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Antero Midstream Rose on Dropdown Acquisitioin Annoucement

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Top gainers

Antero Midstream Partners (AM) was the top gainer among midstream MLPs at the end of trading on Friday, September 18. It rose 3.65%. Antero Resources (AR) holds Antero Midstream Partners’ general partner. It fell 6.55% on the same day.

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Antero Midstream Partners

Antero Midstream Partners rose after a dropdown acquisition announcement of Antero Resources’ integrated water business for a total consideration of $1.05 billion. Also, according to the company’s press release, “Antero Resources is entitled to receive two potential $125 million earnout payments at year-end 2019 and 2020 if certain fresh water volumetric delivery targets are met.”

The acquisition includes:

  • Antero Resources’ fresh water delivery business
  • exclusive right to provide fresh water for Antero Resources’ well completion operations in West Virginia and Ohio
  • the to-be-constructed advanced wastewater treatment complex
  • exclusive right to provide fluid handling and disposal services for Antero Resources

The transaction will be financed with $243 million of cash proceeds from a private placement offer, $257 million worth of units issued to Antero Resources, and $552 million from Antero Midstream Partners’ existing cash on the balance sheet and expanded credit facility.

As a result of this transaction, the partnership has decided to raise its full-year distributable cash flow and EBITDA (earnings before interest, tax, depreciation, and amortization) guidance for 2015 from $150–$160 million and $135–$145 million to $170–$180 million and $150–$160 million, respectively. It also reaffirmed the distribution growth target of 28%–30% per year through 2017. For a comparative analysis on the distribution growth guidance for four midstream subsidiaries of upstream c-corps, including Antero Midstream Partners, read Comparing 4 Midstream MLP Subsidiaries of Upstream C-Corps.

Other gainers

The next four MLPs on the list of the top five midstream MLP gainers on September 18 are Western Refining Logistics (WNRL), JP Energy Partners (JPEP), Crestwood Midstream Partners (CMLP), and ONEOK Partners (OKS). They rose 3.04%, 2.96%, 1.77%, and 1.64%, respectively.

The Alerian MLP ETF (AMLP) and the Global X MLP & Energy Infrastructure ETF (MLPX) fell 0.29% and 0.87% on Friday. ONEOK Partners accounts for 5.28% of AMLP. For context, the upstream energy company heavy SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell 3.81% on the same day.

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