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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, 20172023

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 479,678,273 shares of common stock outstanding as of July 21, 2023.

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

40

Item 6.

Exhibits

24

41

SIGNATURES

25

42

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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, including the Russia-Ukraine conflict, and government regulations;

world health events;

·

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 return of capital 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;

·

expectations regarding the amount and timing of litigation awards;

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, supply chain or other disruptions, 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, cybersecurity risks, the state of 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, 2022 (the “2022 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

See accompanying notes to 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

(Unaudited)

December 31,

    

June 30,

    

2022

    

2023

 

Assets

Current assets:

Accounts receivable–Antero Resources

$

86,152

91,621

Accounts receivable–third party

575

550

Income tax receivable

940

940

Other current assets

1,326

795

Total current assets

88,993

93,906

Property and equipment, net

3,751,431

3,756,496

Investments in unconsolidated affiliates

652,767

639,887

Customer relationships

1,286,103

1,250,767

Other assets, net

12,026

11,827

Total assets

$

5,791,320

5,752,883

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable–Antero Resources

$

5,436

2,921

Accounts payable–third party

22,865

17,947

Accrued liabilities

72,715

74,924

Other current liabilities

1,061

817

Total current liabilities

102,077

96,609

Long-term liabilities:

Long-term debt

3,361,282

3,306,667

Deferred income tax liability

131,215

191,979

Other

4,428

4,589

Total liabilities

3,599,002

3,599,844

Stockholders' equity:

Preferred stock, $0.01 par value: 100,000 authorized as of December 31, 2022 and June 30, 2023

Series A non-voting perpetual preferred stock; 12 designated and 10 issued and outstanding as of December 31, 2022 and June 30, 2023

Common stock, $0.01 par value; 2,000,000 authorized; 478,497 and 479,656 issued and outstanding as of December 31, 2022 and June 30, 2023, respectively

4,785

4,797

Additional paid-in capital

2,104,740

2,061,230

Retained earnings

82,793

87,012

Total stockholders' equity

2,192,318

2,153,039

Total liabilities and stockholders' equity

$

5,791,320

5,752,883

See accompanying notes to unaudited 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,

    

2022

    

2023

Revenue:

    

    

Gathering and compression–Antero Resources

$

184,071

211,068

Water handling–Antero Resources

62,262

64,613

Water handling–third party

242

274

Amortization of customer relationships

(17,668)

(17,668)

Total revenue

228,907

258,287

Operating expenses:

Direct operating

43,299

52,595

General and administrative (including $5,641 and $8,499 of equity-based compensation in 2022 and 2023, respectively)

16,079

18,162

Facility idling

1,185

637

Depreciation

35,675

35,233

Impairment of property and equipment

3,702

Accretion of asset retirement obligations

64

44

Loss on settlement of asset retirement obligations

539

279

Loss (gain) on asset sale

(32)

5,814

Total operating expenses

100,511

112,764

Operating income

128,396

145,523

Other income (expense):

Interest expense, net

(45,426)

(55,388)

Equity in earnings of unconsolidated affiliates

22,824

25,972

Total other expense

(22,602)

(29,416)

Income before income taxes

105,794

116,107

Income tax expense

(26,399)

(29,095)

Net income and comprehensive income

$

79,395

87,012

Net income per share–basic

$

0.17

0.18

Net income per share–diluted

$

0.17

0.18

Weighted average common shares outstanding:

Basic

478,317

479,502

Diluted

480,270

481,512

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,

    

2022

    

2023

Revenue:

    

    

Gathering and compression–Antero Resources

$

366,514

410,644

Water handling–Antero Resources

115,583

141,908

Water handling–third party

637

546

Amortization of customer relationships

(35,336)

(35,336)

Total revenue

447,398

517,762

Operating expenses:

Direct operating

85,311

110,468

General and administrative (including $8,473 and $14,826 of equity-based compensation in 2022 and 2023, respectively)

34,010

35,509

Facility idling

2,333

1,211

Depreciation

63,975

70,429

Impairment of property and equipment

3,702

Accretion of asset retirement obligations

128

88

Loss on settlement of asset retirement obligations

539

620

Loss (gain) on asset sale

(150)

5,569

Total operating expenses

189,848

223,894

Operating income

257,550

293,868

Other income (expense):

Interest expense, net

(89,705)

(110,012)

Equity in earnings of unconsolidated affiliates

46,056

50,428

Total other expense

(43,649)

(59,584)

Income before income taxes

213,901

234,284

Income tax expense

(54,466)

(60,765)

Net income and comprehensive income

$

159,435

173,519

Net income per share–basic

$

0.33

0.36

Net income per share–diluted

$

0.33

0.36

Weighted average common shares outstanding:

Basic

477,983

479,059

Diluted

480,329

481,420

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, 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

Balance at December 31, 2022

    

$

478,497

$

4,785

2,104,740

82,793

2,192,318

Dividends to stockholders

(25,709)

(82,793)

(108,502)

Equity-based compensation

6,327

6,327

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

148

1

(1,167)

(1,166)

Net income and comprehensive income

86,507

86,507

Balance at March 31, 2023

478,645

4,786

2,084,191

86,507

2,175,484

Dividends to stockholders

(24,267)

(86,507)

(110,774)

Equity-based compensation

8,499

8,499

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

1,011

11

(7,193)

(7,182)

Net income and comprehensive income

87,012

87,012

Balance at June 30, 2023

$

479,656

$

4,797

2,061,230

87,012

2,153,039

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,

    

2022

    

2023

 

Cash flows provided by (used in) operating activities:

    

    

  

Net income

$

159,435

173,519

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

Depreciation

63,975

70,429

Accretion of asset retirement obligations

128

88

Impairment of property and equipment

3,702

Deferred income tax expense

54,466

60,765

Equity-based compensation

8,473

14,826

Equity in earnings of unconsolidated affiliates

(46,056)

(50,428)

Distributions from unconsolidated affiliates

60,505

63,570

Amortization of customer relationships

35,336

35,336

Amortization of deferred financing costs

2,828

2,957

Settlement of asset retirement obligations

(916)

(695)

Loss on settlement of asset retirement obligations

539

620

Loss (gain) on asset sale

(150)

5,569

Changes in assets and liabilities:

Accounts receivable–Antero Resources

6,099

(5,470)

Accounts receivable–third party

517

481

Other current assets

158

(800)

Accounts payable–Antero Resources

(2,427)

(2,515)

Accounts payable–third party

9,480

(889)

Accrued liabilities

(1,911)

942

Net cash provided by operating activities

354,181

368,305

Cash flows provided by (used in) investing activities:

Additions to gathering systems and facilities

(131,665)

(59,156)

Additions to water handling systems

(30,369)

(25,583)

Investments in unconsolidated affiliates

(262)

Acquisition of gathering systems and facilities

(266)

Cash received in asset sales

147

1,071

Change in other assets

(15)

Change in other liabilities

(805)

Net cash used in investing activities

(162,692)

(84,211)

Cash flows provided by (used in) financing activities:

Dividends to common stockholders

(217,445)

(218,971)

Dividends to preferred stockholders

(275)

(275)

Payments of deferred financing costs

(302)

Borrowings (repayments) on bank credit facilities, net

33,300

(56,500)

Employee tax withholding for settlement of equity compensation awards

(6,767)

(8,348)

Net cash used in financing activities

(191,489)

(284,094)

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

$

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$

86,688

107,607

Increase (decrease) in accrued capital expenditures and accounts payable for property and equipment

$

2,822

(2,814)

See accompanying notes to unaudited condensed consolidated financial statements.

8


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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 (the “Company” or “Antero Midstream”) 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 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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Table of Contents

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, 2022 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, 2022 consolidated financial statements were included in the Company’s 2022 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, 20162022 and SeptemberJune 30, 2017, and our2023, the results of the Company’s operations for the three and six months ended June 30, 2022 and 2023, and the Company’s cash flows for the three and ninesix months ended SeptemberJune 30, 20162022 and 2017. We have2023. 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), and IDR LLC.

(c)Investment in Antero Midstream

We have determined that 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.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(3) Intangibles

All customer relationships are subject to amortization and are amortized over a weighted average period of 19 years, which reflects the remaining economic life of the relationships as of June 30, 2023. The changes in the carrying amount of customer relationships were as follows (in thousands):

Customer relationships as of December 31, 2022

$

1,286,103

Amortization of customer relationships

(35,336)

Customer relationships as of June 30, 2023

$

1,250,767

Future amortization expense is a variable interest entity (“VIE”) for which we are notas follows (in thousands):

Remainder of year ending December 31, 2023

$

35,336

Year ending December 31, 2024

70,672

Year ending December 31, 2025

70,672

Year ending December 31, 2026

70,672

Year ending December 31, 2027

70,672

Thereafter

932,743

Total

$

1,250,767

(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, 2022 and 2023 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 consist 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 $3 million and $4 million during the three months ended June 30, 2022 and 2023, respectively and $7 million and $9 million during the six months ended June 30, 2022 and 2023, 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 $8 million and $7 million during the three months ended June 30, 2022 and 2023, respectively, and $16 million and $15 million during the six months ended June 30, 2022 and 2023, respectively.  These costs relate to (i) various business services, including payroll processing, accounts payable processing and facilities management, (ii) various corporate services, including legal, accounting, treasury, information technology and human resources and (iii) compensation, including 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 operating lease agreements, 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

The Company’s gathering and compression service agreements with Antero Resources include: (i) the second amended and restated gathering and compression agreement dated December 8, 2019 (the “2019 gathering and compression agreement”), (ii) the gathering and compression agreements acquired with the Crestwood Equity Partners LP (NYSE: CEQP) (“Crestwood”) assets (the “Marcellus gathering and compression agreements”) and (iii) a compression agreement acquired with the EnLink Midstream LLC (NYSE: ENLC) (“EnLink”) assets (the “Utica compression agreement,” and together with the 2019 gathering and compression agreement and the Marcellus gathering and compression agreements, the “gathering and compression agreements”). See Note 6—Property and Equipment for additional information. The 2019 gathering and compression agreement has an initial term through 2038, the Marcellus gathering and compression agreements expire between 2023 and 2031, and the Utica compression agreement has two dedicated areas that expire in 2024 and 2030. Upon expiration of each of the Marcellus gathering and compression service agreements and the Utica compression agreement, the Company will continue to provide gathering and compression services under the 2019 gathering and compression agreement. Pursuant to the gathering and compression agreements, 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. 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 2019 gathering and compression agreement outside of West Virginia, Ohio and Pennsylvania on the same terms and conditions as the 2019 gathering and compression agreement.

The 2019 gathering and compression agreement includes 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’ throughput gathered under the Marcellus gathering and compression agreements is not considered in low pressure gathering volume targets. Antero Resources achieved the first level volumetric target during each of the first and second quarters of 2022 and 2023. Accordingly, Antero Resources earned rebates of $12 million for each of the three months ended June 30, 2022 and 2023 and $24 million for each of the six months ended June 30, 2022 and 2023. Upon completion of the initial contract term in 2038, the 2019 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 agreements, the Company receives, where applicable, a low pressure gathering fee, a high pressure gathering fee and a compression fee, substantially all of which are subject to annual Consumer Price Index (“CPI”)-based adjustments (or, in the case of the 2019 gathering and compression agreement, the option in certain cases to elect a cost of service fee when such assets are placed in-service). In addition, under the 2019 gathering and compression agreement, the Company receives a reimbursement for certain variable costs, such as electricity and operating expenses.

The Company determined that its gathering and compression agreements are operating leases as Antero Resources obtains substantially all of the economic benefit of the assets and has the right to direct the use of the assets. Each gathering and compression system is an identifiable asset, and consists of a network of assets that may include underground low pressure pipelines that 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 processing plant or a Joint Venture processing plant. Each compression system is an identifiable asset, and consists of a network of assets that include compressor stations that connect to underground high pressure pipelines that transport the gas to a third-party pipeline, third-party processing plant or a Joint Venture processing plant. Each set of assets in an agreement is considered to be a single lease due to the interrelated network of the assets required to provide services under each respective agreement. When a modification to an agreement occurs, the Company reassesses the classification of the 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 systems, which are performed on time-elapsed measures.

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

The 2019 gathering and compression agreement and certain of the Marcellus gathering and compression agreements include 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 2019 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. In addition, certain of the Marcellus gathering and compression agreements provide for a minimum volume commitment that requires Antero Resources to utilize or pay for 25% of the capacity of new compressor station construction for 10 years. 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 agreements.

The Company recognizes lease income from its minimum volume commitments and cost of service fees under its gathering and compression agreements 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 are delivered to a processing plant or transmission pipeline, as applicable. Minimum volume commitments are aggregated such that there is a single minimum volume commitment for the respective service each year for each agreement. 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 agreements as of June 30, 2023 are as follows (in thousands):

Remainder of year ending December 31, 2023

$

144,632

Year ending December 31, 2024

316,492

Year ending December 31, 2025

298,143

Year ending December 31, 2026

284,327

Year ending December 31, 2027

224,150

Thereafter

382,434

Total

$

1,650,178

(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 MidstreamResources 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 a fixed-fee basis. Such dedications cover a substantial portion of Antero’s current acreage and future acquired acreage, in each case, except for acreage that was already dedicated to other partiesor before the 180thday prior to entering intothe 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 contracts or that was acquired subjectto 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.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

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 pre-existing dedication. wholly unsatisfied performance obligation. Under this contract, 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 Company also performs water services for third-party customers and such contracts call for Antero Resourcesare 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 present, in advance, drillingremaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

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 completion plans in order for Antero Midstreamtype of fee and is identified by the reportable segment to put in placewhich such revenues relate. For additional information on reportable segments, see Note 15—Reportable Segments.

Three Months Ended

Six Months Ended

June 30,

June 30,

(in thousands)

2022

2023

    

2022

2023

    

Reportable Segment

Type of service

Gathering—low pressure

$

91,660

105,042

181,097

204,679

Gathering and Processing (1)

Gathering—low pressure fee rebate

(12,000)

(12,000)

(24,000)

(24,000)

Gathering and Processing (1)

Compression

51,486

61,565

103,098

119,955

Gathering and Processing (1)

Gathering—high pressure

52,925

56,461

106,319

110,010

Gathering and Processing (1)

Fresh water delivery

41,120

40,399

73,164

87,225

Water Handling

Other fluid handling

21,384

24,488

43,056

55,229

Water Handling

Amortization of customer relationships

(9,272)

(9,272)

(18,543)

(18,543)

Gathering and Processing

Amortization of customer relationships

(8,396)

(8,396)

(16,793)

(16,793)

Water Handling

Total

$

228,907

258,287

447,398

517,762

Type of contract

Per Unit Fixed Fee

$

196,071

223,068

390,514

434,644

Gathering and Processing (1)

Gathering—low pressure fee rebate

(12,000)

(12,000)

(24,000)

(24,000)

Gathering and Processing (1)

Per Unit Fixed Fee

41,362

40,673

73,801

87,772

Water Handling

Cost plus 3%

16,400

18,797

32,038

43,242

Water Handling

Cost of service fee

4,742

5,417

10,381

11,440

Water Handling

Amortization of customer relationships

(9,272)

(9,272)

(18,543)

(18,543)

Gathering and Processing

Amortization of customer relationships

(8,396)

(8,396)

(16,793)

(16,793)

Water Handling

Total

$

228,907

258,287

447,398

517,762

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

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

The Company’s receivables from its contracts with customers and operating leases as of December 31, 2022 and June 30, 2023, were $86 million and $92 million, respectively.

(6) Property and Equipment

(a)

Summary of Property and Equipment

Property and equipment, net consisted of the following items:

(Unaudited)

Estimated

December 31,

    

June 30,

(in thousands)

    

Useful Lives

    

2022

    

2023

Land

    

n/a

    

$

31,668

    

31,668

Gathering systems and facilities

40-50 years (1)

3,281,872

3,317,470

Permanent buried pipelines and equipment

7-20 years

601,347

632,748

Surface pipelines and equipment

1-7 years

66,726

77,858

Heavy trucks and equipment

3-5 years

5,157

5,157

Above ground storage tanks

5-10 years

2,953

5,130

Construction-in-progress

n/a

 

158,977

153,412

Total property and equipment

4,148,700

4,223,443

Less accumulated depreciation

(397,269)

(466,947)

Property and equipment, net

$

3,751,431

3,756,496

(1)Gathering systems and facilities are recognized as a single-leased asset with no residual value.

(b)

Asset Acquisitions

On October 25, 2022, the Company acquired certain Marcellus gas gathering and compression water handling,assets from Crestwood for $205 million in cash, before closing adjustments. These assets included 72 miles of dry gas gathering pipelines and gas processingnine compressor stations with 700 MMcf/d of compression capacity. The cash consideration for this asset acquisition was allocated to land and gathering systems and facilities, included in Property and equipment in the condensed consolidated balance sheets, for $3 million and $202 million, respectively.

Additionally, on December 21, 2022, the Company acquired certain Utica compression assets tofrom EnLink for $10 million in cash, before closing adjustments. These assets included four compressor stations with 380 MMcf/d of compression capacity. The acquired compression assets are interconnected with the Company’s existing low pressure and high pressure gathering systems and service Antero Resources’ assets.production. The drillingcash consideration for this asset acquisition was allocated to gathering systems and completion capital investment decisions madefacilities included in Property and equipment in the condensed consolidated balance sheets.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(7) Long-Term Debt

Long-term debt consisted of the following items:

(Unaudited)

December 31,

    

June 30,

(in thousands)

2022

    

2023

Credit Facility (a)

    

$

782,000

    

725,500

7.875% senior notes due 2026 (b)

550,000

550,000

5.75% senior notes due 2027 (c)

650,000

650,000

5.75% senior notes due 2028 (d)

650,000

650,000

5.375% senior notes due 2029 (e)

750,000

750,000

Total principal

3,382,000

3,325,500

Unamortized debt premiums

1,698

1,496

Unamortized debt issuance costs

(22,416)

(20,329)

Total long-term debt

$

3,361,282

3,306,667

(a)

Credit Facility

Antero Midstream Partners LP (“Antero Midstream Partners”), an indirect, wholly owned subsidiary of Antero Midstream Corporation, as borrower (the “Borrower”), has a senior secured revolving credit facility (the “Credit Facility”) with a consortium of banks. Lender commitments under the Credit Facility were $1.25 billion as of December 31, 2022 and June 30, 2023. The Credit Facility 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, 2023, the Credit Facility had an available borrowing capacity of $524 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, 2022 and June 30, 2023.

The Credit Facility provides for borrowing under either the 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 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, 2022, the Borrower had outstanding borrowings under the Credit Facility of $782 million with a weighted average interest rate of 6.17%. As of June 30, 2023, the Borrower had outstanding borrowings under the Credit Facility of $726 million with a weighted average interest rate of 6.96%. No letters of credit under the Credit Facility were outstanding as of December 31, 2022 or June 30, 2023.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(b)

7.875% Senior Notes Due 2026

On November 10, 2020, Antero Midstream Partners and its wholly owned subsidiary, Antero Midstream Finance Corp (“Finance Corp,” and together with Antero Midstream Partners, 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 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 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% currently to 100.00% on or after May 15, 2025. If Antero Midstream Partners undergoes a change of control followed by a rating decline, the developmentholders of the 2026 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2026 Notes at a price equal to 101% of the principal amount of the 2026 Notes, plus accrued and operationunpaid interest.

(c)

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 restricted 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 101.917% 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.

(d)

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 year.  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% currently to 100.00% on or after January 15, 2026. 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 require Antero 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.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(e)

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 2029 Notes are unsecured and effectively 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 Midstream 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 holders 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 unpaid interest.

(f)

Senior Notes Guarantors

The Company and each of the Company’s wholly owned subsidiaries (except for the Issuers) has fully and unconditionally guaranteed the 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 subsidiary and such designation complies with the other applicable provisions of IDRs is accounted for using the equity methodindenture governing the applicable Senior Notes or in connection with any covenant defeasance, legal defeasance or satisfaction and discharge of accounting. We recognize distributions earned fromthe applicable Senior Notes.

During the three and six months ended June 30, 2022 and 2023, 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)

    

2022

    

2023

 

Capital expenditures

$

16,597

17,811

Operating expenses

11,118

10,764

Interest expense

37,947

37,395

Ad valorem taxes

5,661

6,918

Other

1,392

2,036

Total accrued liabilities

$

72,715

74,924

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(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 as “Equity in earnings ofby 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 Partners LP” on our statement of operationsCorporation Long-Term Incentive Plan (the “AM LTIP”). Antero Midstream’s equity-based compensation expense is included in the period in which they are earnedgeneral and are allocated to our capital account. Our long term interest in IDRs on the balance sheet isadministrative expenses, and recorded in “Investment in Antero Midstream Partners LP.” The ownership of the general partner interests and IDRs do not provide us with any claimas a credit to the assetsapplicable classes 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.equity.

(d)Use of Estimates

The preparation of the condensed consolidated financial statements and notes in conformity with GAAP requires that management formulate estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

(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.

AR LTIP

Equity-based compensation expense of $26.3allocated to Antero Midstream from Antero Resources, which includes expense related to the Converted AM RSU Awards (as defined below), for the three and six months ended June 30, 2022 was $0.1 million and IPO costs of $5.1$0.3 million, are notrespectively, 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 betweenthree and six months ended June 30, 2023 was zero and less than $0.1 million, respectively. All grants made prior to March 12, 2019 were fully amortized during the federal tax ratefirst quarter of 35%2023. Therefore, there will be no further allocation of equity-based compensation expense from Antero Resources to the Company. The Company does not reimburse Antero Resources for noncash equity compensation allocated to it for awards issued under the AR LTIP.

AM LTIP

Effective March 12, 2019, the Board of Directors of Antero Midstream Corporation (the “Board”) adopted the AM LTIP under which awards may be granted to employees, directors, and effective rateother service providers of income tax expense for financial reporting purposesthe Company and its affiliates. 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 nine months ended Septembergrant 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, 2017.2023, a total of 4,620,235 shares were available for future grant under the AM LTIP.

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

(f)General

Three Months Ended

Six Months Ended

June 30,

June 30,

(in thousands)

2022

2023

2022

2023

Restricted stock units (1)

$

4,425

6,549

6,913

11,610

Performance share units (1)

988

1,723

1,105

2,784

Equity awards issued to directors

228

227

455

432

Total expense

$

5,641

8,499

8,473

14,826

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

(b)

Restricted Stock Unit Awards

The Company’s RSU awards included the unvested outstanding phantom units granted under the Antero Midstream Partners Long Term Incentive Plan which were assumed by the Company on March 12, 2019, and Administrative Expenses

General and administrative costs incurred during 2016 and pre-IPO in 2017 primarily relateconverted into 1.8926 RSUs under the AM LTIP representing a right to legal and other costs incurred in connection with our IPO. Post-IPO general and administrative expense consists primarilyreceive shares of management fees paidthe Company’s common stock for each converted phantom unit (all such RSUs, the “Converted AM RSU Awards”). The Converted AM RSU Awards were accounted for as if they were distributed by Antero Midstream Partners to Antero Resources, and other legal and administrative expenses.Resources. Therefore, the expense related to the Converted AM RSU Awards was subject to allocation by Antero Resources. All remaining Converted AM RSU Awards vested during the first quarter of 2023.

(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)

A summary of the RSU awards activity, which included the Converted AM RSU Awards, is as follows:

December 31, 2016 and September

Weighted Average

Number

Grant Date

    

of Units

    

Fair Value

Total AM LTIP RSUs awarded and unvested—December 31, 2022

4,877,258

$

9.79

Granted

3,103,722

10.59

Vested

(1,900,773)

9.59

Forfeited

(74,520)

10.21

Total AM LTIP RSUs awarded and unvested—June 30, 2023

6,005,687

$

10.26

As of June 30, 2017

liabilities that are not recognized or disclosed on a recurring basis (e.g., the initial recognition2023, unamortized equity-based compensation expense of asset retirement obligations and impairments of long ‑lived assets). The fair value is the price that we estimate would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to prioritize inputs to valuation techniques used to estimate fair value. An asset or liability subject$55 million related to the fair value requirementsunvested RSUs is categorized withinexpected to be recognized over a weighted average period of 2.2 years.

(c)

Performance Share Unit Awards

2023 Performance Share Unit Awards

In March 2023, the hierarchyCompany granted PSUs to certain of its executive officers that vest based on the lowest levelCompany’s actual ROIC (as defined in the award agreement) over a three-year period concluding on December 31, 2025 as compared to a targeted ROIC (“2023 ROIC PSUs”). The number of inputshares of the Company’s common stock that can be earned with respect to the 2023 ROIC PSUs ranges from zero to 200% of the target number of 2023 ROIC PSUs originally granted. The grant date fair value of these 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 2023 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 such expense is reversed if the likelihood of achieving the performance condition decreases. The likelihood of achieving the performance conditions related to 2023 ROIC PSU awards was probable as of June 30, 2023.

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, 2022

439,935

$

11.28

Granted

512,166

10.58

Total AM LTIP PSUs awarded and unvested—June 30, 2023

952,101

$

10.90

As of June 30, 2023, unamortized equity-based compensation expense of $16 million related to the unvested PSUs is expected to be recognized over a weighted average period of 2.3 years.

(d)

Cash Awards

In January 2020, the Company granted cash awards of $2.2 million to certain executives under the AM LTIP that vested ratably over a period of up to three years. In July 2020, the Company 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, 2022 and June 30, 2023, the Company has accrued $0.5 million and $0.1 million, respectively, in other liabilities in the unaudited condensed consolidated balance sheets related to unvested cash awards.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(10) Cash Dividends

The 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 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

*

Q2 2022

July 27, 2022

August 10, 2022

107,675

0.2250

*

August 15, 2022

August 15, 2022

138

*

Q3 2022

October 26, 2022

November 9, 2022

107,705

0.2250

*

November 14, 2022

November 14, 2022

137

*

Total 2022

$

433,375

Q4 2022

January 25, 2023

February 8, 2023

$

108,364

$

0.2250

*

February 14, 2023

February 14, 2023

138

*

Q1 2023

April 26, 2023

May 10, 2023

110,607

0.2250

*

May 15, 2023

May 15, 2023

137

*

Total 2023

$

219,246

*

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 12, 2023, 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, 2023. The dividend is payable on August 9, 2023 to stockholders of record as of July 26, 2023. 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 that is significantpayable on August 14, 2023 in accordance with the terms of the Series A Preferred Stock, which are discussed in Note 11—Equity and Earnings Per Common Share. As of June 30, 2023, 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

The 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 cumulative from the date of original issue and payable in cash on the 45th day following the end of each fiscal quarter, or such 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 change of control, or at any time on or after March 12, 2029, the Company 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 the Series A Preferred Stock are held by The Antero Foundation at the time of such redemption, the price for redemption of each share of Series A Preferred Stock will be the 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 time, at the option of the holder into a number of shares of AM common stock equal to the fair value measurement. Our assessmentconversion ratio in effect on the applicable conversion date, subject to certain limitations. The Series A Preferred Stock ranks senior to the AM common stock as to dividend rights, as well as with respect to rights upon liquidation, winding-up or dissolution of the significanceCompany. Holders of a particular inputthe Series A Preferred Stock do not have any voting rights in the Company, except as required by law, or any preemptive rights.

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ANTERO MIDSTREAM CORPORATION

Notes to the fair value measurement in its entirety requires judgment and considers factors specificUnaudited Condensed Consolidated Financial Statements (Continued)

(b)

Weighted Average Shares Outstanding

The following is a reconciliation of the Company’s basic weighted average shares outstanding 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)

    

2022

2023

    

2022

2023

Basic weighted average number of shares outstanding

478,317

479,502

477,983

479,059

Add: Dilutive effect of RSUs

794

797

1,081

1,225

Add: Dilutive effect of PSUs

54

351

160

274

Add: Dilutive effect of Series A Preferred Stock

1,105

862

1,105

862

Diluted weighted average number of shares outstanding

480,270

481,512

480,329

481,420

Weighted average number of outstanding equity awards excluded from calculation of net income per share—diluted (1):

RSUs

2,457

1,170

PSUs

744

375

(1)

The potential dilutive effects of these awards were excluded from the computation of net income per share—diluted because the inclusion of these awards would have been anti-dilutive.

(c)

Net Income Per Share

(h) Net Income (Loss) 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) per common share – share—diluted 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)

    

2022

2023

    

2022

2023

Net income

$

79,395

87,012

159,435

173,519

Less preferred stock dividends

(137)

(137)

(275)

(275)

Net income available to common shareholders

$

79,258

86,875

159,160

173,244

Net income per share–basic

$

0.17

0.18

0.33

0.36

Net income per share–diluted

$

0.17

0.18

0.33

0.36

Weighted average common shares outstanding–basic

478,317

479,502

477,983

479,059

Weighted average common shares outstanding–diluted

480,270

481,512

480,329

481,420

20

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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, 2022

June 30, 2023

(in thousands)

Fair Value (1)

Carrying Value (2)

Fair Value (1)

Carrying Value (2)

2026 Notes

$

556,985

545,416

555,500

546,012

2027 Notes

612,365

646,610

624,065

646,955

2028 Notes

601,575

644,776

615,875

645,232

2029 Notes

685,650

742,480

696,600

742,968

Total

$

2,456,575

2,579,282

2,492,040

2,581,167

(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, 2022 and June 30, 2023 approximated fair value because of their short-term nature. The carrying value of the distributionsamounts under the Credit Facility as of December 31, 2022 and June 30, 2023 approximated fair value because the variable interest rates are reflective of current market conditions.

(13) Investments in Unconsolidated Affiliates

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 two MarkWest fractionators in Ohio.

The Company also 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’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 excesscondensed consolidated balance 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 unaudited 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

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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.the Joint Venture and Stonewall 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).

 

 

 

 

 

 

 

 

 

 

 

 

 

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


participation in policy-making decisions of the Joint Venture and Stonewall.

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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

in Unconsolidated

(in thousands)

    

Joint Venture

    

Stonewall

    

Affiliates

Balance as of December 31, 2022

$

526,652

126,115

652,767

Additional investments

262

262

Equity in earnings of unconsolidated affiliates (1)

46,754

3,674

50,428

Distributions from unconsolidated affiliates

(54,345)

(9,225)

(63,570)

Balance as of June 30, 2023

$

519,061

120,826

639,887

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 the Joint Venture and Stonewall as of March 12, 2019.

(14)Contingencies

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 (the “Court”), 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 $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 $370 million. Also at trial, Veolia sought monetary damages of $118 million, including alleged delay and extra-contractual costs and a contract balance relating to an allegation that Antero Defendants improperly terminated the DBA.

On January 3, 2023, the Court found that Antero Treatment had prevailed on its claims for breach of contract and fraud, and awarded $242 million in damages to Antero Treatment, plus pre- and post-judgment interest and reasonable costs and attorneys’ fees. The Court also found in Antero Defendants’ favor on all of Veolia’s affirmative claims. On January 27, 2023, the Court entered judgment in favor of Antero Treatment in the amount of $309 million in damages, which includes pre-judgment interest. On April 10, 2023, the Court issued an order identifying an error in its previously entered judgment, and on May 3, 2023, the Court entered an amended final judgment in favor of Antero Treatment in the amount of $280 million in damages, which includes pre-judgment interest through April 30, 2023. Antero Treatment was also awarded costs and attorneys’ fees, the amount of which will be determined in separate proceedings. On May 26, 2023, Veolia filed a notice of appeal of the final judgment. On June 9, 2023, Antero Treatment filed a notice of cross-appeal.

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(15)Reportable Segments

(a)

Summary of Reportable Segments

The Company’s operations, which are located in the United States, are organized into two 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 two 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.

(b)

Reportable Segments Financial Information

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

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

$

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.

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended June 30, 2023

Gathering and

Water

Consolidated

(in thousands)

   

Processing

   

Handling

   

Unallocated (1)

  

Total

Revenues:

Revenue–Antero Resources

$

211,068

64,613

275,681

Revenue–third-party

274

274

Amortization of customer relationships

(9,272)

(8,396)

(17,668)

Total revenues

201,796

56,491

258,287

Operating expenses:

Direct operating

25,154

27,441

52,595

General and administrative

11,370

4,861

1,931

18,162

Facility idling

637

637

Depreciation

22,196

13,037

35,233

Accretion of asset retirement obligations

44

44

Loss on settlement of asset retirement obligations

279

279

Loss on asset sale

5,814

5,814

Total operating expenses

64,534

46,299

1,931

112,764

Operating income

$

137,262

10,192

(1,931)

145,523

Equity in earnings of unconsolidated affiliates

$

25,972

25,972

Additions to property and equipment, net

$

29,959

11,823

41,782

(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

$

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)

Six Months Ended June 30, 2023

Gathering and

Water

Consolidated

(in thousands)

    

Processing

    

Handling

    

Unallocated (1)

Total

Revenues:

Revenue–Antero Resources

$

410,644

141,908

552,552

Revenue–third-party

546

546

Amortization of customer relationships

(18,543)

(16,793)

(35,336)

Total revenues

392,101

125,661

517,762

Operating expenses:

Direct operating

49,272

61,196

110,468

General and administrative

21,550

11,069

2,890

35,509

Facility idling

1,211

1,211

Depreciation

44,259

26,170

70,429

Accretion of asset retirement obligations

88

88

Loss on settlement of asset retirement obligations

620

620

Loss (gain) on asset sale

5,572

(3)

5,569

Total operating expenses

120,653

100,351

2,890

223,894

Operating income

$

271,448

25,310

(2,890)

293,868

Equity in earnings of unconsolidated affiliates

$

50,428

50,428

Additions to property and equipment, net

$

59,156

25,583

84,739

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

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

(Unaudited)

December 31,

June 30,

(in thousands)

2022

2023

Gathering and Processing

$

4,711,069

4,686,552

Water Handling

1,079,297

1,065,123

Unallocated (1)

954

1,208

Total assets

$

5,791,320

5,752,883

(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. We believeOur 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.

Market Conditions and Business Trends

Commodity Markets

Prices for natural gas, NGLs and oil have decreased during the three and six months ended June 30, 2023 as compared to the same periods of 2022. While substantially all of our revenues are based on fixed-fee contracts that are not directly impacted by changes in commodity prices, commodity price changes do impact the revenues and cash flows of Antero Midstream’s strategically located assetsResources, and integrated relationshipAntero Resources’ drilling and development plan does have a direct impact on our gathering, compression and water handling services, revenues and cash flows. In the current economic environment, we expect that commodity prices for some or all of the commodities produced by Antero Resources could remain volatile. However, due to Antero Resources’ improved liquidity and leverage position as compared to past levels, Antero Resources is pursuing a maintenance capital program. Therefore, we do not expect to experience significant variability in our throughput volumes resulting from volatile commodity prices.

Growth Incentive Fee Program with Antero Resources position it

Our 2019 gathering and compression agreement with Antero Resources includes a growth incentive fee program whereby we agreed to be a leading Appalachian midstream provider acrossprovide quarterly fee rebates to Antero Resources through December 31, 2023, contingent upon Antero Resources achieving volumetric growth targets on low pressure gathering. Antero Resources’ throughput gathered under the full midstream value chain.

Our revenuesMarcellus gathering and compression agreements is not considered in the low pressure gathering volume targets. If actual low pressure volumes are generated solely frombelow the cash distributions we receive from Antero Midstream through our interests in IDR LLC. Because our success is dependent upon the operations and management of Antero Midstream and its resulting performance, Antero Midstream’s Quarterly Report on Form 10-Qlowest threshold for the quarter ended September 30, 2017, has been includedrespective period, Antero Resources will not earn a reduction in this filing as Exhibit 99.1 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


low pressure gathering fees.

26

Table of Contents

administrative expenses,The growth incentive fee rebate program expires December 31, 2023, and reserves for other purposes deemed necessary by the boardfollowing table summarizes the remaining low pressure gathering growth incentive targets through the remainder of directors of our general partner. Distributable cash for2023:

Low Pressure Gathering

Quarterly Fee

Volume Growth Incentive

Reduction

Targets (MMcf/d)

(in millions)

Calendar Year 2023

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 September June 30, 2017 was2022 and 2023, Antero Resources delivered low pressure gathering volumes under the 2019 gathering and compression agreement of 2,970 MMcf/d and 3,118 MMcf/d, respectively, and as follows (in thousands):a result, earned a quarterly fee reduction of $12 million during both periods. During the six months ended June 30, 2022 and 2023, Antero Resources earned $24 million in fee reductions during both periods.

 

 

 

 

 

 

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

 

 

 

 

Economic Indicators

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 primarilyeconomy experienced elevated inflation levels as a result of global supply and demand imbalances, where global demand outpaced supplies beginning in 2021 and continuing through the significant increasefirst half of 2023. For example, the Consumer Price Index (“CPI”) for all urban consumers increased 9% from June 2021 to June 2022 and an additional 3% from June 2022 to June 2023 as compared to the Federal Reserve’s stated goal of 2%. In order to manage the inflation risk present in the scopeUnited States’ economy, the Federal Reserve utilized monetary policy in the form of interest rate increases beginning in March 2022 in an effort to bring the inflation rate in line with its stated goal of 2% on a long-term basis. Between March 2022 and May 2023, the Federal Reserve increased the federal funds interest rate by 5.0%. While inflationary pressures in the United States’ economy have begun to subside, we continue to be impacted by the increased federal funds interest rate. See “—Results of Operations” for additional information.

The economy also continues to be impacted by global events. These events have often caused global supply chain disruptions with additional pressure due to trade sanctions on Russia and other global trade restrictions, among others. However, neither our nor Antero Midstream’s operations over the last several years. Antero Midstream’sResources’ supply chain has experienced any significant interruptions due to such events.

Inflationary pressures and supply chain disruptions could result in further increases to our operating and capital costs that are not fixed. However, our gathering and compression and water handling and treatment systems are relatively new, asagreements provide for annual CPI-based adjustments that mitigate a substantial portion of these assets have built within the last four years. Accordingly, Antero Midstream’s revenuessuch inflationary pressures.

These economic variables are beyond our control and expenses over that time reflect the significant increase in operations. Similarly, Antero Resources has experienced significant changes in its production and drilling and completion schedule over that same period. Asmay adversely impact 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 historicalbusiness, financial data going forward. In addition, our historicalcondition, results of operations do not reflect the incremental expenses we expect to incur as a result of being a publicly traded company.and future cash flows.

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 and Stonewall. The Joint Venture and Stonewall provide processing and fractionation services and high-pressure gas gathering services, respectively, in the Appalachian Basin. 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, 20162022 Compared to Three Months Ended SeptemberJune 30, 2017 (in thousands):2023

The operating results of our reportable segments are as follows:

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 fee 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2023

Gathering and

Water

Consolidated

(in thousands)

    

Processing

    

Handling

    

Unallocated (1)

    

Total

Revenues:

Revenue–Antero Resources

$

223,068

64,613

287,681

Revenue–third-party

274

274

Gathering—low pressure fee rebate

(12,000)

(12,000)

Amortization of customer relationships

(9,272)

(8,396)

(17,668)

Total revenues

201,796

56,491

258,287

Operating expenses:

Direct operating

25,154

27,441

52,595

General and administrative (excluding equity-based compensation)

5,126

2,832

1,705

9,663

Equity-based compensation

6,244

2,029

226

8,499

Facility idling

637

637

Depreciation

22,196

13,037

35,233

Accretion of asset retirement obligations

44

44

Loss on settlement of asset retirement obligations

279

279

Loss on asset sale

5,814

5,814

Total operating expenses

64,534

46,299

1,931

112,764

Operating income

137,262

10,192

(1,931)

145,523

Other income (expense):

Interest expense, net

(55,388)

(55,388)

Equity in earnings of unconsolidated affiliates

25,972

25,972

Total other income (expense)

25,972

(55,388)

(29,416)

Income before income taxes

163,234

10,192

(57,319)

116,107

Income tax expense

(29,095)

(29,095)

Net income and comprehensive income

$

163,234

10,192

(86,414)

87,012

Adjusted EBITDA (2)

$

242,525

(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 Partners LP. Equity in earnings of Antero Midstreamis as follows:

Three Months Ended

Amount of

June 30,

Increase

Percentage

  

2022

    

2023

  

or Decrease

  

Change

Operating Data:

Gathering—low pressure (MMcf)

270,302

300,706

30,404

11

%

Compression (MMcf)

252,644

295,801

43,157

17

%

Gathering—high pressure (MMcf)

256,537

265,890

9,353

4

%

Fresh water delivery (MBbl)

10,048

9,585

(463)

(5)

%

Other fluid handling (MBbl)

4,128

4,953

825

20

%

Wells serviced by fresh water delivery

15

23

8

53

%

Gathering—low pressure (MMcf/d)

2,970

3,304

334

11

%

Compression (MMcf/d)

2,776

3,251

475

17

%

Gathering—high pressure (MMcf/d)

2,819

2,922

103

4

%

Fresh water delivery (MBbl/d)

110

105

(5)

(5)

%

Other fluid handling (MBbl/d)

45

54

9

20

%

Average Realized Fees:

Average gathering—low pressure fee ($/Mcf)

$

0.34

0.35

0.01

3

%

Average compression fee ($/Mcf)

$

0.21

0.21

*

Average gathering—high pressure fee ($/Mcf)

$

0.21

0.21

*

Average fresh water delivery fee ($/Bbl)

$

4.09

4.21

0.12

3

%

Joint Venture Operating Data:

Processing—Joint Venture (MMcf)

132,664

145,645

12,981

10

%

Fractionation—Joint Venture (MBbl)

3,368

3,553

185

5

%

Processing—Joint Venture (MMcf/d)

1,458

1,600

142

10

%

Fractionation—Joint Venture (MBbl/d)

37

39

2

5

%

*Not meaningful or applicable.

Revenues. Total revenues increased by 13%, from $4.8$229 million for the three months ended SeptemberJune 30, 20162022 to $19.1$258 million for the three months ended SeptemberJune 30, 2017. Antero Midstream’s per-unit distribution increased from $0.265 per unit in the third quarter2023. Total revenues included amortization of 2016 to $0.34 in the third quartercustomer relationships 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$18 million for the three months ended SeptemberJune 30, 2016 to $0.62022 and 2023. Gathering and processing revenues increased by 15%, from $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 related2022 to being a publicly-traded entity.

Equity-based compensation expenses. Equity-based compensation expenses increased from zero for the three months ended September 30, 2016 to $8.3$202 million for the three months ended SeptemberJune 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 expense2023. Water handling revenues increased by 4%, from $1.8$54 million for the three months ended SeptemberJune 30, 20162022 to $7.2$56 million for the three months ended SeptemberJune 30, 2017. The increase is2023. These fluctuations primarily due to higher taxable incomeresulted from the following:

Gathering and Processing

Low pressure gathering revenue increased $13 million period over period primarily due to increased throughput volumes of 30 Bcf, or 334 MMcf/d, and increases in our low pressure gathering rates as a result of annual CPI-based adjustments. Low pressure gathering volumes increased between periods primarily due to 338 additional wells being connected to our system since June 30, 2022, of which 253 wells were connected to the assets we acquired during the fourth quarter of 2022.
Compression revenue increased $10 million period over period primarily due to increased throughput volumes of 43 Bcf, or 475 MMcf/d, and increases in our compression rates as a result of annual CPI-based adjustments. Compression volumes increased between periods primarily due to 338 additional wells being connected to our system since June 30, 2022, of which 253 were connected to the assets we acquired during the fourth quarter of 2022, and the addition of 12 compressor stations that were acquired during the fourth quarter of 2022.
High pressure gathering revenue increased $4 million period over period primarily due to increased throughput volumes of 9 Bcf, or 103 MMcf/d, and an increase to the high pressure gathering rate as a result of annual CPI-based adjustments. High pressure gathering volumes increased between periods primarily due to 85 additional wells being connected to our system since June 30, 2022. The assets acquired during 2022 were already connected to high pressure systems operated by us or third-parties prior to such acquisitions, and therefore, the 253 wells connected to the acquired assets did not increase the throughput on our high pressure gathering system.

30

Table of the increase in equity in earnings of Antero Midstream related to the IDRs.Contents

Water Handling

Fresh water delivery revenue decreased $1 million period over period primarily due to lower fresh water delivery volumes between periods, partially offset by a 3% increase to the fresh water delivery rate for our long-term contract with Antero Resources as a result of the annual CPI-based adjustment. Fresh water delivery volumes decreased between periods due to timing of well completions by Antero Resources.
Other fluid handling services revenue increased $3 million period over period primarily due to increased costs, partially due to inflationary pressures that impact our cost plus 3% and cost of service rates during the three months ended June 30, 2023 and higher other fluid handling volumes of 1 MMBbl, or 9 MBbl/d, between periods.

The difference between income tax expense and expected income tax expense for financial statement purposes computedDirect operating expenses. Direct operating expenses increased 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 increased21%, from net income of $2.8$43 million for the three months ended SeptemberJune 30, 20162022 to net income of $3.0$53 million for the three months ended SeptemberJune 30, 2017.2023. Gathering and processing direct operating expenses increased by 30%, from $19 million for the three months ended June 30, 2022 to $25 million for the three months ended June 30, 2023 primarily due to 12 compressor stations that were acquired during the fourth quarter of 2022 and increased heavy maintenance expense between periods. Water handling direct operating expenses increased by 15%, from $24 million for the three months ended June 30, 2022 to $28 million for the three months ended June 30, 2023 primarily due to higher wastewater trucking volumes and rates, and higher fresh water expense between periods due to maintenance and repairs.

General and administrative (excluding equity-based compensation) expenses. General and administrative expenses (excluding equity-based compensation expense) remained consistent at $10 million for the three months ended June 30, 2022 and 2023.

Equity-based compensation expenses. Equity-based compensation expenses increased from $6 million for the three months ended June 30, 2022 to $8 million for the three months ended June 30, 2023 primarily due to an increase in the annual equity awards granted during the first quarter of 2023 as compared to prior years, which were temporarily and significantly reduced during 2020 and supplemented by our cash awards program. Our equity awards vest over three or four year service periods, and our equity incentive program began returning to normal levels in 2021. See Note 9—Equity-Based Compensation and Cash Awards to the unaudited condensed consolidated financial statements for additional information.

Depreciation expense. Depreciation expense remained relatively consistent at $36 million and $35 million for the three months ended June 30, 2022 and 2023, respectively.

Impairment of property and equipment expense. Impairment of property and equipment expense of $4 million during 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. There were no impairments of property and equipment during the three months ended June 30, 2023.

Loss (gain) on asset sale. Loss on asset sale of $6 million for the three months ended June 30, 2023 is primarily due to sales of miscellaneous equipment.

Interest expense. Interest expense increased by 22%, from $45 million for the three months ended June 30, 2022 to $55 million for the three months ended June 30, 2023 primarily due to the increased interest rates on our Credit Facility as a result of higher benchmark rates during the three months ended June 30, 2023 and higher Credit Facility borrowings between periods primarily as a result of our asset acquisitions in the fourth quarter of 2022.

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates increased by 14%, from $23 million for the three months ended June 30, 2022 to $26 million for the three months ended June 30, 2023 primarily due to higher processing and fractionation fees as a result of annual CPI-based adjustments and increased volumes between periods.

Income tax expense. Income tax expense for the three months ended June 30, 2022 and 2023 was $26 million and $29 million, respectively, which reflects effective tax rates of 25.0% and 25.1%, respectively.

Net income. Net income increased by 10%, from $79 million for the three months ended June 30, 2022 to $87 million for the three months ended June 30, 2023. The increase was primarily due to an increase inhigher gathering, compression and other fluid handling revenues and higher equity in earnings of Antero in the third quarter of 2017,from unconsolidated affiliates, partially offset by the increase inhigher direct operating expenses, interest expense and equity-based compensation and income tax expense.

19


expense between periods.

31

Table of Contents

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. Equity in earnings of Antero MidstreamAdjusted EBITDA. Adjusted EBITDA increased by 10%, from $9.4$221 million for the ninethree months ended SeptemberJune 30, 20162022 to $46.0$243 million for the ninethree months ended SeptemberJune 30, 2017.2023. The increase between periods was primarily due to higher gathering, compression and other fluid handling revenues, partially offset by higher direct operating expenses. 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, 2022 Compared to Six Months Ended June 30, 2023

The operating results of our reportable segments are as follows:

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 fee 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

Six Months Ended June 30, 2023

Gathering and

Water

Consolidated

(in thousands)

    

Processing

    

Handling

    

Unallocated (1)

    

Total

Revenues:

Revenue–Antero Resources

$

434,644

141,908

576,552

Revenue–third-party

546

546

Gathering—low pressure fee rebate

(24,000)

(24,000)

Amortization of customer relationships

(18,543)

(16,793)

(35,336)

Total revenues

392,101

125,661

517,762

Operating expenses:

Direct operating

49,272

61,196

110,468

General and administrative (excluding equity-based compensation)

10,898

7,326

2,459

20,683

Equity-based compensation

10,652

3,743

431

14,826

Facility idling

1,211

1,211

Depreciation

44,259

26,170

70,429

Accretion of asset retirement obligations

88

88

Loss on settlement of asset retirement obligations

620

620

Loss (gain) on asset sale

5,572

(3)

5,569

Total operating expenses

120,653

100,351

2,890

223,894

Operating income

271,448

25,310

(2,890)

293,868

Other income (expense):

Interest expense, net

(110,012)

(110,012)

Equity in earnings of unconsolidated affiliates

50,428

50,428

Total other income (expense)

50,428

(110,012)

(59,584)

Income before income taxes

321,876

25,310

(112,902)

234,284

Income tax expense

(60,765)

(60,765)

Net income and comprehensive income

$

321,876

25,310

(173,667)

173,519

Adjusted EBITDA (2)

$

484,306

(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’s per-unit distributionMidstream is as follows:

Six Months Ended

Amount of

June 30,

Increase

Percentage

  

2022

  

2023

  

or Decrease

  

Change

Operating Data:

Gathering—low pressure (MMcf)

534,029

586,129

52,100

10

%

Compression (MMcf)

506,118

578,163

72,045

14

%

Gathering—high pressure (MMcf)

515,579

518,019

2,440

*

Fresh water delivery (MBbl)

17,922

20,695

2,773

15

%

Other fluid handling (MBbl)

8,331

9,918

1,587

19

%

Wells serviced by fresh water delivery

36

46

10

28

%

Gathering—low pressure (MMcf/d)

2,950

3,238

288

10

%

Compression (MMcf/d)

2,796

3,194

398

14

%

Gathering—high pressure (MMcf/d)

2,849

2,862

13

*

Fresh water delivery (MBbl/d)

99

114

15

15

%

Other fluid handling (MBbl/d)

46

55

9

20

%

Average Realized Fees:

Average gathering—low pressure fee ($/Mcf)

$

0.34

0.35

0.01

3

%

Average compression fee ($/Mcf)

$

0.21

0.21

*

Average gathering—high pressure fee ($/Mcf)

$

0.21

0.21

*

Average fresh water delivery fee ($/Bbl)

$

4.08

4.21

0.13

3

%

Joint Venture Operating Data:

Processing—Joint Venture (MMcf)

268,906

281,386

12,480

5

%

Fractionation—Joint Venture (MBbl)

6,445

6,775

330

5

%

Processing—Joint Venture (MMcf/d)

1,486

1,555

69

5

%

Fractionation—Joint Venture (MBbl/d)

36

37

1

3

%

*Not meaningful or applicable.

Revenues. Total revenues increased inby 16%, from $447 million for the ninesix months ended SeptemberJune 30, 20172022 to $518 million for the six months ended June 30, 2023. Total revenues included amortization of customer relationships of $35 million for the six months ended June 30, 2022 and 2023. Gathering and processing revenues increased by 13%, from $348 million for the six months ended June 30, 2022 to $392 million for the six months ended June 30, 2023. Water handling revenues increased by 26%, from $99 million for the six months ended June 30, 2022 to $126 million for the six months ended June 30, 2023. These fluctuations primarily resulted from the ninefollowing:

Gathering and Processing

Low pressure gathering revenue increased $23 million period over period primarily due to increased throughput volumes of 52 Bcf, or 288 MMcf/d, and increases in our low pressure gathering rates as a result of annual CPI-based adjustments. Low pressure gathering volumes increased between periods primarily due to 338 additional wells being connected to our system since June 30, 2022, of which 253 wells were connected to the assets we acquired during the fourth quarter of 2022.
Compression revenue increased $17 million period over period primarily due to increased throughput volumes of 72 Bcf, or 398 MMcf/d, and increases in our compression rates as a result of annual CPI-based adjustments. Compression volumes increased between periods primarily due to the 338additional wells being connected to our system since June 30, 2022, of which 253 were connected to the assets we acquired during the fourth quarter of 2022, and the addition of 12 compressor stations that were acquired during the fourth quarter of 2022.
High pressure gathering revenue increased $4 million period over period primarily due to an increase to the high pressure gathering rate as a result of an annual CPI-based adjustment and increased throughput volumes of 2 Bcf, or 13 MMcf/d. The high pressure gathering volumes increased period over period primarily due to 85 additional wells being connected to our high pressure system since June 30, 2022. The assets acquired during 2022 were already connected to high pressure systems operated by us or third-parties prior to such acquisitions, and therefore, the 253 wells connected to the acquired assets did not increase the throughput on our high pressure gathering system.

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Table of Contents

Water Handling

Fresh water delivery revenue increased $14 million period over period primarily due to increased fresh water delivery volumes of 3 MMBbl, or 15 MBbl/d, and a 3% increase to the fresh water delivery rate for our long-term contract with Antero Resources as a result of the annual CPI-based adjustment. Fresh water delivery volumes increased between periods due to higher well completions by Antero Resources.
Other fluid handling services revenue increased $13 million period over period primarily due to increased costs, partially due to inflationary pressures that impact our cost plus 3% and cost of service rates during the six months ended June 30, 2023, and higher other fluid handling volumes of 2 MMBl, or 9 MBbl/d, between periods.

Direct operating expenses. Direct operating expenses increased by 29%, from $85 million for the six months ended SeptemberJune 30, 2016, resulting in2022 to $110 million for the increase in distributions onsix months ended June 30, 2023. Gathering and processing direct operating expenses increased by 35%, from $36 million for the IDRssix months ended June 30, 2022 to $49 million for the six months ended June 30, 2023 primarily due to 12 compressor stations that were acquired during the fourth quarter of 2022 and resulting increase inincreased heavy maintenance expense between periods. Water handling direct operating expenses increased by 25%, from $49 million for the six months ended June 30, 2022 to $61 million for the six months ended June 30, 2023 primarily due to higher wastewater trucking volumes and rates, and an increased number of locations connected to our equity in earnings of Antero Midstream.water blending system between periods.

General and administrative (excluding equity-based compensation) expenses. General and administrative expenses increased(excluding equity-based compensation expense) decreased by 19%, from $0.4$26 million for the ninesix months ended SeptemberJune 30, 20162022 to $5.9$21 million for the ninesix months ended SeptemberJune 30, 2017. In2023 primarily due to lower legal costs associated with the first nine months of 2016 we did not incur any significant generalVeolia legal matter between periods and administrative costs; however, in lower costs allocated to us from Antero Resources. See Note 14—Contingencies to 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.unaudited condensed consolidated financial statements for additional information.

Equity-based compensation expenses. Equity-based compensation expenses increased from zero for the nine months ended September 30, 2016 to $26.3$8 million for the ninesix months ended SeptemberJune 30, 2017. The increase was due2022 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$15 million for the ninesix months ended September June 30, 2016 to $17.3 million for the nine months ended September 30, 2017. The increase is primarily due 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 (loss) and comprehensive income (loss). Net income (loss) and comprehensive income (loss) decreased from net income of $5.4 million for the nine months ended September 30, 2016 to a net loss of $3.6 million for the nine months ended September 30, 2017. The decrease was2023 primarily due to an increase in equity-based compensation,the annual equity awards granted during the first half of 2023 as compared to prior years, which were temporarily and significantly reduced during 2020 and supplemented by our cash awards program. Our equity awards vest over three or four year service periods, and our equity incentive program began returning to normal levels in 2021. See Note 9—Equity-Based Compensation and Cash Awards to the unaudited condensed consolidated financial statements for additional information.

Depreciation expense. Depreciation expense increased by 10%, from $64 million for the six months ended June 30, 2022 to $70 million for the six months ended June 30, 2023. This increase is primarily due to (i) $3 million for our assets acquired during the fourth quarter of 2022, (ii) $2 million of higher expense on the phased early retirement of an underutilized compressor station and (iii) $1 million related to assets placed in service between periods. The phased early retirement of the underutilized compressor station began in the second quarter of 2022 and was completed during the first half of 2023, and allowed us to relocate and reuse the compressor units and equipment to (i) expand an existing compressor station and/or (ii) contribute to a new compressor station. There were certain costs associated with the underutilized compressor station that could not be relocated or reused, and such costs were fully depreciated during the first half of 2023.

Impairment of property and equipment expense. Impairment 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. There were no impairments of property and equipment during the six months ended June 30, 2023.

Loss (gain) on asset sale. Loss on asset sale of $6 million for the six months ended June 30, 2023 is primarily due to sales of miscellaneous equipment.

Interest expense. Interest expense increased by 23%, from $90 million for the six months ended June 30, 2022 to $110 million for the six months ended June 30, 2023 primarily due to increased interest rates on our Credit Facility due to higher benchmark rates during the six months ended June 30, 2023 and higher borrowings on our Credit Facility between periods primarily as a result of our asset acquisitions in the fourth quarter of 2022.

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates increased by 9%, from $46 million for the six months ended June 30, 2022 to $50 million for the six months ended June 30, 2023 primarily due to higher processing and fractionation fees as a result of annual CPI-based adjustments and increased volumes between periods.

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Income tax expense. Income tax expense increased by 12%, from $54 million for the six months ended June 30, 2022 to $61 million for the six months ended June 30, 2023, which reflects effective tax rates of 25.5% and 25.9%, respectively. This income tax expense increase was primarily due to higher pre-tax income between periods.

Net income. Net income increased by 9%, from $159 million for the six months ended June 30, 2022 to $174 million for the six months ended June 30, 2023 primarily due to higher gathering, compression and water handling revenues and lower general and administrative expenses, and income taxcosts, excluding equity-based compensation expense between periods, partially offset by higher direct operating expenses, interest expense, depreciation expense and equity-based compensation expense between periods.

Adjusted EBITDA. Adjusted EBITDA increased by 13%, from $430 million for the six months ended June 30, 2022 to $484 million for the six months ended June 30, 2023. The increase between periods was primarily due to higher gathering, compression and water handling revenues, lower general and administrative costs, excluding equity-based compensation expense, and higher distributions from unconsolidated affiliates, partially offset by higher direct operating expenses. 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 equity in earnings of Antero Midstream in 2017.accordance with GAAP, see “—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 flows 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, capital expenditures program and expected quarterly cash distributionsdividends 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 distributiondividend on the shares of our common stock of $0.2250 per share for the quarter ended June 30, 2023. The dividend is payable on August 9, 2023 to stockholders of record as of July 26, 2023. Our Board also declared a cash dividend of $138 thousand on the shares of Series A Preferred Stock that included an IDR distributionis payable on August 14, 2023 in accordance with their terms as discussed in Note 11—Equity and Earnings Per Common Share. As of $19.1 million payableJune 30, 2023, 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 IDR LLC on November 16, 2017.working capital, capital expenditures, acquisitions 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, 2023, 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, 2022 and 2023:

Six Months Ended June 30,

(in thousands)

    

2022

    

2023

Net cash provided by operating activities

$

354,181

368,305

Net cash used in investing activities

(162,692)

(84,211)

Net cash used in financing activities

(191,489)

(284,094)

Net increase in cash and cash equivalents

$

Operating Activities

activities.Net cash provided by operating activities was $5.1$354 million and $13.5$368 million for the ninesix months ended SeptemberJune 30, 20162022 and 2017,2023, respectively. The increase in cash flowflows provided by operations between periods was primarily the result of higher gathering, compression and water handling revenues as well as higher distributions from operationsunconsolidated affiliates between periods, partially offset by changes in working capital, higher direct operating expenses and higher interest expense.

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Table of Contents

Investing activities. Net cash flows used in investing activities was $163 million and $84 million for the ninesix months ended SeptemberJune 30, 2017 compared to the nine months ended September 30, 20162022 and 2023, respectively. The decrease in cash flows used in investing activities between periods was primarily due to increased distributions from Antero Midstreamdecreased capital spending for our gathering systems and facilities and water handling systems of $28.9$73 million offset by an increase in general and administrative expenses (primarily attributable to the IPO)$5 million, respectively, primarily as a result of $5.5 million, $15.1 million of cash paid in 2017 for 2016 and 2017 income taxes, and other workingfewer capital items.projects between periods.

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 $191 million and $284 million for the ninesix months ended SeptemberJune 30, 2017 consisted2022 and 2023, respectively. The increase in cash flows used in financing activities between periods was primarily due to net repayments on our Credit Facility of $15.7$57 million during the six months ended June 30, 2023, as compared to net borrowings on our Credit Facility of $33 million during the six months ended June 30, 2022.

2023 Capital Investment

On April 26, 2023, we announced a revised capital budget with a range of $180 million to $200 million, which includes growth capital supporting the increased volumes expected from Antero Resources’ drilling partnership in pre-IPO income distributed to Antero Investment prioraddition to its liquidationmaintenance capital program for 2023. Our capital budgets may be adjusted as business conditions warrant. Additionally, we monitor our existing assets and $5.0 millionlook for opportunities to reuse or otherwise repurpose assets in quarterly cashan effort to maintain our capital efficiency.

Our capital expenditures were as follows:

Three Months Ended

Six Months Ended

(in thousands)

June 30, 2023

June 30, 2023

Gathering systems and facilities

$

34,475

55,724

Water handling systems

13,847

26,201

Investments in unconsolidated affiliates

262

262

Total capital expenditures

$

48,584

82,187

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 2022 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 before net interest expense, income tax expense, depreciation, impairment of property and equipment, accretion of asset retirement obligations, equity-based compensation, excluding equity in earnings of unconsolidated affiliates, amortization of customer relationships, loss on early extinguishment of debt, loss on settlement of asset retirement obligations, loss (gain) on asset sale and including 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.

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.

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Table of Contents

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)

2022

2023

2022

2023

Net income

$

79,395

87,012

159,435

173,519

Interest expense, net

45,426

55,388

89,705

110,012

Income tax expense

26,399

29,095

54,466

60,765

Depreciation expense

35,675

35,233

63,975

70,429

Impairment of property and equipment

3,702

3,702

Accretion of asset retirement obligations

64

44

128

88

Equity-based compensation

5,641

8,499

8,473

14,826

Amortization of customer relationships

17,668

17,668

35,336

35,336

Equity in earnings of unconsolidated affiliates

(22,824)

(25,972)

(46,056)

(50,428)

Distributions from unconsolidated affiliates

29,375

29,465

60,505

63,570

Loss on settlement of asset retirement obligations

539

279

539

620

Loss (gain) on asset sale

(32)

5,814

(150)

5,569

Adjusted EBITDA

$

221,028

242,525

430,058

484,306

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 of2022 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 distributions on the Series B Units.financial statements.

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 potential exposure to market risk. The term “market risk” refers to the risk of loss arising from adverse changes in commodity prices and interest rates. The disclosures are not meant to 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.

Commodity Price Risk

Our 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 operations is such that no activities or transactions are conducted or entered into by us that would require us to have a discussion under this item.

21


any resulting impact on Antero Resources’ operations.

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Table of Contents

Interest Rate Risk

ForOur 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, 2023, we had $726 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 $4 million increase in interest expense for the quartersix months ended SeptemberJune 30, 2017, which has been included2023.

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, 20172023 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, 2023 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 not currently subjectreasonable and prudent. We cannot, however, assure you that this insurance will be adequate to anyprotect us from all material litigation.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.

See Note 14—Contingencies to the unaudited condensed consolidated financial statements for additional information.

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.2022 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 flowsus.

Item 2. Unregistered Sales of Equity Securities and resultsUse of operations.Proceeds.

Item 5.   Other Information. 

Disclosure pursuant to Section 13(r)Issuer Purchases of theEquity 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% offollowing table sets forth 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 accountstock share purchase activity 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 montheach period ended September 30, 2017 were negligible relative to the overall revenues and profits of Banco Santander SA.presented:

(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

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 (2)

April 1, 2023 – April 30, 2023

676,220

$

10.62

$

149,767,409

May 1, 2023 – May 31, 2023

N/A

June 1, 2023 – June 30, 2023

N/A

Total

676,220

$

10.62

$

149,767,409

23

(1)The total number of shares purchased represents shares of our common stock transferred to us in order to satisfy tax withholding obligations incurred upon the vesting of equity awards 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, 2023, we did not make any repurchases under this program, and the program expired on June 30, 2023.

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(£1,844.73 in debit combined) 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 month period ended September 30, 2017.

Item 6. Exhibits.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

Certificate of May 4, 2017Amendment to Certificate of Incorporation of Antero Midstream Corporation, dated June 8, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8‑K8-K (Commission File No. 001‑38075)001-38075) filed on May 9, 2017)June 8, 2023).

3.2

3.4

Certificate of Limited PartnershipAmended and Restated Bylaws of Antero Midstream GP LP,Corporation, 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 PartnerFebruary 14, 2023 (incorporated by reference to Exhibit 3.3 to the CurrentCompany’s Annual Report on Form 8‑K10-K (Commission File No. 001‑38075)001-38075) filed on May 9, 2017)February 15, 2023).

3.4

3.5

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

3.7

31.1

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

*

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, 2017,2023, formatted in XBRL (eXtensibleiXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (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,

Vice President – Finance and Treasurer

Date:

November 1, 2017

July 26, 2023

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