Antero Midstream Corporation · NYSE:AM
Antero Midstream — Antero Midstream Partners — Citigroup MLP / Midstream Infrastructure Conference 2015
47 slides from Antero Midstream's conference presentation, Aug 19, 2015
Slide 1: Citigroup MLP / Midstream Infrastructure Conference
Citigroup MLP / Midstream Infrastructure Conference August 19 – 20, 2015
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that Antero Midstream Partners LP, and its subsidiaries (collectively, the “Partn
Slide 3: Antero Advanced Wastewater Treatment Complex
ANTERO ADVANCED WASTEWATER TREATMENT COMPLEX Advanced Wastewater Treatment Complex Water Asset System Map • Veolia Water Technologies, Inc. will design and build the largest advanced wastewater treatment complex in Appalachia to support the growing needs for the treatment and recycling of flowback a
Slide 4: Antero Integrated Water Business
ANTERO INTEGRATED WATER BUSINESS Advanced Wastewater Treatment Illustrative Produced & Flowback Water Volumes • Antero’s advanced wastewater treatment facility will (Bbl/d) 80,000 Antero Advanced Wastewater Treatment Capacity (Bbl/d) incorporate Veolia’s proprietary evaporation and 70,000 Produced/F
Slide 5: Leading Unconventional Midstream Business Model
LEADING UNCONVENTIONAL MIDSTREAM BUSINESS MODEL High Growth Sponsor Largest Dedicated Core Drives AM Throughput Liquids-Rich Acreage and Distribution Growth Position in Appalachia 2 3 Growth Liquids- Premier E&P Operator Consolidated Acreage Rich in Appalachia Position in Lowest 1 Sponsor 4 Sustaina
Slide 6: Sponsor Strength – Leadership in Appalachian Basin
SPONSOR STRENGTH – LEADERSHIP IN APPALACHIAN BASIN Antero has the largest proved reserve base, the largest core liquids-rich acreage position and is one of the largest producers in the Appalachian Basin Top Producers in Appalachia (Net MMcfe/d) – 2Q 2015(1)(2) Top 12 U.S. Natural Gas Producers (Ne
Slide 7: Sponsor Strength – Most Active Operator in Appalachia
SPONSOR STRENGTH – MOST ACTIVE OPERATOR IN APPALACHIA COMBINED TOTAL – 12/31/14 RESERVES Assumes Ethane Rejection Net Proved Reserves 12.7 Tcfe Net 3P Reserves 40.7 Tcfe Pre-Tax 3P PV-10 $22.8 Bn 1H 2015 Avg SW Marcellus & Utica(2) Net 3P Reserves & Resource 53 to 57 Tcfe 14 Net 3P Liquids 1,026 MMB
Slide 8: Growth – Highest Growth Large Cap E&P
GROWTH – HIGHEST GROWTH LARGE CAP E&P Antero’s 40%+ production growth guidance for 2015 leads the U.S. large cap E&P industry(1) and drives AM growth 45% 40%+ 35% 27.4% 26.2% 25.9% 24.1% 25% 19.7% 14.4% 15% 11.7% 11.5% 11.0% 8.8% 5% 2.5% (0.1%) (1.1%) (1.5%) -5% (4.0%) (4.6%) -15% (14.0%) (2) (15.
Slide 9: Growth – High Growth Midstream Throughput
GROWTH – HIGH GROWTH MIDSTREAM THROUGHPUT Low Pressure Gathering (MMcf/d) High Pressure Gathering (MMcf/d) 1,200 Utica Marcellus Utica Marcellus 1,197 1,200 1,134 935 965 1,000 1,000 908 738 800 800 600 531 600 531 386 400 331 281 400 216 266 200 108 200 126 38 80 10 0 0 2Q '13 3Q '13 4Q '13 1Q '14
Slide 10: Liquids-Rich – Largest Core Position
LIQUIDS-RICH – LARGEST CORE POSITION Antero has over 3,000 undeveloped rich gas locations with an average lateral length of 6,800’ in its 3P reserves • Antero has the largest core liquids- rich position in Appalachia with ≈385,000 net acres (> 1100 Btu) • Represents over 21% of core liquids- rich
Slide 11: Sustainable Business Model – Multi-Year Drilling Inventory
SUSTAINABLE BUSINESS MODEL – AR MULTI-YEAR DRILLING INVENTORY SUPPORTS LOW RISK, HIGH RETURN GROWTH PROFILE Antero has reduced average well costs for a 9,000’ lateral by 16% in the Marcellus and 18% in the Utica as compared to 2014 well costs, through a combination of service cost reductions and d
Slide 12: Sustainable Business Model – Low Break-Even Price Economics
SUSTAINABLE BUSINESS MODEL– LOW BREAK-EVEN PRICE ECONOMICS Marcellus and Utica undeveloped 3P rich-gas locations have the lowest break-even prices for both oil and natural gas compared to other U.S. shale plays North American Break-even Oil Prices ($/Bbl)(1) Antero Projects $100 2015 WTI Strip: $5
Slide 13: High Visibility – Projected Marcellus Midstream Buildout
HIGH VISIBILITY – PROJECTED MARCELLUS MIDSTREAM BUILDOUT 2014 2015 2016 2017 2018+ 12
Slide 14: High Visibility – Projected Utica Midstream Buildout
HIGH VISIBILITY – PROJECTED UTICA MIDSTREAM BUILDOUT 2014 2015 2016 2017 2018+ 13
Slide 15: Mitigated Commodity Risk – 100% Fixed Fee
MITIGATED COMMODITY RISK – 100% FIXED FEE – RICH TO DRY (1) Contract Mix Commodity Commodity Based Commodity Based Based Commodity Fixed Fixed Fixed Based Fee Fee Fee 100% 100% 100% Fixed Fixed Fixed Fee Fee Fee 94% 97% 90% Appalachian Exposure Marcellus – Dry Marcellus – Rich Ut
Slide 16: Mitigated Commodity Risk – Firm Transportation & Sales Portfolio
MITIGATED COMMODITY RISK – FIRM TRANSPORTATION & SALES PORTFOLIO Antero Resources Transportation Portfolio • Antero Resources has built the largest firm transportation portfolio with 4.85 BBtu/d by year end 2018 BBtu/d 5.0 AR Gross Gas Production 4.5 4.0 3.5 (NYMEX/TCO) Mid-Atlantic (NYMEX) 3.0 (ANR
Slide 17: Mitigated Commodity Risk – Hedging Integral to Business Model
MITIGATED COMMODITY RISK – INTEGRAL TO BUSINESS MODEL Hedging is a key component of Antero’s business model which includes development of a large, repeatable drilling inventory Antero has realized $1.3 billion of gains on commodity hedges over the past 6 ½ years – Gains realized in 25 of last 26
Slide 18: Value Chain Opportunity – Full Midstream Value Chain
VALUE CHAIN OPPORTUNITY – FULL MIDSTREAM VALUE CHAIN Well Pad Condensate Gathering End Stabilization Users (Miles) YE 2014 YE 2015 Compression (Miles) YE 2014 YE 2015 Utica 16 20 Marcellus 62 81 Low Pressure Gathering Utica 35 36 Total 97 117 (Miles) YE 2014 YE 2015 Marcellus 91 118 (MMcf/d) YE 2014
Slide 19: Strong Financial Position – Significant Financial Flexibility
STRONG FINANCIAL POSITION – SIGNIFICANT FINANCIAL FLEXIBILITY AM Liquidity (6/30/2015) Financial Flexibility • Undrawn $1 billion revolver in place to fund future growth ($ in millions) capital (5x Debt/EBITDA Cap) Revolver Capacity $1,000 • $113 million of cash at 6/30/2015 Less: Borrowings - • Spo
Slide 20: Top Tier Distribution Growth & Healthy Coverage
TOP TIER DISTRIBUTION GROWTH & HEALTHY COVERAGE 3–Year Expected Distribution Growth Rate and DCF Coverage(1) 40% 1.80x 1.63x 35% 1.44x 1.50x 1.60x 1.46x 1.40x 30% 1.25x 1.25x 1.17x 1.20x 1.21x 1.18x 1.15x 1.10x 1.20x 25% 1.00x 20% 35% 0.80x 15% 28% 0.60x 25% 25% 24% 24% 10% 17% 0.40x 16% 14% 14% 12%
Slide 21: Attractive Value Proposition
ATTRACTIVE VALUE PROPOSITION • Attractive appreciation potential on a relative basis 8.00% R-squared = .73 7.00% CNNX MWE 6.00% AM - Current WES Yield: 3.37% 5.00% Price: $22.52/unit TEP Yield (%) 4.00% MPLX AM - Implied Yield: 2.59% EQM Price: $29.32/unit 3.00% VLPDM 2.00% PSXP SHLX y = -0.038ln(x)
Slide 22: Antero Midstream Asset Overview
Antero Midstream (NYSE: AM) Asset Overview 21
Slide 23: Antero Midstream Asset Overview
ANTERO MIDSTREAM ASSET OVERVIEW Midstream Assets Utica • Gathering and compression assets in core of rapidly Shale growing Marcellus and Utica Shale plays – Acreage dedication of ~428,000 net leasehold acres for gathering and compression services – Additional stacked pay potential with dedication on
Slide 24: Antero Midstream Assets – Rich Gas Marcellus
ANTERO MIDSTREAM ASSETS – RICH GAS MARCELLUS Marcellus Gathering & Compression • Provides Marcellus gathering and compression services − Liquids-Rich gas is delivered to MWE’s 1.2 Bcf/d Sherwood processing complex • Significant growth projected over the next twelve months as set out below: YE 2014 Y
Slide 25: Antero Midstream Assets – Rich & Dry Gas Utica
ANTERO MIDSTREAM ASSETS – RICH & DRY GAS UTICA Utica Gathering & Compression • Provides Utica natural gas and condensate gathering services − Liquids-Rich gas delivered into MWE’s 800 MMcf/d Seneca processing complex − Condensate delivered to centralized stabilization and truck loading facilities •
Slide 26: Organic Growth Strategy: Build vs. Buy
ORGANIC GROWTH STRATEGY: “BUILD VS. BUY” • Organic growth strategy provides attractive Organic EBITDA Multiple vs. Precedent Drop Down Multiples returns and project economics, while 11.9x avoiding the competitive acquisition market 12.0x • Industry leading organic growth story 11.0x 10.7x 10.0x – ~$
Slide 27: Estimated Project Economics by Segment
ESTIMATED PROJECT ECONOMICS BY SEGMENT AM Option Opportunities Project Economics by Segment(1) 40% 40% 35% 35% Internal Rate of Return 30% 30% 25% 25% Wtd. Avg. 23% IRR 25% 25% 20% 20% 20% 15% 15% 15% 10% 10% 0% LP HP Condensate Water Regional Processing/ Gathering Gathering Compression Gathering Bu
Slide 28: AM Upside Opportunity Set
AM UPSIDE OPPORTUNITY SET ACTIVITY CURRENTLY DEDICATED TO AM • Option to acquire at fair market value 100% of AR’s water Integrated Water Business business dedicating 559,000 net acres, including ROFO on future services; private letter ruling received from IRS • Option to participate up to 15% in re
Slide 29: AM Option – Integrated Water Business
AM OPTION – INTEGRATED WATER BUSINESS • Currently owned by AR who recently received a Private Letter Ruling (PLR) from the IRS regarding qualifying income – AM holds option to purchase 100% of water business at fair market value • Antero has built an integrated water business to serve its water need
Slide 30: Regional Pipeline Project
REGIONAL PIPELINE PROJECT Regional Gathering Pipeline • Option to Acquire Up To 15% Non-Op Equity Interest Throughput Capacity: 1.4 Bcf/d Pipeline 50 miles of 36 inch pipeline Specifications: Project Capital: ≈ $400 Million In-Service Date: 4Q 2015 AR Firm Commitment: 1.1 Bcf/d ● Enables Antero Reso
Slide 31: Processing – Value Chain Potential for Undedicated Acreage
PROCESSING – VALUE CHAIN POTENTIAL FOR UNDEDICATED ACREAGE Antero Resources has 11.6 Tcf of processable gross 3P gas reserves and 616 Million Bbls of gross 3P NGL reserves across 128,500 gross processable Marcellus acres that are dedicated to Antero Midstream for processing Processing Area Of Dedi
Slide 32: Large Utica Shale Dry Gas Position
LARGE UTICA SHALE DRY GAS POSITION Antero spud its first dry gas Utica well in 3Q 2015 Utica Shale Dry Gas Acreage in OH/WV/PA(1) Antero has 224,000 net acres of exposure to Utica dry gas play Rice Hess Chesapeake Bigfoot 9H Porterfield 1H-17 Hubbard BRK #3H − 43,000 net acres in Ohio as of 6/30
Slide 33: Catalysts
CATALYSTS 1 AM Sponsor is the most active operator in Appalachia; 40%+ production Sponsor Production growth targeted for 2015 supported by $1.8 billion capital budget, firm Growth Profile processing and takeaway, long-term natural gas hedges and $2.4 billion of liquidity; targeting 25% to 30% produc
Slide 34: Top Tier Distribution Growth
TOP TIER DISTRIBUTION GROWTH • Antero Midstream is targeting 28% to 30% annual distribution growth through 2017 Distribution Per Unit(1) $0.50 $0.45 $0.40 $0.35 $0.30 $0.25 $0.20 $0.19 $0.18 $0.17 $0.15 $0.10 $0.05 $0.00 4Q14A 1Q15A 2Q15A 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E 4Q16E 1Q17E 2Q17E 3Q17E 4Q17E N
Slide 35: Appendix
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Slide 36: Largest Firm Transportation and Processing Portfolio in Appalachia
LARGEST FIRM TRANSPORTATION AND PROCESSING PORTFOLIO IN APPALACHIA Antero Long Term Firm Processing & Takeaway Position (2018) – Accessing Favorable Markets Chicago(1) Mariner East II $(0.04) / 62 MBbl/d Commitment $(0.06) Marcus Hook Export Dom South(1) $(1.52) / $(1.17) TCO(1) $(0.12) / Cove Point
Slide 37: Current NGL Marketing – Geographically Diverse
CURRENT NGL MARKETING – GEOGRAPHICALLY DIVERSE MarkWest currently processes all of Antero’s rich gas and markets all NGLs Mariner East II 61,500 Bbl/d AR Commitment(1) 4Q 2016 In-Service (2) 2015 NGL Marketing by Region Export 15% Gulf Northeast Coast 43% 13% Midwest 10% Ontario 3% Edmonton Mid- 1
Slide 38: NGL Exports and Netbacks Step-Up by 4Q 2016
NGL EXPORTS AND NETBACKS STEP-UP BY 4Q 2016 Upon in-service of Mariner East II, Antero will have the ability to market its propane and n-butane to international buyers, providing uplifts of $0.14/Gal and $0.12/Gal, respectively, to the current netbacks received from propane and n-butane volumes sh
Slide 39: World Class Marcellus Shale Development Project
WORLD CLASS MARCELLUS SHALE DEVELOPMENT PROJECT 100% operated RJ SMITH PAD Operating 7 drilling rigs including BEE LEWIS PAD 30-Day Rate 2 intermediate rigs 30-Day Rate 4-well combined 4-well combined 30-Day Rate of 410,000 net acres in 30-Day Rate of 56 MMcfe/d 67 MMcfe/d (21% liquids) Southwest
Slide 40: Marcellus ROR% and Gas Price Sensitivity
MARCELLUS ROR% AND GAS PRICE SENSITIVITY • Large portfolio of Highly-Rich Gas/Condensate to Dry Gas locations • Focused on drilling highly economic rich gas locations – rig symbols represent current rig location by Btu regime • Assumes 12/31/2014 WTI strip pricing for 2015-2024, flat thereafter aver
Slide 41: World Class Ohio Utica Shale Development Project
WORLD CLASS OHIO UTICA SHALE DEVELOPMENT PROJECT • 100% operated Cadiz • Operating 4 drilling rigs Processing Plant • 149,000 net acres in the core rich gas/ condensate window (71% includes processable rich gas assuming an 1100 Btu cutoff) – 24% HBP with additional 65% not expiring for 5+ years DOLL
Slide 42: Utica Ohio ROR% and Gas Price Sensitivity
UTICA OHIO ROR% AND GAS PRICE SENSITIVITY • Large portfolio of Condensate to Dry Gas locations • Focused on drilling highly economic rich gas locations – rig symbols represent current rig location by Btu regime • Assumes 12/31/2014 WTI strip pricing for 2015-2024, flat thereafter averaging $72/Bbl;
Slide 43: AR Completion Deferrals – 2016 Volume Impact
AR COMPLETION DEFERRALS – 2016 VOLUME IMPACT Plan to defer 50 Marcellus well completions into 2016 to achieve higher gas price realizations, approximately half of which are located on AM areas of dedication − Regional gathering pipeline expected in-service late 2015 will connect incremental Marcel
Slide 44: Antero Midstream – 2015 Guidance
ANTERO MIDSTREAM – 2015 GUIDANCE Key Operating & Financial Assumptions(1) Key Variable 2015 Guidance Adjusted EBITDA ($MM) $150 - $160 Distributable Cash Flow ($MM) $135 - $145 Year-over-Year Distribution Growth(2) 28% - 30% Low Pressure Pipelines Added (Miles) 44 High Pressure Pipelines Added (Mile
Slide 45: Antero Resources – Updated 2015 Guidance
ANTERO RESOURCES – UPDATED 2015 GUIDANCE Key Operating & Financial Assumptions Key Variable 2015 Guidance Net Daily Production (MMcfe/d) 1,400 Net Residue Natural Gas Production (MMcf/d) 1,175 Net Liquids Production (Bbl/d) 33,000 Net Oil Production (Bbl/d) 4,000 Natural Gas Realized Price Different
Slide 46: Maintenance Capital Methodology
MAINTENANCE CAPITAL METHODOLOGY • Maintenance Capital Calculation Methodology – Estimate the number of new well connections needed during the forecast period in order to offset the natural production decline and maintain the average throughput volume on our system over the LTM period – (1) Compare t
Slide 47: Cautionary Note Regarding Hydrocarbon Quantities
CAUTIONARY NOTE Regarding Hydrocarbon Quantities The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserve estimates (collectively, “3P”). Antero has provided internally generated estimates for proved, probable and possible reserves
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