In a bid to boost shareholder value, Antero Midstream Corporation AM recently announced a $300-million share buyback program. The company expects the program, which is likely to run through Jun 30, 2021, to not to have any impact on its financial leverage profile.
The latest move is expected to further increase the flexibility of its capital return program. Notably, Antero Midstream is aiming to return capital to its shareholders at a high single-digit rate in 2020. To achieve this target, the company will utilize combinations of share repurchase program and dividend hikes.
As far as dividend hikes are considered, the company is on the right track. In the second week of April 2019, the firm announced its first-ever dividend of 30.25 cents per share, after Antero Midstream GP LP completed the buyout of Antero Midstream Partners LP on Mar 12. On the same day, Antero Midstream GP was transformed into Antero Midstream Corporation.
In July, it reported a hike in its quarterly dividend payout for second-quarter 2019 to 30.75 cents per share, reflecting a sequential rise of 2% and 146% surge from Antero Midstream GP LP's year-ago distribution figure. Markedly, Antero Midstream’s dividend yield rate of 17% is much higher than the industry average of 6.7%.
Antero Midstream’s intention of increasing the rate of return of capital is supported by stable operations. It generates sustainable fee-based revenues under long-term contracts for providing customized and integrated midstream services to leading natural gas producer Antero Resources Corporation AR. Moreover, through a joint venture with MPLX LP MPLX, Antero Midstream provides processing and fractionation related services for the produced natural gas by Antero Resources.
However, as the company primarily provides services to Antero Resources, it is losing the opportunity to earn significantly more fee-based revenues by providing midstream services to other drillers in the prolific Marcellus and Utica Shale plays, wherein demand for transportation and storage assets is on the rise. Currently, companies like Anadarko Petroleum Corporation APC, Cabot Oil & Gas Corporation, Carrizo Oil & Gas Corp. and others are boosting hydrocarbon production from the Marcellus Shale & Ohio.
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