Antero Midstream Corporation

Greetings and welcome to the Antero Midstream First Quarter 2020 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to our host, Michael Kennedy, Senior Vice President of Finance, and Chief Financial Officer for Intero Midstream. Thank you. You may begin.

Thank you for joining us for Intero Midstream's first quarter 2020 investor conference call. We'll spend a few minutes going through the financial and operating highlights, and then we'll open it up for Q&A. I'd also like to direct you to the homepage of our website at www.interomidstream.com. where we have provided a separate earnings call presentation that will be reviewed during today's call. Before we start our comments, I would first like to remind you that during this call, Intero management will make forward-looking statements. Such statements are based on our current judgments regarding factors that will impact the future performance of Intero resources and Intero Midstream and are subject to a number of risks and uncertainties, many of which are beyond Intero's control. Actual outcomes and results could materially differ from what is expressed, implied, or forecast in such statements. Today's call may also contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures, including reconciliation after the most comparable GAAP financial measures. Joining me on the call today are Paul Rady, Chairman and CEO of Antero Resources and Antero Midstream. Glenn Warren, President and CFO of Antero Resources and President of Antero Midstream, and Dave Conolongo, Vice President of Liquids Marketing and Transportation. With that, I'll turn the call over to Paul.

Thanks, Mike. I'd like to start by discussing the updated development plans and capital budgets at Antero Resources and Antero Midstream on slide number three. titled Flexible and Just-in-Time Capital Budget. The left-hand side of the page illustrates AR's drilling and completion capital budgets, which have remained flexible based on commodity prices and targeting free cash flow. In March, AR announced a reduction of its drilling and completion capital budget from $1.15 billion to $1.0 billion as a result of achieving D&C capital cost savings ahead of schedule. These savings were driven by flowback water savings and increased efficiencies, such as daily drilling footage improvements and an increase in completion stages per day. This allowed AR to maintain a DNC capital budget that approximated free cash flow even after the initial decline in commodity prices. In order to maintain its financial profile and liquidity, AR has further reduced its DNC capital budget to $750 million in response to the unprecedented demand impacts from the global COVID-19 pandemic and oil price war. This reduction was driven primarily by the deferral of 20 well completions from 2020 into 2021. Importantly, given the visibility AM has into AR's development plans, AM has quickly adapted to these changes and lowered its capital budget from an original budget of $300 to $325 million in February to a range of $215 to $240 million today. Our updated capital budget represents a 27% reduction from our original capital budget and a 65% reduction compared to 2019 capital expenditures. Looking ahead, should natural gas prices continue to strengthen, AR has four dry gas Utica pads that are development ready and can be feathered in to the 2021 drilling program. These dry gas pads require very little additional capital investment from AM and are located nearby existing infrastructure with excess capacity. This development plan visibility and pure play Appalachian focus is a competitive advantage compared to midstream gathering and processing companies that have a multitude of producers across various basins. Our coordinated planning with AR reduces uncertainty, particularly in today's environment, and allows AM to have a more stable financial policy that benefits our shareholders. Slide 4, titled Significant Liquidity Enhancements, illustrates the recent liquidity developments at AR. First, AR's borrowing base under its credit facility was confirmed at $2.85 billion, well in excess of lender commitments of $2.64 billion. As a result, AR had over $1 billion of liquidity under its $2.64 billion credit facility as of March 31, 2020, which is shown on the dark green bar on the left-hand side of the page. AR's updated development plan is expected to generate $175 million of free cash flow in 2020, further improving its liquidity position. Assuming execution of the remaining sales under AR's targeted asset sale program of $900 million, AR would have over $2.1 billion in liquidity at year-end 2020 prior to any further bond repurchases. Over the last two quarters, AR has taken a proactive approach to debt reduction, repurchasing $608 million of notional senior unsecured debt at a 20% weighted average discount, reducing total debt by $120 million. The par value of the remaining 2021s plus 2022 maturities is $1.491 billion. The market value of the remaining 2021 and 22 senior notes net of what has been repurchased to date is shown on the right hand side of the page and totals $1.104 billion. As you can see, due to its broad range of assets and natural gas rather than oil focus, AR should be well positioned with sufficient capacity to repay its near-term maturities. In addition, AR continues to focus on asset sales, cost reductions, and other opportunities to enhance its liquidity position. Before turning the call over to Dave, I would like to briefly walk through AR's updated hedge position on slide number five, titled Enhanced Natural Gas Hedge Positions. AR has continued its consistent hedging program and taken advantage of the natural pricing strength on the back end of the curve. During the first quarter, AR added 688 MMBTUs a day of gas hedges at an average price of $2.48 per MMBTU. As depicted on the slide, AR is 94% hedged on its expected 2020 natural gas production and 100% hedged on its expected natural gas production in 2021. In addition, we expect AR to continue to proactively hedge volumes in Cal 22 and beyond as prices continue to improve. In addition, Antero is 100% hedged on its 2020 oil and C5 Plus production at an oil price equivalent of $55.63 per barrel. Dave will discuss the Northeast storage situation and impacts from COVID-19 on the NGL and condensate markets, but these hedges provide significant price protection for AR's liquids production. This consistent approach to hedging drives development plan stability across commodity price cycles, which in turn benefits AM. With that, I'll turn the call over to Dave.