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PartnersCapitalAbstract

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, 2022

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 478,436,972 shares of common stock outstanding as of April 22, 2022.

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 geopolitical events and 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;
government regulations and changes in laws;
actions taken by third-party producers, operators, processors and transporters;
pending legal or environmental matters;
costs of conducting our operations;
our ability to achieve our greenhouse gas reduction targets and the costs associated therewith;
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.

1

We caution investors that these forward-looking statements are subject to all of the risks and uncertainties incidental to our business, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, environmental risks, Antero Resources’ drilling and completion and other operating risks, regulatory changes or changes in law, 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, the state or markets for, and availability of, verified quality carbon offsets 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, 2021 (the “2021 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.

2

PART I—FINANCIAL INFORMATION

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

December 31,

March 31,

    

2021

   

2022

 

Assets

Current assets:

Accounts receivable–Antero Resources

$

81,197

78,143

Accounts receivable–third party

747

328

Income tax receivable

940

940

Other current assets

920

879

Total current assets

83,804

80,290

Property and equipment, net

3,394,746

3,461,098

Investments in unconsolidated affiliates

696,009

688,111

Customer relationships

1,356,775

1,339,107

Other assets, net

12,667

11,988

Total assets

$

5,544,001

5,580,594

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable–Antero Resources

$

4,956

4,884

Accounts payable–third party

23,592

33,087

Accrued liabilities

80,838

97,022

Other current liabilities

4,623

4,136

Total current liabilities

114,009

139,129

Long-term liabilities:

Long-term debt

3,122,910

3,133,184

Deferred income tax liability

13,721

41,788

Other

6,663

6,539

Total liabilities

3,257,303

3,320,640

Stockholders' Equity:

Preferred stock, $0.01 par value: 100,000 authorized as of December 31, 2021 and March 31, 2022

Series A non-voting perpetual preferred stock; 12 designated and 10 issued and outstanding as of December 31, 2021 and March 31, 2022

Common stock, $0.01 par value; 2,000,000 authorized; 477,495 and 477,683 issued and outstanding as of December 31, 2021 and March 31, 2022, respectively

4,775

4,777

Additional paid-in capital

2,414,398

2,307,612

Accumulated deficit

(132,475)

(52,435)

Total stockholders' equity

2,286,698

2,259,954

Total liabilities and stockholders' equity

$

5,544,001

5,580,594

See accompanying notes to unaudited condensed consolidated financial statements.

3

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31,

    

2021

    

2022

Revenue:

    

    

Gathering and compression–Antero Resources

$

185,161

182,443

Water handling–Antero Resources

56,603

53,321

Water handling–third party

25

395

Amortization of customer relationships

(17,668)

(17,668)

Total revenue

224,121

218,491

Operating expenses:

Direct operating

39,314

42,012

General and administrative (including $4,012 and $2,832 of equity-based compensation in 2021 and 2022, respectively)

17,930

17,931

Facility idling

1,179

1,148

Depreciation

26,850

28,300

Impairment of property and equipment

1,379

Accretion of asset retirement obligations

119

64

Loss (gain) on asset sale

3,763

(118)

Total operating expenses

90,534

89,337

Operating income

133,587

129,154

Other income (expense):

Interest expense, net

(42,866)

(44,279)

Equity in earnings of unconsolidated affiliates

20,744

23,232

Total other expense

(22,122)

(21,047)

Income before income taxes

111,465

108,107

Income tax expense

(28,024)

(28,067)

Net income and comprehensive income

$

83,441

80,040

Net income per share–basic

$

0.17

0.17

Net income per share–diluted

$

0.17

0.17

Weighted average common shares outstanding:

Basic

476,850

477,646

Diluted

479,272

480,173

See accompanying notes to unaudited condensed consolidated financial statements.

4

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, 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

Balance at December 31, 2021

    

$

477,495

$

4,775

2,414,398

(132,475)

    

2,286,698

Dividends to stockholders

(108,287)

(108,287)

Equity-based compensation

2,832

2,832

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

188

2

(1,331)

(1,329)

Net income and comprehensive income

80,040

80,040

Balance at March 31, 2022

$

477,683

$

4,777

2,307,612

(52,435)

2,259,954

See accompanying notes to unaudited condensed consolidated financial statements.

5

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

Three Months Ended March 31,

    

2021

    

2022

 

Cash flows provided by (used in) operating activities:

    

    

  

Net income

$

83,441

80,040

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

Depreciation

26,850

28,300

Accretion

119

64

Impairment

1,379

Deferred income tax expense

28,024

28,067

Equity-based compensation

4,012

2,832

Equity in earnings of unconsolidated affiliates

(20,744)

(23,232)

Distributions from unconsolidated affiliates

31,910

31,130

Amortization of customer relationships

17,668

17,668

Amortization of deferred financing costs

1,388

1,410

Settlement of asset retirement obligations

(408)

(455)

Loss (gain) on asset sale

3,763

(118)

Changes in assets and liabilities:

Accounts receivable–Antero Resources

(15,051)

3,054

Accounts receivable–third party

808

460

Income tax receivable

16,311

Other current assets

593

118

Accounts payable–Antero Resources

(935)

230

Accounts payable–third party

4,786

13,762

Accrued liabilities

(18,213)

1,334

Net cash provided by operating activities

165,701

184,664

Cash flows provided by (used in) investing activities:

Additions to gathering systems and facilities

(15,059)

(70,734)

Additions to water handling systems

(13,330)

(13,533)

Investments in unconsolidated affiliates

(757)

Cash received in asset sale

1,493

121

Net cash used in investing activities

(27,653)

(84,146)

Cash flows provided by (used in) financing activities:

Dividends to stockholders

(147,194)

(108,149)

Dividends to preferred stockholders

(138)

(138)

Payments of deferred financing costs

(543)

(302)

Borrowings on bank credit facilities, net

11,000

9,400

Employee tax withholding for settlement of equity compensation awards

(1,541)

(1,329)

Other

(11)

Net cash used in financing activities

(138,427)

(100,518)

Net decrease in cash and cash equivalents

(379)

Cash and cash equivalents, beginning of period

640

Cash and cash equivalents, end of period

$

261

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$

58,739

40,677

Cash received during the period for income taxes

$

16,913

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

$

780

10,388

See accompanying notes to unaudited condensed consolidated financial statements.

6

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. 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, 2021 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, 2021 consolidated financial statements were included in the Company’s 2021 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, 2021 and March 31, 2022, the results of the Company’s operations and cash flows for the three months ended March 31, 2021 and 2022. The Company has no items of other comprehensive income; therefore, net income is equal to comprehensive income.

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)

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.

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(3) Intangibles

All customer relationships are subject to amortization and are amortized over a weighted average period of 20 years, which reflects the remaining economic life of the relationships as of March 31, 2022. The changes in the carrying amount of customer relationships were as follows (in thousands):

Customer relationships as of December 31, 2021

$

1,356,775

Amortization of customer relationships

(17,668)

Customer relationships as of March 31, 2022

$

1,339,107

Future amortization expense is as follows (in thousands):

Remainder of year ending December 31, 2022

$

53,004

Year ending December 31, 2023

70,672

Year ending December 31, 2024

70,672

Year ending December 31, 2025

70,672

Year ending December 31, 2026

70,672

Thereafter

1,003,415

Total

$

1,339,107

(4) Transactions with Affiliates

(a)

Revenues

Substantially all revenues earned in the three months ended March 31, 2021 and 2022 were earned from Antero Resources, under various agreements for gathering and compression and water handling services. Revenues earned from gathering and compression services consists of lease income.

(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 $3 million during the three months ended March 31, 2021 and 2022. 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 $9 million during the three months ended March 31, 2021 and 2022.  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 the nature of the expenses and are apportioned based on a combination of the Company’s proportionate share of gross property and equipment, capital expenditures and labor costs, as applicable.  The Company reimburses Antero Resources directly for all general and administrative costs charged to it, except costs attributable to noncash equity-based compensation.  For further information on equity-based compensation, see Note 9—Equity-Based Compensation and Cash Awards.

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(5) Revenue

All of the Company’s gathering and compression revenues are derived from an operating lease agreement, and all of the Company’s water handling revenues are derived from service contracts with customers. The Company currently earns substantially all of its revenues from Antero Resources.

(a)

Gathering and Compression

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 did not earn a rebate from the Company for the three months ended March 31, 2021 since Antero Resources did not achieve any volumetric targets during the first quarter of 2021. For the three months ended March 31, 2022, Antero Resources earned a rebate of $12 million from the Company by achieving the first level volumetric target during the first quarter of 2022. 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 Consumer Price Index (“CPI”)-based adjustments, or a cost of service fee, at the Company’s election when such assets are placed in-service. In addition, the agreement stipulates that the Company receives a reimbursement for the actual cost of (i) electricity used at its compressor stations where the compression services are provided based on a compression fee and (ii) operating expenses for all services provided for a cost of service fee.

The Company determined that the gathering and compression agreement is an operating lease as Antero Resources obtains substantially all of the economic benefit of the asset and has the right to direct the use of the asset. The gathering system is an identifiable asset within the gathering and compression agreement, and it consists of underground low pressure pipelines that generally connect and deliver gas from specific well pads to compressor stations to compress the gas before delivery to underground high pressure pipelines that transport the gas to a third-party pipeline or plant. The gathering system is considered a single lease due to the interrelated network of the assets. 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.

The gathering and compression agreement includes certain fixed fee provisions. If and to the extent Antero Resources requests that the Company construct new low pressure lines, high pressure lines and/or 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 cost of service fee that allows the Company to earn a 13% rate of return on such new construction over seven years, which election is made individually for each piece of equipment placed in service. All lease payments under the minimum volume commitments and cost of service fees are considered to be in-substance fixed lease payments under the gathering and compression agreement.

The Company recognizes lease income from its minimum volume commitments and cost of service fees under its gathering and compression agreement on a straight-line basis. Additional variable operating lease income is earned when volumes in excess of the minimum commitments are delivered under the contract. The Company recognizes variable lease income 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. Minimum volume commitments for high pressure gathering capacity and

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

compression capacity are aggregated such that there is a single minimum volume commitment for the respective service each year. The Company invoices the customer the month after each service is performed, and payment is due in the same month. The Company is not party to any leases that have not commenced.

Minimum future lease cash flows to be received by the Company under the gathering and compression agreement as of March 31, 2022 are as follows (in thousands):

Remainder of year ending December 31, 2022

$

194,146

Year ending December 31, 2023

281,779

Year ending December 31, 2024

282,551

Year ending December 31, 2025

268,299

Year ending December 31, 2026

254,886

Thereafter

472,024

Total

$

1,753,685

(b)

Water Handling

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. The initial term of the water services agreement runs to 2035. 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 for fresh water deliveries by pipeline directly to the well site, subject to annual CPI-based adjustments. In addition, the Company also provides other fluid handling services. These operations, along with the Company’s fresh water delivery systems, support well completion and production operations for Antero Resources. These services are provided by the Company directly or through third-parties with which the Company contracts. For these other fluid handling services provided by third-parties, Antero Resources reimburses the Company’s third-party out-of-pocket costs plus 3%. For these other fluid handling services provided by the Company, the Company charges Antero Resources a cost of service fee.

The Company satisfies its performance obligations and recognizes revenue when (i) the fresh water volumes have been delivered to the hydration unit of a specified well pad or (ii) other fluid handling 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.

Transaction Price Allocated to Remaining Performance Obligations

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

The remainder of the Company’s water 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.

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

Contract Balances

Under the Company’s water service contracts, the Company invoices customers after the performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s water service contracts do not give rise to contract assets or liabilities.

(c)

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)

2021

2022

    

Reportable Segment

Type of service

Gathering—low pressure

$

86,306

89,437

Gathering and Processing (1)

Gathering—low pressure rebate

(12,000)

Gathering and Processing (1)

Compression

48,137

51,612

Gathering and Processing (1)

Gathering—high pressure

50,718

53,394

Gathering and Processing (1)

Fresh water delivery

37,358

32,044

Water Handling

Other fluid handling

19,270

21,672

Water Handling

Amortization of customer relationships

(9,271)

(9,271)

Gathering and Processing

Amortization of customer relationships

(8,397)

(8,397)

Water Handling

Total

$

224,121

218,491

Type of contract

Per Unit Fixed Fee

$

185,161

194,443

Gathering and Processing (1)

Gathering—low pressure rebate

(12,000)

Gathering and Processing (1)

Per Unit Fixed Fee

37,358

32,439

Water Handling

Cost plus 3%

15,350

15,638

Water Handling

Cost of service fee

3,920

5,639

Water Handling

Amortization of customer relationships

(9,271)

(9,271)

Gathering and Processing

Amortization of customer relationships

(8,397)

(8,397)

Water Handling

Total

$

224,121

218,491

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

The Company’s receivables from its contracts with customers and operating leases as of December 31, 2021 and March 31, 2022, were $81 million and $78 million, respectively.

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(6) Property and Equipment

Property and equipment, net consisted of the following items:

(Unaudited)

Estimated

December 31,

March 31,

(in thousands)

    

Useful Lives

    

2021

2022

Land

    

n/a

    

$

23,369

    

26,682

Gathering systems and facilities

40-50 years (1)

2,817,918

2,847,444

Permanent buried pipelines and equipment

7-20 years

582,481

584,702

Surface pipelines and equipment

1-7 years

54,542

59,681

Heavy trucks and equipment

3-5 years

5,157

5,157

Above ground storage tanks

5-10 years

2,946

2,953

Construction-in-progress

n/a

 

174,271

228,717

Total property and equipment

3,660,684

3,755,336

Less accumulated depreciation

(265,938)

(294,238)

Property and equipment, net

$

3,394,746

3,461,098

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

(7) Long-Term Debt

Long-term debt consisted of the following items:

(Unaudited)

December 31,

March 31,

(in thousands)

2021

2022

Credit Facility (a)

    

$

547,200

    

556,600

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

5.375% senior notes due 2029 (f)

750,000

750,000

Total principal

3,147,200

3,156,600

Unamortized debt premiums

2,106

2,005

Unamortized debt issuance costs

(26,396)

(25,421)

Total long-term debt

$

3,122,910

3,133,184

(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 with a consortium of banks. On October 26, 2021, the Company entered into an amended and restated senior secured revolving credit facility (the “Credit Facility”). As of December 31, 2021 and March 31, 2022, the Credit Facility had lender commitments of $1.25 billion and matures on October 26, 2026; provided that if on November 17, 2025 any of the 2026 Notes (as defined below) are outstanding, the Credit Facility will mature on such date. As of March 31, 2022, the Credit Facility had an available borrowing capacity of $693 million.

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, provided that no event of default exists or would be caused thereby, and only to the extent permitted by the Borrower’s organizational documents. The Borrower was in compliance with all of the financial covenants under the Credit Facility as of December 31, 2021 and March 31, 2022.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

The senior secured revolving credit facility agreement in effect prior to October 26, 2021 provided for borrowing under either the Base Rate or the Eurodollar Rate (as each term is defined in the agreement), and the Credit Facility provides for borrowing under either Adjusted Term Secured Overnight Financing Rate (“SOFR”) or the Base Rate (as each term is defined in the Credit Facility). Principal amounts borrowed are payable on the maturity date with such borrowings bearing interest that is payable with respect to (i) base rate loans, quarterly and (ii) SOFR Loans at the end of the applicable interest period if three months (or shorter, if applicable), or every three months if the applicable interest period is longer than three months. Interest was 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 under the senior secured revolving credit facility agreement in effect prior to October 26, 2021. Interest is payable at a variable rate based on SOFR or the base rate, determined by election at the time of borrowing, plus an applicable margin rate under the Credit Facility. 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.

As of December 31, 2021, the Borrower had outstanding borrowings under the Credit Facility of $547 million with a weighted average interest rate of 1.81%. As of March 31, 2022, the Borrower had outstanding borrowings under the Credit Facility of $557 million with a weighted average interest rate of 2.07%. No letters of credit under the Credit Facility were outstanding as of December 31, 2021 or March 31, 2022.

(b)

5.375% Senior Notes Due 2024

On September 13, 2016, Antero Midstream Partners and its wholly owned subsidiary, Finance Corp (together with Antero Midstream Partners, the “Issuers”), issued $650 million in aggregate principal amount of 5.375% senior notes due September 15, 2024 (the “2024 Notes”) at par. The 2024 Notes were recorded at their fair value of $652.6 million as of March 12, 2019, and the related premium of $2.6 million was amortized into interest expense over the life of the 2024 Notes. The Issuers redeemed all $650 million of the 2024 Notes at 102.688% of par on June 8, 2021, and recognized a loss of $21 million on the early extinguishment of debt during the second quarter of 2021, which includes the write-off of all unamortized debt premium and issuance costs. Interest on the 2024 Notes was payable on March 15 and September 15 of each year.

(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 Corporation, 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

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

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% currently to 100.00% on or after March 1, 2025.  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 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)

5.375% Senior Notes Due 2029

On June 8, 2021, the Issuers issued $750 million in aggregate principal amount of 5.375% senior notes due June 15, 2029 (the “2029 Notes”) at par. The 2029 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2029 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 2029 Notes is payable on June 15 and December 15 of each year. Antero Midstream Partners may redeem all or part of the 2029 Notes at any time on or after June 15, 2024 at redemption prices ranging from 102.688% on or after June 15, 2024 to 100.00% on or after June 15, 2026. In addition, prior to June 15, 2024, Antero Midstream Partners may redeem up to 35% of the aggregate principal amount of the 2029 Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 105.375% of the principal amount of the 2029 Notes, plus accrued and unpaid interest. At any time prior to June 15, 2024, Antero Midstream Partners may also redeem the 2029 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2029 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 2029 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2029 Notes at a price equal to 101% of the principal amount of the 2029 Notes, plus accrued and unpaid interest.

(g)

Senior Notes Guarantors

The Company and each of the Company’s wholly owned subsidiaries (except for the Issuers) has fully and unconditionally guaranteed the 2024 Notes, 2026 Notes, 2027 Notes, 2028 Notes and 2029 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

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

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, 2021 and 2022, all of the Company’s assets and operations are attributable to the Issuers and its guarantors.

(8) Accrued Liabilities

Accrued liabilities consisted of the following items:

(Unaudited)

December 31,

March 31,

(in thousands)

    

2021

    

2022

 

Capital expenditures

$

24,900

39,554

Operating expenses

10,417

9,278

Interest expense

36,794

38,986

Ad valorem taxes

5,400

2,520

Other

3,327

6,684

Total accrued liabilities

$

80,838

97,022

(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.

AR LTIP

Equity-based compensation expense allocated to Antero Midstream from Antero Resources was $1.1 million and $0.3 million for the three months ended March 31, 2021 and 2022, respectively, which includes expense related to the Converted AM RSU Awards (as defined below). 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 $0.3 million as of March 31, 2022, which includes the Converted AM RSU Awards (as defined below). 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 to it for awards issued under the AR LTIP.

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, 2022, a total of 10,158,912 shares were available for future grant under the AM LTIP.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

The Company’s equity-based compensation expense, by type of award, is as follows:

Three Months Ended March 31,

(in thousands)

2021

2022

Restricted stock units (1)

$

2,778

2,488

Performance share units (1)

1,007

117

Equity awards issued to directors

227

227

Total expense

$

4,012

2,832

(1)Amounts include equity-based compensation expense allocated to the Company by Antero Resources.

(b)

Restricted Stock Unit Awards

As of March 19, 2019, each of the unvested outstanding phantom units granted under the Antero Midstream Partners Long Term Incentive Plan was assumed by the Company and converted into 1.8926 RSUs under the AM LTIP representing a right to receive shares of the Company’s common stock for each converted phantom unit (all such RSUs, the “Converted AM RSU Awards”). The Converted AM RSU Awards are accounted for as if they are distributed by Antero Midstream Partners to Antero Resources. Therefore, the expense related to the Converted AM RSU Awards is subject to allocation by Antero Resources.

A summary of the RSU awards activity, which includes the Converted AM RSU Awards, is as follows:

Weighted Average

Number

Grant Date

    

of Units

    

Fair Value

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

3,573,377

$

8.11

Granted

Vested

(297,353)

7.43

Forfeited

Total AM LTIP RSUs awarded and unvested—March 31, 2022

3,276,024

$

8.18

As of March 31, 2022, unamortized expense of $18.6 million related to the unvested RSUs, which includes $0.1 million related to the Converted AM RSU Awards, is expected to be recognized over a weighted average period of approximately 2.5 years. The Company’s proportionate share of the Converted AM RSU Awards will be allocated to it as it is recognized.

(c)

Performance Share Unit Awards

As of March 31, 2022, there was $0.3 million of unamortized equity-based compensation expense related to unvested PSUs that will be recorded during the second quarter of 2022.

In 2019, the Company granted performance share units (“PSUs”) to certain of its employees and executive officers, a portion of which vest based on the Company’s actual return on invested capital (“ROIC”) (as defined in the award agreement) over a three-year period as compared to a targeted ROIC (“ROIC PSUs”). The number of shares of common stock that could be earned with respect to the ROIC PSUs ranged from zero to 200% of the target number of ROIC PSUs originally granted. In April 2022, the performance condition for the ROIC PSUs was met at 200% of target.

(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 December 31, 2021 and March 31, 2022, the Company has recorded $1 million and $0.5 million, respectively, in other liabilities in the condensed consolidated balance sheets related to unvested cash awards.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(10) Cash Dividends

The Company paid cash dividends for the quarter indicated as follows (in thousands, except per share data):

Dividends

Period

    

Record Date

    

Dividend Date

    

Dividends

    

per Share

Q4 2020

February 3, 2021

February 11, 2021

$

147,194

$

0.3075

*

February 16, 2021

February 16, 2021

138

*

Q1 2021

April 28, 2021

May 12, 2021

108,799

0.2250

*

May 17, 2021

May 17, 2021

137

*

Q2 2021

July 28, 2021

August 11, 2021

107,719

0.2250

*

August 16, 2021

August 16, 2021

138

*

Q3 2021

October 27, 2021

November 10, 2021

107,459

0.2250

*

November 15, 2021

November 15, 2021

137

*

Total 2021

$

471,721

Q4 2021

January 26, 2022

February 9, 2022

$

108,149

$

0.2250

*

February 14, 2022

February 14, 2022

138

*

Total 2022

$

108,287