Analysis of Antero Midstream’s Cash Flow Measures
Antero Midstream’s distributable cash flows
Antero Midstream Partners’s (AM) distributable cash flow for 2Q16 was $77.5 million compared to $36.8 million during the second quarter of 2015, a YoY increase of 110.5%. The increase in distributable cash flows drove AM’s coverage ratio. AM’s 2Q16 coverage ratio stood at 1.7x.
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Antero Midstream’s distributions
Antero Midstream Partners (AM) declared a distribution of $0.25 per unit for 2Q16. This represents a 32.0% YoY increase compared to 2Q15 and a 6.0% sequential increase over 1Q16.
The partnership expects to increase its distribution by an industry-leading growth rate of 28%–30% in 2016. The 2016 distribution guidance is in line with AM’s previously announced distribution growth target of 28%–30% per year through 2017.
According to the company’s 2Q16 earnings conference call, “This visible and strong volume growth along with continued growth in AM’s water business supports to toptier distribution growth and strong DCF coverage at AM.”
Based on its recent distribution, the partnership is currently trading at a distribution yield of 3.8%. Among AM’s peers, Rice Midstream Partners (RMP) and EQT Midstream Partners (EQM) are trading at distribution yield of 4.2% and 4.0%, respectively.
Antero Midstream’s capital expenditure
Antero Midstream Partners’s capital expenditure for the second quarter of 2016 was $90.0 million. The partnership spent $48 million on gathering and compression assets while the remaining $42 million was invested in water handling and treatment assets. This excludes $45 million spent to acquire a 15% interest in Stonewall Gathering Pipeline.
Antero Midstream Partners expects to spend $435 million on growth projects in 2016, which is 3% higher than its capital expenditure in 2015. Antero Midstream’s 2016 capital budget is supported by Antero Resources’s (AR) strong production growth guidance.