Antero Midstream Corporation Q2 FY2025 earnings call

Capital Projects

• In the second quarter, $45 million was invested in gathering, compression, water, and the Stonewall joint venture projects. Year-to-date capital investment is $82 million, 45% of the 2025 capital budget midpoint.
• The back half of 2025 capital will be weighted towards the third quarter for better construction weather, focusing on low-pressure gathering and water connects for the 2026 plan.

Compression Reuse Program

• Over $50 million of savings realized through the reuse program, including $30 million at Torrey's Peak compressor station. The 5-year savings estimate from 2026-2030 increased from $60 million to over $85 million, with cumulative savings already achieved plus forecasted savings over $135 million.

Financial Results and Guidance

• Second quarter EBITDA was $284 million, up 11% year-over-year. Free cash flow after dividends was $82 million, a nearly 90% increase. Leverage reduced to 2.8x.
• Increased 2025 free cash flow guidance by $25 million: adjusted EBITDA guidance up $10 million due to outperformance in gathering and compression throughput, capital budget range lowered from $200 million to $190 million, interest expense lower, and cash income taxes reduced to 0 due to the budget reconciliation bill.

Market Positioning

• Antero Midstream is uniquely positioned for LNG and Northeast demand growth, connecting low-cost production to LNG facilities and maintaining optionality to local markets. Antero Resources has over 10 years of dry gas locations dedicated to Antero Midstream to supply growing opportunities.

During the second quarter, Antero Midstream generated $284 million of EBITDA, an 11% year-over-year increase. This was driven by record gathering and processing volumes. Free cash flow after dividends was $82 million, nearly a 90% increase compared to the previous year. Leverage was reduced to 2.8x as of June 30. Revenue contribution details weren't explicitly broken down by product segment in a way that isolated each, but the overall financial performance is as described.

• Adjusted EBITDA guidance increased by $10 million driven by outperformance in gathering and compression throughput.
• Capital budget range lowered from $200 million to $190 million.
• Interest expense reduced by $5 million.
• Cash income taxes reduced to 0 from a range of 0 to $10 million due to the budget reconciliation bill.
• Not expected to be a material cash taxpayer through at least 2028.

• Clearwater facility lawsuit: The Colorado Supreme Court appealed, and there's no update on the timeline for a decision as of the call.

Q: John Mackay from Goldman Sachs asked about where Antero Midstream could fit into in-basin demand opportunities beyond moving incremental AR volumes.

A: Brendan Krueger said AM could build infrastructure as needed, has a large footprint in West Virginia and Ohio, and could build spurs with take-or-pay contracts for growing Northeast demand.

Q: Jeremy Tonet from JPMorgan asked about in-basin demand opportunities specific to AM related to recent developments.

A: Brendan Krueger said West Virginia passed a microgrid bill benefiting AM, AM can benefit if AR accelerates production or if AM builds infrastructure for supply, with teams internally working but no immediate timeline.

Q: Ned Baramov from Wells Fargo asked about the threshold for adding another processing plant at the JV and cash tax expectations.

A: Brendan Krueger said processing plants can run about 10% over nameplate with no imminent need to add another, and AM isn't expected to be a material cash taxpayer through at least 2028.

Q: Wade Suki from Capital One asked about inorganic opportunities.

A: Brendan Krueger said they've completed bolt-on acquisitions and continue to look at bolt-on opportunities around their current asset base, but no immediate announcements to share.