2024-04-24 19:48:01 ET
Summary
- Antero Midstream has been acquiring underutilized equipment and shifting it to areas with higher needs, leading to reduced capital expenditures and higher rates of equipment use.
- This strategy has resulted in increased efficiency, higher free cash flow, and potential for greater returns for shareholders.
- The company often acquires underutilized equipment as part of acquisitions of noncore assets, purchasing the whole operation at a discount.
- Management then rearranges the equipment to increase overall utilization.
- This company services primarily the liquids rich areas of Antero Resources and can therefore grow faster than Antero Resources for years to come.
For a long time, Antero Midstream ( AM ) has been shopping for capital equipment. But in addition to the usual way that many shop for equipment, this company made a series of small acquisitions over the years of underutilized areas and now has shifted perfectly good equipment to areas with more needs. Shareholders benefited in several ways from this activity. Sometimes management could find a way to redo the pipelines and infrastructure to increase efficiency and then take the extra equipment to areas with a need. This led to reduced capital expenditures compared to the competition and it led to higher rates of equipment use. It also led to rapidly climbing free cash flow which will likely get the shareholders greater returns....
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For further details see:
Antero Midstream: Buying Equipment On The Cheap