What Antero Midstream (AM) Said on Its Q3 Earnings Call

Key Points

• Third-quarter adjusted EBITDA rose 3% year over year to $291 million, while gathering and compression volumes increased 19% and 17%, respectively. Free cash flow after dividends reached $449 million, helping Antero Midstream reduce debt by more than $400 million and accelerate share repurchases.
• Management expects high-single-digit sequential EBITDA growth in Q4 and double-digit year-over-year growth in 2027, supported by higher freshwater deliveries, growth pads, expanded completion activity and integration of the HG water system.
• Antero Midstream is expanding into regional gas infrastructure, with the $200 million-$300 million East Side Express pipeline on track for late 2028 to 2029. The company is also evaluating a north-south pipeline and expects higher capital spending in 2027 to pursue several billion dollars of potential infrastructure projects.

Antero Midstream NYSE: AM said its third-quarter adjusted EBITDA rose 3% from a year earlier to $291 million, as the company continued expanding its Marcellus Shale gathering, water and pipeline infrastructure while reducing debt and advancing regional natural-gas transportation projects.

CEO and President Michael Kennedy said the company is pursuing growth through the integration of its HG acquisition, organic gathering and water projects, and its newly formed regional pipeline business unit. He said Antero Midstream expects high-single-digit EBITDA growth sequentially in the fourth quarter and double-digit year-over-year EBITDA growth in 2027.

Third-Quarter Volumes and Cash Flow

Gathering volumes increased 19% during the third quarter, while compression volumes rose 17%, according to CFO Justin Agnew. Throughput was affected by approximately 10 billion cubic feet of curtailments during the period.

Antero Midstream invested $51 million of capital during the quarter. Free cash flow after dividends totaled $449 million, including $377 million in proceeds from Clearwater litigation. The company used that cash flow to reduce debt by more than $400 million and to accelerate share repurchases after reaching its leverage target.

As of Sept. 30, Antero Midstream's leverage ratio was 2.8 times, below its target of 3 times. Agnew said leverage has declined by one full turn from its peak at the end of 2022, following the company's first dry-gas gathering acquisition.

Since then, the company has integrated five acquisitions totaling $1.4 billion, invested more than $1 billion in organic growth capital, increased throughput by more than 1 billion cubic feet per day and reduced its share count by more than 6 million shares, Agnew said.

Water Operations and 2027 Growth Outlook

Kennedy said two completion crews are currently operating on acreage dedicated to Antero Midstream and supporting two drilled-but-uncompleted growth pads. Higher freshwater delivery volumes in the fourth quarter, along with modest throughput growth net of expected curtailments, are expected to support high-single-digit sequential EBITDA growth.

The company also expects to complete integration of the HG water system by year-end and capture all water-related synergies assumed in the acquisition. Both the legacy and HG water systems recorded 100% uptime during the third quarter, Kennedy said.

For 2027, management expects the growth pads, expanded completion activity and water-system integration to drive double-digit EBITDA growth from 2026. Kennedy said Antero Resources' guidance for approximately 4.5 billion cubic feet equivalent per day of production next year is expected to translate into greater throughput for Antero Midstream.

He also said that operating two completion crews throughout the year should increase freshwater deliveries. “You put that all together, and you get the double-digit EBITDA growth year-over-year 2027 over 2026,” Kennedy said.

Regional Pipeline Projects

Antero Midstream is continuing construction of the East Side Express project, which management described as a regional pipeline intended to connect Antero Resources' natural gas supply with downstream demand. Kennedy said multiple downstream counterparties have expressed interest in accessing Antero Resources' gas through the pipeline.

Agnew said the project's scope remains unchanged, with expected capital spending of roughly $200 million to $300 million. The project is expected to include about seven interconnects with downstream pipelines and remains on track for a late-2028 to 2029 timeframe.

Management said the company sees current Appalachian infrastructure opportunities as being driven by demand from liquefied natural gas facilities, utilities and growing electrification needs, rather than the producer-led expansion projects of earlier periods.

Antero Midstream said it is also assessing a potential north-south pipeline project into the Clarington market. Kennedy said the company is conducting early scoping work and could make a final investment decision in 2027.

Capital Plans and Infrastructure Strategy

Looking ahead, Agnew said Antero Midstream expects a step-up in capital spending in 2027, including more than $100 million of incremental capital beyond its organic program for East Side Express and other regional natural-gas demand projects.

Kennedy said the company is pursuing several billion dollars in potential infrastructure projects, including a north-south regional pipeline, laterals serving natural-gas demand centers and integrated power opportunities.

As existing third-party agreements expire, Antero Midstream plans to use its infrastructure to own a larger share of the value chain previously provided by outside operators, management said. The company said its balance sheet capacity and cash-flow generation provide flexibility to pursue those projects while maintaining its leverage and debt objectives.

About Antero Midstream (NYSE:AM)

Antero Midstream Corporation NYSE: AM owns, operates and develops midstream energy infrastructure that supports natural gas, natural gas liquids and oil production. The company's services include gathering and compression, water handling and other infrastructure activities that help producers transport hydrocarbons from well sites to processing and takeaway facilities.

Antero Midstream primarily serves Antero Resources' operations in the Appalachian Basin, particularly in West Virginia and Ohio.

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