Antero Midstream Corporation

Hello, and welcome to the Antero Midstream fourth quarter 2022 earnings conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Justin Agnew. Please go ahead, Justin.

Good morning, and thank you for joining us for Antero Midstream's fourth 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.anteramidstream.com, where we've 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 reconciliations to the most comparable gap financial measures. Joining me on the call today are Paul Rady, 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. 2022 was an exceptional year for Antero Midstream. Despite the inflationary environment, we delivered capital expenditures below guidance and EBITDA at the high end of guidance. We completed two bolt-on free cash flow accretive strategic acquisitions that extended our dedicated underlying inventory to over two decades. With these achievements, Antero Midstream is in the strongest financial position since its IPO with a very attractive five-year outlook. I'll begin my formal remarks on slide number three, titled Delivering Consistent Returns on Invested Capital. In our 2022 capital expenditures, we were at $265 million, below our guidance range of $275 to $300 million. and approximately flat year over year. This is a tremendous achievement by our midstream planning and procurement teams to deliver these results in the inflationary environment that we're in today. I'd also like to highlight the midstream operations team that maintained asset uptime availability of over 99% in 2022. This exemplary performance contributed to our strong financial results for the year and allowed us to return to deliver a return on invested capital of 17% in 2022. The consistency of our operations and returns on our invested capital support our dividend and balance sheet strength. Now let's move to slide number four titled capital declining in 2023. The chart on the left hand side of the page illustrates the decline in the high pressure trunkline capital depicted in orange that drives much of our capital reduction in 2023. Of our 2023 capital budget, approximately 90% will be invested in the Marcellus shale in the liquids rich midstream corridor. We expect this declining capital trend to continue beyond 2023 while still delivering EBITDA growth. Lastly, I want to finish my comments on the strength of AR and the stability of its development program on slide five titled Premier Customer in Appalachia. As shown on the left-hand side of the page, AR has paid down over $2.6 billion of debt over the past three years. This has resulted in leverage at year-end 2022 of just 0.4 times. This conservative debt reduction strategy as opposed to initiating a dividend policy or adding absolute debt through acquisitions, positions AR to maintain low leverage throughout commodity cycles. Importantly, while other E&Ps have seen their leverage and debt reduction targets extend due to the decline in commodity prices, AR has already achieved its initial debt reduction target. As a result, AR does not expect a change in its development plan that drives growth at AM. This is driven by a number of strategic and competitive advantages that AR has. First, AR sells 100% of its gas production out of basin and approximately 75% of its gas to the LNG fairway. This results in premium pricing relative to NYMEX and more importantly for AM, the ability to avoid volatile local basis in Appalachia that could result in shut-in volumes at certain times. Second, AR is one of the largest NGL producers in North America, with exposure to the liquid's pricing uplift and tailwinds from China reopening. Based on consensus estimates for 2023, AR's liquids revenue as a percent of total revenue is approximately 45%, versus the peer average of just 22%. Lastly, AR only needs two to three rigs and one to two completion crews to deliver gross volume growth on AM's assets. In inflationary environments like today, it's a competitive advantage to operate in Appalachia, where development costs are roughly half of what you see in other gas basins. Steeper decline rates, geologic complexity, and increased competition for rigs and completion crews all contribute to the higher development costs outside of Appalachia. This will likely lead to reductions activity in these other basins and impact midstream providers that are active in these areas. In summary, AM is well positioned to deliver on its five-year targets, supporting a premier customer with low debt in a competitively advantaged basin. With that, I will turn the call over to Brendan.