Antero Midstream Corp (NYSE: AM) has piqued the interest of UBS, which has initiated coverage with a "Buy" rating and a price target of $14.
With a $5bn market cap, Antero Midstream and its parent company Antero Resources ($7bn market cap), stand as one of the most integrated natural gas producers in the U.S., with operations focused on the Appalachian Basin in West Virginia and Ohio.
Antero Midstream recently released its financial and operational results for Q1, 2023. Here are its key highlights year-over-year:
Gathering and compression volumes increased by 8% and 11%, respectively.
Net Income was $87 million, or $0.18 per diluted share, showing a 6% per share increase.
Adjusted Net Income, a non-GAAP measure, was $100 million, or $0.21 per share, reflecting an 11% per share increase.
Adjusted EBITDA, (non-GAAP), was $242 million, indicating a 16% increase.
Capital expenditures amounted to $34 million, representing a 64% decrease.
Free Cash Flow after dividends was $46 million, a significant improvement from the $38 million deficit in the prior year quarter.
The company has updated its guidance for the full year 2023, increasing Net Income by $15 million, Adjusted EBITDA by $20 million, and Free Cash Flow after dividends by $35 million.
Antero Midstream achieved strong operational performance in the first quarter, driven by record throughput and completion efforts from Antero Resources in the freshwater business.
The company aims to reduce absolute debt and leverage, further reducing risk in the outlook for Antero Midstream.
Revenues for the quarter amounted to $259 million, with $190 million from the Gathering and Processing segment and $69 million from the Water Handling segment.
UBS analyst Brian Reynolds points to the company's anticipated positive inflection in free cash flow yield as a compelling reason for its Buy rating. This is the first time in Antero Midstream's public company history that such a shift has been expected, potentially bringing about an increased return on capital opportunities as the company aims to hit its leverage target goals in 2024.
It is worth noting that about half of the revenues of Antero Resources, the parent company of Antero Midstream, are related to natural gas liquids, with 40% of these being exported. With export prices in Asia and Europe generally commanding a premium compared to U.S. prices, this sets the stage for potential increased revenues.
Antero Midstream stock comes with an 8.8% dividend yield.
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