AMPG is a limited partnership (although, it will be treated as a corporation for federal income tax purposes) that owns the general partner of Antero Midstream Partners (AM) as well as all the incentive distribution rights (IDR) in AM. Antero Midstream is an MLP 59% owned by Antero Resources Corporation (AR) that was formed to own, operate and develop midstream energy infrastructure primarily to service Antero Resources' increasing production and completion activity in the Appalachian Basin's Marcellus Shale and Utica Shale located in West Virginia and Ohio.
In terms of how AMPG generates cash flow, the bottom line is, it receives cash distributions from Antero Midstream on the IDRs noted above. It expects these cash distributions to increase substantially over time as Antero Midstream executes its business strategy.
Due to its link to Antero Resources, AMPG's growth in distributions ultimately hinges on AR's success. With that in mind, here is some more background on AR. The company is the second largest natural gas and the largest NGL producer in Appalachia and the eighth largest natural gas producer in North America based on 4Q16 production volumes. It holds over 616,000 net acres as of December 31, 2016 in the prolific southwestern core of the Marcellus Shale in northwest West Virginia and southwestern Pennsylvania and the core of the Utica Shale in southern Ohio.
Circling back to the aforementioned IDRs, the company believes that Antero Midstream will substantially increase its cash distributions on the IDRs due to the expanding production at AR. To simplify, as AR's production increases, the higher the demand for AM's midstream assets, driving higher cash flow to AM. In turn, some of that cash flow funnels to AMPG in the form of these incentive distribution rights.
Financials & Distribution
Taking a look at its financials, net income and comprehensive income increased from about $800K to $9.7 million from FY15 to FY16. The increase was primarily due to an increase in equity in earnings of Antero Midstream, partially offset by an increase in income tax expense and general and administration expense for the year ended December 31, 2016.
Net cash provided by operating activities spiked to $9.5 million from $300K in the year ago period. The increase was mainly due to higher IDR distributions received from Antero Midstream.
Distribution: AMPG will pay a prorated cash distribution for the first quarter that it is publicly traded. This cash distribution will be paid for the period beginning on the closing date of this offering and ending on the last day of that fiscal quarter. It expects to pay this cash distribution in August 2017. The company also expects its quarterly cash distributions for the twelve-month period ending June 30, 2018 to total $0.32 per common share.