Greetings. Welcome to the Antero Midstream 2Q 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Justin Agnew, Vice President of Finance. Thank you. You may begin. Justin J

Good morning, and thank you for joining us for Antero Midstream's Second 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 numbers. 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 the progress on our 2025 capital projects and an update on our capital reuse savings. Brendan will then provide a recap of our second quarter results and increased 2025 guidance. Let me start on Slide #3, titled 2025 Capital projects on track. As depicted on this page, during the second quarter, we invested $45 million in gathering, compression, water and the Stonewall joint venture projects. This brings our year-to-date capital investment to $82 million or 45% of our updated 2025 capital budget at the midpoint of guidance. These projects included the completion of Torrey's peak compressor stations and significant progress on the water system expansion to the southern portion of the Marcellus. . The capital invested in the back half of the year will be weighted towards the third quarter as we take advantage of better weather conditions for construction. Importantly, the remaining capital will be focused on low-pressure gathering and water connects that set up the 2026 development plan. Before turning the call over to Brendan, I also want to provide an update on our compression reuse program on Slide #4, titled exceeding expectations on reuse savings. To date, we have realized over $50 million of savings through our reuse program, including $30 million at the Torrey's Peak compressor station. After a successful proof of concept on 3 compressor stations, we're now increasing the future reuse savings estimates. As you can see on the left side of the page, our 5-year savings estimate from 2026 through 2030 has increased from $60 million to over $85 million. This brings the cumulative savings already achieved plus the forecasted savings to over $135 million. To put it in perspective, these savings approximate the cost of building 2 brand-new 160 million cubic feet per day compressor stations. With that, let me turn it over to Brendan.

Thanks, Paul. I will start with our second quarter financial results on Slide 5. During the second quarter, we generated $284 million of EBITDA, which was an 11% increase year-over-year. This was driven primarily by an increase in gathering and processing volumes, both of which set new company records. This EBITDA growth, combined with declining capital year-over-year, resulted in free cash flow after dividends of $82 million, which was almost a 90% increase compared to last year. We utilized this free cash flow for share repurchases and for debt reduction, which drove our leverage down to 2.8x as of June 30. Now let's move on to Slide #6, titled increased 2025 guidance. This slide illustrates the components that resulted in the $25 million increase in our free cash flow guidance. At the midpoint, we are increasing our adjusted EBITDA guidance by $10 million driven by outperformance in our gathering and compression throughput. In addition, we are lowering our capital budget range, bringing the top end of the guidance down from $200 million to $190 million, a $5 million reduction at the midpoint. Our debt reduction efforts have also resulted in $5 million lower interest expense. Lastly, with the recently passed budget reconciliation bill, we are reducing our cash income taxes from a range of 0 to $10 million to 0. This is driven by a combination of reinstating bonus depreciation and interest deduction limitation improvements. Looking ahead, we do not expect to be a material cash taxpayer through at least 2028. I will finish my comments on Slide 7, titled uniquely positioned for LNG and Northeast demand growth. AM plays the critical role investing in first mile infrastructure, connecting low-cost production to LNG facilities along the Gulf Coast. While most midstream companies can connect producers to local Appalachian markets, AM is uniquely positioned in the fact that it connects its investment-grade producer to premium-priced LNG markets, while still maintaining significant optionality to connect into local markets, should the demand growth warranted. As you can see on the snapshot on the right-hand side of the page, additional projects in Appalachia continue to get announced, and we expect project announcements to accelerate given the regulatory support, specifically in West Virginia for data center development. In the future, if there is a structural change in Northeast demand or production tied to direct sales, Antero Resources has over 10 years of dry gas locations that are substantially HBP and dedicated to AM that can supply that growing opportunity set. Importantly, with over 20 years of liquids-rich and dry gas inventory and an investment-grade balance sheet, Antero is one of the few companies that can be relied on to actually supply long-term agreements. In summary, we continue to execute on our organic growth plan, consistently delivering predictable earnings and peer-leading capital efficiency. These attributes allow us to pay an attractive dividend, reduce absolute debt and make opportunistic share repurchases, all of which continue to drive value for our shareholders. With that, operator, we are ready to take questions.

[Operator Instructions] Our first questions come from the line of John Mackay with Goldman Sachs.

I wanted to start on some of your comments you made on the AR call. You continue to talk about in-basin demand opportunities, also kind of saying that you'd want it to be kind of NYMEX pricing and disciplined on growth into these. But maybe can you spend a second talking about where AM could fit into this? Are there opportunities for AM specifically beyond just moving those -- gathering those incremental AR volumes?

Yes. I think it's a great question, John. I think for AM, we look at the opportunities, similar to AR in the sense AR could be a supplier, AM could build the infrastructure as needed. Obviously, we've got a large footprint with our current gathering and compression system in West Virginia and in Ohio. And so there are certainly opportunities where AM could be the one building the spur, have sort of take-or-pay contracts on those arrangements as well. So we're looking at all of those items as potential solutions as it relates to this growing demand in the Northeast.

That's fair. Maybe just on capital allocation. I think the first kind of 2 quarters of the year -- or sorry, I guess you've talked about the buyback being kind of potentially 50% of, let's call it, excess free cash flow. It's kind of trending below that first 2 quarters of the year. It does look like it stepped up in July, but maybe just -- can you spend a second on how you think about allocating to the buyback versus the balance sheet? And is that 50% number still kind of the right ballpark?

Yes. I mean I think we think about that 50% in probably longer-term numbers. So when we're giving those comments, it's over a full year period, not kind of quarter-to-quarter here. In the first quarter, we had some working capital headwinds. So did not pay as much debt down in that first quarter. And then you saw in the second quarter, we did pay a substantial amount of debt down. And then as you hit on in July, we certainly stepped up on the buyback there. So I would say it really does ebb and flow, and we try to be opportunistic in those share repurchases and can be more aggressive at times we see more value in the shares. I think for AM, we continue to see a lot of value in the share buyback. And we also see the value of paying down debt accruing to the equity as well. I think we're the lowest levered midstream name in the space, and we think that debt paydown does accrue to the equity still as we look at that today. So we'll continue to look at both opportunities, and it will change quarter-to-quarter.

Our next questions come from the line of Jeremy Tonet with JPMorgan.

Just wanted to dig in maybe a little bit more, if you could, with regards to in-basin demand opportunities, and there's been some announcements recently at the Pennsylvania Energy and Innovation Summit. I think there's also been some announcements out of Meta with the new Albany facility. And I was just wondering, related to these recent developments, I guess, do you see opportunities emerging specific to AM here over time?

Yes. I think we talked a little bit about it in the first question there. West Virginia, in particular is where we have our significant asset base for AM. West Virginia recently did pass this microgrid bill, where if you supply 70% of the power to a data center, you're essentially -- you kind of skip the line. So a lot of benefits if you can fall under that microgrid bill. And I think as mentioned in the previous question, for AM, I think there's really 2 ways that AM plays a role. To the extent AR accelerates production to meet that specific demand AM, of course, gets the benefit of the water, the low pressure, the compression, the high-pressure fees. And then the second piece is, of course, if AM participates in building out infrastructure for the supply, AM would then earn a fee with a potential third party on building that infrastructure out. So I think I'd probably communicate what we did on the AR call, which is having lots of conversations. We've got a team internally working it but no time line in terms of when, if any announcements could be made, we're trying to go through this thoughtfully. And to the extent something makes sense for the company, we'll come out with it. But otherwise, no plans in the medium term -- intermediate term.

Got it. Understood. Maybe just pivoting here to the Clearwater facility lawsuit. I don't know if there's any color you could shed on time line at this point from a legal proceeding standing.

No, unfortunately not. I think nothing's changed from what we put in our disclosure. They appealed to the Colorado Supreme Court and just waiting on the Colorado Supreme Court to come out with any sort of decision in terms of whether they take it or not, but no change from that standpoint.

[Operator Instructions] Our next questions come from the line of Ned Baramov with Wells Fargo.

Processing volumes ticked up well above capacity in the second quarter. And given AR's development plan assumes a higher mix of liquids-rich wells going into the fourth quarter, I would imagine utilization will increase even further from here. Could you maybe talk about the threshold above nameplate that would potentially trigger a decision to add another processing plant at the JV? It seems that running 5% to 10% above nameplate is not really a trigger, but just curious at what utilization levels you would have to make that decision?

Yes. I think there's still some room there. You can typically run these about 10% over nameplate. So at the 16% related to the JV, you'd be 160 over nameplate. So you've got another 80 or 90 still above that. So no imminent needs to increase processing capacity. And I think as was talked about on the AR call, there's also pads that get layered in over the next couple of years that are leaner as well. So you'd expect that to stay in that -- in a similar ballpark as you look forward here.

Understood. And then a quick question on cash taxes. The earnings press release indicated an expected reversal of cash taxes paid year-to-date in the second half of the year. Could you maybe talk about your cash tax expectations longer term? When do you think AM will be a full cash taxpayer?

Yes. As we look out at least over the 5 years, we're not expecting to be a full cash taxpayer. And I think as I mentioned in prepared remarks, do not expect to be a material cash taxpayer through at least 2028, and then we'll see after that. But the bill overall was favorable for AM in the sense it reduced at least next 5 years by about $150 million in terms of deferred taxes. So a nice benefit of getting that bill passed.

Our next questions come from the line of Wade Suki with Capital One.

I was just wondering if you might be able to speak to sort of inorganic opportunities, what you're seeing in the asset market out there? Any color you could give would be great.

Yes, good question. We've had some bolt-on acquisitions that we've completed over the last several years. Those -- we'll continue to look at opportunities like that where there's bolt-on opportunities in and around our current asset base. Nothing immediate to talk about there, but we're always looking at opportunities there.

Thank you. This now concludes our question-and-answer session. I would now like to turn the floor back over to Justin Agnew for any closing comments.

Thanks, operator, and thanks to everybody for joining today's conference call. Please feel free to reach out with any follow-up questions.

Thank you. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.