ANTERO RESOURCES Corp [AR] Filings

10-Q 1 ar-20210930x10q.htm 10-Q

Fee

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36120

ANTERO RESOURCES CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		80-0162034
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1615 Wynkoop Street, Denver, Colorado		80202
(Address of principal executive offices)		(Zip Code)

(303) 357-7310

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	AR	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒		Accelerated Filer ☐
Non-accelerated Filer ☐		Smaller Reporting Company ☐
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes ☒ No

The registrant had 313,929,992 shares of common stock outstanding as of October 22, 2021.

Table of Contents

TABLE OF CONTENTS


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		2
PART I—FINANCIAL INFORMATION		4
Item 1.	Financial Statements (Unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	59
Item 4.	Controls and Procedures	61

PART II—OTHER INFORMATION		62
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities	62
Item 5.	Other Information	62
Item 6.	Exhibits	63
SIGNATURES		64

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. Words such as “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential,” or “continue,” and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. When considering these forward-looking statements, investors should keep in mind the risk factors and other cautionary statements in this Quarterly Report on Form 10-Q. These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

●

our ability to execute our business strategy;

●

our production and oil and gas reserves;

●

our financial strategy, liquidity and capital required for our development program;

●

our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;

●

natural gas, natural gas liquids (“NGLs”), and oil prices;

●

impacts of world health events, including the coronavirus (“COVID-19”) pandemic;

●

timing and amount of future production of natural gas, NGLs, and oil;

●

our hedging strategy and results;

●

our ability to meet minimum volume commitments and to utilize or monetize our firm transportation commitments;

●

our future drilling plans;

●

our projected well costs and cost savings initiatives, including with respect to water handling services provided by Antero Midstream Corporation;

●

competition and government regulations;

●

pending legal or environmental matters;

●

marketing of natural gas, NGLs, and oil;

●

leasehold or business acquisitions;

●

costs of developing our properties;

●

operations of Antero Midstream Corporation;

●

general economic conditions;

●

credit markets;

●

uncertainty regarding our future operating results; and

●

our other plans, objectives, expectations and intentions contained in this Quarterly Report on Form 10-Q.

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We caution investors that these forward-looking statements are subject to all of the risks and uncertainties incidental to our business, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, availability of drilling, completion, and production equipment and services, environmental risks, drilling and completion and other operating risks, marketing and transportation risks, regulatory changes, the uncertainty inherent in estimating natural gas, NGLs, and oil reserves and in projecting future rates of production, cash flows and access to capital, the timing of development expenditures, conflicts of interest among our stockholders, impacts of world health events (including the COVID-19 pandemic), cybersecurity risks and the other risks described or referenced under the heading “Item 1A. Risk Factors” herein, including the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), which is on file with the Securities and Exchange Commission (“SEC”).

Reserve engineering is a process of estimating underground accumulations of natural gas, NGLs, and oil that cannot be measured in an exact manner. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data, and the price and cost assumptions made by reservoir engineers. In addition, the results of drilling, testing, and production activities, or changes in commodity prices, may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of natural gas, NGLs, and oil that are ultimately recovered.

Should one or more of the risks or uncertainties described or referenced in this Quarterly Report on Form 10-Q occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

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PART I—FINANCIAL INFORMATION

ANTERO RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)


			(Unaudited)
	December 31,		September 30,
	2020		2021
Assets
Current assets:
Accounts receivable	$	28,457		34,768
Accrued revenue		425,314		652,521
Derivative instruments		105,130		627
Other current assets		15,238		20,937
Total current assets		574,139		708,853
Property and equipment:
Oil and gas properties, at cost (successful efforts method):
Unproved properties		1,175,178		1,052,543
Proved properties		12,260,713		12,559,146
Gathering systems and facilities		5,802		5,802
Other property and equipment		74,361		91,621
		13,516,054		13,709,112
Less accumulated depletion, depreciation, and amortization		(3,869,116)		(4,176,296)
Property and equipment, net		9,646,938		9,532,816
Operating leases right-of-use assets		2,613,603		2,969,642
Derivative instruments		47,293		14,834
Investment in unconsolidated affiliate		255,082		236,597
Other assets		13,790		8,796
Total assets	$	13,150,845		13,471,538

Liabilities and Equity
Current liabilities:
Accounts payable	$	26,728		60,409
Accounts payable, related parties		69,860		79,595
Accrued liabilities		343,524		501,132
Revenue distributions payable		198,117		315,936
Derivative instruments		31,242		1,436,292
Short-term lease liabilities		266,024		353,470
Deferred revenue, VPP		45,257		39,528
Other current liabilities		2,302		16,320
Total current liabilities		983,054		2,802,682
Long-term liabilities:
Long-term debt		3,001,593		2,341,033
Deferred income tax liability		412,252		55,636
Derivative instruments		99,172		331,570
Long-term lease liabilities		2,348,785		2,616,889
Deferred revenue, VPP		156,024		127,844
Other liabilities		59,694		60,642
Total liabilities		7,060,574		8,336,296
Commitments and contingencies (Notes 13 and 14)
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; 268,672 shares and 313,866 shares issued and outstanding as of December 31, 2020 and September 30, 2021, respectively		2,686		3,138
Additional paid-in capital		6,195,497		6,365,929
Accumulated deficit		(430,478)		(1,518,762)
Total stockholders' equity		5,767,705		4,850,305
Noncontrolling interests		322,566		284,937
Total equity		6,090,271		5,135,242
Total liabilities and equity	$	13,150,845		13,471,538

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(In thousands, except per share amounts)


	Three Months Ended September 30,
	2020		2021
Revenue and other:
Natural gas sales	$	436,304		884,669
Natural gas liquids sales		327,426		598,327
Oil sales		34,265		56,734
Commodity derivative fair value losses		(514,751)		(1,250,466)
Marketing		91,497		232,685
Amortization of deferred revenue, VPP		5,175		11,404
Gain on sale of assets		—		539
Other income		675		530
Total revenue		380,591		534,422
Operating expenses:
Lease operating		21,450		25,363
Gathering, compression, processing, and transportation		656,615		628,225
Production and ad valorem taxes		25,790		52,219
Marketing		128,580		266,751
Exploration		454		235
Impairment of oil and gas properties		29,392		26,253
Depletion, depreciation, and amortization		238,418		182,810
Accretion of asset retirement obligations		1,115		828
General and administrative (including equity-based compensation expense of $5,699 and $5,298 in 2020 and 2021, respectively)		31,640		32,442
Contract termination and rig stacking		1,246		3,370
Total operating expenses		1,134,700		1,218,496
Operating loss		(754,109)		(684,074)
Other income (expense):
Interest expense, net		(48,043)		(45,414)
Equity in earnings of unconsolidated affiliate		24,419		21,450
Gain (loss) on early extinguishment of debt		55,633		(16,567)
Transaction expense		(524)		(626)
Total other income (expense)		31,485		(41,157)
Loss before income taxes		(722,624)		(725,231)
Provision for income tax benefit		168,778		158,656
Net loss and comprehensive loss including noncontrolling interests		(553,846)		(566,575)
Less: net loss and comprehensive loss attributable to noncontrolling interests		(18,233)		(17,257)
Net loss and comprehensive loss attributable to Antero Resources Corporation	$	(535,613)		(549,318)

Loss per share—basic	$	(1.99)		(1.75)
Loss per share—diluted	$	(1.99)		(1.75)

Weighted average number of shares outstanding:
Basic		268,511		313,790
Diluted		268,511		313,790

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(In thousands, except per share amounts)


	Nine Months Ended September 30,
	2020		2021
Revenue and other:
Natural gas sales	$	1,214,801		2,231,558
Natural gas liquids sales		797,296		1,503,027
Oil sales		78,233		153,326
Commodity derivative fair value losses		(116,933)		(2,260,062)
Marketing		201,855		562,928
Amortization of deferred revenue, VPP		5,175		33,833
Gain on sale of assets		—		2,827
Other income		2,180		551
Total revenue		2,182,607		2,227,988
Operating expenses:
Lease operating		71,836		71,555
Gathering, compression, processing, and transportation		1,877,084		1,874,664
Production and ad valorem taxes		71,481		130,610
Marketing		334,906		627,822
Exploration		895		6,092
Impairment of oil and gas properties		155,962		69,618
Depletion, depreciation, and amortization		652,130		564,166
Accretion of asset retirement obligations		3,330		2,947
General and administrative (including equity-based compensation expense of $17,001 and $15,189 in 2020 and 2021, respectively)		101,264		108,693
Contract termination and rig stacking		12,317		4,305
Total operating expenses		3,281,205		3,460,472
Operating loss		(1,098,598)		(1,232,484)
Other income (expense):
Interest expense, net		(152,956)		(138,120)
Equity in earnings (loss) of unconsolidated affiliate		(83,408)		57,621
Gain (loss) on early extinguishment of debt		175,365		(82,836)
Loss on convertible note equitizations		—		(50,777)
Impairment of equity method investment		(610,632)		—
Transaction expense		(6,662)		(3,102)
Total other expense		(678,293)		(217,214)
Loss before income taxes		(1,776,891)		(1,449,698)
Provision for income tax benefit		421,167		337,568
Net loss and comprehensive loss including noncontrolling interests		(1,355,724)		(1,112,130)
Less: net loss and comprehensive loss attributable to noncontrolling interests		(17,997)		(23,846)
Net loss and comprehensive loss attributable to Antero Resources Corporation	$	(1,337,727)		(1,088,284)

Loss per share—basic	$	(4.89)		(3.55)
Loss per share—diluted	$	(4.89)		(3.55)

Weighted average number of shares outstanding:
Basic		273,689		306,201
Diluted		273,689		306,201

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands)


					Additional		Accumulated
	Common Stock				Paid-in		Earnings		Noncontrolling		Total
	Shares		Amount		Capital		(Deficit)		Interests		Equity
Balances, December 31, 2019		295,941	$	2,959		6,130,365		837,419		—		6,970,743
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		178		2		(34)		—		—		(32)
Repurchases and retirements of common stock		(27,193)		(272)		(42,418)		—		—		(42,690)
Equity-based compensation		—		—		3,329		—		—		3,329
Net loss and comprehensive loss		—		—		—		(338,810)		—		(338,810)
Balances, March 31, 2020		268,926		2,689		6,091,242		498,609		—		6,592,540
Issuance of common units in Martica Holdings, LLC		—		—		—		—		300,000		300,000
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		464		5		(305)		—		—		(300)
Distributions to noncontrolling interest		—		—		—		—		(3,413)		(3,413)
Repurchases and retirements of common stock		(1,000)		(10)		(743)		—		—		(753)
Equity-based compensation		—		—		7,973		—		—		7,973
Net income (loss) and comprehensive income (loss)		—		—		—		(463,304)		236		(463,068)
Balances, June 30, 2020		268,390		2,684		6,098,167		35,305		296,823		6,432,979
Issuance of common units in Martica Holdings, LLC		—		—		—		—		51,000		51,000
Equity component of 2026 Convertible Notes, net		—		—		61,926		—		—		61,926
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		159		1		(42)		—		—		(41)
Distributions to noncontrolling interest		—		—		—		—		(13,836)		(13,836)
Equity-based compensation		—		—		5,699		—		—		5,699
Net loss and comprehensive loss		—		—		—		(535,613)		(18,233)		(553,846)
Balances, September 30, 2020		268,549	$	2,685		6,165,750		(500,308)		315,754		5,983,881

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (Continued)

(In thousands)


					Additional
	Common Stock				Paid-in		Accumulated		Noncontrolling		Total
	Shares		Amount		Capital		Deficit		Interests		Equity
Balances, December 31, 2020		268,672	$	2,686		6,195,497		(430,478)		322,566		6,090,271
Issuance of common shares		31,388		314		238,551		—		—		238,865
Issuance of common units in Martica Holdings, LLC		—		—		—		—		51,000		51,000
Equity component of 2026 Convertible Notes, net		—		—		(116,381)		—		—		(116,381)
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		1,130		11		(5,656)		—		—		(5,645)
Distributions to noncontrolling interest		—		—		—		—		(24,699)		(24,699)
Equity-based compensation		—		—		5,642		—		—		5,642
Net income (loss) and comprehensive income (loss)		—		—		—		(15,499)		4,395		(11,104)
Balances, March 31, 2021		301,190		3,011		6,317,653		(445,977)		353,262		6,227,949
Issuance of common shares		11,588		116		125,262		—		—		125,378
Equity component of 2026 Convertible Notes, net		—		—		(79,497)		—		—		(79,497)
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		749		8		(3,893)		—		—		(3,885)
Distributions to noncontrolling interest		—		—		—		—		(21,329)		(21,329)
Equity-based compensation		—		—		4,249		—		—		4,249
Net loss and comprehensive loss		—		—		—		(523,467)		(10,984)		(534,451)
Balances, June 30, 2021		313,527		3,135		6,363,774		(969,444)		320,949		5,718,414
Equity component of 2026 Convertible Notes, net		—		—		36		—		—		36
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		339		3		(3,179)		—		—		(3,176)
Distributions to noncontrolling interest		—		—		—		—		(18,755)		(18,755)
Equity-based compensation		—

ANTERO RESOURCES Corp [AR] Filings
10-Q	[2021-10-27]
10-Q	[2021-07-28]
10-Q	[2021-04-28]
10-K	[2021-02-17]
10-Q	[2020-10-28]
10-Q	[2020-07-29]
10-Q	[2020-04-29]
10-K	[2020-02-12]
10-Q	[2019-10-29]
10-Q	[2019-07-31]
10-Q	[2019-05-01]
10-K	[2019-02-13]
10-Q	[2018-10-31]
10-Q	[2018-08-01]
10-Q	[2018-04-25]
10-K	[2018-02-13]
10-Q	[2017-11-01]
10-Q	[2017-08-02]
10-Q	[2017-05-08]
10-K	[2017-02-28]
10-Q	[2016-10-26]
10-Q	[2016-08-02]
10-Q	[2016-04-27]
10-K	[2016-02-24]
10-Q	[2015-10-28]
10-Q	[2015-07-29]
10-Q	[2015-04-29]
10-K	[2015-02-25]
10-Q	[2014-11-05]
10-Q	[2014-08-06]
10-Q	[2014-05-07]
10-K	[2014-02-27]
10-Q	[2013-11-06]
S-1	[2013-06-13]