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Antero Midstream (AM) Stock Down 3.3% Since Q1 Earnings Miss

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Antero Midstream Corporation’s (AM - Free Report) shares have declined 3.3% since it reported an earnings miss on Apr 28. The company is expected to boost capital expenditures in the second and third quarters, which in turn is likely to result in negative free cash flows after dividends.

The company reported first-quarter 2021 adjusted earnings per share of 21 cents, missing the Zacks Consensus Estimate by a penny. The bottom line, moreover, declined from the year-ago quarter’s 23 cents per share.

Quarterly revenues of $224.1 million beat the Zacks Consensus Estimate of $221 million but declined from $243.7 million in the year-ago quarter.

The weak quarterly earnings were due to a decrease in fresh water delivery volumes. This was partially offset by higher daily compression and gathering volumes of natural gas.

Operational Performance

For first-quarter 2021, average daily compression volumes were recorded at 2,706 million cubic feet (MMcf/d), up 8% from the year-ago level of 2,516 MMcf/d. On a per-Mcf basis, compression fee was 20 cents, in line with the prior-year quarter.

For the quarter, high pressure gathering volumes totaled 2,812 MMcf/d, up from the year-ago period’s 2,697 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 2,853 MMcf/d, up from the first-quarter 2020 figure of 2,717 MMcf/d. On a per-Mcf basis, average gathering low pressure fee was 34 cents, up 3% from the prior-year level.

Fresh water delivery volumes came in at 104 MBbls/d, down from the prior-year level of 183 MBbls/d. Decrease in completion activities by Antero Resources Corporation (AR - Free Report) affected operations. On a per-barrel basis, average fresh water distribution fee was $3.97 per barrel for the first quarter, improving from the prior-year level of $3.96.

Operating Expenses

Direct operating expenses for the quarter were recorded at $39.3 million, down from $48.7 million a year ago. G&A expenses rose to $17.9 million from $13.5 million in the year-ago quarter.

Total expenses for the quarter were $90.5 million, significantly down from $762.9 million in first-quarter 2020, when it was affected by massive impairment charges.

Balance Sheet

As of Mar 31, Antero Midstream had cash and cash equivalents of only $261,000, reflecting a significant decline from $640,000 in the fourth quarter. As of the same date, the company had $3,103.4 million of long-term debt, sequentially up from $3,091.6 million. It had a long-term debt to capitalization of 56.8%.

Other Details

Free cash flow after dividend payments was $39.1 million for the first quarter. Notably, this was the second time in its history that the company generated positive free cash flow after dividend payments.

Capital expenditures were recorded at $30 million, down 64% from a year ago. Net cash from operations were $166 million for the quarter, up 13% year over year.


The company has a project backlog of $1.05-$1.15 billion in 2021-2025 period. Antero Midstream reiterated its plan to invest capital in the range of $240-$260 million in 2021. Notably, two thirds of the amount will be invested in the second and third quarter. Importantly, it recorded 2020 capital expenditure of $208 million.

Though the first quarter recorded positive free cash flow (after dividends), the second and third quarters can witness a “bit of a negative” due to increase in capital expenditure. However, in the fourth quarter, the company can have neutral free cash flow (after dividends), attributed to expenditure decline and lower water-related activities.

Zacks Rank & Stocks to Consider

The company currently has a Zacks Rank #5 (Strong Sell). Some better-ranked players in the energy space include Frank's International N.V. (FI - Free Report) and Hess Corporation (HES - Free Report) , each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Frank's International’s bottom line for 2021 is expected to rise 46.7% year over year.

Hess’ bottom line for 2021 is expected to surge 145.4% year over year.

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