Antero Midstream Corporation

Greetings. Welcome to the Ontario Midstream 3Q 2022 earnings conference call. At this time, all participants are on a listen-only mode. A 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. Please note this conference is being recorded. I'll now turn the conference over to your host, Dan Katzenberg, Finance Director. You may begin.

Thank you for joining us. for Antero Midstream's third 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 anteromidstream.com, where we have provided a separate earnings call presentation that will be reviewed during today's call. 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 reconciliation 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, Brennan 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, Dan. First and foremost, the third quarter was one of the more momentous quarters for Antero Midstream. since our IPO in 2014. During the quarter, we generated $30 million of free cash flow after dividends and began paying down debt. We've been talking about this critical inflection point for several quarters, and it has finally arrived. Second, we announced our first organic acquisition of gathering and compression assets in the Marcellus shale, which are highly complementary to our current assets. This acquisition is not only a strategic fit for AM, but further enhances our free cash flow profile, as Brendan will discuss in his remarks. To take a closer look at the acquisition, I will direct you to slide number three, titled Marcellus Bolton Acquisition. We closed this $205 million acquisition from Crestwood earlier this week, and we have started integrating the asset and a number of former Crestwood employees into the AM platform. As you can see on the map, the primarily dry gas gathering and compression system is highly complementary to AM's existing footprint in the core of the Marcellus shale. The acquisition increases Antero Midstream's compression capacity by 20% and gathering pipeline mileage by 15%. Importantly, the assets have significant available capacity for growth without material capital investment. As we look at the asset today, we have identified over $50 million of discounted future capital avoidance through connecting the system to AM's assets and rerouting the volumes to fill underutilized compression capacities. We also plan to move and reuse underutilized compressor units into the liquids-rich midstream corridor, similar to the reuse opportunity we discussed on last quarter's conference call. This results in both capital and operating expense synergies. Most importantly, the acquisition includes approximately 425 undeveloped drilling locations held by AR that will be dedicated to AM for gathering and compression. I think it's important to reiterate this significant undeveloped value and optionality, which extends AM's underlying inventory well into the 2040s. In addition to this acquisition, year to date, Antero Resources has added approximately 60 locations through its organic leasing program. This has effectively replenished the underlying inventory at AM for all the wells completed in 2022. When you combine these 60 locations with the 425 undeveloped locations on the acquired assets, This 485 additional locations represents an incremental six to seven years of highly visible economic well connects for AM. Importantly, AR's organic leasing program is predictable, repeatable, and cost effective. The ability to consolidate acreage in close proximity versus acquisitions that often add scattered locations dedicated to other midstream companies provides significant capital efficiencies and long-term visibility for AM. This characteristic is unique to AM and one of the reasons we continue to generate peer leading returns on invested capital in the mid to high teens. Now let's move on to slide number four titled milestone capital projects completed. This slide illustrates the major compression and high pressure gathering projects that we've constructed over the last 18 months highlighted in green. During the second quarter, we completed phase one of the Castle Peak compressor station, which added 160 million cubic feet a day of compression capacity in the liquids rich midstream corridor in Tyler and Watson counties. Phase two, which will reuse underutilized compressor units, will add another 80 million cubic feet a day of capacity in 2023. During the third quarter of 2022, we finished construction on our 20-mile high-pressure pipeline from Tyler and Wetzel counties that delivers liquids-rich gas to the Sherwood and Smithburg processing complexes With these milestone projects now complete, the stage is set for highly visible throughput growth from the liquids-rich midstream corridor that drives EBITDA growth at AM for the next several years. In addition, AM's capital budgets will continue to decline, which will drive expanding free cash flow and declining leverage. In summary, we generated significant momentum at AM during the quarter. further de-risk the business model, and crystallize the outlook over the long term. Our capital budgets will continue to decline, driving an expanding free cash flow profile. Our unparalleled long-term visibility gives us tremendous confidence in delivering this plan and continuing to generate shareholder value. With that, I'll turn the call over to Brendan.