Fly News Breaks for November 6, 2019
Nov 6, 2019 | 20:19 EDT
Wells Fargo analyst Ned Baramov downgraded Antero Midstream (AM) to Market Perform from Outperform with a price target of $8, down from $10. The analyst cites the increased risk of a re-negotiation of midstream gathering rates, with its primary customer Antero Resources (AR) now looking at all contracts and operating expenses to improve its financial position. Baramov adds that Antero Resources remains under financial duress given low commodity prices and its high cost structure.
News For AM;AR From the Last 2 Days
Dec 9, 2019 | 12:40 EST
Ladenburg analyst Michael Schmitz reiterated a Buy rating on Antero Midstream, but lowered his price target to $8 from $10 after the company agreed to repurchase $100M of its shares from Antero Resources (AR), which Antero Midstream estimated "will result in $20M+ in total dividend savings in 2020." Additionally, Antero Midstream and Antero Resources agreed to a growth incentive fee program where "Antero Midstream will provide fee reductions to Antero Resources in 2020-2023, contingent upon Antero Resources achieving growth targets on low pressure gathering volumes."
Dec 9, 2019 | 07:43 EST
Antero Midstream (AM) announced that it has agreed to repurchase $100M of Antero Midstream shares from Antero Resources (AR). In addition, Antero Midstream and Antero Resources have agreed to a growth incentive fee program where Antero Midstream will provide a reduction in low pressure gathering fees for volumes gathered from January 1, 2020 through December 31, 2023 subject to achieving increasing volumetric targets. The growth incentive fee program aligns with Antero Resources' current 8%-10% compound annual net production growth plan in 2020 and 2021. The share repurchase and growth incentive fee reduction transactions have been negotiated and recommended by the Conflicts Committees of Antero Midstream and Antero Resources and approved by both boards. Due to additional optimization of the midstream infrastructure buildout, Antero Midstream is now targeting a 2020 capital program of approximately $300M-$325M. This represents a $75M-$100M, or 22% reduction, compared to the previous target of $375M- $425M. Antero Resources' previously announced preliminary 2020 target of 110 to 120 completions in 2020, with an average lateral length of 12,100 feet is unchanged. Both Antero Resources and Antero Midstream expect to finalize their respective capital budgets early in Q1 of 2020 following board approval. Formal guidance is expected to be released following board approval. Antero Midstream and Antero Resources have agreed to a growth incentive fee program where Antero Midstream will provide fee reductions to Antero Resources from January 1, 2020 through December 31, 2023, contingent upon Antero Resources achieving volumetric growth targets on low pressure gathering. Antero Midstream's compression, high pressure gathering, and fresh water delivery fees remain unchanged. In addition, Antero Midstream and Antero Resources agreed to extend the gathering and compression contract term for four additional years. The decision to provide a fee reduction on low pressure gathering services was driven by the strong rates of return on low pressure gathering projects. These returns have improved materially relative to expectations at the time the gathering and compression agreement was signed in 2014 due to more wells per pad, longer laterals and higher estimated ultimate recoveries per foot. In addition, Antero Midstream believes that the growth incentive fee program will drive continued throughput growth from Antero Resources supporting Antero Midstream's gathering, compression, processing, fractionation and fresh water delivery businesses. Antero Resources' plans to grow net production 8%-10% through 2021 in order to fill its premium firm transportation portfolio. The initial threshold approximates Antero Midstream's Q3 low pressure volumes. If actual low pressure volumes are below the lowest tier for the respective calendar years, Antero Resources will not receive a reduction in low pressure gathering fees.