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Why Antero Midstream Outperformed AMLP

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Antero Midstream’s market performance

Antero Midstream Partners (AM) is a midstream energy MLP formed by Antero Resources (AR) in March 2014 to provide natural gas gathering and compression services. Late in 2015, Antero Resources dropped down its water business to Antero Midstream. Antero Resources is the fourth-largest producer in the liquid-rich Marcellus and Utica regions.

Antero Midstream’s returns were positive in 2016 until it announced a secondary offering of common units in a press release on March 23, 2016. The partnership fell 17.6% in four trading session following the announcement, reflecting the $22.4 offer price made by Antero Resources for AM’s common units.

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The partnership has fallen 10.7% in the past year, while the Alerian MLP ETF (AMLP), which comprises 24 energy MLPs, has fallen 34.8%. This indicates that Antero Midstream has outperformed the broader midstream sector. AM’s peers EQT Midstream Partners (EQM), Rice Midstream Partners (RMP), and Cone Midstream Partners (CNNX) have fallen 6.7%, 0.1%, and 30.5%, respectively, during the same timeframe.

AM’s outperformance relative to AMLP can be attributed to its 100% fixed fee contracts, strong earnings and distribution guidance, and low leverage.

A look at AM’s moving averages

Antero Midstream rose above its 200-day moving average at the start of March 2016. However, it fell below its 200-day moving average following the plunge discussed above. The partnership is still trading marginally above its 50-day moving average.

Further in the series, we’ll analyze AM’s analyst projections, 2016 capital program, and cash flow measures. Following an analysis of AM’s financial statements, in later articles, we’ll look into AM’s valuations and its commodity price exposure.

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