Antero Resources Dropping Water Business to MLP For $1 Billion Plus

By Jamison Cocklin, NGI Shale Daily, September 18, 2015

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.

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.

Updated: WBOY News 12, Clarksburg, October 27, 2014
 
A cease and desist order remains in effect at an Antero well pad in Doddridge County after an incident that released methane gas into the ground in September 2014, potentially negatively impacting three residential water wells.

The West Virginia Department of Environmental Protection was initially contacted by Antero Resources at approximately 9:23 p.m. Sept. 24, 2014 after Antero drilled a well and came in contact with an adjacent well on Antero’s Primm Pad. The well and pad are located on Oxford Road, in the West Union area of Doddridge County.

While drilling the “Stella 1h” well, which was approved for drilling Sept. 1, 2014 came in contact with the “Callie 2h” well at about 621 feet in depth, according to information from the DEP. While the extent of damage is currently unknown, methane gas was released from the Callie 2h well.   

Preliminary water test results indicated that up to 16 water wells may have been impacted, although recent test results show that only three wells could potentially be impacted, DEP Spokeswoman Kelley Gillenwater said Monday, Oct. 27, 2014.

The homeowners where the three wells are located continue to receive water supplied by Antero, along with three others nearby who have requested the water as a precaution, pending further test results. 

Antero is required to respond to a notice of violation by Nov. 15, 2014 which requires the company to show it has gained control of the well, to demonstrate it has the ability to safely resume operations and to prove it has contained any methane at the site.