Antero Midstream (AM) Q3 2026 earnings call transcript

Thank you. You may now begin. Thank you for joining us for Intero 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 homepage of our website at interomidstream. 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 Ventura Midstream, Justin Agnew, CFO of Ventura Midstream, and Brendan Krueger, CFO of Ventura Resources.

With that, I will turn the call over to Mike.

Thanks, Dan. Good morning, everyone. I'll begin on slide number three. Ventura 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 Intero midstream, supporting two 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 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 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 Eastside Express Since announcing the project last quarter we have seen interest from multiple downstream counterparty seeking access to ARs and 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, Ontario 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 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 in slide number four. 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 number five, which highlights the balance sheet improvement over the last several years.

As of September 30th, our leverage was 2.8 times, below our three 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 2022 after our first dry gas gathering acquisition Since then we integrated five acquisitions totaling billion invested over billion in organic growth capital, increased throughput by over a 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 Eastside 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 queuing.

Yeah, really no change to the scope of that project called $200 to $300 billion. Again, that's 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 kind of on track, on schedule for that late 28, 2029 timeframe. Yeah, and then on the north-south, I don't know if you, John, if you caught the AR call, but we're having so much interest in the Clarington market. I think it'd be natural, very opportunistic for us to build a north-south from our field up into that area And maybe just any timeline on that Yeah over the next couple of years We 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.

Yeah, I don't think fourth quarter is soft. It will be an all-time high EBITDA for the company by quite a margin or quite an amount. So not soft there. And then 27 will have 10% on that. You saw ARs guide into 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 in throughput.

Obviously, that's a net number, so you have a little more on that on growth for AM. Then you have those two water projects, the completion of the ducts 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 two 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.

I'd like to thank you for joining the earnings conference call this quarter. If you have any further questions, please feel free to reach out. Have a good day.