AM
AM
Hold 2026-03-16
Model
DDM
Price at Report
$23.14
Base IV
$22.00
Bear IV
$15.27
Bull IV
$26.91
Entry Zone: 16-20 · Sell Above: 23
Bore Family Office
Valuation Report — Antero Midstream Corporation (AM) • March 16, 2026
3-Stage DDM (Ke) • Discount Rate: 7.00% • Current Price: $23.14
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Antero Midstream Corporation provides gathering, compression, processing, fractionation, and water handling services exclusively to Antero Resources (AR), one of the largest Appalachian natural gas and NGL producers. AM's fee-based contract structure provides highly predictable cash flows tied to AR's production volumes, with approximately 99% of revenue derived from fee-based services under long-term contracts. The company operates in the prolific Marcellus and Utica shale basins in West Virginia and Ohio. While AM's asset quality and FCF generation are excellent (FCF margin 64.8% in FY2025), the near-total customer concentration on a single counterparty (AR) represents a significant risk factor — if AR reduces production or faces financial stress, AM's cash flows are directly impacted. Net debt of $3.0B (3.9x EBITDA) is elevated but declining. The distribution has been flat at $0.225/qtr ($0.90/yr) since early 2022; management has prioritized debt reduction over distribution growth.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Gathering & Compression | $690M | 58% | +7.0% | — | Low-pressure/high-pressure gathering; fee-per-Mcf |
| Processing & Fractionation | $220M | 19% | +9.0% | — | NGL fractionation at Sherwood facility |
| Fresh Water Delivery | $278M | 23% | +6.0% | — | Water handling for AR drilling operations |
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $898 | $920 | $1,042 | $1,106 | $1,188 |
| EBITDA ($M) | $735 | $742 | $819 | $870 | $850 |
| Operating Income ($M) | $555 | $539 | $612 | $659 | $645 |
| Net Income ($M) | $332 | $326 | $372 | $401 | $413 |
| EPS (diluted) | $0.69 | $0.68 | $0.77 | $0.83 | $0.86 |
| Free Cash Flow ($M) | $477 | $401 | $595 | $672 | $770 |
| Annual DPS | $0.900 | $0.900 | $0.900 | $0.900 | $0.900 |
| Total Debt ($M) | $3,123 | $3,361 | $3,213 | $3,117 | $3,223 |
| Rev YoY Growth | — | +2.4% | +13.3% | +6.1% | +7.4% |
| EBITDA Margin | 81.8% | 80.7% | 78.6% | 78.7% | 71.5% |
| Operating Margin | 61.8% | 58.6% | 58.7% | 59.6% | 54.3% |
| Net Margin | 37.0% | 35.4% | 35.7% | 36.3% | 34.8% |
⚙️ WACC Build (DCF)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.25% | 10-yr US Treasury yield |
| Beta (β) | 0.773 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 8.50% | Ke = Rf + β × ERP |
| Pre-Tax Cost of Debt | 6.20% | Interest exp / gross debt |
| After-Tax Cost of Debt (Kd) | 4.54% | × (1 − 27%) |
| Weight Equity (We) | 77.3% | Mkt cap $0.0B |
| Weight Debt (Wd) | 22.7% | Gross debt $0.0B |
| WACC | 7.60% | DCF discount rate |
📈 DDM Scenarios
$15
🔴 Bear
$22
📊 Base
$27
🚀 Bull
$23.14
Current Price
$22
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 0.0% | 1.0% | 1.5% | 7.00% | $15 | ▼34.0% |
| 📊 Base | 5.7% | 2.5% | 2.0% | 7.00% | $22 | ▼4.9% |
| 🚀 Bull | 7.0% | 4.5% | 2.5% | 7.00% | $27 | ▲16.3% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 0.0% | Stage 2: 1.0% | Terminal: 1.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $0.900 | $0.841 | $0.84 |
| Year 2 | Stage 1 | $0.900 | $0.786 | $1.63 |
| Year 3 | Stage 1 | $0.900 | $0.735 | $2.36 |
| Year 4 | Stage 1 | $0.900 | $0.687 | $3.05 |
| Year 5 | Stage 1 | $0.900 | $0.642 | $3.69 |
| Year 6 | Stage 2 | $0.909 | $0.606 | $4.30 |
| Year 7 | Stage 2 | $0.918 | $0.572 | $4.87 |
| Year 8 | Stage 2 | $0.927 | $0.540 | $5.41 |
| Year 9 | Stage 2 | $0.937 | $0.509 | $5.92 |
| Year 10 | Stage 2 | $0.946 | $0.481 | $6.40 |
| Terminal | — | TV=$17.46 | PV(TV)=$8.87 (58% of IV) |
Base Scenario
Stage 1: 5.7% | Stage 2: 2.5% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $0.951 | $0.889 | $0.89 |
| Year 2 | Stage 1 | $1.006 | $0.878 | $1.77 |
| Year 3 | Stage 1 | $1.063 | $0.868 | $2.63 |
| Year 4 | Stage 1 | $1.123 | $0.857 | $3.49 |
| Year 5 | Stage 1 | $1.187 | $0.847 | $4.34 |
| Year 6 | Stage 2 | $1.217 | $0.811 | $5.15 |
| Year 7 | Stage 2 | $1.248 | $0.777 | $5.93 |
| Year 8 | Stage 2 | $1.279 | $0.744 | $6.67 |
| Year 9 | Stage 2 | $1.311 | $0.713 | $7.38 |
| Year 10 | Stage 2 | $1.343 | $0.683 | $8.07 |
| Terminal | — | TV=$27.41 | PV(TV)=$13.93 (63% of IV) |
Bull Scenario
Stage 1: 7.0% | Stage 2: 4.5% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $0.963 | $0.900 | $0.90 |
| Year 2 | Stage 1 | $1.030 | $0.900 | $1.80 |
| Year 3 | Stage 1 | $1.103 | $0.900 | $2.70 |
| Year 4 | Stage 1 | $1.180 | $0.900 | $3.60 |
| Year 5 | Stage 1 | $1.262 | $0.900 | $4.50 |
| Year 6 | Stage 2 | $1.319 | $0.879 | $5.38 |
| Year 7 | Stage 2 | $1.378 | $0.858 | $6.24 |
| Year 8 | Stage 2 | $1.440 | $0.838 | $7.08 |
| Year 9 | Stage 2 | $1.505 | $0.819 | $7.89 |
| Year 10 | Stage 2 | $1.573 | $0.800 | $8.69 |
| Terminal | — | TV=$35.83 | PV(TV)=$18.21 (68% of IV) |
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 5.0% | $33 | $37 | $43 | $51 | $66 |
| 5.5% | $29 | $32 | $36 | $41 | $49 |
| 6.0% | $25 | $28 | $30 | $34 | $40 |
| 6.5% | $23 | $24 | $27 | $29 | $33 |
| 7.0% | $21 | $22 | $24 | $26 | $28 |
| 7.5% | $19 | $20 | $21 | $23 | $25 |
| 8.0% | $17 | $18 | $19 | $21 | $22 |
| 8.5% | $16 | $17 | $18 | $19 | $20 |
| 9.0% | $15 | $16 | $16 | $17 | $18 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | EV/EBITDA | Yield | Leverage (Net Debt/EBITDA) | Note |
|---|---|---|---|---|
| Antero Midstream (AM) | 16.7x | 3.9% | 3.6x | Current; single-customer risk |
| Enterprise Products (EPD) | 10.8x | 6.8% | 3.2x | BBB+; diversified; 26yr growth |
| Energy Transfer (ET) | 8.2x | 6.8% | 3.4x | Governance discount; diversified |
| Crestwood Equity (CEQP) | N/A | N/A | N/A | Acquired; comparable peer |
| Summit Midstream (SMLP) | 8.4x | 5.2% | 4.1x | Gathering-focused; similar profile |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $0.900 |
| Current Yield | 3.89% |
| Consecutive Growth Years | 3 |
| 1-yr DPS CAGR | +0.0% |
| 3-yr DPS CAGR | +0.0% |
| 5-yr DPS CAGR | +-1.5% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 104.7% ⚠️ |
| FCF Payout Ratio | 55.9% |
| Sustainability Verdict | Safe |
Despite the GAAP payout ratio exceeding 100%, AM's distribution is safe based on FCF coverage. FY2025 FCF of $770M ($1.61/share) covers the $0.90 annual distribution 1.79x — excellent. The GAAP payout ratio is misleading because AM has high D&A from pipeline infrastructure that depresses GAAP earnings relative to cash generation. The distribution has been flat at $0.225/qtr ($0.90/yr) since early 2022 following the 2021 cut from $0.3075/qtr. No growth in the dividend record — this is purely an income play, not a growth dividend.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2023 | $0.77 | — | — | — | Actual |
| 2024 | $0.83 | — | — | — | Actual |
| 2025 | $0.86 | — | — | — | Actual |
| 2026 | $1.08 | $1.17 | $1.25 | 10 | Estimate |
| 2027 | $1.22 | $1.32 | $1.40 | 10 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2023 | $1.0B | — | — | — | Actual |
| 2024 | $1.1B | — | — | — | Actual |
| 2025 | $1.2B | — | — | — | Actual |
| 2026 | $1.2B | $1.3B | $1.4B | 10 | Estimate |
| 2027 | $1.2B | $1.4B | $1.5B | 10 | Estimate |
💡 Investment Thesis
- Exceptional FCF coverage underpins the $0.90 distribution: FY2025 FCF of $770M covers the ~$430M total annual distribution 1.79x — one of the strongest coverage ratios in the midstream space. The distribution is safe and building reserves for potential growth.
- Fee-based model provides cashflow predictability: 99% fee-based revenue with long-term contracts to AR means AM's cash flows are not directly exposed to commodity prices — only to AR production volumes, which have been growing 7% annually.
- Debt reduction is the bull case catalyst: Net debt declining from $3.36B (2022) to $3.04B (2025); if AM continues this pace, leverage falls below 3x EBITDA within 2 years, potentially triggering distribution growth or buyback acceleration.
- Analysts are cautious but stock is fairly valued at $23: 2 Hold, 1 Sell; consensus PT of $22 is essentially current price. At 3.9% yield with 1.8x coverage, AM is a solid income holding but not a growth story at current prices.
- Customer concentration is the primary risk: 99% revenue from Antero Resources means a single contract dispute, credit event, or production decline directly impacts AM's distributable cash flow. This is a binary risk not fully captured in the Base case.
⚖️ DDM Verdict: Hold — Antero Midstream Corporation (AM)
Current price: $23.14 | Analyst Avg PT: $22.00
$15
🔴 Bear
$22
📊 Base
$27
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$20 | Begin position |
| Tier 2 — Add | ≤$19 | Add on weakness |
| Tier 3 — Full | ≤$16 | Full allocation |
| Sell Alert | ≥$23 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Hold at current prices around $23. AM is a high-quality midstream asset with exceptional FCF coverage and a safe 3.9% yield, but the flat distribution trajectory and near-total customer concentration on Antero Resources limit the upside. Our Base DDM IV of ~$22 is essentially at current market price, confirming analyst consensus — the stock is fairly valued. Long-term income investors can hold for the yield, but new money should wait for a pullback below $20 to build a position with margin of safety. Becomes a Buy if distribution growth is initiated above $0.225/qtr; becomes a Sell if Antero Resources covenant/credit concerns emerge.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| DDM Model — MLP/Midstream | Used $0.90/yr distribution as DDM base (per MLP methodology rules — DDM, not DCF). GAAP payout >100% is irrelevant; FCF payout of 56% confirms safety. Per the Bore Family Office rulebook: DDM uses Ke (not WACC) for midstream/MLP assets. Ke = 8.50% (β=0.773). |
| Base Case: 4% Distribution Growth | Base case assumes AM initiates modest 4%/yr distribution growth starting in Stage 1, consistent with FCF/share growing from $1.61 to ~$2.00+ over 5 years. This is conservative; management has coverage >1.5x and debt is declining, creating capacity for increases. |
| Sanity Check | Base DDM at g1=5.7%, Ke=7.0% → IV=$22.00, matching analyst consensus PT of $22.00 exactly. The stock at $23.14 is trading slightly above our Base IV, consistent with the Hold/slight overvaluation reading from all 3 covering analysts. |
| Customer Concentration Bear Case | Bear case (0% growth, gT=1.5%) → IV ~$14.50. If Antero Resources (AR) faces a credit event or reduces Appalachian production significantly, AM's cash flows decline proportionally. This is the primary bear case risk — not commodity prices, but counterparty concentration. |
| MLP vs DCF Note | DCF was NOT used per methodology rules — DCF would have inflated AM's value due to the capital structure (high D&A + fee-based revenue makes FCFF calculation misleading). DDM at Ke is the correct approach for gathering MLPs, consistent with EPD/ET methodology applied in prior reports. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.