Q3 2025 Antero Midstream Corp Earnings Call

Speaker #4: Greetings and welcome to the Antero Midstream Corp . Third quarter 2025 Earnings Call . At this time , all participants are in a listen only mode .

Speaker #4: A question and answer session will follow the formal presentation . If anyone should require operator assistance , please press Star Zero on your telephone keypad .

Speaker #4: And as a reminder , this conference is being recorded . It is now my pleasure to introduce to you , Dan Katzenberg , the director of Finance .

Speaker #4: Thank you sir . Please go ahead .

Speaker #5: Thank you for joining us for Antero Midstream Corp'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.

Speaker #5: I would also like to direct you to the home page of our website at Antero Midstream Corp, where we have provided a separate earnings call presentation that will be reviewed during today's call.

Speaker #5: Today's call may also contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures. Joining me on the call today are Michael Kennedy, CEO and President of Antero Midstream Corp.

Speaker #5: Justin Agnew , CFO of Antero Midstream Corp . Brendan Krueger , CFO of Antero Resources . With that , I'll turn the call over to Mike .

Speaker #5: Thanks , Dan . Good morning everyone . In my comments , I will discuss our 2025 capital .

Speaker #6: Budget and strategic initiatives. Justin will then walk through our financial results for the quarter. Let's start on slide number three, titled "Investing in the Core of the Marcellus Shale."

Speaker #6: The maps on this page depict the core outline as we knew it . Upon entering resources . 2013 IPO . Compared to where we see it today .

Speaker #6: As we step out, development has proved up acreage over the last decade. The core boundaries continue to expand into the Marcellus, along with improving well results.

Speaker #6: These results have driven an increase in organic leasing program at AR and an expansion of AMS infrastructure . This organic expansion of both AR and Am is a core initiative at both entities and positions us well for the structure change in natural gas demand over the next several years .

Speaker #6: During the quarter , AR acquired approximately $260 million of assets in this core area . This included transactions , acquiring , working and royalty interests , which were already gathered by Am , as well as additional core acreage .

Speaker #6: The acreage acquisition was dedicated to a midstream provider and resulted in ten additional locations that were dedicated to Am, along with the grassroots leasing program.

Speaker #6: This brings the total locations acquired year-to-date and dedicated to the Am to approximately 80 locations, more than offsetting the 2025 plan.

Speaker #6: Looking at AMS capital investment during the third quarter , we invested $51 million , bringing our year to date capital invested $133 million , or approximately 75% of our total budget .

Speaker #6: At the midpoint of guidance, this capital included significant investments in water assets to expand and connect the southern end of the Marcellus Shale.

Speaker #6: This investment provides development flexibility and unlocks significant low cost inventory across the liquids rich midstream corridor . I also want to touch on some new initiatives on the dry gas portion , and in West Virginia of our acreage , highlighted in blue on slide number four .

Speaker #6: With only a small investment, by AM, AR is now planning to drill its first dry gas Marcellus pad in over a decade.

Speaker #6: This pad is located on existing infrastructure with underutilized midstream capacity that am acquired in 2022 . This pad highlights the speed the market and tarot can deliver on a coordinated basis with Ontario Midstream and significant dry gas optionality .

Speaker #6: Our midstream infrastructure will allow AR to immediately access local markets as proof of concept for future In-basin demand growth from data centers and power generation projects , or if local basis were to tighten .

Speaker #6: This dry gas development results in attractive rates of return for Am and more importantly , significant upside to our previous acquisition that was valued on a PDP only basis .

Speaker #6: In summary , we continue to remain active in our expansion efforts , leveraging our existing assets to drive growth and capitalize on the structure change in demand for natural gas .

Speaker #6: With that , I'll turn the call over to Justin . Thanks , Mike . I'll start with our .

Speaker #7: Third quarter financial results on slide number five . During the third quarter , gathering , compression volumes increased by 5% year over year , driven by another quarter of uptime availability over 99% .

Speaker #7: Adjusted EBITDA was $281 million , which was a 10% increase year over year . This was driven primarily by an increase in gathering , processing , and freshwater delivery volumes .

Speaker #7: Freshwater delivery volumes increased by almost 30% year over year , while operating just one completion . Crew , which is a testament to the significant completion efficiencies achieved over the last year .

Speaker #7: This growth , combined with declining capital , resulted in free cash flow after dividends of $78 million , which was a 94% increase compared to last year .

Speaker #7: We utilized this free cash flow for share repurchases and debt reduction , which drove our leverage down to 2.7 times as of September 30th .

Speaker #7: I'll finish my comments on slide number six , titled Balance Sheet Strength and Flexibility . Over the last year , we've reduced our debt by approximately $175 million , and taken our leverage down by almost a half a turn .

Speaker #7: This credit improvement resulted in a credit rating upgrade from Moody's and the ability to refinance our nearest maturity notes that were due in 2027.

Speaker #7: This transaction , which was upsized due to significant demand , extended the maturity to 2033 . At the same 5.75% coupon . Pro forma for this refinancing , we have over $870 million of liquidity and no near-term maturities .

Speaker #7: Our balanced approach to debt reduction and share repurchases has allowed us to reduce our financing costs further , compounding the growth in free cash flow .

Speaker #7: After dividends . In summary , AMS balance sheet is in the strongest position since our IPO over a decade ago . Our capital investments continue to deliver consistent free cash flow , which we expect to further expand as we head into 2026 .

Speaker #7: This expanding free cash flow positions us well to return additional capital to shareholders and continue to expand our growth opportunities across both the liquids rich and dry gas portions of our asset base .

Speaker #7: With that operator, we are ready to take questions.

Speaker #4: Thank you . We will now be conducting a question and answer session . If you would like to ask a question , please press star one on your telephone keypad .

Speaker #4: A confirmation tone will indicate that your line is in the queue . You may press star two to remove yourself from the queue .

Speaker #4: For participants using speaker equipment , it may be necessary to pick up your handset before pressing the star keys . One moment please .

Speaker #4: While we pull for questions . And the first question comes from the line of Jeremy Tonet with J.P. Morgan . Please proceed with your question .

Speaker #8: Hi , good morning .

Speaker #6: Good morning .

Speaker #8: Just wanted to turn to the topic of In-basin demand , specifically as it relates to the potential for behind the meter opportunities . And I believe Intel has talked about being in discussions there and looking at this and just trying to get a sense for , I guess , how near or later term this is .

Speaker #8: You know , just trying to get a feel for that . And whether customers are looking for , you know , prices pinned to just in-basin or is Henry Hub part of the conversation , wondering how this all mixes together ?

Speaker #7: Yeah , this is Brendan . You know , just just to touch on the .

Speaker #5: Invasion .

Speaker #7: Demand and behind the meter. I think we've talked about it in the past. You know, Antero Resources is one of the largest consumers.

Speaker #5: Of power in the state of West Virginia at the Sherwood.

Speaker #7: Complex .

Speaker #5: So we've talked .

Speaker #7: About it in that light , in the past , where , you know , you could go behind the meter that would accomplish a couple of things .

Speaker #7: One , it would , you know , would would reduce overall .

Speaker #5: Operating costs for .

Speaker #7: Antero Resources on the on the power side of things . And then secondly , you'd obviously free up incremental grid power if you were to go behind the meter in that that scenario .

Speaker #7: So obviously it takes a lot of different parties to work through solutions such as that . So no , no time frame on on our end .

Speaker #7: Still analyzing , still having discussions around opportunities like that . And then in addition , you know , we we've mentioned in the past , but we do we do feel the Antero family is very well positioned as it relates to data center opportunities , to the extent they take hold in the state of West Virginia .

Speaker #7: I think Antero Resources produces about 40% of the natural gas production in the state, highly integrated with Am. Antero Midstream Corp has the water system that it's invested in.

Speaker #7: You know , about $600 million in . So significant water system , which can be helpful in power infrastructure . So a lot of a lot of good attributes , attributes between the two parties that we think could play out well , but still still ongoing discussions at this point .

Speaker #7: And no , no set time frame .

Speaker #8: Got it . Understood . And on this Sherwood behind the meter potential project here . What are the specific I guess , hurdles at this point that , you know , would stop I guess moving forward ?

Speaker #7: You know, there's just a lot of different pieces to it as it relates to, you know, equipment availability and making sure you have the right agreements in place from a power perspective with the utilities in that area.

Speaker #7: So , you know , I think still quite a bit of hurdles just to to get something across the finish line . So again , no near-term announcements expected on that .

Speaker #7: As we sit here today.

Speaker #8: Got it . Thank you . And then , you know , as regards to , you know , the underutilized assets that fit quite nicely , you know , given the dynamics there .

Speaker #8: Just wondering , are there other I guess , pockets across your footprint where the same potential could unfold going forward , where there's underutilized assets that could , you know , step into new production that provides , you know , the strong accretion ?

Speaker #6: Yeah . You know , we we compare a midstream was early in doing all these bolt on acquisitions is really consolidated . The play .

Speaker #6: And so we bought the Crestwood asset, which is the dry gas kind of portion, in 2022. About Summit as well. In 2024, which is kind of in that more lean gas area.

Speaker #6: So those two areas and those comprise a significant amount of acreage , probably about 150,000 acres in total are all underutilized right now from both a high pressure and compression .

Speaker #6: Perspective . So a lot of available availability there for resources to to develop into Antero Midstream Corp under utilize capacity .

Speaker #8: Got it . That's helpful . I'll leave it there . Thanks .

Speaker #4: And the next question comes from the line of Ivan Skarda with UBS. Please proceed with your name and your question.

Speaker #9: Hey , thanks for taking my question . I wanted to ask about the ten undeveloped locations that are acquired . What kind of capital or infrastructure spend is needed on your end for connectivity to those locations .

Speaker #9: ?

Speaker #6: Not very material . I mean , it's within our our core areas . So generally , when I think about it and this is just a good rule of thumb , it's about $1 million per .

Speaker #6: Well , when you think about it from a LP and water and then it's already tied into compression and HP . So , you know , incrementally maybe $10 million .

Speaker #9: Okay . Got it . Thank you for that . And then just based off of your free cash flow , flow growth and leverage of 2.7 times , how should we think about capital allocation priorities moving forward ?

Speaker #7: Yeah . Good question . I think , you know , for now , we're still focused on debt reduction and repurchasing shares . We've had a fairly balanced approach to year to date .

Speaker #7: It's obviously ebbed and flowed a little bit on a quarter to quarter basis . But you know where the shares are trading today .

Speaker #7: We obviously see a lot of value in repurchasing shares, and there's obviously some benefit and value in paying down debt. It provides you with a lot of flexibility.

Speaker #7: And you saw the benefit in terms of refinancing the notes. So, I think looking forward, it's still going to be that balanced approach.

Speaker #7: Roughly 50 over 50 of share repurchases and debt reduction .

Speaker #9: Okay . Great . Thank you .

Speaker #4: Comes from the line of John McKay with Goldman Sachs . Please proceed with your question .

Speaker #10: Hey , everyone . Thank you for the time . I wanted to touch on some of these comments around , you know , drilling into where am open capacity .

Speaker #10: You called this kind of first strike as well as a bit of a proof of concept , but , you know , I guess is the current AR plan to kind of lean more in this direction .

Speaker #10: Really what I'm trying to get to is , you know , could we see the effective capital intensity for Am per incremental M of AR production come down ?

Speaker #10: If you're moving into those windows, or is this again a kind of, hey, we'll see how we develop the dry side?

Speaker #6: I mean , I think it's the back half , you know , we'll see how it goes . But if that does occur , it would be AMS capital intensity be much lower , obviously , because we already have infrastructure in the region .

Speaker #10: And maybe just a follow up to that is . Yeah . I mean , you are calling it a proof of concept I guess .

Speaker #10: Is this, you know, is this a comment on your side on the liquids outlook and more enthusiasm for the dry side?

Speaker #10: Or is this a hey , people that are looking at us for invasive solutions do kind of want to see us be able to execute on on the dry piece as well .

Speaker #6: Yeah , it's a second . It's in basin , but also I mean it's not a bad thought on the first . You know , we do have the diversity of product here and the ability to toggle between liquids and dry gas from both upstream and midstream .

Speaker #6: So you look at a $4 gas curve versus a backwardated oil curve, and that would suggest that dry gas has become more economic on a relative basis.

Speaker #6: So that is something that's optionality for us from both midstream and upstream . So the proof of concept is really for the local demand .

Speaker #6: But at the same time, it could be a portfolio approach as well.

Speaker #10: Makes sense. Thanks for your time.

Speaker #4: There are no further questions at this time, and I would like to turn the floor back over to Dan for any closing remarks.

Speaker #5: Thank you , everyone for dialing in to the call today . Please reach out to us with any questions that you have . Have a good day .

Speaker #4: And thank you, everyone. That does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.