Why This $10 Million Antero Midstream Position Isn’t Likely Just a Plain-Vanilla Yield Play

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Why This Million Antero Midstream Position Isn’t Likely Just a Plain-Vanilla Yield Play — Why This 10 Million Antero Midstream Position Isnt Likely Just.png

Ripple Effect Asset Management, a New York City-based investment firm, recently disclosed a new position in Antero Midstream Corporation (NYSE: AM). According to their SEC filing on November 14, the firm acquired 510,000 shares of Antero Midstream, valued at approximately $9.91 million. In addition to the shares, they also reported holding put options underlying 600,000 shares and call options underlying another 225,000 shares.

This new stake in Antero Midstream accounts for 1.94% of Ripple Effect Asset Management’s 13F reportable assets. The firm’s top holdings after the filing include Vistra Corp (NYSE: VST) at $27.90 million, EQT Corporation (NYSE: EQT) at $25.31 million, Talen Energy Corporation (NASDAQ: TLN) at $17.42 million, Knight-Swift Transportation Holdings Inc (NYSE: KGS) at $15.53 million, and XPO Logistics Inc (NYSE: XIFR) at $15.26 million.

As of the latest data, shares of Antero Midstream were trading at $17.94, showing a 16% increase over the past year. This performance is in line with the S&P 500’s nearly 17% gain during the same period.

Antero Midstream Corporation is a prominent midstream energy company that owns and operates infrastructure for gathering pipelines, compressor stations, and water handling facilities. The company primarily generates revenue from gathering, processing, and water services, with a focus on supporting natural gas and liquids producers in the Appalachian Basin, particularly Antero Resources’ operations in West Virginia and Ohio.

The firm’s fee-based, contract-driven business model provides predictable earnings and positions Antero Midstream as a reliable partner in the energy value chain. The company’s financial metrics show revenue of $1.25 billion, net income of $472.42 million, a dividend yield of 5%, and a stock price of $17.94 as of the latest update.

Antero Midstream’s recent third-quarter results demonstrate a positive outlook, with adjusted EBITDA increasing by 10% year over year to $281 million and free cash flow after dividends nearly doubling to $78 million. The company has also been focused on reducing leverage, cutting capital spending, and repurchasing $41 million of stock during the quarter.

The options strategy employed by Ripple Effect Asset Management for their investment in Antero Midstream indicates a deliberate approach to engineering outcomes rather than solely relying on yield. The combination of put options for downside protection and call options for potential market re-rating reflects confidence in the company’s operational performance while exercising caution on timing.

Overall, Antero Midstream Corporation’s strong financial position and strategic focus on efficient resource extraction in the Appalachian Basin make it an attractive investment opportunity for Ripple Effect Asset Management and other investors looking for long-term growth potential in the energy sector.