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, 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

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)

(303) 357-7310

(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 477,459,735 shares of common stock outstanding as of July 23, 2021.

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	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	41
PART II—OTHER INFORMATION		42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6.	Exhibits	44
SIGNATURES		45

1

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), cybersecurity risks 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,		June 30,
	2020		2021
Assets
Current assets:
Cash and cash equivalents	$	640		678
Accounts receivable–Antero Resources		73,722		89,996
Accounts receivable–third party		839		466
Income tax receivable		17,251		940
Other current assets		1,479		358
Total current assets		93,931		92,438
Property and equipment, net		3,254,044		3,293,791
Investments in unconsolidated affiliates		722,478		707,518
Deferred tax asset		103,402		46,893
Customer relationships		1,427,447		1,392,111
Other assets, net		9,610		7,991
Total assets	$	5,610,912		5,540,742
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable–Antero Resources	$	3,862		4,238
Accounts payable–third party		9,495		24,785
Accrued liabilities		74,947		83,620
Other current liabilities		5,701		5,194
Total current liabilities		94,005		117,837
Long-term liabilities:
Long-term debt		3,091,626		3,087,734
Other		6,995		6,735
Total liabilities		3,192,626		3,212,306
Stockholders' Equity:
Preferred stock, $0.01 par value: 100,000 authorized as of both December 31, 2020 and June 30, 2021
Series A non-voting perpetual preferred stock; 12 designated and 10 issued and outstanding as of both December 31, 2020 and June 30, 2021		—		—
Common stock, $0.01 par value; 2,000,000 authorized; 476,639 and 477,358 issued and outstanding as of December 31, 2020 and June 30, 2021, respectively		4,766		4,774
Additional paid-in capital		2,877,612		2,624,090
Accumulated deficit		(464,092)		(300,428)
Total stockholders' equity		2,418,286		2,328,436
Total liabilities and stockholders' equity	$	5,610,912		5,540,742

See accompanying notes to unaudited condensed consolidated financial statements.

4

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended June 30,
	2020		2021
Revenue:
Gathering and compression–Antero Resources	$	173,991		192,667
Water handling–Antero Resources		63,351		57,718
Water handling–third party		—		70
Amortization of customer relationships		(17,606)		(17,668)
Total revenue		219,736		232,787
Operating expenses:
Direct operating		42,067		39,555
General and administrative (including $2,697 and $3,059 of equity-based compensation in 2020 and 2021, respectively)		12,422		14,251
Facility idling		2,475		984
Depreciation		27,745		26,619
Accretion of asset retirement obligations		61		114
Loss (gain) on asset sale		240		(135)
Total operating expenses		85,010		81,388
Operating income		134,726		151,399
Other income (expense):
Interest expense, net		(35,311)		(43,505)
Equity in earnings of unconsolidated affiliates		20,947		21,515
Loss on early extinguishment of debt		—		(20,701)
Total other expense		(14,364)		(42,691)
Income before income taxes		120,362		108,708
Provision for income tax expense		(31,921)		(28,485)
Net income and comprehensive income	$	88,441		80,223
Net income per share–basic	$	0.19		0.17
Net income per share–diluted	$	0.18		0.17
Weighted average common shares outstanding:
Basic		476,836		477,290
Diluted		478,837		479,530

See accompanying notes to unaudited condensed consolidated financial statements.

5

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

(In thousands, except per share amounts)

	Six Months Ended June 30,
	2020		2021
Revenue:
Gathering and compression–Antero Resources	$	337,120		377,828
Water handling–Antero Resources		161,535		114,321
Water handling–third party		—		95
Amortization of customer relationships		(35,211)		(35,336)
Total revenue		463,444		456,908
Operating expenses:
Direct operating		90,795		78,869
General and administrative (including $6,035 and $7,071 of equity-based compensation in 2020 and 2021, respectively)		25,959		32,181
Facility idling		11,153		2,163
Impairment of goodwill		575,461		—
Impairment of property and equipment		89,083		1,379
Depreciation		55,088		53,469
Accretion of asset retirement obligations		103		233
Loss on asset sale		240		3,628
Total operating expenses		847,882		171,922
Operating income (loss)		(384,438)		284,986
Other income (expense):
Interest expense, net		(72,942)		(86,371)
Equity in earnings of unconsolidated affiliates		40,024		42,259
Loss on early extinguishment of debt		—		(20,701)
Total other expense		(32,918)		(64,813)
Income (loss) before income taxes		(417,356)		220,173
Provision for income tax benefit (expense)		112,864		(56,509)
Net income (loss) and comprehensive income (loss)	$	(304,492)		163,664
Net income (loss) per share–basic	$	(0.63)		0.34
Net income (loss) per share–diluted	$	(0.63)		0.34
Weighted average common shares outstanding:
Basic		479,969		477,071
Diluted		479,969		479,382

See accompanying notes to unaudited condensed consolidated financial statements.

6

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
Dividends to stockholders		—		—		—		(147,656)		—		(147,656)
Equity-based compensation		—		—		—		2,697		—		2,697
Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes		—		311		4		(370)		—		(366)
Repurchases and retirement of common stock		—		(3,210)		(33)		(8,856)		—		(8,889)
Net income and comprehensive income		—		—		—		—		88,441		88,441
Balance at June 30, 2020	$	—		476,486	$	4,765		3,164,474		(646,057)		2,523,182
Balance at December 31, 2020	$	—		476,639	$	4,766		2,877,612		(464,092)		2,418,286
Dividends to stockholders		—		—		—		(147,332)		—		(147,332)
Equity-based compensation		—		—		—		4,012		—		4,012
Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes		—		268		3		(1,544)		—		(1,541)
Net income and comprehensive income		—		—		—		—		83,441		83,441
Balance at March 31, 2021		—		476,907		4,769		2,732,748		(380,651)		2,356,866
Dividends to stockholders		—		—		—		(108,936)		—		(108,936)
Equity-based compensation		—		—		—		3,059		—		3,059
Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes		—		451		5		(2,781)		—		(2,776)
Net income and comprehensive income		—		—		—		—		80,223		80,223
Balance at June 30, 2021	$	—		477,358	$	4,774		2,624,090		(300,428)		2,328,436

See accompanying notes to unaudited condensed consolidated financial statements.

7

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Six Months Ended June 30,
	2020		2021
Cash flows provided by (used in) operating activities:
Net income (loss)	$	(304,492)		163,664
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		55,088		53,469
Payment of contingent consideration in excess of acquisition date fair value		(8,076)		—
Accretion of asset retirement obligations		103		233
Impairment		664,544		1,379
Deferred income tax expense (benefit)		(56,408)		56,509
Equity-based compensation		6,035		7,071
Equity in earnings of unconsolidated affiliates		(40,024)		(42,259)
Distributions from unconsolidated affiliates		41,828		58,185
Amortization of customer relationships		35,211		35,336
Amortization of deferred financing costs		2,190		2,733
Loss on early extinguishment of debt		—		20,701
Settlement of asset retirement obligations		(601)		(602)
Loss on asset sale		240		3,628
Changes in assets and liabilities:
Accounts receivable–Antero Resources		24,941		(16,274)
Accounts receivable–third party		1,089		777
Income tax receivable		(17,547)		16,311
Other current assets		930		1,070
Accounts payable–Antero Resources		(432)		376
Accounts payable–third party		5,495		5,365
Accrued liabilities		(21,701)		(7,297)
Net cash provided by operating activities		388,413		360,375
Cash flows provided by (used in) investing activities:
Additions to gathering systems and facilities		(103,937)		(51,658)
Additions to water handling systems		(19,477)		(22,707)
Investments in unconsolidated affiliates		(21,988)		(966)
Cash received in asset sale		123		1,627
Change in other assets		1,938		—
Net cash used in investing activities		(143,341)		(73,704)
Cash flows provided by (used in) financing activities:
Dividends to stockholders		(296,395)		(255,993)
Dividends to preferred stockholders		(275)		(275)
Repurchases of common stock		(24,713)		—
Issuance of senior notes		—		750,000
Redemption of senior notes		—		(667,472)
Payments of deferred financing costs		—		(8,755)
Borrowings (repayments) on bank credit facilities, net		195,500		(99,800)
Payment of contingent acquisition consideration		(116,924)		—
Employee tax withholding for settlement of equity compensation awards		(392)		(4,317)
Other		(111)		(21)
Net cash used in financing activities		(243,310)		(286,633)
Net increase in cash and cash equivalents		1,762		38
Cash and cash equivalents, beginning of period		1,235		640
Cash and cash equivalents, end of period	$	2,997		678
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	74,665		91,608
Cash received during the period for income taxes	$	38,910		16,913
Increase (decrease) in accrued capital expenditures and accounts payable for property and equipment	$	(3,461)		25,490

See accompanying notes to unaudited condensed consolidated financial statements.

8

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 is 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 June 30, 2021, the results of the Company’s operations for the three and six months ended June 30, 2020 and 2021, and cash flows for the six months ended June 30, 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

9

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

consolidated balance sheets or condensed consolidated statements of operations and comprehensive income (loss). The Company corrected the presentation for the six months ended June 30, 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

During the first quarter of 2020, the Company performed an interim impairment analysis of its 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. Significant assumptions used to estimate the reporting units’ fair value included the discount rate as well as estimates of future cash flows, which were impacted primarily by commodity prices and producer customers’ development plans (which impact volumes and capital requirements).

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 June 30, 2021. The changes in the carrying amount of customer relationships for the six months ended June 30, 2021 were as follows (in thousands):

Customer relationships as of December 31, 2020	$	1,427,447
Amortization of customer relationships		(35,336)
Customer relationships as of June 30, 2021	$	1,392,111

Future amortization expense is as follows (in thousands):

Remainder of year ending December 31, 2021	$	35,336
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	$	1,392,111

(4) Transactions with Affiliates

(a) Revenues

Substantially all revenues earned in the three and six months ended June 30, 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.

10

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 $1 million and $2 million during the three months ended June 30, 2020 and 2021, respectively, and $3 million and $5 million during the six months ended June 30, 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 $7 million during the three months ended June 30, 2020 and 2021, respectively, and $13 million and $16 million during the six months ended June 30, 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. For the three and six months ended June 30, 2020, Antero Resources earned rebates of $12 million and $24 million, respectively, from the Company by achieving the first level volumetric target during the first and second quarters of 2020. Antero Resources did not earn any rebates from the Company for the three and six months ended June 30, 2021 since Antero Resources did not achieve any volumetric targets during the first or second quarters of 2021. 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 180^th 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.

11

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

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 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 180^th 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.

12

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 June 30, 2021 are as follows (in thousands):

Remainder of year ending December 31, 2021	$	94,838
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	$	1,636,838

(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				Six Months Ended
	June 30,				June 30,
(in thousands)	2020		2021		2020		2021		Reportable Segment
Revenue from contracts with customers
Type of service
Gathering—low pressure	$	85,791		91,761		166,939		178,067	Gathering and Processing (1)
Gathering—low pressure rebate		(12,000)		—		(24,000)		—	Gathering and Processing (1)
Gathering—high pressure		51,577		51,535		100,490		102,253	Gathering and Processing (1)
Compression		48,623		49,371		93,691		97,508	Gathering and Processing (1)
Fresh water delivery		36,900		37,751		102,718		75,109	Water Handling
Other fluid handling		26,451		20,037		58,817		39,307	Water Handling
Amortization of customer relationships		(9,239)		(9,271)		(18,477)		(18,542)	Gathering and Processing
Amortization of customer relationships		(8,367)		(8,397)		(16,734)		(16,794)	Water Handling
Total	$	219,736		232,787		463,444		456,908
Type of contract
Per Unit Fixed Fee	$	185,991		192,667		361,120		377,828	Gathering and Processing (1)
Gathering—low pressure rebate		(12,000)		—		(24,000)		—	Gathering and Processing (1)
Per Unit Fixed Fee		36,900		37,751		102,718		75,109	Water Handling
Cost plus 3%		23,742		16,425		54,687		31,775	Water Handling
Cost of service fee		2,709		3,612		4,130		7,532	Water Handling
Amortization of customer relationships		(9,239)		(9,271)		(18,477)		(18,542)	Gathering and Processing
Amortization of customer relationships		(8,367)		(8,397)		(16,734)		(16,794)