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Antero Resources Reports Second Quarter 2018 Financial and Operational Results

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Antero Resources Reports Second Quarter 2018 Financial and Operational Results

PR Newswire

DENVER, Aug. 1, 2018 /PRNewswire/ -- Antero Resources Corporation (NYSE:AR) ("Antero" or the "Company") today released its second quarter 2018 financial and operational results.  The relevant consolidated and consolidating financial statements are included in Antero's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which has been filed with the Securities and Exchange Commission ("SEC").  The relevant Stand-Alone financial statements are also included in Antero's Form 10-Q within the Parent column of the guarantor footnote (Note 16).

Antero Resources logo. (PRNewsFoto/Antero Resources Corporation)

Second Quarter 2018 Highlights:

  • Net daily gas equivalent production averaged a record 2,520 MMcfe/d (27% liquids), a 15% increase over the prior year period and a 6% increase sequentially
  • Liquids production averaged 113,581 Bbl/d, an 11% increase over the prior year period and a 10% increase sequentially, and contributed 38% of total product revenue before hedging
  • Realized natural gas price averaged $2.83 per Mcf, a $0.03 premium to the NYMEX Henry Hub natural gas price before hedging
  • Realized natural gas equivalent price averaged $3.35 per Mcfe before hedges, driven by a $0.52 per Mcfe uplift from liquids production
  • Realized natural gas equivalent price averaged $3.77 per Mcfe after hedges
  • GAAP net loss was reported at $136 million, or $(0.43) per diluted share, non-GAAP adjusted net income at $6 million, or $0.02 per diluted share, and non-GAAP Stand-Alone adjusted net loss at $2 million
  • Reported Adjusted EBITDAX of $405 million and Stand-Alone Adjusted EBITDAX of $335 million, a 26% and 25% increase over the prior year period, respectively
  • Stand-Alone Net Debt to trailing twelve months Stand-Alone Adjusted EBITDAX was 2.6x at quarter-end
  • Drilled longest lateral in West Virginia history at 15,100 lateral feet
  • Antero targeted 2018 and 2019 natural gas production is 100% hedged at $3.50 per MMBtu

Commenting on the quarter, Paul Rady, Chairman and CEO said, "We have made significant progress towards achieving our financial and operating objectives during the first half of 2018.  Our focus on operations execution resulted in meaningful efficiency gains during the first half of the year. This has positioned us to reduce the number of completion crews that we plan to operate in the field during the remainder of the year, while production growth of 20% and capital spending guidance remain on target.  We continue to execute on our long-term 5-year plan in which we expect attractive production growth while generating significant free cash flow."

Recent Developments

2018 Guidance Update

Based on the first half realizations and current strip prices for the second half of the year, Antero is raising its full year realized natural gas price guidance before hedges from a range of $0.00 to $0.05 per Mcf premium to NYMEX Henry Hub to a range of $0.05 to $0.10 per Mcf premium to NYMEX. Importantly, the Rover Phase 2 Sherwood Lateral is expected to allow Antero's Marcellus gas to be transported on Rover to attractively priced Chicago and Gulf Coast markets, highlighting the optionality that the Sherwood Lateral brings to Antero's long-term development plan. The ability to consistently realize natural gas prices above NYMEX reflects the competitive advantage of Antero's diversified firm transportation portfolio and ability to sell gas into favorably priced markets.

Driven primarily by a delay of the in-service date of the Mariner East 2 pipeline, now expected in the fourth quarter of 2018, Antero is lowering its guidance on C3+ NGL realized prices as a percentage of WTI from a range of 62.5% to 67.5% to a range of 57.5% to 62.5%.  Additionally, although NGL prices on an absolute dollar per barrel basis have remained in line with prior guidance assumptions, NGL prices have not increased at the same rate as WTI during 2018.  The Mariner East 2 pipeline and terminal project is expected to result in a significant reduction in propane and butane differentials to Mont Belvieu, driven by lower transportation costs to the market and sales to international markets at a premium to Mont Belvieu pricing.

In conjunction with the Mariner East 2 pipeline delay, Antero is also lowering its cash cost guidance for 2018 from $2.10 to $2.20 per Mcfe on a Stand-Alone basis to $2.05 to $2.15 per Mcfe, and from $1.65 to $1.75 per Mcfe on a consolidated basis to $1.60 to $1.70 per Mcfe.  Cash costs include lease operating, gathering, compression, processing, transportation, and production and ad valorem taxes.

The following table is a comparison of the initial 2018 guidance issued in January 2018 and the revised 2018 guidance.  Except as mentioned below, our previously issued 2018 guidance remains unchanged.

Guidance


2018 – Revised


2018 – Initial


Variance



Low


High


Low


High


 Midpoint

Price Realizations











Natural Gas Realized Price Premium to NYMEX Henry Hub


$0.05

-

$0.10


$0.00

-

$0.05


$0.05

C3+ NGL Realized Price as a Percent of NYMEX WTI


57.5%

-

62.5%


62.5%

-

67.5%


(5.0%)

Benchmark WTI Price ($/Bbl) (1)


$67.00



$60.00



$7.00

Implied C3+ NGL Pricing Guidance ($/Bbl)


$38.53

-

$41.88


$37.50

-

$40.50


$1.20












Cash Production Expense ($/Mcfe) – Stand-Alone


$2.05

-

$2.15


$2.10

-

$2.20


($0.05)

Cash Production Expense ($/Mcfe) – Consolidated


$1.60

-

$1.70


$1.65

-

$1.75


($0.05)
















(1)

Revised benchmark WTI price guidance reflects actual year-to-date WTI prices and futures as of 7/31/18.  Initial benchmark WTI price guidance based on strip prices as of 12/31/17.

Financial and operational results are reported and discussed on a consolidated basis, unless otherwise noted.  Please read "Non-GAAP Financial Measures" for:

  • A description of consolidated and Stand-Alone non-GAAP measures, including Adjusted EBITDAX and adjusted net income and reconciliations to their nearest comparable GAAP measures
  • A reconciliation of revenue excluding unrealized derivative gains (losses) to operating revenue, the most comparable GAAP measure
  • A reconciliation of Net Debt to total debt, the most comparable GAAP measure
  • A reconciliation of Antero Midstream's Adjusted EBITDA and Distributable Cash Flow to their nearest comparable GAAP measure

Please read "Second Quarter 2018 Financial Results" for a reconciliation of consolidated and Stand-Alone Adjusted EBITDAX margin to realized price before cash receipts for settled commodity derivatives, the most comparable GAAP measure.

Second Quarter 2018 Financial Results

As of June 30, 2018, Antero Resources owned a 53% limited partner interest in Antero Midstream Partners LP ("Antero Midstream").  Antero Midstream's results are consolidated within Antero Resources' results. 

For the three months ended June 30, 2018, Antero reported a GAAP net loss of $136 million, or $(0.43) per diluted share, compared to a net loss of $5 million, or $(0.02) per diluted share, in the prior year period.  Excluding items detailed in "Non-GAAP Financial Measures," adjusted net income was $6 million, or $0.02 per diluted share, compared to a $13 million loss, or $(0.04) per diluted share, in the prior year period.  Stand-Alone adjusted net loss was $2 million compared to a loss of $17 million in the prior year period.  Adjusted EBITDAX was $405 million, a 26% increase compared to $321 million in the prior year period, and Stand-Alone Adjusted EBITDAX was $335 million, a 25% increase compared to $267 million in the prior year period.  Second quarter 2018 results include settled marketing derivative losses of $16 million.

The following table details the components of average net production and average realized prices for the three months ended June 30, 2018:




















Three Months Ended June 30, 2018




Natural Gas
(MMcf/d)


Oil (Bbl/d)


C3+ NGLs
(Bbl/d)


Ethane
(Bbl/d)


Combined
Natural Gas
Equivalent
(MMcfe/d)


Average Net Production



1,838



6,940



70,485



36,156



2,520



















Average Realized Prices


Gas ($/Mcf)


Oil ($/Bbl)


C3+ NGLs ($/Bbl)


Ethane ($/Bbl)


Combined Gas Equivalent ($/Mcfe)


Average realized prices before settled derivatives


$

2.83


$

61.55


$

34.81


$

9.93


$

3.35


Settled commodity derivatives



0.67



(9.44)



(1.71)





0.42


Average realized prices after settled derivatives


$

3.50


$

52.11


$

33.10


$

9.93


$

3.77



















NYMEX average price


$

2.80


$

68.03








$

2.80


Premium / (Differential) to NYMEX


$

0.70


$

(15.92)








$

0.97


Net daily natural gas equivalent production in the second quarter averaged 2,520 MMcfe/d, including 113,581 Bbl/d of liquids (27% of production), an increase of 15% compared to the prior year period and a 6% increase sequentially. Natural gas production averaged 1,838 MMcf/d, oil production averaged 6,940 Bbl/d, C3+ NGLs production averaged 70,485 Bbl/d, and recovered ethane production averaged 36,156 Bbl/d. Total liquids production grew 11% compared to the prior year period and 10% sequentially.  Liquids revenue represented approximately 38% of total product revenue before hedges, an increase from 30% of total product revenue in the prior year period.  This increase reflects the substantial increase in liquids pricing year over year. 

Antero's average realized natural gas price before hedging was $2.83 per Mcf, a $0.03 per Mcf premium to the average NYMEX Henry Hub price during the period.   Including hedges, Antero's average realized natural gas price was $3.50 per Mcf, a $0.70 premium to the average NYMEX price, reflecting the realization of a cash settled natural gas hedge gain of $113 million, or $0.67 per Mcf. 

Antero's average realized C3+ NGL price before hedging was $34.81 per barrel, or 51% of the average NYMEX WTI oil price, representing a 44% increase versus the prior year period.  Including hedges, Antero's average realized C3+ NGL price was $33.10 per barrel, reflecting the realization of a cash settled C3+ hedge loss of $11 million, or $1.71 per barrel. 

Antero's average realized oil price before hedging was $61.55 per barrel, a $6.48 negative differential to average NYMEX WTI and a 42% increase versus the prior year period. Including hedges, the average realized oil price was $52.11 per barrel, reflecting the realization of a cash settled WTI crude oil loss of $6 million, or $9.44 per barrel.  The average realized ethane price was $0.24 per gallon, or $9.93 per barrel, compared to $0.20 per gallon, or $8.40 per barrel, in the prior year period. 

Antero's average natural gas equivalent price including recovered C2+ NGLs and oil, but excluding hedge settlements, was $3.35 per Mcfe, representing a 3% increase compared to the prior year period.  Including hedges, the Company's average natural gas equivalent price was $3.77 per Mcfe, an 11% increase from the prior year period, primarily driven by higher realized liquids prices and hedge gains.  Net cash settled hedge gains on all products were $96 million, or $0.42 per Mcfe.

Operating revenues in the second quarter were $989 million, compared to $790 million in the prior year period.  Revenue included a $41 million non-cash loss on unsettled commodity derivatives and a $16 million non-cash gain on unsettled marketing derivatives, while the prior year included a $55 million non-cash gain on unsettled commodity derivatives.  Revenue excluding gains and losses on unsettled derivatives was $1.0 billion, a 38% increase versus the prior year period.  Liquids production contributed 38% of total product revenues before hedges, compared to a 30% contribution in the prior year period.  Please see "Non-GAAP Financial Measures" for a description of revenue excluding unrealized derivative (gains) losses.

The following table presents a reconciliation of Stand-Alone and consolidated realized price before cash receipts for settled derivatives to Adjusted EBITDAX margin for the three months ended June 30, 2017 and 2018:

















Stand-Alone


Consolidated




Three months ended June 30,


Three months ended June 30,




2017


2018


2017


2018


Adjusted EBITDAX margin ($ per Mcfe):














Realized price before cash receipts for settled derivatives


$

3.26



3.35


$

3.26



3.35


Gathering, compression, and water handling and treatment revenues







0.01



0.02


Distributions from unconsolidated affiliates







0.03



0.05


Distributions from Antero Midstream



0.17



0.18






Gathering, compression, processing and transportation costs



(1.76)



(1.79)



(1.33)



(1.34)


Lease operating expense



(0.09)



(0.14)



(0.08)



(0.13)


Marketing, net (1)



(0.14)



(0.30)



(0.14)



(0.30)


Production and ad valorem taxes



(0.11)



(0.11)



(0.11)



(0.11)


General and administrative (excluding equity-based compensation)



(0.15)



(0.15)



(0.19)



(0.19)


Adjusted EBITDAX margin before settled commodity derivatives



1.18



1.04



1.45



1.35


Cash receipts for settled commodity derivatives



0.15



0.42



0.15



0.42


Adjusted EBITDAX margin ($ per Mcfe):


$

1.33



1.46


$

1.60



1.77




(1)

Includes cash payments for settled marketing derivative losses of $0.07 per Mcfe in 2018.

Stand-Alone per unit cash production expense (lease operating, gathering, compression, processing, transportation, and production and ad valorem taxes) was $2.04 per Mcfe, a 4% increase compared to $1.96 per Mcfe in the prior year period.  The per unit cash production expense for the quarter included $1.79 per Mcfe for gathering, compression, processing and transportation costs, $0.14 per Mcfe for lease operating costs, and $0.11 per Mcfe for production and ad valorem taxes.  Lease operating expenses increased in the second quarter due to an increase in produced water from newer wells that were completed with higher water intensity advanced completions.  

Stand-Alone per unit net marketing expense was $0.30 per Mcfe compared to $0.14 per Mcfe reported in the prior year period.  Net marketing expense increased due to higher unutilized excess capacity related to Rover pipeline capacity that was placed in service in late 2017.  Net marketing expense included a $0.07 per Mcfe loss for settled marketing derivatives related to contracts that had resulted in realized gains in the first quarter of 2018.  See note 11 to the condensed consolidated financial statements in Antero's Form 10-Q for more information on these contracts. 

Stand-Alone per unit general and administrative expense, excluding non-cash equity-based compensation expense, was $0.15 per Mcfe, consistent with the prior year period. 

Stand-Alone Adjusted EBITDAX was $335 million for the second quarter of 2018, a 25% increase compared to $267 million in the prior year period.  The increase was primarily driven by increased production and pricing.  Stand-Alone Adjusted EBITDAX margin was $1.46 per Mcfe, a 10% increase from the prior year period.  Consolidated Adjusted EBITDAX was $405 million, compared to $321 million in the prior year period, a 26% increase over the prior year period.  Consolidated Adjusted EBITDAX margin was $1.77 per Mcfe, compared to $1.60 per Mcfe in the prior year period. 

Stand-Alone net cash provided by operating activities was $229 million for the period.  Stand-Alone Adjusted Operating Cash Flow was $279 million, a 36% increase over the prior year period.  Consolidated net cash provided by operating activities was $297 million for the period.  Consolidated Adjusted Operating Cash Flow was $335 million during the second quarter, a 34% increase compared to the prior year period.  Stand-Alone Adjusted Operating Cash Flow and Adjusted Operating Cash Flow increased versus the prior year period primarily due to higher production and liquids prices during the quarter.

Operating Update

Second Quarter 2018

Marcellus Shale — Antero placed 25 horizontal Marcellus wells to sales during the second quarter of 2018 with an average lateral length of 9,500 feet and a 30-day gross average rate per well of 16.9 MMcfe/day on choke. The 30-day gross rate included 914 Bbl/d of liquids, representing oil, C3+ NGLs and 25% of the ethane that could be recovered ("25% ethane recovery").  Current average well costs are $0.86 million per 1,000 feet of lateral in the Marcellus assuming the 2018 average lateral length of 10,000 feet and 2,000 pounds of proppant per foot. 

During the quarter, Antero drilled 22 wells in the Marcellus with an average lateral length of 9,600 feet in approximately 12 total days from spud to final rig release on average.  Antero also set a state of West Virginia record for the longest lateral drilled to date at 15,100 lateral feet during the period.  Antero completed 5.0 stages per day on average during the second quarter and achieved a record 5.5 stages per day during the month of April.  Completion efficiencies improved from 4.3 stages per day in the prior quarter and exceeded the 4.5 stages per day budgeted for 2018.  The trend continues with 6.5 stages per day completed on average in late July 2018.  Antero recently completed its first remote completion which involved locating crews and equipment on a separate pad from the well pad, enabling improved logistics for completion operations. These operational efficiencies led to an acceleration of total stages completed during the first half of the year.  As a result, Antero expects to place a total of 50 to 60 Marcellus wells to sales during the third quarter of 2018, including the Company's largest pad to date, a 14-well pad that recently commenced production in July.  Because of these efficiency gains, Antero expects to release two completion crews in the coming weeks, resulting in an average of four crews operating during the second half of 2018, compared to six crews in the first half of 2018.  Antero's operating plan contemplates a reduction in capital spending during the second half of the year, as compared to the first half of 2018.

Two Marcellus pads completed late in the first quarter of 2018 have now been online for more than 90 days with noteworthy gross production rates.  One 9-well pad with an average lateral length of 8,300' produced a 90-day gross average rate of 157 MMcfe per day, which is on average 17.5 MMcfe/d day per well with 25% ethane recovery, including 7,715 Bbl/d of liquids.  A second 3-well pad representing the most westerly wells completed on Antero's Marcellus acreage to date averaged 9,000 feet in lateral length per well and produced a 90-day gross average rate of 18.5 MMcfe/d per well with 25% ethane recovery, including 1,112 Bbl/d of liquids per well. 

During the latter part of the second quarter and into the third quarter, Antero has experienced production curtailments due to tightness in the local crude trucking takeaway market. This is at present a common issue industry-wide.  The Company's crude buyers have been challenged to secure an adequate number of licensed trucks and drivers to move Antero's growing crude production.  The Company expects these production curtailments to be temporary in nature as Antero has recently executed direct agreements for additional trucking capacity.  This additional capacity will enable Antero to lift existing curtailments as well as move the 100,000 barrel-plus crude inventory that has built up over the past couple of months.  Currently, approximately 100 MMcfe/d is curtailed, including 4,000 Bbl/d of NGLs and 2,000 Bbl/d of crude oil. With truck capacity expected to match oil production beginning in September, Antero anticipates that the production curtailment will be alleviated by the fourth quarter of 2018.

Ohio Utica Shale — Antero placed five horizontal Ohio Utica wells to sales during the second quarter of 2018 with an average lateral length of approximately 15,900 feet and an average 30-day rate of 12.9 MMcfe/d per well on choke. Current average well costs are $0.95 million per 1,000 feet of lateral in the Ohio Utica assuming the 2018 average lateral length of 12,000 feet and 2,000 pounds of proppant per foot.  The Company does not plan to operate any drilling rigs or completion crews in the Ohio Utica Shale during the remainder of 2018 as the second half 2018 development plan shifts to liquids-rich locations in the Marcellus due to the continued strength in liquids pricing. The Company's current five year plan does include the resumption of drilling and completion activity in the Ohio Utica Shale in 2019. 

During the period, Antero drilled six wells in the Utica dry gas regime with an average lateral length of 12,900 feet in 20 total days from spud to final rig release.  This represents a 4% decrease in drilling days and a 22% increase in lateral length in the Utica dry gas regime compared to 2017.  In addition, Antero drilled nearly 5,200 lateral feet in a 24-hour period, which is a company record for drilled lateral footage in 24 hours in the Utica. During the second quarter, the Company completed 5.4 stages per day on average, above the 5.1 stages per day achieved during the first quarter.

During the third quarter of 2018, the Company expects to place a total of 15 wells to sales in the Utica with an average lateral length of 10,200 feet per well.

President and CFO, Glen Warren, commented, "Earlier this year, we set our sights on delivering an attractive plan of living within cash flow and reducing leverage while maintaining disciplined production growth over our five year plan.  Our continued focus on strong execution has propelled us to reach drilling and completion efficiencies faster than anticipated.  As a result, our full year capital spending targets remain the same, but capital is weighted toward the first half of the year and production growth is weighted toward the back half of the year.  Notably, we expect to place 65 to 75 wells to sales in the third quarter, a sizeable increase from the 51 wells placed to sales in the first six months of the year.  Our operational momentum gives us confidence in the execution of our operating plan for 2018 and in future years."

Second Quarter 2018 Capital Investment

Antero invested $393 million on drilling and completion capital expenditures for the three months ended June 30, 2018.  In addition, the Company invested $38 million for land, $113 million for gathering and compression systems and $18 million for water infrastructure projects, including $8 million for the Antero Clearwater Treatment Facility. Antero's Stand-Alone drilling and completion capital expenditures for the three months ended June 30, 2018, were $467 million.

Balance Sheet and Liquidity

As of June 30, 2018, Antero's Stand-Alone Net Debt was $3.8 billion, of which $455 million were borrowings outstanding under the Company's revolving credit facility.  Total lender commitments under this facility were $2.5 billion and the borrowing base is $4.5 billion.  After deducting letters of credit outstanding, the Company had $1.4 billion in available Stand-Alone liquidity as of June 30, 2018.  As of June 30, 2018, Antero's Stand-Alone Net Debt to trailing twelve months Stand-Alone Adjusted EBITDAX ratio was 2.6x.

Commodity Derivative Positions

Antero's estimated natural gas production for the second half of 2018 at the midpoint of guidance is fully hedged at an average index price of $3.49 per MMBtu.  The Company's target natural gas production for 2019 is fully hedged at an average index price of $3.50 per MMBtu. In total, Antero has hedged 2.3 Tcfe of future natural gas equivalent production using fixed price swaps covering the period from July 1, 2018, through December 31, 2023, at an average index price of $3.35 per MMBtu.  As of June 30, 2018, the Company's estimated fair value of commodity derivative instruments was $1.2 billion. The following table summarizes Antero's hedge position as of June 30, 2018:

Period


Natural Gas

MMBtu/d


Average

Index price

($/MMBtu)

Liquids

Bbl/d

Average

Index price

3Q 2018:







NYMEX Henry Hub


2,002,500


$3.45

Propane MB ($/Gal)



26,000

$0.76

NYMEX WTI ($/Bbl)



6,000

$56.99








4Q 2018:







NYMEX Henry Hub


2,002,500


$3.53

Propane MB ($/Gal)



26,000

$0.77

NYMEX WTI ($/Bbl)



6,000

$56.99

            2H 2018 Total


2,002,500


$3.49

32,000

N/A (1)

2019:







NYMEX Henry Hub


2,330,000


$3.50

2020:







NYMEX Henry Hub


1,417,500


$3.25

2021:







NYMEX Henry Hub


710,000


$3.00

2022:







NYMEX Henry Hub


850,000


$3.00

2023:







NYMEX Henry Hub


90,000


$2.91



(1) 

Average index price is not applicable as 2018 liquids hedges include propane and oil hedges.

Antero Midstream Financial Results

Antero Midstream results were released today and are available at www.anteromidstream.com.  A summary of the results are provided below:










Three Months Ended





June 30,



Average Daily Volumes:


2017


2018


% Change

Low Pressure Gathering (MMcf/d) 


1,683


1,981


18%

Compression (MMcf/d)


1,192


1,558


31%

High Pressure Gathering (MMcf/d) 


1,734


1,932


11%

Fresh Water Delivery (MBbl/d) 


173


228


32%

Wastewater Treatment (MBbl/d)



8


*

Gross Joint Venture Processing (MMcf/d) 


216


571


164%

Gross Joint Venture Fractionation (MBbl/d) 


4,039


10,046


148%

Net income for the second quarter of 2018 was $76 million, a 6% increase compared to the prior year quarter.  Net income per limited partner unit was $0.41 per unit, a 5% increase compared to the prior year quarter.  Adjusted EBITDA was $176 million, a 26% increase compared to the prior year quarter.  Distributable Cash Flow was $142 million, a 30% increase over the prior year quarter, resulting in a DCF coverage ratio of 1.3x.  For a description of Antero Midstream's Adjusted EBITDA and Distributable Cash Flow, and reconciliations to their nearest GAAP measures, please read "Non-GAAP Financial Measures."

Antero Midstream declared a distribution of $0.39 per limited partner unit attributable to the first quarter of 2018, resulting in $39 million of distributions received by Antero Resources from Antero Midstream during the second quarter of 2018. On July 18, 2018, Antero Midstream declared a distribution of $0.415 per limited partner unit attributable to the second quarter of 2018.

Conference Call

A conference call is scheduled on Thursday, August 2, 2018 at 9:00 am MT to discuss the quarterly results.  A brief Q&A session for security analysts will immediately follow the discussion of the results for the quarter.  To participate in the call, dial in at 888-347-8204 (U.S.), 855-669-9657 (Canada), or 412-902-4229 (International) and reference "Antero Resources". A telephone replay of the call will be available until Thursday, August 9, 2018 at 9:00 am MT at 844-512-2921 (U.S.) or 412-317-6671 (International) using the passcode 10120010.

A simultaneous webcast of the call may be accessed over the internet at www.anteroresources.com.  The webcast will be archived for replay on the Company's website until Thursday, August 9, 2018 at 9:00 am MT.

Presentation

An updated presentation will be posted to the Company's website before the August 2, 2018 conference call.  The presentation can be found at www.anteroresources.com on the homepage.  Information on the Company's website does not constitute a portion of this press release.

Non-GAAP Financial Measures

Revenue Excluding Unrealized Derivative (Gains) Losses

Revenue excluding unrealized derivative (gains) losses as set forth in this release represents total operating revenue adjusted for non-cash (gains) losses on unsettled derivatives.  Antero believes that revenue excluding unrealized derivative (gains) losses is useful to investors in evaluating operational trends of the Company and its performance relative to other oil and gas producing companies.  Revenue excluding unrealized derivative (gains) losses is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for total operating revenue as an indicator of financial performance.  The following table reconciles total operating revenue to revenue excluding unrealized derivative (gains) losses:











Three months ended




June 30,




2017


2018










Total operating revenue


$

790,389


$

989,344


Commodity derivative fair value gains



(85,641)



(55,336)


Marketing derivative fair value losses





110


Gains on settled commodity derivatives



31,064



95,884


Losses on settled marketing derivatives





(15,884)


Revenue excluding unrealized derivative (gains) losses


$

735,812


$

1,014,118


Adjusted Net Income (Loss) & Stand-Alone Adjusted Net Income (Loss)

Adjusted net income (loss) as set forth in this release represents net income, adjusted for certain items.  Stand-Alone adjusted net income (loss) as presented in this release represents net income that will be reported in the Parent column of Antero's guarantor footnote to its financial statements, adjusted for certain items.  Antero believes that adjusted net income (loss) is useful to investors in evaluating operational trends of the Company and its performance relative to other oil and gas producing companies.  Adjusted net income (loss) and Stand-Alone adjusted net income (loss) are not measures of financial performance under GAAP and should not be considered in isolation or as a substitute for net income as an indicator of financial performance.  The following table reconciles net (loss) to adjusted net income (loss) and Stand-Alone net (loss) to Stand-Alone adjusted net (loss) (in thousands):















Stand-Alone


Consolidated



Three months ended


Three months ended



June 30,


June 30,



2017


2018


2017


2018















Net (loss)

$

(5,132)


$

(136,385)


$

(5,132)


$

(136,385)


Commodity derivative fair value gains


(85,641)



(55,336)



(85,641)



(55,336)


Gains on settled commodity derivatives


31,064



95,884



31,064



95,884


Marketing derivative fair value losses




110





110


Losses on settled marketing derivatives




(15,884)





(15,884)


Impairment of unproved properties


15,199



134,437



15,199



134,437


Impairment of gathering systems and facilities




4,470





8,501


Equity-based compensation


20,024



13,204



26,975



19,071


Income tax effect of reconciling items


7,323



(42,214)



4,693



(44,577)


Adjusted net income (loss)

$

(17,163)


$

(1,714)


$

(12,842)


$

5,821


Adjusted Operating Cash Flow and Stand-Alone Adjusted Operating Cash Flow

Adjusted Operating Cash Flow as presented in this release represents net cash provided by operating activities before changes in working capital items.  Stand-Alone Adjusted Operating Cash Flow as presented in this release represents net cash provided by operating activities that will be reported in the Parent column of Antero's guarantor footnote to its financial statements before changes in working capital items.  Adjusted Operating Cash Flow is widely accepted by the investment community as a financial indicator of an oil and gas company's ability to generate cash to internally fund exploration and development activities and to service debt.  Adjusted Operating Cash Flow is also useful because it is widely used by professional research analysts in valuing, comparing, rating and providing investment recommendations of companies in the oil and gas exploration and production industry.  In turn, many investors use this published research in making investment decisions. 

Management believes that Adjusted Operating Cash Flow and Stand-Alone Adjusted Operating Cash Flow are useful indicators of the company's ability to internally fund its activities and to service or incur additional debt on a consolidated and Stand-Alone basis. Management believes that changes in current assets and liabilities, which are excluded from the calculation of these measures, relate to the timing of cash receipts and disbursements and therefore may not relate to the period in which the operating activities occurred and generally do not have a material impact on the ability of the company to fund its operations. 

There are significant limitations to using Adjusted Operating Cash Flow and Stand-Alone Adjusted Operating Cash Flow as measures of performance, including the inability to analyze the effect of certain recurring and non-recurring items that materially affect the company's net income on a consolidated and Stand-Alone basis, the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted Operating Cash Flow and Stand-Alone Adjusted Operating Cash Flow reported by different companies.  Adjusted Operating Cash Flow and Stand-Alone Adjusted Operating Cash Flow do not represent funds available for discretionary use because those funds may be required for debt service, land acquisitions and lease renewals, other capital expenditures, working capital, income taxes, exploration expenses, and other commitments and obligations.

Adjusted Operating Cash Flow is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for cash flows from operating, investing, or financing activities, as an indicator of cash flows, or as a measure of liquidity.

The following table reconciles net cash provided by operating activities to Adjusted Operating Cash Flow as used in this release (in thousands):

















Stand-Alone


Consolidated




Three months ended


Three months ended




June 30,


June 30,




2017


2018


2017


2018
















Net cash provided by operating activities 


$

202,460



228,503


$

253,647



297,391


Net change in working capital 



2,420



50,513



(2,853)



37,803


Adjusted Operating Cash Flow 


$

204,880



279,016


$

250,794



335,194


Total Debt and Net Debt

The following table reconciles consolidated total debt to Net Debt as used in this release (in thousands):



December 31,


June 30,




2017


2018










AR bank credit facility


$

185,000



455,000


AM bank credit facility



555,000



770,000


5.375% AR senior notes due 2021



1,000,000



1,000,000


5.125% AR senior notes due 2022



1,100,000



1,100,000


5.625% AR senior notes due 2023



750,000



750,000


5.375% AM senior notes due 2024



650,000



650,000


5.000% AR senior notes due 2025



600,000



600,000


Net unamortized premium



1,520



1,382


Net unamortized debt issuance costs



(41,430)



(38,038)


Consolidated total debt


$

4,800,090



5,288,344


Less: AR cash and cash equivalents



20,078



31,083


Less: AM cash and cash equivalents



8,363



19,525


Consolidated Net Debt


$

4,771,649



5,237,736










Stand-Alone Net Debt


$

3,584,012



3,845,695


Adjusted EBITDAX and Stand-Alone Adjusted EBITDAX

Adjusted EBITDAX as defined by the Company represents net income or loss, including noncontrolling interests, before interest expense, interest income, derivative fair value gains or losses, but including net cash receipts or payments on derivative instruments included in derivative fair value gains or losses, taxes, impairments, depletion, depreciation, amortization, and accretion, exploration expense, equity-based compensation, gain or loss on early extinguishment of debt, and gain or loss on sale of assets. Adjusted EBITDAX also includes distributions from unconsolidated affiliates and excludes equity in earnings or losses of unconsolidated affiliates.

Stand-Alone Adjusted EBITDAX as defined by the Company represents income or loss as reported in the Parent column of Antero's guarantor footnote to its financial statements before interest expense, interest income, gains or losses from commodity derivatives and marketing derivatives, but including net cash receipts or payments on derivative instruments included in derivative gains or losses, income taxes, impairments, depletion, depreciation, amortization, and accretion, exploration expense, equity-based compensation, gain or loss on early extinguishment of debt, gain or loss on sale of assets, equity in earnings or loss of Antero Midstream and gain or loss on changes in the fair value of contingent acquisition consideration. Stand-Alone Adjusted EBITDAX also includes distributions received from limited partner interests in Antero Midstream common units.

The GAAP financial measure nearest to Adjusted EBITDAX is net income or loss including noncontrolling interest that will be reported in Antero's condensed consolidated financial statements.  The GAAP financial measure nearest to Stand-Alone Adjusted EBITDAX is Stand-Alone net income or loss that will be reported in the Parent column of Antero's guarantor footnote to its financial statements. While there are limitations associated with the use of Adjusted EBITDAX and Stand-Alone Adjusted EBITDAX described below, management believes that these measures are useful to an investor in evaluating the company's financial performance because these measures:

  • are widely used by investors in the oil and gas industry to measure a company's operating performance without regard to items excluded from the calculation of such term, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;
  • helps investors to more meaningfully evaluate and compare the results of Antero's operations (both on a consolidated and Stand-Alone basis) from period to period by removing the effect of its capital structure from its operating structure; and
  • is used by management for various purposes, including as a measure of Antero's operating performance (both on a consolidated and Stand-Alone basis), in presentations to the company's board of directors, and as a basis for strategic planning and forecasting. Adjusted EBITDAX is also used by the board of directors as a performance measure in determining executive compensation. Adjusted EBITDAX, as defined by our credit facility, is used by our lenders pursuant to covenants under our revolving credit facility and the indentures governing the company's senior notes.

There are significant limitations to using Adjusted EBITDAX and Stand-Alone Adjusted EBITDAX as measures of performance, including the inability to analyze the effect of certain recurring and non-recurring items that materially affect the company's net income on a consolidated and Stand-Alone basis, the lack of comparability of results of operations of different companies and the different methods of calculating Adjusted EBITDAX reported by different companies.  In addition, Adjusted EBITDAX and Stand-Alone Adjusted EBITDAX provide no information regarding a company's capital structure, borrowings, interest costs, capital expenditures, and working capital movement or tax position.  

















Stand-Alone


Consolidated




Three months ended June 30,


Three months ended June 30,


(in thousands)


2017


2018


2017


2018


Net income (loss) including noncontrolling interest


$

(5,132)



(136,385)


$

39,965



(67,275)


Commodity derivative fair value gains



(85,641)



(55,336)



(85,641)



(55,336)


Gains on settled commodity derivatives



31,064



95,884



31,064



95,884


Marketing derivative fair value losses





110





110


Losses on settled marketing derivatives





(15,884)





(15,884)


Interest expense



59,735



54,388



68,582



69,349


Income tax expense (benefit)



18,819



(25,573)



18,819



(25,573)


Depletion, depreciation, amortization, and accretion



171,319



202,283



201,831



238,750


Impairment of unproved properties



15,199



134,437



15,199



134,437


Impairment of gathering systems and facilities





4,470





8,501


Exploration expense



1,804



1,471



1,804



1,471


Gain on change in fair value of contingent acquisition consideration



(3,590)



(3,947)






Equity-based compensation expense



20,024



13,204



26,975



19,071


Equity in earnings of unconsolidated affiliates







(3,623)



(9,264)


Distributions from unconsolidated affiliates







5,820



10,810


Equity in (earnings) loss of Antero Midstream Partners LP



10,408



26,926






Distributions from Antero Midstream Partners LP



32,661



38,559






Adjusted EBITDAX



266,670



334,607



320,795



405,051


Interest expense



(59,735)



(54,388)



(68,582)



(69,349)


Exploration expense



(1,804)



(1,471)



(1,804)



(1,471)


Changes in current assets and liabilities



(2,420)



(50,513)



2,853



(37,803)


Other non-cash items



(251)



268



385



963


Net cash provided by operating activities


$

202,460



228,503


$

253,647



297,391


The following table reconciles Antero's Stand-Alone net income to Adjusted EBITDAX for the twelve months ending June 30, 2018, as used in this release (in thousands):









Stand-Alone





Twelve months ended

June 30,



(in thousands)


2018



Net income including noncontrolling interest


$

230,254



Commodity derivative fair value gains



(211,640)



Gains on settled commodity derivatives



335,252



Marketing derivative fair value gains



(72,730)



Gains on settled marketing derivatives



94,158



Interest expense



222,479



Loss on early extinguishment of debt



1,205



Income tax benefit



(461,669)



Depletion, depreciation, amortization, and accretion



759,260



Impairment of unproved properties



302,473



Impairment of gathering systems and facilities



4,470



Exploration expense



7,983



Gain on change in fair value of contingent acquisition consideration



(14,181)



Equity-based compensation expense



65,070



Equity in (earnings) loss of Antero Midstream



74,056



Distributions from Antero Midstream



143,100



Adjusted EBITDAX


$ 1,479,540



Antero Midstream Adjusted EBITDA & Distributable Cash Flow

Antero Midstream views Adjusted EBITDA as an important indicator of its performance.  Antero Midstream defines Adjusted EBITDA as Net Income before interest expense, gain on sale of assets, depreciation expense, impairment expense, accretion, equity-based compensation expense, excluding equity in earnings of unconsolidated affiliates and including cash distributions from unconsolidated affiliates.

Antero Midstream uses Adjusted EBITDA to assess:

  • the financial performance of Antero Midstream's assets, without regard to financing methods in the case of Adjusted EBITDA, capital structure or historical cost basis;
  • its operating performance and return on capital as compared to other publicly traded partnerships in the midstream energy sector, without regard to financing or capital structure; and
  • the viability of acquisitions and other capital expenditure projects.

Antero Midstream defines Distributable Cash Flow as Adjusted EBITDA less interest paid, income tax withholding payments and cash reserved for payments of income tax withholding upon vesting of equity-based compensation awards, cash reserved for bond interest and ongoing maintenance capital expenditures paid.  Antero Midstream uses Distributable Cash Flow as a performance metric to compare the cash generating performance of Antero Midstream from period to period and to compare the cash generating performance for specific periods to the cash distributions (if any) that are expected to be paid to unitholders.  Distributable Cash Flow does not reflect changes in working capital balances.

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 financial measures of Adjusted EBITDA and Distributable Cash Flow should not be considered as alternatives to the GAAP measure of Net Income.  Adjusted EBITDA and Distributable Cash Flow are not presentations made in accordance with GAAP and have important limitations as an analytical tool because they include some, but not all, items that affect Net Income and Adjusted EBITDA.  You should not consider Adjusted EBITDA and Distributable Cash Flow in isolation or as a substitute for analyses of results as reported under GAAP.  Antero Midstream's definition of Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other partnerships.










Three Months Ended June 30,




2017


2018


Net income


$

87,175



109,466


Interest expense



9,015



14,628


Impairment of property and equipment expense





4,614


Depreciation expense



30,512



36,433


Gain on sale of assets





(583)


Accretion of contingent acquisition consideration



3,590



3,947


Accretion of asset retirement obligations





34


Equity-based compensation



6,951



5,867


Equity in earnings of unconsolidated affiliates



(3,623)



(9,264)


Distributions from unconsolidated affiliates



5,820



10,810


Adjusted EBITDA



139,440



175,952


Interest paid



(2,308)



(6,270)


Decrease in cash reserved for bond interest (1)



(8,734)



(8,734)


Income tax withholding upon vesting of Antero Midstream Partners LP equity-based compensation awards (2)



(2,431)



(1,500)


Maintenance capital expenditures (3)



(16,422)



(17,289)


Distributable Cash Flow


$

109,545



142,159










Distributions Declared to Antero Midstream Holders








Limited Partners


$

59,695



77,624


Incentive distribution rights



15,328



33,137


Total Aggregate Distributions


$

75,023



110,762









DCF coverage ratio



 1.46x



 1.28x














(1)

Cash reserved for bond interest expense on Antero Midstream's 5.375% senior notes outstanding during the period that is paid on a semi-annual basis on March 15th and September 15th of each year.

(2)

Estimate of current period portion of expected cash payment for income tax withholding attributable to vesting of Midstream LTIP equity-based compensation awards to be paid in the fourth quarter.

(3)

Maintenance capital expenditures represent the portion of our estimated capital expenditures associated with (i) the connection of new wells to our gathering and processing systems that we believe will be necessary to offset the natural production declines Antero Resources will experience on all of its wells over time, and (ii) water delivery to new wells necessary to maintain the average throughput volume on our systems.

Antero Resources is an independent natural gas and oil company engaged in the acquisition, development and production of unconventional liquids-rich natural gas properties located in the Appalachian Basin in West Virginia and Ohio. The Company's 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, except for statements of historical fact, made in this release regarding activities, events or developments Antero expects, believes or anticipates will or may occur in the future, such as those regarding future commodity prices, future production targets, completion of natural gas or natural gas liquids transportation projects, future earnings, Adjusted EBITDAX, Stand-Alone Adjusted EBITDAX, Adjusted Operating Cash Flow, Stand-Alone Adjusted Operating Cash Flow, Free Cash Flow, future capital spending plans, improved and/or increasing capital efficiency, continued utilization of existing infrastructure, gas marketability, estimated realized natural gas, natural gas liquids and oil prices, acreage quality, access to multiple gas markets, expected drilling and development plans (including the number, type, lateral length and location of wells to be drilled, the number and type of drilling rigs and the number of wells per pad), projected well costs, future financial position, future technical improvements and future marketing opportunities, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  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 Antero'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, 2017.

In this press release, Antero uses terms such as "resource potential" to describe potentially recoverable hydrocarbon quantities that are not permitted to be used in filings with the SEC.  Antero includes these estimates to demonstrate what management believes to be the potential for future drilling and production on our properties.  These estimates are by their nature much more speculative than estimates of proved reserves and would require substantial additional capital spending over significant number of years to implement recovery.  Actual quantities that may be ultimately recovered from Antero's interests may differ substantially from the estimates in this press release.  Factors affecting ultimate recovery include the scope of Antero's ongoing drilling program, which will be directly affected by commodity prices, the availability of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals and other factors, and actual drilling results, including geological and mechanical factors affecting recovery rates.

 

ANTERO RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

December 31, 2017 and June 30, 2018

(unaudited)

 (In thousands, except per share amounts)




December 31, 2017


June 30, 2018


Assets


Current assets:








Cash and cash equivalents


$

28,441



50,608


Accounts receivable, net of allowance for doubtful accounts of $1,320 at December 31, 2017 and $1,195 at June 30, 2018, respectively



34,896



35,676


Accrued revenue



300,122



321,214


Derivative instruments



460,685



420,842


Other current assets



8,943



6,590


Total current assets



833,087



834,930


Property and equipment:








Natural gas properties, at cost (successful efforts method):








Unproved properties



2,266,673



2,108,109


Proved properties



11,096,462



11,924,864


Water handling and treatment systems



946,670



979,937


Gathering systems and facilities



2,050,490



2,255,385


Other property and equipment



57,429



60,766





16,417,724



17,329,061


Less accumulated depletion, depreciation, and amortization



(3,182,171)



(3,647,910)


Property and equipment, net



13,235,553



13,681,151


Derivative instruments



841,257



763,592


Investments in unconsolidated affiliates



303,302



358,830


Other assets



48,291



52,104


Total assets


$

15,261,490



15,690,607










Liabilities and Equity


Current liabilities:








Accounts payable


$

62,982



96,477


Accrued liabilities



443,225



438,829


Revenue distributions payable



209,617



211,234


Derivative instruments



28,476



30,661


Other current liabilities



17,796



11,532


Total current liabilities



762,096



788,733


Long-term liabilities:








Long-term debt



4,800,090



5,288,344


Deferred income tax liability



779,645



763,192


Derivative instruments



207




Other liabilities



43,316



47,427


Total liabilities



6,385,354



6,887,696


Commitments and contingencies (notes 12 and 13)








Equity:








Stockholders' equity:








Preferred stock, $0.01 par value; authorized - 50,000 shares; none issued






Common stock, $0.01 par value; authorized - 1,000,000 shares; 316,379 shares and 317,052 shares issued and outstanding at December 31, 2017 and June 30, 2018, respectively



3,164



3,171


Additional paid-in capital



6,570,952



6,597,537


Accumulated earnings



1,575,065



1,453,513


Total stockholders' equity



8,149,181



8,054,221


Noncontrolling interests in consolidated subsidiary



726,955



748,690


Total equity



8,876,136



8,802,911


Total liabilities and equity


$

15,261,490



15,690,607


 

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended June 30, 2017 and 2018

(unaudited)

(In thousands, except per share amounts)




Three Months Ended June 30,




2017


2018


Revenue:








Natural gas sales


$

454,257



473,540


Natural gas liquids sales



170,819



255,985


Oil sales



26,512



38,873


Commodity derivative fair value gains



85,641



55,336


Gathering, compression, water handling and treatment



3,192



5,518


Marketing



49,968



160,202


Marketing derivative fair value losses





(110)


Total revenue



790,389



989,344


Operating expenses:








Lease operating



16,992



30,164


Gathering, compression, processing, and transportation



266,747



307,786


Production and ad valorem taxes



22,553



25,891


Marketing



77,421



213,420


Exploration



1,804



1,471


Impairment of unproved properties



15,199



134,437


Impairment of gathering systems and facilities





8,501


Depletion, depreciation, and amortization



201,182



238,050


Accretion of asset retirement obligations



649



700


General and administrative (including equity-based compensation expense of $26,975 and $19,071 in 2017 and 2018, respectively)



64,099



61,687


Total operating expenses



666,646



1,022,107


Operating income (loss)



123,743



(32,763)


Other income (expenses):








Equity in earnings of unconsolidated affiliates



3,623



9,264


Interest



(68,582)



(69,349)


Total other expenses



(64,959)



(60,085)


Income (loss) before income taxes



58,784



(92,848)


Provision for income tax (expense) benefit



(18,819)



25,573


Net income (loss) and comprehensive income (loss) including noncontrolling interests



39,965



(67,275)


Net income and comprehensive income attributable to noncontrolling interests



45,097



69,110


Net loss and comprehensive loss attributable to Antero Resources Corporation


$

(5,132)



(136,385)










Loss per common share—basic


$

(0.02)



(0.43)










Loss per common share—assuming dilution


$

(0.02)



(0.43)










Weighted average number of shares outstanding:








Basic



315,401



316,992


Diluted



315,401



316,992


 

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2017 and 2018

(unaudited)

(In thousands)




Six Months Ended June 30,





2017


2018



Cash flows provided by (used in) operating activities:








Net income including noncontrolling interests


$

345,523



13,535


Adjustments to reconcile net income to net cash provided by operating activities:








Depletion, depreciation, amortization, and accretion



405,197



467,684


Impairment of unproved properties



42,098



184,973


Impairment of gathering systems and facilities





8,501


Commodity derivative fair value gains



(524,416)



(77,773)


Gains on settled commodity derivatives



75,913



197,225


Marketing derivative fair value gains





(94,124)


Gains on settled marketing derivatives





94,158


Deferred income tax expense (benefit)



150,165



(16,453)


Equity-based compensation expense



52,478



40,227


Equity in earnings of unconsolidated affiliates



(5,854)



(17,126)


Distributions of earnings from unconsolidated affiliates



5,820



17,895


Other



472



1,932


Changes in current assets and liabilities:








Accounts receivable



13,188



10,237


Accrued revenue



43,339



(21,092)


Other current assets



(2,385)



2,353


Accounts payable



2,072



2,948


Accrued liabilities



4,204



24,065


Revenue distributions payable



39,162



1,617


Other current liabilities



610



(1,842)


Net cash provided by operating activities



647,586



838,940


Cash flows used in investing activities:








Additions to proved properties



(179,318)




Additions to unproved properties



(129,876)



(87,861)


Drilling and completion costs



(629,308)



(752,781)


Additions to water handling and treatment systems



(95,451)



(58,127)


Additions to gathering systems and facilities



(155,365)



(206,753)


Additions to other property and equipment



(6,564)



(3,502)


Investments in unconsolidated affiliates



(191,364)



(56,297)


Change in other assets



(12,452)



(7,026)


Other



2,156




Net cash used in investing activities



(1,397,542)



(1,172,347)


Cash flows provided by (used in) financing activities:








Issuance of common units by Antero Midstream Partners LP



246,585




Borrowings on bank credit facilities, net



585,000



485,000


Distributions to noncontrolling interests in consolidated subsidiary



(61,869)



(119,023)


Employee tax withholding for settlement of equity compensation awards



(8,433)



(7,967)


Other



(2,747)



(2,436)


Net cash provided by financing activities



758,536



355,574


Net increase in cash and cash equivalents



8,580



22,167


Cash and cash equivalents, beginning of period



31,610



28,441


Cash and cash equivalents, end of period


$

40,190



50,608










Supplemental disclosure of cash flow information:








Cash paid during the period for interest


$

125,284



130,231










Increase in accounts payable and accrued liabilities for additions to property and equipment


$

31,182



2,089














ANTERO RESOURCES CORPORATION

The following tables set forth selected operating data for the three months ended June 30, 2017 and 2018:




Three Months Ended June 30,


Amount of Increase


Percent


(in thousands)


2017


2018


(Decrease)


Change


Operating revenues and other:













Natural gas sales


$

454,257


$

473,540


$

19,283


4

%

NGLs sales



170,819



255,985



85,166


50

%

Oil sales



26,512



38,873



12,361


47

%

Commodity derivative gains



85,641



55,336



(30,305)


(35)

%

Gathering, compression, water handling and treatment



3,192



5,518



2,326


73

%

Marketing



49,968



160,202



110,234


221

%

Marketing derivative loss





(110)



(110)


*


Total operating revenues and other



790,389



989,344



198,955


25

%

Operating expenses:













Lease operating



16,992



30,164



13,172


78

%

Gathering, compression, processing, and transportation



266,747



307,786



41,039


15

%

Production and ad valorem taxes



22,553



25,891



3,338


15

%

Marketing



77,421



213,420



135,999


176

%

Exploration



1,804



1,471



(333)


(18)

%

Impairment of unproved properties



15,199



134,437



119,238


785

%

Impairment of gathering systems and facilities





8,501



8,501


*


Depletion, depreciation, and amortization



201,182



238,050



36,868


18

%

Accretion of asset retirement obligations



649



700



51


8

%

General and administrative (before equity-based compensation)



37,124



42,616



5,492


15

%

Equity-based compensation



26,975



19,071



(7,904)


(29)

%

Total operating expenses



666,646



1,022,107



355,461


53

%

Operating income (loss)



123,743



(32,763)



(156,506)


*















Other earnings (expenses):













Equity in earnings of unconsolidated affiliate



3,623



9,264



5,641


156

%

Interest expense



(68,582)



(69,349)



(767)


1

%

Total other expenses



(64,959)



(60,085)



4,874


(8)

%

Income (loss) before income taxes



58,784



(92,848)



(151,632)


*


Income tax (expense) benefit



(18,819)



25,573



44,392


*


Net income (loss) and comprehensive income (loss) including noncontrolling interest



39,965



(67,275)



(107,240)


*


Net income and comprehensive income attributable to noncontrolling interest



45,097



69,110



24,013


53

%

Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation


$

(5,132)


$

(136,385)


$

(131,253)


2,558

%














Adjusted EBITDAX


$

320,795


$

405,051


$

84,256


26

%














Production data:













Natural gas (Bcf)



144



167



23


16

%

C2 Ethane (MBbl)



2,548



3,290



742


29

%

C3+ NGLs (MBbl)



6,190



6,414



224


4

%

Oil (MBbl)



613



632



19


3

%

Combined (Bcfe)



200



229



29


15

%

Daily combined production (MMcfe/d)



2,200



2,520



320


15

%

Average prices before effects of derivative settlements:













  Natural gas (per Mcf)


$

3.15


$

2.83


$

(0.32)


(10)

%

  C2 Ethane (per Bbl)


$

8.40


$

9.93


$

1.53


18

%

  C3+ NGLs (per Bbl)


$

24.14


$

34.81


$

10.67


44

%

  Oil (per Bbl)


$

43.24


$

61.55


$

18.31


42

%

  Weighted Average Combined (per Mcfe)


$

3.26


$

3.35


$

0.09


3

%

Average realized prices after effects of derivative settlements(2):













  Natural gas (per Mcf)


$

3.53


$

3.50


$

(0.03)


(1)

%

  C2 Ethane (per Bbl)


$

8.61


$

9.93


$

1.32


15

%

  C3+ NGLs (per Bbl)


$

19.92


$

33.10


$

13.18


66

%

  Oil (per Bbl)


$

46.12


$

52.11


$

5.99


13

%

  Weighted Average Combined (per Mcfe)


$

3.41


$

3.77


$

0.36


11

%

Average Costs (per Mcfe):













  Lease operating


$

0.08


$

0.13


$

0.05


63

%

  Gathering, compression, processing, and transportation


$

1.33


$

1.34


$

0.01


1

%

  Production and ad valorem taxes


$

0.11


$

0.11


$


%

  Marketing expense (gain), net


$

0.14


$

0.23


$

0.09


64

%

  Depletion, depreciation, amortization, and accretion


$

1.01


$

1.04


$

0.03


3

%

  General and administrative (before equity-based compensation)


$

0.19


$

0.19


$


%


*Not meaningful or applicable

 

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SOURCE Antero Resources Corporation

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