Greetings and welcome to the Antero Midstream's Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. And it is now my pleasure to introduce to you Justin Agnew, Director of Finance. Thank you, Justin. 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 home page of our website at www.anteromidstream.com where we've 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 Interim Midstream. With that, I'll turn the call over to Paul.

Thanks Justin. In my comments, I will discuss the multi-decade inventory dedicated to Antero Midstream and the Antero Resources capital efficiency achievements in 2023. Both of these attributes support the attractive and derisked long-term outlook at Antero Midstream. Brendan will then discuss our third quarter financial results, repeatable free cash flow business model, and 2022 ESG highlights. I'm going to start my comments on Slide number 3 titled Consistent Growth and Large Low-cost Inventory Dedicated to Antero Midstream. This slide highlights the throughput growth at Antero Midstream and drilling inventory for the natural gas peers at a $2.75 breakeven NYMEX gas price. During the third quarter, Antero Midstream once again delivered double-digit year-over-year throughput growth. With gathering volumes well over three Bcf a day, Antero Midstream now gathers roughly 3% of the total natural gas production in the United States, highlighting the growth and scale of Antero Midstream's operations since 2021. Similar to Antero Midstream's organic growth strategy, Antero Resources has executed its organic leasing program, investing $340 million in land capital since 2021. The result is over 22 years of inventory dedicated to Antero Midstream based on the 2023 development pace as depicted on the right-hand side of the page. So, while Antero Midstream's gathering volumes have increased nearly 15% since 2021, Antero Resources has more than replenished the multi-decade inventory that drove the throughput growth over that time frame. This organic leasing strategy is not only cost-effective for Antero Resources, but incredibly capital efficient at Antero Midstream. A majority of the land capital is invested to extend laterals, fill-in acreage positions, and block up Antero Resources' already contiguous acreage position. This results in more production and reserves per well for Antero Midstream as well as more capital efficient infrastructure build-outs within the consolidated acreage position. Now, let's move to Slide number 4 titled Most Capital-Efficient Customer in Appalachia. This slide illustrates the year-over-year change in production on the Y-axis and the year-over-year change in drilling and completion capital on the X-axis. While targeting a maintenance capital program, Antero Resources' third quarter 2023 production actually grew 9% year-over-year. This growth combined with the contributions from the bolt-on acquisitions and drilling partnerships translated to a 13% year-over-year increase in gathering volumes at Antero Midstream. Conversely, when Antero Resources' peer group attempted to target a maintenance capital program, their volumes actually declined year-over-year. When you compare the production growth to the drilling and completion capital invested to deliver this growth, Antero Resources has been far and away the most capital-efficient operator in Appalachia over the last year. For reference, Antero Resources is consistently running two to three rigs and one to two completion crews, which is a very manageable and balanced development program for one of the largest natural gas producers in the U.S. This peer-leading capital efficiency, combined with a strong balance sheet at Antero Resources, underpins the consistent development program that drives repeatable results at Antero Midstream. In summary, we continue to be one of the most capital-efficient midstream companies in the industry. The multi-decade repeatable low-cost inventory dedicated to Antero Midstream, combined with our unparalleled visibility, consistently generates high-teens return on invested capital or ROIC. These peer-leading returns on invested capital, further supported by Antero Resources' peer-leading capital efficiency, continue to drive value for Antero Midstream shareholders. With that, I turn the call over to Brendan.

Thanks, Paul. I will begin my comments on Slide number 5 titled Operational Success Drives Earnings Growth. During the third quarter, we generated a company record $251 million of EBITDA or over $1 billion on an annualized basis, which was a 12% increase year-over-year. We also generated $138 million of free cash flow before dividends and $30 million of free cash flow after dividends. This free cash flow is utilized to reduce absolute debt and resulted in leverage declining to 3.4x which is a reduction from 3.7x at year-end 2022. These financial achievements were a direct result of Antero Midstream's growth strategy and operational success. During the third quarter, low pressure gathering and compression volumes increased by 13% and 17% respectively compared to the prior year quarter. Both throughput measures set company records for Antero Midstream. Of the 13% growth in low-pressure gathering volumes, approximately 6% was organic growth on our legacy assets and 7% was attributable to the Crestwood acquisition that closed in the fourth quarter of last year. The outperformance in Antero Midstream's gathering and compression business, which drove the increase in our EBITDA guidance, was a result of outperformance on wells turned to sales in 2023, as Paul discussed, as well as the acceleration of completion throughout the year. Now let's move on to Slide number 6, titled Transition to Repeatable Free Cash Flow after Dividends. This quarter was our fifth straight quarter of generating free cash flow after dividends. Year-to-date free cash flow after dividends has totaled $107 million, which is above our original full year guidance midpoint of $105 million, and we have achieved this in just three quarters. Antero Midstream's 2023 free cash flow has benefited from a combination of outperformance in our base business, realizing synergies from our bolt-on acquisitions, and optimizing our capital budget. Looking back at the Crestwood and EnLink acquisitions, we were well positioned to put both acquisitions on the balance sheet, given our leverage position and visibility over the near term. To put it into context, we expect to essentially pay off both of these acquisitions with just six to seven quarters of excess free cash flow after dividends. At the same time, we expect our leverage to decline by almost a turn over that period. This is an incredible feat and highlights just how strong Antero Midstream's base business is, as well as demonstrating how free cash flow accretive those acquisitions were. Before finishing up our prepared remarks, I wanted to briefly touch on our 2022 ESG achievements on slide number 7. The data on this page was just recently published in our annual ESG report. In 2022, we delivered a methane leak loss rate of just 0.031%, one of the lowest in the midstream industry. Our integrated water system, the largest in Appalachia, allowed us to reuse or recycle 86% of our wastewater and eliminated over 12 million miles of truck traffic in our local communities. Importantly, while we have delivered significant growth over the last year, we have delivered it safely. 2022 marked the eighth straight year without an employee lost time incident, which is an incredible achievement and is something we are very proud of here at Antero Midstream. We also had a 59% reduction in the total recordable incident rate in 2022, further highlighting the corporate focus on safe and efficient operations. I'll finish my comments on slide number 8 titled Antero Midstream Checking all the Boxes. The first three quarters of 2023 have been incredibly successful from an operating and financial standpoint, which is reflected in the second guidance increase this year. The outperformance in our base business and successful integration of our complementary acquisitions keep us on track to deliver a peer-leading ROIC in the high-teens again in 2023. We have significantly de-risked the business by transitioning to generate consistent free cash flow after dividends, which we now expect to total $145 million at the midpoint of guidance, which is almost 40% above our initial guidance of $105 million. As we look to 2024, we expect a further meaningful increase in free cash flow after dividends. This will position Antero Midstream well to achieve our three-time leverage target and increase our return of capital to shareholders. In summary, we continue to build on our track record of delivering on our stated guidance and financial targets. More importantly, we deliver these through safe and efficient operations while being good stewards in our local communities. With that, operator, we are ready to take questions.

Thank you, sir. We will now be conducting a question-and-answer session. And the first question comes from the line of Jeremy Tonet with JPMorgan.

Hey, this is Noah on for Jeremy. I wanted to touch on your leverage target of achieving three times by 2024. I guess, just how should we think about your capital allocation priorities after achieving this?

Yes. I think we've talked about this on some past calls as well. I mean, I think overall as we get closer to that target, we'll certainly evaluate where we are from an equity perspective, and we'll look at whether share repurchases or further debt paydown or increases to the dividend makes sense. I think as we've talked about in the past, having significant visibility into the long-term business of Antero Midstream through the integration with Antero Resources gives us a lot of perspective in terms of the underlying equity value. And as we sit here today, I think share repurchases continue to make a lot of sense for that further return of capital. But we'll certainly look at all of those as we approach that leverage target.

Thank you.

And the next question comes from the line of Brian Reynolds with UBS. Please proceed with your questions.

Hi, good afternoon everyone. Maybe to look ahead to 2024, given some of the recent '23 outperformance, just kind of wondering if you could kind of characterize some of the tailwinds going into '24 just given the growth that should flow through some of the rate relief that will go away and then the CPI inflator. Should we kind of characterize this as mid-single-digit EBITDA growth, or could we get into the low teens next year? Thanks.

Yes. Good question, Brian. I think you kind of broke it down nicely. There's really the three components. So the fee rebates rolling off will be about $48 million next year, so that's roughly 5% growth on the midpoint of our guidance this year. The CPI it's measured June to June. So we know that number already. It was a 3% CPI number, and then you take 55% of that. So you're looking at call it 1.5%, second that 6% to 7% overall EBITDA growth. And then if you look at the drilling partnership, and what Antero Resources said, the benefit is that Antero Resources has continued to improve with well performance acceleration of completions. And so, the production number at Antero Resources is up over 200 million a day from year-end '22 to year-end '23. So, depending on what they run from a maintenance capital plan will drive kind of that third component of growth at Antero Midstream. So, you can be anywhere from 6% to 7% up to that low double-digit number that you talked about, just depending on the development plan that we see at the Antero Resources level. Antero Midstream is well positioned from a capital standpoint to meet those levels.

Great, makes sense. I appreciate all the color. Maybe as my follow-up, let's look even further ahead to 2025. The drill co with Antero Resources is expected to end, which could impact the water volumes at Antero Midstream in '25. So just given where Antero Resources' balance sheet is relative to where it was a few years ago and then the call for natural gas given the LNG supply and the demand that's coming online and the call for gas from that gas basin. Just kind of curious how we should think about maybe Antero Resources volumes picking up some of the drill co-activity that ultimately flows through to Antero Midstream on the water side? Thanks.

Thanks. I think overall, as you look to 2025, I mean the benefit for us looking at it from an Antero Resources and Antero Midstream perspective here is the gross wellhead volume. You've got the infrastructure in place from a gross wellhead volume perspective. And so, once the drilling partnership rolls off, that infrastructure already built out will support growth from a net perspective at Antero Resources into that infrastructure capacity that you already have from processing, firm transport, and gathering perspective. So, if the prices hold with what the strip entails, I think that'd probably be a fair assumption that you maintain that gross wellhead volume at the Antero Resources level, and that will flow through to Antero Midstream of course.

Great. That makes sense. I appreciate all the color this afternoon. Have a great rest of your day.

Thanks, Brian.

And the next question comes from the line of Zach Van Everen with Tudor Pickering Holt. Please proceed with your question.

Perfect. Thanks for taking my question. Just one on the processing and frac side. I see you guys are running at or above nameplate for both of those. Have you looked into expanding that capacity? And if so what would the CapEx spend look like on those?

Yes. No, I mean I think the benefit on the processing side is you typically can run about 10% above nameplate. So, if you look just net to the JV at the 1.6 Bcf a day that would be another $160 million of ability to grow. In addition to that, obviously, you've got the Utica, which there will be a couple of pads that will be turned on that Antero Midstream's gathering in the Utica. The benefit in the Utica from an Antero Midstream perspective is a lot of that infrastructure is already built out. So I think there's plenty of levers that can be pulled in terms of where development occurs plus the ability to run above nameplate on the processing side. And then on the dry side, you've also got the assets we acquired from Crestwood, which give you the ability to move over there. So you've got Utica dry assets and Crestwood and the ability to run above the nameplate capacity and processing.

Got it. That makes sense. And then on the frac side can you also run above that capacity, or is that pretty limited?

The benefit on the frac side is the last frac that was there anyway is essentially unutilized. So you've got full capacity. It's just our frac 4. We elected to participate in the fourth fractionation unit; the fifth one, Okla 5, we elected not to participate and that one is essentially pretty empty. So you've got the ability to grow from an Antero Resources perspective and move into that fractionation facility.

Perfect. Thanks. That’s all I have.

Thanks. Thanks, Zach.

And the next question comes from Gregg Brody with Bank of America. Please go ahead with your question.

Was trying to see if I can get back in within 30 minutes of the last call. But just the one more M&A-related question but this one is very specific to Antero Midstream. So we obviously returning capital next year is a possibility. How do you think about the M&A landscape for Antero Midstream today? And if you think there's opportunities out there and does it make sense?

Yes. I mean on the Antero Midstream side, you saw us do the two what we call kind of cleanup acquisitions, which were EnLink and Crestwood assets last year. Those were nice fold-in. Antero Resources volumes drove the asset cash flow there. So we'll look for other opportunities. There are a few opportunities out there, probably smaller in scale. And then you occasionally see some larger opportunities with third parties, and that's where you just need to get comfortable with a third-party perspective. Can you derisk it enough relative to the organic opportunities you have on the Antero Resources side? That's essentially how we look at M&A and how we'll continue to do that going forward.

That’s all I got. Thanks, guys.

Thanks, Gregg.

There are no further questions at this time. And I would like to turn the floor back over to Justin Agnew for any closing comments.

Thanks everyone for joining us today. Please feel free to reach out with any questions.

Ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.