ANTERO RESOURCES Corp [AR] Filings

10-Q 1 ar-20220930x10q.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, 2022


☐	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 300,136,446 shares of common stock outstanding as of October 21, 2022.

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	57
Item 4.	Controls and Procedures	58

PART II—OTHER INFORMATION		60
Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	60
Item 2.	Unregistered Sales of Equity Securities	60
Item 4.	Mine Safety Disclosures	60
Item 6.	Exhibits	61
SIGNATURES		62

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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;

●

our ability to execute our share repurchase program;

●

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

●

impacts of geopolitical events and 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, including with respect to water handling services provided by Antero Midstream Corporation (“Antero Midstream”);

●

competition;

●

government regulations and changes in laws;

●

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;

●

our ability to achieve our greenhouse gas reduction targets and the costs associated therewith;

●

general economic conditions;

●

credit markets;

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●

uncertainty regarding our future operating results; and

●

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

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 and cost of drilling, completion and production equipment and services, environmental risks, drilling and completion and other operating risks, marketing and transportation risks, regulatory changes or changes in law, 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, the state of markets for, and availability of, verified quality carbon offsets 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, 2021 (the “2021 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,
	2021		2022
Assets
Current assets:
Accounts receivable	$	78,998		23,770
Accrued revenue		591,442		924,343
Derivative instruments		757		954
Other current assets		14,922		28,587
Total current assets		686,119		977,654
Property and equipment:
Oil and gas properties, at cost (successful efforts method):
Unproved properties		1,042,118		999,273
Proved properties		12,646,303		13,103,294
Gathering systems and facilities		5,802		5,802
Other property and equipment		116,522		129,853
		13,810,745		14,238,222
Less accumulated depletion, depreciation and amortization		(4,283,700)		(4,587,529)
Property and equipment, net		9,527,045		9,650,693
Operating leases right-of-use assets		3,419,912		3,541,576
Derivative instruments		14,369		7,327
Investment in unconsolidated affiliate		232,399		222,882
Other assets		16,684		13,246
Total assets	$	13,896,528		14,413,378

Liabilities and Equity
Current liabilities:
Accounts payable	$	24,819		103,640
Accounts payable, related parties		76,240		74,584
Accrued liabilities		457,244		497,547
Revenue distributions payable		444,873		682,327
Derivative instruments		559,851		612,237
Short-term lease liabilities		456,347		535,347
Deferred revenue, VPP		37,603		32,330
Other current liabilities		11,140		6,010
Total current liabilities		2,068,117		2,544,022
Long-term liabilities:
Long-term debt		2,125,444		1,172,828
Deferred income tax liability, net		318,126		619,342
Derivative instruments		181,806		445,481
Long-term lease liabilities		2,964,115		3,007,636
Deferred revenue, VPP		118,366		95,514
Other liabilities		54,462		58,293
Total liabilities		7,830,436		7,943,116
Commitments and contingencies
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; 313,930 shares and 303,131 shares issued and outstanding as of December 31, 2021 and September 30, 2022, respectively		3,139		3,031
Additional paid-in capital		6,371,398		5,941,977
Retained earnings (accumulated deficit)		(617,377)		266,468
Total stockholders' equity		5,757,160		6,211,476
Noncontrolling interests		308,932		258,786
Total equity		6,066,092		6,470,262
Total liabilities and equity	$	13,896,528		14,413,378

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(In thousands, except per share amounts)


	Three Months Ended September 30,
	2021		2022
Revenue and other:
Natural gas sales	$	884,669		1,736,039
Natural gas liquids sales		598,327		620,816
Oil sales		56,734		67,025
Commodity derivative fair value losses		(1,250,466)		(530,523)
Marketing		232,685		159,985
Amortization of deferred revenue, VPP		11,404		9,478
Other income		530		1,804
Total revenue		533,883		2,064,624
Operating expenses:
Lease operating		25,363		27,453
Gathering, compression, processing and transportation		628,225		716,388
Production and ad valorem taxes		52,219		92,998
Marketing		266,751		185,377
Exploration and mine expenses		235		2,975
General and administrative (including equity-based compensation expense of $5,298 and $10,402 in 2021 and 2022, respectively)		32,442		42,903
Depletion, depreciation and amortization		182,810		169,607
Impairment of oil and gas properties		26,253		33,924
Accretion of asset retirement obligations		828		630
Contract termination		3,370		17,995
(Gain) loss on sale of assets		(539)		214
Total operating expenses		1,217,957		1,290,464
Operating income (loss)		(684,074)		774,160
Other income (expense):
Interest expense, net		(45,414)		(28,326)
Equity in earnings of unconsolidated affiliate		21,450		14,972
Loss on early extinguishment of debt		(16,567)		(30,307)
Loss on convertible note inducement		—		(169)
Transaction expense		(626)		—
Total other expense		(41,157)		(43,830)
Income (loss) before income taxes		(725,231)		730,330
Income tax benefit (expense)		158,656		(135,823)
Net income (loss) and comprehensive income (loss) including noncontrolling interests		(566,575)		594,507
Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests		(17,257)		34,748
Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation	$	(549,318)		559,759

Income (loss) per share—basic	$	(1.75)		1.83
Income (loss) per share—diluted	$	(1.75)		1.72

Weighted average number of shares outstanding:
Basic		313,790		305,343
Diluted		313,790		325,997

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(In thousands, except per share amounts)


	Nine Months Ended September 30,
	2021		2022
Revenue and other:
Natural gas sales	$	2,231,558		4,290,825
Natural gas liquids sales		1,503,027		1,983,509
Oil sales		153,326		219,504
Commodity derivative fair value losses		(2,260,062)		(1,807,565)
Marketing		562,928		335,173
Amortization of deferred revenue, VPP		33,833		28,125
Other income		551		3,578
Total revenue		2,225,161		5,053,149
Operating expenses:
Lease operating		71,555		70,486
Gathering, compression, processing and transportation		1,874,664		1,962,878
Production and ad valorem taxes		130,610		227,648
Marketing		627,822		415,571
Exploration and mine expenses		6,092		5,267
General and administrative (including equity-based compensation expense of $15,189 and $23,222 in 2021 and 2022, respectively)		108,693		123,033
Depletion, depreciation and amortization		564,166		511,390
Impairment of oil and gas properties		69,618		79,749
Accretion of asset retirement obligations		2,947		3,878
Contract termination		4,305		20,099
(Gain) loss on sale of assets		(2,827)		2,071
Total operating expenses		3,457,645		3,422,070
Operating income (loss)		(1,232,484)		1,631,079
Other income (expense):
Interest expense, net		(138,120)		(100,252)
Equity in earnings of unconsolidated affiliate		57,621		54,863
Loss on early extinguishment of debt		(82,836)		(45,375)
Loss on convertible note inducement and equitizations		(50,777)		(169)
Transaction expense		(3,102)		—
Total other expense		(217,214)		(90,933)
Income (loss) before income taxes		(1,449,698)		1,540,146
Income tax benefit (expense)		337,568		(308,302)
Net income (loss) and comprehensive income (loss) including noncontrolling interests		(1,112,130)		1,231,844
Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests		(23,846)		63,369
Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation	$	(1,088,284)		1,168,475

Income (loss) per share—basic	$	(3.55)		3.77
Income (loss) per share—diluted	$	(3.55)		3.51

Weighted average number of shares outstanding:
Basic		306,201		309,954
Diluted		306,201		333,738

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)


							Retained
					Additional		Earnings
	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)
Equity-based compensation		—		—		5,642		—		—		5,642
Distributions to noncontrolling interests		—		—		—		—		(24,699)		(24,699)
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)
Equity-based compensation		—		—		4,249		—		—		4,249
Distributions to noncontrolling interests		—		—		—		—		(21,329)		(21,329)
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		—		—		5,298		—		—		5,298
Net loss and comprehensive loss		—		—		—		(549,318)		(17,257)		(566,575)
Balances, September 30, 2021		313,866	$	3,138		6,365,929		(1,518,762)		284,937		5,135,242

Balances, December 31, 2021		313,930	$	3,139		6,371,398		(617,377)		308,932		6,066,092
Equity component of 2026 Convertible Notes, net		—		—		(24,411)		3,229		—		(21,182)
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		780		8		(10,385)		—		—		(10,377)
Repurchases and retirements of common stock		(3,690)		(37)		(74,745)		(25,263)		—		(100,045)
Equity-based compensation		—		—		4,649		—		—		4,649
Distributions to noncontrolling interests		—		—		—		—		(35,757)		(35,757)
Net loss and comprehensive loss		—		—		—		(156,419)		(18,277)		(174,696)
Balances, March 31, 2022		311,020		3,110		6,266,506		(795,830)		254,898		5,728,684
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		2,112		21		(54,463)		—		—		(54,442)
Conversion of 2026 Convertible Notes		921		9		3,955		—		—		3,964
Repurchases and retirements of common stock		(5,241)		(52)		(104,524)		(88,430)		—		(193,006)
Equity-based compensation		—		—		8,171		—		—		8,171
Distributions to noncontrolling interests		—		—		—		—		(31,541)		(31,541)
Net income and comprehensive income		—		—		—		765,135		46,898		812,033
Balances, June 30, 2022		308,812		3,088		6,119,645		(119,125)		270,255		6,273,863
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		25		—		(210)		—		—		(210)
Conversion of 2026 Convertible Notes		4,751		48		20,230		—		—		20,278
Repurchases and retirements of common stock		(10,457)		(105)		(208,090)		(174,166)		—		(382,361)
Equity-based compensation		—		—		10,402		—		—		10,402
Distributions to noncontrolling interest		—		—		—		—

ANTERO RESOURCES Corp [AR] Filings
10-Q	[2022-10-26]
10-Q	[2022-07-27]
10-Q	[2022-04-27]
10-K	[2022-02-16]
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]