Antero Midstream’s credit profile upgraded, ’BB+’ ratings confirmed by S&P

Investing.com -- Antero Midstream Partners LP (NYSE:AM) has seen an upward revision in its stand-alone credit profile (SACP) to ’bb+’ from ’bb’ by S&P Global Ratings on March 24, 2025. The credit rating agency also confirmed its ’BB+’ long-term issuer credit and debt ratings on AM. The upward revision and affirmation come in response to sustained deleveraging and improved credit metrics. The company’s outlook remains stable.

The stable outlook aligns with the outlook of its parent company, Antero Resources Corp. (NYSE:AR). This comes from the expectation that AR will continue to uphold conservative financial policies, including allocating approximately half of its free cash flow for debt repayment. This policy, in turn, is expected to support financial measures such as funds from operations (FFO) to debt above 60% over the next two years, while also generating free cash flow.

In 2024, AM improved its stand-alone leverage by using free cash flow to repay outstanding borrowings under its revolving credit facility (RCF). This debt repayment, coupled with EBITDA growth, resulted in leverage slightly below 3x in 2024. It is expected that AM will continue to use free cash flow, after dividends, to reduce debt and repurchase equity. S&P Global Ratings also anticipates that leverage will remain between 2.5x and 3.0x over the near term, backed by stable and growing cash flows.

AM is viewed as a strategically important subsidiary of AR and is likely to receive implicit support from AR. This is mainly due to the fact that almost all of AM’s cash flows come from AR. As of December 31, 2024, AR owns 29% of the common shares of AM.

AM no longer benefits from a rating notch uplift from its relationship to AR, given that its SACP is now ‘bb+’, which is one notch below the rating on AR. The rating on AM will remain capped one notch below AR unless and until the credit quality at AM improves such that S&P Global Ratings raises its SACP assessment for AM above its current level.

The stable outlook on AR reflects the expectation that near-term financial measures will improve, including FFO to debt above 60% and debt to EBITDA of about 1.0x-1.5x over the next two years. S&P Global Ratings could lower its rating on AM if it lowered its rating on AR by more than one notch or if AM’s stand-alone credit quality severely deteriorated such that leverage exceeds 5x.

While deemed unlikely within the next two years, the ratings on Antero Resources could be raised if the company increases the scale and geographic diversification of its operations to align more closely with its higher-rated peers and maintains a prudent financial policy and strong financial measures. Similarly, the rating on AM could be raised if its stand-alone credit profile improves, which could occur if AM diversifies its counterparties and improves its scale while maintaining debt to EBITDA of less than 3x.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.