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Operator: Greetings. Welcome to the Antero Midstream’s First Quarter 2025 Earnings Call. At this time, all participants are in listen only mode. A question and answer session will follow the formal presentation. [Operator Instructions]. Please note that today’s conference is being recorded. At this time, I’ll now turn the conference over to Justin Agnew, Vice President of Finance and Investor Relations. Justin, you may begin.

Justin Agnew: Good morning, and thank you for joining us for Antero Midstream’s first quarter investor conference call. We’ll spend a few minutes going through the financial and operating highlights and then I’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. 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, CEO and President 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.

Paul Rady: Thanks, Justin. Good morning, everyone. In my comments, I will discuss our 2025 capital projects and outlook for natural gas demand. Brendan will then walk through our first quarter results, capital efficiency and return of capital to shareholders. But let me begin with slide number 3 titled 2025 Capital Budget on Track. The right hand side of the slide shows our new Torrey’s Peak Compressor Station. We placed this station online in March ahead of our initial expectation of a second quarter in service date. Importantly, this station was our third compressor station, which was constructed with relocated underutilized units. The reuse savings have totaled approximately $30 million at Torrey’s Peak and over $50 million across all three stations that we’ve done this with.

Looking ahead, we expect over $60 million of additional reuse savings over the next five years. As you can see on the top left portion of the page, we do not have any large diameter high pressure gathering pipelines in the 2025 capital budget. Additionally, we have already secured materials, pricing and lead times for all our steel and high density polyethylene pipelines through 2026. As a result, we see immaterial impacts on our 2025 and 2026 capital budget from tariffs and other macroeconomic headlines. Now let’s move on to slide number 4 titled Growth in Appalachia Gas Demand. The Appalachian Region has quickly become a focal point for natural gas fired power generation, data centers and behind the meter projects. Over a decade ago, we recognized the significant low cost resource base in Appalachia.

Fast forward to today and these announcements further validate positioning. These projects will require a significant amount of gas supply for decades to come. In addition, statewide regulations have been leading to faster approval times and attractive incentives to build in the region. AM is well positioned with an investment grade upstream counterparty, 20 years of dedicated inventory and one of the largest natural gas and water systems in the region that can be supportive of future projects. While these projects generally have a longer lead time in nature, they highlight the long term opportunity set for natural gas focused midstream companies such as AHEM. I’ll finish my comments on slide number 5 titled Natural Gas Demand Estimates Continue to Increase.

This slide illustrates the upward momentum in natural gas demand estimates to power data centers. In just the last six months, the expectations for the power required for data centers by 2030 has doubled as shown on the chart on the left hand side of the page. The right hand side illustrates the percentage of data centers expected to be powered by natural gas, which has increased from 50% to 70%. This compounding effect supports significant growth in natural gas demand over the next several years. With that, I’ll turn the call over to Brendan Krueger, CFO for Antero Midstream.

Brendan Krueger: Thanks, Paul. I will begin my comments on slide number 6 titled First Quarter Highlights. During the first quarter, we generated $274 million of EBITDA, which was a 3% increase year-over-year. This was driven primarily by an increase in gathering and processing volumes, the latter of which set a company record at 1.65 Bcf a day. Looking forward to the remainder of 2025, we expect further increases in gathering volumes to drive low to mid-single digit year-over-year growth in gathering volumes in 2025 versus 2024. During the first quarter, free cash flow after dividends was $79 million, a 7% increase year-over-year. This was the 11th consecutive quarter generating free cash flow after dividends and the second straight quarter above that $75 million mark.

We utilized this free cash flow to reduce absolute debt and repurchase over $29 million of shares during the quarter. Importantly, our leverage declined towards 2.9 times as of March 31. Next, let’s move on to slide 7 titled Low Debt and Capital Efficient Business Model. This slide compares AM’s leverage and capital efficiency to other companies in the midstream industry. In addition to lowering our overall risk profile, our debt reduction efforts have reduced our leverage below three times, well below the C Corp peer average. Looking at capital expenditures as a percent of EBITDA, which highlights overall capital efficiency, AM is best in class with a 17% reinvestment rate. This is a result of our just in time capital investment philosophy and visibility into our primary customers’ development plan.

With low debt and leverage and an attractive reinvestment rate, AM has the capacity to return a significant amount of capital to shareholders. As highlighted on the bottom chart, based on consensus estimates, AM has the ability to allocate approximately 65% of its EBITDA for dividends, additional debt reduction and share repurchases. This is nearly double the C Corp average in the midstream space. I’ll finish my comments on slide eight titled Well Positioned to Enhance Shareholder Returns to elaborate on those return of capital opportunities. The last several years have been focused on debt reduction and accretive bolt on acquisitions. Looking ahead, our low debt and capital efficiency have positioned us well to pay an attractive dividend, repurchase shares and be opportunistic on M&A opportunities should they arise.

We believe this flexible approach directs capital to the highest rate opportunities that will accrue directly to our shareholders. This capital allocation flexibility is beneficial during times where we see opportunities in the equity relative to our current and future cash flow profile, which have been largely unaffected by the recent macro volatility. In fact, we believe the medium to longer term outlook is only getting brighter. With that, operator, we are ready to take questions.

Operator: Thank you. We’ll now be conducting a question and answer session. Our first question is from the line of Jeremy Tonet with JPMorgan.

Jeremy Tonet: Just wanted to touch on a bit more, I guess, for the potential for in-basin demand growth, which could help with AR’s outlook as far as looking for more growth there. How do you see this opportunity to start shaping up over time given the rich resource and the favorable attributes of the region?

Paul Rady: Yes. I think there’s quite a few projects that have already been announced. And I think we see quite a few discussions continuing to take place around local power demand, particularly the power data centers, other industrial uses as well in the region. You’re seeing it in Ohio and Pennsylvania, and I think there’s been a lot of momentum lately in West Virginia as well, in terms of getting some bills passed in West Virginia. So a lot of momentum. Where that ultimately plays out, I think it’s still a bit early, but we’re well positioned given the significant infrastructure we have in place both on the gathering and water side with Antero Midstream and AR is of course well positioned to participate in that as well. So we like where we’re at. A lot of conversations happening, but still early in some of those conversations.

Jeremy Tonet: And then I know, on the AR call, talked a bit about the LPG market. But just wondering if you could talk a bit here, guess, the outlook for propane and I guess AR strategy to mitigate that risk and how that impacts AF?

David Cannelongo: Just to touch on the propane strategy, I mean I think we will reiterate our confidence in the long term outlook for that product. I mean, there’s really no true substitute for it in the res com markets. Folks can go back to solid fuels, but that’s obviously a huge reduction in the quality of moving standards that they’ve moved to. So you’ll continue to see that market grow. There’s really nothing else that’s going to reach those markets in the billions of people that are prime candidates for switching to LPG. So the rescom market growth is very steady and sticky. And then the petrochemical side, I mean, we’ve talked a lot about PDHs in the past and there’s a question out there around whether or not with the tariff landscape of China reduce propane imports.

But naphtha cracking will increase. And I just want to kind of make the point that cracking naphtha, the steam cracker is not a replacement for propane and a PDH. PDH is going to produce around 85% of propylene when you put it into the unit. And when you crack naphtha, you’re going get about 15% of propylene out of it. So they’re really not substitute type of products for what people are looking for. And I think the reason why you’ve seen the global market go to PDH is that propylene is a product they need and want for the types of ultimate products that are being manufactured around the world. And so cracking naphtha is not really going to accomplish that for you in the long run. And we think we’ll continue to see growing petrochemical demand for propane because it’s such a unique product and what it can deliver to those petrochemical companies and the ultimate consumers.

Jeremy Tonet: Got it. That makes sense. And this might be a bit premature, but on the other side of the cycle, just wondering what’s the outlook for the JV here continues to run above nameplate and if the propane market grows over time, could there be more liquid rich production in the basin and could that lead to- would you want to participate in any expansion in the JV on the frac side?

Paul Rady: Yes. I think today where we’re at, I think we’re comfortable. We’re running about 4% over nameplate. I think historically you’ve seen those run as high as 10% over nameplate. So there’s still some room in those facilities. And I think just depending on where prices move and long term outlook for gas and liquids, we’ll reevaluate down the road. But I think as we sit here today, comfortable with the position we’re in, in a maintenance capital mode on the AR side.

Operator: The next question is from the line of Naomi Marfatia with UBS. Please proceed with your questions.

Naomi Marfatia: Just a follow-up on your commentary on data centers. You all gave a good rundown in your prepared remarks, but just curious if you could provide any additional details on how conversations are heading about commercialization and how AM could benefit from the trend?

Paul Rady: I don’t think today as we sit here, anything more to say on that. We’re continuing to have these conversations, as I mentioned. AM, with the infrastructure it has, could certainly participate through additional infrastructure build out to the necessary demand areas. But again, too early to give any more specifics on that as we sit here today.

Naomi Marfatia: Got it. And then my second question is related to capital allocation. You all have done buybacks since the last two quarters and the leverage is below three times target. How should we think about your strategy on M&A or bolt on now that you’re on most of the gathering iron compression in West Virginia?

Paul Rady: So on the overall allocation there, we are below three times. I think we continue to see that portfolio approach, both paying down debt and buying back shares accrue to the equity. At what level does that stop accruing on the debt side? I don’t think we’ve reached that yet. So it will likely be a continued approach going forward. And then on the M&A side, always looking at opportunities. Over the past few years, we’ve added some very strategic bolt on acquisitions that support AR. And so we’ll continue to look at opportunities like that. And we’re well positioned given our balance sheet profile to capitalize on some of those opportunities should they present, but always looking out there and well positioned.

Operator: The next questions are from the line of John Mackay with Goldman Sachs.

John Mackay: I appreciate the comments on the LPG side of things. I guess I’d just be curious to kind of ask it in maybe a more direct way. I mean, from an AM perspective, we obviously care about the volume side, like how much softer would pricing need to get to see a kind of production response from AR that would hit AM’s volumes?

Michael Kennedy: You really can’t get there, John. This is Mike Kennedy. We actually sensitized it to COVID prices and it still wasn’t there. If you have natural gas prices where they’re at, we still have substantial free cash flow. And even if we don’t, we don’t have any debt really. So we would continue to run our two rig, one plus completion crew program really absent any sort of commodity price at this location, we continue to run it regardless.

John Mackay: And then you guys have done a lot on, I guess, can kind of say the self-help side of things, the compressor stations, etc. Understand there aren’t a ton more assets kind of inside the fence to buy. But is there anything else you can do on kind of optimizing the cost side? We’ve seen some of your peers kind of more in the Permian talk about maybe some self-powering projects. Anything like that on the radar for you guys?

Paul Rady: Yes. I mean, I think we’ve talked about some of these in the past just around AR and being the largest consumer of power in the state. Certainly, there’s opportunities to potentially look at behind the meter on those things. But those are, again, in probably the early parts of conversation, whether they move forward still early, at this point. But there opportunities, but, they’re both on kind of in and around where we look today. That’s all I’d say at this point.

Operator: The next question is from the line of Zach Van Everen with TPH. Please proceed with your question.

Zach Van Everen: Just a quick one on water. You guys serviced 28 wells this quarter. I know you mentioned a lot of those or eight of those were kind of to the back of the quarter. Are you still expecting to service the 70 to 75 you guys had in your guidance, which would kind of point towards a step down for maybe Q2?

Paul Rady: Yes. We’re still looking at that similar number. I think those 8. most of that volume we tend to highlight will fall into that second quarter. So if you look at 1Q to 2Q, I’d expect a pretty similar level of volume. You had the second completion crew running for a month in the first quarter and you’ll have it running for a month in the second quarter. So should expect similar volumes there.

Zach Van Everen: And then on the lateral length, still expecting the 13,200, I know the AR length of completed came in a little bit higher, but is that still a good average to look at?

Paul Rady: Yes. That’s a good number to think about.

Operator: At this time, I’ll hand the floor back to Justin Agnew for closing remarks.

Justin Agnew: Thank you, operator, and thank you everyone for joining today’s conference call. Please feel free to reach out with any follow-up questions.

Operator: This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.