Why Antero Midstream’s Low Leverage Is a Major Plus
Antero Midstream Partners’ outstanding debt
Antero Midstream Partners (AM) ended 2Q17 with a total outstanding debt of $945.4 billion, which is 11.2% higher than its debt outstanding at the end of 2016. The slight increase in its outstanding debt could be attributed to the recent rise in capital spending and the acquisition of a stake in a processing and fractionation joint venture. AM has $1.2 billion of liquidity in its credit facility as of June 30, 2017.
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Antero Midstream Partners’ leverage
Antero Midstream Partners’ net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) multiple was 1.9x at the end of 2Q17. Its leverage is among the lowest in the industry and among its peers. MLPs generally target a ratio between 4.0x and 4.5x. Despite its low leverage, AM still continues to raise money from equity markets due to its low cost of equity capital.
AM’s strong leverage position is a major plus amid uncertainty in the energy sector. It allows AM to pursue its ambitious expansion opportunities without the need to sell stakes in projects. Many midstream companies, including Kinder Morgan (KMI) and Energy Transfer Partners (ETP), have sold stakes in expansion projects to reduce their capital burdens and leverages.
In the next part of this series, we’ll take a look at Antero Midstream Partners’ current valuation.