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Antero Midstream Has Top Distribution Targets among MLPs

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Antero Midstream’s 2017 distribution guidance

Antero Midstream Partners (AM), the midstream MLP formed by Antero Resources (AR) to provide natural gas–gathering, compression, and water handling services, is expected to continue its industry-leading growth in 2017 and beyond.

AM recently announced its financial and capital guidance for 2017. AM’s peer, EQT Midstream Partners (EQM), also recently announced its 2017 guidance. For details, read EQT Midstream Expects a Significant Rise in 2017 Earnings.

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The partnership expects to grow its distribution by 29% in 2017. It’s targeting a 28%–30% CAGR (compound annual growth rate) for the next three years. Despite its strong distribution growth, Antero Midstream expects to maintain an impressive distribution coverage of 1.30x–1.45x in 2017 and of more than 2.0x between 2018 and 2020. Antero Midstream’s distribution targets are among the best in the MLP sector.

Antero Midstream Partners is currently trading at a distribution yield of 3.2%. AM’s low distribution yield reflects investors’ confidence in its strong growth prospects.

2017 capex guidance

AM’s strong distribution growth guidance is driven by its strong growth plans. The partnership expects to spend $525 million on growth projects, 9.3% more than was outlined its 2016 capital budget. Around 30% of the partnership’s capital budget is aimed at compression projects. It expects to spend $2.4 billion on organic projects between 2016 and 2020.  

Antero Midstream’s strong growth plans are supported by its sponsor’s strong production guidance. We’ll look more into this in the next article. Later in the series, we’ll analyze AM’s recent stock performance and leverage position. We’ll also look into AM’s valuations, commodity price exposure, key performance indicators, and analyst projections.

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