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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 March 31, 2024

OR

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

Graphic

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)

(303357-7310

(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

Number of shares of the registrant’s common stock outstanding as of April 19, 2024 (in thousands): 310,807

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 and in our Annual Report on Form 10-K for the year ended December 31, 2023. 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 natural gas, natural gas liquids (“NGLs”) and oil 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 acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
our ability to execute our return of capital program;
natural gas, NGLs and oil prices;
impacts of geopolitical events, including the conflicts in Ukraine and in the Middle East, and world health events;
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;
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 Corporation (“Antero Midstream”);
our ability to achieve our greenhouse gas reduction targets and the costs associated therewith;
general economic conditions;
credit markets;

1

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, supply chain or other disruption, 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 geopolitical and world health events, 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, 2023 (the “2023 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.

2

PART I—FINANCIAL INFORMATION

ANTERO RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)

December 31,

March 31,

  

2023

  

2024

Assets

Current assets:

Accounts receivable

$

42,619

40,121

Accrued revenue

400,805

326,218

Derivative instruments

5,175

6,579

Prepaid expenses

12,901

12,326

Other current assets

14,192

17,468

Total current assets

475,692

402,712

Property and equipment:

Oil and gas properties, at cost (successful efforts method):

Unproved properties

974,642

962,738

Proved properties

13,908,804

14,060,385

Gathering systems and facilities

5,802

5,802

Other property and equipment

98,668

104,409

14,987,916

15,133,334

Less accumulated depletion, depreciation and amortization

(5,063,274)

(5,179,844)

Property and equipment, net

9,924,642

9,953,490

Operating leases right-of-use assets

2,965,880

2,932,501

Derivative instruments

5,570

3,929

Investment in unconsolidated affiliate

222,255

226,034

Other assets

25,375

29,828

Total assets

$

13,619,414

13,548,494

Liabilities and Equity

Current liabilities:

  

Accounts payable

$

38,993

38,081

Accounts payable, related parties

86,284

93,707

Accrued liabilities

381,340

314,957

Revenue distributions payable

361,782

358,560

Derivative instruments

15,236

14,148

Short-term lease liabilities

540,060

535,617

Deferred revenue, VPP

27,101

26,593

Other current liabilities

1,295

1,240

Total current liabilities

1,452,091

1,382,903

Long-term liabilities:

Long-term debt

1,537,596

1,510,109

Deferred income tax liability, net

834,268

844,230

Derivative instruments

32,764

25,538

Long-term lease liabilities

2,428,450

2,399,274

Deferred revenue, VPP

60,712

54,482

Other liabilities

59,431

60,082

Total liabilities

6,405,312

6,276,618

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; 303,544 and 310,170 shares issued and outstanding as of December 31, 2023 and March 31, 2024, respectively

3,035

3,102

Additional paid-in capital

5,846,541

5,879,578

Retained earnings

1,131,828

1,168,173

Total stockholders' equity

6,981,404

7,050,853

Noncontrolling interests

232,698

221,023

Total equity

7,214,102

7,271,876

Total liabilities and equity

$

13,619,414

13,548,494

See accompanying notes to unaudited condensed consolidated financial statements.

3

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31,

  

2023

  

2024

Revenue and other:

Natural gas sales

$

668,315

474,133

Natural gas liquids sales

495,435

517,862

Oil sales

51,811

64,717

Commodity derivative fair value gains

126,192

9,446

Marketing

58,529

48,520

Amortization of deferred revenue, VPP

7,533

6,738

Other revenue and income

533

855

Total revenue

1,408,348

1,122,271

Operating expenses:

Lease operating

29,321

29,121

Gathering, compression, processing and transportation

645,172

672,281

Production and ad valorem taxes

49,276

58,168

Marketing

81,361

59,813

Exploration and mine expenses

763

602

General and administrative (including equity-based compensation expense of $13,018 and $16,077 in 2023 and 2024, respectively)

57,261

55,862

Depletion, depreciation and amortization

167,582

173,054

Impairment of property and equipment

15,560

5,190

Accretion of asset retirement obligations

878

776

Contract termination and loss contingency

29,550

2,039

Loss (gain) on sale of assets

(91)

188

Other operating expense

225

17

Total operating expenses

1,076,858

1,057,111

Operating income

331,490

65,160

Other income (expense):

Interest expense, net

(25,700)

(30,187)

Equity in earnings of unconsolidated affiliate

17,681

23,347

Loss on convertible note inducement

(86)

Total other expense

(8,105)

(6,840)

Income before income taxes

323,385

58,320

Income tax expense

(62,183)

(10,033)

Net income and comprehensive income including noncontrolling interests

261,202

48,287

Less: net income and comprehensive income attributable to noncontrolling interests

47,771

11,942

Net income and comprehensive income attributable to Antero Resources Corporation

$

213,431

36,345

Net income per common share—basic

$

0.72

0.12

Net income per common share—diluted

$

0.69

0.12

Weighted average number of common shares outstanding:

Basic

296,763

304,943

Diluted

311,846

312,503

See accompanying notes to unaudited condensed consolidated financial statements.

4

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands)

Additional

Common Stock

Paid-in

Retained

Treasury Stock

Noncontrolling

Total

  

Shares

  

Amount

  

Capital

  

Earnings

Shares

  

Amount

  

Interests

  

Equity

Balances, December 31, 2022

297,393

$

2,974

5,838,848

913,896

(34)

$

(1,160)

262,596

7,017,154

Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes

514

5

(11,464)

(11,459)

Conversion of 2026 Convertible Notes

4,030

40

17,132

17,172

Repurchases and retirements of common stock

(2,616)

(26)

(51,503)

(24,987)

34

1,160

(75,356)

Equity-based compensation

13,018

13,018

Distributions to noncontrolling interests

(51,339)

(51,339)

Net income and comprehensive income

213,431

47,771

261,202

Balances, March 31, 2023

299,321

$

2,993

5,806,031

1,102,340

$

259,028

7,170,392

Balances, December 31, 2023

303,544

$

3,035

5,846,541

1,131,828

$

232,698

7,214,102

Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes

552

6

(9,030)

(9,024)

Conversion of 2026 Convertible Notes

6,074

61

25,990

26,051

Equity-based compensation

16,077

16,077

Distributions to noncontrolling interests

(23,617)

(23,617)

Net income and comprehensive income

36,345

11,942

48,287

Balances, March 31, 2024

310,170

$

3,102

5,879,578

1,168,173

$

221,023

7,271,876

See accompanying notes to unaudited condensed consolidated financial statements.

5

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

Three Months Ended March 31,

2023

  

2024

 

Cash flows provided by (used in) operating activities:

Net income including noncontrolling interests

$

261,202

48,287

Adjustments to reconcile net income to net cash provided by operating activities:

Depletion, depreciation, amortization and accretion

168,460

173,830

Impairments

15,560

5,190

Commodity derivative fair value gains

(126,192)

(9,446)

Gains (losses) on settled commodity derivatives

(14,268)

1,368

Payments for derivative monetizations

(202,339)

Deferred income tax expense

62,149

9,962

Equity-based compensation expense

13,018

16,077

Equity in earnings of unconsolidated affiliate

(17,681)

(23,347)

Dividends of earnings from unconsolidated affiliate

31,285

31,285

Amortization of deferred revenue

(7,533)

(6,738)

Amortization of debt issuance costs and other

871

715

Settlement of asset retirement obligations

(308)

(322)

Contract termination and loss contingency

200

Loss (gain) on sale of assets

(91)

188

Loss on convertible note inducement

86

Changes in current assets and liabilities:

Accounts receivable

5,282

2,498

Accrued revenue

328,349

74,587

Prepaid expenses and other current assets

20,596

(2,701)

Accounts payable including related parties

34,604

3,244

Accrued liabilities

(143,346)

(60,825)

Revenue distributions payable

(86,331)

(3,222)

Other current liabilities

529

780

Net cash provided by operating activities

343,902

261,610

Cash flows provided by (used in) investing activities:

Additions to unproved properties

(73,527)

(27,044)

Drilling and completion costs

(273,154)

(188,905)

Additions to other property and equipment

(4,631)

(6,500)

Proceeds from asset sales

91

363

Change in other assets

417

(4,724)

Net cash used in investing activities

(350,804)

(226,810)

Cash flows provided by (used in) financing activities:

Repurchases of common stock

(75,356)

Borrowings on Credit Facility

1,492,700

1,125,700

Repayments on Credit Facility

(1,347,400)

(1,127,600)

Convertible note inducement

(86)

Distributions to noncontrolling interests in Martica Holdings LLC

(51,339)

(23,617)

Employee tax withholding for settlement of equity compensation awards

(11,459)

(9,024)

Other

(158)

(259)

Net cash provided by (used in) financing activities

6,902

(34,800)

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

$

43,239

48,252

Decrease in accounts payable and accrued liabilities for additions to property and equipment

$

(9,918)

(3,275)

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, 2023 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, 2023 consolidated financial statements were included in Antero Resources’ 2023 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, 2023 and March 31, 2024, results of operations and cash flows for the three months ended March 31, 2023 and 2024. 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 three months ended March 31, 2024 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 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, 2023, the book overdrafts included within accounts payable and revenue distributions payable were $11 million and $19 million, respectively. As of March 31, 2024, the book overdrafts included within accounts payable and revenue distributions payable were $7 million and $24 million, respectively.

(d)

Net Income Per Common Share

Net income per common share—basic for each period is computed by dividing net income attributable to Antero by the basic weighted average number of common shares outstanding during the period. Net income per common share—diluted for each period is computed after giving consideration to the potential dilution from (i) outstanding equity awards using the treasury stock method and (ii) shares of common stock issuable upon conversion of the 2026 Convertible Notes (as defined below in Note 7—Long-Term Debt) using the if-converted method. The Company includes restricted stock unit (“RSU”)

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

awards, performance share unit (“PSU”) awards and stock options in the calculation of diluted weighted average common shares outstanding based on the number of common shares that would be issuable if the end of the period was also the end of the performance period required for the vesting of the awards. During periods in which the Company incurs a net loss, diluted weighted average common shares outstanding are equal to basic weighted average common 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 income attributable to common stockholders for basic and diluted net income per common share (in thousands):

Three Months Ended March 31,

  

2023

  

2024

  

Net income attributable to Antero Resources Corporation—common shareholders

$

213,431

36,345

Add: Interest expense for 2026 Convertible Notes

616

256

Less: Tax-effect of interest expense for 2026 Convertible Notes

(132)

(56)

Net income attributable to Antero Resources Corporation—common shareholders and assumed conversions

$

213,915

36,545

Net income per common share—basic

$

0.72

0.12

Net income per common share—diluted

$

0.69

0.12

Weighted average common shares outstanding—basic

296,763

304,943

Weighted average common shares outstanding—diluted

311,846

312,503

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

Three Months Ended March 31,

   

2023

   

2024

Basic weighted average number of common shares outstanding

296,763

304,943

Add: Dilutive effect of RSUs

2,150

1,307

Add: Dilutive effect of PSUs

1,060

1,389

Add: Dilutive effect of 2026 Convertible Notes

11,873

4,864

Diluted weighted average number of common shares outstanding

311,846

312,503

Weighted average number of outstanding securities excluded from calculation of diluted net income per common share (1):

RSUs

969

371

PSUs

414

Stock options

324

259

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

(e)

Recently Issued Accounting Standards

Reportable Segments

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is intended to improve reportable segment disclosures primarily through enhanced disclosure of reportable segment expenses. This ASU is effective for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 is required to be applied retrospectively to all prior

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

periods presented in the financial statements. The Company is evaluating the impact that ASU 2023-07 will have on the financial statements and its plans for adoption, including the adoption date.

Income Taxes

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to improve income tax disclosures primarily through enhanced disclosure of income tax rate reconciliation items, and disaggregation of income (loss) from continuing operations, income tax expense (benefit) and income taxes paid, net disclosures by federal, state and foreign jurisdictions, among others. This ASU is effective for annual reporting periods beginning after December 15, 2024, and early adoption is permitted. ASU 2023-09 should be applied on a prospective basis, although retrospective application is permitted. The Company is evaluating the impact that ASU 2023-09 will have on the financial statements and its plans for adoption, including the adoption date and transition method.

(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 were achieved in 2020 and 2021. The Company met these production thresholds and received the $102 million of additional contributions from Sixth Street during 2020 and 2021. All cash contributed by Sixth Street at the initial closing and received as part of these additional contributions was distributed to the Company.

The ORRIs include an overriding royalty interest of 1.25% of the Company’s working interest in all of its operated proved developed properties in West Virginia and Ohio, subject to certain excluded wells (the “Initial PDP Override”), and an overriding royalty interest of 3.75% of the Company’s working interest in all of its undeveloped properties in West Virginia and Ohio (the “Development Override”). Wells turned to sales after April 1, 2020 and prior to the later of (a) the date on which the Company turns to sales 2.2 million lateral feet (net to the Company’s interest) of horizontal wells burdened by the Development Override or (b) the earlier of (i) April 1, 2023 or (ii) the date on which the Company turns to sales 3.82 million lateral feet (net to the Company’s interest) of horizontal wells are subject to the Development Override. As of April 1, 2023, Sixth Street no longer has the right to participate in any new wells, and Martica reconveyed the Development Override to the Company, except for the portion relating to wells turned to sales prior to April 1, 2023.

The ORRIs also include an additional overriding royalty interest of 2.00% of the Company’s working interest in the properties underlying the Initial PDP Override (the “Incremental Override”). The Incremental Override (or a portion thereof, as applicable) may be re-conveyed to the Company (at the Company’s election) if certain production targets attributable to the ORRIs are achieved through March 31, 2023. Any portion of the Incremental Override that may not be re-conveyed to the Company based on the Company failing to achieve such production volumes through March 31, 2023 will remain with Martica. As of March 31, 2023, 24% of the Incremental Override (or a 0.48% overriding royalty interest) will remain with Martica.

Prior to Sixth Street achieving an internal rate of return of 13% and 1.5x cash-on-cash return (the “Hurdle”), Sixth Street will receive all distributions in respect of the Initial PDP Override and the Development Override, and 24% of all distributions in respect of the Incremental Override, and the Company will receive 76% of all distributions in respect of the Incremental Override. Following Sixth Street achieving the Hurdle, the Company will receive 85% of the distributions in respect of the ORRIs to which Sixth Street was entitled immediately prior to the Hurdle being achieved.

(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 through 2024, 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

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

participate in all four annual tranches. Antero Resources develops and manages the drilling program associated with each tranche, including the selection of wells. Additionally, for each annual tranche, 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 development capital of 20%, 15% and 15% for wells spud in 2021, 2022 and 2023, respectively, and will fund 20% of development capital for wells spud in 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. The Company received a carry of $29 million for each of the 2021 and 2022 tranches during the three months ended December 31, 2022 and 2023. 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.

The Company has accounted for the drilling partnership as a conveyance under FASB Accounting Standards Codification (“ASC”) Topic 932, Extractive Activities—Oil and Gas, 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, 2023 and 2024.

(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 consolidated financial statements for more information on reportable segments.

Three Months Ended March 31,

   

2023

   

2024

   

Reportable Segment

Revenues from contracts with customers:

Natural gas sales

$

668,315

474,133

Exploration and production

Natural gas liquids sales (ethane)

72,050

63,030

Exploration and production

Natural gas liquids sales (C3+ NGLs)

423,385

454,832

Exploration and production

Oil sales

51,811

64,717

Exploration and production

Marketing

58,529

48,520

Marketing

Other revenue

175

273

Exploration and production

Total revenue from contracts with customers

1,274,265

1,105,505

Income from derivatives, deferred revenue and other sources, net

134,083

16,766

Total revenue

$

1,408,348

1,122,271

(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 FASB ASC Topic 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.

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(c)

Contract Balances

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, 2023 and March 31, 2024, the Company’s receivables from contracts with customers were $401 million and $326 million, respectively.

(5) Equity Method Investment

As of March 31, 2024, Antero owned 28.9% of Antero Midstream’s 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, 2023 (1)

$

222,255

Equity in earnings of unconsolidated affiliate

23,347

Dividends from unconsolidated affiliate

(31,285)

Elimination of intercompany profit

11,717

Balance as of March 31, 2024 (1)

$

226,034

(1)The fair value of the Company’s investment in Antero Midstream as of December 31, 2023 and March 31, 2024 was $1.7 billion and $2.0 billion, respectively, based on the quoted market share price of Antero Midstream.

(6) Accrued Liabilities

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

(Unaudited)

December 31,

March 31,

    

2023

    

2024

Capital expenditures

$

38,848

 

28,755

Gathering, compression, processing and transportation expenses

160,758

159,657

Marketing expenses

36,428

18,667

Interest expense, net

 

33,066

 

14,331

Production and ad valorem taxes

51,516

48,004

General and administrative expense

35,641

21,988

Derivative settlements payable

1,037

269

Other

 

24,046

 

23,286

Total accrued liabilities

$

381,340

 

314,957

(7) Long-Term Debt

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

(Unaudited)

December 31,

March 31,

   

2023

    

2024

Credit Facility (a)

$

417,200

415,300

8.375% senior notes due 2026 (b)

96,870

96,870

7.625% senior notes due 2029 (c)

407,115

407,115

5.375% senior notes due 2030 (d)

600,000

600,000

4.25% convertible senior notes due 2026 (e)

26,386

Total principal

1,547,571

1,519,285

Unamortized debt issuance costs

(9,975)

(9,176)

Long-term debt

$

1,537,596

1,510,109

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(a)Senior Secured Revolving Credit Facility

Antero Resources has a senior secured revolving credit facility (the “Credit Facility”) with a consortium of bank lenders. Borrowings under the Credit Facility are subject to borrowing base limitations based on the collateral value of Antero Resources’ assets and are subject to regular semi-annual redeterminations. As of December 31, 2023 and March 31, 2024, the Credit Facility had a borrowing base of $3.5 billion with lender commitments of $1.6 billion. The borrowing base was re-affirmed in the semi-annual redetermination in April 2024. The maturity date of the Credit Facility is the earlier of (i) October 26, 2026 and (ii) the date that is 180 days prior to the earliest stated redemption date of any series of the Company’s then outstanding senior notes. As of March 31, 2024, the Credit Facility had an available borrowing capacity of $752 million.

The Credit Facility contains requirements with respect to leverage and current ratios, and certain covenants, including restrictions on our ability to incur debt and limitations on our ability to pay dividends unless certain customary conditions are met, in each case, subject to customary carve-outs and exceptions. Antero Resources was in compliance with all of the financial covenants under the Credit Facility as of December 31, 2023 and March 31, 2024.

The Credit Facility provides for borrowing at either an Adjusted Term Secured Overnight Financing Rate (“SOFR”), an Adjusted Daily Simple SOFR or an Alternate Base Rate (each as defined in the Credit Facility). The Credit Facility provides for interest only payments until maturity at which time all outstanding borrowings are due. Interest is payable at a variable rate based on SOFR or the Alternate Base Rate, determined by election at the time of borrowing, plus an applicable margin rate under the Credit Facility. Interest at the time of borrowing is determined with reference to the Antero Resources’ then-current leverage ratio subject to certain exceptions. Commitment fees on the unused portion of the Credit Facility are due quarterly at rates ranging from 0.375% to 0.500% with respect to the Credit Facility, determined with reference to borrowing base utilization, subject to certain exceptions based on the leverage ratio then in effect. The Credit Facility includes fall away covenants, lower interest rates and reduced collateral requirements that Antero Resources may elect if Antero Resources is assigned an Investment Grade Ra