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Table of Contents

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

Table of Contents

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

23

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

30

Item 4.

Controls and Procedures

31

PART II—OTHER INFORMATION

32

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 5

Other Information

32

Item 6.

Exhibits

33

SIGNATURES

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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,

    

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.

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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 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.

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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

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.

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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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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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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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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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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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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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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

1,302,338

$

11.59

As of March 31, 2024, unamortized equity-based compensation expense of $20 million related to the unvested PSUs is expected to be recognized over a weighted average period of 2.2 years.

(10) Cash Dividends

The Company paid cash dividends for the quarter indicated as follows (in thousands, except per share data):

Dividends

Period

    

Record Date

    

Dividend Date

    

Dividends

    

per Share

Q4 2022

January 25, 2023

February 8, 2023

$

108,364

$

0.2250

*

February 14, 2023

February 14, 2023

138

*

Q1 2023

April 26, 2023

May 10, 2023

110,607

0.2250

*

May 15, 2023

May 15, 2023

137

*

Q2 2023

July 26, 2023

August 9, 2023

107,900

0.2250

*

August 14, 2023

August 14, 2023

138

*

Q3 2023

October 25, 2023

November 8, 2023

107,975

0.2250

*

November 14, 2023

November 14, 2023

137

*

Total 2023

$

435,396

Q4 2023

January 24, 2024

February 7, 2024

$

107,918

$

0.2250

*

February 14, 2024

February 14, 2024

138

*

Total 2024

$

108,056

*

Dividends are paid in accordance with the terms of the Series A Preferred Stock (as defined below) as discussed in Note 11—Equity and Net Income Per Common Share.

On April 10, 2024, the Board announced the declaration of a cash dividend on the shares of AM common stock of $0.2250 per share for the quarter ended March 31, 2024. The dividend is payable on May 8, 2024 to stockholders of record as of April 24, 2024. The Company pays dividends (i) out of surplus or (ii) if there is no surplus, out of the net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year, as provided under Delaware law.

The Board also declared a cash dividend of $137,500 on the shares of Series A Preferred Stock of Antero Midstream that is payable on May 15, 2024 in accordance with the terms of the Series A Preferred Stock, which are discussed in Note 11—Equity and Net Income Per Common Share. As of March 31, 2024, there were dividends in the amount of $68,750 accumulated in arrears on the Company’s Series A Preferred Stock.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(11) Equity and Net Income Per Common Share

(a)

Preferred Stock

The Board authorized 100,000,000 shares of preferred stock on March 12, 2019, and issued 10,000 shares of preferred stock designated as "5.5% Series A Non-Voting Perpetual Preferred Stock" (the "Series A Preferred Stock"), to The Antero Foundation on that date. Dividends on the Series A Preferred Stock are cumulative from the date of original issue and payable in cash on the 45th day following the end of each fiscal quarter, or such other dates as the Board will approve, at a rate of 5.5% per annum on (i) the liquidation preference per share of Series A Preferred Stock (as described below) and (ii) the amount of accrued and unpaid dividends for any prior dividend period on such share of Series A Preferred Stock, if any. At any time following the date of issue, in the event of a change of control, or at any time on or after March 12, 2029, the Company may redeem the Series A Preferred Stock at a price equal to $1,000 per share, plus any accrued and unpaid dividends, payable in cash; provided that if any shares of the Series A Preferred Stock are held by The Antero Foundation at the time of such redemption, the price for redemption of each share of Series A Preferred Stock will be the greater of (i) $1,000 per share, plus any accrued but unpaid dividends, and (ii) the fair market value of the Series A Preferred Stock. On or after March 12, 2029, the holder of each share of Series A Preferred Stock (other than The Antero Foundation) may convert such shares, at any time and from time to time, at the option of the holder into a number of shares of AM common stock equal to the conversion ratio in effect on the applicable conversion date, subject to certain limitations. The Series A Preferred Stock ranks senior to the AM common stock as to dividend rights, as well as with respect to rights upon liquidation, winding-up or dissolution of the Company. Holders of the Series A Preferred Stock do not have any voting rights in the Company, except as required by law, or any preemptive rights.

(b)

Weighted Average Common Shares Outstanding

The following is a reconciliation of the Company’s basic weighted average common shares outstanding to diluted weighted average common shares outstanding:

Three Months Ended March 31,

(in thousands)

    

2023

2024

Basic weighted average number of common shares outstanding

478,612

479,897

Add: Dilutive effect of RSUs

1,687

2,666

Add: Dilutive effect of PSUs

207

1,029

Add: Dilutive effect of Series A Preferred Stock

953

711

Diluted weighted average number of common shares outstanding

481,459

484,303

Weighted average number of outstanding equity awards excluded from calculation of net income per common share—diluted (1):

RSUs

872

PSUs

285

(1)

The potential dilutive effects of these awards were excluded from the computation of net income per share—diluted because the inclusion of these awards would have been anti-dilutive.

(c)

Net Income Per Common Share

Net income per common share—basic for each period is computed by dividing the net income or loss attributable to the Company by the basic weighted average number of common shares outstanding during the period. Net income per common share—diluted for each period is computed after giving consideration to the potential dilution from outstanding equity awards, calculated using the treasury stock method. During periods in which the Company incurs a net loss, diluted weighted average common shares outstanding are equal to basic weighted average common shares outstanding because the effect of all equity awards is anti-dilutive.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31,

(in thousands, except per share amounts)

    

2023

2024

Net income

$

86,507

103,926

Less preferred stock dividends

(138)

(138)

Net income available to common shareholders

$

86,369

103,788

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

Weighted average common shares outstanding–diluted

481,459

484,303

(12) Fair Value Measurement

(a)

Senior Unsecured Notes

The fair value and carrying value of the Company’s Senior Notes is as follows:

(Unaudited)

December 31, 2023

March 31, 2024

(in thousands)

Fair Value (1)

Carrying Value (2)

Fair Value (1)

Carrying Value (2)

2026 Notes

$

565,785

546,631

557,488

544,863

2027 Notes

642,655

647,313

640,250

647,499

2028 Notes

641,030

645,702

637,780

645,944

2029 Notes

720,000

743,470

719,025

743,728

2032 Notes

—    

600,600

592,839

Total

$

2,569,470

2,583,116

3,155,143

3,174,873

(1)Fair values are based on Level 2 market data inputs.
(2)Carrying values are presented net of unamortized debt issuance costs and debt premiums.

(b)

Other Assets and Liabilities

The carrying values of accounts receivable and accounts payable as of December 31, 2023 and March 31, 2024 approximated fair value because of their short-term nature. The carrying value of the amounts under the Credit Facility as of December 31, 2023 approximated fair value because the variable interest rates are reflective of current market conditions.

(13) Investments in Unconsolidated Affiliates

The Company has a 50% equity interest in the joint venture to develop processing and fractionation assets with MarkWest Energy Partners, L.P. (“MarkWest”), a wholly owned subsidiary of MPLX, LP (the “Joint Venture”). The Joint Venture was formed to develop processing and fractionation assets in Appalachia. MarkWest operates the Joint Venture assets, which consist of processing plants in West Virginia and a one-third interest in two MarkWest fractionators in Ohio.

The Company also has a 15% equity interest in a gathering system of Stonewall Gas Gathering LLC (“Stonewall”), which operates a 67-mile pipeline on which Antero Resources is an anchor shipper.

The Company’s net income includes its proportionate share of the net income of the Joint Venture and Stonewall. When the Company records its proportionate share of net income, it increases equity income in the unaudited condensed consolidated statements of operations and comprehensive income and the carrying value of that investment on its condensed consolidated balance sheet. When distributions on the Company’s proportionate share of net income are received, they are recorded as reductions to the carrying value of the investment on the unaudited condensed consolidated balance sheet and are classified as cash inflows from operating activities in accordance with the nature of the distribution approach under Financial Accounting Standards Board Accounting Standard Codification Topic 230, Statement of Cash Flows. The Company uses the equity method of accounting to account for its investments in the Joint Venture and Stonewall because it exercises significant influence, but not control, over the entities. The Company’s judgment regarding the level of influence over its equity

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

investments includes considering key factors such as its ownership interest, representation on the applicable Board of Directors and participation in policy-making decisions of the Joint Venture and Stonewall.

The following table is a reconciliation of the Company’s investments in these unconsolidated affiliates:

Total Investment

in Unconsolidated

(in thousands)

    

Joint Venture

    

Stonewall

    

Affiliates

Balance as of December 31, 2023

$

508,821

117,829

626,650

Equity in earnings of unconsolidated affiliates (1)

25,140

2,390

27,530

Distributions from unconsolidated affiliates

(31,015)

(3,945)

(34,960)

Balance as of March 31, 2024

$

502,946

116,274

619,220

(1)As adjusted for the amortization of the difference between the cost of the equity investments in Stonewall and the Joint Venture and the amount of the underlying equity in the net assets of the Joint Venture and Stonewall as of March 12, 2019.

(14)  Contingencies

The Company is currently involved in a consolidated lawsuit with Veolia Water Technologies, Inc. (“Veolia”) relating to the Clearwater Facility.

On March 13, 2020, Antero Treatment LLC (“Antero Treatment”), a wholly owned subsidiary of the Company, filed suit against Veolia in the district court of Denver County, Colorado (the “Court”), asserting claims of fraud, breach of contract and other related claims. Antero Treatment alleges that Veolia failed to meet its contractual obligations to design and build a “turnkey” wastewater disposal facility under a Design/Build Agreement dated August 18, 2015 (the “DBA”), and that Veolia fraudulently concealed certain miscalculations and design flaws during contract negotiations and continued to conceal and fraudulently misrepresent the impact of certain design changes post-execution of the DBA. On March 13, 2020, Veolia filed a separate suit against the Company, Antero Resources, and certain of the Company’s wholly owned subsidiaries (collectively, the “Antero Defendants”) in Denver County, Colorado. In its lawsuit, Veolia asserted breach of contract and equitable claims against the Antero Defendants for alleged failures under the DBA. Veolia’s suit was consolidated into the action filed by Antero Treatment.

Veolia and the Antero Defendants each filed partial motions to dismiss and motions for summary judgment directed at certain claims asserted by the opposing party. A bench trial on the remaining claims was held from January 24 through February 10, 2022 and concluded on February 24, 2022. At trial, Antero Treatment sought damages from Veolia of $450 million, which represents the Company’s out-of-pocket costs associated with the Clearwater Facility project. In the alternative, Antero Treatment sought damages related to multiple breaches of the DBA, totaling $370 million. Also at trial, Veolia sought monetary damages of $118 million, including alleged delay and extra-contractual costs and a contract balance relating to an allegation that Antero Defendants improperly terminated the DBA.

On January 3, 2023, the Court found that Antero Treatment had prevailed on its claims for breach of contract and fraud, and awarded $242 million in damages to Antero Treatment, plus pre- and post-judgment interest and reasonable costs and attorneys’ fees. The Court also found in Antero Defendants’ favor on all of Veolia’s affirmative claims. On January 27, 2023, the Court entered judgment in favor of Antero Treatment in the amount of $309 million in damages, which includes pre-judgment interest. On April 10, 2023, the Court issued an order identifying an error in its previously entered judgment, and on May 3, 2023, the Court entered an amended final judgment in favor of Antero Treatment in the amount of $280 million in damages, which includes pre-judgment interest through April 30, 2023. Antero Treatment was also awarded costs and attorneys’ fees, the amount of which will be determined in separate proceedings. On May 26, 2023, Veolia filed a notice of appeal of the final judgment. On June 9, 2023, Antero Treatment filed a notice of cross-appeal.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

(15) Reportable Segments

(a)

Summary of Reportable Segments

The Company’s operations, which are located in the United States, are organized into two reportable segments: (i) gathering and processing and (ii) water handling. These segments are monitored separately by management for performance and are consistent with internal financial reporting. These segments have been identified based on the differing products and services, regulatory environment and the expertise required for these operations. Management evaluates the performance of the Company’s business segments based on operating income. Interest expense is primarily managed and evaluated on a consolidated basis.

Gathering and Processing

The gathering and processing segment includes a network of gathering pipelines and compressor stations that collect and process production from Antero Resources’ wells in West Virginia and Ohio. The gathering and processing segment also includes equity in earnings from the Company’s investments in the Joint Venture and Stonewall.

Water Handling

The Company’s water handling segment includes two independent systems that deliver water from sources including the Ohio River, local reservoirs and several regional waterways. Portions of these water handling systems are also utilized to transport flowback and produced water. The water handling systems consist of permanent buried pipelines, surface pipelines and water storage facilities, as well as pumping stations, blending facilities and impoundments to transport water throughout the systems used to deliver water for well completions.

(b)

Reportable Segments Financial Information

The summarized operating results of the Company’s reportable segments are as follows:

Three Months Ended March 31, 2023

Gathering and

Water

Consolidated

(in thousands)

    

Processing

    

Handling

    

Unallocated (1)

Total

Revenues:

Revenue–Antero Resources

$

199,576

77,295

276,871

Revenue–third-party

272

272

Amortization of customer relationships

(9,271)

(8,397)

(17,668)

Total revenues

190,305

69,170

259,475

Operating expenses:

Direct operating

24,118

33,755

57,873

General and administrative

10,180

6,208

959

17,347

Facility idling

574

574

Depreciation

22,063

13,133

35,196

Accretion of asset retirement obligations

44

44

Loss on settlement of asset retirement obligations

341

341

Gain on asset sale

(242)

(3)

(245)

Total operating expenses

56,119

54,052

959

111,130

Operating income

$

134,186

15,118

(959)

148,345

Equity in earnings of unconsolidated affiliates

$

24,456

24,456

Additions to property and equipment

$

29,197

13,760

42,957

(1)Certain expenses that are not directly attributable to gathering and processing and water handling are managed and evaluated on a consolidated basis.

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ANTERO MIDSTREAM CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended March 31, 2024

Gathering and

Water

Consolidated

(in thousands)

    

Processing

    

Handling

    

Unallocated (1)

Total

Revenues:

Revenue–Antero Resources

$

227,593

68,455

296,048

Revenue–third-party

671

671

Amortization of customer relationships

(9,271)

(8,397)

(17,668)

Total revenues

218,322

60,729

279,051

Operating expenses:

Direct operating

26,143

27,775

53,918

General and administrative

14,733

5,226

1,262

21,221

Facility idling

522

522

Depreciation

23,421

13,674

37,095

Accretion of asset retirement obligations

44

44

Total operating expenses

64,297

47,241

1,262

112,800

Operating income

$

154,025

13,488

(1,262)

166,251

Equity in earnings of unconsolidated affiliates

$

27,530

27,530

Additions to property and equipment

$

27,723

7,350

35,073

(1)Certain expenses that are not directly attributable to gathering and processing and water handling are managed and evaluated on a consolidated basis.

The summarized total assets of the Company’s reportable segments are as follows:

(Unaudited)

December 31,

    

March 31,

(in thousands)

2023

2024

Gathering and Processing

$

4,691,827

4,718,671

Water Handling

1,045,725

1,030,097

Unallocated (1)

66

473

Total assets

$

5,737,618

5,749,241

(1)Certain assets that are not directly attributable to gathering and processing and water handling are managed and evaluated on a consolidated basis.

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Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report. The information provided below supplements, but does not form part of, our unaudited condensed consolidated financial statements. This discussion contains forward-looking statements that are based on the views and beliefs of our management, as well as assumptions and estimates made by our management. Actual results could differ materially from such forward-looking statements as a result of various risk factors, including those that may not be in the control of management. For further information on items that could impact our future operating performance or financial condition, see “Item 1A. Risk Factors” and the section entitled “Cautionary Statement Regarding Forward-Looking Statements.” We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law. In this section, references to “Antero Midstream,” “AM,” the “Company,” “we,” “us,” and “our” refer to Antero Midstream Corporation and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires.

Overview

We are a growth-oriented midstream energy company formed to own, operate and develop midstream energy assets to primarily service Antero Resources’ production and completion activity. We believe that our strategically located assets and our relationship with Antero Resources have allowed us to become a leading midstream energy company serving the Appalachian Basin and present opportunities to expand our midstream services to other operators in the Appalachian Basin. Our assets consist of gathering pipelines, compressor stations and interests in processing and fractionation plants that collect and process production from Antero Resources’ wells in the Appalachian Basin in West Virginia and Ohio. Our assets also include two independent water handling systems that deliver water from the Ohio River and several regional waterways. These water handling systems consist of permanent buried pipelines, surface pipelines and water storage facilities, as well as pumping stations, blending facilities and impoundments. Portions of these water handling systems are also utilized to transport flowback and produced water. These services are provided by us directly or through third-parties with which we contract.

Financing Highlights

Issuance of Senior Notes

On January 16, 2024, we issued $600 million of 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 rank pari passu to our other outstanding senior notes and are guaranteed on a full and unconditional and joint and several senior unsecured basis by our wholly owned subsidiaries and certain of our future restricted subsidiaries. The net proceeds from this offering were used to repay outstanding borrowings on the Credit Facility. See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements for more information.

Share Repurchase Program

On February 13, 2024, our Board authorized a share repurchase program that allows us to repurchase up to $500 million of shares of our outstanding common stock. The shares may be repurchased from time to time in open market transactions, through privately negotiated transactions or by other means in accordance with federal securities laws. The timing, as well as the number and value of shares repurchased under the program, will be determined by us at our discretion and will depend on a variety of factors, including the market price of our common stock, general market and economic conditions and applicable legal requirements. The exact number of shares to be repurchased by us is not guaranteed and the program may be suspended, modified or discontinued at any time without prior notice. The 1% U.S. federal excise tax on certain repurchases of stock by publicly traded U.S. corporations enacted as part of the Inflation Reduction Act of 2022 applies to our share repurchase program. During the three months ended March 31, 2024, we did not repurchase any shares under this program.

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Table of Contents

Market Conditions and Business Trends

Commodity Markets

Prices for natural gas decreased significantly while prices for NGLs and oil remained consistent during the three months ended March 31, 2024 as compared to the same period of 2023. While substantially all of our revenues are based on fixed-fee contracts that are not directly impacted by changes in commodity prices, commodity price changes do impact the revenues and cash flows of Antero Resources, and Antero Resources’ drilling and development plan does have a direct impact on our gathering, compression and water handling services, revenues and cash flows. In the current economic environment, we expect that commodity prices for some or all of the commodities produced by Antero Resources could remain volatile. However, due to Antero Resources’ improved liquidity and leverage position as compared to historical levels, we do not expect to experience significant variability in our throughput volumes resulting from volatile commodity prices.

Economic Indicators

The economy experienced elevated inflation levels as a result of global supply and demand imbalances, where global demand outpaced supplies beginning in 2021 and continuing through the first quarter of 2024. For example, the Consumer Price Index (“CPI”) for all urban consumers increased 5% from March 2022 to March 2023 and an additional 3% from March 2023 to March 2024 as compared to the Federal Reserve’s stated goal of 2%. In order to manage the inflation risk present in the United States’ economy, the Federal Reserve utilized monetary policy in the form of interest rate increases beginning in March 2022 in an effort to bring the inflation rate in line with its stated goal of 2% on a long-term basis. Between March 2022 and March 2024, the Federal Reserve increased the federal funds interest rate by 5.25%. While inflationary pressures in the United States’ economy have begun to subside, we continue to be impacted by the increased federal funds interest rate. See “—Results of Operations” for additional information.

The economy also continues to be impacted by global events. These events have often caused global supply chain disruptions with additional pressure due to trade sanctions on Russia and other global trade restrictions, among others. However, neither our nor Antero Resources’ supply chain has experienced any significant interruptions due to such events.

Inflationary pressures and supply chain disruptions could result in further increases to our operating and capital costs that are not fixed. However, our gathering and compression and water agreements provide for annual CPI-based adjustments that mitigate a portion of such inflationary pressures.

These economic variables are beyond our control and may adversely impact our business, financial condition, results of operations and future cash flows.

Results of Operations

We have two reportable segments: (i) gathering and processing and (ii) water handling. The gathering and processing segment includes a network of gathering pipelines and compressor stations that collect and process production from Antero Resources’ wells in the Appalachian Basin, as well as equity in earnings from our investments in the Joint Venture and Stonewall. The Joint Venture and Stonewall provide processing and fractionation services and high-pressure gas gathering services, respectively, in the Appalachian Basin. The water handling segment includes (i) two independent systems that deliver water from sources including the Ohio River, local reservoirs and several regional waterways, and (ii) other fluid handling services, which include high rate transfer, wastewater transportation, disposal and blending.

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Table of Contents

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2024

The operating results of our reportable segments are as follows:

Three Months Ended March 31, 2023

Gathering and

Water

Consolidated

(in thousands)

   

Processing

   

Handling

   

Unallocated (1)

   

Total

Revenues:

Revenue–Antero Resources

$

211,576

77,295

288,871

Revenue–third-party

272

272

Gathering—low pressure fee rebate

(12,000)

(12,000)

Amortization of customer relationships

(9,271)

(8,397)

(17,668)

Total revenues

190,305

69,170

259,475

Operating expenses:

Direct operating

24,118

33,755

57,873

General and administrative (excluding equity-based compensation)

5,772

4,494

754

11,020

Equity-based compensation

4,408

1,714

205

6,327

Facility idling

574

574

Depreciation

22,063

13,133

35,196

Accretion of asset retirement obligations

44

44

Loss on settlement of asset retirement obligations

341

341

Gain on asset sale

(242)

(3)

(245)

Total operating expenses

56,119

54,052

959

111,130

Operating income

134,186

15,118

(959)

148,345

Other income (expense):

Interest expense, net

(54,624)

(54,624)

Equity in earnings of unconsolidated affiliates

24,456

24,456

Total other income (expense)

24,456

(54,624)

(30,168)

Income before income taxes

158,642

15,118

(55,583)

118,177

Income tax expense

(31,670)

(31,670)

Net income and comprehensive income

$

158,642

15,118

(87,253)

86,507

(1)Corporate expenses that are not directly attributable to either the gathering and processing or water handling segments.

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Table of Contents

Three Months Ended March 31, 2024

Gathering and

Water

Consolidated

(in thousands)

    

Processing

    

Handling

    

Unallocated (1)

    

Total

Revenues:

Revenue–Antero Resources

$

227,593

68,455

296,048

Revenue–third-party

671

671

Amortization of customer relationships

(9,271)

(8,397)

(17,668)

Total revenues

218,322

60,729

279,051

Operating expenses:

Direct operating

26,143

27,775

53,918

General and administrative (excluding equity-based compensation)

7,470

3,411

1,013

11,894

Equity-based compensation

7,263

1,815

249

9,327

Facility idling

522

522

Depreciation

23,421

13,674

37,095

Accretion of asset retirement obligations

44

44

Total operating expenses

64,297

47,241

1,262

112,800

Operating income

154,025

13,488

(1,262)

166,251

Other income (expense):

Interest expense, net

(53,308)

(53,308)

Equity in earnings of unconsolidated affiliates

27,530

27,530

Loss on early extinguishment of debt

(59)

(59)

Total other income (expense)

27,530

(53,367)

(25,837)

Income before income taxes

181,555

13,488

(54,629)

140,414

Income tax expense

(36,488)

(36,488)

Net income and comprehensive income

$

181,555

13,488

(91,117)

103,926

(1)Corporate expenses that are not directly attributable to either the gathering and processing or water handling segments.

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The operating data for Antero Midstream is as follows:

Three Months Ended

Amount of

March 31,

Increase

Percentage

  

2023

  

2024

  

or Decrease

  

Change

Operating Data:

Gathering—low pressure (MMcf)

285,423

300,429

15,006

5

%

Compression (MMcf)

282,362

296,663

14,301

5

%

Gathering—high pressure (MMcf)

252,129

269,922

17,793

7

%

Fresh water delivery (MBbl)

11,110

10,274

(836)

(8)

%

Other fluid handling (MBbl)

4,965

5,061

96

2

%

Wells serviced by fresh water delivery

23

17

(6)

(26)

%

Gathering—low pressure (MMcf/d)

3,171

3,301

130

4

%

Compression (MMcf/d)

3,137

3,260

123

4

%

Gathering—high pressure (MMcf/d)

2,801

2,966

165

6

%

Fresh water delivery (MBbl/d)

123

113

(10)

(8)

%

Other fluid handling (MBbl/d)

55

56

1

2

%

Average Realized Fees(1):

Average gathering—low pressure fee ($/Mcf)

$

0.35

0.36

0.01

3

%

Average compression fee ($/Mcf)

$

0.21

0.21

*

Average gathering—high pressure fee ($/Mcf)

$

0.21

0.22

0.01

5

%

Average fresh water delivery fee ($/Bbl)

$

4.21

4.30

0.09

2

%

Joint Venture Operating Data:

Processing—Joint Venture (MMcf)

135,741

145,758

10,017

7

%

Fractionation—Joint Venture (MBbl)

3,222

3,640

418

13

%

Processing—Joint Venture (MMcf/d)

1,508

1,602

94

6

%

Fractionation—Joint Venture (MBbl/d)

36

40

4

11

%

*Not meaningful or applicable.
(1)The average realized fees for the three months ended March 31, 2024 include annual CPI-based adjustments of approximately 1.6%.

Revenues. Total revenues increased by 8%, from $259 million for the three months ended March 31, 2023 to $279 million for the three months ended March 31, 2024. Total revenues included amortization of customer relationships of $18 million for each of the three months ended March 31, 2023 and 2024. Gathering and processing revenues increased by 15%, from $190 million for the three months ended March 31, 2023 to $218 million for the three months ended March 31, 2024. Water handling revenues decreased by 12%, from $69 million for the three months ended March 31, 2023 to $61 million for the three months ended March 31, 2024. These fluctuations primarily resulted from the following:

Gathering and Processing

Low pressure gathering revenue increased $19 million period over period primarily due to lower growth incentive fee rebates of $12 million due to the expiration of the program on December 31, 2023, increased throughput volumes of 15 Bcf, or 130 MMcf/d, and increased low pressure gathering rates as a result of annual CPI-based adjustments. Low pressure gathering volumes increased between periods primarily due to 79 additional wells being connected to our system since March 31, 2023.
Compression revenue increased $4 million period over period primarily due to increased throughput volumes of 14 Bcf, or 123 MMcf/d, and increased compression rates as a result of annual CPI-based adjustments. Compression volumes increased between periods primarily due to 79 additional wells being connected to our system since March 31, 2023.
High pressure gathering revenue increased $5 million period over period primarily due to increased throughput volumes of 18 Bcf, or 165 MMcf/d and an increased high pressure gathering rate as a result of an annual CPI-based adjustment. The high pressure gathering volumes increased period over period primarily due to 79 additional wells being connected to our system since March 31, 2023.

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Table of Contents

Water Handling

Fresh water delivery revenue decreased $2 million period over period primarily due to decreased fresh water delivery volumes of 1 MMBbl, or 10 MBbl/d, partially offset by a 2% increase to the fresh water delivery rate for our long-term contract with Antero Resources as a result of the annual CPI-based adjustment. Fresh water delivery volumes decreased between periods primarily due to fewer wells serviced by our fresh water delivery system as a result of decreased completions activity from Antero Resources.
Other fluid handling services revenue decreased $6 million period over period primarily due to higher water blending volumes resulting in lower water trucking volumes, which are billed at cost plus 3%, during the three months ended March 31, 2024.

Direct operating expenses. Direct operating expenses decreased by 7%, from $58 million for the three months ended March 31, 2023 to $54 million for the three months ended March 31, 2024. Gathering and processing direct operating expenses increased by 8%, from $24 million for the three months ended March 31, 2023 to $26 million for the three months ended March 31, 2024 primarily due to increased low pressure, compression and high pressure volumes between periods. Water handling direct operating expenses decreased by 18%, from $34 million for the three months ended March 31, 2023 to $28 million for the three months ended March 31, 2024 primarily due to lower water trucking and fresh water volumes between periods.

General and administrative (excluding equity-based compensation) expenses. General and administrative expenses (excluding equity-based compensation expense) remained relatively consistent at $11 million and $12 million for the three months ended March 31, 2023 and 2024, respectively.

Equity-based compensation expenses. Equity-based compensation expenses increased from $6 million for the three months ended March 31, 2023 to $9 million for the three months ended March 31, 2024 primarily due to annual awards granted during the first quarter of 2024. Our equity awards vest over three or four year service periods. See Note 9—Equity-Based Compensation to the unaudited condensed consolidated financial statements for additional information.

Depreciation expense. Depreciation expense increased by 5%, from $35 million for the three months ended March 31, 2023 to $37 million for the three months ended March 31, 2024. This increase was primarily due to $1 million related to assets placed in service between periods and $1 million of higher expense related to our program to repurpose underutilized compressor units to expand existing or construct new compressor stations between periods.

Interest expense. Interest expense decreased by 2%, from $55 million for the three months ended March 31, 2023 to $53 million for the three months ended March 31, 2024 primarily due to the payoff of our Credit Facility between periods, partially offset by the issuance of $600 million principal amount of 2032 Notes and increased interest rates on our Credit Facility borrowings during the three months ended March 31, 2024 due to higher benchmark rates.

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates increased by 13%, from $24 million for the three months ended March 31, 2023 to $28 million for the three months ended March 31, 2024 primarily due to increased processing and fractionation volumes and higher processing and fractionation fees as a result of annual CPI-based adjustments between periods.

Income tax expense. Income tax expense increased by 15%, from $32 million for the three months ended March 31, 2023 to $36 million for the three months ended March 31, 2024, which reflects effective tax rates of 26.8% and 26.0%, respectively. This income tax expense increase was primarily due to higher pre-tax income between periods.

Capital Resources and Liquidity

Sources and Uses of Cash

Capital resources and liquidity are provided by operating cash flows and available borrowings under our Credit Facility and capital market transactions. See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements. We expect that the combination of these capital resources will be adequate to meet our working capital requirements, capital expenditures program and expected quarterly cash dividends for at least the next 12 months.

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Table of Contents

Our Board declared a cash dividend on the shares of our common stock of $0.2250 per share for the quarter ended March 31, 2024. The dividend is payable on May 8, 2024 to stockholders of record as of April 24, 2024. Our Board also declared a cash dividend of $137,500 on the shares of Series A Preferred Stock that is payable on May 15, 2024 in accordance with their terms as discussed in Note 11—Equity and Net Income Per Common Share. As of March 31, 2024, there were dividends in the amount of $68,750 accumulated in arrears on our Series A Preferred Stock.

We expect our future cash requirements relating to working capital, capital expenditures, acquisitions and quarterly cash dividends to our stockholders will be funded from cash flows internally generated from our operations or borrowings under the Credit Facility.

As of March 31, 2024, we did not have any off-balance sheet arrangements.

Cash Flows

The following table summarizes our cash flows for the three months ended March 31, 2023 and 2024:

Three Months Ended March 31,

(in thousands)

    

2023

    

2024

Net cash provided by operating activities

$

182,719

210,561

Net cash used in investing activities

(42,151)

(37,123)

Net cash used in financing activities

(140,568)

(147,416)

Net increase in cash and cash equivalents

$

26,022

Operating activities. Net cash provided by operating activities was $183 million and $211 million for the three months ended March 31, 2023 and 2024, respectively. The increase in cash flows provided by operations between periods was primarily the result of higher revenues in the gathering and processing segment, lower direct operating expenses and changes in working capital, partially offset by lower revenues in the water handling segment.

Investing activities. Net cash flows used in investing activities was $42 million and $37 million for the three months ended March 31, 2023 and 2024, respectively. The decrease in cash flows used in investing activities between periods was primarily due to decreased capital spending for our water handling systems of $6 million primarily as a result of fewer capital projects between periods.

Financing activities. Net cash used in financing activities was $141 million and $147 million for the three months ended March 31, 2023 and 2024, respectively. The increase in cash flows used in financing activities between periods was primarily due to higher net repayments on our Credit Facility of $599 million, deferred financing costs payments for the 2032 Notes of $7 million and repurchases of the 2026 Notes of $2 million, partially offset by the 2032 Notes issuance proceeds of $600 million.

2024 Capital Investment

On February 14, 2024, we announced a capital budget with a range of $150 million to $170 million. This capital budget supports Antero Resources’ maintenance capital program for 2024. Our capital budget may be adjusted as business conditions warrant. Additionally, we monitor our existing assets and look for opportunities to reuse or otherwise repurpose assets in an effort to optimize our capital efficiency.

Our capital expenditures were as follows:

Three Months Ended March 31,

(in thousands)

2023

2024

Gathering systems and facilities

$

21,249

24,562

Water handling systems

12,354

5,210

Total capital expenditures

$

33,603

29,772

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Debt Agreements

See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements and to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Form 10-K for information on our debt agreements.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. Any new accounting policies or updates to existing accounting policies as a result of recently adopted accounting standards have been included in Note 2—Summary of Significant Accounting Policies to our unaudited condensed consolidated financial statements. The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent liabilities. Accounting estimates and assumptions are considered to be critical if there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported amounts in our unaudited condensed consolidated financial statements that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our unaudited condensed consolidated financial statements. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2023 Form 10-K for information on our critical accounting estimates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risk. The term “market risk” refers to the risk of loss arising from adverse changes in commodity prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures.

Commodity Price Risk

Our gathering and compression and water services agreements with Antero Resources provide for fixed-fee and cost of service fee structures, and we intend to continue to pursue additional fixed-fee or cost of service fee opportunities with Antero Resources and third parties in order to avoid direct commodity price exposure. However, to the extent that our future contractual arrangements with Antero Resources or third parties do not provide for fixed-fee or cost of service fee structures, we may become subject to commodity price risk. We are subject to commodity price risks to the extent that they impact Antero Resources’ development program and production and therefore our gathering, compression, and water handling volumes. We cannot predict to what extent our business would be impacted by lower commodity prices and any resulting impact on Antero Resources’ operations.

Interest Rate Risk

Our primary exposure to interest rate risk results from outstanding borrowings under the Credit Facility, which has a floating interest rate. We do not currently, but may in the future, hedge the interest on portions of our borrowings under the Credit Facility from time-to-time in order to manage risks associated with floating interest rates. At March 31, 2024, we had no borrowings or letters of credit outstanding under the Credit Facility. A 1.0% increase in the Credit Facility interest rate would have resulted in an estimated increase in interest expense of less than one million dollars for the three months ended March 31, 2024.

Credit Risk

We are dependent on Antero Resources as our primary customer, and we expect to derive substantially all of our revenues from Antero Resources for the foreseeable future. As a result, any event, whether in our area of operations or otherwise, that adversely affects Antero Resources’ production, drilling schedule, financial condition, leverage, market reputation, liquidity, results of operations or cash flows may adversely affect our revenues and operating results.

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Further, we are subject to the risk of non-payment or non-performance by Antero Resources, including with respect to our gathering and compression and water handling services agreements. We cannot predict the extent to which Antero Resources’ business would be impacted if conditions in the energy industry were to deteriorate, nor can we estimate the impact such conditions would have on Antero Resources’ ability to execute its drilling and development program or to perform under our agreements. Any material non-payment or non-performance by Antero Resources could adversely affect our revenues and operating results and our ability to return capital to stockholders.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2024 at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Our operations are subject to a variety of risks and disputes normally incident to our business. As a result, we may, at any given time, be a defendant in various legal proceedings and litigation arising in the ordinary course of business.

We maintain insurance policies with insurers in amounts and with coverage and deductibles that we, with the advice of our insurance advisors and brokers, believe are reasonable and prudent. We cannot, however, assure you that this insurance will be adequate to protect us from all material expenses related to potential future claims for personal and property damage or that these levels of insurance will be available in the future at economical prices.

See Note 14—Contingencies to the unaudited condensed consolidated financial statements for additional information.

Item 1A. Risk Factors.

We are subject to certain risks and hazards due to the nature of the business activities we conduct. For a discussion of these risks, see “Item 1A. Risk Factors” in the 2023 Form 10-K. There have been no material changes to the risks described in such report. We may experience additional risks and uncertainties not currently known to us. Furthermore, as a result of developments occurring in the future, conditions that we currently deem to be immaterial may also materially and adversely affect us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

The following table sets forth our common stock share purchase activity for each period presented:

Approximate

Total Number of

Dollar Value of

Total Number

Average Price

Shares Purchased

Shares that May

of Shares

Paid per

as Part of Publicly

Yet be Purchased

Period

Purchased (1)

Share

Announced Plans

Under the Plan (2)

January 1, 2024 – January 31, 2024

2,508

$

12.26

$

February 1, 2024 – February 29, 2024

500,000,000

March 1, 2024 – March 31, 2024

414,527

13.44

500,000,000

Total

417,035

$

13.43

(1)The total number of shares purchased represents shares of our common stock transferred to us in order to satisfy tax withholding obligations incurred upon the vesting of equity awards held by our employees.
(2)In February 2024, the Board authorized a $500 million share repurchase program. During the three months ended March 31, 2024, we did not make any repurchases under this program.

Item 5. Other INFORMATION.

None.

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Item 6. Exhibits

Exhibit Number

Description of Exhibit

3.1

Certificate of Conversion of Antero Midstream Corporation, dated March 12, 2019 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on March 12, 2019).

3.2

Certificate of Incorporation of Antero Midstream Corporation, dated March 12, 2019 (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on March 12, 2019).

3.3

Certificate of Amendment to Certificate of Incorporation of Antero Midstream Corporation, dated June 8, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on June 8, 2023).

3.4

Amended and Restated Bylaws of Antero Midstream Corporation, dated February 14, 2023 (incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K (Commission File No. 001-38075) filed on February 15, 2023).

3.5

Certificate of Designations of Antero Midstream Corporation, dated March 12, 2019 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on March 12, 2019).

4.1

Indenture, dated as of January 16, 2024, by and among Antero Midstream Partners LP, Antero Midstream Finance Corporation, the guarantors party thereto and Computershare Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on January 16, 2024).

4.2

Form of 6.625% Senior Note due 2032 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (Commission File No. 001-38075) filed on January 16, 2024).

31.1

*

Certification of the Company’s Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).

31.2

*

Certification of the Company’s Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).

32.1

*

Certification of the Company’s Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

32.2

*

Certification of the Company’s Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

101

*

The following financial information from this Quarterly Report on Form 10-Q of Antero Midstream Corporation for the quarter ended March 31, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Unaudited Condensed Consolidated Financial Statements, tagged as blocks of text.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

The exhibits marked with the asterisk symbol (*) are filed or furnished with this Quarterly Report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ANTERO MIDSTREAM CORPORATION

By:

/s/ BRENDAN E. KRUEGER

Brendan E. Krueger

Chief Financial Officer, Vice President – Finance and Treasurer

Date:

April 24, 2024

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