ANTERO MIDSTREAM PARTNERS LP, 10-K filed on 2/13/2018
Annual Report
Document and Entity Information (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Feb. 8, 2018
Jun. 30, 2017
Document and Entity Information
 
 
 
Entity Registrant Name
Antero Midstream Partners LP 
 
 
Entity Central Index Key
0001598968 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2017 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 2.6 
Entity Common Stock, Shares Outstanding
 
186,934,568 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
FY 
 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 8,363 
$ 14,042 
Accounts receivable - Antero Resources
110,182 
64,139 
Accounts receivable - third party
1,170 
1,240 
Prepaid expenses
670 
529 
Total current assets
120,385 
79,950 
Property and equipment, net
2,605,602 
2,195,879 
Investments in unconsolidated affiliates
303,302 
68,299 
Other assets, net
12,920 
5,767 
Total assets
3,042,209 
2,349,895 
Current liabilities:
 
 
Accounts payable - third party
8,642 
16,979 
Accounts payable - Antero Resources
6,459 
3,193 
Accrued liabilities
106,006 
61,641 
Other current liabilities
209 
200 
Total current liabilities
121,316 
82,013 
Long-term liabilities:
 
 
Long-term debt
1,196,000 
849,914 
Contingent acquisition consideration
208,014 
194,538 
Other
410 
620 
Total liabilities
1,525,740 
1,127,085 
Partners' capital:
 
 
General partner
23,772 
7,543 
Total partners' capital
1,516,469 
1,222,810 
Total liabilities and partners' capital
3,042,209 
2,349,895 
Common Unitholders Public
 
 
Partners' capital:
 
 
Common unitholders
1,708,379 
1,458,410 
Total partners' capital
1,708,379 
1,458,410 
Common Unitholder Antero Resources
 
 
Partners' capital:
 
 
Common unitholders
(215,682)
26,820 
Total partners' capital
(215,682)
26,820 
Subordinated Unitholder Antero Resources
 
 
Partners' capital:
 
 
Subordinated unitholder - Antero Resources (75,941 issued and outstanding at December 31, 2016)
 
(269,963)
Total partners' capital
 
$ (269,963)
Consolidated Balance Sheets (Parenthetical)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Common Unitholders Public
 
 
Common unitholders units issued
88,059 
70,020 
Common unitholders units outstanding
88,059 
70,020 
Common Unitholder Antero Resources
 
 
Common unitholders units issued
98,870 
32,929 
Common unitholders units outstanding
98,870 
32,929 
Subordinated Unitholder Antero Resources
 
 
Subordinated unitholder units issued
 
75,941 
Subordinated unitholder units outstanding
 
75,941 
Consolidated Statements of Operations and Comprehensive Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Revenue:
 
 
 
Gathering and compression-Antero Resources
$ 396,202 
$ 303,250 
$ 230,210 
Water handling and treatment-Antero Resources
376,031 
282,267 
155,954 
Gathering and compression-third party
264 
835 
382 
Water handling and treatment-third party
 
 
778 
Gain on sale of assets
 
3,859 
 
Total revenue
772,497 
590,211 
387,324 
Operating expenses:
 
 
 
Direct operating
232,538 
161,587 
78,852 
General and administrative (including $22,470, $26,049 and $27,283 of equity-based compensation in 2015, 2016, and 2017, respectively)
58,812 
54,163 
51,206 
Impairment of property and equipment
23,431 
 
 
Depreciation
119,562 
99,861 
86,670 
Accretion of contingent acquisition consideration
13,476 
16,489 
3,333 
Total operating expenses
447,819 
332,100 
220,061 
Operating income
324,678 
258,111 
167,263 
Interest expense, net
(37,557)
(21,893)
(8,158)
Equity in earnings of unconsolidated affiliates
20,194 
485 
 
Net income and comprehensive income
307,315 
236,703 
159,105 
Pre-Water Acquisition net income attributed to parent
 
 
(40,193)
Net income attributable to incentive distribution rights
(69,720)
(16,944)
(1,264)
Limited partners' interest in net income
$ 237,595 
$ 219,759 
$ 117,648 
Net income per limited partner unit - basic and diluted
$ 1.28 
$ 1.24 
$ 0.74 
Weighted average limited partner units outstanding - basic
185,630 
176,647 
158,479 
Weighted average limited partner units outstanding - diluted
186,083 
176,801 
158,527 
Consolidated Statements of Operations and Comprehensive Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Consolidated Statements of Operations and Comprehensive Income
 
 
 
Equity-based compensation
$ 27,283 
$ 26,049 
$ 22,470 
Consolidated Statements of Partners' Capital (USD $)
In Thousands, unless otherwise specified
Common Unitholders Public
Common Unitholder Antero Resources
Subordinated Unitholder Antero Resources
General Partner
Parent Net Investment.
Total
Balance at Dec. 31, 2014
$ 1,090,037 
$ 71,665 
$ 180,757 
 
$ 278,444 
$ 1,620,903 
Partner' Capital
 
 
 
 
 
 
Net income and comprehensive income
37,368 
25,053 
55,227 
1,264 
40,193 
159,105 
Distributions to unitholders
(33,834)
(22,292)
(50,827)
(295)
 
(107,248)
Equity-based compensation
4,577 
7,363 
7,086 
 
3,444 
22,470 
Issuance of common units upon vesting of equity-based compensation awards, net of units withheld for income taxes
12,466 
(17,272)
 
 
 
(4,806)
Issuance of common units, net of offering costs
240,703 
 
 
 
 
240,703 
Deemed distribution to Antero Resources, net
 
 
 
 
(52,669)
(52,669)
Issuance of common units to Antero Resources in Water Acquisition
 
229,988 
 
 
 
229,988 
Purchase price in excess of net assets acquired in Water Acquisition
 
(264,319)
(491,970)
 
 
(756,289)
Carrying value of net assets acquired in Water Acquisition
 
 
 
 
(269,412)
(269,412)
Balance at Dec. 31, 2015
1,351,317 
30,186 
(299,727)
969 
 
1,082,745 
Partner' Capital
 
 
 
 
 
 
Net income and comprehensive income
82,424 
42,817 
94,518 
16,944 
 
236,703 
Distributions to unitholders
(64,712)
(33,701)
(73,663)
(10,370)
 
(182,446)
Equity-based compensation
8,012 
9,128 
8,909 
 
 
26,049 
Issuance of common units upon vesting of equity-based compensation awards, net of units withheld for income taxes
9,555 
(15,191)
 
 
 
(5,636)
Sale of units held by Antero Resources to public
6,419 
(6,419)
 
 
 
 
Issuance of common units, net of offering costs
65,395 
 
 
 
 
65,395 
Balance at Dec. 31, 2016
1,458,410 
26,820 
(269,963)
7,543 
 
1,222,810 
Partner' Capital
 
 
 
 
 
 
Net income and comprehensive income
100,347 
137,248 
 
69,720 
 
307,315 
Distributions to unitholders
(98,861)
(131,598)
 
(53,491)
 
(283,950)
Conversion of subordinated units to common units
 
(269,963)
269,963 
 
 
 
Equity-based compensation
9,776 
17,507 
 
 
 
27,283 
Issuance of common units upon vesting of equity-based compensation awards, net of units withheld for income taxes
9,691 
(15,636)
 
 
 
(5,945)
Sale of units held by Antero Resources to public
(19,940)
19,940 
 
 
 
 
Issuance of common units, net of offering costs
248,956 
 
 
 
 
248,956 
Balance at Dec. 31, 2017
$ 1,708,379 
$ (215,682)
 
$ 23,772 
 
$ 1,516,469 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash flows provided by operating activities:
 
 
 
Net income
$ 307,315 
$ 236,703 
$ 159,105 
Adjustment to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
119,562 
99,861 
86,670 
Accretion of contingent acquisition consideration
13,476 
16,489 
3,333 
Impairment of property and equipment
23,431 
 
 
Equity-based compensation
27,283 
26,049 
22,470 
Equity in earnings of unconsolidated affiliates
(20,194)
(485)
 
Distributions from unconsolidated affiliates
20,195 
7,702 
 
Amortization of deferred financing costs
2,888 
1,814 
1,144 
Gain on sale of assets
 
(3,859)
 
Changes in assets and liabilities:
 
 
 
Accounts receivable – Antero Resources
(41,043)
1,573 
(35,148)
Accounts receivable - third party
70 
1,467 
2,867 
Prepaid expenses
(141)
(529)
518 
Accounts payable - third party
3,003 
95 
2,803 
Accounts payable – Antero Resources
3,266 
1,055 
475 
Accrued liabilities
16,685 
(9,328)
15,441 
Net cash provided by operating activities
475,796 
378,607 
259,678 
Cash flows used in investing activities:
 
 
 
Additions to gathering systems and facilities
(346,217)
(228,100)
(320,002)
Additions to water handling and treatment systems
(195,162)
(188,220)
(132,633)
Investments in unconsolidated affiliates
(235,004)
(75,516)
 
Proceeds from sale of assets
 
10,000 
 
Change in other assets
(3,435)
3,673 
7,180 
Net cash used in investing activities
(779,818)
(478,163)
(445,455)
Cash flows provided by (used in) financing activities:
 
 
 
Deemed distribution to Antero Resources, net
 
 
(52,669)
Distributions to Antero Resources
 
 
(620,997)
Distributions to unitholders
(283,950)
(182,446)
(107,248)
Issuance of senior notes
 
650,000 
 
Borrowings (repayments) on bank credit facilities, net
345,000 
(410,000)
505,000 
Issuance of common units, net of offering costs
248,956 
65,395 
240,703 
Payments of deferred financing costs
(5,520)
(10,435)
(2,059)
Employee tax withholding for settlement of equity compensation awards
(5,945)
(5,636)
 
Other
(198)
(163)
(262)
Net cash provided by (used in) financing activities
298,343 
106,715 
(37,532)
Net increase (decrease) in cash and cash equivalents
(5,679)
7,159 
(223,309)
Cash and cash equivalents, beginning of period
14,042 
6,883 
230,192 
Cash and cash equivalents, end of period
8,363 
14,042 
6,883 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for interest
46,666 
13,494 
7,765 
Supplemental disclosure of noncash investing activities:
 
 
 
Increase (decrease) in accrued capital expenditures and accounts payable for property and equipment
$ 16,338 
$ (8,471)
$ 4,552 
Business and Organization
Business and Organization

(1)  Business and Organization

 

Antero Midstream Partners LP (the “Partnership”) is a growth-oriented master limited partnership formed by Antero Resources Corporation (“Antero Resources”) to own, operate and develop midstream energy infrastructure primarily to service Antero Resources’ increasing production and completion activity in the Appalachian Basin’s Marcellus Shale and Utica Shale located in West Virginia and Ohio. The Partnership’s assets consist of gathering pipelines, compressor stations, interests in processing and fractionation plants, and water handling and treatment assets, through which the Partnership and its affiliates provide midstream services to Antero Resources under long-term, fixed-fee contracts. The Partnership’s consolidated financial statements as of December 31, 2017, include the accounts of the Partnership, Antero Midstream LLC (“Midstream Operating”), Antero Water LLC (“Antero Water”), Antero Treatment LLC (“Antero Treatment”), and Antero Midstream Finance Corporation (“Finance Corp”), all of which are entities under common control.

 

On September 23, 2015, Antero Resources contributed (the “Water Acquisition”) (i) all of the outstanding limited liability company interests of Antero Water to the Partnership and (ii) all of the assets, contracts, rights, permits and properties owned or leased by Antero Resources and used primarily in connection with the construction, ownership, operation, use or maintenance of Antero Resources’ advanced wastewater treatment complex in Doddridge County, West Virginia, to Antero Treatment (collectively, (i) and (ii) are referred to herein as the “Contributed Assets”). Our results for periods prior to September 23, 2015 have been recast to include the historical results of Antero Water because the transaction was between entities under common control. Antero Water’s operations prior to the Water Acquisition consisted entirely of fresh water delivery operations.

 

References in these financial statements to “Predecessor,” “we,” “our,” “us” or like terms, when referring to periods prior to November 10, 2014, refer to Antero Resources’ gathering, compression and water assets, the Partnership’s predecessor for accounting purposes.  References to “the Partnership,” “we,” “our,” “us” or like terms, when referring to periods between November 10, 2014 and September 23, 2015 refer to the Partnership’s gathering and compression assets and Antero Resources’ water handling and treatment assets. References to “the Partnership,” “we,” “our,” “us” or like terms, when referring to periods since September 23, 2015 or when used in the present tense or prospectively, refer to the Partnership.

 

The Partnership’s gathering and compression assets consist of 8-, 12-, 16-, 20-, 24-, and 30-inch high and low pressure gathering pipelines, compressor stations, and processing and fractionation plants that collect and process natural gas, NGLs and oil from Antero Resources’ wells in West Virginia and Ohio. The Partnership’s water handling and treatment assets include two independent systems that deliver fresh water from sources including the Ohio River, local reservoirs as well as several regional waterways and other fluid handling assets which includes high rate transfer, wastewater transportation, disposal, and treatment.

 

The Partnership also has a 15% equity interest in the gathering system of Stonewall Gas Gathering LLC (“Stonewall”) and a 50% equity interest in the Joint Venture to develop processing and fractionation assets with MarkWest. See Note 11 – Equity Method Investments.

 

The Partnership’s financial statements are consolidated with the financial statements of Antero Resources (NYSE: AR), our primary beneficiary, for financial reporting purposes.

 

On April 6, 2017, in connection with its initial public offering, Antero Resources Midstream Management LLC (“ARMM”) formed Antero Midstream Partners GP LLC (“AMP GP” or our “general partner”), a Delaware limited liability company, as a wholly owned subsidiary, and, on April 11, 2017, assigned to AMP GP the general partner interest in us. Concurrent with the assignment, AMP GP was admitted as the Partnership’s sole general partner and ARMM ceased to be our general partner.

 

On May 9, 2017, ARMM closed its initial public offering. In connection with the offering, ARMM was converted into a Delaware limited partnership, and changed its name to Antero Midstream GP LP (“AMGP”).

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

(2)  Summary of Significant Accounting Policies

 

(a) Basis of Presentation

 

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).  In the opinion of management, these statements include all adjustments considered necessary for a fair presentation of the Partnership’s financial position as of December 31, 2016 and 2017, and the results of our operations and our cash flows for the years ended December 31, 2015, 2016, and 2017.  The combined consolidated statements of operations and comprehensive income, partners’ capital, and cash flows for 2015 have been prepared on a combined basis of accounting. The Partnership has no items of other comprehensive income or loss; therefore, net income is identical to comprehensive income.

 

Certain costs of doing business incurred by Antero Resources on our behalf have been reflected in the accompanying consolidated financial statements. These costs include general and administrative expenses attributed to us by Antero Resources in exchange for:

 

business services, such as payroll, accounts payable and facilities management;

 

corporate services, such as finance and accounting, legal, human resources, investor relations and public and regulatory policy; and

 

employee compensation, including equity‑based compensation.

 

Transactions between us and Antero Resources have been identified in the consolidated financial statements (see Note 3 – Transactions with Affiliates).

 

As of the date these consolidated financial statements were filed with the SEC, we completed our evaluation of potential subsequent events for disclosure and no items requiring disclosure were identified, except the declaration of a cash distribution to unitholders, as described in Note 7  – Partnership Equity and Distributions.

 

(b)Revenue Recognition

 

We provide gathering and compression and water handling and treatment services under fee-based contracts primarily based on throughput or at cost plus a margin. Under these arrangements, we receive fees for gathering oil and gas products, compression services, and water handling and treatment services. The revenue we earn from these arrangements is directly related to (1) in the case of natural gas gathering and compression, the volumes of metered natural gas that we gather, compress and deliver to natural gas compression sites or other transmission delivery points, (2) in the case of oil gathering, the volumes of metered oil that we gather and deliver to other transmission delivery points, (3) in the case of fresh water services, the quantities of fresh water delivered to our customers for use in their well completion operations, (4) in the case of wastewater treatment services, the quantities of wastewater treated for our customers, or (5) in the case of flowback and produced water, the third party out-of-pocket costs plus 3%. We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an agreement exists, (2) services have been rendered, (3) prices are fixed or determinable and (4) collectability is reasonably assured.

 

(c)Use of Estimates

 

The preparation of the consolidated financial statements and notes in conformity with GAAP requires that management formulate estimates and assumptions that affect revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities. Items subject to estimates and assumptions include the useful lives of property and equipment and valuation of accrued liabilities, among others. Although management believes these estimates are reasonable, actual results could differ from these estimates.

 

(d)Cash and Cash Equivalents

 

Prior to September 23, 2015 Antero Water was owned and funded by Antero Resources. Net amounts funded by Antero Resources are reflected as “Deemed distribution to Antero Resources, net” on the accompanying Statements of Consolidated Cash Flows.

 

We consider all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments.

 

(e)Property and Equipment

 

Property and equipment primarily consists of gathering pipelines, compressor stations and fresh water delivery pipelines and facilities stated at historical cost less accumulated depreciation. We capitalize construction-related direct labor and material costs. We also capitalize interest on capital costs during the construction phase of the water treatment facility, currently undergoing testing and commissioning. We capitalized interest of $4 million and $12 million for the years ended December 31, 2016 and 2017, respectively. Maintenance and repair costs are expensed as incurred.

 

Depreciation is computed using the straight-line method over the estimated useful lives and salvage values of assets. The depreciation of fixed assets recorded under capital lease agreements is included in depreciation expense. Uncertainties that may impact these estimates of useful lives include, among others, changes in laws and regulations relating to environmental matters, including air and water quality, restoration and abandonment requirements, economic conditions, and supply and demand for our services in the areas in which we operate. When assets are placed into service, management makes estimates with respect to useful lives and salvage values that management believes are reasonable. However, subsequent events could cause a change in estimates, thereby impacting future depreciation amounts.

 

Our investment in property and equipment for the periods presented is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

December 31,

 

 

    

useful lives

    

2016

    

2017

 

Land

 

n/a

 

$

11,338

 

 

15,382

 

Fresh water surface pipelines and equipment

 

5 years

 

 

39,562

 

 

46,139

 

Above ground storage tanks

 

10 years

 

 

4,301

 

 

4,301

 

Fresh water permanent buried pipelines and equipment

 

20 years

 

 

443,453

 

 

472,810

 

Gathering systems and facilities

 

20 years

 

 

1,551,771

 

 

1,781,386

 

Construction-in-progress

 

n/a

 

 

400,096

 

 

654,904

 

Total property and equipment

 

 

 

 

2,450,521

 

 

2,974,922

 

Less accumulated depreciation

 

 

 

 

(254,642)

 

 

(369,320)

 

Property and equipment, net

 

 

 

$

2,195,879

 

 

2,605,602

 

 

(f)Impairment of Long‑Lived Assets

 

We evaluate our long‑lived assets for impairment when events or changes in circumstances indicate that the related carrying values of the assets may not be recoverable.  Generally, the basis for making such assessments are undiscounted future cash flows projections for the asset group being assessed.  If the carrying values of the assets are deemed not recoverable, the carrying values are reduced to the estimated fair value, which are based on discounted future cash flows using assumptions as to revenues, costs and discount rates typical of third party market participants, which is a Level 3 fair value measurement. 

 

During the year ended December 31, 2017, we recorded a $23.4 million impairment charge for the carrying value of property and equipment related to condensate gathering lines which Antero Resources no longer uses. These lines were part of our gathering and processing segment.

 

(g)Asset Retirement Obligations

 

We are under no legal obligations, neither contractually nor under the doctrine of promissory estoppel, to restore or dismantle our gathering pipelines, compressor stations, water delivery pipelines and water treatment facility upon abandonment. Our gathering pipelines, compressor stations and fresh water delivery pipelines and facilities have an indeterminate life, if properly maintained. Accordingly, we are not able to make a reasonable estimate of when future dismantlement and removal dates of our pipelines, compressor stations and facilities will occur. It has been determined by our operational management team that abandoning all other ancillary equipment, outside of the assets stated above, would require minimal costs. For the reasons stated above, we have not recorded asset retirement obligations at December 31, 2016 or 2017.

 

(h)Litigation and Other Contingencies

 

An accrual is recorded for a loss contingency when its occurrence is probable and damages can be reasonably estimated based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes. We regularly review contingencies to determine the adequacy of our accruals and related disclosures. The ultimate amount of losses, if any, may differ from these estimates.

 

We accrue losses associated with environmental obligations when such losses are probable and can be reasonably estimated. Accruals for estimated environmental losses are recognized no later than at the time a remediation feasibility study, or an evaluation of response options, is complete. These accruals are adjusted as additional information becomes available or as circumstances change. Future environmental expenditures are not discounted to their present value. Recoveries of environmental costs from other parties are recorded separately as assets at their undiscounted value when receipt of such recoveries is probable.

 

As of December 31, 2016 and 2017, we have no recorded liabilities for litigation, environmental, or other contingencies.

 

(i)Equity‑Based Compensation

 

Our consolidated financial statements reflect various equity-based compensation awards granted by Antero Resources, as well as compensation expense associated with our own plan. These awards include profits interests awards, restricted stock, stock options, restricted units, and phantom units. We recognized expense in each period for an amount allocated from Antero Resources, with the offset included in partners’ capital. See Note 3—Transactions with Affiliates for additional information regarding Antero Resources’ allocation of expenses to us.

 

In connection with our Initial Public Offering (“IPO”), the Antero Midstream Partners LP Long-Term Incentive Plan (“Midstream LTIP”) was adopted, pursuant to which certain non-employee directors of our general partner and certain officers, employees and consultants of our general partner and its affiliates are eligible to receive awards representing equity interests in the Partnership. An aggregate of 10,000,000 common units may be delivered pursuant to awards under the Midstream LTIP, subject to customary adjustments. For accounting purposes, these units are treated as if they are distributed from us to Antero Resources. Antero Resources recognizes compensation expense for the units awarded to its employees and a portion of that expense is allocated to us. See Note 6—Equity-Based Compensation.

 

(j)Income Taxes

 

Our consolidated financial statements do not include a provision for income taxes as we are treated as a partnership for federal and state income tax purposes, with each partner being separately taxed on its distributive share of our items of income, gain, loss, or deduction.

 

(k)Fair Value Measures

 

The Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, clarifies the definition of fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance also relates to all nonfinancial assets and liabilities that are not recognized or disclosed on a recurring basis (e.g., the initial recognition of asset retirement obligations and impairments of long‑lived assets). The fair value is the price that we estimate would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to prioritize inputs to valuation techniques used to estimate fair value. An asset or liability subject to the fair value requirements is categorized within the hierarchy based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The highest priority (Level 1) is given to unadjusted quoted market prices in active markets for identical assets or liabilities, and the lowest priority (Level 3) is given to unobservable inputs. Level 2 inputs are data, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly.

 

The carrying values on our balance sheet of our cash and cash equivalents, accounts receivable—Antero Resources, accounts receivable—third party, prepaid expenses, other assets, accounts payable, accounts payable—Antero Resources, accrued liabilities, other current liabilities, other liabilities and the revolving credit facility approximate fair values due to their short-term maturities.

 

(l)Investments in Unconsolidated Entities

 

The Partnership uses the equity method to account for its investments in companies if the investment provides the Partnership with the ability to exercise significant influence over, but not control, the operating and financial policies of the investee. The Partnership’s consolidated net income includes the Partnership’s proportionate share of the net income or loss of such companies. The Partnership’s judgment regarding the level of influence over each equity method investee includes considering key factors such as the Partnership’s ownership interest, representation on the board of directors and participation in policy-making decisions of the investee and material intercompany transactions. See Note 11–Equity Method Investments.

 

(m)Recently Adopted Accounting Pronouncement

 

On August 26, 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which removes diversity in practice for how certain cash receipts and payments are presented and classified in the statement of cash flows, including the presentation of distributions received from equity method investees.  We elected to early adopt the standard during 2017.

 

As permitted by this standard we made an accounting policy election to account for distributions received from equity method investees under the “nature of the distribution” approach.  Under the nature of the distribution approach, distributions received from equity method investees are classified on the basis of the nature of the activity or activities of the investee that generated the distribution as either a return on investment (classified as cash inflows from operating activities) or a return of investment (classified as cash inflows from investing activities).  No changes were necessary to our historical financial statements as a result of adopting ASU No. 2016-15.

 

Transactions with Affiliates
Transactions with Affiliates

(3)  Transactions with Affiliates

 

(a)Revenues

 

All revenues earned, except revenues earned from third parties, were earned from Antero Resources, under various agreements for gathering and compression, water handling and treatment services and seconded employees. 

 

(b)Accounts receivable—Antero Resources, and Accounts payable—Antero Resources

 

Accounts receivable—Antero Resources represents amounts due from Antero Resources, primarily related to gathering and compression services and water handling and treatment services. Accounts payable—Antero Resources represents amounts due to Antero Resources for general and administrative and other costs.

 

(c)Allocation of Costs

 

The employees supporting our operations are employees of Antero Resources. Direct operating expense includes allocated costs of $3.0 million, $4.0 million and $6.4 million during the years ended December 31, 2015, 2016, and 2017, respectively, related to labor charges for Antero Resources employees associated with the operation of our assets. General and administrative expense includes allocated costs of $44.2 million, $49.6 million and $54.1 million during the years ended December 31, 2015, 2016, and 2017, respectively. These costs relate to: (i) various business services, including payroll processing, accounts payable processing and facilities management, (ii) various corporate services, including legal, accounting, treasury, information technology and human resources and (iii) compensation, including equity-based compensation (see Note 6—Equity-Based Compensation for more information). These expenses are charged or allocated to us based on the nature of the expenses and are allocated based on a combination of our proportionate share of gross property and equipment, capital expenditures and labor costs, as applicable. We reimburse Antero Resources directly for all general and administrative costs allocated to us, with the exception of noncash equity compensation allocated to the Partnership for awards issued under the Antero Resources long-term incentive plan or the Midstream LTIP.

 

Long-term Debt
Long-term Debt

(4)  Long‑term Debt

 

Long-term debt was as follows at December 31, 2016 and 2017 (in thousands):

 

 

 

 

 

 

 

 

 

 

December 31,

 

    

2016

    

2017

Credit Facility (a)

 

$

210,000

 

 

555,000

5.375% senior notes due 2024 (b)

 

 

650,000

 

 

650,000

Net unamortized debt issuance costs

 

 

(10,086)

 

 

(9,000)

 

 

$

849,914

 

 

1,196,000

(a)Revolving Credit Facility

 

On October 26, 2017, we entered into a restated and amended senior revolving credit facility. The facility was amended to include a fall away covenants and lower interest rates that is triggered if and when we are assigned an investment grade credit rating by either Standard and Poor’s or Moody’s.

 

Lender commitments under our new facility remained at $1.5 billion. The maturity date of the facility was extended from November 2019 to October 26, 2022. At December 31, 2017, we had borrowings of $555 million and no letters of credit outstanding under the Credit Facility. Under the Credit Facility, “Investment Grade Period” is a period that, as long as no event of default has occurred and the Partnership is in pro forma compliance with the financial covenants under the Credit Facility, commences when the Partnership elects to give notice to the Administrative Agent that the Partnership has received at least one of either (i) a BBB- or better rating from Standard and Poor’s or (ii) a Baa3 or better from Moody’s (provided that the non-investment grade rating from the other rating agency is at least either Ba1 if Moody’s or BB+ if Standard and Poor’s (an “Investment Grade Rating”)). An Investment Grade Period can end at the Partnership’s election.    

 

During a period that is not an Investment Grade Period, the Credit Facility is ratably secured by mortgages on substantially all of our properties, including the properties of our subsidiaries, and guarantees from our subsidiaries. During an Investment Grade Period, the liens securing the obligations thereunder shall be automatically released (subject to the provisions of the Credit Facility).

 

The revolving credit facility contains certain covenants including restrictions on indebtedness, and requirements with respect to leverage and interest coverage ratios; provided, however, that during an Investment Grade Period, such covenants become less restrictive on the Partnership. The revolving credit facility permits distributions to the holders of our equity interests in accordance with the cash distribution policy adopted by the board of directors of our general partner in connection with the Partnership’s initial public offering, provided that no event of default exists or would be caused thereby, and only to the extent permitted by our organizational documents. The Partnership was in compliance with all of the financial covenants under the Credit Facility as of December 31, 2016 and 2017.

 

Principal amounts borrowed are payable on the maturity date with such borrowings bearing interest that is payable quarterly or, in the case of Eurodollar Rate Loans, at the end of the applicable interest period if shorter than six months. Interest is payable at a variable rate based on LIBOR or the base rate, determined by election at the time of borrowing.  Interest at the time of borrowing is determined with reference to (i) during any period that is not an Investment Grade Period, the Partnership’s then-current leverage ratio and (ii) during an Investment Grade Period, with reference to the rating given to the Partnership by Moody’s or Standard and Poor’s.  During an Investment Grade Period, the applicable margin rates are reduced by 25 basis points.  Commitment fees on the unused portion of the revolving credit facility are due quarterly at rates ranging from 0.25% to 0.375% based on the leverage ratio, during a period that is not an Investment Grade Period, and 0.175% to 0.375% based on the Partnership’s rating during an Investment Grade Period.

 

At December 31, 2016 and 2017, we had borrowings under the Credit Facility of $210 million and $555 million, respectively, with a weighted average interest rate of 2.23% and 2.81%, respectively.  No letters of credit were outstanding at December 31, 2016 or 2017 under the Credit Facility.

 

(b)5.375% Senior Notes Due 2024

 

On September 13, 2016, the Partnership and its wholly-owned subsidiary, Finance Corp, as co-issuers, issued $650 million in aggregate principal amount of 5.375% senior notes due September 15, 2024 (the “2024 Notes”) at par. The 2024 Notes are unsecured and effectively subordinated to the revolving credit facility to the extent of the value of the collateral securing the revolving credit facility. The 2024 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by the Partnership’s wholly-owned subsidiaries (other than Finance Corp) and certain of its future restricted subsidiaries. Interest on the 2024 Notes is payable on March 15 and September 15 of each year. The Partnership may redeem all or part of the 2024 Notes at any time on or after September 15, 2019 at redemption prices ranging from 104.031% on or after September 15, 2019 or 100.00% on or after September 15, 2022. In addition, prior to September 15, 2019, the Partnership may redeem up to 35% of the aggregate principal amount of the 2024 Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 105.375% of the principal amount of the 2024 Notes, plus accrued and unpaid interest. At any time prior to September 15, 2019, the Partnership may also redeem the 2024 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2024 Notes plus  “make-whole” premium and accrued and unpaid interest. If the Partnership undergoes a change of control, the holders of the 2024 Notes will have the right to require the Partnership to repurchase all or a portion of the notes at a price equal to 101% of the principal amount of the 2024 Notes, plus accrued and unpaid interest.

Accrued Liabilities
Accrued Liabilities

(5)  Accrued Liabilities

 

Accrued liabilities as of December 31, 2016 and 2017 consisted of the following items (in thousands):

 

 

 

 

 

 

 

 

 

December 31,

 

    

2016

    

2017

Capital expenditures

 

$

35,608

 

 

63,286

Operating expenses

 

 

14,582

 

 

29,905

Interest expense

 

 

10,613

 

 

10,508

Other

 

 

838

 

 

2,307

 

 

$

61,641

 

 

106,006

 

Equity-Based Compensation
Equity-Based Compensation

(6)  Equity-Based Compensation

 

Our general and administrative expenses include equity-based compensation costs allocated to us by Antero Resources for grants made pursuant to Antero Resources’ long-term incentive plan and the Midstream LTIP.  Equity‑based compensation expense allocated to us was $22.5 million, $26.0 million and $27.3 million for the years ended December 31, 2015, 2016 and 2017, respectively. These expenses were allocated to us based on our proportionate share of Antero Resources’ labor costs. Antero Resources has unamortized expense totaling approximately $112.0 million as of December 31, 2017 related to its various equity-based compensation plans, which includes the Midstream LTIP. A portion of this will be allocated to us as it is amortized over the remaining service period of the related awards. The Partnership does not reimburse Antero Resources for noncash equity compensation allocated to it for awards issued under the Antero Resources long-term incentive plan or the Midstream LTIP.

 

Midstream LTIP

 

Our general partner manages our operations and activities and Antero Resources employs the personnel who provide support to our operations. In connection with the IPO, our general partner adopted the Midstream LTIP, pursuant to which non‑employee directors of our general partner and certain officers, employees and consultants of our general partner and its affiliates are eligible to receive awards representing ownership interests in the Partnership. An aggregate of 10,000,000 common units may be delivered pursuant to awards under the Midstream LTIP, subject to customary adjustments.  A total of 7,864,621 common units are available for future grant under the Midstream LTIP as of December 31, 2017. Restricted units and phantom units granted under the Midstream LTIP vest subject to the satisfaction of service requirements, upon the completion of which common units in the Partnership are delivered to the holder of the restricted units or phantom units. Compensation related to each restricted unit and phantom unit award is recognized on a straight-line basis over the requisite service period of the entire award.  The grant date fair values of these awards are determined based on the closing price of the Partnership’s common units on the date of grant. These units are accounted for as if they are distributed by the Partnership to Antero Resources. Antero Resources recognizes compensation expense for the units awarded and a portion of that expense is allocated to the Partnership. Antero Resources allocates equity-based compensation expense to the Partnership based on our proportionate share of Antero Resources’ labor costs. The Partnership’s portion of the equity-based compensation expense is included in general and administrative expenses, and recorded as a credit to the applicable classes of partners’ capital.

 

A summary of restricted unit and phantom unit awards activity during the year ended December 31, 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted
average

 

Aggregate

 

 

    

Number of
units

    

grant date
fair value

    

intrinsic value
(in thousands)

 

Total awarded and unvested—December 31, 2016

 

1,331,961

 

$

27.31

 

$

41,131

 

Granted

 

377,660

 

$

32.52

 

 

 

 

Vested

 

(558,525)

 

$

28.00

 

 

 

 

Forfeited

 

(108,133)

 

$

28.63

 

 

 

 

Total awarded and unvested—December 31, 2017

 

1,042,963

 

$

28.69

 

$

30,288

 

 

Intrinsic values are based on the closing price of the Partnership’s common units on the referenced dates.  Midstream LTIP unamortized expense of $25.0 million at December 31, 2017 is expected to be recognized over a weighted average period of approximately 2.0 years and our proportionate share will be allocated to us as it is recognized. We paid $5.9 million in minimum statutory tax withholdings for restricted and phantom units that vested during 2017, which is included in the “Issuance of common units upon vesting of equity-based compensation awards, net of units withheld for income taxes” line item in the Consolidated Statements of Partners’ Capital.

Partnership Equity and Distributions
Partnership Equity and Distributions

(7)  Partnership Equity and Distributions

 

Our Minimum Quarterly Distribution

 

Our partnership agreement provides for a minimum quarterly distribution of $0.17 per unit for each quarter, or $0.68 per unit on an annualized basis.

 

If cash distributions to our unitholders exceed $0.1955 per common unit in any quarter, our unitholders and the holders of our incentive distribution rights (“IDRs”), will receive distributions according to the following percentage allocations:

 

 

 

 

 

 

 

 

 

Marginal Percentage

 

 

 

Interest in

 

 

 

Distributions

 

Total Quarterly Distribution

 

 

 

Holders of

 

Target Amount

    

Unitholders

    

IDRs

 

above $0.1955 up to $0.2125

    

85

%  

15

%

above $0.2125 up to $0.2550

 

75

%  

25

%

above $0.2550

 

50

%  

50

%

 

General Partner Interest

 

Our general partner owns a non‑economic general partner interest in us, which does not entitle it to receive cash distributions. However, our general partner is under common control with the holder of the IDRs and may in the future own common units or other equity interests in us and will be entitled to receive distributions on any such interests.

 

Upon payment of the February 8, 2017 distribution to unitholders, the requirements for the conversion of all subordinated units were satisfied under our partnership agreement. As a result, effective February 9, 2017, the 75,940,957 subordinated units owned by Antero Resources were converted into common units on a one-for-one basis and now participate on terms equal with all other common units in distributions of available cash. The conversion did not impact the amount of the cash distributions paid by the Partnership or the total units outstanding, as shown on the “Conversion of subordinated units to common units” line item on our consolidated Statement of Partners’ Capital.

 

Cash Distributions

 

The board of directors of our general partner has declared a cash distribution of $0.365 per unit for the quarter ended December 31, 2017. The distribution was paid on February 13, 2018 to unitholders of record as of February 1, 2018.

The following table details the amount of quarterly distributions the Partnership paid for each of its partnership interests, with respect to the quarter indicated (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions

 

 

 

 

 

 

 

 

 

Limited Partners

 

 

 

 

 

 

 

 

 

Quarter
and
Year

    

Record Date

    

Distribution Date

    

Common
unitholders

    

Subordinated
unitholders

    

Holder of IDRs

    

Total

  

Distributions
per limited
partner unit

Q4 2015

 

February 15, 2016

 

February 29, 2016

 

$

22,048

 

 

16,708

 

 

969

 

 

39,725

 

$

0.2200

Q1 2016

 

May 11, 2016

 

May 25, 2016

 

 

23,556

 

 

17,846

 

 

1,850

 

 

43,252

 

 

0.2350

Q2 2016

 

August 10, 2016

 

August 24, 2016

 

 

25,059

 

 

18,985

 

 

2,731

 

 

46,775

 

 

0.2500

Q3 2016

 

November 10, 2016

 

November 24, 2016

 

 

26,901

 

 

20,124

 

 

4,820

 

 

51,845

 

 

0.2650

*

 

November 12, 2016

 

November 18, 2016

 

 

849

 

 

 —

 

 

 —

 

 

849

 

 

*

 

 

Total 2016

 

 

 

$

98,413

 

 

73,663

 

 

10,370

 

 

182,446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q4 2016

 

February 1, 2017

 

February 8, 2017

 

$

50,090

 

 

 —

 

 

7,543

 

 

57,633

 

$

0.2800

*

 

April 21, 2017

 

April 30, 2017

 

 

75

 

 

 —

 

 

 —

 

 

75

 

 

*

Q1 2017

 

May 3, 2017

 

May 10, 2017

 

 

55,753

 

 

 —

 

 

11,553

 

 

67,306

 

 

0.3000

Q2 2017

 

August 3, 2017

 

August 16, 2017

 

 

59,695

 

 

 —

 

 

15,328

 

 

75,023

 

 

0.3200

Q3 2017

 

November 1, 2017

 

November 16, 2017

 

 

63,454

 

 

 —

 

 

19,067

 

 

82,521

 

 

0.3400

*

 

November 12, 2017

 

November 17, 2017

 

 

1,392

 

 

 —

 

 

 —

 

 

1,392

 

 

*

 

 

Total 2017

 

 

 

$

230,459

 

 

 -

 

 

53,491

 

 

283,950

 

 

 


*Distribution equivalent rights on limited partner common units that vested under the Midstream LTIP.

 

Net Income Per Limited Partner Unit
Net Income Per Limited Partner Unit

(8)  Net Income Per Limited Partner Unit

 

The Partnership’s net income is attributed to the general partner and limited partners in accordance with their respective ownership percentages, and when applicable, giving effect to incentive distributions paid to the general partner. Basic and diluted net income per limited partner unit is calculated by dividing limited partners’ interest in net income, less general partner incentive distributions, by the weighted average number of outstanding limited partner units during the period.

 

We compute earnings per unit using the two-class method for master limited partnerships. Under the two-class method, earnings per unit is calculated as if all of the earnings for the period were distributed under the terms of the partnership agreement, regardless of whether the general partner has discretion over the amount of distributions to be made in any particular period, whether those earnings would actually be distributed during a particular period from an economic or practical perspective, or whether the general partner has other legal or contractual limitations on its ability to pay distributions that would prevent it from distributing all of the earnings for a particular period.

 

We calculate net income available to limited partners based on the distributions pertaining to the current period’s net income. After adjusting for the appropriate period’s distributions, the remaining undistributed earnings or excess distributions over earnings, if any, are attributed to the general partner and limited partners in accordance with the contractual terms of the partnership agreement under the two-class method.

 

Basic earnings per unit is computed by dividing net earnings attributable to unitholders by the weighted average number of units outstanding during each period. Diluted net income per limited partner unit reflects the potential dilution that could occur if agreements to issue common units, such as awards under long-term incentive plans, were exercised, settled or converted into common units. When it is determined that potential common units resulting from an award should be included in the diluted net income per limited partner unit calculation, the impact is reflected by applying the treasury stock method. Earnings per common unit assuming dilution for the year ended December 31, 2017 was calculated based on the diluted weighted average number of units outstanding of 186,082,898, including 453,035 dilutive units attributable to non-vested restricted unit and phantom unit awards. For the year ended December 31, 2017, there were no non-vested phantom unit and restricted unit awards that were anti-dilutive and therefore excluded from the calculation of diluted earnings per unit.

 

The Partnership’s calculation of net income per unit for the periods indicated is as follows (in thousands, except per unit data):  

 

 

 

 

 

 

 

 

 

 

 

  

 

Year Ended December 31,

 

    

2015

    

2016

    

2017

  

 

 

 

 

 

 

 

 

 

Net income

  

$

159,105

  

 

236,703

  

 

307,315

Less:

 

 

 

 

 

 

 

 

 

Pre-Water Acquisition net income attributed to parent

 

 

(40,193)

 

 

 —

 

 

 —

Net income attributable to incentive distribution rights

 

 

(1,264)

 

 

(16,944)

 

 

(69,720)

Limited partner interest in net income

  

$

117,648

 

 

219,759

 

 

237,595

 

 

 

 

 

 

 

 

 

 

Net income per limited partner unit - basic and diluted

 

$

0.74

 

 

1.24

 

 

1.28

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units outstanding - basic

 

 

158,479

 

 

176,647

 

 

185,630

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units outstanding - diluted

 

 

158,527

 

 

176,801

 

 

186,083

 

 

Sale of Common Units
Sale of Common Units

(9)  Sale of Common Units

 

During the third quarter of 2016, the Partnership entered into an Equity Distribution Agreement (the “Distribution Agreement”), pursuant to which the Partnership may sell, from time to time through brokers acting as its sales agents, common units representing distribution limited partner interest having an aggregate offering price of up to $250 million. The program is registered with the Securities and Exchange Commission (the “SEC”) on an effective registration statement on Form S-3. Sales of the common units may be made by means of ordinary brokers’ transactions on the New York Stock Exchange, at market prices, in block transactions, or as otherwise agreed to between the Partnership and the sales agents. Proceeds are expected to be used for general partnership purposes, which may include repayment of indebtedness and funding working capital or capital expenditures. The Partnership is under no obligation to offer and sell common units under the Distribution Agreement.

 

During the year ended December 31, 2017, the Partnership issued and sold 777,262 common units under the Distribution Agreement, resulting in net proceeds of $25.5 million, net of $0.6 million of compensation payable to the sales agents made during the period and $0.4 million of other offering costs. As of December 31, 2017, additional common units under the Distribution Agreement up to an aggregate sales price of $157.3 million were available for issuance.

 

In conjunction with the Joint Venture, on February 10, 2017 we issued 6,900,000 common units, including common units issued pursuant to the underwriters’ option to purchase additional common units, resulting in net proceeds of approximately $223 million (the “Offering”). We used the proceeds from the Offering to repay outstanding borrowings under our Credit Facility incurred to fund the investment in the Joint Venture, and for general partnership purposes.

Fair Value Measurement
Fair Value Measurement

(10) Fair Value Measurement

 

In connection with the Water Acquisition, we have agreed to pay Antero Resources (a) $125 million in cash if the Partnership delivers 176,295,000 barrels or more of fresh water during the period between January 1, 2017 and December 31, 2019 and (b) an additional $125 million in cash if the Partnership delivers 219,200,000 barrels or more of fresh water during the period between January 1, 2018 and December 31, 2020. This contingent consideration liability is valued based on Level 3 inputs related to expected average volumes and weighted average cost of capital.

 

The following table provides a reconciliation of changes in Level 3 financial liabilities measured at fair value on a recurring basis for the periods shown below (in thousands):

 

 

 

 

Contingent acquisition consideration - December 31, 2015

$

178,049

Accretion

 

16,489

Contingent acquisition consideration - December 31, 2016

$

194,538

Accretion and change in fair value

 

13,476

Contingent acquisition consideration - December 31, 2017

$

208,014

 

 

We account for contingent consideration in accordance with applicable accounting guidance pertaining to business combinations. We are contractually obligated to pay Antero Resources contingent consideration in connection with the Water Acquisition, and therefore recorded this contingent consideration liability at the time of the Water Acquisition. We update our assumptions each reporting period based on new developments and adjust such amounts to fair value based on revised assumptions, if applicable, until such consideration is satisfied through payment upon achievement of the specified objectives or it is eliminated upon failure to achieve the specified objectives.

 

As of December 31, 2017, we expect to pay the entire amount of the contingent consideration amounts in 2019 and 2020. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future milestone payments was based on the risk adjusted present value of the contingent consideration payout.

 

The carrying values of accounts receivable and accounts payable at December 31, 2016 and 2017 approximated fair value because of their short-term nature. The carrying value of the amounts under the revolving credit facility at December 31, 2016 and 2017 approximated fair value because the variable interest rates are reflective of current market conditions.

Based on Level 2 market data inputs, the fair value of the Partnership’s 2024 Notes was approximately $669.5 million at December 31, 2017.

Equity Method Investments
Equity Method Investments

(11)Equity Method Investments

 

In the second quarter of 2016, the Partnership exercised its option to purchase a 15% equity interest in Stonewall, which operates the 67-mile Stonewall pipeline on which Antero is an anchor shipper.

On February 6, 2017, we formed the Joint Venture to develop processing and fractionation assets in Appalachia with MarkWest, a wholly owned subsidiary of MPLX. We and MarkWest each own a 50% equity interest in the Joint Venture and MarkWest operates the Joint Venture assets. The Joint Venture assets consist of processing plants in West Virginia, and a one-third interest in a MarkWest fractionator in Ohio.

Our consolidated net income includes the Partnership’s proportionate share of the net income of the Joint Venture and Stonewall. When the Partnership records its proportionate share of net income, it increases equity income in the consolidated statements of operations and comprehensive income and the carrying value of that investment on its balance sheet. When distributions on its proportionate share of net income are received, they are recorded as reductions to the carrying value of the investment on the balance sheet. The Partnership uses the equity method of accounting to account for its investments in Stonewall and the Joint Venture because the Partnership exercises significant influence, but not control, over the entities. Our judgment regarding the level of influence over our equity investments includes considering key factors such as the Partnership’s ownership interest, representation on the board of directors and participation in policy-making decisions of Stonewall and the Joint Venture.

The following table is a reconciliation of our investments in these unconsolidated affiliates (in thousands):

 

 

 

 

 

 

 

 

 

 

 

MarkWest

 

Total Investment in

 

 

Stonewall

 

Joint Venture

 

Unconsolidated Affiliates

Balance at December 31, 2015

$

 —

 

 —

 

 —

Initial investment

 

45,044

 

 —

 

45,044

Additional investments

 

30,472

 

 —

 

30,472

Equity in net income of unconsolidated affiliates

 

485

 

 —

 

485

Distributions from unconsolidated affiliates

 

(7,702)

 

 —

 

(7,702)

Balance at December 31, 2016

 

68,299

 

 —

 

68,299

Initial investment

 

 —

 

153,770

 

153,770

Additional investments

 

 —

 

81,234

 

81,234

Equity in net income of unconsolidated affiliates

 

10,304

 

9,890

 

20,194

Distributions from unconsolidated affiliates

 

(11,475)

 

(8,720)

 

(20,195)

Balance at December 31, 2017

$

67,128

 

236,174

 

303,302

 

Reporting Segments
Reporting Segments

(12) Reporting Segments

 

The Partnership’s operations are located in the United States and are organized into two reporting segments: (1) gathering and processing and (2) water handling and treatment.

 

Gathering and Processing

 

The gathering and processing segment includes a network of gathering pipelines and compressor stations that collect and process production from Antero Resources’ wells in West Virginia and Ohio. The gathering and processing segment also includes income from processing and fractionation plants through our equity in the Joint Venture with MarkWest.

 

Water Handling and Treatment

 

The Partnership’s water handling and treatment segment includes two independent systems that deliver fresh water from sources including the Ohio River, local reservoirs as well as several regional waterways. The segment also includes a wastewater treatment facility that is currently undergoing testing and commissioning. The water handling and treatment segment also includes other fluid handling services which includes, high rate transfer, wastewater transportation, disposal and treatment. See Note 2 – Summary of Significant Accounting Policies, Property and Equipment.

 

These segments are monitored separately by management for performance and are consistent with internal financial reporting. These segments have been identified based on the differing products and services, regulatory environment and the expertise required for these operations. We evaluate the performance of the Partnership’s business segments based on operating income. Interest expense is primarily managed and evaluated on a consolidated basis.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Water

 

 

 

 

 

  

Gathering and

  

Handling and

  

Consolidated

 

 

    

Processing

    

Treatment

    

Total

 

Year ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

230,210

 

 

155,954

 

 

386,164

 

Revenue - third-party

 

 

382

 

 

778

 

 

1,160

 

Total revenues

 

$

230,592

 

 

156,732

 

 

387,324

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Direct operating

 

 

25,783

 

 

53,069

 

 

78,852

 

General and administrative (before equity-based compensation)

 

 

22,608

 

 

6,128

 

 

28,736

 

Equity-based compensation

 

 

17,840

 

 

4,630

 

 

22,470

 

Depreciation

 

 

60,838

 

 

25,832

 

 

86,670

 

Accretion of contingent acquisition consideration

 

 

 —

 

 

3,333

 

 

3,333

 

Total expenses

 

 

127,069

 

 

92,992

 

 

220,061

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

103,523

 

 

63,740

 

 

167,263

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,428,796

 

 

551,236

 

 

1,980,032

 

Additions to property and equipment

 

$

320,002

 

 

132,633

 

 

452,635

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

303,250

 

 

282,267

 

 

585,517

 

Revenue - third-party

 

 

835

 

 

 —

 

 

835

 

Gain on sale of assets

 

 

3,859

 

 

 —

 

 

3,859

 

Total revenues

 

 

307,944

 

 

282,267

 

 

590,211

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Direct operating

 

 

27,289

 

 

134,298

 

 

161,587

 

General and administrative (before equity-based compensation)

 

 

20,118

 

 

7,996

 

 

28,114

 

Equity-based compensation

 

 

19,714

 

 

6,335

 

 

26,049

 

Depreciation

 

 

69,962

 

 

29,899

 

 

99,861

 

Accretion of contingent acquisition consideration

 

 

 —

 

 

16,489

 

 

16,489

 

Total expenses

 

 

137,083

 

 

195,017

 

 

332,100

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

170,861

 

 

87,250

 

 

258,111

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

485

 

 

 —

 

 

485

 

Total assets

 

$

1,734,208

 

 

615,687

 

 

2,349,895

 

Additions to property and equipment

 

$

228,100

 

 

188,220

 

 

416,320

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

396,202

 

 

376,031

 

 

772,233

 

Revenue - third-party

 

 

264

 

 

 —

 

 

264

 

Total revenues

 

 

396,466

 

 

376,031

 

 

772,497

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Direct operating

 

 

39,251

 

 

193,287

 

 

232,538

 

General and administrative (before equity-based compensation)

 

 

20,607

 

 

10,922

 

 

31,529

 

Equity-based compensation

 

 

19,730

 

 

7,553

 

 

27,283

 

Impairment of property and equipment

 

 

23,431

 

 

 —

 

 

23,431

 

Depreciation

 

 

86,372

 

 

33,190

 

 

119,562

 

Accretion of contingent acquisition consideration

 

 

 —

 

 

13,476

 

 

13,476

 

Total expenses

 

 

189,391

 

 

258,428

 

 

447,819

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

207,075

 

 

117,603

 

 

324,678

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

20,194

 

 

 —

 

 

20,194

 

Total assets

 

$

2,237,913

 

 

804,296

 

 

3,042,209

 

Additions to property and equipment

 

$

346,217

 

 

195,162

 

 

541,379

 

 

Quarterly Financial Information (Unaudited)
Quarterly Financial Information (Unaudited)

(13) Quarterly Financial Information (Unaudited)

 

Our quarterly financial information for the years ended December 31, 2016 and 2017 is as follows (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First

 

Second

 

Third

 

Forth

 

 

    

quarter

    

quarter

    

quarter

    

quarter

 

Year ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating revenues

 

$

136,072

 

 

136,810

 

 

150,475

 

 

166,854

 

Total operating expenses

 

 

89,452

 

 

83,503

 

 

76,192

 

 

82,953

 

Operating income

 

 

46,620

 

 

53,307

 

 

74,283

 

 

83,901

 

Net income

 

 

42,916

 

 

49,912

 

 

70,524

 

 

73,351

 

Less: general partner's interest in net income

 

 

(1,850)

 

 

(2,731)

 

 

(4,806)

 

 

(7,557)

 

Net income attributable to limited partner units

 

$

41,066

 

 

47,181

 

 

65,718

 

 

65,794

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per limited partner unit - basic and diluted

 

$

0.23

 

 

0.27

 

 

0.37

 

 

0.37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating revenues

 

$

174,770

 

 

193,766

 

 

193,629

 

 

210,332

 

Total operating expenses(1)

 

 

93,073

 

 

101,199

 

 

110,458

 

 

143,089

 

Operating income

 

 

81,697

 

 

92,567

 

 

83,171

 

 

67,243

 

Net income

 

 

75,092

 

 

87,175

 

 

80,893

 

 

64,155

 

Less: general partner's interest in net income

 

 

(11,553)

 

 

(15,328)

 

 

(19,067)

 

 

(23,772)

 

Net income attributable to limited partner units

 

$

63,539

 

 

71,847

 

 

61,826

 

 

40,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per limited partner unit - basic and diluted

 

$

0.35

 

 

0.39

 

 

0.33

 

 

0.22

 


(1)Operating expenses in the fourth quarter of 2017 include $23 million of impairment on certain condensate gathering lines that Antero Resources no longer uses.

Summary of Significant Accounting Policies (Policies)

(a) Basis of Presentation

 

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).  In the opinion of management, these statements include all adjustments considered necessary for a fair presentation of the Partnership’s financial position as of December 31, 2016 and 2017, and the results of our operations and our cash flows for the years ended December 31, 2015, 2016, and 2017.  The combined consolidated statements of operations and comprehensive income, partners’ capital, and cash flows for 2015 have been prepared on a combined basis of accounting. The Partnership has no items of other comprehensive income or loss; therefore, net income is identical to comprehensive income.

 

Certain costs of doing business incurred by Antero Resources on our behalf have been reflected in the accompanying consolidated financial statements. These costs include general and administrative expenses attributed to us by Antero Resources in exchange for:

 

business services, such as payroll, accounts payable and facilities management;

 

corporate services, such as finance and accounting, legal, human resources, investor relations and public and regulatory policy; and

 

employee compensation, including equity‑based compensation.

 

Transactions between us and Antero Resources have been identified in the consolidated financial statements (see Note 3 – Transactions with Affiliates).

 

As of the date these consolidated financial statements were filed with the SEC, we completed our evaluation of potential subsequent events for disclosure and no items requiring disclosure were identified, except the declaration of a cash distribution to unitholders, as described in Note 7  – Partnership Equity and Distributions.

(b)Revenue Recognition

 

We provide gathering and compression and water handling and treatment services under fee-based contracts primarily based on throughput or at cost plus a margin. Under these arrangements, we receive fees for gathering oil and gas products, compression services, and water handling and treatment services. The revenue we earn from these arrangements is directly related to (1) in the case of natural gas gathering and compression, the volumes of metered natural gas that we gather, compress and deliver to natural gas compression sites or other transmission delivery points, (2) in the case of oil gathering, the volumes of metered oil that we gather and deliver to other transmission delivery points, (3) in the case of fresh water services, the quantities of fresh water delivered to our customers for use in their well completion operations, (4) in the case of wastewater treatment services, the quantities of wastewater treated for our customers, or (5) in the case of flowback and produced water, the third party out-of-pocket costs plus 3%. We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an agreement exists, (2) services have been rendered, (3) prices are fixed or determinable and (4) collectability is reasonably assured.

(c)Use of Estimates

 

The preparation of the consolidated financial statements and notes in conformity with GAAP requires that management formulate estimates and assumptions that affect revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities. Items subject to estimates and assumptions include the useful lives of property and equipment and valuation of accrued liabilities, among others. Although management believes these estimates are reasonable, actual results could differ from these estimates.

(d)Cash and Cash Equivalents

 

Prior to September 23, 2015 Antero Water was owned and funded by Antero Resources. Net amounts funded by Antero Resources are reflected as “Deemed distribution to Antero Resources, net” on the accompanying Statements of Consolidated Cash Flows.

 

We consider all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments.

(e)Property and Equipment

 

Property and equipment primarily consists of gathering pipelines, compressor stations and fresh water delivery pipelines and facilities stated at historical cost less accumulated depreciation. We capitalize construction-related direct labor and material costs. We also capitalize interest on capital costs during the construction phase of the water treatment facility, currently undergoing testing and commissioning. We capitalized interest of $4 million and $12 million for the years ended December 31, 2016 and 2017, respectively. Maintenance and repair costs are expensed as incurred.

 

Depreciation is computed using the straight-line method over the estimated useful lives and salvage values of assets. The depreciation of fixed assets recorded under capital lease agreements is included in depreciation expense. Uncertainties that may impact these estimates of useful lives include, among others, changes in laws and regulations relating to environmental matters, including air and water quality, restoration and abandonment requirements, economic conditions, and supply and demand for our services in the areas in which we operate. When assets are placed into service, management makes estimates with respect to useful lives and salvage values that management believes are reasonable. However, subsequent events could cause a change in estimates, thereby impacting future depreciation amounts.

 

Our investment in property and equipment for the periods presented is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

December 31,

 

 

    

useful lives

    

2016

    

2017

 

Land

 

n/a

 

$

11,338

 

 

15,382

 

Fresh water surface pipelines and equipment

 

5 years

 

 

39,562

 

 

46,139

 

Above ground storage tanks

 

10 years

 

 

4,301

 

 

4,301

 

Fresh water permanent buried pipelines and equipment

 

20 years

 

 

443,453

 

 

472,810

 

Gathering systems and facilities

 

20 years

 

 

1,551,771

 

 

1,781,386

 

Construction-in-progress

 

n/a

 

 

400,096

 

 

654,904

 

Total property and equipment

 

 

 

 

2,450,521

 

 

2,974,922

 

Less accumulated depreciation

 

 

 

 

(254,642)

 

 

(369,320)

 

Property and equipment, net

 

 

 

$

2,195,879

 

 

2,605,602

 

 

(f)Impairment of Long‑Lived Assets

 

We evaluate our long‑lived assets for impairment when events or changes in circumstances indicate that the related carrying values of the assets may not be recoverable.  Generally, the basis for making such assessments are undiscounted future cash flows projections for the asset group being assessed.  If the carrying values of the assets are deemed not recoverable, the carrying values are reduced to the estimated fair value, which are based on discounted future cash flows using assumptions as to revenues, costs and discount rates typical of third party market participants, which is a Level 3 fair value measurement. 

 

During the year ended December 31, 2017, we recorded a $23.4 million impairment charge for the carrying value of property and equipment related to condensate gathering lines which Antero Resources no longer uses. These lines were part of our gathering and processing segment.

(g)Asset Retirement Obligations

 

We are under no legal obligations, neither contractually nor under the doctrine of promissory estoppel, to restore or dismantle our gathering pipelines, compressor stations, water delivery pipelines and water treatment facility upon abandonment. Our gathering pipelines, compressor stations and fresh water delivery pipelines and facilities have an indeterminate life, if properly maintained. Accordingly, we are not able to make a reasonable estimate of when future dismantlement and removal dates of our pipelines, compressor stations and facilities will occur. It has been determined by our operational management team that abandoning all other ancillary equipment, outside of the assets stated above, would require minimal costs. For the reasons stated above, we have not recorded asset retirement obligations at December 31, 2016 or 2017.

(h)Litigation and Other Contingencies

 

An accrual is recorded for a loss contingency when its occurrence is probable and damages can be reasonably estimated based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes. We regularly review contingencies to determine the adequacy of our accruals and related disclosures. The ultimate amount of losses, if any, may differ from these estimates.

 

We accrue losses associated with environmental obligations when such losses are probable and can be reasonably estimated. Accruals for estimated environmental losses are recognized no later than at the time a remediation feasibility study, or an evaluation of response options, is complete. These accruals are adjusted as additional information becomes available or as circumstances change. Future environmental expenditures are not discounted to their present value. Recoveries of environmental costs from other parties are recorded separately as assets at their undiscounted value when receipt of such recoveries is probable.

 

As of December 31, 2016 and 2017, we have no recorded liabilities for litigation, environmental, or other contingencies.

 

(i)Equity‑Based Compensation

 

Our consolidated financial statements reflect various equity-based compensation awards granted by Antero Resources, as well as compensation expense associated with our own plan. These awards include profits interests awards, restricted stock, stock options, restricted units, and phantom units. We recognized expense in each period for an amount allocated from Antero Resources, with the offset included in partners’ capital. See Note 3—Transactions with Affiliates for additional information regarding Antero Resources’ allocation of expenses to us.

 

In connection with our Initial Public Offering (“IPO”), the Antero Midstream Partners LP Long-Term Incentive Plan (“Midstream LTIP”) was adopted, pursuant to which certain non-employee directors of our general partner and certain officers, employees and consultants of our general partner and its affiliates are eligible to receive awards representing equity interests in the Partnership. An aggregate of 10,000,000 common units may be delivered pursuant to awards under the Midstream LTIP, subject to customary adjustments. For accounting purposes, these units are treated as if they are distributed from us to Antero Resources. Antero Resources recognizes compensation expense for the units awarded to its employees and a portion of that expense is allocated to us. See Note 6—Equity-Based Compensation.

(j)Income Taxes

 

Our consolidated financial statements do not include a provision for income taxes as we are treated as a partnership for federal and state income tax purposes, with each partner being separately taxed on its distributive share of our items of income, gain, loss, or deduction.

 

(k)Fair Value Measures

 

The Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, clarifies the definition of fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance also relates to all nonfinancial assets and liabilities that are not recognized or disclosed on a recurring basis (e.g., the initial recognition of asset retirement obligations and impairments of long‑lived assets). The fair value is the price that we estimate would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to prioritize inputs to valuation techniques used to estimate fair value. An asset or liability subject to the fair value requirements is categorized within the hierarchy based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The highest priority (Level 1) is given to unadjusted quoted market prices in active markets for identical assets or liabilities, and the lowest priority (Level 3) is given to unobservable inputs. Level 2 inputs are data, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly.

 

The carrying values on our balance sheet of our cash and cash equivalents, accounts receivable—Antero Resources, accounts receivable—third party, prepaid expenses, other assets, accounts payable, accounts payable—Antero Resources, accrued liabilities, other current liabilities, other liabilities and the revolving credit facility approximate fair values due to their short-term maturities.

 

(l)Investments in Unconsolidated Entities

 

The Partnership uses the equity method to account for its investments in companies if the investment provides the Partnership with the ability to exercise significant influence over, but not control, the operating and financial policies of the investee. The Partnership’s consolidated net income includes the Partnership’s proportionate share of the net income or loss of such companies. The Partnership’s judgment regarding the level of influence over each equity method investee includes considering key factors such as the Partnership’s ownership interest, representation on the board of directors and participation in policy-making decisions of the investee and material intercompany transactions. See Note 11–Equity Method Investments.

(m)Recently Adopted Accounting Pronouncement

 

On August 26, 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which removes diversity in practice for how certain cash receipts and payments are presented and classified in the statement of cash flows, including the presentation of distributions received from equity method investees.  We elected to early adopt the standard during 2017.

 

As permitted by this standard we made an accounting policy election to account for distributions received from equity method investees under the “nature of the distribution” approach.  Under the nature of the distribution approach, distributions received from equity method investees are classified on the basis of the nature of the activity or activities of the investee that generated the distribution as either a return on investment (classified as cash inflows from operating activities) or a return of investment (classified as cash inflows from investing activities).  No changes were necessary to our historical financial statements as a result of adopting ASU No. 2016-15.

Summary of Significant Accounting Policies (Tables)
Schedule of investment in property and equipment

Our investment in property and equipment for the periods presented is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

December 31,

 

 

    

useful lives

    

2016

    

2017

 

Land

 

n/a

 

$

11,338

 

 

15,382

 

Fresh water surface pipelines and equipment

 

5 years

 

 

39,562

 

 

46,139

 

Above ground storage tanks

 

10 years

 

 

4,301

 

 

4,301

 

Fresh water permanent buried pipelines and equipment

 

20 years

 

 

443,453

 

 

472,810

 

Gathering systems and facilities

 

20 years

 

 

1,551,771

 

 

1,781,386

 

Construction-in-progress

 

n/a

 

 

400,096

 

 

654,904

 

Total property and equipment

 

 

 

 

2,450,521

 

 

2,974,922

 

Less accumulated depreciation

 

 

 

 

(254,642)

 

 

(369,320)

 

Property and equipment, net

 

 

 

$

2,195,879

 

 

2,605,602

 

 

Long-term Debt (Tables)
Schedule of long-term debt

Long-term debt was as follows at December 31, 2016 and 2017 (in thousands):

 

 

 

 

 

 

 

 

 

 

December 31,

 

    

2016

    

2017

Credit Facility (a)

 

$

210,000

 

 

555,000

5.375% senior notes due 2024 (b)

 

 

650,000

 

 

650,000

Net unamortized debt issuance costs

 

 

(10,086)

 

 

(9,000)

 

 

$

849,914

 

 

1,196,000

 

Accrued Liabilities (Tables)
Schedule of accrued liabilities

 

 

 

 

 

 

 

 

 

December 31,

 

    

2016

    

2017

Capital expenditures

 

$

35,608

 

 

63,286

Operating expenses

 

 

14,582

 

 

29,905

Interest expense

 

 

10,613

 

 

10,508

Other

 

 

838

 

 

2,307

 

 

$

61,641

 

 

106,006

 

Equity-Based Compensation (Tables)
Summary of restricted unit and phantom unit awards activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted
average

 

Aggregate

 

 

    

Number of
units

    

grant date
fair value

    

intrinsic value
(in thousands)

 

Total awarded and unvested—December 31, 2016

 

1,331,961

 

$

27.31

 

$

41,131

 

Granted

 

377,660

 

$

32.52

 

 

 

 

Vested

 

(558,525)

 

$

28.00

 

 

 

 

Forfeited

 

(108,133)

 

$

28.63

 

 

 

 

Total awarded and unvested—December 31, 2017

 

1,042,963

 

$

28.69

 

$

30,288

 

 

Partnership Equity and Distributions (Tables)

 

 

 

 

 

 

 

 

Marginal Percentage

 

 

 

Interest in

 

 

 

Distributions

 

Total Quarterly Distribution

 

 

 

Holders of

 

Target Amount

    

Unitholders

    

IDRs

 

above $0.1955 up to $0.2125

    

85

%  

15

%

above $0.2125 up to $0.2550

 

75

%  

25

%

above $0.2550

 

50

%  

50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions

 

 

 

 

 

 

 

 

 

Limited Partners

 

 

 

 

 

 

 

 

 

Quarter
and
Year

    

Record Date

    

Distribution Date

    

Common
unitholders

    

Subordinated
unitholders

    

Holder of IDRs

    

Total

  

Distributions
per limited
partner unit

Q4 2015

 

February 15, 2016

 

February 29, 2016

 

$

22,048

 

 

16,708

 

 

969

 

 

39,725

 

$

0.2200

Q1 2016

 

May 11, 2016

 

May 25, 2016

 

 

23,556

 

 

17,846

 

 

1,850

 

 

43,252

 

 

0.2350

Q2 2016

 

August 10, 2016

 

August 24, 2016

 

 

25,059

 

 

18,985

 

 

2,731

 

 

46,775

 

 

0.2500

Q3 2016

 

November 10, 2016

 

November 24, 2016

 

 

26,901

 

 

20,124

 

 

4,820

 

 

51,845

 

 

0.2650

*

 

November 12, 2016

 

November 18, 2016

 

 

849

 

 

 —

 

 

 —

 

 

849

 

 

*

 

 

Total 2016

 

 

 

$

98,413

 

 

73,663

 

 

10,370

 

 

182,446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q4 2016

 

February 1, 2017

 

February 8, 2017

 

$

50,090

 

 

 —

 

 

7,543

 

 

57,633

 

$

0.2800

*

 

April 21, 2017

 

April 30, 2017

 

 

75

 

 

 —

 

 

 —

 

 

75

 

 

*

Q1 2017

 

May 3, 2017

 

May 10, 2017

 

 

55,753

 

 

 —

 

 

11,553

 

 

67,306

 

 

0.3000

Q2 2017

 

August 3, 2017

 

August 16, 2017

 

 

59,695

 

 

 —

 

 

15,328

 

 

75,023

 

 

0.3200

Q3 2017

 

November 1, 2017

 

November 16, 2017

 

 

63,454

 

 

 —

 

 

19,067

 

 

82,521

 

 

0.3400

*

 

November 12, 2017

 

November 17, 2017

 

 

1,392

 

 

 —

 

 

 —

 

 

1,392

 

 

*

 

 

Total 2017

 

 

 

$

230,459

 

 

 -

 

 

53,491

 

 

283,950

 

 

 


*Distribution equivalent rights on limited partner common units that vested under the Midstream LTIP.

Net Income Per Limited Partner Unit (Tables)
Schedule of net income per common and subordinated unit

The Partnership’s calculation of net income per unit for the periods indicated is as follows (in thousands, except per unit data):  

 

 

 

 

 

 

 

 

 

 

 

  

 

Year Ended December 31,

 

    

2015

    

2016

    

2017

  

 

 

 

 

 

 

 

 

 

Net income

  

$

159,105

  

 

236,703

  

 

307,315

Less:

 

 

 

 

 

 

 

 

 

Pre-Water Acquisition net income attributed to parent

 

 

(40,193)

 

 

 —

 

 

 —

Net income attributable to incentive distribution rights

 

 

(1,264)

 

 

(16,944)

 

 

(69,720)

Limited partner interest in net income

  

$

117,648

 

 

219,759

 

 

237,595

 

 

 

 

 

 

 

 

 

 

Net income per limited partner unit - basic and diluted

 

$

0.74

 

 

1.24

 

 

1.28

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units outstanding - basic

 

 

158,479

 

 

176,647

 

 

185,630

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units outstanding - diluted

 

 

158,527

 

 

176,801

 

 

186,083

 

Fair Value Measurement (Tables)
Schedule of reconciliation of changes in Level 3 financial liabilities measured at fair value on a recurring basis

 

 

The following table provides a reconciliation of changes in Level 3 financial liabilities measured at fair value on a recurring basis for the periods shown below (in thousands):

 

 

 

 

Contingent acquisition consideration - December 31, 2015

$

178,049

Accretion

 

16,489

Contingent acquisition consideration - December 31, 2016

$

194,538

Accretion and change in fair value

 

13,476

Contingent acquisition consideration - December 31, 2017

$

208,014

 

Equity Method Investments (Tables)
Schedule of reconciliation of investments in unconsolidated affiliates

The following table is a reconciliation of our investments in these unconsolidated affiliates (in thousands):

 

 

 

 

 

 

 

 

 

 

 

MarkWest

 

Total Investment in

 

 

Stonewall

 

Joint Venture

 

Unconsolidated Affiliates

Balance at December 31, 2015

$

 —

 

 —

 

 —

Initial investment

 

45,044

 

 —

 

45,044

Additional investments

 

30,472

 

 —

 

30,472

Equity in net income of unconsolidated affiliates

 

485

 

 —

 

485

Distributions from unconsolidated affiliates

 

(7,702)

 

 —

 

(7,702)

Balance at December 31, 2016

 

68,299

 

 —

 

68,299

Initial investment

 

 —

 

153,770

 

153,770

Additional investments

 

 —

 

81,234

 

81,234

Equity in net income of unconsolidated affiliates

 

10,304

 

9,890

 

20,194

Distributions from unconsolidated affiliates

 

(11,475)

 

(8,720)

 

(20,195)

Balance at December 31, 2017

$

67,128

 

236,174

 

303,302

 

Reporting Segments (Tables)
Schedule of financial information concerning the Partnership's segments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Water

 

 

 

 

 

  

Gathering and

  

Handling and

  

Consolidated

 

 

    

Processing

    

Treatment

    

Total

 

Year ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

230,210

 

 

155,954

 

 

386,164

 

Revenue - third-party

 

 

382

 

 

778

 

 

1,160

 

Total revenues

 

$

230,592

 

 

156,732

 

 

387,324

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Direct operating

 

 

25,783

 

 

53,069

 

 

78,852

 

General and administrative (before equity-based compensation)

 

 

22,608

 

 

6,128

 

 

28,736

 

Equity-based compensation

 

 

17,840

 

 

4,630

 

 

22,470

 

Depreciation

 

 

60,838

 

 

25,832

 

 

86,670

 

Accretion of contingent acquisition consideration

 

 

 —

 

 

3,333

 

 

3,333

 

Total expenses

 

 

127,069

 

 

92,992

 

 

220,061

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

103,523

 

 

63,740

 

 

167,263

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,428,796

 

 

551,236

 

 

1,980,032

 

Additions to property and equipment

 

$

320,002

 

 

132,633

 

 

452,635

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

303,250

 

 

282,267

 

 

585,517

 

Revenue - third-party

 

 

835

 

 

 —

 

 

835

 

Gain on sale of assets

 

 

3,859

 

 

 —

 

 

3,859

 

Total revenues

 

 

307,944

 

 

282,267

 

 

590,211

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Direct operating

 

 

27,289

 

 

134,298

 

 

161,587

 

General and administrative (before equity-based compensation)

 

 

20,118

 

 

7,996

 

 

28,114

 

Equity-based compensation

 

 

19,714

 

 

6,335

 

 

26,049

 

Depreciation

 

 

69,962

 

 

29,899

 

 

99,861

 

Accretion of contingent acquisition consideration

 

 

 —

 

 

16,489

 

 

16,489

 

Total expenses

 

 

137,083

 

 

195,017

 

 

332,100

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

170,861

 

 

87,250

 

 

258,111

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

485

 

 

 —

 

 

485

 

Total assets

 

$

1,734,208

 

 

615,687

 

 

2,349,895

 

Additions to property and equipment

 

$

228,100

 

 

188,220

 

 

416,320

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

396,202

 

 

376,031

 

 

772,233

 

Revenue - third-party

 

 

264

 

 

 —

 

 

264

 

Total revenues

 

 

396,466

 

 

376,031

 

 

772,497

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Direct operating

 

 

39,251

 

 

193,287

 

 

232,538

 

General and administrative (before equity-based compensation)

 

 

20,607

 

 

10,922

 

 

31,529

 

Equity-based compensation

 

 

19,730

 

 

7,553

 

 

27,283

 

Impairment of property and equipment

 

 

23,431

 

 

 —

 

 

23,431

 

Depreciation

 

 

86,372

 

 

33,190

 

 

119,562

 

Accretion of contingent acquisition consideration

 

 

 —

 

 

13,476

 

 

13,476

 

Total expenses

 

 

189,391

 

 

258,428

 

 

447,819

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

207,075

 

 

117,603

 

 

324,678

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

20,194

 

 

 —

 

 

20,194

 

Total assets

 

$

2,237,913

 

 

804,296

 

 

3,042,209

 

Additions to property and equipment

 

$

346,217

 

 

195,162

 

 

541,379

 

 

Quarterly Financial Information (Unaudited) (Tables)
Schedule of Quarterly Financial Information

Our quarterly financial information for the years ended December 31, 2016 and 2017 is as follows (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First

 

Second

 

Third

 

Forth

 

 

    

quarter

    

quarter

    

quarter

    

quarter

 

Year ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating revenues

 

$

136,072

 

 

136,810

 

 

150,475

 

 

166,854

 

Total operating expenses

 

 

89,452

 

 

83,503

 

 

76,192

 

 

82,953

 

Operating income

 

 

46,620

 

 

53,307

 

 

74,283

 

 

83,901

 

Net income

 

 

42,916

 

 

49,912

 

 

70,524

 

 

73,351

 

Less: general partner's interest in net income

 

 

(1,850)

 

 

(2,731)

 

 

(4,806)

 

 

(7,557)

 

Net income attributable to limited partner units

 

$

41,066

 

 

47,181

 

 

65,718

 

 

65,794

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per limited partner unit - basic and diluted

 

$

0.23

 

 

0.27

 

 

0.37

 

 

0.37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating revenues

 

$

174,770

 

 

193,766

 

 

193,629

 

 

210,332

 

Total operating expenses(1)

 

 

93,073

 

 

101,199

 

 

110,458

 

 

143,089

 

Operating income

 

 

81,697

 

 

92,567

 

 

83,171

 

 

67,243

 

Net income

 

 

75,092

 

 

87,175

 

 

80,893

 

 

64,155

 

Less: general partner's interest in net income

 

 

(11,553)

 

 

(15,328)

 

 

(19,067)

 

 

(23,772)

 

Net income attributable to limited partner units

 

$

63,539

 

 

71,847

 

 

61,826

 

 

40,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per limited partner unit - basic and diluted

 

$

0.35

 

 

0.39

 

 

0.33

 

 

0.22

 


(1)Operating expenses in the fourth quarter of 2017 include $23 million of impairment on certain condensate gathering lines that Antero Resources no longer uses.

Business and Organization (Details)
12 Months Ended
Dec. 31, 2017
Water Handling and Treatment
item
Dec. 31, 2017
Stonewall Gas Gathering LLC
Jun. 30, 2016
Stonewall Gas Gathering LLC
Feb. 6, 2017
Appalachia Joint venture
Dec. 31, 2017
Mark West
Appalachia Joint venture
Business and Organization
 
 
 
 
 
Number of independent fresh water systems
 
 
 
 
Ownership percentage
 
15.00% 
15.00% 
50.00% 
50.00% 
Summary of Significant Accounting Policies (Details) (USD $)
3 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2017
Dec. 31, 2016
Revenue recognition
 
 
 
Margin over out-of-pocket costs related to water handling and treatment for revenue recognition (as a percent)
 
3.00% 
 
Property and equipment:
 
 
 
Total property and equipment
$ 2,974,922,000 
$ 2,974,922,000 
$ 2,450,521,000 
Less accumulated depreciation
(369,320,000)
(369,320,000)
(254,642,000)
Property and equipment, net
2,605,602,000 
2,605,602,000 
2,195,879,000 
Interest cost capitalized
 
12,000,000 
4,000,000 
Impairment of Long-Lived Assets
 
 
 
Impairment of property and equipment
23,000,000 
23,431,000 
 
Litigation and Other Contingencies
 
 
 
Liabilities for litigation, environmental, or other contingencies
Midstream LTIP
 
 
 
Stock-Based Compensation
 
 
 
Number of stock-based compensation awards authorized
10,000,000 
10,000,000 
 
Land
 
 
 
Property and equipment:
 
 
 
Total property and equipment
15,382,000 
15,382,000 
11,338,000 
Fresh water surface pipelines and equipment
 
 
 
Property and equipment:
 
 
 
Estimated useful lives
 
5 years 
 
Total property and equipment
46,139,000 
46,139,000 
39,562,000 
Above ground storage tanks
 
 
 
Property and equipment:
 
 
 
Estimated useful lives
 
10 years 
 
Total property and equipment
4,301,000 
4,301,000 
4,301,000 
Fresh water permanent buried pipelines and equipment
 
 
 
Property and equipment:
 
 
 
Estimated useful lives
 
20 years 
 
Total property and equipment
472,810,000 
472,810,000 
443,453,000 
Gathering systems and facilities
 
 
 
Property and equipment:
 
 
 
Estimated useful lives
 
20 years 
 
Total property and equipment
1,781,386,000 
1,781,386,000 
1,551,771,000 
Construction-in-progress
 
 
 
Property and equipment:
 
 
 
Total property and equipment
$ 654,904,000 
$ 654,904,000 
$ 400,096,000 
Transactions with Affiliates (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Allocation of costs
 
 
 
Direct labor expenses
$ 6.4 
$ 4.0 
$ 3.0 
General and administrative expense
$ 54.1 
$ 49.6 
$ 44.2 
Long-term Debt (Details) (USD $)
12 Months Ended 12 Months Ended 0 Months Ended 0 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2017
Revolving credit facility
Dec. 31, 2016
Revolving credit facility
Dec. 31, 2017
Letter of credit
Dec. 31, 2016
Letter of credit
Dec. 31, 2017
Letter of credit
Minimum
Dec. 31, 2017
Letter of credit
Maximum
Sep. 13, 2016
5.375% Senior Notes due 2024
Dec. 31, 2017
5.375% Senior Notes due 2024
Dec. 31, 2016
5.375% Senior Notes due 2024
Sep. 13, 2016
5.375% Senior Notes due 2024
Sep. 13, 2016
5.375% Senior Notes due 2024
Prior to September 15, 2019
Sep. 13, 2016
5.375% Senior Notes due 2024
Prior to September 15, 2019
Maximum
Sep. 13, 2016
5.375% Senior Notes due 2024
On or after September 15, 2019
Sep. 13, 2016
5.375% Senior Notes due 2024
On or after September 15, 2022
Long-term debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
 
 
$ 555,000,000 
$ 210,000,000 
 
 
 
 
 
$ 650,000,000 
$ 650,000,000 
 
 
 
 
 
Net unamortized debt issuance costs
(9,000,000)
(10,086,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, net
1,196,000,000 
849,914,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
1,500,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding letters of credit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Margin rates
 
 
 
 
25 
 
 
 
 
 
 
 
 
 
 
 
Commitment fees on the unused portion (as a percent)
 
 
 
 
 
 
0.25% 
0.375% 
 
 
 
 
 
 
 
 
Commitment fees on the unused portion during investment grade period (as a percent)
 
 
 
 
 
 
0.175% 
0.375% 
 
 
 
 
 
 
 
 
Weighted average interest rate (as a percent)
 
 
2.81% 
2.23% 
 
 
 
 
 
 
 
 
 
 
 
 
Face amount
 
 
 
 
 
 
 
 
 
 
 
$ 650,000,000 
 
 
 
 
Interest rate (as a percent)
 
 
 
 
 
 
 
 
 
 
 
5.375% 
 
 
 
 
Debt instrument redemption percentage
 
 
 
 
 
 
 
 
 
 
 
 
105.375% 
 
104.031% 
100.00% 
Debt instrument redemption percentage with payment of premium and interest
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
Debt instrument redemption percentage upon change of control
 
 
 
 
 
 
 
 
101.00% 
 
 
 
 
 
 
 
Percent of aggregate principal amount that can be redeemed
 
 
 
 
 
 
 
 
 
 
 
 
 
35.00% 
 
 
Accrued Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Accrued Liabilities
 
 
Capital expenditures
$ 63,286 
$ 35,608 
Operating expenses
29,905 
14,582 
Interest expense
10,508 
10,613 
Other
2,307 
838 
Accrued liabilities
$ 106,006 
$ 61,641 
Equity Based Compensation (Details) (USD $)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Additional disclosures
 
 
 
Equity-based compensation
$ 27,283,000 
$ 26,049,000 
$ 22,470,000 
Midstream LTIP
 
 
 
Additional disclosures
 
 
 
Number of stock-based compensation awards authorized
10,000,000 
 
 
Unamortized expense
25,000,000 
 
 
Number of shares available for future grant under the Plan
7,864,621 
 
 
Weighted average period for recognizing unrecognized stock-based compensation expense
2 years 
 
 
Restricted unit and phantom unit awards
 
 
 
Number of units
 
 
 
Total awarded and unvested at the beginning of the period (in shares)
1,331,961 
 
 
Granted (in shares)
377,660 
 
 
Vested (in shares)
(558,525)
 
 
Forfeited (in shares)
(108,133)
 
 
Total awarded and unvested at the end of the period (in shares)
1,042,963 
 
 
Weighted average grant date fair value
 
 
 
Total awarded and unvested at the beginning of the period (in dollars per unit)
$ 27.31 
 
 
Granted (in dollars per unit)
$ 32.52 
 
 
Vested (in dollars per unit)
$ 28.00 
 
 
Forfeited (in dollars per unit)
$ 28.63 
 
 
Total awarded and unvested at the end of the period (in dollars per unit)
$ 28.69 
 
 
Aggregate intrinsic value
 
 
 
Total awarded and unvested at the beginning of the period
41,131,000 
 
 
Total awarded and unvested at the end of the period
30,288,000 
 
 
Additional disclosures
 
 
 
Minimum statutory tax withholdings for restricted and phantom units
5,900,000 
 
 
Various equity based compensation plans |
Antero Resources
 
 
 
Additional disclosures
 
 
 
Unamortized expense
$ 112,000,000 
 
 
Partnership Equity and Distributions (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
0 Months Ended 3 Months Ended 12 Months Ended
Nov. 17, 2017
Nov. 16, 2017
Aug. 16, 2017
May 10, 2017
Apr. 30, 2017
Feb. 9, 2017
Feb. 8, 2017
Nov. 24, 2016
Nov. 18, 2016
Aug. 24, 2016
May 25, 2016
Feb. 29, 2016
Dec. 31, 2017
Dec. 31, 2017
Dec. 31, 2016
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual cash distribution (per unit)
 
 
 
 
 
 
 
 
 
 
 
 
 
0.68 
 
Cash distribution declared
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.365 
 
 
Subordinated units
 
 
 
 
 
75,940,957 
 
 
 
 
 
 
 
 
 
Common units conversion ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributions
$ 1,392 
$ 82,521 
$ 75,023 
$ 67,306 
$ 75 
 
$ 57,633 
$ 51,845 
$ 849 
$ 46,775 
$ 43,252 
$ 39,725 
 
$ 283,950 
$ 182,446 
Distributions per limited partner unit (in dollars per share)
 
$ 0.3400 
$ 0.3200 
$ 0.3000 
 
 
$ 0.2800 
$ 0.2650 
 
$ 0.2500 
$ 0.2350 
$ 0.2200 
 
 
 
General Partner
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributions
 
19,067 
15,328 
11,553 
 
 
7,543 
4,820 
 
2,731 
1,850 
969 
 
53,491 
10,370 
Common units
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributions
1,392 
63,454 
59,695 
55,753 
75 
 
50,090 
26,901 
849 
25,059 
23,556 
22,048 
 
230,459 
98,413 
Limited Partner (Subordinated units) |
Limited Partner (Common units)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributions
 
 
 
 
 
 
 
$ 20,124 
 
$ 18,985 
$ 17,846 
$ 16,708 
 
 
$ 73,663 
Above $0.1955 up to $0.2125
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unitholders marginal percentage interest in distribution
 
 
 
 
 
 
 
 
 
 
 
 
 
85.00% 
 
General Partners marginal percentage interest in distribution
 
 
 
 
 
 
 
 
 
 
 
 
 
15.00% 
 
Above $0.2125 up to $0.2550
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unitholders marginal percentage interest in distribution
 
 
 
 
 
 
 
 
 
 
 
 
 
75.00% 
 
General Partners marginal percentage interest in distribution
 
 
 
 
 
 
 
 
 
 
 
 
 
25.00% 
 
Above $0.2550
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unitholders marginal percentage interest in distribution
 
 
 
 
 
 
 
 
 
 
 
 
 
50.00% 
 
General Partners marginal percentage interest in distribution
 
 
 
 
 
 
 
 
 
 
 
 
 
50.00% 
 
Minimum
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum quarterly cash distribution (per unit)
 
 
 
 
 
 
 
 
 
 
 
 
 
0.17 
 
Minimum |
Above $0.1955 up to $0.2125
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro rata cash distribution to the holders of common and subordinate units
 
 
 
 
 
 
 
 
 
 
 
 
 
0.1955 
 
Minimum |
Above $0.2125 up to $0.2550
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro rata cash distribution to the holders of common and subordinate units
 
 
 
 
 
 
 
 
 
 
 
 
 
0.2125 
 
Minimum |
Above $0.2550
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro rata cash distribution to the holders of common and subordinate units
 
 
 
 
 
 
 
 
 
 
 
 
 
0.2550 
 
Maximum |
Above $0.1955 up to $0.2125
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro rata cash distribution to the holders of common and subordinate units
 
 
 
 
 
 
 
 
 
 
 
 
 
0.2125 
 
Maximum |
Above $0.2125 up to $0.2550
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro rata cash distribution to the holders of common and subordinate units
 
 
 
 
 
 
 
 
 
 
 
 
 
0.2550 
 
Net Income Per Limited Partner Unit (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Net income per limited partner unit
 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
$ 307,315 
$ 236,703 
$ 159,105 
Pre-Water Acquisition net income attributed to parent
 
 
 
 
 
 
 
 
 
 
(40,193)
Net income attributable to incentive distribution rights
(23,772)
(19,067)
(15,328)
(11,553)
(7,557)
(4,806)
(2,731)
(1,850)
(69,720)
(16,944)
(1,264)
Limited partners' interest in net income
$ 40,383 
$ 61,826 
$ 71,847 
$ 63,539 
$ 65,794 
$ 65,718 
$ 47,181 
$ 41,066 
$ 237,595 
$ 219,759 
$ 117,648 
Net income per limited partner unit - basic and diluted
$ 0.22 
$ 0.33 
$ 0.39 
$ 0.35 
$ 0.37 
$ 0.37 
$ 0.27 
$ 0.23 
$ 1.28 
$ 1.24 
$ 0.74 
Weighted average limited partner units outstanding - basic
 
 
 
 
 
 
 
 
185,630,000 
176,647,000 
158,479,000 
Weighted average units outstanding - diluted
 
 
 
 
 
 
 
 
186,083,000 
176,801,000 
158,527,000 
Restricted and phantom unit award
 
 
 
 
 
 
 
 
 
 
 
Net income per limited partner unit
 
 
 
 
 
 
 
 
 
 
 
Weighted average units outstanding - diluted
 
 
 
 
 
 
 
 
453,035 
 
 
Weighted average units outstanding:
 
 
 
 
 
 
 
 
 
 
 
Antidilutive securities excluded from computation of earnings per share
 
 
 
 
 
 
 
 
 
 
Common units
 
 
 
 
 
 
 
 
 
 
 
Net income per limited partner unit
 
 
 
 
 
 
 
 
 
 
 
Weighted average units outstanding - diluted
 
 
 
 
 
 
 
 
186,082,898 
 
 
Sale of Common Units (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended 0 Months Ended
Sep. 30, 2016
Dec. 31, 2017
Feb. 10, 2017
Common Unitholders Public
Sale Of Common Units
 
 
 
Maximum aggregate offering price of common limited partners units under an equity distribution agreement
$ 250 
 
 
Units issued and sold (in shares)
 
777,262 
 
Net proceeds from issue and sale of common units
 
25.5 
 
Compensation payable
 
0.6 
 
Other offering costs
 
0.4 
 
Remaining capacity to issue additional common units under an equity distribution agreement
 
157.3 
 
Sale of units to public (in shares)
 
 
6,900,000 
Net proceeds from sale of units
 
 
$ 223 
Fair Value Measurement (Details) (USD $)
12 Months Ended 1 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2017
Level 2
5.375% Senior Notes due 2024
Sep. 30, 2015
Contribution Agreement
Contingent Consideration Period One
bbl
Sep. 30, 2015
Contribution Agreement
Contingent Consideration Period Two
bbl
Fair value measurement
 
 
 
 
 
Contingent consideration
 
 
 
$ 125,000,000 
$ 125,000,000 
Threshold number of barrels of water to trigger contingent consideration payment
 
 
 
176,295,000 
219,200,000 
Debt instrument fair value
 
 
669,500,000 
 
 
Reconciliation of changes in Level 3 financial liabilities measured at fair value on a recurring basis
 
 
 
 
 
Beginning balance
194,538,000 
178,049,000 
 
 
 
Accretion and change in fair value
13,476,000 
16,489,000 
 
 
 
Ending balance
$ 208,014,000 
$ 194,538,000 
 
 
 
Equity Method Investments (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 0 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Feb. 6, 2017
Appalachia Joint venture
Dec. 31, 2017
Appalachia Joint venture
Feb. 6, 2017
Appalachia Joint venture
Feb. 6, 2017
Appalachia Joint venture
MarkWest
Dec. 31, 2017
Stonewall Gas Gathering LLC
Dec. 31, 2016
Stonewall Gas Gathering LLC
Jun. 30, 2016
Stonewall Gas Gathering LLC
mi
Equity Method Investments
 
 
 
 
 
 
 
 
 
Ownership percentage
 
 
 
 
50.00% 
50.00% 
15.00% 
 
15.00% 
Number of miles
 
 
 
 
 
 
 
 
67 
Percentage of interest held by joint venture in third party fractionator in Ohio
 
 
33.33% 
 
 
 
 
 
 
Contribution to joint venture
$ 235,004 
$ 75,516 
 
 
 
 
 
 
 
Investments in unconsolidated affiliates
 
 
 
 
 
 
 
 
 
Balance at beginning of period
68,299 
 
 
 
 
 
68,299 
 
 
Initial investment
153,770 
45,044 
 
153,770 
 
 
 
45,044 
 
Additional investments
81,234 
30,472 
 
81,234 
 
 
 
30,472 
 
Equity in net income of unconsolidated affiliates
20,194 
485 
 
9,890 
 
 
10,304 
485 
 
Distributions from unconsolidated affiliates
(20,195)
(7,702)
 
(8,720)
 
 
(11,475)
(7,702)
 
Balance at end of period
$ 303,302 
$ 68,299 
 
$ 236,174 
 
 
$ 67,128 
$ 68,299 
 
Reporting Segments (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
segment
Dec. 31, 2016
Dec. 31, 2015
Reporting Segments
 
 
 
 
 
 
 
 
 
 
 
Number of reportable segments
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Gain on sale of assets
 
 
 
 
 
 
 
 
 
$ 3,859 
 
Total revenue
210,332 
193,629 
193,766 
174,770 
166,854 
150,475 
136,810 
136,072 
772,497 
590,211 
387,324 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Direct operating
 
 
 
 
 
 
 
 
232,538 
161,587 
78,852 
General and administrative expense (before equity-based compensation)
 
 
 
 
 
 
 
 
31,529 
28,114 
28,736 
Equity-based compensation
 
 
 
 
 
 
 
 
27,283 
26,049 
22,470 
Impairment of property and equipment
23,000 
 
 
 
 
 
 
 
23,431 
 
 
Depreciation
 
 
 
 
 
 
 
 
119,562 
99,861 
86,670 
Accretion of contingent acquisition consideration
 
 
 
 
 
 
 
 
13,476 
16,489 
3,333 
Total operating expenses
143,089 
110,458 
101,199 
93,073 
82,953 
76,192 
83,503 
89,452 
447,819 
332,100 
220,061 
Operating income
67,243 
83,171 
92,567 
81,697 
83,901 
74,283 
53,307 
46,620 
324,678 
258,111 
167,263 
Equity in earnings of unconsolidated affiliates
 
 
 
 
 
 
 
 
20,194 
485 
 
Total assets
3,042,209 
 
 
 
2,349,895 
 
 
 
3,042,209 
2,349,895 
1,980,032 
Additions to property and equipment
 
 
 
 
 
 
 
 
541,379 
416,320 
452,635 
Antero Resources
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
772,233 
585,517 
386,164 
Third party
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
264 
835 
1,160 
Water Handling and Treatment
 
 
 
 
 
 
 
 
 
 
 
Reporting Segments
 
 
 
 
 
 
 
 
 
 
 
Number of independent fresh water systems
 
 
 
 
 
 
 
 
 
 
Operating Segments |
Gathering And Processing
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Gain on sale of assets
 
 
 
 
 
 
 
 
 
3,859 
 
Total revenue
 
 
 
 
 
 
 
 
396,466 
307,944 
230,592 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Direct operating
 
 
 
 
 
 
 
 
39,251 
27,289 
25,783 
General and administrative expense (before equity-based compensation)
 
 
 
 
 
 
 
 
20,607 
20,118 
22,608 
Equity-based compensation
 
 
 
 
 
 
 
 
19,730 
19,714 
17,840 
Impairment of property and equipment
 
 
 
 
 
 
 
 
23,431 
 
 
Depreciation
 
 
 
 
 
 
 
 
86,372 
69,962 
60,838 
Total operating expenses
 
 
 
 
 
 
 
 
189,391 
137,083 
127,069 
Operating income
 
 
 
 
 
 
 
 
207,075 
170,861 
103,523 
Equity in earnings of unconsolidated affiliates
 
 
 
 
 
 
 
 
20,194 
485 
 
Total assets
2,237,913 
 
 
 
1,734,208 
 
 
 
2,237,913 
1,734,208 
1,428,796 
Additions to property and equipment
 
 
 
 
 
 
 
 
346,217 
228,100 
320,002 
Operating Segments |
Gathering And Processing |
Antero Resources
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
396,202 
303,250 
230,210 
Operating Segments |
Gathering And Processing |
Third party
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
264 
835 
382 
Operating Segments |
Water Handling and Treatment
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
376,031 
282,267 
156,732 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Direct operating
 
 
 
 
 
 
 
 
193,287 
134,298 
53,069 
General and administrative expense (before equity-based compensation)
 
 
 
 
 
 
 
 
10,922 
7,996 
6,128 
Equity-based compensation
 
 
 
 
 
 
 
 
7,553 
6,335 
4,630 
Depreciation
 
 
 
 
 
 
 
 
33,190 
29,899 
25,832 
Accretion of contingent acquisition consideration
 
 
 
 
 
 
 
 
13,476 
16,489 
3,333 
Total operating expenses
 
 
 
 
 
 
 
 
258,428 
195,017 
92,992 
Operating income
 
 
 
 
 
 
 
 
117,603 
87,250 
63,740 
Total assets
804,296 
 
 
 
615,687 
 
 
 
804,296 
615,687 
551,236 
Additions to property and equipment
 
 
 
 
 
 
 
 
195,162 
188,220 
132,633 
Operating Segments |
Water Handling and Treatment |
Antero Resources
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
376,031 
282,267 
155,954 
Operating Segments |
Water Handling and Treatment |
Third party
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
 
 
 
$ 778 
Quarterly Financial Information (Unaudited) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Quarterly Financial Information
 
 
 
 
 
 
 
 
 
 
 
Total operating revenues
$ 210,332 
$ 193,629 
$ 193,766 
$ 174,770 
$ 166,854 
$ 150,475 
$ 136,810 
$ 136,072 
$ 772,497 
$ 590,211 
$ 387,324 
Total operating expenses
143,089 
110,458 
101,199 
93,073 
82,953 
76,192 
83,503 
89,452 
447,819 
332,100 
220,061 
Operating income
67,243 
83,171 
92,567 
81,697 
83,901 
74,283 
53,307 
46,620 
324,678 
258,111 
167,263 
Net income
64,155 
80,893 
87,175 
75,092 
73,351 
70,524 
49,912 
42,916 
 
 
 
Less: general partner's interest in net income
(23,772)
(19,067)
(15,328)
(11,553)
(7,557)
(4,806)
(2,731)
(1,850)
(69,720)
(16,944)
(1,264)
Limited partners' interest in net income
40,383 
61,826 
71,847 
63,539 
65,794 
65,718 
47,181 
41,066 
237,595 
219,759 
117,648 
Net income per limited partner unit - basic and diluted
$ 0.22 
$ 0.33 
$ 0.39 
$ 0.35 
$ 0.37 
$ 0.37 
$ 0.27 
$ 0.23 
$ 1.28 
$ 1.24 
$ 0.74 
Impairment of property and equipment
$ 23,000 
 
 
 
 
 
 
 
$ 23,431