Good day, everyone, and welcome to the Antero Midstream Partners LP Third Quarter 2017 Earnings Conference Call. [Operator Instructions]. Please note that today's event is being recorded. I would now like to turn the conference over to Michael Kennedy, CFO of Antero Midstream. Please go ahead.

Thank you for joining us for Antero Midstream's Third Quarter 2017 Investor Conference Call. We'll spend a few minutes going through the financial and operational highlights, and then we'll open it up for Q&A. I would also like to direct you to the homepage of our website at www.anteromidstream.com or www.anteromidstreamgp.com, where we have provided a separate earnings call presentation that will be reviewed during today's call. We've also updated our partnership website presentation, so I would encourage you to review that for additional details. Before we start our comments, I would first like to remind you that during this call, Antero management will make forward-looking statements. Such statements are based on our current judgments regarding factors that will impact the future performance of Antero Resources, Antero Midstream and AMGP and are subject to a number of risks and uncertainties, many of which are beyond Antero's control. Actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements. Joining me on the call today are Paul Rady, Chairman and CEO of Antero Resources and Antero Midstream; and Glen Warren, President and CFO of Antero Resources and President of Antero Midstream. I will now turn the call over to Paul.

Thanks, Mike, and thank you to everyone for listening in to the call today. I will begin my comments today with a discussion on AM's long-term outlook and our unique positioning within the midstream space, and then finish with a discussion on the improving capital efficiencies at both AR and AM. Mike will then walk through second quarter results and the de-levering program announced at AR. First and foremost, our peer-leading 28% to 30% distribution growth target at AM through 2020, with DCF coverage above 1.25x and a stable leverage profile in the low 2x range, remains on track. There are a few reasons why AM is in a unique position to provide these long-term targets and has a proven track record of delivering results. First, AM is still early in its growth lifecycle, developing midstream infrastructure, as AR has developed only 20% of its total current 3P locations to date. Additionally, AR's 20% CAGR for 2017 through 2020 and its long-term development plan of over 53 Tcf equivalent of 3P reserves all require gathering, compression and water services to support it, and most requiring processing and fractionation. As we think about this development plan, AM is one of the few MLPs that has such strong visibility into its primary customer, in our case, Antero Resources. Said another way, we know the true intentions of the producer and know exactly where the growth will come from. Our organic growth strategy does not depend on dropdowns, competitive acquisitions or third-party business. Instead, we are investing non-speculative and just-in-time capital. This investment philosophy is what truly drives the attractive rates of return at Antero Midstream and allows us to target top-tier growth while investing capital within EBITDA for the 2018 through 2020 period. Lastly, the strength of Antero Midstream's balance sheet allows…

Thank you, Paul. I'll first touch on the distribution for AM and AMGP for the third quarter. We recently announced an AM distribution of $0.34 per unit, a 28% increase year-over-year and an AMGP distribution of $0.059 per share. The third quarter distribution at AM was the 11th consecutive distribution increase since its IPO, and the AMGP distribution was the first full quarter distribution since its IPO in early May of this year. Importantly, the distributions keep us on track to achieving our previously provided distribution growth and DCF coverage targets at both entities. Now let's move to second quarter results, beginning with Slide #5, titled High Growth Year-over-year Midstream Throughput. Starting at the top left portion of the page. Low-pressure gathering volumes were 1.6 Bcf per day in the second quarter, which represents an 11% increase from the prior year quarter. Low-pressure volumes were negatively impacted by 90 million per day or approximately $3 million from a one-time prior period adjustment for fees charged on a historical pad that was physically in AM's area of dedication, both flowed to the third-party area of dedication. Additionally, as part of Antero's 2017 advanced completions pilot program, Antero tested a 2,500 pound per foot completion on a dock pad and the lean gas regime in a third-party area of dedication that utilize the AM's freshwater delivery system in the second quarter but flowed gas into the third-party area of dedication during the third quarter. Antero's future development program through 2020 does not currently included additional development outside of AM's footprint and is focused on highly liquids-rich locations. Compression volumes during the quarter averaged 1.2 Bcf per day, a 55% increase compared to the prior year quarter. During the quarter, we placed in service 160 million per day compressor station into Marcellus, bringing…

[Operator Instructions]. And our first questioner today will be Jeremy Tonet with JPMorgan.

Just want to follow up with regards to AR changing the guidance, bringing down growth a little bit. And the readthrough for AM, what it seems like from what you're saying, I gather, correct me if I'm wrong, is the increase in barrels per foot in longer laterals really just kind of offset the decrease in well completions through 2020 and doesn't have a material impact on AM guidance. Is that a fair way to think about things? Or are there any other details you can provide?

Yes, that's right, Jeremy. When you look at the well completions, they did come down from the previous schedule, but the lateral feed increased as well as assuming these will all be advanced completions in the 2025 hundred pound range. So, your average barrel per foot is between the 42, which is the 2,000 barrels per foot or 2,000 pounds per foot or 48 barrels at 2,500 pounds per foot. So, when you do all the math on that, it comes out to very similar barrels per day used in 2018 through 2020.

Great. And then it seems like there's - there could be some momentum here with tax reform. I'm just wondering if you can refresh us on what that could mean for AMGP if some of - the current proposal out there moves forward?

Yes. The AMGP, the current estimates still do assume that 38% tax rate, so that has not incorporated any sort of movements on that. We've been seeing some talk around that 20%, so that obviously will be extremely beneficial to the AMGP distributions. But we haven't incorporated anything into that yet.

Roughly a 10-point change in the tax rate. So, if you drop from 35 to 25, increases the cash flow into AMGP by about 16% of the distributable cash flow as far as that's concerned.

And the next questioner today will be Darren Horowitz with Raymond James.

As you guys think about completions and servicing more completions on the waterside for AM, is the thought process still to get about 190 wells serviced or completed in 2018? And then maybe that builds to closer to 220 plus or minus in 2019 just based on what AR's going to do to the drill bit?

No. We have that new schedule out there. I don't know if you saw that, Darren, in AR. It's 150 completions in '18, 170 in '19 and then I think 150 again in 2020. Those are what are actually tied to sales. That's about where we'll be completing from a water perspective in '18 and '19. We actually complete more than that using our water in 2020. It's just they're not tied to sales yet until the beginning of '21. So that's kind of a new account. We also have a new lateral feet on that slide, too, which - with the increasing lateral feet and we now assume a 2,000 pounds per foot completion or greater so you have more water being used. So, all in combination, it's a similar amount of water usage over that time. It's just a lower well count.

Okay. And then from a low-compression volume perspective, and I appreciate the color as to what caused some of the variance in the third quarter, what's the thought process there, Mike, as that corresponds over the same kind of 18 to 24-month time frame?

Yes. There shouldn't be any more of that. That 90 million a day, as I mentioned, was a onetime catch-up. So that item won't occur anymore. And also, the 8 wells on that pad, that's our only development outside of AM over this time frame. So, a normal relationship between low pressure and high pressure should return when we do have these downstream issues, we do use that bobcat connector from Antero Midstream, which is downstream from Sherwood. And that will result in times like now, whether it will be up 230 million a day of high pressure volumes in excess of low pressure but that should be the normal relationship. So, in times where it's unconstrained, low pressure is a bit higher by about 4% than high pressure. And then in constrained times, like now, high pressure will be about 230 million a day higher than low pressure. But it should track our normal production growth from AR going forward.

Okay. I appreciate the color there especially given that the fees on low pressure is significantly higher than high pressure tends to cause a bit of turbulence in the model from a forecasting perspective.

And the next questioner will be with Christopher Tillett with Barclays.

I was just wondering if you could help us reconcile your outlook on completions in the fourth quarter. I mean, it looks like Antero's guiding about 135 for the year. I'm counting about 110 to date, and that - so that would imply roughly, I would say, equal to 3Q to maybe even down a few completions but it sounds like you guys are expecting a few more. So, I was just...

Yes. We're in the high 30s that's because the 135 number you're referencing is how many wells we're actually tying in. When we speak about water wells, you're actually servicing them in fourth quarter, completing them with the water, but they're actually not tied into the sales until early 2018. So, there's a bit of a reconciling item there. What you referenced, 110 is correct. We're in the high 30s to 40s, as I mentioned, so that would result in water wells being serviced by AM in the high 140s to 150 wells.

Okay. Okay, that's helpful. And then also, in the segment - in the water segment for this quarter, it looked like your operating expenses ticked up pretty materially. So, wastewater volumes were up a little bit but not quite on a one for one basis. And so, I was just curious if there was anything specific going on there.

Yes, there's two things there. As you recall, it was the record water completions in the second quarter at 160,000 barrels of water per day. So, you did have an increase in the amount of water handled because of that in the third quarter. The other reason was the commissioning of the advanced wastewater treatment facility, the Antero Clearwater Facility, during the commissioning phase we are testing. And so, we are trucking in additional truck - handling additional water because of that to commission that plant. So, in all, that resulted in an increase in our direct operating expenses related to the Water Handling to $44 million, up from $35 million in the second quarter. But as you know, that's cost-plus 3% contract, so it had a like EBITDA revenue item. So, the revenues associated with that was $36 million in the second quarter, it increased to $45 million in the third quarter. So, it is a cost-plus contract, so really no impact on the EBITDA for the quarter.

And the next question will be from Holly Stewart with Scotia Howard Weil.

Just a couple of quick follow-ups. One, the first maybe more bigger picture, Slide 3, you talk about the capital inefficiencies at AR and how that would result in a more efficient capital investment at AM. I was kind of thinking through that $2.6 billion of capital over the next 5 years that you've laid out sort of implies, call it, $600 million a year going forward. How can we think about these capital efficiencies sort of impacting that kind of $600 million a year going forward in the future?

Well, those are actually our capital captured in that number. Obviously, we're factoring in the number of wells per pad and have a detailed plan on where AR is drilling. So that number, if you would have seen it last year, higher than that $2.6 billion, so it's already been captured in that. But the $600 million run rate you talked about, Holly, is accurate. That's about what the average for the business over the next couple of years.

Okay. Okay, just making sure I read that correct. And then maybe just 2 quick housekeeping ones. It looked like maintenance CapEx ticked down or trended down in the third quarter. Anything specific there to think through?

Well, it was still - it's similar based on the amount of high-pressure gathering and compression capital that we spent. There's a large part of that capital in the third quarter associated with the Clearwater Facility. The final build out, as we saw, I think, $33 million on that. So that obviously doesn't factor into the maintenance capital. But on the two items that does have maintenance capital, both freshwater and high pressure and compression, those 3, it was a similar percentage as quarters before.

Okay, great. And then just one final, another housekeeping. I didn't see the slide that breaks down the water usage for the quarter between Marcellus and Utica. Do you have those numbers on the barrels per foot?

No. But the barrels per foot in the Utica are generally around 36 barrels. It is lower there. We don't use quite as much water. And then in the Marcellus, it would have been more in the 44 barrels per foot usage.

And the next questioner will be Bernie Colson with Seaport.

Just a quick follow-up on the OpEx. So, looking at the - so it was $10 million higher quarter-over-quarter on the OpEx side. Revenues were down a little bit in the quarter. So, I was hoping if you could help kind of quantify would Water Handling and treating revenue been - had been similar to the first quarter if we didn't have that same uplifts in expense? I'm just looking at kind of volumes of the first quarter, kind of compare, about the same as they were this quarter. You've got $10 million more of revenue.

Yes. So, it's what I talked about. On the first part, the OpEx is up because of the Water Handling. And as I mentioned, that's a cost-plus 3%. So, at similar revenues to expenses. And the total water revenues, though, are down because we serviced only 32 wells in the third quarter and it's about $1 million per well. So, it was actually less activity in the third quarter than the first quarter and 12 wells less in the second quarter. So that's what really drove the revenue being that $10 million lower than the second quarter.

[Operator Instructions]. And the next questioner will be Jerren Holder with Goldman Sachs.

To a degree that Mariner East 2 gets delayed, let's say, hypothetically, into 2019, does that change the amount of completions you guys would do in 2018 to that 150 number or so?

Yes. So Jerren, you said into 2019?

Yes. Let's just say it gets delayed and, yes.

Yes. I don't think so. We've done the sensitivities through the end of '18 and there's not much change, staying local with our barrels versus exporting. But - so it depends on how deeply into '19 we're delayed. We think it'll be probably second quarter of - first or second quarter of 2018, but - so at least for the foreseeable 14 months or so, we see little impact. And I guess, I would say, winter of 2018, 2019, there, again, the differentials are pretty narrow in the Northeast, so keeping our product at home would not have a lot of financial impact.

Okay. And on equity, I recognize you guys don't need equity at AM, but you have the ATM program. Is there still more you guys expect to do on that? Or are you done?

No, we're not done, Jerren. We have done approximately $80 million of the $250 million facility, so there's about $170 million left. We weren't active on it this third quarter. But over the next 3 years, through 2020, we do assume we use that during that time period.

And this will conclude the question-and-answer session. I would like to turn the conference back over to Michael Kennedy for any closing remarks.

Thank you for joining us on our conference call today. If you have any further questions, please feel free to contact us. Thanks again.

And the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.