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PartnersCapitalAbstract

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 March 31, 2024

OR

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

Graphic

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)

(303357-7310

(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 April 19, 2024 (in thousands): 481,241

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

1

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.

2

PART I—FINANCIAL INFORMATION

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)

December 31,

    

March 31,

    

2023

    

2024

 

Assets

Current assets:

Cash and cash equivalents

$

66

26,088

Accounts receivable–Antero Resources

88,610

104,766

Accounts receivable–third party

952

1,023

Other current assets

1,500

1,811

Total current assets

91,128

133,688

Property and equipment, net

3,793,523

3,788,559

Investments in unconsolidated affiliates

626,650

619,220

Customer relationships

1,215,431

1,197,763

Other assets, net

10,886

10,011

Total assets

$

5,737,618

5,749,241

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable–Antero Resources

$

4,457

11,445

Accounts payable–third party

10,499

12,954

Accrued liabilities

80,630

82,044

Other current liabilities

831

876

Total current liabilities

96,417

107,319

Long-term liabilities:

Long-term debt

3,213,216

3,174,873

Deferred income tax liability, net

265,879

302,366

Other

10,375

14,304

Total liabilities

3,585,887

3,598,862

Stockholders' equity:

Preferred stock, $0.01 par value: 100,000 authorized as of December 31, 2023 and March 31, 2024

Series A non-voting perpetual preferred stock; 12 designated and 10 issued and outstanding as of December 31, 2023 and March 31, 2024

Common stock, $0.01 par value; 2,000,000 authorized; 479,713 and 480,328 issued and outstanding as of December 31, 2023 and March 31, 2024, respectively

4,797

4,803

Additional paid-in capital

2,046,487

2,041,650

Retained earnings

100,447

103,926

Total stockholders' equity

2,151,731

2,150,379

Total liabilities and stockholders' equity

$

5,737,618

5,749,241

See accompanying notes to unaudited condensed consolidated financial statements.

3

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31,

    

2023

    

2024

Revenue:

    

    

Gathering and compression–Antero Resources

$

199,576

227,593

Water handling–Antero Resources

77,295

68,455

Water handling–third party

272

671

Amortization of customer relationships

(17,668)

(17,668)

Total revenue

259,475

279,051

Operating expenses:

Direct operating

57,873

53,918

General and administrative (including $6,327 and $9,327 of equity-based compensation in 2023 and 2024, respectively)

17,347

21,221

Facility idling

574

522

Depreciation

35,196

37,095

Accretion of asset retirement obligations

44

44

Loss on settlement of asset retirement obligations

341

Gain on asset sale

(245)

Total operating expenses

111,130

112,800

Operating income

148,345

166,251

Other income (expense):

Interest expense, net

(54,624)

(53,308)

Equity in earnings of unconsolidated affiliates

24,456

27,530

Loss on early extinguishment of debt

(59)

Total other expense

(30,168)

(25,837)

Income before income taxes

118,177

140,414

Income tax expense

(31,670)

(36,488)

Net income and comprehensive income

$

86,507

103,926

Net income per common share–basic

$

0.18

0.22

Net income per common share–diluted

$

0.18

0.21

Weighted average common shares outstanding:

Basic

478,612

479,897

Diluted

481,459

484,303

See accompanying notes to unaudited condensed consolidated financial statements.

4

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

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

See accompanying notes to unaudited condensed consolidated financial statements.

5

ANTERO MIDSTREAM CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

Three Months Ended March 31,

    

2023

    

2024

 

Cash flows provided by (used in) operating activities:

    

    

  

Net income

$

86,507

103,926

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

35,196

37,095

Accretion of asset retirement obligations

44

44

Deferred income tax expense

31,670

36,488

Equity-based compensation

6,327

9,327

Equity in earnings of unconsolidated affiliates

(24,456)

(27,530)

Distributions from unconsolidated affiliates

34,105

34,960

Amortization of customer relationships

17,668

17,668

Amortization of deferred financing costs

1,474

1,655

Settlement of asset retirement obligations

(158)

(164)

Loss on settlement of asset retirement obligations

341

Gain on asset sale

(245)

Loss on early extinguishment of debt

59

Changes in assets and liabilities:

Accounts receivable–Antero Resources

(9,207)

(16,156)

Accounts receivable–third party

431

103

Other current assets

(520)

(189)

Accounts payable–Antero Resources

(660)

716

Accounts payable–third party

2,061

2,346

Accrued liabilities

2,141

10,213

Net cash provided by operating activities

182,719

210,561

Cash flows provided by (used in) investing activities:

Additions to gathering systems, facilities and other

(29,197)

(27,723)

Additions to water handling systems

(13,760)

(7,350)

Acquisition of gathering systems and facilities

(263)

(2,048)

Cash received in asset sales

1,071

Change in other assets

(2)

(2)

Net cash used in investing activities

(42,151)

(37,123)

Cash flows provided by (used in) financing activities:

Dividends to common stockholders

(108,364)

(107,918)

Dividends to preferred stockholders

(138)

(138)

Issuance of Senior Notes

600,000

Redemption of Senior Notes

(2,147)

Payments of deferred financing costs

(7,082)

Borrowings on Credit Facility

248,000

245,100

Repayments on Credit Facility

(278,900)

(875,200)

Employee tax withholding for settlement of equity compensation awards

(1,166)

(31)

Net cash used in financing activities

(140,568)

(147,416)

Net increase in cash and cash equivalents

26,022

Cash and cash equivalents, beginning of period

66

Cash and cash equivalents, end of period

$

26,088

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$

50,340

42,067

Decrease in accrued capital expenditures and accounts payable for property and equipment

$

(9,354)

(5,301)

See accompanying notes to unaudited condensed consolidated financial statements.

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Table of Contents

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 Securities and Exchange Commission (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 March 31, 2024, and the results of operations and cash flows for the three months ended March 31, 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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Table of Contents

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 March 31, 2024. The carrying amount of customer relationships were as follows:

(Unaudited)

December 31,

March 31,

(in thousands)

2023

    

2024

Gross carrying value of customer relationships

$

1,555,000

    

1,555,000

Accumulated amortization of customer relationships

(339,569)

(357,237)

Customer relationships

$

1,215,431

1,197,763

Future amortization expense as of March 31, 2024 is as follows (in thousands):

Remainder of year ending December 31, 2024

$

53,004

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

$

1,197,763

(4) Transactions with Affiliates

(a)

Revenues

Substantially all revenues earned in the three months ended March 31, 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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Table of Contents

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 March 31, 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 $8 million during each of the three months ended March 31, 2023 and 2024. 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 (NYSE: CEQP) (“Crestwood”) assets (the “Marcellus gathering and compression agreement”) and (iii) a compression agreement acquired with the EnLink Midstream LLC (NYSE: ENLC) (“EnLink”) assets (the “Utica compression agreement,” and together with the 2019 gathering and compression agreement and the Marcellus gathering and compression agreement, the “gathering and compression agreements”). The 2019 gathering and compression agreement and Marcellus gathering and compression agreement have initial terms through 2038 and 2031, 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 and the Utica 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.

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 months ended March 31, 2023, Antero Resources earned a rebate of $12 million from the Company by achieving the first level volumetric target during the first quarter of 2023. The growth incentive fee rebate program expired on December 31, 2023.

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

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 and the Marcellus 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. In addition, 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. All lease payments under the minimum volume commitments and cost of service fees are considered to be in-substance fixed lease payments under the gathering and compression agreements.

The Company recognizes lease income from its minimum volume commitments and cost of service fees 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 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 are aggregated such that there is a single minimum volume commitment for the respective service each year for each 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.

Minimum future lease cash flows to be received by the Company under the gathering and compression agreements as of March 31, 2024 are as follows (in thousands):

Remainder of year ending December 31, 2024

$

234,951

Year ending December 31, 2025

311,969

Year ending December 31, 2026

297,928

Year ending December 31, 2027

236,768

Year ending December 31, 2028

168,465

Thereafter

276,219

Total

$

1,526,300

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Table of Contents

ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(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 180th 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.

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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 March 31,

(in thousands)

    

2023

2024

    

Reportable Segment

Type of service

Gathering—low pressure

$

99,637

106,736

Gathering and Processing (1)

Gathering—low pressure fee rebate

(12,000)

Gathering and Processing (1)

Compression

58,390

62,584

Gathering and Processing (1)

Gathering—high pressure

53,549

58,273

Gathering and Processing (1)

Fresh water delivery

46,826

44,146

Water Handling

Other fluid handling

30,741

24,980

Water Handling

Amortization of customer relationships

(9,271)

(9,271)

Gathering and Processing

Amortization of customer relationships

(8,397)

(8,397)

Water Handling

Total

$

259,475

279,051

Type of contract

Per Unit Fixed Fee

$

211,576

227,593

Gathering and Processing (1)

Gathering—low pressure fee rebate

(12,000)

Gathering and Processing (1)

Per Unit Fixed Fee

47,099

44,817

Water Handling

Cost plus 3%

24,445

17,410

Water Handling

Cost of service fee

6,023

6,899

Water Handling

Amortization of customer relationships

(9,271)

(9,271)

Gathering and Processing

Amortization of customer relationships

(8,397)

(8,397)

Water Handling

Total

$

259,475

279,051

(1)Revenue related to the gathering and processing segment is classified as lease income related to the gathering and compression systems.

The Company’s receivables from its contracts with customers and operating leases as of December 31, 2023 and March 31, 2024, were $89 million and $105 million, respectively.

(6) Property and Equipment

(a)

Summary of Property and Equipment

Property and equipment, net consisted of the following items:

(Unaudited)

Estimated

December 31,

    

March 31,

(in thousands)

    

Useful Lives

    

2023

    

2024

Land

    

n/a

    

$

31,668

    

31,739

Gathering systems and facilities

40-50 years (1)

3,345,845

3,440,338

Permanent buried pipelines and equipment

7-20 years

646,469

648,646

Surface pipelines and equipment

1-7 years

90,871

98,032

Heavy trucks and equipment

3-5 years

5,157

5,157

Above ground storage tanks

5-10 years

5,130

5,131

Other assets

3-20 years

8,110

8,111

Construction-in-progress

n/a

 

192,852

121,079

Total property and equipment

4,326,102

4,358,233

Less accumulated depreciation

(532,579)

(569,674)

Property and equipment, net

$

3,793,523

3,788,559

(1)Gathering systems and facilities are recognized as a single-leased asset with no residual value.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(7) Long-Term Debt

Long-term debt consisted of the following items:

(Unaudited)

December 31,

    

March 31,

(in thousands)

2023

    

2024

Credit Facility (a)

    

$

630,100

    

7.875% senior notes due 2026 (b)

550,000

547,900

5.75% senior notes due 2027 (c)

650,000

650,000

5.75% senior notes due 2028 (d)

650,000

650,000

5.375% senior notes due 2029 (e)

750,000

750,000

6.625% senior notes due 2032 (f)

600,000

Total principal

3,230,100

3,197,900

Unamortized debt premiums

1,291

1,189

Unamortized debt issuance costs

(18,175)

(24,216)

Total long-term debt

$

3,213,216

3,174,873

(a)

Credit Facility

Antero Midstream Partners LP (“Antero Midstream Partners”), an indirect, wholly owned subsidiary of Antero Midstream Corporation, as borrower (the “Borrower”), has a senior secured revolving credit facility (the “Credit Facility”) with a consortium of banks. Lender commitments under the Credit Facility were $1.25 billion as of December 31, 2023 and March 31, 2024. The Credit Facility matures on October 26, 2026; provided that if on November 17, 2025 any of the 2026 Notes (as defined below) are outstanding, the Credit Facility will mature on such date. As of March 31, 2024, the Credit Facility had an available borrowing capacity of $1.25 billion.

The Credit Facility contains certain covenants including restrictions on indebtedness, and requirements with respect to leverage and interest coverage ratios. The Credit Facility permits distributions to the holders of the Borrower’s equity interests in accordance with the cash distribution policy, provided that no event of default exists or would be caused thereby, and only to the extent permitted by the Borrower’s organizational documents. The Borrower was in compliance with all of the financial covenants under the Credit Facility as of December 31, 2023 and March 31, 2024.

The Credit Facility provides for borrowing under either the Adjusted Term Secured Overnight Financing Rate (“SOFR”) or the Base Rate (as each term is defined in the Credit Facility). Principal amounts borrowed are payable on the maturity date with such borrowings bearing interest that is payable with respect to (i) Base Rate loans, quarterly and (ii) SOFR Loans at the end of the applicable interest period if three months (or shorter, if applicable), or every three months if the applicable interest period is longer than three months. Interest is payable at a variable rate based on SOFR or the Base Rate, determined by election at the time of borrowing, plus an applicable margin rate under the Credit Facility. Interest at the time of borrowing is determined with reference to the Borrower’s then-current leverage ratio subject to certain exceptions. Commitment fees on the unused portion of the Credit Facility are due quarterly at rates ranging from 0.25% to 0.375% subject to certain exceptions based on the leverage ratio then in effect.

As of December 31, 2023, the Borrower had outstanding borrowings under the Credit Facility of $630 million with a weighted average interest rate of 7.08%. As of March 31, 2024, the Borrower had no outstanding borrowings under the Credit Facility. No letters of credit under the Credit Facility were outstanding as of December 31, 2023 or March 31, 2024.

(b)

7.875% Senior Notes Due 2026

On November 10, 2020, Antero Midstream Partners and its wholly owned subsidiary, Antero Midstream Finance Corp (“Finance Corp,” and together with Antero Midstream Partners, the “Issuers”) issued $550 million in aggregate principal amount of 7.875% senior notes due May 15, 2026 (the “2026 Notes”) at par. The Company repurchased $2 million principal amount of the 2026 Notes during 2024, and as of March 31, 2024, $548 million principal amount of the 2026 Notes remained outstanding. The 2026 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2026 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Antero Midstream Corporation, Antero Midstream Partners’ wholly owned subsidiaries (other than Finance

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

Corp) and certain of its future restricted subsidiaries. Interest on the 2026 Notes is payable on May 15 and November 15 of each year. Antero Midstream Partners may redeem all or part of the 2026 Notes at any time at redemption prices ranging from 103.938% currently to 100.00% on or after May 15, 2025. If Antero Midstream Partners undergoes a change of control followed by a rating decline, the holders of the 2026 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2026 Notes at a price equal to 101% of the principal amount of the 2026 Notes, plus accrued and unpaid interest.

(c)

5.75% Senior Notes Due 2027

On February 25, 2019, the Issuers issued $650 million in aggregate principal amount of 5.75% senior notes due March 1, 2027 (the “2027 Notes”) at par. The 2027 Notes were recorded at their fair value of $653.3 million as of March 12, 2019, and the related premium of $3.3 million will be amortized into interest expense over the life of the 2027 Notes. The 2027 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2027 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Antero Midstream Corporation, Antero Midstream Partners’ wholly owned subsidiaries (other than Finance Corp) and certain of its future restricted subsidiaries. Interest on the 2027 Notes is payable on March 1 and September 1 of each year. Antero Midstream Partners may redeem all or part of the 2027 Notes at any time at redemption prices ranging from 100.958% currently to 100.00% on or after March 1, 2025. If Antero Midstream Partners undergoes a change of control followed by a rating decline, the holders of the 2027 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2027 Notes at a price equal to 101% of the principal amount of the 2027 Notes, plus accrued and unpaid interest.

(d)

5.75% Senior Notes Due 2028

On June 28, 2019, the Issuers issued $650 million in aggregate principal amount of 5.75% senior notes due January 15, 2028 (the “2028 Notes”) at par. The 2028 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2028 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Antero Midstream Corporation, Antero Midstream Partners’ wholly owned subsidiaries (other than Finance Corp) and certain of its future restricted subsidiaries. Interest on the 2028 Notes is payable on January 15 and July 15 of each year.  Antero Midstream Partners may redeem all or part of the 2028 Notes at any time at redemption prices ranging from 101.917% currently to 100.00% on or after January 15, 2026. If Antero Midstream Partners undergoes a change of control followed by a rating decline, the holders of the 2028 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2028 Notes at a price equal to 101% of the principal amount of the 2028 Notes, plus accrued and unpaid interest.

(e)

5.375% Senior Notes Due 2029

On June 8, 2021, the Issuers issued $750 million in aggregate principal amount of 5.375% senior notes due June 15, 2029 (the “2029 Notes”) at par. The 2029 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2029 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Antero Midstream Corporation, Antero Midstream Partners’ wholly owned subsidiaries (other than Finance Corp) and certain of its future restricted subsidiaries. Interest on the 2029 Notes is payable on June 15 and December 15 of each year. Antero Midstream Partners may redeem all or part of the 2029 Notes at any time on or after June 15, 2024 at redemption prices ranging from 102.688% on or after June 15, 2024 to 100.00% on or after June 15, 2026. In addition, prior to June 15, 2024, Antero Midstream Partners may redeem up to 35% of the aggregate principal amount of the 2029 Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 105.375% of the principal amount of the 2029 Notes, plus accrued and unpaid interest. At any time prior to June 15, 2024, Antero Midstream Partners may also redeem the 2029 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2029 Notes plus a “make-whole” premium and accrued and unpaid interest. If Antero Midstream Partners undergoes a change of control followed by a rating decline, the holders of the 2029 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2029 Notes at a price equal to 101% of the principal amount of the 2029 Notes, plus accrued and unpaid interest.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(f)

6.625% Senior Notes Due 2032

On January 16, 2024, the Issuers issued $600 million in aggregate principal amount of 6.625% senior notes due February 1, 2032 (the “2032 Notes”) at par. The 2032 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2032 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Antero Midstream Corporation, Antero Midstream Partners’ wholly owned subsidiaries (other than Finance Corp) and certain of its future restricted subsidiaries. Interest on the 2032 Notes is payable on February 1 and August 1 of each year. Antero Midstream Partners may redeem all or part of the 2032 Notes at any time on or after February 1, 2027 at redemption prices ranging from 103.313% on or after February 1, 2027 to 100.00% on or after February 1, 2029. In addition, prior to February 1, 2027, Antero Midstream Partners may redeem up to 35% of the aggregate principal amount of the 2032 Notes with an amount of cash not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 106.625% of the principal amount of the 2032 Notes, plus accrued and unpaid interest. At any time prior to February 1, 2027, Antero Midstream Partners may also redeem the 2032 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2032 Notes plus a “make-whole” premium and accrued and unpaid interest. If Antero Midstream Partners undergoes a change of control followed by a rating decline, the holders of the 2032 Notes will have the right to require Antero Midstream Partners to repurchase all or a portion of the 2032 Notes at a price equal to 101% of the principal amount of the 2032 Notes, plus accrued and unpaid interest.

(g)

Senior Notes Guarantors

The Company and each of the Company’s wholly owned subsidiaries (except for the Issuers) has fully and unconditionally guaranteed the 2026 Notes, 2027 Notes, 2028 Notes, 2029 Notes and 2032 Notes (collectively the “Senior Notes”). In the event a guarantor is sold or disposed of (whether by merger, consolidation, the sale of a sufficient amount of its capital stock so that it no longer qualifies as a Restricted Subsidiary (as defined in the applicable indenture governing the series of Senior Notes) of the Issuer or the sale of all or substantially all of its assets) and whether or not the guarantor is the surviving entity in such transaction to a person that is not an Issuer or a Restricted Subsidiary of an Issuer, such guarantor will be released from its obligations under its guarantee if the sale or other disposition does not violate the covenants set forth in the indentures governing the applicable Senior Notes.

In addition, a guarantor will be released from its obligations under the applicable indenture and its guarantee (i) upon the release or discharge of the guarantee of other indebtedness under a credit facility that resulted in the creation of such guarantee, except a release or discharge by or as a result of payment under such guarantee, (ii) if the Issuers designate such subsidiary as an unrestricted subsidiary and such designation complies with the other applicable provisions of the indenture governing the applicable Senior Notes or (iii) in connection with any covenant defeasance, legal defeasance or satisfaction and discharge of the applicable Senior Notes.

During the three months ended March 31, 2023 and 2024, all of the Company’s assets and operations are attributable to the Issuers and its guarantors.

(8) Accrued Liabilities

Accrued liabilities consisted of the following items:

(Unaudited)

December 31,

    

March 31,

(in thousands)

    

2023

    

2024

 

Capital expenditures

$

22,195

17,133

Operating expenses

12,060

11,689

Interest expense

37,565

47,152

Ad valorem taxes

6,521

3,144

Other

2,289

2,926

Total accrued liabilities

$

80,630

82,044

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(9) Equity-Based Compensation

(a)

Summary of Equity-Based Compensation

The Company’s equity-based compensation includes costs related to the Antero Midstream Corporation Long-Term Incentive Plan (the “AM LTIP”). Antero Midstream’s equity-based compensation expense is included in general and administrative expenses, and recorded as a credit to additional paid-in capital.

Effective March 12, 2019, the Board of Directors of Antero Midstream Corporation (the “Board”) adopted the AM LTIP under which awards may be granted to employees, directors, and other service providers of the Company and its affiliates. The Company is authorized to grant up to 15,398,901 shares of AM common stock under the AM LTIP. The AM LTIP provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), dividend equivalents, other stock-based awards, cash awards and substitute awards. The terms and conditions of the awards granted are established by the compensation committee of the Board. As of March 31, 2024, a total of 2,281,818 shares were available for future grant under the AM LTIP.

The Company’s equity-based compensation expense, by type of award, is as follows:

Three Months Ended March 31,

(in thousands)

2023

2024

Restricted stock units

$

5,061

7,127

Performance share units

1,061

1,951

Equity awards issued to directors

205

249

Total expense

$

6,327

9,327

(b)

Restricted Stock Unit Awards

A summary of the RSU awards activity is as follows:

Weighted Average

Number

Grant Date

    

of Units

    

Fair Value

Total AM LTIP RSUs awarded and unvested—December 31, 2023

5,877,170

$

10.28

Granted

2,459,643

13.44

Vested

(1,011,669)

10.59

Forfeited

(3,094)

10.56

Total AM LTIP RSUs awarded and unvested—March 31, 2024

7,322,050

$

11.30

As of March 31, 2024, unamortized equity-based compensation expense of $67 million related to the unvested RSUs is expected to be recognized over a weighted average period of 2.2 years.

(c)

Performance Share Unit Awards

2024 Performance Share Unit Awards

In March 2024, the Company granted performance share unit awards (“PSUs”) to certain of its executive officers that vest based on the Company’s actual return on invested capital (“ROIC”) (as defined in the award agreement) over a three-year period concluding on December 31, 2026 as compared to a targeted ROIC (“2024 ROIC PSUs”). The number of shares of the Company’s common stock that can be earned with respect to the 2024 ROIC PSUs ranges from zero to 200% of the target number of 2024 ROIC PSUs originally granted. The grant date fair value of these awards was based on the closing price of the Company’s common stock on the date of the grant, assuming target achievement of the performance condition. Expense related to the 2024 ROIC PSUs is recognized based on the number of shares of the Company’s common stock that are expected to be issued at the end of the measurement period, and such expense is reversed if the likelihood of achieving the performance condition decreases. The likelihood of achieving the performance conditions related to 2024 ROIC PSU awards was probable as of March 31, 2024.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

Summary Information for Performance Share Unit Awards

A summary of the PSU awards activity is as follows:

Weighted Average

Number

Grant Date

    

of Units

    

Fair Value

Total AM LTIP PSUs awarded and unvested—December 31, 2023

952,101

$

10.90

Granted

350,237

13.44

Total AM LTIP PSUs awarded and unvested—March 31, 2024