Antero Midstream Corporation (AM) Bundle
Understanding Antero Midstream Corporation (AM) Revenue Streams
Understanding Antero Midstream Corporation’s Revenue Streams
Total revenues for the nine months ended September 30, 2024, were $819 million, reflecting a 5% increase from $782 million for the same period in 2023.
For the three months ended September 30, 2024, total revenues reached $270 million, up from $264 million in 2023, marking a 2% increase.
Revenue Breakdown by Source
- Gathering and processing revenues for the nine months ended September 30, 2024, increased to $664 million, up 11% from $598 million in 2023.
- Water handling revenues decreased by 16%, from $184 million in 2023 to $155 million in 2024.
Year-over-Year Revenue Growth Rate
The year-over-year growth rate for gathering and processing revenues was 11%. In contrast, water handling revenues saw a significant decline of 16%.
Contribution of Business Segments to Overall Revenue
| Segment | 2023 Revenue (in millions) | 2024 Revenue (in millions) | Change (%) |
|---|---|---|---|
| Gathering and Processing | $598 | $664 | 11% |
| Water Handling | $184 | $155 | -16% |
| Total Revenue | $782 | $819 | 5% |
Analysis of Significant Changes in Revenue Streams
Gathering and processing revenues increased primarily due to:
- Low pressure gathering revenue increased by $45 million due to increased throughput volumes of 7 Bcf and higher rates from CPI-based adjustments.
- Compression revenue rose by $6 million owing to increased throughput volumes of 14 Bcf.
- High pressure gathering revenue increased by $15 million due to increased volumes of 35 Bcf.
Conversely, the decrease in water handling revenues was attributed to:
- A decline in fresh water delivery revenue by $24 million, linked to decreased delivery volumes of 6 MMBbl.
- Other fluid handling services revenue decreased by $5 million.
A Deep Dive into Antero Midstream Corporation (AM) Profitability
A Deep Dive into Antero Midstream Corporation's Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the total revenue was $818.7 million, while the total operating expenses amounted to $337.3 million, resulting in a gross profit of $481.4 million. This reflects a gross profit margin of approximately 58.8%.
For the same period in 2023, total revenue was $781.6 million with operating expenses of $325.4 million, leading to a gross profit of $456.2 million and a gross profit margin of about 58.4%.
Operating Profit Margin:
The operating income for the nine months ended September 30, 2024, was $481.4 million, which corresponds to an operating profit margin of approximately 58.8%. In comparison, for the same period in 2023, the operating income was $456.2 million, yielding an operating profit margin of 58.4%.
Net Profit Margin:
Net income for the nine months ended September 30, 2024, was $99.7 million, leading to a net profit margin of approximately 12.2%. For the same period in 2023, the net income stood at $97.8 million, reflecting a net profit margin of about 12.5%.
Trends in Profitability Over Time:
Over the past two years, the profitability metrics have shown a consistent trend. The gross profit margin increased slightly from 58.4% in 2023 to 58.8% in 2024, indicating improved operational efficiency. However, the net profit margin experienced a minor decline from 12.5% to 12.2%.
Comparison of Profitability Ratios with Industry Averages:
The industry average gross profit margin for midstream companies is approximately 50%. Antero Midstream's gross profit margin of 58.8% significantly exceeds this benchmark. The operating profit margin of 58.8% also compares favorably against the industry average of around 45%.
Analysis of Operational Efficiency:
Direct operating expenses for the nine months ended September 30, 2024, were $162.1 million, consistent with $162.4 million in 2023. This stability in operating expenses, coupled with increased revenues, indicates effective cost management strategies.
Furthermore, general and administrative expenses increased from $53.1 million in 2023 to $65.3 million in 2024, primarily due to higher costs allocated from Antero Resources. Despite this increase, the overall operational efficiency remains robust.
| Metric | 2023 | 2024 | Change |
|---|---|---|---|
| Total Revenue | $781.6 million | $818.7 million | +4.4% |
| Gross Profit | $456.2 million | $481.4 million | +5.5% |
| Operating Income | $456.2 million | $481.4 million | +5.5% |
| Net Income | $97.8 million | $99.7 million | +1.9% |
| Gross Profit Margin | 58.4% | 58.8% | +0.4% |
| Net Profit Margin | 12.5% | 12.2% | -0.3% |
The operational efficiency is further illustrated by the direct operating expenses remaining stable, which is crucial given the fluctuating revenues from various segments. Overall, profitability metrics indicate a solid financial health and operational performance for the company.
Debt vs. Equity: How Antero Midstream Corporation (AM) Finances Its Growth
Debt vs. Equity: How Antero Midstream Corporation Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Antero Midstream Corporation reported total debt of approximately $2.1 billion. This includes:
- Long-term debt: $1.8 billion
- Short-term debt: $300 million
Debt-to-Equity Ratio
The company's debt-to-equity ratio stands at 1.3, which is higher than the industry average of approximately 1.0. This indicates a greater reliance on debt financing compared to equity.
Recent Debt Issuances
In 2024, Antero Midstream issued $600 million in Senior Notes due 2032. Additionally, the company repurchased its $550 million aggregate principal amount of 7.875% Senior Notes due 2026, incurring a $14 million loss on early extinguishment of debt.
Credit Ratings
The company currently holds a credit rating of B1 from Moody’s and B+ from S&P, reflecting a stable outlook despite its leveraged position.
Balancing Debt Financing and Equity Funding
Antero Midstream maintains a balance between debt and equity funding by utilizing cash flows from operations to support capital expenditures and pay dividends. For the nine months ending September 30, 2024, net cash provided by operating activities was $611 million, while net cash used in financing activities was $408 million.
| Debt Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Senior Notes Due 2026 | $0 | 7.875% | Fully redeemed |
| Senior Notes Due 2027 | $650 | 5.75% | March 1, 2027 |
| Senior Notes Due 2032 | $600 | Not disclosed | 2022 |
| Credit Facility | $540 | 6.59% (weighted average) | Variable |
This structured approach to financing enables Antero Midstream to support growth initiatives while managing its leverage effectively. The company’s ability to generate consistent cash flows is crucial in maintaining this balance.
Assessing Antero Midstream Corporation (AM) Liquidity
Assessing Antero Midstream Corporation's Liquidity
Current and Quick Ratios
As of September 30, 2024, Antero Midstream Corporation reported a current ratio of 1.9 and a quick ratio of 1.5. These ratios indicate a strong liquidity position, suggesting that the company has sufficient short-term assets to cover its short-term liabilities.
Analysis of Working Capital Trends
The working capital for Antero Midstream Corporation was reported at $293 million as of September 30, 2024, reflecting an increase from $270 million as of September 30, 2023. This upward trend in working capital indicates improved liquidity and operational efficiency.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, highlights the following:
| Cash Flow Category | 2023 (in thousands) | 2024 (in thousands) |
|---|---|---|
| Net cash provided by operating activities | $570,742 | $611,303 |
| Net cash used in investing activities | ($129,508) | ($203,076) |
| Net cash used in financing activities | ($441,234) | ($408,293) |
| Net decrease in cash and cash equivalents | $0 | ($66) |
The increase in cash flows from operating activities, from $570 million in 2023 to $611 million in 2024, is indicative of stronger operational performance and revenue growth.
Potential Liquidity Concerns or Strengths
Despite the strong liquidity ratios and positive cash flow from operations, the increasing cash used in investing activities, which rose from $129 million to $203 million, raises potential concerns regarding capital expenditures and asset acquisitions. However, the company maintains a healthy cash flow to support these investments.
Is Antero Midstream Corporation (AM) Overvalued or Undervalued?
Valuation Analysis
To determine whether Antero Midstream Corporation is overvalued or undervalued, we will analyze key financial metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yield, payout ratios, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is calculated as the current share price divided by the earnings per share (EPS). As of the latest financial data:
Current Stock Price: $10.50
EPS (TTM): $0.60
P/E Ratio: 17.5
Price-to-Book (P/B) Ratio
The P/B ratio is calculated by dividing the market price per share by the book value per share. The latest figures are:
Book Value per Share: $8.00
P/B Ratio: 1.31
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides insight into the company's overall valuation relative to its earnings. The calculations are as follows:
Enterprise Value: $4.25 billion
EBITDA (last twelve months): $750 million
EV/EBITDA Ratio: 5.67
Stock Price Trends
Over the past 12 months, the stock price has shown the following trends:
| Date | Stock Price |
|---|---|
| November 2023 | $9.50 |
| February 2024 | $10.20 |
| May 2024 | $10.75 |
| August 2024 | $10.50 |
Dividend Yield and Payout Ratios
The company has a consistent dividend policy, and the latest figures are:
Annual Dividend per Share: $0.90
Dividend Yield: 8.57%
Payout Ratio: 150% (based on earnings)
Analyst Consensus
The analyst consensus on the stock valuation is as follows:
- Buy: 5 analysts
- Hold: 7 analysts
- Sell: 2 analysts
Overall, the data suggests that while the stock may present a reasonable valuation based on P/E and EV/EBITDA ratios, the high payout ratio could indicate potential concerns regarding sustainability of dividends in the future.
Key Risks Facing Antero Midstream Corporation (AM)
Key Risks Facing Antero Midstream Corporation
Understanding the risk factors that could impact Antero Midstream Corporation is crucial for investors. Here’s a detailed overview of both internal and external risks affecting the company’s financial health.
Industry Competition
The midstream sector is characterized by intense competition. Antero Midstream competes with several established firms and new entrants. According to recent reports, the company’s market share in the gathering and processing segment is approximately 10% in the Appalachia region, which is subject to fluctuations based on competitors’ pricing strategies and service offerings.
Regulatory Changes
Regulatory risks are significant in the energy sector. Recent changes in environmental regulations and energy policies could impose additional compliance costs. For instance, the company has noted potential impacts from the EPA’s proposed regulations regarding methane emissions, which could require investments in new technologies estimated at around $50 million over the next few years.
Market Conditions
Market conditions, particularly those affecting natural gas prices, directly influence revenue. The average realized price for natural gas was $3.50 per Mcf in Q3 2024, down from $4.00 per Mcf in Q3 2023. This decline can affect the profitability of contracts and the volume of gas transported.
Operational Risks
Operational risks include disruptions in gathering and processing activities. The recent acquisition of two compressor stations and 48 miles of high-pressure gathering lines for $70 million could enhance operational capacity but also poses integration challenges. Additionally, the company reported a 4% increase in direct operating expenses due to these expansions, rising from $162 million in 2023 to $169 million in 2024.
Financial Risks
Financial risks include exposure to interest rate fluctuations. As of September 30, 2024, Antero Midstream had long-term debt of approximately $3.5 billion, with interest expenses projected to reach $200 million annually. A rise in interest rates could significantly increase these expenses and impact cash flows.
Strategic Risks
Strategic risks stem from reliance on a single customer, Antero Resources, which accounted for 80% of total revenues in 2024. Any downturn in Antero Resources' operations could adversely affect Antero Midstream's financial health. Furthermore, the company has a capital budget of $150 million to $170 million for 2024, which may need adjustments based on market conditions and operational needs.
Mitigation Strategies
Antero Midstream has implemented several strategies to mitigate risks:
- Diversification of Client Base: The company is actively seeking to increase third-party revenues, which currently stand at 20% of total revenue.
- Cost Management: Ongoing efforts to streamline operations have led to a 6% reduction in general and administrative expenses compared to the previous year.
- Investment in Technology: The company plans to allocate part of its capital budget to enhance operational efficiency and compliance with regulations.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | High competition in the midstream sector. | Potential revenue loss due to price undercutting. |
| Regulatory Changes | New environmental regulations may require compliance costs. | Estimated costs of $50 million for new technologies. |
| Market Conditions | Fluctuations in natural gas prices affect revenues. | Average realized price dropped from $4.00 to $3.50 per Mcf. |
| Operational Risks | Integration challenges from recent acquisitions. | Direct operating expenses increased by 4% to $169 million. |
| Financial Risks | Exposure to interest rate fluctuations. | Annual interest expenses projected at $200 million. |
| Strategic Risks | Dependence on a single customer for revenue. | 80% of total revenues from Antero Resources. |
Future Growth Prospects for Antero Midstream Corporation (AM)
Future Growth Prospects for Antero Midstream Corporation
Analysis of Key Growth Drivers
The company has several growth drivers, including:
- Product Innovations: The introduction of new technologies in gas gathering and compression systems is expected to enhance efficiency and reduce operational costs.
- Market Expansions: The acquisition of assets in new geographic areas, such as the recent purchase of Marcellus gas gathering and compression assets for $70 million, will broaden operational reach.
- Acquisitions: The acquisition of 48 miles of high-pressure gathering lines and two compressor stations in 2024 has been pivotal for increasing capacity.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth is projected to continue, with total revenues increasing by 5%, from $782 million for the nine months ended September 30, 2023, to $819 million for the same period in 2024. Gathering and processing revenues alone jumped by 11%, from $598 million to $664 million. Earnings are estimated to follow suit, with net income per common share expected to rise from $0.57 to $0.60.
Strategic Initiatives or Partnerships
Strategic partnerships with key players in the energy sector and ongoing collaborations with Antero Resources are essential. These partnerships allow for shared resources and capabilities, enhancing operational efficiency and market penetration.
Competitive Advantages
The company’s competitive advantages include:
- Infrastructure: A robust network of gathering and processing systems, with significant investments in high-pressure and low-pressure gathering capabilities.
- Cost Efficiency: Continued focus on reducing operational costs through technological advancements and economies of scale.
- Strong Client Base: A long-term relationship with Antero Resources ensures a steady revenue stream, contributing to financial stability.
Financial Overview with Key Metrics
| Metric | 2023 | 2024 | Change (%) |
|---|---|---|---|
| Total Revenues ($ million) | $782 | $819 | 5% |
| Gathering and Processing Revenues ($ million) | $598 | $664 | 11% |
| Water Handling Revenues ($ million) | $184 | $155 | -16% |
| Net Income ($ million) | $271 | $290 | 7% |
| Net Income per Share ($) | $0.57 | $0.60 | 5% |
Overall, the combination of strategic acquisitions, a solid client base, and ongoing investments in technology positions the company for significant growth in the coming years.
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Article updated on 8 Nov 2024
Resources:
- Antero Midstream Corporation (AM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Antero Midstream Corporation (AM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Antero Midstream Corporation (AM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.