Antero Midstream Partners: An MLP with Strong Growth Guidance
Antero Midstream’s 2016 capital guidance
Antero Midstream Partners (AM) is bullish on its organic projects, while most players in the midstream sector have decided to cut their 2016 planned capital expenditure, considering the current commodity price environment.
Antero Midstream expects to spend $435 million on growth projects in 2016, 3% higher than its 2015 capital expenditure. Antero Midstream’s 2016 capital budget is supported by Antero Resources’ (AR) production growth guidance.
According to a related press release, “Antero Resources announced its 2016 drilling and completion capital budget of $1.3 billion which is forecast to generate production growth of 15%.”
Below is a segment-by-segment breakdown of AM’s 2016 capital spending:
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Gathering and Compression ($240 million): 90% of Gathering and Compression capital is planned to be invested in the Marcellus shale, and the remaining 10% will be invested in the Utica shale. By 2016, the partnership “expects to have over 170 miles and 134 miles of low pressure and high pressure gathering pipelines, respectively, and over 1 Bcf/d [billion cubic feet per day] of compression capacity in-service in the Marcellus and Utica Shale plays combined.”
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Fresh Water Infrastructure ($40 million): 75% of water infrastructure will be allocated to the Marcellus shale, and the remaining 25% will be allocated to the Utica shale.
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Advanced Wastewater Treatment ($130 million): The partnership is bullish on the Advanced Wastewater Treatment facility. The 60,000 barrel per day facility is expected to generate attractive returns ranging from 15% to 25% at full utilization.
The remaining $25 million will be invested in maintenance capital.
Means of financing for AM
Antero Midstream doesn’t expect to use external financing for funding its growth capital expenditure in 2016. The partnership expects to “fund all 2016 capital expenditures through internally generated operating cash flow and available borrowing capacity within Antero Midstream’s existing $1.5 billion bank credit facility.”
Similarly, other midstream companies, including Enable Midstream Partners (ENBL) and Western Gas Partners (WES), have no plans to raise money from external capital markets in the current tough market environment. WES forms 0.12% of the PowerShares FTSE International Low Beta Equal Weight ETF (IDLB).
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