Antero (NYSE:AM) reported Q4-16 DCF that was under the Q3-16 number. But that still provided great distribution coverage. The spreadsheet below shows the 2017 Antero provided EBITDA guidance. I used the run rate DCF/EBITDA ratio to produce my own DCF guidance. I used run rate 'unit count' growth (meaning it is still an educated guess) to then make a home made DCF/unit number - which is in line with some of the more bullish DCF projections from the brokerages. The credit metrics are declining from 'too good to imagine' to merely 'great'.
AM did not start to reporting with sufficient metric transparency until Q2-16. I could use the 2016 reports to generate 2015 numbers - but it will require Q1-17's release to have good Q1-16 numbers.
From the earnings release: 2016 "Adjusted EBITDA was $404 million, a 45% increase compared to the prior year. . . . . Distributable cash flow was $353 million, resulting in a DCF coverage ratio of 1.8x. . . . . Antero Midstream increased its 2017 capital budget from $525 million to $800 million. Additionally, Antero Midstream increased its 2017 Adjusted EBITDA guidance to $520 million to $560 million and reaffirmed its compound annual distribution growth target of 28% to 30% and increased its DCF coverage target to greater than 1.25x through 2020. Antero Midstream is targeting leverage in the low 2-times range over the corresponding period."
The "DCF coverage target to greater than 1.25x through 2020" implies at least double digit distribution growth until 2021. The 2016 guidance was overly conservative. The AM footprint is in the Marcellus - another growth story. This is a distribution growth story in which one can have some confidence. But still, one needs to never put all your eggs in one basket. Diversify when you buy high CAGR stocks. My current assessment is that AM is one of those growth eggs one should be holding. If I were not overweight in MLPs already, I would be buying AM - even at its 3.27% yield.
My earnings spreadsheet on AM:
Antero Midstream metrics
|GPs DFC dollars||7,557||4,807||2,731||969||295||000|
|Net DCF dollars||95,412||98,278||74,774||71,390||49,815||36,795|
|AM's 2016 guidance wa for $325-$350 in EBITDA and $275-$300 in DCF -- or approx (290 - 15)/176 = $1.56|
|AM's 2017 guidance is for $520-$560 in EBITDA and this implies (my numbers) $440-$480 in DCF -- or approx (460 - 52)/200 = $2.04 (my number)|
|R James DCF/unit||$0.56||$0.42||$0.38|
|Run Rate EBITDA||505,172||442,180||350,804||318,280|
|Long Term Debt||849,914||820,000||760,000||680,000||620,000||620,000||620,000||620,000|
|Long Term Debt/(RR)EBITDA||1.68x||1.85x||2.17x||2.14x|
|Long Term Debt/(NYSE:LTM)EBITDA||2.10x||2.27x||2.36x||2.47x|
|WFC Pro Forma Debt/EBITDA||2.2x||2.4x||2.3x|
|AM has $650 million in 5.375% senior notes due 2024 (rated B1 by Moody's, which is approx a BB S&P rating) plus a credit facility|
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.