Antero Midstream (AM) Update - June 11

[dan_s]

I just finished working on the updated profile & forecast for Antero Midstream (AM).

During the first quarter, AM completed their "Simplification Transaction" and converted to a C-Corp. Despite the title, the conversion made it more difficult to model. That said, AM is now a C-Corp. that offers a 9.5% annual yield and plenty of upside from there. Based on their comments and my model, this company should be raising dividends by about 8% annually.

If you do look at the forecast model, note that 2018 is for "Old AMP" and 2019 is for "New AM". Sorry for the confusion.

AM closed at $12.71 on June 11.
Since the company announced conversion to a C-Corp. the following firms have published fresh reports:
Barclays on 5/8/2019 rated AM a BUY with a price target of $16.00
Raymond James on 4/16/2019 rated AM a BUY with a price target of $17.00.

AM's future is tied directly to the growth of Antero Resources (AR), so read that profile (under the Sweet 16 tab).

[bobs]

AM continues to slip lower and since I understand it is largely dependent on AR production as NG prices drift down AR production may drop and AM pricing for the pipeline would also drop and then what happens. Not sure how all this might work since long term NG prices seems like can only go down even with higher demand since production keeps going up despite lower prices.

[dan_s]

AR has 100% of 2019 production hedged at prices that will cover all of their capex in 2019. Yes, if gas prices go much lower AR might reduce their drilling program in 2020.

AM and OMP do have more risk than the much larger midstream companies, which is why they have a higher yield. MMP, OKE and PAA/PAGP have the lowest risk. We will be sending out a fresh profile on MPLX late this we.

[ChuckGeb]

Not to be overlooked is AR’s focus on development of their liquids rich acreage. With their secured takeaway to Marcus Hook with access to European markets, they should keep the minerals flowing though at a tempered rate until gas prices improve and the markets give their stock price some more positive attention.

[dan_s]

Yes, AR is the #1 producer of NGLs.