Antero Midstream Corporation (AM - Free Report) shares declined 5.5% despite reporting strong second-quarter 2021 earnings on Jul 28. Although production stabilized after a challenging pandemic-induced period for natural gas producers; the pressure on midstream firms continues to remain due to demand destructions and is beginning to reflect in reality.
The company reported second-quarter adjusted earnings per share of 23 cents, which beat the Zacks Consensus Estimate of 19 cents. The bottom line increased from the year-ago quarter’s 22 cents per share.
Total quarterly revenues of $232.8 million surpassed the Zacks Consensus Estimate of $217 million. The top line improved from $219.7 million in the year-ago quarter.
The strong quarterly earnings can be attributed to lower operating expenses, and higher daily compression and fresh water delivery volumes.
Antero Midstream Corporation Price, Consensus and EPS Surprise
Operational Performance
For second-quarter 2021, average daily compression volumes were recorded at 2,744 million cubic feet (MMcf/d), marginally increased from the year-ago level of 2,712 MMcf/d. On a per-Mcf basis, the compression fee was 20 cents, in line with the prior-year quarter.
For the reported quarter, high-pressure gathering volumes totaled 2,826 MMcf/d, down from the year-ago period’s 2,839 MMcf/d. On a per-Mcf basis, average gathering high-pressure fee was 20 cents, flat with the prior-year level.
Low-pressure gathering volumes averaged 2,897 MMcf/d, up from the second-quarter 2020 figure of 2,869 MMcf/d. On a per-Mcf basis, average gathering low-pressure fee was 33 cents, in line with the prior-year level.
Fresh water delivery volumes were at 104 MBbls/d, up 2% from the prior-year level of 102 MBbls/d. On a per-barrel basis, average fresh water distribution fee was $3.97 per barrel for the second quarter, improving from the prior-year level of $3.96.
Operating Expenses
For second-quarter 2021, direct operating expenses were recorded at $39.6 million, down from $42.1 million a year ago. G&A expenses rose to $14.3 million from $12.4 million in the year-ago quarter.
The decrease in direct operating expenses can be attributed to lower costs associated with flowback and produced water due to the company's blending operations.
Total expenses for the quarter were $81.4 million, down from $85 million in second-quarter 2020.
Balance Sheet
As of Jun 30, Antero Midstream had cash and cash equivalents of only $678,000, reflecting a significant increase from $261,000 in the first quarter. As of the same date, the company had $3,087.7 million of long-term debt, sequentially down from $3,103.4 million. It had a long-term debt to capitalization of 57%.
Other Details
Free cash flow after dividend payments was $3.2 million for the second quarter. Notably, this was the third time in its history that the company generated positive free cash flow after dividend payments.
Capital expenditure was recorded at $71 million, up 20.3% from a year ago. Net cash from operations was $195 million for the reported quarter.
Outlook
For 2021, Antero Midstream reiterated its plan to invest capital of $240-$260 million. The company has an organic project backlog of $1.05-$1.15 billion for 2021-2025.
Antero Midstream is well-positioned to deliver peer-leading free cash flow, with a declining leverage profile in 2021. The company expects to generate more than $750 million of free cash flow in 2021, and $3.5 billion between 2021 and 2025. It anticipates an absolute debt reduction of $900 million for 2021.
Zacks Rank & Stocks to Consider
The company currently has a Zacks Rank #3 (Hold).
Some better-ranked players in the energy space are Chevron Corporation (CVX - Free Report) , EOG Resources, Inc. (EOG - Free Report) and Matador Resources Company (MTDR - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chevron's International’s bottom line for 2021 is expected to rise 12.1% year over year.
EOG Resources’ bottom line for 2021 is expected to increase 6.9% year over year.
Matador’s bottom line for 2021 is expected to rise 35.3% year over year.
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Antero Midstream Corporation (AM - Free Report) shares declined 5.5% despite reporting strong second-quarter 2021 earnings on Jul 28. Although production stabilized after a challenging pandemic-induced period for natural gas producers; the pressure on midstream firms continues to remain due to demand destructions and is beginning to reflect in reality.
The company reported second-quarter adjusted earnings per share of 23 cents, which beat the Zacks Consensus Estimate of 19 cents. The bottom line increased from the year-ago quarter’s 22 cents per share.
Total quarterly revenues of $232.8 million surpassed the Zacks Consensus Estimate of $217 million. The top line improved from $219.7 million in the year-ago quarter.
The strong quarterly earnings can be attributed to lower operating expenses, and higher daily compression and fresh water delivery volumes.
Antero Midstream Corporation Price, Consensus and EPS Surprise
Operational Performance
For second-quarter 2021, average daily compression volumes were recorded at 2,744 million cubic feet (MMcf/d), marginally increased from the year-ago level of 2,712 MMcf/d. On a per-Mcf basis, the compression fee was 20 cents, in line with the prior-year quarter.
For the reported quarter, high-pressure gathering volumes totaled 2,826 MMcf/d, down from the year-ago period’s 2,839 MMcf/d. On a per-Mcf basis, average gathering high-pressure fee was 20 cents, flat with the prior-year level.
Low-pressure gathering volumes averaged 2,897 MMcf/d, up from the second-quarter 2020 figure of 2,869 MMcf/d. On a per-Mcf basis, average gathering low-pressure fee was 33 cents, in line with the prior-year level.
Fresh water delivery volumes were at 104 MBbls/d, up 2% from the prior-year level of 102 MBbls/d. On a per-barrel basis, average fresh water distribution fee was $3.97 per barrel for the second quarter, improving from the prior-year level of $3.96.
Operating Expenses
For second-quarter 2021, direct operating expenses were recorded at $39.6 million, down from $42.1 million a year ago. G&A expenses rose to $14.3 million from $12.4 million in the year-ago quarter.
The decrease in direct operating expenses can be attributed to lower costs associated with flowback and produced water due to the company's blending operations.
Total expenses for the quarter were $81.4 million, down from $85 million in second-quarter 2020.
Balance Sheet
As of Jun 30, Antero Midstream had cash and cash equivalents of only $678,000, reflecting a significant increase from $261,000 in the first quarter. As of the same date, the company had $3,087.7 million of long-term debt, sequentially down from $3,103.4 million. It had a long-term debt to capitalization of 57%.
Other Details
Free cash flow after dividend payments was $3.2 million for the second quarter. Notably, this was the third time in its history that the company generated positive free cash flow after dividend payments.
Capital expenditure was recorded at $71 million, up 20.3% from a year ago. Net cash from operations was $195 million for the reported quarter.
Outlook
For 2021, Antero Midstream reiterated its plan to invest capital of $240-$260 million. The company has an organic project backlog of $1.05-$1.15 billion for 2021-2025.
Antero Midstream is well-positioned to deliver peer-leading free cash flow, with a declining leverage profile in 2021. The company expects to generate more than $750 million of free cash flow in 2021, and $3.5 billion between 2021 and 2025. It anticipates an absolute debt reduction of $900 million for 2021.
Zacks Rank & Stocks to Consider
The company currently has a Zacks Rank #3 (Hold).
Some better-ranked players in the energy space are Chevron Corporation (CVX - Free Report) , EOG Resources, Inc. (EOG - Free Report) and Matador Resources Company (MTDR - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chevron's International’s bottom line for 2021 is expected to rise 12.1% year over year.
EOG Resources’ bottom line for 2021 is expected to increase 6.9% year over year.
Matador’s bottom line for 2021 is expected to rise 35.3% year over year.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How To Profit From Trillions On Spending For Infrastructure >>
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