Antero Resources (AR) Q4 Results - Feb 16

[dan_s]

Wed, February 16, 2022, 3:15 PM CST

DENVER, Feb. 16, 2022 /PRNewswire/ -- Antero Resources Corporation (NYSE: AR) ("Antero Resources," "Antero," or the "Company") today announced its fourth quarter 2021 financial and operating results, year end 2021 estimated proved reserves, as well as its 2022 capital budget and guidance. In addition, Antero announced targets for returning capital to shareholders. The relevant consolidated financial statements are included in Antero Resources' Annual Report on Form 10-K for the year ended December 31, 2021.

Fourth Quarter 2021 Highlights Include:

Net production averaged 3.2 Bcfe/d, including 160 MBbl/d of liquids < Compares to my forecast of 3.39 Bcfe/d with liquids of 175 Mbl/d of liquids.

Realized pre-hedge natural gas equivalent price of $6.48 per Mcfe, a $0.65 per Mcfe premium to NYMEX pricing

Net Income was $901 million, Adjusted Net Income was $157 million (Non-GAAP) < Adjusted net income beat my forecast of $137.5 million, thanks to significantly higher realize NGL prices of $41.31/bbl, more than a $10/bbl increase of NGL prices in Q3..

Adjusted EBITDAX was $420 million (Non-GAAP); net cash provided by operating activities was $475 million

Free Cash Flow was $237 million (Non-GAAP)

Total Debt and Net Debt at quarter end was $2.1 billion, an $875 million reduction from year end 2020 (Non-GAAP) < Very Good!

Net Debt to trailing last twelve month Adjusted EBITDAX declined to 1.3x (Non-GAAP)

Estimated proved reserves were 17.7 Tcfe at year end 2021 and proved developed reserves increased to 12.8 Tcfe (72% Proved Developed)

Estimated future development cost for 5.0 Tcfe of proved undeveloped reserves is $0.31 per Mcfe

Capital Return Program, 2022 Guidance and Other Highlights:

Targeting return of capital to shareholders of 25% to 50% of Free Cash Flow annually going forward

Announced plans to redeem all remaining Senior Notes due 2025 on March 1, 2022 < The improvement in AR's balance sheet is stunning.

Drilling and completion capital budget is $675 to $700 million

Net production is expected to average 3.2 to 3.3 Bcfe/d, including 175 to 185 MBbl/d of liquids (NGLs and oil)

Expanded 2025 Net Zero emissions target to include Scope 2 emissions

Received Responsibly Sourced Gas certification following completion of initial Project Canary Pilot

Paul Rady, Chairman, President and Chief Executive Officer of Antero Resources commented, "This past year proved to be an important inflection point for Antero as we shifted to a maintenance capital program and generated approximately $850 million of Free Cash Flow. This substantial Free Cash Flow was used to reduce debt during the year, driving leverage down to 1.3x as of December 31, 2021. Looking ahead to 2022, our capital budget reflects another year of maintenance capital that is projected to generate $1.5 to $1.7 billion in Free Cash Flow based on current commodity prices. This Free Cash Flow outlook allows us to continue to reduce debt while also returning substantial capital to our shareholders."

Michael Kennedy, Chief Financial Officer of Antero Resources said, "The dramatic reduction in our absolute debt, below $2.0 billion in the first quarter of 2022, enables us to initiate a return of capital program. Going forward we will target returning 25% to 50% of Free Cash Flow annually to our shareholders, beginning with the $1.0 billion share repurchase program that is effective immediately. This plan puts Antero in the unique position of reducing leverage below 1.0x in 2022 while maintaining a peer-leading return of capital profile."

Return of Capital Program

Antero is initially targeting a return of capital of 25% to 50% of Free Cash Flow annually going forward, beginning with the implementation of the share repurchase program. Antero's Board of Directors authorized a share repurchase program that allows the Company to repurchase up to $1.0 billion of outstanding common stock. This represents approximately 16% of Antero's market capitalization based on the current share price. The open market share repurchase program is expected to commence during the first quarter of 2022.

The actual amount, timing and nature of any returns of capital to shareholders is subject to review and approval by Antero's Board of Directors. The shares may be repurchased from time to time in open market transactions, through privately negotiated transactions or by other means in accordance with federal securities laws. The timing, as well as the number and value of shares repurchased under the program, will be determined by the Company at its discretion and will depend on a variety of factors, including the market price of the Company's common stock, general market and economic conditions and applicable legal requirements. The exact number of shares to be repurchased by the Company is not guaranteed and the program may be suspended, modified, or discontinued at any time without prior notice.

Debt Reduction

As of December 31, 2021, Antero's total debt was $2.1 billion with no borrowings under the Company's revolving credit facility. Net Debt to trailing twelve month Adjusted EBITDAX was 1.3x. In late January, Antero announced that on March 1, 2022 it will redeem all $585 million of outstanding senior notes due 2025 at 101.25% of par, plus accrued and unpaid interest on March 1, 2022. The redemption is expected to reduce annual interest expense by approximately $30 million. The Company intends to utilize cash on hand and borrowings under its revolving credit facility to fund this senior note redemption. Borrowings utilized to fund the redemption are expected to be paid down in 2022 with Free Cash Flow.

[farrell90]

Dan, thanks for reviewing the results. Do you believe the " Return of Capital Program" could eventually result in a dividend? Are you surprised the AH trading turned negative?

[dan_s]

I have updated my valuation of AR to $32/share, but I want to check out a few more details on Thursday after our webinar at 10AM CT.

[dan_s]

I made a few minor changes, but my valuation stays at $32 which is a $2/share increase from where it was in my January newsletter. The model will be posted to the EPG website this afternoon.