Greetings and welcome to Antero Midstream, Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Brendan Krueger, Chief Financial Officer at Antero Midstream. Please proceed.

Thank you, Operator. Thank you for joining us for Antero Midstream's, Third Quarter 2021 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.anteromidstream.com, where we have provided a separate earnings call presentation that will be reviewed during today's call. Before we start our comments, I would first like to remind you that during this call Antero management will make forward-looking statements. Such statements are based on our current judgments regarding factors that will impact the future performance of Antero Resources and Antero Midstream and are subject to a number of risks and uncertainties, many of which are beyond Antero's control. Actual outcomes and results could materially differ from what is expressed, implied, or forecast in such statements. 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 and CEO of Antero Resources and Antero Midstream. And Michael Kennedy, CFO of Antero Resources and Director at Antero Midstream. With that, I will turn the call over to Paul.

Thanks, Brendan. I'll start on slide number 3, entitled expansion projects supporting the drilling partnership, which illustrates the progress on our midstream build-out supporting the AR and QL partners drilling partnership. First, as shown on the bottom left portion of the page, we placed the Smithburg one processing plant online in early July, adding 200 million cubic feet a day of incremental joint venture processing capacity. This brings the joint venture's total processing capacity to 1.6 BCF per day. Consistent with our just-in-time capital investment philosophy, the joint venture processing capacity was 96% utilized during the third quarter. As you can see on the right-hand side of the page, we continue to build out -- our compression infrastructure in Tyler and Wetzel counties in West Virginia. These stations, which will be placed online in early 2022, will support the incremental throughput growth from the drilling partnership over the next several years. Looking ahead to 2022, we will continue the Marcellus midstream build-out, constructing a high-pressure pipeline from Tyler and Wetzel Counties, down to the Sherwood and Smithburg processing complex. In addition, we will continue building out our low-pressure gathering infrastructure in this area where AR's development is focused over the next several years. Importantly, we are encouraged by the well performance in the Core Marcellus, where our build-out is focused, which drives stronger economics for Antero Midstream. Slide 4 entitled AR's, Peer Leading Premium Core Drilling Inventory, provides a summary of AR's premium inventory that underpins the AM capital investment, and throughput growth over the next several years. At AR, we regularly perform a technical review of pure acreage positions, undrilled acreage, and location potential based on BTU regimes and EURs. Based on these results, we sub-divided the core of the Southwest Marcellus and Ohio Utica into Premium and Tier 2 sub areas. We have identified approximately 5,200 premium undeveloped locations for industry in the Southwest Marcellus, which are located within the red line -- the red outlines on the map. Off that, we estimate AR holds 1,865 of these premium locations or 36% of the total, which includes more than 1,000 liquids-rich locations. In the Ohio Utica, we estimate roughly 1,100 premium undeveloped locations for industry of which AR holds 210 locations or 19% of the total. You can see that much of the acreage is covered up with existing Marcellus and Utica horizontal well-bores, which are the red lines on the map. Ultimately, we believe the concept of inventory fatigue, and the limited number of premium drilling locations, will be a critical distinction between E&P operators in Appalachia. Importantly, for AM, its primary producer, AR has over 15 years of liquids-rich drilling inventory, and a highly contiguous acreage position, which results in efficient Midstream buildouts and pure leading return on invested capital for AM. With that, I will turn the call over to Brendan.

Thanks Paul. I'll begin my comments highlighting our recently published 2020 ESG Report. As a leading midstream Company and one of the lowest cost basins, Antero Midstream plays a vital role in transporting and processing low-emission hydrocarbons needed to power our economy and heat our communities. Our infrastructure links reliable energy supply in Appalachia with global demand and allows us to aid in the effort to eliminate energy poverty across the world. As depicted on Slide number 5 titled AM's Role in Supporting Global Energy Access, AM's integrated midstream services allow AR to transport its LPG, both domestically and internationally, including dominion developing nations. Specifically, approximately 1/3 of AR's LPG exports went to developing nations in 2020, which included Nigeria, Peru, and India to name a few. This trend continued through 2021. And importantly, we expect this trend to continue into the future. This delivery of LPG to these communities directly improves people's health, safety, and livelihood, through the displacement of more expensive and carbon intensive energy sources used for heating and cooking. We are very proud of our role in responsibly delivering the energy needed to drive a recovering global economy, and a lower carbon future. Slide Number 6 highlights our ongoing commitment to the communities in which we operate. Safe operations, environmental excellence, and strong governance. Even through the COVID-19 pandemic, we remained active in our communities, supporting hunger relief efforts through the United Way and other community organizations. With a Company-wide focus on safety, we had 0 employee lost-time incidences for the sixth consecutive year. We are also environmental leaders in Midstream industry. In 2020, we reduced our methane leak loss rate to 0.15% significantly below the 1 future industry goal of 1% and more than 50% lower than the Midstream industry peer average of 0.033%. Our…

At this time, we will be conducting a question-and-answer session, if you'd like to ask a question, [Operator's instructions]. One moment, please, while we poll for questions. Your first question comes from the line of Jeremy Tonet with JPMorgan, please proceed with your question.

Hi, good morning.

Hi, Jeremy.

Good morning, Jeremy.

Hi. Just want to touch base on completions if you could. Just want to see what expectations or what color you can share for 4Q that you might expect to be serviced. It seems like AR s still has 65 to 70 in the guidance. AM has serviced about 59, I think, so that 6 to 11 range is a wide range for the quarter. So just wondering if you could provide any more color there.

Yes. I think what we said on last quarter's call still hold. So, we said mid to high teens. During the third quarter, we came out with 18, and we said that low to mid double-digits for the fourth quarter on completions for well-serviced, and that still holds for the fourth quarter. So, at low to mid double digits for completions in the fourth quarter.

Got it. That's helpful. Thanks. And just want to refresh tax, I guess at this point, as far as cash tax paying expectations, and if there's a corporate minimum tax, how that might impact AM's outlook for cash flow.

Yeah. Based on what we know thus far in terms of what's being proposed out there, no change to our impact right now as we look out to the later part of the decade. I think we said last time, we do not expect to be a cash taxpayer to -- through the end of the 2020s. And then at that time, depending on what the situation looks like, we may begin to start paying taxes in the 2030s.

Got it. I'll leave it there. Thank you.

Bye, thank you.

Your next question comes from the line of Brian Reynolds with UBS, please proceed with your question.

Thanks for taking my question. To start off on capital allocation and given Antero's pivot to free cash flow in 2022 and moderating capex. I know you guys talked about reducing the credit facility of 500 million, which is in line with your long-term free cash flow forecasts. But is there a leverage target where buybacks could become part of the conversation just given the spread between equity and debt over time? Thanks.

Yes, I think we've been pretty public on the three times target out there on leverage, which we expect to hit in that 24, or 2025 time period and after we hit that leverage, we will evaluate what a further return of capital could look like at that time.

Fair enough. As a quick follow-up, just given the [Indiscernible] gas and NGL macro stands right now within the Northeast and the rate relief programs falling off at 4Q 22, I believe. Is there any opportunity to extend that rate relief program in exchange for more drilling activity from AR or is that something that you would consider at a later time? Thanks.

Yeah, I think it's important to keep in mind that rate relief program was put in place in late 2019, both entities do not really have access to capital markets, so it helped to address some of the challenges on the balance sheet side of things. Just to clarify that it does run through the fourth quarter of '23, not the fourth quarter of '22. And currently there will be no plans to extend that. I think AM would be happy to take the incremental free cash flow in 2024 plus as a result of that. And no plans right now to consider a further extension there.

Great. Thanks for the color. Appreciate it.

Thank you.

Your next question comes from the line of Colton Bean with Tudor, Pickering, Holt and Company. Please proceed with your question.

Morning. So just one on my end, I think on the AR call the team noted that [Indiscernible], about 150,000 barrels a day of ethane with the South [Indiscernible] pipeline reaching commissioning this month and cracker start-up expected next year, should we see a step-up in extraction and a commensurate increase in JV frac volumes?

Just as a reminder, on the ethane side, AM through the JV does not participate in the de - ethanitization. It's only on the fractionation side on the C3 plus, so no impact from the ethane recovery. AR will recover more volumes as a result of its commitment to the Shell Cracker, but that will not have an impact to the processing JV.

[Indiscernible]

Your next question comes from the line of John MacKay with Goldman Sachs, please proceed with your question.

Hey, good morning. Thanks for the time. Just one quick one from me. Don't thing we talked about yet just on '22 capex, you guys have kind of guided a couple of times in the past on that $275 to $300 million level. Just curious given where we've seen steel prices go and kind of inflation more generally, if you're looking at that range, still, still holding right now. Thanks.

Thanks for the question, John. I appreciate it. Good question. I think overall, the $275 to $300 is still the range we have out there. You certainly have seen some inflation on steel. But I think, it's important to note for Antero, given the visibility that AM has and the development program with AR, we do have the luxury of being able to pre -order some of that steel. And so, we're not going to see necessarily the impact that others may see out there that don't have the visibility. And in the second point I just mentioned is labor does make up about 75% of that capital costs, and so you're not seeing an impact commensurate with what you're seeing on the steel side with labor. So overall, still expected to be within that $275 to $300 million for 2022.

Thank you.

Thank you.

Your next question comes from the line of Michael Cusamano with Pickering Energy Partners. Please proceed with your question.

Hi, thanks for taking my question. Could you talk about the capital required for AM if AR would elect to drill? I understand that AR is expected to remain flat, but is the capital [Indiscernible] at AM part of that decision process when I think of the whole enterprise?

Yeah. I mean, I think certainly as AR looks at its development plans. And given it is a 30% owner of AM, I think AR certainly looks at the full picture when it makes it decisions. Overall, I think it's difficult to say whether incremental growth would require incremental capital. It depends on where the growth is relative to where the infrastructure is built out. Tough to give you any sort of direct answer today, but again, I'd just reiterate, I think. Right now, AR is planning for maintenance capital and no change on that front. And so, as we look at the AM capital backlog, we're still at that 1.1 billion at the midpoint for the 5-year period. That's 2021 through 2025.

Okay. Could you, if possible, help me understand where capacity might be available today?

Yeah. I mean, I think overall there is certainly availability in various areas of AR's operations. Not to get into specific areas, but I think it's diversified around AR's acreage position, both on the liquids-rich side and the dry gas side there's availability. And then where AM is investing most of the capital going forward is certainly in the more liquids-rich areas, which is where AR is developing today. So, a lot of the growth of -- the growth through the drilling partnership, it's planned into that liquids-rich areas, and that's were AM's investing capital today. But overall, access -- to the extent there's excess capacity, it's diversified across portfolio outside of where AR is developing today.

Got it. All right. That's helpful. I'll leave it there. Appreciate it.

Thanks, Michael,

Thank you, Michael.

Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Mr. Brendan Krueger for closing remarks.

Yes. Thanks, Operator. Thank you for joining us for the call today. Please reach out if there's any further questions. We are available. Thank you.

This concludes today's conference You may disconnect your lines at this time. Thank you all for your participation.