Energy Prospectus

Q2 production was right on my forecast and increased production guidance is good. - Dan

Highlights Include:
•Net daily gas equivalent production averaged a record 2,200 MMcfe/d (28% liquids), a 25% increase over the prior year quarter
•Achieved record 102,766 Bbl/d of liquids production, a 37% increase over the prior year quarter
•Raising 2017 production guidance range to 2,250 to 2,300 MMcfe/d, a 3% increase from previous guidance range with no change to the drilling and completion capital budget
•Realized natural gas price of $3.15 per Mcf, a $0.03 differential to the average Nymex natural gas price before hedging
•Realized natural gas equivalent price of $3.41 per Mcfe including NGLs, oil and hedges
•GAAP net loss of $(5) million, or $(0.02) per share, compared to a net loss of $(596) million, or $(2.12) per share, in the prior year quarter
•Adjusted EBITDAX of $321 million, a 3% decrease compared to the prior year quarter
•Increased type curve for almost 600 proved undeveloped and probable Marcellus locations from 1.7 Bcf/1,000' to approximately 2.0 Bcf/1,000' of lateral with an average lateral length of 8,600 feet for mid-year reserves
•Increased mid-year 3P reserves by 14% to 53.0 Tcfe (29% liquids) from year-end 2016
•Pre-tax PV-10 of 3P reserves was $17.0 billion at 6/30/2017 strip pricing, including hedges
•Completed two laterals in the Marcellus averaging 13,700 feet of lateral length and drilled a 17,400 foot lateral in the Ohio Utica

This is a big deal, which the market seems to be ignoring today.

Antero announced today that internally estimated proved reserves at mid-year 2017 were 16.5 Tcfe, a 7% increase compared to estimated proved reserves at December 31, 2016. Assuming futures strip benchmark pricing and applying company-specific production weighting for Appalachian index pricing, the pre-tax present value discounted at 10% ("pre-tax PV–10") of the June 30, 2017 estimated proved reserves was $10.1 billion, including $1.7 billion of hedge value. All-in finding and development cost for proved reserve additions was $0.48 per Mcfe. Drill bit only finding and development cost for proved reserve additions was $0.47 per Mcfe. Proved developed reserves increased by 20% from year-end 2016 to 8.3 Tcfe at June 30, 2017 and the percentage of proved reserves classified as proved developed increased to 50%. The Company's proved, probable and possible ("3P") reserves at mid-year 2017 totaled 53.0 Tcfe, which represents a 14% increase compared to year-end 2016. Assuming futures strip benchmark pricing and applying the same company-specific production weighting for Appalachian index pricing, the pre-tax PV–10 of the June 30, 2017 3P reserves was $17.0 billion, including hedges. The 3P reserve figures exclude virtually all of the Company's Upper Devonian and West Virginia Utica resource.

Included in the mid-year 2017 reserves are 199 proved undeveloped and 398 probable locations that were upgraded to an approximate 2.0 Bcf/1,000' type curve from a 1.7 Bcf/1,000' type curve at year-end 2016. There are now 294 proved undeveloped locations, or 83% of the total proved undeveloped locations in the Marcellus that are booked at an approximate 2.0 Bcf/1,000' type curve. The remaining 60 Marcellus proved undeveloped locations are booked at a 1.7 Bcf/1,000' type curve.

Commenting on the continued enhanced recoveries and the impact on production and reserves, Paul Rady, Chairman and CEO, said, "We continue to see outstanding results from our advanced completions in the Marcellus that we began implementing in early 2016. In recognition of these productivity gains, our reserve engineers have now upgraded nearly 600 proved and probable drilling locations in the Marcellus from our previous 1.7 Bcf/1,000' type curve to an approximate 2.0 Bcf/1,000' type curve. The enhanced productivity from these completions combined with continued operational efficiencies has resulted in a further reduction in per unit development costs and a further increase in capital efficiency. The enhanced completions program has also resulted in a 3% increase to our production guidance without raising capital spending guidance."

I have updated my forecast model for Antero Resources. It will be on the EPG website this afternoon.

I have adjusted my valuation to $44.00/share, which compares to First Call's price target of $28.96.

Antero has over 100% of their natural gas production for the next two quarters hedged, so they will get $3.60 to $3.70 for their natural gas no matter what the near-term price movements are.

Over 90% of their 2018 natural gas production is hedged at $3.91/mcf.

Cash flow from operations will be approximately $1.2 Billion in 2017 and $1.6 Billion in 2018.