Antero Midstream Corp 10-Q for FY2020 Q1

Antero Midstream Corp (AM)

10-Q 2020-04-29 For: 2020-03-31

Added on April 08, 2026

About this 10-Q

Antero Midstream Corp filed this 10-Q on April 29, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $243.71M; up 350.4% from $54.11M a year earlier
Net loss: $392.93M; compared with net income of $9.65M a year earlier

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Delaware		61-1748605
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1615 Wynkoop Street Denver, Colorado		80202
(Address of principal executive offices)		(Zip Code)



Securities registered pursuant to section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	AM	New York Stock Exchange


Large Accelerated Filer ⌧		Accelerated Filer ◻

Non-accelerated Filer ◻		Smaller Reporting Company ☐
Emerging Growth Company ☐


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		2
PART I—FINANCIAL INFORMATION		4
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47
Item 4.	Controls and Procedures	48
PART II—OTHER INFORMATION		49
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 6.	Exhibits	52
SIGNATURES		53


			(Unaudited)
	December 31,		March 31,
	2019		2020
Assets
Current assets:
Cash and cash equivalents	$	1,235		—
Accounts receivable–Antero Resources		101,029		90,569
Accounts receivable–third party		4,574		3,095
Income tax receivable		—		56,457
Other current assets		1,720		1,251
Total current assets		108,558		151,372
Property and equipment, net		3,273,410		3,228,265
Investments in unconsolidated affiliates		709,639		716,778
Deferred tax asset		103,231		192,499
Customer relationships		1,498,119		1,480,514
Goodwill		575,461		—
Other assets, net		14,460		11,931
Total assets	$	6,282,878		5,781,359

Liabilities and Equity
Current liabilities:
Accounts payable–Antero Resources	$	3,146		1,675
Accounts payable–third party		6,645		21,662
Accrued liabilities		104,188		57,139
Contingent acquisition consideration		125,000		—
Other current liabilities		3,105		3,084
Total current liabilities		242,084		83,560
Long-term liabilities:
Long-term debt		2,892,249		3,103,762
Other		5,131		5,082
Total liabilities		3,139,464		3,192,404

Stockholders' Equity:
Preferred stock, $0.01 par value: 100,000 authorized at December 31, 2019 and March 31, 2020, respectively
Series A non-voting perpetual preferred stock; 12 designated and 10 issued and outstanding at December 31, 2019 and March 31, 2020, respectively		—		—
Common stock, $0.01 par value; 2,000,000 authorized; 484,042 and 479,385 issued and outstanding at December 31, 2019 and March 31, 2020, respectively		4,840		4,794
Additional paid-in capital		3,480,139		3,318,659
Accumulated loss		(341,565)		(734,498)
Total stockholders' equity		3,143,414		2,588,955
Total liabilities and stockholders' equity	$	6,282,878		5,781,359


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended March 31,
	2019		2020
Revenue:
Gathering and compression–Antero Resources	$	33,534		163,129
Water handling–Antero Resources		22,351		98,184
Water handling–third party		4		—
Amortization of customer relationships		(1,781)		(17,605)
Total revenue		54,108		243,708
Operating expenses:
Direct operating		14,982		48,728
General and administrative (including $11,423 and $3,338 of equity-based compensation in 2019 and 2020, respectively)		19,809		13,537
Facility idling		—		8,678
Impairment of goodwill		—		575,461
Impairment of property and equipment		—		89,083
Depreciation		7,650		27,343
Accretion and change in fair value of contingent acquisition consideration		1,049		—
Accretion of asset retirement obligations		10		42
Total operating expenses		43,500		762,872
Operating income (loss)		10,608		(519,164)
Interest expense, net		(6,217)		(37,631)
Equity in earnings of unconsolidated affiliates		2,880		19,077
Income (loss) before income taxes		7,271		(537,718)
Provision for income tax benefit		2,377		144,785
Net income (loss) and comprehensive income (loss)	$	9,648		(392,933)

Net income (loss) per share–basic and diluted	$	0.04		(0.81)

Weighted average common shares outstanding:
Basic		253,877		483,103
Diluted		254,903		483,103


	Common
	Shares
	Representing
	Limited										Additional
	Partner		Series B		Preferred		Common Stock				Paid-In		Accumulated		Total
	Interests		Unitholders		Stock		Shares		Amount		Capital		Earnings		Equity
Balance at December 31, 2018	$	(41,969)		72,830		—		—	$	—		—		—		30,861
Distributions to unitholders		(30,543)		(3,720)		—		—		—		—		—		(34,263)
Net (loss) and comprehensive (loss) pre-acquisition		(13,549)		—		—		—		—		—		—		(13,549)
Equity-based compensation pre-acquisition		7,034		—		—		—		—		—		—		7,034
Exchange of common shares for shares of common stock and cash consideration paid		79,027		(69,110)		—		506,641		5,066		4,002,898		—		4,017,881
Issuance of Series A non-voting perpetual preferred stock		—		—		—		—		—		—		—		—
Equity-based compensation post-acquisition		—		—		—		—		—		4,389		—		4,389
Net income and comprehensive income post-acquisition		—		—		—		—		—		—		23,197		23,197
Balance at March 31, 2019	$	—		—		—		506,641	$	5,066		4,007,287		23,197		4,035,550


Fair value of shares of AM common stock issued⁽¹⁾	$	4,017,881
Cash		598,709
Total fair value of consideration transferred	$	4,616,590


	As
	Adjusted
Cash and cash equivalents	$	619,532
Accounts receivable–Antero Resources		142,312
Accounts receivable–third party		117
Other current assets		1,150
Property and equipment, net		3,371,427
Investments in unconsolidated affiliates		568,285
Customer relationships		1,567,000
Other assets, net		42,887
Total assets acquired		6,312,710

Accounts payable–Antero Resources		3,316
Accounts payable–third party		30,674
Accrued liabilities		87,021
Other current liabilities		537
Long-term debt		2,364,935
Contingent acquisition consideration		116,924
Other liabilities		8,524
Total liabilities assumed		2,611,931
Net assets acquired, excluding goodwill		3,700,779
Goodwill		915,811
Net assets acquired	$	4,616,590


Impairment of property and equipment	$	408,882
Impairment of goodwill		42,290
Impairment of customer relationships		11,871
Total impairment expense	$	463,043


Customer relationships as of December 31, 2019	$	1,498,119
Accumulated amortization		(17,605)
Customer relationships as of March 31, 2020	$	1,480,514


Remainder of year ending December 31, 2020	$	53,069
Year ending December 31, 2021		70,672
Year ending December 31, 2022		70,672
Year ending December 31, 2023		70,672
Year ending December 31, 2024		70,672
Year ending December 31, 2025		70,672
Thereafter		1,074,085
Total	$	1,480,514


Remainder of 2020	$	138,954
Year ending December 31, 2021		211,408
Year ending December 31, 2022		211,408
Year ending December 31, 2023		211,408
Year ending December 31, 2024		211,987
Year ending December 31, 2025		198,365
Thereafter		390,968
Total	$	1,574,498


	Three Months Ended March 31,				Segment to which
(in thousands)	2019		2020		revenues relate
Revenue from contracts with customers
Type of service
Gathering—low pressure	$	15,826		81,148	Gathering and Processing⁽¹⁾
Gathering—low pressure rebate		—		(12,000)	Gathering and Processing⁽¹⁾
Gathering—high pressure		9,284		48,913	Gathering and Processing⁽¹⁾
Compression		8,424		45,068	Gathering and Processing⁽¹⁾
Fresh water delivery		10,776		65,818	Water Handling
Wastewater treatment		2,430		—	Water Handling
Other fluid handling		9,149		32,366	Water Handling
Amortization of customer relationships⁽²⁾		(501)		(9,238)	Gathering and Processing
Amortization of customer relationships⁽²⁾		(1,280)		(8,367)	Water Handling
Total	$	54,108		243,708

Type of contract
Per Unit Fixed Fee	$	33,534		175,129	Gathering and Processing⁽¹⁾
Gathering—low pressure rebate		—		(12,000)	Gathering and Processing⁽¹⁾
Per Unit Fixed Fee		13,206		65,818	Water Handling
Cost plus 3%		9,149		30,945	Water Handling
Cost of service fee		—		1,421	Water Handling
Amortization of customer relationships⁽²⁾		(501)		(9,238)	Gathering and Processing
Amortization of customer relationships⁽²⁾		(1,280)		(8,367)	Water Handling
Total	$	54,108		243,708


	Estimated	December 31,		March 31,
(in thousands)	useful lives	2019		2020
Land	n/a	$	23,549		23,549
Gathering systems and facilities	40-50 years⁽¹⁾		2,375,241		2,397,023
Permanent buried pipelines and equipment	7-20 years		602,230		530,005
Surface pipelines and equipment	1-7 years		48,594		37,308
Landfill	n/a⁽²⁾		1,244		1,244
Heavy trucks and equipment	3-5 years		6,617		6,623
Above ground storage tanks	5-10 years		3,418		1,868
Construction-in-progress	n/a		300,165		307,284
Total property and equipment			3,361,058		3,304,904
Less accumulated depreciation			(87,648)		(76,639)
Property and equipment, net		$	3,273,410		3,228,265


		Weighted
		Average		Aggregate
	Number of	grant date		intrinsic value
	units	fair value		(in thousands)
Total AM LTIP RSUs awarded and unvested—December 31, 2019	1,275,990	$	14.38	$	9,685
Granted	985,269	$	7.23
Vested	(10,120)	$	8.98
Forfeited	(21,891)	$	14.51
Total AM LTIP RSUs awarded and unvested—March 31, 2020	2,229,248	$	11.22	$	4,681


					Distributions/
Quarter			Distributions/		Dividends
and Year	Record Date	Distribution Date	Dividends		per share
Q4 2018	February 1, 2019	February 21, 2019	$	30,543	$	0.164
Q1 2019	April 26, 2019	May 8, 2019		152,082	$	0.3025
Q1 2019	May 15, 2019	May 15, 2019		98		*
Q2 2019	July 26, 2019	August 7, 2019		154,146	$	0.3075
Q2 2019	August 14, 2019	September 18, 2019		138		*
Q3 2019	November 1, 2019	November 13, 2019		153,033	$	0.3075
Q3 2019	November 14, 2019	November 14, 2019		138		*
**	December 31, 2019	December 31, 2019		2,299		**
	Total 2019		$	492,477

Q4 2019	January 31, 2020	February 12, 2020		148,876	$	0.3075
*	February 14, 2020	February 14, 2020		138		*
	Total 2020		$	149,014


	Three Months Ended March 31,
(in thousands, except per share amounts)	2019		2020
Net income (loss)	$	9,648		(392,933)
Less preferred stock dividends		(29)		(138)
Net income (loss) available to common shareholders	$	9,619		(393,071)

Net income (loss) per share–basic and diluted	$	0.04		(0.81)
Weighted average common shares outstanding–basic		253,877		483,103
Weighted average common shares outstanding–diluted		254,903		483,103


	Antero						Total Investment
	Midstream				MarkWest		in Unconsolidated
(in thousands)	Partners LP		Stonewall			Joint Venture	Affiliates
Balance at December 31, 2018	$	43,492		—		—		43,492
Distributions from unconsolidated affiliates		(43,492)		—		—		(43,492)
Balance at March 12, 2019		—		—		—		—
Investments in unconsolidated affiliates acquired from Antero Midstream Partners		—		142,071		426,214		568,285
Additional Investments		—		—		154,359		154,359
Equity in net income of unconsolidated affiliates⁽¹⁾		—		4,117		47,198		51,315
Distributions from unconsolidated affiliates		—		(5,730)		(58,590)		(64,320)
Balance at December 31, 2019		—		140,458		569,181		709,639
Additional investments		—		—		11,690		11,690
Equity in net income of unconsolidated affiliates⁽¹⁾		—		1,376		17,701		19,077
Distributions from unconsolidated affiliates		—		(2,085)		(21,543)		(23,628)
Balance at March 31, 2020	$	—		139,749		577,029		716,778


	Gathering and		Water				Consolidated
(in thousands)	Processing		Handling		Unallocated ⁽¹⁾		Total
Three months ended March 31, 2019
Revenues:
Revenue–Antero Resources	$	33,534		22,351		—		55,885
Revenue–third-party		—		4		—		4
Amortization of customer relationships		(501)		(1,280)		—		(1,781)
Total revenues		33,033		21,075		—		54,108

Operating expenses:
Direct operating		2,935		12,047		—		14,982
General and administrative (excluding equity-based compensation)		1,020		574		6,792		8,386
Equity-based compensation		377		213		10,833		11,423
Depreciation		2,560		5,090		—		7,650
Accretion and change in fair value of contingent acquisition consideration		—		1,049		—		1,049
Accretion of asset retirement obligations		—		10		—		10
Total operating expenses		6,892		18,983		17,625		43,500
Operating income	$	26,141		2,092		(17,625)		10,608

Equity in earnings of unconsolidated affiliates	$	2,880		—		—		2,880
Total assets	$	4,818,809		1,841,516		8,102		6,668,427
Additions to property and equipment	$	7,677		8,328		—		16,005


	Low Pressure Gathering	Quarterly Fee
	Volume Growth Incentive	Reduction
	Targets (MMcf/d)	(in millions)
Calendar Year 2020
First Quarter	>2,700	$12
Second Quarter	>2,700	$12
Third Quarter	>2,800	$12
Fourth Quarter	>2,900	$12
Calendar Years 2021-2023
Threshold 1	>2,900 and <3,150	$12
Threshold 2	>3,150 and <3,400	$15.5
Threshold 3	>3,400	$19


									Pro Forma
	Gathering and		Water		Pro Forma				Consolidated
(in thousands)	Processing		Handling		Adjustments		Unallocated ⁽¹⁾		Total
Three months ended March 31, 2019
Revenues:
Revenue–Antero Resources	$	158,307		115,888		—		—		274,195
Revenue–third-party		—		55		—		—		55
Amortization of customer contracts		(501)		(1,280)		(15,989)		—		(17,770)
Total revenues		157,806		114,663		(15,989)		—		256,480

Operating expenses:
Direct operating		14,108		65,692		—		—		79,800
General and administrative (excluding equity-based compensation)		10,912		6,998		(15,345)		6,792		9,357
Equity-based compensation		1,963		1,104		—		10,833		13,900
Impairment of property and equipment		6,590		392		—		—		6,982
Depreciation		10,882		18,475		1,479		—		30,836
Accretion and change in fair value of contingent acquisition consideration		—		2,977		—		—		2,977
Accretion of asset retirement obligations		—		73		—		—		73
Total operating expenses		44,455		95,711		(13,866)		17,625		143,925
Operating income		113,351		18,952		(2,123)		(17,625)		112,555
Other income (expenses):
Interest expense, net		—		—		(3,301)		(23,032)		(26,333)
Equity in earnings of unconsolidated affiliates		15,144		—		(989)		—		14,155
Income before taxes		128,495		18,952		(6,413)		(40,657)		100,377
Provision for income tax expense		—		—		(23,276)		2,377		(20,899)
Net income and comprehensive income	$	128,495		18,952		(29,689)		(38,280)		79,478

Adjusted EBITDA⁽²⁾									$	202,473


	Three Months Ended				Amount of
	March 31,				Increase		Percentage
	2019⁽¹⁾		2020		or Decrease		Change
Operating Data:
Gathering—low pressure (MMcf)		230,540		247,223		16,683		7	%
Gathering—high pressure (MMcf)		224,786		245,446		20,660		9	%
Compression (MMcf)		202,938		228,967		26,029		13	%
Fresh water delivery (MBbl)		13,732		16,620		2,888		21	%
Treated water (MBbl)		2,147		—		(2,147)		*
Other fluid handling (MBbl)		5,066		5,600		534		11	%
Wells serviced by fresh water delivery		31		43		12		39	%
Gathering—low pressure (MMcf/d)		2,562		2,717		155		6	%
Gathering—high pressure (MMcf/d)		2,498		2,697		199		8	%
Compression (MMcf/d)		2,255		2,516		261		12	%
Fresh water delivery (MBbl/d)		153		183		30		20	%
Treated water (MBbl/d)		24		—		(24)		*
Other fluid handling (MBbl/d)		56		61		5		9	%
Average realized fees:
Average gathering—low pressure fee ($/Mcf)	$	0.33		0.33		—		*
Average gathering—high pressure fee ($/Mcf)	$	0.20		0.20		—		*
Average compression fee ($/Mcf)	$	0.19		0.20		0.01		5	%
Average fresh water delivery fee ($/Bbl)	$	3.89		3.96		0.07		2	%
Average treatment fee ($/Bbl)	$	4.48		—		(4.48)		*
Joint Venture Operating Data:
Processing—Joint Venture (MMcf)		89,652		120,514		30,862		34	%
Fractionation—Joint Venture (MBbl)		1,981		2,984		1,003		51	%
Processing—Joint Venture (MMcf/d)		996		1,324		328		33	%
Fractionation—Joint Venture (MBbl/d)		22		33		11		50	%


	Remainder		Year Ended December 31,
(in millions)	of 2020		2021		2022		2023		2024		2025		Thereafter		Total
Credit Facility ⁽¹⁾	$	—		—		1,171		—		—		—		—		1,171
5.375% senior notes due 2024—principal		—		—		—		—		650		—		—		650
5.375% senior notes due 2024—interest		17		35		35		35		35		—		—		157
5.75% senior notes due 2027—principal		—		—		—		—		—		—		650		650
5.75% senior notes due 2027—interest		19		37		37		37		37		37		56		260
5.75% senior notes due 2028—principal		—		—		—		—		—		—		650		650
5.75% senior notes due 2028—interest		19		37		37		37		37		37		93		297
Asset retirement obligations		3		—		—		1		—		—		2		6
Total	$	58		109		1,280		110		759		74		1,451		3,841


	Three Months Ended March 31,
(in thousands)	2019 ⁽¹⁾		2020
Reconciliation of Net Income (Loss) to Adjusted EBITDA:
Net income (loss)	$	79,478		(392,933)
Interest expense, net		26,333		37,631
Income tax expense (benefit)		20,899		(144,785)
Amortization of customer relationships		17,770		17,605
Depreciation expense		30,836		27,343
Impairment		6,982		664,544
Accretion and change in fair value of contingent acquisition consideration		3,050		42
Equity-based compensation		13,900		3,338
Equity in earnings of unconsolidated affiliates		(14,155)		(19,077)
Distributions from unconsolidated affiliates		17,380		23,628
Adjusted EBITDA	$	202,473		217,336


				Total Number of	Approximate Value
	Number of	Average Price		Common	of Common
	Common	Paid per		Shares Purchased	Shares that May
	Shares	Common		as Part of Publicly	Yet be Purchased
Period	Purchased⁽¹⁾	Share		Announced Plans⁽²⁾	Under the Plan
January 1, 2020 – January 31, 2020	3,486	$	7.59	—		N/A
February 1, 2020 – February 29, 2020	1,500,000	$	4.48	1,500,000	$	167,745,268
March 1, 2020 – March 31, 2020	3,200,000	$	2.83	3,200,000	$	158,656,788
Total	4,703,486	$	3.36	4,700,000	$	158,656,788


Exhibit Number		Description of Exhibit
3.1		Certificate of Conversion of Antero Midstream Corporation, dated March 12, 2019 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on March 12, 2019).
3.2		Certificate of Incorporation of Antero Midstream Corporation, dated March 12, 2019 (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on March 12, 2019).
3.3		Bylaws of Antero Midstream Corporation, dated March 12, 2019 (incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on March 12, 2019).
3.4		Certificate of Designations of Antero Midstream Corporation, dated March 12, 2019 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on March 12, 2019).
10.1	*	Form of Retention Award Grant Notice and Retention Award Agreement under the Antero Midstream Corporation Long Term Incentive Plan.
31.1	*	Certification of the Company’s Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).
31.2	*	Certification of the Company’s Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).
32.1	*	Certification of the Company’s Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
32.2	*	Certification of the Company’s Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
99.1	*	Unaudited pro forma condensed combined financial statements of Antero Midstream Corporation.
101	*	The following financial information from this Quarterly Report on Form 10-Q of Antero Midstream Corporation for the quarter ended March 31, 2020, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Condensed Consolidated Statements of Partners’ Capital and Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).



ANTERO MIDSTREAM CORPORATION

By:	/s/ Michael N. Kennedy
	MICHAEL N. KENNEDY
	Chief Financial Officer

Date:	April 29, 2020