DENVER - Antero Midstream Corporation (NYSE: NYSE:AM) has finalized the purchase of additional assets in the Marcellus Shale for $70 million, the company announced today. The acquisition from Summit Midstream Partners LP (NYSE: NYSE:SMLP) includes gathering and compression assets and was completed on Wednesday, with an effective date of April 1, 2024.
The newly acquired assets consist of two compressor stations and 48 miles of high-pressure gas gathering pipelines. These are already integrated with Antero Midstream's existing low-pressure gathering system, which now handles the majority of Antero Resources (NYSE:AR)' production. According to Antero Midstream's Chairman and CEO, Paul Rady, this marks the third significant bolt-on acquisition in Appalachia within the last two years, emphasizing strategic growth in the region.
The transaction is expected to be over 5% accretive to the company's Free Cash Flow after dividends through 2027. As a result, Antero Midstream has updated its 2024 financial guidance, anticipating an increase of $15 million in Adjusted EBITDA and a $10 million rise in Free Cash Flow. Brendan Krueger, CFO of Antero Midstream, highlighted the acquisition's role in aiding the company to achieve its leverage target and potentially increase capital returns to shareholders within the year.
In conjunction with the asset acquisition, Antero Midstream has also called for the redemption of all outstanding 7.875% Senior Notes due 2026. The redemption is scheduled for May 16, 2024, and will be financed using cash on hand and borrowings under the company's revolving credit facility.
This financial maneuver is part of Antero Midstream's broader strategy to optimize its capital structure and reduce debt. The company's updated 2024 guidance reflects a positive outlook, with a midpoint increase in net income, adjusted net income, and free cash flow before dividends.
The company's press release also notes that these forward-looking statements are subject to various risks and uncertainties and that actual results may differ materially from those projected. The information provided in this article is based on a press release statement from Antero Midstream Corporation.
InvestingPro Insights
Summit Midstream Partners LP (NYSE: SMLP), the seller in the recent acquisition by Antero Midstream Corporation, has been navigating a challenging financial landscape. According to the latest data from InvestingPro, SMLP's market capitalization stands at approximately $294.32M, indicating the size of the company in the current market. The firm's P/E ratio, a measure of its current share price relative to its per-share earnings, is negative at -4.58, reflecting concerns about its profitability. Adjusting for the last twelve months as of Q4 2023, the P/E ratio worsens to -6.75, underscoring the company's difficulties in generating net income.
Despite these challenges, SMLP has experienced a high return over the last year, with a 1-year price total return of 84.22%. This performance is complemented by a strong return over the last three months, amounting to 70.12%. An InvestingPro Tip suggests that SMLP's stock price movements are quite volatile, which could be an important consideration for investors looking at the company's recent asset sale to Antero Midstream. Additionally, SMLP is trading near its 52-week high, with its price at 95.34% of the peak, which may indicate a bullish sentiment among investors or a potential reevaluation of the company's value post-transaction.
Investors interested in a deeper dive into Summit Midstream Partners LP's financials and future outlook can find additional InvestingPro Tips by visiting https://www.investing.com/pro/SMLP. For those seeking to expand their investment toolkit, using the coupon code PRONEWS24 will grant an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering access to a total of 7 InvestingPro Tips that could further inform investment decisions.
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