Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Antero Midstream Corp (AM, Financial) reported a 5% year-over-year increase in adjusted EBITDA for the second quarter, reaching $255 million.
- Free cash flow after dividends during the quarter was $43 million, a 41% increase compared to the second quarter of last year.
- The company successfully closed a $70 million acquisition from Summit Midstream, which was immediately accretive to free cash flow.
- Antero Midstream Corp (AM) maintained its leverage at 3.1 times despite the acquisition, highlighting the attractive purchase price and immediate accretion to free cash flow.
- The company received an upgrade from S&P to double-B plus on its corporate credit rating, marking the fourth ratings increase since the end of 2020.
Negative Points
- There was a notable decline in water volumes, dropping to about 81,000 barrels a day from 113,000 barrels a day in the first quarter.
- The company is currently running only one completion crew, which may impact future volumes and operational efficiency.
- The deferred pad at Antero Resources could potentially delay the gathering and compression of volumes from five wells, affecting future guidance.
- The company faces challenges in securing third-party opportunities, particularly in Ohio, despite ongoing conversations.
- There is uncertainty regarding the timing and impact of the buyback program, which is contingent on achieving the three times leverage target.
Q & A Highlights
Highlights from Antero Midstream Corp (AM) Q2 2024 Earnings Call
Q: Was the potential delay in gathering and compressing volumes from the deferred pad at AR reflected in your most recent guidance update?
A: Yes, the delay is currently included in the guidance update. Any further deferral would still fall within the provided guidance range.
Q: Can you explain the decline in water volumes in the second quarter despite an increase in serviced wells?
A: The decline is related to the timing of well servicing. A seven-well pad began servicing at the end of June, with most volume expected in the third quarter. The decline also reflects AR's shift from two completion crews to one.
Q: What is the thought process on buybacks once the three times leverage target is achieved?
A: We expect to start the buyback program in the second half of the year, utilizing the $500 million authorization over a short timeframe, given current leverage trends.
Q: Can you provide more details on the drivers of base business growth and the increased 2024 EBITDA guidance following the Summit Midstream acquisition?
A: The acquisition added about $15 million to 2024 EBITDA. The base business growth is driven by maintenance capital at AR, CPI on fees, and flat volumes year-over-year, leading to low single-digit EBITDA growth.
Q: Should we expect a similar number of wells to be brought into service in Q3 as in Q2?
A: Yes, Q3 should see a similar level of well service, with a slight step down from Q2. Q4 should mirror Q1 levels, assuming two completion crews are run.
Q: How does AR having one less completion crew impact volumes, and what are the expectations for the number of completion crews for the rest of the year?
A: With one completion crew, volumes should remain flat at around 80,000 barrels a day in Q3. If two completion crews are run in Q4, volumes should be similar to Q1 levels.
Q: How sensitive is the timing of the buyback program to the deferral at AR?
A: The timing of the buyback program is not significantly impacted by the deferral at AR, given the overall debt levels.
Q: Can you provide an update on third-party opportunities?
A: Conversations on third-party opportunities, particularly in Ohio, are ongoing. However, securing third-party deals remains challenging.
Q: What is driving the increase in rates for both gas and water quarter-over-quarter?
A: The increase in gas rates is due to the accounting treatment of the Summit bolt-on acquisition. There should be no significant impact on water rates.
Q: Can you clarify the impact of the Summit Midstream acquisition on high-pressure gathering rates?
A: The change in high-pressure gathering rates is due to the accounting treatment of the Summit acquisition, which added about $20 million in annual EBITDA.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
