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Antero Midstream & Antero Midstream Partners Close Deal

Zacks Equity Research

The structural simplification deal between Antero Midstream GP LP AMGP and Antero Midstream Partners LP AM was recently concluded with the creation of a corporation, which can create financial transparency.

The cash-and-stock transaction materialized within the scheduled time. Per the deal, Antero Midstream bought all the outstanding units of Antero Midstream Partners, including those owned by Antero Resources Corporation AR. The new entity is named Antero Midstream Corporation and starts trading on the NYSE on Mar 13, 2018, under the ticker AM.

Per the deal, Antero Resources received $297 million in cash and 158.4 million shares of the new entity. The share amount received by Antero Resources represents 31% current ownership in the new entity. The new entity now owns, operates and develops midstream gathering, compression, processing and fractionation properties. These assets are located in Ohio and West Virginia. Moreover, the entity owns integrated water assets, which primarily provide services to Antero Resources' properties.


Notably, during the 2011-2014 time period, numerous energy companies created master limited partnerships (MLPs) to gain more profit amid the then business environment. Given the current commodity price environment, the companies are either going back to traditional corporate structure or bringing the MLPs back to their businesses, which they once formed. This recent move by Antero Midstream Partners and Antero Midstream depicts a similar story. The new entity can now have a place in retirement accounts of investors (IRAs), wherein current MLPs cannot go.

The move, which was announced on Oct 9, 2018, is expected to enable Antero Midstream Corporation save $375 million from tax payments over the 2019-2022 period. The new entity is expected not to pay any tax till 2024. Additionally, Antero Midstream Corporation’s tax shield is estimated to provide it with tax savings of $800 million.

Separately, Antero Resources announced that it expects its capital budget for 2019 in the range of $1,375-$1,550 million. Net production in 2019 is expected in the range of 3,150-3,250 million cubic feet equivalent per day.

Price Performance

Antero Midstream has lost 27.2% in the past year against 1.2% collective gain of the industry it belongs to.

Zacks Rank and Stock to Consider

Currently, Antero Midstream has a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for a better-ranked stock as given below:

Brentwood, TN-based Delek Logistics Partners, LP DKL is a midstream energy firm. Its bottom line in 2019 is expected to improve 20.4% year over year. The stock currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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ANTERO MIDSTRM (AM) : Free Stock Analysis Report
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