0.33330false--12-31Q2201900016239250050684798600018621900010P6MP12MP12MP12MP12MP12MP6MP6MP12MP12MP12MP12MP12M0001623925us-gaap:CommonStockMember2019-04-012019-06-300001623925us-gaap:RetainedEarningsMember2019-06-300001623925us-gaap:CommonStockMember2019-06-300001623925us-gaap:AdditionalPaidInCapitalMember2019-06-300001623925us-gaap:RetainedEarningsMember2019-03-310001623925us-gaap:CommonStockMember2019-03-310001623925us-gaap:AdditionalPaidInCapitalMember2019-03-3100016239252019-03-310001623925amgp:SeriesBUnitAwardsMember2018-01-012018-12-310001623925amgp:AmcLtipMember2019-06-300001623925amgp:AmcLtipMember2019-03-120001623925srt:MinimumMemberamgp:PerformanceShareUnitAwardsBasedOnReturnOnInvestedCapitalMember2019-01-012019-06-300001623925srt:MaximumMemberamgp:PerformanceShareUnitAwardsBasedOnReturnOnInvestedCapitalMember2019-01-012019-06-3000016239252025-01-01amgp:WaterServicesAgreementMember2019-06-3000016239252025-01-01amgp:GatheringAndCompressionAgreementMember2019-06-3000016239252024-01-01amgp:GatheringAndCompressionAgreementMember2019-06-3000016239252023-01-01amgp:GatheringAndCompressionAgreementMember2019-06-3000016239252022-01-01amgp:GatheringAndCompressionAgreementMember2019-06-3000016239252021-01-01amgp:GatheringAndCompressionAgreementMember2019-06-3000016239252020-01-01amgp:GatheringAndCompressionAgreementMember2019-06-3000016239252019-07-01amgp:WaterServicesAgreementMember2019-06-3000016239252019-07-01amgp:GatheringAndCompressionAgreementMember2019-06-300001623925amgp:WaterServicesAgreementMember2019-06-300001623925amgp:GatheringAndCompressionAgreementMember2019-06-3000016239252025-01-012019-06-3000016239252024-01-012019-06-3000016239252023-01-012019-06-3000016239252022-01-012019-06-3000016239252021-01-012019-06-3000016239252020-01-012019-06-3000016239252019-07-012019-06-300001623925us-gaap:OperatingSegmentsMemberamgp:ThirdPartyCustomersMemberamgp:WaterHandlingMember2019-04-012019-06-300001623925us-gaap:OperatingSegmentsMemberamgp:AnteroResourcesCorporationMemberamgp:WaterHandlingMember2019-04-012019-06-300001623925us-gaap:OperatingSegmentsMemberamgp:AnteroResourcesCorporationMemberamgp:GatheringAndCompressionMember2019-04-012019-06-300001623925us-gaap:FixedPriceContractMemberamgp:WaterHandlingMember2019-04-012019-06-300001623925us-gaap:FixedPriceContractMemberamgp:GatheringAndCompressionMember2019-04-012019-06-300001623925us-gaap:TimeAndMaterialsContractMember2019-04-012019-06-300001623925amgp:WastewaterTreatmentMember2019-04-012019-06-300001623925amgp:ThirdPartyCustomersMember2019-04-012019-06-300001623925amgp:OtherFluidHandlingMember2019-04-012019-06-300001623925amgp:NaturalGasWaterHandlingAndTreatmentMember2019-04-012019-06-300001623925amgp:NaturalGasWaterHandlingAndTreatmentAffiliateMember2019-04-012019-06-300001623925amgp:NaturalGasGatheringTransportationMarketingAndProcessingAffiliateMember2019-04-012019-06-300001623925amgp:GatheringLowPressureMember2019-04-012019-06-300001623925amgp:GatheringHighPressureMember2019-04-012019-06-300001623925amgp:FreshWaterDeliveryMember2019-04-012019-06-300001623925amgp:CompressionMember2019-04-012019-06-300001623925amgp:AnteroResourcesCorporationMember2019-04-012019-06-300001623925us-gaap:OperatingSegmentsMemberamgp:ThirdPartyCustomersMemberamgp:WaterHandlingMember2019-01-012019-06-300001623925us-gaap:OperatingSegmentsMemberamgp:AnteroResourcesCorporationMemberamgp:WaterHandlingMember2019-01-012019-06-300001623925us-gaap:OperatingSegmentsMemberamgp:AnteroResourcesCorporationMemberamgp:GatheringAndCompressionMember2019-01-012019-06-300001623925us-gaap:FixedPriceContractMemberamgp:WaterHandlingMember2019-01-012019-06-300001623925us-gaap:FixedPriceContractMemberamgp:GatheringAndCompressionMember2019-01-012019-06-300001623925us-gaap:TimeAndMaterialsContractMember2019-01-012019-06-300001623925amgp:WastewaterTreatmentMember2019-01-012019-06-300001623925amgp:ThirdPartyCustomersMember2019-01-012019-06-300001623925amgp:OtherFluidHandlingMember2019-01-012019-06-300001623925amgp:NaturalGasWaterHandlingAndTreatmentMember2019-01-012019-06-300001623925amgp:NaturalGasWaterHandlingAndTreatmentAffiliateMember2019-01-012019-06-300001623925amgp:NaturalGasGatheringTransportationMarketingAndProcessingAffiliateMember2019-01-012019-06-300001623925amgp:GatheringLowPressureMember2019-01-012019-06-300001623925amgp:GatheringHighPressureMember2019-01-012019-06-300001623925amgp:FreshWaterDeliveryMember2019-01-012019-06-300001623925amgp:CompressionMember2019-01-012019-06-300001623925amgp:AnteroResourcesCorporationMember2019-01-012019-06-300001623925srt:MinimumMemberamgp:HeavyTrucksAndEquipmentMember2019-01-012019-06-300001623925srt:MinimumMemberamgp:GatheringPipeLinesAndCompressorStationsMember2019-01-012019-06-300001623925srt:MinimumMemberamgp:FreshwaterSurfacePipelinesAndEquipmentMember2019-01-012019-06-300001623925srt:MinimumMemberamgp:FreshwaterPermanentBuriedPipelinesMember2019-01-012019-06-300001623925srt:MinimumMemberamgp:AboveGroundStorageTanksMember2019-01-012019-06-300001623925srt:MaximumMemberamgp:HeavyTrucksAndEquipmentMember2019-01-012019-06-300001623925srt:MaximumMemberamgp:GatheringPipeLinesAndCompressorStationsMember2019-01-012019-06-300001623925srt:MaximumMemberamgp:FreshwaterSurfacePipelinesAndEquipmentMember2019-01-012019-06-300001623925srt:MaximumMemberamgp:FreshwaterPermanentBuriedPipelinesMember2019-01-012019-06-300001623925srt:MaximumMemberamgp:AboveGroundStorageTanksMember2019-01-012019-06-300001623925amgp:WastewaterTreatmentFacilityMember2019-01-012019-06-300001623925us-gaap:LandMember2019-06-300001623925us-gaap:LandfillMember2019-06-300001623925us-gaap:AssetUnderConstructionMember2019-06-300001623925amgp:WastewaterTreatmentFacilityMember2019-06-300001623925amgp:HeavyTrucksAndEquipmentMember2019-06-300001623925amgp:GatheringPipeLinesAndCompressorStationsMember2019-06-300001623925amgp:FreshwaterSurfacePipelinesAndEquipmentMember2019-06-300001623925amgp:FreshwaterPermanentBuriedPipelinesMember2019-06-300001623925amgp:AboveGroundStorageTanksMember2019-06-300001623925us-gaap:PreferredClassAMember2019-06-300001623925us-gaap:PreferredClassAMember2018-12-310001623925us-gaap:SeriesAPreferredStockMember2019-03-120001623925us-gaap:SeriesAPreferredStockMember2019-03-122019-03-120001623925amgp:SeriesBUnitholdersMember2018-04-012018-06-300001623925amgp:CommonUnitholdersPublicMember2018-04-012018-06-300001623925amgp:SeriesBUnitholdersMember2018-01-012018-03-310001623925amgp:CommonUnitholdersPublicMember2018-01-012018-03-3100016239252018-01-012018-03-310001623925amgp:SeriesBUnitholdersMember2018-06-300001623925amgp:CommonUnitholdersPublicMember2018-06-300001623925amgp:SeriesBUnitholdersMember2018-03-310001623925amgp:CommonUnitholdersPublicMember2018-03-3100016239252018-03-310001623925amgp:SeriesBUnitholdersMember2017-12-310001623925amgp:CommonUnitholdersPublicMember2017-12-310001623925amgp:SeriesBUnitholdersMember2019-06-300001623925srt:MinimumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:InternalNoninvestmentGradeMember2019-01-012019-06-300001623925srt:MinimumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:InternalInvestmentGradeMember2019-01-012019-06-300001623925srt:MaximumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:InternalNoninvestmentGradeMember2019-01-012019-06-300001623925srt:MaximumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:InternalInvestmentGradeMember2019-01-012019-06-300001623925amgp:AnteroMidstreamGeneralPartnersMemberamgp:AmgpCreditFacilityMember2018-05-090001623925amgp:CommonUnitholdersPublicMember2019-06-300001623925amgp:CommonUnitholdersPublicMember2018-12-310001623925amgp:AnteroMidstreamPartnersLpMember2018-12-310001623925us-gaap:FairValueInputsLevel3Member2019-06-300001623925amgp:AnteroMidstreamPartnersLpMember2019-01-012019-03-1200016239252019-01-012019-03-120001623925amgp:PerformanceShareUnitAwardsBasedOnReturnOnInvestedCapitalMember2019-06-300001623925amgp:MidstreamLongTermIncentivePlanMember2019-06-300001623925amgp:AnteroResourcesCorporationMember2019-06-300001623925amgp:MidstreamLongTermIncentivePlanMember2019-01-012019-06-3000016239252018-04-012018-06-300001623925us-gaap:PreferredClassAMember2019-01-012019-06-300001623925amgp:AnteroMidstreamGpLpMemberamgp:CashDistributionToCommonShareholdersMember2019-05-152019-05-150001623925amgp:AnteroMidstreamGpLpMemberamgp:CashDistributionToCommonShareholdersMember2019-05-082019-05-080001623925amgp:AnteroMidstreamGpLpMemberamgp:CashDistributionToCommonShareholdersMember2019-02-212019-02-210001623925amgp:AnteroMidstreamGpLpMemberamgp:CashDistributionToCommonShareholdersMember2019-01-012019-06-300001623925amgp:AnteroMidstreamGpLpMemberamgp:CashDistributionToCommonShareholdersMember2018-11-212018-11-210001623925amgp:AnteroMidstreamGpLpMemberamgp:CashDistributionToCommonShareholdersMember2018-08-222018-08-220001623925amgp:AnteroMidstreamGpLpMemberamgp:CashDistributionToCommonShareholdersMember2018-05-232018-05-230001623925amgp:AnteroMidstreamGpLpMemberamgp:CashDistributionToCommonShareholdersMember2018-02-202018-02-200001623925amgp:AnteroMidstreamGpLpMemberamgp:CashDistributionToCommonShareholdersMember2018-01-012018-12-310001623925amgp:SeniorNotesDue2028Bearing5.75RateMemberus-gaap:DebtInstrumentRedemptionPeriodTwoMember2019-06-282019-06-280001623925amgp:SeniorNotesDue2028Bearing5.75RateMemberus-gaap:DebtInstrumentRedemptionPeriodOneMember2019-06-282019-06-280001623925amgp:SeniorNotesDue2027Bearing5.75RateMemberus-gaap:DebtInstrumentRedemptionPeriodTwoMember2019-02-252019-02-250001623925amgp:SeniorNotesDue2027Bearing5.75RateMemberus-gaap:DebtInstrumentRedemptionPeriodOneMember2019-02-252019-02-250001623925amgp:AnteroMidstreamPartnersAndAnteroMidstreamFinanceCorpMemberus-gaap:SeniorNotesMemberus-gaap:DebtInstrumentRedemptionPeriodTwoMember2016-09-132016-09-130001623925amgp:AnteroMidstreamPartnersAndAnteroMidstreamFinanceCorpMemberus-gaap:SeniorNotesMemberus-gaap:DebtInstrumentRedemptionPeriodOneMember2016-09-132016-09-130001623925amgp:AnteroMidstreamPartnersAndAnteroMidstreamFinanceCorpMemberus-gaap:SeniorNotesMember2016-11-130001623925us-gaap:SeniorNotesMemberus-gaap:FairValueInputsLevel2Member2019-06-300001623925amgp:SeniorNotesDue2028Bearing5.75RateMemberus-gaap:FairValueInputsLevel2Member2019-06-300001623925amgp:SeniorNotesDue2027Bearing5.75RateMemberus-gaap:FairValueInputsLevel2Member2019-06-300001623925amgp:SeniorNotesDue2028Bearing5.75RateMember2019-06-280001623925amgp:SeniorNotesDue2027Bearing5.75RateMember2019-02-250001623925amgp:AnteroMidstreamPartnersAndAnteroMidstreamFinanceCorpMemberus-gaap:SeniorNotesMember2016-09-130001623925amgp:AnteroMidstreamPartnersMemberus-gaap:RevolvingCreditFacilityMember2019-06-300001623925us-gaap:SeniorNotesMember2019-06-300001623925us-gaap:RevolvingCreditFacilityMember2019-06-300001623925amgp:SeniorNotesDue2028Bearing5.75RateMember2019-06-300001623925amgp:SeniorNotesDue2027Bearing5.75RateMember2019-06-300001623925amgp:AnteroMidstreamGeneralPartnersMemberamgp:AmgpCreditFacilityMember2018-12-310001623925amgp:AnteroResourcesCorporationMember2019-04-012019-06-300001623925amgp:AnteroResourcesCorporationMember2019-01-012019-06-300001623925amgp:AnteroResourcesCorporationMember2018-04-012018-06-300001623925amgp:AnteroResourcesCorporationMember2018-01-012018-06-300001623925amgp:UnvestedSeriesBUnitsMember2019-03-122019-03-120001623925amgp:RestrictedStockUnitsRSUPhantomShareUnitsPSUsMember2019-01-012019-06-300001623925amgp:AnteroMidstreamCorporationMember2019-03-1200016239252018-06-3000016239252017-12-310001623925amgp:ThirdPartyMemberamgp:AnteroMidstreamPartnersMember2019-03-120001623925amgp:AnteroResourcesMemberamgp:AnteroMidstreamPartnersMember2019-03-120001623925amgp:ContingentConsiderationPeriodTwoMemberamgp:ContributionConveyanceAndAssumptionAgreementMember2015-09-300001623925amgp:ContingentConsiderationPeriodOneMemberamgp:ContributionConveyanceAndAssumptionAgreementMember2015-09-300001623925amgp:AnteroMidstreamPartnersMember2019-03-122019-03-1200016239252019-03-120001623925us-gaap:OperatingSegmentsMemberamgp:WaterHandlingMember2019-06-300001623925us-gaap:OperatingSegmentsMemberamgp:GatheringAndCompressionMember2019-06-300001623925us-gaap:CorporateNonSegmentMember2019-06-300001623925amgp:WaterHandlingMember2019-04-012019-06-300001623925amgp:GatheringAndCompressionMember2019-04-012019-06-300001623925amgp:GatheringAndCompressionMember2019-01-012019-06-3000016239252018-01-012018-06-300001623925amgp:UnvestedSeriesBUnitsMember2019-04-012019-06-300001623925amgp:ExchangedSeriesBUnitsMember2019-04-012019-06-300001623925amgp:AnteroMidstreamGPLPLongTermIncentivePlanMember2019-04-012019-06-300001623925amgp:AmcLtipMember2019-04-012019-06-300001623925amgp:UnvestedSeriesBUnitsMember2019-01-012019-06-300001623925amgp:ExchangedSeriesBUnitsMember2019-01-012019-06-300001623925amgp:AnteroMidstreamGPLPLongTermIncentivePlanMember2019-01-012019-06-300001623925amgp:AmcLtipMember2019-01-012019-06-300001623925amgp:AnteroMidstreamGPLPLongTermIncentivePlanMember2018-04-012018-06-300001623925amgp:AnteroMidstreamGPLPLongTermIncentivePlanMember2018-01-012018-06-300001623925us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-3000016239252019-07-260001623925amgp:ContingentConsiderationPeriodTwoMemberamgp:ContributionConveyanceAndAssumptionAgreementMember2015-09-012015-09-300001623925amgp:ContingentConsiderationPeriodOneMemberamgp:ContributionConveyanceAndAssumptionAgreementMember2015-09-012015-09-300001623925amgp:AnteroIDRHoldingsLLCMemberamgp:SeriesBUnitAwardsMember2018-12-310001623925amgp:WaterServicesAgreementMember2019-01-012019-06-300001623925amgp:AnteroIDRHoldingsLLCMemberamgp:SeriesBUnitAwardsClassifiedAsEquityMember2019-03-120001623925amgp:AnteroIDRHoldingsLLCMemberamgp:SeriesBUnitAwardsClassifiedAsEquityMember2019-03-122019-03-120001623925amgp:RestrictedStockUnitsRSUPhantomShareUnitsPSUsMember2019-06-300001623925amgp:PerformanceShareUnitAwardsBasedOnReturnOnInvestedCapitalMember2019-01-012019-06-3000016239252018-12-310001623925amgp:AppalachiaJointVentureMember2019-01-012019-06-300001623925amgp:AnteroIDRHoldingsLLCMember2018-01-012018-12-310001623925amgp:AnteroIDRHoldingsLLCMembersrt:MaximumMemberamgp:SeriesBUnitAwardsMember2018-01-012018-12-310001623925srt:MaximumMemberamgp:SeniorNotesDue2028Bearing5.75RateMember2019-06-282019-06-280001623925srt:MaximumMemberamgp:SeniorNotesDue2027Bearing5.75RateMember2019-02-252019-02-250001623925amgp:AnteroMidstreamPartnersAndAnteroMidstreamFinanceCorpMembersrt:MaximumMemberus-gaap:SeniorNotesMember2016-09-132016-09-130001623925amgp:SeriesBUnitholdersMember2018-12-310001623925amgp:StonewallGasGatheringLLCMember2019-06-300001623925amgp:WaterHandlingMember2019-01-012019-06-300001623925amgp:AppalachiaJointVentureMember2019-06-300001623925us-gaap:RetainedEarningsMember2019-04-012019-06-300001623925us-gaap:RetainedEarningsMember2019-01-012019-03-310001623925us-gaap:CorporateNonSegmentMember2019-04-012019-06-300001623925us-gaap:CorporateNonSegmentMember2019-01-012019-06-300001623925us-gaap:FairValueInputsLevel3Member2019-01-012019-06-300001623925us-gaap:CommonStockMember2019-01-012019-03-310001623925us-gaap:AdditionalPaidInCapitalMember2019-01-012019-03-310001623925amgp:SeriesBUnitholdersMember2019-01-012019-03-310001623925amgp:CommonUnitholdersPublicMember2019-01-012019-03-3100016239252019-01-012019-03-310001623925amgp:StonewallGasGatheringLLCMember2019-03-132019-06-300001623925amgp:AppalachiaJointVentureMember2019-03-132019-06-3000016239252019-03-132019-06-300001623925amgp:SeniorNotesDue2028Bearing5.75RateMemberus-gaap:DebtInstrumentRedemptionPeriodThreeMember2019-06-282019-06-280001623925amgp:SeniorNotesDue2027Bearing5.75RateMemberus-gaap:DebtInstrumentRedemptionPeriodThreeMember2019-02-252019-02-250001623925amgp:AnteroMidstreamPartnersAndAnteroMidstreamFinanceCorpMemberus-gaap:SeniorNotesMemberus-gaap:DebtInstrumentRedemptionPeriodThreeMember2016-09-132016-09-130001623925amgp:SeniorNotesDue2028Bearing5.75RateMember2019-06-282019-06-280001623925amgp:SeniorNotesDue2027Bearing5.75RateMember2019-02-252019-02-250001623925amgp:AnteroMidstreamPartnersAndAnteroMidstreamFinanceCorpMemberus-gaap:SeniorNotesMember2016-09-132016-09-130001623925us-gaap:RevolvingCreditFacilityMemberus-gaap:InternalInvestmentGradeMember2019-01-012019-06-300001623925us-gaap:CommonStockMember2019-03-122019-03-120001623925amgp:ExchangedSeriesBUnitsMember2019-03-122019-03-120001623925amgp:SeriesBUnitVestedAndUnvestedMember2019-03-122019-03-120001623925amgp:AnteroMidstreamGPLPLongTermIncentivePlanMember2019-03-122019-03-120001623925amgp:AmcLtipMember2019-03-122019-03-120001623925us-gaap:OperatingSegmentsMemberamgp:GatheringAndCompressionMember2019-04-012019-06-300001623925us-gaap:OperatingSegmentsMemberamgp:GatheringAndCompressionMember2019-01-012019-06-300001623925amgp:AnteroMidstreamPartnersMember2019-03-120001623925us-gaap:OperatingSegmentsMemberamgp:WaterHandlingMember2019-04-012019-06-3000016239252019-04-012019-06-300001623925us-gaap:OperatingSegmentsMemberamgp:WaterHandlingMember2019-01-012019-06-3000016239252019-01-012019-06-300001623925amgp:WaterServicesAgreementMember2015-09-232015-09-230001623925amgp:GatheringAndCompressionAgreementMember2014-11-102014-11-1000016239252019-06-30iso4217:USDxbrli:sharesxbrli:pureutr:bblamgp:itemutr:miiso4217:USDxbrli:sharesamgp:segment

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

OR

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

For the transition period from                    to                   

Commission file number: 001-38075

Graphic

ANTERO MIDSTREAM CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

61-1748605

(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)

(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 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, smaller reporting company, or 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

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

The registrant had 506,896,640 shares of common stock outstanding as of July 26, 2019.

Table of Contents

TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    

2

PART I—FINANCIAL INFORMATION

4

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

4

Item 2.

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

33

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

54

Item 4.

Controls and Procedures

54

PART II—OTHER INFORMATION

56

Item 1.

Legal Proceedings

56

Item 1A.

Risk Factors

56

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

56

Item 5.

Other Information

56

Item 6.

Exhibits

57

SIGNATURES

58

1

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this Quarterly Report on Form 10-Q may contain 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, no forward-looking statements can be guaranteed. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Quarterly Report on Form 10-Q. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. 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 ability to meet its drilling and development plan;
our ability to execute our business strategy;
our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
our ability to realize the anticipated benefits of our investments in unconsolidated affiliates;
natural gas, natural gas liquids (“NGLs”) and oil prices;
our ability to complete the construction of or purchase new gathering and compression, processing, water handling and treatment 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;
competition and government regulations;
actions taken by third-party producers, operators, processors and transporters;
legal or environmental matters;
costs of conducting our operations;
general economic conditions;
credit markets;
operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control;
uncertainty regarding our future operating results; and
plans, objectives, expectations and intentions contained in this Quarterly Report on Form 10-Q that are not historical.

We caution investors that these forward-looking statements are subject to all of the risks and uncertainties incidental to our business, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, environmental risks, Antero Resources’ drilling and completion and other operating risks, regulatory changes, the uncertainty inherent in projecting Antero Resources’ future rates of production, cash flows and access to capital, the timing of development expenditures, and the other risks described under the heading “Risk Factors” in our and Antero Midstream Partners LP’s (“Antero Midstream Partners”) Annual Reports on Form 10-K, each for the year ended December 31, 2018 (the “2018 Forms 10-K”), and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, each of which is on file with the Securities and Exchange Commission (“SEC”).

2

Table of Contents

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

All forward-looking statements, expressed or implied, included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

3

Table of Contents

PART I—FINANCIAL INFORMATION

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Balance Sheets

December 31, 2018 and June 30, 2019

(Unaudited)

(In thousands)

    

December 31, 2018

    

June 30, 2019

Assets

Current assets:

  

Cash and cash equivalents

$

2,822

7,791

Accounts receivable–Antero Resources

103,898

Accounts receivable–third party

586

Other current assets

87

3,092

Total current assets

2,909

115,367

Property and equipment, net

3,744,336

Investments in unconsolidated affiliates

43,492

1,186,161

Deferred tax asset

1,304

Customer relationships

547,685

Goodwill

1,135,266

Other assets, net

40,194

Total assets

$

47,705

6,769,009

Liabilities and Equity

Current liabilities:

Accounts payable–Antero Resources

$

731

5,021

Accounts payable–third party

28

27,003

Accrued liabilities

407

82,077

Contingent acquisition consideration

120,270

Asset retirement obligations

2,615

Taxes payable

15,678

Other current liabilities

518

Total current liabilities

16,844

237,504

Long-term liabilities:

Long-term debt

2,526,334

Asset retirement obligations

3,402

Deferred tax liability

26,738

Other

2,672

Total liabilities

16,844

2,796,650

Partners' Capital and Stockholders' Equity:

Common shareholders—186,219 shares issued and outstanding at December 31, 2018; none issued and outstanding at June 30, 2019

(41,969)

IDR LLC Series B units (66 units vested at December 31, 2018; none issued and outstanding at
June 30, 2019)

72,830

Preferred stock, $0.01 par value: none authorized or issued at December 31, 2018; 100,000 authorized at June 30, 2019

Series A non-voting perpetual preferred stock; none designated, issued or outstanding at
December 31, 2018; 12 designated and 10 issued and outstanding at June 30, 2019

Common stock, $0.01 par value; none authorized, issued or outstanding at December 31, 2018; 2,000,000 authorized and 506,847 issued and outstanding at June 30, 2019

5,068

Additional paid-in capital

3,874,820

Accumulated earnings

92,471

Total partners' capital and stockholders' equity

30,861

3,972,359

Total liabilities and partners' capital and stockholders' equity

$

47,705

6,769,009

See accompanying notes to the unaudited condensed consolidated financial statements.

4

Table of Contents

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income

Three Months Ended June 30, 2018 and 2019

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended June 30,

    

2018

    

2019

    

Revenue:

    

Gathering and compression–Antero Resources

$

168,925

Water handling and treatment–Antero Resources

95,181

Water handling and treatment–third party

46

Amortization of customer relationships

(8,534)

Total revenue

255,618

Operating expenses:

Direct operating

63,998

General and administrative (including $9,111 and $21,543 of equity-based compensation in 2018 and 2019, respectively)

11,509

34,622

Impairment of property and equipment

594

Depreciation

36,447

Accretion and change in fair value of contingent acquisition consideration

2,297

Accretion of asset retirement obligations

69

Total operating expenses

11,509

138,027

Operating income (loss)

(11,509)

117,591

Interest expense, net

(18)

(31,521)

Equity in earnings of unconsolidated affiliates

33,145

13,623

Income before taxes

21,618

99,693

Provision for income tax expense

(7,231)

(30,419)

Net income and comprehensive income

$

14,387

69,274

Net income per share–basic and diluted

$

0.07

0.14

Weighted average common shares outstanding:

Basic

186,199

506,816

Diluted

186,199

507,767

See accompanying notes to the unaudited condensed consolidated financial statements.

5

Table of Contents

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income

Six Months Ended June 30, 2018 and 2019

(Unaudited)

(In thousands, except per share amounts)

Six Months Ended June 30,

2018

    

2019

Revenue:

Gathering and compression–Antero Resources

$

202,459

Water handling and treatment–Antero Resources

117,532

Water handling and treatment–third party

50

Amortization of customer relationships

(10,315)

Total revenue

309,726

Operating expenses:

Direct operating

78,980

General and administrative (including $17,745 and $32,966 of equity-based compensation in 2018 and 2019, respectively)

21,073

54,431

Impairment of property and equipment

594

Depreciation

44,097

Accretion and change in fair value of contingent acquisition consideration

3,346

Accretion of asset retirement obligations

79

Total operating expenses

21,073

181,527

Operating income

(21,073)

128,199

Interest expense, net

(14)

(37,738)

Equity in earnings of unconsolidated affiliates

61,598

16,503

Income before taxes

40,511

106,964

Provision for income tax expense

(13,319)

(28,042)

Net income and comprehensive income

$

27,192

78,922

Net income per share–basic and diluted

$

0.14

0.21

Weighted average common shares outstanding:

Basic

186,194

381,045

Diluted

186,194

382,026

See accompanying notes to the unaudited condensed consolidated financial statements.

6

Table of Contents

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Partners’ Capital

Three and Six Months Ended June 30, 2018

(Unaudited)

(In thousands)

Common

Shares

Representing

Total

Limited Partner

Series B

Partners'

Interests

Unitholders

Capital

Balance at December 31, 2017

$

(19,866)

35,474

15,608

Net income and comprehensive income

12,392

413

12,805

Equity-based compensation

7,777

7,777

Distributions to shareholders

(13,964)

(783)

(14,747)

Balance at March 31, 2018

(13,661)

35,104

21,443

Net income and comprehensive income

13,881

506

14,387

Equity-based compensation

7,777

7,777

Distributions to shareholders

(20,109)

(414)

(20,523)

Balance at June 30, 2018

$

(12,112)

35,196

23,084

See accompanying notes to the unaudited condensed consolidated financial statements.

7

Table of Contents

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Partners’ Capital and Stockholders’ Equity

Three and Six Months Ended June 30, 2019

(Unaudited)

(In thousands)

Common

Shares

Representing

Limited

Additional

Partner

Series B

Common

Paid-In

Preferred

Accumulated

Total

Interests

Unitholders

Stock

Capital

Stock

Earnings

Equity

Balance at December 31, 2018

$

(41,969)

72,830

30,861

Distributions to unitholders

(30,543)

(3,720)

(34,263)

Net (loss) and comprehensive (loss) pre-acquisition

(13,549)

(13,549)

Equity-based compensation pre-acquisition

7,034

7,034

Exchange of common shares for shares of common stock and cash consideration paid

79,027

(69,110)

5,066

4,002,898

4,017,881

Issuance of Series A non-voting perpetual preferred stock

Equity-based compensation

4,389

4,389

Net income and comprehensive income

23,197

23,197

Balance at March 31, 2019

5,066

4,007,287

23,197

4,035,550

Dividends to shareholders

(152,180)

(152,180)

Equity-based compensation

21,543

21,543

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

2

(1,830)

(1,828)

Net income and comprehensive income

69,274

69,274

Balance at June 30, 2019

$

5,068

3,874,820

92,471

3,972,359

See accompanying notes to unaudited condensed consolidated financial statements.

8

Table of Contents

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2018 and 2019

(Unaudited)

(In thousands)

Six Months Ended June 30,

    

2018

    

2019

 

Cash flows provided by (used in) operating activities:

  

Net income

$

27,192

78,922

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

Distributions received from Antero Midstream Partners LP, prior to the Transactions

52,232

43,492

Depreciation

44,097

Accretion and change in fair value of contingent acquisition consideration

3,346

Accretion of asset retirement obligations

79

Impairment of property and equipment

594

Deferred income taxes

28,042

Equity-based compensation

17,745

32,966

Equity in earnings of unconsolidated affiliates

(61,598)

(16,503)

Distributions from unconsolidated affiliates

23,860

Amortization of customer relationships

10,315

Amortization of deferred financing costs

18

1,102

Changes in assets and liabilities:

Accounts receivable–Antero Resources

38,414

Accounts receivable–third party

9

Other current assets

(974)

(1,867)

Accounts payable–Antero Resources

(6)

973

Accounts payable–third party

31

(4,629)

Accrued liabilities

506

(15,370)

Income taxes payable

(548)

(15,678)

Net cash provided by operating activities

34,598

252,164

Cash flows provided by (used in) investing activities:

Additions to gathering systems and facilities

(89,206)

Additions to water handling and treatment systems

(51,984)

Investments in unconsolidated affiliates

(103,409)

Cash received on acquisition of Antero Midstream Partners LP

619,532

Cash consideration paid to Antero Midstream Partners LP unitholders

(598,709)

Change in other assets

2,375

Net cash used in investing activities

(221,401)

Cash flows provided by (used in) financing activities:

Distributions to shareholders

(34,073)

(182,625)

Distributions to Series B unitholders

(1,197)

(3,720)

Distributions to preferred shareholders

(98)

Issuance of senior notes

650,000

Payments of deferred financing costs

(15)

(6,952)

Payments on bank credit facilities, net

(480,500)

Employee tax withholding for settlement of equity compensation awards

(1,828)

Other

(71)

Net cash used in financing activities

(35,285)

(25,794)

Net increase (decrease) in cash and cash equivalents

(687)

4,969

Cash and cash equivalents, beginning of period

5,987

2,822

Cash and cash equivalents, end of period

$

5,300

7,791

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$

3

31,147

Cash paid during the period for income taxes

$

13,867

16,001

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

$

9,447

See accompanying notes to unaudited condensed consolidated financial statements.

9

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements

December 31, 2018 and June 30, 2019

(1) Organization

Antero Midstream Corporation was originally formed as Antero Resources Midstream Management LLC in 2013 to become the general partner of Antero Midstream Partners LP (“Antero Midstream Partners”).  On May 4, 2017, Antero Resources Midstream Management LLC converted from a limited liability company to a limited partnership under the laws of the State of Delaware (the “Conversion”), and changed its name to Antero Midstream GP LP (“AMGP”) in connection with its initial public offering.  On March 12, 2019, pursuant to the previously announced Simplification Agreement, dated as of October 9, 2018, by and among AMGP, Antero Midstream Partners and certain of their affiliates (the “Simplification Agreement”), (i) AMGP was converted from a limited partnership to a corporation under the laws of the State of Delaware and changed its name to Antero Midstream Corporation, (ii) an indirect, wholly owned subsidiary of Antero Midstream Corporation was merged with and into Antero Midstream Partners, with Antero Midstream Partners surviving the merger as an indirect, wholly owned subsidiary of Antero Midstream Corporation (the “Merger”), and (iii) Antero Midstream Corporation exchanged (the “Series B Exchange” and, together with the Conversion, the Merger and the other transactions pursuant to by the Simplification Agreement, the “Transactions”) each issued and outstanding Series B Unit (the “Series B Units”) representing a membership interest in Antero IDR Holdings LLC (“IDR Holdings”) for 176.0041 shares of its common stock, par value $0.01 per share (“AMC common stock”). As a result of the Transactions, Antero Midstream Partners is now a wholly owned subsidiary of Antero Midstream Corporation and former shareholders of AMGP, unitholders of Antero Midstream Partners, including Antero Resources Corporation (“Antero Resources”), and holders of Series B Units now own AMC common stock. Unless the context otherwise requires, references to the “Company,” “we,” “us” or “our” refer to (i) for the period prior to March 13, 2019, AMGP and its consolidated subsidiaries, which did not include Antero Midstream Partners and its subsidiaries, and (ii) for the period beginning on March 13, 2019, Antero Midstream Corporation and its consolidated subsidiaries, including Antero Midstream Partners and its subsidiaries Antero Midstream LLC, Antero Water LLC (“Antero Water”), Antero Treatment LLC, and Antero Midstream Finance Corporation (“Finance Corp”).

We are a growth-oriented midstream company formed to own, operate and develop midstream energy infrastructure primarily to service Antero Resources and its increasing production and completion activity in the Appalachian Basin’s Marcellus Shale and Utica Shale located in West Virginia and Ohio. Our assets consist of gathering pipelines, compressor stations, interests in processing and fractionation plants, and water handling and treatment assets. The Company, through Antero Midstream Partners and its affiliates, provides midstream services to Antero Resources under long-term contracts. The Company’s corporate headquarters are located in Denver, Colorado.

(2) Summary of Significant Accounting Policies

(a)

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable to interim financial information and should be read in the context of the Company’s December 31, 2018 consolidated financial statements and notes thereto for a more complete understanding of the Company’s operations, financial position, and accounting policies, which have been filed with the SEC.

These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, and, accordingly, do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of the Company, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of December 31, 2018 and June 30, 2019, and the results the Company’s operations and its cash flows for the three and six months ended June 30, 2018 and 2019. The Company has no items of other comprehensive income; therefore, net income is equal to its comprehensive income.

10

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

Certain costs of doing business incurred and charged to the Company by Antero Resources have been reflected in the accompanying unaudited condensed consolidated financial statements. These costs include general and administrative expenses provided to the Company by Antero Resources in exchange for:

business services, such as payroll, accounts payable and facilities management;
corporate services, such as finance and accounting, legal, human resources, investor relations and public and regulatory policy; and
employee compensation, including equity-based compensation.

Transactions between the Company and Antero Resources have been identified in the unaudited condensed consolidated financial statements (see Note 4—Transactions with Affiliates).

As of the date these unaudited condensed consolidated financial statements were filed with the SEC, the Company completed its evaluation of potential subsequent events for disclosure and no items requiring disclosure were identified other than as disclosed in Note 12—Dividends.

(b)

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include (i) for the period prior to March 13, 2019, the accounts of AMGP and its consolidated subsidiaries, which did not include Antero Midstream Partners and its subsidiaries, and (ii) for the period beginning on March 13, 2019, the accounts of Antero Midstream Corporation and its consolidated subsidiaries, including Antero Midstream Partners and its subsidiaries, which were acquired in the Transactions. See Note 3—Business Combination.

(c)

Revenue Recognition

The Company, through Antero Midstream Partners and its affiliates, provides gathering and compression and water handling and treatment services under fee-based contracts primarily based on throughput or at cost plus a margin. Certain of these contracts contain operating leases of the Company’s assets under GAAP. Under these arrangements, the Company receives fees for gathering gas products, compression services, and water handling and treatment services. The revenue the Company earns from these arrangements is directly related to (1) in the case of natural gas gathering and compression, the volumes of metered natural gas that it gathers, compresses, and delivers to natural gas compression sites or other transmission delivery points, (2) in the case of fresh water services, the quantities of fresh water delivered to its customers for use in their well completion operations, (3) in the case of wastewater treatment services performed by the Company, the quantities of wastewater treated for our customers, or (4) in the case of flowback and produced water services provided by third parties, the third-party costs the Company incurs plus 3%. The Company recognizes revenue when it satisfies a performance obligation by delivering a service to a customer or the use of leased assets to a customer. See Note 5—Revenue for the Company’s required disclosures under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. The Company includes lease revenue within revenues by service.

(d)

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements and notes in conformity with GAAP requires that management formulate estimates and assumptions that affect revenues, expenses, assets, liabilities, and the disclosure of contingent liabilities. Items subject to estimates and assumptions include the useful lives of property and equipment, the valuation of assets and liabilities acquired from Antero Midstream Partners, as well as the valuation of accrued liabilities, among others. Although management believes these estimates are reasonable, actual results could differ from these estimates.

11

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

(e)

Cash and Cash Equivalents

The Company considers all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments.   

(f)

Property and Equipment

Property and equipment primarily consists of gathering pipelines, compressor stations, fresh water delivery pipelines and facilities, and the wastewater treatment facility and related landfill used for the disposal of salt therefrom, stated at historical cost less accumulated depreciation and amortization. The Company capitalizes construction-related direct labor and material costs. Maintenance and repair costs are expensed as incurred.

Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives and salvage values of assets. The depreciation of fixed assets recorded under operating lease agreements is included in depreciation expense. Uncertainties that may impact these estimates of useful lives include, among others, changes in laws and regulations relating to environmental matters, including air and water quality, restoration and abandonment requirements, economic conditions, and supply and demand for the Company’s services in the areas in which it operates. When assets are placed into service, management makes estimates with respect to useful lives and salvage values that management believes are reasonable.

Amortization of landfill airspace consists of the amortization of landfill capital costs, including those that have been incurred and capitalized and estimated future costs for landfill development and construction, as well as the amortization of asset retirement costs arising from landfill final capping, closure, and post-closure obligations. Amortization expense is recorded on a units-of-consumption basis, applying cost as a rate per-cubic yard. The rate per-cubic yard is calculated by dividing each component of the amortizable basis of the landfill by the number of cubic yards needed to fill the corresponding asset’s airspace. Landfill capital costs and closure and post-closure asset retirement costs are generally incurred to support the operation of the landfill over its entire operating life and are, therefore, amortized on a per-cubic yard basis using a landfill’s total airspace capacity. Estimates of disposal capacity and future development costs are created using input from independent engineers and internal technical teams and are reviewed at least annually.

The Company evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying values of the assets may not be recoverable.  Generally, the basis for making such assessments is undiscounted future cash flow projections for the assets being assessed.  If the carrying values of the assets are deemed not recoverable, the carrying values are reduced to the estimated fair values, which are based on discounted future cash flows using assumptions as to revenues, costs, and discount rates typical of third-party market participants, which is a Level 3 fair value measurement.

(g)

Asset Retirement Obligations

The Company’s asset retirement obligations include its obligation to close, maintain, and monitor landfill cells and support facilities. After the entire landfill reaches capacity and is certified closed, the Company must continue to maintain and monitor the landfill for a post-closure period, which generally extends for 30 years. The Company records the fair value of its landfill retirement obligations as a liability in the period in which the regulatory obligation to retire a specific asset is triggered. For the Company’s individual landfill cells, the required closure and post-closure obligations under the terms of its permits and its intended operation of the landfill cell are triggered and recorded when the cell is placed into service and salt is initially disposed in the landfill cell. The fair value is based on the total estimated costs to close the landfill cell and perform post-closure activities once the landfill cell has reached capacity and is no longer accepting salt. Retirement obligations are increased each year to reflect the passage of time by accreting the balance at the weighted average credit-adjusted risk-free rate that is used to calculate the recorded liability, with accretion charged to direct costs. Actual cash expenditures to perform closure and post-closure activities reduce the retirement obligation liabilities as incurred. After initial measurement, asset retirement obligations are adjusted at the end of each period to reflect changes, if any, in the estimated future cash flows underlying the obligation. Landfill retirement assets are capitalized as the related retirement obligations are incurred, and are amortized on a units-of-consumption basis as the disposal capacity is consumed.

12

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

Asset retirement obligations are recorded for fresh water impoundments and waste water pits when an abandonment date is identified. The Company records the fair value of its freshwater impoundment and waste water pit retirement obligations as liabilities in the period in which the regulatory obligation to retire a specific asset is triggered. The fair value is based on the total reclamation costs of the assets. Retirement obligations are increased each year to reflect the passage of time by accreting the balance at the weighted average credit-adjusted risk-free rate that is used to calculate the recorded liability, with accretion charged to direct costs. Actual cash expenditures to perform remediation activities reduce the retirement obligation liabilities as incurred. After initial measurement, asset retirement obligations are adjusted at the end of each period to reflect changes, if any, in the estimated future cash flows underlying the obligation. Fresh water impoundments and wastewater pit retirement assets are capitalized as the related retirement obligations are incurred, and are amortized on a straight-line basis until reclamation.

The Company is under no legal obligations, neither contractually nor under the doctrine of promissory estoppel, to restore or dismantle its gathering pipelines, compressor stations, water delivery pipelines and facilities and wastewater treatment facility upon abandonment. The Company’s gathering pipelines, compressor stations, fresh water delivery pipelines and facilities and wastewater treatment facility have an indeterminate life, if properly maintained. Accordingly, the Company is not able to make a reasonable estimate of when future dismantlement and removal dates of its pipelines, compressor stations and facilities will occur.

(h)

Income Taxes

Antero Midstream Corporation recognizes deferred tax assets and liabilities for temporary differences resulting from net operating loss carryforwards for income tax purposes and the differences between the financial statement and tax basis of assets and liabilities.  The effect of changes in tax laws or tax rates is recognized in income during the period such changes are enacted.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.  Antero Midstream Corporation regularly reviews its tax positions in each significant taxing jurisdiction during the process of evaluating its tax provision.  Antero Midstream Corporation makes adjustments to its tax provision when: (i) facts and circumstances regarding a tax position change, causing a change in management’s judgment regarding that tax position; and/or (ii) a tax position is effectively settled with a tax authority at a differing amount.

(i)

Fair Value Measures

The Financial Accounting Standards Board (the “FASB”) ASC Topic 820, Fair Value Measurements and Disclosures, clarifies the definition of fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  This guidance also relates to all nonfinancial assets and liabilities that are not recognized or disclosed on a recurring basis (e.g., the initial recognition of asset retirement obligations and impairments of long-lived assets).  The fair value is the price that the Company estimates would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  A fair value hierarchy is used to prioritize inputs to valuation techniques used to estimate fair value.  An asset or liability subject to the fair value requirements is categorized within the hierarchy based on the lowest level of input that is significant to the fair value measurement.  The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.  The highest priority (Level 1) is given to unadjusted quoted market prices in active markets for identical assets or liabilities, and the lowest priority (Level 3) is given to unobservable inputs.  Level 2 inputs are data, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly.

The carrying values on the balance sheet of the Company’s cash and cash equivalents, accounts receivable—Antero Resources, accounts receivable—third party, other current assets, accounts payable—Antero Resources, accounts payable, accrued liabilities, other current liabilities, other liabilities and the Credit Facility (as defined in Note 7—Long-Term Debt) approximate fair values due to their short-term maturities. The assets and liabilities of Antero Midstream Partners were recorded at fair value as of the acquisition date, March 12, 2019 (see Note 3—Business Combination).

13

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

(j)

Investments in Unconsolidated Affiliates

The Company uses the equity method to account for its investments in companies if the investment provides the Company with the ability to exercise significant influence over, but not control of, the operating and financial policies of the investee. The Company’s consolidated net income includes the Company’s proportionate share of the net income or loss of such companies. The Company’s judgment regarding the level of influence over each equity method investee includes considering key factors such as the Company’s ownership interest, representation on the board of directors and participation in policy-making decisions of the investee and material intercompany transactions. See Note 15—Investments in Unconsolidated Affiliates.

(k)

Business Combinations

The Company recognizes and measures the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date, with any remaining difference recorded as goodwill. For acquisitions, management engages an independent valuation specialist to assist with the determination of fair value of the assets acquired, liabilities assumed, and goodwill, based on recognized business valuation methodologies.  If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, an estimate will be recorded.  Subsequent to the acquisition, and not later than one year from the acquisition date, the Company will record any material adjustments to the initial estimate based on new information obtained that would have existed as of the acquisition date.  An adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the period of the adjustment. Acquisition-related costs are expensed as incurred in connection with each business combination. See Note 3—Business Combination.

(l)

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in the acquisition of a business.  Goodwill is not amortized, but rather is tested for impairment annually and when events or changes in circumstances indicate that the fair value of a reporting unit with goodwill has been reduced below carrying value.  The impairment test requires allocating goodwill and other assets and liabilities to reporting units.  The fair value of each reporting unit is determined and compared to the carrying value of the reporting unit.  The fair value is calculated using the expected present value of future cash flows method. Significant assumptions used in the cash flow forecasts include future net operating margins, future volumes, discount rates, and future capital requirements. If the fair value of the reporting unit is less than the carrying value, including goodwill, the implied fair value of goodwill is calculated.  The excess, if any, of the book value over the implied fair value of goodwill is charged to net income as an impairment expense.

Amortization of intangible assets with definite lives is calculated using the straight-line method which is reflective of the benefit pattern in which the estimated economic benefit is expected to be received over the estimated useful life of the intangible asset. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible may not be recoverable. If the sum of the expected undiscounted future cash flows related to the asset is less than the carrying amount of the asset, an impairment loss is recognized based on the fair value of the asset.

14

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

(k)

Adoption of New Accounting Principle

On February 25, 2016, the FASB issued Accounting Standard Update (“ASU”) No. 2016-02, Leases, which requires lessees to record lease liabilities and right-of-use assets as of the date of adoption and was incorporated into GAAP as ASC Topic 842. The new lease standard does not substantially change accounting by lessors. The Company adopted the new standard prospectively effective January 1, 2019. The Company is not a party to material contracts as a lessee. The Company determined that Antero Midstream Partners’ contractual arrangement with Antero Resources to provide gathering and compression services is an operating lease of certain of the Company’s assets, which are accounted for under the new ASU (see Note 5—Revenue for information on this arrangement).

(3) Business Combination

On March 12, 2019, AMGP and Antero Midstream Partners completed the Transactions. The Transactions have been accounted for using the acquisition method of accounting with Antero Midstream Corporation identified as the acquirer of Antero Midstream Partners.

The components of the fair value of consideration transferred are as follows (in thousands):

Fair value of shares of AMC common stock issued(1)

$

4,017,881

Cash

598,709

Total fair value of consideration transferred

$

4,616,590

(1)The fair value of each share of AMC common stock issued in connection with the Transactions was determined to be $12.54, the closing price of AMGP common shares on March 12, 2019.

15

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

The following table summarizes the preliminary purchase price allocation. Due to the proximity of the Transactions to June 30, 2019, the Company is still completing its analysis of the final purchase price allocation. The estimated fair value of assets acquired and liabilities assumed at March 12, 2019, are as follows (in thousands):

Cash and cash equivalents

$

619,532

Accounts receivable–Antero Resources

142,312

Accounts receivable–third party

117

Other current assets

1,150

Property and equipment, net

3,639,148

Investments in unconsolidated affiliates

1,090,109

Customer relationships

558,000

Other assets, net

42,887

Total assets acquired

6,093,255

Accounts payable–Antero Resources

3,316

Accounts payable–third party

30,674

Accrued liabilities

87,021

Other current liabilities

537

Long-term debt

2,364,935

Contingent acquisition consideration

116,924

Asset retirement obligations

5,715

Other liabilities

2,809

Total liabilities assumed

2,611,931

Net assets acquired, excluding goodwill

3,481,324

Goodwill

1,135,266

Net assets acquired

$

4,616,590

The Company’s financial statements include $6 million of acquisition-related costs associated with the Transactions. These costs were expensed as general and administrative costs.

(4) Transactions with Affiliates

(a)

Revenues

Substantially all revenues earned in the three and six months ended June 30, 2019 were earned from Antero Resources, under various agreements for gathering and compression and water handling and treatment services. Revenues earned from gathering and processing services consists of lease income. There were no such revenues earned by AMGP for the three and six months ended June 30, 2018.

(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 and treatment services. “Accounts payable—Antero Resources” represents amounts due to Antero Resources for general and administrative and other costs.

(c)

Costs charged by Antero Resources

The employees supporting the Company’s operations are employees of Antero Resources.  Direct operating expense includes costs charged to the Company of $1.9 million and $2.3 million during the three months and six months ended June 30, 2019, respectively, related to labor charges for Antero Resources employees associated with the operation of the Company’s gathering lines, compressor stations, and water handling and treatment assets.  There were no such charges to AMGP during the three months and six

16

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

months ended June 30, 2018. General and administrative expense includes costs charged to the Company by Antero Resources of $0.1 million and $11.8 million during the three months ended June 30, 2018 and 2019, respectively.  For the six months ended June 30, 2018 and 2019, general and administrative expenses charged to the Company by Antero Resources were $0.3 million and $13.9 million, 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 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, with the exception of noncash equity compensation attributed to the Company for awards issued under Antero Resources’ long-term incentive plan and the Antero Midstream Corporation Long Term Incentive Plan (the “AMC LTIP”).  See Note 10—Equity-Based Compensation.

(5) Revenue

(a)   Revenue from Contracts with Customers

All of the Company’s revenues are derived from service contracts with customers and are recognized when the Company satisfies a performance obligation by delivering a service to a customer. The Company derives substantially all of its revenues from Antero Resources. The following sets forth the nature, timing of satisfaction of performance obligations, and significant payment terms of the Company’s contracts with Antero Resources.

Gathering and Compression Agreement

Pursuant to the Company’s 20-year gathering and compression agreement with Antero Resources, which was originally entered into on November 10, 2014, Antero Resources has dedicated all of its current and future acreage in West Virginia, Ohio and Pennsylvania to the Company for gathering and compression services except for acreage subject to third-party commitments or pre-existing dedications. Upon completion of the initial 20-year term, the gathering and compression agreement will continue in effect from year to year until such time as the agreement is terminated, effective upon an anniversary of the effective date of the agreement, by either the Company or Antero Resources on or before the 180th day prior to the anniversary of such effective date.

The Company also has an option to gather and compress natural gas produced by Antero Resources on any acreage it acquires in the future outside of West Virginia, Ohio and Pennsylvania on the same terms and conditions. Under the gathering and compression agreement, the Company receives a low pressure gathering fee, a high pressure gathering fee and a compression fee, in each case subject to CPI-based adjustments. In addition, the agreement stipulates that the Company receives a reimbursement for the actual cost of electricity used at its compressor stations.

The Company determined that the gathering and compression agreement is an operating lease as Antero Resources obtains substantially all of the economic benefit of the asset and has the right to direct the use of the asset. The gathering system is an identifiable asset within the gathering and compression agreement, and it consists of underground low pressure pipelines that generally connect and deliver gas from specific well pads to compressor stations to compress the gas before delivery to underground high pressure pipelines that transport the gas to a third-party pipeline or plant. The gathering system is considered a single lease due to the interrelated network of the assets. The Company accounts for its lease and non-lease components as a single lease component as the lease component is the predominant component. The non-lease components consist of operating, oversight and maintenance of the gathering system, which are performed on time-elapsed measures. All lease payments, under the future Minimum Volume Commitments discussed below, are considered to be in-substance fixed lease payments under the gathering and compression agreement.

The Company recognizes revenue when low pressure volumes are delivered to a compressor station, compression volumes are delivered to a high pressure line and high pressure volumes are delivered to a processing plant or transmission pipeline. The Company invoices the customer the month after each service is performed, and payment is due in the same month.

17

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

Water Services Agreement

Antero Midstream Partners is party to a Water Services Agreement with Antero Resources whereby Antero Midstream Partners agreed to provide certain water handling and treatment services to Antero Resources within an area of dedication in defined service areas in Ohio and West Virginia. Antero Resources agreed to pay Antero Midstream Partners for all water handling and treatment services provided by Antero Midstream Partners in accordance with the terms of the water services agreement. The initial term of the water services agreement is 20 years from September 23, 2015 and from year to year thereafter until terminated by either party. Under the agreement, the Company receives a fixed fee per barrel in West Virginia, Ohio and all other locations for fresh water deliveries by pipeline directly to the well site. Additionally, the Company receives a fixed fee per barrel for fresh water delivered by truck to high-rate transfer facilities. All of these fees have been subject to annual CPI adjustments since the inception of the agreement in 2015. Antero Resources also agreed to pay the Company a fixed fee per barrel for wastewater treatment at the advanced wastewater treatment complex, in each case subject to annual CPI-based adjustments and additional fees based on certain costs.

Under the water services agreement, the Company may also contract with third parties to provide water services to Antero Resources. Antero Resources reimburses the Company for third-party out-of-pocket costs plus a 3% markup.

The Company satisfies its performance obligations and recognizes revenue when the fresh water volumes have been delivered to the hydration unit of a specified well pad and the wastewater volumes have been delivered to the Company’s wastewater treatment facility. The Company invoices the customer the month after water services are performed, and payment is due in the same month. For services contracted through third-party providers, the Company’s performance obligation is satisfied when the service to be performed by the third-party provider has been completed. The Company invoices the customer after the third-party provider billing is received, and payment is due in the same month.

Minimum Volume Commitments

Both the gathering and compression and water services agreements include certain minimum volume commitment provisions. If and to the extent Antero Resources requests that the Company construct new high pressure lines and compressor stations, the gathering and compression agreement contains minimum volume commitments that require Antero Resources to utilize or pay for 75% and 70%, respectively, of the capacity of such new construction for 10 years. Antero Resources also committed to pay a fee on a minimum volume of fresh water deliveries in calendar years 2016 through 2019. Antero Resources is obligated to pay a minimum volume fee to the Company in the event the aggregate volume of fresh water delivered to Antero Resources under the water services agreement is less than 120,000 barrels per day in 2019. The Company recognizes water handling and treatment revenue related to these minimum volume commitments at the time it is determined that the volumes will not be consumed by Antero Resources, and the amount of the shortfall is known. The Company recognizes lease income from its minimum volume commitments under its gathering and compression agreement on a straight-line basis.

18

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

Minimum revenue amounts under the minimum volume commitments are as follows:

Remainder of

Year Ended December 31,

(in thousands)

2019

2020

2021

2022

2023

2024

Thereafter

Total

Minimum revenue under the Gathering and Compression Agreement (1)

$

63,997

210,363

209,788

209,788

209,788

210,363

535,756

1,649,843

Minimum revenue under the Water Services Agreement

73,604

73,604

Total

$

137,601

210,363

209,788

209,788

209,788

210,363

535,756

1,723,447

(1)Minimum volume commitments under the Gathering and Compression Agreement are recognized on a straight-line basis and additional operating lease income is earned when excess volumes are delivered under the contract. The Company is not party to any leases that have not commenced.

(b)   Disaggregation of Revenue

In the following table, revenue is disaggregated by type of service and type of fee. The table also identifies the reportable segment to which the disaggregated revenues relate. For more information on reportable segments, see Note 16—Reporting Segments.

Three Months

Six Months

Ended

Ended

June 30,

June 30,

Segment to which

(in thousands)

2019

2019

revenues relate

Revenue from contracts with customers

Type of service

Gathering—low pressure

$

78,807

94,634

Gathering and Processing(1)

Gathering—high pressure

47,749

57,032

Gathering and Processing(1)

Compression

42,369

50,793

Gathering and Processing(1)

Fresh water delivery

43,429

54,204

Water Handling and Treatment

Wastewater treatment

12,011

14,441

Water Handling and Treatment

Other fluid handling

39,787

48,937

Water Handling and Treatment

Amortization of customer relationships(2)

(2,402)

(2,903)

Gathering and Processing

Amortization of customer relationships(2)

(6,132)

(7,412)

Water Handling and Treatment

Total

$

255,618

309,726

Type of contract

Per Unit Fixed Fee

$

168,925

202,459

Gathering and Processing(1)

Per Unit Fixed Fee

55,440

68,645

Water Handling and Treatment

Cost plus 3%

39,787

48,937

Water Handling and Treatment

Amortization of customer relationships

(2,402)

(2,903)

Gathering and Processing

Amortization of customer relationships

(6,132)

(7,412)

Water Handling and Treatment

Total

$

255,618

309,726

(1)Revenue related to the gathering and processing segment is classified as lease income related to the gathering system.
(2)Fair value of customer contracts acquired as part of the Transactions discussed in Note 3—Business Combination.

19

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

(c)   Transaction Price Allocated to Remaining Performance Obligations

The majority of the Company’s service contracts have a term greater than one year. As such, the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under the Company’s service contracts, each unit of product delivered to the customer represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.

The remainder of our service contracts, which relate to contracts with third parties, are short-term in nature with a contract term of one year or less. Accordingly, the Company is exempt from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

(d)   Contract Balances

Under the Company’s service contracts, the Company invoices customers after its performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s service contracts do not give rise to contract assets or liabilities. At June 30, 2019, the Company’s receivables with customers were $104 million. There were no receivables from customers as of December 31, 2018.

(6) Property and Equipment

The Company’s investment in property and equipment for the periods presented is as follows:

Estimated

(in thousands)

    

useful lives

    

June 30, 2019

Land

n/a

$

23,665

Gathering systems and facilities

40-50 years(1)

2,390,018

Fresh water permanent buried pipelines and equipment

10-20 years

686,179

Wastewater treatment facility

30 years

304,375

Fresh water surface pipelines and equipment

1-5 years

44,915

Landfill

n/a(2)

77,866

Heavy trucks and equipment

3-5 years

4,941

Above ground storage tanks

5-10 years

4,235

Construction-in-progress

n/a

251,940

Total property and equipment

3,788,134

Less accumulated depreciation

(43,798)

Property and equipment, net

$

3,744,336

(1)Gathering systems and facilities are recognized as a single-leased asset with no residual value.
(2)Amortization of landfill costs is recorded over the life of the landfill on a units-of-consumption basis.

20

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

(7)

Long-Term Debt

On May 9, 2018, AMGP entered into a credit facility (the “AMGP Credit Facility”) with a bank, which provided for a line of credit of up to $12 million. At December 31, 2018, AMGP had no borrowings under the AMGP Credit Facility. In connection with the Transactions, the AMGP Credit Facility was terminated on March 12, 2019.

AMGP had no long-term debt at December 31, 2018. Antero Midstream Corporation’s long-term debt was as follows at June 30, 2019:

(in thousands)

June 30, 2019

Credit Facility (a)

$

594,500

5.375% senior notes due 2024 (b)

652,600

5.75% senior notes due 2027 (c)

653,250

5.75% senior notes due 2028 (d)

650,000

Net unamortized debt issuance costs

(24,016)

Total long-term debt

$

2,526,334

(a)

Antero Midstream Partners Revolving Credit Facility

Antero Midstream Partners, an indirect, wholly owned subsidiary of Antero Midstream Corporation, as borrower (the “Borrower”), has a senior secured revolving credit facility (the “Credit Facility”) with a consortium of banks. Lender commitments under the Credit Facility are $2.0 billion. At June 30, 2019, the Borrower had borrowings under the Credit Facility of $595 million with a weighted average interest rate of 3.79%. No letters of credit were outstanding at June 30, 2019 under the Credit Facility. The maturity date of the facility is October 26, 2022. The Credit Facility includes fall away covenants and lower interest rates that are triggered if and when the Borrower is assigned an Investment Grade Rating (as defined below).

Under the Credit Facility, “Investment Grade Period” is a period that, as long as no event of default has occurred and the Borrower is in pro forma compliance with the financial covenants under the Credit Facility, commences when the Borrower elects to give notice to the Administrative Agent that the Borrower has received at least one of either (i) a BBB- or better rating from Standard and Poor’s or (ii) a Baa3 or better from Moody’s (provided that the non-investment grade rating from the other rating agency is at least either Ba1 if Moody’s or BB+ if Standard & Poor’s (an “Investment Grade Rating”)). An Investment Grade Period can end at the Borrower’s election. 

During a period that is not an Investment Grade Period, the Credit Facility is ratably secured by mortgages on substantially all of the Borrower’s properties, including the properties of its subsidiaries, and guarantees from its subsidiaries. During an Investment Grade Period, the liens securing the obligations thereunder shall be automatically released (subject to the provisions of the Credit Facility).

The Credit Facility contains certain covenants including restrictions on indebtedness, and requirements with respect to leverage and interest coverage ratios; provided, however, that during an Investment Grade Period, such covenants become less restrictive on the Borrower. The Credit Facility permits distributions to the holders of the Borrower’s equity interests in accordance with the cash distribution policy previously adopted by the board of directors of the general partner of the Borrower, provided that no event of default exists or would be caused thereby, and only to the extent permitted by our organizational documents. The Borrower was in compliance with all of the financial covenants under the Credit Facility as of June 30, 2019.

Principal amounts borrowed are payable on the maturity date with such borrowings bearing interest that is payable quarterly or, in the case of Eurodollar Rate Loans, at the end of the applicable interest period if shorter than six months. Interest is payable at a variable rate based on LIBOR or the base rate, determined by election at the time of borrowing, plus an applicable margin rate. Interest at the time of borrowing is determined with reference to (i) during any period that is not an Investment Grade Period, the Borrower’s then-current leverage ratio and (ii) during an Investment Grade Period, with reference to the rating given to the Borrower by Moody’s or Standard and Poor’s. During an Investment Grade Period, the applicable margin rates are reduced by 25 basis points.

21

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

Commitment fees on the unused portion of the Credit Facility are due quarterly at rates ranging from 0.25% to 0.375% based on the leverage ratio, during a period that is not an Investment Grade Period, and 0.175% to 0.375% based on the Borrower’s rating during an Investment Grade Period.

(b) 5.375% Senior Notes Due 2024

On September 13, 2016, Antero Midstream Partners and its wholly owned subsidiary, Finance Corp together with Antero Midstream Partners, (the “Issuers”), issued $650 million in aggregate principal amount of 5.375% senior notes due September 15, 2024 (the “2024 Notes”) at par.  The 2024 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility.  The 2024 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 2024 Notes is payable on March 15 and September 15 of each year.  Antero Midstream Partners may redeem all or part of the 2024 Notes at any time on or after September 15, 2019 at redemption prices ranging from 104.031% on or after September 15, 2019 to 100.00% on or after September 15, 2022.  In addition, prior to September 15, 2019, Antero Midstream Partners may redeem up to 35% of the aggregate principal amount of the 2024 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 2024 Notes, plus accrued and unpaid interest.  At any time prior to September 15, 2019, Antero Midstream Partners may also redeem the 2024 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2024 Notes plus a “make-whole” premium and accrued and unpaid interest.  If Antero Midstream Partners undergoes a change of control, the holders of the 2024 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2024 Notes at a price equal to 101% of the principal amount of the 2024 Notes, plus accrued and unpaid 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 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 102.875% on or after March 1, 2022 to 100.00% on or after March 1, 2025.  In addition, prior to March 1, 2022, Antero Midstream Partners may redeem up to 35% of the aggregate principal amount of the 2027 Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 105.75% of the principal amount of the 2027 Notes, plus accrued and unpaid interest.  At any time prior to March 1, 2022, Antero Midstream Partners may also redeem the 2027 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2027 Notes plus a “make-whole” premium and accrued and unpaid interest.  If Antero Midstream Partners undergoes a change of control, 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.

22

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

(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% on or after January 15, 2023 to 100.00% on or after January 15, 2026.  In addition, prior to January 15, 2023, Antero Midstream Partners may redeem up to 35% of the aggregate principal amount of the 2028 Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 105.75% of the principal amount of the 2028 Notes, plus accrued and unpaid interest.  At any time prior to January 15, 2023, Antero Midstream Partners may also redeem the 2028 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2028 Notes plus a “make-whole” premium and accrued and unpaid interest.  If Antero Midstream Partners undergoes a change of control, 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.

(8) Accrued Liabilities

Accrued liabilities as of December 31, 2018 and June 30, 2019 consisted of the following items:

December 31,

June 30,

(in thousands)

    

2018

    

2019

 

Capital expenditures

$

27,864

Operating expenses

21,717

Interest expense

25,735

Other

407

6,761

Total accrued liabilities

$

407

82,077

(9) Asset Retirement Obligations

The following is a reconciliation of our asset retirement obligations for the period shown below (in thousands):

Asset retirement obligations—December 31, 2018

$

Antero Midstream Partners asset retirement obligation assumed—March 12, 2019

5,715

Obligations incurred

223

Accretion expense

79

Asset retirement obligations—June 30, 2019

$

6,017

(10) Equity-Based Compensation

The Company’s general and administrative expenses include equity-based compensation costs related to the Antero Midstream GP LP Long-Term Incentive Plan (“AMGP LTIP”) and the Series B Units prior to the Transactions. Equity-based compensation after the Transactions include (i) costs allocated to Antero Midstream Partners by Antero Resources for grants made prior to the Transactions pursuant to Antero Resources’ long-term incentive plan, (ii) costs due to Antero Midstream Corporation LTIP (the “AMC LTIP”) and (iii) the Exchanged B Units (as defined below). Antero Midstream Partners’ portion of the equity-based compensation expense is included in general and administrative expenses, and recorded as a credit to the applicable classes of equity. Equity-based compensation expense allocated to Antero Midstream Partners was $2.8 million for the period from March 13, 2019 to June 30, 2019. Antero Resources has unamortized expense totaling approximately $64 million as of June 30, 2019 related to its various equity-based compensation plans, which includes grants made under the AMC LTIP prior to the Transactions. A portion of

23

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

this will be allocated to Antero Midstream Partners as it is amortized over the remaining service period of the related awards. Antero Midstream Partners does not reimburse Antero Resources for noncash equity compensation allocated to it for awards issued under the Antero Resources long-term incentive plan.

Exchanged B Units

As of December 31, 2018, IDR Holdings had 98,600 Series B Units authorized and outstanding that entitled the holders to receive up to 6% of the amount of the distributions that Antero Midstream Partners made on its incentive distribution rights (“IDRs”) in excess of $7.5 million per quarter, subject to certain vesting conditions. On December 31, 2018, 65,745 Series B Units were vested. The holders of vested Series B Units had 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 AMGP’s equity value in excess of $2.0 billion.

Upon Closing of the Transactions, each Series B Unit, vested and unvested, was exchanged for 176.0041 shares of our common stock (the “Series B Exchange”). A total of 17,353,999 shares of AMC common stock were issued in exchange for the 98,600 Series B Units then outstanding (the “Exchanged B Units”), which included 5,782,601 restricted shares of AMC common stock issued in exchange for the 32,855 unvested Series B Units.

The Company accounted for the Series B Exchange as a share-based payment modification under ASC 718, Stock Compensation. On March 12, 2019, which is the modification date, the Company determined the estimated fair value of the Series B Unit awards using a Monte Carlo simulation using various assumptions including a floor equity value of $2.0 billion, expected volatility of 40% based on historical volatility of a peer group of publicly traded partnerships, a risk free rate of 2.51%, 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 $1,257 when exchanged for shares of AMC common stock. The 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. The unvested Exchanged B Units retain the same vesting conditions as the Series B Units and are expected to vest on December 31, 2019. Expenses related to Exchanged B Units are recognized on a straight-line basis over the requisite service period of the entire award. Forfeitures are accounted for as they occur by reversing the expense previously recognized for awards that were forfeited during the period.

The Company recognized $18 million and $29 million of equity-based compensation expense related to the Series B awards, including the Series B Units prior to the Closing of the Transactions, for the three and six months ended June 30, 2019, respectively.
For the three and six months ended June 30, 2018, the Company recognized
$9 million and $17 million, respectively, of equity-based compensation expense related to the Series B Units. Unamortized expense related to these awards was $37 million as of June 30, 2019, which is expected to be recognized during the remainder of 2019.

AMGP LTIP

On April 17, 2017, Antero Midstream GP LP adopted the AMGP LTIP pursuant to which certain non-employee directors of Antero Midstream GP LP’s general partner and certain officers, employees and consultants of Antero Resources were eligible to receive awards representing equity interests in Antero Midstream GP LP. The Company recognized expense of $0.2 million for the three months ended June 30, 2018, and the Company did not recognize expense related to these awards for the three months ended June 30, 2019. For the six months ended June 30, 2018 and 2019, the Company recognized $0.3 million and $0.2 million, respectively, related to these awards. Expenses related to these awards were recognized on a straight-line basis over the requisite service period of the entire award. Forfeitures were accounted for as they occur by reversing the expense previously recognized for awards that were forfeited during the period. In connection with the Transactions, the AMGP LTIP was terminated on March 12, 2019. No awards were issued and outstanding as of March 12, 2019.

AMC LTIP

Effective March, 12, 2019, the Board of Directors of Antero Midstream Corporation (the “Board”) adopted the AMC LTIP under which awards may be granted to employees, directors and other service providers of the Company and its affiliates. The AMC LTIP provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents,

24

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

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. The Company is authorized to grant up to 15,398,901 shares of common stock to employees and directors under the AMC LTIP. As of June 30, 2019, a total of 13,653,739 shares were available for future grant under the AMC LTIP. For the three and six months ended June 30, 2019, the Company recognized $0.8 million and $0.8 million, respectively, expenses related to these awards. Expenses related to restricted stock units are recognized on a straight-line basis over the requisite service period of the entire award. Forfeitures are accounted for as they occur by reversing the expense previously recognized for awards that were forfeited during the period.

As part of the Transactions, each of the unvested outstanding phantom units in the Antero Midstream Partners Long Term Incentive Plan (“AMP LTIP”) was assumed by Antero Midstream Corporation and converted into 1.8926 restricted stock units under the AMC LTIP representing a right to receive shares of AMC common stock for each converted phantom unit.

A summary of the restricted stock unit awards activity during the six months ended June 30, 2019 is as follows:

Weighted

Average

Aggregate

Number of

grant date

intrinsic value

    

units

    

fair value

    

(in thousands)

Total AMC LTIP units awarded and unvested—December 31, 2018

$

$

AMP LTIP Awards converted into AMC LTIP Awards(1)

1,068,900

$

14.58

Granted

647,030

$

14.15

Vested

(335,480)

$

14.04

Forfeited

(23,674)

$

13.92

Total AMC LTIP units awarded and unvested—June 30, 2019

1,356,776

$

14.52

$

15,549

(1)

Effective as of March 12, 2019, all unvested outstanding phantom units in the AMP LTIP were assumed by the Company and converted into restricted stock units under the AMC LTIP at a conversion rate of 1.8926.

Intrinsic values are based on the closing price of the Company’s common shares on the referenced dates. AMC LTIP unamortized expense of $18 million at June 30, 2019, is expected to be recognized over a weighted average period of approximately 2.8 years and the Company’s proportionate share will be allocated to it as it is recognized.

Performance Share Unit Awards Based on Return on Invested Capital (“ROIC”)

In 2019, the Company granted PSUs to certain of its employees and executive officers, a portion of which vest based on the Company’s actual ROIC (as defined in the award agreement) over a three-year period as compared to a targeted ROIC (“ROIC PSUs”). The number of shares of common stock that may ultimately be earned with respect to the ROIC PSUs ranges from zero to 200% of the target number of ROIC PSUs originally granted. Expense related to the ROIC PSUs is recognized based on the number of shares of common stock that are expected to be issued at the end of the measurement period, and is reversed if the likelihood of achieving the performance condition decreases. For the three and six months ended June 30, 2019, the Company recognized $0.2 million and $0.2 million, respectively, expenses related to these awards.

25

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

Summary Information for Performance Share Unit Awards

A summary of PSU activity for the six months ended June 30, 2019 is as follows:

Weighted

Average

Number of

grant date

    

units

    

fair value

Total awarded and unvested—December 31, 2018

$

Granted

164,196

$

14.16

Vested

$

Forfeited

$

Total awarded and unvested—June 30, 2019

164,196

$

14.16

The grant-date fair value for the ROIC PSUs is based on the closing price of the Company’s common stock on the date of the grant, assuming the achievement of the performance condition.

As of June 30, 2019, there was $2.2 million of unamortized equity-based compensation expense related to unvested PSUs. That expense is expected to be recognized over a weighted average period of approximately 2.8 years.

(11) Cash Distributions and Dividends Paid

The following table details the amount of distributions and dividends paid with respect to the quarter indicated (in thousands, except per share data):

Common

Quarter

shareholders

Distributions

and Year

    

Record Date

    

Distribution Date

    

distributions

  

per share

Q4 2017

February 1, 2018

February 20, 2018

$

13,964

$

0.075

Q1 2018

May 3, 2018

May 23, 2018

20,109

$

0.108

Q2 2018

August 2, 2018

August 22, 2018

23,276

$

0.125

Q3 2018

November 2, 2018

November 21, 2018

26,817

$

0.144

Total 2018

$

84,166

Q4 2018

February 1, 2019

February 21, 2019

$

30,543

$

0.164

Q1 2019

April 26, 2019

May 8, 2019

152,082

$

0.3025

Q1 2019

May 15, 2019

May 15, 2019

98

*

Total 2019

$

182,723

*

Dividends are paid in accordance with the terms of the Series A Preferred Stock as discussed in Note 13—Equity and Earnings Per Common Share.

(12)

Dividends

On July 10, 2019 the Board declared a cash dividend on the shares of AMC common stock of $0.3075 per share for the quarter ended June 30, 2019. The dividend will be payable on August 7, 2019 to stockholders of record as of July 26, 2019.

The Board also declared a cash dividend of $139 thousand on the shares of Series A Preferred Stock of Antero Midstream Corporation to be paid on August 14, 2019 in accordance with the terms of the Series A Preferred Stock, which are discussed in Note

26

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

13—Equity and Earnings Per Common Share. As of June 30, 2019, there were dividends in the amount $70 thousand accumulated in arrears on the Company’s Series A Preferred Stock.

(13) Equity and Earnings Per Common Share

(a) Preferred Stock

The Board authorized 100,000,000 shares of preferred stock in connection with the closing of the Transactions (see Note 3—Business Combination) 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 AMC common stock equal to the conversion ratio in effect on the applicable conversion date, subject to certain limitations. The Series A Preferred Stock ranks senior to the AMC common stock as to dividend rights, as well as with respect to rights upon liquidation, winding-up or dissolution of the Company. Holders of the Series A Preferred Stock do not have any voting rights in the Company, except as required by law, or any preemptive rights.

(b) Weighted Average Shares Outstanding

The following is a reconciliation of the Company’s basic weighted average shares outstanding to diluted weighted average shares outstanding during the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

    

2018

    

2019

    

2018

    

2019

Basic weighted average number of shares outstanding

186,199

506,816

186,194

381,045

Add: Dilutive effect of restricted stock units

78

108

Add: Dilutive effect of Series A preferred stock

873

873

Diluted weighted average number of shares outstanding

186,199

507,767

186,194

382,026

(c) Earnings Per Common Share

Earnings per common share—basic for (i) the three and six months ended June 30, 2018 is computed by dividing net income (loss) attributable to AMGP by the basic weighted average number of common shares representing limited partner interest in AMGP outstanding during the period and (ii) the three and six months ended June 30, 2019 is computed by dividing net income (loss) attributable to Antero Midstream Corporation by the basic weighted average number of shares of AMC common stock outstanding during the period. Earnings per common share—assuming dilution for each period is computed after giving consideration to the potential dilution from outstanding equity awards, calculated using the treasury stock method. During periods in which the Company incurs a net loss, diluted weighted average shares outstanding are equal to basic weighted average shares outstanding because the effect of all equity awards is anti-dilutive.

27

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except per share amounts)

    

2018

    

2019

    

2018

    

2019

Net income

$

14,387

69,274

$

27,192

78,922

Less net income attributable to Series B Units

(506)

(919)

Less preferred stock dividends

(139)

(168)

Net income available to common shareholders

$

13,881

69,135

$

26,273

78,754

Net income per share–basic and diluted

$

0.07

0.14

$

0.14

0.21

Weighted average common shares outstanding–basic

186,199

506,816

186,194

381,045

Weighted average common shares outstanding–diluted

186,199

507,767

186,194

382,026

(14) Fair Value Measurement

In connection with Antero Resources’ contribution of Antero Water and certain wastewater treatment assets to Antero Midstream Partners in September 2015 (the “Water Acquisition”), Antero Midstream Partners agreed to pay Antero Resources (a) $125 million in cash if Antero Midstream Partners delivers 176,295,000 barrels or more of fresh water during the period between January 1, 2017 and December 31, 2019 and (b) an additional $125 million in cash if Antero Midstream Partners delivers 219,200,000 barrels or more of fresh water during the period between January 1, 2018 and December 31, 2020. This contingent consideration liability is valued based on Level 3 inputs related to expected average volumes and weighted average cost of capital.

The following table provides a reconciliation of changes in Level 3 financial liabilities measured at fair value on a recurring basis for the period shown below (in thousands):

Contingent acquisition consideration—December 31, 2018

$

Contingent acquisition consideration assumed from Antero Midstream Partners

116,924

Accretion and change in fair value of contingent acquisition consideration

3,346

Contingent acquisition consideration—June 30, 2019

$

120,270

The Company accounts for contingent consideration in accordance with applicable accounting guidance pertaining to business combinations. Antero Midstream Partners is contractually obligated to pay Antero Resources contingent consideration in connection with the Water Acquisition, and therefore recorded this contingent consideration liability at the time of the Water Acquisition. The Company updates its assumptions each reporting period based on new developments and adjusts such amounts to fair value based on revised assumptions, if applicable, until such consideration is satisfied through payment upon achievement of the specified objectives or it is eliminated upon failure to achieve the specified objectives.

As of June 30, 2019, Antero Midstream Partners expects to pay the entire amount of the contingent consideration for the 176,295,000 barrels or more of fresh water delivered during the period between January 1, 2017 and December 31, 2019, but not for the 219,200,000 barrels or more of fresh water during the period between January 1, 2018 and December 31, 2020 as a result of changes to Antero Resources’ current 2019 budget and long-term outlook. The 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. The fair value of the contingent consideration liability associated with future milestone payments was based on the risk adjusted present value of the contingent consideration payout.

The carrying values of accounts receivable and accounts payable at December 31, 2018 and June 30, 2019 approximated fair value because of their short-term nature. The carrying value of the amounts under the Credit Facility at December 31, 2018 and June 30, 2019 approximated fair value because the variable interest rates are reflective of current market conditions.

As of June 30, 2019, the fair value of the Company’s 2024 Notes, 2027 Notes and 2028 Notes was approximately $651 million, $650 million and $644 million, respectively, based on Level 2 market data inputs.

28

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

(15) Investments in Unconsolidated Affiliates

Investment in Antero Midstream Partners

Prior to the closing of the Transactions, AMGP did not consolidate Antero Midstream Partners, and AMGP’s share of Antero Midstream Partners’ earnings as a result of AMGP’s ownership of the IDRs was accounted for using the equity method of accounting. AMGP recognized distributions earned from Antero Midstream Partners as “Equity in earnings of unconsolidated affiliates” on its statement of operations in the period in which they were earned and were allocated to AMGP’s capital account. AMGP’s long-term interest in the IDRs on the balance sheet is recorded in “Investment in unconsolidated affiliates.” The ownership of the general partner interests and IDRs did not provide AMGP with any claim to the assets of AMGP other than the balance in its Antero Midstream Partners capital account. Income related to the IDRs was recognized as earned and increased AMGP’s capital account and equity investment. When these distributions were paid to AMGP, they reduced its capital account and its equity investment in Antero Midstream Partners. As a result of the Transactions, Antero Midstream Corporation assumed financial control of Antero Midstream Partners and Antero Midstream Partners is now consolidated (see Note 3—Business Combination).

Investment in Stonewall and MarkWest Joint Venture

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

Antero Midstream Partners has a 50% equity interest in the joint venture (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 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’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 investment on its balance sheet. When distributions on the Company’s proportionate share of net income are received, they are recorded as reductions to the carrying value of the investment on the balance sheet and are classified as cash inflows from operating activities in accordance with the nature of the distribution approach under ASU No. 2016-15. The Company uses the equity method of accounting to account for its investments in Stonewall and the Joint Venture because it exercises significant influence, but not control, over the entities. The Company’s judgment regarding the level of influence over its equity investments includes considering key factors such as its ownership interest, representation on the Board and participation in policy-making decisions of Stonewall and the Joint Venture.

29

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

The following table is a reconciliation of our investments in these unconsolidated affiliates:

Antero

Total Investment

Midstream

MarkWest

in Unconsolidated

(in thousands)

Partners LP

Stonewall

Joint Venture

Affiliates

Balance at December 31, 2018

$

43,492

43,492

Distributions from unconsolidated affiliates

(43,492)

(43,492)

Balance at March 12, 2019

Investments in unconsolidated affiliates acquired from Antero Midstream Partners

133,752

956,357

1,090,109

Additional investments

103,409

103,409

Equity in net income of unconsolidated affiliates(1)

2,000

14,503

16,503

Distributions from unconsolidated affiliates

(2,520)

(21,340)

(23,860)

Balance at June 30, 2019

$

133,232

1,052,929

1,186,161

(1)

As adjusted for the amortization of the difference between the cost of the equity investments in Stonewall and the Joint Venture and the amount of the underlying equity in the net assets of Stonewall and the Joint Venture as of the date of the acquisition of Antero Midstream Partners.

(16) Reporting Segments

Prior to the closing of the Transactions, AMGP had no reporting segment results. Following the completion of the Transactions, the Company’s operations, which are located in the United States, are organized into two reporting segments: (1) gathering and processing and (2) water handling and treatment.

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 and Treatment

The Company’s water handling and treatment segment includes two independent systems that deliver fresh water from sources including the Ohio River, local reservoirs as well as several regional waterways. The water handling and treatment segment also includes a wastewater treatment facility that was placed in service in 2018, as well as other fluid handling services, which includes high rate transfer, wastewater transportation, disposal and treatment. See Note 6—Property and Equipment.

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.

30

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

Summarized financial information concerning the Company’s segments for the periods indicated is shown in the following table (in thousands):

Water

Gathering and

Handling and

Consolidated

    

Processing

    

Treatment

    

Unallocated (1)

    

Total

Three months ended June 30, 2019

Revenues:

Revenue–Antero Resources

$

168,925

95,181

264,106

Revenue–third-party

46

46

Amortization of customer contracts

(2,402)

(6,132)

(8,534)

Total revenues

166,523

89,095

255,618

Operating expenses:

Direct operating

12,377

51,621

63,998

General and administrative (excluding equity-based compensation)

7,335

3,958

1,786

13,079

Equity-based compensation

2,286

926

18,331

21,543

Impairment of property and equipment

592

2

594

Depreciation

12,721

23,726

36,447

Accretion and change in fair value of contingent acquisition consideration

2,297

2,297

Accretion of asset retirement obligations

69

69

Total expenses

35,311

82,599

20,117

138,027

Operating income

$

131,212

6,496

(20,117)

117,591

Equity in earnings of unconsolidated affiliates

$

13,623

13,623

Total assets

$

4,916,854

1,844,385

7,770

6,769,009

Additions to property and equipment

$

81,529

43,656

125,185

(1)

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

31

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

December 31, 2018 and June 30, 2019

Water

Gathering and

Handling and

Consolidated

    

Processing

    

Treatment

    

Unallocated (1)

    

Total

Six months ended June 30, 2019

Revenues:

Revenue–Antero Resources

$

202,459

117,532

319,991

Revenue–third-party

50

50

Amortization of customer contracts

(2,903)

(7,412)

(10,315)

Total revenues

199,556

110,170

309,726

Operating expenses:

Direct operating

15,312

63,668

78,980

General and administrative (excluding equity-based compensation)

8,355

4,532

8,578

21,465

Equity-based compensation

2,663

1,139

29,164

32,966

Impairment of property and equipment

592

2

594

Depreciation

15,281

28,816

44,097

Accretion and change in fair value of contingent acquisition consideration

3,346

3,346

Accretion of asset retirement obligations

79

79

Total expenses

42,203

101,582

37,742

181,527

Operating income

$

157,353

8,588

(37,742)

128,199

Equity in earnings of unconsolidated affiliates

$

16,503

16,503

Total assets

$

4,916,854

1,844,385

7,770

6,769,009

Additions to property and equipment

$

89,206

51,984

141,190

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

32

Table of Contents

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes 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-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-looking statements as a result of various risk factors, including those that may not be in the control of management. For further information on 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-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 refer to our Annual Report on Form 10-K for the year ended December 31, 2018 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, each on file with the SEC.

On March 12, 2019, pursuant to the previously announced Simplification Agreement, dated as of October 9, 2018, by and among Antero Midstream Partners GP LP (“AMGP”), Antero Midstream Partners LP (“Antero Midstream Partners”) and certain of their affiliates (the “Simplification Agreement”), (i) AMGP was converted from a limited partnership to a corporation under the laws of the State of Delaware and changed its name to Antero Midstream Corporation, (ii) an indirect, wholly owned subsidiary of Antero Midstream Corporation was merged with and into Antero Midstream Partners, with Antero Midstream Partners surviving the merger as an indirect, wholly owned subsidiary of Antero Midstream Corporation (the “Merger”), and (iii) Antero Midstream Corporation exchanged (the “Series B Exchange” and, together with the Conversion, the Merger and the other transactions pursuant to the Simplification Agreement, the “Transactions”) each issued and outstanding Series B Unit (the “Series B Units”) representing a membership interest in Antero IDR Holdings LLC (“IDR Holdings”) for 176.0041 shares of its common stock, par value $0.01 per share (“AMC common stock”).

The Merger has been accounted for as an acquisition by AMGP of Antero Midstream Partners under ASC 805 – Business Combinations and accounted for as a business combination, with the assumed assets and liabilities of Antero Midstream Partners recorded at fair value. As a result, the unaudited condensed consolidated balance sheet of Antero Midstream Corporation at June 30, 2019 includes the financial position of Antero Midstream Partners and its subsidiaries and the unaudited condensed consolidated statements of operations and comprehensive income and cash flows for the three and six months ended June 30, 2019 include the results of operations of Antero Midstream Partners and its subsidiaries commencing on March 13, 2019. Unless the context otherwise requires, references to the “Company,” “we,” “us,” or “our” refer to (i) for the period prior to March 13, 2019, AMGP and its consolidated subsidiaries, which did not include Antero Midstream Partners and its subsidiaries, and (ii) for the period beginning and after March 13, 2019, Antero Midstream Corporation and its consolidated subsidiaries, including Antero Midstream Partners and its subsidiaries.

Overview

We are a growth-oriented midstream energy company formed to own, operate and develop midstream energy assets to service Antero Resources’ increasing production and completion activity. Our assets consist of gathering pipelines, compressor stations, and interests in processing and fractionation plants that collect and process production from Antero Resources’ wells in the Marcellus and Utica Shales in West Virginia and Ohio. Our assets also include two independent fresh water delivery systems that deliver fresh water from the Ohio River and several regional waterways and a wastewater treatment facility (referred to herein as our “wastewater treatment facility”) that was placed in service in 2018 and a related landfill used for the disposal of salt therefrom. These fresh water delivery systems consist of permanent buried pipelines, surface pipelines and fresh water storage facilitates, as well as pumping stations and impoundments to transport the fresh water throughout the pipelines. Other fluid handling services include third-party services for well completion and production operations in Antero Resources’ operating areas managed by Antero Midstream Partners. We believe that Antero Midstream Partners’ strategically located assets and our relationship with Antero Resources have allowed us to become a leading midstream energy company serving the Marcellus and Utica Shale plays.

33

Table of Contents

Recent Developments and Highlights

Closing of Previously Announced Simplification Transaction

On March 12, 2019, AMGP and Antero Midstream Partners completed the Transactions. The Merger has been accounted for as an acquisition by AMGP of Antero Midstream Partners under ASC 805, Business Combinations, and accounted for as a business combination, with the assumed assets and liabilities of Antero Midstream Partners recorded at fair value.

The financial results of the Company for the three months and six months ended June 30, 2019 are not comparative to the three and six months ended June 30, 2018 due to the closing of the Transactions on March 12, 2019, nor are they reflective of the ongoing operations and financial results of the Company as the operating and financial results of Antero Midstream Partners are only included for the period from March 13, 2019 to March 31, 2019. Accordingly, in addition to presenting a discussion of Antero Midstream Corporation’s results of operations, we are also presenting Antero Midstream Corporation’s pro forma results of operations for the three and six months ended June 30, 2018 and 2019, which give pro forma effect to the Transactions as if they had occurred on January 1, 2018. See additional discussion below regarding “Items Affecting Comparability of our Financial Results.”

Financial Results as Reported

We recognized net income of $69 million and $14 million for the three months ended June 30, 2019 and 2018, respectively. For the three months ended June 30, 2018 and 2019, we generated cash flows from operations of $12 million and $183 million, respectively. For the three months ended June 30, 2019, we consolidated the results of Antero Midstream Partners and its subsidiaries, whereas in the three months ended June 30, 2018, our source of income and cash flow was from the incentive distribution rights of Antero Midstream Partners.

For the six months ended June 30, 2019, we generated cash flows from operations of $252 million and net income of $79 million. Cash flows from operations were $35 million and net income was $27 million for the six months ended June 30, 2018. From March 13, 2019 through June 30, 2019, we consolidated the results of Antero Midstream Partners and its subsidiaries, whereas in the six months ended June 30, 2018, our source of income and cash flow was from the incentive distribution rights of Antero Midstream Partners.

Dividends Declared

The Board declared a cash dividend on the shares of AMC common stock of $0.3075 per share for the quarter ended June 30, 2019. The dividend will be payable on August 7, 2019 to stockholders of record as of July 26, 2019. The Board also declared a $139 thousand cash dividend on the shares of Series A Preferred Stock of Antero Midstream Corporation to be paid on August 14, 2019 in accordance with the terms of the Series A Preferred Stock, which are discussed in Note 13—Equity and Earnings Per Common Share. As of June 30, 2019, there were dividends in the amount $70 thousand accumulated in arrears on the Company’s Series A Preferred Stock.

2019 Capital Budget and Capital Spending

Our full year 2019 capital spending will include Antero Midstream Partners capital spending beginning on March 13, 2019. Antero Midstream Partners’ full year 2019 capital budget is a range of $750 million to $800 million, which at the midpoint includes $710 million of expansion capital and $65 million of maintenance capital. The capital budget includes $400 million of capital for gathering and compression infrastructure primarily in the Marcellus Shale. We also expect to invest $135 million for fresh water delivery infrastructure including an additional withdrawal point and associated trunklines to support Antero Resources’ development in Tyler and Wetzel Counties, West Virginia. Antero Midstream Partner’s 2019 budget also includes $200 million for our investment in the Joint Venture primarily for the construction of two more processing plants to provide an additional 400 Mmcf/d of processing capacity.

Based on ongoing assessments of drilling and completion designs, Antero Resources announced that it expects to trend lower in water used in completion operations over time. Depending on the areas being developed, Antero Resources expects water use will be reduced by 5 to 7 barrels per foot from the current design of 40 to 45 barrels per foot in the Marcellus, beginning in January 2020. Importantly, Antero Resources has announced that the savings from completion optimization, combined with other savings initiatives is forecasted to allow Antero Resources to continue targeting its 10% production CAGR through 2023, despite the decline in overall commodity prices. In combination with the planned expansion in the scope of produced water services, the continued development

34

Table of Contents

plan for Antero Resources is expected to offset a majority of the reduced cash flow from fewer barrels of water being used in completions.

For the six months ended June 30, 2019, Antero Midstream Partners’ full year to date capital expenditures were approximately $347 million, including $186 million of expansion capital, $33 million of maintenance capital and $128 million of capital investment in the Joint Venture.

Credit Facility

We will fund our operations through borrowings under the Credit Facility, our operating cash flows, cash on our balance sheet and capital market transactions. As of June 30, 2019, lender commitments under the Credit Facility were $2.0 billion, with a letter of credit sublimit of $150 million. At June 30, 2019, Antero Midstream Partners had borrowings of $595 million and no letters of credit outstanding under the Credit Facility. See “—Debt Agreements—Antero Midstream Partners Revolving Credit Facility” for a description of the Credit Facility. In conjunction with the closing of the Transactions, AMGP’s $12 million credit facility was terminated on March 12, 2019.

Items Affecting Comparability of Our Financial Results

Our historical financial results discussed below are not comparable to our future financial results primarily as a result of the Merger. The Merger has been accounted for as an acquisition by AMGP of Antero Midstream Partners under ASC 805, Business Combinations, and accounted for as a business combination with the acquired assets and liabilities of Antero Midstream Partners recorded at estimated preliminary fair value. As such, the condensed consolidated financial statements for the three and six months ended June 30, 2018 and as of December 31, 2018 are the condensed consolidated financial statements of AMGP and its consolidated subsidiaries, which does not include Antero Midstream Partners and its subsidiaries.  Effective March 12, 2019, Antero Midstream Corporation commenced consolidating Antero Midstream Partners and its subsidiaries in the condensed consolidated financial statements of Antero Midstream Corporation. As a result, the condensed consolidated balance sheet of Antero Midstream Corporation at June 30, 2019 includes the financial position of Antero Midstream Partners and its subsidiaries, and the condensed consolidated statements of operations and comprehensive income and cash flows for the three and six months ended June 30, 2019 include the results of operations of Antero Midstream Partners and its subsidiaries beginning on March 13, 2019.

The historical condensed consolidated financial statements included herein are the financial statements of Antero Midstream Corporation, formerly AMGP, which prior to the Merger reflect that AMGP’s only income resulted from distributions made on the IDRs of Antero Midstream Partners and expenses were limited to general and administrative expenses and equity-based compensation. The condensed consolidated financial statements for the three and six months ended June 30, 2019 include the results of Antero Midstream Partners and its subsidiaries beginning on March 13, 2019.

Accordingly, in addition to presenting a discussion of our results of operations as reported, we are also presenting our pro forma results of operations, which give effect to the adjustments described below under “—Pro Forma Adjustments.” The pro forma information presented below should be read in conjunction with the unaudited pro forma condensed combined financial statements, which are filed as Exhibit 99.1 to this Quarterly Report on Form 10-Q and describe the assumptions and adjustments used in preparing such information. The pro forma adjustments are based on currently available information and certain estimates and assumptions. Therefore, the actual adjustments may differ from the pro forma adjustments. However, management believes that the pro forma assumptions provide a reasonable basis for presenting the results of operations on a more meaningful basis.

Results of Operations as Reported

Three Months Ended June 30, 2018 Compared to Three Months Ended June 30, 2019

Revenue and Direct Operating Expenses. Revenues from Antero Resources and direct operating expenses reflect revenue and operating expenses generated by Antero Midstream Partners after the completion of the Transactions on March 12, 2019.

General and administrative expenses. General and administrative expenses (excluding equity-based compensation expense) increased from $2 million for the three months ended June 30, 2018 to $13 million for the three months ended June 30, 2019. The increase was primarily due to the inclusion of general and administrative expenses of Antero Midstream Partners after the completion of the Transactions on March 12, 2019. Equity-based compensation increased from $9 million for the three months ended June 30,

35

Table of Contents

2018 to $22 million for the three months ended June 30, 2019 due to the Series B Exchange and the adoption of the AMC LTIP as result of the Transactions.

Depreciation expense. Depreciation expense increased from none for the three months ended June 30, 2018 to $36 million for the three months ended June 30, 2019 as a result of our acquisition of Antero Midstream Partners on March 12, 2019.

Accretion and change in fair value of contingent acquisition consideration. Accretion expenses increased from none for the three months ended June 30, 2018 to $2 million for the three months ended June 30, 2019 as a result of our acquisition of Antero Midstream Partners on March 12, 2019.

Interest expense. Interest expense increased from $18 thousand for the three months ended June 30, 2018 to $32 million for the three months ended June 30, 2019 as a result of the acquisition of Antero Midstream Partners, which included the assumption of approximately $2.4 billion of debt.

Operating income. Total operating income increased from a loss of $12 million for the three months ended June 30, 2018 to operating income of $118 million for the three months ended June 30, 2019. The increase was due to operating revenues and expenses as a result of the acquisition of Antero Midstream Partners on March 12, 2019.

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates for the three months ended June 30, 2018 represents Antero Midstream GP LP’s equity investment in Antero Midstream Partners. Equity in earnings of unconsolidated affiliates for the three months ended June 30, 2019 represents the portion of the net income from Antero Midstream Partners’ investments in Stonewall and the Joint Venture, which is allocated to us based on our equity interests for the three months ended June 30, 2019.

Income tax expense. Income tax expense increased from $7 million for the three months ended June 30, 2018 to $30 million for the three months ended June 30, 2019 due to increased income before taxes.

Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2019

Revenue and Direct Operating Expenses. Revenues from Antero Resources and direct operating expenses reflect 110 days of revenue and operating expenses generated by Antero Midstream Partners after the completion of the Transactions on March 12, 2019.

General and administrative expenses. General and administrative expenses (excluding equity-based compensation expense) increased from $3 million for the six months ended June 30, 2018 to $21 million for the six months ended June 30, 2019. The increase was primarily due to the inclusion of general and administrative expenses of Antero Midstream Partners after the completion of the Transactions on March 12, 2019. Equity-based compensation increased from $18 million for the six months ended June 30, 2018 to $33 million for the six months ended June 30, 2019 due to the Series B Exchange and the adoption of the AMC LTIP as result of the Transactions.

Depreciation expense. Depreciation expense increased from none for the six months ended June 30, 2018 to $44 million for the six months ended June 30, 2019 as a result of our acquisition of Antero Midstream Partners on March 12, 2019.

Accretion and change in fair value of contingent acquisition consideration. Accretion expenses increased from none for the six months ended June 30, 2018 to $3 million for the six months ended June 30, 2019 as a result of our acquisition of Antero Midstream Partners on March 12, 2019.

Interest expense. Interest expense increased from $14 thousand for the six months ended June 30, 2018 to $38 million for the six months ended June 30, 2019 as a result of the acquisition of Antero Midstream Partners, which included the assumption of approximately $2.4 billion of debt.

Operating income. Total operating income increased from a loss of $21 million for the six months ended June 30, 2018 to operating income of $128 million for the six months ended June 30, 2019. The increase was due to operating revenues and expenses as a result of the acquisition of Antero Midstream Partners on March 12, 2019.

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates for the six months ended June 30, 2018 represents Antero Midstream GP LP’s equity investment in Antero Midstream Partners. Equity in earnings of

36

Table of Contents

unconsolidated affiliates for the six months ended June 30, 2019 represents Antero Midstream GP LP’s equity investment in Antero Midstream Partners from January 1, 2019 through March 12, 2019 and the portion of the net income from Antero Midstream Partners’ investments in Stonewall and the Joint Venture, which is allocated to us based on our equity interests for the period from March 13, 2019 through June 30, 2019.

Income tax expense. Income tax expense increased from $13 million for the six months ended June 30, 2018 to $28 million for the six months ended June 30, 2019 due to increased income before taxes.

Pro Forma Results of Operations

Unless the context otherwise requires, references in this “Pro Forma Segment Results of Operations” to the “Company,” “we,” “us” or “our” refer to, and the results of operations discussed below relate to, the combined results of Antero Midstream Corporation and Antero Midstream Partners as if the Transactions had occurred on January 1, 2018.

The pro forma segment results of operations and the pro forma operations data for the three and six months ended June 30, 2018 and for the six months ended June 30, 2019 have been prepared to give pro forma effect to the Transactions as if they had occurred on January 1, 2018. For the three months ended June 30, 2019, actual segment results of operations and operations data has been presented. The pro forma adjustments are based on currently available information and certain estimates and assumptions, including preliminary purchase price allocation, which is subject to finalization. Therefore, the actual adjustments may differ from the pro forma adjustments. However, management believes that the pro forma assumptions provide a reasonable basis for presenting the significant effects of the Transactions.

The pro forma information is for illustrative purposes only. If the Transactions had occurred on January 1, 2018, operating results might have been materially different from those presented in the pro forma financial information. The pro forma financial information should not be relied upon as an indication of operating results that we would have achieved if the Transactions had taken place on January 1, 2018. In addition, future results may vary significantly from the pro forma results reflected herein and should not be relied upon as an indication of our future results. The pro forma information presented below should be read in conjunction with the unaudited pro forma condensed combined financial statements, which are filed as Exhibit 99.1 to this Quarterly Report on Form 10-Q.

37

Table of Contents

Pro Forma Segment Results of Operations for the three months ended June 30, 2018 and actual results for the three months ended June 30, 2019

Water

Pro Forma

Gathering and

Handling and

Pro Forma

Consolidated

    

Processing

    

Treatment

    

Adjustments

    

Unallocated (1)

    

Total

Three months ended June 30, 2018

Revenues:

Revenue–Antero Resources

$

118,136

132,231

250,367

Revenue–third-party

25

25

Gain on sale of assets–Antero Resources

583

583

Amortization of customer contracts

(8,533)

(8,533)

Total revenues

118,719

132,256

(8,533)

242,442

Operating expenses:

Direct operating

12,405

63,218

75,623

General and administrative (excluding equity-based compensation)

7,240

2,387

2,398

12,025

Equity-based compensation

4,754

1,113

9,111

14,978

Impairment of property and equipment

4,614

4,614

Depreciation

24,258

12,175

8,387

44,820

Accretion and change in fair value of contingent acquisition consideration

3,947

3,947

Accretion of asset retirement obligations

34

34

Total expenses

53,271

82,874

8,387

11,509

156,041

Operating income

65,448

49,382

(16,920)

(11,509)

86,401

Other income (expenses):

Interest expense, net

(5,439)

(14,646)

(20,085)

Equity in earnings of unconsolidated affiliates

9,264

(2,992)

6,272

Income before taxes

74,712

49,382

(25,351)

(26,155)

72,588

Provision for income tax expense

(12,743)

(7,231)

(19,974)

Net income and comprehensive income

$

74,712

49,382

(38,094)

(33,386)

52,614

Pro Forma Adjusted EBITDA(2)

$

174,137

(1)Corporate expenses that are not directly attributable to either the gathering and processing or water handling and treatment segments.
(2)For a reconciliation of Pro Forma Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP, see the description below.

38

Table of Contents

Water

Pro Forma

Gathering and

Handling and

Pro Forma

Consolidated

    

Processing

    

Treatment

    

Adjustments

    

Unallocated (1)

    

Total

Three months ended June 30, 2019

Revenues:

Revenue–Antero Resources

$

168,925

95,181

264,106

Revenue–third-party

46

46

Amortization of customer contracts

(2,402)

(6,132)

(8,534)

Total revenues

166,523

89,095

255,618

Operating expenses:

Direct operating

12,377

51,621

63,998

General and administrative (excluding equity-based compensation)

7,335

3,958

1,786

13,079

Equity-based compensation

2,285

927

18,331

21,543

Impairment of property and equipment

592

2

594

Depreciation

12,721

23,726

36,447

Accretion and change in fair value of contingent acquisition consideration

2,297

2,297

Accretion of asset retirement obligations

69

69

Total expenses

35,310

82,600

20,117

138,027

Operating income

131,213

6,495

(20,117)

117,591

Other income (expenses):

Interest expense, net

(31,521)

(31,521)

Equity in earnings of unconsolidated affiliates

13,623

13,623

Income before taxes

144,836

6,495

(51,638)

99,693

Provision for income tax expense

(30,419)

(30,419)

Net income and comprehensive income

$

144,836

6,495

(82,057)

69,274

Adjusted EBITDA(2)

$

206,160

(1)Corporate expenses that are not directly attributable to either the gathering and processing or water handling and treatment segments.
(2)For a reconciliation of Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP, see the description below.

39

Table of Contents

The operating data below represents (i) the operating data of Antero Midstream Partners and its subsidiaries for the three months ended June 30, 2018 and (ii) the operating data of Antero Midstream Corporation and its subsidiaries, including Antero Midstream Partners and its subsidiaries, for the three months ended June 30, 2019.

Amount of

Three Months Ended June 30,

Increase

Percentage

2018(1)

    

2019

or Decrease

Change

Operating Data:

Gathering—low pressure (MMcf)

180,268

242,266

61,998

34

%

Gathering—high pressure (MMcf)

175,818

238,406

62,588

36

%

Compression (MMcf)

141,819

218,020

76,201

54

%

Fresh water delivery (MBbl)

20,766

11,147

(9,619)

(46)

%

Treated water (MBbl)

700

2,658

1,958

280

%

Other fluid handling (MBbl)

4,382

5,086

704

16

%

Wells serviced by fresh water delivery

48

25

(23)

(48)

%

Gathering—low pressure (MMcf/d)

1,981

2,662

681

34

%

Gathering—high pressure (MMcf/d)

1,932

2,620

688

36

%

Compression (MMcf/d)

1,558

2,396

838

54

%

Fresh water delivery (MBbl/d)

228

122

(106)

(46)

%

Treated water (MBbl/d)

8

29

21

263

%

Other fluid handling (MBbl/d)

48

56

8

17

%

Average realized fees:

Average gathering—low pressure fee ($/Mcf)

$

0.32

0.33

0.01

3

%

Average gathering—high pressure fee ($/Mcf)

$

0.19

0.20

0.01

5

%

Average compression fee ($/Mcf)

$

0.19

0.19

%

Average fresh water delivery fee ($/Bbl)

$

3.78

3.90

0.12

3

%

Average treatment fee ($/Bbl)

$

4.11

4.50

0.39

9

%

Joint Venture Operating Data:

Processing—Joint Venture (MMcf)

51,921

89,770

37,849

73

%

Fractionation—Joint Venture (MBbl)

914

2,470

1,556

170

%

Processing—Joint Venture (MMcf/d)

571

986

415

73

%

Fractionation—Joint Venture (MBbl/d)

10

27

17

170

%

(1)

Represents pro forma operations data of Antero Midstream Partners as if the Transactions had occurred on January 1, 2018.

40

Table of Contents

Pro Forma Discussion of Results of Operations Three Months Ended June 30, 2018 Compared to Three Months Ended June 30, 2019

Revenues. Total revenues, including the amortization of customer contracts of $9 million, increased by 5%, from $242 million for the three months ended June 30, 2018 to $256 million for the three months ended June 30, 2019. Gathering and processing revenues increased by 40%, from $119 million for the three months ended June 30, 2018 to $166 million for the three months ended June 30, 2019. Water handling and treatment revenues decreased by 33%, from $132 million for the three months ended June 30, 2018 to $89 million for the three months ended June 30, 2019. These fluctuations primarily resulted from the following:

Gathering and Processing

low pressure gathering revenue increased $21 million period over period due to an increase of throughput volumes of 62 Bcf, or 681 MMcf/d, which was due to 177 additional wells connected to our system since June 30, 2018;
high pressure gathering revenue increased $14 million period over period due to an increase of throughput volumes of 63 Bcf, or 688 MMcf/d, primarily as a result of the addition of three new high pressure gathering lines placed in service since June 30, 2018;
compression revenue increased $15 million period over period due to an increase of throughput volumes of 76 Bcf, or 838 MMcf/d, primarily due to the addition of two new compressor stations that were placed in service since June 30, 2018, and additional wells connected to our system; and
amortization of customer contracts was $2 million due to the acquisition of Antero Midstream Partners on March 12, 2019.

Water Handling and Treatment

fresh water delivery revenue decreased $35 million period over period due to a decrease in fresh water delivery of 9,619 MBbl, or 106 MBbl/d, as a result of a decrease in the number of wells serviced as Antero Resources reduced its drilling and completion program;
water treatment services revenue provided at our wastewater treatment facility increased revenue by $9 million for the period with increased throughput volumes of 1,958 MBbl, or 21 MBbl/d, as the plant was placed into service in May 2018;
other fluid handling services revenue decreased $11 million period over period due to overall operational efficiencies realized by the increased use of the wastewater treatment facility; and
amortization of customer contracts was $6 million due to the acquisition of Antero Midstream Partners on March 12, 2019.

Direct operating expenses. Total direct operating expenses decreased by 15%, from $76 million for the three months ended June 30, 2018 to $64 million for the three months ended June 30, 2019. Gathering and processing direct operating expenses remained relatively consistent for the three months ended June 30, 2018 and 2019 at $12 million for each period as operational efficiencies offset two new compressor stations. Water handling and treatment direct operating expenses decreased from $63 million for the three months ended June 30, 2018 to $52 million for the three months ended June 30, 2019. The decrease was primarily due to a decrease in freshwater delivery volumes and increased wastewater handling operational efficiencies partially offset by an increase in treatment volumes.

General and administrative (excluding equity-based compensation) expenses. General and administrative expenses (excluding equity-based compensation expense) remained relatively consistent for the three months ended June 30, 2018 and 2019 at $12 million and $13 million, respectively.

Equity-based compensation expenses. Equity-based compensation expenses increased from $15 million for the three months ended June 30, 2018 to $22 million for the three months ended June 30, 2019 primarily due to the revaluation of the Series B Units as result of the Transactions.

41

Table of Contents

Impairment expense. Impairment expense of $5 million for the three months ended June 30, 2018 was due to the impairment of gathering assets acquired from Antero Resources at the time of Antero Midstream Partners’ initial public offering related to well pads Antero Resources no longer planned to drill and complete. Impairment expense of $0.6 million for three months ended June 30, 2019 was related to the costs of decommissioning of a compressor station.

Depreciation expense. Total depreciation expense decreased by 19%, from $45 million for the three months ended June 30, 2018 to $36 million for the three months ended June 30, 2019. The decrease was primarily due to the change in estimated useful lives of gathering and compression facilities, partially offset by additional assets placed into service.

Accretion and change in fair value of contingent acquisition consideration. Accretion of contingent acquisition consideration decreased from $4 million for the three months ended June 30, 2018 to $2 million for the three months ended June 30, 2019. In connection with the Water Acquisition, we agreed to pay Antero Resources $125 million in cash if we deliver 176 million barrels or more of fresh water during the period between January 1, 2017 and December 31, 2019. As of June 30, 2019, we have delivered 152 million of the 176 million barrels and we expect to pay the entire amount of the contingent consideration for the delivery of 176 million barrels or more of fresh water during the period between January 1, 2017 and December 31, 2019. We have agreed to pay an additional $125 million in cash if we deliver 219 million barrels or more of fresh water during the period between January 1, 2018 and December 31, 2020. As of June 30, 2019, we have delivered 96 million of the 219 million barrels or more of fresh water during the period between January 1, 2018 and December 31, 2020 and do not expect to deliver at least 219 million barrels based on Antero Resources’ 2019 budget and long-term outlook.

Interest expense. Interest expense increased by 57%, from $20 million, net of $1 million in capitalized interest, for the three months ended June 30, 2018 to $32 million for the three months ended June 30, 2019. No interest was capitalized for the three months ended June 30, 2019. Total interest costs increased from $21 million for the three months ended June 30, 2018 to $32 million for the three months ended June 30, 2019 primarily due to (i) an increase in interest expense incurred on increased borrowings under the Credit Facility during the period, (ii) increased interest rates, and (iii) the issuance of $650 million of 5.75% senior unsecured notes on February 25, 2019.

Operating income. Total operating income increased by 36%, from $86 million for the three months ended June 30, 2018 to $117 million for the three months ended June 30, 2019. Gathering and processing operating income increased by 100% from $65 million for the three months ended June 30, 2018 to $131 million for the three months ended June 30, 2019. The increase was primarily due to an increase in gathering and compression throughput volumes and lower depreciation on the gathering system in 2019. Water handling and treatment operating income decreased by 87%, from $49 million for the three months ended June 30, 2018 to $6 million for the three months ended June 30, 2019. The decrease was primarily due to a decrease in the number of wells serviced by freshwater delivery services and increase in depreciation expense.

Equity in earnings of unconsolidated affiliates. Equity in earnings in unconsolidated affiliates increased by 117%, from $6 million for the three months ended June 30, 2018 to $14 million for the three months ended June 30, 2019. Equity in earnings of unconsolidated affiliates represents the portion of the net income from our investments in Stonewall and the Joint Venture, which is allocated to us based on our equity interests. The increase is primarily attributable to an increase in the level of operations at the Joint Venture in 2019.

Net income. Net income increased by 32%, from $52 million for the three months ended June 30, 2018 to $69 million for the three months ended June 30, 2019. The increase was primarily due to increased revenues partially offset by increased expenses.

Pro Forma Adjusted EBITDA and Adjusted EBITDA. Pro Forma Adjusted EBITDA increased by 18%, from $174 million for the three months ended June 30, 2018 to Adjusted EBITDA of $206 million for the three months ended June 30, 2019. The increase was primarily due to an increase in revenue resulting from an increase in gathering and compression volumes. For a discussion of the non-GAAP financial measure Pro Forma Adjusted EBITDA and 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.

42

Table of Contents

Pro Forma Segment Results of Operations for the six months ended June 30, 2018 and 2019

Water

Pro Forma

Gathering and

Handling and

Pro Forma

Consolidated

    

Processing

    

Treatment

    

Adjustments

    

Unallocated (1)

    

Total

Six months ended June 30, 2018

Revenues:

Revenue–Antero Resources

$

226,313

253,120

479,433

Revenue–third-party

550

550

Gain on sale of assets–Antero Resources

583

583

Amortization of customer contracts

(16,973)

(16,973)

Total revenues

226,896

253,670

(16,973)

463,593

Operating expenses:

Direct operating

23,786

119,093

142,879

General and administrative (excluding equity-based compensation)

12,945

4,926

3,328

21,199

Equity-based compensation

9,412

2,666

17,745

29,823

Impairment of property and equipment

4,614

4,614

Depreciation

47,672

21,193

16,774

85,639

Accretion and change in fair value of contingent acquisition consideration

7,821

7,821

Accretion of asset retirement obligations

68

68

Total expenses

98,429

155,767

16,774

21,073

292,043

Operating income

128,467

97,903

(33,747)

(21,073)

171,550

Other income (expenses):

Interest expense, net

(10,880)

(25,939)

(36,819)

Equity in earnings of unconsolidated affiliates

17,126

(5,952)

11,174

Income before taxes

145,593

97,903

(50,579)

(47,012)

145,905

Provision for income tax expense

(26,349)

(13,319)

(39,668)

Net income and comprehensive income

$

145,593

97,903

(76,928)

(60,331)

106,237

Pro Forma Adjusted EBITDA(2)

$

334,383

(1)Corporate expenses that are not directly attributable to either the gathering and processing or water handling and treatment segments.
(2)For a reconciliation of Pro Forma Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP, see the description below.

43

Table of Contents

Water

Pro Forma

Gathering and

Handling and

Pro Forma

Consolidated

Processing

    

Treatment

    

Adjustments

    

Unallocated (1)

    

Total

Six months ended June 30, 2019

Revenues:

Revenue–Antero Resources

$

327,232

211,069

538,301

Revenue–third-party

101

101

Amortization of customer contracts

(2,903)

(7,412)

(6,659)

(16,974)

Total revenues

324,329

203,758

(6,659)

521,428

Operating expenses:

Direct operating

26,485

117,313

143,798

General and administrative (excluding equity-based compensation)

18,247

10,956

(15,345)

8,578

22,436

Equity-based compensation

4,248

2,031

29,164

35,443

Impairment of property and equipment

7,183

393

7,576

Depreciation

23,603

42,201

5,932

71,736

Accretion and change in fair value of contingent acquisition consideration

5,274

5,274

Accretion of asset retirement obligations

142

142

Total expenses

79,766

178,310

(9,413)

37,742

286,405

Operating income

244,563

25,448

2,754

(37,742)

235,023

Other income (expenses):

Interest expense, net

(3,301)

(54,553)

(57,854)

Equity in earnings of unconsolidated affiliates

28,767

(2,335)

26,432

Income before taxes

273,330

25,448

(2,882)

(92,295)

203,601

Provision for income tax expense

(24,159)

(28,042)

(52,201)

Net income and comprehensive income

$

273,330

25,448

(27,041)

(120,337)

151,400

Pro Forma Adjusted EBITDA(2)

$

408,633

(1)Corporate expenses that are not directly attributable to either the gathering and processing or water handling and treatment segments.
(2)For a reconciliation of Pro Forma Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP, see the description below.

44

Table of Contents

The operating data below represents (i) the operating data of Antero Midstream Partners and its subsidiaries for the six months ended June 30, 2018 and (ii) the operating data of Antero Midstream Corporation and its subsidiaries, including Antero Midstream Partners and its subsidiaries, for the six months ended June 30, 2019.

Amount of

Six Months Ended June 30,

Increase

Percentage

2018

    

2019(1)

or Decrease

Change

Pro Forma Operating Data:

Gathering—low pressure (MMcf)

345,460

472,806

127,346

37

%

Gathering—high pressure (MMcf)

334,680

463,192

128,512

38

%

Compression (MMcf)

269,013

420,958

151,945

56

%

Fresh water delivery (MBbl)

40,682

24,879

(15,803)

(39)

%

Treated water (MBbl)

700

4,805

4,105

586

%

Other fluid handling (MBbl)

8,362

10,152

1,790

21

%

Wells serviced by fresh water delivery

94

56

(38)

(40)

%

Gathering—low pressure (MMcf/d)

1,909

2,612

703

37

%

Gathering—high pressure (MMcf/d)

1,849

2,559

710

38

%

Compression (MMcf/d)

1,486

2,325

839

56

%

Fresh water delivery (MBbl/d)

225

137

(88)

(39)

%

Treated water (MBbl/d)

4

27

23

575

%

Other fluid handling (MBbl/d)

46

56

10

22

%

Pro Forma Average realized fees:

Average gathering—low pressure fee ($/Mcf)

$

0.32

0.33

0.01

3

%

Average gathering—high pressure fee ($/Mcf)

$

0.19

0.20

0.01

5

%

Average compression fee ($/Mcf)

$

0.19

0.19

%

Average fresh water delivery fee ($/Bbl)

$

3.78

3.89

0.11

3

%

Average treatment fee ($/Bbl)

$

4.11

4.49

0.38

9

%

Pro Forma Joint Venture Operating Data:

Processing—Joint Venture (MMcf)

98,646

179,422

80,776

82

%

Fractionation—Joint Venture (MBbl)

1,469

4,451

2,982

203

%

Processing—Joint Venture (MMcf/d)

545

991

446

82

%

Fractionation—Joint Venture (MBbl/d)

8

25

17

213

%

(1)

Includes actual operations data for Antero Midstream Corporation since March 12, 2019.

Pro Forma Discussion of Results of Operations Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2019

Revenues. Total revenues, including the amortization of customer contracts of $17 million, increased by 12% from $464 million for the six months ended June 30, 2018 to $521 million for the six months ended June 30, 2019. Gathering and processing revenues increased by 43%, from $227 million for the six months ended June 30, 2018 to $324 million for the six months ended June 30, 2019. Water handling and treatment revenues decreased by 20%, from $254 million for the six months ended June 30, 2018 to $204 million for the six months ended June 30, 2019. These fluctuations primarily resulted from the following:

45

Table of Contents

Gathering and Processing

low pressure gathering revenue increased $43 million period over period due to an increase of throughput volumes of 127 Bcf, or 703 MMcf/d, which was due to 177 additional wells connected to our system since June 30, 2018;
high pressure gathering revenue increased $27 million period over period due to an increase of throughput volumes of 129 Bcf, or 710 MMcf/d, primarily as a result of the addition of three new high pressure gathering lines placed in service since six months ended June 30, 2018;
compression revenue increased $30 million period over period due to an increase of throughput volumes of 152 Bcf, or 839 MMcf/d, primarily due to the addition of two new compressor stations that were placed in service since June 30, 2018, and additional wells connected to our system;
amortization of customer contracts was $3 million due to the acquisition of Antero Midstream Partners on March 12, 2019.

Water Handling and Treatment

fresh water delivery revenue decreased $57 million period over period due to a decrease in fresh water delivery of 15,803 MBbl, or 88 MBbl/d, as a result of a decrease in the number of wells serviced as Antero Resources reduced its drilling and completion program;
we began recognizing revenues for water treatment services provided at our wastewater treatment facility when the facility was placed in service in May 2018, which increased revenue by $18 million for the period with increased throughput volumes of 4,105 MBbl, or 23 MBbl/d;
other fluid handling services revenue decreased $3 million period over period due to overall operational efficiencies realized by the increased use of the wastewater treatment facility; volumes increased by 1,790 MBbl, or 10 MBbl/d; and
amortization of customer contracts was $7 million due to the acquisition of Antero Midstream Partners on March 12, 2019.

Direct operating expenses. Total direct operating expenses remained relatively the same at $143 million and $144 million for the six months ended June 30, 2018 and 2019, respectively. Gathering and processing direct operating expenses increased from $24 million for the six months ended June 30, 2018 to $27 million for the six months ended June 30, 2019. The increase was primarily due to an increase in the number of gathering pipelines and compressor stations. Water handling and treatment direct operating expenses decreased from $119 million for the six months ended June 30, 2018 to $117 million for the six months ended June 30, 2019. The decrease was primarily due to a decrease in freshwater delivery volumes and increased wastewater handling operational efficiencies partially offset by an increase in treatment volumes.

General and administrative (excluding equity-based compensation) expenses. General and administrative expenses (excluding equity-based compensation expense) remained relatively consistent at $21 million and $22 million for the six months ended June 30, 2018 and 2019, respectively.

Equity-based compensation expenses. Equity-based compensation expenses increased from $30 million for the six months ended June 30, 2018 to $35 million for the six months ended June 30, 2019 primarily due to the Series B Exchange as result of the Transactions.

Impairment expense. Impairment expense of $5 million for the six months ended June 30, 2018 was due to the impairment of gathering assets acquired from Antero Resources at the time of Antero Midstream Partners’ initial public offering related to well pads Antero Resources no longer planned to drill and complete. Impairment expense of $8 million for the six months ended June 30, 2019 was primarily for the decommissioning of assets related to a third-party compressor station.

Depreciation expense. Total depreciation expense decreased by 16%, from $86 million for the six months ended June 30, 2018 to $72 million for the six months ended June 30, 2019. The decrease was primarily due to the change in estimated useful lives of gathering and compression facilities, partially offset by additional assets placed into service.

46

Table of Contents

Accretion and change in fair value of contingent acquisition consideration. Accretion of contingent acquisition consideration decreased from $8 million for the six months ended June 30, 2018 to $5 million for the six months ended June 30, 2019. In connection with the Water Acquisition, we agreed to pay Antero Resources $125 million in cash if we deliver 176 million barrels or more of fresh water during the period between January 1, 2017 and December 31, 2019. As of June 30, 2019, we have delivered 152 million of the 176 million barrels and we expect to pay the entire amount of the contingent consideration for the delivery of 176 million barrels or more of fresh water during the period between January 1, 2017 and December 31, 2019. We have agreed to pay an additional $125 million in cash if we deliver 219 million barrels or more of fresh water during the period between January 1, 2018 and December 31, 2020. As of June 30, 2019, we have delivered 96 million of the 219 million barrels or more of fresh water during the period between January 1, 2018 and December 31, 2020 and do not expect to deliver at least 219 million barrels based on Antero Resources’ 2019 budget and long-term outlook.

Interest expense. Interest expense increased by 57%, from $37 million, net of $4 million in capitalized interest, for the six months ended June 30, 2018 to $58 million for the six months ended June 30, 2019. No interest was capitalized for the six months ended June 30, 2019. Total interest costs increased from $41 million for the six months ended June 30, 2018 to $58 million for the six months ended June 30, 2019 primarily due to (i) an increase in interest expense incurred on increased borrowings under the Credit Facility during the period, (ii) increased interest rates, and (iii) this issuance of $650 million of 5.75% senior unsecured notes on February 25, 2019.

Operating income. Total operating income increased by 37%, from $172 million for the six months ended June 30, 2018 to $235 million for the six months ended June 30, 2019. Gathering and processing operating income increased by 90%, from $128 million for the six months ended June 30, 2018 to $245 million for the six months ended June 30, 2019. The increase was primarily due to an increase in gathering and compression throughput volumes and lower depreciation on the gathering system in 2019. Water handling and treatment operating income decreased by 74%, from $98 million for the six months ended June 30, 2018 to $25 million for the six months ended June 30, 2019. The decrease was primarily due to a decrease in the number of wells serviced by freshwater delivery services and increased depreciation expense.

Equity in earnings of unconsolidated affiliates. Equity in earnings in unconsolidated affiliates increased by 137%, from $11 million for the six months ended June 30, 2018 to $26 million for the six months ended June 30, 2019. Equity in earnings of unconsolidated affiliates represents the portion of the net income from our investments in Stonewall and the Joint Venture, which is allocated to us based on our equity interests. The increase is primarily attributable to an increase in the level of operations at the Joint Venture in 2019.

Net income. Net income increased by 43%, from $106 million for the six months ended June 30, 2018 to $151 million for the six months ended June 30, 2019. The increase was primarily due to increased revenues partially offset by increased income tax expense.

Pro Forma Adjusted EBITDA. Pro Forma Adjusted EBITDA increased by 22%, from $334 million for the six months ended June 30, 2018 to $409 million for the six months ended June 30, 2019. The increase was primarily due to an increase in revenue resulting from an increase in gathering and compression volumes. For a discussion of the non-GAAP financial measure Pro Forma 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.

47

Table of Contents

Capital Resources and Liquidity as Reported

Sources and Uses of Cash

Capital resources and liquidity are provided by operating cash flow, cash on our balance sheet, borrowings under the Credit Facility and capital market transactions. We expect that the combination of these capital resources will be adequate to meet our working capital requirements, capital expenditures program and expected quarterly cash distributions for at least the next twelve months.

The Board declared a cash dividend on the shares of AMC common stock of $0.3075 per share for the quarter ended June 30, 2019. The dividend will be payable on August 7, 2019 to stockholders of record as of July 26, 2019. The Board also declared a cash dividend of $139 thousand on the shares of Series A Preferred Stock of Antero Midstream Corporation, which will be paid on August 14, 2019 in accordance with the terms of the Series A Preferred Stock as discussed in Note 13—Equity and Earnings Per Common Share. As of June 30, 2019, there were dividends in the amount $70 thousand accumulated in arrears on the Company’s Series A Preferred Stock.

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

The following table summarizes our cash flows for the six months ended June 30, 2018 and 2019:

Six Months Ended June 30,

Increase

(in thousands)

    

2018

    

2019

    

(Decrease)

Net cash provided by operating activities

$

34,598

252,164

217,566

Net cash used in investing activities

(221,401)

221,401

Net cash used in financing activities

(35,285)

(25,794)

(9,491)

Net increase (decrease) in cash and cash equivalents

$

(687)

4,969

Cash Flows Provided by Operating Activities

Net cash provided by operating activities was $35 million and $252 million for the three months ended June 30, 2018 and 2019, respectively. The increase in cash flows from operations for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 was primarily the result of increased cash flows associated with Antero Midstream Partners for the period March 13, 2019 through June 30, 2019 due to the Transactions.

Cash Flows Used in Investing Activities

During the six months ended June 30, 2019, we used cash flows in investing activities of $221 million while we had no cash flows from investing activities during the six months ended June 30, 2018. The increase was due to $599 million of cash paid to Antero Midstream Partners unitholders as consideration in the Merger, $103 million in investments in unconsolidated affiliates and $141 million in capital expenditures for gathering systems and facilities and water handling and treatment assets partially offset by cash received of $620 million, which was borrowed by Antero Midstream Partners on the Credit Facility primarily to pay the aforementioned $599 million of consideration in the Merger.

Our capital budget is $750 million to $800 million for 2019 (including capital expenditures by Antero Midstream Partners prior to March 13, 2019), which includes $710 million of expansion capital and $65 million of maintenance capital at the midpoint of the range. Our capital budgets may be adjusted as business conditions warrant. If natural gas, NGLs, and oil prices decline to levels below acceptable levels or costs increase to levels above acceptable levels, Antero Resources could choose to defer a significant portion of its budgeted capital expenditures until later periods. As a result, we may also defer a significant portion of our budgeted capital expenditures to achieve the desired balance between sources and uses of liquidity and prioritize capital projects that we believe have the highest expected returns and potential to generate near-term cash flows. We routinely monitor and adjust our capital expenditures in response to changes in Antero Resources’ development plans, changes in prices, availability of financing, acquisition costs, industry conditions, the timing of regulatory approvals, success or lack of success in Antero Resources’ drilling activities, contractual obligations, internally generated cash flows and other factors both within and outside our control.

48

Table of Contents

Cash Flows Used in Financing Activities

Net cash used in financing activities was $35 million and $26 million for the six months ended June 30, 2018 and 2019, respectively. Net cash used in financing activities for the six months ended June 30, 2019 included: (i) issuance of the 2028 Notes (as defined below) of $650 million; (ii); total distributions to shareholders, Series B unitholders and preferred shareholders of $186 million; (iii) net payments on the Credit Facility of $481 million and (iv) $7 million of payments for deferred financing. For the six months ended June 30, 2018, net cash used in financing activities consisted of $35 million in distributions to shareholders and Series B unitholders.

Debt Agreements and Contractual Obligations

Antero Midstream Partners Revolving Credit Facility

On October 26, 2017, Antero Midstream Partners entered into the Credit Facility. The Credit Facility includes fall away covenants and lower interest rates that are triggered if and when the Borrower elects to enter into an Investment Grade Period, as described below. Our Credit Facility provides for borrowing under either the London Inter-Bank Offered Rate or an Alternative Rate of Interest (as defined in the credit facility agreement).

The Credit Facility was amended on October 31, 2018 and February 26, 2019 to, among other things: (i) increase lender commitments from $1.5 billion to $2.0 billion, (ii) permit us, the Borrower and the guarantors under the facility to consummate the Transactions and (iii) to modify pricing to the levels described in more detail below. The maturity date of the facility is October 26, 2022. At June 30, 2019, we had $595 million of borrowings and no letters of credit outstanding under the Credit Facility.

Under the Credit Facility, “Investment Grade Period” is a period that, as long as no event of default has occurred and the Borrower is in pro forma compliance with the financial covenants under the Credit Facility, commences when the Borrower elects to give notice to the Administrative Agent that the Borrower has received at least one of either (i) a BBB- or better rating from Standard and Poor’s or (ii) a Baa3 or better from Moody’s (provided that the non-investment grade rating from the other rating agency is at least either Ba1 if Moody’s or BB+ if Standard and Poor’s (an “Investment Grade Rating”)). An Investment Grade Period can end at the Borrower’s election.

We have a choice of borrowing in Eurodollars or at the base rate. Principal amounts borrowed are payable on the maturity date with such borrowings bearing interest that is payable (i) with respect to base rate loans, quarterly and (ii) with respect to Eurodollar loans, the last day of each Interest Period (as defined below); provided that if any Interest Period for a Eurodollar loan exceeds three months, interest will be payable on the respective dates that fall every three months after the beginning of such Interest Period. Eurodollar loans bear interest at a rate per annum equal to the LIBOR Rate administered by the ICE Benchmark Administration for one, two, three, six or, if available to the lenders, twelve months (the “Interest Period”) plus an applicable margin ranging from (i) 125 to 225 basis points during any period that is not an Investment Grade Period, depending on the leverage ratio then in effect and (ii) 112.5 to 200 basis points during an Investment Grade Period, depending on the Borrower’s credit rating then in effect. Base rate loans bear interest at a rate per annum equal to the greatest of (i) the agent bank’s reference rate, (ii) the federal funds effective rate plus 50 basis points and (iii) the rate for one month Eurodollar loans plus 100 basis points, plus an applicable margin ranging from (i) 25 to 125 basis points during any period that is not an Investment Grade Period, depending on the leverage ratio then in effect and (ii) 12.5 to 100 basis points during an Investment Grade Period, depending on the Borrower’s credit rating then in effect.

During any period that is not an Investment Grade Period, the Credit Facility is guaranteed by our subsidiaries and is secured by mortgages on substantially all of Antero Midstream Partners’ and its subsidiaries’ properties; provided that the liens securing the Credit Facility shall be automatically released during an Investment Grade Period. The Credit Facility contains restrictive covenants that may limit our ability to, among other things:

incur additional indebtedness;
sell assets;
make loans to others;
make investments;

49

Table of Contents

enter into mergers;
make certain restricted payments;
incur liens; and
engage in certain other transactions without the prior consent of the lenders.

The Credit Facility also requires us to maintain the following financial ratios:

a consolidated interest coverage ratio, which is the ratio of our consolidated EBITDA to its consolidated current interest charges of at least 2.5 to 1.0 at the end of each fiscal quarter; provided that during an Investment Grade Period, the Borrower will not to be subject to such ratio;
a consolidated total leverage ratio, which is the ratio of consolidated debt to consolidated EBITDA, of not more than 5.00 to 1.00 at the end of each fiscal quarter; provided that during an Investment Grade Period or at our election (the “Financial Covenant Election”), the consolidated total leverage ratio shall be no more than 5.25 to 1.0; and
after a Financial Covenant Election (and up to the commencement of an Investment Grade Period), a consolidated senior secured leverage ratio covenant rather than the consolidated total leverage ratio covenant, which is the ratio of consolidated senior secured debt to consolidated EBITDA, of not more than 3.75 to 1.0.

We were in compliance with the applicable covenants and ratios as of June 30, 2019. The actual borrowing capacity available to Antero Midstream Partners may be limited by the interest coverage ratio, consolidated total leverage ratio, and consolidated senior secured leverage ratio covenants.

5.375% Senior Notes Due 2024

On September 13, 2016, Antero Midstream Partners and its wholly owned subsidiary, Finance Corp together with Antero Midstream Partners, (the “Issuers”), issued $650 million in aggregate principal amount of 5.375% senior notes due September 15, 2024 (the “2024 Notes”) at par.  The 2024 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility.  The 2024 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 2024 Notes is payable on March 15 and September 15 of each year.  Antero Midstream Partners may redeem all or part of the 2024 Notes at any time on or after September 15, 2019 at redemption prices ranging from 104.031% on or after September 15, 2019 to 100.00% on or after September 15, 2022.  In addition, prior to September 15, 2019, Antero Midstream Partners may redeem up to 35% of the aggregate principal amount of the 2024 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 2024 Notes, plus accrued and unpaid interest.  At any time prior to September 15, 2019, Antero Midstream Partners may also redeem the 2024 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2024 Notes plus a “make-whole” premium and accrued and unpaid interest.  If Antero Midstream Partners undergoes a change of control, the holders of the 2024 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2024 Notes at a price equal to 101% of the principal amount of the 2024 Notes, plus accrued and unpaid interest.

50

Table of Contents

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 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 102.875% on or after March 1, 2022 to 100.00% on or after March 1, 2025.  In addition, prior to March 1, 2022, Antero Midstream Partners may redeem up to 35% of the aggregate principal amount of the 2027 Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 105.75% of the principal amount of the 2027 Notes, plus accrued and unpaid interest.  At any time prior to March 1, 2022, Antero Midstream Partners may also redeem the 2027 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2027 Notes plus a “make-whole” premium and accrued and unpaid interest.  If Antero Midstream Partners undergoes a change of control, 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.

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% on or after January 15, 2023 to 100.00% on or after January 15, 2026.  In addition, prior to January 15, 2023, Antero Midstream Partners may redeem up to 35% of the aggregate principal amount of the 2028 Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 105.75% of the principal amount of the 2028 Notes, plus accrued and unpaid interest.  At any time prior to January 15, 2023, Antero Midstream Partners may also redeem the 2028 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2028 Notes plus a “make-whole” premium and accrued and unpaid interest.  If Antero Midstream Partners undergoes a change of control, 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.

51

Table of Contents

Contractual Obligations

Future capital contributions to unconsolidated affiliates are excluded from the table as neither the amounts nor the timing of the obligations can be determined in advance. A summary of our contractual obligations by maturity date as of June 30, 2019 is provided in the following table.

Remainder

Year Ended December 31,

(in millions)

of 2019

2020

2021

2022

2023

2024

Thereafter

Total

Credit Facility (1)

$

595

595

5.375% senior notes due 2024—principal

650

650

5.375% senior notes due 2024—interest

17

35

35

35

35

35

192

5.75% senior notes due 2027—principal

650

650

5.75% senior notes due 2027—interest

19

37

37

37

37

37

93

297

5.75% senior notes due 2028—principal

650

650

5.75% senior notes due 2028—interest

39

37

37

37

37

131

318

Water treatment (2)

27

27

Contingent acquisition consideration

125

125

Asset retirement obligations

1

2

1

2

6

Total

$

64

238

109

704

110

759

1,526

3,510

(1)Includes outstanding principal amounts on the Credit Facility at June 30, 2019. This table does not include future commitment fees, interest expense or other fees on the Credit Facility because they are floating rate instruments and we cannot determine with accuracy the timing of future loan advances, repayments, or future interest rates to be charged.
(2)Includes obligations related to the construction of our wastewater treatment facility.

Non-GAAP Financial Measures

We use Pro Forma Adjusted EBITDA and Adjusted EBITDA (for the three months ended June 30, 2019) as important indicators of our performance. Pro Forma Adjusted EBITDA is used to represent both Pro Forma Adjusted EBITDA and Adjusted EBITDA throughout the Non-GAAP Financial Measures discussion below. We define Pro Forma Adjusted EBITDA as net income before net interest expense, interest tax expense (benefit), depreciation, accretion and changes in fair value of contingent acquisition consideration, accretion of asset retirement obligations, equity-based compensation, excluding equity in earnings of unconsolidated affiliates, transaction expenses, amortization of customer relationships and including cash distributions from unconsolidated affiliates and including Antero Midstream Partners’ pre-acquisition: net income before interest expense, simplification expenses, depreciation, impairment, accretion and changes in fair value of contingent acquisition consideration, accretion of asset retirement obligations, equity-based compensation, amortization of customer relationships excluding equity in earnings of unconsolidated affiliates, including cash distributions from unconsolidated affiliates and excluding equity in earnings of Antero Midstream Partners.

We use Pro Forma Adjusted EBITDA to assess:

the financial performance of our assets, 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.

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

52

Table of Contents

The following table represents a reconciliation of our Pro Forma Adjusted EBITDA to the most directly comparable GAAP financial measure for the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

 

(in thousands)

    

2018

    

2019(1)

    

2018

    

2019

Reconciliation of Pro Forma Net Income to Pro Forma Adjusted EBITDA:

Pro Forma Net income

$

52,614

69,274

106,237

151,400

Interest expense

20,085

31,521

36,819

57,854

Income tax expense

19,974

30,419

39,668

52,201

Amortization of customer relationships

8,533

8,534

16,973

16,974

Depreciation expense

44,820

36,447

85,639

71,736

Impairment

4,614

594

4,614

7,576

Accretion of contingent asset consideration

3,947

2,297

7,821

5,274

Accretion of asset retirement obligations

34

69

68

142

Equity-based compensation

14,978

21,543

29,823

35,443

Equity in earnings of unconsolidated affiliates

(6,272)

(13,623)

(11,174)

(26,432)

Distributions from unconsolidated affiliates

10,810

19,085

17,895

36,465

Pro Forma Adjusted EBITDA

$

174,137

206,160

334,383

408,633

(1)Represents Adjusted EBITDA for the three months ended June 30, 2019.

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 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. We provide expanded discussion of our more significant accounting policies, estimates and judgments in the 2018 Forms 10-K. For acquisitions, management engages an independent valuation specialist to assist with the determination of fair value of the assets acquired, liabilities assumed, and goodwill, based on recognized business valuation methodologies.  If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, an estimate will be recorded.  Subsequent to the acquisition, and not later than one year from the acquisition date, the Company will record any material adjustments to the initial estimate based on new information obtained that would have existed as of the acquisition date.  An adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the period of the adjustment. We believe these accounting policies reflect our more significant estimates and assumptions used in preparation of our financial statements.

New Accounting Pronouncements

On February 25, 2016, the FASB issued Accounting Standard Update (“ASU”) No. 2016-02, Leases, which requires lessees to record lease liabilities and right-of-use assets as of the date of adoption and was incorporated into GAAP as Accounting Standards Codification (“ASC”) Topic 842. The new lease standard does not substantially change accounting by lessors. The Company adopted the new standard prospectively effective January 1, 2019. The Company is not a party to material contracts as a lessee. The Company determined that Antero Midstream Partners’ contractual arrangement with Antero Resources to provide gathering and compression services is an operating lease of certain of the Company’s assets, which are accounted for under the new ASU (see Note 5—Revenue for information on this arrangement).

Off-Balance Sheet Arrangements

As of June 30, 2019, we did not have any off-balance sheet arrangements.

53

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The primary 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 structures, and we intend to continue to pursue additional fixed-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 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 and treatment volumes. We cannot predict to what extent our business would be impacted by lower commodity prices and any resulting impact on Antero Resources’ operations.

Interest Rate Risk

Our primary exposure to interest rate risk results from outstanding borrowings under the Credit Facility, which has a floating interest rate. We do not currently, but may in the future, hedge the interest on portions of our borrowings under the Credit Facility from time-to-time in order to manage risks associated with floating interest rates. At June 30, 2019, we had $595 million of borrowings and no letters of credit outstanding under the Credit Facility. A 1.0% increase in the Credit Facility interest rate would have resulted in an estimated $3 million increase in interest expense for the six months ended June 30, 2019.

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 our area of operations or otherwise, that adversely affects Antero Resources’ production, drilling schedule, financial condition, leverage, market reputation, liquidity, results of operations or cash flows may adversely affect our revenues and cash available for distribution.

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 and treatment 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 agreement. Any material non-payment or non-performance by Antero Resources could reduce our ability to make distributions to our unitholders.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under 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 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this 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 reports that we file 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 rules and 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 June 30, 2019 at a reasonable assurance level.

54

Table of Contents

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

55

Table of Contents

PART II—OTHER INFORMATION

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 are not currently subject to any material litigation.

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

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, see “Item 1A. Risk Factors” in the 2018 Form 10-K and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. The risks described in such reports could materially and adversely affect our business, financial condition, cash flows, and results of operations. There have been no material changes to the risks described in such reports. We may experience additional risks and uncertainties not currently known to us. Furthermore, as a result of developments occurring in the future, conditions that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, cash flows and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

The following table sets forth our share purchase activity for each period presented:

Total Number of

Maximum Number

Number of

Average Price

Common Shares

of Common Shares

Common

Paid per

Purchased as Part of

that May Yet be

Shares

Common Share

Publicly Announced

Purchased Under

Period

Purchased

Share

Plans

the Plan

April 1, 2019 – April 30, 2019

129,119

$

14.15

N/A

May 1, 2019 – May 31, 2019

$

N/A

June 1, 2019 – June 30, 2019

$

N/A

Shares purchased represent shares of our common stock transferred to us in order to satisfy tax withholding obligations incurred upon the vesting of Antero Midstream Corporation equity awards held by our employees.

Item 5.  Other Information.

On July 29, 2019, David A. Peters notified the Company of his intent to resign from the Board of Directors of the Company effective as of August 1, 2019 for personal reasons. The resignation was not the result of any disagreement with the Company or any of its affiliates on any matter relating to the Company’s operations, policies or practices.

56

Table of Contents

Item 6.Exhibits

3.1

Certificate of Conversion of Antero Midstream Corporation, dated March 12, 2019 (incorporated by reference to Exhibit 3.2 to the 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 March 12, 2019 (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K (Commission File No. 001-38075) filed on March 12, 2019).

3.3

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

3.4

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

4.1

First Supplemental Indenture, dated as of April 15, 2019, among Antero Midstream Partners LP, Antero Midstream Finance Corporation, Antero Midstream Corporation, each of the other parties identified therein and Wells Fargo Bank, National Association, a national banking association, to the indenture governing the 2027 Notes (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (Commission File No. 001-38075) filed on April 16, 2019).

4.2

Second Supplemental Indenture, dated as of April 15, 2019, among Antero Midstream Partners LP, Antero Midstream Finance Corporation, Antero Midstream Corporation, each of the other parties identified therein and Wells Fargo Bank, National Association, a national banking association to the indenture governing the 2024 Notes (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K (Commission File No. 001-38075) filed on April 16, 2019).

4.3

Indenture, dated as of June 28, 2019, by and among Antero Midstream Partners LP, Antero Midstream Finance Corporation, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (Commission File No. 001-38075) filed on June 28, 2019).

4.4

Form of 5.75% Senior Note due 2028 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K (Commission File No. 001-38075) filed on June 28, 2019).

10.1

*

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

10.2

*

Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the Antero Midstream Corporation Long Term Incentive Plan.

31.1

*

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

99.1

*

Unaudited pro forma condensed combined financial statements of Antero Midstream Corporation.

101

*

The following financial information from this Form 10-Q of Antero Midstream Corporation for the quarter ended June 30, 2019, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Partners’ Capital, (iv) Condensed Consolidated Statements of Partners’ Capital and Stockholders’ Equity, (v)

Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.

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

57

Table of Contents

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 CORPORATION

By:

/s/ Michael N. Kennedy

MICHAEL N. KENNEDY

Chief Financial Officer

Date:

July 31, 2019

58