Antero Midstream Corp [AM] Filings

10-Q 1 am-20240630x10q.htm 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-38075

ANTERO MIDSTREAM CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		61-1748605
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1615 Wynkoop Street Denver, Colorado		80202
(Address of principal executive offices)		(Zip Code)

(303) 357-7310

(Registrant’s telephone number, including area code)



Securities registered pursuant to section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	AM	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ☒	Accelerated Filer ☐
Non-accelerated Filer ☐	Smaller Reporting Company ☐
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes ☒ No

Number of shares of the registrant’s common stock outstanding as of July 26, 2024 (in thousands): 481,261

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TABLE OF CONTENTS



		Page
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		1
PART I—FINANCIAL INFORMATION		3
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	38
PART II—OTHER INFORMATION		39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 5	Other Information	39
Item 6.	Exhibits	40
SIGNATURES		41

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. Words such as “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential,” or “continue,” and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. When considering these forward-looking statements, investors should keep in mind the risk factors and other cautionary statements in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2023. These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

●

Antero Resources Corporation’s (“Antero Resources”) expected production and development plan;

●

impacts to producer customers of insufficient storage capacity;

●

our ability to execute our business strategy;

●

our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;

●

our ability to realize the anticipated benefits of our investments in unconsolidated affiliates;

●

our ability to execute our share repurchase program;

●

natural gas, natural gas liquids (“NGLs”), and oil prices;

●

impacts of geopolitical events, including the conflicts in Ukraine and in the Middle East, and world health events;

●

our ability to complete the construction of or purchase new gathering and compression, processing, water handling or other assets on schedule, at the budgeted cost or at all, and the ability of such assets to operate as designed or at expected levels;

●

our ability to execute our return of capital program;

●

competition;

●

government regulations and changes in laws;

●

actions taken by third-party producers, operators, processors and transporters;

●

pending legal or environmental matters;

●

costs of conducting our operations;

●

our ability to achieve our greenhouse gas reduction targets and the costs associated therewith;

●

general economic conditions;

●

credit markets;

●

operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control;

●

expectations regarding the amount and timing of litigation awards;

●

uncertainty regarding our future operating results; and

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●

our other plans, objectives, expectations and intentions contained in this Quarterly Report on Form 10-Q.

We caution investors that these forward-looking statements are subject to all of the risks and uncertainties incidental to our business, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, supply chain or other disruptions, environmental risks, Antero Resources’ drilling and completion and other operating risks, regulatory changes or changes in law, the uncertainty inherent in projecting Antero Resources’ future rates of production, cash flows and access to capital, the timing of development expenditures, impacts of world health events, cybersecurity risks, the state of markets for, and availability of, verified quality carbon offsets and the other risks described or referenced under the heading “1A. Risk Factors” herein, including the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”), which is on file with the Securities and Exchange Commission (“SEC”).

Should one or more of the risks or uncertainties described or referenced in this Quarterly Report on Form 10-Q occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

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PART I—FINANCIAL INFORMATION

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)


			(Unaudited)
	December 31,		June 30,
	2023		2024
Assets
Current assets:
Cash and cash equivalents	$	66		—
Accounts receivable–Antero Resources		88,610		101,251
Accounts receivable–third party		952		1,384
Other current assets		1,500		963
Total current assets		91,128		103,598

Property and equipment, net		3,793,523		3,868,885
Investments in unconsolidated affiliates		626,650		612,847
Customer relationships		1,215,431		1,180,095
Other assets, net		10,886		9,542
Total assets	$	5,737,618		5,774,967

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable–Antero Resources	$	4,457		3,816
Accounts payable–third party		10,499		15,058
Accrued liabilities		80,630		96,202
Other current liabilities		831		893
Total current liabilities		96,417		115,969
Long-term liabilities:
Long-term debt		3,213,216		3,186,577
Deferred income tax liability, net		265,879		330,802
Other		10,375		14,531
Total liabilities		3,585,887		3,647,879

Stockholders' equity:
Preferred stock, $0.01 par value: 100,000 authorized as of December 31, 2023 and June 30, 2024
Series A non-voting perpetual preferred stock; 12 designated and 10 issued and outstanding as of December 31, 2023 and June 30, 2024		—		—
Common stock, $0.01 par value; 2,000,000 authorized; 479,713 and 481,243 issued and outstanding as of December 31, 2023 and June 30, 2024, respectively		4,797		4,812
Additional paid-in capital		2,046,487		2,036,239
Retained earnings		100,447		86,037
Total stockholders' equity		2,151,731		2,127,088
Total liabilities and stockholders' equity	$	5,737,618		5,774,967

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In thousands, except per share amounts)


	Three Months Ended June 30,
	2023		2024
Revenue:
Gathering and compression–Antero Resources	$	211,068		228,993
Water handling–Antero Resources		64,613		58,056
Water handling–third party		274		414
Amortization of customer relationships		(17,668)		(17,668)
Total revenue		258,287		269,795
Operating expenses:
Direct operating		52,595		56,409
General and administrative (including $8,499 and $11,599 of equity-based compensation in 2023 and 2024, respectively)		18,162		21,219
Facility idling		637		412
Depreciation		35,233		37,576
Accretion of asset retirement obligations		44		47
Loss on settlement of asset retirement obligations		279		—
Loss on asset sale		5,814		1,379
Total operating expenses		112,764		117,042
Operating income		145,523		152,753
Other income (expense):
Interest expense, net		(55,388)		(52,186)
Equity in earnings of unconsolidated affiliates		25,972		27,597
Loss on early extinguishment of debt		—		(13,691)
Total other expense		(29,416)		(38,280)
Income before income taxes		116,107		114,473
Income tax expense		(29,095)		(28,436)
Net income and comprehensive income	$	87,012		86,037

Net income per common share–basic	$	0.18		0.18
Net income per common share–diluted	$	0.18		0.18

Weighted average common shares outstanding:
Basic		479,502		481,103
Diluted		481,512		484,778

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In thousands, except per share amounts)


	Six Months Ended June 30,
	2023		2024
Revenue:
Gathering and compression–Antero Resources	$	410,644		456,586
Water handling–Antero Resources		141,908		126,511
Water handling–third party		546		1,085
Amortization of customer relationships		(35,336)		(35,336)
Total revenue		517,762		548,846
Operating expenses:
Direct operating		110,468		110,327
General and administrative (including $14,826 and $20,926 of equity-based compensation in 2023 and 2024, respectively)		35,509		42,440
Facility idling		1,211		934
Depreciation		70,429		74,671
Accretion of asset retirement obligations		88		91
Loss on settlement of asset retirement obligations		620		—
Loss on asset sale		5,569		1,379
Total operating expenses		223,894		229,842
Operating income		293,868		319,004
Other income (expense):
Interest expense, net		(110,012)		(105,494)
Equity in earnings of unconsolidated affiliates		50,428		55,127
Loss on early extinguishment of debt		—		(13,750)
Total other expense		(59,584)		(64,117)
Income before income taxes		234,284		254,887
Income tax expense		(60,765)		(64,924)
Net income and comprehensive income	$	173,519		189,963

Net income per common share–basic	$	0.36		0.39
Net income per common share–diluted	$	0.36		0.39

Weighted average common shares outstanding:
Basic		479,059		480,500
Diluted		481,420		484,534

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands)


									Retained
							Additional		Earnings
	Preferred		Common Stock				Paid-In		(Accumulated		Total
	Stock		Shares		Amount		Capital		Deficit)		Equity
Balance at December 31, 2022	$	—		478,497	$	4,785		2,104,740		82,793		2,192,318
Dividends to stockholders		—		—		—		(25,709)		(82,793)		(108,502)
Equity-based compensation		—		—		—		6,327		—		6,327
Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes		—		148		1		(1,167)		—		(1,166)
Net income and comprehensive income		—		—		—		—		86,507		86,507
Balance at March 31, 2023		—		478,645		4,786		2,084,191		86,507		2,175,484
Dividends to stockholders		—		—		—		(24,267)		(86,507)		(110,774)
Equity-based compensation		—		—		—		8,499		—		8,499
Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes		—		1,011		11		(7,193)		—		(7,182)
Net income and comprehensive income		—		—		—		—		87,012		87,012
Balance at June 30, 2023	$	—		479,656	$	4,797		2,061,230		87,012		2,153,039

Balance at December 31, 2023	$	—		479,713	$	4,797		2,046,487		100,447		2,151,731
Dividends to stockholders		—		—		—		(8,542)		(100,447)		(108,989)
Equity-based compensation		—		—		—		9,327		—		9,327
Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes		—		615		6		(5,622)		—		(5,616)
Net income and comprehensive income		—		—		—		—		103,926		103,926
Balance at March 31, 2024		—		480,328		4,803		2,041,650		103,926		2,150,379
Dividends to stockholders		—		—		—		(8,154)		(103,926)		(112,080)
Equity-based compensation		—		—		—		11,599		—		11,599
Issuance of common stock upon vesting of equity-based compensation awards, net of common stock withheld for income taxes		—		915		9		(8,856)		—		(8,847)
Net income and comprehensive income		—		—		—		—		86,037		86,037
Balance at June 30, 2024	$	—		481,243	$	4,812		2,036,239		86,037		2,127,088

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Six Months Ended June 30,
	2023		2024
Cash flows provided by (used in) operating activities:
Net income	$	173,519		189,963
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		70,429		74,671
Accretion of asset retirement obligations		88		91
Deferred income tax expense		60,765		64,924
Equity-based compensation		14,826		20,926
Equity in earnings of unconsolidated affiliates		(50,428)		(55,127)
Distributions from unconsolidated affiliates		63,570		68,930
Amortization of customer relationships		35,336		35,336
Amortization of deferred financing costs		2,957		3,150
Settlement of asset retirement obligations		(695)		(414)
Loss on settlement of asset retirement obligations		620		—
Loss on asset sale		5,569		1,379
Loss on early extinguishment of debt		—		13,750
Changes in assets and liabilities:
Accounts receivable–Antero Resources		(5,470)		(12,641)
Accounts receivable–third party		481		755
Other current assets		(800)		452
Accounts payable–Antero Resources		(2,515)		(353)
Accounts payable–third party		(889)		3,387
Accrued liabilities		942		17,188
Net cash provided by operating activities		368,305		426,367
Cash flows provided by (used in) investing activities:
Additions to gathering systems, facilities and other		(59,156)		(62,330)
Additions to water handling systems		(25,583)		(16,142)
Investments in unconsolidated affiliates		(262)		—
Acquisition of gathering systems and facilities		(266)		(70,634)
Cash received in asset sales		1,071		685
Change in other assets		(15)		(1)
Net cash used in investing activities		(84,211)		(148,422)
Cash flows provided by (used in) financing activities:
Dividends to common stockholders		(218,971)		(220,736)
Dividends to preferred stockholders		(275)		(275)
Issuance of Senior Notes		—		600,000
Redemption of Senior Notes		—		(560,862)
Payments of deferred financing costs		—		(7,274)
Borrowings on Credit Facility		502,100		1,006,400
Repayments on Credit Facility		(558,600)		(1,080,800)
Employee tax withholding for settlement of equity-based compensation awards		(8,348)		(14,464)
Net cash used in financing activities		(284,094)		(278,011)
Net decrease in cash and cash equivalents		—		(66)
Cash and cash equivalents, beginning of period		—		66
Cash and cash equivalents, end of period	$	—		—

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	107,607		88,672
Increase (decrease) in accrued capital expenditures and accounts payable for property and equipment	$	(2,814)		2,576

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO MIDSTREAM CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Organization

Antero Midstream Corporation together with its consolidated subsidiaries (the “Company” or “Antero Midstream”) is a growth-oriented midstream company formed to own, operate and develop midstream energy infrastructure primarily to service Antero Resources and its production and completion activity in the Appalachian Basin. The Company’s assets consist of gathering pipelines, compressor stations, interests in processing and fractionation plants and water handling assets. Antero Midstream provides midstream services to Antero Resources under long-term contracts. The Company’s corporate headquarters is located in Denver, Colorado.

(2) Summary of Significant Accounting Policies

(a)	Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC applicable to interim financial information and should be read in the context of the Company’s December 31, 2023 consolidated financial statements and notes thereto for a more complete understanding of the Company’s operations, financial position, and accounting policies. The Company’s December 31, 2023 consolidated financial statements were included in the Company’s 2023 Annual Report on Form 10-K, which was filed with the SEC.

These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, and, accordingly, do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Company’s financial position as of December 31, 2023 and June 30, 2024, results of operations for the three and six months ended June 30, 2023 and 2024 and cash flows for the six months ended June 30, 2023 and 2024. The Company has no items of other comprehensive income or loss; therefore, net income is equal to comprehensive income.

Certain costs of doing business incurred and charged to the Company by Antero Resources have been reflected in the accompanying unaudited condensed consolidated financial statements. These costs include general and administrative expenses provided to the Company by Antero Resources in exchange for:

●

business services, such as payroll, accounts payable and facilities management;

●

corporate services, such as finance and accounting, legal, human resources, investor relations and public and regulatory policy; and

●

employee compensation, including equity-based compensation.

Transactions between the Company and Antero Resources have been identified in the unaudited condensed consolidated financial statements (see Note 4—Transactions with Affiliates).

(b)	Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Antero Midstream Corporation and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the Company’s unaudited condensed consolidated financial statements.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(c)	Recently Issued Accounting Standards

Reportable Segments

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is intended to improve reportable segment disclosures primarily through enhanced disclosure of reportable segment expenses. This ASU is effective for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 is required to be applied retrospectively to all prior periods presented in the financial statements. The Company is evaluating the impact that ASU 2023-07 will have on the financial statements and its plans for adoption, including the adoption date.

Income Taxes

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to improve income tax disclosures primarily through enhanced disclosure of income tax rate reconciliation items, and disaggregation of income (loss) from continuing operations, income tax expense (benefit) and income taxes paid, net disclosures by federal, state and foreign jurisdictions, among others. This ASU is effective for annual reporting periods beginning after December 15, 2024, although early adoption is permitted. ASU 2023-09 should be applied on a prospective basis, although retrospective application is permitted. The Company is evaluating the impact that ASU 2023-09 will have on the financial statements and its plans for adoption, including the adoption date and transition method.

(3) Intangibles

All customer relationships are subject to amortization and are amortized over a weighted average period of 18 years, which reflects the remaining economic life of the relationships as of June 30, 2024. The carrying amount of customer relationships were as follows:


			(Unaudited)
	December 31,		June 30,
(in thousands)	2023		2024
Gross carrying value of customer relationships	$	1,555,000		1,555,000
Accumulated amortization of customer relationships		(339,569)		(374,905)
Customer relationships	$	1,215,431		1,180,095

Future amortization expense as of June 30, 2024 is as follows (in thousands):


Remainder of year ending December 31, 2024	$	35,336
Year ending December 31, 2025		70,672
Year ending December 31, 2026		70,672
Year ending December 31, 2027		70,672
Year ending December 31, 2028		70,672
Thereafter		862,071
Total	$	1,180,095

(4) Transactions with Affiliates

(a)

Revenues

Substantially all revenues earned in the three and six months ended June 30, 2023 and 2024 were earned from Antero Resources, under various agreements for gathering and compression and water handling services. Revenues earned from gathering and compression services consist of lease income.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(b)	Accounts receivable—Antero Resources and Accounts payable—Antero Resources

Accounts receivable—Antero Resources represents amounts due from Antero Resources, primarily related to gathering and compression services and water handling services. Accounts payable—Antero Resources represents amounts due to Antero Resources for general and administrative and other costs.

(c)	Allocation of Costs Charged by Antero Resources

The employees supporting the Company’s operations are concurrently employed by Antero Resources and the Company. Direct operating expense includes costs charged to the Company of $4 million and $5 million during the three months ended June 30, 2023 and 2024, respectively, and $9 million and $10 million during the six months ended June 30, 2023 and 2024, respectively. These costs were for services provided by employees associated with the operation of the Company’s gathering lines, compressor stations and water handling assets. General and administrative expense includes costs charged to the Company by Antero Resources of $7 million and $8 million during the three months ended June 30, 2023 and 2024, respectively, and $15 million and $16 million during the six months ended June 30, 2023 and 2024, respectively. These costs relate to (i) various business services, including payroll processing, accounts payable processing and facilities management, (ii) various corporate services, including legal, accounting, treasury, information technology and human resources and (iii) compensation. These expenses are charged to the Company based on the nature of the expenses and are apportioned based on a combination of the Company’s proportionate share of gross property and equipment, capital expenditures and labor costs, as applicable. The Company reimburses Antero Resources directly for all general and administrative costs charged to it.

(5) Revenue

All of the Company’s gathering and compression revenues are derived from operating lease agreements, and all of the Company’s water handling revenues are derived from service contracts with customers. The Company currently earns substantially all of its revenues from Antero Resources.

(a)	Gathering and Compression

The Company’s gathering and compression service agreements with Antero Resources include: (i) the second amended and restated gathering and compression agreement dated December 8, 2019 (the “2019 gathering and compression agreement”), (ii) a gathering and compression agreement acquired with the Crestwood Equity Partners LP (“Crestwood”) assets (the “Marcellus gathering and compression agreement”), (iii) a compression agreement acquired with the EnLink Midstream LLC (NYSE: ENLC) (“EnLink”) assets (the “Utica compression agreement”) and (iv) a gathering and compression agreement acquired with the Summit Midstream Partners, LP (NYSE: SMLP) (“Summit”) assets (the “Mountaineer gathering and compression agreement,” and together with the 2019 gathering and compression agreement, the Marcellus gathering and compression agreement and the Utica compression agreement, the “gathering and compression agreements”). See Note 6—Property and Equipment for additional information. The 2019 gathering and compression agreement, Marcellus gathering and compression agreement and Mountaineer gathering and compression agreement have initial terms through 2038, 2031 and 2026, respectively, and the Utica compression agreement has two dedicated areas that expire in 2024 and 2030. Upon expiration of the Marcellus gathering and compression agreement, the Utica compression agreement and the Mountaineer gathering and compression agreement, the Company will continue to provide gathering and compression services under the 2019 gathering and compression agreement. Pursuant to the gathering and compression agreements, Antero Resources has dedicated substantially all of its current and future acreage in West Virginia, Ohio and Pennsylvania to the Company for gathering and compression services. The Company also has an option to gather and compress natural gas produced by Antero Resources on any additional undedicated acreage it acquires during the term of the 2019 gathering and compression agreement outside of West Virginia, Ohio and Pennsylvania on the same terms and conditions as the 2019 gathering and compression agreement. Upon completion of the initial contract term in 2038, the 2019 gathering and compression agreement will continue in effect from year to year until such time as the agreement is terminated, effective upon an anniversary of the effective date of the agreement, by notice from either the Company or Antero Resources to the other party on or before the 180th day prior to the anniversary of such agreement.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

The 2019 gathering and compression agreement included a growth incentive fee program whereby low pressure gathering fees were reduced from 2020 through 2023 to the extent Antero Resources achieved certain quarterly volumetric targets during such time. Antero Resources’ throughput gathered under the Marcellus gathering and compression agreement was not considered in low pressure gathering volume targets. For the three and six months ended June 30, 2023, Antero Resources earned rebates of $12 million and $24 million, respectively, from the Company by achieving the first level volumetric target during each of the first and second quarters of 2023. The growth incentive fee rebate program expired on December 31, 2023.

Under the gathering and compression agreements, the Company receives, where applicable, a low pressure gathering fee, a high pressure gathering fee and a compression fee, substantially all of which are subject to annual Consumer Price Index (“CPI”)-based adjustments (or, in the case of the 2019 gathering and compression agreement, the option in certain cases to elect a cost of service fee when such assets are placed in-service). In addition, under the 2019 gathering and compression agreement, the Company receives a reimbursement for certain variable costs, such as electricity and operating expenses.

The Company determined that its gathering and compression agreements are operating leases as Antero Resources obtains substantially all of the economic benefit of the assets and has the right to direct the use of the assets. Each gathering and compression system is an identifiable asset, and consists of a network of assets that may include underground low pressure pipelines that connect and deliver gas from specific well pads to compressor stations to compress the gas before delivery to underground high pressure pipelines that transport the gas to a third-party pipeline, third-party processing plant or a Joint Venture processing plant. Each compression system is an identifiable asset, and consists of a network of assets that include compressor stations that connect to underground high pressure pipelines that transport the gas to a third-party pipeline, third-party processing plant or a Joint Venture processing plant. Each set of assets in an agreement is considered to be a single lease due to the interrelated network of the assets required to provide services under each respective agreement. When a modification to an agreement occurs, the Company reassesses the classification of the lease. The Company accounts for its lease and non-lease components as a single lease component as the lease component is the predominant component. The non-lease components consist of operating, oversight and maintenance of the gathering systems, which are performed on time-elapsed measures.

The 2019 gathering and compression agreement, the Marcellus gathering and compression agreement and the Mountaineer gathering and compression agreement include certain fixed fee provisions. If and to the extent Antero Resources requests that the Company construct new low pressure lines, high pressure lines and/or compressor stations, the 2019 gathering and compression agreement contains options at the Company’s election for either (i) minimum volume commitments that require Antero Resources to utilize or pay for 75% of the high pressure gathering capacity and 70% of the compression capacity of such new construction for 10 years or (ii) a cost of service fee that allows the Company to earn a 13% rate of return on such new construction over seven years, which election is made individually for each piece of equipment placed in service. The Marcellus gathering and compression agreement provides for a minimum volume commitment that requires Antero Resources to utilize or pay for 25% of the compression capacity for a period of 10 years from the in-service date. The Mountaineer gathering and compression agreement provides for monthly minimum compression and gathering fees for each compressor station or high pressure gathering line, respectively, for a period of 12 years commencing 90 days after such asset’s in-service date. All lease payments under the minimum volume commitments, cost of service fees and minimum gathering and compression fees are considered to be in-substance fixed lease payments (“minimum lease payments”) under the gathering and compression agreements. As of June 30, 2024, the minimum lease payments for the 2019 gathering and compression agreement, Marcellus gathering and compression agreement and Mountaineer gathering and compression agreement end in 2034, 2024 and 2026, respectively.

The Company recognizes lease income from its minimum lease payments under its gathering and compression agreements on a straight-line basis. Additional variable operating lease income is earned when volumes in excess of the minimum commitments or fees are delivered under the contract. The Company recognizes variable lease income when low pressure volumes are delivered to a compressor station, compression volumes are delivered to a high pressure line and high pressure volumes are delivered to a processing plant or transmission pipeline, as applicable. Minimum volume commitments for each of the 2019 gathering and compression agreement and Marcellus gathering and compression agreement are aggregated such that each agreement has a single minimum volume commitment for the respective service each year. The Mountaineer gathering and compression agreement minimum compression and gathering fees are not subject to aggregation and are determined on a monthly basis for each compressor station and gathering line, respectively, subject to such agreement. The Company invoices the customer the month after each service is performed, and payment is due in the same month. The Company is not party to any leases that have not commenced.

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

Minimum future lease cash flows to be received by the Company under the gathering and compression agreements as of June 30, 2024 are as follows (in thousands):


Remainder of year ending December 31, 2024	$	154,093
Year ending December 31, 2025		320,323
Year ending December 31, 2026		301,108
Year ending December 31, 2027		236,768
Year ending December 31, 2028		168,465
Thereafter		276,219
Total	$	1,456,976

(b)	Water Handling

The Company is party to a water services agreement with Antero Resources, whereby the Company provides certain water handling services to Antero Resources within an area of dedication in defined service areas in West Virginia and Ohio. The initial term of the water services agreement runs to 2035. Upon completion of the initial term in 2035, the water services agreement will continue in effect from year to year until such time as the agreement is terminated, effective upon an anniversary of the effective date of the agreement, by notice from either the Company or Antero Resources to the other party on or before the 180^th day prior to the anniversary of such agreement. Under the agreement, the Company receives a fixed fee for fresh water deliveries by pipeline directly to the well site, subject to annual CPI-based adjustments. In addition, the Company also provides other fluid handling services. These operations, along with the Company’s fresh water delivery systems, support well completion and production operations for Antero Resources. These services are provided by the Company directly or through third-parties with which the Company contracts. For these other fluid handling services provided by third-parties, Antero Resources reimburses the Company’s third-party out-of-pocket costs plus 3%. For these other fluid handling services provided by the Company, the Company charges Antero Resources a cost of service fee.

The Company satisfies its performance obligations and recognizes revenue when (i) the fresh water volumes have been delivered to the hydration unit of a specified well pad or (ii) other fluid handling services have been completed. The Company invoices the customer the month after water services are performed, and payment is due in the same month. For services contracted through third-party providers, the Company’s performance obligation is satisfied when the service to be performed by the third-party provider has been completed. The Company invoices the customer after the third-party provider billing is received, and payment is due in the same month.

Transaction Price Allocated to Remaining Performance Obligations

The Company’s water service agreement with Antero Resources has a term greater than one year. The Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under this contract, each unit of product delivered to the customer represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.

The Company also performs water services for third-party customers and such contracts are short-term in nature with a contract term of one year or less. Accordingly, the Company is exempt from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

Contract Balances

Under the Company’s water service contracts, the Company invoices customers after the performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s water service contracts do not give rise to contract assets or liabilities.

Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(c)	Disaggregation of Revenue

In the following table, revenue is disaggregated by type of service and type of fee and is identified by the reportable segment to which such revenues relate. For additional information on reportable segments, see Note 15—Reportable Segments.


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2024		2023		2024		Reportable Segment
Type of service
Gathering—low pressure	$	105,042		105,580	$	204,679		212,316	Gathering and Processing ⁽¹⁾
Gathering—low pressure fee rebate		(12,000)		—		(24,000)		—	Gathering and Processing ⁽¹⁾
Compression		61,565		62,648		119,955		125,232	Gathering and Processing ⁽¹⁾
Gathering—high pressure		56,461		60,765		110,010		119,038	Gathering and Processing ⁽¹⁾
Fresh water delivery		40,399		31,700		87,225		75,846	Water Handling
Other fluid handling		24,488		26,770		55,229		51,750	Water Handling
Amortization of customer relationships		(9,272)		(9,272)		(18,543)		(18,543)	Gathering and Processing
Amortization of customer relationships		(8,396)		(8,396)		(16,793)		(16,793)	Water Handling
Total	$	258,287		269,795	$	517,762		548,846

Type of contract
Per unit fixed fee	$	223,068		228,993	$	434,644		456,586	Gathering and Processing ⁽¹⁾
Gathering—low pressure fee rebate		(12,000)		—		(24,000)		—	Gathering and Processing ⁽¹⁾
Per unit fixed fee		40,673		32,113		87,772		76,930	Water Handling
Cost plus 3%		18,797		19,128		43,242		36,538	Water Handling
Cost of service fee		5,417		7,229		11,440		14,128

Antero Midstream Corp [AM] Filings
10-Q	[2024-07-31]
10-Q	[2024-04-24]
10-K	[2024-02-14]
10-Q	[2023-10-25]
10-Q	[2023-07-26]
10-Q	[2023-04-26]
10-K	[2023-02-15]
10-Q	[2022-10-26]
10-Q	[2022-07-27]
10-Q	[2022-04-27]
10-K	[2022-02-16]
10-Q	[2021-10-27]
10-Q	[2021-07-28]
10-Q	[2021-04-28]
10-K	[2021-02-17]
10-Q	[2020-10-28]
10-Q	[2020-07-29]
10-Q	[2020-04-29]
10-K	[2020-02-12]
10-Q	[2019-10-29]
10-Q	[2019-07-31]
10-Q	[2019-05-01]
10-K	[2019-02-13]
10-Q	[2018-10-31]
10-Q	[2018-08-01]
10-Q	[2018-04-25]
10-K	[2018-02-13]
10-Q	[2017-11-01]
10-Q	[2017-08-02]
10-Q	[2017-06-02]
S-1	[2017-03-28]