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What Lies ahead for Antero Midstream Partners?

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Part 3
What Lies ahead for Antero Midstream Partners? PART 3 OF 12

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.

Analysis of Antero Midstream’s Cash Flow Measures

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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.

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