Antero Midstream Corporation

Greetings and welcome to the Ontario Midstream second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Brendan Kruger, CFO of Ontario Midstream. Thank you. You may begin.

Thank you, operator. Thank you for joining us for Antero Midstream's second quarter 2021 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.anteromidstream.com, where we have provided a separate earnings call presentation that will be reviewed during today's call. Before we start our comments, I would 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 Antero Resources and Antero Midstream, and Michael Kennedy, CFO of Antero Resources and the Director at Antero Midstream. With that, I'll turn the call over to Paul.

Thanks, Brendan. I'll start on slide number three, highlighting the continued improvement in the financial strength of Antero Midstream's primary customer, Antero Resources. Antero Resources, or AR, has paid down almost $600 million of debt year to date and has reduced its leverage by almost a turn and a half to 1.7 times achieving its leverage target of 2.0 times well ahead of schedule. This resulted in an undrawn revolving credit facility and $1.9 billion of liquidity as detailed on the right-hand side of the page. As we mentioned this morning on the Antero Resources call, AR is targeting over $750 million of free cash flow in each of 2021 and 2022, assuming current strip prices. This level of free cash flow, strong balance sheet, and flexible liquidity position collectively provide protection against a downside price scenario and further de-risks the long-term growth outlook for Antero Midstream. Now, let's turn to slide number four, which illustrates the benefits of AR's firm transportation portfolio on throughput certainty for AM. The green light on the chart illustrates AR's historical gas price differential to NYMEX, and the red line illustrates the Appalachian differentials. As you can see, AR's FT portfolio has generated a premium to NYMEX and significantly reduced realized pricing volatility over the last several years. This provides AM with consistent volume and cash flow assurance as AR does not need to shut in volumes when Appalachia basis blows out like many of its peers have to. This gives Antero Midstream an additional level of protection as we begin construction on additional infrastructure supporting AR and the drilling partnership. In addition, this competitive advantage resulted in AR generating price realizations that were $0.90 in MCF better than in-basin Appalachian pricing, which was $0.72 in MCF behind NYMEX. These attractive price realizations further support drilling economics that underpin the volume growth and returns at AM. I'll finish my comments by looking at slide number five to highlight AM's asset utilization rates and discuss future growth projects. As you can see on the left-hand side of the page, despite AR's transition to a maintenance capital program in 2019 and 2020, AM was able to maintain asset utilization rates greater than 90% across its assets. AM's joint venture processing capacity over the last year has been 100% utilized, and we recently commissioned the new SmithBerg One processing plant which added an additional 200 million cubic feet a day of processing capacity in the third quarter. This brings AM's total joint venture processing capacity to 1.6 BCF a day. SmithBerg 1 will support processing volume growth from the drilling partnership targeting Marcellus liquids-rich development over the next several years. Similarly, on the compression side, we are currently constructing two stations in the Marcellus liquids rich regimes that will add 480 million cubic feet a day of additional compression capacity. These two stations, along with the associated high pressure gathering projects, are expected to be placed online in 2022 to facilitate the development in Tyler and Wetzel counties in West Virginia. Importantly, AM has the visibility into AR and the Drilling Partnerships Development Plan that allows AM to maintain these high asset utilization rates as we transition back to a growth outlook. As depicted on the right-hand side of the page, we expect volume growth combined with high asset utilization rates to generate EBITDA growth and, more importantly, mid to high teens returns on invested capital on average through 2025. With that, I will turn it over to Brandon.