousands):



Three Months Ended
December 31,



2019


2020

Net Income (Loss)


$

(144,559)


76,458

Amortization of customer relationships



17,832


17,661

Impairment expense



303,888


8,149

Loss on asset sale




2,689

Tax effect of reconciling items(1)



(79,465)


(7,039)

Adjusted Net Income



97,696


97,861







Net Income (Loss)


$

(144,559)


76,458

Interest expense



36,530


39,564

Provision for income tax expense (benefit)



(68,240)


22,194

Amortization of customer relationships



17,832


17,661

Depreciation expense



26,969


26,901

Impairment expense



303,888


8,149

Accretion and change in fair value of contingent acquisition consideration



2,807


38

Equity-based compensation



20,422


3,065

Equity in earnings of unconsolidated affiliates



(16,334)


(23,233)

Distributions from unconsolidated affiliates



21,750


29,545

Loss on asset sale




2,689

Contract restructuring fees



2,278


Adjusted EBITDA



203,343


203,031

Interest paid



(7,944)


(5,306)

Increase in cash reserved for bond interest (2)



(27,422)


(33,558)

Maintenance capital expenditures (3)



(8,898)


(5,427)

Employee tax withholding for settlement of equity compensation awards



(7)


(10)

Distributable Cash Flow


$

159,072


158,730







Total Aggregate Dividends Declared


$

148,856


146,649







Distributable Cash Flow Coverage Ratio



 1.1x


 1.1x







Adjusted EBITDA


$

203,343


203,031

Interest paid



(7,944)


(5,306)

Increase in cash reserved for bond interest (2)



(27,422)


(33,558)

Total capital expenditures (accrual-based)



(126,063)


(28,770)

Free Cash Flow Before Dividends


$

41,914


135,397



1)

Statutory tax rate was approximately 24.7% for 2019 and 24.9% for 2020.

2)

Cash reserved for bond interest expense on Antero Midstream's senior notes outstanding during the period that is paid on a semi-annual basis.

3)

Maintenance capital expenditures represent the portion of our estimated capital expenditures associated with (i) the connection of new wells to our gathering and processing systems that we believe will be necessary to offset the natural production declines Antero Resources will experience on all of its wells over time, and (ii) water delivery to new wells necessary to maintain the average throughput volume on our systems.

Fourth Quarter 2020 Operating Update

Gathering and Processing During the fourth quarter of 2020, Antero Midstream connected 11 wells to its gathering system. The Company's 3.2 Bcf/d of compression capacity was approximately 90% utilized during the quarter. Joint Venture processing capacity of 1.4 Bcf/d was 108% utilized during the quarter. Joint Venture fractionation capacity was 100% utilized during the quarter.

Water HandlingAntero Midstream's Marcellus water delivery systems serviced 5 well completions during the fourth quarter of 2020, an 84% decrease from the prior year quarter, driven by a reduction in completion activity by Antero Resources.

Balance Sheet and Liquidity

As of December 31, 2020, Antero Midstream had approximately $614 million drawn on its $2.13 billion bank credit facility, resulting in approximately $1.5 billion of liquidity. Antero Midstream's Net Debt to trailing twelve months Adjusted EBITDA ("Leverage") was 3.7x as of December 31, 2020.

Capital Investments

Total accrued capital expenditures including investments in the Joint Venture were $29 million during the fourth quarter of 2020. Gathering, compression, and water infrastructure capital investments totaled $28 million and investments in unconsolidated affiliates for the Joint Venture were $1 million. Of the $28 million invested in gathering, compression, and water infrastructure, $16 million was in gathering and compression assets and $12 million was in water handling assets.    

Conference Call

A conference call for Antero Midstream is scheduled on Thursday, February 18, 2021 at 10:00 am MT to discuss the financial and operational 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 877-407-9126 (U.S.), or 201-493-6751 (International) and reference "Antero Midstream".  A telephone replay of the call will be available until Thursday, February 25, 2021 at 10:00 am MT at 877-660-6853 (U.S.) or 201-612-7415 (International) using the conference ID: 13714535. 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 until Thursday, February 25, 2021 at 10:00 am MT.

Presentation

An updated presentation will be posted to the Company's website before the conference call. The presentation can be found at www.anteromidstream.com on the homepage. Information on the Antero Midstream's website does not constitute a portion of, and is not incorporated by reference into, this press release.

Non-GAAP Financial Measures and Definitions

Antero Midstream uses certain non-GAAP financial measures. Antero Midstream defines Adjusted Net Income as net income (loss) plus amortization of customer contracts, loss on asset sale and impairment expenses, net of tax effect of reconciling items. Antero Midstream uses Adjusted Net Income to assess the operating performance of its assets. Antero Midstream defines Adjusted EBITDA as net income (loss) before amortization of customer relationships, impairment expense, interest expense, provision for income tax expense (benefit), depreciation expense, accretion, loss on asset sale, equity-based compensation expense, excluding equity in earnings of unconsolidated affiliates and contract restructuring fees, and including cash distributions from unconsolidated affiliates.

Antero Midstream uses Adjusted EBITDA to assess:

  • the financial performance of Antero Midstream's 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 companies 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 Free Cash Flow as Adjusted EBITDA less interest paid, increase or decrease in cash reserved for bond interest and capital expenditures. Free Cash Flow is before dividend payments, share repurchases and changes in working capital. Antero Midstream uses Free Cash Flow as a performance metric to compare the cash generating performance of Antero Midstream from period to period. 

Antero Midstream's defines Distributable Cash Flow as Adjusted EBITDA less interest paid, increase or decrease in cash reserved for bond interest, income tax withholding upon vesting of equity-based compensation awards, 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 dividends (if any) that are expected to be paid to shareholders.  Distributable Cash Flow does not reflect changes in working capital balances.

Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Distributable Cash Flow are non-GAAP financial measures.  The GAAP measure most directly comparable to such measures is Net Income.  Such non-GAAP financial measures should not be considered as alternatives to the GAAP measure of Net Income.  The presentations of such measures are not made in accordance with GAAP and have important limitations as analytical tools because they include some, but not all, items that affect Net Income.  You should not consider any or all such measures in isolation or as a substitute for analyses of results as reported under GAAP.  Antero Midstream's definitions of such measures may not be comparable to similarly titled measures of other companies.

Antero Midstream defines Net Debt as consolidated total debt less cash and cash equivalents. Antero Midstream views Net Debt as an important indicator in evaluating Antero Midstream's financial leverage.

This release also includes certain non-GAAP financial information for Antero Resources. For a more information regarding those measures, please see Antero Resources' press release dated today, a copy of which can be found on Antero Resources website, www.anteroresources.com. For additional information on the drilling partnership please see Antero Resources' press release and Annual Report on Form 10-K, which can also be found at www.anteroresources.com.

The Company's ability to make future dividends is substantially dependent upon the development and drilling plan of Antero Resources, which itself is substantially dependent upon the review and approval by the board of directors of Antero Resources of its capital budget on an annual basis.  The Board of Directors of Antero Midstream will take into consideration many factors, including the capital budget of Antero Resources adopted by its Board of Directors and the capital resources and liquidity of Antero Midstream at the time, prior to approving future dividends.

The following table reconciles cash paid for capital expenditures and accrued capital expenditures during the period (in thousands):



Three Months Ended
D
ecember 31,



2019


2020

Capital expenditures (as reported on a cash basis)


$

166,945


31,924

Change in accrued capital costs



(40,882)


(3,154)

Capital expenditures (accrual basis)



126,063


28,770

The following table reconciles consolidated total debt to consolidated net debt, excluding debt premiums and issuance costs, ("Net Debt") as used in this release (in thousands):



September 30,
2020


December 31,
2020

Bank credit facility


$

1,187,500


613,500

5.375% senior notes due 2024



650,000


650,000

7.875% senior notes due 2026




550,000

5.75% senior notes due 2027



650,000


650,000

5.75% senior notes due 2028



650,000


650,000

Consolidated total debt



3,137,500


3,113,500

Cash and cash equivalents



(2,393)


(640)

Consolidated net debt


$

3,135,107


3,112,860

The following table reconciles net loss to Adjusted EBITDA for the last twelve months as used in this release (in thousands):



12 months ended
September 30, 2020


12 months ended
December 31, 2020

Net Loss


$

(343,544)


(122,527)

Amortization of customer relationships



70,843


70,672

Impairment expense



969,379


673,640

Interest expense



143,973


147,007

Provision for income tax benefit



(146,122)


(55,688)

Depreciation expense



108,858


108,790

Accretion and change in fair value of contingent acquisition consideration



2,949


180

Equity-based compensation



30,135


12,778

Loss on asset sale



240


2,929

Equity in earnings of unconsolidated affiliates



(79,531)


(86,430)

Distributions from unconsolidated affiliates



91,063


98,858

Contract restructuring fees



2,278


Adjusted EBITDA


$

850,521


850,209

Interest paid



($89,824)


($140,732)

Increase in cash reserved for bond interest (2)



($31,457)


($4,267)

Total capital expenditures (accrual-based)



($646,424)


($207,509)

Free Cash Flow Before Dividends



$61,836


$497,941

Antero Midstream defines Return on Invested Capital ("ROIC") as earnings before interest and taxes excluding amortization of customer relationships divided by average total liabilities and partners capital, excluding goodwill and intangible assets in order to derive an operating asset driven ROIC calculation.

The following table reconciles return on invested capital for the last twelve months as used in this release (in thousands):



2020

Net Loss


$

(122,527)

Amortization of customer relationships



70,672

Impairment expense



673,640

Loss on asset sale



2,689

Tax effect of reconciling items



(196,038)

Adjusted Net Income



428,436

Interest expense



147,007

Provision for income tax expense (benefit)



(55,688)

Tax effect of reconciling items



196,041

Adjusted EBIT



716,033

Average Invested Capital



4,282,296

Return on Invested Capital



17%

Antero Midstream has not included a reconciliation of Adjusted EBITDA and Free Cash Flow to the nearest GAAP financial measure for 2021 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 such measures and Net Income (in thousands):


Twelve Months Ending 
December 31, 2021


Low


High

Depreciation expense

$

110

$

115

Equity-based compensation expense


10


15

Amortization of customer relationships


70


75

Distributions from unconsolidated affiliates


110


115

Antero Midstream has not included a reconciliation of Adjusted EBITDA and Free Cash Flow to the nearest GAAP financial measure for the cumulative period from 2021 through 2025 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 such measures and Net Income (in thousands):


Cumulative Period From 2021-2025


Low


High

Depreciation expense

$

580

$

620

Equity-based compensation expense


50


75

Amortization of customer relationships


350


375

Distributions from unconsolidated affiliates


550


600

Interest Expense


825


875

Antero Midstream Corporation is a Delaware corporation that owns, operates and develops midstream gathering, compression, processing and fractionation assets located in the Appalachian Basin, as well as integrated water assets that primarily service Antero Resources Corporation's properties.

This release includes "forward-looking statements." Such forward-looking statements are subject to a number of risks and uncertainties, many of which are not under Antero Midstream's control. All statements, except for statements of historical fact, made in this release regarding activities, events or developments Antero Midstream expects, believes or anticipates will or may occur in the future, such as statements regarding Antero Midstream's ability to execute its business plan and return capital to its stockholders, information regarding Antero Midstream's return of capital policy, information regarding long-term financial and operating outlooks for Antero Midstream and Antero Resources, information regarding Antero Resources' expected future growth and its ability to meet its drilling and development plan and the participation level of Antero Resources' drilling partner and the impact on demand for Antero Midstream's services as a result of incremental production by Antero Resources, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All forward-looking statements speak only as of the date of this release. Although Antero Midstream 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 forecast in such statements. Except as required by law, Antero Midstream expressly disclaims any obligation to and does not intend to publicly update or revise any forward-looking statements.

Antero Midstream cautions you that these forward-looking statements are subject to all of the risks and uncertainties incident to our business, most of which are difficult to predict and many of which are beyond Antero Midstream's control. These risks include, but are not limited to, commodity price volatility, inflation, environmental risks, Antero Resources' drilling and completion and other operating risks, regulatory changes, the uncertainty inherent in projecting Antero Resources' future rates of production, cash flows and access to capital, the timing of development expenditures, impacts of world health events, including the COVID-19 pandemic, potential shut-ins of production by producers due to lack of downstream demand or storage capacity, and the other risks described under the heading "Item 1A. Risk Factors" in Antero Midstream's Annual Report on Form 10-K for the year ended December 31, 2020.

ANTERO MIDSTREAM CORPORATION

Consolidated Balance Sheets

(In thousands, except per share amounts)



December 31,


2019


2020

Assets






Current assets:






Cash and cash equivalents

$

1,235



640

Accounts receivable–Antero Resources


101,029



73,722

Accounts receivable–third party


4,574



839

Income tax receivable




17,251

Other current assets


1,720



1,479

Total current assets


108,558



93,931







Property and equipment, net


3,273,410



3,254,044

Investments in unconsolidated affiliates


709,639



722,478

Deferred tax asset


103,231



103,402

Customer relationships


1,498,119



1,427,447

Goodwill


575,461



Other assets, net


14,460



9,610

Total assets

$

6,282,878



5,610,912







Liabilities and Stockholders' Equity






Current liabilities:






Accounts payable–Antero Resources

$

3,146



3,862

Accounts payable–third party


6,645



9,495

Accrued liabilities


104,188



74,947

Contingent acquisition consideration


125,000



Other current liabilities


3,105



5,701

Total current liabilities


242,084



94,005

Long-term liabilities:






Long-term debt


2,892,249



3,091,626

Other


5,131



6,995

Total liabilities


3,139,464



3,192,626







Stockholders' Equity:






Preferred stock, $0.01 par value: 100,000 authorized as of both December 31, 2019 and 
     2020






Series A non-voting perpetual preferred stock; 12 designated and 10 issued and 
     outstanding as of both December 31, 2019 and 2020




Common stock, $0.01 par value; 2,000,000 authorized; 484,042 and 476,639 issued and 
          outstanding as of December 31, 2019 and 2020, respectively


4,840



4,766

Additional paid-in capital


3,480,139



2,877,612

Accumulated deficit


(341,565)



(464,092)

Total stockholders' equity


3,143,414



2,418,286

Total liabilities and stockholders' equity

$

6,282,878



5,610,912

 

 

ANTERO MIDSTREAM CORPORATION

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share amounts)

(Unaudited)



Three Months Ended

December 31,


2019


2020

Revenue:






Gathering and compression–Antero Resources

$

165,360



184,125

Water handling–Antero Resources


91,539



37,396

Amortization of customer relationships


(17,832)



(17,661)

Total revenue


239,067



203,860

Operating expenses:






Direct operating


55,030



36,539

General and administrative (including $20,422 and $3,065 of equity-based compensation in 
     2019 and 2020, respectively)


33,087



13,022

Facility idling


9,889



1,539

Impairment of goodwill


296,591



Impairment of property and equipment


1,297



8,149

Impairment of customer relationships


6,000



Depreciation


26,969



26,901

Accretion and change in fair value of contingent acquisition consideration


2,753



Accretion of asset retirement obligations


54



38

Loss on asset sale




2,689

Total operating expenses


431,670



88,877

Operating income (loss)


(192,603)



114,983

Interest expense, net


(36,530)



(39,564)

Equity in earnings of unconsolidated affiliates


16,334



23,233

Income (loss) before income taxes


(212,799)



98,652

Provision for income tax benefit (expense)


68,240



(22,194)

Net income (loss) and comprehensive income (loss)

$

(144,559)



76,458







Net income (loss) per share–basic

$

(0.29)



0.16

Net income (loss) per share–diluted

$

(0.29)



0.16







Weighted average common shares outstanding:






Basic


500,043



476,633

Diluted


500,043



478,757

 

 

ANTERO MIDSTREAM CORPORATION

Selected Operating Data

(Unaudited)




Three Months Ended


Amount of







December 31,


 Increase


Percentage



2019


2020


or Decrease


Change

Operating Data:














Gathering—low pressure (MMcf)



242,785



280,872



38,087



16

%

Gathering—high pressure (MMcf)



240,366



277,595



37,229



15

%

Compression (MMcf)



222,050



262,259



40,209



18

%

Fresh water delivery (MBbl)



13,602



3,937



(9,665)



(71)

%

Other fluid handling (MBbl)



5,380



4,761



(619)



(12)

%

Wells serviced by fresh water delivery



32



5



(27)



(84)

%

Gathering—low pressure (MMcf/d)



2,639



3,053



414



16

%

Gathering—high pressure (MMcf/d)



2,613



3,017



404



15

%

Compression (MMcf/d)



2,414



2,851



437



18

%

Fresh water delivery (MBbl/d)



148



43



(105)



(71)

%

Other fluid handling (MBbl/d)



58



52



(6)



(10)

%

Average realized fees:














Average gathering—low pressure fee ($/Mcf)


$

0.33



0.33





*


Average gathering—high pressure fee ($/Mcf)


$

0.18



0.19



0.01



6

%

Average compression fee ($/Mcf)


$

0.20



0.19



(0.01)



(5)

%

Average fresh water delivery fee ($/Bbl)


$

3.90



3.96



0.06



2

%

Joint Venture Operating Data:














Processing—Joint Venture (MMcf)



110,647



138,879



28,232



26

%

Fractionation—Joint Venture (MBbl)



2,871



3,651



780



27

%

Processing—Joint Venture (MMcf/d)



1,202



1,510



308



26

%

Fractionation—Joint Venture (MBbl/d)



31



40



9



29

%


*        Not meaningful or applicable.

 

 

ANTERO MIDSTREAM CORPORATION

Consolidated Results of Segment Operations

(Unaudited)




Three Months Ended
December 31, 2020



Gathering and


Water




Consolidated

(in thousands)


Processing


Handling


Unallocated


Total

Revenues:













Revenue–Antero Resources


$

184,125



37,396





221,521

Amortization of customer relationships



(9,267)



(8,394)





(17,661)

Total revenues



174,858



29,002





203,860














Operating expenses:













Direct operating



12,980



23,559





36,539

General and administrative (excluding equity-based compensation)



4,521



3,618



1,818



9,957

Facility idling





1,539





1,539

Equity-based compensation



1,958



881



226



3,065

Impairment of property and equipment





8,149





8,149

Depreciation



14,944



11,957





26,901

Accretion of asset retirement obligations





38





38

Loss on asset sale



2,689







2,689

Total expenses



37,092



49,741



2,044



88,877

Operating income


$

137,766



(20,739)



(2,044)



114,983














Equity in earnings of unconsolidated affiliates


$

23,233








23,233

Total assets


$

4,364,848



1,125,318



120,746



5,610,912

Additions to property and equipment, net


$

19,953



11,506






31,459

 

 

ANTERO MIDSTREAM CORPORATION

Consolidated Statements of Cash Flows

(In thousands)




Year Ended December 31,



2018


2019


2020

Cash flows provided by (used in) operating activities:










Net income (loss)


$

66,608



(355,114)



(122,527)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:










Distributions from Antero Midstream Partners LP, prior to the Transactions



123,186



43,492



Depreciation





95,526



108,790

Payment of contingent consideration in excess of acquisition date fair value







(8,076)

Accretion and change in fair value of contingent acquisition consideration





8,263



180

Impairment





761,960



673,640

Deferred income taxes



(1,304)



(101,927)



(171)

Equity-based compensation



35,111



73,517



12,778

Equity in earnings of unconsolidated affiliates



(142,906)



(51,315)



(86,430)

Distributions from unconsolidated affiliates





64,320



98,858

Amortization of customer relationships





57,010



70,672

Amortization of deferred financing costs



148



3,183



4,503

Settlement of asset retirement obligations







(2,183)

Loss on asset sale







2,929

Changes in assets and liabilities:










Accounts receivable–Antero Resources





42,484



27,306

Accounts receivable–third party





185



1,434

Income tax receivable







(17,251)

Other current assets



(5)



(335)



155

Accounts payable–Antero Resources



674



(2,103)



716

Accounts payable–third party



28



(9,762)



1,201

Income taxes payable



1,820



(15,678)



Accrued liabilities



171



8,681



(13,142)

Net cash provided by operating activities



83,531



622,387



753,382

Cash flows provided by (used in) investing activities:










Additions to gathering systems and facilities





(267,383)



(157,931)

Additions to water handling systems





(124,607)



(38,793)

Investments in unconsolidated affiliates





(154,359)



(25,267)

Cash received on acquisition of Antero Midstream Partners LP





619,532



Cash consideration paid to Antero Midstream Partners LP unitholders





(598,709)



Cash received in asset sale







822

Change in other assets





901



1,938

Change in other liabilities





(1,050)



Net cash used in investing activities





(525,675)



(219,231)

Cash flows provided by (used in) financing activities:










Distributions to unitholders and dividends to stockholders



(84,166)



(492,103)



(589,640)

Distributions to Series B unitholders



(2,300)



(3,720)



Distributions to preferred stockholders





(374)



(550)

Repurchases of common stock





(125,519)



(24,713)

Issuance of senior notes





650,000



550,000

Payments of deferred financing costs



(230)



(8,894)



(6,283)

Repayments on bank credit facilities, net





(115,500)



(346,000)

Payment of contingent acquisition consideration







(116,924)

Employee tax withholding for settlement of equity compensation awards





(2,015)



(476)

Other





(174)



(160)

Net cash used in financing activities



(86,696)



(98,299)



(534,746)

Net decrease in cash and cash equivalents



(3,165)



(1,587)



(595)

Cash and cash equivalents, beginning of period



5,987



2,822



1,235

Cash and cash equivalents, end of period


$

2,822



1,235



640

Supplemental disclosure of cash flow information:










Cash paid during the period for interest


$

3



83,016



140,732

Cash received (paid) during the period for income taxes


$

(31,795)



(16,079)



39,205

Decrease in accrued capital expenditures and accounts payable for property and equipment


$



(6,215)



(14,472)

 

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SOURCE Antero Midstream Corporation

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