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Antero Resources Third Quarter 2022 Results

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Antero Resources Corp. announced its third quarter 2022 financial and operating results.

Third Quarter 2022 Highlights Include:

• Net production averaged 3.2 Bcfe/d, including 171 MBbl/d of liquids
• Realized pre-hedge natural gas price of $8.69 per Mcf, a $0.49 per Mcf premium to NYMEX pricing
• Realized C3+ NGL price of $50.61 per barrel, or 55% of WTI
• Net income was $560 million, Adjusted Net Income was $531 million (Non-GAAP)
• Adjusted EBITDAX was $878 million (Non-GAAP); net cash provided by operating activities was $1.1 billion
• Free Cash Flow was $797 million (Non-GAAP)
• Reduced total debt by $404 million during the quarter
• Purchased $382 million of shares during the quarter
• Net Debt at quarter end was $1.17 billion (Non-GAAP)
• Net Debt to trailing last twelve month Adjusted EBITDAX declined to 0.4x (Non-GAAP)

Paul Rady, Chairman, Chief Executive Officer and President of Antero Resources commented, "Antero's third quarter results reflect the Company's core strengths that include access to premium priced markets through our firm transportation portfolio and low absolute debt. At a time when basis differentials are widening across the U.S., Antero's differentiated strategy delivered a $0.49 per Mcf premium to NYMEX. Through our direct sales contracts along the LNG corridor, we anticipate our premium in basis pricing relative to NYMEX Henry Hub to increase further as additional LNG facilities are placed in service. Today's balance sheet strength and a strong Free Cash Flow outlook will allow us to deliver significant capital returns to our shareholders in the quarters ahead."

Mr. Rady continued, "We remain committed to maintaining our leadership position in ESG. Our 2021 ESG achievements highlight our continued focus on the communities where we live and operate, while keeping our workforce safe. We have made tremendous progress on our commitment to achieve Net Zero Scope 1 and 2 GHG emissions by 2025, already reducing our peer-leading GHG emissions by 36% since 2019. Our ability to provide lower carbon energy to both our communities at home and abroad, directly improves the health, safety and livelihood for people living in energy poverty."

Michael Kennedy, Chief Financial Officer of Antero Resources said, "The $1 billion increase in our share repurchase authorization highlights the confidence we have in our business strategy and the significant Free Cash Flow that it generates."

Mr. Kennedy added, "Since the start of our debt reduction program in the fourth quarter of 2019, we have reduced debt by $2.6 billion, including $400 million during the third quarter and almost $1 billion year to date. Because of this aggressive focus on debt reduction, we are now poised to return the majority of our Free Cash Flow to our shareholders."

Debt Reduction

As of September 30, 2022, Antero's total debt was $1.17 billion. Net Debt to trailing twelve month Adjusted EBITDAX was 0.4x. During the third quarter, Antero reduced total debt by $404 million including a $62 million reduction in borrowings under the credit facility, the repurchase of $300 million aggregate principal amount of its 2026 and 2029 Senior Notes pursuant to its tender offer, the repurchase of $22 million aggregate principle amount of senior notes in the open market and the redemption of $20 million of its convertible debt.

Increased Share Repurchase Program

On October 25, 2022, Antero's Board of Directors authorized a $1 billion increase in the Company's share repurchase program to $2 billion. During the third quarter of 2022, Antero purchased 10.5 million shares at a weighted average price of $36.56 per share for $382 million. For the first nine months of 2022, Antero purchased 21.5 million shares at a weighted average price of $34.84 per share for $740 million. Combined with the new authorization, this results in $1.3 billion of remaining capacity under the share repurchase program.

Free Cash Flow

During the third quarter, Antero generated $797 million of Free Cash Flow. Free Cash Flow before Changes in Working Capital was $556 million.

Borrowing Base Redetermination

The borrowing base under Antero Resources' credit facility was reaffirmed at $3.5 billion in October of 2022. Lender commitments under the credit facility remained at $1.5 billion. As of September 30, 2022, Antero had $9 million drawn under its credit facility.

Guidance Update

Antero is revising its cash production expense guidance to a range of $2.55 to $2.65 per Mcfe reflecting higher fuel costs and ad valorem tax due to the increase in commodity prices.

Antero is also increasing its drilling and completion capital expenditure guidance reflecting completion activity being pulled into the fourth quarter and incremental inflationary pressure related in part to higher services, diesel and steel costs. Development optimization to retain preferred crews is expected to result in an additional pad being completed in late December that had originally been planned for the first quarter of 2023. Antero now expects 72 wells to be completed in 2022, compared to initial guidance of 60 to 65 wells. These additional well completions are expected to lead to higher sequential production in the first quarter of 2023.

Land capital guidance is increasing to a range of $125 to $150 million due to continued success in the organic leasing program that has allowed Antero to increase its premium drilling locations in its liquids-rich fairway. During the third quarter, Antero added approximately 5,500 net acres which hold approximately 25 incremental drilling locations at an average cost of under $1 million per location. During the first nine months of 2022, Antero's organic leasing program has added approximately 60 drilling locations in the core of the Appalachia liquids area at an average cost of under $1 million per location, essentially offsetting Antero's maintenance capital plan that assumes an average of 60 to 65 wells per year. In addition to the incremental locations added, Antero also acquired minerals in its Marcellus area of development to increase its net revenue interest in future drilling locations. The Company believes this organic leasing program is the most cost efficient approach to lengthening its core inventory position.

Third Quarter 2022 Financial Results

Net daily natural gas equivalent production in the third quarter averaged 3.2 Bcfe/d, including 171 MBbl/d of liquids, as detailed in the table below. Due to the ongoing commissioning of the Shell Cracker and an NGL downstream pipeline outage at the beginning of October that required volumes to be shut in temporarily, Antero anticipates fourth quarter production volumes will be 3.25 to 3.35 Bcfe/d. Full year 2022 production guidance remains unchanged at a range of 3.2 to 3.3 Bcfe/d with expectations to now be at the low end of the range.

Antero's average realized natural gas price before hedging was $8.69 per Mcf, representing a 102% increase compared to the prior year period. Antero realized a $0.49 per Mcf premium to the average NYMEX Henry Hub price. The realized natural gas price benefited from higher premiums to NYMEX at the price hubs where Antero sells its natural gas in the LNG fairway of the Gulf Coast. Antero sells approximately 75% of its natural gas into these premium priced NYMEX related hubs.

 Antero's average realized C3+ NGL price was $50.61 per barrel. Antero shipped 61% of its total C3+ NGL net production on Mariner East 2 for export and realized a $0.07 per gallon premium to Mont Belvieu pricing on these volumes at Marcus Hook, PA. Antero sold the remaining 39% of C3+ NGL net production at a $0.09 per gallon discount to Mont Belvieu pricing at Hopedale, OH. The resulting blended price on 108 MBbl/d of net C3+ NGL production was in line with Mont Belvieu pricing.

All-in cash expense, which includes lease operating, gathering, compression, processing and transportation, production and ad valorem taxes was $2.84 per Mcfe in the third quarter, a 21% increase compared to $2.35 per Mcfe average during the third quarter of 2021. The increase was due primarily to higher natural gas and fuel costs that impacted gathering, processing and transportation costs and an increase in production taxes as a result of higher commodity prices during the quarter. Fourth quarter cash production expense is expected to decline sequentially to a range of $2.55 to $2.65 per Mcfe, driven by lower commodity prices and lower volumes being shipped on Mariner East 2.

Net marketing expense was $0.09 per Mcfe in the third quarter, a decrease from $0.11 per Mcfe during the third quarter of 2021 due to lower firm transportation commitments from the year ago period.

Third Quarter 2022 Operating Update

Antero placed 22 horizontal Marcellus wells to sales during the third quarter with an average lateral length of 13,600 feet. Ten of these wells have been on line for at least 60 days and the average 60-day rate per well was 27.4 MMcfe/d, including an Antero record of approximately 1,509 Bbl/d of liquids per well assuming 25% ethane recovery. The remaining 12 wells were completed in September and will contribute to the volume increase in the fourth quarter.

Third Quarter 2022 Capital Investment

Antero's accrued drilling and completion capital expenditures for the three months ended September 30, 2022, were $227 million. For a reconciliation of accrued capital expenditures to cash capital expenditures, see the table in the Non-GAAP Financial Measures section.

In addition to capital invested in drilling and completion costs, the Company invested $46 million in land during the third quarter.