Antero Midstream Corporation · NYSE:AM
Antero Midstream — Antero Midstream Partners — J.P. Morgan High Yield & Leveraged Finance Conference (February 2019)
47 slides from Antero Midstream's conference presentation, Feb 25, 2019
Slide 1: Legal Disclaimer
Legal Disclaimer NO OFFER OR SOLICITATION This presentation includes a discussion of a proposed business combination transaction (the “Transaction”) between AM and AMGP. This presentation is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to b
Slide 2: Legal Disclaimer
Legal Disclaimer This presentation includes “forward-looking statements.” Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond AR’s control. All statements, except for statements of historical fact, made in this presentation regarding activitie
Slide 3: Antero Family at a Glance
Antero Family at a Glance 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 / BB+ / BBB- Corporate Family Ratings $9 Billion Enterprise Value
Slide 4: Track Record of Navigating Commodity Price Volatility
Track Record of Navigating Commodity Price Volatility 5 Stand-alone Adjusted EBITDAX Antero has increased its EBITDAX by 58% and reduced leverage from 3.9x at YE 2014 to 2.2x at YE 2018, despite a 30% reduction in NYMEX natural gas prices Antero Resources J.P. Morgan High Yield & Leveraged Finance C
Slide 5: Recent Credit Enhancement Developments
Recent Credit Enhancement Developments Natural Gas & Liquids Infrastructure Completed (November/December 2018) All of Antero’s firm transportation is now in-service Provides clear path to flexible production growth outlook Rover Sherwood Lateral: enabled AR to shift ~550 MMcf/d from local pricing to
Slide 6: Simplification Transaction Summary
Simplification Transaction Summary Highlights Simplifies the organizational structure Results in liquid midstream C-Corp for governance and tax purposes Provides AR with at least $300 million of cash for further deleveraging Increases New AM retained cash flow from IDR elimination, tax efficiency an
Slide 7: Flexible Development Plan to Maintain Strength
Flexible Development Plan to Maintain Strength 8 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 production guidance and 55%-60% hedged on 2020 outlook Antero’s flexible develo
Slide 8: Long-Term Outlook - AR
10% Production CAGR 9 Long-Term Outlook - AR Antero resources J.P. Morgan High Yield & Leveraged Finance Conference <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
Slide 9: Long-Term Outlook – New AM
Long-Term Outlook – New AM 10 18% Distributable Cash Flow CAGR Declining Leverage Profile to low to mid 2x Excess DCF and optionality for New AM $50 / $2.85 25% Distributable Cash Flow CAGR Declining Leverage Profile to low to mid 2x Excess DCF and optionality for New AM $65 / $3.15 (1) Based on AR’
Slide 10: Antero's Integrated Strategy
Antero’s Integrated Strategy Diversified Product Mix and Scale Diversified Commodity Mix and Integrated Strategy Enhance Credit Quality Top NGL and #5 natural gas producer in the U.S. Mitigate Commodity Risk Peer Leading Margins 100% hedged on natural gas in 2019 @ $3.00/MMBtu floor on average Appal
Slide 11: World Class E&P Operator: Antero Resources
World Class E&P Operator: Antero Resources These materials are not to be printed, downloaded or distributed. These materials are only available to QIBs and non-US persons.
Slide 12: Prolific Underlying Liquids-Rich Resource Base
Prolific Underlying Liquids-Rich Resource Base 13 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 acr
Slide 13: Scale to Capitalize on Resource Base
Scale to Capitalize on Resource Base Top U.S. C2+ NGL Producers - 2019E(1) Antero is the largest NGL producer in the U.S. and 4th largest natural gas producer in the U.S. with ~3,000 core drilling locations and 18 Tcfe of proved reserves Antero C2+ NGL production represents the midpoint of 2019 guid
Slide 14: Antero vs. Best Industry Natural Gas Inventory
Antero vs. Best Industry Natural Gas Inventory 15 JP Morgan Equity Research breakeven analysis for best industry dry gas drilling locations. Excludes associated gas inventory with >50% liquids. Breakeven analysis for AR prepared by management based on same parameters as J.P. Morgan Equity Research c
Slide 15: Sustainable and De-risked Business Model
Sustainable and De-risked Business Model 16 Antero Resources J.P. Morgan High Yield & Leveraged Finance Conference Firm Transportation Portfolio Allows Antero Resources to achieve: Effectively Hedge NYMEX Index Allows Antero to directly hedge the absolute price Premium Price Certainty Eliminates bas
Slide 16: Antero Resources' Hedge Position
Antero Resources’ Hedge Position 17 Antero Hedge Profile AR realized $357 MM in proceeds from hedge restructuring while remaining 100% hedged on gas in 2019 and 55%-60% hedged in 2020 at ~$3.00/MMBtu Monetize + maintain upside to call price 30% Swaps 30% Swaps 30% Swaps 1) Based on 01/31/2018 strip
Slide 17: Firm Transportation Portfolio Provides Visibility
Firm Transportation Portfolio Provides Visibility 18 All of Antero Resources’ contracted firm capacity is now in service, providing visible production growth and premium pricing to NYMEX Antero Resources Firm Transportation Portfolio vs. Gross Gas Production (MMcf/d) Appalachia (M2/Dom S.) – 625 MMc
Slide 18: Natural Gas Price Realization Improvement
Note: Local index represents a blend of Dominion South and TETCO M2 pricing. Midwest index represents a blend of Chicago and MichCon pricing. Gulf Coast index represents a blend of Gulf and NYMEX-based pricing. 2018 premium to NYMEX includes a ~$0.27/Mcf Btu upgrade. 2019E premium to NYMEX represent
Slide 19: Antero's NGL Pricing Uplift from Mariner East
Antero’s NGL Pricing Uplift from Mariner East 2 31 Mont Belvieu Conway Europe Netback 2019 NWE Price ($/Gal) $0.80 Pipeline, Terminal & Shipping Cost (1) $(0.22) NWE Netback $0.58 Blended Conway / MB Netback $0.52 Uplift vs. YTD 2018 Average Differential +$0.06 Asia Netback 2019 FEI Price ($/Gal) $0
Slide 20: Liquids Focus Drives Peer-leading and Consistent Margins
Liquids Focus Drives Peer-leading and Consistent Margins 21 Antero’s strategy has resulted in peer-leading realized prices and margins for 6 straight years and consistent results through commodity cycles All-in Pricing Realizations ($/Mcfe) Stand-alone E&P Adjusted EBITDAX Margins ($/Mcfe) Source: S
Slide 21: Midstream Critical to Sustainable Development
Midstream Critical to Sustainable Development 22 Takeaway assurance and reliable project execution AM Midstream Buildout Midstream Ownership Benefits Never missed a completion date with fresh water delivery system Unparalleled downstream visibility Stable dividend stream from AR owned AM Units Just-
Slide 22: Premier Integrated Appalachian Midstream Assets
23 Premier Integrated Appalachian Midstream Assets Premier Northeast Infrastructure Platform Antero Clearwater Facility – February 2018
Slide 23: What Does Antero Do?
NGL Pipelines Long Haul Pipelines Terminals & Storage What Does Antero Do? 24 Exploration and production integrated with full midstream value chain Exploration & Production Gathering & Compression Natural Gas Processing C3+ NGL Fractionation Future downstream potential opportunity set End Users & Ex
Slide 24: High Growth Midstream Throughput
High Growth Midstream Throughput 25 44% CAGR Low Pressure Gathering (MMcf/d) Compression (MMcf/d) Gas Processing (MMcf/d) Fresh Water Delivery (MBbl/d) 102% CAGR 27% CAGR +87% YoY Note: CAGRs represent 2014-2018 growth period where applicable. N/A Antero Midstream has delivered consistent, peer-lead
Slide 25: 4-year Organic Project Backlog: 2019 - 2022
4-year Organic Project Backlog: 2019 - 2022 26 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 $2.0B “High-graded” orga
Slide 26: Fixed Fee Business Model Supports Stable Cash Flows
Fixed Fee Business Model Supports Stable Cash Flows 27 See appendix for Non-GAAP items and reconciliation. 2019 reflects previously disclosed Antero Midstream guidance ranges. 2020 reflects FactSet consensus estimates as of 2/22/2019, denoted in light gray. Note: CAGR represents CAGR from 2019 midpo
Slide 27: Organic Strategy Drives Attractive Return on Capital
Organic Strategy Drives Attractive Return on Capital 28 AM Return on Invested Capital (ROIC) Return on invested capital is a non-GAAP measure. For additional information regarding this measure, please see “Antero Midstream Non-GAAP Measures” in the Appendix. Investment Philosophy Non-speculative “Ju
Slide 28: Highest DCF Growth Among Top Midstream
Highest DCF Growth Among Top 20 Midstream 29 New AM will be a unique midstream vehicle with scale, low leverage and high distributable cash flow growth all in a C-Corp structure C-Corp Leverage MLP ENBRIDGE KINDER MORGAN TRANSCANADA WILLIAMS ANTERO MIDSTREAM * * TARGA RESOURCES * PLAINS ALL AMERICAN
Slide 29: DCF Profile Supports Capital Retention
DCF Profile Supports Capital Retention 30 Distributable Cash Flow vs. Growth Capex ($MM) Antero Midstream’s cash flow growth, self-funding business model, and declining capex profile drives optionality for New AM 25% DCF CAGR Target Note: Distributable Cash Flow is a Non-GAAP measures. For additiona
Slide 30: Antero Credit Attributes Summary
31 Antero Credit Attributes Summary Diversified product mix supports strong balance sheet and ability to withstand commodity price volatility Well Hedged in Low Cost Basin Reduced leverage from 3.9x at YE 2014 to 2.2x at YE 2018 Despite Commodity Price Volatility Focused on Capital Discipline and Fr
Slide 31: Antero Credit Attributes Summary
Antero Credit Attributes Summary Ma Antero Reduced leverage from 3.9x at YE 2014 to 2.2x at YE 2018 Despite Commodity Price Volatility Diversified product mix supports strong balance sheet and ability to withstand commodity price volatility Well Hedged in Low Cost Basin Focused on Capital Discipline
Slide 32: Midstream Simplification Highlights
33 Midstream Simplification Highlights Pro Forma Organizational Structure Simplifies midstream into one publicly traded C-corp for both governance and tax purposes (“New AM”) Eliminates incentive distribution rights (“IDRs”) lowering equity cost of capital Tax efficient and eliminates ~$375 MM of ex
Slide 33: Capitalization as of December 31, 2018
As of December 31, 2018 ($MM) Antero Midstream Antero Resources (Stand-alone) Antero Resources (Consolidated) Cash $0 $0 $0 Debt Revolving Credit Facility $990 $405 $1,395 5.375% Senior Notes Due 2021 $1,000 $1,000 5.125% Senior Notes Due 2022 $1,100 $1,100 5.625% Senior Notes Due 2023 $750 $750 5.3
Slide 34: Track Record of Positive Ratings Momentum
Track Record of Positive Ratings Momentum 35 Historical Corporate Credit Ratings Corporate Credit Rating (Moody’s / S&P / Fitch) Ba3 / BB- B1 / B+ B2 / B B3 / B- Ba2 / BB Ba1 / BB+ Caa1 / CCC+ / CCC Baa3 / BBB- 2010 Investment Grade Rating: BBB- Fitch Jan. 2018 Stable through commodity price crash A
Slide 35: Net Proved Reserves
2012, 2013, 2014 and 2015 reserves assuming ethane rejection. In 2016, 554 MMBbls of ethane assumed recovered to meet ethane contract. In 2017, 656 MMBbls of ethane assumed recovered to meet ethane contract. 12/31/2018 SEC prices were $3.09/MMBtu for Nymex natural gas and $65.66/Bbl for WTI oil. PV-
Slide 36: Antero Definitions
37 Antero Resources J.P. Morgan High Yield & Leveraged Finance Conference Antero Definitions Consolidated Adjusted EBITDAX: Represents net income or loss from continuing operations, including noncontrolling interests, before interest expense, interest income, derivative fair value gains or losses (e
Slide 37: Antero Non-GAAP Measures
38 Antero Non-GAAP Measures 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. Stand-a
Slide 38: Antero Non-GAAP Measures Continued
39 Antero Non-GAAP Measures Continued 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 cas
Slide 39: Antero Non-GAAP Measures Continued
40 Antero Non-GAAP Measures Continued Antero Resources J.P. Morgan High Yield & Leveraged Finance Conference The pre-tax PV-10 value is a non-GAAP financial measure as defined by the SEC. Antero believes that the presentation of pre-tax PV-10 is relevant and useful to its investors because it presen
Slide 40: Antero Resources Stand-alone Adjusted EBITDAX Reconciliation
Antero Resources Stand-alone Adjusted EBITDAX Reconciliation Stand-alone LTM Adjusted EBITDAX Reconciliation Antero Resources J.P. Morgan High Yield & Leveraged Finance Conference 41 Stand-alone Twelve months ended (in thousands) December 31, 2018 Net (loss) and comprehensive (loss) attributable to
Slide 41: Stand-alone Adjusted EBITDAX Per Mcfe
Antero Resources Stand-alone Adjusted EBITDAX Per Mcfe Antero Resources J.P. Morgan High Yield & Leveraged Finance Conference 42 Stand-alone Adjusted EBITDAX per Mcfe Reconciliation (Annual) 2013 2014 2015 2016 2017 1Q2018 2Q2018 3Q2018 4Q2018 ($/Mcfe) Natural Gas, Oil, Ethane and NGL sales $ 4.31 $
Slide 42: Maintenance Capital Methodology
Maintenance Capital Methodology 43 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 over the LT
Slide 43: Antero Midstream Non-GAAP Measures
Antero Midstream Non-GAAP Measures 44 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 44: Adjusted EBITDA and DCF Reconciliation
Adjusted EBITDA and DCF Reconciliation 45 Adjusted EBITDA and DCF Reconciliation ($ in thousands) 1) Cash reserved for bond interest expense on Antero Midstream’s 5.375% senior notes outstanding during the period that is paid on a semi-annual basis on March 15th and September 15th of each year. 2) E
Slide 45: Antero Midstream Non-GAAP Reconciliation
Antero Midstream Non-GAAP Reconciliation 46 The following reconciles net income to Adjusted EBITDA and Distributable Cash Flow: Antero Resources J.P. Morgan High Yield & Leveraged Finance Conference $ in Thousands 2014 G&C Only 2014 2015 2016 2017 Net income $ 16,832 $ 127,875 159,105 236,703 307,31
Slide 46: Antero Midstream Non-GAAP Measures
Antero Midstream Non-GAAP Measures Antero Resources J.P. Morgan High Yield & Leveraged Finance Conference 47 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-GA
Slide 47: Antero Midstream Non-GAAP Measures
eam Non-GAAP Measures ») Antero Midstr 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 Cash Flow s