Antero Midstream Corporation · NYSE:AM
Antero Midstream — Antero Midstream Partners — Merger or Acquisition (October 2018)
18 slides from Antero Midstream's merger presentation, Oct 9, 2018
Slide 1: Legal Disclaimer
Legal Disclaimer NO OFFER OR SOLICITATION This presentation relates to a proposed business combination transaction (the “Transaction”) between Antero Midstream Partners LP (“AM”) and Antero Midstream GP LLC (“AMGP”). This presentation is for informational purposes only and does not constitute an off
Slide 2: Special Committee Process Objectives
Special Committee Process Objectives 3 1 Achieve a “win-win-win” Transaction Across the Antero Family Improve the financial profile and deliver value to all three Antero equities including AR, AM and AMGP Maintain target distributions to AM unitholders with strong coverage Further Align the Interest
Slide 3: Today’s Strategic Announcement
Today’s Strategic Announcement 4 1 AMGP to acquire AM in a midstream simplification transaction AM public unitholders receive all-in consideration valued at $31.41/unit Eliminates IDRs, lowering AM cost of capital Tax basis step-up eliminates ~$375 MM of expected AMGP taxes through 2022 Resulting en
Slide 4: Best in Class Midstream Vehicle
Best in Class Midstream Vehicle 5 Simplification “checks all the boxes” for midstream investors Attribute 1099 Tax Form No IDRs Self-funding Model Reasonable Leverage Visible Growth Capital Efficiency Strong DCF Coverage Sufficient Liquidity Elected Board Tax Shield C-corp for tax and governance pur
Slide 5: Simplification Transaction Overview
Simplification Transaction Overview 6 AMGP to acquire 100% of outstanding common units of AM, including common units owned by AR Elimination of incentive distribution rights (“IDRs”) and Series B profits interest All-in consideration to AM public unitholders valued at $31.41/unit consisting of 1.635
Slide 6: Antero Family Simplified Pro Forma Structure
Antero Family Simplified Pro Forma Structure 7 Status Quo Structure Simplified Pro Forma Structure Midstream simplification transaction results in one publicly traded midstream infrastructure corporation with no IDRs and AR as its largest shareholder 1) Series B profits interest held by Antero manag
Slide 7: New AM – Increased Cash Dividend Targets
New AM – Increased Cash Dividend Targets 8 8 Note: Note: For additional information regarding Non-GAAP Financial Measures and Definitions please see appendix. 2019 distribution growth target relative to midpoint of 2018 guidance of $0.54/share and $1.72/unit for AMGP and AM, respectively. Represents
Slide 8: Simplification Transaction Sources & Uses
Simplification Transaction Sources & Uses 9 Transaction Sources and Uses Sources $MM AMGP Common Equity Issuance(1) $5,510 Revolving Credit Facility 619 Total $6,129 Uses $MM Acquisition of AM (Equity) $5,510 Acquisition of AM (Cash) 598 Estimated Transaction Fees 21 Total $6,129 Pro Forma Capitaliz
Slide 9: Highest Dividend Growth Among Top Midstream
Highest Dividend Growth Among Top 20 Midstream 10 New AM will be a unique midstream vehicle with scale, low leverage and high distribution growth all in a C-corp structure C-CORP Leverage MLP ENBRIDGE ONEOK KINDER MORGAN TRANSCANADA WILLIAMS ANTERO MIDSTREAM * * * * * * * TARGA RESOURCES * * PLAINS
Slide 10: Yield vs. Growth Correlation Implies Attractive Value
Yield vs. Growth Correlation Implies Attractive Value 11 Source: FactSet. Prices as of 10/08/2018. Yield vs. Dividend/Distribution Growth (2018 – 2021) New AM dividend targets imply 4.1% yield ($23/share) based on 2018 – 2021 dividend growth of 27% Antero Midstream Corporation’s dividend growth prof
Slide 11: Simplification Transaction Summary
Simplification Transaction Summary 12 1 2 Simplifies midstream structure and aligns all Antero equity holders C-Corp structure without IDRs is the increasingly preferred structure by investors Broadens potential investor base and creates opportunity for inclusion in major equity indices Tax efficien
Slide 12: Simplification Transaction Summary
») Simplification Transaction Summary Simplifies midstream structure and aligns all Antero equity holders + C-Corp structure without IDRs is the increasingly preferred structure by investors + Broadens potential investor base and creates opportunity for inclusion in major equity indices Tax efficien
Slide 13: Long-term Outlook – Status Quo vs. Pro Forma
Long-term Outlook – Status Quo vs. Pro Forma 14 AM Targets / Policies Pro Forma AMGP Entity Status Quo Distribution Growth Targets Change DCF Coverage Ratio Leverage Policy 5-Year Organic Project Backlog (2018-2022) 29% Through 2020 20% in 2021 & 2022 29% Through 2020 20% in 2021 & 2022 No Change 1.
Slide 14: Series B Profits Elimination
Series B Profits Elimination 15 Prior to Simplification: The Series B profits interests were created in December 2016 through an agreement between Antero’s co-founders and private equity sponsors, who jointly owned 100% of IDR LLC prior to the AMGP IPO Series B units are entitled to receive up to 6%
Slide 15: Antero Midstream Non-GAAP Measures
Antero Midstream Non-GAAP Measures 16 Non-GAAP Financial Measures and Definitions Antero Midstream views Adjusted EBITDA as an important indicator of the Partnership’s performance. Antero Midstream defines Adjusted EBITDA as Net Income before interest expense, depreciation expense, impairment expens
Slide 16: Adjusted EBITDA and DCF Reconciliation
Adjusted EBITDA and DCF Reconciliation 17 Adjusted EBITDA and DCF Reconciliation ($ in thousands) Three months ended June 30, 2017 2018 Net income $ 87,175 $ 109,466 Interest expense 9,015 14,628 Impairment of property and equipment expense — 4,614 Depreciation expense 30,512 36,433 Accretion of con
Slide 17: Antero Midstream Non-GAAP Measures
Antero Midstream Non-GAAP Measures 18 Twelve Months Ended June 30, 2018 Net income $ 362,620 Interest expense 45,631 Impairment of property and equipment expense 28,045 Depreciation expense 130,379 Accretion of contingent acquisition consideration 14,180 Accretion of asset retirement obligations 68
Slide 18: Antero Midstream Non-GAAP Measures
»») Antero Midstream Non-GAAP Measures : A The following table reconciles consolidated total debt to consolidated net debt ("Net Debt”) as used in this presentation (in thousands): Sune 30,2018 Bank credit facility s 770,000 5.375% AM senior notes due 2024 650,000 Consolidated total debt s 1,420,000
Antero Midstream Partners — Merger or Acquisition (October 2018) on 6ix