Antero Midstream Corporation Q3 FY2025 earnings call

• AR acquired approximately $260 million of assets in the core Marcellus area during the quarter, including working and royalty interest, and additional core acreage, with 10 additional locations dedicated to AM.
• AM invested $51 million in the third quarter, with year-to-date capital invested at $133 million, 75% of the midpoint of the total budget. Significant investments in water assets were made to expand and connect the southern end of the Marcellus Shale.
• AR is planning to drill its first dry gas Marcellus pad in over a decade in West Virginia on existing AM infrastructure with underutilized midstream capacity, highlighting Antero's coordinated delivery and dry gas optionality.
• Justin Agnew discussed third quarter financial results, noting EBITDA growth, free cash flow after dividends increase, and balance sheet strength with over $870 million of liquidity and no near-term maturities after refinancing.

During the third quarter, gathering and compression volumes increased by 5% year-over-year. Adjusted EBITDA was $281 million, a 10% increase year-over-year. Fresh water delivery volumes increased by almost 30% year-over-year. Free cash flow after dividends was $78 million, a 94% increase compared to the previous year. Leverage was driven down to 2.7x as of September 30. Revenue contribution details weren't explicitly broken down by product segment in a way to list % contribution, but the financials for gathering, compression, fresh water delivery, etc., are key performance indicators.

• Year-to-date capital invested in AM is 75% of the midpoint of the total budget.
• Free cash flow after dividends is expected to further expand as we head into 2026.
• Capital allocation priority is a balanced approach, roughly 50-50 between share repurchases and debt reduction.

Q: 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 Antero has talked about being in discussions there and looking at this. I'm just trying to get a sense for, I guess, how near or later term this is. Just trying to get a feel for that and whether customers are looking for prices pin to just in-basin or is Henry Hub part of the conversation? I'm wondering how this all mixes together.

A: Yes, this is Brendan. Just to touch on the in-basin demand and behind the meter. I think we've talked about it in the past. Antero Resources is one of the largest consumers of power in the state of West Virginia at the Sherwood complex. So we've talked about it in that light. in the past where you could go behind the meter, that would accomplish a couple of things. One, it would reduce overall operating costs for Antero Resources 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 scenario. So obviously, it takes a lot of different parties to work through solutions such as that. So no time frame on our end, still analyzing, still having discussions around opportunities like that. And then in addition, we've mentioned in the past, but 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. I think Antero Resources produces about 40% of the production -- natural gas production in the state, highly integrated with AM. Antero Midstream has the water system that it's invested about $600 million in. So significant water system, which can be helpful in power infrastructure. So a lot of good attributes between the 2 parties that we think could play out well, but still ongoing discussions at this point and no set time frame.

Q: I wanted to ask about the 10 undeveloped locations that AR acquired. What kind of capital or infrastructure spend is needed on your end for connectivity to those locations?

A: Not very material. I mean it's within 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 well when you think about it from an LP and water. And then it's already tied into compression and HP. So incrementally, maybe $10 million.

Q: I wanted to touch on some of these comments around drilling into where AM is moving capacity. You called this kind of first dry gas well as a bit of a proof of concept. But I guess, is the current AR plan to kind of lean more in this direction? Really, what I'm trying to get to is could we see the effective capital intensity for AM per incremental [ M ] of AR production come down if you're moving into those windows? Or is this again a kind of, hey, we'll see how we develop the dry side?

A: I mean I think it's the back half. We'll see how it goes. But if that does occur, it would be AM's capital intensity will be much lower, obviously, because we already have its structure in the region.