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Antero Resources First Quarter 2022 Results

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   |    Thursday,April 28,2022

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

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 $156 million, Adjusted Net Income was $360 million (Non-GAAP)
  • Adjusted EBITDAX was $707 million (Non-GAAP); net cash provided by operating activities was $566 million
  • Free Cash Flow was $465 million before Changes in Working Capital (Non-GAAP)
  • Repurchased $100 million 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 $1.96 billion
  • 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 March 31, 2022, Antero's total debt was $1.96 billion, including $388 million 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 $585 million 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 $1.0 billion 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 $465 million of Free Cash Flow before Changes in Working Capital. Free Cash Flow after Changes in Working Capital was $315 million.

First Quarter 2022 Financial Results

Net loss was $156 million, or $0.50 per diluted share, compared to net loss of $15 million, or $0.05 per diluted share, in the prior year period. Adjusted Net Income was $360 million, or $1.15 per diluted share, compared to Adjusted Net Income of $183 million, or $0.62 per diluted share, in the prior year period.

Adjusted EBITDAX was $707 million, 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.

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

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 $175 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 $24 million 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 $1 million 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 March 31, 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.

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