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How Mid-Cap and Large-Cap MLPs Performed in 2Q17

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Part 5
How Mid-Cap and Large-Cap MLPs Performed in 2Q17 PART 5 OF 10

What Drove Antero Midstream’s Strong 2Q17 Earnings Growth?

AM posted 59% YoY EBITDA growth in 2Q17

Antero Midstream Partners (AM), the midstream MLP formed by Antero Resources (AR) to own, operate, and acquire natural gas midstream assets in the Appalachian Basin, posted strong YoY EBITDA growth in the recent quarter. AM’s EBITDA rose to $139.4 million in 2Q17 compared to $77.5 million in 2Q16, a YoY increase of 59%. The partnership’s huge EBITDA growth was driven by strong gathering volumes, fresh water delivery volumes, and drop-down acquisitions. The 2Q17 earnings don’t include the impact of the processing and fractionation joint venture with MPLX LP (MPLX). For details on the AM-MPLX JV, read Antero Midstream Announces Joint Venture with MPLX.

AM’s distributable cash flow rose 41% YoY to $110 million in 2Q17, which drove the partnership’s distribution coverage higher to 1.5x.

What Drove Antero Midstream’s Strong 2Q17 Earnings Growth?

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AM’s distribution grew by 7% in 2Q17

Antero Midstream Partners declared distribution per unit of $0.32 for the recent quarter, a 28% YoY increase over 2Q16 and a 7% increase compared to the previous quarter. AM’s GP, AMGP GP (AMGP), which closed its IPO (initial public offer) on May 9, announced a pro-rated distribution of $0.03 per unit for the recent quarter. The GP expects distribution per unit of $0.15 to $0.17 for 2017. According to the 2Q17 earnings release, “AMGP is targeting distributions per share of $0.43 to $0.46 for 2018, $0.70 to $0.76 for 2019, and $1.06 to $1.16 for 2020, driven by Antero Midstream’s compound annual distribution growth target per unit of 28% to 30% through 2020.”

Analyst recommendations

100% of analysts surveyed by Reuters rate Antero Midstream Partners a “buy” as of August 9. Out of the 17 analysts surveyed, nine rate it as a “strong buy,” while the remaining eight rate it as a “buy.” AM’s target price of $41.65 implies 26.9% returns from its current price of $32.8.

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