Why This $10 Million Antero Midstream Position Isn’t Likely Just a Plain-Vanilla Yield Play
Key Points
The asset management firm acquired 510,000 shares of Antero Midstream in the third quarter.
The transaction represents about 1.94% of reported 13F AUM.
The shares were worth about $9.91 million at quarter-end.
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New York City-based Ripple Effect Asset Management disclosed a new position in Antero Midstream Corporation (NYSE:AM), acquiring 510,000 shares valued at approximately $9.91 million, according to its November 14 SEC filing. The firm also reported holding put options underlying 600,000 shares and call options underlying another 225,000 shares.
What Happened
According to a filing with the U.S. Securities and Exchange Commission dated November 14, Ripple Effect Asset Management LP initiated a new stake in Antero Midstream Corporation (NYSE:AM), purchasing 510,000 shares. The estimated value of the new holding was $9.91 million at the close of the third quarter, based on the quarterly average price. The position accounts for 1.94% of the firm’s 13F reportable assets.
What Else to Know
Top holdings after the filing include:
- NYSE: VST: $27.90 million (16.1% of AUM)
- NYSE: EQT: $25.31 million (14.6% of AUM)
- NASDAQ: TLN: $17.42 million (10.0% of AUM)
- NYSE: KGS: $15.53 million (8.9% of AUM)
- NYSE: XIFR: $15.26 million (8.8% of AUM)
As of Friday, shares of Antero Midstream were priced at $17.94, up 16% over the past year, which was relatively in line with the S&P 500's nearly 17% gain in the same period.
Company Overview
| Metric | Value |
|---|---|
| Revenue (TTM) | $1.25 billion |
| Net Income (TTM) | $472.42 million |
| Dividend Yield | 5% |
| Price (as of Friday) | $17.94 |
Company Snapshot
- Antero Midstream owns and operates midstream energy infrastructure, including gathering pipelines, compressor stations, and water handling facilities; revenue is primarily generated from gathering, processing, and water services.
- Its primary customers are upstream natural gas and liquids producers in the Appalachian Basin, with a strong focus on supporting Antero Resources' production in West Virginia and Ohio.
Antero Midstream Corporation is a leading midstream energy company that leverages its integrated infrastructure network to provide essential gathering, processing, and water services to natural gas producers, supporting efficient resource extraction in the Appalachian Basin. Its fee-based, contract-driven business model delivers predictable earnings and positions the company as a reliable partner within the energy value chain.
Foolish Take
The structure here certainly sticks out. Pairing common shares with both put and call exposure signals an investor trying to engineer outcomes rather than simply collect yield and wait. That’s notable in a midstream name that already trades as a cash-flow vehicle, not a momentum story.
Antero Midstream’s third-quarter results back up that framework. Adjusted EBITDA rose 10% year over year to $281 million, while free cash flow after dividends nearly doubled to $78 million. Leverage declined to 2.7x, capital spending fell, and the company repurchased $41 million of stock during the quarter. This is a business throwing off excess cash while tightening its balance sheet, a setup that tends to cap downside even when energy sentiment turns.
The options overlay sharpens that view. The puts suggest downside protection or a hedge against commodity or rate-driven volatility. The calls add convexity if the market re-rates midstream cash flows, especially as share repurchases and debt reduction continue. That combination implies conviction in the operating base, but caution on timing.
Glossary
13F AUM: The total value of U.S. equity holdings reported by an institutional investment manager in SEC Form 13F filings.
New position: An investment in a security that a fund or investor did not previously own.
Stake: The amount of ownership or investment held in a company by an individual or institution.
Quarterly average price: The average price of a security over a specific quarter, used for valuation in reports.
Top holdings: The largest investments in a fund’s portfolio by value.
Midstream energy infrastructure: Assets and facilities that transport, store, and process oil, natural gas, or related products between production and end users.
Gathering pipelines: Pipelines that collect oil or gas from production sites and transport it to processing facilities.
Compressor stations: Facilities along pipelines that maintain pressure and move natural gas efficiently through the system.
Fee-based, contract-driven business model: A revenue model where earnings come from long-term contracts with fixed fees for services provided.
Appalachian Basin: A large geographic region in the eastern U.S. known for significant natural gas and oil production.
Upstream producers: Companies involved in the exploration and extraction of oil and natural gas.
TTM: The 12-month period ending with the most recent quarterly report.
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Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends EQT. The Motley Fool has a disclosure policy.
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