(Antero, 27.Apr.2022) — Antero Resources Corporation (NYSE: AR) announced its first quarter 2022 financial and operating results. The relevant consolidated financial statements are included in Antero Resources’ Quarterly Report on Form 10-Q for the quarter ended 31 March 2022.
First Quarter 2022 Highlights Include:
- Net production averaged 3.2 Bcfe/d, including 160 MBbl/d of liquids
- Realized pre-hedge natural gas equivalent price of $6.04 per Mcfe, a $1.09 per Mcfe premium to NYMEX pricing
- Realized pre-hedge natural gas price of $5.01 per Mcf, a $0.06 per Mcf premium to NYMEX pricing
- Realized C3+ NGL price of $61.55 per barrel, or 65% of WTI, a 51% increase from the prior year period
- Net loss was $156mn, Adjusted Net Income was $360mn (Non-GAAP)
- Adjusted EBITDAX was $707mn (Non-GAAP); net cash provided by operating activities was $566 million
- Free Cash Flow was $465mn before Changes in Working Capital (Non-GAAP)
- Repurchased $100mn of shares during the quarter at an average price of $27.11 per share
- Total long-term debt and Net Debt at quarter end was $1.96bn
- Net Debt to trailing last twelve month Adjusted EBITDAX declined to 1.1x (Non-GAAP)
Paul Rady, Chairman, Chief Executive Officer and President of Antero Resources commented, “Antero’s first quarter results highlight our substantial exposure to rising commodity prices. We realized the highest quarterly NGL price in company history and benefited from direct exposure to NYMEX natural gas prices. During the quarter we sold approximately 75% of our natural gas into NYMEX-priced natural gas hubs, including the LNG fairway along the Gulf Coast and the Cove Point LNG facility in the Mid-Atlantic region. As LNG export demand increases, we are uniquely positioned to benefit from increasing prices due to our 2.3 Bcf/d of firm transportation delivered into these LNG fairways. We are currently selling nearly 1 Bcf/d of natural gas directly to LNG facilities on a mix of long-term and short-term contracts. As this market grows and develops we intend to utilize our significant firm transportation portfolio to increase our exposure.”
Michael Kennedy, Chief Financial Officer of Antero Resources said, “We initiated our return of capital program by repurchasing $100 million of AR shares during the last six weeks of the first quarter, which approximated 25% of our first quarter Free Cash Flow estimate. As previously communicated, we expect to use approximately 25% of Free Cash Flow for share repurchases until the borrowings on our credit facility are repaid. Our current estimate forecasts the credit facility to be repaid later in the second quarter and we then intend to increase our return of capital to greater than 50% of Free Cash Flow. Looking ahead, we expect in excess of $2.5 billion of Free Cash Flow in 2022 and approximately $10 billion of Free Cash Flow through 2026, based on current commodity prices. This Free Cash Flow outlook allows us to continue to reduce debt while also returning substantial capital to our shareholders.”
Debt Reduction
As of 31 March 2022, Antero’s total debt was $1.96bn, including $388mn of borrowings under the Company’s revolving credit facility. Net Debt to trailing twelve month Adjusted EBITDAX was 1.1x. During the first quarter, Antero redeemed all $585mn of outstanding senior notes due 2025 at 101.25% of par, plus accrued and unpaid interest. The Company used cash on hand and borrowings under its revolving credit facility to fund this senior note redemption. Borrowings under the credit facility utilized to fund the redemption are expected to be paid down during the second quarter of 2022 with Free Cash Flow.
Share Repurchase Program
In February, Antero’s Board of Directors authorized a share repurchase program for the Company to repurchase up to $1bn of its outstanding common stock. During the first quarter of 2022, Antero repurchased 3.7 million shares for $100 million at an average share price of $27.11.
Free Cash Flow
During the first quarter, Antero generated $465mn of Free Cash Flow before Changes in Working Capital. Free Cash Flow after Changes in Working Capital was $315mn.
| Three Months Ended March 31, | |||||||
| 2021 | 2022 | ||||||
| Net cash provided by operating activities | $ | 563,731 | 565,673 | ||||
| Less: Net cash used in investing activities | (122,975) | (215,117) | |||||
| Less: Proceeds from sale of assets, net | — | (195) | |||||
| Less: Distributions to non-controlling interests in Martica | (24,699) | (35,757) | |||||
| Free Cash Flow | $ | 416,057 | 314,604 | ||||
| Changes in Working Capital (1) | (96,369) | 150,474 | |||||
| Free Cash Flow before Changes in Working Capital | $ | 319,688 | 465,078 |
| (1) | Working capital adjustments in the first quarter of 2022 include $136mn in changes in current assets and current liabilities and a $14.5mn decrease in accounts payable and accrued liabilities for additions to property and equipment. |
First Quarter 2022 Financial Results
Net loss was $156mn, or $0.50 per diluted share, compared to net loss of $15mn, or $0.05 per diluted share, in the prior year period. Adjusted Net Income was $360mn, or $1.15 per diluted share, compared to Adjusted Net Income of $183mn, or $0.62 per diluted share, in the prior year period.
Adjusted EBITDAX was $707mn, a 36% increase compared to the prior year quarter, driven by higher realized natural gas and NGL prices.
Net daily natural gas equivalent production in the first quarter averaged 3.2 Bcfe/d, including 160 MBbl/d of liquids, as detailed in the table below. As completion activity accelerates through the second quarter of 2022, production is expected to increase to a range of 3.3 to 3.4 Bcfe/d in the second half of 2022.
Antero’s average realized natural gas price before hedging was $5.01 per Mcf, representing a 44% increase compared to the prior year period. Antero realized a $0.06 per Mcf premium to the average NYMEX Henry Hub. The premium to NYMEX was negatively impacted by the sharp increase in the natural gas price on the final trading day for the February natural gas contract, resulting in a settlement price of $6.27 per Mcf, followed by a subsequent decline in natural gas daily prices for the month. However, Antero expects realized natural gas prices, before hedges, to be a premium of $0.15 to $0.25 per Mcf for the full year 2022, unchanged from prior guidance. Antero’s ability to capture a premium to NYMEX is a result of selling the majority of its gas into the NYMEX-based LNG fairways. In the first quarter, Antero sold approximately 75% of its natural gas into these premium priced, NYMEX-related hubs.
The following table details the components of average net production and average realized prices for the three months ended 31 March 2022:
| Three Months Ended March 31, 2022 | ||||||||||||||||
| Combined | ||||||||||||||||
| Natural | ||||||||||||||||
| Natural Gas | Oil | C3+ NGLs | Ethane | Gas Equivalent | ||||||||||||
| (MMcf/d) | (Bbl/d) | (Bbl/d) | (Bbl/d) | (MMcfe/d) | ||||||||||||
| Average Net Production | 2,207 | 8,042 | 107,086 | 44,501 | 3,165 | |||||||||||
| Combined | ||||||||||||||||
| Natural | ||||||||||||||||
| Natural Gas | Oil | C3+ NGLs | Ethane | Gas Equivalent | ||||||||||||
| Average Realized Prices | ($/Mcf) | ($/Bbl) | ($/Bbl) | ($/Bbl) | ($/Mcfe) | |||||||||||
| Average realized prices before settled derivatives | $ | 5.01 | $ | 87.45 | $ | 61.55 | $ | 16.74 | $ | 6.04 | ||||||
| NYMEX average price | $ | 4.95 | $ | 94.45 | $ | 4.95 | ||||||||||
| Premium / (Differential) to NYMEX | $ | 0.06 | $ | (7.00) | $ | 1.09 | ||||||||||
| Settled commodity derivatives (1) | $ | (1.41) | $ | (0.69) | $ | (0.41) | $ | (0.11) | $ | (1.01) | ||||||
| Average realized prices after settled derivatives | $ | 3.60 | $ | 86.76 | $ | 61.14 | $ | 16.63 | $ | 5.03 | ||||||
| Premium / (Differential) to NYMEX | $ | (1.35) | $ | (7.69) | $ | 0.08 |
| (1) | These commodity derivative instruments include contracts attributable to Martica Holdings LLC (“Martica”), Antero’s consolidated variable interest entity. All gains or losses from Martica’s derivative instruments are fully attributable to the noncontrolling interests in Martica, which includes portions of the natural gas and all oil and C3+ NGL derivative instruments during the three months ended 31 March 2022. |
Antero’s average realized C3+ NGL price was $61.55 per barrel, a 51% increase versus the prior year period. Antero shipped 53% of its total C3+ NGL net production on Mariner East 2 for export and realized a $0.04 per gallon premium to Mont Belvieu pricing on these volumes at Marcus Hook, PA. Antero sold the remaining 47% of C3+ NGL net production at a $0.04 per gallon discount to Mont Belvieu pricing at Hopedale, OH. The resulting blended price on 107,086 Bbl/d of net C3+ NGL production was $61.14 per barrel, which was flat with Mont Belvieu pricing.
Three Months Ended March 31, 2022
| Pricing Point | Net C3+ NGL Production (Bbl/d) | % by Destination | Premium (Discount) To Mont Belvieu ($/Gal) | |||||
| Propane / Butane exported on ME2 | Marcus Hook, PA | 57,163 | 53% | $0.04 | ||||
| Remaining C3+ NGL volume | Hopedale, OH | 49,923 | 47% | ($0.04) | ||||
| Total C3+ NGLs/Blended Premium | 107,086 | 100% | $0.00 |
All-in cash expense, which includes lease operating, gathering, compression, processing and transportation, production and ad valorem taxes was $2.33 per Mcfe in the first quarter, a 3% increase compared to $2.26 per Mcfe average during the first quarter of 2021. The increase was due primarily to higher production taxes as a result of higher commodity prices during the quarter.
Net marketing expense was $0.10 per Mcfe in the first quarter, an increase from a gain of $0.01 per Mcfe during the first quarter of 2021. The gain in the year ago period was due to higher third party marketing volumes during Winter Storm Uri.
First Quarter 2022 Operating Update
Antero placed 15 horizontal Marcellus wells to sales during the first quarter with an average lateral length of 12,707 feet. Nine of these wells have been online for at least 60 days and the average 60-day rate per well was 25.5 MMcfe/d, including approximately 1,416 Bbl/d of liquids assuming 25% ethane recovery.
First Quarter 2022 Capital Investment
Antero’s accrued drilling and completion capital expenditures for the three months ended March 31, 2022, were $175mn. 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 $24mn in land during the first quarter. A portion of the land capital was used to acquire 2,500 net acres which hold approximately 11 incremental drilling locations at an average cost of less than $1mn per location. 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.
Commodity Derivative Positions
Antero did not enter into any new natural gas, NGL or oil hedges during the first quarter of 2022. As of 31 March 2022, the company has hedged 313 Bcf of natural gas for the remainder of 2022 at a weighted average index price of $2.49 per MMBtu and 16 Bcf of natural gas in 2023 at a weighted average index price of $2.37 per MMBtu.
Please see Antero’s Quarterly Report on Form 10-Q for the quarter ended 31 March 2022, for more information on all commodity derivative positions. For detail on current commodity positions, please see the Hedge Profile presentations at www.anteroresources.com.
Conference Call
A conference call is scheduled on Thursday, 28 April 2022 at 9:00 am MT to discuss the financial and operational results. A brief Q&A session for security analysts will immediately follow the discussion of the results. To participate in the call, dial in at 877-407-9079 (U.S.), or 201-493-6746 (International) and reference “Antero Resources.” A telephone replay of the call will be available until Thursday, May 5, 2022 at 9:00 am MT at 877-660-6853 (U.S.) or 201-612-7415 (International) using the conference ID: 13726236. To access the live webcast and view the related earnings conference call presentation, visit Antero’s website at www.anteroresources.com. The webcast will be archived for replay until Thursday, 5 May 2022 at 9:00 am MT.
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