Antero Midstream Corporation (AM): Business Model Canvas [10-2024 Updated]

In the dynamic world of energy infrastructure, Antero Midstream Corporation (AM) stands out with a robust business model designed to navigate the complexities of natural gas gathering and processing. Central to its operations is a strategic partnership with Antero Resources, ensuring a steady stream of revenue through long-term contracts. The company excels in water handling services and boasts an extensive pipeline network, positioning itself as a reliable player in the oil and gas sector. Dive deeper to explore the components of Antero Midstream's business model canvas and discover how it creates value and maintains competitive advantages in a challenging market.

Antero Midstream Corporation (AM) - Business Model: Key Partnerships

Antero Resources as primary customer

Antero Midstream Corporation's primary customer is Antero Resources, which significantly impacts its revenue streams. For the nine months ended September 30, 2024, Antero Resources generated $691 million in revenue for gathering and compression services and $178 million in water handling services. The total revenue from Antero Resources accounted for approximately 85% of Antero Midstream's total revenue during this period.

Third-party service providers for water handling

Antero Midstream collaborates with various third-party service providers for water handling solutions. For the nine months ended September 30, 2024, revenue from third-party water handling services was $1.5 million, indicating a growing segment despite the overall decrease in water handling revenues from Antero Resources. This partnership enables Antero Midstream to enhance service offerings and mitigate operational risks associated with water management.

Equipment manufacturers for gathering and processing systems

The company relies on partnerships with equipment manufacturers to develop and maintain its gathering and processing systems. In 2024, Antero Midstream acquired assets worth $70 million from Summit, which included 48 miles of high-pressure gathering pipelines and two compressor stations. These acquisitions are crucial for expanding operational capacity and improving efficiency in service delivery.

Partnership Type	Details	Financial Impact
Antero Resources	Primary customer for gathering and compression services	$691 million in revenue (9M 2024)
Third-party service providers	Water handling services	$1.5 million in revenue (9M 2024)
Equipment manufacturers	Asset acquisition from Summit	$70 million for pipelines and compressor stations

Regulatory agencies for compliance and permitting

Antero Midstream cooperates with regulatory agencies to ensure compliance with environmental and operational standards. This partnership is vital for securing necessary permits and maintaining operational integrity. The company has incurred $32 million in general and administrative expenses related to regulatory compliance in the nine months ended September 30, 2024. Such collaborations help mitigate risks associated with regulatory changes and enhance the company's reputation in the industry.

Antero Midstream Corporation (AM) - Business Model: Key Activities

Gathering and processing natural gas

Antero Midstream Corporation's key activity in gathering and processing natural gas is critical to its operations. For the nine months ended September 30, 2024, gathering and processing revenues increased by 11%, reaching $664 million compared to $598 million in the same period of 2023. This revenue growth was attributed to increased throughput volumes of 7 Bcf and higher low-pressure gathering rates due to annual CPI-based adjustments. The volume of low-pressure gathering increased by approximately 1% from 891,805 MMcf in 2023 to 898,386 MMcf in 2024.

Water handling services for hydraulic fracturing

Antero provides water handling services crucial for hydraulic fracturing activities. However, water handling revenues decreased by 16% from $184 million in the nine months ended September 30, 2023, to $155 million in the same period of 2024. This decline was primarily due to reduced fresh water delivery volumes, which fell by 21% from 30,445 MBbl in 2023 to 24,150 MBbl in 2024. The decrease in volumes serviced was a result of the timing of well completions by Antero Resources.

Maintenance of pipeline infrastructure

Maintaining the pipeline infrastructure is essential for Antero Midstream's operational efficiency. The total direct operating expenses remained consistent at $162 million for the nine months ended September 30, 2023, and 2024. Notably, direct operating expenses for gathering and processing increased by 6%, from $73 million to $77 million, primarily due to increased gathering and compression volumes and the acquisition of additional compressor stations and high-pressure gathering lines.

Customer service and relationship management

Customer service and relationship management are vital for Antero Midstream, particularly with its main customer, Antero Resources. Substantially all revenues are derived from contracts with Antero Resources. For the three months ended September 30, 2024, revenues from Antero Resources amounted to $234.8 million for gathering and processing services, while third-party revenues were $397, indicating strong customer reliance.

Key Activity	Revenue (in millions)	Volume/Units	Percentage Change
Gathering and Processing	$664	898,386 MMcf	+11%
Water Handling	$155	24,150 MBbl	-16%
Direct Operating Expenses	$162	N/A	0%
Customer Revenue (Antero Resources)	$234.8	N/A	N/A

Antero Midstream Corporation (AM) - Business Model: Key Resources

Extensive pipeline network for gas gathering

Antero Midstream operates a robust and extensive pipeline network, which is critical for its gas gathering operations. As of September 30, 2024, the total length of gathering systems and facilities was approximately 3,531,786 thousand dollars, reflecting an increase from 3,345,845 thousand dollars at the end of 2023. The company also completed the acquisition of additional gathering assets for 70 million dollars in May 2024, which included 48 miles of high-pressure gathering pipelines.

Compression and processing facilities

Antero Midstream's compression and processing facilities are pivotal in ensuring the efficiency of gas operations. The company has established facilities capable of handling 100 MMcf/d of compression capacity as part of its recent asset acquisitions. The total property and equipment, net of accumulated depreciation, was valued at 3,892,154 thousand dollars as of September 30, 2024. Furthermore, the company reported capital expenditures of approximately 90,175 thousand dollars for gathering systems and facilities within the nine months ended September 30, 2024.

Skilled workforce and operational expertise

Antero Midstream relies on a skilled workforce to manage its operations efficiently. The company has invested significantly in human resources, with general and administrative expenses amounting to 65,312 thousand dollars for the nine months ended September 30, 2024. This includes equity-based compensation expenses, which reached 32,871 thousand dollars. The expertise of the workforce is crucial for maintaining operational efficiencies across the gathering and processing segments, which reported operating income of 481,431 thousand dollars for the same period.

Financial resources for capital expenditures

Antero Midstream's financial resources are essential for sustaining and expanding its capital expenditures. The company reported net cash provided by operating activities of 611,303 thousand dollars for the nine months ended September 30, 2024. Furthermore, the company’s total long-term debt as of September 30, 2024, was approximately 3,171,664 thousand dollars, allowing it to leverage financing for growth initiatives. The capital budget for 2024 is projected between 150 million to 170 million dollars, aimed at supporting Antero Resources' maintenance capital program.

Antero Midstream Corporation (AM) - Business Model: Value Propositions

Reliable gathering and processing services

Antero Midstream Corporation offers comprehensive gathering and processing services, which are vital for the natural gas and NGL (natural gas liquids) industry. For the nine months ended September 30, 2024, the company reported gathering and processing revenues of $664 million, an increase of 11% compared to $598 million for the same period in 2023. This growth was driven by increased throughput volumes and an expansion of their infrastructure, including the connection of 67 additional wells since September 30, 2023.

Cost-effective water handling solutions

Water handling services are a critical component of Antero's operations, especially in the context of hydraulic fracturing. However, for the nine months ended September 30, 2024, water handling revenues decreased by 16%, amounting to $155 million compared to $184 million in the same period of 2023. This decline was primarily attributed to reduced fresh water delivery volumes, which fell by 6 MMBbl (24 MBbl/d). Despite this, Antero's water handling solutions remain competitively priced, with fresh water delivery fees averaging $4.30 per barrel, marking a 2% increase year-over-year.

Strong partnership with Antero Resources

Antero Midstream benefits significantly from its strategic partnership with Antero Resources, which is its primary customer. In Q3 2024, revenues from Antero Resources accounted for $234.8 million in gathering and processing and $52.3 million in water handling. This relationship ensures a steady demand for Antero's services, with the majority of its revenues derived from long-term contracts with Antero Resources, reinforcing the value proposition of reliability and consistency in service delivery.

Commitment to operational efficiency and safety

Antero Midstream's commitment to operational efficiency is evident in its financial performance and operational metrics. For the nine months ending September 30, 2024, the company's direct operating expenses remained stable at $162 million, reflecting effective cost management despite increased activity levels. Furthermore, the company has invested in enhancing safety protocols and operational reliability, which is crucial in the energy sector. This focus on safety and efficiency not only mitigates risks but also supports sustainable growth and enhances customer trust.

Metric	2023 (9 months)	2024 (9 months)	Percentage Change
Gathering and Processing Revenues	$598 million	$664 million	+11%
Water Handling Revenues	$184 million	$155 million	-16%
Fresh Water Delivery Average Fee	$4.21	$4.30	+2%
Direct Operating Expenses	$162 million	$162 million	0%

Antero Midstream Corporation (AM) - Business Model: Customer Relationships

Long-term contracts with Antero Resources

Antero Midstream Corporation maintains strong customer relationships primarily through long-term contracts with Antero Resources, its largest customer. As of September 30, 2024, revenues from Antero Resources amounted to approximately $691 million in the gathering and processing segment. This relationship is characterized by long-term agreements that provide stable revenue streams and predictable cash flows, with significant components including:

• Fresh water delivery services
• Low and high-pressure gathering services
• Compression services

Responsive customer service for third-party clients

Antero Midstream also serves third-party clients, generating approximately $1.5 million in revenues for the nine months ended September 30, 2024. The company emphasizes responsive customer service, which includes:

• Dedicated account management for each third-party client
• Timely resolution of service-related inquiries
• Flexible service offerings tailored to client needs

This approach not only enhances customer satisfaction but also fosters long-term partnerships with third-party operators in the region.

Regular communication and performance updates

Antero Midstream prioritizes regular communication with both Antero Resources and third-party clients. This includes:

• Quarterly performance reviews to discuss service efficiency and areas for improvement
• Annual operational updates to inform clients of changes in services or pricing, including CPI-based adjustments to fees
• Regular newsletters and reports on operational metrics and industry trends

Such proactive communication helps maintain transparency and build trust with clients, ensuring that they are informed and engaged.

Engagement in collaborative projects and initiatives

Antero Midstream actively engages in collaborative projects with Antero Resources and selected third-party clients. These initiatives focus on enhancing operational efficiencies and include:

• Joint ventures for infrastructure development, such as the acquisition of 48 miles of high-pressure gathering lines in 2024
• Shared investment in technology to improve service delivery and reduce costs
• Collaborative environmental initiatives aimed at sustainability and regulatory compliance

Through these collaborative efforts, Antero Midstream not only strengthens its relationships with clients but also drives innovation within its service offerings.

Metric	Q3 2023	Q3 2024	Change (%)
Total Revenues	$264 million	$270 million	2%
Revenue from Antero Resources	$625 million	$691 million	10.5%
Revenue from Third Parties	$929,000	$1.5 million	61%
Average Gathering Fee (Low Pressure)	$0.35 per Mcf	$0.36 per Mcf	3%
Average Compression Fee	$0.21 per Mcf	$0.21 per Mcf	0%

Antero Midstream Corporation (AM) - Business Model: Channels

Direct contracts with Antero Resources

As of September 30, 2024, Antero Midstream Corporation earns substantially all of its revenues from Antero Resources under various agreements for gathering and compression services. The total revenue from Antero Resources for the nine months ended September 30, 2024, was approximately $870.2 million, which includes $691.4 million from gathering and compression services and $178.8 million from water handling services.

Marketing to potential third-party clients

Antero Midstream is actively pursuing third-party clients to diversify its revenue base. In the nine months ended September 30, 2024, the company generated $1.5 million in revenue from third-party water handling services, reflecting a slight increase from $929,000 in the same period of the previous year.

Industry conferences and networking events

Participation in industry conferences and networking events is a crucial channel for Antero Midstream to build relationships and market its services. The company aims to enhance its visibility among potential clients and partners, leveraging these opportunities to showcase its capabilities in gathering, processing, and water handling services. Specific revenue figures from these events are not disclosed, but they contribute to the overall strategy of client acquisition and partnership development.

Online platforms for service promotion

Antero Midstream utilizes online platforms to promote its services and engage with potential customers. This includes maintaining a robust online presence through its corporate website and social media channels to provide information about its services, updates on operations, and industry insights. While specific revenue generated through online channels is not quantified, the digital strategy supports broader marketing efforts and client engagement initiatives.

Channel	Revenue (Q3 2024)	Revenue (Q3 2023)	Change (%)
Direct Contracts with Antero Resources	$287.1 million	$281.1 million	2.1%
Third-party Water Handling	$397,000	$383,000	3.7%
Total Revenue	$269.9 million	$263.8 million	2.6%

Antero Midstream Corporation (AM) - Business Model: Customer Segments

Major oil and gas producers (e.g., Antero Resources)

As of September 30, 2024, Antero Midstream Corporation generated approximately $691 million in revenues from Antero Resources, which represents a significant portion of their total revenues. The company has established a long-term contract with Antero Resources for its gathering and processing services, securing a steady revenue stream.

Independent exploration and production companies

Antero Midstream also serves independent exploration and production companies. In the nine months ended September 30, 2024, revenues from third-party customers amounted to approximately $1.5 million. This segment allows Antero Midstream to diversify its customer base beyond its primary relationship with Antero Resources.

Service companies in the hydraulic fracturing industry

Service companies, particularly those involved in hydraulic fracturing, are critical customers for Antero Midstream. The average realized fees for compression services were $0.21 per Mcf in 2024, reflecting the demand for compression services in the hydraulic fracturing process. This fee structure indicates the importance of hydraulic fracturing service companies as customers in Antero Midstream's operational model.

Regulatory bodies requiring compliance

Antero Midstream must comply with various regulatory requirements, which necessitates maintaining relationships with regulatory bodies. Compliance efforts often involve reporting and operational adjustments that align with environmental and safety regulations, impacting the company’s operational costs. For instance, the general and administrative expenses, which include compliance costs, increased by 8% from $30 million in the nine months ended September 30, 2023, to $32 million in the same period of 2024.

Customer Segment	Revenue (2024)	Average Realized Fees	Key Relationships
Major Oil and Gas Producers	$691 million	N/A	Antero Resources
Independent Exploration and Production Companies	$1.5 million	N/A	Various Independents
Service Companies in Hydraulic Fracturing	N/A	$0.21/Mcf	Hydraulic Fracturing Service Providers
Regulatory Bodies	N/A	N/A	Environmental and Safety Regulators

Antero Midstream Corporation (AM) - Business Model: Cost Structure

Operational costs for pipeline and facility maintenance

For the nine months ended September 30, 2024, Antero Midstream reported direct operating expenses of $162 million, which remained consistent compared to the same period in 2023. This includes:

• Gathering and processing direct operating expenses: $77 million, up from $73 million in 2023.
• Water handling direct operating expenses: $85 million, down from $89 million in 2023.

The increase in gathering and processing expenses was driven by higher throughput volumes and the acquisition of two compressor stations and 48 miles of high pressure gathering lines during the second quarter of 2024.

General and administrative expenses

General and administrative expenses (excluding equity-based compensation) increased by 8%, from $30 million for the nine months ended September 30, 2023 to $32 million for the same period in 2024. This increase was primarily due to higher costs allocated from Antero Resources.

Including equity-based compensation, total general and administrative expenses rose from $53 million in 2023 to $65 million in 2024, reflecting an increase in equity-based compensation expenses from $23 million to $33 million.

Depreciation of assets and infrastructure

Depreciation expense for Antero Midstream increased by 6%, from $101 million for the nine months ended September 30, 2023 to $107 million for the same period in 2024. This rise is attributed to:

• $3 million related to new assets placed in service.
• $2 million increase due to the repurposing of underutilized compressor units.
• $1 million for assets acquired during the second quarter of 2024.

Interest expenses related to financing activities

Interest expense decreased by 5%, from $165 million for the nine months ended September 30, 2023 to $157 million for the same period in 2024. This decrease was primarily due to lower borrowings on the Credit Facility and a reduction in interest expense on Senior Notes following the repurchase and redemption of the remaining $550 million principal amount of the 2026 Notes.

Cost Component	2023 (Nine Months)	2024 (Nine Months)	Change
Direct Operating Expenses	$162 million	$162 million	No Change
General and Administrative Expenses	$53 million	$65 million	+15%
Depreciation Expense	$101 million	$107 million	+6%
Interest Expense	$165 million	$157 million	-5%

Antero Midstream Corporation (AM) - Business Model: Revenue Streams

Gathering and processing fees from Antero Resources

For the nine months ended September 30, 2024, Antero Midstream reported gathering and processing revenues of $664 million, an increase of 11% from $598 million in the same period of 2023. This revenue includes:

• Low pressure gathering revenue: $335 million
• High pressure gathering revenue: $221 million
• Compression revenue: $108 million

The increase in low pressure gathering revenue was primarily attributed to lower growth incentive fee rebates and increased throughput volumes, with an additional 67 wells connected to the system since September 30, 2023.

Water handling service fees from third-party clients

Water handling revenues for the nine months ended September 30, 2024, totaled $155 million, which reflects a 16% decrease from $184 million in the same period of 2023. The breakdown is as follows:

• Fresh water delivery revenue: $134 million
• Other fluid handling services revenue: $21 million

The decline in fresh water delivery revenue was mainly due to decreased delivery volumes of 6 million barrels (MMBbl), offset by a 1.6% increase in delivery rates.

Lease income from pipeline agreements

Antero Midstream derives significant lease income from its pipeline agreements. For the nine months ending September 30, 2024, total revenues from Antero Resources included:

Type of Revenue	Amount (in millions)
Lease income from gathering and compression systems	$870 million

This revenue is classified under operating lease agreements and accounts for a considerable portion of the company's total income.

Revenue from equity in unconsolidated affiliates

Antero Midstream also earns revenue from its equity interests in unconsolidated affiliates, which amounted to $82.8 million for the nine months ended September 30, 2024. This includes:

• Equity in earnings from joint ventures: $77.8 million
• Distributions from unconsolidated affiliates: $100.9 million

The company's equity investments primarily relate to processing and fractionation assets developed in collaboration with MarkWest Energy Partners.

Article updated on 8 Nov 2024

Resources:

1. 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.
2. 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.