Antero Midstream Corporation (AM) Earnings Call Transcript
October 29, 2026
Earnings Call Speaker Segments
Greetings. Welcome to Antero Midstream Corporation's Third Quarter 2026 Earnings Call. [Operator Instructions]. Please note that today's conference is being recorded. At this time, I'll turn the conference over to Dan Katzenberg, Vice President, Investor Relations. Thank you. You may now begin.
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'll open it up for Q&A. I would also like to direct you to the home page of our website at anteromidstream.com, where we 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 Mike Kennedy, CEO and President of Antero Midstream; Justin Agnew, CFO of Antero Midstream; and Brendan Krueger, CFO of Interior Resources. With that, I will turn the call over to Mike.
Thanks, Dan. Good morning, everyone. I'll 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. 2 completion crews are operating on acreage dedicated to Antero Midstream, supporting 2 drilled but uncompleted growth paths. 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 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 paths 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 continued 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 and 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 teller 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 into service 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 and 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 2.8x and below our 3x 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 have integrated 5 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 eSight Xpress and other regional gas demand projects. Even after these enhanced growth projects, we still have significant balance sheet capacity to pursue the large infrastructure opportunity that 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 at Appalachia. With that, operator, we are ready to begin Q&A.
[Operator Instructions]. And the first question comes from the line of John Mackay with Goldman Sachs.
I 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. So just maybe if you can kind of 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.
Yes, really no change in the scope of that project, call it, $200 million to $300 million. Again, that's going to be roughly 7 interconnects with downstream pipelines, really positioning for that demand pull industry dynamic we talked about. So really no change in that scope. Everything remains kind of on track on schedule for that late '28, 2029 timeframe.
Yes. And then on the North-South, I don't know if you -- Sean, if you cut the AR call, but we're having so much interest in the Clarington market. I think it'd be natural and very opportunistic for us to build a North-South from our field up into that area.
And maybe just any time line on that?
Yes, over the next couple of years. We're actually scoping it right now, having a little initial capital right now assessing it, but I think you'll probably see us FID that in 2027.
That's clear. And then second one for me. I appreciate the commentary on kind of double-digit EBITDA growth into next year. Obviously, third quarter and kind of implied fourth quarter are softer. You guys touched on that in terms of the curtailments and some of the kind of more actual physical constraints. But maybe just walk through a little bit of the bridge for us in terms of kind of underlying volumes versus margin versus anything else?
Yes. I don't think the fourth quarter is soft. It will be an all-time high EBITDA for the company by quite margin or quite amount. So not soft there. And then '27, we'll have 10% on that. You saw AR's guidance of 15 to 20 Bcf, but it's still at 4.3 Bcfe versus the 4 -- 234, I believe it was for AR. So you'll have that growth. Obviously, that's a net number, so you have a little more on that on growth for AM and you have this 2 water projects, the completion of the DUCs on the AR legacy acreage. So that will result in substantial water volume growth. So that will drive the Q4 up in that high single-digit EBITDA growth quarter-over-quarter. And then looking at next year, at that 4.5% that AR guided, you'll see that obviously come through in the throughput, and then you'll have more freshwater delivery as we run 2 completion crews flat for the year. So you put that all together and you get the double-digit EBITDA growth year-over-year, '27 over '26.
[Operator Instructions]. It appears we have no additional questions. We've reached the end of our question-and-answer session. I'll hand the floor to management for any closing or final remarks.
I'd like to thank you for joining here in this conference call this quarter. If you have any further questions, please feel free to reach out. Have a good day.
This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation. Have a wonderful day.
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