ANTERO MIDSTREAM PARTNERS LP, 10-Q filed on 4/27/2016
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2016
Apr. 25, 2016
Common Units Outstanding
Apr. 25, 2016
Subordinated
Entity Registrant Name
Antero Midstream Partners LP 
 
 
Entity Central Index Key
0001598968 
 
 
Document Type
10-Q 
 
 
Document Period End Date
Mar. 31, 2016 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
100,230,728 
75,940,957 
Document Fiscal Year Focus
2016 
 
 
Document Fiscal Period Focus
Q1 
 
 
Condensed Combined Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2016
Dec. 31, 2015
Current assets:
 
 
Cash and cash equivalents
$ 14,478 
$ 6,883 
Accounts receivable - Antero
63,445 
65,712 
Accounts receivable - third party
1,292 
2,707 
Prepaid expenses
336 
 
Total current assets
79,551 
75,302 
Property and equipment:
 
 
Gathering and compressions systems
1,527,205 
1,485,835 
Water handling and treatment systems
582,331 
565,616 
Less accumulated depreciation
(181,448)
(157,625)
Property and equipment, net
1,928,088 
1,893,826 
Other assets, net
19,807 
10,904 
Total assets
2,027,446 
1,980,032 
Current liabilities:
 
 
Accounts payable
11,338 
10,941 
Accounts payable - Antero
3,736 
2,138 
Accrued capital expenditures
22,101 
50,022 
Accrued ad valorem tax
8,454 
7,195 
Accrued liabilities
27,722 
28,168 
Other current liabilities
156 
150 
Total current liabilities
73,507 
98,614 
Long-term liabilities:
 
 
Long-term debt
680,000 
620,000 
Contingent acquisition consideration (Note 8)
181,445 
178,049 
Other
584 
624 
Total liabilities
935,536 
897,287 
Partners' capital:
 
 
General partner
1,850 
969 
Total partners' capital
1,091,910 
1,082,745 
Total liabilities and partners' capital
2,027,446 
1,980,032 
Common Unitholders Public
 
 
Partners' capital:
 
 
Common unitholders - (59,286,451 units and 67,292,931 units issued and outstanding, Antero 40,929,378 units and 32,929,378 units issued and outstanding)
1,360,212 
1,351,317 
Total partners' capital
1,360,212 
1,351,317 
Common Unitholder Antero
 
 
Partners' capital:
 
 
Common unitholders - (59,286,451 units and 67,292,931 units issued and outstanding, Antero 40,929,378 units and 32,929,378 units issued and outstanding)
26,611 
30,186 
Total partners' capital
26,611 
30,186 
Subordinated Unitholder
 
 
Partners' capital:
 
 
Subordinated unitholder - (75,940,957 units issued and outstanding)
(296,763)
(299,727)
Total partners' capital
$ (296,763)
$ (299,727)
Condensed Combined Consolidated Balance Sheets (Parenthetical)
Mar. 31, 2016
Dec. 31, 2015
Subordinated unitholder units issued
75,940,957 
75,940,957 
Subordinated unitholder units outstanding
75,940,957 
75,940,957 
Common Unitholders Public
 
 
Common unitholders units issued
67,292,931 
59,286,451 
Common unitholders units outstanding
67,292,931 
59,286,451 
Common Unitholder Antero
 
 
Common unitholders units issued
32,929,378 
40,929,378 
Common unitholders units outstanding
32,929,378 
40,929,378 
Condensed Combined Consolidated Statements of Operations and Comprehensive Income (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Revenue:
 
 
Gathering and compression–Antero
$ 69,116 
$ 52,243 
Water handling and treatment–Antero
66,439 
33,441 
Gathering and compression–third party
275 
 
Water handling and treatment–third party
 
151 
Total revenues
135,830 
85,835 
Operating expenses:
 
 
Direct operating
49,141 
19,301 
General and administrative (including $5,779 and $5,972 of equity-based compensation in 2015 and 2016, respectively)
13,091 
11,919 
Depreciation
23,823 
20,702 
Contingent acquisition consideration accretion
3,396 
 
Total operating expenses
89,451 
51,922 
Operating income
46,379 
33,913 
Interest expense, net
3,461 
1,586 
Net income and comprehensive income
42,918 
32,327 
Less: Pre-Water Acquisition net income attributed to parent
 
(16,679)
General partner's interest in net income attributable to incentive distribution rights
(1,850)
 
Limited partners' interest in net income
$ 41,068 
$ 15,648 
Basic
 
 
Common units (in dollars per unit)
$ 0.23 
$ 0.10 
Subordinated units (in dollars per unit)
$ 0.23 
$ 0.10 
Diluted
 
 
Common units (in dollars per unit)
$ 0.23 
$ 0.10 
Subordinated units (in dollars per unit)
$ 0.23 
$ 0.10 
Basic
 
 
Common units
100,213 
75,941 
Subordinated units
75,941 
75,941 
Diluted
 
 
Common units
100,219 
75,942 
Subordinated units
75,941 
75,941 
Condensed Combined Consolidated Statements of Operations and Comprehensive Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Condensed Combined Consolidated Statements of Operations and Comprehensive Income
 
 
Equity-based compensation
$ 5,972 
$ 5,779 
Condensed Combined Consolidated Statements of Partners’ Capital (USD $)
In Thousands, unless otherwise specified
Common Unitholders Public
Common Unitholder Antero
Subordinated Unitholder
General Partner
Total
Balance at Dec. 31, 2015
$ 1,351,317 
$ 30,186 
$ (299,727)
$ 969 
$ 1,082,745 
Partner' Capital
 
 
 
 
 
Net income and comprehensive income
13,855 
9,508 
17,705 
1,850 
42,918 
Distribution to unitholders
(13,044)
(9,004)
(16,708)
(969)
(39,725)
Equity-based compensation
1,665 
2,340 
1,967 
 
5,972 
Sale of 8,000,000 units held by Antero to public
6,419 
(6,419)
 
 
 
Balance at Mar. 31, 2016
$ 1,360,212 
$ 26,611 
$ (296,763)
$ 1,850 
$ 1,091,910 
Condensed Combined Consolidated Statements of Partners’ Capital (Parenthetical)
3 Months Ended
Mar. 31, 2016
Condensed Combined Consolidated Statements of Partners’ Capital
 
Sale of units to public (in shares)
8,000,000 
Condensed Combined Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Cash flows provided by operating activities:
 
 
Net income
$ 42,918 
$ 32,327 
Adjustment to reconcile net income to net cash provided by operating activities:
 
 
Depreciation
23,823 
20,702 
Accretion of contingent acquisition consideration
3,396 
 
Equity-based compensation
5,972 
5,779 
Amortization of deferred financing costs
366 
244 
Changes in assets and liabilities:
 
 
Accounts receivable – Antero
2,267 
1,880 
Accounts receivable - third party
1,415 
4,458 
Prepaid expenses
(336)
162 
Accounts payable
116 
577 
Accounts payable – Antero
1,598 
641 
Accrued ad valorem tax
1,259 
 
Accrued liabilities
(446)
3,302 
Net cash provided by operating activities
82,348 
70,072 
Cash flows used in investing activities:
 
 
Additions to gathering and compression systems
(48,686)
(85,737)
Additions to Water handling and treatment systems
(37,036)
(21,315)
Change in other assets
(9,270)
(7,515)
Net cash used in investing activities
(94,992)
(114,567)
Cash flows provided by (used in) financing activities:
 
 
Deemed distribution to Antero, net
 
(28,937)
Distribution to unitholders
(39,725)
(14,322)
Borrowings on bank credit facilities, net
60,000 
20,000 
Payments of deferred financing costs
 
(14)
Other
(36)
(85)
Net cash provided by (used in) financing activities
20,239 
(23,358)
Net increase (decrease) in cash and cash equivalents
7,595 
(67,853)
Cash and cash equivalents, beginning of period
6,883 
230,192 
Cash and cash equivalents, end of period
14,478 
162,339 
Supplemental disclosure of cash flow information:
 
 
Cash paid during the period for interest
3,686 
1,393 
Supplemental disclosure of noncash investing activities:
 
 
Decrease in accrued capital expenditures and accounts payable for property and equipment
$ (27,640)
$ (21,062)
Business and Organization
Business and Organization

(1)Business and Organization

Antero Midstream Partners LP (the “Partnership”) is a growth-oriented limited partnership formed by Antero Resources Corporation (“Antero”) to own, operate and develop midstream energy assets to service Antero’s increasing production. The Partnership’s assets consist of gathering pipelines, compressor stations and water handling and treatment assets, through which the Partnership provides midstream services to Antero under long-term, fixed-fee contracts. Our assets are located in the southwestern core of the Marcellus Shale in northwest West Virginia and the core of the Utica Shale in southern Ohio. The Partnership’s condensed combined consolidated financial statements as of March 31, 2016, include the accounts of the Partnership, Antero Midstream LLC (“Midstream Operating”), Antero Water LLC (“Antero Water”), and Antero Treatment LLC (“Antero Treatment”), all of which are entities under common control.

On September 23, 2015, Antero contributed (the “Water Acquisition”) (i) all of the outstanding limited liability company interests of Antero Water to the Partnership and (ii) all of the assets, contracts, rights, permits and properties owned or leased by Antero and used primarily in connection with the construction, ownership, operation, use or maintenance of Antero’s advanced waste water treatment complex to be constructed in Doddridge County, West Virginia, to Antero Treatment (collectively, (i) and (ii) are referred to herein as the “Contributed Assets”). Our results for the three months ended March 31, 2015 have been recast to include the historical results of Antero Water because the transaction was between entities under common control. Antero Water’s operations prior to the Water Acquisition consisted entirely of water fresh handling operations.

References to “the Partnership,” “we,” “our,” “us” or like terms, when referring to the three months ended March 31, 2015, refer to the Partnership’s gathering and compression assets and operations, and include Antero’s water assets and operations, which were contributed to us on September 23, 2015. References to “the Partnership,” “we,” “our,” “us” or like terms, when referring to the three months ended March 31, 2016 or when used in the present tense or prospectively, refer to Antero Midstream Partners LP.

The Partnership’s gathering and compression assets consist of 8-, 12-, 16-, 20-, and 24-inch high and low pressure gathering pipelines and compressor stations that collect natural gas, NGLs and oil from Antero’s wells in West Virginia and in Ohio. The Partnership’s assets also include two independent fresh water distribution systems that deliver water used by Antero for hydraulic fracturing activities in Antero’s operating areas. The fresh water distribution systems consist of permanent buried pipelines, surface pipelines and fresh water storage facilitates, as well as pumping stations and impoundments to transport fresh water throughout the pipeline system.

The Partnership has the right to participate in up to a 15% non-operating equity interest in the 67-mile Stonewall gathering pipeline for which Antero is an anchor shipper. The Stonewall gathering pipeline was placed into service on November 30, 2015 and Antero has a firm commitment of 900 MMBtu/d through the system. The Partnership’s option expires six months following the date on which the regional gathering system was placed into service, or May 30, 2016. In addition, the Partnership has entered into a right-of-first-offer agreement with Antero to provide Antero with gas processing or NGLs fractionation, transportation or marketing services in the future.

 

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

(2)Summary of Significant Accounting Policies

(a) Basis of Presentation

These condensed combined consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim financial information, and should be read in the context of the December 31, 2015 combined consolidated financial statements and notes thereto for a more complete understanding of the Partnership’s operations, financial position, and accounting policies.  The December 31, 2015 combined consolidated financial statements were originally filed with the SEC in the 2015 Form 10-K.

The accompanying unaudited condensed combined consolidated financial statements of the Partnership have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, and, accordingly, do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, these statements include all adjustments (consisting of normal and recurring accruals) considered necessary for a fair presentation of the Partnership’s financial position as of December 31, 2015 and March 31, 2016, and the results of its operations and its cash flows for the three months ended March 31, 2015 and 2016. The Partnership has no items of other comprehensive income; therefore, its net income is identical to its comprehensive income. Operating results for the period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the full year.

Certain costs of doing business which are incurred by Antero on our behalf have been reflected in the accompanying condensed combined consolidated financial statements. These costs include general and administrative expenses attributed to us by Antero in exchange for:

·

business services, such as payroll, accounts payable and facilities management;

·

corporate services, such as finance and accounting, legal, human resources, investor relations and public and regulatory policy; and

·

employee compensation, including equity‑based compensation.

Transactions between us and Antero have been identified in the condensed combined consolidated financial statements (see Note 3).

As of the date these condensed combined consolidated financial statements were filed with the SEC, the Partnership completed its evaluation of potential subsequent events for disclosure and no items requiring disclosure were identified, except the declaration of a cash distribution to unitholders, as described in Note 6—Partnership Equity and Distributions.

 (b)Revenue Recognition

We provide gathering and compression and water handling and treatment services under fee-based contracts primarily based on throughput or cost plus margin. Under these arrangements, we receive fees for gathering oil and gas products, compression services, and water handling and treatment services. The revenue we earn from these arrangements is directly related to (1) in the case of natural gas gathering and compression, the volumes of metered natural gas that we gather, compress and deliver to natural gas compression sites or other transmission delivery points, (2) in the case of oil and condensate gathering, the volumes of metered oil and condensate that we gather and deliver to other transmission delivery points, (3) in the case of fresh water delivery, the quantities of fresh water delivered to our customers for use in their well completion operations, or (4) in the case of water handling and treatment, our third party out-of-pocket costs plus 3%. We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an agreement exists, (2) services have been rendered, (3) prices are fixed or determinable and (4) collectability is reasonable assured.

(c) Use of Estimates

The preparation of the condensed combined consolidated financial statements and notes in conformity with GAAP requires that management formulate estimates and assumptions that affect revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities. Items subject to estimates and assumptions include the useful lives of property and equipment and valuation of accrued liabilities, among others. Although management believes these estimates are reasonable, actual results could differ from these estimates.

(d)Cash and Cash Equivalents

Prior to September 23, 2015 Antero Water’s operations were funded by Antero. Net amounts funded by Antero are reflected as “Deemed distribution to Antero, net” on the accompanying statements of Condensed Combined Consolidated Cash Flows.

We consider all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments.

(e)Property and Equipment

Property and equipment primarily consists of gathering pipelines, compressor stations and fresh water distribution pipelines and facilities stated at historical cost less accumulated depreciation. We capitalize construction-related direct labor and material costs. Maintenance and repair costs are expensed as incurred.

Depreciation is computed using the straight-line method over the estimated useful lives and salvage values of assets. The depreciation of fixed assets recorded under capital lease agreements is included in depreciation expense. Uncertainties that may impact these estimates of useful lives include, among others, changes in laws and regulations relating to environmental matters, including air and water quality, restoration and abandonment requirements, economic conditions, and supply and demand for our services in the areas in which we operate. When assets are placed into service, management makes estimates with respect to useful lives and salvage values that management believes are reasonable. However, subsequent events could cause a change in estimates, thereby impacting future depreciation amounts. 

Our investment in property and equipment for the periods presented is as follows:

 

 

 

 

 

 

 

 

 

 

(in thousands)

    

Estimated
useful lives

    

As of December
31, 2015

    

As of March
31, 2016

 

Land

 

n/a

 

$

3,430

 

$

3,430

 

Fresh water surface pipelines and equipment

 

5 years

 

 

34,402

 

 

34,482

 

Above ground storage tanks

 

10 years

 

 

4,296

 

 

4,296

 

Fresh water permanent buried pipelines and equipment

 

20 years

 

 

410,202

 

 

411,722

 

Gathering and compression systems

 

20 years

 

 

1,291,871

 

 

1,325,562

 

Construction-in-progress

 

n/a

 

 

307,250

 

 

330,044

 

Total property and equipment

 

 

 

 

2,051,451

 

 

2,109,536

 

Less accumulated depreciation

 

 

 

 

(157,625)

 

 

(181,448)

 

Property and equipment, net

 

 

 

$

1,893,826

 

$

1,928,088

 

 

(f)Impairment of Long‑Lived Assets

We evaluate our long‑lived assets for impairment when events or changes in circumstances indicate that the related carrying values of the assets may not be recoverable.  Generally, the basis for making such assessments is undiscounted future cash flow projections for the unit being assessed.  If the carrying values of the assets are deemed not recoverable, the carrying values are reduced to the estimated fair value, which are based on discounted future cash flows or other techniques, as appropriate.  No impairments for such assets have been recorded through March 31, 2016.

(g)Asset Retirement Obligations

Our gathering pipelines, compressor stations and fresh water distribution pipelines and facilities have an indeterminate life, if properly maintained. A liability will be recorded only if and when a future retirement obligation with a determinable life can be estimated. We are not able to make a reasonable estimate of when future dismantlement and removal dates of our pipelines, compressor stations and facilities, will occur and, because it has been determined that abandonment of all other ancillary assets would require minimal costs, we have not recorded asset retirement obligations at December 31, 2015 or March 31, 2016.

(h)Litigation and Other Contingencies

An accrual is recorded for a loss contingency when its occurrence is probable and damages can be reasonably estimated based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes. We regularly review contingencies to determine the adequacy of our accruals and related disclosures. The ultimate amount of losses, if any, may differ from these estimates.

We accrue losses associated with environmental obligations when such losses are probable and can be reasonably estimated. Accruals for estimated environmental losses are recognized no later than at the time a remediation feasibility study, or an evaluation of response options, is complete. These accruals are adjusted as additional information becomes available or as circumstances change. Future environmental expenditures are not discounted to their present value. Recoveries of environmental costs from other parties are recorded separately as assets at their undiscounted value when receipt of such recoveries is probable.

(i)Equity‑Based Compensation

On March 30, 2016, the FASB issued ASU No. 2016-09, Stock Compensation–Improvements to Employee Share-Based Payment Accounting, and the Partnership has elected to early-adopt the standard as of March 31, 2016. See Note 2 (l) Recently Adopted Accounting Pronouncements.

Our condensed combined consolidated financial statements reflect various equity-based compensation awards granted by Antero, as well as compensation expense associated with our own plan. These awards include profits interests awards, restricted stock, stock options, restricted units, and phantom units. For purposes of these condensed combined consolidated financial statements, we recognized as expense in each period an amount allocated from Antero, with the offset included in partners’ capital. See Note 3—Transactions with Affiliates for additional information regarding Antero’s allocation of expenses to us.

In connection with our initial public offering (“IPO”), our general partner adopted the Antero Midstream Partners LP Long-Term Incentive Plan (“Midstream LTIP”), pursuant to which certain non-employee directors of our general partner and certain officers, employees and consultants of our general partner and its affiliates are eligible to receive awards representing equity interests in the Partnership. An aggregate of 10,000,000 common units may be delivered pursuant to awards under the Midstream LTIP, subject to customary adjustments. For accounting purposes, these units are treated as if they are distributed from us to Antero. Antero recognizes compensation expense for the units awarded to its employees and a portion of that expense is allocated to us. See Note 5—Equity-Based Compensation.

(j)Income Taxes

Our condensed combined consolidated financial statements do not include a provision for income taxes as we are treated as a partnership for federal and state income tax purposes, with each partner being separately taxed on its share of taxable income.

 (k)Fair Value Measures

The Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, clarifies the definition of fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance also relates to all nonfinancial assets and liabilities that are not recognized or disclosed on a recurring basis (e.g., the initial recognition of asset retirement obligations and impairments of long ‑lived assets). The fair value is the price that we estimate would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to prioritize inputs to valuation techniques used to estimate fair value. An asset or liability subject to the fair value requirements is categorized within the hierarchy based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The highest priority (Level 1) is given to unadjusted quoted market prices in active markets for identical assets or liabilities, and the lowest priority (Level 3) is given to unobservable inputs. Level 2 inputs are data, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly.

The carrying values on our balance sheet of our cash and cash equivalents, accounts receivable—Antero, accounts receivable—third party, prepaid expenses, other assets, accounts payable, accounts payable—Antero, accrued liabilities, accrued capital expenditures, accrued ad valorem tax, other current liabilities, other liabilities and the revolving credit facility approximate fair values due to their short-term maturities.

As discussed in Note 8—Fair Value Measurement, the Partnership has agreed to pay Antero contingent consideration in connection with the Water Acquisition.

(l) Recently Adopted Accounting Pronouncements

On March 30, 2016, the FASB issued ASU No. 2016-09, Stock Compensation–Improvements to Employee Share-Based Payment Accounting.  This standard simplifies or clarifies several aspects of the accounting for equity-based payment awards, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  Certain of these changes are required to be applied retrospectively, while other changes are required to be applied prospectively.  The Partnership has elected to early-adopt the standard as of March 31, 2016.

As a result of adopting this standard, we will reclassify cash outflows attributable to tax withholdings on the net settlement of equity-classified awards from operating cash flows to financing cash flows. No retrospective adjustments to the condensed combined consolidated statement of cash flows were required for the three months ended March 31, 2015, because no equity compensation awards were settled during this period.

 

Transactions with Affiliates
Transactions with Affiliates

(3)Transactions with Affiliates

(a)Revenues

Gathering and compression revenues earned from Antero were $52.2 million and $69.1 million during the three months ended March 31, 2015 and 2016, respectively. Water handling revenues earned from Antero were $33.4 million and $66.4 million during the three months ended March 31, 2015 and 2016, respectively.  Water handling revenue includes waste water treatment and high rate transfer revenue of zero and $33.9 million during the three months ended March 31, 2015 and 2016, respectively, which is calculated as third party out-of-pocket costs plus 3%.

(b)Accounts receivable—Antero and Accounts payable—Antero

Accounts receivable—Antero represents amounts due from Antero, primarily related to gathering and compression services and water handling and treatment services. Accounts payable—Antero represents amounts due to Antero for general and administrative expenses and other costs.

(c)Accounts Payable, Accrued Expenses, and Accrued Capital Expenditures

All accounts payable, accrued liabilities and accrued capital expenditures balances are due to transactions with unaffiliated parties. Prior to September 23, 2015, all operating and capital expenditures related to Antero Water were funded through capital contributions from Antero and borrowings under the water credit facility. See Note 4 — Long-term Debt. These balances were managed and paid under Antero’s cash management program. On September 23, 2015, we began to maintain our own bank accounts and sources of liquidity for water handling and treatment operations.

(d)Allocation of Costs

The employees supporting our operations are employees of Antero. Direct operating expense includes allocated costs of $0.7 million and $0.9 million during the three months ended March 31, 2015 and 2016, respectively, related to labor charges for Antero employees associated with the operation of our gathering lines, compressor stations, and water handling and treatment assets. General and administrative expense includes allocated costs of $10.9 million and $12.4 million during the three months ended March 31, 2015 and 2016, respectively. These costs relate to: (i) various business services, including payroll processing, accounts payable processing and facilities management, (ii) various corporate services, including legal, accounting, treasury, information technology and human resources and (iii) compensation, including equity-based compensation (see Note 5—Equity-Based Compensation for more information). These expenses are charged or allocated to us based on the nature of the expenses and are allocated based on a combination of our proportionate share of Antero’s gross property and equipment, capital expenditures and labor costs, as applicable.

(e)Agreements

The Partnership has entered into various agreements with Antero, as summarized below.

Gathering and Compression

In connection with the IPO on November 10, 2014, the Partnership entered in a 20-year gathering and compression agreement, whereby Antero has agreed to dedicate all of its current and future acreage in West Virginia, Ohio and Pennsylvania to us (other than the existing third-party commitments). The initial term of the gathering and compression agreement is 20 years from the date thereof and from year to year thereafter until terminated by either party. We also have an option to gather and compress natural gas produced by Antero on any acreage it acquires in the future outside of West Virginia, Ohio and Pennsylvania on the same terms and conditions. Under the gathering and compression agreement, we receive a low pressure gathering fee of $0.30 per Mcf, a high pressure gathering fee of $0.18 per Mcf, a compression fee of $0.18 per Mcf, and a condensate gathering fee of $4.00 per Bbl, in each case subject to CPI-based adjustments. If and to the extent Antero requests that we construct new high pressure lines and compressor stations, the gathering and compression agreement contains minimum volume commitments that require Antero to utilize or pay for 75% and 70% , respectively, of the capacity of such new construction. Additional high pressure lines and compressor stations installed on our own initiative are not subject to such volume commitments. These minimum volume commitments on new infrastructure are intended to support the stability of our cash flows.

Water Services Agreement

In connection with the Water Acquisition on September 23, 2015, the Partnership entered a 20-year Water Services Agreement with Antero whereby we have agreed to provide certain fluid handling services to Antero within an area of dedication in defined service areas in Ohio and West Virginia and Antero agreed to pay monthly fees to us for all fluid handling services provided by us in accordance with the terms of the Water Services Agreement. The initial term of the Water Services Agreement is 20 years from the date thereof and from year to year thereafter until terminated by either party. Under the agreement, Antero will pay a fixed fee of $3.685 per barrel in West Virginia and $3.635 per barrel in Ohio and all other locations for fresh water deliveries by pipeline directly to the well site, subject to annual CPI-based adjustments. Antero has committed to pay a fee on a minimum volume of fresh water deliveries in calendar years 2016 through 2019. Antero is obligated to pay a minimum volume fee to us in the event the aggregate volume of fresh water delivered to Antero under the Water Services Agreement is less than 90,000 barrels per day in 2016, 100,000 barrels per day in 2017 and 120,000 barrels per day in 2018 and 2019. Antero also agreed to pay us a fixed fee of $4.00 per barrel for waste water treatment at the advanced waste water treatment complex and a fee per barrel for waste water collected in trucks owned by the Partnership, in each case subject to annual CPI-based adjustments. Until such time as the advanced waste water treatment complex is placed into service or we operate our own fleet of trucks for transporting waste water, the Partnership will continue to contract with third parties to provide Antero flow back and produced water services and Antero will reimburse us third party out-of-pocket costs plus 3%. Waste water treatment and high rate transfer revenue were zero and $33.9 million during the three months ended March 31, 2015 and 2016, respectively, and waste water treatment and high rate transfer operating expenses were zero and $32.9 million during the three months ended March 31, 2015 and 2016, respectively.

Secondment Agreement

On September 23, 2015, the Partnership entered into a secondment agreement with Antero, our general partner, Midstream Operating, Antero Water and Antero Treatment, whereby Antero has agreed to provide seconded employees to perform certain operational services with respect to the Partnership’s gathering and compression facilities and the Contributed Assets, and the Partnership has agreed to reimburse Antero for expenditures incurred by Antero in the performance of those operational services. The initial term of the secondment agreement is 20 years from November 10, 2014, and from year to year thereafter.

 

Long-term Debt
Long-term Debt

(4)Long-Term Debt

Revolving Credit Facility

On November 10, 2014, in connection with the closing of the IPO, the Partnership entered into a revolving credit facility with a syndicate of bank lenders. The revolving credit facility provides for lender commitments of $1.5 billion and a letter of credit sublimit of $150 million. The revolving credit facility matures on November 10, 2019.

The revolving credit facility is ratably secured by mortgages on substantially all of our properties, including the properties of our subsidiaries, and guarantees from our subsidiaries. The revolving credit facility contains certain covenants including restrictions on indebtedness, and requirements with respect to leverage and interest coverage ratios. The revolving credit facility provides that, so long as no event of default exists or would be caused thereby, and only to the extent permitted by our organizational documents, distributions to the holders of our equity interests may be made in accordance with the cash distribution policy adopted by the board of directors of our general partner in connection with the IPO. The Partnership was in compliance with all of the financial covenants under the revolving credit facility as of December 31, 2015 and March 31, 2016.

Principal amounts borrowed are payable on the maturity date with such borrowings bearing interest that is payable quarterly or, in the case of Eurodollar Rate Loans, at the end of the applicable interest period if shorter than three months. Interest is payable at a variable rate based on LIBOR or the base rate, determined by election at the time of borrowing. Commitment fees on the unused portion of the revolving credit facility are due quarterly at rates ranging from 0.25% to 0.375% of the unused facility based on utilization.

At December 31, 2015 and March 31, 2016, we had borrowings under the revolving credit facility of $620 million and $680 million, respectively, with a weighted average interest rate of 1.94%No letters of credit were outstanding at December 31, 2015 or March 31, 2016. 

Equity-Based Compensation
Equity-Based Compensation

(5)Equity-Based Compensation

Our general and administrative expenses include equity-based compensation costs allocated to us by Antero for grants made pursuant to: (i) the Antero Resources Corporation Long‑Term Incentive Plan (the “Antero LTIP”); (ii) profits interests awards valued in connection with the Antero reorganization pursuant to its initial public offering of common stock; and (iii) the Midstream LTIP. Equity‑based compensation expense allocated to us was $5.8 million and $6.0 million for the three months ended March 31, 2015 and 2016, respectively. These expenses were allocated to us based on our proportionate share of Antero’s labor costs. Antero has unamortized expense totaling approximately $228.8 million as of March 31, 2016 related to its various equity-based compensation plans, which includes the Midstream LTIP. A portion of this will be allocated to us as it is amortized over the remaining service period of the related awards.

Midstream LTIP

Our general partner manages our operations and activities and Antero employs the personnel who provide support to our operations. In connection with the IPO, our general partner adopted the Midstream LTIP, pursuant to which non‑employee directors of our general partner and certain officers, employees and consultants of our general partner and its affiliates are eligible to receive awards representing ownership interests in the Partnership. An aggregate of 10,000,000 common units may be delivered pursuant to awards under the Midstream LTIP, subject to customary adjustments. A total of 7,953,111 common units are available for future grant under the Midstream LTIP as of March 31, 2016. Restricted units and phantom units granted under the Midstream LTIP vest subject to the satisfaction of service requirements, upon the completion of which common units in the Partnership are delivered to the holder of the restricted units or phantom units. Compensation related to each restricted unit and phantom unit award is recognized on a straight-line basis over the requisite service period of the entire award. The grant date fair values of these awards are determined based on the closing price of the Partnership’s common units on the date of grant. These units are accounted for as if they are distributed by the Partnership to Antero. Antero recognizes compensation expense for the units awarded and a portion of that expense is allocated to the Partnership. Antero allocates equity-based compensation expense to the Partnership based on our proportionate share of Antero’s labor costs. The Partnership’s portion of the equity-based compensation expense is included in general and administrative expenses, and recorded as a credit to the applicable classes of partners’ capital.

A summary of restricted unit and phantom unit awards activity during the three months ended March 31, 2016 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted
average

 

Aggregate

 

 

    

Number of
units

    

grant date
fair value

    

intrinsic value
(in thousands)

 

Total awarded and unvested—December 31, 2015

 

1,667,832

 

$

28.97

 

$

38,060

 

Forfeited

 

(11,820)

 

$

29.00

 

 

 

 

Total awarded and unvested—March 31, 2016

 

1,656,012

 

$

28.97

 

$

36,614

 

 

Intrinsic values are based on the closing price of the Partnership’s common units on the referenced dates. Midstream LTIP unamortized expense of $41.8 million at March 31, 2016 is expected to be recognized over a weighted average period of approximately 2.6 years and our proportionate share will be allocated to us as it is recognized.

Partnership Equity and Distributions
Partnership Equity and Distributions

(6)Partnership Equity and Distributions

Our Minimum Quarterly Distribution

Our partnership agreement provides for a minimum quarterly distribution of $0.17 per unit for each quarter, or $0.68 per unit on an annualized basis.

Our partnership agreement generally provides that we distribute cash each quarter during the subordination period in the following manner:

·

first, to the holders of common units, until each common unit has received the minimum quarterly distribution of $0.17 plus any arrearages from prior quarters;

·

second, to the holders of subordinated units, until each subordinated unit has received the minimum quarterly distribution of $0.17; and

·

third, to the holders of common units and subordinated units pro rata until each has received a distribution of $0.1955.

If cash distributions to our unitholders exceed $0.1955 per common unit and subordinated unit in any quarter, our unitholders and our general partner, as the holder of our incentive distribution rights (“IDRs”), will receive distributions according to the following percentage allocations:

 

 

 

 

 

 

 

 

Marginal Percentage

 

 

 

Interest in

 

 

 

Distributions

 

 

 

 

 

General Partner

 

Total Quarterly Distribution

 

 

 

(as holder of

 

Target Amount

 

Unitholders

 

IDRs)

 

above $0.1955 up to $0.2125

    

85

%  

15

%  

above $0.2125 up to $0.2550

 

75

%  

25

%  

above $0.2550

 

50

%  

50

%  

 

General Partner Interest

Our general partner owns a non‑economic general partner interest in us, which does not entitle it to receive cash distributions. However, our general partner owns the IDRs and may in the future own common units or other equity interests in us and will be entitled to receive distributions on any such interests.

Subordinated Units

Antero owns all of our subordinated units. The principal difference between our common units and subordinated units is that, for any quarter during the subordination period, holders of the subordinated units are not entitled to receive any distribution from operating surplus until the common units have received the minimum quarterly distribution from operating surplus for such quarter plus any arrearages in the payment of the minimum quarterly distribution from prior quarters. Subordinated units will not accrue arrearages. When the subordination period ends, all of the subordinated units will convert into an equal number of common units. The subordination period will end on the first business day after we have earned and paid at least $0.68 (the minimum quarterly distribution on an annualized basis) on each outstanding common unit and subordinated unit for each of three consecutive, non-overlapping four-quarter periods ending on or after September 30, 2017 and there are no outstanding arrearages on our common units.

To the extent we do not pay the minimum quarterly distribution on our common units, our common unitholders will not be entitled to receive such arrearage payments in the future except during the subordination period. To the extent we have cash available for distribution from operating surplus in any future quarter during the subordination period in excess of the amount necessary to pay the minimum quarterly distribution to holders of our common units, we will use this excess cash to pay any distribution arrearages on common units related to prior quarters before any cash distribution is made to holders of subordinated units.

Cash Distributions

The board of directors of our general partner has declared a cash distribution of $0.235 per unit for the quarter ended March 31, 2016. The distribution will be payable on May 25, 2016 to unitholders of record as of May 11, 2016.

The following table details the distributions paid during or pertaining to the periods presented below (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions

 

 

 

 

 

 

 

 

 

Limited Partners

 

 

 

 

 

 

 

 

 

Quarter
and
Year

    

Record Date

    

Distribution Date

    

Common
unitholders

    

Subordinated
unitholders

    

General
partner
(IDRs)

    

Total

  

Distributions
per limited
partner unit

Q4 2014

 

February 13, 2015

 

February 27, 2015

 

$

7,161

 

$

7,161

 

$

 -

 

$

14,322

 

$

0.0943

Q1 2015

 

May 13, 2015

 

May 27, 2015

 

$

13,669

 

$

13,669

 

$

 -

 

$

27,338

 

$

0.1800

Q2 2015

 

August 13, 2015

 

August 27, 2015

 

$

14,429

 

$

14,429

 

$

 -

 

$

28,858

 

$

0.1900

Q3 2015

 

November 11, 2015

 

November 30, 2015

 

$

20,470

 

$

15,568

 

$

295

 

$

36,333

 

$

0.2050

*

 

November 12, 2015

 

November 20, 2015

 

$

397

 

$

 -

 

$

 -

 

$

397

 

$

*

 

 

Total 2015

 

 

 

$

56,126

 

$

50,827

 

$

295

 

$

107,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q4 2015

 

February 15, 2016

 

February 29, 2016

 

$

22,048

 

$

16,708

 

$

969

 

$

39,725

 

$

0.2200

Q1 2016

 

May 11, 2016

 

May 25, 2016

 

$

23,556

 

$

17,846

 

$

1,850

 

$

43,252

 

$

0.2350

 

 

Total 2016

 

 

 

$

45,604

 

$

34,554

 

$

2,819

 

$

82,977

 

 

 

* Distribution equivalent rights on units that vested under the Midstream LTIP.

Net Income Per Limited Partner Unit
Net Income Per Limited Partner Unit

(7)Net Income Per Limited Partner Unit

The Partnership’s net income is attributed to the general partner and limited partners, including subordinated unitholders, in accordance with their respective ownership percentages, and when applicable, giving effect to incentive distributions paid to the general partner. Basic and diluted net income per limited partner unit is calculated by dividing limited partners’ interest in net income, less general partner incentive distributions, by the weighted average number of outstanding limited partner units during the period.

We compute earnings per unit using the two-class method for master limited partnerships. Under the two-class method, earnings per unit is calculated as if all of the earnings for the period were distributed under the terms of the partnership agreement, regardless of whether the general partner has discretion over the amount of distributions to be made in any particular period, whether those earnings would actually be distributed during a particular period from an economic or practical perspective, or whether the general partner has other legal or contractual limitations on its ability to pay distributions that would prevent it from distributing all of the earnings for a particular period.

We calculate net income available to limited partners based on the distributions pertaining to the current period’s net income. After adjusting for the appropriate period’s distributions, the remaining undistributed earnings or excess distributions over earnings, if any, are attributed to the general partner and limited partners in accordance with the contractual terms of the partnership agreement under the two-class method.

Basic earnings per unit is computed by dividing net earnings attributable to unitholders by the weighted average number of units outstanding during each period. Diluted net income per limited partner unit reflects the potential dilution that could occur if agreements to issue common units, such as awards under long-term incentive plans, were exercised, settled or converted into common units. When it is determined that potential common units resulting from an award should be included in the diluted net income per limited partner unit calculation, the impact is reflected by applying the treasury stock method. Earnings per common unit assuming dilution for the three months ended March 31, 2016 was calculated based on the diluted weighted average number of units outstanding of 100,218,579, including 5,380 dilutive units attributable to non-vested restricted unit and phantom unit awards. For the three months ended March 31, 2016, 1,643,955 non-vested phantom unit and restricted unit awards were anti-dilutive.

The Partnership’s calculation of net income per common and subordinated unit for the periods indicated is as follows (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

  

 

Three months ended March 31,

 

    

2015

    

2016

  

 

 

 

 

 

 

Net income

  

$

32,327

  

$

42,918

Less:

 

 

 

 

 

 

Pre-Water Acquisition net income attributed to parent

 

 

(16,679)

 

 

 —

General partner interest in net income attributable to incentive distribution rights

 

 

 —

 

 

(1,850)

Limited partner interest in net income

  

$

15,648

 

$

41,068

 

 

 

 

 

 

 

Net income allocable to common units - basic and diluted

 

$

7,824

 

$

23,363

Net income allocable to subordinated units - basic and diluted

 

 

7,824

 

 

17,705

Limited partner interest in net income - basic and diluted

 

$

15,648

 

$

41,068

 

 

 

 

 

 

 

Net income per limited partner unit - basic

 

 

 

 

 

 

Common units

 

$

0.10

 

$

0.23

Subordinated units

 

$

0.10

 

$

0.23

 

 

 

 

 

 

 

Net income per limited partner unit - diluted

 

 

 

 

 

 

Common units

 

$

0.10

 

$

0.23

Subordinated units

 

$

0.10

 

$

0.23

 

 

 

 

 

 

 

Weighted average limited partner units  outstanding - basic

 

 

 

 

 

 

Common units

 

 

75,941

 

 

100,213

Subordinated units

 

 

75,941

 

 

75,941

 

 

 

 

 

 

 

Weighted average limited partner units  outstanding - diluted

 

 

 

 

 

 

Common units

 

 

75,942

 

 

100,219

Subordinated units

 

 

75,941

 

 

75,941

 

Fair Value Measurement
Fair Value Measurement

(8) Fair Value Measurement

In connection with the Water Acquisition, we have agreed to pay Antero (a) $125 million in cash if the Partnership delivers 176,295,000 barrels or more of fresh water during the period between January 1, 2017 and December 31, 2019 and (b) an additional $125 million in cash if the Partnership delivers 219,200,000 barrels or more of fresh water during the period between January 1, 2018 and December 31, 2020. This contingent consideration liability is valued based on Level 3 inputs.

The following table provides a reconciliation of changes in Level 3 financial liabilities measured at fair value on a recurring basis (in thousands):

 

 

 

 

Contingent Acquisition Consideration

    

Three months ended March 31, 2016

Beginning balance

 

$

178,049

Accretion

 

 

3,396

Ending balance

 

$

181,445

 

We account for contingent consideration in accordance with applicable accounting guidance pertaining to business combinations. We are contractually obligated to pay Antero contingent consideration in connection with the Water Acquisition, and therefore recorded this contingent consideration liability at the time of the Water Acquisition. We update our assumptions each reporting period based on new developments and adjust such amounts to fair value based on revised assumptions, if applicable, until such consideration is satisfied through payment upon achievement of the specified objectives or it is eliminated upon failure to achieve the specified objectives.

As of March 31, 2016, we expect to pay the entire amount of the contingent consideration amounts in 2019 and 2020. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future milestone payments was based on the risk adjusted present value of the contingent consideration payout.

Reporting Segments
Reporting Segments

(9)    Reporting Segments

The Partnership’s operations are located in the United States and are organized into two reporting segments: (1) gathering and compression and (2) water handling and treatment.

Gathering and Compression

The gathering and compression segment includes a network of gathering pipelines and compressor stations that collect natural gas, NGLs and oil from Antero’s wells in West Virginia and Ohio.

Water Handling and Treatment

The Partnership’s water handling and treatment segment includes two independent fresh water distribution systems that source and deliver fresh water from the Ohio River and several regional waterways, and waste water services for well completion operations in Antero’s operating areas. These fresh water systems consist of permanent buried pipelines, surface pipelines and fresh water storage facilitates, as well as pumping stations and impoundments to transport the fresh water throughout the pipelines. The waste water services consist of waste water transportation, disposal, and treatment, including a water treatment facility, currently under construction.

These segments are monitored separately by management for performance and are consistent with internal financial reporting. These segments have been identified based on the differing products and services, regulatory environment and the expertise required for these operations. We evaluate the performance of the Partnership’s business segments based on operating income. Interest expense is primarily managed and evaluated on a consolidated basis.

Summarized financial information concerning the Partnership’s segments for the periods indicated is shown in the following table (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Water

 

 

 

 

  

Gathering and

  

Handling and

  

Consolidated

 

    

Compression

    

Treatment

    

Total

Three months ended March 31, 2015

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero

 

$

52,243

 

$

33,441

 

$

85,684

Revenue - third-party

 

 

 -

 

 

151

 

 

151

Total revenues

 

 

52,243

 

 

33,592

 

 

85,835

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

11,689

 

 

7,612

 

 

19,301

General and administrative (before equity-based compensation)

 

 

4,878

 

 

1,262

 

 

6,140

Equity-based compensation

 

 

4,623

 

 

1,156

 

 

5,779

Depreciation

 

 

14,582

 

 

6,120

 

 

20,702

Total expenses

 

 

35,772

 

 

16,150

 

 

51,922

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

16,471

 

$

17,442

 

$

33,913

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,394,349

 

$

420,481

 

$

1,814,830

Additions to property and equipment

 

$

85,737

 

$

21,315

 

$

107,052

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2016

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero

 

$

69,116

 

$

66,439

 

$

135,555

Revenue - third-party

 

 

275

 

 

 -

 

 

275

Total revenues

 

 

69,391

 

 

66,439

 

 

135,830

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

7,619

 

 

41,522

 

 

49,141

General and administrative (before equity-based compensation)

 

 

4,949

 

 

2,170

 

 

7,119

Equity-based compensation

 

 

4,386

 

 

1,586

 

 

5,972

Depreciation

 

 

16,861

 

 

6,962

 

 

23,823

Contingent acquisition consideration accretion

 

 

 -

 

 

3,396

 

 

3,396

Total expenses

 

 

33,815

 

 

55,636

 

 

89,451

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

35,576

 

$

10,803

 

$

46,379

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,503,098

 

$

524,348

 

$

2,027,446

Additions to property and equipment

 

$

48,686

 

$

37,036

 

$

85,722

 

 

 

Contingencies
Contingencies

(10)  Contingencies

Environmental Obligations

We are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. We believe there are currently no such matters that will have a material adverse effect on our results of operations, cash flows or financial position.

Summary of Significant Accounting Policies (Policies)

(a) Basis of Presentation

These condensed combined consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim financial information, and should be read in the context of the December 31, 2015 combined consolidated financial statements and notes thereto for a more complete understanding of the Partnership’s operations, financial position, and accounting policies.  The December 31, 2015 combined consolidated financial statements were originally filed with the SEC in the 2015 Form 10-K.

The accompanying unaudited condensed combined consolidated financial statements of the Partnership have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, and, accordingly, do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, these statements include all adjustments (consisting of normal and recurring accruals) considered necessary for a fair presentation of the Partnership’s financial position as of December 31, 2015 and March 31, 2016, and the results of its operations and its cash flows for the three months ended March 31, 2015 and 2016. The Partnership has no items of other comprehensive income; therefore, its net income is identical to its comprehensive income. Operating results for the period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the full year.

Certain costs of doing business which are incurred by Antero on our behalf have been reflected in the accompanying condensed combined consolidated financial statements. These costs include general and administrative expenses attributed to us by Antero in exchange for:

·

business services, such as payroll, accounts payable and facilities management;

·

corporate services, such as finance and accounting, legal, human resources, investor relations and public and regulatory policy; and

·

employee compensation, including equity‑based compensation.

Transactions between us and Antero have been identified in the condensed combined consolidated financial statements (see Note 3).

As of the date these condensed combined consolidated financial statements were filed with the SEC, the Partnership completed its evaluation of potential subsequent events for disclosure and no items requiring disclosure were identified, except the declaration of a cash distribution to unitholders, as described in Note 6—Partnership Equity and Distributions.

(b)Revenue Recognition

We provide gathering and compression and water handling and treatment services under fee-based contracts primarily based on throughput or cost plus margin. Under these arrangements, we receive fees for gathering oil and gas products, compression services, and water handling and treatment services. The revenue we earn from these arrangements is directly related to (1) in the case of natural gas gathering and compression, the volumes of metered natural gas that we gather, compress and deliver to natural gas compression sites or other transmission delivery points, (2) in the case of oil and condensate gathering, the volumes of metered oil and condensate that we gather and deliver to other transmission delivery points, (3) in the case of fresh water delivery, the quantities of fresh water delivered to our customers for use in their well completion operations, or (4) in the case of water handling and treatment, our third party out-of-pocket costs plus 3%. We recognize revenue when all of the following criteria are met: (1) persuasive evidence of an agreement exists, (2) services have been rendered, (3) prices are fixed or determinable and (4) collectability is reasonable assured.

(c) Use of Estimates

The preparation of the condensed combined consolidated financial statements and notes in conformity with GAAP requires that management formulate estimates and assumptions that affect revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities. Items subject to estimates and assumptions include the useful lives of property and equipment and valuation of accrued liabilities, among others. Although management believes these estimates are reasonable, actual results could differ from these estimates.

(d)Cash and Cash Equivalents

Prior to September 23, 2015 Antero Water’s operations were funded by Antero. Net amounts funded by Antero are reflected as “Deemed distribution to Antero, net” on the accompanying statements of Condensed Combined Consolidated Cash Flows.

We consider all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments.

(e)Property and Equipment

Property and equipment primarily consists of gathering pipelines, compressor stations and fresh water distribution pipelines and facilities stated at historical cost less accumulated depreciation. We capitalize construction-related direct labor and material costs. Maintenance and repair costs are expensed as incurred.

Depreciation is computed using the straight-line method over the estimated useful lives and salvage values of assets. The depreciation of fixed assets recorded under capital lease agreements is included in depreciation expense. Uncertainties that may impact these estimates of useful lives include, among others, changes in laws and regulations relating to environmental matters, including air and water quality, restoration and abandonment requirements, economic conditions, and supply and demand for our services in the areas in which we operate. When assets are placed into service, management makes estimates with respect to useful lives and salvage values that management believes are reasonable. However, subsequent events could cause a change in estimates, thereby impacting future depreciation amounts.  

Our investment in property and equipment for the periods presented is as follows:

 

 

 

 

 

 

 

 

 

 

(in thousands)

    

Estimated
useful lives

    

As of December
31, 2015

    

As of March
31, 2016

 

Land

 

n/a

 

$

3,430

 

$

3,430

 

Fresh water surface pipelines and equipment

 

5 years

 

 

34,402

 

 

34,482

 

Above ground storage tanks

 

10 years

 

 

4,296

 

 

4,296

 

Fresh water permanent buried pipelines and equipment

 

20 years

 

 

410,202

 

 

411,722

 

Gathering and compression systems

 

20 years

 

 

1,291,871

 

 

1,325,562

 

Construction-in-progress

 

n/a

 

 

307,250

 

 

330,044

 

Total property and equipment

 

 

 

 

2,051,451

 

 

2,109,536

 

Less accumulated depreciation

 

 

 

 

(157,625)

 

 

(181,448)

 

Property and equipment, net

 

 

 

$

1,893,826

 

$

1,928,088

 

 

(f)Impairment of Long‑Lived Assets

We evaluate our long‑lived assets for impairment when events or changes in circumstances indicate that the related carrying values of the assets may not be recoverable.  Generally, the basis for making such assessments is undiscounted future cash flow projections for the unit being assessed.  If the carrying values of the assets are deemed not recoverable, the carrying values are reduced to the estimated fair value, which are based on discounted future cash flows or other techniques, as appropriate.  No impairments for such assets have been recorded through March 31, 2016.

(g)Asset Retirement Obligations

Our gathering pipelines, compressor stations and fresh water distribution pipelines and facilities have an indeterminate life, if properly maintained. A liability will be recorded only if and when a future retirement obligation with a determinable life can be estimated. We are not able to make a reasonable estimate of when future dismantlement and removal dates of our pipelines, compressor stations and facilities, will occur and, because it has been determined that abandonment of all other ancillary assets would require minimal costs, we have not recorded asset retirement obligations at December 31, 2015 or March 31, 2016.

(h)Litigation and Other Contingencies

An accrual is recorded for a loss contingency when its occurrence is probable and damages can be reasonably estimated based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes. We regularly review contingencies to determine the adequacy of our accruals and related disclosures. The ultimate amount of losses, if any, may differ from these estimates.

We accrue losses associated with environmental obligations when such losses are probable and can be reasonably estimated. Accruals for estimated environmental losses are recognized no later than at the time a remediation feasibility study, or an evaluation of response options, is complete. These accruals are adjusted as additional information becomes available or as circumstances change. Future environmental expenditures are not discounted to their present value. Recoveries of environmental costs from other parties are recorded separately as assets at their undiscounted value when receipt of such recoveries is probable.

(i)Equity‑Based Compensation

On March 30, 2016, the FASB issued ASU No. 2016-09, Stock Compensation–Improvements to Employee Share-Based Payment Accounting, and the Partnership has elected to early-adopt the standard as of March 31, 2016. See Note 2 (l) Recently Adopted Accounting Pronouncements.

Our condensed combined consolidated financial statements reflect various equity-based compensation awards granted by Antero, as well as compensation expense associated with our own plan. These awards include profits interests awards, restricted stock, stock options, restricted units, and phantom units. For purposes of these condensed combined consolidated financial statements, we recognized as expense in each period an amount allocated from Antero, with the offset included in partners’ capital. See Note 3—Transactions with Affiliates for additional information regarding Antero’s allocation of expenses to us.

In connection with our initial public offering (“IPO”), our general partner adopted the Antero Midstream Partners LP Long-Term Incentive Plan (“Midstream LTIP”), pursuant to which certain non-employee directors of our general partner and certain officers, employees and consultants of our general partner and its affiliates are eligible to receive awards representing equity interests in the Partnership. An aggregate of 10,000,000 common units may be delivered pursuant to awards under the Midstream LTIP, subject to customary adjustments. For accounting purposes, these units are treated as if they are distributed from us to Antero. Antero recognizes compensation expense for the units awarded to its employees and a portion of that expense is allocated to us. See Note 5—Equity-Based Compensation.

(j)Income Taxes

Our condensed combined consolidated financial statements do not include a provision for income taxes as we are treated as a partnership for federal and state income tax purposes, with each partner being separately taxed on its share of taxable income.

(k)Fair Value Measures

The Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, clarifies the definition of fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance also relates to all nonfinancial assets and liabilities that are not recognized or disclosed on a recurring basis (e.g., the initial recognition of asset retirement obligations and impairments of long ‑lived assets). The fair value is the price that we estimate would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to prioritize inputs to valuation techniques used to estimate fair value. An asset or liability subject to the fair value requirements is categorized within the hierarchy based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The highest priority (Level 1) is given to unadjusted quoted market prices in active markets for identical assets or liabilities, and the lowest priority (Level 3) is given to unobservable inputs. Level 2 inputs are data, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly.

The carrying values on our balance sheet of our cash and cash equivalents, accounts receivable—Antero, accounts receivable—third party, prepaid expenses, other assets, accounts payable, accounts payable—Antero, accrued liabilities, accrued capital expenditures, accrued ad valorem tax, other current liabilities, other liabilities and the revolving credit facility approximate fair values due to their short-term maturities.

As discussed in Note 8—Fair Value Measurement, the Partnership has agreed to pay Antero contingent consideration in connection with the Water Acquisition.

(l) Recently Adopted Accounting Pronouncements

On March 30, 2016, the FASB issued ASU No. 2016-09, Stock Compensation–Improvements to Employee Share-Based Payment Accounting.  This standard simplifies or clarifies several aspects of the accounting for equity-based payment awards, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  Certain of these changes are required to be applied retrospectively, while other changes are required to be applied prospectively.  The Partnership has elected to early-adopt the standard as of March 31, 2016.

As a result of adopting this standard, we will reclassify cash outflows attributable to tax withholdings on the net settlement of equity-classified awards from operating cash flows to financing cash flows. No retrospective adjustments to the condensed combined consolidated statement of cash flows were required for the three months ended March 31, 2015, because no equity compensation awards were settled during this period.

Summary of Significant Accounting Policies (Tables)
Schedule of investment in property and equipment

 

 

 

 

 

 

 

 

 

 

(in thousands)

    

Estimated
useful lives

    

As of December
31, 2015

    

As of March
31, 2016

 

Land

 

n/a

 

$

3,430

 

$

3,430

 

Fresh water surface pipelines and equipment

 

5 years

 

 

34,402

 

 

34,482

 

Above ground storage tanks

 

10 years

 

 

4,296

 

 

4,296

 

Fresh water permanent buried pipelines and equipment

 

20 years

 

 

410,202

 

 

411,722

 

Gathering and compression systems

 

20 years

 

 

1,291,871

 

 

1,325,562

 

Construction-in-progress

 

n/a

 

 

307,250

 

 

330,044

 

Total property and equipment

 

 

 

 

2,051,451

 

 

2,109,536

 

Less accumulated depreciation

 

 

 

 

(157,625)

 

 

(181,448)

 

Property and equipment, net

 

 

 

$

1,893,826

 

$

1,928,088

 

 

Equity-Based Compensation (Tables)
Summary of restricted unit and phantom unit awards activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted
average

 

Aggregate

 

 

    

Number of
units

    

grant date
fair value

    

intrinsic value
(in thousands)

 

Total awarded and unvested—December 31, 2015

 

1,667,832

 

$

28.97

 

$

38,060

 

Forfeited

 

(11,820)

 

$

29.00

 

 

 

 

Total awarded and unvested—March 31, 2016

 

1,656,012

 

$

28.97

 

$

36,614

 

 

Partnership Equity and Distributions (Tables)

 

 

 

 

 

 

 

 

Marginal Percentage

 

 

 

Interest in

 

 

 

Distributions

 

 

 

 

 

General Partner

 

Total Quarterly Distribution

 

 

 

(as holder of

 

Target Amount

 

Unitholders

 

IDRs)

 

above $0.1955 up to $0.2125

    

85

%  

15

%  

above $0.2125 up to $0.2550

 

75

%  

25

%  

above $0.2550

 

50

%  

50

%  

 

The following table details the distributions paid during or pertaining to the periods presented below (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions

 

 

 

 

 

 

 

 

 

Limited Partners

 

 

 

 

 

 

 

 

 

Quarter
and
Year

    

Record Date

    

Distribution Date

    

Common
unitholders

    

Subordinated
unitholders

    

General
partner
(IDRs)

    

Total

  

Distributions
per limited
partner unit

Q4 2014

 

February 13, 2015

 

February 27, 2015

 

$

7,161

 

$

7,161

 

$

 -

 

$

14,322

 

$

0.0943

Q1 2015

 

May 13, 2015

 

May 27, 2015

 

$

13,669

 

$

13,669

 

$

 -

 

$

27,338

 

$

0.1800

Q2 2015

 

August 13, 2015

 

August 27, 2015

 

$

14,429

 

$

14,429

 

$

 -

 

$

28,858

 

$

0.1900

Q3 2015

 

November 11, 2015

 

November 30, 2015

 

$

20,470

 

$

15,568

 

$

295

 

$

36,333

 

$

0.2050

*

 

November 12, 2015

 

November 20, 2015

 

$

397

 

$

 -

 

$

 -

 

$

397

 

$

*

 

 

Total 2015

 

 

 

$

56,126

 

$

50,827

 

$

295

 

$

107,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q4 2015

 

February 15, 2016

 

February 29, 2016

 

$

22,048

 

$

16,708

 

$

969

 

$

39,725

 

$

0.2200

Q1 2016

 

May 11, 2016

 

May 25, 2016

 

$

23,556

 

$

17,846

 

$

1,850

 

$

43,252

 

$

0.2350

 

 

Total 2016

 

 

 

$

45,604

 

$

34,554

 

$

2,819

 

$

82,977

 

 

 

* Distribution equivalent rights on units that vested under the Midstream LTIP.

Net Income Per Limited Partner Unit (Tables)
Schedule of net income per common and subordinated unit

The Partnership’s calculation of net income per common and subordinated unit for the periods indicated is as follows (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

  

 

Three months ended March 31,

 

    

2015

    

2016

  

 

 

 

 

 

 

Net income

  

$

32,327

  

$

42,918

Less:

 

 

 

 

 

 

Pre-Water Acquisition net income attributed to parent

 

 

(16,679)

 

 

 —

General partner interest in net income attributable to incentive distribution rights

 

 

 —

 

 

(1,850)

Limited partner interest in net income

  

$

15,648

 

$

41,068

 

 

 

 

 

 

 

Net income allocable to common units - basic and diluted

 

$

7,824

 

$

23,363

Net income allocable to subordinated units - basic and diluted

 

 

7,824

 

 

17,705

Limited partner interest in net income - basic and diluted

 

$

15,648

 

$

41,068

 

 

 

 

 

 

 

Net income per limited partner unit - basic

 

 

 

 

 

 

Common units

 

$

0.10

 

$

0.23

Subordinated units

 

$

0.10

 

$

0.23

 

 

 

 

 

 

 

Net income per limited partner unit - diluted

 

 

 

 

 

 

Common units

 

$

0.10

 

$

0.23

Subordinated units

 

$

0.10

 

$

0.23

 

 

 

 

 

 

 

Weighted average limited partner units  outstanding - basic

 

 

 

 

 

 

Common units

 

 

75,941

 

 

100,213

Subordinated units

 

 

75,941

 

 

75,941

 

 

 

 

 

 

 

Weighted average limited partner units  outstanding - diluted

 

 

 

 

 

 

Common units

 

 

75,942

 

 

100,219

Subordinated units

 

 

75,941

 

 

75,941

 

Fair Value Measurement (Tables)
Schedule of reconciliation of changes in Level 3 financial liabilities measured at fair value on a recurring basis

 

The following table provides a reconciliation of changes in Level 3 financial liabilities measured at fair value on a recurring basis (in thousands):

 

 

 

 

Contingent Acquisition Consideration

    

Three months ended March 31, 2016

Beginning balance

 

$

178,049

Accretion

 

 

3,396

Ending balance

 

$

181,445

 

Reporting Segments (Tables)
Schedule of financial information concerning the Partnership's segments

Summarized financial information concerning the Partnership’s segments for the periods indicated is shown in the following table (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Water

 

 

 

 

  

Gathering and

  

Handling and

  

Consolidated

 

    

Compression

    

Treatment

    

Total

Three months ended March 31, 2015

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero

 

$

52,243

 

$

33,441

 

$

85,684

Revenue - third-party

 

 

 -

 

 

151

 

 

151

Total revenues

 

 

52,243

 

 

33,592

 

 

85,835

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

11,689

 

 

7,612

 

 

19,301

General and administrative (before equity-based compensation)

 

 

4,878

 

 

1,262

 

 

6,140

Equity-based compensation

 

 

4,623

 

 

1,156

 

 

5,779

Depreciation

 

 

14,582

 

 

6,120

 

 

20,702

Total expenses

 

 

35,772

 

 

16,150

 

 

51,922

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

16,471

 

$

17,442

 

$

33,913

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,394,349

 

$

420,481

 

$

1,814,830

Additions to property and equipment

 

$

85,737

 

$

21,315

 

$

107,052

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2016

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenue - Antero

 

$

69,116

 

$

66,439

 

$

135,555

Revenue - third-party

 

 

275

 

 

 -

 

 

275

Total revenues

 

 

69,391

 

 

66,439

 

 

135,830

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct operating

 

 

7,619

 

 

41,522

 

 

49,141

General and administrative (before equity-based compensation)

 

 

4,949

 

 

2,170

 

 

7,119

Equity-based compensation

 

 

4,386

 

 

1,586

 

 

5,972

Depreciation

 

 

16,861

 

 

6,962

 

 

23,823

Contingent acquisition consideration accretion

 

 

 -

 

 

3,396

 

 

3,396

Total expenses

 

 

33,815

 

 

55,636

 

 

89,451

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

35,576

 

$

10,803

 

$

46,379

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,503,098

 

$

524,348

 

$

2,027,446

Additions to property and equipment

 

$

48,686

 

$

37,036

 

$

85,722

 

 

Business and Organization (Details) (Regional Gathering System)
0 Months Ended
Nov. 30, 2015
mi
Regional Gathering System
 
Business and Organization
 
Threshold non-operating equity percentage
15.00% 
Distance of regional gathering pipeline extension (in miles)
67 
Regional gathering pipeline commitment
900 
Time period for expiration of participation in regional gathering pipeline extension
6 years 
Summary of Significant Accounting Policies (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Property and equipment:
 
 
Property and equipment
$ 2,109,536 
$ 2,051,451 
Less accumulated depreciation
(181,448)
(157,625)
Property and equipment, net
1,928,088 
1,893,826 
Impairment of Long-Lived Assets
 
 
Impairment of assets
 
Midstream LTIP
 
 
Stock-Based Compensation
 
 
Number of stock-based compensation awards authorized
10,000,000 
 
Land
 
 
Property and equipment:
 
 
Property and equipment
3,430 
3,430 
Freshwater surface pipelines and equipment
 
 
Property and equipment:
 
 
Useful life
5 years 
 
Property and equipment
34,482 
34,402 
Above Ground Storage Tanks
 
 
Property and equipment:
 
 
Useful life
10 years 
 
Property and equipment
4,296 
4,296 
Freshwater permanent buried pipelines and equipment
 
 
Property and equipment:
 
 
Useful life
20 years 
 
Property and equipment
411,722 
410,202 
Gathering and compression systems
 
 
Property and equipment:
 
 
Useful life
20 years 
 
Property and equipment
1,325,562 
1,291,871 
Construction-in-progress
 
 
Property and equipment:
 
 
Property and equipment
$ 330,044 
$ 307,250 
Transactions with Affiliates (Details) (USD $)
3 Months Ended 0 Months Ended 3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Nov. 10, 2014
Antero
Sep. 23, 2015
Antero
Gathering And Compression Agreement
Sep. 23, 2015
Antero
Water Services Agreement
Sep. 23, 2015
Antero
Water Services Agreement
Advanced Waste Water Treatment Complex
Sep. 23, 2015
Antero
Water Services Agreement
West Virginia
Sep. 23, 2015
Antero
Water Services Agreement
Ohio
Nov. 10, 2014
Antero
High Pressure Lines
Nov. 10, 2014
Antero
Compressor stations
Mar. 31, 2016
Antero Midstream Partners LP
Mar. 31, 2015
Antero Midstream Partners LP
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
Gathering and compression–Antero
$ 69,116,000 
$ 52,243,000 
 
 
 
 
 
 
 
 
 
 
Water handling revenue from Antero
66,439,000 
33,441,000 
 
 
 
 
 
 
 
 
 
 
Waste water treatment and high rate transfer revenue
33,900,000 
 
 
 
 
 
 
 
 
 
 
Allocation of costs
 
 
 
 
 
 
 
 
 
 
 
 
Direct labor expenses
 
 
 
 
 
 
 
 
 
 
900,000 
700,000 
General and administrative expense
12,400,000 
10,900,000 
 
 
 
 
 
 
 
 
 
 
Agreements
 
 
 
 
 
 
 
 
 
 
 
 
Term of agreement with Antero
 
 
20 years 
20 years 
20 years 
 
 
 
 
 
 
 
Low pressure gathering fee
 
 
0.30 
 
 
 
 
 
 
 
 
 
High pressure gathering fee
 
 
0.18 
 
 
 
 
 
 
 
 
 
Compression fee
 
 
0.18 
 
 
 
 
 
 
 
 
 
Condensate gathering fee
 
 
4.00 
 
 
 
 
 
 
 
 
 
Minimum volume commitment that require Antero to pay
 
 
 
 
 
 
 
 
75.00% 
70.00% 
 
 
Water Service Agreement fee
 
 
 
 
 
4.00 
3.685 
3.635 
 
 
 
 
Third party out of pocket costs reimbursement (as a percent)
 
 
 
 
3.00% 
 
 
 
 
 
 
 
Waste water treatment and high rate transfer operating expenses
$ 32,900,000 
$ 0 
 
 
 
 
 
 
 
 
 
 
Minimum Obligation
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
90,000 
 
 
 
 
 
 
 
2017
 
 
 
 
100,000 
 
 
 
 
 
 
 
2018
 
 
 
 
120,000 
 
 
 
 
 
 
 
2019
 
 
 
 
120,000 
 
 
 
 
 
 
 
Long-term Debt (Details) (USD $)
3 Months Ended
Mar. 31, 2016
New revolving credit facility
Dec. 31, 2015
New revolving credit facility
Nov. 10, 2014
New revolving credit facility
Mar. 31, 2016
Letter of credit
Dec. 31, 2015
Letter of credit
Nov. 10, 2014
Letter of credit
Mar. 31, 2016
Letter of credit
Minimum
Mar. 31, 2016
Letter of credit
Maximum
Long-term debt
 
 
 
 
 
 
 
 
Maximum amount of the Credit Facility
 
 
$ 1,500,000,000 
 
 
 
 
 
Current borrowing capacity
 
 
 
 
 
150,000,000 
 
 
Commitment fees on the unused portion (as a percent)
 
 
 
 
 
 
0.25% 
0.375% 
Outstanding balance
$ 680,000,000 
$ 620,000,000 
 
$ 0 
$ 0 
 
 
 
Weighted average interest rate (as a percent)
1.94% 
1.94% 
 
 
 
 
 
 
Equity Based Compensation (Details) (USD $)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Number of units
 
 
Total awarded and unvested at the beginning of the period (in shares)
1,667,832 
 
Forfeited (in shares)
(11,820)
 
Total awarded and unvested at the end of the period (in shares)
1,656,012 
 
Weighted average grant date fair value
 
 
Total awarded and unvested at the beginning of the period (in dollars per unit)
$ 28.97 
 
Forfeited (in dollars per unit)
$ 29.00 
 
Total awarded and unvested at the end of the period (in dollars per unit)
$ 28.97 
 
Aggregate intrinsic value
 
 
Total awarded and unvested at the beginning of the period
$ 38,060,000 
 
Total awarded and unvested at the end of the period
36,614,000 
 
Additional disclosures
 
 
Equity-based compensation expense
5,972,000 
5,779,000 
Midstream LTIP
 
 
Additional disclosures
 
 
Number of stock-based compensation awards authorized
10,000,000 
 
Unamortized expense
41,800,000 
 
Number of shares available for future grant under the Plan
7,953,111 
 
Weighted average period for recognizing unrecognized stock-based compensation expense
2 years 7 months 6 days 
 
Various equity based compensation plans |
Antero
 
 
Additional disclosures
 
 
Unamortized expense
$ 228,800,000 
 
Partnership Equity and Distributions (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
0 Months Ended 3 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 3 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended
Feb. 29, 2016
Nov. 30, 2015
Nov. 20, 2015
Aug. 27, 2015
May 27, 2015
Feb. 27, 2015
Mar. 31, 2016
Dec. 31, 2015
Feb. 29, 2016
General Partner
Nov. 30, 2015
General Partner
Dec. 31, 2015
General Partner
Feb. 29, 2016
Common units
Limited Partner (Common units)
Nov. 30, 2015
Common units
Limited Partner (Common units)
Nov. 20, 2015
Common units
Limited Partner (Common units)
Aug. 27, 2015
Common units
Limited Partner (Common units)
May 27, 2015
Common units
Limited Partner (Common units)
Feb. 27, 2015
Common units
Limited Partner (Common units)
Dec. 31, 2015
Common units
Limited Partner (Common units)
Feb. 29, 2016
Limited Partner (Subordinated units)
Limited Partner (Common units)
Nov. 30, 2015
Limited Partner (Subordinated units)
Limited Partner (Common units)
Aug. 27, 2015
Limited Partner (Subordinated units)
Limited Partner (Common units)
May 27, 2015
Limited Partner (Subordinated units)
Limited Partner (Common units)
Feb. 27, 2015
Limited Partner (Subordinated units)
Limited Partner (Common units)
Dec. 31, 2015
Limited Partner (Subordinated units)
Limited Partner (Common units)
Mar. 31, 2016
Above $0.1955 up to $0.2125
Mar. 31, 2016
Above $0.2125 up to $0.2550
Mar. 31, 2016
Above $0.2550
Mar. 31, 2016
Minimum
Mar. 31, 2016
Minimum
Above $0.1955 up to $0.2125
Mar. 31, 2016
Minimum
Above $0.2125 up to $0.2550
Mar. 31, 2016
Maximum
Above $0.1955 up to $0.2125
Mar. 31, 2016
Maximum
Above $0.2125 up to $0.2550
May 25, 2016
Forecast
Dec. 31, 2016
Forecast
May 25, 2016
Forecast
General Partner
Dec. 31, 2016
Forecast
General Partner
May 25, 2016
Forecast
Common units
Limited Partner (Common units)
Dec. 31, 2016
Forecast
Common units
Limited Partner (Common units)
May 25, 2016
Forecast
Limited Partner (Subordinated units)
Limited Partner (Common units)
Dec. 31, 2016
Forecast
Limited Partner (Subordinated units)
Limited Partner (Common units)
Partnership equity and distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum quarterly cash distribution (per unit)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.17 
 
 
 
 
 
 
 
 
 
 
 
 
Annual cash distribution (per unit)
 
 
 
 
 
 
0.68 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro rata cash distribution to the holders of common and subordinate units
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.2550 
 
0.1955 
0.2125 
0.2125 
0.2550 
 
 
 
 
 
 
 
 
Unitholders marginal percentage interest in distribution
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
85.00% 
75.00% 
50.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
General Partners marginal percentage interest in distribution
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15.00% 
25.00% 
50.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Distribution
$ 39,725 
$ 36,333 
$ 397 
$ 28,858 
$ 27,338 
$ 14,322 
 
$ 107,248 
$ 969 
$ 295 
$ 295 
$ 22,048 
$ 20,470 
$ 397 
$ 14,429 
$ 13,669 
$ 7,161 
$ 56,126 
$ 16,708 
$ 15,568 
$ 14,429 
$ 13,669 
$ 7,161 
$ 50,827 
 
 
 
 
 
 
 
 
$ 43,252 
$ 82,977 
$ 1,850 
$ 2,819 
$ 23,556 
$ 45,604 
$ 17,846 
$ 34,554 
Cash distribution declared
$ 0.2200 
$ 0.2050 
 
$ 0.1900 
$ 0.1800 
$ 0.0943 
$ 0.235 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.2350 
 
 
 
 
 
 
 
Minimum cash distributions to trigger unitholder and general partner distributions
 
 
 
 
 
 
$ 0.1955 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income Per Limited Partner Unit (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Earnings Per Share, Basic and Diluted [Abstract]
 
 
Net income allocable to common units - basic and diluted
$ 23,363 
$ 7,824 
Net income allocable to subordinated units - basic and diluted
17,705 
7,824 
Limited partner interest in net income - basic and diluted
41,068 
15,648 
Net income
42,918 
32,327 
Less: Pre-Water Acquisition net income attributed to parent
 
(16,679)
Less: General partner interest in net income attributable to incentive distribution rights
(1,850)
 
Limited partners' interest in net income
$ 41,068 
$ 15,648 
Weighted average units outstanding:
 
 
Common units - basic
100,213 
75,941 
Subordinated units - basic
75,941 
75,941 
Common units diluted
100,219 
75,942 
Subordinated units - diluted
75,941 
75,941 
Net income attributable to Antero Midstream Partners LP subsequent to IPO
 
 
Common units - basic
$ 0.23 
$ 0.10 
Subordinated units - basic
$ 0.23 
$ 0.10 
Common units - diluted
$ 0.23 
$ 0.10 
Subordinated units - diluted
$ 0.23 
$ 0.10 
Restricted and phantom unit award
 
 
Weighted average units outstanding:
 
 
Weighted average units outstanding - diluted
5,380 
 
Antidilutive securities excluded from computation of earnings per share
1,643,955 
 
Common units
 
 
Weighted average units outstanding:
 
 
Weighted average units outstanding - diluted
100,218,579 
 
Fair Value Measurement (Details) (USD $)
3 Months Ended 0 Months Ended 0 Months Ended
Mar. 31, 2016
Recurring Member
Level 3
Sep. 17, 2015
Contribution Agreement
Contingent Consideration Period One
bbl
Sep. 17, 2015
Contribution Agreement
Contingent Consideration Period One
Sep. 17, 2015
Contribution Agreement
Contingent Consideration Period Two
bbl
Sep. 17, 2015
Contribution Agreement
Contingent Consideration Period Two
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
 
 
 
Contingent consideration
 
 
$ 125,000,000 
 
$ 125,000,000 
Threshold number of barrels of water to trigger contingent consideration payment
 
176,295,000 
 
219,200,000 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
 
Beginning balance
178,049,000 
 
 
 
 
Accretion
3,396,000 
 
 
 
 
Ending balance
$ 181,445,000 
 
 
 
 
Reporting Segments (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2016
segment
Mar. 31, 2015
Dec. 31, 2015
Reporting Segments
 
 
 
Number of reportable segments
 
 
Revenues:
 
 
 
Revenue - Antero
$ 135,555 
$ 85,684 
 
Revenue – third party
275 
151 
 
Total revenues
135,830 
85,835 
 
Operating expenses:
 
 
 
Direct operating
49,141 
19,301 
 
General and administrative expense (before equity-based compensation)
7,119 
6,140 
 
Equity-based compensation expense
5,972 
5,779 
 
Depreciation
23,823 
20,702 
 
Contingent acquisition consideration accretion
3,396 
 
 
Total operating expenses
89,451 
51,922 
 
Operating income
46,379 
33,913 
 
Total assets
2,027,446 
1,814,830 
1,980,032 
Additions to property and equipment
85,722 
107,052 
 
Gathering And Compression
 
 
 
Revenues:
 
 
 
Revenue - Antero
69,116 
52,243 
 
Revenue – third party
275 
 
 
Total revenues
69,391 
52,243 
 
Operating expenses:
 
 
 
Direct operating
7,619 
11,689 
 
General and administrative expense (before equity-based compensation)
4,949 
4,878 
 
Equity-based compensation expense
4,386 
4,623 
 
Depreciation
16,861 
14,582 
 
Total operating expenses
33,815 
35,772 
 
Operating income
35,576 
16,471 
 
Total assets
1,503,098 
1,394,349 
 
Additions to property and equipment
48,686 
85,737 
 
Water Handling and Treatment
 
 
 
Reporting Segments
 
 
 
Number of independent fresh water systems
 
 
Revenues:
 
 
 
Revenue - Antero
66,439 
33,441 
 
Revenue – third party
 
151 
 
Total revenues
66,439 
33,592 
 
Operating expenses:
 
 
 
Direct operating
41,522 
7,612 
 
General and administrative expense (before equity-based compensation)
2,170 
1,262 
 
Equity-based compensation expense
1,586 
1,156 
 
Depreciation
6,962 
6,120 
 
Contingent acquisition consideration accretion
3,396 
 
 
Total operating expenses
55,636 
16,150 
 
Operating income
10,803 
17,442 
 
Total assets
524,348 
420,481 
 
Additions to property and equipment
$ 37,036 
$ 21,315