ANTERO RESOURCES Corp [AR] Filings

10-Q 1 ar-20220331x10q.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 March 31, 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 311,085,147 shares of common stock outstanding as of April 22, 2022.

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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	35
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46
Item 4.	Controls and Procedures	47

PART II—OTHER INFORMATION		48
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities	48
Item 6.	Exhibits	49
SIGNATURES		50

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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;

●

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 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,		March 31,
	2021		2022
Assets
Current assets:
Accounts receivable	$	78,998		45,755
Accrued revenue		591,442		660,884
Derivative instruments		757		263
Other current assets		14,922		17,874
Total current assets		686,119		724,776
Property and equipment:
Oil and gas properties, at cost (successful efforts method):
Unproved properties		1,042,118		1,001,420
Proved properties		12,646,303		12,786,692
Gathering systems and facilities		5,802		5,802
Other property and equipment		116,522		123,824
		13,810,745		13,917,738
Less accumulated depletion, depreciation, and amortization		(4,283,700)		(4,384,971)
Property and equipment, net		9,527,045		9,532,767
Operating leases right-of-use assets		3,419,912		3,285,337
Derivative instruments		14,369		10,516
Investment in unconsolidated affiliate		232,399		234,390
Other assets		16,684		15,714
Total assets	$	13,896,528		13,803,500

Liabilities and Equity
Current liabilities:
Accounts payable	$	24,819		67,769
Accounts payable, related parties		76,240		73,259
Accrued liabilities		457,244		341,692
Revenue distributions payable		444,873		408,347
Derivative instruments		559,851		1,152,299
Short-term lease liabilities		456,347		455,723
Deferred revenue, VPP		37,603		35,864
Other current liabilities		11,140		16,099
Total current liabilities		2,068,117		2,551,052
Long-term liabilities:
Long-term debt		2,125,444		1,959,944
Deferred income tax liability, net		318,126		254,633
Derivative instruments		181,806		311,005
Long-term lease liabilities		2,964,115		2,830,175
Deferred revenue, VPP		118,366		110,832
Other liabilities		54,462		57,175
Total liabilities		7,830,436		8,074,816
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 311,020 shares issued and outstanding as of December 31, 2021 and March 31, 2022, respectively		3,139		3,110
Additional paid-in capital		6,371,398		6,266,506
Accumulated deficit		(617,377)		(795,830)
Total stockholders' equity		5,757,160		5,473,786
Noncontrolling interests		308,932		254,898
Total equity		6,066,092		5,728,684
Total liabilities and equity	$	13,896,528		13,803,500

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 March 31,
	2021		2022
Revenue and other:
Natural gas sales	$	720,369		995,792
Natural gas liquids sales		440,319		660,305
Oil sales		44,686		63,294
Commodity derivative fair value losses		(177,756)		(1,011,380)
Marketing		164,790		69,038
Amortization of deferred revenue, VPP		11,150		9,272
Other income		640		519
Total revenue		1,204,198		786,840
Operating expenses:
Lease operating		24,547		17,780
Gathering, compression, processing, and transportation		605,077		590,278
Production and ad valorem taxes		44,697		52,808
Marketing		162,077		98,896
Exploration		219		898
General and administrative (including equity-based compensation expense of $5,642 and $4,649 in 2021 and 2022, respectively)		44,074		35,691
Depletion, depreciation, and amortization		194,026		168,388
Impairment of oil and gas properties		34,062		22,462
Accretion of asset retirement obligations		788		2,444
Contract termination		91		8
Loss on sale of assets		—		1,786
Total operating expenses		1,109,658		991,439
Operating income (loss)		94,540		(204,599)
Other income (expense):
Interest expense, net		(42,743)		(37,713)
Equity in earnings of unconsolidated affiliate		18,694		25,178
Loss on early extinguishment of debt		(43,204)		(10,654)
Loss on convertible note equitization		(39,046)		—
Transaction expense		(2,291)		—
Total other expense		(108,590)		(23,189)
Loss before income taxes		(14,050)		(227,788)
Income tax benefit		2,946		53,092
Net loss and comprehensive loss including noncontrolling interests		(11,104)		(174,696)
Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests		4,395		(18,277)
Net loss and comprehensive loss attributable to Antero Resources Corporation	$	(15,499)		(156,419)

Loss per share—basic	$	(0.05)		(0.50)
Loss per share—diluted	$	(0.05)		(0.50)

Weighted average number of shares outstanding:
Basic		296,746		314,081
Diluted		296,746		314,081

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
	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

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)
Distributions to noncontrolling interest		—		—		—		—		(35,757)		(35,757)
Repurchases and retirements of common stock		(3,690)		(37)		(74,745)		(25,263)		—		(100,045)
Equity-based compensation		—		—		4,649		—		—		4,649
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

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Three Months Ended March 31,
	2021		2022
Cash flows provided by (used in) operating activities:
Net loss including noncontrolling interests	$	(11,104)		(174,696)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depletion, depreciation, amortization, and accretion		194,814		170,832
Impairments		34,062		22,462
Commodity derivative fair value losses		177,756		1,011,380
Gains (losses) on settled commodity derivatives		5,322		(285,386)
Deferred income tax benefit		(2,946)		(57,383)
Equity-based compensation expense		5,642		4,649
Equity in earnings of unconsolidated affiliate		(18,694)		(25,178)
Dividends of earnings from unconsolidated affiliate		42,756		31,285
Amortization of deferred revenue		(11,150)		(9,272)
Amortization of debt issuance costs, debt discount and debt premium		4,536		1,451
Settlement of asset retirement obligations		—		(886)
Loss on sale of assets		—		1,786
Loss on early extinguishment of debt		43,204		10,654
Loss on convertible note equitizations		39,046		—
Changes in current assets and liabilities:
Accounts receivable		(7,200)		33,244
Accrued revenue		(21,199)		(69,442)
Other current assets		3,593		(2,952)
Accounts payable including related parties		16,527		37,664
Accrued liabilities		(17,779)		(94,456)
Revenue distributions payable		84,296		(36,526)
Other current liabilities		2,249		(3,557)
Net cash provided by operating activities		563,731		565,673
Cash flows provided by (used in) investing activities:
Additions to unproved properties		(14,691)		(23,789)
Drilling and completion costs		(105,131)		(184,557)
Additions to other property and equipment		(3,336)		(7,530)
Proceeds from asset sales		—		195
Change in other assets		262		564
Change in other liabilities		(79)		—
Net cash used in investing activities		(122,975)		(215,117)
Cash flows provided by (used in) financing activities:
Repurchases of common stock		—		(100,045)
Issuance of senior notes		1,200,000		—
Repayment of senior notes		(660,516)		(591,943)
Borrowings (repayments) on bank credit facilities, net		(873,800)		387,700
Payment of debt issuance costs		(15,370)		—
Distributions to noncontrolling interests in Martica Holdings LLC		(24,699)		(35,757)
Employee tax withholding for settlement of equity compensation awards		(5,645)		(10,377)
Convertible note equitizations		(60,461)		—
Other		(265)		(134)
Net cash used in financing activities		(440,756)		(350,556)
Net increase in cash and cash equivalents		—		—
Cash and cash equivalents, beginning of period		—		—
Cash and cash equivalents, end of period	$	—		—

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	35,097		80,454
Increase (decrease) in accounts payable and accrued liabilities for additions to property and equipment	$	35,882		(14,449)

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Organization

Antero Resources Corporation (individually referred to as “Antero” and together with its consolidated subsidiaries “Antero Resources,” or the “Company”) is engaged in the development, production, exploration and acquisition of natural gas, NGLs and oil properties in the Appalachian Basin in West Virginia and Ohio. The Company targets large, repeatable resource plays where horizontal drilling and advanced fracture stimulation technologies provide the means to economically develop and produce natural gas, NGLs and oil from unconventional formations. The Company’s corporate headquarters is located in Denver, Colorado.

(2) Summary of Significant Accounting Policies

(a)	Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim financial information and should be read in the context of the Company’s December 31, 2021 consolidated financial statements and notes thereto for a more complete understanding of the Company’s operations, financial position and accounting policies. The Company’s December 31, 2021 consolidated financial statements were included in Antero Resources’ 2021 Annual Report on Form 10-K, which was filed with the SEC.

These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, and, accordingly, do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Company’s financial position as of December 31, 2021 and March 31, 2022 and its results of operations and cash flows for the three months ended March 31, 2021 and 2022. The Company has no items of other comprehensive income or loss; therefore, its net income or loss is equal to its comprehensive income or loss. Operating results for the period ended March 31, 2022 are not necessarily indicative of the results that may be expected for the full year because of the impact of fluctuations in prices received for natural gas, NGLs and oil, natural production declines, the uncertainty of exploration and development drilling results, fluctuations in the fair value of derivative instruments, the impacts of COVID-19 and other factors.

(b)	Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Antero Resources Corporation, its wholly owned subsidiaries and its variable interest entity (“VIE”), Martica Holdings LLC, (“Martica”), for which the Company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in the Company’s unaudited condensed consolidated financial statements.

(c)	Cash and Cash Equivalents

The Company considers all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments. From time to time, the Company may be in the position of a “book overdraft” in which outstanding checks exceed cash and cash equivalents. The Company classifies book overdrafts in accounts payable and revenue distributions payable within its condensed consolidated balance sheets, and classifies the change in accounts payable associated with book overdrafts as an operating activity within its unaudited condensed consolidated statements of cash flows. As of December 31, 2021, the book overdrafts included within accounts payable and revenue distributions payable were $5 million and $52 million, respectively. As of March 31, 2022, the book overdrafts included within accounts payable and revenue distributions payable were $47 million and $41 million, respectively.

(d)	Earnings (Loss) Per Common Share

Earnings (loss) per common share—basic for each period is computed by dividing net income (loss) attributable to Antero by the basic weighted average number of shares outstanding during the period. Earnings (loss) per common share—diluted for each period is computed after giving consideration to the potential dilution from outstanding equity awards and shares of common stock issuable upon conversion of the 2026 Convertible Notes (as defined below in Note 7—Long-Term Debt). The Company includes restricted stock unit (“RSU”) awards, performance share unit (“PSU”) awards and stock options in the calculation of diluted weighted average shares outstanding based on the number of common shares that would be issuable if the end of the period was also the end of

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

the performance period required for the vesting of the awards. The potential dilutive effect of the 2026 Convertible Notes is calculated using the (i) treasury stock method for the three months ended March 31, 2021 as a result of the Company’s intent to settle the principal amount of such convertible notes in cash upon conversion, and (ii) if-converted method for the three months ended March 31, 2022, as a result of the partial equitizations of the 2026 Convertible Notes during 2021. See Note 7—Long-Term Debt for further discussion on the equitization transactions. During periods in which the Company incurs a net loss, diluted weighted average shares outstanding are equal to basic weighted average shares outstanding because the effects of all equity awards and the 2026 Convertible Notes are anti-dilutive.

The following is a reconciliation of the Company’s basic weighted average shares outstanding to diluted weighted average shares outstanding during the periods presented (in thousands):


	Three Months Ended March 31,
	2021	2022
Basic weighted average number of shares outstanding	296,746	314,081
Add: Dilutive effect of RSUs	—	—
Add: Dilutive effect of PSUs	—	—
Add: Dilutive effect of outstanding stock options	—	—
Add: Dilutive effect of 2026 Convertible Notes	—	—
Diluted weighted average number of shares outstanding	296,746	314,081

Weighted average number of outstanding securities excluded from calculation of diluted earnings per common share ⁽¹⁾:
RSUs	6,455	4,878
PSUs	1,863	3,443
Outstanding stock options	427	351
2026 Convertible Notes	15,307	18,778

(1)	The potential dilutive effects of these awards were excluded from the computation of diluted earnings (loss) per common share because the inclusion of these awards would have been anti-dilutive.

(e)	Recently Issued Accounting Standard

Convertible Debt Instruments

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which eliminates the cash conversion model in Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options, that required separate accounting for conversion features, and instead, allows the debt instrument and conversion features to be accounted for as a single debt instrument. It is effective for interim and annual reporting periods beginning after December 31, 2021. The Company adopted the standard effective January 1, 2022 under the modified retrospective transition method, which impacts only the debt instruments outstanding on the adoption date.

Upon adoption of this new standard, the Company reclassified $24 million, net of deferred income taxes and equity issuance costs, from additional paid-in capital and increased long-term debt by $27 million, reduced deferred income tax liability by $6 million and reduced accumulated deficit by $3 million as of January 1, 2022. Additionally, annual interest expense for the 2026 Convertible Notes beginning January 1, 2022 is based on an effective interest rate of 4.9% as compared to 15.1% for the three months ended March 31, 2021.

Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. This ASU removes certain exceptions to the general principles in ASC 740, Income Taxes (“ASC 740”) and also simplifies portions of ASC 740 by clarifying and amending existing guidance. It is effective for interim and annual reporting periods beginning after December 15, 2020. The Company adopted this ASU on January 1, 2021, and it did not have a material impact on the Company's consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(3) Transactions

(a)	Conveyance of Overriding Royalty Interest

On June 15, 2020, the Company announced the consummation of a transaction with an affiliate of Sixth Street Partners, LLC (“Sixth Street”) relating to certain overriding royalty interests across the Company’s existing asset base (the “ORRIs”). In connection with the transaction, the Company contributed the ORRIs to Martica and Sixth Street contributed $300 million in cash (subject to customary adjustments) and agreed to contribute up to an additional $102 million in cash if certain production thresholds attributable to the ORRIs are achieved in the third quarter of 2020 and first quarter of 2021. All cash contributed by Sixth Street at the initial closing was distributed to the Company. The Company met the applicable production thresholds related to the third quarter of 2020 and the first quarter of 2021 as of September 30, 2020 and March 31, 2021, respectively. The Company received a $51 million cash distribution during each of the fourth quarter of 2020 and the second quarter of 2021.

(b)	Drilling Partnership

On February 17, 2021, Antero Resources announced the formation of a drilling partnership with QL Capital Partners (“QL”), an affiliate of Quantum Energy Partners, for the Company’s 2021 through 2024 drilling program. Under the terms of the arrangement, each year in which QL participates represents an annual tranche, and QL will be conveyed a working interest in any wells spud by Antero Resources during such tranche year. For 2021 and 2022, Antero Resources and QL agreed to the estimated internal rate of return (“IRR”) of the Company’s capital budget for each annual tranche, and QL agreed to participate in the 2021 and 2022 tranches. For each subsequent year through 2024, Antero Resources will propose a capital budget and estimated IRR for all wells to be spud during such year and, subject to the mutual agreement of the parties that the estimated IRR for the year exceeds a specified return, QL will be obligated to participate in such tranche. Antero Resources develops and manages the drilling program associated with each tranche, including the selection of wells. Additionally, for each annual tranche in which QL participates, Antero Resources and QL will enter into assignments, bills of sale and conveyances pursuant to which QL will be conveyed a proportionate working interest percentage in each well spud in that year, which conveyances will not be subject to any reversion.

Under the terms of the arrangement, QL funded 20% of development capital for wells spud in 2021, is expected to fund 15% in 2022 and between 15% and 20% of development capital spending for wells spud on an annual basis in 2023 and 2024, which funding amounts represent QL’s proportionate working interest in such wells. Additionally, Antero Resources may receive a carry in the form of a one-time payment from QL for each annual tranche if the IRR for such tranche exceeds certain specified returns, which will be determined no earlier than October 31 and no later than December 1 following the end of each tranche year. All of the wells spud during each calendar year period will be a separate annual tranche. Capital costs in excess of, and cost savings below, a specified percentage of budgeted amounts for each annual tranche will be for Antero Resources’ account.

Subject to the preceding sentence, for any wells included in a tranche, QL is obligated and responsible for its working interest share of costs and liabilities, and is entitled to its working interest share of revenues, associated with such wells for the life of such wells. If Antero Resources presents a capital budget for an annual tranche with an estimated IRR equal to or exceeding a specified return that QL in good faith believes is less than such specified return and QL elects not to participate, Antero Resources will not be obligated to offer QL the opportunity to participate in subsequent annual tranches.

The Company has accounted for the drilling partnership as a conveyance under ASC 932 and such conveyances are recorded in the unaudited condensed consolidated financial statements as QL obtains its proportionate working interest in each well. No gain or loss was recognized for the interests conveyed during the three months ended March 31, 2021 and 2022.

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(4) Revenue

(a)	Disaggregation of Revenue

The table set forth below presents revenue disaggregated by type and reportable segment to which it relates (in thousands). See Note 16—Reportable Segments to the unaudited condensed financial statements for more information on reportable segments.


	Three Months Ended March 31,
	2021		2022		Reportable Segment
Revenues from contracts with customers:
Natural gas sales	$	720,369		995,792	Exploration and production
Natural gas liquids sales (ethane)		36,110		67,063	Exploration and production
Natural gas liquids sales (C3+ NGLs)		404,209		593,242	Exploration and production
Oil sales		44,686		63,294	Exploration and production
Marketing		164,790		69,038	Marketing
Total revenue from contracts with customers		1,370,164		1,788,429
Loss from derivatives, deferred revenue and other sources, net		(165,966)		(1,001,589)
Total revenue	$	1,204,198		786,840

(b)	Transaction Price Allocated to Remaining Performance Obligations

For the Company’s product sales that have a contract term greater than one year, the Company utilized the practical expedient in ASC 606, Revenue from Contracts with Customers (“ASC 606”), which does not require the disclosure of the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under the Company’s product sales contracts, each unit of product delivered to the customer represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required. For the Company’s product sales that have a contract term of one year or less, the Company utilized the practical expedient in ASC 606, which does not require the disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

Under the Company’s sales contracts, the Company invoices customers after its performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s contracts do not give rise to contract assets or liabilities. As of December 31, 2021 and March 31, 2022, the Company’s receivables from contracts with customers were $591 million and $661 million, respectively.

(5) Equity Method Investment

(a)	Summary of Equity Method Investment

As of March 31, 2022, Antero owned approximately 29.1% of Antero Midstream Corporation’s (“Antero Midstream”) common stock, which is reflected in Antero’s unaudited condensed consolidated financial statements using the equity method of accounting.

The following table sets forth a reconciliation of Antero’s investment in unconsolidated affiliate (in thousands):


Balance as of December 31, 2021 ⁽¹⁾	$	232,399
Equity in earnings of unconsolidated affiliate		25,178
Dividends from unconsolidated affiliate		(31,285)
Elimination of intercompany profit		8,098
Balance as of March 31, 2022 ⁽¹⁾	$	234,390

(1)	The fair value of the Company’s investment in Antero Midstream as of December 31, 2021 and March 31, 2022 was $1.3 billion and $1.5 billion, respectively, based on the quoted market share price of Antero Midstream.

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(b)	Summarized Financial Information of Antero Midstream

The tables set forth below present summarized financial information of Antero Midstream (in thousands):

Balance Sheet


			(Unaudited)
	December 31,		March 31,
	2021		2022
Current assets	$	83,804		80,290
Noncurrent assets		5,460,197		5,500,304
Total assets	$	5,544,001		5,580,594

Current liabilities	$	114,009		139,129
Noncurrent liabilities		3,143,294		3,181,511
Stockholders' equity		2,286,698		2,259,954
Total liabilities and stockholders' equity	$	5,544,001		5,580,594

Statement of Operations


	Three Months Ended March 31,
	2021		2022
Revenues	$	224,121		218,491
Operating expenses		90,534		89,337
Income from operations		133,587		129,154
Net income	$	83,441		80,040

(6) Accrued Liabilities

Accrued liabilities consisted of the following items (in thousands):


			(Unaudited)
	December 31,		March 31,
	2021		2022
Capital expenditures	$	46,983		34,576
Gathering, compression, processing, and transportation expenses		164,900		160,707
Marketing expenses		50,589		35,054
Interest expense, net		65,093		21,284
Accrued production and ad valorem taxes		44,298		26,882
Derivative settlements payable		35,202		28,743
Accrued general and administrative expense		27,740		17,732
Other		22,439		16,714
Total accrued liabilities	$	457,244		341,692

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(7) Long-Term Debt

Long-term debt consisted of the following items (in thousands):


			(Unaudited)
	December 31,		March 31,
	2021		2022
Credit Facility ^(a)	$	—		387,700
5.00% senior notes due 2025 ^(d)		584,635		—
8.375% senior notes due 2026 ^(e)		325,000		325,000
7.625% senior notes due 2029 ^(f)		584,000		584,000
5.375% senior notes due 2030 ^(g)		600,000		600,000
4.25% convertible senior notes due 2026

ANTERO RESOURCES Corp [AR] Filings
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]