Executive Summary / Key Takeaways

• Integrated Infrastructure and Strategic Positioning: Antero Midstream (AM) leverages its deep integration with Antero Resources (AR) and a comprehensive midstream network in the Appalachian Basin to capture stable, fee-based revenues and drive efficient organic growth, particularly through its advanced gathering, compression, and water handling systems.
• Technological Edge and Capital Efficiency: The company's innovative compressor reuse program and integrated water systems significantly reduce capital intensity and operating costs, enhancing its Return on Invested Capital (ROIC) and generating substantial free cash flow.
• Robust Financial Performance and Shareholder Returns: AM consistently delivers strong EBITDA growth, with a 10% year-over-year increase in Q3 2025 Adjusted EBITDA to $281 million, and record free cash flow after dividends, enabling a balanced capital allocation strategy focused on debt reduction and opportunistic share repurchases.
• Dry Gas Optionality and Emerging Demand: AM is strategically positioned to capitalize on growing in-basin natural gas demand, particularly from data centers and power generation, with AR exploring dry gas development on AM's underutilized infrastructure, offering significant upside and diversification.
• Disciplined Capital Allocation and Strong Balance Sheet: With leverage at 2.7x as of September 30, 2025, and no material cash taxes expected through at least 2028, AM maintains a flexible capital allocation framework, supporting an attractive dividend and further enhancing shareholder value through financial strength.

The Appalachian Advantage: A Foundation for Midstream Dominance

Antero Midstream Corporation, established in 2002, has carved out a specialized and robust position within the energy midstream sector. Headquartered in Denver, Colorado, the company's core mission revolves around owning, operating, and developing critical energy infrastructure primarily to service Antero Resources' extensive production and completion activities across the prolific Appalachian Basin. This deep, long-term contractual integration with Antero Resources forms the bedrock of AM's business model, providing a stable, fee-based revenue stream largely insulated from direct commodity price volatility.

The Appalachian Basin itself is a focal point for natural gas production, and AM's strategically located assets—including gathering pipelines, compressor stations, and interests in processing and fractionation plants—are integral to bringing this production to market. While many midstream companies connect producers to local Appalachian markets, AM distinguishes itself by connecting its investment-grade producer, Antero Resources, to premium-priced LNG markets, while also maintaining significant optionality to access local markets as demand warrants. This dual market access, coupled with AR's vast, dedicated inventory spanning over two decades, underpins AM's competitive strength and long-term growth potential.

The company's history reflects a consistent drive for growth and efficiency. By 2024, Antero Midstream achieved its tenth consecutive year of EBITDA growth, reaching $1.05 billion, and a company-record 19% Return on Invested Capital (ROIC). This impressive track record is a direct outcome of its "just-in-time capital investment philosophy," which optimizes infrastructure deployment, and the strategic accretion from bolt-on acquisitions that have consolidated its operational footprint.

Technological Edge and Operational Efficiency

Antero Midstream's operational prowess is significantly enhanced by its commitment to technological differentiation and capital efficiency. A prime example is its innovative compressor reuse program. This initiative involves relocating and repurposing underutilized compressor units from existing stations to construct new or expand current compressor stations. This approach offers substantial, quantifiable benefits over traditional new builds.

The compressor reuse program has already generated over $50 million in savings across three compressor stations, including a notable $30 million at the Torrey's Peak Compressor Station, which came online ahead of schedule in March 2025. Looking ahead, the company projects an additional $85 million in reuse savings from 2026 through 2030. To put this into perspective, these cumulative savings are equivalent to the cost of building two brand-new 160 million cubic feet per day compressor stations. This technological approach directly translates into lower capital expenditures, improved capital efficiency, and higher returns on invested capital for AM.

Beyond compression, AM's integrated water handling systems represent another critical technological differentiator. The company has invested significantly in expanding and connecting the southern end of the Marcellus Shale with its water assets, creating a single, integrated system. This system, comprising permanent buried pipelines, surface pipelines, water storage facilities, pumping stations, blending facilities, and impoundments, supports capital-efficient development and provides flexibility across AR's entire acreage position for the next decade and beyond. The efficiency of these systems was underscored in Q3 2025, when fresh water delivery volumes increased by almost 30% year-over-year while operating just one completion crew, a testament to significant completion efficiencies. This integrated approach allows AM to offer superior water management services, a crucial component for modern drilling and completion activities, and a competitive advantage over midstream peers with less specialized water infrastructure.

Robust Performance and Strategic Growth

Antero Midstream's financial performance in 2025 demonstrates consistent growth and effective capital management. For the three months ended September 30, 2025, total revenues increased by 9% to $295 million, and for the nine months ended September 30, 2025, total revenues also rose by 9% to $891 million. This growth was primarily driven by increases in both gathering and processing, and water handling segments. Gathering and processing revenues increased by 7% for both periods, fueled by higher throughput volumes and annual CPI-based adjustments to rates. Water handling revenues saw a significant 23% increase for the three months and an 18% increase for the nine months, largely due to increased fresh water delivery volumes, CPI-based rate adjustments, and higher other fluid handling volumes.

Operating expenses have seen a controlled increase, with direct operating expenses rising by 12% for the three months and 10% for the nine months ended September 30, 2025. These increases are directly linked to higher gathering and compression volumes, increased heavy maintenance, and costs associated with recently acquired assets and higher water handling volumes. Despite these operational cost increases, the company's Adjusted EBITDA for Q3 2025 reached $281 million, a 10% increase year-over-year, reflecting strong operational leverage.

The company's financial health is further bolstered by its proactive debt management. Interest expense decreased by 9% for both the three and nine months ended September 30, 2025, a result of lower average daily Credit Facility borrowings and interest rates, alongside the strategic repurchase and redemption of the 2026 Notes. As of September 30, 2025, AM's leverage stood at a healthy 2.7x, a significant reduction of almost 0.5 turn over the last year. This credit improvement led to credit ratings upgrades from Moody's and enabled the successful refinancing of its 2027 notes with new 5.75% senior notes due 2033, extending maturities and enhancing liquidity. Pro forma for this refinancing, AM boasts over $870 million of liquidity and no near-term maturities.

Strategic Outlook and Capital Allocation

Antero Midstream's outlook is characterized by disciplined capital investment and a flexible approach to shareholder returns. The company's 2025 capital budget, revised to a range of $170 million to $190 million, supports Antero Resources' maintenance capital program. This budget includes approximately $85 million for gathering and compression, focusing on low-pressure gathering connects and the completion of the Torrey's Peak compressor station. An additional $85 million is allocated to water infrastructure, expanding the integrated system across the Marcellus footprint. A $15 million investment in the Stonewall joint venture for additional compression aims to diversify AM's customer base by facilitating third-party gas delivery to long-haul pipelines.

A significant strategic initiative involves Antero Resources' plan to drill its first dry gas Marcellus pad in over a decade, utilizing AM's existing, underutilized midstream capacity acquired in 2022. This "proof of concept" development offers attractive rates of return for AM and provides significant upside to previous acquisitions valued on a PDP-only basis. It also highlights AM's ability to provide immediate access to local markets, positioning it for future in-basin demand growth from data centers and power generation projects. This dry gas optionality allows AM and AR to toggle between liquids and dry gas development based on market economics, enhancing portfolio flexibility.

The broader industry trend of increasing natural gas demand, particularly from data centers and power generation in the Appalachian region, presents a substantial long-term opportunity for AM. Expectations for data center power requirements by 2030 have doubled in the last six months, with 70% projected to be powered by natural gas. AM's extensive infrastructure, coupled with AR's position as a major natural gas producer in West Virginia and its significant water system, uniquely positions the Antero family to capitalize on this growing demand. AM is actively exploring opportunities to build infrastructure for these demand areas, potentially through take-or-pay contracts, which would further solidify its revenue base.

Financially, AM expects to generate $250 million to $300 million in free cash flow after dividends in 2025, representing a 10% increase year-over-year at the midpoint. This robust cash flow, combined with lower interest expense and the favorable impact of the "One Big Beautiful Bill Act" (OBBB) which is expected to result in a refund of substantially all cash paid for income taxes in 2025 and no material cash taxes through at least 2028, provides significant financial flexibility. The company plans to maintain its $0.90 per share dividend and allocate the remaining free cash flow after dividends to a balanced approach of share repurchases and further debt reduction, aiming for roughly a 50-50 split over a full year. This strategy is designed to accrue value directly to shareholders and maintain a strong balance sheet, which is in its strongest position since the company's IPO.

Competitive Landscape and Risks

Antero Midstream operates in a competitive midstream energy sector alongside larger, more diversified players such as Enterprise Products Partners (EPD), Kinder Morgan (KMI), and Williams Companies (WMB). While these competitors boast broader scale and geographic diversity, AM's competitive advantage lies in its deep vertical integration with Antero Resources, its specialized water handling capabilities, and its established network effects within the Appalachian Basin. This integration fosters strong customer loyalty and enables efficient resource allocation, potentially leading to faster innovation cycles in its niche. AM's proprietary water handling technology, for instance, offers significantly higher efficiency in water management compared to broader, less specialized infrastructure offered by some rivals.

However, AM's reliance on Antero Resources as its primary customer presents a key vulnerability. Any event adversely affecting AR's production, drilling schedule, or financial condition could directly impact AM's revenues and operating results. While AM's fixed-fee and CPI-based contracts mitigate direct commodity price exposure, changes in commodity prices can still influence AR's development plans, indirectly affecting AM's throughput volumes. The company is also exposed to broader economic indicators, such as inflation and supply chain disruptions, which could increase operating and capital costs, although CPI-based adjustments in its contracts offer some mitigation.

Furthermore, AM is involved in ongoing litigation with Veolia Water Technologies, Inc. regarding the Clearwater Facility. While Antero Treatment LLC (a wholly-owned subsidiary of AM) has received favorable judgments, including a $280 million damages award and $19 million in attorneys' fees and costs, Veolia has appealed to the Colorado Supreme Court. The outcome and timing of this legal process remain uncertain, posing a contingent risk.

Conclusion

Antero Midstream Corporation presents a compelling investment thesis rooted in its strategically integrated midstream operations within the prolific Appalachian Basin. The company's history of consistent EBITDA growth, coupled with its innovative approach to capital efficiency through programs like compressor reuse and integrated water systems, underscores its operational excellence and ability to generate robust free cash flow. This financial strength, reflected in its declining leverage and enhanced liquidity, supports a disciplined capital allocation strategy that prioritizes an attractive dividend, debt reduction, and opportunistic share repurchases, all designed to maximize shareholder value.

Looking ahead, AM is well-positioned to capitalize on the burgeoning demand for natural gas, particularly from the rapidly expanding data center and power generation sectors. Its dry gas optionality, leveraging existing underutilized infrastructure, provides a strategic avenue for future growth and diversification. While customer concentration and ongoing litigation represent identifiable risks, AM's strong contractual framework, technological advantages, and disciplined financial management provide a resilient foundation. For discerning investors, Antero Midstream offers a unique blend of stable income, capital-efficient growth, and strategic upside in an evolving energy landscape.