Antero Resources Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

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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 June 30, 2020


☐	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 268,548,938 shares of common stock outstanding as of July 24, 2020.

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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 execute our debt repurchase program and/or our asset sale program;

●

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 and treatment 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;

●

expectations regarding the amount and timing of jury awards;

●

uncertainty regarding our future operating results; and

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●

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, 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, potential shut-ins of production due to lack of downstream demand or storage capacity, and the other risks described or referenced under the heading “Risk Factors” herein, including the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”) and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, each of 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

December 31, 2019 and June 30, 2020

(In thousands)


			(Unaudited)
	December 31,		June 30,
	2019		2020
Assets
Current assets:
Accounts receivable	$	46,419		57,013
Accounts receivable, related parties		125,000		—
Accrued revenue		317,886		254,863
Derivative instruments		422,849		521,459
Other current assets		10,731		8,942
Total current assets		922,885		842,277
Property and equipment:
Oil and gas properties, at cost (successful efforts method):
Unproved properties		1,368,854		1,277,476
Proved properties		11,859,817		11,989,302
Gathering systems and facilities		5,802		5,802
Other property and equipment		71,895		72,649
		13,306,368		13,345,229
Less accumulated depletion, depreciation, and amortization		(3,327,629)		(3,408,099)
Property and equipment, net		9,978,739		9,937,130
Operating leases right-of-use assets		2,886,500		2,562,945
Derivative instruments		333,174		103,514
Investment in unconsolidated affiliate		1,055,177		279,805
Other assets		21,094		18,319
Total assets	$	15,197,569		13,743,990

Liabilities and Equity
Current liabilities:
Accounts payable	$	14,498		36,736
Accounts payable, related parties		97,883		73,375
Accrued liabilities		400,850		339,388
Revenue distributions payable		207,988		173,759
Derivative instruments		6,721		3,652
Short-term lease liabilities		305,320		230,499
Other current liabilities		6,879		6,831
Total current liabilities		1,040,139		864,240
Long-term liabilities:
Long-term debt		3,758,868		3,518,076
Deferred income tax liability		781,987		529,598
Derivative instruments		3,519		2,558
Long-term lease liabilities		2,583,678		2,334,227
Other liabilities		58,635		62,312
Total liabilities		8,226,826		7,311,011
Commitments and contingencies (Notes 14 and 15)
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; 295,941 shares and 268,390 shares issued and outstanding at December 31, 2019 and June 30, 2020, respectively		2,959		2,684
Additional paid-in capital		6,130,365		6,098,167
Accumulated earnings		837,419		35,305
Total stockholders' equity		6,970,743		6,136,156
Noncontrolling interests		—		296,823
Total equity		6,970,743		6,432,979
Total liabilities and equity	$	15,197,569		13,743,990

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)

Three Months Ended June 30, 2019 and 2020

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended June 30,
	2019		2020
Revenue and other:
Natural gas sales	$	553,372		367,415
Natural gas liquids sales		303,963		212,197
Oil sales		49,062		8,322
Commodity derivative fair value gains (losses)		328,427		(168,015)
Marketing		63,080		64,285
Other income		1,760		707
Total revenue		1,299,664		484,911
Operating expenses:
Lease operating		40,857		24,742
Gathering, compression, processing, and transportation		566,834		631,845
Production and ad valorem taxes		30,968		19,992
Marketing		137,539		113,053
Exploration		314		231
Impairment of oil and gas properties		130,999		37,350
Depletion, depreciation, and amortization		242,302		214,035
Loss on sale of assets		951		—
Accretion of asset retirement obligations		918		1,111
General and administrative (including equity-based compensation expense of $6,549 and $7,973 in 2019 and 2020, respectively)		42,382		38,403
Contract termination and rig stacking		5,604		11,071
Total operating expenses		1,199,668		1,091,833
Operating income (loss)		99,996		(606,922)
Other income (expenses):
Equity in earnings of unconsolidated affiliates		13,585		20,228
Transaction expense		—		(6,138)
Interest expense, net		(54,164)		(51,811)
Gain on early extinguishment of debt		—		39,171
Total other income (expenses)		(40,579)		1,450
Income (loss) before income taxes		59,417		(605,472)
Provision for income tax (expense) benefit		(17,249)		142,404
Net income (loss) and comprehensive income (loss) including noncontrolling interests		42,168		(463,068)
Less: net income and comprehensive income attributable to noncontrolling interests		—		236
Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation	$	42,168		(463,304)

Income (loss) per share—basic	$	0.14		(1.73)
Income (loss) per share—diluted	$	0.14		(1.73)

Weighted average number of shares outstanding:
Basic		309,062		268,386
Diluted		309,137		268,386

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)

Six Months Ended June 30, 2019 and 2020

(Unaudited)

(In thousands, except per share amounts)


	Six Months Ended June 30,
	2019		2020
Revenue and other:
Natural gas sales	$	1,210,638		778,497
Natural gas liquids sales		617,648		469,870
Oil sales		97,114		43,968
Commodity derivative fair value gains		251,059		397,818
Gathering, compression, water handling and treatment		4,479		—
Marketing		154,266		110,358
Other income		1,867		1,505
Total revenue		2,337,071		1,802,016
Operating expenses:
Lease operating		82,589		50,386
Gathering, compression, processing, and transportation		991,363		1,220,469
Production and ad valorem taxes		66,646		45,691
Marketing		300,623		206,326
Exploration		440		441
Impairment of oil and gas properties		212,243		126,570
Impairment of midstream assets		6,982		—
Depletion, depreciation, and amortization		482,503		413,712
Loss on sale of assets		951		—
Accretion of asset retirement obligations		1,894		2,215
General and administrative (including equity-based compensation expense of $15,452 and $11,302 in 2019 and 2020, respectively)		110,584		69,624
Contract termination and rig stacking		13,964		11,071
Total operating expenses		2,270,782		2,146,505
Operating income (loss)		66,289		(344,489)
Other income (expenses):
Equity in earnings (loss) of unconsolidated affiliates		27,666		(107,827)
Impairment of equity investment		—		(610,632)
Gain on deconsolidation of Antero Midstream Partners LP		1,406,042		—
Transaction expense		—		(6,138)
Interest expense, net		(126,114)		(104,913)
Gain on early extinguishment of debt		—		119,732
Total other income (expenses)		1,307,594		(709,778)
Income (loss) before income taxes		1,373,883		(1,054,267)
Provision for income tax (expense) benefit		(305,959)		252,389
Net income (loss) and comprehensive income (loss) including noncontrolling interests		1,067,924		(801,878)
Less: net income and comprehensive income attributable to noncontrolling interests		46,993		236
Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation	$	1,020,931		(802,114)

Income (loss) per share—basic	$	3.31		(2.90)
Income (loss) per share—diluted	$	3.30		(2.90)

Weighted average number of shares outstanding:
Basic		308,879		276,306
Diluted		309,082		276,306

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statement of Equity

Six Months Ended June 30, 2019

(Unaudited)

(In thousands)


					Additional
	Common Stock				paid-in		Accumulated		Noncontrolling		Total
	Shares		Amount		capital		earnings		interests		equity
Balances, December 31, 2018		308,594	$	3,086		6,485,174		1,177,548		821,669		8,487,477
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		147		1		(451)		—		—		(450)
Issuance of common units in Antero Midstream Partners LP upon vesting of equity-based compensation awards, net of units withheld for income taxes		—		—		(85)		—		56		(29)
Equity-based compensation		—		—		7,801		—		1,102		8,903
Net income and comprehensive income		—		—		—		978,763		46,993		1,025,756
Distributions to noncontrolling interests		—		—		—		—		(85,076)		(85,076)
Effect of deconsolidation of Antero Midstream Partners LP		—		—		(359,039)		—		(784,744)		(1,143,783)
Balances, March 31, 2019		308,741	$	3,087		6,133,400		2,156,311		—		8,292,798
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		382		4		(1,819)		—		—		(1,815)
Equity-based compensation		—		—		6,549		—		—		6,549
Net income and comprehensive income		—		—		—		42,168		—		42,168
Balances, June 30, 2019		309,123	$	3,091		6,138,130		2,198,479		—		8,339,700

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statement of Equity

Six Months Ended June 30, 2020

(Unaudited)

(In thousands)

Price	3.36	EPS	1
Shares	309	P/E	5
MCap	1,037	P/FCF	1
Net Debt	3,704	EBIT	313
TEV	4,741	TEV/EBIT	15
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-07-29
10-Q	2020-03-31	Filed 2020-04-29
10-K	2019-12-31	Filed 2020-02-12
10-Q	2019-09-30	Filed 2019-10-30
10-Q	2019-06-30	Filed 2019-07-31
10-Q	2019-03-31	Filed 2019-05-01
10-K	2018-12-31	Filed 2019-02-13
10-Q	2018-09-30	Filed 2018-10-31
10-Q	2018-06-30	Filed 2018-08-01
10-Q	2018-03-31	Filed 2018-04-25
10-K	2017-12-31	Filed 2018-02-13
10-Q	2017-09-30	Filed 2017-11-01
10-Q	2017-06-30	Filed 2017-08-02
10-Q	2017-03-31	Filed 2017-05-08
10-K	2016-12-31	Filed 2017-02-28
10-Q	2016-09-30	Filed 2016-10-26
10-Q	2016-06-30	Filed 2016-08-02
10-Q	2016-03-31	Filed 2016-04-27
10-K	2015-12-31	Filed 2016-02-24
10-Q	2015-09-30	Filed 2015-10-28
10-Q	2015-06-30	Filed 2015-07-29
10-Q	2015-03-31	Filed 2015-04-29
10-K	2014-12-31	Filed 2015-02-25
10-Q	2014-09-30	Filed 2014-11-05
10-Q	2014-06-30	Filed 2014-08-06
10-Q	2014-03-31	Filed 2014-05-07
10-K	2013-12-31	Filed 2014-02-27
10-Q	2013-09-30	Filed 2013-11-06

8-K	2020-09-09	Regulation FD
8-K	2020-08-31	Other Events
8-K	2020-08-24	Regulation FD, Other Events, Exhibits
8-K	2020-08-18	Other Events, Exhibits
8-K	2020-08-18	Other Events, Exhibits
8-K	2020-08-18	Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K	2020-08-17	Other Events, Exhibits
8-K	2020-08-11	Regulation FD, Exhibits
8-K	2020-07-29	Earnings, Exhibits
8-K	2020-06-17
8-K	2020-06-17
8-K	2020-06-15
8-K	2020-05-12
8-K	2020-04-29
8-K	2020-03-31
8-K	2020-03-24
8-K	2020-03-23
8-K	2020-02-25
8-K	2020-02-12
8-K	2020-02-03
8-K	2019-12-16
8-K	2019-12-08
8-K	2019-12-03
8-K	2019-10-29
8-K	2019-10-07
8-K	2019-09-03
8-K	2019-08-12
8-K	2019-07-31
8-K	2019-07-01
8-K	2019-06-25
8-K	2019-06-21
8-K	2019-06-19
8-K	2019-06-17
8-K	2019-06-12
8-K	2019-06-10
8-K	2019-05-31
8-K	2019-05-14
8-K	2019-05-01
8-K	2019-03-25
8-K	2019-03-11
8-K	2019-03-05
8-K	2019-02-25
8-K	2019-02-14
8-K	2019-02-13
8-K	2019-02-12
8-K	2019-01-24
8-K	2019-01-08
8-K	2018-12-21
8-K	2018-12-18
8-K	2018-12-07
8-K	2018-11-06
8-K	2018-11-01
8-K	2018-11-01
8-K	2018-10-31
8-K	2018-10-09
8-K	2018-10-09
8-K	2018-08-01
8-K	2018-06-20
8-K	2018-04-25
8-K	2018-04-13
8-K	2018-02-26
8-K	2018-02-20
8-K	2018-02-13
8-K	2018-02-13
8-K	2018-01-17

EX-4.1	ar-20200630ex41f29c31c.htm
EX-4.2	ar-20200630ex42cf818c4.htm
EX-4.3	ar-20200630ex4305e5d93.htm
EX-4.4	ar-20200630ex4449936ad.htm
EX-10.1	ar-20200630ex10117b5be.htm
EX-10.2	ar-20200630ex102e45e42.htm
EX-31.1	ar-20200630ex311ec5e0a.htm
EX-31.2	ar-20200630ex3125786a4.htm
EX-32.1	ar-20200630ex321dabcbe.htm
EX-32.2	ar-20200630ex322bb08f3.htm


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	45
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	67
Item 4.	Controls and Procedures	69
PART II—OTHER INFORMATION		70
Item 1.	Legal Proceedings	70
Item 1A.	Risk Factors	70
Item 2.	Unregistered Sales of Equity Securities	70
Item 6.	Exhibits	71
SIGNATURES		72

AR 10Q Quarterly Report

Antero Resources Earnings 2020-06-30