NEW YORK - Oil and natural gas exploration and production company Antero Resources Corp. Friday announced decision to sell its water business to Antero Midstream Partners LP, its midstream master limited partnership, for about $1.05 billion in cash, debt and partnership units.

Last year, Antero Midstream made the biggest-ever initial public offering for a master limited partnership company with Antero Resources parking some of its infrastructure assets into a new entity. The move was in line with the practice of other oil and gas companies to create separate, dividend-paying vehicles that command a high premium from investors.

As per terms of the deal, Antero Resources is entitled to receive two potential $125 million earn-out payments at the end of 2019 and 2020 if certain fresh water volumetric delivery targets are met.

The acquisition includes 100 percent of Antero Resources' fresh water delivery business, which consists of two independent systems that deliver water from the Ohio River and other regional water sources for well completions in both the Marcellus and Utica Shales in West Virginia and Ohio.

The Marcellus and Utica systems consist of a combined 150 miles of permanent buried pipelines, 80 miles of surface water pipelines, 35 fresh water impoundments with storage capacity of over 5 million barrels and 15,000 horsepower of water pump capacity.

As of June 30, 2015, over 300 well completions have utilized Antero Resources' extensive network of fresh water delivery pipelines since inception, eliminating an estimated 400,000 truck trips and thereby reducing Antero Resources' overall environmental impact, Antero Resources statement claimed.

The deal, expected to close on Wednesday, also includes the previously announced to-be-constructed advanced wastewater treatment facility, which will now be funded by Antero Midstream.

The wastewater treatment facility is expected to be in service by the fourth quarter of 2017 and will allow Antero Resources the exclusive right to treat and reuse all flowback and produced water rather than permanently dispose of wastewater in water injection wells.

In conjunction with Antero Midstream's acquisition of the fresh water delivery business, Antero Resources will enter into a 20-year water services agreement with Antero Midstream covering Antero Resources' 534,000 net acres in West Virginia and Ohio, with a right of first offer on all future areas of operation.

Under the agreement, Antero Resources will pay a fixed fee of $3.69 per barrel in West Virginia and $3.64 per barrel inOhio for fresh water deliveries by pipeline directly to the well site, subject to annual CPI adjustments.

In connection with the acquisition, Antero Resources will commit to pay a fee on a minimum volume of fresh water deliveries in calendar years 2016 through 2019. The minimum volume commitments are 90,000 barrels per day in 2016, 100,000 barrels per day in 2017 and 120,000 barrels per day in each of 2018 and 2019.

Assuming average barrels of water used to complete a Marcellus and Utica well of 250,000 barrels and 275,000 barrels, respectively, and based on an average lateral length of 9,000 feet for 2015, the minimum volume commitment equates to 125 to 135 completions, which is less than the total completions currently targeted for 2016.

Additionally, the transaction includes a total of $250 million of potential earn out payments to be paid to Antero Resources at the end of 2019 and 2020, contingent on meeting specific average volume thresholds.

Antero Midstream will pay Antero Resources $125 million if Antero Midstream's delivered fresh water volumes average 161,000 barrels per day or more between January 1, 2017 and December 31, 2019 and an additional $125 million if Antero Midstream's delivered fresh water volumes average 200,000 barrels per day or more during the period between January 1, 2018 and December 31, 2020.

No impact is expected on Antero Resources' operating cash flow as a result of this transaction because fresh water delivery costs are capitalized by Antero Resources as a component of drilling and completion capital. The fees charged by Antero Midstream will be eliminated upon consolidation

Paul Rady, chief executive for both companies, called the transaction a "win-win for both entities," as it moves Antero Midstream closer to "becoming a full-value chain midstream services provider in the Appalachian Basin," while allowing Antero Resources to cut its debt by $794 million.

The partnership will pay Antero Resources a cash distribution of $522 million, less assumed debt, and issue 23.9 million shares.

The companies said the partnership on Thursday priced the private placement of 12.9 million shares for proceeds of about $243 million.

Antero Midstream said the deal would add to its earnings. The company lifted its guidance for earnings before interest, taxes, depreciation and amortization between $170 million to $180 million from an earlier range of $150 million to $160 million.