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Equity-Based Compensation

12 Months Ended

Dec. 31, 2023

Equity-Based Compensation

Equity-Based Compensation

(10) Equity-Based Compensation

(a)	Summary of Equity-Based Compensation

The Company’s equity-based compensation includes (i) costs allocated to Antero Midstream by Antero Resources for grants made prior to March 12, 2019 pursuant to the Antero Resources Corporation Long-Term Incentive Plan (the “AR LTIP”) and (ii) costs related to the Antero Midstream Corporation Long-Term Incentive Plan (the “AM LTIP”). Antero Midstream’s equity-based compensation expense is included in general and administrative expenses, and recorded as a credit to additional paid in capital.

AR LTIP

Equity-based compensation expense allocated to Antero Midstream from Antero Resources was $2.1 million, $0.4 million and less than $0.1 million for the years ended December 31, 2021, 2022 and 2023, respectively, which includes expense related to the Converted AM RSU Awards (as defined below). All grants made prior to March 12, 2019 were fully amortized and vested during 2023. Therefore, there will be no further allocation of equity-based compensation expense from Antero Resources to the Company. The Company does not reimburse Antero Resources for noncash equity compensation allocated to it for awards issued under the AR LTIP.

AM LTIP

Effective March 12, 2019, the Board of Directors of Antero Midstream Corporation (the “Board”) adopted the AM LTIP under which awards may be granted to employees, directors, and other service providers of the Company and its affiliates. The Company is authorized to grant up to 15,398,901 shares of AM common stock under the AM LTIP. The AM LTIP provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), dividend equivalents, other stock-

based awards, cash awards and substitute awards. The terms and conditions of the awards granted are established by the compensation committee of the Board. As of December 31, 2023, a total of 4,691,855 shares were available for future grant under the AM LTIP.

The Company’s equity-based compensation expense, by type of award, is as follows:



		Year Ended December 31,
(in thousands)		2021			2022			2023
Restricted stock units ⁽¹⁾		$	11,461			16,039			24,409
Performance share units ⁽¹⁾			1,158			2,770			6,266
Equity awards issued to directors			910			845			931
Total expense		$	13,529			19,654			31,606

(1)	Amounts include equity-based compensation expense allocated to the Company by Antero Resources.

The total fair value of the Company’s vested equity awards for the years ended December 31, 2021, 2022 and 2023 were $12 million, $18 million and $22 million, respectively.

(b)	Restricted Stock Unit Awards

RSU awards vest subject to the satisfaction of service requirements. Expense related to each RSU award is recognized on a straight-line basis over the requisite service period of the entire award. Forfeitures are accounted for as they occur by reversing the expense previously recognized for awards that were forfeited during the period. The grant date fair values of these awards are determined based on the closing price of the Company’s common stock on the date of the grant. The weighted average grant date fair value per share for RSUs granted during the years ended December 31, 2021, 2022 and 2023 were $8.71, $11.28 and $10.59, respectively.

The Company’s RSU awards included the unvested outstanding phantom units granted under the Antero Midstream Partners Long Term Incentive Plan which were assumed by the Company on March 12, 2019, and converted into 1.8926 RSUs under the AM LTIP representing a right to receive shares of the Company’s common stock for each converted phantom unit (all such RSUs, the “Converted AM RSU Awards”). The Converted AM RSU Awards were accounted for as if they were distributed by Antero Midstream Partners to Antero Resources. Therefore, the expense related to the Converted AM RSU Awards was subject to allocation by Antero Resources. All remaining Converted AM RSU Awards vested during the year ended December 31, 2023.

A summary of the RSU awards activity, which included the Converted AM RSU Awards, is as follows:


				Weighted Average
		Number		Grant Date
		of Units		Fair Value
Total AM LTIP RSUs awarded and unvested—December 31, 2022		4,877,258		$	9.79
Granted		3,103,722			10.59
Vested		(1,927,368)			9.54
Forfeited		(176,442)			10.38
Total AM LTIP RSUs awarded and unvested—December 31, 2023		5,877,170		$	10.28

As of December 31, 2023, unamortized equity-based compensation expense of $41 million related to the unvested RSUs is expected to be recognized over a weighted average period of 1.8 years.

(c)	Performance Share Unit Awards

In April 2019, the Company granted performance share units (“PSUs”) to certain of its employees and executive officers that vest based on the Company’s actual return on invested capital (“ROIC”) (as defined in the award agreement) over a three-year period as compared to a targeted ROIC (“2019 ROIC PSUs”). The number of shares of the Company’s common stock that could be earned with respect to the 2019 ROIC PSUs ranged from zero to 200% of the target number of the 2019 ROIC PSUs originally granted. The grant date fair value of these awards was based on the closing price of the Company’s common stock on the date of the grant, assuming target achievement of the performance condition. Expense related to the 2019 ROIC PSUs was recognized based on the number of shares of the Company’s common stock that are expected to be issued at the end of the measurement period. During the year ended December 31, 2022, the performance condition for the 2019 ROIC PSU’s was met at 200% of target and 137,712 target 2019 ROIC PSU’s converted into 275,424 shares of the Company’s common stock. As of December 31, 2022, there were no 2019 ROIC PSU’s outstanding.

In April 2022, the Company granted PSUs to certain of its employees and executive officers that vest based on the Company’s actual ROIC (as defined in the award agreement) over a three-year period concluding on December 31, 2024 as compared to a targeted ROIC (“2022 ROIC PSUs”). The number of shares of the Company’s common stock that can be earned with respect to the 2022 ROIC PSUs ranges from zero to 200% of the target number of 2022 ROIC PSUs originally granted. The grant date fair value of these awards was based on the closing price of the Company’s common stock on the date of the grant, assuming target achievement of the performance condition. Expense related to the 2022 ROIC PSUs is recognized based on the number of shares of the Company’s common stock that are expected to be issued at the end of the measurement period, and such expense is reversed if the likelihood of achieving the performance condition decreases. The likelihood of achieving the performance conditions related to 2022 ROIC PSU awards was probable as of December 31, 2023.

In March 2023, the Company granted PSUs to certain of its employees and executive officers that vest based on the Company’s actual ROIC (as defined in the award agreement) over a three-year period concluding on December 31, 2025 as compared to a targeted ROIC (“2023 ROIC PSUs”). The number of shares of the Company’s common stock that can be earned with respect to the 2023 ROIC PSUs ranges from zero to 200% of the target number of 2023 ROIC PSUs originally granted. The grant date fair value of these awards was based on the closing price of the Company’s common stock on the date of the grant, assuming target achievement of the performance condition. Expense related to the 2023 ROIC PSUs is recognized based on the number of shares of the Company’s common stock that are expected to be issued at the end of the measurement period, and such expense is reversed if the likelihood of achieving the performance condition decreases. The likelihood of achieving the performance conditions related to 2023 ROIC PSU awards was probable as of December 31, 2023.

The grant date fair value per share for PSUs granted during the years ended December 31, 2022 and 2023 were $11.05 and $10.58, respectively. There were no PSUs granted during the year ended December 31, 2021.

A summary of the PSU awards activity is as follows:


				Weighted Average
		Number		Grant Date
		of Units		Fair Value
Total AM LTIP PSUs awarded and unvested—December 31, 2022		439,935		$	11.28
Granted		512,166			10.58
Total AM LTIP PSUs awarded and unvested—December 31, 2023		952,101		$	10.90

As of December 31, 2023, unamortized equity-based compensation expense of $12 million related to the unvested PSUs is expected to be recognized over a weighted average period of 1.9 years.