Antero Midstream Fourth Quarter 2025 Earnings Call - $1.1B HG acquisition lifts EBITDA and frees low-capex growth
Summary
Antero Midstream closed a $1.1 billion bolt-on acquisition of HG Midstream, which management says immediately adds over 400 highly economic, undeveloped locations and accelerates water and dry gas optionality. 2025 was another steady year: adjusted EBITDA rose 7% year-over-year for the full year, marking the 11th consecutive year of EBITDA growth since IPO, and free cash flow after dividends jumped 30% to a company record $325 million.
Looking forward, management guides to adjusted EBITDA above $1.2 billion in 2026, an 8% increase, and free cash flow after dividends of $360 million, up 11%. The story is capital efficiency, not heavy new spending: a modest 2026 capex range of $190 million to $220 million funds well connects, water integration, compression and dry gas deliverability projects, while the company preserves a $0.90 per share dividend and targets low 3x leverage through a mix of debt paydown and buybacks. Management flags additional upside as HG assets and the Intervale water system are integrated and Antero Resources ramps a 3-rig, 2-completion program, which they say supports continued mid- to high single-digit EBITDA growth beyond 2027.
Key Takeaways
- Closed HG Midstream acquisition for $1.1 billion, adding over 400 undeveloped, dedicated locations in the core Marcellus.
- Management says HG is a strategic bolt-on that fits AM’s just-in-time capital approach and immediate development optionality.
- Full-year 2025 adjusted EBITDA grew 7% year-over-year, marking the 11th consecutive year of EBITDA growth since the IPO.
- Company record free cash flow after dividends for 2025 was $325 million, up 30% versus 2024, driven by capital-efficient organic growth and throughput from Antero Resources.
- Q4 2025 adjusted EBITDA was $285 million, up 4% year-over-year, and Q4 free cash flow after dividends was $85 million.
- Cash use in Q4 included leverage reduction to 2.7x and approximately $48 million of share repurchases.
- 2026 guidance: adjusted EBITDA above $1.2 billion (about +8% YoY) and free cash flow after dividends of $360 million (+11% YoY), assuming transaction close timing.
- 2026 capital budget is modest at $190 million to $220 million, focused on well connects, water integration, compression relocations, high-pressure gathering trunks, and dry gas deliverability expansion.
- Management expects to integrate the Intervale water system in 2026 and see additional water business growth in 2027 as HG acreage is serviced.
- Antero expects to run a 3-rig, 2-completion crew program that management says drives roughly 200 million a day of throughput growth and supports mid- to high single-digit EBITDA growth beyond 2027.
- Company targets a balanced return of capital in 2026, combining debt reduction and share repurchases while maintaining a $0.90 per share dividend.
- Management financed the HG acquisition without issuing equity, which they say improves after-tax accretion and preserves value for existing shareholders.
- 2025 ROIC was 20%, cited as evidence of high capital efficiency from leveraging existing assets.
- Management emphasizes AM’s capital-light profile for growth, saying most incremental development requires minimal AM capital because of existing trunk lines, water, and pipeline optionality.
- Key execution risks implicit in the story include integration timing for HG water assets, realization of expected synergies, and the dependence on AR’s development cadence to deliver throughput upside.
Full Transcript
Conference Operator: 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, Antero Midstream: 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, Antero Midstream: 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 Intervale 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, Antero Midstream: 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.
Michael Kennedy, CEO and President, Antero Midstream: ...With that, operator, we are ready to take questions.
Conference Operator: 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 McKay with Goldman Sachs. Please proceed.
John McKay, Analyst, Goldman Sachs: 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 crew program.
Michael Kennedy, CEO and President, Antero Midstream: 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 McKay, Analyst, Goldman Sachs: 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, Antero Midstream: 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 McKay, Analyst, Goldman Sachs: All right. That’s clear. Appreciate the time.
Michael Kennedy, CEO and President, Antero Midstream: Yep.
Conference Operator: 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, Antero Midstream: Thank you, everyone, for joining us on the call today. Please reach out with any questions that you have. Have a good day.
Conference Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time.
