Second Quarter 216 Earnings Call Presentation August 3, 216
FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that Antero Midstream Partners LP, and its subsidiaries (collectively, the Partnership ) expect, believe or anticipate will or may occur in the future are forward-looking statements. The words believe, expect, anticipate, plan, intend, estimate, project, foresee, should, would, could, or other similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. Without limiting the generality of the foregoing, forward-looking statements contained in this presentation specifically include expectations of plans, strategies, objectives, and anticipated financial and operating results of the Partnership and Antero Resources Corporation ( Antero Resources ). These statements are based on certain assumptions made by the Partnership and Antero Resources based on management s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Partnership, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include the factors discussed or referenced under the heading Item 1A. Risk Factors in our Annual Report on Form 1-K for the year ended December 31, 215 and in the Partnership s subsequent filings with the SEC. The Partnership cautions you that these forward-looking statements are subject to risks and uncertainties that may cause these statements to be inaccurate, and readers are cautioned not to place undue reliance on such statements. These risks include, but are not limited to, Antero Resources expected future growth, Antero Resources ability to meet its drilling and development plan, commodity price volatility, inflation, environmental risks, drilling and completion and other operating risks, regulatory changes, the uncertainty inherent in projecting future rates of production, cash flow and access to capital, the timing of development expenditures, and the other risks discussed or referenced under the heading Item 1A. Risk Factors in the Partnership s Annual Report on Form 1-K for the year ended December 31, 215 and in the Partnership s subsequent filings with the SEC. Our ability to make future distributions is substantially dependent upon the development and drilling plan of Antero Resources, which itself is substantially dependent upon the review and approval by the board of directors of Antero Resources of its capital budget on an annual basis. In connection with the review and approval of the annual capital budget by the board of directors of Antero Resources, the board of directors will take into consideration many factors, including expected commodity prices and the existing contractual obligations and capital resources and liquidity of Antero Resources at the time. Any forward-looking statement speaks only as of the date on which such statement is made, and the Partnership undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. Antero Midstream Partners LP is denoted as AM and Antero Resources Corporation is denoted as AR in the presentation, which are their respective New York Stock Exchange ticker symbols. 1
TOP TIER DISTRIBUTION GROWTH AND COVERAGE Antero Midstream is targeting 28% to 3% annual distribution growth through 217 AM has delivered on those targets with DCF coverage of 1.7x in the second quarter 216 $.5 Distribution Per Unit (Left Axis) DCF Coverage (Right Axis) 2.x $.45 $.4 1.8x 1.6x 1.7x 1.8x 1.6x $.35 $.3 $.25 $.2 1.1x $.17 1.2x $.18 1.3x $.19 1.4x $.25 $.22 $.235 $.25 1.4x 1.2x 1.x.8x $.15.6x $.1.4x $.5.2x $. 4Q14A 1Q15A 2Q15A 3Q15A 4Q15A 1Q16A 2Q16A 3Q16E 4Q16E 1Q17E 2Q17E 3Q17E 4Q17E.x Note: Future distributions subject to AM Board approval. 1. Assumes midpoint of target distribution growth range. 2
HIGH GROWTH MIDSTREAM THROUGHPUT Low Pressure Gathering (MMcf/d) High Pressure Gathering (MMcf/d) 1,8 1,6 1,4 1,2 1, 8 6 4 2 18 Utica 216 Marcellus 281 331 386 531 935 738 965 1,38 1,124 1,353 1,33 1,8 Utica Marcellus 1,6 1,4 1,2 1, 8 6 531 4 266 1 38 8 126 2 98 1,134 1,197 1,216 1,195 1,222 1,253 Compression (MMcf/d) Adjusted EBITDA ($MM) 8 Utica Marcellus 7 6 5 4 3 2 1 26 31 4 36 41 116 222 358 454 435 478 66 658 $12 $1 $8 $6 $4 $2 $ $1 $5 $7 $8 $11 $19 $28 $36 $41 $55 $83 $8 $88 $338 $215 Note: Y-O-Y growth based on 2Q 15 to 2Q 16. 1. Represents adjusted EBITDA attributable to the Partnership. 2. Represents midpoint of updated 216 guidance. 3
AM VOLUME THROUGHPUT VS. AR PRODUCTION AM continues to gather and compress an increasing percentage of the total gross gas production 2,5 2, Gross Wellhead Gas Production (MMcf/d) 1,5 1, 5 Production/Throughput Reconciliation (MMcf/d) 2Q16 AR Net Gas Production 1,311 Net Revenue Interest Gross-Up 8% Average Processing Shrink Gross-Up 94% AR Gross Gas Production (MMcf/d) 1,755 - Third Party LP Gathering Volumes 42 = AM LP Gathering Volumes 1,353 - Fuel/Third Party HP Gathering Volumes (1) 7% = AM HP Gathering Volumes 1,253 1,755 MMcf/d Third Party Gathering: 42 MMcf/d AM Compression Capacity: 82 MMcf/d AR does not expect material growth in third party gathered volumes through 217 AM LP: 1,353 MMcf/d (77% of AR Gross Wellhead Volume) AM HP: 1,253 MMcf/d (93% of LP Volume) AM Compression: 658 MMcf/d (8% Utilization) 1,783 MMcf/d Third Party Gathering AM Compression Capacity @ YE 216: 1,6 MMcf/d 2,184 MMcf/d Third Party Gathering AM Compression Capacity @ YE 217: 1,42 MMcf/d 2Q16 Actual 216 Guidance 217 Target AR Gross Wellhead Gas Production (Including 3 rd Party Gathering) Antero Midstream Volumes 4 1. Assumes 3% fuel.
ADVANCED COMPLETIONS DRIVE INCREASED WATER VOLUMES AR has Increased Proppant Load by Over 25% in the Marcellus and Utica Sand Placed Per Foot of Lateral 2, 1,8 1,6 1,4 1,2 1, 8 6 4 2 Pilot Testing Demonstrated Improved Recoveries While Maintaining Well Density 1,194 1,128 1,117 99 1,31 1,16 958 956 1,84 1,126 1,274 1,34 1,337 1,418 1,48 1,53 1,578 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 216 Plan 1,71 1,5 New AR Marcellus Completion Designs Utilizing 38 to 4 Barrels of Water Per Lateral Foot, a 25% Increase Barrels Per Foot of Lateral 44 42 4 38 36 34 32 3 28 26 24 22 2 32 31 32 32 32 32 32 31 31 32 34 34 35 36 37 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 216 Plan 39 41 43 39 5
SUSTAINABLE WATER BUSINESS GROWTH Deferred completions drive substantial growth in 217 and beyond, underpinned by minimum volume commitments Fresh Water Delivery Volumes (MBbl/d) 2 Traditional Completions Advanced Completions utilizing 25% more water 22 Earn Out 2 MBbl/d Avg 18 219 Earn Out 161 MBbl/d Avg 16 MBbl/d 14 12 1 8 6 4 2 132 177 Completions 96 131 Completions MVC 9 ~ 11 Completions (Guidance) MVC 1 17-18 Completions Targeted (1) 214 215 216 217 218 219 22 MVC 12 MVC 12 217 MVC 217-219 Earnout Fresh Water Volumes (MBbl/d) 1 161 Fresh Water Volumes (MBbls) 36,5 58,765 Volumes per Well Completion (MBbls) (2) 345 345 Implied Well Completions (Annual) 15 17 217 targeted activity implies 155-165 MBbl/d of delivered water 1. Includes 7 deferred completions. 2. Assumes 9, foot lateral and 39 Bbl/ft and 34 Bbl/ft of water for Marcellus and Utica, respectively. 6
ANTERO MIDSTREAM EXERCISES STONEWALL OPTION Stonewall Gathering Pipeline Option Antero Midstream has exercised its option to acquire a 15% non-operated equity interest in the Stonewall gathering pipeline - Capital investment: $45 million - Expected unlevered IRR: 25% - 35% - Effective date: May 26, 216 Another step towards becoming full value chain midstream provider - Fixed fee revenues with minimum volume commitments Antero Resources is an anchor shipper with the ability to transport up to 1.1 Bcf/d of gas on a firm basis (9 MMcf/d minimum volume commitment) to more favorably priced markets including TCO, NYMEX and Gulf Coast markets - Currently transporting ~95 MMcf/d Stonewall Gathering Pipeline Asset Details Acquisition Acreage Throughput Capacity: Pipeline Specifications: Project Capital: 1.4 Bcf/d 67 miles of 36-inch pipeline $4 Million In-Service Date: 12/1/215 AR Firm Commitment: 9 MMcf/d 7
ANTERO RESOURCES ACQUISITION BENEFITS AM A unique opportunity as most Appalachian core acreage is already dedicated to third party midstream providers On June 9, 216 Antero Resources announced the acquisition of 66,5 net acres in the southwestern Marcellus Shale, over 95% of which will be dedicated to AM for gathering, compression, processing, and water services Acquisition and associated equity financing allows Antero Resources to increase 217 production target to 2% to 25%, providing further support to Antero Midstream s 217 distribution growth target of 28% to 3% Antero Midstream Buildout Expands Antero Midstream footprint and identified 5-year investment opportunity set by over 15% to ~$3.2 billion (1) Attractive organic investment opportunities at 4x to 7x build-out EBITDA Additional adjacent third-party midstream opportunities AM Gross Dedicated Acreage ( s) 1, 9 8 7 6 5 4 3 2 1 12/31/215 Pro Forma 491 597 Dedicated Acreage: Gathering & Compression 1. Includes projects currently under construction. 638 744 Dedicated Acreage: Water Services Acquisition Acreage Districts with 3,+ Antero Net Acres Existing Gathering Line Planned Gathering Line Planned Gathering Line Acquisition Acreage Existing Fresh Water Line New Platform for Antero Midstream Infrastructure Buildout Compressor Station In service Compressor Station Planned on Existing Acreage Compressor Station Planned on Acquisition Acreage Fresh Water Delivery Take Point Fresh Water Impoundment Planed Fresh Water Line 8
LEADERSHIP IN MARCELLUS HIGH-GRADED CORE High- Graded Core Areas: Northern Rich Gas Southern Rich Gas Antero s internal reserve engineers have analyzed over 3, wells in southwest Marcellus, which led to the highgraded core outlines to the right Average wellhead recovery including condensate but before processing is as follows: Most Active Operators RRC, CNX, NBL AR, EQT, SWN Dry Gas EQT, CVX, RRC, CNX % Undeveloped (1) Advanced Completions (>1,3 lbs/ft) EUR / 1, Wells All Completions EUR / 1, Wells 58% 1.9 234 1.8 355 73% 2. 148 1.8 4 75% 2.2 273 2. 516 Best Rock Washington and Greene Counties, PA and Wetzel, Tyler and Doddridge Counties, WV all have significant areas that average 1.9 to 2.2 Bcf/1, of recoveries at the wellhead using advanced completions (>1,3 lbs per foot and 33 Bbls of water per foot) Pro forma for the transaction, Antero controls approximately 237, undeveloped gross acres in the High-Graded areas Controls 53% of the undeveloped Southern Rich Gas area and 13% of the undeveloped Dry Gas area 1,6 undeveloped locations Southwest Marcellus High-Graded Core High-Graded Northern Rich ~2, acres 1.9 Bcf / 1, Wellhead EUR OHIO High-Graded Southern OHIO Rich ~375, acres 2. Bcf / 1, Wellhead EUR Potential for high-graded core outlines to expand as advanced completions are applied more broadly across the Marcellus core 1) % undeveloped calculation considers urban areas as developed. High-Graded Dry Gas ~9, acres 2.2 Bcf / 1, Wellhead EUR Southwest Marcellus Core ~4 Million Acres ~71% Undeveloped (1) Antero Acquisition Acreage EQT / STO Acquisition Acreage (May 216) Vantage / Alpha Acquisition Acreage (May 216) Districts with 3,+ Antero Net Acres Antero Marcellus Wells Industry Marcellus Wells Antero Marcellus Rig Industry Marcellus Rig 9
CONTINUOUS OPERATING IMPROVEMENT Operating Highlights Top 2 best drilling footage days in Marcellus since 29 have all occurred in 216, including 7,274 drilled in 24 hours in West Virginia on the Hunter 1H Recently drilled and cased longest lateral in company history at 14,24 feet Stayed within targeted zone for 95% of lateral length drilled in Q2 216 Increased sand placement during completions to 99% in Q2 216 Utilizing new floating casing procedure, reducing casing run time by over 12 hours Increased proppant and water loading by 25% in 216 with encouraging results to date Utica Shale Ohio Marcellus Shale Acquired Acreage Utica Marcellus 214 215 Q2 216 Q2 216 vs. 214 214 215 Q2 216 Q2 216 vs. 214 Activity Levels Average Rigs Running 4 5 1 (75%) 14 9 6 (57%) Average Completion Crews 2. 3. 1. (5%) 5.5 2. 3.5 (36%) Operational Improvements Drilling Days 29 31 16 45% 29 24 15 48% Average Lateral Length (Ft) 8,543 8,575 9, 5% 8,52 8,91 9, 12% Stages per Well 47 49 51 9% 4 45 45 12% Stage Length 183 175 175 4% 2 2 2 % Stages per Day 3.2 3.7 4.4 38% 3.2 3.5 3.9 22% Well Cost & Performance Improvements D&C per 1,' of lateral ($MMs) $1.55 $1.36 $1.4 (33%) $1.34 $1.18 $.9 (33%) Wellhead EUR per 1,' of lateral (Bcf) (1) 1.4 1.6 1.6 14% 1.5 1.7 2. 33% Processed EUR per 1,' of lateral (Bcfe) (1)(2) 1.5 1.8 1.8 2% 1.8 1.9 2.3 28% Net development cost per processed Mcfe (2)(3) $1.28 $.94 $.72 (44%) $.88 $.73 $.46 (47%) 1. Based on statistics for wells completed within each respective period. 2. Ethane rejection assumed. 3. Current D&C cost per 1, lateral divided by net EUR per 1, lateral assuming 81% NRI in Utica and 85% NRI in Marcellus. 1
AR MULTI-YEAR DRILLING INVENTORY SUPPORTS LOW RISK, HIGH RETURN GROWTH PROFILE At 6/3/216 strip pricing, Antero has 2,713 locations with well economics that exceed 2% rate of return (excluding hedges), pro forma for third-party acquisition Including hedges, these locations generate rates of return of approximately 48% to 84% Rates of return include pad, facilities, cash production expenses (including midstream and FT costs) See assumptions pages in website presentation for further detail ROR ANTERO MARCELLUS & UTICA WELL ECONOMICS (1)(2)(3) 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% 66% 79% 62% 84% 58% 69% 49% 7% 71% 216/217 Drilling Plan Focus 44% 38% 48% $5. $4. $3. $2. $1. $. 6/3/216 NYMEX Strip Pricing - Before Hedges 6/3/216 NYMEX Strip Pricing - After Hedges $4.13 $3.65 $3.8 $3.4 $3.18 $3.2 $3. $3.6 221-25 $3.53 $58 $3 28% 24% 24% 21% 19% 17% $3.58 $3.3 216 217 218 219 22 6/3/16 Strip Pricing 6/3/16 Hedge Pricing NYMEX ($/MMBtu) WTI ($/Bbl) C3+ NGL ($/Bbl) 216 $3.4 $5 $22 217 $3.18 $52 $26 218 $3.2 $54 $27 219 $3. $55 $28 22 $3.6 $55 $28 NYMEX ($/MMBtu) C3+ NGL ($/Bbl) $4.13 $24 $3.65 $21 $3.8 $28 $3.58 $28 $3.3 $28 $3.56 $3 % Utica Highly- Rich Gas/ Condensate Locations (4) Utica Highly- Rich Gas Marcellus Highly-Rich Gas/ Condensate Utica Rich Gas Utica Dry Gas - Ohio ROR @ 6/3/216 Strip Pricing - Before Hedges Marcellus Highly-Rich Gas Utica Condensate Marcellus Dry Gas ROR @ 6/3/216 Strip Pricing - After Hedges Marcellus Rich Gas 2,713 High Grade Drilling Locations 98 18 664 161 263 1,235 184 94 691 1. 6/3/216 pre-tax well economics based on a 9, lateral, 6/3/216 natural gas and WTI strip pricing for 216-224, flat thereafter, NGLs at 37.5% of WTI for 216 and ~5% of WTI thereafter, and applicable firm transportation and operating costs including 5% of Antero Midstream fees. Well cost estimates include $1.2 million for road, pad and production facilities. 2. ROR @ 6/3/216 Strip Pricing After Hedges reflects 6/3/216 well cost ROR methodology with the 6/3/216 hedge value allocated based on 216-221 projected production volumes resulting in blend of strip and hedge prices. 3. Marcellus well count, adjusted for 6/3/216 net acreage and pro forma for third-party acquisition per press release dated 6/9/216, assumes 1.7 Bcf/1, type curve. 4. Undeveloped well locations as of 12/31/215 adjusted for 6/3/216 acreage changes. 11
Annual Completions LEADER IN APPALACHIAN CORE DRILLING INVENTORY Antero plans to develop over 1, horizontal locations in the Marcellus and Ohio Utica by the end of the decade while reducing less than 25% of its current 3P drilling inventory 4 35 3 25 2 15 1 5 Average Lateral Length ~8,8 feet 11 PLANNED ANTERO WELL COMPLETIONS BY YEAR 216E 217E 218E 219E 22E Marcellus 3P Completions Ohio Utica Completions CURRENT UNDRILLED 3P LOCATIONS (1) ESTIMATED YE 22 UNDRILLED 3P LOCATIONS Dry Gas 28% 19% to 44% IRRs Rich Gas 2% 17% to 49% IRRs Condensate 4% 21% IRR Highly-Rich Gas/Condensate 19% 58% to 66% IRRs Highly-Rich Gas 29% 38% to 62% IRRs Expect to place >1, Marcellus and Utica wells to sales by YE 22 Condensate, 5% Dry Gas, 34% Rich Gas, 2% Highly-Rich Gas 33% Highly-Rich Gas/Condens Highly-Rich Gas/Condensate ate (8%) 4,344 Locations 3,39 Locations 1. Marcellus and Utica 3P locations pro forma for acreage acquisition announced 6/9/216. Excludes WV/PA Utica Dry locations. 12
APPENDIX 13
ANTERO MIDSTREAM EBITDA RECONCILIATION EBITDA Reconciliation Reconciliation of Net Income to Adjusted EBITDA and DCF (Dollars in thousands): Three months ended June 3, 215 216 Net income $ 35,124 $ 49,912 Add: Interest expense 1,636 3,879 Depreciation expense 21,253 24,14 Accretion of contingent acquisition consideration 3,461 Equity-based compensation 6,597 6,793 Less: Equity in earnings of unconsolidated affiliate 484 Adjusted EBITDA $ 64,61 $ 87,71 Less: Pre-water acquisition net income attributed to parent 15,674 Pre-water acquisition depreciation expense attributed to parent 6,162 Pre-water acquisition equity-based compensation expense attributed to parent 1,29 Pre-water acquisition interest expense attributed to parent 793 Adjusted EBITDA attributable to the Partnership $ 4,772 $ 87,71 Less: Cash interest paid, net - attributable to the Partnership 598 4,264 Cash reserved for payment of income tax withholding upon vesting of Antero Midstream equity-based compensation awards Maintenance capital expenditures Add: 1, 3,379 5,71 Cash distribution to be received from unconsolidated affiliate 778 Distributable cash flow $ 36,795 $ 77,55 Total distributions declared $ 28,858 $ 46,775 DCF coverage ratio 1.28x 1.66x 14