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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 March 31, 2021

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 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 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 an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

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 not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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 477,357,880 shares of common stock outstanding as of April 23, 2021.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. 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, although not all forward-looking statements contain such identifying words. When considering these forward-looking statements, investors should keep in mind the risk factors and other cautionary statements in this Quarterly Report on Form 10-Q. These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

Antero Resources Corporation’s (“Antero Resources”) expected production and development plan;
impacts to producer customers of insufficient storage capacity;
our ability to 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;
impacts of world health events, including the coronavirus (“COVID-19”) pandemic;
our ability to complete the construction of or purchase new gathering and compression, processing, water handling or other assets on schedule, at the budgeted cost or at all, and the ability of such assets to operate as designed or at expected levels;
our ability to execute our share repurchase program;
competition and government regulations;
actions taken by third-party producers, operators, processors and transporters;
pending 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
our other plans, objectives, expectations and intentions contained in this Quarterly Report on Form 10-Q.

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,

2

regulatory changes, the uncertainty inherent in projecting Antero Resources’ future rates of production, cash flows and access to capital, the timing of development expenditures, impacts of world health events, including the COVID-19 pandemic and the other risks described or referenced under the heading “1A. Risk Factors” herein, including the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), which is on file with the Securities and Exchange Commission (“SEC”).

Should one or more of the risks or uncertainties described or referenced 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

PART I—FINANCIAL INFORMATION

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

December 31,

March 31,

    

2020

   

2021

 

Assets

Current assets:

Cash and cash equivalents

$

640

261

Accounts receivable–Antero Resources

73,722

88,773

Accounts receivable–third party

839

227

Income tax receivable

17,251

940

Other current assets

1,479

966

Total current assets

93,931

91,167

Property and equipment, net

3,254,044

3,249,726

Investments in unconsolidated affiliates

722,478

712,069

Deferred tax asset

103,402

75,378

Customer relationships

1,427,447

1,409,779

Other assets, net

9,610

8,641

Total assets

$

5,610,912

5,546,760

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable–Antero Resources

$

3,862

2,927

Accounts payable–third party

9,495

14,898

Accrued liabilities

74,947

56,598

Other current liabilities

5,701

5,327

Total current liabilities

94,005

79,750

Long-term liabilities:

Long-term debt

3,091,626

3,103,428

Other

6,995

6,716

Total liabilities

3,192,626

3,189,894

Stockholders' Equity:

Preferred stock, $0.01 par value: 100,000 authorized as of both December 31, 2020 and March 31, 2021

Series A non-voting perpetual preferred stock; 12 designated and 10 issued and outstanding as of both December 31, 2020 and March 31, 2021

Common stock, $0.01 par value; 2,000,000 authorized; 476,639 and 476,907 issued and outstanding as of December 31, 2020 and March 31, 2021, respectively

4,766

4,769

Additional paid-in capital

2,877,612

2,732,748

Accumulated deficit

(464,092)

(380,651)

Total stockholders' equity

2,418,286

2,356,866

Total liabilities and stockholders' equity

$

5,610,912

5,546,760

See accompanying notes to unaudited condensed consolidated financial statements.

4

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31,

    

2020

    

2021

Revenue:

    

    

Gathering and compression–Antero Resources

$

163,129

185,161

Water handling–Antero Resources

98,184

56,603

Water handling–third party

25

Amortization of customer relationships

(17,605)

(17,668)

Total revenue

243,708

224,121

Operating expenses:

Direct operating

48,728

39,314

General and administrative (including $3,338 and $4,012 of equity-based compensation in 2020 and 2021, respectively)

13,537

17,930

Facility idling

8,678

1,179

Impairment of goodwill

575,461

Impairment of property and equipment

89,083

1,379

Depreciation

27,343

26,850

Accretion of asset retirement obligations

42

119

Loss on asset sale

3,763

Total operating expenses

762,872

90,534

Operating income (loss)

(519,164)

133,587

Interest expense, net

(37,631)

(42,866)

Equity in earnings of unconsolidated affiliates

19,077

20,744

Income (loss) before income taxes

(537,718)

111,465

Provision for income tax benefit (expense)

144,785

(28,024)

Net income (loss) and comprehensive income (loss)

$

(392,933)

83,441

Net income (loss) per share–basic

$

(0.81)

0.17

Net income (loss) per share–diluted

$

(0.81)

0.17

Weighted average common shares outstanding:

Basic

483,103

476,850

Diluted

483,103

479,272

See accompanying notes to unaudited condensed consolidated financial statements.

5

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands)

Additional

Preferred

Common Stock

Paid-In

Accumulated

Total

Stock

Shares

Amount

Capital

Deficit

Equity

Balance at December 31, 2019

    

$

    

484,042

    

$

4,840

    

3,480,139

    

(341,565)

    

3,143,414

Dividends to stockholders

(149,014)

(149,014)

Equity-based compensation

3,338

3,338

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

43

(26)

(26)

Repurchases and retirement of common stock

(4,700)

(46)

(15,778)

(15,824)

Net loss and comprehensive loss

(392,933)

(392,933)

Balance at March 31, 2020

$

479,385

$

4,794

3,318,659

(734,498)

2,588,955

Balance at December 31, 2020

    

$

476,639

    

$

4,766

    

2,877,612

    

(464,092)

    

2,418,286

Dividends to stockholders

(147,332)

(147,332)

Equity-based compensation

4,012

4,012

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

268

3

(1,544)

(1,541)

Net income and comprehensive income

83,441

83,441

Balance at March 31, 2021

$

476,907

$

4,769

2,732,748

(380,651)

2,356,866

See accompanying notes to unaudited condensed consolidated financial statements.

6

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Three Months Ended March 31,

    

2020

    

2021

 

Cash flows provided by (used in) operating activities:

    

    

  

Net income (loss)

$

(392,933)

83,441

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

Depreciation

27,343

26,850

Payment of contingent consideration in excess of acquisition date fair value

(8,076)

Accretion of asset retirement obligations

42

119

Impairment

664,544

1,379

Deferred income tax expense (benefit)

(88,328)

28,024

Equity-based compensation

3,338

4,012

Equity in earnings of unconsolidated affiliates

(19,077)

(20,744)

Distributions from unconsolidated affiliates

23,628

31,910

Amortization of customer relationships

17,605

17,668

Amortization of deferred financing costs

1,090

1,388

Settlement of asset retirement obligations

(408)

Loss on asset sale

3,763

Changes in assets and liabilities:

Accounts receivable–Antero Resources

10,460

(15,051)

Accounts receivable–third party

998

808

Income tax receivable

(56,457)

16,311

Other current assets

517

593

Accounts payable–Antero Resources

(1,470)

(935)

Accounts payable–third party

6,614

4,786

Accrued liabilities

(42,852)

(18,213)

Net cash provided by operating activities

146,986

165,701

Cash flows provided by (used in) investing activities:

Additions to gathering systems and facilities

(54,659)

(15,059)

Additions to water handling systems

(13,324)

(13,330)

Investments in unconsolidated affiliates

(11,690)

(757)

Cash received in asset sale

1,493

Change in other assets

2,296

Net cash used in investing activities

(77,377)

(27,653)

Cash flows provided by (used in) financing activities:

Dividends to stockholders

(148,876)

(147,194)

Dividends to preferred stockholders

(138)

(138)

Repurchases of common stock

(15,824)

Payments of deferred financing costs

(543)

Borrowings on bank credit facilities, net

211,000

11,000

Payment of contingent acquisition consideration

(116,924)

Employee tax withholding for settlement of equity compensation awards

(26)

(1,541)

Other

(56)

(11)

Net cash used in financing activities

(70,844)

(138,427)

Net decrease in cash and cash equivalents

(1,235)

(379)

Cash and cash equivalents, beginning of period

1,235

640

Cash and cash equivalents, end of period

$

261

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$

67,609

58,739

Cash received during the period for income taxes

$

16,913

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

$

3,266

780

See accompanying notes to unaudited condensed consolidated financial statements.

7

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Organization

Antero Midstream Corporation (together with its consolidated subsidiaries, “Antero Midstream,” “AM” or the “Company”) is a growth-oriented midstream company formed to own, operate and develop midstream energy infrastructure primarily to service Antero Resources Corporation (“Antero Resources”) and its production and completion activity in the Appalachian Basin’s Marcellus Shale and Utica Shale located in West Virginia and Ohio. The Company’s assets consist of gathering pipelines, compressor stations, interests in processing and fractionation plants and water handling assets. Antero Midstream 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 Securities and Exchange Commission (the “SEC”) applicable to interim financial information and should be read in the context of the Company’s December 31, 2020 consolidated financial statements and notes thereto for a more complete understanding of the Company’s operations, financial position, and accounting policies. The Company’s December 31, 2020 consolidated financial statements were included in the Company’s 2020 Annual Report on Form 10-K, which was 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 management, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Company’s financial position as of December 31, 2020 and March 31, 2021, and the results of the Company’s operations and cash flows for the three months ended March 31, 2020 and 2021. The Company has no items of other comprehensive income (loss); therefore, net income (loss) is equal to comprehensive income (loss).

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).

(b)

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Antero Midstream Corporation and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated in the Company’s unaudited condensed consolidated financial statements.

(c)

Immaterial Correction of Prior Period Financial Statements

The Company identified that it incorrectly classified the cash flows related to the contingent acquisition consideration paid in the first quarter of 2020, and the amounts previously reflected in the Company’s net cash provided by operating activities and cash used in financing activities were incorrect. The error had no impact to total net change in cash or to the Company’s condensed consolidated balance sheets or condensed consolidated statements of operations and comprehensive income (loss). The Company

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

corrected the presentation for the three months ended March 31, 2020 in the accompanying condensed consolidated statements of cash flows.

(d)

Recently Adopted Accounting Standard

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Simplifying the Accounting for Income Taxes. This ASU removes certain exceptions to the general principles in Accounting Standard Codifications Topic 740, Income Taxes (“ASC 740”), and also simplifies portions of ASC 740 by clarifying and amending existing guidance. It is effective for interim and annual reporting periods after December 15, 2020. The Company adopted this ASU on January 1, 2021, and it did not have a material impact on the Company's consolidated financial statements.

(3) Goodwill and Intangibles

The Company evaluates goodwill for impairment annually during the fourth quarter and whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit with goodwill is less than its carrying amount. Significant assumptions used to estimate the reporting units’ fair value include the discount rate as well as estimates of future cash flows, which are impacted primarily by commodity prices and producer customers’ development plans (which impact volumes and capital requirements).

During the first quarter of 2020, the Company performed an interim impairment analysis of the goodwill due to changes in Antero Resources’ drilling plans as a result of the decline in commodity prices. As a result of this evaluation, the Company impaired all remaining goodwill of $575 million associated with its gathering and processing segment in the first quarter of 2020.

All customer relationships are subject to amortization and are amortized over a weighted-average period of 21 years, which reflects the remaining economic life of the relationships as of March 31, 2021. The changes in the carrying amount of customer relationships for the three months ended March 31, 2021 were as follows (in thousands):

Customer relationships as of December 31, 2020

$

1,427,447

Amortization of customer relationships

(17,668)

Customer relationships as of March 31, 2021

$

1,409,779

Future amortization expense is as follows (in thousands):

Remainder of year ending December 31, 2021

$

53,004

Year ending December 31, 2022

70,672

Year ending December 31, 2023

70,672

Year ending December 31, 2024

70,672

Year ending December 31, 2025

70,672

Thereafter

1,074,087

Total

$

1,409,779

(4) Transactions with Affiliates

(a)

Revenues

Substantially all revenues earned in the three months ended March 31, 2020 and 2021 were earned from Antero Resources, under various agreements for gathering and compression and water handling services. Revenues earned from gathering and processing services consists of lease income.

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(b)

Accounts receivable—Antero Resources and Accounts payable—Antero Resources

Accounts receivable—Antero Resources represents amounts due from Antero Resources, primarily related to gathering and compression services and water handling services. Accounts payable—Antero Resources represents amounts due to Antero Resources for general and administrative and other costs.

(c)

Allocation of Costs Charged by Antero Resources

The employees supporting the Company’s operations are concurrently employed by Antero Resources and the Company.  Direct operating expense includes costs charged to the Company of $2 million and $3 million during the three months ended March 31, 2020 and 2021, respectively. These costs were for services provided by employees associated with the operation of the Company’s gathering lines, compressor stations, and water handling assets.  General and administrative expense includes costs charged to the Company by Antero Resources of $6 million and $9 million during the three months ended March 31, 2020 and 2021, respectively.  These costs relate to: (i) various business services, including payroll processing, accounts payable processing and facilities management, (ii) various corporate services, including legal, accounting, treasury, information technology and human resources and (iii) compensation, including certain equity-based compensation.  These expenses are charged to the Company based on (i) 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, and (ii) an annual management services fee.  The Company reimburses Antero Resources directly for all general and administrative costs charged to it.  See Note 9—Equity-Based Compensation and Cash Awards.

(5) Revenue

(a)

Revenue from Contracts with Customers

All of the Company’s revenues are currently 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 gathering and compression agreement with Antero Resources, Antero Resources has dedicated substantially all of its current and future acreage in West Virginia, Ohio and Pennsylvania to the Company for gathering and compression services except for acreage subject to third-party commitments or pre-existing dedications. The Company also has an option to gather and compress natural gas produced by Antero Resources on any additional acreage it acquires during the term of the agreement outside of West Virginia, Ohio and Pennsylvania on the same terms and conditions. In December 2019, the Company and Antero Resources agreed to extend the initial term of the gathering and compression agreement to 2038 and established a growth incentive fee program whereby low pressure gathering fees will be reduced from 2020 through 2023 to the extent Antero Resources achieves certain quarterly volumetric targets during such time. Antero Resources achieved the first level volumetric target for the three months ended March 31, 2020 and earned a rebate of $12 million from the Company. Antero Resources did not achieve the volumetric target for the three months ended March 31, 2021. Upon completion of the initial contract term, the gathering and compression agreement will continue in effect from year to year until such time as the agreement is terminated, effective upon an anniversary of the effective date of the agreement, by either the Company or Antero Resources on or before the 180th day prior to the anniversary of such effective date.

Under the gathering and compression agreement, the Company receives a low pressure gathering fee, a high pressure gathering fee and a compression fee, in each case subject to annual 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 because 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

10

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

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. When a modification to the gathering and compression agreement occurs, the Company reassesses the classification of this lease. The Company accounts for its lease and non-lease components as a single lease component as the lease component is the predominant component. The non-lease components consist of operating, oversight and maintenance of the gathering system, which are performed on time-elapsed measures. 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.

Water Services Agreement

The Company is party to a water services agreement with Antero Resources, whereby the Company provides certain water handling services to Antero Resources within an area of dedication in defined service areas in West Virginia and Ohio. Upon completion of the initial term in 2035, the water services agreement will continue in effect from year to year until such time as the agreement is terminated, effective upon an anniversary of the effective date of the agreement, by either the Company or Antero Resources on or before the 180th day prior to the anniversary of such effective date. Under the agreement, the Company receives a fixed fee per barrel for fresh water delivered 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. For flowback and produced water blending services, the Company receives a cost of service fee based on the costs incurred by the Company. All such fees under the agreement are 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 or when flowback and produced water blending services have been completed. The Company invoices the customer the month after water services are performed, and payment is due in the same month. For services contracted through third-party providers, the Company’s performance obligation is satisfied when the service to be performed by the third-party provider has been completed. The Company invoices the customer after the third-party provider billing is received, and payment is due in the same month.

Minimum Volume Commitments

The gathering and compression agreement includes 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 options at the Company’s election for either (i) minimum volume commitments that require Antero Resources to utilize or pay for 75% of the high pressure gathering capacity and 70% of the compression capacity of such new construction for 10 years or (ii) a service fee that allows us to earn a 13% rate of return on such new construction over seven years. The Company recognizes lease income from its minimum volume commitments under its gathering and compression agreement 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.

11

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

Minimum revenue amounts under the gathering and compression minimum volume commitments as of March 31, 2021 are as follows (in thousands):

Remainder of year ending December 31, 2021

$

170,459

Year ending December 31, 2022

249,029

Year ending December 31, 2023

249,029

Year ending December 31, 2024

249,712

Year ending December 31, 2025

235,940

Thereafter

558,290

Total

$

1,712,459

(b)

Disaggregation of Revenue

In the following table, revenue is disaggregated by type of service and type of fee and is identified by the reportable segment to which such revenues relate. For more information on reportable segments, see Note 14—Reportable Segments.

Three Months Ended March 31,

(in thousands)

2020

2021

    

Reportable segment

Revenue from contracts with customers

    

    

Type of service

Gathering—low pressure

$

81,148

86,306

Gathering and Processing (1)

Gathering—low pressure rebate

(12,000)

Gathering and Processing (1)

Gathering—high pressure

48,913

50,718

Gathering and Processing (1)

Compression

45,068

48,137

Gathering and Processing (1)

Fresh water delivery

65,818

37,358

Water Handling

Other fluid handling

32,366

19,270

Water Handling

Amortization of customer relationships

(9,238)

(9,271)

Gathering and Processing

Amortization of customer relationships

(8,367)

(8,397)

Water Handling

Total

$

243,708

224,121

Type of contract

Per Unit Fixed Fee

$

175,129

185,161

Gathering and Processing (1)

Gathering—low pressure rebate

(12,000)

Gathering and Processing (1)

Per Unit Fixed Fee

65,818

37,358

Water Handling

Cost plus 3%

30,945

15,350

Water Handling

Cost of service fee

1,421

3,920

Water Handling

Amortization of customer relationships

(9,238)

(9,271)

Gathering and Processing

Amortization of customer relationships

(8,367)

(8,397)

Water Handling

Total

$

243,708

224,121

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

(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.

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

The remainder of the Company’s 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 December 31, 2020 and March 31, 2021, the Company’s receivables with customers were $74 million and $89 million, respectively.

(6) Property and Equipment

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

(Unaudited)

Estimated

December 31,

March 31,

(in thousands)

    

useful lives

    

2020

2021

Land

    

n/a

    

$

23,582

    

23,272

Gathering systems and facilities

40-50 years (1)

2,643,927

2,653,975

Permanent buried pipelines and equipment

7-20 years

545,419

551,983

Surface pipelines and equipment

1-7 years

50,916

51,743

Heavy trucks and equipment

3-5 years

5,919

5,919

Above ground storage tanks

5-10 years

2,483

2,483

Construction-in-progress

n/a

 

139,506

144,909

Total property and equipment

3,411,752

3,434,284

Less accumulated depreciation

(157,708)

(184,558)

Property and equipment, net

$

3,254,044

3,249,726

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

Due to the decline in the industry environment as a result of low commodity prices, the Company evaluated its assets for impairment during the first quarter of 2020. As a result of this evaluation, the Company recorded an impairment expense of $89 million, which included an $83 million impairment expense to its permanent buried pipelines and equipment and a $6 million impairment expense to its surface pipelines and equipment.

Additionally, the Company incurred $9 million and $1 million in facility idling costs for the care and maintenance of its wastewater treatment facility and related landfill (collectively, the “Clearwater Facility”) during the three months ended March 31, 2020 and 2021, respectively. The Clearwater Facility was fully impaired when it was idled in September 2019.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(7) Long-Term Debt

The Company’s long-term debt as of December 31, 2020 and March 31, 2021 was as follows:

(Unaudited)

December 31,

March 31,

(in thousands)

2020

2021

Credit Facility (a)

    

$

613,500

    

624,500

5.375% senior notes due 2024 (b)

650,000

650,000

7.875% senior notes due 2026 (c)

550,000

550,000

5.75% senior notes due 2027 (d)

650,000

650,000

5.75% senior notes due 2028 (e)

650,000

650,000

Total principal

3,113,500

3,124,500

Unamortized debt premiums

4,261

4,045

Unamortized debt issuance costs

(26,135)

(25,117)

Total long-term debt

$

3,091,626

3,103,428

(a)

Credit Facility

Antero Midstream Partners LP (“Antero Midstream Partners”), an indirect, wholly owned subsidiary of Antero Midstream Corporation, as borrower (the “Borrower”), has a senior secured revolving credit facility (the “Credit Facility”) with a consortium of banks. Lender commitments under the Credit Facility are currently $2.13 billion. As of December 31, 2020, the Borrower had outstanding borrowings under the Credit Facility of $614 million with a weighted average interest rate of 1.66%. As of March 31, 2021, the Borrower had outstanding borrowings under the Credit Facility of $625 million with a weighted average interest rate of 1.61%. No letters of credit under the Credit Facility were outstanding at either December 31, 2020 or March 31, 2021. 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 in the Credit Facility).

The Credit Facility contains certain covenants including restrictions on indebtedness, and requirements with respect to leverage and interest coverage ratios. The Credit Facility permits distributions to the holders of the Borrower’s equity interests in accordance with the cash distribution policy 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 the Company’s organizational documents. The Borrower was in compliance with all of the financial covenants under the Credit Facility as of December 31, 2020 and March 31, 2021.

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 the Borrower’s then-current leverage ratio subject to certain exceptions. Commitment fees on the unused portion of the Credit Facility are due quarterly at rates ranging from 0.25% to 0.375% (subject to certain exceptions) based on the leverage ratio then in effect.

(b)

5.375% Senior Notes Due 2024

On September 13, 2016, Antero Midstream Partners and its wholly owned subsidiary, Antero Midstream Finance Corporation (“Finance Corp,” and together with Antero Midstream Partners, the “Issuers”), issued $650 million in aggregate principal amount of 5.375% senior notes due September 15, 2024 (the “2024 Notes”) at par.  The 2024 Notes were recorded at their fair value of $652.6 million as of March 12, 2019, and the related premium of $2.6 million will be amortized into interest expense over the life of the 2024 Notes. 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

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

year.  Antero Midstream Partners may redeem all or part of the 2024 Notes at any time at redemption prices ranging from 102.688% as of March 31, 2021 to 100.00% on or after September 15, 2022.  If Antero Midstream Partners undergoes a change of control followed by a rating decline, 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)

7.875% Senior Notes Due 2026

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

(d)

5.75% Senior Notes Due 2027

On February 25, 2019, the Issuers issued $650 million in aggregate principal amount of 5.75% senior notes due March 1, 2027 (the “2027 Notes”) at par.   The 2027 Notes were recorded at their fair value of $653.3 million as of March 12, 2019, and the related premium of $3.3 million will be amortized into interest expense over the life of the 2027 Notes.  The 2027 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility.  The 2027 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Antero Midstream Corporation, Antero Midstream Partners’ wholly owned subsidiaries (other than Finance Corp) and certain of its future 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 followed by a rating decline, the holders of the 2027 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2027 Notes at a price equal to 101% of the principal amount of the 2027 Notes, plus accrued and unpaid interest.

(e)

5.75% Senior Notes Due 2028

On June 28, 2019, the Issuers issued $650 million in aggregate principal amount of 5.75% senior notes due January 15, 2028 (the “2028 Notes”) at par.  The 2028 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility.  The 2028 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Antero Midstream Corporation, Antero Midstream Partners’ wholly owned subsidiaries (other than Finance Corp) and certain of its future restricted subsidiaries.  Interest on the 2028 Notes is payable on January 15 and July 15 of each 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

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

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 followed by a rating decline, the holders of the 2028 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2028 Notes at a price equal to 101% of the principal amount of the 2028 Notes, plus accrued and unpaid interest.

(f)

Senior Notes Guarantors

The Company and each of the Company’s wholly owned subsidiaries (except for the Issuers) have fully and unconditionally guaranteed the 2024 Notes, 2026 Notes, 2027 Notes and 2028 Notes (collectively the “Senior Notes”). In the event a guarantor is sold or disposed of (whether by merger, consolidation, the sale of a sufficient amount of its capital stock so that it no longer qualifies as a Restricted Subsidiary (as defined in the applicable indenture governing the series of Senior Notes) of the Issuer or the sale of all or substantially all of its assets) and whether or not the guarantor is the surviving entity in such transaction to a person that is not an Issuer or a Restricted Subsidiary of an Issuer, such guarantor will be released from its obligations under its guarantee if the sale or other disposition does not violate the covenants set forth in the indentures governing the applicable Senior Notes.

In addition, a guarantor will be released from its obligations under the applicable indenture and its guarantee, upon the release or discharge of the guarantee of other indebtedness under a credit facility that resulted in the creation of such guarantee, except a release or discharge by or as a result of payment under such guarantee; if the Issuers designate such subsidiary as an unrestricted subsidiary and such designation complies with the other applicable provisions of the indenture governing the applicable Senior Notes or in connection with any covenant defeasance, legal defeasance or satisfaction and discharge of the applicable Senior Notes.

During the three months ended March 31, 2020 and 2021, all of the Company’s assets and operations are attributable to the Issuers and its guarantors.

(8) Accrued Liabilities

Accrued liabilities as of December 31, 2020 and March 31, 2021 consisted of the following items:

(Unaudited)

December 31,

March 31,

(in thousands)

    

2020

    

2021

 

Capital expenditures

$

11,307

11,469

Operating expenses

10,038

9,338

Interest expense

46,209

29,549

Production taxes

3,368

2,858

Other

4,025

3,384

Total accrued liabilities

$

74,947

56,598

(9) Equity-Based Compensation and Cash Awards

(a)

Summary of Equity-Based Compensation

The Company’s equity-based compensation includes (i) costs allocated to Antero Midstream by Antero Resources for grants made prior to March 12, 2019 pursuant to the Antero Resources Corporation Long-Term Incentive Plan (the “AR LTIP”) and (ii) costs related to the Antero Midstream Corporation Long-Term Incentive Plan (the “AM LTIP”). Antero Midstream’s equity-based compensation expense is included in general and administrative expenses, and recorded as a credit to the applicable classes of equity. Equity-based compensation expense allocated to the Company from Antero Resources was $1.5 million and $1.1 million for the three months ended March 31, 2020 and 2021. For grants made prior to March 12, 2019, Antero Resources has total unamortized expense related to its various equity-based compensation plans that can be allocated to the Company of approximately $4.4 million as of March 31, 2021. A portion of this unamortized cost will be allocated to Antero Midstream as it is amortized over the remaining service period of the related awards. The Company does not reimburse Antero Resources for noncash equity compensation allocated

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

to it for awards issued under the AR LTIP or the Antero Resources Corporation 2020 Long-Term Incentive Plan following March 12, 2019.

AM LTIP

The Company is authorized to grant up to 15,398,901 shares of AM common stock to employees and directors under the AM LTIP. The AM LTIP provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), dividend equivalents, other stock-based awards, cash awards and substitute awards. The terms and conditions of the awards granted are established by the compensation committee of the Board of Directors (the “Board”). As of March 31, 2021, a total of 11,332,985 shares were available for future grant under the AM LTIP. For the three months ended March 31, 2020 and 2021, the Company recognized expense of $1.4 million and $2.3 million, respectively, related to these awards, which does not include expense for the Company’s performance share unit (“PSU”) awards.

(b)

Restricted Stock Unit Awards

A summary of the RSU awards activity during the three months ended March 31, 2021 is as follows:

Weighted

Average

Number

Grant Date

    

of Units

    

Fair Value

Total AM LTIP RSUs awarded and unvested—December 31, 2020

3,314,955

$

8.09

Granted

Vested

(429,593)

7.46

Forfeited

(39,414)

7.27

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

2,845,948

$

8.20

As of March 31, 2021, unamortized expense of $16.6 million related to the unvested RSUs is expected to be recognized over a weighted average period of approximately 2.3 years and the Company’s proportionate share will be allocated to it as it is recognized.

(c)

Performance Share Unit Awards

Performance Share Unit Awards Based on Return on Invested Capital

The likelihood of achieving the performance conditions related to return on invested capital for the PSU awards outstanding was probable for the three months ended March 31, 2020 and 2021, and, therefore, the Company recognized expense of $0.1 million and $0.7 million, respectively. As of March 31, 2021, there was $0.7 million of unamortized equity-based compensation expense related to unvested PSUs that is expected to be recognized over a weighted average period of 1.1 years.

(d)

Cash Awards

In January 2020, the Company granted cash awards of $2.2 million to certain executives under the AM LTIP that vest ratably over a period of up to three years. In July 2020, the Company granted additional cash awards of $0.7 million to certain non-executive employees under the AM LTIP that vest ratably over a period of four years. The compensation expense for these awards is recognized ratably over the applicable vesting period. As of March 31, 2021, the Company has recorded $1.1 million in other liabilities in the unaudited condensed consolidated balance sheet related to cash awards.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(10) Cash Dividends

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

Dividends

Period

    

Record Date

    

Dividend Date

    

Dividends

    

per Share

Q4 2019

January 31, 2020

February 12, 2020

$

148,876

$

0.3075

*

February 14, 2020

February 14, 2020

138

*

Q1 2020

April 30, 2020

May 12, 2020

147,519

0.3075

*

May 15, 2020

May 15, 2020

137

*

Q2 2020

July 30, 2020

August 12, 2020

146,664

0.3075

*

August 14, 2020

August 14, 2020

138

*

Q3 2020

October 29, 2020

November 12, 2020

146,581

0.3075

*

November 16, 2020

November 16, 2020

137

*

Total 2020

$

590,190

Q4 2020

February 3, 2021

February 11, 2021

$

147,194

$

0.3075

*

February 16, 2021

February 16, 2021

138

*

Total 2021

$

147,332

*

Dividends are paid in accordance with the terms of the Series A Preferred Stock (as defined below) as discussed in Note 11—Equity and Earnings Per Common Share.

On April 14, 2021, the Board announced the declaration of a cash dividend on the shares of AM common stock of $0.225 per share for the quarter ended March 31, 2021. The dividend will be payable on May 12, 2021 to stockholders of record as of April 28, 2021. The Company pays dividends (i) out of surplus or (ii) if there is no surplus, out of the net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year, as provided under Delaware law.

The Board also declared a cash dividend of $138 thousand on the shares of Series A Preferred Stock of Antero Midstream to be paid on May 17, 2021 in accordance with the terms of the Series A Preferred Stock, which are discussed in Note 11—Equity and Earnings Per Common Share. As of March 31, 2021, there were dividends in the amount of $69 thousand accumulated in arrears on the Company’s Series A Preferred Stock.

(11) Equity and Earnings Per Common Share

(a)

Preferred Stock

The Board authorized 100,000,000 shares of preferred stock on March 12, 2019, and issued 10,000 shares of preferred stock designated as "5.5% Series A Non-Voting Perpetual Preferred Stock" (the "Series A Preferred Stock"), to The Antero Foundation on that date. Dividends on the Series A Preferred Stock are cumulative from the date of original issue and payable in cash on the 45th day following the end of each fiscal quarter, or such other dates as the Board w