Antero Midstream (AM) Q3 2026 Earnings Call: EBITDA and Pipeline Growth

Key Takeaways

• Antero Midstream Corporation (AM) reported Q3 2026 adjusted EBITDA of $291 million, up 3% year over year, despite approximately 10 Bcf of throughput curtailments.
• Gathering and compression volumes increased by 19% and 17%, respectively, while capital investment totaled $51 million.
• Free cash flow after dividends reached $449 million, including $377 million of Clearwater litigation proceeds. The company used the cash flow to reduce debt by more than $400 million and accelerate share repurchases.
• Leverage declined to 2.8x as of September 30, below AM’s 3.0x target and one full turn below its year-end 2022 peak.
• Management expects Q4 2026 adjusted EBITDA to reach a company record and grow at a high-single-digit rate sequentially, supported by freshwater delivery and modest throughput growth net of expected curtailments.
• For 2027, management expects double-digit year-over-year EBITDA growth and more than $100 million of capital spending incremental to the organic program for East Side Express and other regional gas-demand projects.

Key Financial Data

Business and Operating Performance

Antero Midstream continued expanding its integrated Marcellus Shale infrastructure through the HG acquisition, organic gathering and water projects, and its new regional pipeline business unit.

Two completion crews were operating on acreage dedicated to AM, supporting two drilled but uncompleted growth pads. Both the legacy and HG water systems achieved 100% uptime during Q3. The company remains on track to complete the HG Water System integration by year-end and realize the water synergies assumed in the acquisition.

Construction continued on East Side Express. Management said multiple downstream counterparties have shown interest in accessing Antero Resources’ natural gas through the pipeline. The project is expected to include roughly seven interconnections with downstream pipelines.

AM is also evaluating several billion dollars of potential infrastructure projects, including a north-south regional pipeline, laterals to natural gas demand centers and integrated power opportunities. Management said the company intends to use its infrastructure to capture more of the value chain as existing third-party agreements expire.

Since year-end 2022, AM has integrated five acquisitions totaling $1.4 billion, invested more than $1 billion in organic growth capital, increased throughput by over 1 Bcf per day and reduced its share count by more than 6 million shares.

Management Guidance

Management expects Q4 2026 adjusted EBITDA to set a company record and increase at a high-single-digit rate from Q3. The anticipated improvement is based on higher freshwater delivery volumes and modest throughput growth after expected curtailments.

For 2027, management expects double-digit EBITDA growth year over year. Key drivers include higher throughput linked to Antero Resources’ production plans, two completion crews operating throughout the year, additional freshwater deliveries and the completion of the two legacy-acreage growth pads.

The company expects 2027 capital spending to increase by more than $100 million above its organic program, primarily for East Side Express and other regional gas-demand projects.

East Side Express remains scoped at approximately $200 million to $300 million, with completion targeted for late 2028 or 2029. Management is currently assessing the proposed north-south pipeline and said a final investment decision could occur in 2027.

Risks and Items to Watch

Q3 throughput was reduced by approximately 10 Bcf of curtailments, and management’s Q4 outlook still assumes some expected curtailments.

East Side Express has a multi-year construction timeline, while the north-south pipeline remains in the scoping stage and has not yet reached a final investment decision.

The expected 2027 EBITDA growth depends partly on higher Antero Resources throughput, sustained completion activity and increased freshwater delivery volumes.

Analyst Q&A Highlights

Goldman Sachs analyst John Mackay asked about the scope, cost and timing of AM’s regional pipeline projects. Management reiterated a $200 million to $300 million scope for East Side Express, including approximately seven downstream interconnections, with a late-2028 or 2029 timeline.

On the potential north-south pipeline, management cited strong interest in the Clarington market. The company is conducting initial assessment work and may reach a final investment decision in 2027.

Asked about the bridge to 2027 EBITDA growth, management pointed to higher throughput, completion of two drilled but uncompleted pads and increased freshwater delivery from running two completion crews throughout the year.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Greetings. Welcome to Antero Midstream Corporation's Third Quarter 2026 Earnings Call. [Operator Instructions]. Please note that today's conference is being recorded.

At this time, I'll turn the conference over to Dan Katzenberg, Vice President, Investor Relations. Thank you. You may now begin.

Daniel Katzenberg

Thank you for joining us for Antero Midstream's Third Quarter Investor Conference Call. We will spend a few moments 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.

Joining me on the call today are Michael Kennedy, CEO and President of Antero Midstream; Justin Agnew, CFO of Antero Midstream; and Brendan Krueger, CFO of Antero Resources.

With that, I will turn the call over to Mike.

Michael Kennedy

Thanks, Dan. Good morning, everyone. I'll begin on Slide #3. Antero Midstream continues to expand its integrated Marcellus Shale footprint to support growing natural gas demand across North America. This expansion includes our HG acquisition and integration, organic gathering and water growth projects and our new regional pipeline business unit.

Turning first to Water. Two completion crews are operating on acreage dedicated to Antero Midstream, supporting 2 drilled, but uncompleted growth pads. Higher freshwater delivery volumes in the fourth quarter, combined with modest throughput growth net of expected curtailments are expected to drive high single-digit EBITDA growth quarter-over-quarter.

We also remain on track to complete the HG Water System Integration by year-end and realize all of the water synergies assumed in the acquisition. Both our legacy and HG water systems achieved 100% uptime in the third quarter, positioning us well for full operational integration.

Looking ahead to 2027, these growth pads and water system integration are expected to drive double-digit year-over-year EBITDA growth.

Turning to our newly established regional pipeline business unit. We continued construction on the East Side Express. Since announcing the project last quarter, we have seen interest from multiple downstream counterparties seeking access to AR's natural gas through the pipeline. This interest underscores a shift in industry dynamics in Appalachia.

Unlike the producer push expansions of the past, today's opportunities are driven by demand pull from LNG facilities, utilities and growing electrification of America.

Importantly, unlike the previous wave of expansions that were farmed out to third parties, Antero Midstream now has the scale, balance sheet capacity and expertise to pursue these opportunities. We are actively pursuing several billion dollars in potential projects, including our first North-South directed regional pipeline, laterals to natural gas demand centers and integrated power opportunities.

As existing third-party agreements expire, we plan to leverage our infrastructure to own more of the value chain previously served by those providers. This strategy positions AM to play an integrated role in expanding AR's margins and to serve as the industrial builder in West Virginia, delivering customized infrastructure that connects growing demand with investment-grade producers.

With that, I'll turn the call over to Justin.

Justin Agnew

Thanks, Mike. I'll start with our third quarter highlights on Slide #4. Gathering and compression volumes increased by 19% and 17%, respectively. As noted in the press release, throughput was impacted by approximately 10 Bcf of curtailments during the quarter.

Adjusted EBITDA for the third quarter was $291 million, which was a 3% increase year-over-year. Capital invested during the quarter was $51 million, which marked another quarter of EBITDA growth and flat capital.

Free cash flow after dividends was $449 million, including $377 million of Clearwater litigation proceeds. This free cash flow was utilized to reduce debt by over $400 million during the quarter and accelerate share repurchases once our leverage target was achieved.

I'll conclude our prepared remarks on Slide #5, which highlights the balance sheet improvement over the last several years. As of September 30, our leverage was 2.8x, below our 3x target and in line with this time last year. As you can see on the right-hand side of the page, our leverage is down a full turn from its peak at year-end 2022 after our first dry gas gathering acquisition.

Since then, we have integrated 5 acquisitions totaling $1.4 billion, invested over $1 billion in organic growth capital, increased throughput by over 1 Bcf a day and reduced our share count by over 6 million shares.

Looking ahead to 2027, we expect a step-up in capital as we invest over $100 million of capital incremental to our organic program related to East Side Express and other regional gas demand projects.

Even after these in-hand growth projects, we still have significant balance sheet capacity to pursue the large infrastructure opportunity set, Mike referenced in his comments, while still maintaining peer-leading leverage and debt levels.

In summary, our balance sheet, consistent free cash flow generation and integrated platform position us well to capitalize on the growing need for natural gas infrastructure in Appalachia.

With that, operator, we are ready to begin the Q&A.

Operator

[Operator Instructions]. The first question comes from the line of John Mackay with Goldman Sachs.

Question-and-Answer Session

John Mackay

I appreciate the updates on East Side Express and some of the early comments on North-South. Last call, you guys were still, I guess, kind of codifying the scope on East-West. So just maybe if you can kind of share a little bit more of what the latest thoughts are in terms of size, total CapEx. And then off of that, any early read on North-South would be interesting.

Justin Agnew

Yes, really no change to the scope of that project, call it, $200 million to $300 million. Again, that's going to be roughly 7 interconnects with downstream pipelines really positioning for that demand pull industry dynamic we talked about. So really no change in that scope. Everything remains kind of on track, on schedule for that late '28, 2029 time frame.

Michael Kennedy

Yes. And then on the North-South, I don't know if you -- John, if you caught the AR call, but we're having so much interest in the Clarington market. I think it'd be natural and very opportunistic for us to build a North-South from our field up into that area.

John Mackay

And maybe just any time line on that?

Michael Kennedy

Yes, over the next couple of years. We're actually scoping it right now, having a little initial capital right now assessing it. But I think you'll probably see us FID that in 2027.

John Mackay

All right. That's clear. And then second one for me. I appreciate the commentary on kind of double-digit EBITDA growth into next year. Obviously, the third quarter and kind of implied fourth quarter are softer. You guys touched on that in terms of the curtailments and some of the kind of more actual physical constraints. But maybe just walk through a little bit of the bridge for us in terms of kind of underlying volumes versus margin versus anything else.

Michael Kennedy

Yes. I don't think the fourth quarter is soft. It will be an all-time high EBITDA for the company by quite a margin or quite an amount. So not soft there. And then '27 we will have 10% on that. You saw AR's guidance at 15 to 20 Bcf, but it's still at 4.3 Bcfe versus the 4.2, 4.3, 4.4, I believe it was for AR. So you'll have that growth in throughput.

Obviously, that's a net number. So you have a little more on that on gross for AM. And then you have those 2 water projects, the completion of the DUCs on the AR legacy acreage. So that will result in substantial water volume growth. So that will drive the Q4 up in that high single-digit EBITDA growth quarter-over-quarter.

And then looking at next year at that 4.5 that AR guided, you'll see that obviously come through in the throughput. And then you'll have more freshwater delivery as we run 2 completion crews flat for the year. So you put that all together and you get the double-digit EBITDA growth year-over-year, '27 over '26.

Operator

[Operator Instructions]. It appears we have no additional questions. We've reached the end of our question-and-answer session. I'll hand the floor to management for any closing or final remarks.

Daniel Katzenberg

I'd like to thank you for joining the earnings conference call this quarter. If you have any further questions, please feel free to reach out. Have a good day.

Operator

This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation. Have a wonderful day.