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PartnersCapitalAbstract

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20172022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For thethe transition period from                    to

Commission file number: 001‑38075001-38075

Graphic

ANTERO MIDSTREAM GP LPCORPORATION

(Exact name of registrant as specified in its charter)

Delaware

61‑174860561-1748605

(State or other jurisdiction of
incorporation or organization)

(IRS Employer Identification No.)

1615 Wynkoop Street
Denver, Colorado

80202

(Address of principal executive offices)

(Zip Code)

(303) 357‑7310(303357-7310

(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

Common Stock, par value $0.01

AM

New York Stock Exchange

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.  Yes   No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

Large accelerated filer ☐

Large Accelerated Filer

Accelerated filer Filer

Non-accelerated filer ☒Filer

Smaller reporting company Reporting Company

(Do not check if a smaller reporting company)Emerging Growth 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.

☒ Yes ☐ No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑212b-2 of the Exchange Act)  Yes   No

The registrant had 478,457,912 shares of common stock outstanding as of July 22, 2022.

As of October 26, 2017, there were 186,181,975 common shares representing limited partner interests outstanding.


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EXPLANATORY NOTE

Antero Midstream GP LP (“AMGP”) was originally formed as Antero Resources Midstream Management LLC (“ARMM”) in 2013, to become the general partner of Antero Midstream Partners LP (“Antero Midstream”), a master limited partnership that is publicly traded on the New York Stock Exchange (NYSE: AM). On May 4, 2017, ARMM converted from a Delaware limited liability company to a Delaware limited partnership and changed its name to Antero Midstream GP LP in connection with our initial public offering (“IPO”). Unless the context otherwise requires, references to “we” and “our” refer to: (i) for the period prior to May 4, 2017, ARMM, and (ii) beginning on May 4, 2017, AMGP. We are traded on the New York Stock Exchange (NYSE: AMGP). We own 100% of the membership interests of Antero Midstream Partners GP LLC (“AMP GP”), which owns the non-economic general partner interest in Antero Midstream, and we own all of the Series A capital interests in Antero IDR Holdings LLC (“IDR LLC”), which entity owns the incentive distribution rights (“IDRs”) in Antero Midstream. IDR distributions earned by us through May 9, 2017 were distributed to Antero Resources Investment LLC (“Antero Investment”), the sole member of ARMM for all periods prior to the IPO which was liquidated on October 31, 2017, net of any related liabilities including income taxes through that date and expenses of the IPO.


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TABLE OF CONTENTS

Page

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    

1

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSPART I—FINANCIAL INFORMATION

2

3

PART I—FINANCIAL INFORMATION

4

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

4

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

26

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

21

38

Item 4.

Controls and Procedures

22

39

PART II—OTHER INFORMATION

23

40

Item 1.

Legal Proceedings

23

40

Item 1A.

Risk Factors

23

40

Item 5.2.

Other InformationUnregistered Sales of Equity Securities and Use of Proceeds

23

41

Item 6.

Exhibits

24

42

SIGNATURES

25

43

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this reportQuarterly 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. Forward-looking statements give our current expectations, contain projections of results of operations or of financial condition, or forecasts of future events. 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. They can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, nostatements, although not all forward-looking statements can be guaranteed.contain such identifying words. When considering these forward-looking statements, youinvestors should keep in mind the risk factors and other cautionary statements in this report. Actual results may vary materially. YouQuarterly Report on Form 10-Q. These forward-looking statements are cautioned notbased on management’s current beliefs, based on currently available information, as to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factorsthe outcome and should not consider the following list to be a complete statement of all potential risks and uncertainties. We own the general partner of Antero Midstream Partners LP (NYSE: AM) (“Antero Midstream”) and all of the capital interests in the owner of the incentive distribution rights (“IDRs”) in Antero Midstream. Antero Midstream is a master limited partnership 53.0% owned by Antero Resources Corporation (NYSE: AR) (“Antero Resources”) that was formed to primarily service Antero Resources’ production and completion activity in the Appalachian Basin’s Marcellus Shale and Utica Shale located in West Virginia and Ohio. Because the IDRs are our sole source of revenues, all potential risks and uncertainties that affect the results of operations, financial condition, or forecaststiming of future events of either Antero Resources or Antero Midstream will also affect us.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 pay distributionsexecute our business strategy;
our ability to our common shareholders;

·

our expected receipt of,obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the amountsrepayment or refinancing of distributions from Antero Midstream and IDR LLC in respect of the IDRs;

indebtedness;

·

Antero Resources’ expected production and ability to execute its drilling and development plan;

·

our and Antero Midstream’s business strategies;

·

Antero Midstream’s ability to realize the anticipated benefits of investingour investments in unconsolidated affiliates;

·

natural gas, natural gas liquids (“NGLs”), and oil prices;

·

competitionimpacts of geopolitical events and government regulations;

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;
government regulations and changes in laws;
actions taken by third partythird-party producers, operators, processors and transporters;

·

pending legal or environmental matters;

·

costs of conducting gatheringour operations;

our ability to achieve our greenhouse gas reduction targets and compression operations;

the costs associated therewith;

·

general economic conditions;

·

credit markets;

·

operating hazards, natural disasters, weather relatedweather-related delays, casualty losses and other matters beyond our control;

·

uncertainty regarding Antero Midstream’sour future operating results; and

·

our other plans, objectives, expectations and intentions contained in this report that are not historical.

Quarterly Report on Form 10-Q.

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We caution youinvestors that these forward lookingforward-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 and Antero Midstream’s control, incident to Antero Midstream’s business.control. These risks include, but are not limited to, commodity price volatility, inflation, environmental risks, Antero Resources’ drilling and completion and other operating risks, regulatory changes or changes in law, the uncertainty inherent in projecting Antero Resources’ future rates of production, cash flowflows and access to capital, the timing of development expenditures, impacts of world health events (including the COVID-19 pandemic), cybersecurity risks, the state or markets for, and availability of, verified quality carbon offsets and the other risks described or referenced under “Riskthe heading “1A. Risk Factors” herein, including the risk factors set forth in this Quarterlyour Annual Report on Form 10-Q, our Quarterly Report on Form 10-Q10-K for the quarteryear ended June 30, 2017December 31, 2021 (the “2021 Form 10-K”), which is on file with the Securities and in Antero Midstream’s Quarterly Reports on Form 10-Q for the quarters March 3, 2017 and June 30, 2017.Exchange Commission (“SEC”).

Should one or more of the risks or uncertainties described or referenced in this reportQuarterly Report on Form 10-Q occur, or should underlying assumptions prove incorrect, our and Antero Midstream’s actual results and plans could differ materially from those expressed in any forward lookingforward-looking statements.

All forward lookingforward-looking statements, expressed or implied, included in this reportQuarterly 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 lookingforward-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 lookingforward-looking statements all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

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PART I—FINANCIAL INFORMATION

ANTERO MIDSTREAM CORPORATION

Antero Midstream GP LP

Condensed Consolidated Balance Sheets

December 31, 2016 and September 30, 2017

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

    

December 31, 2016

    

September 30, 2017

Assets

Current assets:

 

  

 

 

  

 

Cash

 

$

9,609

 

 

2,419

Accounts receivable - related party

 

 

217

 

 

 —

Prepaid expenses

 

 

 —

 

 

49

Total current assets

 

 

9,826

 

 

2,468

Investment in Antero Midstream Partners LP

 

 

7,543

 

 

19,067

Total assets

 

$

17,369

 

 

21,535

 

 

 

 

 

 

 

Liabilities and Partners' Capital

Current liabilities:

 

 

 

 

 

 

Accrued liabilities

 

 

426

 

 

611

Income taxes payable

 

 

6,674

 

 

8,900

Total current liabilities

 

 

7,100

 

 

9,511

Liability for equity-based compensation

 

 

 —

 

 

3,344

Total liabilities

 

 

7,100

 

 

12,855

Partners' capital (186,174 shares issued and outstanding at

  September 30, 2017)

 

 

10,269

 

 

8,680

Total liabilities and partners' capital

 

$

17,369

 

 

21,535

(Unaudited)

December 31,

June 30,

    

2021

   

2022

 

Assets

Current assets:

Accounts receivable–Antero Resources

$

81,197

75,098

Accounts receivable–third party

747

431

Income tax receivable

940

940

Other current assets

920

588

Total current assets

83,804

77,057

Property and equipment, net

3,394,746

3,492,489

Investments in unconsolidated affiliates

696,009

681,560

Customer relationships

1,356,775

1,321,439

Other assets, net

12,667

12,956

Total assets

$

5,544,001

5,585,501

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable–Antero Resources

$

4,956

2,227

Accounts payable–third party

23,592

24,510

Accrued liabilities

80,838

90,656

Other current liabilities

4,623

6,379

Total current liabilities

114,009

123,772

Long-term liabilities:

Long-term debt

3,122,910

3,157,966

Deferred income tax liability

13,721

68,187

Other

6,663

5,457

Total liabilities

3,257,303

3,355,382

Stockholders' Equity:

Preferred stock, $0.01 par value: 100,000 authorized as of December 31, 2021 and June 30, 2022

Series A non-voting perpetual preferred stock; 12 designated and 10 issued and outstanding as of December 31, 2021 and June 30, 2022

Common stock, $0.01 par value; 2,000,000 authorized; 477,495 and 478,437 issued and outstanding as of December 31, 2021 and June 30, 2022, respectively

4,775

4,784

Additional paid-in capital

2,414,398

2,198,375

Retained earnings (accumulated deficit)

(132,475)

26,960

Total stockholders' equity

2,286,698

2,230,119

Total liabilities and stockholders' equity

$

5,544,001

5,585,501

See accompanying notes to unaudited condensed consolidated financial statements.

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Antero Midstream GP LP

Condensed Consolidated Statements of Operations and Comprehensive Income

Three Months Ended September 30, 2016 and 2017

(Unaudited)

(In thousands, except per share amounts)

 

 

 

 

 

 

 

Three Months Ended September 30,

 

2016

  

2017

Equity in earnings of Antero Midstream Partners LP

$

4,807

 

 

19,067

Total income

 

4,807

 

 

19,067

General and administrative expense

 

205

 

 

615

Equity-based compensation

 

 —

 

 

8,317

Total expenses

 

205

 

 

8,932

Income before income taxes

 

4,602

 

 

10,135

Provision for income taxes

 

(1,825)

 

 

(7,157)

Net income and comprehensive income

$

2,777

 

 

2,978

 

 

 

 

 

 

Net income per common share - basic and diluted

 

 

 

$

0.02

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic

 

 

 

 

186,173

Weighted average number of common shares outstanding - diluted

 

 

 

 

191,175

See accompanying notes to condensed consolidated financial statements.

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Antero Midstream GP LPANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Nine Months Ended September 30, 2016 and 2017

(Unaudited)

(In thousands, except per share amounts)

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

2016

  

2017

Equity in earnings of Antero Midstream Partners LP

$

9,388

 

 

45,948

Total income

 

9,388

 

 

45,948

General and administrative expense

 

390

 

 

5,922

Equity-based compensation

 

 —

 

 

26,271

Total expenses

 

390

 

 

32,193

Income before income taxes

 

8,998

 

 

13,755

Provision for income taxes

 

(3,563)

 

 

(17,337)

Net income (loss) and comprehensive income (loss)

$

5,435

 

 

(3,582)

 

 

 

 

 

 

Net income attributable to Antero Midstream GP LP subsequent to IPO

 

 

 

$

1,357

 

 

 

 

 

 

Net income per common share - basic and diluted

 

 

 

$

0.01

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic

 

 

 

 

186,172

Weighted average number of common shares outstanding - diluted

 

 

 

 

191,191

Three Months Ended June 30,

    

2021

    

2022

Revenue:

    

    

Gathering and compression–Antero Resources

$

192,667

184,071

Water handling–Antero Resources

57,718

62,262

Water handling–third party

70

242

Amortization of customer relationships

(17,668)

(17,668)

Total revenue

232,787

228,907

Operating expenses:

Direct operating

39,555

43,299

General and administrative (including $3,059 and $5,641 of equity-based compensation in 2021 and 2022, respectively)

14,251

16,079

Facility idling

984

1,185

Depreciation

26,619

35,675

Impairment of property and equipment

3,702

Accretion of asset retirement obligations

114

64

Loss on settlement of asset retirement obligations

539

Gain on asset sale

(135)

(32)

Total operating expenses

81,388

100,511

Operating income

151,399

128,396

Other income (expense):

Interest expense, net

(43,505)

(45,426)

Equity in earnings of unconsolidated affiliates

21,515

22,824

Loss on early extinguishment of debt

(20,701)

Total other expense

(42,691)

(22,602)

Income before income taxes

108,708

105,794

Income tax expense

(28,485)

(26,399)

Net income and comprehensive income

$

80,223

79,395

Net income per share–basic

$

0.17

0.17

Net income per share–diluted

$

0.17

0.17

Weighted average common shares outstanding:

Basic

477,290

478,317

Diluted

479,530

480,270

See accompanying notes to unaudited condensed consolidated financial statements.

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Antero Midstream GP LPANTERO MIDSTREAM CORPORATION

Condensed Consolidated StatementStatements of Partners’ Capital

Nine Months Ended September 30, 2017

Operations and Comprehensive Income (Unaudited)

(In thousands)thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares Representing Limited Partner Interests

 

Antero Resources Midstream Management LLC Members' Equity

 

Partners' Capital

Balance at December 31, 2016

 

$

 —

 

 

10,269

 

 

10,269

Pre-IPO net loss and comprehensive loss

 

 

 —

 

 

(4,939)

 

 

(4,939)

Pre-IPO equity-based compensation

 

 

 —

 

 

10,237

 

 

10,237

Conversion of Antero Resources Midstream

  Management LLC to a limited partnership

 

 

15,567

 

 

(15,567)

 

 

 —

Post-IPO net income and comprehensive income

 

 

1,357

 

 

 —

 

 

1,357

Post-IPO equity-based compensation

 

 

12,690

 

 

 —

 

 

12,690

Distributions to Antero Resources Investment LLC

 

 

(15,908)

 

 

 —

 

 

(15,908)

Distributions to shareholders

 

 

(5,026)

 

 

 —

 

 

(5,026)

Balance at September 30, 2017

 

$

8,680

 

 

 —

 

 

8,680

Six Months Ended June 30,

    

2021

    

2022

Revenue:

    

    

Gathering and compression–Antero Resources

$

377,828

366,514

Water handling–Antero Resources

114,321

115,583

Water handling–third party

95

637

Amortization of customer relationships

(35,336)

(35,336)

Total revenue

456,908

447,398

Operating expenses:

Direct operating

78,869

85,311

General and administrative (including $7,071 and $8,473 of equity-based compensation in 2021 and 2022, respectively)

32,181

34,010

Facility idling

2,163

2,333

Depreciation

53,469

63,975

Impairment of property and equipment

1,379

3,702

Accretion of asset retirement obligations

233

128

Loss on settlement of asset retirement obligations

539

Loss (gain) on asset sale

3,628

(150)

Total operating expenses

171,922

189,848

Operating income

284,986

257,550

Other income (expense):

Interest expense, net

(86,371)

(89,705)

Equity in earnings of unconsolidated affiliates

42,259

46,056

Loss on early extinguishment of debt

(20,701)

Total other expense

(64,813)

(43,649)

Income before income taxes

220,173

213,901

Income tax expense

(56,509)

(54,466)

Net income and comprehensive income

$

163,664

159,435

Net income per share–basic

$

0.34

0.33

Net income per share–diluted

$

0.34

0.33

Weighted average common shares outstanding:

Basic

477,071

477,983

Diluted

479,382

480,329

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands)

Retained

Additional

Earnings

Preferred

Common Stock

Paid-In

(Accumulated

Total

Stock

Shares

Amount

Capital

Deficit)

Equity

Balance at December 31, 2020

    

$

476,639

    

$

4,766

    

2,877,612

    

(464,092)

    

2,418,286

Dividends to stockholders

(147,332)

(147,332)

Equity-based compensation

4,012

4,012

Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes

268

3

(1,544)

(1,541)

Net income and comprehensive income

83,441

83,441

Balance at March 31, 2021

476,907

4,769

2,732,748

(380,651)

2,356,866

Dividends to stockholders

(108,936)

(108,936)

Equity-based compensation

3,059

3,059

Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes

451

5

(2,781)

(2,776)

Net income and comprehensive income

80,223

80,223

Balance at June 30, 2021

$

477,358

$

4,774

2,624,090

(300,428)

2,328,436

Balance at December 31, 2021

    

$

477,495

$

4,775

2,414,398

(132,475)

    

2,286,698

Dividends to stockholders

(108,287)

(108,287)

Equity-based compensation

2,832

2,832

Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes

188

2

(1,331)

(1,329)

Net income and comprehensive income

80,040

80,040

Balance at March 31, 2022

477,683

4,777

2,307,612

(52,435)

2,259,954

Dividends to stockholders

(109,433)

(109,433)

Equity-based compensation

5,641

5,641

Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes

754

7

(5,445)

(5,438)

Net income and comprehensive income

79,395

79,395

Balance at June 30, 2022

$

478,437

$

4,784

2,198,375

26,960

2,230,119

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2016 and 2017

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

    

2016

    

2017

 

Cash flows provided by operating activities:

 

  

 

 

  

 

 

Net income (loss)

 

$

5,435

 

 

(3,582)

 

Adjustment to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Equity in earnings of Antero Midstream Partners LP

 

 

(9,388)

 

 

(45,948)

 

Distributions received from Antero Midstream Partners LP

 

 

5,550

 

 

34,424

 

Equity-based compensation

 

 

 —

 

 

26,271

 

Deferred income taxes

 

 

(368)

 

 

 —

 

Changes in current assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable - related party

 

 

(202)

 

 

 —

 

Prepaid expenses

 

 

 —

 

 

(49)

 

Accounts payable

 

 

 —

 

 

 —

 

Accrued liabilities

 

 

350

 

 

185

 

Income taxes payable

 

 

3,741

 

 

2,226

 

Net cash provided by operating activities

 

 

5,118

 

 

13,527

 

Cash flows used in investing activities

 

 

 —

 

 

 —

 

Cash flows used in financing activities

 

 

 

 

 

 

 

Distributions to Antero Resources Investment LLC

 

 

 —

 

 

(15,691)

 

Distributions to shareholders

 

 

 —

 

 

(5,026)

 

Net cash used in financing activities

 

 

 —

 

 

(20,717)

 

Net increase (decrease) in cash

 

 

5,118

 

 

(7,190)

 

Cash, beginning of period

 

 

72

 

 

9,609

 

Cash, end of period

 

$

5,190

 

 

2,419

 

Six Months Ended June 30,

    

2021

    

2022

 

Cash flows provided by (used in) operating activities:

    

    

  

Net income

$

163,664

159,435

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

53,469

63,975

Accretion

233

128

Impairment

1,379

3,702

Deferred income tax expense

56,509

54,466

Equity-based compensation

7,071

8,473

Equity in earnings of unconsolidated affiliates

(42,259)

(46,056)

Distributions from unconsolidated affiliates

58,185

60,505

Amortization of customer relationships

35,336

35,336

Amortization of deferred financing costs

2,733

2,828

Settlement of asset retirement obligations

(602)

(916)

Loss on settlement of asset retirement obligations

539

Loss (gain) on asset sale

3,628

(150)

Loss on early extinguishment of debt

20,701

Changes in assets and liabilities:

Accounts receivable–Antero Resources

(16,274)

6,099

Accounts receivable–third party

777

517

Income tax receivable

16,311

Other current assets

1,070

158

Accounts payable–Antero Resources

376

(2,427)

Accounts payable–third party

5,365

9,480

Accrued liabilities

(7,297)

(1,911)

Net cash provided by operating activities

360,375

354,181

Cash flows provided by (used in) investing activities:

Additions to gathering systems and facilities

(51,658)

(131,665)

Additions to water handling systems

(22,707)

(30,369)

Investments in unconsolidated affiliates

(966)

Cash received in asset sale

1,627

147

Change in other liabilities

(805)

Net cash used in investing activities

(73,704)

(162,692)

Cash flows provided by (used in) financing activities:

Dividends to stockholders

(255,993)

(217,445)

Dividends to preferred stockholders

(275)

(275)

Issuance of senior notes

750,000

Redemption of senior notes

(667,472)

Payments of deferred financing costs

(8,755)

(302)

Borrowings (repayments) on bank credit facilities, net

(99,800)

33,300

Employee tax withholding for settlement of equity compensation awards

(4,317)

(6,767)

Other

(21)

Net cash used in financing activities

(286,633)

(191,489)

Net increase in cash and cash equivalents

38

Cash and cash equivalents, beginning of period

640

Cash and cash equivalents, end of period

$

678

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$

91,608

86,688

Cash received during the period for income taxes

$

16,913

Increase in accrued capital expenditures and accounts payable for property and equipment

$

25,490

2,822

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO MIDSTREAM GP LPCORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2016 and September 30, 2017

(1) Organization

(1)   Business and Organization

Antero Midstream GP LP (“AMGP”Corporation (together with its consolidated subsidiaries, “Antero Midstream,” “AM” or the “Company”) was originallyis a growth-oriented midstream company formed as Antero Resources Midstream Management LLC (“ARMM”) in 2013, to become the general partner of Antero Midstream Partners LP (“Antero Midstream”), a master limited partnership that is publicly traded on the New York Stock Exchange (NYSE: AM). On May 4, 2017, ARMM converted from a Delaware limited liability company to a Delaware limited partnership and changed its name to Antero Midstream GP LP in connection with our initial public offering (“IPO”). Unless the context otherwise requires, references to “we” and “our” refer to: (i) for the period prior to May 4, 2017, ARMM, and (ii) beginning on May 4, 2017, AMGP. We own 100% of the membership interests of Antero Midstream Partners GP LLC (“AMP GP”), which owns the non-economic general partner interest in Antero Midstream, and we own all of the Series A capital interests (“Series A Units”) in Antero IDR Holdings LLC (“IDR LLC”), which entity owns the incentive distribution rights (“IDRs”) in Antero Midstream.  IDR LLC also has Series B profits interests (“Series B Units”) outstanding that entitle the holders to receive up to 6% of the distributions that Antero Midstream makes on the IDRs in excess of $7.5 million per quarter, subject to certain vesting conditions (see Note 3—Long-Term Incentive Plans).

Our only income results from distributions made on the IDRs of Antero Midstream. IDRs entitle holders to receive cash distributions from Antero Midstream when distributions exceed certain target amounts (see Note 4 – Distributions from Antero Midstream).  We are taxed as a corporation for U.S. federal income tax purposes and we refer to our outstanding limited partner interests as common shares.

We are managed by our general partner, AMGP GP LLC (“AMGP GP”), who establishes the quarterly cash distribution for our common shares payable to shareholders. AMGP GP has a board of directors appointed by certain former members of Antero Resources Investment LLC (“Antero Investment”), the former sole member of ARMM which was liquidated on October 31, 2017. Following the completion of our IPO, certain of our directors and executive officers own AMGP common shares as well as Series B Units in IDR LLC. In addition, certain of our directors and executive officers own a portion of Antero Resources Corporation’s (“Antero Resources”) (NYSE: AR) common stock and Antero Midstream’s common units. We have an agreement with Antero Resources, under which Antero Resources provides general and administrative services to us for a fee of $0.5 million per year, subject to annual inflation adjustments. We also incur recurring direct expenses for the costs associated with being a publicly traded entity.

IDR distributions earned by us through May 9, 2017 were distributed to Antero Investment prior to its liquidation for all periods prior to the IPO, net of any related liabilities including income taxes through that date and expenses of the IPO.

Antero Midstream was formed by Antero Resources to own, operate and develop midstream energy assetsinfrastructure primarily to service Antero Resources’ oilResources Corporation (“Antero Resources”) and gas producing assets. Both Antero Midstreamits production and Antero Resources’ assets are locatedcompletion activity in the Marcellus Shale and Utica Shale located in West Virginia and Ohio. Antero Midstream’sAppalachian Basin. The Company’s assets consist of gathering pipelines, compressor stations, interests in processing and fractionation plants and water handling and treatment systems, which provideassets. Antero Midstream provides midstream services to Antero Resources under long term, fixed feelong-term contracts. Antero Midstream also has a 15% equity interestThe Company’s corporate headquarters is located in the gathering system of Stonewall Gas Gathering LLC (“Stonewall”) and a 50% equity interest in a joint venture to develop processing and fractionation assets with MarkWest Energy Partners, L.P. (“MarkWest”). Our results of operations, financial position and cash flows are dependent on the results of operations, financial position and cash flows of Antero Midstream. As a result, these unaudited condensed consolidated financial statements should be read in conjunction with Antero Midstream’s audited combined consolidated financial statements and notes thereto presented in its Annual Report on Form 10-K for the year ended December 31, 2016, as well as Antero Midstream’s unaudited condensed consolidated financial statements presented in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.Denver, Colorado.

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ANTERO MIDSTREAM GP LP

Notes to Condensed Consolidated Financial Statements

December 31, 2016 and September 30, 2017

(2)Summary of Significant Accounting Policies

(a)Basis of Presentation

(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 (“SEC”(the “SEC”) applicable to interim financial information.information and should be read in the context of the Company’s December 31, 2021 consolidated financial statements and notes thereto for a more complete understanding of the Company’s operations, financial position, and accounting policies. The accompanyingCompany’s December 31, 2021 consolidated financial statements were included in the Company’s 2021 Annual Report on Form 10-K, which was filed with the SEC.

These unaudited condensed consolidated financial statements of AMGPthe 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 for a fair presentation of ourto present fairly the Company’s financial position as of December 31, 20162021 and SeptemberJune 30, 2017, and our2022, the results of the Company’s operations for the three and six months ended June 30, 2021 and 2022, and the Company’s cash flows for the three and ninesix months ended SeptemberJune 30, 20162021 and 2017. We have2022. The Company has no items of other comprehensive income (loss);income; therefore, our net income (loss) is identicalequal to our comprehensive income (loss). Operating results forincome.

Certain costs of doing business incurred and charged to the period ended September 30, 2017 are not necessarily indicative ofCompany by Antero Resources have been reflected in the results that may be expected foraccompanying unaudited condensed consolidated financial statements. These costs include general and administrative expenses provided to the full year.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.

As ofTransactions between the date theseCompany and Antero Resources have been identified in the unaudited condensed consolidated financial statements were filed(see Note 4—Transactions 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 5 – Cash Distributions.Affiliates).

(b)Principles of Consolidation

(b)

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of AMGP, AMP GP (its wholly-owned subsidiary)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)

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 IDR LLC.also simplifies portions of ASC 740 by clarifying and

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ANTERO MIDSTREAM CORPORATION

(c)InvestmentNotes to the Unaudited Condensed Consolidated Financial Statements (Continued)

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) Intangibles

All customer relationships are subject to amortization and are amortized over a weighted average period of 20 years, which reflects the remaining economic life of the relationships as of June 30, 2022. The changes in Antero Midstreamthe carrying amount of customer relationships were as follows (in thousands):

Customer relationships as of December 31, 2021

$

1,356,775

Amortization of customer relationships

(35,336)

Customer relationships as of June 30, 2022

$

1,321,439

We have determined that Antero MidstreamFuture amortization expense is a variable interest entity (“VIE”) for which we are notas follows (in thousands):

Remainder of year ending December 31, 2022

$

35,336

Year ending December 31, 2023

70,672

Year ending December 31, 2024

70,672

Year ending December 31, 2025

70,672

Year ending December 31, 2026

70,672

Thereafter

1,003,415

Total

$

1,321,439

(4) Transactions with Affiliates

(a)

Revenues

Substantially all revenues earned in the primary beneficiarythree and therefore do not consolidate. We have concluded thatsix months ended June 30, 2021 and 2022 were earned from Antero Resources, is the primary beneficiary of Antero Midstream and should consolidate its financial statements. 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 it. Antero Resources owns approximately 53.0% 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. We do not own any limited partnership interests in Antero Midstream and have no capital interests in Antero Midstream. We have not provided and do not anticipate providing financial support to Antero Midstream.

Antero Resources and Antero Midstream have contracts with 20-year initial terms and automatic renewal provisions, whereby Antero Resources has dedicated the rightsvarious agreements for gathering and compression and water handling services. Revenues earned from gathering and compression services consists of lease income.

(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 $2 million and $3 million during the three months ended June 30, 2021 and 2022, respectively, and $5 million and $7 million during the six months ended June 30, 2021 and 2022, respectively. These costs were for services provided by employees associated with the operation of the Company’s gathering lines, compressor stations, and water handling assets.  General and administrative expense includes costs charged to the Company by Antero Resources of $7 million and $8 million during the three months ended June 30, 2021 and 2022, respectively, and $16 million during the six months ended June 30, 2021 and 2022.  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 certain equity-based compensation.  These expenses are charged to the Company based on the nature of the expenses and are apportioned based on a combination of the Company’s proportionate share of gross property and equipment, capital expenditures and labor costs, as applicable.  The Company reimburses Antero Resources directly for all general and administrative costs charged to it, except costs attributable to noncash equity-based compensation.  For further information on equity-based compensation, see Note 9—Equity-Based Compensation and Cash Awards.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(5) Revenue

All of the Company’s gathering and compression revenues are derived from an operating lease agreement, and all of the Company’s water handling revenues are derived from service contracts with customers. The Company currently earns substantially all of its revenues from Antero Resources.

(a)

Gathering and Compression

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 did 0t earn any rebates from the Company for the three and six months ended June 30, 2021 since Antero Resources did not achieve any volumetric targets during the first or second quarters of 2021. For the three and six months ended June 30, 2022, Antero Resources earned rebates of $12 million and $24 million, respectively, from the Company by achieving the first level volumetric target during the first and second quarters of 2022. Upon completion of the initial contract term, the gathering and compression 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 180th day prior to the anniversary of such effective date.

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 Consumer Price Index (“CPI”)-based adjustments, or a cost of service fee, at the Company’s election when such assets are placed in-service. In addition, the agreement stipulates that the Company receives a reimbursement for the actual cost of (i) electricity used at its compressor stations where the compression services are provided based on a compression fee and (ii) operating expenses for all services provided for a cost of service fee.

The Company determined that the gathering and compression agreement is an operating lease as 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 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, third-party plant or Joint Venture (as defined in Note 13— Investments in Unconsolidated Affiliates) 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.

The gathering and compression agreement includes certain fixed fee provisions. If and to the extent Antero Resources requests that the Company construct new low pressure lines, high pressure lines and/or 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 75% of the high pressure gathering capacity and 70% of the compression capacity of such new construction for 10 years or (ii) a cost of service fee that allows the Company to earn a 13% rate of return on such new construction over seven years, which election is made individually for each piece of equipment placed in service. All lease payments under the minimum volume commitments and cost of service fees are considered to be in-substance fixed lease payments under the gathering and compression agreement.

The Company recognizes lease income from its minimum volume commitments and cost of service fees under its gathering and compression agreement on a straight-line basis. Additional variable operating lease income is earned when volumes in excess of the minimum commitments are delivered under the contract. The Company recognizes variable lease income when low pressure volumes are delivered to a compressor station, compression volumes are delivered to a high pressure line and high pressure volumes

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

are delivered to a processing plant or transmission pipeline. Minimum volume commitments for high pressure gathering capacity and compression capacity are aggregated such that there is a single minimum volume commitment for the respective service each year. The Company invoices the customer the month after each service is performed, and payment is due in the same month. The Company is not party to any leases that have not commenced.

Minimum future lease cash flows to be received by the Company under the gathering and compression agreement as of June 30, 2022 are as follows (in thousands):

Remainder of year ending December 31, 2022

$

125,982

Year ending December 31, 2023

298,655

Year ending December 31, 2024

299,473

Year ending December 31, 2025

285,175

Year ending December 31, 2026

271,762

Thereafter

562,414

Total

$

1,843,461

(b)

Water Handling

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. The initial term of the water services agreement runs to 2035. 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 180thday prior to the anniversary of such effective date. Under the agreement, the Company receives a fixed fee for fresh water deliveries by pipeline directly to the well site, subject to annual CPI-based adjustments. In addition, the Company also provides other fluid handling services. These operations, along with the Company’s fresh water delivery systems, support well completion and production operations for Antero Resources. These services are provided by the Company directly or through third-parties with which the Company contracts. For these other fluid handling services provided by third-parties, Antero Resources reimburses the Company’s third-party out-of-pocket costs plus 3%. For these other fluid handling services provided by the Company, the Company charges Antero Resources a cost of service fee.

The Company satisfies its performance obligations and recognizes revenue when (i) the fresh water volumes have been delivered to the hydration unit of a specified well pad or (ii) other fluid handling 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.

Transaction Price Allocated to Remaining Performance Obligations

The Company’s water service agreement with Antero Resources has a term greater than one year. 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.

The remainder of the Company’s water 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 one year or less.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

Contract Balances

Under the Company’s water service contracts, the Company invoices customers after the performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s water service contracts do not give rise to contract assets or liabilities.

(c)

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 June 30,

Six Months Ended June 30,

(in thousands)

2021

2022

2021

2022

    

Reportable Segment

Type of service

Gathering—low pressure

$

91,761

91,660

178,067

181,097

Gathering and Processing (1)

Gathering—low pressure rebate

(12,000)

(24,000)

Gathering and Processing (1)

Compression

49,371

51,486

97,508

103,098

Gathering and Processing (1)

Gathering—high pressure

51,535

52,925

102,253

106,319

Gathering and Processing (1)

Fresh water delivery

37,751

41,120

75,109

73,164

Water Handling

Other fluid handling

20,037

21,384

39,307

43,056

Water Handling

Amortization of customer relationships

(9,271)

(9,272)

(18,542)

(18,543)

Gathering and Processing

Amortization of customer relationships

(8,397)

(8,396)

(16,794)

(16,793)

Water Handling

Total

$

232,787

228,907

456,908

447,398

Type of contract

Per Unit Fixed Fee

$

192,667

196,071

377,828

390,514

Gathering and Processing (1)

Gathering—low pressure rebate

(12,000)

(24,000)

Gathering and Processing (1)

Per Unit Fixed Fee

37,751

41,362

75,109

73,801

Water Handling

Cost plus 3%

16,425

16,400

31,775

32,038

Water Handling

Cost of service fee

3,612

4,742

7,532

10,381

Water Handling

Amortization of customer relationships

(9,271)

(9,272)

(18,542)

(18,543)

Gathering and Processing

Amortization of customer relationships

(8,397)

(8,396)

(16,794)

(16,793)

Water Handling

Total

$

232,787

228,907

456,908

447,398

(1)Revenue related to the gathering and processing segment is classified as lease income related to the gathering system.

The Company’s receivables from its contracts with customers and operating leases as of December 31, 2021 and June 30, 2022, were $81 million and $75 million, respectively.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(6) Property and Equipment

Property and equipment, net consisted of the following items:

(Unaudited)

Estimated

December 31,

June 30,

(in thousands)

    

Useful Lives

    

2021

2022

Land

    

n/a

    

$

23,369

    

26,682

Gathering systems and facilities

40-50 years (1)

2,817,918

2,974,773

Permanent buried pipelines and equipment

7-20 years

582,481

602,024

Surface pipelines and equipment

1-7 years

54,542

61,649

Heavy trucks and equipment

3-5 years

5,157

5,157

Above ground storage tanks

5-10 years

2,946

2,953

Construction-in-progress

n/a

 

174,271

148,733

Total property and equipment

3,660,684

3,821,971

Less accumulated depreciation

(265,938)

(329,482)

Property and equipment, net

$

3,394,746

3,492,489

(1)Gathering systems and facilities are recognized as a single-leased asset with 0 residual value.

(7) Long-Term Debt

Long-term debt consisted of the following items:

(Unaudited)

December 31,

June 30,

(in thousands)

2021

2022

Credit Facility (a)

    

$

547,200

    

580,500

7.875% senior notes due 2026 (c)

550,000

550,000

5.75% senior notes due 2027 (d)

650,000

650,000

5.75% senior notes due 2028 (e)

650,000

650,000

5.375% senior notes due 2029 (f)

750,000

750,000

Total principal

3,147,200

3,180,500

Unamortized debt premiums

2,106

1,904

Unamortized debt issuance costs

(26,396)

(24,438)

Total long-term debt

$

3,122,910

3,157,966

(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 with a consortium of banks. On October 26, 2021, the Company entered into an amended and restated senior secured revolving credit facility (the “Credit Facility”). As of December 31, 2021 and June 30, 2022, the Credit Facility had lender commitments of $1.25 billion and matures on October 26, 2026; provided that if on November 17, 2025 any of the 2026 Notes (as defined below) are outstanding, the Credit Facility will mature on such date. As of June 30, 2022, the Credit Facility had an available borrowing capacity of $669 million.

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, provided that no event of default exists or would be caused thereby, and only to the extent permitted by the Borrower’s organizational documents. The Borrower was in compliance with all of the financial covenants under the Credit Facility as of December 31, 2021 and June 30, 2022.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

The senior secured revolving credit facility agreement in effect prior to October 26, 2021 provided for borrowing under either the Base Rate or the Eurodollar Rate (as each term is defined in the agreement), and the Credit Facility provides for borrowing under either Adjusted Term Secured Overnight Financing Rate (“SOFR”) or the Base Rate (as each term is defined in the Credit Facility). Principal amounts borrowed are payable on the maturity date with such borrowings bearing interest that is payable with respect to (i) base rate loans, quarterly and (ii) SOFR Loans at the end of the applicable interest period if three months (or shorter, if applicable), or every three months if the applicable interest period is longer than three months. Interest was 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 under the senior secured revolving credit facility agreement in effect prior to October 26, 2021. Interest is payable at a variable rate based on SOFR or the base rate, determined by election at the time of borrowing, plus an applicable margin rate under the Credit Facility. 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 0.25% to 0.375% subject to certain exceptions based on the leverage ratio then in effect.

As of December 31, 2021, the Borrower had outstanding borrowings under the Credit Facility of $547 million with a weighted average interest rate of 1.81%. As of June 30, 2022, the Borrower had outstanding borrowings under the Credit Facility of $581 million with a weighted average interest rate of 3.24%. No letters of credit under the Credit Facility were outstanding as of December 31, 2021 or June 30, 2022.

(b)

5.375% Senior Notes Due 2024

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 $650 million in aggregate principal amount of 5.375% senior notes due September 15, 2024 (the “2024 Notes”) at par. The 2024 Notes were recorded at their fair value of $652.6 million as of March 12, 2019, and the related premium of $2.6 million was amortized into interest expense over the life of the 2024 Notes. The Issuers redeemed all $650 million of the 2024 Notes at 102.688% of par on June 8, 2021, and recognized a loss of $21 million on the early extinguishment of debt during the second quarter of 2021, which includes the write-off of all unamortized debt premium and issuance costs. Interest on the 2024 Notes was payable on March 15 and September 15 of each year.

(c)

7.875% Senior Notes Due 2026

On November 10, 2020, the Issuers issued $550 million in aggregate principal amount of 7.875% senior notes due May 15, 2026 (the “2026 Notes”) at par. The 2026 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2026 Notes are fully and unconditionally guaranteed on a fixed-fee basis. Such dedications coverjoint and several senior unsecured basis by Antero Midstream Corporation, Antero Midstream Partners’ wholly owned subsidiaries (other than Finance Corp) and certain of its future restricted subsidiaries. Interest on the 2026 Notes is payable on May 15 and November 15 of each year. Antero Midstream Partners may redeem all or part of the 2026 Notes at any time on or after May 15, 2023 at redemption prices ranging from 103.938% on or after May 15, 2023 to 100.00% on or after May 15, 2025. In addition, prior to May 15, 2023, Antero Midstream Partners may redeem up to 35% of the aggregate principal amount of the 2026 Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a substantialredemption price of 107.875% of the principal amount of the 2026 Notes, plus accrued and unpaid interest. At any time prior to May 15, 2023, Antero Midstream Partners may also redeem the 2026 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2026 Notes plus a “make-whole” premium and accrued and unpaid interest. If Antero Midstream Partners undergoes a change of control followed by a rating decline, the holders of the 2026 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of Antero’s current acreagethe 2026 Notes at a price equal to 101% of the principal amount of the 2026 Notes, plus accrued and unpaid interest.

(d)

5.75% Senior Notes Due 2027

On February 25, 2019, the Issuers issued $650 million in aggregate principal amount of 5.75% senior notes due March 1, 2027 (the “2027 Notes”) at par.   The 2027 Notes were recorded at their fair value of $653.3 million as of March 12, 2019, and the related premium of $3.3 million will be amortized into interest expense over the life of the 2027 Notes.  The 2027 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility.  The 2027 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Antero Midstream Corporation, Antero Midstream Partners’ wholly owned subsidiaries (other than Finance Corp) and certain of its future acquired acreage,restricted

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

subsidiaries.  Interest on the 2027 Notes is payable on March 1 and September 1 of each year.  Antero Midstream Partners may redeem all or part of the 2027 Notes at any time on or after March 1, 2022 at redemption prices ranging from 102.875% currently to 100.00% on or after March 1, 2025.  If Antero Midstream Partners undergoes a change of control followed by a rating decline, the holders of the 2027 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2027 Notes at a price equal to 101% of the principal amount of the 2027 Notes, plus accrued and unpaid interest.

(e)

5.75% Senior Notes Due 2028

On June 28, 2019, the Issuers issued $650 million in aggregate principal amount of 5.75% senior notes due January 15, 2028 (the “2028 Notes”) at par.  The 2028 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility.  The 2028 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Antero Midstream Corporation, Antero Midstream Partners’ wholly owned subsidiaries (other than Finance Corp) and certain of its future restricted subsidiaries.  Interest on the 2028 Notes is payable on January 15 and July 15 of each case, except for acreage that was already dedicatedyear.  Antero Midstream Partners may redeem all or part of the 2028 Notes at any time on or after January 15, 2023 at redemption prices ranging from 102.875% on or after January 15, 2023 to other parties100.00% on or after January 15, 2026.  In addition, prior to entering into the service contracts or that was acquired subject to a pre-existing dedication. The contracts call for Antero Resources to present, in advance, drilling and completion plans in order forJanuary 15, 2023, Antero Midstream Partners may redeem up to put35% of the aggregate principal amount of the 2028 Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 105.75% of the principal 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 place gatheringwhole or in part, at a price equal to 100% of the principal amount of the 2028 Notes plus a “make-whole” premium and compression, water handling,accrued and gas processing assetsunpaid interest.  If Antero Midstream Partners undergoes a change of control followed by a rating decline, the holders of the 2028 Notes will have the right to servicerequire Antero Resources’ assets.Midstream Partners to repurchase all or a portion of the 2028 Notes at a price equal to 101% of the principal amount of the 2028 Notes, plus accrued and unpaid interest.

(f)

5.375% Senior Notes Due 2029

On June 8, 2021, the Issuers issued $750 million in aggregate principal amount of 5.375% senior notes due June 15, 2029 (the “2029 Notes”) at par. The drilling2029 Notes are unsecured and completion capital investment decisions madeeffectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2029 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Antero ResourcesMidstream Corporation, Antero Midstream Partners’ wholly owned subsidiaries (other than Finance Corp) and certain of its future restricted subsidiaries. Interest on the 2029 Notes is payable on June 15 and December 15 of each year. Antero Midstream Partners may redeem all or part of the 2029 Notes at any time on or after June 15, 2024 at redemption prices ranging from 102.688% on or after June 15, 2024 to 100.00% on or after June 15, 2026. In addition, prior to June 15, 2024, Antero Midstream Partners may redeem up to 35% of the aggregate principal amount of the 2029 Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 105.375% of the principal amount of the 2029 Notes, plus accrued and unpaid interest. At any time prior to June 15, 2024, Antero Midstream Partners may also redeem the 2029 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2029 Notes plus a “make-whole” premium and accrued and unpaid interest. If Antero Midstream Partners undergoes a change of control followed by a rating decline, the developmentholders of the 2029 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2029 Notes at a price equal to 101% of the principal amount of the 2029 Notes, plus accrued and operationunpaid interest.

(g)

Senior Notes Guarantors

The Company and each of the Company’s wholly owned subsidiaries (except for the Issuers) has fully and unconditionally guaranteed the 2024 Notes, 2026 Notes, 2027 Notes, 2028 Notes and 2029 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 of Antero Midstream’s assets. Antero Resources therefore controls the activities that most significantly impact Antero Midstream’s economic performance. Because of these contractual obligations and the capital requirements related to these obligations, Antero Midstream has devoted and, for the foreseeable future, will devoteor substantially all of its

10


Table 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 Contentsan 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.

ANTERO MIDSTREAM GP LP

Notes to Condensed Consolidated Financial Statements

December 31, 2016In addition, a guarantor will be released from its obligations under the applicable indenture and September 30, 2017

resources to servicing Antero Resources’ operations and revenues from Antero Resources will provide substantially all of Antero Midstream’s financial support and therefore its ability to finance its operations. Becauseguarantee, upon the release or discharge of the long term contractual commitment to support Antero Resources’ substantial growth plans, Antero Midstream will be practically and physically constrained from providing any significant amountguarantee of services to third parties.

Our ownershipother indebtedness under a credit facility that resulted in the creation of the non-economic general partner interest in Antero Midstream provides us with significant influence over Antero Midstream, but not control over the decisions that most significantly impact the economic performance of Antero Midstream. Our ownership of IDRs of Antero Midstream entitles us to receive cash distributions from Antero Midstream when distributions exceed certain target amounts. The ownership of these interests and IDRs do not require us to provide financial support to Antero Midstream. We obtained these interests upon our formation for no consideration. Therefore, they have no cost basis and are classified as long term investments. Our share of Antero Midstream’s earningssuch guarantee, except a release or discharge by or as a result of our ownershippayment under such guarantee; if the Issuers designate such subsidiary as an unrestricted

15

Table of IDRsContents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

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 and six months ended June 30, 2021 and 2022, all of the Company’s assets and operations are attributable to the Issuers and its guarantors.

(8) Accrued Liabilities

Accrued liabilities consisted of the following items:

(Unaudited)

December 31,

June 30,

(in thousands)

    

2021

    

2022

 

Capital expenditures

$

24,900

36,283

Operating expenses

10,417

9,953

Interest expense

36,794

36,984

Ad valorem taxes

5,400

5,029

Other

3,327

2,407

Total accrued liabilities

$

80,838

90,656

(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 accountedincluded in general and administrative expenses, and recorded as a credit to the applicable classes of equity.

AR LTIP

Equity-based compensation expense allocated to Antero Midstream from Antero Resources was $0.4 million and $0.1 million for using the equity methodthree months ended June 30, 2021 and 2022, respectively, and $1.5 million and $0.3 million for the six months ended June 30, 2021 and 2022, respectively, which includes expense related to the Converted AM RSU Awards (as defined below). For grants made prior to March 12, 2019, Antero Resources has total unamortized expense related to its various equity-based compensation plans that can be allocated to the Company of accounting. We recognize distributions earned fromapproximately $0.1 million as of June 30, 2022, which includes the Converted AM RSU Awards (as defined below). A portion of this unamortized cost will be allocated to Antero Midstream as “Equity in earningsit is amortized over the remaining service period of the related awards. The Company does not reimburse Antero Resources for noncash equity compensation allocated to it for awards issued under the AR LTIP.

AM LTIP

The Company is authorized to grant up to 15,398,901 shares of AM common stock to employees and directors under the AM LTIP. The AM LTIP provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), dividend equivalents, other stock-based awards, cash awards and substitute awards. The terms and conditions of the awards granted are established by the compensation committee of the Board of Directors (the “Board”). As of June 30, 2022, a total of 7,270,722 shares were available for future grant under the AM LTIP.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

The Company’s equity-based compensation expense, by type of award, is as follows:

Three Months Ended

Six Months Ended

June 30,

June 30,

(in thousands)

2021

2022

2021

2022

Restricted stock units (1)

$

2,925

4,425

5,703

6,913

Performance share units (1)

(94)

988

913

1,105

Equity awards issued to directors

228

228

455

455

Total expense

$

3,059

5,641

7,071

8,473

(1)Amounts include equity-based compensation expense allocated to the Company by Antero Resources.

(b)

Restricted Stock Unit Awards

As of March 19, 2019, each of the unvested outstanding phantom units granted under the Antero Midstream Partners LP” on our statementLong Term Incentive Plan was assumed by the Company and converted into 1.8926 RSUs under the AM LTIP representing a right to receive shares of operations in the period in whichCompany’s common stock for each converted phantom unit (all such RSUs, the “Converted AM RSU Awards”). The Converted AM RSU Awards are accounted for as if they are earned and are allocated to our capital account. Our long term interest in IDRs on the balance sheet is recorded in “Investment indistributed by Antero Midstream Partners LP.” The ownershipto Antero Resources. Therefore, the expense related to the Converted AM RSU Awards is subject to allocation by Antero Resources.

A summary of the general partner interests and IDRs do not provide us with any claimRSU awards activity, which includes the Converted AM RSU Awards, is as follows:

Weighted Average

Number

Grant Date

    

of Units

    

Fair Value

Total AM LTIP RSUs awarded and unvested—December 31, 2021

3,573,377

$

8.11

Granted

2,750,896

11.28

Vested

(1,237,558)

8.38

Forfeited

(132)

11.28

Total AM LTIP RSUs awarded and unvested—June 30, 2022

5,086,583

$

9.76

As of June 30, 2022, unamortized expense of $45.2 million related to the assetsunvested RSUs, which includes less than $0.1 million related to the Converted AM RSU Awards, is expected to be recognized over a weighted average period of Antero Midstream other than the balance in our Antero Midstream capital account. IDRs are recognized as earned and increase our capital account and equity investment. When these distributions are paid to us they reduce our capital accounts and our equity investment in Antero Midstream. See Note 4—Distributions from Antero Midstream.

(d)Use of Estimates

approximately 2.6 years. The preparationCompany’s proportionate share of the condensed consolidated financial statementsConverted AM RSU Awards will be allocated to it as it is recognized.

(c)

Performance Share Unit Awards

2019 Performance Share Unit Awards

In 2019, the Company granted performance share units (“PSUs”) to certain of its employees and notesexecutive officers that vest based on the Company’s actual return on invested capital (“ROIC”) (as defined in conformitythe award agreement) over a three-year period as compared to a targeted ROIC (“2019 ROIC PSUs”). The number of shares of the Company’s common stock that could be earned with GAAP requiresrespect to the 2019 ROIC PSUs ranged from 0 to 200% of the target number of 2019 ROIC PSUs originally granted. During the second quarter of 2022, the performance condition for the 2019 ROIC PSUs was met at 200% of target and 137,712 target 2019 ROIC PSUs converted into 275,424 shares of the Company’s common stock. As of June 30, 2022, there were no 2019 ROIC PSUs outstanding.

2022 Performance Share Unit Awards

In April 2022, the Company granted PSUs to certain of its executive officers that management formulate estimatesvest based on the Company’s actual ROIC (as defined in the award agreement) over a three-year period concluding on December 31, 2024 as compared to a targeted ROIC (“2022 ROIC PSUs”). The number of shares of the Company’s common stock that can be earned with respect to the 2022 ROIC PSUs ranges from zero to 200% of the target number of 2022 ROIC PSUs originally granted. The grant date fair value of these

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

awards was based on the closing price of the Company’s common stock on the date of the grant, assuming target achievement of the performance condition. Expense related to the 2022 ROIC PSUs is recognized based on the number of shares of the Company’s common stock that are expected to be issued at the end of the measurement period, and assumptionssuch expense is reversed if the likelihood of achieving the performance condition decreases. The likelihood of achieving the performance conditions related to 2022 ROIC PSU awards was probable as of June 30, 2022.

Summary Information for Performance Share Unit Awards

A summary of the PSU awards activity is as follows:

Weighted Average

Number

Grant Date

    

of Units

    

Fair Value

Total AM LTIP PSUs awarded and unvested—December 31, 2021

116,526

$

6.32

Granted

461,121

11.05

Vested (1)

(137,712)

6.32

Forfeited

Total AM LTIP PSUs awarded and unvested—June 30, 2022

439,935

$

11.28

(1)The performance condition for these vested PSUs was met at 200% of target and as such, they converted into 275,424 shares of the Company’s common stock during the second quarter of 2022.

As of June 30, 2022, unamortized expense of $9.2 million related to unvested PSUs is expected to be recognized over a weighted average period of approximately 2.8 years.

(d)

Cash Awards

In January 2020, the Company granted cash awards of $2.2 million to certain executives under the AM LTIP that affectvest ratably over a period of up to three years. In July 2020, the amounts reportedCompany granted additional cash awards of $0.7 million to certain non-executive employees under the AM LTIP that vest ratably over a period of four years. The compensation expense for these awards is recognized ratably over the applicable vesting period. As of December 31, 2021 and June 30, 2022, the Company has recorded $1.1 million and $0.4 million, respectively, in other liabilities in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.balance sheets related to unvested cash awards.

(e)Income Taxes

We regularly review our tax positions in each significant taxing jurisdiction during the process of evaluating our tax provision. We make adjustments to our 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.

Equity-based compensation expense of $26.3 million and IPO costs of $5.1 million are not and will not be deductible for federal income tax purposes. Our inability to deduct those expenses and costs, along with the effect of state taxes, account for the difference between the federal tax rate of 35% and effective rate of income tax expense for financial reporting purposes for the nine months ended September 30, 2017.

(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 our IPO. Post-IPO general and administrative expense consists primarily of management fees paid to Antero Resources, and other legal and administrative expenses.

(g) 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

11


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ANTERO MIDSTREAM GP LPCORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(10) Cash Dividends

December 31, 2016The Company paid cash dividends for the quarter indicated as follows (in thousands, except per share data):

Dividends

Period

    

Record Date

    

Dividend Date

    

Dividends

    

per Share

Q4 2020

February 3, 2021

February 11, 2021

$

147,194

$

0.3075

*

February 16, 2021

February 16, 2021

138

*

Q1 2021

April 28, 2021

May 12, 2021

108,799

0.2250

*

May 17, 2021

May 17, 2021

137

*

Q2 2021

July 28, 2021

August 11, 2021

107,719

0.2250

*

August 16, 2021

August 16, 2021

138

*

Q3 2021

October 27, 2021

November 10, 2021

107,459

0.2250

*

November 15, 2021

November 15, 2021

137

*

Total 2021

$

471,721

Q4 2021

January 26, 2022

February 9, 2022

$

108,149

$

0.2250

*

February 14, 2022

February 14, 2022

138

*

Q1 2022

April 27, 2022

May 11, 2022

109,296

0.2250

*

May 16, 2022

May 16, 2022

137

*

Total 2022

$

217,720

*

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 July 13, 2022, the Board announced the declaration of a cash dividend on the shares of AM common stock of $0.2250 per share for the quarter ended June 30, 2022. The dividend will be payable on August 10, 2022 to stockholders of record as of July 27, 2022. The Company pays dividends (i) out of surplus or (ii) if there is no surplus, out of the net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year, as provided under Delaware law.

The Board also declared a cash dividend of $138 thousand on the shares of Series A Preferred Stock of Antero Midstream to be paid on August 15, 2022 in accordance with the terms of the Series A Preferred Stock, which are discussed in Note 11—Equity and SeptemberEarnings Per Common Share. As of June 30, 20172022, there were dividends in the amount of $69 thousand accumulated in arrears on the Company’s Series A Preferred Stock.

(11) Equity and Earnings Per Common Share

(a)

Preferred Stock

liabilitiesThe Board authorized 100,000,000 shares of preferred stock on March 12, 2019, and issued 10,000 shares of preferred stock designated as "5.5% Series A Non-Voting Perpetual Preferred Stock" (the "Series A Preferred Stock"), to The Antero Foundation on that date. Dividends on the Series A Preferred Stock are not recognizedcumulative from the date of original issue and payable in cash on the 45th day following the end of each fiscal quarter, or disclosedsuch other dates as the Board will approve, at a rate of 5.5% per annum on (i) the liquidation preference per share of Series A Preferred Stock (as described below) and (ii) the amount of accrued and unpaid dividends for any prior dividend period on such share of Series A Preferred Stock, if any. At any time following the date of issue, in the event of a recurring basis (e.g.,change of control, or at any time on or after March 12, 2029, the initial recognitionCompany may redeem the Series A Preferred Stock at a price equal to $1,000 per share, plus any accrued and unpaid dividends, payable in cash; provided that if any shares of asset retirement obligations and impairmentsthe Series A Preferred Stock are held by The Antero Foundation at the time of long ‑lived assets). The fair value issuch redemption, the price that we estimate wouldfor redemption of each share of Series A Preferred Stock will be receivedthe greater of (i) $1,000 per share, plus any accrued but unpaid dividends, and (ii) the fair market value of the Series A Preferred Stock. On or after March 12, 2029, the holder of each share of Series A Preferred Stock (other than The Antero Foundation) may convert such shares, at any time and from time to sell an asset or paid to transfer a liability in an orderly transaction between market participantstime, at the measurement date. A fair value hierarchy is usedoption of the holder into a number of shares of AM common stock equal to prioritize inputs to valuation techniques used to estimate fair value. An asset or liabilitythe conversion ratio in effect on the applicable conversion date, subject to the fair value requirements is categorized within the hierarchy based on the lowest level of input that is significantcertain limitations. The Series A Preferred Stock ranks senior to the fair value measurement. Our assessmentAM common stock as to dividend rights, as well as with respect to rights upon liquidation, winding-up or

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

dissolution of the significanceCompany. Holders of the Series A Preferred Stock do not have any voting rights in the Company, except as required by law, or any preemptive rights.

(b)

Weighted Average Shares Outstanding

The following is a particular inputreconciliation of the Company’s basic weighted average shares outstanding 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.diluted weighted average shares outstanding:

Three Months Ended

Six Months Ended

June 30,

June 30,

(in thousands)

    

2021

    

2022

    

2021

    

2022

Basic weighted average number of shares outstanding

477,290

478,317

477,071

477,983

Add: Dilutive effect of RSUs

1,063

794

1,109

1,081

Add: Dilutive effect of PSUs

215

54

240

160

Add: Dilutive effect of Series A Preferred Stock

962

1,105

962

1,105

Diluted weighted average number of shares outstanding

479,530

480,270

479,382

480,329

Weighted average number of outstanding equity awards excluded from calculation of diluted earnings per common share (1):

RSUs

341

2,457

310

1,170

PSUs

744

375

(1)

The potential dilutive effects of these awards were excluded from the computation of earnings (loss) per common shares—assuming dilution because the inclusion of these awards would have been anti-dilutive.

(c)

Earnings Per Common Share

(h) Net Income (Loss)Earnings per Common Share

Net income (loss) per common share – share—basic for each period is computed by dividing netthe net income or loss attributable to AMGP subsequent to IPOthe Company by the basic weighted average number of common shares outstanding during the period. Net income (loss)Earnings per common share – dilutedshare—assuming dilution for each period is computed after giving consideration to the potential dilution from outstanding equity awards, calculated using the treasury stock method. During the periods in which AMGPthe Company 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.

Three Months Ended

Six Months Ended

June 30,

June 30,

(in thousands, except per share amounts)

    

2021

    

2022

    

2021

    

2022

Net income

$

80,223

79,395

163,664

159,435

Less preferred stock dividends

(137)

(137)

(275)

(275)

Net income available to common shareholders

$

80,086

79,258

163,389

159,160

Net income per share–basic

$

0.17

0.17

0.34

0.33

Net income per share–diluted

$

0.17

0.17

0.34

0.33

Weighted average common shares outstanding–basic

477,290

478,317

477,071

477,983

Weighted average common shares outstanding–diluted

479,530

480,270

479,382

480,329

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(12) Fair Value Measurement

(a)

Senior Unsecured Notes

The following is a reconciliation of AMGP's basic weighted average common shares outstanding to diluted weighted average common shares outstanding during the periods presented (in thousands):

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2017

 

2017

Basic weighted average number of common shares outstanding

 

186,173

 

186,172

Add: Dilutive effect of Series B units

 

5,002

 

5,019

Diluted weighted average number of common shares outstanding

 

191,175

 

191,191

(3)Long-Term Incentive Plans

As of September 30, 2017, IDR LLC had 98,600 Series B Units authorizedfair value and outstanding that entitle the holders to receive up to 6%carrying value of the amountCompany’s Senior Notes is as follows:

(Unaudited)

December 31, 2021

June 30, 2022

(in thousands)

Fair Value (1)

Carrying Value (2)

Fair Value (1)

Carrying Value (2)

2026 Notes

$

604,450

544,294

548,625

544,844

2027 Notes

672,750

645,970

611,000

646,284

2028 Notes

680,225

643,902

594,750

644,333

2029 Notes

783,750

741,544

670,275

742,005

Total

$

2,741,175

2,575,710

2,424,650

2,577,466

(1)Fair values are based on Level 2 market data inputs.
(2)Carrying values are presented net of unamortized debt issuance costs and debt premiums.

(b)

Other Assets and Liabilities

The carrying values of accounts receivable and accounts payable as of December 31, 2021 and June 30, 2022 approximated fair value because of their short-term nature. The carrying value of the distributionsamounts under the Credit Facility as of December 31, 2021 and June 30, 2022 approximated fair value because the variable interest rates are reflective of current market conditions.

(13) Investments in Unconsolidated Affiliates

The Company has a 15% equity interest in a gathering system of Stonewall Gas Gathering LLC (“Stonewall”), which operates a 67-mile pipeline on which Antero Resources is an anchor shipper.

The Company has a 50% equity interest in the joint venture to develop processing and fractionation assets with MarkWest Energy Partners, L.P. (“MarkWest”), a wholly owned subsidiary of MPLX, LP (the “Joint Venture”). The Joint Venture was formed to develop processing and fractionation assets in Appalachia. MarkWest operates the Joint Venture assets, which consist of processing plants in West Virginia and a one-third interest in 2 MarkWest fractionators in Ohio.

The Company’s net income includes its proportionate share of the net income of the Joint Venture and Stonewall. When the Company records its proportionate share of net income, it increases equity income in the unaudited condensed consolidated statements of operations and comprehensive income and the carrying value of that Antero Midstream makesinvestment on its IDRs in excessbalance sheet. When distributions on the Company’s proportionate share of $7.5 million per quarter, subjectnet income are received, they are recorded as reductions to certain vesting conditions.  Series B Units issued to common law employeesthe carrying value of AMGP, including officers of AMGPthe investment on the condensed consolidated balance sheet and Antero Resources employees who provide services directly to AMGP, are classified as equity awards. Series B Units issued to Antero Resources employees who are not common law employees of AMGP are classified as liability awards. IDR LLC granted 92,000 Series B Units that are equity classified awards and 8,000 Series B Units that are liability classified awards. Duringcash inflows from operating activities in accordance with the nine months ending September 30, 2017, 500 Series B Units that were equity classified awards were forfeited, and 900 Series B units that were liability classified awards were forfeited. The Series B Units vest ratably over a three year period. The holders of vested Series B Units have the right to convert the units to common shares with a value equal to their pro rata share of up to 6% of any increase in our equity value in excess of $2.0 billion. In no event will the aggregate number of newly issued common shares exceed 6%nature of the total numberdistribution approach under FASB ASC Topic 230, Statement of our issued and outstanding common shares.

For equity classified awards, we recognize expense for the grant date fair value of the awards over the vesting period of the awards. Forfeitures are accounted for as they occur by reversing expense previously recognized for awards that were forfeited during the period.Cash Flows. The grant date fair value of the Series B Unit awards was estimated using a Monte Carlo simulation using various assumptions including a floor equity value of $2.0 billion, expected volatility of 43% based on

12


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ANTERO MIDSTREAM GP LP

Notes to Condensed Consolidated Financial Statements

December 31, 2016 and September 30, 2017

historical volatility of a peer group of publicly traded partnerships, a risk free rate of 2.45%, and expected IDR distributions based on internal estimates discounted based on a weighted average cost of capital assumption of 7.25%. Based on these assumptions, the estimated value of each Series B Unit was $999 when they were issued.

For liability classified awards, we recognize expense for the fair value of the awards over the vesting period of the awards. Forfeitures are accounted for as they occur by reversing expense previously recognized for awards that were forfeited during the period. We update our assumptions each reporting period based on new developments and adjust such amounts to fair value based on revised assumptions, if applicable, over the vesting period. At September 30, 2017, the fair value of the Series B Unit awards was estimated using a Monte Carlo simulation using various assumptions including an equity value of $4.0 billion, expected volatility of 41% based on historical volatility of a peer group of publicly traded partnerships, a risk free rate of 2.28%, and expected IDR distributions based on internal estimates discounted based on a weighted average cost of capital assumption of 7.25%. Based on these assumptions, the estimated value of each Series B Unit at September 30, 2017 was $1,884The 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.

We recognized expense of $8.2 million, of which $7.6 million was for equity classified awards and $0.6 million was for liability classified awards, during the three months ended September 30, 2017. We recognized expense of $26.2 million, of which $22.9 million was for equity classified awards and $3.3 million was for liability classified awards, during the nine months ended September 30, 2017. As of September 30, 2017, there was $78.6 million of unamortized compensation expense related to nonvested Series B Units that is expected to be recognized over the next 2.25 years.

On April 17, 2017, we also adopted the Antero Midstream GP LP Long-Term Incentive Plan (“2017 LTIP”), pursuant to which certain non-employee directors of our general partner and certain officers, employees and consultants of Antero Resources are eligible to receive awards representing equity interests in AMGP. An aggregate of 930,851 common shares may be delivered pursuant to awards under the 2017 LTIP, subject to customary adjustments. As of September 30, 2017, 3,850 common shares have been granted and we have recognized related expense of $0.1 million. As of September 30, 2017, 927,001 common shares remain available for grant under the 2017 LTIP.

(4)Distributions from Antero Midstream

Antero Midstream’s partnership agreement provides for a target minimum quarterly distribution of $0.17 per unit for each quarter, or $0.68 per unit on an annualized basis. The partnership agreement generally provides that Antero Midstream distribute cash each quarter to the holders of the common units pro rata until each unit has received a distribution of $0.1955.

If cash distributions to Antero Midstream’s unitholders exceed $0.1955 per common unit in any quarter, IDR LLC, as the holder of Antero Midstream’s IDRs, will receive distributions according to the following percentage allocations:

 

 

 

 

 

 

 

 

 

Marginal Percentage Interest in Distributions

Total Quarterly Distribution
Target Amount

 

Antero Midstream Common Unitholders

 

Holder of IDRs

above $0.1955 up to $0.2125

 

85

%  

 

15

%  

above $0.2125 up to $0.2550

 

75

%  

 

25

%  

above $0.2550

 

50

%  

 

50

%  

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ANTERO MIDSTREAM GP LP

Notes to Condensed Consolidated Financial Statements

December 31, 2016 and September 30, 2017

From the initial public offering of Antero Midstream in the fourth quarter of 2014 through September 30, 2017, distributions per common unit and distributions related to the IDRs were as follows:

 

 

 

 

 

 

 

 

 

Quarter
and
Year

    

Distribution Date

    

Antero Midstream Distribution Amount
per Common Unit

    

Income Attributable to IDRs
($ thousands)

Q4 2014

 

February 27, 2015

 

$

0.0943

 

$

 —

Q1 2015

 

May 27, 2015

 

$

0.1800

 

$

 —

Q2 2015

 

August 27, 2015

 

$

0.1900

 

$

 —

Q3 2015

 

November 30, 2015

 

$

0.2050

 

$

295

Q4 2015

 

February 29, 2016

 

$

0.2200

 

$

969

Q1 2016

 

May 25, 2016

 

$

0.2350

 

$

1,850

Q2 2016

 

August 24, 2016

 

$

0.2500

 

$

2,731

Q3 2016

 

November 24, 2016

 

$

0.2650

 

$

4,820

Q4 2016

 

February 8, 2017

 

$

0.2800

 

$

7,543

Q1 2017

 

May 10, 2017

 

$

0.3000

 

$

11,553

Q2 2017

 

August 16, 2017

 

$

0.3200

 

$

15,328

The board of directors of Antero Midstream’s general partner has declared a cash distribution of $0.34 per unit for the quarter ended September 30, 2017. The distribution will be payable on November 16, 2017 to shareholders of record as of November 1, 2017.

IDR distributions paid by Antero Midstream relating to periods prior to May 9, 2017, the closing of our IPO, were distributed to Antero Investment prior to its liquidation.

(5)Cash Distributions

The following table details the amount of quarterly distributions AMGP paid with respect to the quarter indicated (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions

 

 

 

Quarter
and
Year

    

Record Date

    

Distribution Date

    

Common

shareholders

    

Antero Resources Investment

    

Total

  

Distributions

per common share

*

 

May 9, 2017

 

September 13, 2017

 

$

 —

 

 

15,907

 

$

15,907

 

 

*

Q2 2017

 

August 3, 2017

 

August 23, 2017

 

 

5,027

 

 

 —

 

$

5,027

 

$

0.0270

 

 

Total 2017

 

 

 

$

5,027

 

 

15,907

 

$

20,934

 

 

 

* Income relating to periods prior to May 9, 2017, the closing of our IPO, was distributed to Antero Investment prior to its liquidation.

The board of directors of our general partner has declared a cash distribution of $0.059 per share for the quarter ended September 30, 2017. The distribution will be payable on November 23, 2017 to shareholders of record as of November 1, 2017.

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ANTERO MIDSTREAM GP LP

Notes to Condensed Consolidated Financial Statements

December 31, 2016 and September 30, 2017

(6)Related Party Transactions

Certain of AMGP’s shareholders, including members of its executive management group, own a significant interest in AMGP and, either through their representatives or directly, serve as members of the Board of Directors of Antero Resources and the Boards of Directors of the general partners of Antero Midstream and AMGP.  These same groups or individuals own common stock in Antero Resources and limited partner interests in Antero Midstream.  AMGP’s executive management group also manages the operations and business affairs of Antero Resources and Antero Midstream.

(a) Accounts receivable – related party

Accounts receivable at December 31, 2016 and September 30, 2017 includes general and administrative expenses of $0.2 million and $0, respectively, paid by AMGP on behalf of Antero Investment prior to its liquidation. In the nine months ended September 30, 2017, a $0.4 million receivable was settled as part of the Antero Investment liquidation distribution.

(b) Accounts payable

Accounts payable at December 31, 2016 and September 30, 2017 includes $0.3 million and $0, respectively, payable to Antero Resources for general and administrative expenses.

(7)Summarized Financial Information for Antero Midstream

Summarized financial information for Antero Midstream, our investee accounted for usingCompany uses the equity method of accounting is includedto account for its investments in this note.Stonewall and the Joint Venture because it exercises significant influence, but not control, over the entities. The following tables present summarized income statementCompany’s judgment regarding the level of influence over its equity investments includes considering key factors such as its ownership interest, representation on the applicable Board of Directors and balance sheet information for Antero Midstream (in thousands).participation in policy-making decisions of Stonewall and the Joint Venture.

 

 

 

 

 

 

 

 

 

 

 

 

 

Summarized Antero Midstream Income Statement Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2016

 

2017

  

2016

 

2017

 

 

(in thousands)

Revenues

 

$

150,475

 

 

193,629

 

 

423,357

 

 

562,165

Operating expenses

 

 

76,192

 

 

110,458

 

 

249,147

 

 

304,730

Operating income

 

$

74,283

 

 

83,171

 

 

174,210

 

 

257,435

Net income

 

 

70,524

 

 

80,893

 

 

163,352

 

 

243,160

Net income attributable to incentive distribution rights

 

 

(4,807)

 

 

(19,067)

 

 

(9,387)

 

 

(45,948)

Limited partners' interest in net income

 

$

65,717

 

 

61,826

 

 

153,965

 

 

197,212

15


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Table of Contents

ANTERO MIDSTREAM GP LPCORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements

December 31, 2016 and September 30, 2017

 

 

 

 

 

 

 

Summarized Antero Midstream Balance Sheet Information

 

 

 

 

 

 

 

 

 

December 31, 2016

 

September 30, 2017

 

 

(in thousands)

Current assets

 

$

79,950

 

 

88,797

Non-current assets

 

$

2,269,945

 

 

2,806,594

Current liabilities

 

$

82,013

 

 

88,608

Non-current liabilities

 

$

1,045,072

 

 

1,272,397

Partners' capital

 

$

1,222,810

 

 

1,534,386

(Continued)

The following table is a reconciliation of the Company’s investments in these unconsolidated affiliates:

Total Investment

MarkWest

in Unconsolidated

(in thousands)

    

Stonewall

    

Joint Venture

    

Affiliates

Balance as of December 31, 2021

$

130,572

565,437

696,009

Equity in earnings of unconsolidated affiliates (1)

3,429

42,627

46,056

Distributions from unconsolidated affiliates

(5,610)

(54,895)

(60,505)

Balance as of June 30, 2022

$

128,391

553,169

681,560

16


(1)As adjusted for the amortization of the difference between the cost of the equity investments in Stonewall and the Joint Venture and the amount of the underlying equity in the net assets of Stonewall and the Joint Venture as of March 12, 2019.

(14)Reportable Segments

(a)

Summary of Reportable Segments

The Company’s operations, which are located in the United States, are organized into 2 reportable segments: (i) gathering and processing and (ii) water handling. 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. Management evaluates the performance of the Company’s business segments based on operating income. Interest expense is primarily managed and evaluated on a consolidated basis.

Gathering and Processing

The gathering and processing segment includes a network of gathering pipelines and compressor stations that collect and process production from Antero Resources’ wells in West Virginia and Ohio. The gathering and processing segment also includes equity in earnings from the Company’s investments in the Joint Venture and Stonewall.

Water Handling

The Company’s water handling segment includes 2 independent systems that deliver water from sources including the Ohio River, local reservoirs and several regional waterways. Portions of these water handling systems are also utilized to transport flowback and produced water. The water handling systems consist of permanent buried pipelines, surface pipelines and water storage facilities, as well as pumping stations, blending facilities and impoundments to transport water throughout the systems used to deliver water for Antero Resources’ well completions.

22

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(b)

Reportable Segments Financial Information

The summarized operating results of the Company’s reportable segments are as follows:

Three Months Ended June 30, 2021

Gathering and

Water

Consolidated

(in thousands)

  

Processing

  

Handling

  

Unallocated (1)

  

Total

Revenues:

Revenue–Antero Resources

$

192,667

57,718

250,385

Revenue–third-party

70

70

Amortization of customer relationships

(9,271)

(8,397)

(17,668)

Total revenues

183,396

49,391

232,787

Operating expenses:

Direct operating

17,012

22,543

39,555

General and administrative

8,734

4,873

644

14,251

Facility idling

984

984

Depreciation

14,404

12,215

26,619

Accretion of asset retirement obligations

114

114

Gain on asset sale

(135)

(135)

Total operating expenses

40,015

40,729

644

81,388

Operating income

$

143,381

8,662

(644)

151,399

Equity in earnings of unconsolidated affiliates

$

21,515

21,515

Additions to property and equipment

$

36,599

9,377

45,976

(1)Certain expenses that are not directly attributable to gathering and processing and water handling are managed and evaluated on a consolidated basis.

Three Months Ended June 30, 2022

Gathering and

Water

Consolidated

(in thousands)

   

Processing

   

Handling

   

Unallocated (1)

  

Total

Revenues:

Revenue–Antero Resources

$

184,071

62,262

246,333

Revenue–third-party

242

242

Amortization of customer relationships

(9,272)

(8,396)

(17,668)

Total revenues

174,799

54,108

228,907

Operating expenses:

Direct operating

19,343

23,956

43,299

General and administrative

10,490

3,849

1,740

16,079

Facility idling

1,185

1,185

Depreciation

22,854

12,821

35,675

Impairment of property and equipment

1,130

2,572

3,702

Accretion of asset retirement obligations

64

64

Loss on settlement of asset retirement obligations

539

539

Gain on asset sale

(32)

(32)

Total operating expenses

53,785

44,986

1,740

100,511

Operating income

$

121,014

9,122

(1,740)

128,396

Equity in earnings of unconsolidated affiliates

$

22,824

22,824

Additions to property and equipment, net

$

60,931

16,836

77,767

(1)Certain expenses that are not directly attributable to gathering and processing and water handling are managed and evaluated on a consolidated basis.

23

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

Six Months Ended June 30, 2021

Gathering and

Water

Consolidated

(in thousands)

    

Processing

    

Handling

    

Unallocated (1)

Total

Revenues:

Revenue–Antero Resources

$

377,828

114,321

492,149

Revenue–third-party

95

95

Amortization of customer relationships

(18,542)

(16,794)

(35,336)

Total revenues

359,286

97,622

456,908

Operating expenses:

Direct operating

34,248

44,621

78,869

General and administrative

17,383

12,553

2,245

32,181

Facility idling

2,163

2,163

Depreciation

29,117

24,352

53,469

Impairment of property and equipment

1,218

161

1,379

Accretion of asset retirement obligations

233

233

Loss on asset sale

3,628

3,628

Total operating expenses

85,594

84,083

2,245

171,922

Operating income

$

273,692

13,539

(2,245)

284,986

Equity in earnings of unconsolidated affiliates

$

42,259

42,259

Additions to property and equipment

$

51,658

22,707

74,365

(1)Certain expenses that are not directly attributable to gathering and processing and water handling are managed and evaluated on a consolidated basis.

Six Months Ended June 30, 2022

Gathering and

Water

Consolidated

(in thousands)

    

Processing

    

Handling

    

Unallocated (1)

Total

Revenues:

Revenue–Antero Resources

$

366,514

115,583

482,097

Revenue–third-party

637

637

Amortization of customer relationships

(18,543)

(16,793)

(35,336)

Total revenues

347,971

99,427

447,398

Operating expenses:

Direct operating

36,525

48,786

85,311

General and administrative

20,191

10,590

3,229

34,010

Facility idling

2,333

2,333

Depreciation

38,661

25,314

63,975

Impairment of property and equipment

1,130

2,572

3,702

Accretion of asset retirement obligations

128

128

Loss on settlement of asset retirement obligations

539

539

Gain on asset sale

(63)

(87)

(150)

Total operating expenses

96,444

90,175

3,229

189,848

Operating income

$

251,527

9,252

(3,229)

257,550

Equity in earnings of unconsolidated affiliates

$

46,056

46,056

Additions to property and equipment, net

$

131,665

30,369

162,034

(1)Certain expenses that are not directly attributable to gathering and processing and water handling are managed and evaluated on a consolidated basis.

24

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

The summarized total assets of the Company’s reportable segments are as follows:

(Unaudited)

December 31,

June 30,

(in thousands)

2021

2022

Gathering and Processing

$

4,450,939

4,503,022

Water Handling

1,092,122

1,081,276

Unallocated (1)

940

1,203

Total assets

$

5,544,001

5,585,501

(1)Certain assets that are not directly attributable to gathering and processing and water handling are managed and evaluated on a consolidated basis.

25

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read theThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with theour unaudited condensed consolidated financial statements and related notes thereto, included elsewhere in this report. The information provided below supplements, but does not form part of, our unaudited condensed consolidated financial statements. This discussion contains forward lookingforward-looking statements that are based on the views and beliefs of our management, as well as assumptions and estimates made by our management. Actual results could differ materially from such forward lookingforward-looking statements as a result of various risk factors, including those that may not be in the control of management. For further information on these items that could impact our future operating performance or financial condition, please see “Item 1A. Risk Factors” and the section entitled “Cautionary Statement Regarding Forward LookingForward-Looking Statements.” We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law. For more information please In this section, references to “Antero Midstream,” “AM,” the “Company,” “we,” “us,” and “our” refer to Antero Midstream Corporation and its consolidated subsidiaries, unless otherwise indicated or the final prospectus dated May 3, 2017, filed with the SEC on May 5, 2017, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 and Antero Midstream’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017.context otherwise requires.

Overview

Overview

We are a Delaware limited partnership that is taxed as a corporation for U.S. federal income tax purposes. We own 100% of the membership interests in Antero Midstream Partners GP LLC, which owns the non-economic general partner interest in Antero Midstream Partners LP (NYSE: AM) (“Antero Midstream”) and we own all of the Series A capital interests (“Series A Units”) in Antero IDR Holdings LLC (“IDR LLC”), which owns the incentive distribution rights (“IDRs”) in Antero Midstream. IDR LLC also has Series B profits interests (“Series B Units”) outstanding that entitle the holders to receive up to 6% of the distributions that Antero Midstream makes on the IDRs in excess of $7.5 million per quarter, subject to certain vesting conditions. Antero Midstream is a growth-oriented master limited partnership 53.0% owned by Antero Resources Corporation (NYSE: AR) (“Antero Resources”) andmidstream energy company formed to own, operate and develop midstream energy infrastructureassets to primarily to service Antero Resources’ rapidly increasing production and completion activityactivity. We believe that our strategically located assets and our relationship with Antero Resources have allowed us to become a leading midstream energy company serving the Appalachian Basin and present opportunities to expand our midstream services to other operators in the Appalachian Basin’s Marcellus ShaleBasin. Our assets consist of gathering pipelines, compressor stations and Utica Shale locatedinterests in processing and fractionation plants that collect and process production from Antero Resources’ wells in the Appalachian Basin in West Virginia and Ohio. Our assets also include two independent water handling systems that deliver water from the Ohio River and several regional waterways. These water handling systems consist of permanent buried pipelines, surface pipelines and water storage facilities, as well as pumping stations, blending facilities and impoundments. Portions of these water handling systems are also utilized to transport flowback and produced water. These services are provided by us directly or through third-parties with which we contract.

COVID-19 Pandemic

Since the start of the COVID-19 pandemic, governments have tried to slow the spread of the virus by imposing social distancing guidelines, travel restrictions and stay-at-home orders, among other actions, which caused a significant decrease in activity in the global economy and the demand for oil, and to a lesser extent, natural gas and NGLs. As vaccines have become widely available, social distancing guidelines, travel restrictions and stay-at-home orders have eased, activity in the global economy has increased and demand for oil, natural gas and NGLs, and related commodity pricing, has improved. However, new variants of the virus could cause further commodity market volatility and resulting financial market instability, and these are variables beyond our control that may adversely impact our generation of funds from operating cash flows, distributions from unconsolidated affiliates and our ability to access the capital markets.

We believehave continued to operate throughout the pandemic, in some cases subject to federal, state and local regulations, and we are taking steps to protect the health and safety of our workers. We have implemented protocols to reduce the risk of an outbreak within our field operations, and these protocols have not reduced Antero Resources’ production and our throughput in a significant manner. A substantial portion of our non-field level employees currently operate in a hybrid working arrangement that involves a combination of in-office and remote work-from-home arrangements. We have been able to maintain a consistent level of effectiveness through these arrangements, including maintaining our day-to-day operations, our financial reporting systems and our internal control over financial reporting. We continue to monitor the COVID-19 environment in order to protect the health and safety of our employees and contract workers.

Neither our nor Antero Midstream’s strategically located assets and integrated relationship withResources’ supply chain has experienced any significant interruptions due to the COVID-19 pandemic. Prior to the COVID-19 pandemic, Antero Resources position it to behad developed a leading Appalachian midstream provider across the full midstream value chain.

Our revenues are generated solely from the cash distributions we receive from Antero Midstream through our interests in IDR LLC. Because our success is dependent upon the operationsdiverse set of buyers and management of Antero Midstreamdestinations, as well as in-field and off-site storage capacity for its resulting performance, Antero Midstream’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, has been included in this filing as Exhibit 99.1condensate volumes, and incorporated herein by reference.

Address, Internet Website and Availability of Public Filings

Our principal executive offices are at 1615 Wynkoop Street, Denver, Colorado 80202. Our telephone number is (303) 357‑7310. Our website is located at www.anteromidstreamgp.com.

We make available free of charge our Annual Reports on Form 10‑K, our Quarterly Reports on Form 10‑Q and our Current Reports on Form 8‑K as soon as reasonably practicable after we file such material with, or furnish it to, the SEC. These documents are located on our website under the “Investors Relations” link.

Information on our website is not incorporated into this Quarterly Report on Form 10‑Q or our other filings with the SEC and is not a part of them.

Third Quarter 2017 Developments and Highlights

Cash Distributions

We distribute cash available for distribution to our shareholders. Cash available for distribution is the cash distribution received from Antero Midstream reduced by reserves for estimated federal and state income taxes, general and

17


Table of Contents

administrative expenses, and reserves for other purposes deemed necessary by the board of directors of our general partner. Distributable cash for the three months ended September 30, 2017 was as follows (in thousands):

 

 

 

 

 

 

Three Months Ended September 30, 2017

Cash distributions from Antero Midstream Partners LP

 

$

19,067

Cash reserved for distributions to Series B units of IDR LLC

 

 

(684)

Cash distributions to Antero Midstream GP LP

 

 

18,383

General and administrative expenses

 

 

(615)

Provision for income taxes

 

 

(7,157)

Reserve for tax benefit on Series B Unit distributions

 

 

272

Distributable cash

 

$

10,883

 

 

 

 

The board of directors of our general partner has declared a cash distribution of $0.059 per share for the quarter ended September 30, 2017. The distribution will be payable on November 23, 2017 to shareholders of record as of November 1, 2017.

Items Affecting Comparability of Our Financial Results

Certain of the historical financial results discussed below may not be comparable to future financial results primarily as a result of the significant increase in the scope of Antero Midstream’s operations over the last several years. Antero Midstream’s gathering and compression and water handling and treatment systems are relatively new, as a substantial portion of these assets have built within the last four years. Accordingly, Antero Midstream’s revenues and expenses over that time reflect the significant increase in operations. Similarly,pandemic, Antero Resources has experienced significant changes inexpanded its customer base and its condensate storage capacity within the Appalachian Basin. However, if Antero Resources or our other customers were to experience any production curtailments or shut-ins it would reduce throughput for our gathering and drilling and completion schedule over that same period. As our revenue is predicated on Antero Midstream’s cash available for distribution, any change in Antero Midstream’s revenue and expenses could have a direct impact on us. Accordingly, it may be difficult to project trends from our historical financial data going forward.processing systems. In addition, if our historical resultscustomers were to delay or discontinue drilling or completion activities, it would reduce the volumes of operations do not reflectwater that we handle and therefore revenues for our water distribution and handling business.

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Table of Contents

The global economy continues to be impacted by the incremental expenses we expecteffects of the COVID-19 pandemicand global events, among other factors. Employment activity has strengthened as demonstrated by the United States Bureau of Labor and Statistics (“BLS”) unemployment rate declining from a high of 15% in April 2020 to incur4% in June 2022. However, the economy is also experiencing elevated inflation levels as a result of beingglobal supply and demand imbalances. For example, the BLS Consumer Price Index (“CPI”) for all urban consumers increased 9% from June 2021 to June 2022 as compared to the average annual increase of 3% over the previous 10 years. Inflationary pressures and labor shortages could result in increases to our operating and capital costs that are not fixed, renegotiation of contracts and/or supply agreements and higher labor costs, among others. These economic variables are beyond our control and may adversely impact our business, financial condition, results of operations and future cash flows.

Growth Incentive Fee Program with Antero Resources

Our gathering and compression agreement with Antero Resources includes a publicly traded company.growth incentive fee program whereby we agreed to provide quarterly fee reductions to Antero Resources through 2023, contingent upon Antero Resources achieving volumetric growth targets on low pressure gathering. The compression, high pressure gathering and fresh water delivery fees payable to us were unchanged. If actual low pressure volumes are below the lowest threshold for the respective period, Antero Resources will not earn a reduction in low pressure gathering fees. The following table summarizes the remaining low pressure gathering growth incentive targets through 2023:

Low Pressure Gathering

Quarterly Fee

Volume Growth Incentive

Reduction

Targets (MMcf/d)

(in millions)

Threshold 1

>2,900 and <3,150

$12.0

Threshold 2

>3,150 and <3,400

$15.5

Threshold 3

>3,400

$19.0

During the three months ended June 30, 2022, Antero Resources delivered low pressure gathering volumes of 2,970 and as a result, earned a quarterly fee reduction of $12 million during the period. During the six months ended June 30, 2022, Antero Resources earned an aggregate of $24 million in fee reductions. Antero Resources did not earn any quarterly fee reductions during the three and six months ended June 30, 2021.

Results of Operations

We have two operating segments: (i) gathering and processing and (ii) water handling. The gathering and processing segment includes a network of gathering pipelines and compressor stations that collect and process production from Antero Resources’ wells in the Appalachian Basin, as well as equity in earnings from our investments in the joint venture to develop processing and fractionation assets with MarkWest Energy Partners, L.P., a wholly owned subsidiary of MPLX, LP (the “Joint Venture”) and Stonewall Gas Gathering LLC. The water handling segment includes (i) two independent systems that deliver water from sources including the Ohio River, local reservoirs and several regional waterways and (ii) other fluid handling services, which include high rate transfer, wastewater transportation, disposal and blending.

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Table of Contents

Three Months Ended SeptemberJune 30, 20162021 Compared to Three Months Ended SeptemberJune 30, 2017 (in thousands):2022

The operating results of our reportable segments are as follows:

Three Months Ended June 30, 2021

Gathering and

Water

Consolidated

(in thousands)

   

Processing

   

Handling

   

Unallocated (1)

   

Total

Revenues:

Revenue–Antero Resources

$

192,667

57,718

250,385

Revenue–third-party

70

70

Amortization of customer relationships

(9,271)

(8,397)

(17,668)

Total revenues

183,396

49,391

232,787

Operating expenses:

Direct operating

17,012

22,543

39,555

General and administrative (excluding equity-based compensation)

6,412

4,364

416

11,192

Equity-based compensation

2,322

509

228

3,059

Facility idling

984

984

Depreciation

14,404

12,215

26,619

Accretion of asset retirement obligations

114

114

Gain on asset sale

(135)

(135)

Total operating expenses

40,015

40,729

644

81,388

Operating income

143,381

8,662

(644)

151,399

Other income (expense):

Interest expense, net

(43,505)

(43,505)

Equity in earnings of unconsolidated affiliates

21,515

21,515

Loss on early extinguishment of debt

(20,701)

(20,701)

Total other income (expense)

21,515

(64,206)

(42,691)

Income before income taxes

164,896

8,662

(64,850)

108,708

Income tax expense

(28,485)

(28,485)

Net income and comprehensive income

$

164,896

8,662

(93,335)

80,223

Adjusted EBITDA (2)

$

224,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount of

 

 

Three Months Ended September 30,

 

Increase

 

 

2016

  

2017

 

(Decrease)

  

Equity in earnings of Antero Midstream Partners LP

$

4,807

 

 

19,067

 

 

14,260

 

Total income

 

4,807

 

 

19,067

 

 

14,260

 

General and administrative expense

 

205

 

 

615

 

 

410

 

Equity-based compensation

 

 —

 

 

8,317

 

 

8,317

 

Total expenses

 

205

 

 

8,932

 

 

8,727

 

Income before income taxes

 

4,602

 

 

10,135

 

 

5,533

 

Provision for income taxes

 

(1,825)

 

 

(7,157)

 

 

(5,332)

 

Net income and comprehensive income

$

2,777

 

 

2,978

 

 

201

 

(1)Corporate expenses that are not directly attributable to either the gathering and processing or water handling segments.
(2)Adjusted EBITDA is a non-GAAP financial measure. For a discussion of this measure, including a reconciliation to its most directly comparable financial measure calculated and presented in accordance with GAAP, see “—Non-GAAP Financial Measures.”

Equity in earnings28

Table of Contents

Three Months Ended June 30, 2022

Gathering and

Water

Consolidated

(in thousands)

    

Processing

    

Handling

    

Unallocated (1)

    

Total

Revenues:

Revenue–Antero Resources

$

196,071

62,262

258,333

Revenue–third-party

242

242

Gathering—low pressure rebate

(12,000)

(12,000)

Amortization of customer relationships

(9,272)

(8,396)

(17,668)

Total revenues

174,799

54,108

228,907

Operating expenses:

Direct operating

19,343

23,956

43,299

General and administrative (excluding equity-based compensation)

6,268

2,658

1,512

10,438

Equity-based compensation

4,222

1,191

228

5,641

Facility idling

1,185

1,185

Depreciation

22,854

12,821

35,675

Impairment of property and equipment

1,130

2,572

3,702

Accretion of asset retirement obligations

64

64

Loss on settlement of asset retirement obligations

539

539

Gain on asset sale

(32)

(32)

Total operating expenses

53,785

44,986

1,740

100,511

Operating income

121,014

9,122

(1,740)

128,396

Other income (expense):

Interest expense, net

(45,426)

(45,426)

Equity in earnings of unconsolidated affiliates

22,824

22,824

Total other income (expense)

22,824

(45,426)

(22,602)

Income before income taxes

143,838

9,122

(47,166)

105,794

Income tax expense

(26,399)

(26,399)

Net income and comprehensive income

$

143,838

9,122

(73,565)

79,395

Adjusted EBITDA (2)

$

221,028

(1)Corporate expenses that are not directly attributable to either the gathering and processing or water handling segments.
(2)Adjusted EBITDA is a non-GAAP financial measure. For a discussion of this measure, including a reconciliation to its most directly comparable financial measure calculated and presented in accordance with GAAP, see “—Non-GAAP Financial Measures.”

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The operating data for Antero Midstream Partners LP. Equity in earningsis as follows:

Three Months Ended

Amount of

June 30,

Increase

Percentage

  

2021

    

2022

  

or Decrease

  

Change

Operating Data:

Gathering—low pressure (MMcf)

263,640

270,302

6,662

3

%

Compression (MMcf)

249,681

252,644

2,963

1

%

Gathering—high pressure (MMcf)

257,193

256,537

(656)

*

Fresh water delivery (MBbl)

9,499

10,048

549

6

%

Other fluid handling (MBbl)

4,381

4,128

(253)

(6)

%

Wells serviced by fresh water delivery

17

15

(2)

(12)

%

Gathering—low pressure (MMcf/d)

2,897

2,970

73

3

%

Compression (MMcf/d)

2,744

2,776

32

1

%

Gathering—high pressure (MMcf/d)

2,826

2,819

(7)

*

Fresh water delivery (MBbl/d)

104

110

6

6

%

Other fluid handling (MBbl/d)

48

45

(3)

(6)

%

Average Realized Fees:

Average gathering—low pressure fee ($/Mcf)

$

0.33

0.34

0.01

3

%

Average compression fee ($/Mcf)

$

0.20

0.21

0.01

3

%

Average gathering—high pressure fee ($/Mcf)

$

0.20

0.21

0.01

3

%

Average fresh water delivery fee ($/Bbl)

$

3.97

4.09

0.12

3

%

Joint Venture Operating Data:

Processing—Joint Venture (MMcf)

131,912

132,664

752

1

%

Fractionation—Joint Venture (MBbl)

3,417

3,368

(49)

(1)

%

Processing—Joint Venture (MMcf/d)

1,450

1,458

8

1

%

Fractionation—Joint Venture (MBbl/d)

38

37

(1)

(3)

%

*Not meaningful or applicable.

Revenues. Total revenues decreased by 2%, from $233 million, including amortization of Antero Midstream increased from $4.8customer relationships of $18 million, for the three months ended SeptemberJune 30, 20162021, to $19.1$229 million, including amortization of customer relationships of $18 million, for the three months ended SeptemberJune 30, 2017. Antero Midstream’s per-unit distribution increased2022. Gathering and processing revenues decreased by 5%, from $0.265 per unit in the third quarter of 2016 to $0.34 in the third quarter of 2017, resulting in the increase in distributions on the IDRs and resulting increase in our equity in earnings of Antero Midstream.

18


General and administrative expenses. General and administrative expenses increased from $0.2$184 million for the three months ended SeptemberJune 30, 20162021 to $0.6$175 million for the three months ended SeptemberJune 30, 2017. In the third quarter of 2016, we did not incur any significant general and administrative costs; however, in the third quarter of 2017, we incurred general and administrative costs related to being a publicly-traded entity.

Equity-based compensation expenses. Equity-based compensation expenses2022. Water handling revenues increased by 10%, from zero for the three months ended September 30, 2016 to $8.3$49 million for the three months ended SeptemberJune 30, 2017. The increase was due2021 to the issuance of equity-based compensation in the form of Series B Units. See Note 3 to the condensed consolidated financial statements.

Income tax expense. Income tax expense increased from $1.8$54 million for the three months ended SeptemberJune 30, 2016 to $7.22022. These fluctuations primarily resulted from the following:

Gathering and Processing

Low pressure gathering revenue decreased $12 million period over period primarily due to $12 million in higher rebates to Antero Resources during the three months ended June 30, 2022. Low pressure gathering volumes increased period over period primarily as a result of 66 additional wells being connected to our system since June 30, 2021.
Compression revenue increased $2 million period over period primarily due to a 3% increase in the compression rate as a result of the annual CPI-based adjustment and increased throughput volumes of 3 Bcf, or 32 MMcf/d. Compression volumes increased between periods primarily due to (i) 66 additional wells being connected to our system since June 30, 2021, (ii) one compressor that came online in the fourth quarter of 2021 and (iii) one compressor that came online during the second quarter of 2022.

High pressure gathering revenue increased $1 million period over period primarily due to a 3% increase in the high pressure gathering rate as a result of the annual CPI-based adjustment. High pressure gathering volumes decreased slightly period over period by 1 Bcf, or 7 MMcf/d due to higher production from Antero Resources that was attributable to third-party high pressure gathering acreage dedications, offset by 66 additional wells being connected to our system since June 30, 2021.

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Table of Contents

Water Handling

Fresh water delivery revenue increased $3 million period over period primarily due to (i) increased fresh water volumes of 1 MMBbl or 6 MBbl/d and (ii) a 3% increase to the fresh water delivery rate as a result of the annual CPI-based adjustment.

Other fluid handling services revenue increased $1 million period over period primarily due to increased water blending services between periods.

Direct operating expenses. Total direct operating expenses increased by 9%, from $40 million for the three months ended SeptemberJune 30, 2017. The increase is primarily due2021 to higher taxable income as a result of the increase in equity in earnings of Antero Midstream related to the IDRs.

The difference between income tax expense and expected income tax expense for financial statement purposes computed by applying the federal statutory rate of 35% to pre-tax income is caused by nondeductible equity-based compensation and IPO expenses, and the effect of state income taxes.

Net income and comprehensive income. Net income and comprehensive income increased from net income of $2.8$43 million for the three months ended SeptemberJune 30, 2016 to net income of $3.02022. Gathering and processing direct operating expenses increased by 14%, from $17 million for the three months ended SeptemberJune 30, 2017. The2021 to $19 million for the three months ended June 30, 2022 primarily due to higher throughput volumes between periods and the two compressors that came online between periods . Water handling direct operating expenses increased by 6%, from $23 million for the three months ended June 30, 2021 to $24 million for the three months ended June 30, 2022 primarily due to the increase wasin fresh water volumes between periods.

General and administrative (excluding equity-based compensation) expenses. General and administrative expenses (excluding equity-based compensation expense) decreased by 7%, from $11 million for the three months ended June 30, 2021 to $10 million for three months ended June 30, 2022 primarily due to lower legal costs associated with the Veolia legal matter between periods. See “Item 1. Legal Proceedings” below for additional information.

Equity-based compensation expenses. Equity-based compensation expenses increased by 84%, from $3 million for the three months ended June 30, 2021 to $6 million for the three months ended June 30, 2022 primarily due to an increase in the annual equity in earningsawards granted during the second quarter of Antero2022 as compared to prior years.

Facility idling expenses. Facility idling expenses remained consistent at $1 million for the three months ended June 30, 2021 and 2022.

Depreciation expense. Total depreciation expense increased by 34% from $27 million for the three months ended June 30, 2021 to $36 million for the three months ended June 30, 2022. This increase is primarily a result of a phased early retirement of an underutilized compressor station beginning in the thirdsecond quarter of 2017,2022 through the first half of 2023, which allows us to relocate and reuse the compressor units and equipment to (i) expand an existing compressor station and (ii) contribute to a new compressor station. There are certain costs associated with the underutilized compressor station that cannot be relocated or reused that will be depreciated over the remaining period of use. During the three months ended June 30, 2022, we recognized depreciation expense associated with assets that were retired early during the quarter and assets that are subject to early retirement in the future of $5 million and $2 million, respectively.

Impairment of property and equipment expense. There were no impairments of property and equipment during the three months ended June 30, 2021. Impairment of property and equipment expense of $4 million for the three months ended June 30, 2022 was primarily due to (i) a write-down of the Clearwater Facility related to the retirement obligation for the facility and (ii) cancelled projects.

Interest expense. Interest expense increased by 4%, from $44 million for the three months ended June 30, 2021 to $45 million for the three months ended June 30, 2022 primarily due to the (i) issuance of $750 million of 5.375% senior notes due 2029 (“2029 Notes”) on June 8, 2021 and (ii) increased interest rates on our senior secured revolving credit facility (“Credit Facility”) due to higher benchmark rates during the three months ended June 30, 2022, partially offset by the increase in equity-based compensation and income tax expense.redemption of all $650 million of the 5.375% senior notes due 2024 (“2024 Notes”) on June 8, 2021.

19


Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2017 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount of

 

 

Nine Months Ended September 30,

 

Increase

 

 

2016

  

2017

 

(Decrease)

  

Equity in earnings of Antero Midstream Partners LP

$

9,388

 

 

45,948

 

 

36,560

 

Total income

 

9,388

 

 

45,948

 

 

36,560

 

General and administrative expense

 

390

 

 

5,922

 

 

5,532

 

Equity-based compensation

 

 —

 

 

26,271

 

 

26,271

 

Total expenses

 

390

 

 

32,193

 

 

31,803

 

Income before income taxes

 

8,998

 

 

13,755

 

 

4,757

 

Provision for income taxes

 

(3,563)

 

 

(17,337)

 

 

(13,774)

 

Net income (loss) and comprehensive income (loss)

$

5,435

 

 

(3,582)

 

 

(9,017)

 

Equity in earnings of Antero Midstream Partners LP. unconsolidated affiliates.Equity in earnings of Antero Midstreamin unconsolidated affiliates increased by 6%, from $9.4$22 million for the ninethree months ended SeptemberJune 30, 20162021 to $46.0$23 million for the ninethree months ended SeptemberJune 30, 2017. Antero Midstream’s per-unit distribution increased2022 primarily due to an increase in processed volumes at the nineJoint Venture between periods, including one new Joint Venture processing plant with nameplate capacity of 200 MMcf/d being placed in service during July 2021.

Loss on early extinguishment of debt. Loss on early extinguishment of debt for the three months ended SeptemberJune 30, 2017 from2021 of $21 million relates to the nineredemption of all $650 million principal amount of the 2024 Notes at a premium to par of $17 million as well as the write-off of $6 million of unamortized deferred financing costs, partially offset by $2 million of unamortized premium. There was no loss on early extinguishment of debt for the three months ended SeptemberJune 30, 2016, resulting in the increase in distributions on the IDRs and resulting increase in our equity in earnings2022.

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Table of Antero Midstream.Contents

General and administrative expenses. General and administrative expenses increased from $0.4 million for the nine months ended September 30, 2016 to $5.9 million for the nine months ended September 30, 2017. In the first nine months of 2016 we did not incur any significant general and administrative costs; however, in the first nine months of 2017, we incurred approximately $5.1 million of general and administrative costs in connection with our IPO and $0.8 million of expenses related to being a public company.

Equity-based compensation expenses. Equity-based compensation expenses increased from zero for the nine months ended September 30, 2016 to $26.3 million for the nine months ended September 30, 2017. The increase was due to the issuance of equity-based compensation in the form of Series B Units. See Note 3 to the condensed consolidated financial statements.

Income tax expense.Income tax expense increased from $3.6 million for the ninethree months ended SeptemberJune 30, 2016 to $17.32021 and 2022 was $28 million forand $26 million, respectively, which reflects effective tax rates of 26.2% and 25.0%, respectively. The decrease in the nine months ended September 30, 2017. The increaseeffective tax rate between periods is primarily due to an income tax benefit for the equity-based awards that vested during the three months ended June 30, 2022, partially offset by a higher amount of taxable income as a result of the increase in equity in earnings of Antero Midstream relatedbeing apportioned to the IDRs.West Virginia.

The difference between income tax expense and expected income tax expense for financial statement purposes computed by applying the federal statutory rate of 35% to pre-tax income is caused by nondeductible equity-based compensation and IPO expenses, and the effect of state income taxes.

Net income.Net income (loss)remained relatively consistent at $80 million and comprehensive income (loss). Net income (loss)$79 million for three months ended June 30, 2021 and comprehensive income (loss)2022, respectively.

Adjusted EBITDA. Adjusted EBITDA decreased by 2%, from net income of $5.4$225 million for the ninethree months ended SeptemberJune 30, 20162021 to a net loss of $3.6$221 million for the ninethree months ended SeptemberJune 30, 2017.2022. The decrease was primarily due to decreased low pressure gathering revenues and higher direct operating costs between periods, partially offset by higher water handling revenues between periods. For a discussion of the non-GAAP financial measure Adjusted EBITDA, including a reconciliation to its most directly comparable financial measure calculated and presented in accordance with GAAP, read “—Non-GAAP Financial Measures” below.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2022

The operating results of our reportable segments are as follows:

Six Months Ended June 30, 2021

Gathering and

Water

Consolidated

(in thousands)

   

Processing

   

Handling

   

Unallocated (1)

   

Total

Revenues:

Revenue–Antero Resources

$

377,828

114,321

492,149

Revenue–third-party

95

95

Amortization of customer relationships

(18,542)

(16,794)

(35,336)

Total revenues

359,286

97,622

456,908

Operating expenses:

Direct operating

34,248

44,621

78,869

General and administrative (excluding equity-based compensation)

12,336

10,984

1,790

25,110

Equity-based compensation

5,047

1,569

455

7,071

Facility idling

2,163

2,163

Depreciation

29,117

24,352

53,469

Impairment of property and equipment

1,218

161

1,379

Accretion of asset retirement obligations

233

233

Loss on asset sale

3,628

3,628

Total operating expenses

85,594

84,083

2,245

171,922

Operating income

273,692

13,539

(2,245)

284,986

Other income (expense):

Interest expense, net

(86,371)

(86,371)

Equity in earnings of unconsolidated affiliates

42,259

42,259

Loss on early extinguishment of debt

(20,701)

(20,701)

Total other income (expense)

42,259

(107,072)

(64,813)

Income before income taxes

315,951

13,539

(109,317)

220,173

Income tax expense

(56,509)

(56,509)

Net income and comprehensive income

$

315,951

13,539

(165,826)

163,664

Adjusted EBITDA (2)

$

444,287

(1)Corporate expenses that are not directly attributable to either the gathering and processing or water handling segments.
(2)Adjusted EBITDA is a non-GAAP financial measure. For a discussion of this measure, including a reconciliation to its most directly comparable financial measure calculated and presented in accordance with GAAP, see “—Non-GAAP Financial Measures.”

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Table of Contents

Six Months Ended June 30, 2022

Gathering and

Water

Consolidated

(in thousands)

    

Processing

    

Handling

    

Unallocated (1)

    

Total

Revenues:

Revenue–Antero Resources

$

390,514

115,583

506,097

Revenue–third-party

637

637

Gathering—low pressure rebate

(24,000)

(24,000)

Amortization of customer relationships

(18,543)

(16,793)

(35,336)

Total revenues

347,971

99,427

447,398

Operating expenses:

Direct operating

36,525

48,786

85,311

General and administrative (excluding equity-based compensation)

13,833

8,930

2,774

25,537

Equity-based compensation

6,358

1,660

455

8,473

Facility idling

2,333

2,333

Depreciation

38,661

25,314

63,975

Impairment of property and equipment

1,130

2,572

3,702

Accretion of asset retirement obligations

128

128

Loss on settlement of asset retirement obligations

539

539

Gain on asset sale

(63)

(87)

(150)

Total operating expenses

96,444

90,175

3,229

189,848

Operating income

251,527

9,252

(3,229)

257,550

Other income (expense):

Interest expense, net

(89,705)

(89,705)

Equity in earnings of unconsolidated affiliates

46,056

46,056

Total other income (expense)

46,056

(89,705)

(43,649)

Income before income taxes

297,583

9,252

(92,934)

213,901

Income tax expense

(54,466)

(54,466)

Net income and comprehensive income

$

297,583

9,252

(147,400)

159,435

Adjusted EBITDA (2)

$

430,058

(1)Corporate expenses that are not directly attributable to either the gathering and processing or water handling segments.
(2)Adjusted EBITDA is a non-GAAP financial measure. For a discussion of this measure, including a reconciliation to its most directly comparable financial measure calculated and presented in accordance with GAAP, see “—Non-GAAP Financial Measures.”

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Table of Contents

The operating data for Antero Midstream is as follows:

Six Months Ended

Amount of

June 30,

Increase

Percentage

  

2021

  

2022

  

or Decrease

  

Change

Operating Data:

Gathering—low pressure (MMcf)

522,994

534,029

11,035

2

%

Compression (MMcf)

493,243

506,118

12,875

3

%

Gathering—high pressure (MMcf)

510,284

515,579

5,295

1

%

Fresh water delivery (MBbl)

18,899

17,922

(977)

(5)

%

Other fluid handling (MBbl)

8,332

8,331

(1)

*

Wells serviced by fresh water delivery

41

36

(5)

(12)

%

Gathering—low pressure (MMcf/d)

2,889

2,950

61

2

%

Compression (MMcf/d)

2,725

2,796

71

3

%

Gathering—high pressure (MMcf/d)

2,819

2,849

30

1

%

Fresh water delivery (MBbl/d)

104

99

(5)

(5)

%

Other fluid handling (MBbl/d)

46

46

*

Average Realized Fees:

Average gathering—low pressure fee ($/Mcf)

$

0.33

0.34

0.01

3

%

Average compression fee ($/Mcf)

$

0.20

0.21

0.01

3

%

Average gathering—high pressure fee ($/Mcf)

$

0.20

0.21

0.01

3

%

Average fresh water delivery fee ($/Bbl)

$

3.97

4.08

0.11

3

%

Joint Venture Operating Data:

Processing—Joint Venture (MMcf)

260,450

268,906

8,456

3

%

Fractionation—Joint Venture (MBbl)

6,848

6,445

(403)

(6)

%

Processing—Joint Venture (MMcf/d)

1,439

1,486

47

3

%

Fractionation—Joint Venture (MBbl/d)

38

36

(2)

(5)

%

*Not meaningful or applicable.

Revenues. Total revenues decreased by 2%, from $457 million, including amortization of customer relationships of $35 million, for the six months ended June 30, 2021, to $447 million, including amortization of customer relationships of $35 million, for the six months ended June 30, 2022. Gathering and processing revenues decreased by 3%, from $360 million for the six months ended June 30, 2021 to $348 million for the six months ended June 30, 2022. Water handling revenues increased by 2%, from $97 million for the six months ended June 30, 2021 to $99 million for the six months ended June 30, 2022. These fluctuations primarily resulted from the following:

Gathering and Processing

Low pressure gathering revenue decreased $21 million period over period due to the $24 million rebate earned by Antero Resources during the six months ended June 30, 2022, partially offset by increased throughput volumes of 11 Bcf, or 61 MMcf/d, and a 3% increase in the low pressure gathering rate as a result of the annual CPI-based adjustment. Low pressure gathering volumes increased between periods primarily due to 66 additional wells being connected to our system since June 30, 2021.
Compression revenue increased $5 million period over period primarily due to increased throughput volumes of 13 Bcf, or 71 MMcf/d, and a 3% increase in the compression rate as a result of the annual CPI-based adjustment. Compression volumes increased between periods primarily due to (i) 66 additional wells being connected to our system since June 30, 2021, (ii) one compressor that came online in the fourth quarter of 2021 and (iii) one compressor that came online during the second quarter of 2022.
High pressure gathering revenue increased $4million period over period due to increased throughput volumes of 5 Bcf, or 30 MMcf/d, and a 3% increase to the high pressure gathering rate as a result of the annual CPI-based adjustment. The high pressure gathering volumes increased period over period primarily due to 66 additional wells being connected to our system since June 30, 2021.

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Water Handling

Fresh water delivery revenue decreased $2 million period over period primarily due to decreased fresh water delivery volumes of 1 MMBbl, or 5 MBbl/d, as a result of a decrease in the number of wells completed, partially offset by a 3% increase to the fresh water delivery rate as a result of the annual CPI-based adjustment.
Other fluid handling services revenue increased $4 million period over period primarily due to increased water blending services between periods.

Direct operating expenses. Total direct operating expenses increased by 8%, from $79 million for the six months ended June 30, 2021 to $85 million for the six months ended June 30, 2022. Gathering and processing direct operating expenses increased by 7%, from $34 million for the six months ended June 30, 2021 to $36 million for the six months ended June 30, 2022 primarily due to higher throughput volumes between periods and the two compressors that came online between periods. Water handling direct operating expenses increased by 9%, from $45 million for the six months ended June 30, 2021 to $49 million for the six months ended June 30, 2022 primarily due to the increase in fresh water volumes between periods and resuming fresh water deliveries in the Utica for Antero Resources’ development program during the first quarter of 2022.

General and administrative (excluding equity-based compensation) expenses. General and administrative expenses (excluding equity-based compensation expense) remained consistent at $25 million and $26 million for the six months ended June 30, 2021 and 2022, respectively.

Equity-based compensation expenses. Equity-based compensation expenses increased by 20%, from $7 million for the six months ended June 30, 2021 to $8 million for the six months ended June 30, 2022 primarily due to an increase in equity-based compensation,the annual equity awards granted during the second quarter of 2022 as compared to prior years.

Facility idling expenses. Facility idling expenses remained consistent at $2 million for the six months ended June 30, 2021 and 2022.

Depreciation expense. Total depreciation expense increased by 20%, from $53 million for the six months ended June 30, 2021 to $64 million for the six months ended June 30, 2022. This increase is primarily a result of a phased early retirement of an underutilized compressor station beginning in the second quarter of 2022 through the first half of 2023, which allows us to relocate and reuse the compressor units and equipment to (i) expand an existing compressor station and (ii) contribute to a new compressor station. There are certain costs associated with the underutilized compressor station that cannot be relocated or reused that will be depreciated over the remaining period of use. During the six months ended June 30, 2022, we recognized depreciation expense associated with assets that were retired early during the period and assets that are subject to early retirement in the future of $5 million and $2 million, respectively.

Impairment of property and equipment expense. Impairment of property and equipment expense of $1 million for the six months ended June 30, 2021 was primarily a lower of cost or market adjustment for pipe inventory. Impairments of property and equipment expense of $4 million during the six months ended June 30, 2022 was primarily due to (i) a write-down of the Clearwater Facility related to the retirement obligation for the facility and (ii) cancelled projects.

Loss (gain) on asset sale. Loss on asset sale of $4 million for the six months ended June 30, 2021 primarily relates to the sale of excess pipe inventory during the period.Gain on asset sale for the six months ended June 30, 2022 primarily relates to the sale of miscellaneous equipment and excess pipe inventory during the period.

Interest expense. Interest expense increased by 4%, from $86 million for the six months ended June 30, 2021 to $90 million for the six months ended June 30, 2022 primarily due to the issuance of $750 million of 2029 Notes on June 8, 2021, partially offset by the redemption of all $650 million of the 2024 Notes on June 8, 2021.

Equity in earnings of unconsolidated affiliates. Equity in earnings in unconsolidated affiliates increased by 9%, from $42 million for the six months ended June 30, 2021 to $46 million for the six months ended June 30, 2022 primarily due to an increase in processed volumes at the Joint Venture between periods, including one new Joint Venture processing plant with nameplate capacity of 200 MMcf/d being placed in service during July 2021.

Loss on early extinguishment of debt. Loss on early extinguishment of debt for the six months ended June 30, 2021 of $21 million relates to the redemption of all $650 million principal amount of the 2024 Notes at a premium to par of $17 million as well as

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the write-off of $6 million of unamortized deferred financing costs, partially offset by $2 million of unamortized premium. There was no loss on early extinguishment of debt for the six months ended June 30, 2022.

Income tax expense. Income tax expense remained relatively consistent for the six months ended June 30, 2021 and 2022 at $57 million and $54 million, respectively, which reflects effective tax rates of 25.7% and 25.5%, respectively.

Net income. Net income decreased by 3%, from $164 million for the six months ended June 30, 2021 to $159 million for the six months ended June 30, 2022 primarily due to (i) a decrease in low pressure gathering revenues, (ii) lower fresh water delivery revenues, (iii) higher direct operating expenses, (iv) higher depreciation expense, (v) higher general and administrative expenses,costs and income tax(vi) higher interest expense, partially offset by the increase inhigher equity in earnings of Antero Midstreamunconsolidated affiliates and increased other fluid handling revenues. In addition, the six months ended June 30, 2021 included a loss on early extinguishment of debt for the redemption of the 2024 Notes, and there was no loss on early extinguishment of debt during the six months ended June 30, 2022.

Adjusted EBITDA. Adjusted EBITDA decreased by 3%, from $444 million for the six months ended June 30, 2021 to $430 million for the six months ended June 30, 2022. The decrease between periods was primarily due to (i) a decrease in 2017.low pressure gathering revenues, (ii) lower fresh water delivery revenues, (iii) higher direct operating expenses and (iv) higher general and administrative costs, excluding equity-based compensation expense, partially offset by higher other fluid handling revenues. For a discussion of the non-GAAP financial measure Adjusted EBITDA, including a reconciliation to its most directly comparable financial measure calculated and presented in accordance with GAAP, read “—Non-GAAP Financial Measures” below.

Capital Resources and Liquidity

Sources and Uses of Cash

As a result ofCapital resources and liquidity are provided by operating cash flow and available borrowings under our interest in IDR LLC, we will receive at least 94% ofCredit Facility and capital market transactions. See Note 7—Long-Term Debt to the cash distributions paid by Antero Midstream on the IDRs. Our interest in the IDR distributions is our only cash-generating asset.unaudited condensed consolidated financial statements. We expect that the cash distributions on the IDRscombination of these capital resources will be adequate to meet our working capital requirements, andcapital expenditures program, expected quarterly cash distributionsdividends and share repurchases under our share repurchases program for at least the next twelve12 months. At September 30, 2017, we had a working capital deficit due to our

20


income tax payable, which is based on equity in earnings from unconsolidated affiliates for the three months ended September 30, 2017. The cash distribution attributable to our equity in earnings for the three months ended September 30, 2017 will be received in the fourth quarter of 2017 when Antero Midstream declares and pays the cash distribution for the third quarter. On October 11, 2017, Antero MidstreamDirectors (the “Board”) declared a cash distribution that included an IDR distributiondividend on the shares of $19.1 millionour common stock of $0.2250 per share for the quarter ended June 30, 2022. The dividend will be payable on August 10, 2022 to IDR LLCstockholders of record as of July 27, 2022. Our Board also declared a cash dividend of $138 thousand on November 16, 2017.the shares of Series A Preferred Stock, which will be paid on August 15, 2022 in accordance with their terms, which are discussed in Note 11—Equity and Earnings Per Common Share. As of June 30, 2022, there were dividends in the amount of $69 thousand accumulated in arrears on our Series A Preferred Stock.

We expect our future cash requirements relating to working capital, capital expenditures and quarterly cash dividends to our stockholders will be funded from cash flows internally generated from our operations or borrowings under the Credit Facility.

As of June 30, 2022, we did not have any off-balance sheet arrangements.

Cash Flows Provided by

The following table summarizes our cash flows for the six months ended June 30, 2021 and 2022:

Six Months Ended June 30,

(in thousands)

    

2021

    

2022

Net cash provided by operating activities

$

360,375

354,181

Net cash used in investing activities

(73,704)

(162,692)

Net cash used in financing activities

(286,633)

(191,489)

Net increase in cash and cash equivalents

$

38

Operating Activities

Activities.Net cash provided by operating activities was $5.1$360 million and $13.5$354 million for the ninesix months ended SeptemberJune 30, 20162021 and 2017,2022, respectively. The decrease in cash flows provided by operations between periods was primarily the result of decreased low pressure gathering revenues, higher direct operating expenses, partially offset by changes in working capital, excluding income tax receivable, and higher other fluid handling revenues between periods. Additionally, we received income tax refunds during

36

Table of Contents

the six months ended June 30, 2021 of $17 million from certain net operating loss carryback provisions included in the Coronavirus Aid, Relief, and Economic Security Act that was enacted in March 2020. We did not receive any income tax refunds during the six months ended June 30, 2022.

Investing Activities. Net cash flows used in investing activities was $74 million and $163 million for the six months ended June 30, 2021 and 2022, respectively. The increase in cash flow from operations for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016flows used in investing activities between periods was primarily due to increased distributions from Antero Midstream of $28.9an $80 million offset by an increase in generalcapital spending for expansion of our gathering system and administrative expenses (primarily attributable to the IPO)an $8 million increase in capital spending for expansion of $5.5 million, $15.1 million of cash paid in 2017 for 2016 and 2017 income taxes, and other working capital items.our water handling system.

Cash Flows Used in Investing Activities

We did not have any investing cash flow activities during the nine months ended September 30, 2016 or 2017.

Cash Flows Used in Financing Activities

Activities.Net cash used in financing activities was $287 million and $191 million for the ninesix months ended SeptemberJune 30, 2017 consisted2021 and 2022, respectively. The decrease in cash flows used in financing activities between periods was primarily due to no redemptions of $15.7our senior notes or net repayments on our Credit Facility, and reduced dividends to stockholders of $39 million. During the six months ended June 30, 2021, we issued $750 million principal amount of 2029 Notes, redeemed $650 million principal amount of 2024 Notes at 102.688% of par and repaid $100 million on our Credit Facility. During the six months ended June 30, 2022, we incurred net borrowings of $33 million on our Credit Facility.

2022 Capital Investment

The Board approved a 2022 capital budget with a range of $275 million to $300 million, which includes growth capital supporting the increased volumes expected from Antero Resources’ drilling partnership. Our capital budgets may be adjusted as business conditions warrant. If natural gas, NGLs and oil prices decline to levels below acceptable levels or costs increase to levels above acceptable levels, Antero Resources could choose to defer a significant portion of its budgeted capital expenditures until later periods. As a result, we may also defer a significant portion of our budgeted capital expenditures to achieve the desired balance between sources and uses of liquidity and prioritize capital projects that we believe have the highest expected returns. We routinely monitor and adjust our capital expenditures in pre-IPOresponse to changes in Antero Resources’ development plans, changes in prices, availability of financing, acquisition costs, industry conditions, the timing of regulatory approvals, success or lack of success in Antero Resources’ drilling activities, contractual obligations, internally generated cash flows and other factors both within and outside our control. Additionally, we monitor our existing assets and look for opportunities to reuse or otherwise repurpose assets in an effort to maintain our capital efficiency.

For the three months ended June 30, 2022, our capital expenditures were $70 million, including $53 million for our gathering and compression system and $17 million for our water handling facilities. For the six months ended June 30, 2022, our capital expenditures were $165 million, including $131 million for our gathering and compression system and $34 million for our water handling facilities.

Debt Agreements

See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements and to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2021 Form 10-K for information on our debt agreements.

Non-GAAP Financial Measures

We use Adjusted EBITDA as an important indicator of our performance. We define Adjusted EBITDA as net income distributed to Antero Investment prior to its liquidationbefore net interest expense, income tax expense, depreciation, impairment, accretion of asset retirement obligations, equity-based compensation, excluding equity in earnings of unconsolidated affiliates, amortization of customer relationships, loss on settlement of asset retirement obligations, loss (gain) on asset sale and $5.0 million in quarterlyincluding cash distributions from unconsolidated affiliates.

We use Adjusted EBITDA to assess:

the financial performance of our shareholders. We didassets, without regard to financing methods, capital structure or historical cost basis;

our operating performance and return on capital as compared to other publicly traded companies in the midstream energy sector, without regard to financing or capital structure; and

the viability of acquisitions and other capital expenditure projects.

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Adjusted EBITDA is a non-GAAP financial measure. The GAAP measure most directly comparable to Adjusted EBITDA is net income. The non-GAAP financial measure of Adjusted EBITDA should not be considered as an alternative to the GAAP measure of net income. Adjusted EBITDA presentations are not made in accordance with GAAP and have any financing cash flow activities duringimportant limitations as an analytical tool because they include some, but not all, items that affect net income. You should not consider Adjusted EBITDA in isolation or as a substitute for analyses of results as reported under GAAP. Our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other corporations.

The following table represents a reconciliation of our Adjusted EBITDA to the nine months ended September 30, 2016.most directly comparable GAAP financial measure for the periods presented:

Three Months Ended

Six Months Ended

June 30,

June 30,

(in thousands)

2021

2022

2021

2022

Net income

$

80,223

79,395

163,664

159,435

Interest expense, net

43,505

45,426

86,371

89,705

Income tax expense

28,485

26,399

56,509

54,466

Depreciation expense

26,619

35,675

53,469

63,975

Amortization of customer relationships

17,668

17,668

35,336

35,336

Equity-based compensation

3,059

5,641

7,071

8,473

Impairment

3,702

1,379

3,702

Accretion of asset retirement obligations

114

64

233

128

Equity in earnings of unconsolidated affiliates

(21,515)

(22,824)

(42,259)

(46,056)

Distributions from unconsolidated affiliates

26,275

29,375

58,185

60,505

Loss on early extinguishment of debt

20,701

20,701

Loss on settlement of asset retirement obligations

539

539

Loss (gain) on asset sale

(135)

(32)

3,628

(150)

Adjusted EBITDA

$

224,999

221,028

444,287

430,058

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our financial statements.

Equity-Based Compensation

Equity-based compensation awards are measured at their grant date fair value We provide expanded discussion of our more significant accounting policies, estimates and related compensation cost is recognized overjudgments in the vesting period of the grant. Compensation cost for awards with only service conditions is recognized on a straight-line basis over the requisite service period of the entire award. Estimating the fair value of each award involves a number of2021 Form 10-K. We believe these accounting policies reflect our more significant estimates including interest rates, expected volatilityand assumptions used in preparation of our equity value, and expected distributionsfinancial statements.

New Accounting Pronouncements

See Note 2—Summary of Significant Accounting Policies to the unaudited condensed consolidated financial statements for information on the Series B Units.new accounting pronouncements.

Off-Balance Sheet Arrangements

As of September 30, 2017, we did not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Risk.

The natureprimary objective of the following information is to provide forward-looking quantitative and qualitative information about our businesspotential exposure to market risk. The term “market risk” refers to the risk of loss arising from adverse changes in commodity prices and operations is such that no activities or transactionsinterest rates. The disclosures are conducted or entered into by us that would require usnot meant to have a discussion under this item.

21


be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures.

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Table of Contents

Commodity Price Risk

ForOur gathering and compression and water services agreements with Antero Resources provide for fixed-fee and cost of service fee structures, and we intend to continue to pursue additional fixed-fee or cost of service fee opportunities with Antero Resources and third parties in order to avoid direct commodity price exposure. However, to the extent that our future contractual arrangements with Antero Resources or third parties do not provide for fixed-fee or cost of service fee structures, we may become subject to commodity price risk. We are subject to commodity price risks to the extent that they impact Antero Resources’ development program and production and therefore our gathering, compression, and water handling volumes. We cannot predict to what extent our business would be impacted by lower commodity prices and any resulting impact on Antero Resources’ operations.

Interest Rate Risk

Our primary exposure to interest rate risk results from outstanding borrowings under the Credit Facility, which has a discussionfloating interest rate. We do not currently, but may in the future, hedge the interest on portions of these matters as they pertainour borrowings under the Credit Facility from time-to-time in order to Antero Midstream, please read Item 3. “Quantitativemanage risks associated with floating interest rates. At June 30, 2022, we had $581 million of borrowings and Qualitative Disclosures About Market Risk”no letters of Antero Midstream’s Quarterly Report on Form 10-Qcredit outstanding under the Credit Facility. A 1.0% increase in the Credit Facility interest rate would have resulted in an estimated $3 million increase in interest expense for the quartersix months ended SeptemberJune 30, 2017, which has been included2022.

Credit Risk

We are dependent on Antero Resources as our primary customer, and we expect to derive substantially all of our revenues from Antero Resources for the foreseeable future. As a result, any event, whether in this filing as Exhibit 99.1 and incorporated herein by reference, as the activitiesour area of operations or otherwise, that adversely affects Antero Midstream have a significant impact on ourResources’ production, drilling schedule, financial condition, leverage, market reputation, liquidity, results of operations or cash flows may adversely affect our revenues and financial position.operating results.

Further, we are subject to the risk of non-payment or non-performance by Antero Resources, including with respect to our gathering and compression and water handling services agreements. We cannot predict the extent to which Antero Resources’ business would be impacted if conditions in the energy industry were to deteriorate, nor can we estimate the impact such conditions would have on Antero Resources’ ability to execute its drilling and development program or to perform under our agreements. Any material non-payment or non-performance by Antero Resources could adversely affect our revenues and operating results and our ability to return capital to stockholders.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a15(b)13a-15(b) under the Securities Exchange Act, of 1934, as amended (the Exchange Act), we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a15(e)13a-15(e) and 15d15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report.Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of SeptemberJune 30, 20172022 at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There hashave been no changechanges in our internal control over financial reporting (as defined in Rules 13a‑15(f)13a-15(f) and 15d‑15(f)15d-15(f) under the Exchange Act) during the third quarter of 2017three months ended June 30, 2022 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

Item 5.   Other Information.

Amended and Restated Antero Midstream Credit Facility

On October 26, 2017, Antero Midstream entered into an amendment and restatement of its revolving credit facility (as amended, the “Credit Facility”). For a description of the Credit Facility, see “—Debt Agreements—Revolving Credit Facility” in Antero Midstream’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, which has been included in this filing as Exhibit 99.1 and incorporated herein by reference.. The description of the Credit Facility is a summary and is qualified in its entirety by the terms of the Credit Facility. A copy of the Credit Facility is filed as Exhibit 10.1 hereto, and is incorporated herein by reference.

22


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Table of Contents

PART II—OTHER INFORMATIONINFORMATION

Item 1. Legal Proceedings.

Our operations are subject to a variety of risks and disputes normally incident to our business. As a result, we may, at any given time, be a defendant in various legal proceedings and litigation arising in the ordinary course of business. However,

We maintain insurance policies with insurers in amounts and with coverage and deductibles that we, with the advice of our insurance advisors and brokers, believe are reasonable and prudent. We cannot, however, assure you that this insurance will be adequate to protect us from all material expenses related to potential future claims for personal and property damage or that these levels of insurance will be available in the future at economical prices.

Veolia

The Company is currently involved in a consolidated lawsuit with Veolia Water Technologies, Inc. (“Veolia”) relating to the Clearwater Facility.

On March 13, 2020, Antero Treatment LLC (“Antero Treatment”), a wholly owned subsidiary of the Company, filed suit against Veolia in the district court of Denver County, Colorado, asserting claims of fraud, breach of contract and other related claims. Antero Treatment alleges that Veolia failed to meet its contractual obligations to design and build a “turnkey” wastewater disposal facility under a Design/Build Agreement dated August 18, 2015 (the “DBA”), and that Veolia fraudulently concealed certain miscalculations and design flaws during contract negotiations and continued to conceal and fraudulently misrepresent the impact of certain design changes post-execution of the DBA. On March 13, 2020, Veolia filed a separate suit against the Company, Antero Resources, and certain of the Company’s wholly owned subsidiaries (collectively, the “Antero Defendants”) in Denver County, Colorado. In its lawsuit, Veolia asserted breach of contract and equitable claims against the Antero Defendants for alleged failures under the DBA. Veolia’s suit was consolidated into the action filed by Antero Treatment.

Veolia and the Antero Defendants each filed partial motions to dismiss and motions for summary judgment directed at certain claims asserted by the opposing party. A bench trial on the remaining claims was held from January 24 through February 10, 2022 and concluded on February 24, 2022. At trial, Antero Treatment sought damages from Veolia of approximately $450 million, which represents the Company’s out-of-pocket costs associated with the Clearwater Facility project. In the alternative, Antero Treatment sought damages related to multiple breaches of the DBA, totaling approximately $370 million. Also at trial, Veolia sought monetary damages of approximately $118 million, including alleged delay and extra-contractual costs and a contract balance relating to an allegation that Antero Defendants improperly terminated the DBA. The Antero Defendants vigorously deny Veolia’s claims. A final judgment on the claims has not currently subject to any material litigation.yet been rendered.

Item 1A. Risk Factors.

We are subject to certain risks and hazards due to the nature of the business activities we conduct. For a discussion of these risks, set forthsee “Item 1A. Risk Factors” in our prospectus dated May 3, 2017 and filed with the SEC on May 5, 2017 that were set forth under the caption “Risk Factors.” The risks described in our prospectus could materially and adversely affect our business, financial condition, cash flows, and results of operations.2021 Form 10-K. There have been no material changes to the risks described in our prospectus and under the heading “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 and in Antero Midstream’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017.such report. We may experience additional risks and uncertainties not currently known to us, or,us. Furthermore, as a result of developments occurring in the future, conditions that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, cash flows and results of operations.

Item 5.   Other Information. 

Disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934

Pursuant to Section 13(r) of the Securities Exchange Act of 1934, we may be required to disclose in our annual and quarterly reports to the SEC, whether we or any of our “affiliates” knowingly engaged in certain activities, transactions or dealings relating to Iran or with certain individuals or entities targeted by U.S. economic sanctions. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law. Because the SEC defines the term “affiliate” broadly, it includes any entity under common “control” with us (and the term “control” is also construed broadly by the SEC).

The description of the activities below has been provided to us by Warburg Pincus LLC (“Warburg”), affiliates of which: (i) beneficially own more than 10% of our outstanding common shares and/or are members of our general partner’s board of directors, (ii) beneficially own more than 10% of the equity interests of, and have the right to designate members of the board of directors of Santander Asset Management Investment Holdings Limited (“SAMIH”). SAMIH may therefore be deemed to be under common “control” with us; however, this statement is not meant to be an admission that common control exists.

The disclosure below relates solely to activities conducted by SAMIH and its affiliates. The disclosure does not relate to any activities conducted by us or by Warburg and does not involve our or Warburg’s management. Neither we nor Warburg has had any involvement in or control over the disclosed activities, and neither we nor Warburg has independently verified or participated in the preparation of the disclosure. Neither we nor Warburg is representing as to the accuracy or completeness of the disclosure nor do we or Warburg undertake any obligation to correct or update it.

We understand that one or more SEC-reporting affiliates of SAMIH intend to disclose in their next annual or quarterly SEC report that:

a) Santander UK plc (“Santander UK”) holds two savings accounts and one current account for two customers resident in the United Kingdom (“UK”) who are currently designated by the United States (“US”) under the Specially Designated Global Terrorist (“SDGT”) sanctions program. Revenues and profits generated by Santander UK on these accounts in the nine month period ended September 30, 2017 were negligible relative to the overall revenues and profits of Banco Santander SA.

(b) Santander UK holds two frozen current accounts for two UK nationals who are designated by the US under the SDGT sanctions program. The accounts held by each customer have been frozen since their designation and have remained frozen through the nine month period ended September 30, 2017. The accounts are in arrears

23


us.

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Table of Contents

(£1,844.73 in debit combined)Item 2. Unregistered Sales of Equity Securities and are currently being managed by Santander UK Collections & Recoveries department. No revenues or profits were generated by Santander UK on this account in the nine monthUse of Proceeds.

Issuer Purchases of Equity Securities

The following table sets forth our common stock share purchase activity for each period ended September 30, 2017.presented:

Item 6.   Exhibits.

Approximate

Total Number of

Dollar Value of

Total Number

Average Price

Shares Purchased

Shares that May

of Shares

Paid per

as Part of Publicly

Yet be Purchased

Period

Purchased (1)

Share

Announced Plans (2)

Under the Plan

April 1, 2022 – April 30, 2022

482,274

$

11.28

$

149,767,409

May 1, 2022 – May 31, 2022

N/A

June 1, 2022 – June 30, 2022

N/A

Total

482,274

$

11.28

$

149,767,409

(1)The total number of shares purchased includes shares of our common stock transferred to us in order to satisfy tax withholding obligations incurred upon the vesting of restricted stock units and performance share units held by our employees.
(2)In August 2019, the Board authorized a $300 million share repurchase program, which was extended through June 30, 2023 during the first quarter of 2021. During the three months ended June 30, 2022, we did not make any repurchases under this program.

41

Table of Contents

Item 6. Exhibits

Exhibit Number

Description of Exhibit

3.1

Certificate of Conversion of Antero Resources Midstream Management LLC from a Delaware limited liability companyCorporation, dated March 12, 2019 (incorporated by reference to a Delaware limited partnership,Exhibit 3.2 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on March 12, 2019).

3.2

Certificate of Incorporation of Antero Midstream Corporation, dated asMarch 12, 2019 (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on March 12, 2019).

3.3

Bylaws of May 4, 2017Antero Midstream Corporation, dated March 12, 2019 (incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on March 12, 2019).

3.4

Certificate of Designations of Antero Midstream Corporation, dated March 12, 2019 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8‑K (Commission File No. 001‑38075) filed on May 9, 2017).

3.2

Certificate of Limited Partnership of Antero Midstream GP LP, dated as of May 4, 2017 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8‑K (Commission File No. 001‑38075) filed on May 9, 2017).

3.3

Agreement of Limited Partnership of Antero Midstream GP LP, dated as of May 9, 2017, by and between AMGP GP LLC, as the General Partner, and Antero Resources Investment LLC, as the Organizational Limited Partner  (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8‑K (Commission File No. 001‑38075) filed on May 9, 2017).

3.4

Certificate of Formation of AMGP GP LLC, dated as of April 18, 2017 (incorporated by reference to Exhibit 3.5 to Antero Resources Midstream Management LLC’s  Registration Statement on Form S-1 (Commission File No. 333‑216975) filed on April 24, 2017).

3.5

Limited Liability Company Agreement of AMGP GP LLC, dated as of May 9, 2017, by and among Warburg Pincus Private Equity X O&G, L.P., Warburg Pincus X Partners, L.P., Warburg Pincus Private Equity VIII, LP, Warburg Pincus Netherlands Private Equity VIII C.V.I, WP-WPVIII Investors, L.P., Yorktown Energy Partners V, L.P., Yorktown Energy Partners VI, L.P., Yorktown Energy Partners VII, L.P., Yorktown Energy Partners VIII, L.P., Paul M. Rady and Glen C. Warren, Jr. (incorporated by reference to Exhibit 3.4 to the Current Report on Form 8‑K (Commission File No. 001‑38075) filed on May 9, 2017).

3.6

Agreement of Limited Partnership of Antero Midstream Partners LP dated as of November 10, 2014 (incorporated by reference to Exhibit 3.1 to Antero Midstream Partners LP'sCompany’s Current Report on Form 8-K (Commission File No. 001-38075) filed November 17, 2014)on March 12, 2019).

3.7

10.1

Amendment No. 1 dated February 23, 2016 to the Agreement of Limited Partnership of Antero Midstream Partners LP (incorporated by reference to Exhibit 3.4 to Antero Midstream Partners LP's Annual Report on Form 10-K filed February 24, 2016).

3.8

Limited Liability Company Agreement of Antero IDR Holdings LLC dated December 31, 2016 (incorporated by reference to Exhibit 3.9 to Antero Resources Midstream Management LLC’s  Registration Statement on Form S-1 (Commission File No. 333‑216975) filed on April 7, 2017).

10.1

Amended and Restated Credit Agreement, by and among Antero Midstream Partners LP, the lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to Antero Midstream Partners LP's Quarterly Report on Form 10-Q (Commission File No. 001-36719) filed on November 1, 2017).

31.1

*

Form of Performance Share Unit Grant Notice and Performance Share Unit Agreement under the Antero Midstream Corporation Long Term Incentive Plan

31.1

*

Certification of the Company’s Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).

31.2

*

Certification of the Company’s Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).

32.1

*

Certification of the Company’s Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

32.2

*

Certification of the Company’s Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

99.1

*101

Antero Midstream Partners LP’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.

101

*

The following financial information from this Quarterly Report on Form 10‑Q10-Q of ANTERO MIDSTREAM GP LPAntero Midstream Corporation for the quarter ended SeptemberJune 30, 2017,2022, formatted in XBRL (eXtensibleiXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Condensed Consolidated Statements of Partners’ Capital,Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Unaudited Condensed Consolidated Financial Statements, tagged as blocks of text.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


The exhibits marked with the asterisk symbol (*) are filed or furnished with this Quarterly Report on Form 10-Q.

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SIGNATURES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ANTERO MIDSTREAM GP LP

CORPORATION

By:

AMGP GP LLC, its general partner

By:

/s/ Michael Kennedy

Brendan E. Krueger

Michael Kennedy

BRENDAN E. KRUEGER

Chief Financial Officer,

Treasurer and Vice President of Finance

Date:

November 1, 2017

July 27, 2022

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