Q3 2024 Antero Midstream Corp Earnings Call

Greetings and welcome to Anthero mid-stream third quarter 2020 24 earnings content call. At the same, all participants are in a listen only mode.

The brief question and answer session will follow the formal presentation.

If anyone should require operate assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded.

It is now an pleasure to introduce your host, Mr. Justin Agnew, Vice President of Finance and Administration Relations. Thank you Mr. Agnew, you may begin.

Good morning and thank you for joining us for Antaro Midstreme's third quarter investor conference call.

We'll spend a few minutes going through the financial and operating highlights and then we'll open it up for Q&A.

I would also like to direct you to the homepage of our website at www.antirometry.com where we've provided a separate learnings called presentation that will be reviewed during today's call.

Today's call may also contain certain non-gap financial measures. Please refer to our earnings press release for important disclosures regarding such measures, including reconciliation to the most comparable gap financial measures.

Joining me on the call today are Paul Rady, Chairman, CEO and President of Anterra Resources and Anterra McMream, Brendan Krueger, CFO of Anterra McMream, and Michael Kennedy, CFO of Anterra Resources and Director of Anterra McMream.

Speaker Change: with that, I'll turn the call over to Paul.

and Good Morning Everyone.

In my comments, I will discuss AMs 2024 Capitol Budget as well as AR's peer leading pre-cast flow break-evens supported by strong international LPG pricing.

Brendan will then walk through our third quarter results in fourth quarter outlook.

Let me start on slide number three titled, efficiently executing on 2024 Capital Program.

The left-hand side of the page illustrates our 2024 capile expenditures compared to our budget of $150-$170 million.

Speaker Change: As we laid out in our initial guidance earlier this year, we had expected a majority of the capital to be invested in the second and third quarters as some of weather conditions are supportive of construction in Appalachia.

Speaker Change: During the third quarter, as a result of more favorable weather conditions, we accelerated some capital, initially scheduled for later in the year.

Speaker Change: This resulted in $56 million invested during the third quarter or 35% of the full year budget.

Because of this acceleration, we expect a significant decline in capital in the fourth quarter and also expect to end the year within our annual capital budget guide strange.

Speaker Change: The End.

Speaker Change: i

Speaker Change: Looking at...

Page number three, pictures on the right-hand side of the page, the big, our Torries Peak compressor station. We continue to make good progress on the construction of this station which was expected to have 160 million cubic feet a day of capacity.

Speaker Change: This station is expected to be placed online in the second quarter of 2025 and is located in the heart of our Liquid's Rich midstream corridor.

Speaker Change: Now let's move on to slide number four.

Guided International Premiums Support AR Free Gas Flow.

The left-hand side of the page depicts the premium that AR receives on its pro-Bane exports transported on the Marinaries pipeline and exported out of Marcoso, Pennsylvania.

Speaker Change: This premium has expanded into the high 20 cents per gallon range as a result of strong international demand, combined with export constraints along the Gulf Coast.

This is a distinct competitive advantage for AR to have unconstrained access to the international markets.

and to be able to capture these premiums by selling pro-Bane at the Doc at Marcus Hook.

Speaker Change: Importantly, we expect these premiums to persist into 2025 until additional export capacity along with golf co-host is placed online.

Speaker Change: These premiums

Speaker Change: AR's significant liquid exposure.

and Capital efficiencies that have resulted in peer leading un-edged free cash flow break-evens in 2024.

[inaudible] MTF of gas, well below other natural gas piers.

This allows AR to continue operating at a maintenance capital level even in today's depressed natural gas environment, providing development and earnings stability for AM.

Speaker Change: With that, I will turn the call over to Brendan Krueger.

Brendan Krueger: Thanks, Paul. I will begin my comments from slide number five titled third quarter 2024 Highlights. During the quarter we generated Eva Dough of 256 million.

Brendan Krueger: which was a 2% increase year over year.

Throughput volumes were approximately flat compared to the second quarter, and fresh water delivery volumes declined sequentially. As a result of AR operating one completion crew and deferring a duct bat out of the third quarter due to depressed natural gas prices.

Brendan Krueger: Freak Ashwell after David ends with 40 million, which was a 32% increase from last year.

Brendan Krueger: All free cash flow during the quarter was utilized to reduce absolute debt and resulted in leverage of 3.1 times as of September 30.

Looking ahead to the fourth quarter and reiterating Paul's earlier comments, we expect a significant decline in capital as a result of the acceleration that occurred in the third quarter.

This is expected to result in increasing free cash flow, additional absolute debt reduction, and leverage declining below three times starting the fourth quarter.

Next, let's move on to slide number six titled Consistent Free Cache Flow Generation.

This slide illustrates the quarterly and cumulative free cash flow after dividends since the third quarter of 2022 when we acquired the first of our bolt-on acquisitions.

As you can see, we have generated free cash flow after dividends in every single quarter, which is total over 350 million over the last two years.

Brendan Krueger: This is well above the 287 million of bolt-on acquisitions over the same period.

Hi, Liding the Accredum Nature and Successful Integration of these Assants.

Importantly, this slide also illustrates our ability to internally finance both our organic capital program and acquisitions that drive EBITDA and free cash flow growth.

I'll finish my comments in slide number 7 titled delivering on our free cash flow outlook.

Brendan Krueger: Over the past decade, we have built out Apple Laches largest integrated liquid-drich midstream system.

and are now realizing the benefits of our organic capital investment.

These investments generate high teams, return on invested capital, and significant free cash flow.

This results in the ability to internally finance our capital programs, fund our dividend payments and reduce absolute debt.

Brendan Krueger: As a result of absolute debt reduction and EBDog growth, we expect leverage to decline to less than three times in the fourth quarter. As a reminder, our initial expectation was to achieve our three times leverage target by year end 2025. So we are one year ahead of schedule on our target.

Brendan Krueger: Additionally, I will note that our initial leverage target did not include any acquisitions. And Jeremy and James were able to execute several creative transactions as we just discussed, all of which were 100% financed through free cash flow.

As we look ahead to 2025, we expect further growth in Eva Dodd-free cash flow. This position is as well to return incremental capital to shareholders.

Brendan Krueger: with that operator we are ready to take questions.

We will now be conducting a question and a session.

If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation to own will indicate your line is in the question cube.

Speaker Change: You may press start to if you would like to remove your questions from the queue.

For participants using St. John Agnew, it may be necessary to pick up the handset before passing the stockings. One more please, valuable for questions.

The first question comes on the line of Jeremy Tanett with JB Morgan Chase and co-plz go ahead.

Hey, this is Noah Cats on for Jeremy. First, I wanted to touch on the impact to AM's results from AR announcing the deferral of completion on the one pad from 24 to 25, and then the deferral of the second pad from early 25 into the latter part of the year. Can you size the impact towards the end of 24 and into 25? Thanks.

Greg Krueger, if you look at 2024 and the guidance range we've given, you can see we've given a range to the extent AR.

Completed that due to higher prices, you would fall in the middle of that range. If they extend AR to first it, you'd fall near the lower end of the range. It's about 10 million.

Speaker Change: of the Evidah overall if you look at just the water impact.

Speaker Change: You wanted to see the gathering impact until next year anyways. So the water impact is here would be about 10 million. And then no change really on 2025 in terms of where that's shaking out, push back of it, you'll get the water volumes.

Speaker Change: and the gathering would fall within expectations.

Thanks for that, and then going off of that question with the nine wells being serviced in three queue. It looks like AMA service 45 wells so far this year. So, take the guide of 52 to 57. I think you'd have to service between seven to 12 wells and four queue. If there was another completion crew added, what are your guys to expectations on how many more water wells you could potentially service in total? Thanks.

Speaker Change: Yeah, so I think that, again, the 7-12 you mentioned there, midpoint of that, what is soon the completion of that hot bat, if it got deferred out, it's five wells, so you'd be slightly below that, that 7-12.

Speaker Change: So I think that answers your question, but...

Over all of the Red of the...

Easy answer to think about in terms of how much one completion crew provides in terms of water. It's about 75 to 80,000 barrels a day per completion crew in terms of water that is delivered. We had a little bit less this.

This quarter just driven by the ramp up of the heat fleet. We made a move to an E-flate this quarter, so.

Rambup Time led to a little bit less than the 75-80,000, but generally, if you have one crew at 75-80,000, so if you're operating two crews, for example, in a quarter you'd be you know, 150,000, a little bit about that.

Speaker Change: God, thank you.

Thanks for watching

Thank you. Next question comes to the line of Naomi and Faita with UBSB's Go ahead.

Hi, good morning. Just as a follow up, we want to go to earlier questions. Maybe to look ahead to 25, given some of the deaf roles in the ER activity, along with the drop-in of a competition, Krueger and a Regan 24. He's kind of wondering if you could kind of characterize some of the drivers of Krueger going to 25. Should we still be expecting like the single, the Jid Krueger or the Zera potential upside to it?

Now I think that's a better assumption on the gathering side. We'd expect in the low to mid-single digit growth. You have a little bit of CPI escalation on those fees. And then on the water side it'll just depend on where we end up on those deferrals.

Speaker Change: Generation, Tritofume.

About Consisted Volume Zero Rear, it's a pad gets deferred completely out of 24 into 25. Then you'd expect a little bit more volumes in 25 relative to 24.

Speaker Change: Krueger, thanks. This is a follow up. I think on the view of payment, you'll then give you a small update. So just wondering what are the next sign, both in how is management thinking about the user's potential user perceived?

Speaker Change: Yeah, no great answer in terms of timing there. It's still in the court hands, went through the appeals, but we don't have a definitive answer and they don't have a definitive time in terms of when they need to respond. So a little bit of the waiting game is still there.

Speaker Change: Today's event, that came in, we would just certainly analyze where we're at on debt, where we're at in terms of the leverage target and make a decision in terms of what makes the most sense at that time. But no great timing, as we said here today, after that, after that update.

Thanks for the help for all of the guys

Thank you.

Thank you. Next question comes with a line of John McKay with Goldman Sachs, please go by hand.

Hey, thanks so much. I just wanted to pick up on a couple of these pointing to getting below three times in the fourth quarter. I guess.

How much of that is driven by your confidence and kind of cab-ex coming down in the free cash while looking better that way versus this kind of implied EBITDA step up. Just because we've talked about all moving pieces and should that mean we could start to see Bob Ex this quarter? Thanks.

Yeah, I think you know which sentence.

Speaker Change: In terms of, when once we hit the three times target, we'll let to the buyback market. I think we do have a lot of confidence. We'll hit that three times target in the fourth quarter.

really a combination of your...

Speaker Change: of your point, very confident in the capital coming down.

Speaker Change: and then in terms of the HevaDoc.

Richard should see a bit of growth as I imagine we had some ramp up.

Time in the third quarter on that E-fleet. So even if you just ran one fleet, you should see 10,000 barrels a day of growth or so relative to third quarter. So feel good about...

Ovalon and Chris and Cashelo. And if that adds to the foot into the fourth quarter because of pricing, then you'd see even a further benefit. But even without that, we feel pretty good about it in that three times, starting in the fourth quarter.

Speaker Change: I think so then I guess if we're looking at the implied capex budget for fourth quarter I mean again you've talked about some of the moving pieces but like how do we take that and think about what maybe like a run rate capex could look like and let's say 25 going forward

Speaker Change: it

Yeah, in 25, I think, you know, we've said historically that we'd be in that 150-to-a.

The 200 million I think assuming somewhere in that in the middle of that range, it's probably safe, safe bet for 25. We're still in the budgeting process, but in that 150 to 200 million dollar range is a fair assumption, as we sit here today, assuming the midpoint is probably a fair assumption.

and that group thanks for the time.

John Agnew: Thanks, John Agnew

Thank you. I remind that to all the participants that you may press star and one to ask question.

John Agnew: The End

Ladies and gentlemen, we have reached the end of question on answer session. I would now like to turn the floor over to Justin Agnew for closing comments.

Justin Agnew: Thank you, operator and thank you to everyone that joined today's conference call. Please feel free to reach out with any follow-up questions.

Thank you.

Speaker Change: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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