Operator: Greetings, and welcome to the Antero Midstream Corporation Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Dan Katzenberg, Vice President, Investor Relations. Please go ahead.
Daniel Katzenberg: Thank you for joining us for Antero Midstream's Second Quarter Investor Conference Call. We will spend a few minutes going through the financial and operating highlights, and then we will open it up for Q&A. I would also like to direct you to the homepage of our website at anteromidstream.com, where we have provided a separate earnings call presentation that will be reviewed during today's call. Today's call may contain certain non-GAAP financial measures. Please refer to the earnings press release for important disclosures regarding such measures. Joining me on the call today are Michael Kennedy, CEO and President of Antero Midstream; Justin Agnew, CFO of Antero Midstream; and Benny Krueger, CFO of Antero Resources. With that, I will turn the call over to Mike.
Michael Kennedy: Thanks, Dan. Good morning, everyone. I'll start my comments on Slide #3. Last year has been an exciting year for growth in Appalachia and more importantly, Antero Midstream. During the second quarter, we gathered over 4.1 Bcf per day of gas, which was almost a 20% increase year-over-year. This growth was driven by the successful integration of the HG Midstream assets. This increased scale, premier footprint and strong balance sheet positions Antero Midstream to capture the abundant opportunities that are beginning to materialize in the region. To this point, we've seen an acceleration of new gas-fired power generation project announcements and supply deals, including a 2-gigawatt combined cycle power plant in Doddridge County, West Virginia, accessed by AM's joint venture pipeline. We expect this trend to continue as final investment decisions and construction start-ups accelerate, providing increased visibility into the Appalachian demand growth story. Looking ahead, we are positioning our infrastructure to support the significant demand growth over the next several years. This starts with beginning construction on our first intrastate regional pipeline called Eastside Express. This large diameter east-west pipeline will enhance the regional connectivity of our dry gas gathering system with several downstream market outlets. We plan to phase in this project over the next several years as new market opportunities arise with the objective of increasing optionality and supporting low-cost dry gas growth. As the industrial builder in the state of West Virginia that gathers half of the gas produced in the state, we view this project as step 1 in positioning Antero Midstream to capture the incremental production needed to fulfill the visible demand growth. In our view, this production growth will have to come from high-quality investment-grade producers with multi-decade inventories like Antero Resources. In addition to this project, the opportunity set ahead of Antero Midstream is larger than ever. In aggregate, we are evaluating several billion dollars of infrastructure opportunities within the region and we'll be selective with projects that are near term, actionable and accretive to our free cash flow and generate attractive rates of return. Before turning the call over to Justin, I wanted to briefly touch on the early results we are seeing on our first return to the dry gas Marcellus in over a decade. As you can see on Slide #4, EURs on our revisit were over 60% higher than offset wells completed the last time we were actively developing the area. This highlights the productivity improvements from enhanced completion designs and validates the decades of underlying resource that underpins the growth outlook at Antero Midstream. With that, I'll turn the call over to Justin.
Justin Agnew: Thanks, Mike. I'll start with our second quarter highlights on Slide #5. The second quarter represents the first full quarter of contribution from the recently acquired HG assets, which have been successfully integrated. Adjusted EBITDA for the second quarter was a company record $289 million, which was a 2% increase year-over-year, driven by an increase in gathering volumes. Looking ahead to the third quarter, we expect high single-digit sequential EBITDA growth in Q3, driven by increased volumes, which keeps us on track to achieve our full year EBITDA guidance. Capital invested during the quarter was $47 million, which helped to generate $80 million of free cash flow after dividends. This quarter marks the 12th consecutive quarter of generating free cash flow after dividends, highlighting the consistency and durability of cash flows over the last 3 years. I'll conclude my prepared remarks on Slide #6, which highlights our pro forma balance sheet and maturity schedule. In July, we received over $370 million of damages and interest from Veolia. Pro forma for these proceeds, our leverage was 2.8x as of June 30, below our 3x target and well ahead of schedule. Excess cash on hand and availability -- available capacity under our undrawn credit facility positioned us to call our nearest term 2028 maturity at par. As a result, we have no near-term maturities, and we have converted that debt into lower cost prepayable debt on our credit facility while maintaining significant liquidity. This financial flexibility is critical in today's environment as we position Antero Midstream to execute on the large opportunity that Mike referenced in his remarks. This flexibility and project opportunity set, in addition to our organic growth strategy, position us well to continue delivering shareholder value over the long term and enhance our return of capital to shareholders. With that, operator, we are ready to open up for Q&A.
Operator: [Operator Instructions] Our first question today is coming from John Mackay from Goldman Sachs.
John Mackay: Let's start on East Side Express. Just wondering if there's a little more you can share with us in terms of CapEx expectations and the contracting side. Is this AR underwriting? Are you looking to get customers on the demand side to underwrite? Maybe just walk us through the spending and the return profile.
Michael Kennedy: Yes, it's really AR underwriting, but it's $200 million to $300 million over the next 2 to 3 years. So I think about kind of $100 million each year. I think it has 7 interconnects with long-haul pipelines. Big pipe, 1.5 to 2 Bcf a day. So there will be opportunities, but solely underwritten by Antero Resources and its development plans, but with optionality to get third-party business and connect with all those different pipes.
John Mackay: That's helpful. And then maybe just looking broadly, you mentioned the several billion dollars of opportunities. Maybe just walk us through some of the general buckets that could include. Is there anything in there that could kind of dovetail with some of the cost saving initiatives that AR has been talking about? Or should we kind of think about this as pretty separate?
Michael Kennedy: Yes. No, I think you've heard about all the different power plant construction, data center construction in West Virginia, that's capturing that from a midstream perspective, building these type of regional pipelines or laterals off of existing pipelines to those type of projects. I referenced it on the AR call, but a decade ago, a good go buy the Stonewall pipeline. We had to farm that out. We didn't have the ability to build that internally, whether from capital or expertise. Now that's not the case. We are the builder in this area of the world. We have 1 million acres dedicated to us from AR. We have all these demand projects and power plants within that acreage or close to it. So we will be building those pipelines and laterals to those type of projects within the state of West Virginia.
John Mackay: Appreciate that. And maybe just a clarification. Is there a kind of time frame on that, that you can throw out there?
Michael Kennedy: No, this is our first one, the East Side Express. So that's over the next 2 to 3 years of the '28, '29 time frame. We're hopeful to announce more in the near term.
Operator: Next question is coming from Jeremy Tonet from JPMorgan.
Jeremy Tonet: Just wanted to peel back that several billion of CapEx opportunities that you said there. And it sounds like some of this could be servicing third parties beyond AR here. And just wondering that part of the business, how much opportunity you see to grow as far as servicing other producers or just in general, moving beyond what AR provides?
Michael Kennedy: Yes. I'm looking at a project backlog right now there's 15 projects that generally make that up all within the state of West Virginia. So that's what we're looking at. Antero Midstream could be involved solely or more probably probability-wise with AR's gas. So we're way more comfortable with AR as a supplier of that. AR, of course, we know exactly when they drill wells and where the gas goes and very confident in that throughput. So probably most likely associated with AR, but there are 15 projects on this list I'm looking at right now, and AR is probably half of them.
Jeremy Tonet: Okay. Got it. And then just pivoting towards water here. Just wondering what opportunities on the water beneficial reuse side you might see there. Given disposal costs much higher in the Northeast versus Texas, does that create more incentive economic benefit to recycling here? Just wondering what that -- any updates there?
Michael Kennedy: Yes. For AR, it's terrific to have a closed-loop water system that -- it's in a kind of cost plus 13 versus the kind of the disposal cost that you referenced. That's great for AR. Also great for AM because that closed-loop system is the freshwater distribution where it gets nice returns and both from a freshwater distribution and also from a produced water disposal reuse case. So really a benefit to both parties, also allows AR to complete in that 14, 15, 16 stages range and not have water be a logistics issue. So very beneficial to both. We'll connect the HG system. We're connecting it as we speak. That will be what's responsible, and it could be more than this, but what we've talked about on the high single-digit EBITDA growth for '27, that's just connecting the water systems to get the water down to the HG area. So that will benefit us going forward into '27 with the EBITDA growth on top of what we had this year.
Jeremy Tonet: Got it. That's very helpful there. And apologies if I missed the details on the AR call. But with regards to power generation investment, the governor has a 50 by 50 goal. So clearly, a lot of appetite in state to develop new generation there. And just wondering, I guess, Antero's appetite to more fully, I guess, embrace that build-out going further downstream, what have you? Just any thoughts on that side?
Michael Kennedy: Yes, we fully embrace that. We're the only investment-grade producer in West Virginia that's focused solely on West Virginia. We are the midstream builder. We've built everything up here over the last decade. So you combine those 2, and we produce about half of the state's gas. So we would be the logical person to benefit or entities to benefit from that initiative governor has.
Operator: Next question is coming from Sunil Sibal from Seaport Global.
Sunil Sibal: Most of my questions have been hit, but I just had one clarification with regard to the opportunity to contract for the gas to ultimate consumers. So I was curious when you're talking for those contracts, are you contracting with the power producers in the region? Or you're more focused on contracting with the data center entities per se?
Michael Kennedy: It's all of the above, both. We're building the East Side Express just knowing Antero's development and where that's going and where the interconnects are and just the opportunity set in front of us. We want to get in front of that and be positioned well. So when these opportunities present themselves, we are positioned to deliver gas to them.
Operator: Next question today is coming from Ned Baramov from Wells Fargo.
Ned Baramov: Just wanted to go back to the time line for additional infrastructure or intrastate projects you're currently working on. I think you noted you plan to announce potentially other projects soon. We're just wondering if construction of these projects would potentially overlap with that of the East Side Express project?
Michael Kennedy: Yes, not in '26, but '27 and beyond, that's probably a good assumption.
Ned Baramov: Understood. And then I guess, you mentioned the AR contracts on -- or AR will underwrite the project. I was just wondering if the contracts would be in a take-or-pay type of format? Or will there be volumetric exposure from AM's perspective?
Michael Kennedy: It just acreage dedication from AR, but because we know where AR drills and the plants are drilling, there's no need for those MVCs because we know the volumes will be there.
Ned Baramov: Understood. And then maybe one more, if I could. It seems that curtailments will be used a little bit more to better align the timing of production at AR with gas prices. Can you talk about the impact to AM's results? And does this imply that volumes going forward will have a little bit more pronounced seasonality?
Michael Kennedy: Yes. No, I mean we're talking 50 million a day. I think AM gathered 4.1 Bcf. So that's about 1% for maybe 1 quarter of the year. So maybe you're looking at 0.25%. So that doesn't move the needle for AM.
Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.
Daniel Katzenberg: Thank you, everyone, for joining the second quarter conference call today. If you have any follow-up questions, please reach out. Have a good day.
Operator: Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
