Antero Resources (AR) Q3 Results - Oct 28
Posted: Wed Oct 28, 2020 5:34 pm
Antero Resources (AR), a "gasser" that I have followed for over 5 years, will be added to the Sweet 16.
Third Quarter Highlights Include:
Net production averaged 3,772 MMcfe/d, including 220,000 Bbl/d of liquids (65% natural gas by volume) < Compares to my forecast of 3,525 MMcfe/day, 192,500 liquids.
Realized natural gas equivalent price including hedges averaged $2.92 per Mcfe, a $0.94 premium to NYMEX pricing
Net loss was $536 million , due to a $749 million unrealized commodity hedge movement in fair value driven by the impact of a 10% increase in the natural gas strip during the quarter < As I have posted here many time, during periods of wild swings in commodity prices reported net income is a worthless number because of the GAAP rules for hedges.
Adjusted EBITDAX was $272 million (Non-GAAP); net cash provided by operating activities was $176 million
Free Cash Flow before changes in working capital was $88 million (Non-GAAP) < Better than expected, thanks to rising ngas and NGL prices, which will be much higher next quarter.
Drilling and completion capital expenditures were $161 million , down 11% sequentially and 44% from the year ago period
Well costs were $640 per lateral foot including roads, pad and facility costs with an average lateral length of 15,900 feet
Net marketing expense was $0.11 per Mcfe, the lowest since Antero gained access to its full firm transportation portfolio
Released 300 MMcf/d of firm transportation commitments effective in 2021, reducing expected 2021 costs by $25 million
Repurchased $461 million of senior notes principal, inclusive of the previously announced tender offers, at a 13% weighted average discount during the quarter
Borrowing base under the credit facility was reaffirmed at $2.85 billion , $210 million above the $2.64 billion of lender commitments < VERY GOOD NEWS!
Published annual Corporate Sustainability Report citing industry-low greenhouse gas intensity, methane leak loss rate, no gas flaring and set environmental reduction goals for 2025
Paul Rady , Chairman and Chief Executive Officer of Antero Resources commented, "Our third quarter results highlight the exceptional operational momentum that continues at Antero. Our development program and well results continue to exceed expectations, which drove the quarterly production outperformance. Antero's long-haul firm transportation portfolio allowed for no shut-ins or curtailments and delivered gas sales at just $0.05 per Mcf below NYMEX prices during a period of wide regional basis differentials. Our operational and strategic advantages combined with an improving backdrop for natural gas and NGL prices support our expectation of significant free cash flow generation during the second half of 2020.
Mr. Rady continued "Earlier this month we published our annual Corporate Sustainability Report, which highlights our outstanding environmental, social, and governance ("ESG") performance and unwavering commitment to being an industry leader in ESG metrics. We believe that natural gas will be key to the energy transition over the coming decades as it compliments renewable energy growth. As the third largest natural gas producer in the U.S., we are well positioned to maintain our peer-leading ESG position and be a natural gas provider of choice. Finally, we are committed to improving our already low greenhouse gas metrics even further as we work to achieve our 2025 environmental goals."
Glen Warren , CFO and President of Antero Resources said, "We have delivered on our commitment to reduce debt through a combination of $751 million of asset sales and debt repurchases at a discount. Our debt repurchase program which we launched in late 2019, has resulted in a $1.3 billion reduction in near-term maturities and the elimination of $220 million of total debt due to the realized discount. During the second half of 2020, we expect to generate $175 to $200 million in free cash flow, based on today's strip prices, and to receive the first of two $51 million contingency payments from our overriding royalty holder, Sixth Street Partners, providing additional funds for debt retirement. By year-end 2020 we estimate that Antero will have reduced total debt by over $800 million . Longer term, we are committed to maximizing free cash flow and further reducing total debt and financial leverage."
Asset Sale Program Update
Since the announcement of the Company's $750 million to $1 billion asset sale target in December 2019 , Antero has closed $751 million of transactions as detailed in the table below. Proceeds received to date have been used to repurchase debt at a discount. The Company intends to continue to evaluate other opportunities for asset monetizations with the proceeds earmarked for further debt reduction.
Third Quarter Highlights Include:
Net production averaged 3,772 MMcfe/d, including 220,000 Bbl/d of liquids (65% natural gas by volume) < Compares to my forecast of 3,525 MMcfe/day, 192,500 liquids.
Realized natural gas equivalent price including hedges averaged $2.92 per Mcfe, a $0.94 premium to NYMEX pricing
Net loss was $536 million , due to a $749 million unrealized commodity hedge movement in fair value driven by the impact of a 10% increase in the natural gas strip during the quarter < As I have posted here many time, during periods of wild swings in commodity prices reported net income is a worthless number because of the GAAP rules for hedges.
Adjusted EBITDAX was $272 million (Non-GAAP); net cash provided by operating activities was $176 million
Free Cash Flow before changes in working capital was $88 million (Non-GAAP) < Better than expected, thanks to rising ngas and NGL prices, which will be much higher next quarter.
Drilling and completion capital expenditures were $161 million , down 11% sequentially and 44% from the year ago period
Well costs were $640 per lateral foot including roads, pad and facility costs with an average lateral length of 15,900 feet
Net marketing expense was $0.11 per Mcfe, the lowest since Antero gained access to its full firm transportation portfolio
Released 300 MMcf/d of firm transportation commitments effective in 2021, reducing expected 2021 costs by $25 million
Repurchased $461 million of senior notes principal, inclusive of the previously announced tender offers, at a 13% weighted average discount during the quarter
Borrowing base under the credit facility was reaffirmed at $2.85 billion , $210 million above the $2.64 billion of lender commitments < VERY GOOD NEWS!
Published annual Corporate Sustainability Report citing industry-low greenhouse gas intensity, methane leak loss rate, no gas flaring and set environmental reduction goals for 2025
Paul Rady , Chairman and Chief Executive Officer of Antero Resources commented, "Our third quarter results highlight the exceptional operational momentum that continues at Antero. Our development program and well results continue to exceed expectations, which drove the quarterly production outperformance. Antero's long-haul firm transportation portfolio allowed for no shut-ins or curtailments and delivered gas sales at just $0.05 per Mcf below NYMEX prices during a period of wide regional basis differentials. Our operational and strategic advantages combined with an improving backdrop for natural gas and NGL prices support our expectation of significant free cash flow generation during the second half of 2020.
Mr. Rady continued "Earlier this month we published our annual Corporate Sustainability Report, which highlights our outstanding environmental, social, and governance ("ESG") performance and unwavering commitment to being an industry leader in ESG metrics. We believe that natural gas will be key to the energy transition over the coming decades as it compliments renewable energy growth. As the third largest natural gas producer in the U.S., we are well positioned to maintain our peer-leading ESG position and be a natural gas provider of choice. Finally, we are committed to improving our already low greenhouse gas metrics even further as we work to achieve our 2025 environmental goals."
Glen Warren , CFO and President of Antero Resources said, "We have delivered on our commitment to reduce debt through a combination of $751 million of asset sales and debt repurchases at a discount. Our debt repurchase program which we launched in late 2019, has resulted in a $1.3 billion reduction in near-term maturities and the elimination of $220 million of total debt due to the realized discount. During the second half of 2020, we expect to generate $175 to $200 million in free cash flow, based on today's strip prices, and to receive the first of two $51 million contingency payments from our overriding royalty holder, Sixth Street Partners, providing additional funds for debt retirement. By year-end 2020 we estimate that Antero will have reduced total debt by over $800 million . Longer term, we are committed to maximizing free cash flow and further reducing total debt and financial leverage."
Asset Sale Program Update
Since the announcement of the Company's $750 million to $1 billion asset sale target in December 2019 , Antero has closed $751 million of transactions as detailed in the table below. Proceeds received to date have been used to repurchase debt at a discount. The Company intends to continue to evaluate other opportunities for asset monetizations with the proceeds earmarked for further debt reduction.