Greetings and welcome to Antero Midstream Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Justin Agnew, Vice President of Finance and Investment Relations. Thank you, Mr. Agnew. You may begin.

Good morning, and thank you for joining us for Antero Midstream's third 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.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.

Thanks, Justin, and good morning, everyone. In my comments, I will discuss AM's 2024 capital budget, as well as AR's peer-leading free cash flow breakevens, supported by strong international LPG pricing. Brendan will then walk through our third-quarter results and fourth-quarter outlook. Let me start on Slide 3 three, titled, Efficiently Executing on 2024 Capital Program. The left-hand side of the page illustrates our 2024 capital expenditures, compared to our budget of $150 million to $170 million. As we laid out in our initial guidance earlier this year, we had expected a majority of the capital to be invested in the second and third quarters, as summer weather conditions are supportive of construction in Appalachia. During the third quarter, as a result of more favorable weather conditions, we accelerated some capital, initially scheduled for later in the year. This resulted in $56 million invested during the third quarter, or 35% of the full-year budget. Because of this acceleration, we expect a significant decline in capital in the fourth quarter, and also expect to end the year within our annual capital budget guidance range. Looking at page number 3, the pictures on the right-hand side of the page depict our Torreys Peak Compressor Station. We continue to make good progress on the construction of this station, which is expected to have 160 million cubic feet a day of capacity. This station is expected to be placed online in the second quarter of 2025, and is located in the heart of our liquids-rich midstream corridor. Now, let's move on to Slide number 4, titled International Premiums Support AR Free Cash Flow. The left-hand side of the page depicts the premium that AR receives on its propane exports transported on the Mariner East pipeline and exported out of Marcus Hook, Pennsylvania. This premium has expanded into the high $0.20 per gallon range as a result of strong international demand, combined with export constraints along the Gulf Coast. This is a distinct competitive advantage for AR to have unconstrained access to the international markets, and to be able to capture these premiums by selling propane at the dock at Marcus Hook. Importantly, we expect these premiums to persist into 2025 until additional export capacity along the Gulf Coast is placed online. These premiums, AR's significant liquids exposure, and capital efficiencies that have resulted in peer leading unhedged free cash flow break-evens in 2024. As you can see on the right-hand side of the page, AR's unhedged free cash flow break-evens are approximately $2.20 per MCF of gas, well below other natural gas peers. This allows AR to continue operating at a maintenance capital level, even in today's depressed natural gas environment, providing development and earning stability for AM. With that, I will turn the call over to Brendan Kruger.

Thanks, Paul. I will begin my comments on Slide number 5, titled Third Quarter 2024 Highlights. During the quarter, we generated EBITDA of $256 million, which was a 2% increase year-over-year. Throughput volumes were approximately flat compared to the second quarter, and freshwater delivery volumes declined sequentially as a result of AR operating one completion crew and deferring a duck pad out of the third quarter due to depressed natural gas prices. Free cash flow after dividends was $40 million, which was a 32% increase from last year. All free cash flow during the quarter was utilized to reduce absolute debt and resulted in leverage of 3.1 times as of September 30th. Looking ahead to the fourth quarter and reiterating Paul's earlier comments, we expect a significant decline in capital as a result of the acceleration that occurred in the third quarter. This is expected to result in increasing free cash flow, additional absolute debt reduction, and leverage declining below three times during the fourth quarter. Next, let's move on to Slide number 6, titled Consistent Free Cash Flow Generation. This slide illustrates the quarterly and cumulative free cash flow after dividends since the third quarter of 2022 when we acquired the first of our bolt-on acquisitions. As you can see, we have generated free cash flow after dividends in every single quarter, which has totaled over $350 million over the last two years. This is well above the $287 million of bolt-on acquisitions over the same period. Highlighting the accretive nature and successful integration of these assets. Importantly, this slide also illustrates our ability to internally finance both our organic capital program and acquisitions that drive EBITDA and free cash flow growth. I'll finish my comments in Slide number 7, titled Delivering on our Free Cash Flow Outlook. Over the past decade, we have built out Appalachia's largest integrated liquids-rich midstream system and are now realizing the benefits of our organic capital investments. These investments generate high teens, return on invested capital, and significant free cash flow. This results in the ability to internally finance our capital programs, fund our dividend payments, and reduce absolute debt. As a result of absolute debt reduction and EBITDA growth, we expect leverage to decline to less than three times in the fourth quarter. As a reminder, our initial expectation was to achieve our three times leverage target by year-end 2025, so we are one year ahead of schedule on our target. Additionally, I will note that our initial leverage target did not include any acquisitions. Antero Midstream was able to execute several accretive transactions, as we just discussed, all of which were 100% financed through free cash flow. As we look ahead to 2025, we expect further growth in EBITDA and free cash flow. This positions us well to return incremental capital to shareholders. With that, operator, we are ready to take questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. The first question comes from the line of Noah Katz with J.P. Morgan Chase & Co. Please go ahead.

Hey, this is Noah Katz on for Jeremy. First, I wanted to touch on the impact to AM's results from AR announcing the deferral of completion on the one pad from 2024 into 2025 and then the deferral of the second pad from early 2025 into the latter part of the year. Can you size the impact towards the end of 2024 and into 2025? Thanks.

Yeah. Great question. If you look at 2024 and the guidance range we have given, you can see we have given a range that to the extent AR completed that due to higher prices, you would fall in the middle of that range. To the extent AR defers it, you would fall near the lower end of the range. It is about $10 million of EBITDA overall. If you look at just the water impact, you would not see the gathering impact until next year anyways. So the water impact this year would be about $10 million. And then no change really on 2025 in terms of where that is shaking out. Push back a bit, you will still get the water volumes and the gathering would fall within expectations.

Thanks for that. And then going off of that question, with the nine wells being serviced in 3Q. It looks like AM has serviced 45 wells so far this year. So to hit the guide of 52 to 57, I think you would have to service between 7 to 12 wells in 4Q. If there was another completion crew added, what are your guys' expectations on how many more water wells you could potentially service in total? Thanks.

Yeah, so I think that again, the 7 to 12 you mentioned there, midpoint of that, would assume that the completion of that hot pad, if it got deferred out, it is five wells, so you would be slightly below that 7 to 12. So I think that answers your question. But overall, the easy answer to think about in terms of how much one completion crew provides in terms of water, it is about 75,000 to 80,000 barrels a day per completion crew in terms of water that is delivered. We had a little bit less this quarter just driven by the ramp up of the E-fleet. We made a move to an E-fleet this quarter. So just the ramp up time led to a little bit less than the 75,000 to 80,000. But generally, if you have one crew, it is 75,000 to 80,000. So if you were operating two crews, for example, in a quarter, you would be 150,000 or a little bit above that.

Got it. Thank you.

Thanks.

Thank you. Next question comes from the line of Q - Naomi Marfatia with UBS. Please go ahead.

Hi. Good morning. Just as a follow-up to one of the earlier questions, maybe to look ahead to ‘25, given some of the depth growth in AR activity, along with the dropping of a completion crew on a rig in ‘24. Just kind of wondering if you could kind of characterize some of the drivers of growth going into 2025. Should we still be expecting mid-single-digit growth, or is there a potential upside to it?

No, I think that is a fair assumption. On the gathering side, we would expect in the low to mid-single-digit growth, you have a little bit of CPI escalation on those fees. Then on the water side, it will just depend on where we end up on those deferrals, but generally should assume about consistent volumes year-over-year. If the pad gets deferred completely out of ‘24 into ‘25, then you would expect a little bit more volumes in ‘25 relative to ‘24.

Great. Thanks. Just as a follow-up, I think on the Veolia payment, your tentative had a small update. So, just wondering what are the next signposts, and how is management thinking about the use of potential use of proceeds?

Yeah, no great answer in terms of timing there. It is still in the court's hands, went through the appeals, but we do not have a definitive answer, and they don’t have a definitive time in terms of when they need to respond, so a little bit of the waiting game is still there. To the extent that came in, we would just certainly analyze where we are at on debt. Where we are at in terms of the leverage target and make a decision in terms of what makes the most sense at that time, but no great timing as we sit here today after that update.

Thanks. That’s helpful. I’ll leave it there.

Thank you.

Thank you. Next question comes from the line of John Mackay with Goldman Sachs. Please go ahead.

Hi, thanks for that. I just wanted to pick up on a couple of these pointing to getting below three times in the fourth quarter. I guess, how much of that is driven by your confidence in kind of CapEx coming down and the free cash flow looking better that way versus just kind of implied EBITDA step-up just because you’ve talked about the moving pieces. And should that mean we can sort of see buybacks this quarter? Thanks.

I think we’ve said it in terms of once we hit the three times target we’ll led to the buyback market. I think we do have a lot of confidence we'll hit that three times target in the fourth quarter. It's really a combination of your points. Very confident in the capital coming down. And then in terms of the EBITDA, should see a bit of growth. As I mentioned, we had some ramp up time in the third quarter on that E-fleet. So even if you just ran one fleet, you should see 10,000 barrels a day of growth or so relative to third quarter. So feel good about overall increase in cash flow. And if that pad slid into the fourth quarter because of pricing, then you'd see even a further benefit. But even without that, we feel pretty good about hitting that three times target in the fourth quarter.

Thanks for that. And I guess if we're looking at the implied CapEx budget for fourth quarter, and again, you've talked about some of the moving pieces, but like how do we take that and think about what maybe like a run rate CapEx could look like in, let's say, ‘25 going forward?

Yeah, in ‘25, I think, we've said historically that we'd be in that $150 million to $200 million, I think assuming somewhere in the middle of that range, it's probably a safe bet for ‘25. We're still in the budgeting process, but in that $150 million to $200 million range is a fair assumption as we sit here today, assuming the midpoint is probably a fair assumption.

All right, great, thanks for your time.

Thanks, John. Thank you.

Thank you. [Operator Instructions]. Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to Justin Agnew for closing comments.

Thank you, operator, and thank you to everyone that joined today's conference call. Please feel free to reach out with any follow-up questions. Thank you.

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