As a reminder, this conference is being recorded. It is now my pleasure to introduce Dan Katzenberg, Vice President of Investor Relations. Thank you. You may begin.
Thank you for joining us for Antero Midstream's first quarter 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 would also like to direct you to the homepage of our website at anteromidstream.com, where we have provided a separate earnings call presentation that will be reviewed during today's call. Today's call may contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures. Joining me on the call today are Michael Kennedy, CEO and President of Antero Midstream, Justin Agnew, CFO of Antero Midstream, and Brendan E. Krueger, CFO of Antero Resources. With that, I'll turn the call over to Mike.
Thanks, Dan. Good morning, everyone. I'll start my comments in slide number three. The first quarter of 2026 was an exciting quarter for Antero Midstream as we continue to make progress on our strategic initiatives. We successfully navigated adverse winter weather conditions and delivered another quarter of EBITDA and free cash flow growth. In addition, we closed the company's largest acquisition to date in February, which was ahead of our initial expectations. These achievements highlight two of Antero Midstream's greatest strengths, a world-class asset base in the lowest cost basin in North America, and hard work and dedication from our team. As we look ahead, recent geopolitical events and data center announcements highlight the significant demand growth for U.S. energy, both domestic and abroad.
Given this outlook, we are focused on enhancing connectivity within our operating areas, particularly in the dry gas area and the newly acquired assets, and providing cost-effective integrated solutions for this demand growth. Our balance sheet scale and integrated planning with our investment-grade producer position us well to capitalize on these growth opportunities. Let's move on to slide number four to highlight some of our 2026 growth projects. At the end of the first quarter, we commissioned our dry gas compression expansion depicted on the right-hand side of the page. This station utilized relocated and repurposed units to support our first dry gas Marcellus pad in over a decade. During the first quarter, we also commenced our initial water system integration efforts.
This capital investment to connect Antero Midstream's water system to the acquired water system is on track to be completed by year-end and will allow AM to begin servicing completions on the acquired assets in 2027. Today, there are currently three rigs running on AM dedicated acreage, one on the rich gas system, one in the dry gas system, and one on the acquired blended system. This balanced and consistent development program delivers low-cost volume growth and is expected to drive high single-digit EBITDA growth for the foreseeable future. In summary, we're off to a great start in 2026, executing our capital-efficient growth plan. Beyond our base business, we continue to be active in opportunities to further extend and enhance that growth outlook to support the increasing demand for natural gas. With that, I'll turn the call over to Justin.
Thanks, Michael. I'll start with our first quarter highlights in slide number five. During the first quarter, we took over operations of our newly acquired assets right in the middle of winter storm Gerri. As you can see from our results, we did not experience any outages during the storm, highlighting the benefit of integrated planning and communication between the upstream and midstream businesses. Adjusted EBITDA for the first quarter was $288 million, which was a 5% increase year-over-year, driven by an increase in gathering, compression, and processing volumes. During the quarter, we generated $192 million of free cash flow before dividends and $85 million of free cash flow after dividends, which was an 8% increase year-over-year.
This cash flow was used to finance a portion of the acquisition and opportunistically repurchase shares on the open market. Importantly, even after a $1.1 billion acquisition and share repurchases, we exited the quarter with leverage in the low three times range with over $800 million of liquidity. Looking ahead to the next few quarters, we expect an increase in capital expenditures as we take advantage of improved construction season conditions in line with our full year budget. In addition, we expect to see gradual EBITDA growth throughout the year, driven by increasing gathering and freshwater delivery volumes. This cash flow profile results in declining leverage throughout the year towards 3.0 times at year-end 2026, in line with our long-term target. In summary, we continue to build on the growth and momentum from our organic investments and accretive acquisitions.
These results place us on track to achieve our 2026 guidance, which remains unchanged, and position us well for capital-efficient growth over the next several years. With that, operator, we are ready to take questions.
Thank you. At this time, we will conduct our question and answer session. If you would like to ask a question, press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question comes from John Mackay with Goldman Sachs. Please state your question.
Hey guys, thank you for the time. Maybe we'll start on the kinda in-basin demand side of things. There's a couple projects floating around, a lot of eyeballs on Monarch, et cetera. I know you guys are kind of too early, and you touched on this in the AR call as well. Do you mind kinda just framing up what you guys could see the opportunity set for AM looking like here again? If you wanna use a, you know, generic kind of EBITDA per gigawatt or anything like that, just kind of frame us up how you're thinking about the AM side of things here.
We're, we're not gonna use a generic metric there, but AM is participating in all of those 'cause the vast majority of these need some infrastructure, laterals off existing pipe that Brendan talked about, water, some sort of infrastructure build-out from the existing infrastructure. AM's got its seat at the table all those discussions 'cause, like I mentioned, we are the industrial builder of Northern West Virginia. We built all of this infrastructure. It's all been a greenfield expansion for us from a gathering, compression, processing, and water, and built out the whole system here. We are the builder of choice and that's part of the attraction of what AR and AM bring is that integrated development between upstream and midstream. We have the resource and we have the ability to build the infrastructure.
Maybe just to clarify, any sense you guys could give on just kind of how long of a timeline would be needed to kind of support a larger project?
We're mainly talking about everything in state, so it wouldn't be that long of a timeline. It would just be our typical kind of high pressure build, you know, in kind of year, you know, 1, 2, 3 , not five years out.
Great. Thanks. Second question for me. You guys mentioned the kind of high single-digit growth target. Could you just frame that up a little bit around what that implies for AR's underlying growth? AR kind of came out with a kind of higher growth pace on the last quarter call. Just trying to figure out where that shakes, again, kind of what the AM algorithm off that is. Thanks.
That's off the base business. You get to the high single digit just from integrating the water system in 2027. Just servicing AR's from a water perspective gets you that high single digit. If AR actually does pursue, you know, three rigs, two completions, and doesn't build DUCs and actually completes those, you'd be in excess of that high single-digit EBITDA growth in 2027 and 2028.
I appreciate that. Thank you.
Thank you. Your next question comes from Ivan Scotto with UBS.
Hi, team. Thanks for taking the question. I wanted to ask for any additional color you have on how much capital is needed to fully integrate the acquired HG assets, and also how far along that process do you think you are at this point?
I think it's $25 million, probably at halfway through. Like I mentioned that the water system, we commenced that in the first quarter. That'll be done by year-end. The gathering system, which was almost all already fully integrated, I think it was $5 million to connect that. It's really around the water, and we're in the midst of it and should be completed by year-end.
Okay, great. Then just, looking forward, where do you feel that most of your opportunity set is for incremental returns in the future?
I think it's around these, you know, data center, local power projects. You know, our base business delivers, you know, very high rates return. I think it's in the high teens, 20% return on invested capital on the base, and we've got that fully mapped out. We've built the whole backbone of the system, the whole water pipe, so the large gathering system that we've got. I think the incremental returns will just be building off of that and building off of our relationship with AR and our own ability to build industrial projects in Northern West Virginia. That's kind of the next leg. You know, the base is terrific. You know, high single-digit EBITDA growth we've had for quite some time and will going forward, but incremental growth and returns from that will be from these local demand projects.
Okay, great. Thank you.
Mm-hmm.
Thank you. Ladies and gentlemen, there appears to be no additional requests for questions at this time. I'll hand the floor back to our management team for closing remarks. Thank you.
Yes, thank you for joining us on today's earnings conference call. Please feel free to reach out with any further questions. Have a good day.
Thank you. That concludes today's call. All parties may disconnect.