On July 31, 2024, Antero Midstream Corp (AM, Financial) released its 8-K filing detailing its financial and operating results for the second quarter of 2024. Antero Midstream Corp is a midstream company that owns, operates, and develops midstream energy infrastructure services and production activity in the Appalachian Basin's Marcellus Shale and Utica Shale located in West Virginia and Ohio. The company has two operating segments: the Gathering and Processing segment and the Water Handling segment, deriving a majority of its revenue from the former.
Quarterly Financial Highlights
For the second quarter of 2024, Antero Midstream Corp reported net income of $86 million, or $0.18 per diluted share, which aligns with the prior year quarter on a per-share basis. Adjusted net income was $110 million, or $0.23 per diluted share, reflecting a 5% increase compared to the prior year quarter. This adjusted figure meets the analyst estimate of $0.23 per share.
Revenue for the quarter was $270 million, slightly exceeding the analyst estimate of $269.80 million. The revenue breakdown includes $229 million from the Gathering and Processing segment and $59 million from the Water Handling segment, net of $18 million of amortization of customer relationships.
Operational Performance
Low pressure gathering volumes averaged 3,258 MMcf/d, a 1% decrease compared to the prior year quarter. Compression volumes remained steady at 3,246 MMcf/d, while high pressure gathering volumes increased by 2% to 2,994 MMcf/d. Fresh water delivery volumes saw a significant decline of 23%, averaging 81 MBbl/d, due to a reduction in completion stages by Antero Resources.
Gross processing volumes from the joint venture with MPLX, LP averaged 1,588 MMcf/d, a 1% decrease compared to the prior year quarter. However, gross joint venture fractionation volumes increased by 3% to 40 MBbl/d, with the fractionation capacity being fully utilized.
Financial Metrics and Achievements
Adjusted EBITDA for the quarter was $255 million, a 5% increase compared to the prior year quarter. Capital expenditures totaled $51 million, and free cash flow after dividends was $43 million, marking a 41% increase year-over-year. The company also maintained a leverage ratio of 3.1x as of June 30, 2024, and received an upgrade on corporate and issuer credit ratings to BB+ from S&P Global Ratings.
Paul Rady, Chairman and CEO, stated, “During the quarter, Antero Midstream closed on a highly strategic bolt-on acquisition, increasing throughput volumes from our primary investment grade customer, Antero Resources. This acquisition complements our organic just-in-time business model that generates consistent Free Cash Flow after dividends, which increased 41% year-over-year.”
Brendan Krueger, CFO, added, “During 2024, Antero Midstream improved its balance sheet through the successful refinancing of its highest coupon senior notes and the extension of its credit facility to 2029. Importantly, over the last year, we have reduced our net debt by $120 million and our leverage has declined from 3.5x to 3.1x. This balance sheet improvement is evidenced by our upgrade from S&P and highlights our consistent Free Cash Flow generation and the accretive nature of the recent bolt-on acquisition.”
Income Statement and Cash Flow Analysis
Direct operating expenses for the Gathering and Processing and Water Handling segments were $26 million and $30 million, respectively, totaling $56 million. General and administrative expenses, excluding equity-based compensation, were $10 million. Total operating expenses included $12 million of equity-based compensation expense and $38 million of depreciation.
Free cash flow before dividends was $152 million, a 9% increase compared to the prior year quarter. The following table reconciles net income to adjusted EBITDA and free cash flow before and after dividends:
| Three Months Ended June 30 | 2023 | 2024 |
|---|---|---|
| Net Income | $87,012 | $86,037 |
| Adjusted EBITDA | $242,525 | $254,992 |
| Free Cash Flow before dividends | $138,553 | $151,530 |
| Free Cash Flow after dividends | $30,626 | $43,246 |
Strategic Acquisitions and ESG Initiatives
During the quarter, Antero Midstream acquired bolt-on Marcellus gathering and compression assets for $70 million, enhancing its throughput volumes. Additionally, the company published its 2023 ESG Report, highlighting its emissions reduction progress, significant local economic impacts, increased water recycling rate, and continued commitment to safety.
Overall, Antero Midstream Corp's Q2 2024 performance demonstrates solid financial health and strategic growth through acquisitions, positioning the company well within the midstream energy sector.
Explore the complete 8-K earnings release (here) from Antero Midstream Corp for further details.
