UPDATE: Credit Suisse Initiates Coverage On Antero Midstream Partners

Credit Suisse initiated coverage on Antero Midstream Partners LP AM Monday with an Outperform rating and $36 price target.

Analysts led by John Edwards noted three pillars supporting his investment thesis:

“(1) Antero Resources’ (AR) accelerating drilling program should drive demand for gathering and compression services from Antero Midstream.

"(2) Antero Midstream's “build vs. buy” growth strategy will drive growth through the completion of organic projects with attractive economics.

"(3) Third-party agreements assigned to AM by AR add additional upside.”

“AM’s initial assets consist of gathering pipelines and compressor stations located in the liquids-rich southwestern core of the Marcellus Shale in northwest West Virginia and liquids-rich core of the Utica Shale in southern Ohio, through which they provide midstream services to Antero under a long-term, fixed-fee contracts.” according to the analyst report.

Edwards added that “AM’s “build vs. buy” growth strategy is based on its ability to complete organic projects with attractive economics (4-6x EBITDA per mgmt.). We expect AM to invest ~$700mm in organic projects over the NTM, and its backlog is expected to grow significantly thanks to its Right of First Offer (ROFO) agreement with AR.

The report expected “AM to take advantage of its ROFO by building out processing and fractionation infrastructure as well as additional gathering and compression capacity over the coming years.”

Antero Midstream Partners LP closed Friday at $27.69, down 0.07 percent.