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July 2018 Corporate Presentation – Antero Resources

Antero Resources · Jul 12, 2018 · 74 slides

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Slides

  1. July 2018 Corporate Presentation – Antero Resources – slide 1
    Company Presentation JULY 2018
  2. July 2018 Corporate Presentation – Antero Resources – slide 2
    The Size and Scale to Capitalize on the Resource Antero Resources Profile Market Cap............ 6.7B Enterprise Value. 10.3B Corporate Debt Ratings Ba2 / BB+ / BBB- Stand-Alone Leverage.. 2.5x Net Production (2018E)....... 2.7…
  3. July 2018 Corporate Presentation – Antero Resources – slide 3
    Organizational Structure An 18B Integrated Natural Gas and NGL Business Sponsors(1) Public Sponsors(1) Public 27% 73% 67% 33% NYSE: AR 100% Incentive NYSE: AMGP Distribution Rights E&P Enterprise Value: 7.4B Enterprise…
  4. July 2018 Corporate Presentation – Antero Resources – slide 4
    The Leader in All-In Realized Pricing in Appalachia Integrated strategy including the most effective firm transportation portfolio, NGL production growth, midstream build out and hedging resulted in the highest all-in realized prices…
  5. July 2018 Corporate Presentation – Antero Resources – slide 5
    More Importantly, The Leader in EBITDAX Margin Too Anteros integrated strategy has generated the highest EBITDAX margins in its peer group for over five years EBITDAX Margin WTI Price (/Mcfe) EBITDAX Margin vs WTI Oil Price (/Bbl)…
  6. July 2018 Corporate Presentation – Antero Resources – slide 6
    A Cash Flow Inflection Point Joining an Announced Longer Lateral Elite E&P Development Plan Group With: Averaging 11,500 per Well Sustainable Cash Flow Growth Scale Step Change in Capital Generating 5-Year Free Cash Efficiency…
  7. July 2018 Corporate Presentation – Antero Resources – slide 7
    Long Lateral Development Plan 59% of Inventory Now 5-Year Plan Averages 11,500 10,000 Lateral Length Average Lateral Length Core Drilling Inventory by Lateral Length per Completed Well 14,000 1,600 12,700 1,450 10,800…
  8. July 2018 Corporate Presentation – Antero Resources – slide 8
    Step Change in Capital Efficiency Consolidated Drilling & Completion Capital Production Targets Expenditures As of December 2016 As of December 2017 As of December 2016 As of December 2017 2.5 2.4 2.9B Capex Reduction 6.0 2.2…
  9. July 2018 Corporate Presentation – Antero Resources – slide 9
    Breakdown of D&C Capex Savings D&C Capex Capital Allocation Lateral Lengths Cycle Times & Enhanced Well Cost Savings Savings Recoveries 0.4B Well Cost Savings Related to reduced AFEs including lower flowback 1.1B water…
  10. July 2018 Corporate Presentation – Antero Resources – slide 10
    Drilling and Completion Efficiencies Drilling Days Completion Stages per Day 35 12.0 10.0 30 10.0 9.0 Stages per Day 25 Drilling Days 8.0 20 15.5 6.0 5.1 15 11.5 4.3 10.0 4.0 10 8.0 5 2.0 0 - 2014 2015 2016 2017 1Q 2018 RECORD 2014…
  11. July 2018 Corporate Presentation – Antero Resources – slide 11
    Drilling Best Lateral Footage in 2018 Antero Top 15 Marcellus Lateral Footage Days (24 Hour Period) 2018 Drilling 2016 2017 Drilling 9,000 8,206 8,178 Drilling efficiencies 7,987 8,000 7,786 7,573 continue in 2018 7,000 6,000 5,000…
  12. July 2018 Corporate Presentation – Antero Resources – slide 12
    <p>Highest Leverage to NGL Prices Among Top Producers Top NGL Producers in the U.S. 1Q18 Daily NGL Production Including Recovered Ethane 115.0 45% Pre-Hedge Realized NGL Price Pre-hedged Realized Price (/Bbl) NGL % of Product…
  13. July 2018 Corporate Presentation – Antero Resources – slide 13
    Outstanding Corporate Level Well Economics Single Well Economics Excluding Hedges Well Economics Support Investment Full Cycle ROR Half Cycle ROR Full Cycle ROR at 70/Bbl Half Cycle ROR at 70/Bbl ROR Well in Excess of Cost of Capital…
  14. July 2018 Corporate Presentation – Antero Resources – slide 14
    Lower Capital & Higher Liquids Free Cash Flow D&C Capital Investment Fully Funded with Cash Flow 1.6B of Targeted Free Cash Flow Over the Next 5 Years 5-Year Stand-Alone Free Cash Flow: Cumulative 1,500 Stand-Alone E&P Free…
  15. July 2018 Corporate Presentation – Antero Resources – slide 15
    Cash Flow Growth Deleveraging Profile 12/31/17 Strip Pricing (Base Case) 60 Oil / 2.85 Gas 5.0x 50 Oil / 2.85 Gas S&P Upgrade to BB+ 23% Debt-Adjusted 4.5x Moodys Ba2 Outlook Positive Production CAGR 3.9x BBB- Rating…
  16. July 2018 Corporate Presentation – Antero Resources – slide 16
    Antero Profile Should Drive Multiple Expansion Median Debt/ Median EV/ of Adjusted 2018 Adj. Companies EBITDAX EBITDAX AR 2018E unhedged U.S. Publicly Traded E&Ps EBITDAX 52 2.4x 6.6x Multiple: 5.4x Premium for: Leverage <…
  17. July 2018 Corporate Presentation – Antero Resources – slide 17
    Attractive Free Cash Flow Yield Assuming current stock prices, Antero should deliver free cash flow yield well in excess of both the integrateds and the best in class E&P peers AR 8% 7% FCF Yield(1) Surpasses Industry Leading…
  18. July 2018 Corporate Presentation – Antero Resources – slide 18
    Scale & Growth: Liquids-Rich Resource Meets Capital Efficiency
  19. July 2018 Corporate Presentation – Antero Resources – slide 19
    Positioned in the Core of the Core Antero Acreage Antero Marcellus Wells Northern Rich Industry Marcellus Wells High-Graded Core Antero Marcellus Rig 283,000 acres Industry Marcellus Rig 2.24 Bcfe/1,000 Avg. EUR 1,300 lb/ft…
  20. July 2018 Corporate Presentation – Antero Resources – slide 20
    Largest Undrilled Core Drilling Inventory Undrilled Core Marcellus &amp; Utica Locations(1) Marcellus &amp; Utica Liquids Rich Locations SW Marcellus &amp; Utica Dry Locations NE Pennsylvania Dry Locations 4,000 3,500 Who Can…
  21. July 2018 Corporate Presentation – Antero Resources – slide 21
    A Pioneer in Longer Lateral Development in Appalachia Antero Historical &amp; Future Lateral Length Program 300 of Avg. Lateral Antero Wells Length Total Drilling Program 250 945 8,275 to Date 103 2018-2022 Program(2) 790 11,425 57…
  22. July 2018 Corporate Presentation – Antero Resources – slide 22
    Longer Laterals Scale the Resource EURs by Marcellus Lateral Lengths EUR in Bcfe/1,000' 2.3 Bcfe/1,000' R2 = .73 45 A 1:1 Proportional 40 Increase in EURs with 35 Longer Laterals Antero well results show no evidence of degradation in…
  23. July 2018 Corporate Presentation – Antero Resources – slide 23
    The Longer, the Better Single Well Economics by Lateral Lengths PV-10 (MM) ROR (%) 25.0 100% 89% 90% 77% 20.0 80% 21.0 58% 15.0 60% 16.6 10.0 40% 11.9 5.0 7.1 20% - 0% 6,000' Lateral 9,000' Lateral 12,000' Lateral 15,000' Lateral 60%…
  24. July 2018 Corporate Presentation – Antero Resources – slide 24
    Declining Well Costs Longer Laterals the Next Step Historical Well Costs Marcellus Utica 41% 43% 2014 2017 2014 2017 Lower Costs 2.20 2.60 Marcellus Utica reduction in well costs 2.40 from 2014 to 2017 for a 9,000 lateral 2.00 - 54%…
  25. July 2018 Corporate Presentation – Antero Resources – slide 25
    Operating Evolution Continues Achievements Next Steps in 2018 Marcellus Well Cost(1) to Date Efficiency Evolution Facilities, Pad Flowback Water &amp; Road Drilling Rigs/Services 42% 5% Allocation 9% Fit-for-purpose rigs with dual…
  26. July 2018 Corporate Presentation – Antero Resources – slide 26
    Dramatically Lower F&amp;D Cost F&amp;D Cost per Mcfe(1)(2) Marcellus Utica 1.40 1.28 52% 42% 1.20 Lower F&amp;D in Marcellus Utica 1.00 0.94 0.88 0.80 0.73 0.73 0.74 0.60 0.51 0.42 0.40 0.20 0.00 2014 2015 2016 2017 Dramatic…
  27. July 2018 Corporate Presentation – Antero Resources – slide 27
    Rapidly Growing NGL Production Antero NGL Production Growth by Purity Product 250,000 Natural Gasoline (C5+) IsoButane (iC4) 245,000 Normal Butane (nC4) Propane (C3) Ethane (C2) C3+ Production 200,000 C2 Total (Bbl/d) 150,000 C2 Ethane…
  28. July 2018 Corporate Presentation – Antero Resources – slide 28
    Strong Propane Fundamentals Current propane days of supply are 15% Material reduction in U.S. propane below the 5-year average inventories relative to the 5-year average Propane Days of Supply U.S. Propane Inventories 80 120 MB…
  29. July 2018 Corporate Presentation – Antero Resources – slide 29
    Winter Propane Futures are Historically Conservative Spring (Apr - Jun) Winter (Dec - Feb) Winter Propane Prices vs. Mont Belvieu Propane Prices Mont Belvieu Propane Futures 1.10 Prior Spring Prices(1): 5-year historical prices…
  30. July 2018 Corporate Presentation – Antero Resources – slide 30
    C3+ NGLs: Price Improvement Strong NGL Prices Expect to Continue Through 2018 Mont Belvieu Product Pricing (/Gallon) AR C3+ Barrel 1Q 2018 Actuals Balance 2018 (1) Propane 57% 0.87 0.94 N. Butane 16% 0.84 1.08 2.00 IsoButane 10% 1.05…
  31. July 2018 Corporate Presentation – Antero Resources – slide 31
    Powerful C3+ NGL Pricing Upside Exposure Significant Upside to C3+ NGL Pricing (2018 vs. 2017) C3+ Cash Flow Incremental C3+ Cash Flow 900 840 800 C3+ NGL Cash Flow (MM) 700 656 184 600 500 400 374 300 200 100 30.48/Bbl 39.00/Bbl…
  32. July 2018 Corporate Presentation – Antero Resources – slide 32
    Diversified Natural Gas Market Mix Antero Firm Transportation Portfolio in 2018 % of Gas Index Differential Sold TETCO M2 (0.53) 10% Local Mid-Atlantic (0.34) 6% Markets TCO (0.27) 16% 10% of FT Portfolio Gulf Coast (0.14) 41%…
  33. July 2018 Corporate Presentation – Antero Resources – slide 33
    Well Hedged at High Prices Relative to Strip Commodity Hedge Position Hedged Volume Average Index Hedge Price(1) Current NYMEX Strip(2) Mark-to-Market Value(2) 100% of 2018 and 2019 Target Gas Production Hedged (/MMBtu) at 3.50/MMBtu…
  34. July 2018 Corporate Presentation – Antero Resources – slide 34
    A Paired Trade Hedges Support Firm Commitments Net Marketing Expense (High End) Hedge Portfolio Supports Net Marketing Expense (Low End) Firm Commitments Hedge Gains 585 0.48/Mcfe 600 469 0.45/Mcfe 5-Year Cumulative: 500…
  35. July 2018 Corporate Presentation – Antero Resources – slide 35
    Midstream Driving Value for AR Since Inception Antero Midstream Return on Investment for AR (Pre-tax)(1) 7,000 2,893 5,935 6,000 4.6x Cash Proceeds (SMM) 5,000 ROI 4,000 357 2,792 250 3,000 311 795 179 2,000 1,150…
  36. July 2018 Corporate Presentation – Antero Resources – slide 36
    Liquidity & Debt Term Structure 3/31/2018 Debt Maturity Profile AR Credit Facility AM Credit Facility AR Senior Notes AM Senior Notes 2,500 2,000 New credit facilities for AR and AM have allowed Antero to extend its average…
  37. July 2018 Corporate Presentation – Antero Resources – slide 37
    Deleveraging is Driving Ratings Momentum Corporate Credit Ratings History Stable Credit Ratings with Consistent Investment Grade Rating from Upgrades from the Beginning of the Fitch (BBB-) & Recent Decade Through the Downturn…
  38. July 2018 Corporate Presentation – Antero Resources – slide 38
    Antero Midstream Overview: Disciplined Capital Efficient Business Model
  39. July 2018 Corporate Presentation – Antero Resources – slide 39
    Antero Midstream At A Glance AM Highlights Antero Midstream Marcellus Assets Market Cap....... 5.5B Enterprise Value.......... 6.8B LTM Adjusted EBITDA(1).. 571 MM % Gathering/Compression 66% Smithburg Processing % Water..........…
  40. July 2018 Corporate Presentation – Antero Resources – slide 40
    Disciplined EBITDA Growth AM EBITDA and Leverage EBITDA Leverage 1,800 2014 IPO Leverage 3.0x Target: Low 2x 1,600 2.3x 2.5x 1,400 2.2x 2.1x 1,200 2.0x 1,000 1Q 2018 Leverage: 2.3x 1.5x 800 730 600 1.0x 529 404 400…
  41. July 2018 Corporate Presentation – Antero Resources – slide 41
    Capital Efficiency Drives Free Cash Flow Generation With No Change Leverage existing asset base 500MM in Capital and realization of full build-out Efficiencies to Throughput Volumes EBITDA multiples Over 2.4 billion of Free Cash…
  42. July 2018 Corporate Presentation – Antero Resources – slide 42
    Antero Midstream Project Economics Just-in-time capital investment philosophy drives attractive project IRRs AM Project Economics by Investment 45% 40% 40% 40% Weighted Internal Rate of Return 35% Avg: 25% IRR 30% 28% 30%…
  43. July 2018 Corporate Presentation – Antero Resources – slide 43
    Antero Midstream Return on Invested Capital AM Return on Invested Capital (ROIC) 2017 ROIC of 15% in 25% only fourth year of AM operations 20% Future organic growth 15% 15% capital leverages 13% existing trunklines and 12%…
  44. July 2018 Corporate Presentation – Antero Resources – slide 44
    Long-Term Distribution and Coverage Targets Unchanged capital investment philosophy with disciplined financial policies result in ability to target peer-leading distribution growth through 2022 Long-Term Distribution Targets and DCF…
  45. July 2018 Corporate Presentation – Antero Resources – slide 45
    Antero Midstreams Premier Asset Footprint Antero Midstream provides a customized full value chain midstream solution in the lowest cost natural gas and liquids basins: the Marcellus and Utica Shale Integrated system in the core of the…
  46. July 2018 Corporate Presentation – Antero Resources – slide 46
    Northeast Value Chain Opportunity 5-year identified project inventory of 2.7B plus an additional 1.0B of potential downstream opportunities Upstream Downstream AM Assets AM/MPLX JV Assets Potential AM Opportunities 800MM JV…
  47. July 2018 Corporate Presentation – Antero Resources – slide 47
    Most Integrated Natural Gas & NGL Business in the U.S. 53% of LP Units World Class E&P Operator in Appalachia A Leading Northeast Infrastructure Platform Contiguous Core Acreage Position Allows for Long Lateral Drilling and…
  48. July 2018 Corporate Presentation – Antero Resources – slide 48
    Appendix
  49. July 2018 Corporate Presentation – Antero Resources – slide 49
    2018 Guidance Stand-Alone E&P Consolidated Net Daily Production (Bcfe/d) 2.7 Net Liquids Production (BBl/d) 130,000 Natural Gas Realized Price Differential to 0.00 to 0.05 Premium Nymex C3+ NGL Realized Price 62.5% 67.5% (% of…
  50. July 2018 Corporate Presentation – Antero Resources – slide 50
    Antero Guidance and Long-Term Target Assumptions Stand-Alone E&P Consolidated 20% CAGR through 2020 and 15% Growth in each of Net Daily Production (MMcfe/d) 2021 and 2022 Natural Gas Realized Price Differential to 0.00 to 0.05…
  51. July 2018 Corporate Presentation – Antero Resources – slide 51
    Antero Guidance and Long-Term Target Assumptions (Cont.) Stand-Alone E&P Consolidated 10.4B Adjusted Operating Cash Flow(1) N/A (Cumulative 2018 2022) 1,500 1,600 (2018 2020) 1,300 1,400 (2018 2021) Annual D&C Capital…
  52. July 2018 Corporate Presentation – Antero Resources – slide 52
    Antero Long-Term Target Project Assumptions In-Service Date Rover Phase 2 2Q 2018 Mariner East 2 Mid-Year 2018 WB Xpress West 4Q 2018 WB Xpress East 4Q 2018 Mountaineer Xpress / Gulf Xpress YE 2018 Note: Based on…
  53. July 2018 Corporate Presentation – Antero Resources – slide 53
    D&C Capital Transparency D&C Capital (MM) 2018 2019 2020 Total Well Completions (I.e. First Sales) 145 155 160 Average Lateral 9,700 10,500 11,600 Adjusted Well Count (I.e. Based on Capital Timing) 155 157 150 Average Lateral…
  54. July 2018 Corporate Presentation – Antero Resources – slide 54
    Antero Long-Term Target Pricing Assumptions Commodity prices: All forecasts reflect the following commodity price cases: Base case: Strip commodity pricing at 12/31/17 (54.71 WTI crude oil & 2.84 Nymex Henry Hub) for 2018 - 2022…
  55. July 2018 Corporate Presentation – Antero Resources – slide 55
    Substantial Reserve Growth NET PROVED RESERVES (Tcfe)(1) (Tcfe) Marcellus Utica 18.0 17.3 16.0 15.4 14.0 12.7 13.2 10.8B Proved PV-10 12.0 2017 Year-End proved pre-tax PV-10 10.0 at SEC pricing, including 7.6 0.6B of hedge value…
  56. July 2018 Corporate Presentation – Antero Resources – slide 56
    Competitive Gathering and Compression Fee Structure 1 AR Pays Competitive Gathering & Compression Fees - ARs gathering and compression fees paid to AM are below the Appalachian average based on extensive internal analysis of 19…
  57. July 2018 Corporate Presentation – Antero Resources – slide 57
    Appalachia Gathering and Compression Fee Study AR Fees Paid to AM Converted to MMBtu AR Contracted Gathering/Compression Fees to AM (/Mcf) 0.66 Typical BTU Conversion (Average BTU of 1250) for 2018/2019 Programs 1.25 1.00 AR…
  58. July 2018 Corporate Presentation – Antero Resources – slide 58
    Competitive Fresh Water Fee Structure 1 AR Pays Highly Competitive Fresh Water Fees - AR pays a fixed-fee per barrel to AM for fresh water pipeline service at the well pad that is firm and is 0.50/Bbl lower cost than variable sourcing…
  59. July 2018 Corporate Presentation – Antero Resources – slide 59
    AR Saved 0.50/Bbl on Fresh Water in 2017 Antero analyzed its 2017 completions and the avoided cost of utilizing AMs fresh water pipeline system vs. trucking water for completions - Antero utilized mapping and routing expertise to find…
  60. July 2018 Corporate Presentation – Antero Resources – slide 60
    Fresh Water MVCs and Earn-Outs Minimum volume commitments (MVCs) on fresh water delivery volumes were put in place to support revenues and rates of return for AMs acquisition of the water business in September 2015 Earn-outs at…
  61. July 2018 Corporate Presentation – Antero Resources – slide 61
    Guidance Summary - 2018 2017 2018 Guidance Guidance Guidance Change Net Income (MM) 305 - 345 435 - 480 +41% Adjusted EBITDA (MM) 520 - 560 705 - 755 +35% DCF (MM) 405 - 445 575 - 625 +41% Distribution Growth 28 30% 28 30% - DCF…
  62. July 2018 Corporate Presentation – Antero Resources – slide 62
    Core of the Core Development Programs Half Cycle Total Average BTU 2018 Well 2019 Well Well EUR Regime Undrilled Lateral Range Completions Completions Economics Locations Length (Strip Price) Marcellus Highly-Rich Gas 1275-1350…
  63. July 2018 Corporate Presentation – Antero Resources – slide 63
    2018 Product Revenue Buildup Volumes Realized % of Total Product Revenues (Guidance) Price Revenue 38% Liquids as a Percent Natural Gas of Total Volume 1,925 GAS 2.85/Mcf 2.0B 52% MMcf/d C2 44 MBbl/d 10/Bbl 0.2B 5%…
  64. July 2018 Corporate Presentation – Antero Resources – slide 64
    Antero Consolidated and Stand-Alone Enterprise Value Hedged Multiple 2018E EBITDAX (MM): 1,591 Excludes AM Distributions EV / 2018E EBITDAX: 4.7x (MM) Unhedged Multiple 2018E EBITDAX (MM): 1,138 Excludes AM Distributions & Hedge…
  65. July 2018 Corporate Presentation – Antero Resources – slide 65
    Antero Assumptions: Single Well Economics SWE Cost Type Description of Cost Half Cycle Full Cycle Drilling and completion costs Assumes well costs for a 12,000 lateral, Marcellus: 10.6MM Marcellus: 11.4MM 2,000 lbs of proppant per…
  66. July 2018 Corporate Presentation – Antero Resources – slide 66
    Single Well Economics: Marcellus In Ethane Rejection Highly-Rich Classification Highly-Rich Gas Rich Gas Dry Gas Gas/Condensate Modeled BTU 1313 1250 1150 1050 EUR (Bcfe): 32 29 26 24 EUR (MMBoe): 5.3 4.9 4.3 3.9 % Liquids: 33%…
  67. July 2018 Corporate Presentation – Antero Resources – slide 67
    Single Well Economics: Utica In Ethane Rejection Highly-Rich Highly-Rich Classification Condensate Gas/ Rich Gas Dry Gas Gas Condensate Modeled BTU 1275 1235 1215 1175 1050 EUR (Bcfe): 13 25 29 28 26 EUR (MMBoe): 2.2 4.2 4.8 4.6…
  68. July 2018 Corporate Presentation – Antero Resources – slide 68
    Antero Resources Stand-Alone E&P Adjusted EBITDAX Reconciliation AR Stand-Alone E&P Adjusted EBITDAX Reconciliation ( in thousands) Three Months Ended LTM Ended 3/31/2018 3/31/2018 Net income including noncontrolling interest…
  69. July 2018 Corporate Presentation – Antero Resources – slide 69
    Antero Resources Consolidated Adjusted EBITDAX Reconciliation Consolidated Adjusted EBITDAX Reconciliation Three Months ( in thousands) Ended LTM Ended 3/31/2018 3/31/2018 Net income (loss) including noncontrolling interest…
  70. July 2018 Corporate Presentation – Antero Resources – slide 70
    Antero Midstream Non-GAAP Measures Non-GAAP Financial Measures and Definitions Antero Midstream views Adjusted EBITDA as an important indicator of the Partnerships performance. Antero Midstream defines Adjusted EBITDA as Net Income…
  71. July 2018 Corporate Presentation – Antero Resources – slide 71
    Antero Midstream Non-GAAP Measures The GAAP financial measure nearest to Adjusted Operating Cash Flow is cash flow from operating activities as reported in Antero Midstreams consolidated financial statements. Management believes that…
  72. July 2018 Corporate Presentation – Antero Resources – slide 72
    Antero Midstream Non-GAAP Measures Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures. The GAAP measure most directly comparable to Adjusted EBITDA and Distributable Cash Flow is Net Income. The non-GAAP…
  73. July 2018 Corporate Presentation – Antero Resources – slide 73
    Adjusted EBITDA and DCF Reconciliation Adjusted EBITDA and DCF Reconciliation ( in thousands) Three months ended March 31, 2017 2018 Net income 75,091 108,105 Interest expense 8,836 11,297 Depreciation expense 27,536 32,432…
  74. July 2018 Corporate Presentation – Antero Resources – slide 74
    Cautionary Note Regarding Hydrocarbon Quantities The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserve estimates (collectively, 3P). Antero has provided internally…

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