Antero Midstream Corporation

Hello, and welcome to the Ontario Midstream fourth quarter 2021 earnings call and webcast. At this time, all participants are in 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 Justin Agnew, Director of Finance. Please go ahead, sir.

Good morning and thank you for joining us for Ontario Midstream's fourth quarter and full year 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.antaromidstream.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 can 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 Rainey, Chairman and CEO of Antero Resources and Antero Midstream, Brendan Krueger, CFO of Antero Midstream, and Michael Kennedy, CFO of Antero Resources and Director of Antero Midstream. With that, I'll turn the call over to Paul.

Thanks, Justin. In my comments, I'll discuss AM's 2022 capital budget, along with our updated five-year, $1 billion organic project backlog. These projects are underpinned by AR's peer-leading liquids-rich inventory in Appalachia, the lowest-cost gas basin in the U.S., Importantly, this infrastructure drives growth at AM and plays a vital role in supplying clean natural gas, both domestically and abroad, to help lower overall global emissions. We believe that building and owning midstream assets with high throughput visibility in the lowest cost basin is the most attractive way to deliver value to our shareholders. Now let's discuss some of the key infrastructure projects at AM. I'll start on slide number three, titled AM 2022 Capital Budget and Key Projects. First, as depicted on the right-hand side of the page, we placed the Lincoln Compressor Station in service in the fourth quarter of 2021, which was accelerated from the first quarter of 2022. For the full year 2022, we have budgeted capital investments of $275 to $300 million, which is in line with our comments made on last quarter's earnings call. Entero Midstream's 2022 capital budget includes approximately $45 million for two additional compressor stations that will be placed online in 2022 and 2023. These compressor stations are located in the core of the liquids-rich Marcellus fairway, where AR's development is focused over the next several years. Importantly, AM's visibility into AR's development plan allows us to phase in capacity at these future stations on a just-in-time basis. Entero Midstream has also budgeted $50 million of remaining capital investment for a 20-mile high-pressure line from Wetzel County to the Sherwood and Smithburg processing complex, highlighted in green. This trunk line connects AR's core development area, highlighted in blue, with our processing capacity and supports AM's throughput growth over the next several years. In addition to some of these larger projects, we will continue to invest in the low-pressure gathering and water delivery projects, which reflect the remaining capital in the 2022 budget. Slide number four, entitled AM Organic Project Backlog, illustrates AM's $1 billion organic project backlog through 2026. Once the major projects I just discussed are completed, AM will effectively complete the upfront capital investment required to support the drilling partnership. On a quarterly basis, our 2022 capital program is front-loaded and we expect to invest approximately 70% to 75% of our full-year capital budget in the first half of 2022. This results in declining capital investments on a quarterly basis throughout the year. Beyond 2022, we expect declining capital budgets from 2023 through 2026. These just-in-time capital projects include our bread and butter gathering, compression, and water projects infrastructure that support the low single-digit throughput and EBITDA growth over the next several years. Importantly, This development visibility, the short lead time projects, and the just-in-time approach allows us to generate peer-leading return on invested capital, or ROIC, which is illustrated in yellow. In 2021, AM generated its highest annual ROIC of 18%, and we expect to generate high teens ROICs over the next five years as our EBITDA growth and capital declines. I'll finish my comments on slide number five, titled AR, Peer-Leading Liquids-Rich Drilling Inventory. Every year at AR, we do an extensive technical analysis of the Appalachian Basin to evaluate undrilled locations, well performance, and EURs in Appalachia. The map on the right-hand side of the page illustrates this analysis with AR's acreage in yellow and drilled stick locations in red compared to AR's premium and Tier 2 acreage outlines. As you can see, AR holds an extensive position in Appalachia, particularly in the liquids-rich core area of West Virginia, west of the 1100 BTU line. Specifically, AR holds over 925 liquids-rich premium core locations with laterals averaging over 13,250 feet, which is nearly 40% of the premium liquids-rich core on drilled locations in Appalachia. This leading liquids-rich inventory is the focus of AR's development program over the next decade and given the attractive economics for liquids-rich locations compared to dry gas locations at current commodity prices. The map also illustrates AR's highly contiguous acreage position that results in an efficient midstream build-out that generates peer-leading return on invested capital for AM. Importantly, AR continues to be active in its organic leasing program, acquiring bolt-on acreage. This organic approach is both cost-effective for AR and capital-efficient for AM compared to corporate M&A transactions, both in Appalachia or out of Basin. This organic approach, historically avoiding the competitive acquisition markets, has resulted in strong balance sheets and attractive outlooks at both entities. With that, I'll turn the call over to Brendan.