aluxum/E+ via Getty Images Introduction It's time to talk about energy - yes, again. However, in this article, I'll do things differently, as this is an article I had on my planning for a while, I just missed some "puzzle pieces" to complete what I'm working on here. As most of my readers know, I have been very bullish on oil (and gas) since the end of the pandemic, mainly due to increasingly favorable supply/demand dynamics. With that said, I cover a wide range of energy stocks in a variety of industri ...

DENVER, May 2, 2024 /PRNewswire/ -- Antero Midstream Corporation (NYSE: AM) ("Antero Midstream" or the "Company") today announced a bolt-on acquisition of gathering and compression assets in the Marcellus Shale for $70 million from Summit Midstream Partners LP (NYSE: SMLP). The transaction closed on May 1, 2024 with an effective date of April 1, 2024. In addition, the Company announced that it has called for redemption all of its outstanding 7.875% Senior Notes due 2026 (the "2026 Notes") for redemption on ...

Core Viewpoint - The market is currently favoring growth stocks over value stocks despite economic indicators suggesting a preference for value investments. This trend is expected to shift as the market reassesses the potential of midstream companies like Antero Midstream, which is seen as undervalued with strong fundamentals and high yield potential [1][2][25]. Company Overview - Antero Midstream operates as a C-Corp and has a unique position in the midstream sector, primarily serving Antero Resources, which has low breakeven costs and significant reserves in the Appalachian Basin [10][12]. - The company has a robust infrastructure with over 400 miles of low-pressure pipelines and 230 miles of high-pressure pipelines, positioning it well for future growth [12]. Financial Performance - Antero Midstream reported a record-breaking free cash flow of $182 million before dividends, with post-dividend free cash flow reaching $74 million, marking a significant improvement in financial health [18][21]. - The company has reduced its net leverage ratio from 3.3x to 3.1x, indicating a stronger balance sheet and the ability to support its dividend and growth initiatives [20][21]. Dividend and Shareholder Value - Antero Midstream currently offers a dividend yield of 6.3%, with expectations for dividend growth as the company approaches its leverage target of 3.0x [22][25]. - Analysts project that the company could generate $700 million in free cash flow next year, allowing for substantial shareholder distributions through dividends and buybacks [22][25]. Market Position and Outlook - The natural gas market is expected to see a 25% increase in demand by 2050, with Antero Midstream positioned to benefit from this growth due to its strategic assets and relationships [6][10]. - The company is trading at a blended P/OCF ratio of 8.5x, below its historical average, suggesting significant upside potential as the market recognizes its value [22][23].

Financial Data and Key Metrics Changes - Antero Midstream reported record-breaking financial results for Q1 2024, with a 4% increase in gathering volumes and a 6% increase in processing volumes compared to the previous year [11] - The company achieved double-digit EBITDA growth alongside double-digit declines in capital expenditures year-over-year, resulting in $182 million of free cash flow before dividends and $74 million after dividends, both record figures [11] - Leverage decreased to 3.1x from 3.3x at year-end 2023, supported by EBITDA growth and debt reduction [12] Business Line Data and Key Metrics Changes - The Grays Peak compressor station was placed in service, with an initial capacity of 160 million cubic feet per day, supporting future throughput growth [6] - Antero Midstream delivered 113,000 barrels per day of freshwater, achieving a 35% improvement in efficiency compared to previous operations [7][8] Market Data and Key Metrics Changes - Antero Resources' firm transportation portfolio allows for premium natural gas price realizations, with expectations of prices above $5 per MMBtu near Henry Hub compared to $3 to $4 per MMBtu further away [9] - 75% of Antero Resources' firm transportation delivers gas to Tier 1 markets, enhancing Antero Midstream's position in supplying LNG globally [9] Company Strategy and Development Direction - The company focuses on capital efficiency and operational improvements, with a commitment to maintaining low breakeven costs for producers [10] - Antero Midstream aims to achieve a 3x leverage target by the second half of 2024, positioning itself for potential share buybacks and further capital returns [13] Management's Comments on Operating Environment and Future Outlook - Management highlighted the increasing demand for natural gas driven by data centers and AI, indicating a strategic focus on directing gas to the Gulf Coast for premium pricing [16] - The company anticipates modest throughput growth in Q2 2024, offset by lower expected freshwater delivery volumes due to reduced completion crews [12] Other Important Information - Antero Midstream completed a small acquisition of gathering systems for $2 million, which is expected to provide future capital savings [33] - The company has maintained a consistent free cash flow generation, marking the seventh consecutive quarter of free cash flow after dividends [13] Q&A Session Summary Question: Increased demand for power related to AI and data centers - Management discussed the demand from data centers and the strategy to direct gas to the Gulf Coast for premium pricing [16] Question: Timing of buybacks and capital allocation priorities - Management indicated that as they approach the 3x leverage target, they will evaluate share buybacks, debt paydown, and bolt-on acquisitions [18] Question: Impact of deferred projects on AM volumes - Management clarified that a deferred project would not impact AM volumes for the year [22] Question: Guidance on liquids-rich area and volume forecast - Management confirmed that there was no change in AM's guidance despite AR's revised outlook, solidifying existing forecasts [26] Question: Debt repurchase decision and further paydown plans - Management explained the rationale behind the debt repurchase and indicated that further debt paydown would be considered as they approach the leverage target [31] Question: Details on the recent acquisition - Management provided insights into the recent acquisition, emphasizing its potential for future capital savings despite low current volume [33]

Core Viewpoint - Antero Midstream reported first-quarter 2024 adjusted earnings per share of 24 cents, matching the Zacks Consensus Estimate, and showing an improvement from 21 cents in the same quarter last year. Total revenues of $279 million exceeded the Zacks Consensus Estimate of $274 million and increased from $259.5 million year-over-year, driven by higher compression and gathering volumes [1]. Operational Performance - Average daily compression volumes reached 3,260 million cubic feet (MMcf/d), up from 3,137 MMcf/d in the prior year and exceeding the estimate of 3,195 MMcf/d. The compression fee remained at 21 cents per Mcf, consistent with the previous year [2]. - High-pressure gathering volumes totaled 2,966 MMcf/d, an increase from 2,801 MMcf/d year-over-year and above the estimate of 2,882 MMcf/d. The average high-pressure gathering fee rose to 22 cents per Mcf from 21 cents [2]. - Low-pressure gathering volumes averaged 3,301 MMcf/d, up from 3,171 MMcf/d in the first quarter of 2023, surpassing the estimate of 3,202 MMcf/d. The average low-pressure gathering fee increased to 36 cents per Mcf from 35 cents [2]. Freshwater Delivery - Freshwater delivery volumes were recorded at 113 MBbls/d, down approximately 8% from 123 MBbls/d in the prior year. The average freshwater distribution fee increased to $4.30 per barrel from $4.21 [3]. Operating Expenses - Direct operating expenses were $53.9 million, a decrease from $57.9 million year-over-year. Total operating expenses rose to $112.8 million from $111.1 million in the same period of 2023 [4]. Balance Sheet - As of March 31, 2024, the company had cash and cash equivalents of $26.1 million and long-term debt of $3,174.9 million [5]. Outlook - For 2024, Antero Midstream expects adjusted EBITDA in the range of $1,020-$1,060 million, indicating a 5% increase from 2023 at the midpoint. Projected free cash flows after dividends are estimated to be between $235-$275 million, with a capital budget of $150-$170 million, reflecting a 14% decrease from 2023 at the midpoint [6].

[Financial and Operating Highlights](index=1&type=section&id=Financial%20and%20Operating%20Highlights) Antero Midstream reported record Q1 2024 results, with Adjusted EBITDA up 10% to $265 million and leverage reduced to 3.1x Q1 2024 Key Metrics vs. Q1 2023 | Metric | Q1 2024 Value | YoY Change | | :--- | :--- | :--- | | Net Income per Diluted Share | $0.21 | +17% | | Adjusted Net Income per Diluted Share | $0.24 | +14% | | Adjusted EBITDA | $265 million | +10% | | Capital Expenditures | $30 million | -11% | | Free Cash Flow after dividends | $74 million | +62% | | Gathering Volumes | N/A | +4% | | Processing Volumes | N/A | +6% | - Leverage was reduced from **3.3x** at year-end 2023 to **3.1x** as of March 31, 2024, with the company expecting to achieve its **3.0x** leverage target in 2024, positioning it for further return of capital to shareholders[2](index=2&type=chunk) - The company placed the Grays Peak compressor station into service with an initial capacity of **160 MMcf/d**[2](index=2&type=chunk) [First Quarter 2024 Financial Results](index=2&type=section&id=First%20Quarter%202024%20Financial%20Results) Q1 2024 financial results reflect increased volumes, driving revenues to $279 million and Adjusted EBITDA to $265 million, with Free Cash Flow after dividends up 62% [Operating Volumes](index=2&type=section&id=Operating%20Volumes) Q1 2024 operating volumes showed broad growth in gathering, compression, processing, and fractionation, offset by a decline in fresh water delivery Average Daily Volumes | Volume Type | Q1 2023 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Low Pressure Gathering (MMcf/d) | 3,171 | 3,301 | 4% | | Compression (MMcf/d) | 3,137 | 3,260 | 4% | | High Pressure Gathering (MMcf/d) | 2,801 | 2,966 | 6% | | Fresh Water Delivery (MBbl/d) | 123 | 113 | (8)% | | Gross Joint Venture Processing (MMcf/d) | 1,508 | 1,602 | 6% | | Gross Joint Venture Fractionation (MBbl/d) | 36 | 40 | 11% | - The Joint Venture processing and fractionation capacity was **100% utilized** during the quarter[4](index=4&type=chunk) [Revenue and Expenses](index=2&type=section&id=Revenue%20and%20Expenses) Q1 2024 total revenues increased to $279 million, driven by Gathering and Processing, with direct operating expenses decreasing to $54 million Q1 2024 Revenue and Expense Breakdown (in millions) | Item | Amount | | :--- | :--- | | **Revenues** | | | Gathering and Processing | $218 | | Water Handling | $61 | | **Total Revenues** | **$279** | | **Direct Operating Expenses** | | | Gathering and Processing | $26 | | Water Handling | $28 | | **Total Direct Operating Expenses** | **$54** | - General and administrative expenses, excluding equity-based compensation, were **$12 million** for the quarter[6](index=6&type=chunk) [Profitability and Cash Flow](index=2&type=section&id=Profitability%20and%20Cash%20Flow) Q1 2024 profitability improved with record Net Income, Adjusted EBITDA up 10% to $265 million, and Free Cash Flow after dividends increasing 62% Q1 Profitability and Cash Flow (in millions) | Metric | Q1 2023 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Income | $86.5 | $103.9 | +20% | | Adjusted Net Income | $99.7 | $117.1 | +17% | | Adjusted EBITDA | $241.8 | $265.3 | +10% | | Free Cash Flow before dividends | $153.6 | $182.3 | +19% | | Free Cash Flow after dividends | $45.6 | $74.0 | +62% | - Interest expense decreased by **2%** to **$53 million** compared to the prior year quarter, due to lower average total debt[9](index=9&type=chunk) [Operational and Corporate Updates](index=3&type=section&id=Operational%20and%20Corporate%20Updates) Q1 operational updates include connecting 12 new wells, bringing the Grays Peak compressor station online, and $30 million in capital expenditures - Placed the Grays Peak compressor station into service with an initial capacity of **160 MMcf/d**, utilizing relocated compressor units for approximately **$15 million** of capital savings[12](index=12&type=chunk) Q1 2024 Capital Investments (in millions) | Category | Investment | | :--- | :--- | | Gathering and Compression | $25 | | Water Infrastructure | $5 | | **Total** | **$30** | - Announced a **$4 million** gift with Antero Resources to West Virginia University to support Petroleum and Natural Gas Engineering and help develop a new Master's Degree program in Petroleum Midstream Engineering, the first of its kind in the U.S[14](index=14&type=chunk) [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles key non-GAAP financial measures, such as Adjusted Net Income, Adjusted EBITDA, Free Cash Flow, and Net Debt, used for performance and leverage assessment - Adjusted EBITDA is defined as Net Income adjusted for items such as interest, taxes, depreciation, amortization, equity-based compensation, and certain other non-cash or non-recurring items, plus distributions from unconsolidated affiliates[17](index=17&type=chunk) - Free Cash Flow before dividends is defined as Adjusted EBITDA less net interest expense and accrual-based capital expenditures[19](index=19&type=chunk) Net Debt and Leverage Calculation as of March 31, 2024 (in thousands) | Component | Amount | | :--- | :--- | | Consolidated total debt | $3,197,900 | | Less: Cash and cash equivalents | ($26,088) | | **Consolidated net debt** | **$3,171,812** | | LTM Adjusted EBITDA | $1,012,756 | | **Leverage Ratio (Net Debt / LTM Adj. EBITDA)** | **3.1x** | [Financial Statements](index=8&type=section&id=Financial%20Statements) The unaudited condensed consolidated financial statements for Q1 2024 detail the company's financial position and performance, including the Balance Sheet, Statement of Operations, and Cash Flows [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, Antero Midstream's balance sheet shows total assets of $5.75 billion, total liabilities of $3.60 billion, and stable stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | Mar 31, 2024 | | :--- | :--- | :--- | | Total current assets | $91,128 | $133,688 | | Total assets | $5,737,618 | $5,749,241 | | Long-term debt | $3,213,216 | $3,174,873 | | Total liabilities | $3,585,887 | $3,598,862 | | Total stockholders' equity | $2,151,731 | $2,150,379 | [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2024 statements of operations show total revenue increased to $279.1 million, operating income grew to $166.3 million, and Net Income reached a record $103.9 million Q1 Statement of Operations Highlights (in thousands) | Account | Q1 2023 | Q1 2024 | | :--- | :--- | :--- | | Total revenue | $259,475 | $279,051 | | Total operating expenses | $111,130 | $112,800 | | Operating income | $148,345 | $166,251 | | Net income | $86,507 | $103,926 | | Net income per share–diluted | $0.18 | $0.21 | [Selected Operating Data](index=10&type=section&id=Selected%20Operating%20Data) This section provides detailed Q1 operating volumes and average realized fees, highlighting YoY increases in most gathering and processing volumes, offset by a decline in fresh water delivery Q1 Average Realized Fees | Fee Type | Q1 2023 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Low pressure gathering ($/Mcf) | $0.35 | $0.36 | 3% | | High pressure gathering ($/Mcf) | $0.21 | $0.22 | 5% | | Fresh water delivery ($/Bbl) | $4.21 | $4.30 | 2% | [Condensed Consolidated Results of Segment Operations](index=11&type=section&id=Condensed%20Consolidated%20Results%20of%20Segment%20Operations) In Q1 2024, the Gathering and Processing segment generated $154.0 million in operating income on $218.3 million revenue, serving as the primary driver of company profitability Q1 2024 Segment Results (in thousands) | Segment | Total Revenues | Operating Income | Net Income | | :--- | :--- | :--- | :--- | | Gathering and Processing | $218,322 | $154,025 | $181,555 | | Water Handling | $60,729 | $13,488 | $13,488 | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2024, net cash from operating activities increased to $210.6 million, with cash used in investing and financing activities, ending the quarter with $26.1 million cash Q1 Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $182,719 | $210,561 | | Net cash used in investing activities | ($42,151) | ($37,123) | | Net cash used in financing activities | ($140,568) | ($147,416) | | **Cash and cash equivalents, end of period** | **$0** | **$26,088** |

Revenue Performance - Total revenues for the three months ended March 31, 2024, were $279.051 million, compared to $259.475 million for the same period in 2023, representing a 7.5% increase [131]. - Revenue from Antero Resources increased to $227.593 million in Q1 2024 from $211.576 million in Q1 2023, a growth of 7.6% [134]. - Total revenues increased by 8%, from $259 million for the three months ended March 31, 2023 to $279 million for the three months ended March 31, 2024 [136]. - Gathering and processing revenues increased by 15%, from $190 million to $218 million during the same period [136]. - Low pressure gathering revenue increased by $19 million due to lower growth incentive fee rebates and increased throughput volumes of 15 Bcf, or 130 MMcf/d [137]. - Fresh water delivery revenue decreased by $2 million primarily due to decreased delivery volumes of 1 MMBbl, or 10 MBbl/d [140]. - Equity in earnings of unconsolidated affiliates increased by 13%, from $24 million to $28 million [144]. - Net cash provided by operating activities increased from $183 million to $211 million [149]. Operating Income and Expenses - Operating income for the gathering and processing segment was $154.025 million in Q1 2024, up from $134.186 million in Q1 2023, reflecting a 14.8% increase [134]. - Operating expenses for the three months ended March 31, 2024, totaled $112.800 million, compared to $111.130 million for the same period in 2023, a slight increase of 1.5% [134]. - Direct operating expenses decreased by 7%, from $58 million to $54 million [141]. - Capital expenditures totaled $29.8 million for the three months ended March 31, 2024, down from $33.6 million in the same period of 2023 [152]. - The company announced a capital budget for 2024 ranging from $150 million to $170 million to support maintenance capital programs [151]. Net Income and Shareholder Returns - Net income for the three months ended March 31, 2024, was $103.926 million, compared to $86.507 million for the same period in 2023, indicating a 20.2% increase [134]. - A cash dividend of $0.2250 per share was declared for the quarter ended March 31, 2024 [147]. - A share repurchase program was authorized on February 13, 2024, allowing the company to repurchase up to $500 million of its common stock [125]. Financial Position and Debt - The company issued $600 million of 2032 Notes on January 16, 2024, to repay outstanding borrowings on the Credit Facility [124]. - As of March 31, 2024, the company had no borrowings or letters of credit outstanding under the Credit Facility [158]. - A 1.0% increase in the Credit Facility interest rate would result in an estimated increase in interest expense of less than $1 million for the three months ended March 31, 2024 [158]. Market Conditions and Risks - The company expects commodity prices to remain volatile but does not anticipate significant variability in throughput volumes due to Antero Resources' improved liquidity and leverage position [126]. - The Federal Reserve increased the federal funds interest rate by 5.25% from March 2022 to March 2024, impacting the company's financial condition [127]. - The company is highly dependent on Antero Resources, expecting to derive substantially all revenues from them for the foreseeable future [159]. - Any adverse events affecting Antero Resources' production or financial condition could negatively impact the company's revenues and operating results [160]. - The company faces risks of non-payment or non-performance by Antero Resources under their agreements [160]. Segment Information - The company operates two reportable segments: gathering and processing, and water handling, with significant contributions from both segments to overall revenues [129]. - The company has fixed-fee and cost of service fee structures in agreements with Antero Resources to mitigate commodity price risk [157].

Core Viewpoint - Antero Midstream Corporation (AM) has received a Zacks Rank 1 (Strong Buy) upgrade, indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Outlook - The Zacks Consensus Estimate for Antero Midstream indicates expected earnings of $0.98 per share for the fiscal year ending December 2024, reflecting a year-over-year increase of 27.3% [5]. - Over the past three months, the consensus estimate has risen by 0.8%, showcasing a trend of increasing earnings estimates [5]. Impact of Earnings Estimate Revisions - There is a strong correlation between changes in earnings estimates and near-term stock price movements, with institutional investors using these estimates to assess fair value [3][4]. - The Zacks Rank system effectively utilizes earnings estimate revisions to classify stocks, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [4]. Positioning in the Market - The upgrade to Zacks Rank 1 places Antero Midstream in the top 5% of Zacks-covered stocks, suggesting potential for stock price appreciation in the near term [7].

For those looking to find strong Oils-Energy stocks, it is prudent to search for companies in the group that are outperforming their peers. Has Antero Midstream Corporation (AM) been one of those stocks this year? By taking a look at the stock's year-to-date performance in comparison to its Oils-Energy peers, we might be able to answer that question.Antero Midstream Corporation is one of 251 individual stocks in the Oils-Energy sector. Collectively, these companies sit at #10 in the Zacks Sector Rank. The Z ...

Antero Midstream Corporation (AM) has witnessed upward earnings estimate revisions for 2024 in the past 60 days.The company, currently carrying a Zacks Rank #3 (Hold), beat the Zacks Consensus Estimate for earnings in the trailing four quarters, delivering a surprise of 11.1% on average.Sustained Earnings GrowthAntero Midstream has shown consistent earnings growth, with an 18% compound annual growth rate in EBITDA from 2014 to 2023, and is guiding to a mid-point of $1.04 billion of EBITDA for 2024. The comp ...