Midstream madness: Antero Midstream Partners LP sets terms for $750 million IPO

Antero Midstream Partners LP, which owns Antero Resources' midstream energy assets in the Marcellus and Utica Shales, announced terms for its IPO on Monday. The Denver, CO-based company plans to raise $750 million by offering 37.5 million shares at a price range of $19 to $21. At the midpoint of the proposed range, Antero Midstream Partners LP would command a fully diluted market value of $3.0 billion.

Antero Midstream, which had been on file for a $500 million IPO since February, may have been spurred into action by the success of recent IPO Dominion Midstream Partners LP (DM; up 33%) and the decision of Shell Midstream Partners LP (SHLX) to price its $750 million IPO this week.

Business
Antero Midstream operates its pipelines and compressor stations out of the Marcellus Shale and Utica Shale. It has 20-year fixed-fee contracts covering substantially all of Antero Resources' (its only customer) current and future acreage for gathering and compression services. The company generates revenue from low pressure gathering (70% of revenue in the 1H14), high pressure gathering (22%), compression (4%) and, starting in April, condensate gathering (4%). Antero Midstream originally planned to own Antero's entire fresh water distribution systems business as well, but in August disclosed that it has the option to purchase the business at fair value. Antero will have a 75% post-IPO stake in its spinoff, while PE firm Warburg Pincus owns approximately one third of the parent company's equity.

Financials
For the six months ended June 30, 2014, pro forma total revenue grew from $5 million to $29 million. The increase was primarily due to higher throughput volume of natural gas gathering with the addition of 80 new wells and 5 new high-pressure gathering lines. In addition, average gathering fee for its low pressure lines increased from $0.30 per Mcf to $0.31. Adjusted EBITDA rose 51% to $20 million. The company forecasts it will produce $119 million in cash available to distribute for the twelve months ended September 30, 2015, an excess of $16 million required to make its planned annualized distribution of $0.68 per unit.

Antero Midstream Partners LP, which was founded in 2013 and booked $134 million in sales for the 12 months ended June 30, 2014, plans to list on the NYSE under the symbol AM. Barclays, Citi, Wells Fargo Securities, Credit Suisse, J.P. Morgan and Morgan Stanley are the joint bookrunners on the deal. It is expected to price during the week of November 3, 2014.