Summary of Significant Accounting Policies
|12 Months Ended|
Dec. 31, 2018
|Summary of Significant Accounting Policies|
|Summary of Significant Accounting Policies||
(2) Summary of Significant Accounting Policies
(a)Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, the accompanying consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly AMGP’s financial position as of December 31, 2017 and 2018, and AMGP’s results of operations and cash flows for the years ended December 31, 2016, 2017 and 2018. AMGP has no items of other comprehensive income; therefore, AMGP’s net income is identical to its comprehensive income.
As of the date these consolidated financial statements were filed with the SEC, AMGP completed its evaluation of potential subsequent events for disclosure and no items requiring disclosure were identified other than as disclosed in Note 7—Cash Distributions.
(b)Principles of Consolidation
The consolidated financial statements include the accounts of AMGP, AMP GP (its wholly-owned subsidiary), and IDR LLC.
(c) Investment in Antero Midstream
AMGP has determined that Antero Midstream is a variable interest entity (“VIE”) for which AMGP is not the primary beneficiary and therefore does not consolidate. AMGP concluded that Antero Resources is the primary beneficiary of Antero Midstream and should consolidate its financial results. Antero Resources is the primary beneficiary based on its power to direct the activities that most significantly impact Antero Midstream’s economic performance and its obligations to absorb losses or receive benefits of Antero Midstream that could be significant to Antero Midstream. Antero Resources owns approximately 52.8% of the outstanding limited partner interests in Antero Midstream and its officers and management group also act as management of Antero Midstream. Antero Midstream was formed to own, operate and develop midstream energy assets to service Antero Resources’ production under long-term contracts as described herein. AMGP does not own any limited partnership interests in Antero Midstream and have no capital interests in Antero Midstream. AMGP has not provided, and does not anticipate providing, financial support to Antero Midstream.
AMGP’s ownership of the non-economic general partner interest in Antero Midstream provides AMGP with significant influence over Antero Midstream, but not control over the decisions that most significantly impact the economic performance of Antero Midstream. AMGP’s indirect ownership of the IDRs of Antero Midstream entitles AMGP to receive cash distributions from Antero Midstream when distributions exceed certain target amounts. AMGP’s ownership of these interests does not require AMGP to provide financial support to Antero Midstream. AMGP obtained these interests upon its formation for no consideration. Therefore, they have no cost basis and are classified as long term investments. AMGP’s share of Antero Midstream’s earnings as a result of AMGP’s ownership of the IDRs is accounted for using the equity method of accounting. AMGP recognizes distributions earned from Antero Midstream as “Equity in earnings of Antero Midstream Partners LP” on its statement of operations in the period in which they are earned and are allocated to AMGP’s capital account. AMGP’s long-term interest in the IDRs on the balance sheet is recorded in “Investment in Antero Midstream Partners LP.” The ownership of the general partner interests and IDRs do not provide AMGP with any claim to the assets of Antero Midstream other than the balance in its Antero Midstream capital account. Income related to the IDRs is recognized as earned and increases AMGP’s capital account and equity investment. When these distributions are paid to AMGP, they reduce its capital account and its equity investment in Antero Midstream. See Note 6—Distributions from Antero Midstream.
(d)Use of Estimates
The preparation of the consolidated financial statements and notes in conformity with GAAP requires that management formulate estimates and assumptions that affect income, expenses, assets, and liabilities. Changes in facts and circumstances or discovery of new information may result in revised estimates, and actual results could differ from those estimates.
(e) Income Taxes
AMGP is a Delaware limited partnership that is taxed as a corporation for U.S. federal income tax purposes. AMGP recognizes deferred tax assets and liabilities for temporary differences resulting from net operating loss carryforwards for income tax purposes and the differences between the financial statement and tax basis of assets and liabilities. The effect of changes in tax laws or tax rates is recognized in income during the period such changes are enacted. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. AMGP regularly reviews its tax positions in each significant taxing jurisdiction during the process of evaluating its tax provision. AMGP makes adjustments to its tax provision when: (i) facts and circumstances regarding a tax position change, causing a change in management’s judgment regarding that tax position; and/or (ii) a tax position is effectively settled with a tax authority at a differing amount.
(f) General and Administrative Expenses
General and administrative costs incurred during 2016 and pre-IPO in 2017 primarily relate to legal and other costs incurred in connection with AMGP’s IPO. Post-IPO general and administrative expense consists primarily of management fees paid to Antero Resources, and other legal and administrative expenses. Additionally, in connection with the formation of a conflicts committee of the board of directors of the Partnership’s general partner to consider potential transactions involving us in connection with Antero Resources’ and Antero Midstream’s efforts to explore, review, and evaluate potential measures related to its valuation, the conflicts committee retained an investment advisor and attorneys. Attorneys’ fees related to this matter are charged to expense as incurred. For the year ended December 31, 2018, the AMGP has expensed $6.9 million related to conflicts committee expenses.
AMGP recognizes compensation cost related to all equity-based awards in the financial statements based on their estimated grant date fair value. AMGP has authorized and outstanding Series B Units and AMGP is authorized to grant common share awards. The grant date fair values are determined based on the type of award and may utilize market prices on the date of grant or a Monte Carlo simulation, as appropriate for the type of equity-based award. Compensation cost is recognized ratably over the applicable vesting or service period. Forfeitures are accounted for as they occur by reversing the expense previously recognized for awards that were forfeited during the period. See Note 5—Long-Term Incentive Plans for additional information regarding our equity-based compensation.
(h)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 AMGP estimates 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. AMGP’s 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, which are observable for the asset or liability, either directly or indirectly.
(i)Net Income per Common Share
Net income per common share–basic for each period is computed by dividing net income attributable to common shareholders by the basic weighted average number of common shares outstanding during the period. Net income per common share – diluted for each period is computed after giving consideration to the potential dilution from outstanding Series B units, calculated using the if converted method. During the periods in which AMGP incurs a net loss, diluted weighted average shares outstanding are equal to basic weighted average common shares outstanding because the effect of all equity awards is anti-dilutive.
At December 31, 2017 and 2018, there were 4,777,759 and 1,365,525 shares, respectively, to be issued upon assumed conversion of the Series B Units. The effect of these awards is anti-dilutive for 2017 and 2018, and thus, AMGP’s diluted net income per common share for the years ended December 31, 2017 and 2018 is equal to our basic net income per common share.
(j)Recently Adopted Accounting Standard
On June 20, 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for employee and nonemployee share-based payments. AMGP elected to adopt the standard as of October 1, 2018. As a result of adopting this standard, AMGP reclassified its $3.0 million liability for equity-based compensation to partners’ capital as of as of October 1, 2018. See Note 5—Long-Term Incentive Plans.
The entire disclosure for all significant accounting policies of the reporting entity.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef