Antero Midstream (AM) Q4 Results - Feb 15

[dan_s]

This morning, I updated my forecast/valuation model for Antero Resources (AR) and posted it to the EPG Website. To understand the upside for AM you need to understand the Company's relationship with AR. See what I've posted under the Sweet 16 tab about AR's Q4 results.
AM is one of the midstream companies in our High Yield Income Portfolio. At the time of this post AM was trading for $12.39. It pays quarterly dividends of $0.225/share for annualized yield of 7.26%.

AM's Fourth Quarter 2023 Highlights:

Net Income was $100 million, or $0.21 per diluted share, a 24% per share increase compared to the prior year quarter

Adjusted Net Income was $114 million, or $0.24 per diluted share, a 20% per share increase compared to the prior year quarter (non-GAAP measure) < Compares to my forecast of $110.6 million net income.

Low pressure gathering and processing volumes increased by 10% and 12%, respectively, compared to the prior year quarter

Adjusted EBITDA was $254 million, a 10% increase compared to the prior year quarter (non-GAAP measure)

Capital expenditures were $46 million, a 27% decrease compared to the prior year quarter

Free Cash Flow after dividends was $48 million compared to $8 million in the prior year quarter (non-GAAP measure) < This means that AM has the potential to raise dividends this year.

[ChuckGeb]

I think this is their plans in lieu of increased dividend:

DENVER, Feb. 14, 2024 /PRNewswire/ -- Antero Midstream Corporation (NYSE: AM) ("Antero Midstream" or the "Company") today announced its fourth quarter 2023 financial and operating results and 2024 guidance. In addition, Antero Midstream announced the authorization of a $500 million share repurchase program. The relevant consolidated financial statements are included in Antero Midstream's Annual Report on Form 10-K for the year ended December 31, 2023.

[dan_s]

My valuation of AM is now $15/share compared to TipRanks' price target of $14/share.

Even though AM will be generating a lot of free cash flow this year, I don't expect them to raise dividends this year. Their first goal is to pay off more debt, which will lower interest expense and raise free cash flow. After they meet their goal of getting their debt leverage ratio down to 3.0 (from 3.3 at YE), they will start an aggressive stock repurchase program. Lowering debt and the number of outstanding shares will increase per share value.