ANTERO MIDSTREAM PARTNERS LP, 10-Q filed on 11/1/2017
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2017
Oct. 26, 2017
Document and Entity Information
 
 
Entity Registrant Name
Antero Midstream Partners LP 
 
Entity Central Index Key
0001598968 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2017 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
186,628,240 
Document Fiscal Year Focus
2017 
 
Document Fiscal Period Focus
Q3 
 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 2,495 
$ 14,042 
Accounts receivable - Antero Resources
84,124 
64,139 
Accounts receivable - third party
1,165 
1,240 
Prepaid expenses
1,013 
529 
Total current assets
88,797 
79,950 
Property and equipment:
 
 
Property and equipment, net
2,508,204 
2,195,879 
Investment in unconsolidated affiliates
287,842 
68,299 
Other assets, net
10,548 
5,767 
Total assets
2,895,391 
2,349,895 
Current liabilities:
 
 
Accounts payable
13,820 
16,979 
Accounts payable - Antero Resources
4,050 
3,193 
Accrued liabilities
70,532 
61,641 
Other current liabilities
206 
200 
Total current liabilities
88,608 
82,013 
Long-term liabilities:
 
 
Long-term debt
1,067,722 
849,914 
Contingent acquisition consideration
204,210 
194,538 
Other
465 
620 
Total liabilities
1,361,005 
1,127,085 
Partners' capital:
 
 
General partner
19,067 
7,543 
Total partners' capital
1,534,386 
1,222,810 
Total liabilities and partners' capital
2,895,391 
2,349,895 
Common Unitholders Public
 
 
Partners' capital:
 
 
Common unitholders
1,708,930 
1,458,410 
Total partners' capital
1,708,930 
1,458,410 
Common Unitholder Antero Resources
 
 
Partners' capital:
 
 
Common unitholders
(193,611)
26,820 
Total partners' capital
(193,611)
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)
Condensed Consolidated Balance Sheets (Parenthetical)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Common Unitholders Public
 
 
Common unitholders units issued
87,753 
70,020 
Common unitholders units outstanding
87,753 
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 
Condensed Consolidated Statements of Operations and Comprehensive Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Revenue:
 
 
 
 
Gathering and compression-Antero Resources
$ 100,518 
$ 77,871 
$ 290,675 
$ 218,938 
Water handling and treatment-Antero Resources
93,111 
72,411 
271,226 
203,750 
Gathering and compression-third party
 
193 
264 
669 
Total revenue
193,629 
150,475 
562,165 
423,357 
Operating expenses:
 
 
 
 
Direct operating
63,030 
33,213 
162,892 
124,951 
General and administrative (including $6,599 and $7,199 for three months ended and $19,366 and $20,436 for six months ended of equity-based compensation in 2016 and 2017, respectively)
14,316 
13,316 
43,562 
39,712 
Depreciation
30,556 
26,136 
88,604 
74,100 
Accretion of contingent acquisition consideration
2,556 
3,527 
9,672 
10,384 
Total operating expenses
110,458 
76,192 
304,730 
249,147 
Operating income
83,171 
74,283 
257,435 
174,210 
Interest expense, net
(9,311)
(5,303)
(27,162)
(12,885)
Equity in earnings of unconsolidated affiliates
7,033 
1,544 
12,887 
2,027 
Net income and comprehensive income
80,893 
70,524 
243,160 
163,352 
Net income attributable to incentive distribution rights
(19,067)
(4,807)
(45,948)
(9,387)
Limited partners' interest in net income
$ 61,826 
$ 65,717 
$ 197,212 
$ 153,965 
Net income per limited partner unit - basic and diluted
$ 0.33 
$ 0.37 
$ 1.06 
$ 0.87 
Weighted average limited partner units outstanding - basic
186,581 
176,395 
185,240 
176,243 
Weighted average limited partner units outstanding - diluted
187,145 
176,766 
185,728 
176,306 
Condensed Consolidated Statements of Operations and Comprehensive Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Condensed Consolidated Statements of Operations and Comprehensive Income
 
 
 
 
Equity-based compensation
$ 7,199 
$ 6,599 
$ 20,436 
$ 19,366 
Condensed Consolidated Statements of Partners' Capital (USD $)
In Thousands, unless otherwise specified
Common Unitholders Public
Common Unitholder Antero Resources
Subordinated Unitholder Antero Resources
General Partner
Total
Balance at Dec. 31, 2016
$ 1,458,410 
$ 26,820 
$ (269,963)
$ 7,543 
$ 1,222,810 
Partner' Capital
 
 
 
 
 
Net income and comprehensive income
81,374 
115,838 
 
45,948 
243,160 
Distribution to unitholders
(67,629)
(97,984)
 
(34,424)
(200,037)
Conversion of subordinated units to common units
 
(269,963)
269,963 
 
 
Equity-based compensation
7,139 
13,297 
 
 
20,436 
Issuance of common units upon vesting of equity-based compensation awards, net of units withheld for income taxes
627 
(1,559)
 
 
(932)
Sale of units held by Antero Resources to public
(19,940)
19,940 
 
 
 
Issuance of common units, net of offering costs
248,949 
 
 
 
248,949 
Balance at Sep. 30, 2017
$ 1,708,930 
$ (193,611)
 
$ 19,067 
$ 1,534,386 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Cash flows from operating activities:
 
 
Net income
$ 243,160 
$ 163,352 
Adjustment to reconcile net income to net cash provided by operating activities:
 
 
Depreciation
88,604 
74,100 
Accretion of contingent acquisition consideration
9,672 
10,384 
Equity-based compensation
20,436 
19,366 
Equity in earnings of unconsolidated affiliates
(12,887)
(2,027)
Distribution of earnings from unconsolidated affiliates
10,120 
 
Amortization of deferred financing costs
1,906 
1,185 
Changes in assets and liabilities:
 
 
Accounts receivable – Antero Resources
(19,985)
7,314 
Accounts receivable - third party
75 
1,464 
Prepaid expenses
(484)
(53)
Accounts payable
1,181 
1,467 
Accounts payable – Antero Resources
857 
99 
Accrued liabilities
1,612 
(17,516)
Net cash provided by operating activities
344,267 
259,135 
Cash flows used in investing activities:
 
 
Additions to gathering systems and facilities
(254,619)
(152,769)
Additions to water handling and treatment systems
(143,470)
(137,355)
Investment in unconsolidated affiliates
(216,776)
(45,044)
Change in other assets
(5,877)
(2,409)
Net cash used in investing activities
(620,742)
(337,577)
Cash flows provided by financing activities:
 
 
Distributions to unitholders
(200,037)
(129,752)
Issuance of senior notes
 
650,000 
Borrowings (repayments) on bank credit facilities, net
217,000 
(450,000)
Issuance of common units, net of offering costs
248,949 
19,605 
Payments of deferred financing costs
 
(8,940)
Employee tax withholding for settlement of equity compensation awards
(932)
 
Other
(52)
(133)
Net cash provided by financing activities
264,928 
80,780 
Net increase (decrease) in cash and cash equivalents
(11,547)
2,338 
Cash and cash equivalents, beginning of period
14,042 
6,883 
Cash and cash equivalents, end of period
2,495 
9,221 
Supplemental disclosure of cash flow information:
 
 
Cash paid during the period for interest
42,530 
11,751 
Supplemental disclosure of noncash investing activities:
 
 
Increase (decrease) in accrued capital expenditures and accounts payable for property and equipment
$ 2,936 
$ (21,971)
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’ rapidly 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 provides midstream services to Antero Resources under long-term, fixed-fee contracts. The Partnership’s condensed consolidated financial statements as of September 30, 2017, include the accounts of the Partnership and its 100% owned operating subsidiaries: Antero Midstream LLC, Antero Water LLC (“Antero Water”), and Antero Treatment LLC. The condensed consolidated financial statements also include the accounts of Antero Midstream Finance Corporation (“Finance Corp”), a wholly owned subsidiary and the co-issuer of the Partnership’s senior notes. The Partnership’s 100% owned operating subsidiaries fully and unconditionally guarantee the Partnership’s outstanding debt securities on a joint and several basis. The Partnership has no independent assets or operations and there are no restrictions on the ability of the Partnership to obtain funds from its 100% owned subsidiaries by dividend or loan.

The Partnership also has a 15% equity interest in the gathering system of Stonewall Gas Gathering LLC (“Stonewall”) and a 50% equity interest in a joint venture to develop processing and fractionation assets with MarkWest Energy Partners, L.P. (“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 condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable to interim financial information and should be read in the context of the December 31, 2016 combined consolidated financial statements and notes thereto for a more complete understanding of the Partnership’s operations, financial position, and accounting policies.  The December 31, 2016 combined consolidated financial statements have been filed with the SEC in the Partnership’s 2016 Form 10-K.

These unaudited condensed consolidated financial statements of the Partnership have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, and, accordingly, do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Partnership’s financial position as of December 31, 2016 and September 30, 2017, the results of its operations for the three and nine months ended September 30, 2016 and 2017, and its cash flows for the nine months ended September 30, 2016 and 2017. The Partnership has no items of other comprehensive income or loss; therefore, its net income or loss is identical to its comprehensive income or loss.

Certain costs of doing business that are incurred by Antero Resources on our behalf have been reflected in the condensed 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 condensed consolidated financial statements (see Note 3—Related Party Transactions).

As of the date these condensed consolidated financial statements were filed with the SEC, the Partnership completed its 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, and the amended and restated credit facility entered into in October 2017, as described in Note 4—Long-Term Debt.

 (b)Revenue Recognition

We provide gathering and compression and water handling and treatment services under fee-based contracts based on throughput or cost plus a margin. Under these arrangements, we receive fees for gathering oil and gas products, compression services, and water handling and treatment services. 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 condensed 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

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 related to the water treatment facility currently under construction. 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 was as follows as of December 31, 2016 and September 30, 2017 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

    

Estimated
useful lives

    

December 31,
2016

    

September 30,
2017

 

Land

 

n/a

 

$

11,338

 

 

14,850

 

Fresh water surface pipelines and equipment

 

5 years

 

 

39,562

 

 

46,183

 

Above ground storage tanks

 

10 years

 

 

4,301

 

 

4,301

 

Fresh water permanent buried pipelines and equipment

 

20 years

 

 

443,453

 

 

472,012

 

Gathering systems and facilities

 

20 years

 

 

1,551,771

 

 

1,774,221

 

Construction-in-progress

 

n/a

 

 

400,096

 

 

539,883

 

Total property and equipment

 

 

 

 

2,450,521

 

 

2,851,450

 

Less accumulated depreciation

 

 

 

 

(254,642)

 

 

(343,246)

 

Property and equipment, net

 

 

 

$

2,195,879

 

 

2,508,204

 

 

(f)Equity‑Based Compensation

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

Our predecessor general partner adopted the Antero Midstream Partners LP Long-Term Incentive Plan (“Midstream LTIP”), 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.

(g)Income Taxes

Our condensed 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 share of taxable income.

 (h)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.

(i) Investment in Unconsolidated Affiliates

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.

Related Party Transactions
Related Party Transactions

(3)Related Party Transactions

Certain of the Partnership’s unitholders, including members of its executive management group, own a significant interest in the Partnership and, either through their representatives or directly, serve as members of the Board of Directors of Antero Resources and the Boards of Directors of the general partners of the Partnership and AMGP.  These same groups or individuals own common stock in Antero Resources and common shares and other interests in AMGP, which indirectly owns the incentive distribution rights in the Partnership.  The Partnership’s executive management group also manages the operations and business affairs of Antero Resources and AMGP.

(a)Revenues

Substantially all revenues earned in the nine months ended September 30, 2016 and 2017 were earned from Antero Resources under various agreements for gathering and compression and water handling and treatment.

(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 expenses, seconded employees, and other costs.

(c)Allocation of Costs

The employees supporting our operations are employees of Antero Resources. Direct operating expense includes allocated costs of $1.0 million and $2.6 million during the three months ended September 30, 2016 and 2017, respectively, and $2.8 million and $5.0 million during the nine months ended September 30, 2016 and 2017, respectively, related to labor charges for Antero Resources employees associated with the operation of our gathering lines, compressor stations, and water handling and treatment assets. General and administrative expense includes allocated costs of $12.2 million and $13.0 million during the three months ended September 30, 2016 and 2017, respectively, and $36.1 million and $39.8 million during the nine months ended September 30, 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 September 30, 2017 (in thousands):

 

 

 

 

 

 

 

 

    

December 31, 2016

    

September 30, 2017

Prior Credit Facility (a)

 

$

210,000

 

 

427,000

5.375% senior notes due 2024 (b)

 

 

650,000

 

 

650,000

Net unamortized debt issuance costs

 

 

(10,086)

 

 

(9,278)

 

 

$

849,914

 

 

1,067,722

 

(a) Revolving Credit Facility

On November 10, 2014 the Partnership entered into a revolving credit facility with a syndicate of bank lenders (the “Prior Credit Facility”).  On October 26, 2017 we executed an amendment and restatement of the Prior Credit Facility with a syndicate of bank lenders (our “Credit Facility” or our “revolving credit facility”). The Credit Facility provides for lender commitments of $1.5 billion and a letter of credit sublimit of $150 million. The Credit Facility matures on October 26, 2022.

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 (i) a BBB- or better rating from Standard and Poor’s and (ii) a Baa3 or better from Moody’s (provided that the non-investment grade rating from the other rating agency is at least either Bai 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 Prior Credit Facility as of December 31, 2016 and September 30, 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 September 30, 2017, we had borrowings under the Prior Credit Facility of $210 million and $427 million, respectively, with a weighted average interest rate of 2.23% and 2.82%, respectively.  No letters of credit were outstanding at December 31, 2016 or September 30, 2017 under the Prior Credit Facility. 

(b) 5.375% Senior Notes Due 2024

On September 13, 2016, the Partnership and 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 to 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 a “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 September 30, 2017 consisted of the following items (in thousands):

 

 

 

 

 

 

 

 

    

December 31, 2016

    

September 30, 2017

Capital expenditures

 

$

35,608

 

 

42,883

Operating expenses

 

 

14,582

 

 

24,707

Interest

 

 

10,613

 

 

1,950

Other

 

 

838

 

 

992

 

 

$

61,641

 

 

70,532

 

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 $6.6 million and $7.2 million for the three months ended September 30, 2016 and 2017, respectively, and $19.4 million and $20.4 million for the nine months ended September 30, 2016 and 2017, respectively. These expenses were allocated to us based on our proportionate share of Antero Resources’ labor costs. Antero Resources has unamortized expenses totaling approximately $140.1 million as of September 30, 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 pursuant to a secondment agreement between us and Antero Resources. Our predecessor 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 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. A total of 7,656,134 common units are available for future grant under the Midstream LTIP as of September 30, 2017. 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 and distribution equivalent rights are delivered to the holder of the phantom units. Compensation related to each 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 phantom unit awards activity during the nine months ended September 30, 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

 

(73,080)

 

$

21.34

 

 

 

 

Forfeited

 

(78,584)

 

$

28.75

 

 

 

 

Total awarded and unvested—September 30, 2017

 

1,557,957

 

$

28.78

 

$

49,122

 

 

Intrinsic values are based on the closing price of the Partnership’s common units on the referenced dates. Midstream LTIP unamortized expense of $30.4 million at September 30, 2017, is expected to be recognized over a weighted average period of approximately 2.2 years and our proportionate share will be allocated to us as it is recognized.

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 holder of our incentive distribution rights (“IDRs”), will receive distributions according to the following percentage allocations:

 

 

 

 

 

 

 

 

Marginal Percentage

 

 

 

Interest in Distributions

 

Total Quarterly Distribution

 

 

 

Holder 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, AMP GP, owns a non-economic general partner interest in us, which does not entitle it to receive cash distributions. However, AMGP controls the holder of the IDRs and may in the future own common units or other equity interests in us and would 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 condensed consolidated Statement of Partners’ Capital.

Cash Distributions

The board of directors of our general partner has declared a cash distribution of $0.34 per unit for the quarter ended September 30, 2017. The distribution will be payable on November 16, 2017 to unitholders of record as of November 1, 2017.

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

 

 

Total 2017

 

 

 

$

165,613

 

 

 —

 

 

34,424

 

 

200,037

 

 

 

 

 

 

 

* Distribution equivalent rights on 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 limited partners, in accordance with their respective ownership percentages, and when applicable, giving effect to incentive distributions paid to the holders of the incentive distribution rights. Basic and diluted net income per limited partner unit is calculated by dividing limited partners’ interest in net income, less 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 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 three months ended September 30, 2017 was calculated based on the diluted weighted average number of units outstanding of 187,144,983, including 563,817 dilutive units attributable to non-vested phantom unit awards. Earnings per common unit assuming dilution for the nine months ended September 30, 2017 was calculated based on the diluted weighted average number of units outstanding of 185,728,119, including 488,515 dilutive units attributable to non-vested phantom unit awards.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

    

2016

    

2017

    

2016

    

2017

  

 

 

 

 

 

 

 

 

 

 

 

 

Net income

  

$

70,524

  

 

80,893

  

 

163,352

  

 

243,160

Less:

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to incentive distribution rights

 

 

(4,807)

 

 

(19,067)

 

 

(9,387)

 

 

(45,948)

Limited partner interest in net income

  

$

65,717

 

 

61,826

  

 

153,965

 

 

197,212

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per limited partner unit - basic and diluted

 

$

0.37

 

 

0.33

 

 

0.87

 

 

1.06

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units  outstanding - basic

 

 

176,395

 

 

186,581

 

 

176,243

 

 

185,240

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units  outstanding - diluted

 

 

176,766

 

 

187,145

 

 

176,306

 

 

185,728

 

 

Sale of Common Units Under Equity Distribution Agreement
Sale of Common Units Under Equity Distribution Agreement

(9) Sale of Common Units Under Equity Distribution Agreement

During the third quarter of 2016, the Partnership entered into an Equity Distribution Agreement and in the first quarter of 2017 amended and restated the Equity Distribution Agreement to reflect AMP GP’s succession as our general partner (as amended and restated, the “Distribution Agreement”), pursuant to which the Partnership may sell, from time to time through brokers acting as its sales agents, common units representing limited partner interests having an aggregate offering price of up to $250 million.  The offer and sale of common units under the program has been registered with 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 nine months ended September 30, 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 for sales made during the period, and $0.4 million of other offering costs. As of September 30, 2017, the Partnership had the capacity to issue additional common units under the Distribution Agreement up to an aggregate sales price of $157.3 million.

Fair Value Measurement
Fair Value Measurement

(10) Fair Value Measurement

In connection with Antero Resources’ contribution of Antero Water and certain wastewater treatment assets to the Partnership in September 2015 (“Water Acquisition”), we 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.

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

 

 

 

 

Beginning balance - December 31, 2016

$

194,538

Accretion and change in fair value

 

9,672

Ending balance - September 30, 2017

$

204,210

 

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 September 30, 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 September 30, 2017 approximated market value because of their short-term nature. The carrying value of the amounts under Prior Credit Facility at December 31, 2016 and September 30, 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 $676.0 million at September 30, 2017.

Equity Method Investment
Equity Method Investment

(11) Equity Method Investments

On February 6, 2017, we formed a joint venture to develop processing and fractionation assets in Appalachia (the “Joint Venture”) with MarkWest, a wholly owned subsidiary of MPLX, LP. 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 recently commissioned MarkWest fractionator in Ohio.

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 Prior Credit Facility incurred to fund the investment in the Joint Venture, and for general partnership purposes.

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.

Our condensed consolidated net income includes the Partnership’s proportionate share of the net income of equity method investees. When the Partnership records its proportionate share of net income, it increases equity income in the condensed consolidated statements of operations and comprehensive income and the carrying value of that investment. 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 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 unconsolidated affiliates as presented on our condensed consolidated balance sheets (in thousands):

 

 

 

 

 

 

 

 

 

 

 

MarkWest

 

Total Investment in

 

 

Stonewall

 

Joint Venture

 

Unconsolidated Affiliates

Balance at December 31, 2016

$

68,299

 

 —

 

68,299

Initial investment

 

 —

 

153,770

 

153,770

Additional investments

 

 —

 

63,006

 

63,006

Equity in net income of unconsolidated affiliates

 

7,669

 

5,218

 

12,887

Distributions from unconsolidated affiliates

 

(8,460)

 

(1,660)

 

(10,120)

Balance at September 30, 2017

$

67,508

 

220,334

 

287,842

 

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, compressor stations, and interests in processing and fractionation plants that collect and process natural gas, NGLs and oil from Antero Resources’ wells in West Virginia and Ohio.

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 water handling and treatment segment also includes other fluid handling services which includes high rate transfer, wastewater transportation, disposal and treatment.

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.

Summarized financial information concerning the Partnership’s segments for the periods indicated is shown in the following table (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Water

 

 

 

 

  

Gathering and

  

Handling and

  

Consolidated

 

    

Processing

    

Treatment

    

Total

Three months ended September 30, 2016

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

77,871

 

 

72,411

 

 

150,282

Revenue - third-party

 

 

193

 

 

 —

 

 

193

Total revenues

 

 

78,064

 

 

72,411

 

 

150,475

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

4,692

 

 

28,521

 

 

33,213

General and administrative (before equity-based compensation)

 

 

5,068

 

 

1,649

 

 

6,717

Equity-based compensation

 

 

5,213

 

 

1,386

 

 

6,599

Depreciation

 

 

18,298

 

 

7,838

 

 

26,136

Accretion of contingent acquisition consideration

 

 

 —

 

 

3,527

 

 

3,527

Total expenses

 

 

33,271

 

 

42,921

 

 

76,192

Operating income

 

$

44,793

 

 

29,490

 

 

74,283

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

1,544

 

 

 —

 

 

1,544

Total assets

 

$

1,653,292

 

 

562,995

 

 

2,216,287

Additions to property and equipment

 

$

55,800

 

 

58,730

 

 

114,530

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2017

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

100,518

 

 

93,111

 

 

193,629

Revenue - third-party

 

 

 —

 

 

 —

 

 

 —

Total revenues

 

 

100,518

 

 

93,111

 

 

193,629

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

10,560

 

 

52,470

 

 

63,030

General and administrative (before equity-based compensation)

 

 

4,225

 

 

2,892

 

 

7,117

Equity-based compensation

 

 

5,111

 

 

2,088

 

 

7,199

Depreciation

 

 

21,803

 

 

8,753

 

 

30,556

Accretion of contingent acquisition consideration

 

 

 —

 

 

2,556

 

 

2,556

Total expenses

 

 

41,699

 

 

68,759

 

 

110,458

Operating income

 

$

58,819

 

 

24,352

 

 

83,171

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

7,033

 

 

 —

 

 

7,033

Total assets

 

$

2,142,409

 

 

752,982

 

 

2,895,391

Additions to property and equipment

 

$

99,254

 

 

48,019

 

 

147,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Water

 

 

 

 

  

Gathering and

  

Handling and

  

Consolidated

 

    

Processing

    

Treatment

    

Total

Nine months ended September 30, 2016

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

218,938

 

 

203,750

 

 

422,688

Revenue - third-party

 

 

669

 

 

 -

 

 

669

Total revenues

 

 

219,607

 

 

203,750

 

 

423,357

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

19,758

 

 

105,193

 

 

124,951

General and administrative  (before equity-based compensation)

 

 

14,853

 

 

5,493

 

 

20,346

Equity-based compensation

 

 

14,902

 

 

4,464

 

 

19,366

Depreciation

 

 

52,125

 

 

21,975

 

 

74,100

Accretion of contingent acquisition consideration

 

 

 -

 

 

10,384

 

 

10,384

Total expenses

 

 

101,638

 

 

147,509

 

 

249,147

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

117,969

 

 

56,241

 

 

174,210

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

2,027

 

 

 -

 

 

2,027

Total assets

 

$

1,653,292

 

 

562,995

 

 

2,216,287

Additions to property and equipment

 

$

152,769

 

 

137,355

 

 

290,124

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2017

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

290,675

 

 

271,226

 

 

561,901

Revenue - third-party

 

 

264

 

 

 —

 

 

264

Total revenues

 

 

290,939

 

 

271,226

 

 

562,165

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

28,596

 

 

134,296

 

 

162,892

General and administrative  (before equity-based compensation)

 

 

15,242

 

 

7,884

 

 

23,126

Equity-based compensation

 

 

14,937

 

 

5,499

 

 

20,436

Depreciation

 

 

63,773

 

 

24,831

 

 

88,604

Accretion of contingent acquisition consideration

 

 

 —

 

 

9,672

 

 

9,672

Total expenses

 

 

122,548

 

 

182,182

 

 

304,730

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

168,391

 

 

89,044

 

 

257,435

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

12,887

 

 

 —

 

 

12,887

Total assets

 

$

2,142,409

 

 

752,982

 

 

2,895,391

Additions to property and equipment

 

$

254,619

 

 

143,470

 

 

398,089

 

Summary of Significant Accounting Policies (Policies)

(a) Basis of Presentation

These condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable to interim financial information and should be read in the context of the December 31, 2016 combined consolidated financial statements and notes thereto for a more complete understanding of the Partnership’s operations, financial position, and accounting policies.  The December 31, 2016 combined consolidated financial statements have been filed with the SEC in the Partnership’s 2016 Form 10-K.

These unaudited condensed consolidated financial statements of the Partnership have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, and, accordingly, do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Partnership’s financial position as of December 31, 2016 and September 30, 2017, the results of its operations for the three and nine months ended September 30, 2016 and 2017, and its cash flows for the nine months ended September 30, 2016 and 2017. The Partnership has no items of other comprehensive income or loss; therefore, its net income or loss is identical to its comprehensive income or loss.

Certain costs of doing business that are incurred by Antero Resources on our behalf have been reflected in the condensed 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 condensed consolidated financial statements (see Note 3—Related Party Transactions).

As of the date these condensed consolidated financial statements were filed with the SEC, the Partnership completed its 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, and the amended and restated credit facility entered into in October 2017, as described in Note 4—Long-Term Debt.

(b)Revenue Recognition

We provide gathering and compression and water handling and treatment services under fee-based contracts based on throughput or cost plus a margin. Under these arrangements, we receive fees for gathering oil and gas products, compression services, and water handling and treatment services. 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 condensed 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

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 related to the water treatment facility currently under construction. 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 was as follows as of December 31, 2016 and September 30, 2017 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

    

Estimated
useful lives

    

December 31,
2016

    

September 30,
2017

 

Land

 

n/a

 

$

11,338

 

 

14,850

 

Fresh water surface pipelines and equipment

 

5 years

 

 

39,562

 

 

46,183

 

Above ground storage tanks

 

10 years

 

 

4,301

 

 

4,301

 

Fresh water permanent buried pipelines and equipment

 

20 years

 

 

443,453

 

 

472,012

 

Gathering systems and facilities

 

20 years

 

 

1,551,771

 

 

1,774,221

 

Construction-in-progress

 

n/a

 

 

400,096

 

 

539,883

 

Total property and equipment

 

 

 

 

2,450,521

 

 

2,851,450

 

Less accumulated depreciation

 

 

 

 

(254,642)

 

 

(343,246)

 

Property and equipment, net

 

 

 

$

2,195,879

 

 

2,508,204

 

 

(f)Equity‑Based Compensation

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

Our predecessor general partner adopted the Antero Midstream Partners LP Long-Term Incentive Plan (“Midstream LTIP”), 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.

(g)Income Taxes

Our condensed 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 share of taxable income.

(h)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.

(i) Investment in Unconsolidated Affiliates

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.

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

Our investment in property and equipment was as follows as of December 31, 2016 and September 30, 2017 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

    

Estimated
useful lives

    

December 31,
2016

    

September 30,
2017

 

Land

 

n/a

 

$

11,338

 

 

14,850

 

Fresh water surface pipelines and equipment

 

5 years

 

 

39,562

 

 

46,183

 

Above ground storage tanks

 

10 years

 

 

4,301

 

 

4,301

 

Fresh water permanent buried pipelines and equipment

 

20 years

 

 

443,453

 

 

472,012

 

Gathering systems and facilities

 

20 years

 

 

1,551,771

 

 

1,774,221

 

Construction-in-progress

 

n/a

 

 

400,096

 

 

539,883

 

Total property and equipment

 

 

 

 

2,450,521

 

 

2,851,450

 

Less accumulated depreciation

 

 

 

 

(254,642)

 

 

(343,246)

 

Property and equipment, net

 

 

 

$

2,195,879

 

 

2,508,204

 

 

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

Long-term debt was as follows at December 31, 2016 and September 30, 2017 (in thousands):

 

 

 

 

 

 

 

 

    

December 31, 2016

    

September 30, 2017

Prior Credit Facility (a)

 

$

210,000

 

 

427,000

5.375% senior notes due 2024 (b)

 

 

650,000

 

 

650,000

Net unamortized debt issuance costs

 

 

(10,086)

 

 

(9,278)

 

 

$

849,914

 

 

1,067,722

 

Accrued Liabilities (Tables)
Schedule of accrued liabilities

Accrued liabilities as of December 31, 2016 and September 30, 2017 consisted of the following items (in thousands):

 

 

 

 

 

 

 

 

    

December 31, 2016

    

September 30, 2017

Capital expenditures

 

$

35,608

 

 

42,883

Operating expenses

 

 

14,582

 

 

24,707

Interest

 

 

10,613

 

 

1,950

Other

 

 

838

 

 

992

 

 

$

61,641

 

 

70,532

 

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

 

(73,080)

 

$

21.34

 

 

 

 

Forfeited

 

(78,584)

 

$

28.75

 

 

 

 

Total awarded and unvested—September 30, 2017

 

1,557,957

 

$

28.78

 

$

49,122

 

 

Partnership Equity and Distributions (Tables)

 

 

 

 

 

 

 

 

Marginal Percentage

 

 

 

Interest in Distributions

 

Total Quarterly Distribution

 

 

 

Holder 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

%  

 

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

 

 

Total 2017

 

 

 

$

165,613

 

 

 —

 

 

34,424

 

 

200,037

 

 

 

 

 

 

 

* Distribution equivalent rights on 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 limited partner unit for the periods indicated is as follows (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

    

2016

    

2017

    

2016

    

2017

  

 

 

 

 

 

 

 

 

 

 

 

 

Net income

  

$

70,524

  

 

80,893

  

 

163,352

  

 

243,160

Less:

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to incentive distribution rights

 

 

(4,807)

 

 

(19,067)

 

 

(9,387)

 

 

(45,948)

Limited partner interest in net income

  

$

65,717

 

 

61,826

  

 

153,965

 

 

197,212

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per limited partner unit - basic and diluted

 

$

0.37

 

 

0.33

 

 

0.87

 

 

1.06

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units  outstanding - basic

 

 

176,395

 

 

186,581

 

 

176,243

 

 

185,240

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units  outstanding - diluted

 

 

176,766

 

 

187,145

 

 

176,306

 

 

185,728

 

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 (in thousands):

 

 

 

 

Beginning balance - December 31, 2016

$

194,538

Accretion and change in fair value

 

9,672

Ending balance - September 30, 2017

$

204,210

 

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

The following table is a reconciliation of our investments in unconsolidated affiliates as presented on our condensed consolidated balance sheets (in thousands):

 

 

 

 

 

 

 

 

 

 

 

MarkWest

 

Total Investment in

 

 

Stonewall

 

Joint Venture

 

Unconsolidated Affiliates

Balance at December 31, 2016

$

68,299

 

 —

 

68,299

Initial investment

 

 —

 

153,770

 

153,770

Additional investments

 

 —

 

63,006

 

63,006

Equity in net income of unconsolidated affiliates

 

7,669

 

5,218

 

12,887

Distributions from unconsolidated affiliates

 

(8,460)

 

(1,660)

 

(10,120)

Balance at September 30, 2017

$

67,508

 

220,334

 

287,842

 

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

Summarized financial information concerning the Partnership’s segments for the periods indicated is shown in the following table (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Water

 

 

 

 

  

Gathering and

  

Handling and

  

Consolidated

 

    

Processing

    

Treatment

    

Total

Three months ended September 30, 2016

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

77,871

 

 

72,411

 

 

150,282

Revenue - third-party

 

 

193

 

 

 —

 

 

193

Total revenues

 

 

78,064

 

 

72,411

 

 

150,475

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

4,692

 

 

28,521

 

 

33,213

General and administrative (before equity-based compensation)

 

 

5,068

 

 

1,649

 

 

6,717

Equity-based compensation

 

 

5,213

 

 

1,386

 

 

6,599

Depreciation

 

 

18,298

 

 

7,838

 

 

26,136

Accretion of contingent acquisition consideration

 

 

 —

 

 

3,527

 

 

3,527

Total expenses

 

 

33,271

 

 

42,921

 

 

76,192

Operating income

 

$

44,793

 

 

29,490

 

 

74,283

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

1,544

 

 

 —

 

 

1,544

Total assets

 

$

1,653,292

 

 

562,995

 

 

2,216,287

Additions to property and equipment

 

$

55,800

 

 

58,730

 

 

114,530

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2017

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

100,518

 

 

93,111

 

 

193,629

Revenue - third-party

 

 

 —

 

 

 —

 

 

 —

Total revenues

 

 

100,518

 

 

93,111

 

 

193,629

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

10,560

 

 

52,470

 

 

63,030

General and administrative (before equity-based compensation)

 

 

4,225

 

 

2,892

 

 

7,117

Equity-based compensation

 

 

5,111

 

 

2,088

 

 

7,199

Depreciation

 

 

21,803

 

 

8,753

 

 

30,556

Accretion of contingent acquisition consideration

 

 

 —

 

 

2,556

 

 

2,556

Total expenses

 

 

41,699

 

 

68,759

 

 

110,458

Operating income

 

$

58,819

 

 

24,352

 

 

83,171

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

7,033

 

 

 —

 

 

7,033

Total assets

 

$

2,142,409

 

 

752,982

 

 

2,895,391

Additions to property and equipment

 

$

99,254

 

 

48,019

 

 

147,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Water

 

 

 

 

  

Gathering and

  

Handling and

  

Consolidated

 

    

Processing

    

Treatment

    

Total

Nine months ended September 30, 2016

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

218,938

 

 

203,750

 

 

422,688

Revenue - third-party

 

 

669

 

 

 -

 

 

669

Total revenues

 

 

219,607

 

 

203,750

 

 

423,357

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

19,758

 

 

105,193

 

 

124,951

General and administrative  (before equity-based compensation)

 

 

14,853

 

 

5,493

 

 

20,346

Equity-based compensation

 

 

14,902

 

 

4,464

 

 

19,366

Depreciation

 

 

52,125

 

 

21,975

 

 

74,100

Accretion of contingent acquisition consideration

 

 

 -

 

 

10,384

 

 

10,384

Total expenses

 

 

101,638

 

 

147,509

 

 

249,147

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

117,969

 

 

56,241

 

 

174,210

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

2,027

 

 

 -

 

 

2,027

Total assets

 

$

1,653,292

 

 

562,995

 

 

2,216,287

Additions to property and equipment

 

$

152,769

 

 

137,355

 

 

290,124

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2017

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero Resources

 

$

290,675

 

 

271,226

 

 

561,901

Revenue - third-party

 

 

264

 

 

 —

 

 

264

Total revenues

 

 

290,939

 

 

271,226

 

 

562,165

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

28,596

 

 

134,296

 

 

162,892

General and administrative  (before equity-based compensation)

 

 

15,242

 

 

7,884

 

 

23,126

Equity-based compensation

 

 

14,937

 

 

5,499

 

 

20,436

Depreciation

 

 

63,773

 

 

24,831

 

 

88,604

Accretion of contingent acquisition consideration

 

 

 —

 

 

9,672

 

 

9,672

Total expenses

 

 

122,548

 

 

182,182

 

 

304,730

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

168,391

 

 

89,044

 

 

257,435

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

$

12,887

 

 

 —

 

 

12,887

Total assets

 

$

2,142,409

 

 

752,982

 

 

2,895,391

Additions to property and equipment

 

$

254,619

 

 

143,470

 

 

398,089

 

 

Business and Organization (Details)
9 Months Ended
Sep. 30, 2017
Operating Subsidiaries
Sep. 30, 2017
Antero Midstream LLC
Sep. 30, 2017
Antero Water
Sep. 30, 2017
Antero Treatment
Sep. 30, 2017
Stonewall Gas Gathering LLC
Jun. 30, 2016
Stonewall Gas Gathering LLC
Feb. 6, 2017
Appalachia Joint venture
Sep. 30, 2017
MarkWest
Appalachia Joint venture
Feb. 6, 2017
MarkWest
Appalachia Joint venture
Business and Organization
 
 
 
 
 
 
 
 
 
Ownership interest in subsidiaries (as a percent)
100.00% 
100.00% 
100.00% 
100.00% 
 
 
 
 
 
Ownership percentage
 
 
 
 
15.00% 
15.00% 
50.00% 
50.00% 
50.00% 
Summary of Significant Accounting Policies (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Property and equipment:
 
 
Total property and equipment
$ 2,851,450 
$ 2,450,521 
Less accumulated depreciation
(343,246)
(254,642)
Property and equipment, net
2,508,204 
2,195,879 
Midstream LTIP
 
 
Stock-Based Compensation
 
 
Number of stock-based compensation awards authorized
10,000,000 
 
Land
 
 
Property and equipment:
 
 
Total property and equipment
14,850 
11,338 
Fresh water surface pipelines and equipment
 
 
Property and equipment:
 
 
Useful life
5 years 
 
Total property and equipment
46,183 
39,562 
Above ground storage tanks
 
 
Property and equipment:
 
 
Useful life
10 years 
 
Total property and equipment
4,301 
4,301 
Fresh water permanent buried pipelines and equipment
 
 
Property and equipment:
 
 
Useful life
20 years 
 
Total property and equipment
472,012 
443,453 
Gathering systems and facilities
 
 
Property and equipment:
 
 
Useful life
20 years 
 
Total property and equipment
1,774,221 
1,551,771 
Construction-in-progress
 
 
Property and equipment:
 
 
Total property and equipment
$ 539,883 
$ 400,096 
Related Party Transactions (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Allocation of costs
 
 
 
 
Direct labor expenses
$ 2.6 
$ 1.0 
$ 5.0 
$ 2.8 
General and administrative expense
$ 13.0 
$ 12.2 
$ 39.8 
$ 36.1 
Long-term Debt (Details) (USD $)
9 Months Ended 9 Months Ended 0 Months Ended 0 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Sep. 30, 2017
Revolving credit facility
Dec. 31, 2016
Revolving credit facility
Sep. 30, 2017
Letter of credit
Dec. 31, 2016
Letter of credit
Sep. 30, 2017
Letter of credit
Minimum
Sep. 30, 2017
Letter of credit
Maximum
Sep. 13, 2016
5.375% Senior Notes due 2024
Sep. 30, 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
Maximum
Sep. 13, 2016
5.375% Senior Notes due 2024
Prior to September 15, 2019
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
 
 
$ 427,000,000 
$ 210,000,000 
 
 
 
 
 
$ 650,000,000 
$ 650,000,000 
 
 
 
 
 
Net unamortized debt issuance costs
(9,278,000)
(10,086,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, net
1,067,722,000 
849,914,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
1,500,000 
 
150,000,000 
 
 
 
 
 
 
 
 
 
 
 
Margin rates
25.00 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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% 
 
 
 
 
 
 
 
 
Outstanding letters of credit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average interest rate (as a percent)
 
 
2.82% 
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
Sep. 30, 2017
Dec. 31, 2016
Accrued Liabilities
 
 
Capital expenditures
$ 42,883 
$ 35,608 
Operating expenses
24,707 
14,582 
Interest
1,950 
10,613 
Other
992 
838 
Accrued liabilities
$ 70,532 
$ 61,641 
Equity Based Compensation (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Additional disclosures
 
 
 
 
Equity-based compensation
$ 7,199,000 
$ 6,599,000 
$ 20,436,000 
$ 19,366,000 
Midstream LTIP
 
 
 
 
Additional disclosures
 
 
 
 
Number of stock-based compensation awards authorized
10,000,000 
 
10,000,000 
 
Unamortized expense
30,400,000 
 
30,400,000 
 
Number of shares available for future grant under the Plan
7,656,134 
 
7,656,134 
 
Weighted average period for recognizing unrecognized stock-based compensation expense
 
 
2 years 2 months 12 days 
 
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)
 
 
(73,080)
 
Forfeited (in shares)
 
 
(78,584)
 
Total awarded and unvested at the end of the period (in shares)
1,557,957 
 
1,557,957 
 
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)
 
 
$ 21.34 
 
Forfeited (in dollars per unit)
 
 
$ 28.75 
 
Total awarded and unvested at the end of the period (in dollars per unit)
$ 28.78 
 
$ 28.78 
 
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
49,122,000 
 
49,122,000 
 
Various equity based compensation plans |
Antero Resources
 
 
 
 
Additional disclosures
 
 
 
 
Unamortized expense
$ 140,100,000 
 
$ 140,100,000 
 
Partnership Equity and Distributions (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
0 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Aug. 16, 2017
May 10, 2017
Apr. 30, 2017
Feb. 9, 2017
Feb. 8, 2017
Nov. 24, 2016
Nov. 8, 2016
Aug. 24, 2016
May 25, 2016
Feb. 29, 2016
Sep. 30, 2017
Sep. 30, 2017
Dec. 31, 2017
Dec. 31, 2016
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual cash distribution (per unit)
 
 
 
 
 
 
 
 
 
 
 
0.68 
 
 
Minimum cash distributions to trigger unitholder and general partner distributions
 
 
 
 
 
 
 
 
 
 
 
$ 0.1955 
 
 
Cash distribution declared
 
 
 
 
 
 
 
 
 
 
$ 0.34 
 
 
 
Subordinated units
 
 
 
75,940,957 
 
 
 
 
 
 
 
 
 
 
Common units conversion ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributions
$ 75,023 
$ 67,306 
$ 75 
 
$ 57,633 
$ 51,845 
$ 849 
$ 46,775 
$ 43,252 
$ 39,725 
 
 
$ 200,037 
$ 182,446 
Distributions per limited partner unit (in dollars per share)
$ 0.3200 
$ 0.3000 
 
 
$ 0.2800 
$ 0.2650 
 
$ 0.2500 
$ 0.2350 
$ 0.2200 
 
 
 
 
General Partner
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributions
15,328 
11,553 
 
 
7,543 
4,820 
 
2,731 
1,850 
969 
 
 
34,424 
10,370 
Common units
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributions
59,695 
55,753 
75 
 
50,090 
26,901 
849 
25,059 
23,556 
22,048 
 
 
165,613 
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 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Net income per limited partner unit
 
 
 
 
Net income
$ 80,893 
$ 70,524 
$ 243,160 
$ 163,352 
Net income attributable to incentive distribution rights
(19,067)
(4,807)
(45,948)
(9,387)
Limited partners' interest in net income
$ 61,826 
$ 65,717 
$ 197,212 
$ 153,965 
Net income per limited partner unit - basic and diluted
$ 0.33 
$ 0.37 
$ 1.06 
$ 0.87 
Weighted average limited partner units outstanding - basic
186,581,000 
176,395,000 
185,240,000 
176,243,000 
Weighted average limited partner units outstanding - diluted
187,145,000 
176,766,000 
185,728,000 
176,306,000 
Phantom share units
 
 
 
 
Net income per limited partner unit
 
 
 
 
Weighted average limited partner units outstanding - diluted
563,817 
 
488,515 
 
Common units
 
 
 
 
Net income per limited partner unit
 
 
 
 
Weighted average limited partner units outstanding - diluted
187,144,983 
 
185,728,119 
 
Sale of Common Units Under Equity Distribution Agreement (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2017
Sale of Common Units Under Equity Distribution Agreement
 
 
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 
Fair Value Measurement (Details) (USD $)
9 Months Ended 1 Months Ended
Sep. 30, 2017
Sep. 30, 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
 
676,000,000 
 
 
Reconciliation of changes in Level 3 financial liabilities measured at fair value on a recurring basis
 
 
 
 
Beginning balance
194,538,000 
 
 
 
Accretion and change in fair value
9,672,000 
 
 
 
Ending balance
$ 204,210,000 
 
 
 
Equity Method Investments (Details) (USD $)
3 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Feb. 10, 2017
Common Unitholders Public
Feb. 6, 2017
Appalachia Joint venture
Sep. 30, 2017
Appalachia Joint venture
Feb. 6, 2017
Appalachia Joint venture
Sep. 30, 2017
Appalachia Joint venture
MarkWest
Feb. 6, 2017
Appalachia Joint venture
MarkWest
Sep. 30, 2017
Stonewall Gas Gathering LLC
Jun. 30, 2016
Stonewall Gas Gathering LLC
mi
Equity Method Investment
 
 
 
 
 
 
 
 
 
 
 
 
Ownership percentage
 
 
 
 
 
 
 
50.00% 
50.00% 
50.00% 
15.00% 
15.00% 
Percentage of interest held by joint venture in third party fractionator in Ohio
 
 
 
 
 
33.33% 
 
 
 
 
 
 
Contribution to joint venture
 
 
$ 216,776,000 
$ 45,044,000 
 
 
 
 
 
 
 
 
Sale of units to public (in shares)
 
 
 
 
6,900,000 
 
 
 
 
 
 
 
Net proceeds from sale of units
 
 
 
 
223,000,000 
 
 
 
 
 
 
 
Number of miles
 
 
 
 
 
 
 
 
 
 
 
67 
Investments in unconsolidated affiliates
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
 
68,299,000 
 
 
 
 
 
 
 
68,299,000 
 
Initial investment
 
 
153,770,000 
 
 
 
153,770,000 
 
 
 
 
 
Additional investment
 
 
63,006,000 
 
 
 
63,006,000 
 
 
 
 
 
Equity in net income (loss) of unconsolidated affiliates
7,033,000 
1,544,000 
12,887,000 
2,027,000 
 
 
5,218,000 
 
 
 
7,669,000 
 
Distributions from unconsolidated affiliates
 
 
(10,120,000)
 
 
 
(1,660,000)
 
 
 
(8,460,000)
 
Balance at end of period
$ 287,842,000 
 
$ 287,842,000 
 
 
 
$ 220,334,000 
 
 
 
$ 67,508,000 
 
Reporting Segments (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
segment
Sep. 30, 2016
Dec. 31, 2016
Reporting Segments
 
 
 
 
 
Number of reportable segments
 
 
 
 
Revenues:
 
 
 
 
 
Total revenue
$ 193,629 
$ 150,475 
$ 562,165 
$ 423,357 
 
Operating expenses:
 
 
 
 
 
Direct operating
63,030 
33,213 
162,892 
124,951 
 
General and administrative expense (before equity-based compensation)
7,117 
6,717 
23,126 
20,346 
 
Equity-based compensation
7,199 
6,599 
20,436 
19,366 
 
Depreciation
30,556 
26,136 
88,604 
74,100 
 
Accretion of contingent acquisition consideration
2,556 
3,527 
9,672 
10,384 
 
Total operating expenses
110,458 
76,192 
304,730 
249,147 
 
Operating income
83,171 
74,283 
257,435 
174,210 
 
Equity in earnings of unconsolidated affiliates
7,033 
1,544 
12,887 
2,027 
 
Total assets
2,895,391 
2,216,287 
2,895,391 
2,216,287 
2,349,895 
Additions to property and equipment
147,273 
114,530 
398,089 
290,124 
 
Antero Resources
 
 
 
 
 
Revenues:
 
 
 
 
 
Total revenue
193,629 
150,282 
561,901 
422,688 
 
Third party
 
 
 
 
 
Revenues:
 
 
 
 
 
Total revenue
 
193 
264 
669 
 
Water Handling and Treatment
 
 
 
 
 
Reporting Segments
 
 
 
 
 
Number of independent fresh water systems
 
 
 
 
Operating Segments |
Gathering And Processing
 
 
 
 
 
Revenues:
 
 
 
 
 
Total revenue
100,518 
78,064 
290,939 
219,607 
 
Operating expenses:
 
 
 
 
 
Direct operating
10,560 
4,692 
28,596 
19,758 
 
General and administrative expense (before equity-based compensation)
4,225 
5,068 
15,242 
14,853 
 
Equity-based compensation
5,111 
5,213 
14,937 
14,902 
 
Depreciation
21,803 
18,298 
63,773 
52,125 
 
Total operating expenses
41,699 
33,271 
122,548 
101,638 
 
Operating income
58,819 
44,793 
168,391 
117,969 
 
Equity in earnings of unconsolidated affiliates
7,033 
1,544 
12,887 
2,027 
 
Total assets
2,142,409 
1,653,292 
2,142,409 
1,653,292 
 
Additions to property and equipment
99,254 
55,800 
254,619 
152,769 
 
Operating Segments |
Gathering And Processing |
Antero Resources
 
 
 
 
 
Revenues:
 
 
 
 
 
Total revenue
100,518 
77,871 
290,675 
218,938 
 
Operating Segments |
Gathering And Processing |
Third party
 
 
 
 
 
Revenues:
 
 
 
 
 
Total revenue
 
193 
264 
669 
 
Operating Segments |
Water Handling and Treatment
 
 
 
 
 
Revenues:
 
 
 
 
 
Total revenue
93,111 
72,411 
271,226 
203,750 
 
Operating expenses:
 
 
 
 
 
Direct operating
52,470 
28,521 
134,296 
105,193 
 
General and administrative expense (before equity-based compensation)
2,892 
1,649 
7,884 
5,493 
 
Equity-based compensation
2,088 
1,386 
5,499 
4,464 
 
Depreciation
8,753 
7,838 
24,831 
21,975 
 
Accretion of contingent acquisition consideration
2,556 
3,527 
9,672 
10,384 
 
Total operating expenses
68,759 
42,921 
182,182 
147,509 
 
Operating income
24,352 
29,490 
89,044 
56,241 
 
Total assets
752,982 
562,995 
752,982 
562,995 
 
Additions to property and equipment
48,019 
58,730 
143,470 
137,355 
 
Operating Segments |
Water Handling and Treatment |
Antero Resources
 
 
 
 
 
Revenues:
 
 
 
 
 
Total revenue
$ 93,111 
$ 72,411 
$ 271,226 
$ 203,750