Antero Midstream Corporation Common Stock 2026 Q3 Earnings Call

Thank you for joining us for Antero Midstream's third quarter investor conference call. We will spend a few moments going through the financial and operating highlights, and then we will open it up for Q&A. I would also like to direct you to the homepage of our website at anteromidstream.com, where we have provided a separate earnings call presentation that will be reviewed during today's call. 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, Justin Agnew, CFO of Antero Midstream, and Brendan Krueger, CFO of Antero Resources. With that, I will turn the call over to Mike.

Thanks, Dan. Good morning, everyone. I will begin on slide 3. Antero Midstream continues to expand its integrated Marcellus Shale footprint to support growing natural gas demand across North America. This expansion includes our HG acquisition and integration, organic gathering and water growth projects, and our new regional pipeline business unit. Turning first to water, two completion crews are operating on acreage dedicated to Antero Midstream, supporting two drilled-but-uncompleted growth pads. Higher freshwater delivery volumes in the fourth quarter, combined with modest throughput growth, net of expected curtailments, are expected to drive high single-digit EBITDA growth quarter-over-quarter. We also will remain on track to complete the HG water system integration by year-end and realize all of the water synergies assumed in the acquisition. Both our legacy and HG water systems achieved 100% uptime in the third quarter, positioning us well for full operational integration.

Looking ahead to 2027, these growth pads and water system integration are expected to drive double-digit year-over-year EBITDA growth. Turning to our newly established regional pipeline business unit, we continue construction on the East Side Express. Since announcing the project last quarter, we have seen interest from multiple downstream counterparties seeking access to AR's natural gas through the pipeline. This interest underscores a shift in industry dynamics in Appalachia. Unlike the producer push expansions of the past, today's opportunities are driven by demand pull from LNG facilities, utilities, and growing electrification of America. Importantly, unlike the previous wave of expansions that were farmed out to third parties, Antero Midstream now has the scale, balance sheet capacity, and expertise to pursue these opportunities. We are actively pursuing several billion dollars in potential projects, including our first North South directed regional pipeline, laterals to natural gas demand centers, and integrated power opportunities.

As existing third-party agreements expire, we plan to leverage our infrastructure to own more of the value chain previously served by those providers. This strategy positions AM to play an integrated role in expanding AR's margins and to serve as the industrial builder in West Virginia, delivering customized infrastructure that connects growing demand with investment-grade producers. With that, I'll turn the call over to Justin.

Thanks, Mike. I'll start with our third quarter highlights on slide 4. Gathering and compression volumes increased by 19% and 17%, respectively. As noted in the press release, throughput was impacted by approximately 10 BCF of curtailments during the quarter. Adjusted EBITDA for the third quarter was $291 million, which was a 3% increase year-over-year. Capital invested during the quarter was $51 million, which marked another quarter of EBITDA growth in flat capital. Free cash flow after dividends was $449 million, including $377 million of Clearwater litigation proceeds. This free cash flow was utilized to reduce debt by over $400 million during the quarter and accelerate share repurchases once our leverage target was achieved. I'll conclude our prepared remarks on slide 5, which highlights the balance sheet improvement over the last several years.

As of September 30, our leverage was 2.8 times, below our 3 times target and in line with this time last year. As you can see on the right-hand side of the page, our leverage is down a full turn from its peak at year-end 2022 after our first dry gas gathering acquisition. Since then, we've integrated five acquisitions totaling $1.4 billion, invested over $1 billion in organic growth capital, increased throughput by over 1 BCF a day, and reduced our share count by over 6 million shares. Looking ahead to 2027, we expect a step-up in capital as we invest over $100 million of capital incremental to our organic program related to East Side Express and other regional gas demand projects.

Even after these in hand growth projects, we still have significant balance sheet capacity to pursue the large infrastructure opportunity set Mike referenced in his comments, while still maintaining peer-leading leverage and debt levels. In summary, our balance sheet, consistent free cash flow generation, and integrated platform position us well to capitalize on the growing need for natural gas infrastructure in Appalachia. With that operator, we are ready to begin Q&A.

Hey, team. Thank you for the time. Appreciate the updates on East Side Express and some of the early comments on North South. Last call, you guys were still, I guess, kind of codifying the scope on East West. Just maybe if you can share a little bit more of what the latest thoughts are in terms of size, total CapEx, and then off of that, any early read on North South would be interesting.

Thanks. Yeah. Really no change to the scope of that project.

Call it $200 million-$300 million. Again, that is going to be roughly seven interconnects with downstream pipelines really positioning for that demand pull industry dynamic we talked about. So really no change to that scope. Everything remains on track, on schedule, for that late 2028, 2029 timeframe.

Yeah. On the North South, I do not know if you, John, if you caught the AR call, but we are having so much interest in the Clarington market, I think it would be natural and very opportunistic for us to build a North South from our field up into that area.

And maybe just any timeline on that?