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Antero Sees 115% Gas Production Increase in Q2
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Antero Resources has reported its second quarter 2013 results.
Highlights:
- Net daily production averaged 458 MMcfe/d, up 115% over second quarter 2012 production from continuing operations
- Net daily liquids production averaged 4,160 Bbl/d, up 74% over first quarter 2013 liquids production
- Reported GAAP earnings were $131 million and adjusted net income was $34 million
- EBITDAX was $133 million, up 120% over second quarter 2012 EBITDAX from continuing operations
- Current estimated combined net production is 580 MMcfe/d including 8,400 Bbl/d of NGLs and condensate
- Producing 35 MMcfe/d net (6,200 Boe/d) from Utica including 1,500 Bbl/d of liquids with first two wells flowing to processing
- Antero's first 11 Utica Shale wells had average 24-hour peak rate of 5,600 Boe/d, a 6,300 ft lateral and 57% liquids (ethane recovery assumed)
- Antero's first four Marcellus wells with shorter stage lengths had average 24-hour peak rate of 25.3 MMcfe/d, a 7,000 ft lateral, 190 ft stages and 45% liquids (ethane recovery assumed)
- 18 Antero-operated drilling rigs currently running in Marcellus and Utica
- Lender commitments on credit facility increased by 21% to $1.45 billion
- Proved reserves increased 47% from year-end 2012 to 6.3 Tcfe at mid-year in each case assuming ethane rejection
Recent Developments
Effective June 27, 2013, the lender commitments under Antero's credit facility increased to $1.45 billion. This represents a $250 million increase over Antero's previous lender commitments of $1.2 billion. The $1.45 billion in commitments can be expanded to the full $1.75 billion borrowing base upon lender approval. The next borrowing base redetermination is expected to occur in September 2013. Antero has $25 million of debt maturing prior to the May 2016 maturity date of the credit facility.
Antero's proved reserves at June 30, 2013 were 6.3 Tcfe, a 47% increase compared to reserves at December 31, 2012, in each case assuming ethane rejection. The June 30, 2013 reserves exclude 178 MMBbls of ethane which are not recovered through processing due to current SEC price assumptions for ethane and methane. Proved, probable and possible reserves (3P) taken in the aggregate totaled 27.7 Tcfe at June 30, 2013, a 28% increase compared to 3P reserves in the aggregate at December 31, 2012, also assuming ethane rejection. The aggregate 3P reserves exclude 984 MMBbls of ethane. The June 30, 2013 3P reserves were comprised of 18.7 Tcfe in the Marcellus Shale, 5.3 Tcfe in the Utica Shale and 3.8 Tcfe in the Upper Devonian Shale.
Capital Spending
Antero's drilling and completion costs for the six months ended June 30, 2013 were $758 million including $84 million for our 200-miles of water-handling infrastructure projects in the Marcellus and Utica Shales. In addition, during the first half of 2013, $271 million was expended on acreage purchases, $152 million on gas gathering systems and $84 million on water-handling infrastructure. In the Marcellus, $621 million funded the drilling of 74 (72 net) wells and the completion of previously drilled wells as well as $63 million on water-handling infrastructure. A further $126 million was expended on acreage purchases and $96 million on gas gathering systems. In the Utica, $53 million funded the drilling of 11 (9 net) wells and the completion of previously drilled wells and $21 million was expended on water-handling infrastructure, $145 million on acreage purchases and $56 million on gas gathering systems.
Antero Operations
All operational figures are as of the date of this release unless otherwise noted.
During the month of July 2013, Antero estimates that net production averaged 461 MMcfe/d including 4,500 Bbl/d of liquids. Antero's current estimated net daily production is 580 MMcfe/d, including non-operated production, NGLs and oil. Current estimated gross operated production is 660 MMcf/d. Antero has an additional estimated 160 MMcfe/d of net production associated with 14 completed and tested horizontal wells in the Marcellus and Utica Shales that are shut-in waiting on infrastructure and a number of producing wells that are constrained and waiting on additional pipeline and compression facilities. The current estimated net daily production is comprised of 533 MMcf/d of natural gas and 8,400 Bbl/d of NGLs and condensate. During the second quarter of 2013, Antero completed 33 gross (32 net) operated wells in the Marcellus and Utica Shales and currently has 57 gross (54 net) operated wells in various stages of drilling, completion, or waiting on completion in the Marcellus and Utica Shale projects.
Individual updates on the company's Marcellus and Utica operations can be found below:
Antero Sees Utica Production Delayed in Q2; Plans Rig Additions
Antero Boasts Shorter Stage Lengths in Marcellus Shale
2013 Outlook
Due to the pending registration of Antero's securities with the SEC, Antero will no longer provide its outlook for the remainder of 2013. In addition, Antero's previously announced outlook for 2013 should no longer be relied upon.
Financial Results
Net production for the second quarter of 2013 increased to 42 Bcfe, a 115% increase over net production from continuing operations in the second quarter of 2012. Second quarter 2013 net production increased 20% from net production of 34 Bcfe in the first quarter 2013. The sequential net production increase was primarily driven by production from 26 new wells brought on line in the second quarter of 2013 in the Marcellus Shale. Net production of 42 Bcfe for the second quarter of 2013 was comprised of 39 Bcf of natural gas, 354,000 barrels of NGLs and 25,000 barrels of oil. Net daily production averaged 458 MMcfe/d for the second quarter of 2013 and was comprised of 433 MMcf/d of natural gas (95%), 3,891 Bbl/d of NGLs (4%) and 269 Bbl/d of crude oil (1%). Second quarter 2013 net daily liquids production of 4,160 Bbl/d increased 74% from net daily liquids production in the first quarter of 2013.
Revenues for the second quarter of 2013 were $387 million as compared to $39 million for the second quarter of 2012. Revenues for the second quarter of 2012 included a $56 million unrealized loss on commodity derivative instruments while the second quarter of 2013 included a $181 million unrealized gain on commodity derivatives due to a decline in natural gas prices in the second quarter of 2013. Liquids production (NGLs and oil) contributed 10% of oil, NGLs and natural gas sales before commodity hedges in the second quarter of 2013 compared to less than 1% during the second quarter of 2012. Non-GAAP adjusted net revenues increased 117% to $206 million compared to the second quarter of 2012 (including cash-settled derivatives but excluding unrealized derivative gains and losses).
Average natural gas prices before hedges increased 89% from the prior-year quarter to $4.37 per Mcf and average natural gas-equivalent prices before hedges increased 98% to $4.60 per Mcfe. Average realized gas prices including hedges were $4.74 per Mcf for the second quarter of 2013, a 3% decrease as compared to the second quarter of 2012. Average gas-equivalent prices including NGLs, oil and hedges, increased by 1% to $4.94 per Mcfe for the second quarter of 2013 as compared to the second quarter of 2012. For the second quarter of 2013, Antero realized natural gas hedging gains of $0.34 per Mcfe.
The Company had net income of $131 million on a GAAP basis for the second quarter of 2013, including $181 million of unrealized gains on commodity derivatives driven by a decrease in futures prices from the previous quarter-end and the realization of $14 million of commodity gains during the quarter. Excluding the unrealized gain on commodity derivatives and the related income tax expense, adjusted net income, a non-GAAP measure, was $34 million for the second quarter of 2013 as compared to $8 million for the prior year quarter.
For the second quarter of 2013, cash flow from continuing operations before changes in working capital, a non-GAAP financial measure, increased 195% from the prior-year quarter to $92 million. EBITDAX from continuing operations of $133 million for the second quarter of 2013 was 120% higher than the prior-year quarter due to increased production and revenues.
Per unit cash production costs (lease operating, gathering, compression, processing and transportation, and production tax) for the second quarter of 2013 were $1.44 per Mcfe a 10% increase compared to $1.31 per Mcfe in the prior year quarter. The increase was primarily driven by processing fees incurred in the Marcellus Shale in the second quarter of 2013 following the opening of the MarkWest Energy Partners, L.P. (MarkWest) Sherwood I plant in October 2012. Per unit depreciation, depletion and amortization expense increased 10% from the prior year quarter to $1.27 per Mcfe, primarily driven by higher depreciation on gas gathering assets as the Company continued to build out its gas gathering system in the rich gas areas of the Marcellus and Utica Shales. On a per unit basis, general and administrative expense for the second quarter of 2013 was $0.33 per Mcfe, a 39% decrease from the second quarter of 2012, primarily driven by the increase in gas-equivalent production.