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Antero Exceeds Production Estimates in 2Q; 1,484 MMcfe/d

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Antero Resources has announced its second quarter 2015 operations update.

Highlights include:

• Average net daily gas equivalent production was 1,484 MMcfe/d, a 67% increase over the prior year quarter and flat quarter over quarter
• Average net daily liquids production (C3+) was 45,900 Bbl/d, a 127% increase over the prior year quarter and a 15% increase sequentially
• Realized natural gas price after hedging averaged $3.86 per Mcf, a $1.22 positive differential to Nymex
• Realized C3+ NGL price after hedging averaged $19.51 per barrel (34% of WTI)
• Realized natural gas equivalent price including NGLs, oil and hedges averaged $3.85 per Mcfe
• Planning to spud Antero's first Utica Shale well in West Virginia in the third quarter of 2015
• Completed bolt-on acquisition of approximately 4,400 net acres with both Marcellus Shale and Utica Shale potential
• Preliminary net production growth target of 25% to 30% in 2016 

Operational Update

Click here to access Antero's 2Q15 Operational Update.

Operating Update

All operational figures are as of the date of this release unless otherwise noted. 

Antero's net daily production for the second quarter of 2015 averaged 1,484 MMcfe/d, including 45,900 Bbl/d of liquids (19% liquids).  Second quarter 2015 production represents an organic production growth rate of 67% from the second quarter of 2014 and was approximately the same as the first quarter of 2015.  Liquids production for the second quarter of 2015 represents an organic production growth rate of 127% and 15% from the second quarter of 2014 and first quarter of 2015, respectively.

Commenting on second quarter 2015 production and expectations for the remainder of the year, as well as the 2016 outlook, Paul Rady, Chairman of the Board and CEO, said, "We had an outstanding quarter operationally, once again beating our production estimates.  As we look ahead to the second half of 2015, we expect to see a slight decrease in production during the third quarter, but expect a ramp up in completions and production during the fourth quarter as we head into 2016.  Driven by our expected fourth quarter operational momentum and the expected completion of the 50 Marcellus deferred completions in the first half of 2016, we are preliminarily targeting 2016 production growth of 25% to 30%.  Additionally, we have achieved significant drilling and completion efficiencies this year and continue to realize reductions in service costs.  The 2015 cost improvements are expected to be fully realized next year and would generate $150 million of drilling and completion capital cost savings, resulting in only a modest increase in the anticipated 2016 drilling and completion capital budget compared to 2015."

Firm Transportation Update

In the second quarter of 2015, Antero entered into 700 MMcf/d of incremental firm transportation agreements with Columbia Pipeline Group through Columbia's Mountaineer Xpress ("MXP") and Gulf Xpress ("GXP") pipeline projects. Both projects are expected to be placed in service in the fourth quarter of 2018.  Antero will have a firm commitment on MXP of 700 MMcf/d to Leach, Kentucky, where the Company will be able to sell its gas at TCO based pricing.  Antero will have the further option, through its firm transportation agreement with GXP, to ship approximately 180 MMcf/d of the 700 MMcf/d to the Gulf Coast.

These firm transportation agreements result in Antero's firm transportation portfolio growing to 4.8 Bcf/d by the end of 2018, enabling Antero to sell its expected gas production at currently favorable price indices such as TCO, Chicago, and CGTLA.

Other Updates

Antero's average realized natural gas price before hedging for the second quarter of 2015 was $2.20 per Mcf, a $0.44 per Mcf negative differential to the average Nymex price for the period.  Approximately 62% of Antero's second quarter 2015 natural gas production was sold at favorable price indices including TCO, Chicago and Nymex.  The percentage of natural gas production sold at currently favorable indices is expected to increase further upon completion of a third party regional gathering pipeline, anticipated by the end of 2015, which will provide Antero with access to firm transport to the Gulf Coast and Mid-Atlantic areas. When the pipeline is operational, Antero expects an approximate $0.80 per Mcf improvement from the Dominion South and Tetco M2 directed gas realizations, based on current strip pricing, which would result in approximately $150 million of incremental EBITDA during 2016. 

Antero's average realized natural gas price after hedging for the second quarter of 2015 was $3.86 per Mcf, a $1.22 per Mcf positive differential to the average Nymex price for the period.  For the second quarter of 2015, Antero realized a cash settled natural gas hedge gain of $182 million, or $1.66 per Mcf.  This cash settled natural gas hedge gain included $84 million associated with hedges at the Dominion South index, $77 million associated with Nymex hedges, $16 million associated with hedges at the TCO index and $5 million associated with hedges at the Columbia Gulf Coast Onshore index.    

Antero's average realized C3+ natural gas liquid ("NGL") price before hedging for the second quarter of 2015 was $16.29 per barrel, or approximately 28% of the average WTI oil price average for the period.  The Company's average realized NGL price after hedging for the quarter was $19.51 per barrel, or 34% of the average WTI oil price average for the period.  For the second quarter of 2015, Antero realized a cash settled NGL hedge gain of $12 million, or $3.22 per barrel.  Antero's NGL barrels are comprised of propane, butane and heavier liquids, as ethane is rejected at the gas processing plant and sold in the natural gas stream.  Antero has 23,000 barrels per day of propane hedged for the remainder of 2015 at $0.63 per gallon and 30,000 barrels per day of propane hedged in 2016 at $0.59 per gallon.

As previously announced, Antero committed to a 61,500 Bbl/d (11,500 barrels of ethane, 35,000 barrels of propane and 15,000 barrels of butane) 10-year transport, terminal and storage agreement with Sunoco Logistics Partners LP related to its Mariner East II Project. The Mariner East II Project is expected to be operational by the end of 2016 and will connect Antero's NGL resources in the Marcellus and Utica Shale to Sunoco's existing infrastructure and international port at its Marcus Hook facility near Philadelphia, Pennsylvania.  Once the pipeline is operational, Antero expects an approximate $5.00 to $6.00 per barrel improvement in C3+ NGL realizations as compared to current Mont Belvieu strip pricing and differentials on the committed 50,000 barrels per day of 2017 gross propane and butane production, which would result in approximately $100 million of incremental EBITDA during 2017.

Antero's average realized oil price before hedging for the second quarter of 2015 was $44.06 per barrel, a $13.58 per barrel negative differential to the average WTI oil price.  The Company's average realized oil price after hedging for the quarter was $47.33 per barrel, a $10.31 per barrel negative differential to the average WTI oil price.  For the second quarter of 2015, Antero realized a cash settled oil hedge gain of $2 million, or $3.27 per barrel. 

Antero's liquids production and realizations for the second quarter of 2015 added an incremental $0.20 per Mcfe, increasing the average natural gas equivalent realized price before hedging from $2.20 per Mcfe to $2.40 per Mcfe.  The average all-in natural gas equivalent price, including NGLs, oil and hedge settlements, was $3.85 per Mcfe for the second quarter of 2015.

Commenting on product pricing including NGLs and hedging, Glen Warren, President and Chief Financial Officer, said "While we saw a material downturn in realized NGL prices during the quarter, our expected NGL production is well-hedged through 2016 and we plan to gain access to additional export market growth through our 61,500 Bbl/d commitment on the Mariner East II project, which is expected to be online in the fourth quarter of 2016.  On the natural gas front, we continued to benefit from our attractive hedge position and attractive firm transport portfolio, resulting in a $1.22 per Mcf premium to Nymex.  Upon completion of the regional gathering pipeline expected in the fourth quarter of this year, we estimate an increase in the percentage of our gas sales at currently favorable indices from 62% achieved during the second quarter of 2015 to approximately 85% in 2016.  These price realizations continue to highlight the value of our hedge position and our firm transport agreements."