Antero Midstream - Q4 2025
February 12, 2026
Transcript
Operator (participant)
Greetings. Welcome to Antero Midstream fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to Dan Katzenberg, Director of Finance. Thank you. You may begin.
Dan Katzenberg (Director of Finance)
Thank you for joining us for Antero Midstream's fourth 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 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. Joining me on the call today are Michael Kennedy, CEO and President of Antero Midstream, Justin Agnew, CFO of Antero Midstream, and Brendan Krueger, CFO of Antero Resources. With that, I'll turn the call over to Mike.
Michael Kennedy (CEO and President)
Thanks, Dan. Good morning, everyone. We recently closed the acquisition of HG Midstream for $1.1 billion. This bolt-on asset in the core of the Marcellus Shale adds over 400 highly economic, undeveloped locations dedicated to Antero Midstream that immediately compete for development, capital, and infrastructure projects in 2026. This asset is a strategic fit in AM's portfolio and will follow our just-in-time capital investment strategy that generates consistent and repeatable free cash flow. Looking back at 2025, we generated EBITDA growth of 7% year-over-year, which marked our eleventh consecutive year of growth since our IPO in 2014. Free cash flow after dividends increased by 30%, driven by capital-efficient organic growth and throughput from AR.
In 2026, this EBITDA and free cash flow growth continues as we expect 8% year-over-year EBITDA growth and 11% year-over-year free cash flow growth. Looking ahead further to 2027, we expect another year of high single-digit EBITDA growth as we realize the full benefits of the acquisition and synergies, including the integration of the water system and AR, running a 3-rig, 2-completion crew development program on our dedicated acreage. Justin will go into the details in his remarks, but the Intergrated water system, combined with our investment in dry gas assets, provides high visibility into growth at AM. Importantly, we can achieve this growth with very modest capital budgets, which allows us to further expand our free cash flow after dividends in 2027. With that, I'll turn the call over to Justin.
Justin Agnew (CFO)
Thanks, Mike. I'll start with our fourth quarter and full-year highlights on slide 4. Adjusted EBITDA was $285 million during the quarter, which is a 4% increase year-over-year, driven by an increase in gathering and compression volumes. During the quarter, we generated $85 million of free cash flow after dividends, which we used to reduce leverage to 2.7x and repurchase approximately $48 million of AM shares. For the full year, we generated a company record free cash flow after dividends of $325 million, which is a 30% increase compared to 2024. This free cash flow growth, driven by capital efficiencies from leveraging our existing assets, generated a 20% return on invested capital for ROIC in 2025. Now let's move on to slide 5, titled 2026 Capital Budget.
In 2026, we have budgeted a capital investment of $190 million-$220 million. The capital budget includes our blocking and tackling well connects and water capital, construction and relocation of compression assets, high-pressure gathering trunk lines, and capital to integrate the water systems. It also includes expansion capital on the dry gas portion of the acreage to enhance downstream deliverability to multiple long-haul pipelines. These projects will unlock significant optionality and improve reliability in the dry gas regime that we don't currently have today. I'll finish my comments on slide number 6, titled 2026 Guidance and Outlook. This guidance includes the impact of the acquisition and divestiture, with contributions to guidance based on closing dates of each transaction.
For 2026, we are forecasting Adjusted EBITDA of over $1.2 billion from this point, or an 8% increase year-over-year. As Mike mentioned, after we finish the integration of the acquired water assets in 2026, we expect further growth in the water business in 2027 as we begin servicing locations on HG-acquired acreage. After interest, a capital budget of $190 million-$220 million, and an attractive $0.90 per share dividend, we are forecasting to generate free cash flow after dividends of $360 million, or an 11% increase compared to 2025. Consistent with our historical approach, we expect a balanced return of capital program in 2026 in the form of debt reduction and share repurchases.
This allows us to maintain a strong balance sheet with leverage in the low 3x range. Core to AM's strategy, the recent acquisition highlights the benefit of lower leverage and debt reduction, which allowed us to flex the balance sheet for the HG acquisition. This improves after-tax accretion and, more importantly, allows the value to accrete to our existing shareholders without the need for equity financing. In summary, we expect 2026 to be yet another year of EBITDA expansion, high capital efficiency, and most importantly, double-digit free cash flow growth. Our organic growth strategy, coupled with a highly accretive acquisition that is fully financed, positions us well to build upon the momentum created in 2025.
...With that, operator, we are ready to take questions.
Operator (participant)
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. Our first question is from John MacKay with Goldman Sachs. Please proceed.
John MacKay (Analyst)
Hey, good morning, guys. Thank you for the time. I want to start on the growth outlook. I understand 2026 and 2027 have some, you know, tailwinds from M&A in the headline numbers. Could you just walk us through a little bit what the kind of longer-term growth trajectory looks like? Let's say, you know, once the assets are kind of fully up and running, if you guys are running a 3-rig and 2-rig program.
Michael Kennedy (CEO and President)
Yeah, John, good question. That 3-rig, 2-rig program does provide continued growth even past 2027. It's about 200 million a day of growth on throughput volume, so expect that to continue. So I think you'd still be in the mid- to high single-digit EBITDA growth like we've experienced over our time, our last 11 years, and we'll have in 2025 and 2026. I think that's pretty fair to have us generate those type of growth in 2027 and beyond.
John MacKay (Analyst)
That's clear. Appreciate it. And then, you know, on the AR side, you guys were talking about some growth upside plans. Can you just walk... And, you gave the color on the AR call, but maybe just again, like walk us through the thought process there and then what that means for AM, both from an EBITDA growth standpoint, but also a capital standpoint, if you move to that, higher potential target.
Michael Kennedy (CEO and President)
Yeah, that's a great thing about it. There's really no capital for AM outside of what we just outlined, Justin did. It's right in the heart of our field. We already have all the big trunk lines. We have whatever pipelines are necessary. We have the water. A lot of this is dry gas, so it doesn't need further processing. So really, really nothing different than these capital budgets that we've experienced over the past couple of years for AM. For AR, AR is well positioned, partly because of AM, but also because of firm transport, optionality around dry gas, being in the right part of the country, but also having the ability to transport our gas to the Gulf Coast for the LNG. So a lot of different demand centers coming AR's way.
So AR is the likely company in most well-positioned to meet the growing demand over the next 5-10 years.
John MacKay (Analyst)
All right. That's clear. Appreciate the time.
Michael Kennedy (CEO and President)
Yep.
Operator (participant)
There are no further questions at this time. I would like to turn the conference back over to Dan for closing remarks.
Dan Katzenberg (Director of Finance)
Thank you, everyone, for joining us on the call today. Please reach out with any questions that you have. Have a good day.
Operator (participant)
Thank you. This will conclude today's conference. You may disconnect your lines at this time.