Antero Resources Raises Production Guidance & Capital Budget

Antero Resources Corporation

("Antero" or the "Company") today announced an update to its 2014 guidance, 2015 and 2016 production targets and capital budget. Guidance Update Driven by the successful execution of Antero's development program to date, along with its positive operating outlook for the remainder of the year, the Company is raising 2014 net production guidance to an average of 990 – 1,010 MMcfe/d, which is a 5% increase from the midpoint of previously announced guidance. Antero estimates that second half 2014 net production will average 1,160 MMcfe/d, an increase of 100 MMcfe/d or 9% from the midpoint of previously estimated second half 2014 production. Additionally, the average production target for 2015 has been increased to 1.5 Bcfe/d from a previous 1.4 Bcfe/d and the 2016 target has been increased to 2.2 Bcfe/d from a previous 2.1 Bcfe/d. The Company has accelerated its initiatives to develop the highly rich gas areas of its Marcellus and Utica assets. The development program is focused on the highly rich gas areas as the liquids component of the production stream allows for attractive rates of return in current price environments. The current rates of return and natural gas price sensitivities are detailed in the Company's investor presentation located at www.anteroresources.com. Antero currently has 10 of its 15 operated Marcellus rigs drilling in 1200 Btu or greater areas where the Company has completed 23 shorter stage length ("SSL") wells in 2014. These 23 wells had initial 30-day rates averaging 15.8 MMcfe/d (22% liquids rejecting ethane) and an average combined liquids yield of 47 Bbl/MMcf. The remaining five operated Marcellus rigs are drilling in 1150 to 1200 Btu areas where the Company has completed 27 SSL wells in 2014 with initial 30-day rates averaging 12.4 MMcfe/d (14% liquids rejecting ethane). The combined 50 wells continue to support the Company's 1.7 Bcf/1,000' of lateral SSL type curve. In the first half of 2014, Antero completed wells with an average Btu content of 1179 Btu and forecasts that wells to be completed during the second half of 2014 will have an average Btu content greater than 1215. In the Utica, Antero has added two operated rigs to the development program that results in seven operated rigs drilling in highly rich gas areas. The Company has completed 23 SSL wells to date in the Utica with initial 30-day rates averaging 16.2 MMcfe/d (43% liquids rejecting ethane) and an average combined liquids yield of 124 Bbl/MMcf. In the first half of 2014, Antero completed wells with an average Btu content greater than 1250 Btu and forecasts that wells to be completed during the second half of 2014 will have an average Btu content greater than 1200 Btu. Due to the recent natural gas price basis widening at Tetco M2 and Dominion South in Appalachia, Antero will defer its originally planned second half of 2014 Utica dry gas test until 2015 and continue to focus its drilling activity in the liquids-rich Marcellus and Utica. Antero does not currently have access to premium Appalachian TCO, Midwest or Gulf Coast markets for Utica dry gas production in northwest West Virginia. The Company believes that there is adequate industry activity in the deep dry Utica play that will serve to further de-risk the play prior to any Antero drilling activity. In the first half of 2014, Antero began marketing its excess firm transportation capacity to third parties in need of transportation as well as purchasing and selling third party gas in back to back transactions to minimize transportation costs and in certain cases capture positive basis differentials between regional indices. As a result, the Company is presenting, as separate line items in the income statement, the marketing revenues and expenses that are associated with its excess firm transportation capacity. Prior to the second quarter, the marketing revenues and expenses were combined in the gathering, processing, compression and transportation line item in the income statement. Marketing revenues include sales of third party natural gas and revenues associated with the release of its firm transportation to others. Marketing expenses include the cost of purchased third party natural gas and firm transportation costs associated with excess capacity, including the cost of firm ethane transportation that is currently not being utilized. Antero is in the initial phase of generating third party marketing opportunities and as a result is estimating that for 2014 it will have marketing expenses, net of marketing revenues, of approximately $0.10 to $0.20 per Mcfe. Capital Budget Update Antero is increasing its 2014 capital budget to $3.7 billion, which includes $2.4 billion for drilling and completion, $850 million for the expansion of midstream facilities, including $200 million for fresh water distribution infrastructure, and $450 million for core leasehold acreage acquisitions. Antero is accelerating its drilling program in the second half of 2014 due to the continued success of the SSL program, timely execution on the Company's Appalachian infrastructure build-out and the targeted addition of approximately 70,000 net acres during the year. The Company operated an average of 20 drilling rigs in the first half of 2014 and plans to increase the rig count to 22 for the second half of 2014 for an average of 21 rigs in 2014. This compares to the previous capital budget which contemplated averaging 18 rigs in 2014. The increase in average rig count is the primary contributor to the drilling and completion budget increase. Additionally, the 2014 drilling and completion budget increase is driven by a higher average working interest of 93% for wells drilled in 2014, as compared to 86% working interest assumed at the beginning of the year, a 1% increase in average drilled lateral length to over 7,900 feet compared to 7,800 feet previously, and the application of SSL completions to several additional wells. These increases are primarily the result of successful leasehold acquisitions in the first half of 2014 resulting in higher working interest and longer laterals for wells drilled in the 2014 program. The entire drilling and completion budget represents Antero-operated drilling, with virtually all allocated to drilling liquids-rich horizontal locations utilizing SSL completions. Additionally, Antero has added one rig to the Utica and is also moving one rig from the Marcellus to the Utica liquids-rich gas core in order to capitalize on estimated higher rates of return and available takeaway capacity to premium markets. The accelerated drilling program leads to the increased production guidance for the remainder of 2014 as well as maintaining the 2015 and 2016 production growth target rates of 45 to 50% despite a higher base level of production in 2014. Antero anticipates averaging 21 rigs and plans to maintain a stable drilling and completion budget of $2.3 to $2.5 billion for 2015. Antero's midstream subsidiary is increasing its capital budget by $100 million in anticipation of the expected election to participate in two recently announced regional pipeline projects subject to the completion of the initial public offering of Antero's midstream subsidiary. Equity ownership in the regional pipeline projects is designed to provide Antero's midstream subsidiary with incremental fixed fee revenue in 2016 and beyond adding to the long-term stability of midstream cash flows. In the second half of 2014, Antero plans to continue consolidating acreage in the core of the southwestern Marcellus liquids-rich play and the core of the Utica liquids-rich play in southern Ohio. During the first half of 2014, Antero invested approximately $240 million in land by adding approximately 22,000 net acres in the Marcellus and 13,000 net acres in the Utica including the 6,363 net acre Piedmont Lake lease acquisition. The following is a comparison of previous 2014 guidance compared to the revised 2014 guidance. 2014 Guidance Comparison Previous Revised Total net production (MMcfe/d) 925 – 975 990 – 1,010 Net natural gas production (MMcf/d) 780 – 820 840 – 850 Net liquids production (Bbl/d) 24,000 – 26,000 25,000 – 26,000 Cash production expense ($/Mcfe) $1.50 – $1.60 $1.50 – $1.60 Marketing expense, net ($/Mcfe) N/A $0.10 – $0.20 G&A ($/Mcfe) $0.25 – $0.30 $0.25 – $0.30 Natural gas realized price differential to Nymex before hedging($/Mcf) $(0.15) – $(0.25) $(0.15) – $(0.25) Natural gas liquids realized price (% of WTI) 53% – 57% 53% – 57% Oil realized price differential to NYMEX before hedging ($/Bbl) $(10.00) – $(12.00) $(10.00) – $(12.00) 2014 Capital Budget Comparison Drilling & completion ($MM) $1,800 $2,400 Midstream ($MM) $750 $850 Land ($MM) $300 $450 Total $2,850 $3,700 Average drilling rigs 18 21 Commenting on the results and updated guidance, Paul Rady, Antero's Chairman and CEO, said, "The positive momentum from our development program and infrastructure build-out has resulted in Antero's election to maintain its rig count from earlier in the year and add two additional rigs for the remainder of the year, thereby accelerating the 2014 drilling program. This drilling plan revision will result in Antero averaging 21 rigs for 2014 which will lead to 100 MMcfe/d of increased production in the second half of the year. Antero has assembled a long-term wellhead to market infrastructure that is second to none and that enables us to focus on executing our development program and deliver market leading growth. In 2015 we expect to maintain a drilling and completion activity level similar to 2014 which will allow us to continue to target organic growth rates of 45% to 50% in 2015 and 2016 off of a higher 2014 production base." Mr. Rady further added, "Our strategy is to continue to consolidate and block up our areas of operations. We added 35,000 net acres in the core of the liquids-rich Marcellus and Utica Shale plays during the first half of 2014. This added approximately 151 new drilling locations and increased the working interest percentage and planned lateral lengths associated with numerous existing locations resulting in the addition of 2.0 Tcfe of 3P reserves with a $1.5 billion PV-10 value assuming mid-year 2014 SEC prices. We believe the leasing opportunities we capture due to our concentrated acreage position and our sizable land organization are a distinct competitive advantage that continually adds significant value to our Company." Antero Resources is an independent oil and natural gas company engaged in the acquisition, development and production of unconventional oil and liquids-rich natural gas properties located in the Appalachian Basin in West Virginia, Ohio and Pennsylvania. Our website is located at www.anteroresources.com. This release includes "forward-looking statements". Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond Antero's control. All statements, other than historical facts included in this release, are forward-looking statements. All forward-looking statements speak only as of the date of this release. Although Antero believes that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements. Antero cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company's control, incident to the exploration for and development, production, gathering and sale of natural gas, NGLs and oil. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating natural gas and oil reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures, and the other risks described under the heading "Item 1A. Risk Factors" in Antero's Annual Report on Form 10-K for the year ended December 31, 2013.