Antero Midstream Corporation

Greetings and welcome to the Antero midstream second quarter 2022 earnings conference call. At this time, all participants are in a listen only mode. A brief 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. And as a reminder, this conference call is being recorded. It is now my pleasure to introduce Justin Agnew, director of finance. Thank you, Justin. You may begin.

Good morning, and thank you for joining us for Antero Midstream's second quarter 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 CDO 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 will discuss AM's infrastructure expansion into the liquids-rich midstream corridor, capital synergies from relocation and reuse of legacy assets, and well performance on AM's gathering system. Brendan Krueger will then highlight our quarterly results, growth outlook, and transition to consistent free cash flow generation after dividends. I'll start my comments on slide number three, titled Castle Peak Compression Construction. This slide illustrates the construction progress on our Castle Peak compressor station in the liquids-rich midstream corridor in the Marcellus Shale. This station was on time and on budget, which is a testament to the planning, engineering, and civil groups given the topography as shown in the pictures on this slide. As you can see on the bottom right photograph, the Castle Peak Station has an initial capacity of 160 million cubic feet a day. In 2023, we will expand this station's capacity by another 80 million a day to a total of 240 million cubic feet per day. This phasing in of capacity allows us to maintain high utilization rates and defer capital until the capacity is needed on a just-in-time basis. Importantly, the Castle Peak Station is the first station that we will be relocating compression units from Antero Midstream's assets base that are currently underutilized. As detailed on slide number four, titled Capital optimization from relocation and reuse, our historical utilization has been very consistent, averaging 85% over the last five years. This is a result of our unparalleled visibility into AR's development plan and just-in-time investment philosophy. Because of these high utilization rates, we haven't previously had opportunities to relocate and reuse underutilized capacity. As you can see on the right-hand side of the page, we plan to move four units from a legacy station to expand the Castle Peak compressor station by $80 million a day in 2023. Compared to buying and installing new units, we expect to save approximately $5 million in capital on this station alone. In 2024, we expect to use the remaining eight units from the highlighted legacy station for our new-build Grays Peak Compressor Station. We expect this reuse opportunity to save AM approximately $15 million, resulting in total capital savings of $20 million. Importantly, both of these stations are located in the liquids-rich midstream corridor, outlined in purple, where AR's development plan is focused over the next several years. Looking forward, AM is well positioned from a capacity perspective to accommodate the highly visible throughput growth expected over the next several years on AM's dedicated acreage. I finish my remarks on slide number five, entitled Improving and Consistent Well Performance. which highlights the well performance since 2018. The plot illustrates the average cumulative production over the first 90 to 180 days of the well. As evidenced on this page, well performance at AR continues to improve as AR has optimized completion techniques, well spacing, and has moved into the heart of its development area. To date in 2022, AR's average wells have displayed a 55% increase in cumulative production versus the 2018 average. These results in the liquids-rich midstream corridor give us tremendous confidence in the underlying resource that supports the throughput growth at AM. This also results in a more capital-efficient business model at AM. Lastly, I want to highlight a Utica pad included in the 2022 production plot. Wells on this pad have outperformed the 2021 and 2020 production plots average by 50% and 65% respectively. While AR's development plan is focused on the liquids rich Marcellus shale, there are several pads planned in the Utica over the next five years located in areas with existing midstream infrastructure. This results in minimal capital spend for AM in the Utica while still capturing volumes from a strong expected well performance. In summary, we continue to optimize our capital program as we expand our footprint into the liquids rich midstream corridor. The well results give us tremendous confidence in executing our growth plan while maintaining high asset utilization rates. This results in attractive return on invested capital, which we estimate will remain in the high teens. Importantly, we are not reliant on competing for third-party growth projects that dilute our overall corporate returns. With that, I'll turn the call over to Brendan Krueger.