Energy Prospectus

Third Quarter Highlights Include:

Net income was $71 million, or $0.37 per limited partner unit, representing a per unit increase of 61% compared to the prior year quarter
Adjusted EBITDA was $111 million, a 55% increase compared to the prior year quarter
Distributable cash flow was $103 million, resulting in DCF coverage of 2.0x
Declared a cash distribution of $0.265 per unit for the third quarter of 2016, a 29% increase compared to the prior year quarter and a 6% increase sequentially
Completed private placement of $650 million of 5.375% senior notes due 2024 at par, resulting in $1.0 billion of liquidity to fund organic growth opportunities

This midstream MLP has significant growth locked in. Yield is low compare to our other midstream MLPs, but it has more than enough DCF to keep increasing distributions and it has the highest growth potential of the group because it is handling all of Antero Resources production, which is growing rapidly.

I have posted my updated forecast model for Antero Midstream (AM) to the EPG website.

I have gained a lot more confidence in my forecast model for this one over the last few quarters. My current valuation is $37.00/unit compared to First Call's price target of $33.73.

AM has built in growth because most of its dedicated acreage is in the Top Tier of the Marcellus/Utica plan and Antero Resources has an aggressive drilling program in the area. There is significant upside to my valuation if they continue to grow revenues at this pace. DCF coverage is very strong.

We will cover AM in our profile on Antero Resources (AR), which has been assigned to one of our top MBA Student Interns.

As of September 30, 2016, Antero Resources owned a 62% limited partner interest in Antero Midstream Partners LP ("Antero Midstream"). Antero Midstream's results are consolidated with Antero's results.

Tom Abrams – Morgan Stanley
October 27, 2016 9:25 PM GMT

"AM prints ahead of MS and consensus expectations. Robust volumes and low operating costs drove the quarter and lead to base case target increase from $29 to $33; E/w maintained.
Volumes stronger and expenses lower than MS estimates. Gas volumes were solid and relatively in-line with our estimates while water volumes surprised. Low pressure gas rose 38% y/y to 1,431 MMcf/d, high pressure gas up 11% to 1,351 MMcf/d. Water delivery volumes were a standout, up 109%, driven by water use in Marcellus with use increasing 35% y/y to 43 bbls/ft, though price/unit declined to partially offset this positive. Gathering and compression volumes were driven by AR production growth in dedicated acreage while condensate gathering volumes were down due to an AR shift to dry Ohio Utica development from wetter areas. Operations, maintenance, and G&A (excluding stock-based compensation) expenses were ~$40 M vs. MSe $53 M, contributing to the beat with management indicating the cost savings should be sticky. The advantages of a peer-leading sponsor. AR production increased 25% y/y to 1,875 MMcf/d. AR has acquired ~65,000 net acres YTD in the core of the Marcellus (71% includes Utica rights), with substantially all of the acreage dedicated to AM. AR ended the quarter with pro-forma net debt/TTM EBITDAX of 3.2x and $3.7 Bil in consolidated liquidity. To AM's benefit, AR is a natural consolidator in the northeast, and its balance sheet should support any activity. Meanwhile though, AR did announce the sale for $170 M of ~17 K non-core net acres; $10 M of proceeds is expected to be allocated to AM for the release of the dedication. AR could further elect to monetize some of it AM holdings to fund its aggressive growth during the next few years. Strong EBITDA outlook. Street numbers are slowly rising to better capture the volume growth potential at AM. We see EBITDA potential in 2017 about 10% higher than street estimates suggest. AR has guided to 25% production growth in 2017."