Antero Resources Q3 Results - Oct 29

[dan_s]

DENVER, Oct. 29, 2019 /PRNewswire/ -- Antero Resources Corporation (AR) ("Antero," "Antero Resources," or the "Company") today released its third quarter 2019 financial and operational results. The relevant condensed consolidated and condensed consolidating financial statements are included in Antero's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, which has been filed with the Securities and Exchange Commission ("SEC").

Third Quarter 2019 Highlights Include:

Net daily gas equivalent production averaged 3,367 MMcfe/d (32% liquids by volume), a 24% increase over the prior year period
Realized natural gas equivalent price averaged $3.13 per Mcfe including liquids and hedges
Drilling and completion capital spending was $290 million, lowest quarterly spending since 2013 IPO
Well costs are currently averaging $895 per foot, 4% below the second half of 2019 targeted well cost of $930 per foot
Lease operating expenses were $0.12 per Mcfe during the quarter, a 21% reduction from the first half of 2019, and is expected to be $0.10 per Mcfe for the fourth quarter of 2019
Released 250 MMcf/d of firm transportation capacity to third parties for the September 2019 to March 2020 period, resulting in a reduction of over $15 million of net marketing expense for the corresponding time period
Received a $59 million net payment from South Jersey related to past underpayment for natural gas
Reported $879 million of net loss, or $(2.86) per diluted share, largely due to a $1 billion non-cash impairment charge related to properties in the Utica Shale tied to lower future commodity prices, and Adjusted Net Loss of $150 million (Non-GAAP), or $(0.49) per diluted share
Reported Adjusted EBITDAX of $258 million (Non-GAAP)
Increased credit facility commitment from $2.5 billion to $2.64 billion
Net debt to trailing twelve months Adjusted EBITDAX ratio was 2.6x (Non-GAAP)

2019 Outlook Update:

Increasing full year production guidance to the top end of the range, or approximately 3,250 MMcfe/d, a 2% increase from the midpoint of the prior range of 3,150 to 3,250 MMcfe/d.
Reducing full year 2019 drilling and completion capital to a range of $1.275 to $1.3 billion, a 4% decrease from the prior range of $1.3 to $1.375 billion
Projecting a $4 to $5 per barrel improvement in realized C3+ prices in the fourth quarter of 2019 based on current strip prices


Paul Rady, Chairman and CEO said, "Antero made substantial progress during the quarter towards lowering its overall cost structure. Driven by our well cost reduction initiatives, we recorded our lowest drilling and completion capital in a given quarter since our IPO in 2013. Importantly, these savings led to a 4% reduction in our 2019 capital budget and a $100 million reduction since our initial 2019 budget announcement. Despite this reduced capital budget we have increased our 2019 production guidance, a testament to the capital efficiency of our operations. As a result of our water savings initiatives, particularly the blending of our flowback and produced water, third quarter lease operating expenses per Mcfe declined 21% from the first half of this year as well. We expect these costs to decline an additional 15% by 2020.

Mr. Rady continued "During the quarter, we also released a meaningful portion of our unutilized firm transportation capacity to third parties, which contributed to a 22% reduction in net marketing expenses compared to the first half of the year. These capacity releases are expected to result in lower net marketing expenses than expected in 2020. General and administrative costs per Mcfe have also declined by 25% since the first half of this year and we are targeting a further 10% reduction by mid-2020. In the aggregate, these capital and expense reductions will create meaningful shareholder value over the long-term and are especially important in this low commodity price environment."

[dan_s]

Liquidity Update (from 10Q):
In October 2019, Antero added Royal Bank of Canada (“RBC”) to its lending group with $140 million of incremental commitments.
Pro forma for the addition of RBC, Antero lender commitments increased to $2.64 billion and the Company’s available liquidity increased to approximately $1.7 billion.

Antero Resources is still outspending cash flow from operations to increase production by ~19% in 2019 and ~9% in 2020 (per updated guidance), but liquidity is not an issue.

Balance Sheet and Liquidity
As of September 30, 2019, Antero’s total debt was $3.7 billion, of which $275 million were borrowings outstanding under the
Company’s revolving credit facility. Pro forma for RBC being added to bank group, lender commitments under this facility total
$2.64 billion, and the borrowing base is $4.5 billion. After deducting letters of credit outstanding, the Company had $1.7 billion in
available liquidity. As of September 30, 2019, Antero’s net debt to trailing twelve months Adjusted EBITDAX ratio was 2.6x.

President and CFO, Glen Warren, commented, “The third quarter was a turning point for Antero on the cost front, as cost saving and
efficiency initiatives began to make a meaningful impact on financial results. Further, Antero continued to take steps towards
improving our financial strength through the expansion of our commodity hedge position, mitigation of net marketing expenses and
the increase in our lender commitments, which allows us to be deliberate in the execution of our business strategy with a
fundamentally sound balance sheet in a low commodity price environment.”

Commodity Derivative Positions
Antero has hedged 1.8 Tcf of natural gas at a weighted average index price of $2.90 per MMBtu through 2023 with a combination of
fixed price swap positions in 2019 through 2023 and collar agreements in 2019. Antero also has oil and NGL fixed price swap
positions, including oil positions that totaled 6.5 MMbls/day at a weighted average price of $59.05 per barrel from October 2019
through December 2019. As of October 28, 2019, the Company’s estimated fair value of commodity derivative instruments was $807
million based on strip pricing.

Antero's estimated natural gas production for the remainder of 2019 is fully hedged with a combination of fixed price swap positions
and collars. As of October 29, 2019, the Company had fixed price swaps on the NYMEX index totaling 996,766 MMBtu/day of
natural gas for October 2019 through December 2019 fixed at a weighted average price of $3.23 per MMBtu. Collar agreements for
October 2019 through December 2019 total 1,575,000 MMBtu/day of natural gas at a weighted average floor of $2.50 per MMBtu
and ceiling of $3.52 per MMBtu. Natural gas liquids derivative contract positions include a combination of fixed price swaps and
basis swaps.

[dan_s]

Antero has reduced the book value of its assets by taking close to $1.3 Billion of impairment charges this year. Even after all of these non-cash charges, AR's book value per share is over $24.00.

PV10 Net Asset Value of just the company's proved reserves (P1) should be over $7.50/share when they report year-end reserves.

AR closed at $2.70 today, which compares to my estimated cash flow from operation of $3.48/share in 2019 based on my forecast model. First Call's forecast is $3.12 operating CFPS in 2019.

Q4 results are locked in because they have 100% of their natural gas hedged for Q4. 91% of their natural gas for 2020 is now hedged at $2.87/mcf.