Greetings, and welcome to Antero Midstream First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Justin Agnew, Vice President of Finance and Investor Relations.

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 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. Good morning, everyone. In my comments, I will discuss our capital projects completed in the first quarter, operational efficiencies in our water business and AR's peer-leading free cash flow breakeven costs. Brendan will then go through our first quarter results, which set multiple company records. Let's start with Slide number 3 titled Continued Asset Optimization. At the end of the first quarter, we placed our Grays Peak compressor station in service as depicted in the light blue outline on the north part of our map. The station was the second compressor station that utilized relocated compressor units, which resulted in approximately $15 million in capital savings. Grays Peak has an initial capacity of 160 million cubic feet a day and will support the future throughput growth in the liquids-rich corridor of AR's acreage position. Importantly, Grays Peak was placed online slightly ahead of schedule and on budget. This exemplifies our just-in-time capital investment philosophy and integrated planning with Antero Resources. Looking ahead, you can see in the yellow highlighted box where the future expansion of the Grays Peak station will occur. Our visibility into the future development of our dedicated acreage allows us to phase in capacity over time as needed. This maximizes our project rates of return and drives our peer-leading return on invested capital. In addition to our capital efficiencies, we had significant operational efficiencies on the freshwater side of the business, highlighted on Slide number 4 titled 2024 Completion Efficiencies. During the first quarter, Antero Midstream delivered 113,000 barrels per day of freshwater to AR, who was running 1.3 completion crews on average. The last time AM delivered a similar amount of water during the quarter AR was running two completion crews on average. So, this is a 35% improvement. As depicted on the left-hand side of the page, AR averaged 11.3 completion stages per day, which is a quarterly company record and a 44% increase compared to 2022. This performance is partially due to AM's integrated freshwater delivery system. This system provides industry-leading water deliverability rates and eliminates the need for water trucks, which significantly reduces congestion on our pad sites. In addition, an underappreciated aspect of our operations is the integrated planning between AR and AM. This starts with efficient pad design incorporating gathering and water lines, and there's consistent communication between upstream and midstream teams and the elimination of non-productive time. To put our planning into perspective since AM acquired the water business almost a decade ago, we have had zero missed completions with our freshwater delivery system, which is an outstanding achievement. Adding to the development stability at AR is its premium natural gas price realizations highlighted on Slide 5, titled, Not All Transport to the U.S. Gulf Coast is Equal. This map illustrates AR's firm transportation portfolio directly into the heart of the LNG corridor, with several new LNG facilities starting up over the next several years, we expect to see a widening spread between sales points near Henry Hub and sales points outside of the Tier 1 markets. The blue callout box highlights a recent quote from a research commodity team that emphasizes this view. They believe sales points within 100 miles of Henry Hub could see prices above $5 per MMBtu, while sales points outside of that range comprised at $3 to $4 per MMBtu. Importantly, 75% of AR's firm transportation delivers gas to these Tier 1 markets, providing direct exposure to these premium-priced markets. This solidifies AM's position as the critical first mile infrastructure to supply LNG across the globe. I'll finish my comments on Slide number 6 titled AR has the lowest free cash flow breakevens. We previously put this slide out highlighting that AR's breakeven natural gas price was $2.27 on an unhedged basis. As you can see on the left-hand side of the page, AR generated approximately $10 million of unhedged free cash flow in the first quarter of 2024 when NYMEX gas averaged $2.24 per MMBtu. In combination, AR's capital efficiency, liquids pricing uplift and premium natural gas price realizations results in development stability that underpins AM's consistency. As a midstream provider, we desire to service producers with the lowest overall breakeven costs, and AR certainly meets that test. With that, I will turn the call over to Brendan.

Thanks, Paul. I will begin my comments on Slide number 7 titled First Quarter 2024 Highlights. The first quarter of 2024 was a record-breaking quarter, both financially and operationally. Antero Midstream's organic growth strategy delivered a 4% and 6% increase in gathering and processing volumes, respectively, compared to last year. We delivered double-digit EBITDA growth, combined with double-digit declines in capital year-over-year. The growing EBITDA and declining capital resulted in $182 million of free cash flow before dividends and $74 million of free cash flow after dividends, both of which were company records. All of this record free cash flow was utilized to reduce absolute debt during the quarter. In combination, our EBITDA growth and declining debt resulted in leverage declining to 3.1x from 3.3x at year-end 2023. The strong first quarter results place us on track to achieve our full year 2024 guidance. Looking ahead to the second quarter, we expect modest throughput growth compared to the first quarter offset by lower expected freshwater delivery volumes as a result of AR reducing its completion crews to one in February, consistent with our full year guidance. I'll finish my comments on Slide number 8, titled Executing on Debt and Leverage Reduction Plan. This page illustrates AM's free cash flow after dividends and leverage since we announced our 3x leverage target on our fourth quarter 2022 earnings release. As you can see, after the initial outspend to fund the drilling partnership growth in the first half of 2022, we transitioned to generate consistent free cash flow after dividends. The first quarter represented the seventh consecutive quarter of generating free cash flow after dividends, which totaled almost $270 million on a cumulative basis. This has been used to reduce absolute debt and internally financed two highly accretive bolt-on acquisitions. In summary, our business continues to operate as efficiently as any midstream company in the industry and delivers consistent returns through commodity cycles. We are on track to achieve our 3x leverage target in the back half of 2024, which is almost 1.5 years ahead of our initial target laid out at the end of 2020. This positions AM to pursue incremental return of capital to shareholders. With that, operator, we are ready to take questions.

Our first question comes from Naomi Marfatia with UBS. Please proceed with your question.

Maybe to start, if you could touch on the theme of increased demand for power related to AI and data centers. Just curious on the opportunity set that AM has and if you've taken any steps to commercialize on this AI trend.

So, on the data center, I don't know if you caught the AR call, but we went through how much demand is coming from that in our basin, but also went through our firm transport portfolio to the Gulf Coast, and that's where we're going to be directing all of our gas. All competition is good. Gulf Coast, we think we'll get the premium for that. So that's where AR is focused. And of course, that would underpin AM's investments and allowing visibility into decades worth of development of this asset.

Maybe to switch gears to some ROE opportunities. AM did announce buyback authorization last quarter and indicated that buybacks would start post hitting the 3x leverage target. Since we're almost there, how should we think about the timing of buybacks and capital allocation priorities between M&A and buybacks?

Thank you for the question. This is Brendan. As we've discussed in previous calls, we evaluate everything based on the overall capital return. As we approach our leverage target of 3x, which we expect in the second half of this year, we will be well positioned to buy back shares, reduce debt further, or pursue small acquisitions. We have a $500 million buyback program in place, and we continue to find our shares appealing. Therefore, share buybacks remain a strong consideration for us, but we will reassess as we reach that 3x target later this year.

Our next question comes from John Mackay with Goldman Sachs. Please proceed with your question.

Maybe we'll pick up that last one a little bit, maybe not to put words in your mouth, but it does sound like the buyback was kind of clearly front of the line for capital allocation decisions. I just maybe looking for a clarification on the last comment there. Are you guys seeing maybe more bolt-on opportunities than you'd expected before that look a little more attractive? I guess just curious if that kind of stack has changed at all? Or maybe I'm just reading a little too much into your last comment there?

Yes. No, I mean, I think it's the same messaging we've been giving over the last several quarters, which is share buybacks as we sit here today continue to make a lot of sense for further return of capital. To the extent we come across opportunities similar to past opportunities on the bolt-on where you've got high visibility into the assets, we'll certainly look at those type of opportunities, but share buybacks do continue to make a lot of sense as we look at return of capital today.

Okay. No, that's absolutely clear. Maybe just shifting gears. On the AR call, there was a comment around there's the one pad. I guess, in the third quarter that could push to the right or be deferred a little bit given where dry gas pricing is right now. Maybe if you could just kind of frame up for us what that could mean for AM volumes back half of the year? I imagine it's a relatively small impact, but maybe just tie that together for us.

Yes. This is Mike. It would not come on this year. So, it had no impact on AM volumes.

Maybe just comment on the water side then?

Just on the water side.

Our next question comes from Zack Van Everen with TPH & Company. Please proceed with your question.

Just a follow-up from the AR call, it sounds like they revised up their guidance kind of on the liquids-rich area a little bit. Does that just provide more confidence around your volume forecast of flat to slight growth or are you guys leaning more towards that slight growth kind of higher end of the volume guidance?

No. I think AR was solely really driven by the liquid side of banks. So, no change on the AM front, just overall, I think, solidifies the guidance we put out there already.

Got you. That makes sense. And then it does look like your guys' JV frac is full. I know in previous calls, you mentioned there's plenty of capacity in the area on non-baby fracs. Do you guys have to pay any third-party frac fees? And if so, would those show up just in direct OpEx under the G&P segment?

Yes, we don't have any fees we're paying on that front, so nothing to note there.

Our next question comes from Ned Baramov with Wells Fargo. Please proceed with your question.

One more on capital allocation, if I may. I caught the approximately $2 million repurchase of your 2026 senior notes. So, could you maybe elaborate a little bit more on the decision to buy back debt in the first quarter and whether your capital allocation framework assumes further debt paydown this year?

Yes, that's a good question. To remind you, we issued senior notes in January and paid off our revolving credit facility. In terms of our outstanding senior notes, we will consider repurchasing them if it makes financial sense compared to holding cash on our balance sheet. We have already bought back bonds at the end of the quarter. As we aim for our 3x leverage target, we will also evaluate options for further returning capital through debt reduction.

That makes sense. And then, it seems you guys completed a small acquisition of gathering systems and other facilities in the first quarter, not a material number relative to overall spending, but still it would be great to get some additional details on that purchase?

Yes, we did make a purchase, which was a relatively sizable line, but there wasn't much volume associated with it. We invested $2 million in a nice asset that provides a lot of potential for future capital savings. Over the years, we've demonstrated our ability to reuse compressor units, and through various acquisitions, we've managed to reduce future capital requirements. This asset doesn't have much volume flowing through it, but we acquired it at an attractive price, and we believe it could be very beneficial for our future capital savings. We will share more details about this in the future, but it was a valuable piece of infrastructure that we were able to secure at a low cost.

There are no further questions at this time. I'd like to turn the call back over to Justin Agnew for brief closing comments.

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

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