Antero Midstream Corporation

Greetings, and welcome to the Antero Midstream Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Michael Kennedy, Chief Financial Officer. Please go ahead, sir.

Thank you for joining us for Entero Midstream's third quarter 2020 investor conference call. We'll spend a few minutes 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 www.enteromidstream.com, where we've provided a separate earnings call presentation that will be reviewed during today's call. Before we start our comments, I'd first like to remind you that during this call, Antero management will make forward-looking statements. Such statements are based on our current judgments regarding factors that will impact the future performance of Antero resources and Antero Midstream and are subject to a number of risks and uncertainties, many of which are beyond Antero's control. Actual outcomes and results could materially differ from what is expressed, implied, or forecast in such statements. Today's call may also contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. Joining me on the call today are Paul Rady, Chairman and CEO of Intero Resources and Intero Midstream, Glenn Warren, President and CFO of Intero Resources and President of Intero Midstream, and Dave Conolongo, Vice President of Liquids Marketing and Transportation. With that, I'll turn the call over to Paul.

Thanks, Mike. I'd like to start by highlighting the progress AR has made on its asset sale program in 2020, beginning on slide number three, titled AR Asset Sale Refinancing and Debt Repurchase Update. To date, AR has executed $751 million of asset sales, achieving the bottom end of its $750 million to $1 billion asset sale target. These transactions have allowed AR to reduce its near-term maturities by $1.3 billion since initiating the asset sale program in the fourth quarter of 2019 and and positions AR to repay its 2021 and 2022 maturities. AR continues to monitor various asset sale markets, and any additional proceeds will be used for further debt reduction. The current natural gas and NGL fundamentals continue to look encouraging as we head into 2021. as Dave Cantalongo will discuss in his comments. This further supports upside to AR's free cash flow profile driven by the scale AR has achieved over the last several years. To put it in perspective, as the second largest NGL producer in the U.S., every $5 per barrel change in C3 plus NGL prices improves AR's annual cash flow profile by over $225 million. On the natural gas side, AR is 100% hedged in 2021, but the improving gas strip increases AR's underlying value and opportunity set. Now let's turn to slide number four, titled AR Firm Transportation Provides Stability. The red line in the chart represents the Appalachian basis differential, which has averaged 82 cents below NYMEX going back to 2014. AR's premium FT from transportation has delivered a 5-cent discount to NYMEX over that same time frame. It is also worth noting that since AR has had access to its entire FT portfolio in 2018, it has been able to realize a six-cent premium to NYMEX to date. During the third quarter, this benefit was even more pronounced as Appalachian basis differentials blew out and regional prices traded at $1.50 below NYMEX. As depicted on the slide, AR's FT portfolio provides pricing stability and production flow assurance, de-risking AR's business model. It effectively provides an insurance policy that protects physical gas flow and allows AR to hedge liquid NYMEX Henry Hub prices. This has allowed AR to avoid shut-ins and curtailments experienced by other peers in Appalachia, and in turn, it drives stability and reliability for AM's revenue stream. Lastly, I would like to briefly discuss AM's corporate sustainability report, which highlights our outstanding environmental, social, and governance, or ESG, performance on slide number five. Since its inception, Antero Midstream has been committed to environmental excellence, and our greenhouse gas intensity is one of the lowest in the industry. Our methane leak loss rate of 0.017% in 2019 was significantly below the one future industry and sector targets of of 1% and 0.28% respectively. Looking forward, we believe natural gas will be key to the energy transition in the coming decades as a complement to renewable energy growth. As one of the largest natural gas gathering and processing midstream companies in the U.S., we are well positioned to maintain our peer-leading ESG position while striving to improve our metrics even further through our 2025 environmental targets. On the governance front, in 2019, Antero Midstream transitioned away from the MLP structure to a full C-Corp structure, significantly enhancing shareholder rights and improving corporate governance. Our board is comprised of a majority of independent directors, and our compensation plans are based on metrics aligned with shareholder value, including return on invested capital, leverage, ESG metrics, and per share cash flow growth. With that, I'll turn it over to Dave Canalondo.