Good day, everyone, and welcome to the Antero Midstream Partners LP Second Quarter 2016 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note today’s event is being recorded. At this time, I would like to turn the conference call over to Mr. Chad Green, Vice President of Finance. Sir, please go ahead.

Thank you. And thank you everyone for joining us on Antero Midstream's second Quarter 2016 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 home page of our website at www.anteromidstream.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 Midstream management will make forward-looking statements. Such statements are based on our current judgments regarding factors that will impact the future performance of Antero Midstream and its sponsor, Antero Resources, 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 today on the call today are Paul Rady, Chairman and CEO, of Antero Resource and Antero Midstream; Glen Warren, President and CFO of Antero Resources and President of Antero Midstream; and Mike Kennedy, CFO of Antero Midstream. I will now turn the call over to Mike.

Thanks, Chad, and thank you, everyone for listening into the call today. In my comments I'm going to highlight our second quarter results and the stonewall option exercise. Paul will round out our comments by providing a brief update on AR's operational improvements and its Marcellus core acreage acquisition. During our comments today will commonly reference AM and AR in order to more easily make the distinction between Antero Midstream and Antero Resources.. First and foremost there was another strong quarter for Antero Midstream both operationally and financially. AM announced the second quarter distribution of $0.25 per unit a 32% increase year-over-year and 6% increase sequentially. The distribution marks our sixth consecutive distribution increase since the IPO in November of 2014. As you can see on Slide number 2, entitled top-tier distribution growth and coverage AM continues to deliver top-tier distribution growth while maintaining outstanding DCF coverage of 1.7times during the quarter. Now let’s move on to our operating results during the second quarter. As a reminder, the results in year-over-year comparisons both include contribution from the Gathering and Compression and Water Handling and Treatment segments on a combined basis after successfully closing the water dropdown transaction at the end of the third quarter of last year. As highlighted on Slide number 3 of our earnings call presentation titled high growth midstream throughput, average daily low pressure gathering volumes were 1,353 million per day in the second quarter, which represents a 40% increase from the prior year, and a 4% increase sequentially. High pressure gathering volumes were 1,253 million per day, and 5% increase over the prior year and 3% increase sequentially. Compression volumes during the quarter averaged 658 million per day, a 45% increase compared to the prior year quarter and a 9% increase sequentially. Compression capacity was 80%…

Thanks Mike. Today I’ll discuss AR’s Marcellus core acreage acquisition and then finish with the significant operational improvements during the quarter. As you know AR entered into an agreement to acquire 66,500 net acres in the core of the Marcellus Shale during the second quarter over 95% of which will be dedicated to Antero Midstream for gathering, compression, processing and water services. Slide number 8 entitled Antero Resources, acquisition benefits AM provides detail on the acquisition and the significant growth opportunity for AM to build infrastructure throughout the acreage position in Tyler and Wetzel County’s. This results in an increase to AM’s identified investment opportunity set by over 15% to $3.2 billion. In addition to the attractive 4 to 7 times investment to EBITDA build out multiples, AM generates through supporting AR. This expanding footprint opens the door for additional third-party midstream opportunities for both the gathering and water businesses at AM. Directing you to Page 9 entitled leadership in Marcellus high graded core, I want to highlight the pro forma position of AR's acreage position in the Marcellus. We did an extensive data driven analysis looking at over 3,000 wells and have broken out the core of the Marcellus into 3 distinct high grade areas in West Virginia and Pennsylvania. Looking at the red box on the middle of the page, Antero has a dominant position in the high graded Southern Rich area which has exhibited 2.0 Bcf per 1,000 wellhead EUR’s on advanced completions. This Slide illustrates why Antero continues to move its development into Tyler and Wetzel County’s. Pro forma for the acquisition and Antero controls approximately 53% of the undeveloped high grade Southern Rich gas area which is almost entirely dedicated to Antero Midstream. The core consolidated acreage positions in the world class Marcellus Shale play…

[Operator Instructions] Our first question today comes from Vikram Bagree from Citi. Please go ahead with your question.

Good morning. As you mentioned in your prepared remarks AR has not abated its type curve for 2.0 Bcf per 1,000 foot. What does it mean for completions next year will AR look at hitting the targeted production levels are they look to reduce - I will spend next year. How should we think about completions in 2017?

Yes, certainly we keep an eye on lots of different factors, but no I don't think it means if you're getting it, you'll be spending more on wells with higher problem loading and higher water would you increase your budget to do. No I think you’ll probably mean you're getting better results from those wells so therefore you just drill fewer wells. So I think the dollar number we have in mind but AR is around $1.3 billion give or take a few percentage points with that kind of the budget that we have – that’s our budget this year and kind of the expected budget next year. So don't see that changing due to these well results. It's nice to get greater capital efficiency certainly and you should end up and better production and better margins overall and therefore lower leverage, but time will tell is still kind of early days for AR on the higher problem loading.

And then just as a follow-up water utilization is now up to 43 barrels per foot. Is that the new normal for water utilization going forward or should we be using 40 barrels per foot going forward?

It’s probably the new normal, I think our new design is going to be 5100 pounds and 43 but as Glen said time will tell and we are still tweaking things.

Just as my a final question operating expenses in gathering segment were down slightly although gathering volumes were up 4% this quarter. How should we think about operating expenses going forward as gathering volumes increase?

Yes. That's been a trend throughout Antero Midstream's life continued operating expense improvement. You know, our guidance was based on our 2015 run rate we've actually been able to improve on that as we realized efficiencies throughout the operations. So I would think that will continue to trend down. But right now our guidance remains the same.

Great. Thank you very much.

Thank you.

Our next question comes from Lane French from Baird. Please go ahead with your question.

Good morning. Your direct operating expenses in the water handling segment decreased by 15% or so from the first quarter to second quarter as revenues for the segment were just slightly down by 2%. Can you elaborate on what drove those operating cost efficiencies quarter-over-quarter? And then do you expect further operating cost efficiencies in this water segment to persist sequentially through the rest of 2016 here.

Yes. Our original guidance around the water is around about a $0.75 to a $1 of operating expense per barrel actually in the second quarter where we achieved $0.64. So we are below our original guidance such as continued operating efficiencies continued knowledge on how to best operate the system, decrease in the amount of consultants used to operate it. So we do see that continuing going forward and just lot of operating efficiencies around the water system.

Great, thank you.

Our next question comes from Richard Verdi from Ladenburg. Please go ahead with your question.

Hi, good morning and thank you for taking my call here. Just a few questions. So for the Stonewall Gathering pipeline there's the option to provide processing, fractionation, terminaling and storage to Antero Resources. Can you give us an update on where the company stands with possibly adding any of these services?

Yes. AM does have the opportunity to build processing, fractionation down the road. It's something that we certainly think about we've done in the past. Our team has built up the processing in the Woodford Shale in Oklahoma. So it's something where we do have a capability. But we’re not sure that will go that route and operate ourself. It may be a situation where we joint venture and go non-op on some of the processing or we may not participate and all it just depends, so that's all kind of up in the air and being evaluated for future processing down the road particularly in the Marcellus.

Okay, great. And then kind of dovetailing off of that actually on the CapEx front the Marcellus spend versus the Utica spend last year I think it was approximately let’s call it 75% to 25% this year I'm seeing it more as 95% to 5%. So with half of 2016 in the rearview mirror I would assume Antero AM will have some sort of sense of what 2017 spend is going to look like. And so I'm hoping you could give me a little color on the CapEx breakdown for next year between the Marcellus versus Utica and what the drivers will be behind that…

Yes. It’s going to be more like 2016, what's driving that for this year is the activity levels in the Utica have been subdued because we're currently at 600 million a day of gross production in the Utica which fills our 600 million a day of favorable FT on REX, we don't have any additional takeaway in the Utica until Rover comes on. So the capital going forward is going to be more of a function of assessing Rover's delivery date or start date and that's been able to ramp into that pipe and get favorable pricing. So that's what's driving the midstream capital spend 2015 you know we were ramping into our REX capacity, 2016 were at our REX capacity. So there's only approximately $20 million of capital spend in the Utica for this year, it should maybe take up a little bit in 2017 but will probably be more of a 2018 story as Rover comes on.

Okay, great. And just two more questions. The first one, in your slide deck I have seen this in a few of your presentations. There's a slide that lays out the value chain opportunity. You know full midstream value chain and what's in blue is AM owned assets and what's in red is the AM option opportunities. Some of these are gas processing, NGL products pipelines. I am wondering if you could give us some sort of sense of what the cadence might be Antero – of AM exploring each one of these and possibly bringing them online. Which could come on first, I guess is the best way to put it.

Yes. I think that's hard to say, we've been having discussions along those lines for quite some time now with different parties and we're still evaluating, I think there's still a very good possibility or probability that we participate in processing fractionation maybe even NGL pipelines, terminal storage. I think that's while that is on the page and maybe even additional regional type of dry gas pipelines, but they tend to be pretty clucky, it's not a. processing plant by plant kind of decision, generally these are bigger more macro type deals and they take time to negotiate it and they involve multiple processing plants or fractionator for example. So it's a lumpy process and it will be lumpy in terms of announcing that kind of stuff it if does come to pass. But it's an active discussion and that continues and we're optimistic about it. What we like about that is to just provide lots of balance to the revenue stream for AM over time to diversify into different types of the facilities and to have some third-party input to those facilities as you get further downstream.

Great. That's great color. Thank you. And then just the last question for me, so listening to Hi-Crush’s call yesterday, [indiscernible] this morning, both are saying they're expecting higher northern white volume sand sales into the back half of this year, was it continuing to ramp in the 2017. Proportion of this is expected to build the Marcellus and so given AR has such a high rig count in the Marcellus. I would assume AR is probably employing more sand in each well and so can you just talk a little bit about how AM could be impacted on both the gathering side and the water side, as more sand use plays out?

Yes. As we've talked about we're definitely upsizing our fracs and we've gone over the last little while from 1,000 pounds a foot to 1,500 pounds a foot is now our standard design. And we're piloting 1,750 and 2,000 pounds per foot. We are – as we use is northern white and we get it through the service companies whether Hi-Crush is a provider couldn't say, but what it will result in is more productivity per well. And so if we drilled the same number of wells which I'm not sure we will if we have higher productivity, but if we did, of course, that would be more gathering volumes and there is the commensurate proportional amount of water that we use when we do more sand, we also use more water, so that's going to affect the water business. So it will translate to AM in terms of at least those things gathering, compression, water business, trunk lines and so on. So it's a plus and we like that, you can see it in of course in the rest of industry that others are upsizing their fracs and seeing still an evolution I guess the shale revolution that in so many places people are seeing the great response by upsizing the fracs, more sand, more water.

Okay. That's great. So that’s great color on the positive impact there. Just as a follow-up, Mike just one more because of your remarks there. You had mentioned that AR is up to 1,500 pounds of sand, they added 1,000 and now they are testing 1,750 and possibly going to 2,000. So let’s say if when they were at 1,000, those water volumes flowing through. Can we then think that okay, whatever that I’m thinking about modeling moving slower. Whatever that increase in volumes was from going from 1,000 pound of sand to 1,500 the increase in water volumes, could we expect that same type of change as AR goes to 2,000 pounds of sand?

That’s a good question, but our frac engineers are constantly designing and redesigning, so directionally it’s true, but we can’t say it’s linearly proportionate, so have to check the [indiscernible] on that one.

Okay. Great. I appreciate the time. Thank you for the color guys. Much appreciated.

Thank you.

Our next question comes from Ethan Bellamy from Baird. Please go ahead with your question.

Hey, guys. Couple questions here. First, is there any reason to believe that you would not achieve the earnouts in 2019 and 2020?

No, there's not. You can see on the balance sheet and in the income statement, we continue to accrue for that payment and accrete that on the income statement, so the projections still are that we meet – AR meets those hurdles.

Okay. Are there any state or local issues this fall that are on your radar as potential risks?

No, there are not. This fall are you talking about as in election type?

Yes.

Not really anticipating any changes, we're not on federal acreage so that's the first that gets impacted if it's – if there's a federal input as to new frac rules or something. All of our acreage is fee, very little state even. And it's a pretty industry friendly environment in West Virginia and Ohio, so don't see anything happening there.

Okay. Your DCF coverage ratio is obviously the envy of the group. Remind me please, where do you expect to normalize that ratio longer-term and is the high coverage there indicative of your belief that the equity market simply just won't pay you for a higher rate of growth on what you are achieving now.

Yes. Our stated range Ethan is the 1.1 to 1.2 times obviously we've been well above that since our IPO. We are really using that more as a prudent measure and managing the balance sheet and keeping our capital available for future opportunities. So, again what we do continue to see that DCF actually being above that 1.2 times well into future, but we'll reserve that for balance sheet strength.

Okay. And just last one. I apologize I missed the AR call earlier but to follow up on the prior caller. Is there any upward pressure at all on service costs be it sand or anything else?

We have not seen that. No we don't see the upward pressure. Still see good supply.

All right. Thanks much guys. Appreciate it.

Thank you.

Thanks, Ethan.

And our next question comes from Brian Brungardt from Stifel. Please go ahead with your question.

Good morning, guys.

Good morning.

Just wanted to expand on Richard’s earlier question. I guess how should we be thinking about 2017 CapEx needs in light of the recent acquisition and meeting Antero Resources development plans. Highlighted there on Slide 15?

2017 it will be in a similar range of 2016, our pace of build out of the gathering compression in the liquids rich air in the Marcellus has been fairly consistent. So you should expect a fairly similar capital budget in 2017 and 2016.

Gotcha. And then - for that acquired acreage should we be thinking that there's need for any header systems or is this a primarily just tying into existing infrastructure?

There will be a need for some high pressure lines there ultimately. So its low pressure, high pressure as well as water infrastructure and compression. So it kind of checks all boxes.

That’s all I had. Thanks guys.

Thank you. End of Q&A

And ladies and gentlemen, at this time we've reached the end of today's question-and-answer session. I'd like to turn the conference call back over to management for any closing remarks.

Thank you for joining us on the call today. If you have any further questions please feel free to contact us. Thank you.

Ladies and gentlemen, that does conclude today’s conference call. We do thank you for attending. You may now disconnect you lines.