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o First quarter 2014 average net daily gas equivalent production is
estimated to be 783 to 787 MMcfe/d, a 105% increase over the prior year
quarter and 16% sequentially
o First quarter 2014 average net daily liquids production is estimated to be
16,000 to 16,500 Bbl/d, a 580% increase over the prior year quarter and
45% sequentially
o First quarter 2014 average realized natural gas price before hedging is
estimated to be $5.02 to $5.06 per Mcf, an approximate $0.08 to $0.12
premium to NYMEX after Btu upgrade; average natural gas equivalent price
including NGLs, oil and hedges is estimated to be $5.76 to $5.80 per Mcfe,
a 10% increase compared to the first quarter of 2013
o First 15 Marcellus Shale wells with shorter stage length (SSL) completions
had an average 180-day production rate of 8.1 MMcfe/d, 25% above the
Company's non-SSL reserve report type curve
o Latest 9 Utica Shale wells had an average 30-day production rate of 15.3
MMcfe/d in ethane rejection (50% liquids)
o Utica Condensate and Highly-Rich Gas/Condensate type curves and regimes
were revised downward based on recent unconstrained production history
o Second Utica compressor station was recently placed in service, resulting
in a combined 240 MMcf/d of Antero-committed compression capacity in Ohio
o Firm transportation and firm gas sales were increased to an average 2.6
Bcf/d in 2016 (assuming 1,000 Btu gas)
o Entered into an agreement to be the anchor supplier to the planned Ascent
ethane cracker project in West Virginia with 30,000 Bbl/d ethane
commitment
o Entered into an agreement to be the anchor shipper on the proposed Mariner
East II pipeline and export project in Pennsylvania with 51,500 Bbl/d NGL
commitment
Antero Resources logo
Antero Resources
AR ("Antero" or the "Company") announced today recent
operational highlights and an increase in its firm transportation position.
Operating Update
All operational figures are as of the date of this release unless otherwise
noted.
Antero's net daily production for the first quarter of 2014 is estimated to
average 783 to 787 MMcfe/d, including 16,000 to 16,500 Bbl/d of liquids (12%
liquids). The midpoint of the first quarter 2014 estimated production
represents an organic production growth rate of 16% and 105% from the fourth
quarter of 2013 and first quarter of 2013, respectively, despite severe winter
weather and challenging operating conditions during the quarter. The midpoint
of the first quarter 2014 estimated liquids production represents an organic
production growth rate of 45% and 580% from the fourth quarter of 2013 and
first quarter of 2013, respectively. The Company has completed a combined 266
horizontal wells in the Marcellus Shale and Utica Shale since commencing
drilling operations in Appalachia in 2009.
Antero's average realized natural gas price before hedging for the first
quarter of 2014 is estimated to be $5.02 to $5.06 per Mcf, a 2% premium to the
NYMEX average for the period. Approximately 45% of Antero's first quarter
2014 natural gas revenue was realized at the Columbia Gas Transmission (TCO)
index and the remaining natural gas revenue was realized at various other
index pricing points including Dominion South, TETCO M2 and NYMEX. The
midpoint of the estimated realized gas price before hedging represents a $0.10
premium to NYMEX, at the high end of the Company's 2014 guidance of a $0.00 to
$0.10 premium.
Antero's average realized Y-grade C3+ NGL price for the first quarter of 2014
is estimated to be $60.00 to $62.00 per barrel, or an average of approximately
62% of the NYMEX WTI oil price average for the period, and the average
realized oil price is estimated to be $87.00 to $89.00 per barrel. Average
natural gas equivalent price including NGLs and oil, but excluding hedge
settlements, is estimated to be $5.78 to $5.82 per Mcfe.
Antero's average realized natural gas price for the first quarter of 2014
including hedges is estimated to be $5.00 to $5.04 per Mcf, a decrease of
approximately 2% as compared to the first quarter of 2013. Average natural
gas equivalent price including NGLs, oil and hedge settlements is estimated to
be $5.76 to $5.80 per Mcfe, an increase of approximately 10% as compared to
the first quarter of 2013 due to the significant increase in liquids
production. For the first quarter of 2014, Antero realized estimated hedging
losses of approximately $1.1 million, or $0.02 per Mcf, due to the sharp rise
in natural gas prices this past winter.
Commenting on Antero's estimated first quarter 2014 results and firm
transportation update, Paul Rady, Antero's Chairman of the Board and CEO,
said, "Our estimated first quarter results demonstrate Antero's positive
momentum and high growth profile with over 100% production growth compared to
the prior year quarter. Additionally, our forward-looking integrated strategy
has resulted in the accumulation of an extensive portfolio of firm takeaway
capacity and firm sales both for natural gas and NGLs. This portfolio results
in diversified exposure to index prices in Appalachia, the Midwest and the
Gulf Coast. It also gives Antero the ability to sustain high growth well into
the future. The midpoint of our 2014 guidance targets 80% production growth
compared to the prior year. Additionally, now that we have incremental firm
transportation capacity in hand, we are targeting compound annual growth in
net production of 45% to 50% in 2015 and 2016."
Marcellus Shale — Antero utilized shorter stage length completions on all of
its Marcellus wells during the first quarter of 2014. Antero continues to be
encouraged by its SSL well results. To date, the Company has completed and
placed on line 38 Marcellus wells utilizing SSL completions that have at least
30 days of production history. The various actual average production rates
are compared to the non-SSL reserve report type curve in the table below:
SSL vs Non-SSL Average Rate Comparison (MMcfe/d)
30-day rate 90-day rate 180-day rate
SSL Well Count 38 23 15
SSL Average Rate – MMcfe/d 11.3 9.0 8.1
1.5 Bcf/1,000' Type Curve 8.7 7.5 6.5
Average Rate – MMcfe/d
SSL % Rate Improvement 30% 20% 25%
The 15 wells that have been on line for at least 180 days are 25% above
Antero's 1.5 Bcf per 1,000 feet of lateral non-SSL type curve. The average
well cost for an SSL well, defined as a well with stage lengths less than 225
feet, is approximately 10% to 15% higher than a comparable non-SSL well with
an average stage length of 350 feet.
Antero is currently operating 15 drilling rigs in the Marcellus Shale play.
The Company has 79 gross (75 net) horizontal wells either in the process of
drilling, completing or waiting on completion in the Marcellus. Antero
currently has three dedicated frac crews and five spot frac crews working in
West Virginia.
During the first quarter of 2014, Antero added approximately 9,000 net acres
and currently holds approximately 354,000 net acres in the southwestern core
of the Marcellus play. Approximately 27% of this net acreage was associated
with proved reserves and approximately 8% with proved developed producing
reserves at year-end 2013. Additionally, approximately 70% of the leasehold
is prospective for processable rich gas assuming an 1100 Btu cutoff.
Marcellus Processing Update
Antero currently has access to a total of 600 MMcf/d of cryogenic processing
capacity at the MarkWest Sherwood processing facility located in Doddridge
County, West Virginia. Antero has committed to three additional 200 MMcf/d
cryogenic processing plants, Sherwood IV, V and VI. Sherwood IV is expected
to go on line in the third quarter of 2014, Sherwood V is expected to go on
line in the fourth quarter of 2014, and Sherwood VI is expected to go on line
in the second quarter of 2015. These commitments provide Antero access to a
total of 1.2 Bcf/d of Marcellus cryogenic processing capacity. Ethane is
currently being rejected at the processing facility and left in the gas
stream.
Utica Shale - Since the fourth quarter operations update on January 27, 2014,
the Company has completed and placed on line nine additional wells in the
Utica that have at least 30 days of production history. Eight of the nine
additional wells are located in the 1250 to 1300 Btu regime and had an average
30-day production rate (in ethane rejection) of 14.8 MMcfe/d (52% liquids),
representing a 58% improvement over the average 30-day production rate of the
five previously disclosed wells in the same Btu regime of 9.4 MMcfe/d (36%
liquids). One of the nine additional wells is located in the new 1225 to 1250
Btu regime and had a 30-day production rate (in ethane rejection) of 19.0
MMcfe/d (36% liquids), representing a 36% improvement over the 30-day
production rate of the one previously disclosed well in the same Btu regime of
14.0 MMcfe/d (23% liquids).
Antero is currently operating 5 drilling rigs in the Utica Shale play. The
Company has 18 gross (13 net) horizontal wells either in the process of
drilling, completing or waiting on completion. Antero currently has one full
time dedicated frac crew and one spot crew working in Ohio.
During the first quarter of 2014, Antero added approximately 3,000 net acres
and currently holds approximately 108,000 net acres in the core of the Utica
Shale play. Approximately 6% of this net acreage was associated with proved
reserves and approximately 3% with proved developed producing reserves at
year-end 2013. Additionally, approximately 75% of the leasehold is
prospective for processable rich gas assuming an 1100 Btu cutoff.
Utica Type Curve Revisions and New Regime Delineation
As Antero has further delineated its Utica position, the Company has divided
its acreage into five different type curve regimes, based on Btu content and
estimated ultimate recoveries (EURs). This compares to the previous
methodology in which Antero divided its acreage into four different type curve
regimes. Based on additional production history, Antero has divided the
Highly-Rich Gas/Condensate regime, previously spanning the 1250 to 1300 Btu
range, and the Highly-Rich Gas regime, previously spanning the 1200 to 1250
Btu range, into three regimes instead of two. The new regimes are defined as
Condensate (1250 to 1300 Btu), Highly-Rich Gas/Condensate (1225 to 1250 Btu)
and Highly-Rich Gas (1200 to 1225 Btu).
The EUR/1,000' of lateral assumption has been adjusted downward by 31% to 1.1
Bcfe/1,000' in the Condensate regime to reflect lower expected recoveries of
condensate and rich gas based on several months of relatively unconstrained
production. Early in the first quarter of 2014, Antero gained access to the
first 120 MMcf/d of third-party operated compression. This compression
allowed for normal operating pressure and unconstrained production history.
The EUR assumption in the new Highly-Rich Gas/Condensate regime is 1.9
Bcfe/1,000' or 34% below the previous assumption for this area which was
previously a subset of the Highly-Rich Gas regime. This regime is considered
a transition zone between the Highly-Rich Gas regime and the Condensate
regime. While the Company has seen some encouraging early results, there is
still uncertainty regarding EURs in the Highly-Rich Gas/Condensate regime due
to limited well population and limited production history. The Company has
undertaken several initiatives in order to improve the ultimate recovery of
wells located in the Condensate and the Highly-Rich Gas/Condensate regimes,
including shorter stage lengths, restricted choke pilots and artificial lift
measures.
There are no material changes to the Highly-Rich Gas (1200 to 1225 Btu), the
Rich Gas (1100 to 1200 Btu) or the Dry Gas (less than 1100 Btu) regimes.
Please refer to page 24 of the April Company Presentation on Antero's website
for revised Utica well assumptions at www.anteroresources.com. The new EUR
regime assumptions are summarized below.
Highly-Rich Highly-Rich
EUR Regime Condensate Rich Gas Dry Gas
Gas/Condensate Gas
Btu Range 1250-1300 1225-1250 1200-1225 1100-1200 <1100
EUR (Bcfe): 7.4 13.3 19.9 18.5 16.6
EUR (MMboe): 1.2 2.2 3.3 3.1 2.8
% Liquids: 35% 26% 21% 14% 0%
Lateral Length (ft): 7,000 7,000 7,000 7,000 7,000
Stage Length (ft): 240 240 240 240 240
Well Cost ($MM): $11.0 $11.0 $11.0 $11.0 $11.0
Bcfe/1,000': 1.1 1.9 2.8 2.6 2.4
Gross Locations 193 75 91 180 211
(Undeveloped):
Commenting on the Utica Shale, Glen Warren, President and CFO, said "The
downward type curve revision in our Condensate and Highly-Rich Gas/Condensate
regimes affects 268 or approximately 6% of our total 4,843 gross undrilled 3P
locations. We have maintained since our first Utica completions that EURs in
the condensate heavy areas would be less predictable than rich gas and dry gas
areas due to retrograde condensate challenges. Because the Condensate and
Highly-Rich Gas/Condensate regimes provide Antero with significant exposure to
wellhead condensate and highly-rich processable gas, we plan to continue
developing these areas as we adjust completions and apply various production
enhancement measures. We are seeing improvement in 30-day rates in the
condensate heavy areas but we need more production history to judge whether
these improved results are sustainable. "
Utica Compression Update
A second third party owned and operated compression and condensate
stabilization facility was recently placed in service resulting in total
Antero-dedicated compression capacity of 240 MMcf/d and total condensate
stabilization capacity of 11,000 Bbl/d. A third compression station and
condensate stabilization facility is expected to start up in the third quarter
of 2014. Antero continues to lay both low-pressure and high-pressure
gathering pipelines to connect the wells to compression and transport its
production to the MarkWest Seneca processing complex.
Firm Transportation and Firm Sales
Antero has entered into firm transportation agreements with various pipelines
and firm sales agreements with various counterparties who hold firm
transportation capacity in order to facilitate the delivery of its production
to preferred markets and diversify its exposure to basis concentration risk.
The firm transportation agreements generally have a term of ten to thirty
years and include fixed and variable cost components referred to as demand and
commodity charges, respectively. The firm sales agreements are sales to other
firm shippers, are typically two to five years in term, are settled on an
agreed-to price based on a local index, and do not involve demand or commodity
charges.
Natural Gas
On April 14, 2014, Kinder Morgan Energy Partners, L.P. announced that KMP unit
Tennessee Gas Pipeline Company ("TGP") awarded Antero Resources 100% of the
capacity offered in TGP's binding open season for its proposed Broad Run
Flexibility ("BRF") and Broad Run Expansion ("BRE") Projects located in West
Virginia. The BRF Project provides 590,000 MMBtu/d of firm transportation
capacity from TGP's Broad Run Lateral in TGP Zone 3 to delivery points along
the Gulf Coast. The anticipated in service date of the BRF Project is
November 1, 2015. The BRE Project provides an additional 200,000 MMBtu/d of
firm transportation capacity on the same capacity path to the Gulf Coast. The
anticipated in service date of the BRE Project is November 1, 2017. The term
of this agreement is 15 years and provides Antero with the ability to access
Gulf Coast pricing hubs as well as international LNG markets.
Further, Antero successfully bid on an additional 600,000 MMBtu/d of firm gas
transportation directed to the Gulf Coast. The primary delivery point for
this firm transportation capacity is located near growing Gulf Coast
petrochemical demand and the future LNG export corridor. In the near term,
this new firm capacity gives Antero the option to redirect gas from its
Midwest-directed capacity to Gulf Coast pricing when commodity prices are more
favorable than Midwest pricing. Should Antero elect not to redirect this gas,
this firm capacity will likely be utilized as release capacity to transport
third party gas out of the constrained Northeast area offsetting Antero's firm
transportation costs associated with this capacity. In the longer term,
Antero ultimately expects to link to this capacity by committing volumes
either to existing east to west pipelines or support a new-build project
connecting Antero's Utica Shale to this new firm transportation. In the
latter case, the 600,000 MMBtu/d of firm transportation will be incremental to
Antero's firm transportation portfolio from the Utica Shale to the Gulf
Coast.
Below is a summary schedule of Antero's average annual firm transportation and
sales volumes for each of the years presented.
2014 – Average 2015 – 2016 –
Average Average
MMbtu/d MMbtu/d MMbtu/d Pricing Region
Firm Transportation
Columbia 403,000 595,000 582,000 Appalachia or Gulf Coast
REX/Other 306,000 600,000 600,000 Midwest or Gulf Coast
Tennessee – 100,000 590,000 Gulf Coast
Other Regional 395,000 615,000 625,000 Appalachia
Firm Sales 250,000 240,000 223,000 Appalachia, NYMEX
Total Firm 1,354,000 2,150,000 2,620,000
Commitments
By 2016, the above firm transportation portfolio provides Antero the ability
to direct 49% of its production to the Gulf Coast, 28% to Appalachia and 23%
to Midwest pricing, including Chicago and Detroit. Antero's all-in average
firm transportation and firm sales cost per MMbtu assuming full utilization,
including both demand and commodity charges, is $0.31, $0.32 and $0.42 for
2014, 2015 and 2016, respectively. The firm transportation portfolio, based
on current futures pricing and differentials, would result in an approximate
$0.15 per MMbtu basis differential improvement in its 2016 realized prices
compared to 2014 realized prices.
NGLs
On March 26, 2014, Antero signed an agreement to become the anchor supplier
for the planned Ascent petrochemical complex to be located near Parkersburg,
West Virginia. Under the agreement, Antero intends to provide 30,000 Bbl/d of
ethane which represents almost half of the volume required to operate the
Ascent ethane cracker. This agreement is contingent upon Ascent reaching a
final investment decision once the multi-year feasibility analysis is
completed and a construction decision has been made.
Antero recently committed to a 10 year transport, terminal and storage
agreement with Sunoco Logistics Partners LP
SXL on its Mariner East II
Project. Subject to the outcome of the binding open season currently underway
and all of the necessary regulatory approvals, the Mariner East II pipeline
and export project will connect the NGL resources in the Marcellus and Utica
Shale to Sunoco's existing infrastructure and international port at its Marcus
Hook facility near Philadelphia. Mariner East II is expected to be
operational in early 2016. Under the agreement, Antero will be an anchor
shipper and have firm transportation of 51,500 barrels per day (11,500 barrels
of ethane, 28,000 barrels of propane and 12,000 barrels of butane). Antero
will have the ability, through the Marcus Hook facility, to market ethane,
propane and butane to local markets in the Northeast as well as export product
to international markets. These markets are currently paying a premium price
relative to Appalachian prices.
Subject to the finalization of the agreements above, combined with the
Company's previously reported 20,000 Bbl/d firm transportation contract on the
ATEX pipeline, Antero will have access to 101,500 barrels per day of NGL
takeaway capacity. This capacity is comprised of 61,500 barrels per day of
ethane takeaway, 28,000 barrels per day of propane takeaway and 12,000 barrels
per day of butane takeaway to diversified markets both domestic and
international.
Capital Spending
Antero's total capital expenditures for the three months ended March 31, 2014
are estimated to be $725 million to $745 million, including drilling and
completion costs of $490 million to $495 million, gathering and compression
costs of $110 million to $115 million, fresh water distribution project costs
of $57.5 million to $62.5 million, leasehold acquisition costs of $57.5
million to $62.5 million and approximately $10 million on other capital
expenditures. During the quarter, due to the success of Antero's infill
acreage leasing efforts, average drilled lateral length compared to budget
increased 2%. The successful acreage adds also had the effect of increasing
the average working interest on wells drilled during the quarter from the
budgeted 95% to 97%.
Antero has increased its 2014 capital budget by $150 million to $2.75
billion. The budget has been increased for additional gathering and
compression projects to be built by the Company including two compressor
stations in the Utica Shale as well as one compressor station and a 15 mile
high pressure gathering line accessing rich gas production in the Marcellus
Shale. The additional compression and gathering assets will be included in
the contemplated master limited partnership offering involving Antero's
midstream assets.
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