Greetings, and welcome to the Antero Midstream third quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require our operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Kennedy, Senior Vice President of Finance and Chief Financial Officer. Thank you, sir. You may begin.
Thank you for joining us for Antero Midstream's third quarter 2019 investor conference call. We'll spend a few minutes going through the financial and operating highlights, and then we'll open it up for Q&A. I'd also like to direct you to the homepage of our website at www.anteromidstream.com, where we have provided a separate earnings call presentation that will be reviewed during today's call. Before we start our comments, I would first like to remind you that during this call, Antero management will make forward-looking statements. Such statements are based on our current judgments regarding factors that will impact the future performance of Antero Resources and Antero Midstream, and are subject to a number of risks and uncertainties, many of which are beyond Antero's control. Actual outcomes and results could materially differ from what is expressed, implied, or forecast in such statements.
Today's call may also contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. Joining me on the call today are Paul Rady, Chairman and CEO of Antero Resources and Antero Midstream, and Glen Warren, President and CFO of Antero Resources, and President of Antero Midstream. With that, I'll turn the call over to Paul.
Thanks, Mike. I'd like to start by discussing the expansive cost savings efforts underway at Antero Resources, AR. Over the last year, we've been intensely focused on reducing the overall cost structure to make AR more competitive in a lower-for-longer commodity price environment. This process included a line-by-line review of every expense item throughout the company. Through this comprehensive review, we've identified the potential to remove $250 million from AR's overall cost structure in 2020 alone. As detailed on slide number three, titled AR Cost Reduction Strategy Overview, the majority of these reductions will come from lower well costs and reduced lease operating expenses, or LOE, driven by the new flowback and produced water blending operations.
Through these blending operations, optimized trucking logistics, drier completions, and improved coordination during well turn-in-line events, we expect to see $160 million of D&C CapEx savings and $60 million of LOE savings in 2020. Importantly, the vast majority of these savings can be achieved in-house and are under Antero's control. These savings allow AR to target a D&C CapEx budget of $1.15 billion-$1.2 billion in 2020 that is expected to generate 8%-10% year-over-year net production growth. In addition, AR continues to focus on mitigating net marketing expense and has already entered into agreements to mitigate excess capacity this winter. These initiatives save approximately $15 million, and AR remains active in evaluating opportunities to further reduce net marketing expenses with third-party midstream providers.
Lastly, AR is targeting a 10% reduction in G&A or approximately $14 million of savings in 2020 from natural employee attrition and overall G&A reductions. Now let's move to page four, titled Marcellus Well Cost Reductions. Last quarter, AR announced a well cost savings initiative that targets 10%-15% reduction in well costs on a per lateral foot basis, or approximately $1.2 million-$1.7 million per well. The left-hand side of the page illustrates AR's January 2019 well costs at $970 per foot that was assumed in AR's budget. Today, AR's well costs are $895 per foot, which equates to savings of nearly $1 million per well.
The savings already achieved are substantially ahead of our previous second half 2020 target of $930 per foot. Our ability to achieve lower well costs ahead of schedule is primarily due to the acceleration of localized blending operations during the third quarter that resulted in reduced flowback water costs. The coordinated effort between AR and AM allowed us to quickly and successfully execute our blending program and deliver savings ahead of schedule. Before getting into the details of our new flowback and produced water blending operations, I want to briefly discuss our decision to idle the Antero Clearwater Facility. As you remember, we began construction on the facility in 2015 to become industry leaders in water recycling and to be at the forefront of environmentally responsible shale development.
At the time, flowback water was not used in completions, and there were industry-wide concerns regarding the long-term viability of injection wells in Appalachia. The decision to idle the facility was driven by its inability to operate at its intended specifications. As a result of idling the plant, we recorded a $457 million impairment of the facility. While we are disappointed in the outcome, we remain focused on developing new opportunities such as blending and other flowback and produced water initiatives that reduce the overall cost structure at AR. This, in turn, supports the sustainable development at AR that underpins the long-term growth at AM, particularly in a lower-for-longer commodity price environment. Slide number three, titled "Antero Water Savings Performance," shows the blending operations to date. Antero Midstream plays an integral role in providing blending operations for both flowback and produced water that drives CapEx and LOE savings at AR.
As depicted by the yellow line on the chart, AR's all-in cost to dispose of wastewater was in the $10 per barrel range during the first half of 2019. The downward trend in cost per barrel shown on the slide is driven primarily by an increase in blending volumes, which are depicted in the purple bars. These savings from blending, combined with reduced trucking costs, is expected to reduce AR's wastewater disposal costs by over $4.50 a barrel compared to the first quarter of 2019. While the EBITDA contribution from blending operations is not material to AM's overall portfolio, it is a critical business for AM supporting AR and driving down costs.
Now let's move on to the discussion of our preliminary 2020 capital budget on slide six, titled "2020 Preliminary Capital Target." As depicted on the map on the right side of the page, in 2019, we constructed the backbone of our infrastructure into Tyler County, West Virginia, that supports AR's development over the next several years. Looking ahead to 2020, we have optimized our capital plan to focus on the highest rate of return locations at AR that are also in close proximity to existing gathering and water infrastructure. This allows us to target a capital budget of $375 million-$425 million in 2020, or a 40% reduction compared to the midpoint of the updated 2019 capital budget of $665 million-$685 million.
Looking at our processing investments in the joint venture with MPLX, we have already invested a majority of the capital for Sherwood 12 and 13, which adds 400 million cubic feet a day of combined processing capacity in the fourth quarter of 2019. This increase in processing capacity at Sherwood, along with one expected plant in the new Smithburg site in mid-2020, supports Antero's 2020 production growth without a significant amount of incremental processing capital investment. AM's capital flexibility, in addition to its visibility into AR's development plan, is a competitive advantage for AM. Before handing the call over to Mike, I want to briefly touch on AR's hedges on slide number seven, titled "Industry Leading Natural Gas Hedge Position." During the third quarter, AR added to its hedge position for both gas and NGLs.
On the gas side, we shifted 2022 hedges into calendar year 2021 to more closely align AR's hedge profile with its unutilized firm transportation expenses and modest growth profile. AR is now over 90% hedged on natural gas in 2020 at an average price of $2.87 per MMBtu, and 89% hedged in calendar year 2021 at an average price of $2.80 per MMBtu, assuming approximately 8%-10% annual growth in 2020, 10% growth in 2021. Based on strip pricing today, AR's hedge realizations more than offset its net marketing expense through calendar year 2021. On the NGL side, AR has been actively hedging and was able to take advantage of the global price spikes following the incident in Saudi Arabia.
As depicted on slide number eight, titled C3+ NGL Hedges Capturing Recent Pricing Strength, AR is currently 50% hedged on C3+ NGL volumes for the fourth quarter and 28% hedged in cal 2020. This includes a balanced mix of domestic hedges and international hedges for the volumes shipped to Europe and Asia out of Marcus Hook. While AR's capital budget will be flexible based on commodity prices, this industry-leading hedge portfolio allows AR to have more consistent capital budgets that are less sensitive to drastic changes in response to commodity prices. With that, I'll turn the call over to Mike.
Thank you, Paul. I'll begin my AM comments by highlighting the recently announced AM cash dividend of $0.3075 per share, 114% increase year-over-year for former AMGP shareholders. A 40% increase year-over-year for Antero Midstream Partners unit holders. The dividend at AM was the 19th consecutive distribution declared since the IPO of Antero Midstream Partners in 2014. In addition, during the third quarter, we commenced our $300 million share repurchase program and repurchased 3.5 million shares for approximately $25 million, which equates to $0.05 per share of return of capital in addition to the dividend. Repurchasing shares at today's prices generates attractive rates of return in DCF per share accretion at AM. Looking forward, we expect our high single-digit return of capital growth target in 2020 to be comprised primarily of share repurchases.
We believe this is an attractive use of capital, especially when combined with a 40% year-over-year reduction in AM's capital budget. Let's move on to third quarter operational results, beginning with slide number nine, titled High Growth Year-over-Year Midstream Throughput. Starting in the top left portion of the page, low pressure gathering volumes were 2.7 Bcf per day in the third quarter, which represents a 25% increase from the prior year quarter. Compression volumes during the quarter averaged 2.4 Bcf per day. That's 39% increase compared to the prior year. Compression capacity was 90% utilized during the third quarter. Our 50/50 joint venture gross processing volumes averaged a Bcf a day, a 71% increase compared to the prior year quarter. Processing capacity was 100% utilized during the quarter. Joint venture gross fractionation volumes averaged 32,000 barrels per day, an 88% increase from the prior year.
Fresh water delivery volumes averaged 141,000 barrels per day, a 28% decrease over the prior year quarter. During the fourth quarter, Antero Resources picked up an additional completion crew, which we expect to drive an increase in completion activities and fresh water delivery volumes as compared to the third quarter of 2019. AR remains on track to achieve the volumetric targets for the first $125 million earn out payment from AM, as expected to be paid in the first quarter of 2020. Moving on to financial results. Adjusted EBITDA for the third quarter was $218 million, an 18% increase compared to the prior year quarter. The increase in adjusted EBITDA was driven by increased throughput volumes. Distributable cash flow for the third quarter was $170 million, resulting in a DCF coverage ratio of 1.1 times.
Antero Midstream invested $135 million in gathering, compression, water infrastructure in the processing and fractionation JV during the third quarter. Gathering, compression, and water infrastructure capital investments totaled $121 million, and investments in the JV totaled $14 million. Moving on to balance sheet and liquidity. As of September 30th, 2019, Antero Midstream had $726 million drawn on its $2.1 billion revolving credit facility. In October, we added an additional lender to our revolving credit facility, resulting in $134 million of incremental commitments, bringing our total liquidity to $1.4 billion. Additionally, AM's net debt to LTM adjusted EBITDA was 3.3 times at quarter end. I'll finish my comments on slide number 10 that summarizes the 2019 guidance changes.
The left-hand side of the page depicts the change in our 2019 capital budget, driven by the deferral of just-in-time gathering, processing, and freshwater delivery projects, capital saving initiatives, and the removal of the final Antero Clearwater Facility milestone payment, we lowered our capital budget to a range of $665 million-$685 million from $750 million-$800 million. The reduction in capital more than offsets the decrease in our adjusted EBITDA guidance, resulting in a net positive cash flow impact of approximately $50 million at the midpoint of the guidance ranges. The reduction in EBITDA guidance is primarily driven by the idling of the Antero Clearwater Facility and includes an additional $10 million-$15 million of idling expenses during the fourth quarter that we did not expect to persist into 2020. In summary, we remain highly focused on capital discipline and our overall cash flow profile.
During sustained periods of low commodity prices, this results in lower AM capital budgets and non-speculative investment that still generates high asset utilization rates and EBITDA growth. This capital flexibility results in an attractive cash flow profile and maintains AM's strong balance sheet, positioning it to continue growing the return of capital to shareholders in the future. With that, operator, we are ready to take questions.
Thank you. Please proceed with your question.
Good morning, gentlemen.
Good morning.
Good morning.
Mike, maybe the first question just on the 2020 CapEx number. I think last quarter you mentioned something in that $600 million neighborhood, so a big reduction at this point in terms of what you're thinking. Is there or was there a change in AR's development plan? I'm just trying to think through since their growth plans haven't changed for 2020. Was there something else that you were able to reduce that infrastructure spend?
Yeah, I think you could see it on that map that's in our presentation. We're really focusing on the development in the Tyler County area with all the blending of the water. It really helps AR's cost structure to just drill that next pad over. Really just focusing in that Tyler area and not expanding out into the Wetzel County would really eliminate a lot of capital. Also, not having any Clearwater capital in 2020 is beneficial. We highlighted that Sherwood 12 and 13 just came on in the fourth quarter of this year. You have ample processing capacity to grow into. Focusing in Tyler County and then having processing capacity and not having Clearwater really drove those capital reductions by about $200 million.
Okay. Sort of think about that Wetzel County development being pushed out to maybe 2021 or beyond?
Exactly. We'll just gradually build out from our Tyler County position. It really is very efficient just to do pad by pad development, mowing the lawn out towards Wetzel County is our plan.
Okay. You began the repurchase program. How should we think about that? Is that going to be systematic, lumpy? Just trying to get a sense for how we should allocate that capital.
It'll be opportunistic. You saw we bought back $25 million, or it's about 3.5 million shares in September. We've got a $300 million program. It is obviously beneficial to buy it back earlier rather than later so that you can get those shares and then not have to pay the dividend on that. We said that program we would not leverage the balance sheet to do that. When you look at that gives you about $100 million to play with. We plan on buying back that amount over the next couple of quarters.
Okay, great. Maybe just one final one from me on AR. Is there any implications to AM if AR should receive a downgrade?
No
from a financing standpoint?
No, there are none.
Okay.
Well, for AM generally follows AR's credit rating. As much as they are consistent with that, AM with AR would probably go down in tandem, but it's not on any sort of AM credit metrics.
Got it. Thanks, guys.
Thanks, Ally.
Thank you. The next question is from the line of Jeremy Tonet with J.P. Morgan. Please proceed with your question.
Hi, good morning. Just wanted to follow up with the CapEx side of the equation here. Did a good job pulling back CapEx for 2020, just want to kind of think longer term normalized, I guess, realize it's a very difficult question to ask. If we look into 2021, it seems like the system is largely kind of mature backbone built out, that argue there's not a lot of CapEx that's left, there's other areas that you could expand to, I think, as you just touched on with Holly there. Just wondering how you think about what normalized CapEx could look like for this business going forward with what you guys see in front of you.
Yeah, we talked about we had a $2 billion backlog, and the initial cadence of that was $750 million-$800 million this year. We've obviously reduced that to $665 million-$685 million, and then we thought around $600 million next year, and that's down to $400 million. The subsequent years after that were like $400 million, $400 million, and then $200 million. Looking out now with reducing that capital this year and next, that kind of puts the capital budgets in 2021, 2022, and 2023 in the $400 million-$500 million range. Kind of just evens everything out around that kind of $400 million, a little bit over range over the next four years.
That's helpful. Thanks. If I think about capital allocation here, just wondering, you talked about the return of capital to equity holders, but with the AM bonds kind of yielding near 10% right now, just wondering if that factors into your calculus there, if you might be opportunistic there, or what do you think about that side?
No, we really don't have any plans around that. The AM bonds have term on it. The first one's maturity's not till 2024, and then the next two are 2027 and 2028. I think the opportunities at AR that those bonds trade at a discount, plus the maturities there in 2021 and 2022, so a little more near-term. At AM, we've got a really nice maturity schedule out there, and we enjoy that term.
That's helpful. Thanks. One last one, if I could. If I look at the guidance, it looks like the JV contributions that you guys list in the last slide here is down a little bit versus what you had said before. Just wondering if you could provide a bit of color as far as the delta. Is that timing, or is there anything else happening there?
Yeah, I think it was just timing. The JV's definitely on schedule, and we just put on the Sherwood 12 and 13 in the fourth quarter, and those should be filled in the next couple of quarters. It's definitely meeting expectations.
Great. That's it for me. Thanks.
Mm-hmm. Thanks, Jeremy.
Thank you. Our next question comes from Crawford Kob with Tudor, Pickering Holt. Please proceed with your question.
Morning, guys. With regard to the share repurchase program, any preference between repurchasing AM units owned by AR relative to AM units in the open market?
We've just been focused on the open market. That's obviously where AM can go out and just purchase every day and then just been opportunistic, like I mentioned. Really haven't thought around the AR. The AR position is something that generates dividends for them and they enjoy. Really just kind of been focused on when you see the dips in the AM share price, trying to be opportunistic and picking some up then.
Got it. That makes sense. All right. That's it for me. Thanks, guys.
Thank you.
Thank you. Our next question comes from Kyle May with Capital One Securities. Please proceed.
Good morning. I wanted to talk a little bit more about the water program. You've talked about the water savings initiatives, just wondering if you can give us some more perspective on how this affects the outlook at Antero Midstream compared to your prior expectations.
Yeah. Go ahead, Mike.
Yeah, no, I was gonna kind of just run through some numbers here. For our blending operations, it's about $7 million of capital to AM for the second half of 2019. In 2020, that capital is about $10 million-$15 million. That'll generate EBITDA, really kind of starting in 2020, of $3 million-$4 million from the blending and then the trucking that actually occurs during that. We get a cost plus 3%, that adds about $6 million-$7 million of EBITDA. It'll generate about $10 million of EBITDA. That's all from the blending. Just to review from the Clearwater side, the Clearwater had a couple million dollars of EBITDA this year, but was costing about $10 million a quarter in capital. It was actually consuming about $8 million of net cash flow.
Not having that continuing after the fourth quarter is obviously beneficial for AM, and then you add in this blending opportunity for us. The water initiatives are going to improve AM definitely in 2020 versus 2019.
Got it. That's helpful. That's all for me today. Thank you.
Mm-hmm. Thanks, Kyle.
Thank you. The next question comes from the line of Ethan Bellamy with Baird. Please proceed with your question.
Hey, guys. Good morning. What is the probability of a renegotiation of contracts between AR and AM? How should we think about that?
That's one of many discussions we're having, I think, Ethan, that we have to think about the overall Antero family there. If something were done, it needs to be favorable for both at the end of the day. Obviously, if we did something that was overly favorable for AR, that would be good for AR, but not necessarily for AM. Historically, by not doing anything, that's been tough overall for AR, and then there's the flow-through negativity to AM. There's room for something to happen there, but it's just one of, gosh, a half a dozen different parties we're having those discussions with around sort of amend and extend type discussions and otherwise. It's just one of many, and it's hard to handicap whether or not anything happens with any particular one at this point.
Hopefully we get something done with the majority of those.
Okay. Thanks, Glen. With respect to the 2020 CapEx program, can you give us any granularity about how much is within and without of the MPLX JV, and is there any lumpiness or returns that we can be modeling in terms of specific spending or projects?
Yeah. I can kind of give you a year-over-year comparison, Ethan. The low pressure's very similar in 2020 to 2019. The compression, you're actually spending quite a bit less in 2020. We put a lot of compression on this year, definitely up in that Tyler County. You're spending about $90 million less in compression in 2020 versus 2019. High pressure somewhat similar freshwater infrastructure. You're down about $40 million year-over-year. We built a big trunk line in 2019 that goes through the heart of our Tyler County development, obviously don't need to replicate that. You're down about $40 million on clearwater, because you obviously don't have any capital in 2020 versus 2019. Specifically to your question for the processing and fractionation JV, we're down about $100 million. We spent $175 million this year. We're thinking it's $80 million-$90 million next year.
That does even indeed have the Hopedale 5 election in for the fractionation. It even includes that. Quite a bit less spend. We did just put on, as I mentioned, Sherwood 12 and 13, so I think you only have one processing plant in the budget for next year.
Remind me the governance of that JV. Who controls the spending there?
It's a joint JV. It's 50/50.
Mutually agreed to.
Yeah.
Antero proposes what its growth plans are, and it goes from there with the partners planning what will be needed in what timeframe.
Okay. Last question. You've got a dividend yield at AM that is uncompetitive and uncompelling. Assuming that the share price does not recover, it looks like that cash might be better used for something else. Could you talk about how you think about the distribution policy or dividend policy here? Is there some point in the future where you're modeling AR not necessarily needing that cash or allowing you the flexibility to change the dividend policy if you wanted to do that?
No. We really haven't thought about changing the dividend. Obviously, we haven't increased it, and we don't plan on increasing it. Like I mentioned, the return of capital is going to come in the form of buying back shares. When you actually look at our model, we highlighted the trend of the capital going much lower, and then you have the EBITDA growth that kind of mirrors AR's growth plans. Your coverage goes up to the one-two to a one-three range. That's really not a profile that would lend itself to be reducing the dividend. You also kind of look out in 2021, 2022, the cash flow plus the dividend payout, cash flow, excuse me, less the dividend payout, less the capital is about at parity. You're almost at free cash flow after dividends.
Again, not a profile that would suggest that you would be needing to cut any of the dividends. We don't see that in the future. We just plan on holding it flat and then returning capital through buying back shares. If it just stays down at these low prices, we'll just be opportunistic and get a lot of shares in.
Okay. Thanks, Mike. Paul, if you'll indulge me just one question. With respect to gas macro, you guys have historically made an argument about decline rates leading to supply correction, which would improve price. Do you still see that, or are we sort of in the doldrums but just early on that thesis? What are your thoughts right now?
Yeah. Do we have a page of that in our presentation? Maybe on our website.
On our website, Ethan shows what natural gas prices are, NYMEX prices plotted over this last year, so Cal '19, it shows what horizontal gas rig count is doing. We have that both for nationwide and also for Appalachia, and that is tied to the local price of the TETCO M-2 price. The big picture is that prices have been sliding. It's taken a little while, but rig count has begun to fall pretty dramatically as many people are following. We also show that for completion crews, those are getting idled, too. As from experience in the business, that self-correcting on both sides. On the high side, gets self-corrected, on the low side, gets self-corrected. Should see a fall-off in supply. Of course, it takes a little while. There's a lag time.
If you drill a well, you actually want to complete it before you back away and stop spending money. A little bit of lag time. What will be the pecking order? Well, the least sensitive, of course, are the pure oil plays, as in Permian Basin and so on, that the gas price is not material for them. But that's not that large of a proportion of the total gas supply, 10 to 13 Bcf a day out of 90 plus. What are the next least vulnerable? Well, it's the mix in plays like Antero with liquids supporting the development. One gets to the dry gas basins. I think many people who follow this have the more vulnerable ones on the list. You can already see rig counts dropping in some, and maybe it'll happen in some others, too.
Do see it self-correcting. Meanwhile, on the demand side, I've made the argument before that demand will be stickier, especially with LNG, that the LNG shippers and offtakers are looking for 10 to 20 year contracts.
They'll need that gas once they put in the infrastructure much longer, so supply can fall off with gas prices, lower rig count, while demand will increase once the infrastructure is sunk. I would say that it's just a matter of time, as it has been for the last many downturns. All investors are seeing that macro, but wondering when. For that, obviously, we all hope sooner the better.
Yes, sir. Thank you very much.
Thank you. Our next question comes from Patrick Sheehan with Bank of America. Please proceed with your question.
Hi, guys. This is actually Gregg Brody. Pat called in for me.
Good morning, Gregg.
Hey, guys. Thanks for all the color and obviously a big update today across the board with AR and AM. Just honing in on a few things. You mentioned AM and AR working together, and also the opportunity to possibly renegotiate some of your transportation costs with other third parties. How can we think about how that plays out? Is it a mend and extend where it's net present value neutral, or is there a possibility that in the case of AM, there's some shared pain, I guess?
Yeah, it all depends on the parties. We're not going to get into details on that, Gregg. I'd say discussions are pretty free form around all of those midstream service arrangements. It's hard to pinpoint any particular viewpoint or strategy at this point. I think you'll just have to be patient. We'll see what gets done there.
Got it. That's helpful. I appreciate that you can't negotiate against yourself on the phone. Just in terms of dividend, you threw a number out there, I think, of $100 million over the next couple of quarters. Is that what we're supposed to think about when you talk about high single-digit growth of return on capital, that it's effectively $100 million you've allocated for 2020 for that?
The $100 million, really that number comes from when you recall, Gregg, when the board approved this share repurchase, it could not be additive to leverage. You do the math on how much you have that you're supposed to increase the dividend by, so that's 7%-9%, and that's off of $600 million. You do the math on that, what is that, $50 million-$60 million increase in dividends. That was kind of the initial pot you were working with. When you actually buy back shares sooner rather than later, you don't have to pay dividends over that two-year timeframe. That adds to the pot. You kind of add that $50 million-$60 million plus the dividends that you don't have to pay on the shares that you bought back, that's how you get to $100 million.
Got it. Thank you. You ran through the math that I was trying to figure out.
Sure.
All right. Maybe just one more here with just with Clearwater. I think I heard you say on the call that this $10 million-$15 million expense for idling doesn't continue next year. I'm just reading the 8-K you put out that says you're unable to estimate the cost thereafter. How should I interpret that?
It doesn't include it in that magnitude. There will obviously be some costs in 2020, but not $10 million-$15 million a quarter.
You mentioned that it just wasn't operating as expected, but it looks like this was sort of the shared pain together that would, for AR and AM to work together. Is it as simple as it wasn't working properly, or was there sort of some net present value analysis you guys were doing when you thought about idling this and not using it?
Yeah, fundamentally, it just wasn't working properly relative to the design and what we envisioned it was going to be able to achieve.
All right, guys. Look, thank you for the time. I appreciate all of it.
Sure. Thank you, Gregg.
Thank you. Our next question comes from Ned Baramov with Wells Fargo. Please proceed with your question.
Good morning. Thanks for taking the questions. Just looking at AR's production growth guidance for 2020 of 8%-10%. Could you maybe talk about what does that translate to in terms of gathering growth on the AM side, given all the puts and takes related to royalty interests and third-party acreage dedications, et cetera?
Generally, the only real reconciling item, if you recall, Ned, is that we have on the eastern side, kind of in Harrison County, West Virginia, of our Antero Resources acreage in the dry gas area. That's not Antero Midstream dedicated acreage, and there's no development that occurs there. That actually declines. When you actually hear about percentages for AR, you generally add about 1% or 2% for the gathering compression volumes, and a little bit more than that on the processing for Antero Midstream's growth.
Got it. Maybe, can you break out the maintenance CapEx number from the total CapEx guidance you provided for 2020?
We don't have that exactly calculated, but it generally runs. It's not calculated this way, but if you look at it, our maintenance capital is generally in the 10% of the capital range. I think this quarter is $13 million or something like that. Probably around $50 million-$60 million next year.
Got it. Thanks. That's all I had.
Thank you. We have no additional questions at this time, so I'd like to pass the floor back over to management for any additional concluding comments.
Sure. Thank you for joining us on our conference call today. If you have any further questions, please feel free to contact us. Thanks again.
Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.