Good day, and welcome to the Antero Midstream Partners LP Second Quarter 2018 Earnings Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. And with that, I’d like to turn the conference over to Mr. Michael Kennedy, Senior Vice President and Chief Financial Officer. Please go ahead.

Thank you for joining us for Antero Midstream’s second quarter 2018 investor conference call. We’ll spend a few minutes going through the financial and operating highlights, and then we’ll open it up for Q&A. I would also like to direct you to the home page 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. 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. Today’s call may also contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. Before I turn it over to Paul, I also quickly want to provide a brief update on the review of potential measures to enhance Antero’s valuation. As we have mentioned, a special committee of independent directors of AR’s board, in conjunction with legal and financial advisers, is conducting this review and working with the special committees of Antero Midstream and Antero Midstream GP’s board and their advisers. The special committees are exploring the full range of options to create long-term value for the stakeholders of all three entities, which is a complex process and remains ongoing. While substantial progress has been made by the special committees, as we stated previously, there is no definitive timetable for completion of this evaluation, and there can be no assurances that any initiatives will be announced or completed in the future as a result of this review. We hope to be in a position to give you an update before the end of the third quarter. As you can understand, we will not be able to address any questions related to this review or discuss it further during today’s call. 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 the discussion on the operational improvements at AR and project updates at AM. Mike will then walk through second quarter 2018 results and outlook for the remainder of the year. I’ll begin my comments covering AR highlights on Slide number 3, titled AR’s Consistency and Leadership in EBITDAX margin. During the second quarter, Antero Resources reported a record 2.5 Bcf equivalent per day of production, a 15% increase over the prior year quarter. Additionally, AR realized a natural gas price of $2.83 per Mcf before hedges, which was a premium to average NYMEX price during the quarter due to our industry-leading firm transportation portfolio. This marks the 16th consecutive quarter that AR has delivered pre-hedged natural gas realizations at a premium to Henry Hub. Including liquids production and hedging, AR realized a natural gas equivalent price of $3.77 per Mcf equivalent. AR not only generates the highest price realizations in Appalachia, but more importantly, has been a consistent leader in EBITDAX margins. As illustrated on the slide, AR’s first half 2018 stand-alone EBITDAX margin was $1.86 per Mcf equivalent. This was again near the top of the peer group and is trending to be the sixth consecutive year in which AR realizes the highest EBITDAX margin in Appalachia. This outperformance and consistency is a direct result of AR’s industry-leading liquids exposure, firm transportation portfolio to attractive markets, hedge portfolio and integrated midstream business. In addition to the financial and production records AR achieved during the quarter, AR had significant operational achievements, which I’ll highlight on Slide number 4, titled Drilling and Completion Efficiencies. Starting on the top left portion of the slide, AR held its Marcellus average drilling days…

Thank you, Paul. I’ll first touch on the distributions for AM and AMGP for the second quarter, beginning on Slide number 7, titled AM Track Record of Delivering Per Unit Growth. We recently announced an AM distribution of $0.415 per unit, a 30% increase year-over-year and a 6% increase sequentially. Additionally, AMGP announced a distribution of $0.125 per share, a 165% increase compared to the prior year full quarter and a 16% increase sequentially. The second quarter distribution at AM was the 14th consecutive distribution increase since its IPO, all of which have represented growth of 28% to 30% on an annualized basis since 2014, which is an incredible achievement. AM’s DCF coverage ratio has averaged 1.45 times since the IPO, well in excess of the IPO DCF coverage target of 1.15 times. The AMGP distribution was the fourth consecutive distribution increase since its IPO in May of 2017. Now let’s move on to second quarter operational results, beginning with Slide number 8, titled High Growth Year-Over-Year Midstream Throughput. All of our gathering, compression, fresh water delivery, processing and fractionation volumes represented record highs for AM during the second quarter of 2018. Starting in the top left portion of the page. Low-pressure gathering volumes were 2 Bcf per day in the second quarter, which represents an 18% increase from the prior year quarter. Compression volumes during the quarter averaged 1.6 Bcf per day, a 31% increase compared to the prior year quarter. High-pressure gathering volumes were 1.9 Bcf per day, an 11% increase over the prior year quarter. Joint venture gross processing volumes were 571 million per day during the second quarter, a 164% increase over the prior year quarter. Joint venture gross fractionation volumes were 10,000 barrels per day, a 148% increase over the prior year quarter. Fresh water…

[Operator Instructions] And our first question today comes from Jeremy Tonet with JPMorgan.

Good afternoon, guys. This is Rahul on for Jeremy. I just have a couple of quick questions. First off, thinking about AM’s guide – outlook for 2018 on the bottom half of the range. Are the curtailments noted at AR also included in this guidance revision? And if you can any provide any color there.

Yes, they are included. We always have a healthy risking of the throughput volumes, and those have been captured in that EBITDA guidance.

Got you. That’s helpful. And then any thoughts you could share with us on the ramp for Sherwood 10 and 11 for the remainder of the year? I mean, are those plants going to fill up immediately as they come? Or – just curious, if adjustment dynamic is still in play here.

Yes. Sherwood 10 is in the latter part of the third quarter, and that will be filled upon the completion of that plant. And Sherwood 11 is the latter part of the fourth quarter, and that will be filled as well.

Got you. And then with AR’s focus shifting to the liquids side of the Marcellus, is there any potential to accelerate the schedule for the newbuild Smithburg site? Any color you can share with us there?

I didn’t quite...

Yes, could you repeat that question?

Yes. With Antero’s focus shifting to the liquids side of Marcellus, I’m just curious if there is any potential for accelerating the schedule for the newbuild site, the Smithburg Processing Site.

Yes. No, the Smithburg is under – we’ve started civil construction in the third quarter, but there is no ability to accelerate from the already scheduled in-service date.

Got you. And then one last one. On the fresh water side, this quarter came in quite strong as well. Just curious on the cadence for the back half of the year given the run rate seems to track well above the guided range for the wells serviced.

Yes. We serviced, from a waters perspective, 94 wells in the first half of 2018. Our guidance for the year was 150 to 160 wells serviced. So at the midpoint, you have approximately 60 wells left in the second half.

Got you. That’s helpful. Thanks, guys. That’s it for me.

Thank you.

Next question comes from Barrett Blaschke with MUFG Securities. Please go ahead.

Hi, guys. Can you give us any color on how much of Smithburg is sort of committed to go forward at this point? I know there’s capacity to 1.2 billion, but sort of where – what does it look like in terms of what’s – where’s the demand is falling, I guess, at this point?

Well, we have the – we certainly have the resource to fill up those six plants. And running the business, you sort of commit to them so that there’s plenty of time to get the plants built out. But there’s no need to commit to plants two, three years out, but we certainly have the resources to support filling all six of those plants.

Okay. And then on the completion crew, kind of the expected reduction there, is that related to curtailments?

No, it’s related to the fact that, big picture, we have so many stages to complete across all our wells. And so if the crews are accomplishing more in a shorter period of time, then we don’t need quite as many crews. And so that’s why we’re ahead of schedule on our completions, because we’re getting more stages per day done. And so that’s the significance of it. It’s not related to the curtailments, which those curtailments, we expect to be – to not exist by the beginning of the fourth quarter. So that’s a temporary situation. But crews, it’s really just the increased efficiency on stages per day.

Which really enabled us to front-end load the budget, essentially at the bottom line, but we’re not increasing the budget. If we kept those crews running and kept rigs on, we would have to increase the budget above the $1.3 billion drill and complete budget on a consolidated basis.

Thank you.

The next question is from Ethan Bellamy with Baird. Please go ahead.

With respect to ME2, how would potential further delays there impact your plans, if at all? And are you still interested in a potential stake in that pipeline?

Yes, Ethan. We don’t see any impact if this was delayed – if ME2 was delayed even through the winter. The impact would occur next spring because, at that point, with the growth in volumes – in liquids volumes, we need more rail unloading capacity. So that’s really kind of the time stop that we’re watching. We can do without ME2 through the winter due to strong local Northeast liquids pricing. But on the other hand, we do have quite a bit of hope in this workaround that Energy Transfer is working on right now, which would be to repurpose the product pipeline. And that’s only about 5 miles of ME2 that they need to work around. Otherwise, they’d use the rest of ME2 which is already in the ground and welded. And that’s something we’re – they’ve said that they thought that they could actually get that online here by the end of the third quarter, I believe. So we’re optimistic that we actually can move pretty much all of our committed volumes on ME2 center in the year rather than later. But you’re right, fourth quarter is kind of the target now given the delays that they’ve had certainly on that last few miles into Philadelphia and Marcus Hook. And yes, we continue to have an interest in the facility from a midstream investment standpoint. Nothing to report there. But we continue to have an interest there, and I think they continue to have an interest in a strategic partner there.

Thank you.

[Operator Instructions] Our next question comes from Ned Baramov with Wells Fargo. Please go ahead.

Hi, thanks for taking the question. Maybe can you provide your thoughts on midstream consolidation in the Northeast? I know EGT is looking to spin off its midstream business into a stand-alone company. Dominion is looking to sell their ownership interest in Blue Racer. AR has some acreage that is dedicated to another midstream company. I guess, would you be a buyer or a seller of midstream assets in here today?

Well, I don’t think we’re a seller. But of course, everything is always for sale at a price, but we’re not a seller from a strategic standpoint. And we do watch everything that moves. Our mantra is we’d be interested in assets where our molecules really touch those assets in a significant way. So some of the things that you mentioned are sort of outside of that, but we are following all the developments in the basin for sure. We haven’t traditionally grown through acquisitions in a big way on the midstream side. But that could change over time. We certainly look at that and compare it to what we have from a development standpoint, cost of capital and balance sheet and all that, but it’s something we keep an eye on.

All right. Thanks for that. And I guess, could you just provide an update on the total CapEx spending on the Clearwater facility, including the recent investments to improve its operations?

Yes. I think the total – the recent one is about $10 million during this past quarter, but I think it’s up to around $375 million.

Got it. And then last question for me on – going back to the Smithburg plant. What is the timing schedule of those? Would you say that it is possible that these are all constructed by the end of 2020?

Well, the site will be constructed in Cal 20, and the first plant would be there in Cal 20. But you tend to order these plants and build them every six months or so. And so I can’t say whether a second one will be ready in Cal 20, but at least the first one plus the site itself in Cal 20.

That’s helpful. Thank you. That’s all I had.

The next question comes from Holly Stewart with Scotia Howard. Please go ahead.

Good day, gentlemen. Maybe the first for either Mike or Glen. It looks like you’re about, I guess, half utilized or so on the revolver, but leverage is certainly within the target. How are you thinking about kind of longer-term financing? And then maybe remind me, is the ATM still in place? And how do you think about using that?

Yes. I’ll first address the ATM. The ATM is in place, but we have not used it during 2018. On the actual term out of the credit facility, we generally, when it does reach about 50% utilized, look at the senior note markets and see if it’s attractive and be opportunistic around terming that out. You did mention – our leverage is very attractive at 2.3 times, and that does not escalate. That actually stays in the low 2s throughout the next couple of years. And with the size and scale, we are on a trajectory to investment grade. So we definitely want to be opportunistic around terming that $750 million out, but it is something we monitor.

How is that market right now, Mike?

It’s fairly healthy, I would say. It’s not where it was this last year, but it’s still somewhat attractive right now.

Okay, great. And then maybe one final one. Glen, you said that your interest in ME2 remains. Have there been any cost overruns on that project? I’m just assuming the pushback of timing would mean yes. And then, I guess, how would that eat into kind of overall returns on it?

Well, we don’t know specifically, Holly. But I think that any time a project runs a year or two late, you generally have higher costs than you expected going in. So it’s likely, but we don’t have any specifics on that. You have to ask Energy Transfer about that.

Sure. Okay, great. Thanks, guys.

At this time, this will conclude today’s question-and-answer session. I’d like to turn the conference back over to management 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.

The conference has now concluded. Thank you very much for attending today’s presentation. You may now disconnect.