Antero Midstream Corp (AM)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. The information provided below supplements, but does not form part of, our consolidated financial statements. This discussion contains forward-looking statements that are based on the views and beliefs of our management, as well as assumptions and estimates made by our management. Actual results could differ materially from such forward-looking statements as a result of various risk factors, including those that may not be in the control of management. For further information on items that could impact our future operating performance or financial condition, see “Item 1A. Risk Factors.” and the section entitled “Cautionary Statement Regarding Forward-Looking Statements.” We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

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Overview

We are a growth-oriented midstream energy company formed to own, operate and develop midstream energy assets to primarily service Antero Resources’ production and completion activity. We believe that our strategically located assets and our relationship with Antero Resources have allowed us to become a leading midstream energy company serving the Appalachian Basin and present opportunities to expand our midstream services to other operators in the Appalachian Basin. Our assets consist of gathering pipelines, compressor stations and interests in processing and fractionation plants that collect and process production from Antero Resources’ wells in the Appalachian Basin in West Virginia and Ohio. Our assets also include two independent water handling systems that deliver water from the Ohio River and several regional waterways. These water handling systems consist of permanent buried pipelines, surface pipelines and water storage facilities, as well as pumping stations, blending facilities and impoundments. Portions of these water handling systems are also utilized to transport flowback and produced water. These services are provided by us directly or through third-parties with which we contract.

Asset Acquisition

On May 1, 2024, we acquired certain Marcellus gas gathering and compression assets from Summit for $70 million in cash, before closing adjustments, with an effective date of April 1, 2024. This acquisition was funded with our operating cash flow. The acquired assets include 48 miles of high pressure gathering pipelines and two compressor stations with 100 MMcf/d of compression capacity. These assets were already interconnected to our low pressure and high pressure gas gathering systems at the time of acquisition and service Antero Resources’ production. Currently, we do not expect to make any significant capital investments related to the acquired assets. See Note 6—Property and Equipment to our consolidated financial statements for additional information.

Financing Highlights

Credit Facility

On July 30, 2024, we entered into an amendment and restatement of our senior secured revolving credit facility with lender commitments of $1.25 billion, which matures on July 30, 2029 (subject to certain terms and conditions related to the outstanding balances to our 2027, 2028 and 2029 notes). See Note 8—Long-Term Debt to our consolidated financial statements for additional information.

Issuance of Senior Notes

On January 16, 2024, we issued $600 million of 6.625% senior notes due February 1, 2032 (the “2032 Notes”) at par. The 2032 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2032 Notes rank pari passu to our other outstanding senior notes and are guaranteed on a full and unconditional and joint and several senior unsecured basis by our wholly owned subsidiaries and certain of our future restricted subsidiaries. The net proceeds from this offering were used to repay outstanding borrowings on the Credit Facility. See Note 8—Long-Term Debt to our consolidated financial statements for additional information.

Repurchase of Senior Notes

During the year ended December 31, 2024, we repurchased or otherwise fully redeemed $550 million aggregate principal amount of our 7.875% senior notes due May 15, 2026 (the “2026 Notes”) at a weighted average premium of 101.975% of the principal amount thereof, plus accrued and unpaid interest. The 2026 Notes were retired as of May 16, 2024. See Note 8—Long-Term Debt to our consolidated financial statements for additional information.

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Share Repurchase Program

On February 13, 2024, our Board authorized a share repurchase program that allows us to repurchase up to $500 million of shares of our outstanding common stock. During the year ended December 31, 2024, we repurchased approximately 2 million shares of our common stock through our share repurchase program for a total cost of $29 million. As of December 31, 2024, we have $471 million remaining under our share repurchase program. The shares may be repurchased from time to time in open market transactions, through privately negotiated transactions or by other means in accordance with federal securities laws. The timing, as well as the number and value of shares repurchased under the program, will be determined by us at our discretion and will depend on a variety of factors, including the market price of our common stock, general market and economic conditions and applicable legal requirements. The exact number of shares to be repurchased by us is not guaranteed and the program may be suspended, modified or discontinued at any time without prior notice. The 1% U.S. federal excise tax on certain repurchases of stock by publicly traded U.S. corporations enacted as part of the Inflation Reduction Act of 2022 applies to our share repurchase program.

Market Conditions and Business Trends

Commodity Markets

Benchmark prices for natural gas decreased significantly, while benchmark prices for oil remained relatively consistent and NGLs increased during the year ended December 31, 2024 as compared to the year ended December 31, 2023. While substantially all of our revenues are based on fixed-fee contracts that are not directly impacted by changes in commodity prices, commodity price changes do impact the revenues and cash flows of Antero Resources, and Antero Resources’ drilling and development plan does have a direct impact on our gathering, compression and water handling services, revenues and cash flows. In the current economic environment, we expect that commodity prices for some or all of the commodities produced by Antero Resources could remain volatile. However, due to Antero Resources’ improved liquidity and leverage position as compared to historical levels, we do not expect to experience significant variability in our throughput volumes resulting from volatile commodity prices.

Economic Indicators

The economy experienced elevated inflation levels as a result of global supply and demand imbalances, where global demand outpaced supplies beginning in 2021 and continuing through 2024. For example, CPI for all urban consumers increased 4.1% from the year ended December 31, 2022 to the year ended December 31, 2023 and an additional 2.9% from the year ended December 31, 2023 to the year ended December 31, 2024. In order to manage the inflation risk present in the United States’ economy, the Federal Reserve utilized monetary policy in the form of interest rate increases beginning in March 2022 in an effort to bring the inflation rate in line with its stated goal of 2% on a long-term basis. Between March 2022 and July 2023, the Federal Reserve increased the federal funds interest rate by 5.25%. During the second half of 2024, inflation rates began to approach the Federal Reserve’s stated goal of 2%, and the Federal Reserve decreased the federal funds rate by 1.0% between September and December 2024. While inflationary pressures in the United States’ economy have begun to subside, we continue to be impacted by the increased federal funds interest rate. See “—Results of Operations” for additional information.

The economy also continues to be impacted by global events. These events have often caused global supply chain disruptions with additional pressure due to trade sanctions on Russia and other global trade restrictions, among others. However, neither our nor Antero Resources’ supply chain has experienced any significant interruptions due to such events.

Inflationary pressures and supply chain disruptions could result in further increases to our operating and capital costs that are not fixed. However, our gathering and compression and water agreements provide for annual CPI-based adjustments that mitigate a portion of such inflationary pressures.

These economic variables are beyond our control and may adversely impact our business, financial condition, results of operations and future cash flows.

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Sources of Our Revenues

The following items are the primary components of our revenues:

Principal Components of Our Cost Structure

The following items are the primary components of our operating expenses:

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Results of Operations

We have two reportable segments: (i) gathering and processing and (ii) water handling. The gathering and processing segment includes a network of gathering pipelines and compressor stations that collect and process production from Antero Resources’ wells in the Appalachian Basin, as well as equity in earnings from our investments in the Joint Venture and Stonewall. The Joint Venture and Stonewall provide processing and fractionation services and high-pressure gas gathering services, respectively, in the Appalachian Basin. The water handling segment includes (i) two independent systems that deliver water from sources including the Ohio River, local reservoirs and several regional waterways, and (ii) other fluid handling services, which include high rate transfer, wastewater transportation, disposal and blending. See Note 16—Reportable Segments to our consolidated financial statements for additional information.

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Year Ended December 31, 2023 Compared to Year Ended December 31, 2024

The operating results of our reportable segments were as follows:

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The operating data for Antero Midstream is as follows:

*Not meaningful or applicable.

(1)The average realized fees for the year ended December 31, 2024 include annual CPI-based adjustments of approximately 1.6%.

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Revenues. Total revenues increased by 6%, from $1.0 billion for the year ended December 31, 2023, to $1.1 billion for the year ended December 31, 2024. Total revenues included amortization of customer relationships of $71 million during each of the years ended December 31, 2023 and 2024. Gathering and processing revenues increased by 10%, from $805 million for the year ended December 31, 2023 to $889 million for the year ended December 31, 2024. Water handling revenues decreased by 8%, from $237 million for the year ended December 31, 2023 to $217 million for the year ended December 31, 2024. These fluctuations primarily resulted from the following:

Gathering and Processing

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Water Handling

Direct operating expenses. Direct operating expenses increased by 2%, from $213 million for the year ended December 31, 2023 to $218 million for the year ended December 31, 2024. Gathering and processing direct operating expenses increased by 8% from $96 million for the year ended December 31, 2023 to $103 million for the year ended December 31, 2024 primarily due to increased high pressure gathering and compression volumes between periods and our acquisition of two compressor stations and 48 miles of high pressure gathering lines during the second quarter of 2024. Water handling direct operating expenses decreased by 2%, from $117 million for the year ended December 31, 2023 to $115 million for the year ended December 31, 2024 primarily due to decreased fresh water and other fluid handling volumes between periods, partially offset by increased pipeline maintenance, repair and monitoring activities.

General and administrative (excluding equity-based compensation) expenses. General and administrative expenses (excluding equity-based compensation expense) increased by 6%, from $39 million for the year ended December 31, 2023 to $42 million for the year ended December 31, 2024 primarily due to higher costs allocated to us from Antero Resources.

Equity-based compensation expenses. Equity-based compensation expenses increased by 40% from $32 million for the year ended December 31, 2023 to $44 million for the year ended December 31, 2024 primarily due to annual equity-based awards granted during the first quarter of 2024. Our equity-based awards vest over three or four year service periods. See Note 10—Equity-Based Compensation to our consolidated financial statements for additional information.

Depreciation expense. Depreciation expense increased by 3% from $136 million for the year ended December 31, 2023 to $140 million for the year ended December 31, 2024. This increase was primarily due to $5 million related to assets placed in service between periods and $1 million for our assets acquired during the second quarter of 2024, partially offset by $2 million of lower expense between periods related to our program to repurpose underutilized compressor units to expand existing or construct new compressor stations.

Loss on asset sale. Loss on asset sale of $6 million and $1 million for the years ended December 31, 2023 and 2024, respectively, was primarily due to sales of miscellaneous equipment.

Interest expense. Interest expense decreased by 5%, from $217 million for the year ended December 31, 2023 to $207 million for the year ended December 31, 2024 primarily due to lower Credit Facility borrowings between periods and the repurchase and redemption of $550 million principal amount of the 2026 Notes during the year ended December 31, 2024, partially offset by the issuance of $600 million principal amount of 2032 Notes during the year ended December 31, 2024.

Equity in earnings of unconsolidated affiliates. Equity in earnings in unconsolidated affiliates increased by 5%, from $105 million for the year ended December 31, 2023 to $111 million for the year ended December 31, 2024 primarily due to increased processing and fractionation volumes and higher processing and fractionation fees as a result of annual CPI-based adjustments between periods.

Loss on early extinguishment of debt. During the year ended December 31, 2024, we repurchased or otherwise fully redeemed the $550 million aggregate principal amount of our 2026 Notes at a weighted average premium of 101.975% of the principal amount thereof, plus accrued and unpaid interest, and recognized a loss on early debt extinguishment of $14 million. There was no loss on early extinguishment of debt for the year ended December 31, 2023. See Note 8—Long-Term Debt to our consolidated financial statements for additional information.

Income tax expense. Income tax expense increased by 15% from $128 million for the year ended December 31, 2023 to $148 million for the year ended December 31, 2024, which reflects effective tax rates of 25.7% and 26.9%, respectively. This income tax expense increase was primarily due to higher pre-tax income between periods. The increase in our effective tax rate between periods was primarily due to changes in apportionment of state income taxes during the year ended December 31, 2024.

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2023

See “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations —Results of Operations” in our 2023 Annual Report on Form 10-K for a discussion of the results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2023.

Capital Resources and Liquidity

Sources and Uses of Cash

Capital resources and liquidity are provided by operating cash flows, available borrowings under our Credit Facility and capital market transactions. See Note 8—Long-Term Debt to our consolidated financial statements for additional information. We expect that the combination of these capital resources will be adequate to meet our working capital requirements, capital expenditures program and expected quarterly cash dividends for at least the next 12 months.

During the year ended December 31, 2024, we paid dividends of $0.90 per share, or a total of $438 million, to holders of our common stock, as applicable, and we paid $550,000 of dividends on our Series A Preferred Stock. On January 14, 2025, the Board declared a cash dividend on the shares of our common stock of $0.2250 per share for the quarter ended December 31, 2024. The dividend was paid on February 12, 2025 to stockholders of record as of January 29, 2025. Our Board also declared a cash dividend of $137,500 on our Series A Preferred Stock that will be paid on February 14, 2025 in accordance with their terms. As of December 31, 2024, there were dividends in the amount of $68,750 accumulated in arrears on our Series A Preferred Stock. See Note 11—Cash Dividends and Note 12—Equity and Net Income Per Common Share to our consolidated financial statements for additional information.

We expect our future cash requirements relating to working capital, capital expenditures, acquisitions and quarterly cash dividends to our stockholders will be funded from cash flows internally generated from our operations or borrowings under the Credit Facility.

As of December 31, 2024, we did not have any off-balance sheet arrangements.

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Cash Flows

The following table summarizes our cash flows for the years ended December 31, 2023 and 2024:

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Year Ended December 31, 2023 Compared to Year Ended December 31, 2024

Operating Activities. Net cash provided by operating activities was $779 million and $844 million for the years ended December 31, 2023 and 2024, respectively. The increase in cash provided by operations between periods was primarily due to higher gathering and processing revenues and increased distributions from our equity method investments during the year ended December 31, 2024, partially offset by lower water handling revenues between periods. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Results of Operations” for additional information on the period over period changes in our gathering and processing and water handling revenues.

Investing Activities. Net cash used in investing activities was $183 million and $243 million for the years ended December 31, 2023 and 2024, respectively. The increase in cash used in investing activities between periods was primarily due to our acquisition of gathering and compression assets during the second quarter of 2024 of $70 million, before closing adjustments, and increased capital spending for our gathering systems and facilities of $12 million, partially offset by decreased capital spending for our water handling systems of $23 million between periods. During the year ended December 31, 2023, we expanded our gathering systems and facilities by building 17 miles of pipeline and adding capacity to one existing compressor station and water handling systems by building buried and surface pipelines of 6 miles and 9 miles, respectively. During the year ended December 31, 2024, we expanded our gathering systems and facilities by building 29 miles of pipeline and one new compressor station and water handling systems by building buried and surface pipelines of 1 mile and 17 miles, respectively.

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Financing Activities. Net cash used in financing activities was $596 million and $601 million for the years ended December 31, 2023 and 2024, respectively. The increase in cash used in financing activities between periods was primarily due to our repurchases and redemption of the 2026 Notes of $561 million, repurchases of approximately 2 million shares of our common stock for $29 million and payments for the 2032 Notes and New Credit Facility deferred financing costs of $13 million during the year ended December 31, 2024, partially offset by the issuance of the 2032 Notes of $600 million during the year ended December 31, 2024.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2023

See “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations —Capital Resources and Liquidity” in our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of the cash flows for the year ended December 31, 2022 compared to the year ended December 31, 2023.

Capital Investments

Our capital expenditures were as follows:

On February 12, 2025, we announced a 2025 capital budget with a range of $170 million to $200 million. This capital budget supports Antero Resources’ maintenance capital program for 2025. Our capital budgets may be adjusted as business conditions warrant. If natural gas, NGLs and oil prices decline to levels below acceptable levels or costs increase to levels above acceptable levels, Antero Resources could choose to defer a significant portion of its budgeted capital expenditures until later periods. As a result, we may also defer a significant portion of our budgeted capital expenditures to achieve the desired balance between sources and uses of liquidity and prioritize capital projects that we believe have the highest expected returns and potential to generate consistent cash flows. We routinely monitor and adjust our capital expenditures in response to changes in Antero Resources’ development plans, changes in prices, availability of financing, acquisition costs, industry conditions, the timing of regulatory approvals, success or lack of success in Antero Resources’ drilling activities, contractual obligations, internally generated cash flows and other factors both within and outside our control. Additionally, we monitor our existing assets and look for opportunities to reuse or otherwise repurpose assets in an effort to optimize our capital efficiency.

Debt Agreements

We may, from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, open market purchases, privately negotiated transactions or otherwise. Any such repurchases will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved could be material. We were in compliance with all covenants and ratios applicable to our debt agreements as of December 31, 2023 and 2024. See Note 8—Long-Term Debt to our consolidated financial statements for additional information.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. Any new accounting policies or updates to existing accounting policies as a result of recently adopted accounting standards have been included in Note 2—Summary of Significant Accounting Policies to our consolidated financial statements. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent liabilities. Accounting estimates and assumptions are considered to be critical if there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported amounts in our consolidated financial statements that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our financial statements.

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Property and Equipment

Property and equipment primarily consists of gathering pipelines, compressor stations and the water handling assets. We evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying values of the assets may not be recoverable.  Generally, the basis for making such assessments is undiscounted future cash flow projections for the assets being assessed.  If the carrying values of the assets are deemed not recoverable, the carrying values are reduced to the estimated fair values, which are calculated using the expected present value of future cash flows method. Significant assumptions used in the cash flow forecasts include future net operating margins, future volumes, discount rates and future capital requirements.

Determination of depreciation expense requires judgment regarding the estimated useful lives and salvage values of property and equipment. Uncertainties that may impact these estimates of useful lives include, among others, changes in laws and regulations relating to environmental matters, including air and water quality, restoration and abandonment requirements, economic conditions and supply and demand for the Company’s services in the areas in which it operate. Historically, we have not experienced material changes in our results of operations from revisions to the estimated useful lives or salvage values of our property and equipment. However, these estimates are reviewed periodically and can be subject to revision as circumstances warrant. We believe that the estimates and assumptions related to depreciation expense are critical because the assumptions used to estimate useful lives and salvage values of property and equipment are susceptible to change as circumstances warrant. These assumptions affect depreciation expense and, if changed, could have a material effect on the Company's results of operations and financial position.

Income Taxes

Income taxes are accounted for using the asset and liability approach. Under this approach, deferred income tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax basis. We record deferred income tax expense to the extent our deferred income tax liabilities exceed our deferred income tax assets. We record a deferred income tax benefit to the extent our deferred income tax assets exceed our deferred income tax liabilities. We are subject to state and federal income taxes, but are currently not in a cash tax paying position with respect to federal income taxes.

We record a valuation allowance when we believe all or a portion of our deferred income tax assets will not be realized. In assessing the realizability of our deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will be realized based on a more-likely-than-not standard of judgment. The ultimate realization of deferred income tax assets is dependent upon our ability to generate future taxable income during the periods in which our deferred income tax assets are deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income and tax planning strategies in making this assessment, estimates of which may be imprecise due to unforeseen future events or conditions outside of our control, including changes in Antero Resources’ production or development plans or changes to tax laws and regulations. The amount of deferred income tax assets considered realizable could change based upon the amounts of taxable income actually generated, or as estimates of future taxable income change.

The calculation of deferred income tax assets and liabilities involves uncertainties in the application of complex tax laws and regulations. We recognize in our financial statements those tax positions which we believe are more-likely-than-not to be sustained upon examination by the IRS or state revenue authorities. We believe that the estimates and assumptions related to income taxes are critical because the assumptions and estimates required to assess the likelihood that our deferred income tax assets will be recovered from future taxable income, as well as the amount and timing of a valuation allowance on our deferred income tax assets is an exercise in judgement and susceptible to change as circumstances warrant. These assumptions affect deferred income tax liability and income tax expense and, if changed, could have a material effect on the Company's financial position and results of operations.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. The information provided below supplements, but does not form part of, our consolidated financial statements. This discussion contains forward-looking statements that are based on the views and beliefs of our management, as well as assumptions and estimates made by our management. Actual results could differ materially from such forward-looking statements as a result of various risk factors, including those that may not be in the control of management. For further information on items that could impact our future operating performance or financial condition, see “Item 1A. Risk Factors.” and the section entitled “Cautionary Statement Regarding Forward-Looking Statements.” We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

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Overview

We are a growth-oriented midstream energy company formed to own, operate and develop midstream energy assets to primarily service Antero Resources’ production and completion activity. We believe that our strategically located assets and our relationship with Antero Resources have allowed us to become a leading midstream energy company serving the Appalachian Basin and present opportunities to expand our midstream services to other operators in the Appalachian Basin. Our assets consist of gathering pipelines, compressor stations and interests in processing and fractionation plants that collect and process production from Antero Resources’ wells in the Appalachian Basin in West Virginia and Ohio. Our assets also include two independent water handling systems that deliver water from the Ohio River and several regional waterways. These water handling systems consist of permanent buried pipelines, surface pipelines and water storage facilities, as well as pumping stations, blending facilities and impoundments. Portions of these water handling systems are also utilized to transport flowback and produced water. These services are provided by us directly or through third-parties with which we contract.

Financing Highlights

Issuance of Senior Notes

On January 16, 2024, we issued $600 million of 6.625% senior notes due February 1, 2032 (the “2032 Notes”) at par. The 2032 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2032 Notes rank pari passu to our other outstanding senior notes and are guaranteed on a full and unconditional and joint and several senior unsecured basis by our wholly owned subsidiaries and certain of our future restricted subsidiaries. The net proceeds from this offering were used to repay outstanding borrowings on the Credit Facility. See Note 8—Long-Term Debt to the consolidated financial statements for more information.

Share Repurchase Program

On February 13, 2024, our Board of Directors authorized a share repurchase program that allows us to repurchase up to $500 million of shares of our outstanding common stock. The shares may be repurchased from time to time in open market transactions, through privately negotiated transactions or by other means in accordance with federal securities laws. The timing, as well as the number and value of shares repurchased under the program, will be determined by us at our discretion and will depend on a variety of factors, including the market price of our common stock, general market and economic conditions and applicable legal requirements. The exact number of shares to be repurchased by us is not guaranteed and the program may be suspended, modified or discontinued at any time without prior notice.

Market Conditions and Business Trends

Commodity Markets

Prices for natural gas, NGLs and oil decreased significantly during the year ended December 31, 2023 as compared to the year ended December 31, 2022. While substantially all of our revenues are based on fixed-fee contracts that are not directly impacted by changes in commodity prices, commodity price changes do impact the revenues and cash flows of Antero Resources, and Antero Resources’ drilling and development plan does have a direct impact on our gathering, compression and water handling services, revenues and cash flows. In the current economic environment, we expect that commodity prices for some or all of the commodities produced by Antero Resources could remain volatile. However, due to Antero Resources’ improved liquidity and leverage position as compared to historical levels, we do not expect to experience significant variability in our throughput volumes resulting from volatile commodity prices.

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Growth Incentive Fee Program with Antero Resources

Our 2019 gathering and compression agreement with Antero Resources included a growth incentive fee program whereby we agreed to provide quarterly fee rebates to Antero Resources through December 31, 2023, contingent upon Antero Resources achieving volumetric growth targets on low pressure gathering. Antero Resources’ throughput gathered under the gathering and compression agreements acquired with the Crestwood assets was not considered in the low pressure gathering volume targets. During the year ended December 31, 2022, Antero Resources earned $48 million in fee rebates by achieving the first level volumetric target during each quarter in 2022. During the year ended December 31, 2023, Antero Resources earned $52 million in fee rebates by achieving the first level volumetric target during the first, second and third quarters of 2023 and the second level volumetric target during the fourth quarter of 2023. The growth incentive fee rebate program expired on December 31, 2023.

Economic Indicators

The economy experienced elevated inflation levels as a result of global supply and demand imbalances, where global demand outpaced supplies beginning in 2021 and continuing through 2023. For example, CPI for all urban consumers increased 8% from the year ended December 31, 2021 to the year ended December 31, 2022 and an additional 4% from the year ended December 31, 2022 to the year ended December 31, 2023 as compared to the Federal Reserve’s stated goal of 2%. In order to manage the inflation risk present in the United States’ economy, the Federal Reserve utilized monetary policy in the form of interest rate increases beginning in March 2022 in an effort to bring the inflation rate in line with its stated goal of 2% on a long-term basis. Between March 2022 and December 2023, the Federal Reserve increased the federal funds interest rate by 5.25%. While inflationary pressures in the United States’ economy have begun to subside, we continue to be impacted by the increased federal funds interest rate. See “—Results of Operations” for additional information.

The economy also continues to be impacted by global events. These events have often caused global supply chain disruptions with additional pressure due to trade sanctions on Russia and other global trade restrictions, among others. However, neither our nor Antero Resources’ supply chain has experienced any significant interruptions due to such events.

Inflationary pressures and supply chain disruptions could result in further increases to our operating and capital costs that are not fixed. However, our gathering and compression and water agreements provide for annual CPI-based adjustments that mitigate a portion of such inflationary pressures.

These economic variables are beyond our control and may adversely impact our business, financial condition, results of operations and future cash flows.

Sources of Our Revenues

The following items are the primary components of our revenues:

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Principal Components of Our Cost Structure

The following items are the primary components of our operating expenses:

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Results of Operations

We have two reportable segments: (i) gathering and processing and (ii) water handling. The gathering and processing segment includes a network of gathering pipelines and compressor stations that collect and process production from Antero Resources’ wells in the Appalachian Basin, as well as equity in earnings from our investments in the Joint Venture and Stonewall. The Joint Venture and Stonewall provide processing and fractionation services and high pressure gas gathering services, respectively, in the Appalachian Basin. The water handling segment includes (i) two independent systems that deliver water from sources including the Ohio River, local reservoirs and several regional waterways, and (ii) other fluid handling services, which include high rate transfer, wastewater transportation, disposal and blending.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2023

The operating results of our reportable segments were as follows:

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The operating data for Antero Midstream is as follows:

*Not meaningful or applicable.

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Revenues. Total revenues increased by $122 million, from $920 million for the year ended December 31, 2022, to $1,042 million for the year ended December 31, 2023. Total revenues included amortization of customer relationships of $71 million during each of the years ended December 31, 2022 and 2023. Gathering and processing revenues increased by 14%, from $706 million for the year ended December 31, 2022 to $805 million for the year ended December 31, 2023. Water handling revenues increased by 11%, from $214 million for the year ended December 31, 2022 to $237 million for the year ended December 31, 2023. These fluctuations primarily resulted from the following:

Gathering and Processing

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Water Handling

Direct operating expenses. Direct operating expenses increased by 18%, from $180 million for the year ended December 31, 2022 to $213 million for the year ended December 31, 2023. Gathering and processing direct operating expenses increased 26% from $76 million for the year ended December 31, 2022 to $96 million for the year ended December 31, 2023 primarily due to 12 compressor stations that were acquired during the fourth quarter of 2022 and increased heavy maintenance expense between periods. Water handling direct operating expenses increased by 13%, from $104 million for the year ended December 31, 2022 to $117 million for the year ended December 31, 2023 primarily due to higher wastewater trucking expenses, an increased number of locations connected to our water blending system and higher fresh water volumes between periods.

General and administrative (excluding equity-based compensation) expenses. General and administrative expenses (excluding equity-based compensation expense) decreased 7%, from $42 million for the year ended December 31, 2022 to $39 million for the year ended December 31, 2023 primarily due to lower legal costs associated with the Veolia legal matter between periods and lower costs allocated to us from Antero Resources. See Note 15—Contingencies to our consolidated financial statements for additional information.

Equity-based compensation expenses. Equity-based compensation expenses increased by 61% from $20 million for the year ended December 31, 2022 to $32 million for the year ended December 31, 2023 primarily due to an increase in the annual equity awards granted during the years ended December 31, 2022 and 2023 as compared to prior years, which were temporarily and significantly reduced during 2020 and supplemented by our cash awards program. Our equity awards vest over three or four year service periods, and our equity incentive program began returning to normal levels in 2021. See Note 10—Equity-Based Compensation to our consolidated financial statements for additional information.

Depreciation expense. Depreciation expense increased by 3% from $132 million for the year ended December 31, 2022 to $136 million for the year ended December 31, 2023. This increase was primarily due to $4 million for our assets acquired during the fourth quarter of 2022 and $3 million related to assets placed in service between periods, partially offset by $3 million of lower expense related to our program to repurpose underutilized compressor units to expand existing or construct new compressor stations between periods.

Impairment of property and equipment expense. Impairment of property and equipment expense of $4 million for the year ended December 31, 2022 was primarily due to (i) a write-down of the Clearwater Facility related to the retirement obligation for the facility and (ii) cancelled projects. Impairment of property and equipment expense during the year ended December 31, 2023 related to cancelled projects.

Loss (gain) on asset sale. Gain on asset sale of $2 million for the year ended December 31, 2022 was primarily due to (i) the sale of four compressor engines, (ii) reimbursement of certain cancelled project costs and (iii) sales of miscellaneous equipment and excess pipe inventory. Loss on asset sale of $6 million for the year ended December 31, 2023 was primarily due to sales of miscellaneous equipment.

Interest expense. Interest expense increased by 14%, from $190 million for the year ended December 31, 2022 to $217 million for the year ended December 31, 2023 primarily due to increased interest rates on our Credit Facility due to higher benchmark rates during the year ended December 31, 2023 and higher average borrowings on our Credit Facility between periods as a result of our asset acquisitions during the fourth quarter of 2022.

Equity in earnings of unconsolidated affiliates. Equity in earnings in unconsolidated affiliates increased by 12%, from $94 million for the year ended December 31, 2022 to $105 million for the year ended December 31, 2023 primarily due to increased processing and fractionation volumes and higher processing and fractionation fees as a result of annual CPI-based adjustments.

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Income tax expense. Income tax expense increased by 9% from $117 million for the year ended December 31, 2022 to $128 million for the year ended December 31, 2023, which reflects effective tax rates of 26.5% and 25.7%, respectively. This income tax expense increase was primarily due to higher pre-tax income between periods.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2022

See “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations —Results of Operations” in our 2022 Annual Report on Form 10-K for a discussion of the results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2022.

Capital Resources and Liquidity

Sources and Uses of Cash

Capital resources and liquidity are provided by operating cash flows, available borrowings under our Credit Facility and capital market transactions. See Note 8—Long-Term Debt to our consolidated financial statements. We expect that the combination of these capital resources will be adequate to meet our working capital requirements, capital expenditures program and expected quarterly cash dividends for at least the next 12 months.

During the year ended December 31, 2023, we paid dividends of $0.90 per share, or a total of $435 million, to holders of our common stock, as applicable, and we paid $550,000 of dividends on our Series A Preferred Stock. On January 10, 2024, the Board declared a cash dividend on the shares of our common stock of $0.2250 per share for the quarter ended December 31, 2023. The dividend was paid on February 7, 2024 to stockholders of record as of January 24, 2024. Our Board also declared a cash dividend of $137,500 on our Series A Preferred Stock that was paid on February 14, 2024 in accordance with their terms. As of December 31, 2023, there were dividends in the amount of $68,750 accumulated in arrears on our Series A Preferred Stock. See Note 11—Cash Dividends and Note 12—Equity and Net Income Per Common Share to our consolidated financial statements for additional information.

As of December 31, 2023, we did not have any off-balance sheet arrangements.

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Cash Flows

The following table summarizes our cash flows for the years ended December 31, 2022 and 2023:

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2023

Operating Activities. Net cash provided by operating activities was $700 million and $779 million for the years ended December 31, 2022 and 2023, respectively. The increase in cash flows provided by operations between periods was primarily due to (i) higher revenues in the gathering and processing and water handling segments, (ii) higher distributions from unconsolidated affiliates and (iii) a $10 million tax refund received during the year ended December 31, 2023, partially offset by higher direct operating and interest expenses and changes in working capital between periods.

Investing Activities. Net cash flows used in investing activities decreased by $311 million from $494 million for the year ended December 31, 2022 to $183 million for the year ended December 31, 2023 primarily due to decreased asset acquisitions of $217 million and capital spending for our gathering systems and facilities, water handling systems and other assets of $115 million, partially offset by decreased return of investment in the Joint Venture of $17 million and asset sale proceeds of $5 million during the year ended December 31, 2022. The capital spending for our gathering systems, facilities and other and water handling systems decreased between periods primarily as a result of fewer capital projects during the year ended December 31, 2023.

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Financing Activities. Net cash used in financing activities was $206 million and $596 million for the years ended December 31, 2022 and 2023, respectively. The increase in cash flows used in financing activities between periods was primarily due to net repayments on our Credit Facility of $152 million during the year ended December 31, 2023, as compared to net borrowings on our Credit Facility of $235 million during the year ended December 31, 2022.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2022

See “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations —Capital Resources and Liquidity” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of the cash flows for the year ended December 31, 2021 compared to the year ended December 31, 2022.

Capital Investments

Our capital expenditures were as follows:

Our 2024 capital budget is $150 million to $170 million. Our capital budgets may be adjusted as business conditions warrant. If natural gas, NGLs and oil prices decline to levels below acceptable levels or costs increase to levels above acceptable levels, Antero Resources could choose to defer a significant portion of its budgeted capital expenditures until later periods. As a result, we may also defer a significant portion of our budgeted capital expenditures to achieve the desired balance between sources and uses of liquidity and prioritize capital projects that we believe have the highest expected returns and potential to generate consistent cash flows. We routinely monitor and adjust our capital expenditures in response to changes in Antero Resources’ development plans, changes in prices, availability of financing, acquisition costs, industry conditions, the timing of regulatory approvals, success or lack of success in Antero Resources’ drilling activities, contractual obligations, internally generated cash flows and other factors both within and outside our control. Additionally, we monitor our existing assets and look for opportunities to reuse or otherwise repurpose assets in an effort to optimize our capital efficiency.

Debt Agreements

Credit Facility

Antero Midstream Partners, as borrower (the “Borrower”), an indirect, wholly owned subsidiary of Antero Midstream Corporation, has a senior secured revolving credit facility with a consortium of banks. The Credit Facility provides for borrowing under either Adjusted Term Secured Overnight Financing Rate (“SOFR”) or the Base Rate (as each term is defined in the Credit Facility).

The Credit Facility has lender commitments of $1.25 billion and matures on October 26, 2026; provided that if on November 17, 2025 any of the 7.875% senior notes due May 15, 2026 (the “2026 Notes”) are outstanding, the Credit Facility will mature on such date. As of December 31, 2023, we had $630 million of borrowings and no letters of credit outstanding under the Credit Facility.

We have a choice of borrowing at Adjusted Term SOFR or at the base rate. Principal amounts borrowed are payable on the maturity date with such borrowings bearing interest that is payable (i) with respect to base rate loans, quarterly and (ii) with respect to SOFR Loans, the last day of each Interest Period (as defined below); provided that if any Interest Period for a SOFR Loan exceeds three months, interest will be payable on the respective dates that fall every three months after the beginning of such Interest Period. SOFR Loans bear interest at a rate per annum equal to the rate for SOFR rate loans for three or six months (the “Interest Period”) plus an applicable margin ranging from 150 to 250 basis points (subject to certain exceptions), depending on the leverage ratio then in effect. Base rate loans bear interest at a rate per annum equal to the greatest of (i) the agent bank’s reference rate, (ii) the federal funds effective rate plus 50 basis points and (iii) the rate for one month SOFR Rate loans plus 100 basis points, plus an applicable margin ranging from 50 to 150 basis points (subject to certain exceptions) depending on the leverage ratio then in effect.

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The Credit Facility is guaranteed by our subsidiaries and is secured by mortgages on substantially all of Antero Midstream Partners’ and its subsidiaries’ properties. The Credit Facility contains restrictive covenants that may limit our ability to, among other things:

The Credit Facility also requires us to maintain the following financial ratios (subject to certain exceptions):

We were in compliance with the applicable covenants and ratios as of December 31, 2023.

See Note 8—Long-Term Debt to the consolidated financial statements for more information.

Senior Notes

The following table summarizes the material terms of our senior unsecured notes as of December 31, 2023:

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See Note 8—Long-Term Debt to the consolidated financial statements for more information.

We may, from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, open market purchases, privately negotiated transactions or otherwise. Any such repurchases will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved could be material. See Note 8—Long-Term Debt to the consolidated financial statements for more information.

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Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. Any new accounting policies or updates to existing accounting policies as a result of recently adopted accounting standards have been included in Note 2—Summary of Significant Accounting Policies to our consolidated financial statements. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent liabilities. Accounting estimates and assumptions are considered to be critical if there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported amounts in our consolidated financial statements that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our financial statements.

Property and Equipment

Property and equipment primarily consists of gathering pipelines, compressor stations and the water handling assets. We evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying values of the assets may not be recoverable.  Generally, the basis for making such assessments is undiscounted future cash flow projections for the assets being assessed.  If the carrying values of the assets are deemed not recoverable, the carrying values are reduced to the estimated fair values, which are calculated using the expected present value of future cash flows method. Significant assumptions used in the cash flow forecasts include future net operating margins, future volumes, discount rates and future capital requirements.

Determination of depreciation expense requires judgment regarding the estimated useful lives and salvage values of property and equipment. Uncertainties that may impact these estimates of useful lives include, among others, changes in laws and regulations relating to environmental matters, including air and water quality, restoration and abandonment requirements, economic conditions and supply and demand for the Company’s services in the areas in which it operate. Historically, we have not experienced material changes in our results of operations from revisions to the estimated useful lives or salvage values of our property and equipment. However, these estimates are reviewed periodically and can be subject to revision as circumstances warrant. We believe that the estimates and assumptions related to depreciation expense are critical because the assumptions used to estimate useful lives and salvage values of property and equipment are susceptible to change as circumstances warrant. These assumptions affect depreciation expense and, if changed, could have a material effect on the Company's results of operations and financial position.

Income Taxes

Income taxes are accounted for using the asset and liability approach. Under this approach, deferred income tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax basis. We record deferred income tax expense to the extent our deferred income tax liabilities exceed our deferred income tax assets. We record a deferred income tax benefit to the extent our deferred income tax assets exceed our deferred income tax liabilities. We are subject to state and federal income taxes, but are currently not in a cash tax paying position with respect to federal income taxes.

We record a valuation allowance when we believe all or a portion of our deferred income tax assets will not be realized. In assessing the realizability of our deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will be realized based on a more-likely-than-not standard of judgment. The ultimate realization of deferred income tax assets is dependent upon our ability to generate future taxable income during the periods in which our deferred income tax assets are deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income and tax planning strategies in making this assessment, estimates of which may be imprecise due to unforeseen future events or conditions outside of our control, including changes in Antero Resources’ production or development plans or changes to tax laws and regulations. The amount of deferred income tax assets considered realizable could change based upon the amounts of taxable income actually generated, or as estimates of future taxable income change. As of December 31, 2023, we have recognized a valuation allowance of $3 million related to charitable contributions.

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The calculation of deferred income tax assets and liabilities involves uncertainties in the application of complex tax laws and regulations. We recognize in our financial statements those tax positions which we believe are more-likely-than-not to be sustained upon examination by the IRS or state revenue authorities. We believe that the estimates and assumptions related to income taxes are critical because the assumptions and estimates required to assess the likelihood that our deferred income tax assets will be recovered from future taxable income, as well as the amount and timing of a valuation allowance on our deferred income tax assets is an exercise in judgement and susceptible to change as circumstances warrant. These assumptions affect deferred income tax liability and income tax expense and, if changed, could have a material effect on the Company's financial position and results of operations.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. The information provided below supplements, but does not form part of, our consolidated financial statements. This discussion contains forward-looking statements that are based on the views and beliefs of our management, as well as assumptions and estimates made by our management. Actual results could differ materially from such forward-looking statements as a result of various risk factors, including those that may not be in the control of management. For further information on items that could impact our future operating performance or financial condition, see “Item 1A. Risk Factors.” and the section entitled “Cautionary Statement Regarding Forward-Looking Statements.” We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

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In this section, references to “Antero Midstream,” “AM,” the “Company,” “we,” “us,” and “our” refer to Antero Midstream Corporation and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires.

Overview

We are a growth-oriented midstream energy company formed to own, operate and develop midstream energy assets to primarily service Antero Resources’ production and completion activity. We believe that our strategically located assets and our relationship with Antero Resources have allowed us to become a leading midstream energy company serving the Appalachian Basin and present opportunities to expand our midstream services to other operators in the Appalachian Basin. Our assets consist of gathering pipelines, compressor stations and interests in processing and fractionation plants that collect and process production from Antero Resources’ wells in the Appalachian Basin in West Virginia and Ohio. Our assets also include two independent water handling systems that deliver water from the Ohio River and several regional waterways. These water handling systems consist of permanent buried pipelines, surface pipelines and water storage facilities, as well as pumping stations, blending facilities and impoundments. Portions of these water handling systems are also utilized to transport flowback and produced water. These services are provided by us directly or through third-parties with which we contract.

Asset Acquisitions

On October 25, 2022, we acquired certain Marcellus gas gathering and compression assets from Crestwood for $205 million in cash, before closing adjustments, which was funded by borrowings under our Credit Facility. These assets include 72 miles of dry gas gathering pipelines and nine compressor stations with approximately 700 MMcf/d of compression capacity. Current throughput of the assets is approximately 200 MMcf/d, resulting in significant available capacity for growth.

Additionally, on December 21, 2022, we acquired certain Utica compression assets from EnLink for $10 million in cash, before closing adjustments, which was funded by borrowings under our Credit Facility. These assets include four compressor stations with approximately 380 MMcf/d of compression capacity. The acquired compression assets are interconnected with the Company’s existing low pressure and high pressure gathering systems and service Antero Resources’ production. Current throughput of the assets is approximately 100 MMcf/d. See Note 6—Property and Equipment to the consolidated financial statements for more information on our asset acquisitions.

Market Conditions and Business Trends

Commodity Markets

Prices for natural gas, NGLs and oil increased significantly during the year ended December 31, 2022 as compared to the year ended December 31, 2021. While substantially all of our revenues are based on fixed-fee contracts that are not directly impacted by changes in commodity prices, commodity price changes do impact the revenues and cash flows of Antero Resources, and Antero Resources’ drilling and development plan does have a direct impact on our gathering, compression and water handling services, revenues and cash flows. In the current economic environment, we expect that commodity prices for some or all of the commodities produced by Antero Resources could remain volatile. However, to the extent Antero Resources maintains a maintenance capital program as it has done in recent years, we do not expect to experience substantial variability in our throughput volumes resulting from volatile commodity prices.

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Growth Incentive Fee Program with Antero Resources

Our 2019 gathering and compression agreement with Antero Resources includes a growth incentive fee program whereby we agreed to provide quarterly fee rebates to Antero Resources through December 31, 2023, contingent upon Antero Resources achieving volumetric growth targets on low pressure gathering. Antero Resources’ throughput on the acquired assets is not considered in the low pressure gathering volume targets. If actual low pressure volumes are below the lowest threshold for the respective period, Antero Resources will not earn a reduction in low pressure gathering fees.

The growth incentive fee rebate program expires December 31, 2023, and the following table summarizes the remaining low pressure gathering growth incentive targets through 2023:

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Antero Resources earned $48 million in fee rebates during the year ended December 31, 2022 by achieving all four quarterly volumetric targets for the year. Antero Resources earned $12 million in fee rebates during the year ended December 31, 2021 by achieving the quarterly volumetric target during the fourth quarter of 2021.

Economic Indicators

The economy is experiencing elevated inflation levels as a result of global supply and demand imbalances, where global demand continues to outpace current supplies. For example, the CPI for all urban consumers increased 8% from year ended December 31, 2021 to year ended December 31, 2022 as compared to the Federal Reserve’s stated goal of 2%. See “—Capital Resources and Liquidity—Capital Investment” for more information. In order to manage the inflation risk currently present in the United States’ economy, the Federal Reserve has utilized monetary policy in the form of interest rate increases in an effort to bring the inflation rate in line with its stated goal of 2% on a long-term basis.

The global economy also continues to be impacted by the effects of the COVID-19 pandemic and global events, among other factors. These events have often caused global supply chain disruptions with additional pressure due to trade sanctions on Russia and other global trade restrictions, among others. However, neither our nor Antero Resources’ supply chain has experienced any significant interruptions due to the COVID-19 pandemic or global supply and demand imbalances.

Inflationary pressures and supply chain disruptions could result in further increases to our operating and capital costs that are not fixed. Additionally, these economic variables could lead to a renegotiation of contracts and/or supply agreements, among others. These economic variables are beyond our control and may adversely impact our business, financial condition, results of operations and future cash flows.

COVID-19 Pandemic

We continue to operate throughout the COVID-19 pandemic, in some cases subject to federal, state and local regulations, and we have taken and continue to take steps to protect the health and safety of our workers. We have implemented protocols to reduce the risk of an outbreak within our field operations and offices, and these protocols have not impacted Antero Resources’ production, our throughput or our business activities. During 2022, we transitioned from a hybrid working arrangement for non-field level employees, which involved a combination of in-office and remote work-from-home arrangements, to an in-office working arrangement for all non-field level employees. We have been able to maintain a consistent level of effectiveness through these arrangements, including maintaining our day-to-day operations, our financial reporting systems and our internal control over financial reporting. We continue to monitor the COVID-19 environment in order to protect the health and safety of our employees.

Sources of Our Revenues

The following items are the primary components of our revenues:

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Principal Components of Our Cost Structure

The following items are the primary components of our operating expenses:

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How We Evaluate Our Operations

We use a variety of financial and operational metrics to evaluate our performance. These metrics help us identify factors and trends that impact our operating results, profitability and financial condition. The following are the key metrics we use to evaluate our business:

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Results of Operations

We have two operating segments: (i) gathering and processing and (ii) water handling. The gathering and processing segment includes a network of gathering pipelines and compressor stations that collect and process production from Antero Resources’ wells in the Appalachian Basin, as well as equity in earnings from our investments in the Joint Venture and Stonewall. The Joint Venture and Stonewall provide processing, fractionation and high-pressure gas gathering services in the Appalachian Basin. The water handling segment includes (i) two independent systems that deliver water from sources including the Ohio River, local reservoirs and several regional waterways, and (ii) other fluid handling services, which include high rate transfer, wastewater transportation, disposal and blending.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2022

The operating results of our reportable segments were as follows:

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The operating data for Antero Midstream is as follows: