UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (IRS Employer Identification No.) | |
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act: | ||||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ⌧
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ⌧
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated Filer ◻ | ||
Non-accelerated Filer ◻ | Smaller Reporting Company | |
Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
The registrant had
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | |||
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1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. Words such as “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential,” or “continue,” and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. When considering these forward-looking statements, investors should keep in mind the risk factors and other cautionary statements in this Quarterly Report on Form 10-Q. These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:
● | Antero Resources Corporation’s (“Antero Resources”) expected production and development plan; |
● | impacts to producer customers of insufficient storage capacity; |
● | our ability to execute our business strategy; |
● | our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness; |
● | our ability to realize the anticipated benefits of our investments in unconsolidated affiliates; |
● | natural gas, natural gas liquids (“NGLs”), and oil prices; |
● | impacts of world health events, including the coronavirus (“COVID-19”) pandemic; |
● | our ability to complete the construction of or purchase new gathering and compression, processing, water handling or other assets on schedule, at the budgeted cost or at all, and the ability of such assets to operate as designed or at expected levels; |
● | our ability to execute our share repurchase program; |
● | competition and government regulations; |
● | actions taken by third-party producers, operators, processors and transporters; |
● | pending legal or environmental matters; |
● | costs of conducting our operations; |
● | general economic conditions; |
● | credit markets; |
● | operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; |
● | uncertainty regarding our future operating results; and |
● | our other plans, objectives, expectations and intentions contained in this Quarterly Report on Form 10-Q. |
We caution investors that these forward-looking statements are subject to all of the risks and uncertainties incidental to our business, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, environmental risks, Antero Resources’ drilling and completion and other operating risks,
2
regulatory changes, the uncertainty inherent in projecting Antero Resources’ future rates of production, cash flows and access to capital, the timing of development expenditures, impacts of world health events, including the COVID-19 pandemic and the other risks described or referenced under the heading “1A. Risk Factors” herein, including the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), which is on file with the Securities and Exchange Commission (“SEC”).
Should one or more of the risks or uncertainties described or referenced in this Quarterly Report on Form 10-Q occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.
All forward-looking statements, expressed or implied, included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.
Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.
3
PART I—FINANCIAL INFORMATION
ANTERO MIDSTREAM CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited) | |||||||
December 31, | March 31, | ||||||
| 2020 |
| 2021 |
| |||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | | | ||||
Accounts receivable–Antero Resources | | | |||||
Accounts receivable–third party | | | |||||
Income tax receivable | | | |||||
Other current assets | | | |||||
Total current assets | | | |||||
Property and equipment, net | | | |||||
Investments in unconsolidated affiliates | | | |||||
Deferred tax asset | | | |||||
Customer relationships | | | |||||
Other assets, net | | | |||||
Total assets | $ | | | ||||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable–Antero Resources | $ | | | ||||
Accounts payable–third party | | | |||||
Accrued liabilities | | | |||||
Other current liabilities | | | |||||
Total current liabilities | | | |||||
Long-term liabilities: | |||||||
Long-term debt | | | |||||
Other | | | |||||
Total liabilities | | | |||||
Stockholders' Equity: | |||||||
Preferred stock, $ | |||||||
Series A non-voting perpetual preferred stock; | |||||||
Common stock, $ | | | |||||
Additional paid-in capital | | | |||||
Accumulated deficit | ( | ( | |||||
Total stockholders' equity | | | |||||
Total liabilities and stockholders' equity | $ | | |
See accompanying notes to unaudited condensed consolidated financial statements.
4
ANTERO MIDSTREAM CORPORATION
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended March 31, | |||||||
| 2020 |
| 2021 |
| |||
Revenue: |
|
| |||||
Gathering and compression–Antero Resources | $ | | | ||||
Water handling–Antero Resources | | | |||||
Water handling–third party | — | | |||||
Amortization of customer relationships | ( | ( | |||||
Total revenue | | | |||||
Operating expenses: | |||||||
Direct operating | | | |||||
General and administrative (including $ | | | |||||
Facility idling | | | |||||
Impairment of goodwill | | — | |||||
Impairment of property and equipment | | | |||||
Depreciation | | | |||||
Accretion of asset retirement obligations | | | |||||
Loss on asset sale | — | | |||||
Total operating expenses | | | |||||
Operating income (loss) | ( | | |||||
Interest expense, net | ( | ( | |||||
Equity in earnings of unconsolidated affiliates | | | |||||
Income (loss) before income taxes | ( | | |||||
Provision for income tax benefit (expense) | | ( | |||||
Net income (loss) and comprehensive income (loss) | $ | ( | | ||||
Net income (loss) per share–basic | $ | ( | | ||||
Net income (loss) per share–diluted | $ | ( | | ||||
Weighted average common shares outstanding: | |||||||
Basic | | | |||||
Diluted | | |
See accompanying notes to unaudited condensed consolidated financial statements.
5
ANTERO MIDSTREAM CORPORATION
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands)
Additional | |||||||||||||||||||
Preferred | Common Stock | Paid-In | Accumulated | Total | |||||||||||||||
Stock | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||
Balance at December 31, 2019 |
| $ | — |
| |
| $ | |
| |
| ( |
| | |||||
Dividends to stockholders | — | — | — | ( | — | ( | |||||||||||||
Equity-based compensation | — | — | — | | — | | |||||||||||||
Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes | — | | — | ( | — | ( | |||||||||||||
Repurchases and retirement of common stock | — | ( | ( | ( | — | ( | |||||||||||||
Net loss and comprehensive loss | — | — | — | — | ( | ( | |||||||||||||
Balance at March 31, 2020 | $ | — | | $ | | | ( | | |||||||||||
Balance at December 31, 2020 |
| $ | — | |
| $ | |
| |
| ( |
| | ||||||
Dividends to stockholders | — | — | — | ( | — | ( | |||||||||||||
Equity-based compensation | — | — | — | | — | | |||||||||||||
Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes | — | | | ( | — | ( | |||||||||||||
Net income and comprehensive income | — | — | — | — | | | |||||||||||||
Balance at March 31, 2021 | $ | — | | $ | | | ( | |
See accompanying notes to unaudited condensed consolidated financial statements.
6
ANTERO MIDSTREAM CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended March 31, | |||||||
| 2020 |
| 2021 |
| |||
Cash flows provided by (used in) operating activities: |
|
|
| ||||
Net income (loss) | $ | ( | | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation | | | |||||
Payment of contingent consideration in excess of acquisition date fair value | ( | — | |||||
Accretion of asset retirement obligations | | | |||||
Impairment | | | |||||
Deferred income tax expense (benefit) | ( | | |||||
Equity-based compensation | | | |||||
Equity in earnings of unconsolidated affiliates | ( | ( | |||||
Distributions from unconsolidated affiliates | | | |||||
Amortization of customer relationships | | | |||||
Amortization of deferred financing costs | | | |||||
Settlement of asset retirement obligations | — | ( | |||||
Loss on asset sale | — | | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable–Antero Resources | | ( | |||||
Accounts receivable–third party | | | |||||
Income tax receivable | ( | | |||||
Other current assets | | | |||||
Accounts payable–Antero Resources | ( | ( | |||||
Accounts payable–third party | | | |||||
Accrued liabilities | ( | ( | |||||
Net cash provided by operating activities | | | |||||
Cash flows provided by (used in) investing activities: | |||||||
Additions to gathering systems and facilities | ( | ( | |||||
Additions to water handling systems | ( | ( | |||||
Investments in unconsolidated affiliates | ( | ( | |||||
Cash received in asset sale | — | | |||||
Change in other assets | | — | |||||
Net cash used in investing activities | ( | ( | |||||
Cash flows provided by (used in) financing activities: | |||||||
Dividends to stockholders | ( | ( | |||||
Dividends to preferred stockholders | ( | ( | |||||
Repurchases of common stock | ( | — | |||||
Payments of deferred financing costs | — | ( | |||||
Borrowings on bank credit facilities, net | | | |||||
Payment of contingent acquisition consideration | ( | — | |||||
Employee tax withholding for settlement of equity compensation awards | ( | ( | |||||
Other | ( | ( | |||||
Net cash used in financing activities | ( | ( | |||||
Net decrease in cash and cash equivalents | ( | ( | |||||
Cash and cash equivalents, beginning of period | | | |||||
Cash and cash equivalents, end of period | $ | — | | ||||
Supplemental disclosure of cash flow information: | |||||||
Cash paid during the period for interest | $ | | | ||||
Cash received during the period for income taxes | $ | — | | ||||
Increase in accrued capital expenditures and accounts payable for property and equipment | $ | | |
See accompanying notes to unaudited condensed consolidated financial statements.
7
ANTERO MIDSTREAM CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
(1) Organization
Antero Midstream Corporation (together with its consolidated subsidiaries, “Antero Midstream,” “AM” or the “Company”) is a growth-oriented midstream company formed to own, operate and develop midstream energy infrastructure primarily to service Antero Resources Corporation (“Antero Resources”) and its production and completion activity in the Appalachian Basin’s Marcellus Shale and Utica Shale located in West Virginia and Ohio. The Company’s assets consist of gathering pipelines, compressor stations, interests in processing and fractionation plants and water handling assets. Antero Midstream provides midstream services to Antero Resources under long-term contracts. The Company’s corporate headquarters are located in Denver, Colorado.
(2) Summary of Significant Accounting Policies
(a) | Basis of Presentation |
These unaudited condensed 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 Company’s December 31, 2020 consolidated financial statements and notes thereto for a more complete understanding of the Company’s operations, financial position, and accounting policies. The Company’s December 31, 2020 consolidated financial statements were included in the Company’s 2020 Annual Report on Form 10-K, which was filed with the SEC.
These unaudited condensed consolidated financial statements of the Company 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 unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Company’s financial position as of December 31, 2020 and March 31, 2021, and the results of the Company’s operations and cash flows for the three months ended March 31, 2020 and 2021. The Company has no items of other comprehensive income (loss); therefore, net income (loss) is equal to comprehensive income (loss).
Certain costs of doing business incurred and charged to the Company by Antero Resources have been reflected in the accompanying unaudited condensed consolidated financial statements. These costs include general and administrative expenses provided to the Company by Antero Resources 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 the Company and Antero Resources have been identified in the unaudited condensed consolidated financial statements (see Note 4—Transactions with Affiliates).
(b) | Principles of Consolidation |
The accompanying unaudited condensed consolidated financial statements include the accounts of Antero Midstream Corporation and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated in the Company’s unaudited condensed consolidated financial statements.
(c) | Immaterial Correction of Prior Period Financial Statements |
The Company identified that it incorrectly classified the cash flows related to the contingent acquisition consideration paid in the first quarter of 2020, and the amounts previously reflected in the Company’s net cash provided by operating activities and cash used in financing activities were incorrect. The error had no impact to total net change in cash or to the Company’s condensed consolidated balance sheets or condensed consolidated statements of operations and comprehensive income (loss). The Company
8
ANTERO MIDSTREAM CORPORATION
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
corrected the presentation for the three months ended March 31, 2020 in the accompanying condensed consolidated statements of cash flows.
(d) | Recently Adopted Accounting Standard |
In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Simplifying the Accounting for Income Taxes. This ASU removes certain exceptions to the general principles in Accounting Standard Codifications Topic 740, Income Taxes (“ASC 740”), and also simplifies portions of ASC 740 by clarifying and amending existing guidance. It is effective for interim and annual reporting periods after December 15, 2020. The Company adopted this ASU on January 1, 2021, and it did not have a material impact on the Company's consolidated financial statements.
(3) Goodwill and Intangibles
The Company evaluates goodwill for impairment annually during the fourth quarter and whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit with goodwill is less than its carrying amount. Significant assumptions used to estimate the reporting units’ fair value include the discount rate as well as estimates of future cash flows, which are impacted primarily by commodity prices and producer customers’ development plans (which impact volumes and capital requirements).
During the first quarter of 2020, the Company performed an interim impairment analysis of the goodwill due to changes in Antero Resources’ drilling plans as a result of the decline in commodity prices. As a result of this evaluation, the Company impaired all remaining goodwill of $
All customer relationships are subject to amortization and are amortized over a weighted-average period of
Customer relationships as of December 31, 2020 | $ | | ||
Amortization of customer relationships | ( | |||
Customer relationships as of March 31, 2021 | $ | |
Future amortization expense is as follows (in thousands):
Remainder of year ending December 31, 2021 | $ | | ||
Year ending December 31, 2022 | | |||
Year ending December 31, 2023 | | |||
Year ending December 31, 2024 | | |||
Year ending December 31, 2025 | | |||
Thereafter | | |||
Total | $ | |
(4) Transactions with Affiliates
(a) | Revenues |
Substantially all revenues earned in the three months ended March 31, 2020 and 2021 were earned from Antero Resources, under various agreements for gathering and compression and water handling services. Revenues earned from gathering and processing services consists of lease income.
9
ANTERO MIDSTREAM CORPORATION
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(b) | Accounts receivable—Antero Resources and Accounts payable—Antero Resources |
Accounts receivable—Antero Resources represents amounts due from Antero Resources, primarily related to gathering and compression services and water handling services. Accounts payable—Antero Resources represents amounts due to Antero Resources for general and administrative and other costs.
(c) | Allocation of Costs Charged by Antero Resources |
The employees supporting the Company’s operations are concurrently employed by Antero Resources and the Company. Direct operating expense includes costs charged to the Company of $
(5) Revenue
(a) | Revenue from Contracts with Customers |
All of the Company’s revenues are currently derived from service contracts with customers and are recognized when the Company satisfies a performance obligation by delivering a service to a customer. The Company derives substantially all of its revenues from Antero Resources. The following sets forth the nature, timing of satisfaction of performance obligations and significant payment terms of the Company’s contracts with Antero Resources.
Gathering and Compression Agreement
Pursuant to the gathering and compression agreement with Antero Resources, Antero Resources has dedicated substantially all of its current and future acreage in West Virginia, Ohio and Pennsylvania to the Company for gathering and compression services except for acreage subject to third-party commitments or pre-existing dedications. The Company also has an option to gather and compress natural gas produced by Antero Resources on any additional acreage it acquires during the term of the agreement outside of West Virginia, Ohio and Pennsylvania on the same terms and conditions. In December 2019, the Company and Antero Resources agreed to extend the initial term of the gathering and compression agreement to 2038 and established a growth incentive fee program whereby low pressure gathering fees will be reduced from 2020 through 2023 to the extent Antero Resources achieves certain quarterly volumetric targets during such time. Antero Resources achieved the first level volumetric target for the three months ended March 31, 2020 and earned a rebate of $
Under the gathering and compression agreement, the Company receives a low pressure gathering fee, a high pressure gathering fee and a compression fee, in each case subject to annual CPI-based adjustments. In addition, the agreement stipulates that the Company receives a reimbursement for the actual cost of electricity used at its compressor stations.
The Company determined that the gathering and compression agreement is an operating lease because Antero Resources obtains substantially all of the economic benefit of the asset and has the right to direct the use of the asset. The gathering system is an identifiable asset within the gathering and compression agreement, and it consists of underground low pressure pipelines that generally
10
ANTERO MIDSTREAM CORPORATION
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
connect and deliver gas from specific well pads to compressor stations to compress the gas before delivery to underground high pressure pipelines that transport the gas to a third-party pipeline or plant. The gathering system is considered a single lease due to the interrelated network of the assets. When a modification to the gathering and compression agreement occurs, the Company reassesses the classification of this lease. The Company accounts for its lease and non-lease components as a single lease component as the lease component is the predominant component. The non-lease components consist of operating, oversight and maintenance of the gathering system, which are performed on time-elapsed measures. All lease payments under the future minimum volume commitments discussed below are considered to be in-substance fixed lease payments under the gathering and compression agreement.
The Company recognizes revenue when low pressure volumes are delivered to a compressor station, compression volumes are delivered to a high pressure line and high pressure volumes are delivered to a processing plant or transmission pipeline. The Company invoices the customer the month after each service is performed, and payment is due in the same month.
Water Services Agreement
The Company is party to a water services agreement with Antero Resources, whereby the Company provides certain water handling services to Antero Resources within an area of dedication in defined service areas in West Virginia and Ohio. Upon completion of the initial term in 2035, the water services agreement will continue in effect from year to year until such time as the agreement is terminated, effective upon an anniversary of the effective date of the agreement, by either the Company or Antero Resources on or before the
Under the water services agreement, the Company may also contract with third parties to provide water services to Antero Resources. Antero Resources reimburses the Company for third-party out-of-pocket costs plus a
The Company satisfies its performance obligations and recognizes revenue when the fresh water volumes have been delivered to the hydration unit of a specified well pad or when flowback and produced water blending services have been completed. The Company invoices the customer the month after water services are performed, and payment is due in the same month. For services contracted through third-party providers, the Company’s performance obligation is satisfied when the service to be performed by the third-party provider has been completed. The Company invoices the customer after the third-party provider billing is received, and payment is due in the same month.
Minimum Volume Commitments
The gathering and compression agreement includes certain minimum volume commitment provisions. If and to the extent Antero Resources requests that the Company construct new high pressure lines and compressor stations, the gathering and compression agreement contains options at the Company’s election for either (i) minimum volume commitments that require Antero Resources to utilize or pay for
11
ANTERO MIDSTREAM CORPORATION
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
Minimum revenue amounts under the gathering and compression minimum volume commitments as of March 31, 2021 are as follows (in thousands):
Remainder of year ending December 31, 2021 | $ | 170,459 | ||
Year ending December 31, 2022 | | |||
Year ending December 31, 2023 | | |||
Year ending December 31, 2024 | | |||
Year ending December 31, 2025 | | |||
Thereafter | | |||
Total | $ | |
(b) | Disaggregation of Revenue |
In the following table, revenue is disaggregated by type of service and type of fee and is identified by the reportable segment to which such revenues relate. For more information on reportable segments, see Note 14—Reportable Segments.
Three Months Ended March 31, | |||||||||
(in thousands) | 2020 | 2021 |
| Reportable segment |
| ||||
Revenue from contracts with customers |
|
| |||||||
Type of service | |||||||||
Gathering—low pressure | $ | | | Gathering and Processing (1) | |||||
Gathering—low pressure rebate | ( | — | Gathering and Processing (1) | ||||||
Gathering—high pressure | | | Gathering and Processing (1) | ||||||
Compression | | | Gathering and Processing (1) | ||||||
Fresh water delivery | | | Water Handling | ||||||
Other fluid handling | | | Water Handling | ||||||
Amortization of customer relationships | ( | ( | Gathering and Processing | ||||||
Amortization of customer relationships | ( | ( | Water Handling | ||||||
Total | $ | | | ||||||
Type of contract | |||||||||
Per Unit Fixed Fee | $ | | | Gathering and Processing (1) | |||||
Gathering—low pressure rebate | ( | — | Gathering and Processing (1) | ||||||
Per Unit Fixed Fee | | | Water Handling | ||||||
Cost plus | | | Water Handling | ||||||
Cost of service fee | | | Water Handling | ||||||
Amortization of customer relationships | ( | ( | Gathering and Processing | ||||||
Amortization of customer relationships | ( | ( | Water Handling | ||||||
Total | $ | | |
(1) | Revenue related to the gathering and processing segment is classified as lease income related to the gathering system. |
(c) | Transaction Price Allocated to Remaining Performance Obligations |
The majority of the Company’s service contracts have a term greater than one year. As such, the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under the Company’s service contracts, each unit of product delivered to the customer represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.
12
ANTERO MIDSTREAM CORPORATION
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
The remainder of the Company’s service contracts, which relate to contracts with third parties, are short-term in nature with a contract term of one year or less. Accordingly, the Company is exempt from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of
(d) | Contract Balances |
Under the Company’s service contracts, the Company invoices customers after its performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s service contracts do not give rise to contract assets or liabilities. At December 31, 2020 and March 31, 2021, the Company’s receivables with customers were $
(6) Property and Equipment
The Company’s investment in property and equipment for the periods presented is as follows:
(Unaudited) | |||||||||
Estimated | December 31, | March 31, | |||||||
(in thousands) |
| useful lives |
| 2020 | 2021 |
| |||
Land |
| n/a |
| $ | |
| | ||
Gathering systems and facilities | | | |||||||
Permanent buried pipelines and equipment | | | |||||||
Surface pipelines and equipment | | | |||||||
Heavy trucks and equipment | | | |||||||
Above ground storage tanks | | | |||||||
Construction-in-progress | n/a |
| | | |||||
Total property and equipment | | | |||||||
Less accumulated depreciation | ( | ( | |||||||
Property and equipment, net | $ | | |
(1) | Gathering systems and facilities are recognized as a single-leased asset with |
Due to the decline in the industry environment as a result of low commodity prices, the Company evaluated its assets for impairment during the first quarter of 2020. As a result of this evaluation, the Company recorded an impairment expense of $
Additionally, the Company incurred $
13
ANTERO MIDSTREAM CORPORATION
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(7) Long-Term Debt
The Company’s long-term debt as of December 31, 2020 and March 31, 2021 was as follows:
(Unaudited) | |||||||
December 31, | March 31, | ||||||
(in thousands) | 2020 | 2021 | |||||
Credit Facility (a) |
| $ | |
| | ||
| | ||||||
| | ||||||
| | ||||||
| | ||||||
Total principal | | | |||||
Unamortized debt premiums | | | |||||
Unamortized debt issuance costs | ( | ( | |||||
Total long-term debt | $ | | |
(a) | Credit Facility |
Antero Midstream Partners LP (“Antero Midstream Partners”), an indirect, wholly owned subsidiary of Antero Midstream Corporation, as borrower (the “Borrower”), has a senior secured revolving credit facility (the “Credit Facility”) with a consortium of banks. Lender commitments under the Credit Facility are currently $
The Credit Facility contains certain covenants including restrictions on indebtedness, and requirements with respect to leverage and interest coverage ratios. The Credit Facility permits distributions to the holders of the Borrower’s equity interests in accordance with the cash distribution policy previously adopted by the board of directors of the general partner of the Borrower, provided that no event of default exists or would be caused thereby, and only to the extent permitted by the Company’s organizational documents. The Borrower was in compliance with all of the financial covenants under the Credit Facility as of December 31, 2020 and March 31, 2021.
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 six months. Interest is payable at a variable rate based on LIBOR or the base rate, determined by election at the time of borrowing, plus an applicable margin rate. Interest at the time of borrowing is determined with reference to the Borrower’s then-current leverage ratio subject to certain exceptions. Commitment fees on the unused portion of the Credit Facility are due quarterly at rates ranging from
(b) |
On September 13, 2016, Antero Midstream Partners and its wholly owned subsidiary, Antero Midstream Finance Corporation (“Finance Corp,” and together with Antero Midstream Partners, the “Issuers”), issued $
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ANTERO MIDSTREAM CORPORATION
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
year. Antero Midstream Partners may redeem all or part of the 2024 Notes at any time at redemption prices ranging from
(c) |
On November 10, 2020, the Issuers issued $
(d) |
On February 25, 2019, the Issuers issued $
(e) |
On June 28, 2019, the Issuers issued $
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ANTERO MIDSTREAM CORPORATION
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
amount of the 2028 Notes, plus accrued and unpaid interest. At any time prior to January 15, 2023, Antero Midstream Partners may also redeem the 2028 Notes, in whole or in part, at a price equal to
(f) | Senior Notes Guarantors |
The Company and each of the Company’s wholly owned subsidiaries (except for the Issuers) have fully and unconditionally guaranteed the 2024 Notes, 2026 Notes, 2027 Notes and 2028 Notes (collectively the “Senior Notes”). In the event a guarantor is sold or disposed of (whether by merger, consolidation, the sale of a sufficient amount of its capital stock so that it no longer qualifies as a Restricted Subsidiary (as defined in the applicable indenture governing the series of Senior Notes) of the Issuer or the sale of all or substantially all of its assets) and whether or not the guarantor is the surviving entity in such transaction to a person that is not an Issuer or a Restricted Subsidiary of an Issuer, such guarantor will be released from its obligations under its guarantee if the sale or other disposition does not violate the covenants set forth in the indentures governing the applicable Senior Notes.
In addition, a guarantor will be released from its obligations under the applicable indenture and its guarantee, upon the release or discharge of the guarantee of other indebtedness under a credit facility that resulted in the creation of such guarantee, except a release or discharge by or as a result of payment under such guarantee; if the Issuers designate such subsidiary as an unrestricted subsidiary and such designation complies with the other applicable provisions of the indenture governing the applicable Senior Notes or in connection with any covenant defeasance, legal defeasance or satisfaction and discharge of the applicable Senior Notes.
During the three months ended March 31, 2020 and 2021, all of the Company’s assets and operations are attributable to the Issuers and its guarantors.
(8) Accrued Liabilities
Accrued liabilities as of December 31, 2020 and March 31, 2021 consisted of the following items:
(Unaudited) | |||||||
December 31, | March 31, | ||||||
(in thousands) |
| 2020 |
| 2021 |
| ||
Capital expenditures | $ | | | ||||
Operating expenses | | | |||||
Interest expense | | | |||||
Production taxes | | | |||||
Other | | | |||||
Total accrued liabilities | $ | | |
(9) Equity-Based Compensation and Cash Awards
(a) | Summary of Equity-Based Compensation |
The Company’s equity-based compensation includes (i) costs allocated to Antero Midstream by Antero Resources for grants made prior to March 12, 2019 pursuant to the Antero Resources Corporation Long-Term Incentive Plan (the “AR LTIP”) and (ii) costs related to the Antero Midstream Corporation Long-Term Incentive Plan (the “AM LTIP”). Antero Midstream’s equity-based compensation expense is included in general and administrative expenses, and recorded as a credit to the applicable classes of equity. Equity-based compensation expense allocated to the Company from Antero Resources was $
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ANTERO MIDSTREAM CORPORATION
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
to it for awards issued under the AR LTIP or the Antero Resources Corporation 2020 Long-Term Incentive Plan following March 12, 2019.
AM LTIP
The Company is authorized to grant up to
(b) | Restricted Stock Unit Awards |
A summary of the RSU awards activity during the three months ended March 31, 2021 is as follows:
Weighted | ||||||
Average | ||||||
Number | Grant Date | |||||
| of Units |
| Fair Value |
| ||
Total AM LTIP RSUs awarded and unvested—December 31, 2020 | | $ | | |||
Granted | — | — | ||||
Vested | ( | | ||||
Forfeited | ( | | ||||
Total AM LTIP RSUs awarded and unvested—March 31, 2021 | | $ | | |||
As of March 31, 2021, unamortized expense of $
(c) | Performance Share Unit Awards |
Performance Share Unit Awards Based on Return on Invested Capital
The likelihood of achieving the performance conditions related to return on invested capital for the PSU awards outstanding was probable for the three months ended March 31, 2020 and 2021, and, therefore, the Company recognized expense of $
(d) | Cash Awards |
In January 2020, the Company granted cash awards of $
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ANTERO MIDSTREAM CORPORATION
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(10) Cash Dividends
The following table details the amount of distributions and dividends paid with respect to the quarter indicated (in thousands, except per share data):
Dividends |
| ||||||||||
Period |
| Record Date |
| Dividend Date |
| Dividends |
| per Share | |||
Q4 2019 | January 31, 2020 | February 12, 2020 | $ | | $ | ||||||
* | February 14, 2020 | February 14, 2020 | | * | |||||||
Q1 2020 | April 30, 2020 | May 12, 2020 | | ||||||||
* | May 15, 2020 | May 15, 2020 | | * | |||||||
Q2 2020 | July 30, 2020 | August 12, 2020 | | ||||||||
* | August 14, 2020 | August 14, 2020 | | * | |||||||
Q3 2020 | October 29, 2020 | November 12, 2020 | | ||||||||
* | November 16, 2020 | November 16, 2020 | | * | |||||||
Total 2020 | $ | | |||||||||
Q4 2020 | February 3, 2021 | February 11, 2021 | $ | | $ | ||||||
* | February 16, 2021 | February 16, 2021 | | * | |||||||
Total 2021 | $ | |
* | Dividends are paid in accordance with the terms of the Series A Preferred Stock (as defined below) as discussed in Note 11—Equity and Earnings Per Common Share. |
On April 14, 2021, the Board announced the declaration of a cash dividend on the shares of AM common stock of $
The Board also declared a cash dividend of $
(11) Equity and Earnings Per Common Share
(a) | Preferred Stock |
The Board authorized