Antero Resources Corp. (AR) plans to drop down its integrated water business in Ohio and West Virginia to its midstream master limited partnership for $1.05 billion in cash, debt and equity, it said Friday.
The deal is expected to close on Wednesday. Antero Midstream Partners LP (AM) would receive the producer's fresh water delivery business, an exclusive right to provide fresh water for AR's completion operations in both states and the $275 million, 60,000 barrels/day wastewater treatment complex that AR plans to build in Doddridge County, WV (see Shale Daily, Aug. 19).
AM would pay AR a cash distribution of $552 million. It has also priced a private placement of 12.9 million common units that's expected to raise another $243 million for payment to AR along with the issuance of nearly 11 million common units to AR representing limited partner interests.
The deal also includes two earn-out payments to AR of $125 million each at year-end 2019 and 2020 if AM hits certain fresh water delivery targets. After the deal is completed, AR said its liquidity would be boosted to $4.3 billion from the $3.5 billion it had at the end of the second quarter.
The fresh water delivery business includes two independent systems that deliver water from the Ohio River and other regional water sources for Marcellus and Utica shale completions in both states. The systems consist of 150 miles of underground pipelines; 80 miles of surface water pipelines; 35 fresh water impoundments with storage capacity of more than five million barrels, and 15,000 hp of water pump capacity. AR said the systems have helped with more than 300 well completions and eliminated an estimated 400,000 truck deliveries since they were completed.
AM would also acquire a state-of-the-art wastewater treatment facility that AR plans to have operational by 2017. AR would pay a fixed fee of $4/barrel of wastewater to use the facility under a 20-year agreement. Over the same time period, the producer would also pay a fixed fee of $3.69/barrel of fresh water delivered in West Virginia and a fee of $3.64/barrel for fresh water delivered in Ohio.