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Antero Resources Third Quarter 2020 Results

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   |    Monday,November 02,2020

Antero Resources announced its third quarter 2020 financial and operational results. 

Q3 Highlights Include:

  • Net production averaged 3,772 MMcfe/d, including 220,000 Bbl/d of liquids (65% natural gas by volume)

  • Realized natural gas equivalent price including hedges averaged $2.92 per Mcfe, a $0.94 premium to NYMEX pricing

  • Net loss was $536 million , due to a $749 million unrealized commodity hedge movement in fair value driven by the impact of a 10% increase in the natural gas strip during the quarter

  • Adjusted EBITDAX was $272 million (Non-GAAP); net cash provided by operating activities was $176 million

  • Free Cash Flow before changes in working capital was $88 million (Non-GAAP)

  • Drilling and completion capital expenditures were $161 million , down 11% sequentially and 44% from the year ago period

  • Well costs were $640 per lateral foot including roads, pad and facility costs with an average lateral length of 15,900 feet

  • Net marketing expense was $0.11 per Mcfe, the lowest since Antero gained access to its full firm transportation portfolio

  • Released 300 MMcf/d of firm transportation commitments effective in 2021, reducing expected 2021 costs by $25 million

  • Repurchased $461 million of senior notes principal, inclusive of the previously announced tender offers, at a 13% weighted average discount during the quarter

  • Borrowing base under the credit facility was reaffirmed at $2.85 billion , $210 million above the $2.64 billion of lender commitments

  • Published annual Corporate Sustainability Report citing industry-low greenhouse gas intensity, methane leak loss rate, no gas flaring and set environmental reduction goals for 2025

Paul Rady , Chairman and Chief Executive Officer of Antero Resources commented, "Our third quarter results highlight the exceptional operational momentum that continues at Antero.  Our development program and well results continue to exceed expectations, which drove the quarterly production outperformance.  Antero's long-haul firm transportation portfolio allowed for no shut-ins or curtailments and delivered gas sales at just $0.05 per Mcf below NYMEX prices during a period of wide regional basis differentials.  Our operational and strategic advantages combined with an improving backdrop for natural gas and NGLs support our expectation of significant free cash flow generation during the second half of 2020. 

"Earlier this month we published our annual Corporate Sustainability Report, which highlights our outstanding environmental, social, and governance ("ESG") performance and unwavering commitment to being an industry leader in ESG metrics.  We believe that natural gas will be key to the energy transition over the coming decades as it compliments renewable energy growth.  As the third largest natural gas producer in the U.S., we are well positioned to maintain our peer-leading ESG position and be a natural gas provider of choice.  Finally, we are committed to improving our already low greenhouse gas metrics even further as we work to achieve our 2025 environmental goals."

Glen Warren , CFO and President of Antero Resources said, "We have delivered on our commitment to reduce debt through a combination of $751 million of asset sales and debt repurchases at a discount.  Our debt repurchase program which we launched in late 2019, has resulted in a $1.3 billion reduction in near-term maturities and the elimination of $220 million of total debt due to the realized discount.  During the second half of 2020, we expect to generate $175 to $200 million in free cash flow, based on today's strip prices, and to receive the first of two $51 million contingency payments from our overriding royalty holder, Sixth Street Partners, providing additional funds for debt retirement.  By year-end 2020 we estimate that Antero will have reduced total debt by over $800 million .  Longer term, we are committed to maximizing free cash flow and further reducing total debt and financial leverage."

Asset Sale Program Update

Since the announcement of the Company's $750 million to $1 billion asset sale target in December 2019 , Antero has closed $751 million of transactions as detailed in the table below.  Proceeds received to date have been used to repurchase debt at a discount.  The Company intends to continue to evaluate other opportunities for asset monetizations with the proceeds earmarked for further debt reduction.  



Antero Midstream Common Stock Sale (December 2019)


ORRI Transaction (June 2020) (1)


Hedge Monetization (July 2020) (2)


VPP Transaction (August 2020)


Total Asset Sale Proceeds to Date





Includes $102 million of contingent payments, $51 million of which was earned based on volume thresholds met during the third quarter of 2020. The remainder may be earned based on achieving volume thresholds through the first quarter of 2021.


Includes hedge monetization related to the ORRI transaction that resulted in Antero being over-hedged on natural gas.

Debt Repurchases

Antero repurchased $461 million principal amount of senior notes during the third quarter of 2020 at a 13% weighted average discount price.  The total includes the results of the completed tender offer for Antero's senior notes maturing in 2021, 2022 and 2023. The repurchase discount during the third quarter reduced total indebtedness by $59 million .  Since the commencement of the debt repurchase program in the fourth quarter of 2019, Antero has repurchased $1.3 billion of debt principal at a 17% weighted average discount.  This discount alone reduced total indebtedness by $220 million , while interest expense has been reduced by $34 million on an annualized basis. 

The table below shows the principal amount of our senior notes repurchased between September 30, 2019 and 2020.



Par Value at
September 30,
















5.375% Senior Notes Due 2021










5.375% Senior Notes Due 2022










5.375% Senior Notes Due 2023










5.375% Senior Notes Due 2025




















Borrowing Base Redetermination Completed

As a result of the recently completed October 2020 borrowing base redetermination, the borrowing base under Antero Resources' credit facility was reaffirmed at $2.85 billion .  Lender commitments under the credit facility remained at $2.64 billion , supported by 24 banks.  Antero has $1.1 billion in available liquidity under its credit facility as of September 30, 2020 .

Firm Transportation Commitments

Antero's firm transportation commitments will decline by 810 MMcf/d by year end 2024 at Antero's option. Of that, 300 MMcf/d of firm transportation commitments will expire during 2021 and notice has been given to the pipeline counterparties to that effect.  If Antero elects to release the remaining 510 MMcf/d, the annual reduction in demand fees will total $100 million by 2024.  The released commitment volumes are expected to reduce net marketing expense by approximately $25 million in 2021 and $60 million in 2022, as compared to 2020 levels, assuming maintenance level capital spending.

Third quarter net marketing expense of $0.11 per Mcfe was the lowest since Antero's full firm transportation portfolio was completed in 2018.  As basis differentials widened during the third quarter of 2020, Antero's firm transportation portfolio allowed for the flow of its production without any shut-ins or curtailments and shielded it from the wide regional basis to NYMEX prices.  During the month of September, when the regional basis differential expanded to over $1.50 per Mcf, Antero's firm transportation provided a $38 million benefit relative to selling gas in-basin, net of utilized transportation expense and unutilized marketing expense.  The wide basis differentials continued during October and Antero experienced similar benefits from its firm transportation portfolio. 

Third Quarter 2020 Free Cash Flow

Antero generated $88 million in Free Cash Flow before changes in working capital during the third quarter.  After adjusting for working capital investments of $80 million during the quarter, Free Cash Flow was $7 million . Antero expects working capital adjustments to reverse during the fourth quarter of 2020 and continues to expect Free Cash Flow of $175 to $200 million during the second half of 2020, assuming strip pricing.



Three Months Ended
September 30,








Net Cash Provided by Operating Activities






Less: Capital Expenditures






Less: Distributions to Non-Controlling Interests






Free Cash Flow






Changes in Working Capital






Free Cash Flow before changes in working capital






Corporate Sustainability Report

Antero published its 2019 Corporate Sustainability Report ("CSR") in October detailing the Company's ongoing commitment to environmental excellence, strong governance, safe operations and the communities in which it operates. The report highlights Antero's leadership in greenhouse gas (GHG) intensity, methane leak loss rate and safety metrics.  Within the report, Antero set in place year 2025 environmental goals which include a 50% reduction in its 2019 methane leak loss rate to under 0.025%, a 10% reduction in GHG intensity, alignment with TCFD and SASB reporting guidelines and endeavoring to achieve net zero carbon emissions through operational improvements and carbon offsets. 

The Company believes that natural gas will be key to the energy transition and the ability to address the risks associated with climate change. As the lightest and least GHG intensive hydrocarbon, natural gas is as important as wind and solar in the energy mix that allows the U.S. and the globe to transition to a lower carbon energy future.

COVID-19 Pandemic Developments

As a producer of natural gas, NGLs and oil, Antero Resources is recognized as an essential business under various federal, state and local regulations related to the COVID-19 pandemic and the communities in which it operates. The Company has continued to operate under these regulations, while taking steps to protect the health and safety of its workers.  Antero has implemented protocols to reduce the risk of an outbreak within its field operations, and these protocols have not had an impact on production or performance.  A substantial portion of the Company's non-field level employees have transitioned to remote work from home arrangements.  Antero has been able to maintain a consistent level of effectiveness, including maintaining day-to-day operations and decision making, and financial reporting systems and internal control over financial reporting.  For more information, please see Antero's Quarterly Report on Form 10-Q for the quarter ended September 30 , 2020.   

Third Quarter 2020 Financial Results

For the three months ended September 30, 2020 , Antero reported a GAAP net loss of $536 million , or $1.99 per diluted share, compared to a GAAP net loss of $879 million , or $2.86 per diluted share, in the prior year period.  The loss was driven by a $749 million unrealized commodity derivative fair value loss as a result of the 10% rise in the natural gas strip pricing during the quarter.  Adjusted Net Income (non-GAAP measure) was $15 million , or $0.05 per diluted share, compared to Adjusted Net Loss of $150 million during the three months ended September 30, 2019 , or $0.49 per diluted share. 

Adjusted EBITDAX (non-GAAP measure) was $272 million , a 5% increase compared to the prior year period driven by lower operating costs and increased production.  Antero's average realized gas equivalent price after hedges declined by 7% from $3.13 per Mcfe in the third quarter of 2019 to $2.92 per Mcfe in the third quarter of 2020, a $0.94 per Mcf premium to NYMEX pricing.

The following table details the components of average net production and average realized prices for the three months ended September 30, 2020 :



Three months ended September 30, 2020




























Natural Gas




C3+ NGLs




Gas Equivalent














Average Net Production





















































































Natural Gas




C3+ NGLs




Gas Equivalent


Average Realized Prices












Average realized prices before settled derivatives

















Settled commodity derivatives

















Average realized prices after settled derivatives


































NYMEX average price

















Premium / (Differential) to NYMEX

















Net daily natural gas equivalent production in the third quarter averaged 3,772 MMcfe/d, including 219,859 Bbl/d of liquids (65% natural gas by volume), a new company record.  Net production increased 12% from the prior year period.  Throughput on Antero Midstream's low pressure gathering system was in excess of the third quarter 2020 growth incentive fee threshold of 2,800 MMcf/d, resulting in a $12 million rebate to Antero Resources.

Antero's average realized natural gas price before hedging was $1.93 per Mcf, representing a 23% decrease versus the prior year period. Despite a sharp widening in the regional basis differential during the quarter, Antero realized a $0.05 per Mcf discount to the average NYMEX Henry Hub price through the use of its premium firm transportation to NYMEX-based markets.  Antero expects its pre-hedge natural gas differentials to return to a $0.00 to $0.10 premium to NYMEX in the fourth quarter of 2020.  Including hedges, Antero's average realized natural gas price was $2.73 per Mcf, a $0.75 premium to the average NYMEX price. 

Antero's average realized C3+ NGL price before hedging was $22.01 per barrel, a 47% sequential improvement and a 2% decrease versus the prior year period.  Antero shipped 49% of its total C3+ NGL net production on Mariner East 2 for export and realized a $0.06 per gallon premium to Mont Belvieu pricing on these volumes at Marcus Hook, PA.  Antero sold the remaining 51% of C3+ NGL net production at a $0.10 per gallon discount to Mont Belvieu pricing at Hopedale, OH.  The resulting blended price on 145,654 Bbl/d of net C3+ NGL production was $22.01 per barrel, which was a $0.02 per gallon discount to Mont Belvieu pricing.  Antero expects to sell at least 50% of its C3+ NGL production in 2020 at Marcus Hook for export at a premium to Mont Belvieu.    



Three months ended September 30, 2020



Pricing Point


Net C3+ NGL



% by


Premium (Discount)

To Mont Belvieu

Propane / Butane exported on ME2

Marcus Hook, PA







Remaining C3+ NGL volume

Hopedale, OH







Total C3+ NGLs/Blended Premium  









All-in cash expense, which includes lease operating, gathering, compression, processing and transportation, production and ad valorem taxes, net marketing, and general and administrative expense (excluding equity-based compensation) was $2.21 per Mcfe in the third quarter, a 10% decrease compared to $2.46 per Mcfe average during the third quarter of 2019.  Lease operating expense was $0.06 per Mcfe in the third quarter, a 50% decline from $0.12 per Mcfe in the year ago period driven by a decrease in water handling costs as Antero increased water blending and reuse in completion operations.  G&A expense was $0.07 per Mcfe, a 30% decrease from the third quarter of 2019 primarily due to a lower employee headcount and a 12% increase in production. 

Per unit net marketing expense declined to $0.11 per Mcfe in the third quarter, compared to $0.20 per Mcfe reported in the prior year period.  The decline was driven primarily by higher production volumes during the quarter and wide regional basis differentials resulting in less unutilized transportation capacity. 

Third Quarter 2020 Operating Update

Marcellus Shale 

Antero placed 27 horizontal Marcellus wells to sales during the third quarter with an average lateral length of 11,937 feet. Fifteen of the 27 new wells have been on-line for at least 60 days and the average 60-day rate per well was 24.5 MMcfe/d, including approximately 1,169 Bbl/d of liquids assuming 25% ethane recovery.  Year-to-date, Antero has averaged over 6,000 feet per day drilling the lateral section of its wells.  Additionally, Antero's ongoing emphasis on completion efficiencies resulted in an improvement during the third quarter to 8.5 stages completed per day. 

These efficiency gains led to average all-in well costs of $675 per lateral foot, normalized to a 12,000 foot lateral.  This represents a 30% reduction in all-in well cost per lateral foot since the beginning of 2019.  The vast majority of the improvement in well costs has been driven by operational efficiency and process changes.  Actual well costs averaged $640 per lateral foot during the third quarter as the average lateral length drilled was 15,900 feet.  All-in well costs are expected to average $675 per lateral during the fourth quarter for a 12,000 foot lateral.  Antero currently has one drilling rig and one completion crew running.

Third Quarter 2020 Capital Investment

Antero's drilling and completion capital expenditures for the three months ended September 30, 2020 , were $161 million .  Through the first nine months of 2020, Antero has turned in line 96 of the projected 105 well completions planned for the year.  Antero anticipates a decline in capital spending during the fourth quarter of 2020, reflecting reduced drilling and completion activity with full year drilling and capital spend of $750 million , unchanged from prior guidance.  In addition to capital invested in drilling and completion costs, the Company invested $10 million in land during the third quarter.  For a reconciliation of accrued capital expenditures to cash capital expenditures see the table on page 11.

Balance Sheet and Liquidity

As of September 30, 2020 , Antero's total debt was $3.2 billion , of which $827 million were borrowings outstanding under the Company's revolving credit facility.  Antero has a borrowing base of $2.85 billion with lender commitments that total $2.64 billion .  After deducting letters of credit outstanding of $730 million , the Company had $1.1 billion in available liquidity at September 30 , 2020.  Net debt to trailing twelve month Adjusted EBITDA ratio was 3.2x as of September 30, 2020 , down from the prior quarter's ratio of 3.6x.

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