Antero Midstream Still Near 52-Week Low Post Q3 Earnings

Shares of Antero Midstream Corporation (NYSE:AM) have been near a 52-week low despite strong third-quarter 2019 earnings announced on Oct 29. The outperformance failed to lift the stock, since the company downwardly revised its adjusted 2019 EBITDA and distributable cash flow guidance. Notably, the stock’s price was $6.84 on Nov 6, near a 52-week low of $6.34.

Let’s delve deeper.

Antero Midstream’s third-quarter 2019 adjusted earnings per share of 39 cents were up 156% from the year-ago level. Moreover, the figure beat the Zacks Consensus Estimate of 20 cents.

Revenues in the quarter marginally declined to $243.8 million from $248.4 million in the year-ago period. Also, the top line missed the Zacks Consensus Estimate of $277 million.

The strong earnings can be attributed to growth in gathering, compression and Clearwater treatment volumes, partially offset by lower fresh water delivery volumes.

Operational Performance

During third-quarter 2019, compression volumes were recorded at 223,904 million cubic feet (MMcf), up 39% from the year-ago level of 161,549 MMcf. On a per-Mcf basis, compression fee was 19 cents, in line with the prior-year level.

In the third quarter, high pressure gathering volumes were 244,937 MMcf, up from the year-ago period’s 199,897 MMcf. On a per-Mcf basis, average gathering high pressure fee was 21 cents, higher than the prior-year level of 19 cents.

Low pressure gathering volumes averaged 248,208 MMcf, up from the third-quarter 2018 figure of 199,226 MMcf. On a per-Mcf basis, average gathering low pressure fee was 33 cents, higher than the year-ago level of 32 cents.

In the quarter under review, the company treated 2,332 thousand barrels (MBbls) of water, up from the year-ago period’s 1,062 MBbls. On a per-Mcf basis, average treatment fee was $4.55 per barrel, lower than the prior-year level of $4.92.

Fresh water delivery volumes came in at 12,945 MBbls, down from the prior-year level of 17,984 MBbls. On a per-barrel basis, average fresh water distribution fee was $3.90 in the third quarter, improving from the prior-year level of $3.78.

Operating Expenses

Total pro-forma operating expenses in the quarter were recorded at $577.9 million.

Balance Sheet

As of Sep 30, Antero Midstream had no cash and cash equivalents, and around $1.4 billion in liquidity on its bank credit facility. As of the same date, the company had $2,657.8 million of long-term debt and a long-term debt-to-capitalization ratio of 43%.

Return of Capital to Investors

The company commenced a $300-million share buyback program on Aug 12, 2019. In the quarter under review, it bought back around 3.5 million shares for a total of $25 million.

The company’s board of directors approved third-quarter 2019 dividend of 30.75 cents per share ($1.23 on an annualized basis), up 114% year over year from Antero Midstream GP LP's paid distribution.

Notably, adjusted distributable cash flow of $169.7 million, with coverage of 1.1x, was up from the prior-year quarter’s $157.3 million.

Guidance

The company downwardly revised its capital budget for 2019 from $750-$800 million to $665-$685 million, aided by capital-saving initiatives. Moreover, it expects capital budget for 2020 to decline 40% year over year to the range of $375-$425 million.

Due to idling of the Antero Clearwater Facility and lower wastewater volumes, it reduced the adjusted EBITDA guided range for 2019 to $840-$850 million from $870-$920 million. Moreover, the company expects distributable cash flow in the range of $655-$665 million, lower than previous guidance of $680-$730 million.

Zacks Rank and Stocks to Consider

Currently, Antero Midstream has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Lonestar Resources US Inc. (NASDAQ:LONE) , CNX Resources Corporation (NYSE:CNX) and Contango Oil & Gas Company (NYSE:MCF) . All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lonestar’s 2020 earnings per share are expected to rise 77% year over year.

CNX Resources’ 2019 earnings per share have witnessed two upward movements and no downward revision in the past 30 days.

Contango Oil & Gas’ bottom line for the current year is expected to rise around 87% year over year.

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