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Fee

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2022

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

The registrant had 300,136,446 shares of common stock outstanding as of October 21, 2022.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

our ability to execute our business strategy;
our production and oil and gas reserves;
our financial strategy, liquidity and capital required for our development program;
our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
our ability to execute our share repurchase program;
natural gas, natural gas liquids (“NGLs”) and oil prices;
impacts of geopolitical events and world health events, including the coronavirus (“COVID-19”) pandemic;
timing and amount of future production of natural gas, NGLs and oil;
our hedging strategy and results;
our ability to meet minimum volume commitments and to utilize or monetize our firm transportation commitments;
our future drilling plans;
our projected well costs, including with respect to water handling services provided by Antero Midstream Corporation (“Antero Midstream”);
competition;
government regulations and changes in laws;
pending legal or environmental matters;
marketing of natural gas, NGLs and oil;
leasehold or business acquisitions;
costs of developing our properties;
operations of Antero Midstream;
our ability to achieve our greenhouse gas reduction targets and the costs associated therewith;
general economic conditions;
credit markets;

2

uncertainty regarding our future operating results; and
our other plans, objectives, expectations and intentions contained in this Quarterly Report on Form 10-Q.

We caution investors that these forward-looking statements are subject to all of the risks and uncertainties incidental to our business, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, availability and cost of drilling, completion and production equipment and services, environmental risks, drilling and completion and other operating risks, marketing and transportation risks, regulatory changes or changes in law, the uncertainty inherent in estimating natural gas, NGLs and oil reserves and in projecting future rates of production, cash flows and access to capital, the timing of development expenditures, conflicts of interest among our stockholders, impacts of world health events (including the COVID-19 pandemic), cybersecurity risks, the state of markets for, and availability of, verified quality carbon offsets and the other risks described or referenced under the heading “Item 1A. Risk Factors” herein, including the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”), which is on file with the Securities and Exchange Commission (“SEC”).

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

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

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

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

3

PART I—FINANCIAL INFORMATION

ANTERO RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

December 31,

September 30,

  

2021

  

2022

Assets

Current assets:

  

Accounts receivable

$

78,998

23,770

Accrued revenue

591,442

924,343

Derivative instruments

757

954

Other current assets

14,922

28,587

Total current assets

686,119

977,654

Property and equipment:

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

Unproved properties

1,042,118

999,273

Proved properties

12,646,303

13,103,294

Gathering systems and facilities

5,802

5,802

Other property and equipment

116,522

129,853

13,810,745

14,238,222

Less accumulated depletion, depreciation and amortization

(4,283,700)

(4,587,529)

Property and equipment, net

9,527,045

9,650,693

Operating leases right-of-use assets

3,419,912

3,541,576

Derivative instruments

14,369

7,327

Investment in unconsolidated affiliate

232,399

222,882

Other assets

16,684

13,246

Total assets

$

13,896,528

14,413,378

Liabilities and Equity

Current liabilities:

  

Accounts payable

$

24,819

103,640

Accounts payable, related parties

76,240

74,584

Accrued liabilities

457,244

497,547

Revenue distributions payable

444,873

682,327

Derivative instruments

559,851

612,237

Short-term lease liabilities

456,347

535,347

Deferred revenue, VPP

37,603

32,330

Other current liabilities

11,140

6,010

Total current liabilities

2,068,117

2,544,022

Long-term liabilities:

Long-term debt

2,125,444

1,172,828

Deferred income tax liability, net

318,126

619,342

Derivative instruments

181,806

445,481

Long-term lease liabilities

2,964,115

3,007,636

Deferred revenue, VPP

118,366

95,514

Other liabilities

54,462

58,293

Total liabilities

7,830,436

7,943,116

Commitments and contingencies

Equity:

Stockholders' equity:

Preferred stock, $0.01 par value; authorized - 50,000 shares; none issued

Common stock, $0.01 par value; authorized - 1,000,000 shares; 313,930 shares and 303,131 shares issued and outstanding as of December 31, 2021 and September 30, 2022, respectively

3,139

3,031

Additional paid-in capital

6,371,398

5,941,977

Retained earnings (accumulated deficit)

(617,377)

266,468

Total stockholders' equity

5,757,160

6,211,476

Noncontrolling interests

308,932

258,786

Total equity

6,066,092

6,470,262

Total liabilities and equity

$

13,896,528

14,413,378

See accompanying notes to unaudited condensed consolidated financial statements.

4

ANTERO RESOURCES CORPORATION

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

(In thousands, except per share amounts)

Three Months Ended September 30,

  

2021

  

2022

 

Revenue and other:

Natural gas sales

$

884,669

1,736,039

Natural gas liquids sales

598,327

620,816

Oil sales

56,734

67,025

Commodity derivative fair value losses

(1,250,466)

(530,523)

Marketing

232,685

159,985

Amortization of deferred revenue, VPP

11,404

9,478

Other income

530

1,804

Total revenue

533,883

2,064,624

Operating expenses:

Lease operating

25,363

27,453

Gathering, compression, processing and transportation

628,225

716,388

Production and ad valorem taxes

52,219

92,998

Marketing

266,751

185,377

Exploration and mine expenses

235

2,975

General and administrative (including equity-based compensation expense of $5,298 and $10,402 in 2021 and 2022, respectively)

32,442

42,903

Depletion, depreciation and amortization

182,810

169,607

Impairment of oil and gas properties

26,253

33,924

Accretion of asset retirement obligations

828

630

Contract termination

3,370

17,995

(Gain) loss on sale of assets

(539)

214

Total operating expenses

1,217,957

1,290,464

Operating income (loss)

(684,074)

774,160

Other income (expense):

Interest expense, net

(45,414)

(28,326)

Equity in earnings of unconsolidated affiliate

21,450

14,972

Loss on early extinguishment of debt

(16,567)

(30,307)

Loss on convertible note inducement

(169)

Transaction expense

(626)

Total other expense

(41,157)

(43,830)

Income (loss) before income taxes

(725,231)

730,330

Income tax benefit (expense)

158,656

(135,823)

Net income (loss) and comprehensive income (loss) including noncontrolling interests

(566,575)

594,507

Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests

(17,257)

34,748

Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation

$

(549,318)

559,759

Income (loss) per share—basic

$

(1.75)

1.83

Income (loss) per share—diluted

$

(1.75)

1.72

Weighted average number of shares outstanding:

Basic

313,790

305,343

Diluted

313,790

325,997

See accompanying notes to unaudited condensed consolidated financial statements.

5

ANTERO RESOURCES CORPORATION

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

(In thousands, except per share amounts)

Nine Months Ended September 30,

  

2021

  

2022

Revenue and other:

Natural gas sales

$

2,231,558

4,290,825

Natural gas liquids sales

1,503,027

1,983,509

Oil sales

153,326

219,504

Commodity derivative fair value losses

(2,260,062)

(1,807,565)

Marketing

562,928

335,173

Amortization of deferred revenue, VPP

33,833

28,125

Other income

551

3,578

Total revenue

2,225,161

5,053,149

Operating expenses:

Lease operating

71,555

70,486

Gathering, compression, processing and transportation

1,874,664

1,962,878

Production and ad valorem taxes

130,610

227,648

Marketing

627,822

415,571

Exploration and mine expenses

6,092

5,267

General and administrative (including equity-based compensation expense of $15,189 and $23,222 in 2021 and 2022, respectively)

108,693

123,033

Depletion, depreciation and amortization

564,166

511,390

Impairment of oil and gas properties

69,618

79,749

Accretion of asset retirement obligations

2,947

3,878

Contract termination

4,305

20,099

(Gain) loss on sale of assets

(2,827)

2,071

Total operating expenses

3,457,645

3,422,070

Operating income (loss)

(1,232,484)

1,631,079

Other income (expense):

Interest expense, net

(138,120)

(100,252)

Equity in earnings of unconsolidated affiliate

57,621

54,863

Loss on early extinguishment of debt

(82,836)

(45,375)

Loss on convertible note inducement and equitizations

(50,777)

(169)

Transaction expense

(3,102)

Total other expense

(217,214)

(90,933)

Income (loss) before income taxes

(1,449,698)

1,540,146

Income tax benefit (expense)

337,568

(308,302)

Net income (loss) and comprehensive income (loss) including noncontrolling interests

(1,112,130)

1,231,844

Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests

(23,846)

63,369

Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation

$

(1,088,284)

1,168,475

Income (loss) per share—basic

$

(3.55)

3.77

Income (loss) per share—diluted

$

(3.55)

3.51

Weighted average number of shares outstanding:

Basic

306,201

309,954

Diluted

306,201

333,738

See accompanying notes to unaudited condensed consolidated financial statements.

6

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands)

Retained

Additional

Earnings

Common Stock

Paid-in

(Accumulated

Noncontrolling

Total

  

Shares

  

Amount

  

Capital

  

Deficit)

  

Interests

  

Equity

Balances, December 31, 2020

268,672

$

2,686

6,195,497

(430,478)

322,566

6,090,271

Issuance of common shares

31,388

314

238,551

238,865

Issuance of common units in Martica Holdings, LLC

51,000

51,000

Equity component of 2026 Convertible Notes, net

(116,381)

(116,381)

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

1,130

11

(5,656)

(5,645)

Equity-based compensation

5,642

5,642

Distributions to noncontrolling interests

(24,699)

(24,699)

Net income (loss) and comprehensive income (loss)

(15,499)

4,395

(11,104)

Balances, March 31, 2021

301,190

3,011

6,317,653

(445,977)

353,262

6,227,949

Issuance of common shares

11,588

116

125,262

125,378

Equity component of 2026 Convertible Notes, net

(79,497)

(79,497)

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

749

8

(3,893)

(3,885)

Equity-based compensation

4,249

4,249

Distributions to noncontrolling interests

(21,329)

(21,329)

Net loss and comprehensive loss

(523,467)

(10,984)

(534,451)

Balances, June 30, 2021

313,527

3,135

6,363,774

(969,444)

320,949

5,718,414

Equity component of 2026 Convertible Notes, net

36

36

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

339

3

(3,179)

(3,176)

Distributions to noncontrolling interest

(18,755)

(18,755)

Equity-based compensation

5,298

5,298

Net loss and comprehensive loss

(549,318)

(17,257)

(566,575)

Balances, September 30, 2021

313,866

$

3,138

6,365,929

(1,518,762)

284,937

5,135,242

Balances, December 31, 2021

313,930

$

3,139

6,371,398

(617,377)

308,932

6,066,092

Equity component of 2026 Convertible Notes, net

(24,411)

3,229

(21,182)

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

780

8

(10,385)

(10,377)

Repurchases and retirements of common stock

(3,690)

(37)

(74,745)

(25,263)

(100,045)

Equity-based compensation

4,649

4,649

Distributions to noncontrolling interests

(35,757)

(35,757)

Net loss and comprehensive loss

(156,419)

(18,277)

(174,696)

Balances, March 31, 2022

311,020

3,110

6,266,506

(795,830)

254,898

5,728,684

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

2,112

21

(54,463)

(54,442)

Conversion of 2026 Convertible Notes

921

9

3,955

3,964

Repurchases and retirements of common stock

(5,241)

(52)

(104,524)

(88,430)

(193,006)

Equity-based compensation

8,171

8,171

Distributions to noncontrolling interests

(31,541)

(31,541)

Net income and comprehensive income

765,135

46,898

812,033

Balances, June 30, 2022

308,812

3,088

6,119,645

(119,125)

270,255

6,273,863

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

25

(210)

(210)

Conversion of 2026 Convertible Notes

4,751

48

20,230

20,278

Repurchases and retirements of common stock

(10,457)

(105)

(208,090)

(174,166)

(382,361)

Equity-based compensation

10,402

10,402

Distributions to noncontrolling interest