Antero Midstream Corporation · NYSE:AM
Antero Midstream — Antero Midstream Partners — Merger or Acquisition (February 2019)
53 slides from Antero Midstream's merger presentation, Feb 5, 2019
Slide 1: Legal Disclaimer
Legal Disclaimer No Offer or Solicitation This presentation includes a discussion of a proposed simplification transaction (the “Transaction”) between Antero Midstream Partners LP (“AM” or the “Partnership”) and Antero Midstream GP LP (“AMGP”). This presentation is for informational purposes only an
Slide 2: Legal Disclaimer (Continued)
Legal Disclaimer (Continued) Forward-Looking Statements: This presentation includes "forward-looking statements" within the meaning of federal securities laws. Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond AM and AMGP’s control. All stat
Slide 3: Why We're Here
Why We’re Here 4 Midstream Simplification has been approved by the AM and AMGP Conflicts Committees and by the AR Special Committee Transaction Timeline October 9, 2018 Simplification transaction announced January 31, 2019 Proxy statements mailed to AM unitholders and AMGP shareholders March 4, 2019
Slide 4: Antero Midstream Presenters
Antero Midstream Presenters 5 Paul Rady Antero Co-Founder Chairman & CEO of Antero Resources and Antero Midstream Glen Warren Antero Co-Founder President of Antero Midstream President and CFO of Antero Resources Michael Kennedy CFO of Antero Midstream SVP of Antero Resources Antero is the only publi
Slide 5: Long Track Record Of Success
Long Track Record Of Success 6 Distributable Cash Flow(1): $53 MM $680 MM - $730 MM $67 MM $870 MM - $920 MM Adjusted EBITDA(1): +1,201% +1,235% New AM Dividend Per Share and DCF Coverage Since IPO IPO Year - 2014 2019 Guidance Adjusted EBITDA and Distributable Cash Flow are non-GAAP measures. For a
Slide 6: Antero Family at a Glance
Antero Family at a Glance 7 The Most Integrated Natural Gas and NGL Platform in the U.S. A World Class E&P Operator in Appalachia What’s new: Midstream simplification creating C-Corp and eliminating MLP and IDRs A Leading Northeast Infrastructure Platform 31%(1) $7 Billion Enterprise Value(1) Ba2 /
Slide 7: What Does Antero Midstream Do?
NGL Pipelines Long Haul Pipelines Terminals & Storage What Does Antero Midstream Do? 8 Provides a customized, integrated full value chain midstream solution Exploration & Production Gathering & Compression Natural Gas Processing C3+ NGL Fractionation Future downstream potential opportunity set End U
Slide 8: Antero Midstream's Strategy
Antero Midstream’s Strategy 9 Largest drilling inventory with long laterals Dominant position in highest return natural gas and NGL basins Controlled and sustainable development Premier E&P sponsor with scale 100% natural gas hedged in 2019/ largest transport portfolio in Appalachia #1 NGL / #5 Gas
Slide 9: AMGP/AM Simplification Transaction Summary
AMGP/AM Simplification Transaction Summary 10 1 2 Simplifies midstream structure and aligns all Antero equity holders Converts MLP to C-Corp structure without IDRs Expected to broaden investor base and create opportunity for inclusion in major equity indices Tax efficient and eliminates ~$375 MM of
Slide 10: Antero Family Simplified Pro Forma Structure
Antero Family Simplified Pro Forma Structure 11 Status Quo Structure Simplified Pro Forma Structure(2) Midstream simplification transaction results in one publicly traded midstream infrastructure corporation with no IDRs and AR as its largest shareholder Series B profits interest held by Antero mana
Slide 11: DCF Profile Supports Growing Return of Capital
DCF Profile Supports Growing Return of Capital 12 Distributable Cash Flow vs. Growth Capex ($MM) Antero Midstream’s distributable cash flow growth, self-funding business model, and leverage profile supports an increase in return of capital to shareholders 25% DCF CAGR Target Note: Distributable Cash
Slide 12: Highest DCF Growth Among Top Midstream
Highest DCF Growth Among Top 20 Midstream 13 New AM will be a unique midstream vehicle with scale, low leverage and high distributable cash flow growth all in a C-Corp structure C-Corp Leverage MLP ENBRIDGE KINDER MORGAN TRANSCANADA WILLIAMS ANTERO MIDSTREAM * * TARGA RESOURCES * PLAINS ALL AMERICAN
Slide 13: World Class E&P Operator: Antero Resources
World Class E&P Operator: Antero Resources
Slide 14: Prolific Underlying Resource Underpins Growth
Prolific Underlying Resource Underpins Growth 15 Antero Resources holds 40% of the core undrilled liquids-rich locations in Appalachia with attractive economics and low breakeven prices Peers include Ascent, CHK, CNX, COG, CVX, EQT, GPOR, HG, RRC and SWN. Based on Antero analysis of undeveloped acre
Slide 15: Antero's Disciplined Strategy
Antero’s Disciplined Strategy 16 PRICE CYCLICAL CAPITAL INTENSIVE Antero’s Strategy Focus on liquids-rich development – not just a natural gas producer Sell production forward (100% hedged on gas in 2019) when favorable Maintain strong balance sheet to absorb pricing volatility COMPETITIVE & DYNAMIC
Slide 16: Strong Sponsor with Scale to Capitalize on Resource
Strong Sponsor with Scale to Capitalize on Resource 17 Top U.S. C2+ NGL Producers - 2019E(1) Largest NGL producer in the U.S. 1) Factset consensus estimates as of 02/01/2019. 2) Liquids defined as oil and natural gas liquids (NGLs). AM’s sponsor and primary customer (AR), is the largest NGL producer
Slide 17: Resilient and Flexible Development Plan
Resilient and Flexible Development Plan 18 Lower Prices Higher Prices Lower Prices: $50 Oil / $2.85 Gas 10% Production CAGR (2019-2023) <2x Stand-alone leverage by 2022 Free Cash Flow neutrality 100% hedged on 2019 and 55-60% hedged on 2020 production guidance and outlook Antero’s flexible developme
Slide 18: Long-Term Outlook
Long-Term Outlook 19 10% Production CAGR <2x Stand-alone Leverage by 2022 Free Cash Flow Neutral $50 / $2.85 15% Production CAGR <1x Stand-alone Leverage by 2021 $2.5 - $3.0 Bn Free Cash Flow $65 / $3.15 Note: Production CAGR ranges apply to midpoint of 2019 production guidance. Based on midpoint of
Slide 19: Sustainable and De-risked Development Plan
Sustainable and De-risked Development Plan 20 Firm Transportation Portfolio Allows Antero Resources to Achieve: Hedge NYMEX Index A key advantage as our product is delivered to NYMEX-related markets Premium Price Certainty Less volatility and greater surety in realized prices Hedge Portfolio Support
Slide 20: Antero Hedge Position
Antero Hedge Position 21 Antero has 100% of its gas production hedged in 2019 and 55% to 60% hedged in 2020 at ~$3.00/MMbtu Antero Hedge Profile(1) Monetize + maintain upside to call price 30% Swaps 30% Swaps 30% Swaps 1) Based on 2/01/2019 NYMEX Henry Hub strip pricing . $2.50 $3.44 (MMcf/d) ($/MMB
Slide 21: Firm Transportation Portfolio Provides Visibility
Firm Transportation Portfolio Provides Visibility 22 All of Antero Resources’ contracted firm capacity is now in service, providing visible production growth and sales to diversified markets Antero Resources Firm Transportation Portfolio vs. Gross Gas Production (MMcf/d) Appalachia (M2/Dom South) –
Slide 22: Integration is Critical in Shale Development
Integration is Critical in Shale Development 23 Antero’s integrated strategy has resulted in peer-leading realized prices and margins for 6 straight years and consistent results through commodity cycles All-in Pricing Realizations ($/Mcfe) Stand-alone E&P Adjusted EBITDAX Margins ($/Mcfe) Source: SE
Slide 23: Premier Integrated Appalachian Midstream Assets
24 Premier Integrated Appalachian Midstream Assets Premier Northeast Infrastructure Platform Antero Clearwater Facility – February 2018
Slide 24: Antero Midstream Asset Overview
Antero Midstream Asset Overview 25 Gathering Compression Fresh Water Delivery & Treatment Processing & Fractionation Over 300 miles of pipeline Over 2.2 Bcf/d of compression capacity Over 1.0 Bcf/d processing capacity and 20,000 Bbl/d of fractionation capacity Over 275 miles of fresh water pipeline
Slide 25: High Growth Midstream Throughput
High Growth Midstream Throughput 26 49% CAGR Low Pressure Gathering (MMcf/d) Compression (MMcf/d) Gas Processing (MMcf/d) Fresh Water Delivery (MBbl/d) 126% CAGR 32% CAGR +65% YoY Note: CAGRs represent 2014-2017 growth period where applicable. N/A Antero Midstream has delivered consistent, peer-lead
Slide 26: Capital and Adjusted EBITDA Contribution - 2019
Capital and Adjusted EBITDA Contribution - 2019 27 Capital Expenditures ($MM) Adjusted EBITDA ($MM) Processing & Fractionation Gathering & Compression Water Delivery & Treatment Gathering & Compression Water Delivery & Treatment Processing & Fractionation Capital Budget: $775MM EBITDA Guidance(1): $
Slide 27: 4-year Organic Project Backlog: 2019 - 2022
4-year Organic Project Backlog: 2019 - 2022 28 Marcellus Ohio Utica Compression Processing & Fractionation JV Low Pressure Gathering High Pressure Gathering Fresh Water $2.0B Project Backlog – By Area $2.0B Project Backlog – By Function 4-year identified project inventory of $2.0B “High-graded” orga
Slide 28: Gathering and Compression Assets & Strategy
Gathering and Compression Assets & Strategy 29 Asset Strategy Historical Compression Utilization “Just-in-Time” capital investment philosophy appropriately sizes infrastructure buildout Eliminates “gas waiting on pipe” for AR Targets high asset utilization rates and continued focus on expense reduct
Slide 29: Water Handling and Treatment Assets & Strategy
Water Handling and Treatment Assets & Strategy 31 Asset Strategy Due to the reliability of AM’s buried fresh water pipeline system, AM has a 100% track record of timely fresh water deliveries to AR’s completions 2019 Fresh Water Projects Growth Projects Miles/ Capacity In Service Ohio River to Pione
Slide 30: Fixed Fee Business Model Supports Stable Cash Flows
Fixed Fee Business Model Supports Stable Cash Flows 32 See appendix for Non-GAAP items and reconciliation. 2018 and 2019 reflects previously disclosed Antero Midstream guidance ranges. 2020 reflects FactSet consensus estimates as of 2/1/2019, denoted in light gray. Note: CAGR represents CAGR from 20
Slide 31: Organic Strategy Drives Attractive Return on Capital
Organic Strategy Drives Attractive Return on Capital 33 AM Return on Invested Capital (ROIC) Actual Consensus Source: FactSet. Return on invested capital is a non-GAAP measure. For additional information regarding this measure, please see “Antero Midstream Non-GAAP Measures” in the Appendix. Note: N
Slide 32: Long-Term Outlook – New AM
Long-Term Outlook – New AM 34 18% Distributable Cash Flow CAGR Declining Leverage Profile to low to mid 2x Supports Previously Communicated Dividend Growth Targets $50 / $2.85 25% Distributable Cash Flow CAGR Declining Leverage Profile to low to mid 2x Supports Previously Communicated Dividend Growt
Slide 33: The "New" Energy Infrastructure Model
The “New” Energy Infrastructure Model 35 “Old” MLP Model Perception “New” Infrastructure Model Corporate Structure K-1 tax form and “IDRs” Financing Serial equity issuance Leverage Over-levered in 4x – 5x range 1099 tax form and No “IDRs” Capital Discipline Growth at sub-optimal economics Self-fundi
Slide 34: Investment Thesis
Investment Thesis 36 Prolific Underlying Resource & De-risked Development Plan Multi-decade underlying NGL and natural gas resource base in Appalachia Dominant liquids-rich position with significant barriers to entry Run by Co-Founders Significant ownership directly aligned with shareholders One of
Slide 35: Investment Thesis
») Investment : 0 Prolific Underlying Resource & De-risked Development Plan... + Multi-decade underlying NGL and natural gas resource base in Appalachia + Dominant liquids-rich position with significant barriers to entry esIS JV ..Run by Co-Founders... + Significant ownership directly aligned with s
Slide 36: Merger Consideration – AM Public Unitholder
Merger Consideration – AM Public Unitholder 38 At the effective time of the Merger: in exchange for each AM Common Unit held, each AM Public Unitholder will be entitled to receive, at its election and subject to proration, one of: Note: The aggregate cash consideration to be paid as Merger Considera
Slide 37: Simplification Transaction Overview
Simplification Transaction Overview 39 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 consisting of 1.635 AMGP shares and $3.4
Slide 38: Attractive Valuation on Traditional Metrics
Attractive Valuation on Traditional Metrics 40 Price / 2019E Net Income (EPS) Enterprise Value / 2019E EBITDA The energy sector and AM provide attractive combination of earnings growth and yield investment opportunity vs. other S&P 500 companies Price / Book Value 2019E Dividend Yield Source: FactSe
Slide 39: Antero Capitalization – Pro forma as of 9/30/18
Antero Capitalization – Pro forma as of 9/30/18 41 Antero Midstream: Liquidity and Balance Sheet Status Quo Pro Forma As of September 30, 2018 ($MM) Antero Midstream Antero Resources (Standalone) Antero Resources (Consolidated) Cash $0 $0 $0 Debt Revolving Credit Facility $875 $547 $1,422 5.375% Sen
Slide 40: Antero Resources D&C Capital
Antero Resources D&C Capital 42 Antero Resources Stand-alone Marcellus Well Cost ($MM/1,000’ assuming 12,000’ Lateral) Through negotiating contracts and self sourcing sand, Antero was able to mitigate a majority of inflationary pressures on D&C capital for 2019 Drilling, water hauling, and productio
Slide 41: 9/30/2018 Debt Maturity Profile
9/30/2018 Debt Maturity Profile Liquidity & Debt Term Structure AM Credit Facility AM Senior Notes Credit facility for AM extended its average debt maturity out to 2023 43 Antero Midstream: Liquidity and Balance Sheet No maturities until 2022 $650 $875 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900
Slide 42: Antero Midstream Project Economics
Antero Midstream Project Economics 44 AM Project Economics by Investment (Ranges) “Just-in-Time” capital investment philosophy drives attractive project IRR’s 23% 11% 23% 18% - 25% % of 4-year Organic Project Backlog Weighted Avg: 25% IRR Organic Project Backlog with Peer-Leading Returns 30% 18% 15%
Slide 43: Antero Midstream Fee Structure
Antero Midstream Fee Structure 45 Gathering & Compression Agreement Water Services Agreement Fixed-fee agreement to provide gathering and compression services to AR with 20-year term beginning in November 2014 Low-pressure gathering fee of $0.30/Mcf(1) High-pressure gathering fee of $0.18/Mcf(1) Com
Slide 44: Maintenance Capital Methodology
Maintenance Capital Methodology APPENDIX 46 Maintenance Capital Calculation Methodology – Low Pressure Gathering 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 ov
Slide 45: Antero Midstream Non-GAAP Measures
Antero Midstream Non-GAAP Measures APPENDIX 47 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, impairme
Slide 46: Antero Midstream Non-GAAP Reconciliation
Antero Midstream Non-GAAP Reconciliation APPENDIX 48 The following reconciles net income to Adjusted EBITDA and Distributable Cash Flow: $ in Thousands 2014 G&C Only 2014 2015 2016 2017 Net income $ 16,832 $ 127,875 159,105 236,703 307,315 Interest expense, net 4,620 6,183 8,158 21,893 37,557 Impair
Slide 47: Antero Midstream Non-GAAP Measures
Antero Midstream Non-GAAP Measures APPENDIX 49 Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures. The GAAP measure most directly comparable to Adjusted EBITDA and Distributable Cash Flow is Net Income. The non-GAAP financial measures of Adjusted EBITDA and Distributable Cas
Slide 48: Antero Midstream Non-GAAP Measures
Antero Midstream Non-GAAP Measures 50 The following table reconciles net income to Adjusted EBITDA for the twelve months ended September 30, 2018 as used in this presentation (in thousands): The following table reconciles consolidated total debt to consolidated net debt (“Net Debt”) as used in this
Slide 49: Antero Resources Definitions
Antero Resources Definitions 51 Stand-alone Adjusted Operating Cash Flow and Free Cash Flow Free Cash Flow as presented in this release and defined by the Company represents Stand-alone Adjusted Operating Cash Flow, less Stand-alone Drilling and Completion capital, less Land Maintenance Capital. Sta
Slide 50: Antero Resources Definitions
Antero Resources Definitions 52 Adjusted EBITDAX and Stand-alone Adjusted EBITDAX Adjusted EBITDAX as defined by the Company represents net income or loss, including noncontrolling interests, before interest expense, interest income, derivative fair value gains or losses, but including net cash rece
Slide 51: Antero Resources Standalone Adjusted EBITDAX Reconciliation
Antero Resources Standalone Adjusted EBITDAX Reconciliation Stand-alone LTM Adjusted EBITDAX Reconciliation 53 Stand-alone Twelve months ended September 30, (in thousands) 2018 Net income attributable to Antero Resources Corporation $ 210,898 Commodity derivative fair value gains (334,617) Gains on
Slide 52: Antero Resources Stand-alone Adjusted EBITDAX
Antero Resources Stand-alone Adjusted EBITDAX 54 Stand-alone Adjusted EBITDAX per Mcfe Reconciliation (Annual) 2013 2014 2015 2016 2017 1Q2018 2Q2018 3Q2018 ($/Mcfe) Natural Gas, Oil, Ethane and NGL sales 4.31 $ 4.74 $ 2.53 $ 2.60 $ 3.35 $ 3.56 $ 3.35 $ 3.70 $ Realized commodity derivative gains (lo
Slide 53: Stand-alone Adjusted EBITDAX per Mcfe Reconciliation
y sources Stand-alone Adjusted EBITDAX sy Stand-alone Adjusted EBITDAX per Mcfe Reconciliation (Annual) 20132014 2018 2016 207102018 zaz018 02018 (sate Natural Gas, 0, Ethane and NGL sales S 431S 47% S$ 253 $ 260 335 $ 38 S| 395 $370 Realized commodity dervatve gains (osses) S 08S 037 $ 1857S 1485 0
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