Antero Resources Corporation

Greetings, and welcome to Entero Resources' first quarter 2020 conference call. 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mike Kennedy, Senior Vice President of Finance.

Thank you for joining us for Intero's first quarter 2020 investor conference call. We'll spend a few minutes going through the financial and operational 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.interoresources.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 like to first 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 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 reconciliations to the most comparable GAAP financial measures. Joining me on the call today are Paul Rady, Chairman and CEO of Glenn Warren, President and CFO, and Dave Conolongo, Vice President of Liquids Marketing and Transportation. I will now turn the call over to Paul.

Thank you, Mike. Let's start by discussing the cost reduction momentum across all of Antero's cost structure, detailed on slide number three, titled Cost Reduction Momentum. lower well costs as we have driven a $3 million per well cost reduction in 2020 relative to our initial 2019 budget. This equates to roughly $320 million in total well cost savings based on our updated development plan that assumes 105 completed wells in 2020 and with an average lateral length of 11,400 feet. We deferred approximately 20 well completions from our 2020 plan to better align activity levels with today's depressed commodity price environment and resulting cash flow. Lower midstream fees, net marketing expense, LOE, and G&A make up the remaining savings of approximately $280 million. In total, we expect our capital and operating cost structure to be reduced by $600 million in 2020 as compared to 2019. Now, let's get a little more granular with slide number four, titled, provides an update to our Marcellus well-cost targets. Driven by expanded flowback water blending operations during the first quarter, continued step change improvements in our drilling and completion efficiencies, and service cost deflation, we are now targeting $8.6 million for a 12,000-foot lateral. a $3 million per well savings relative to our 2019 budgeted well cost. The left-hand side of the page illustrates AR's January 2019 budgeted well cost of $970 per lateral foot. As we exited the first quarter of 2020, AR's well costs averaged approximately $720 per foot during the month of March. This also represents a $30 per foot improvement from our previously targeted AFE of $750 per foot announced earlier this year. These accelerated savings were primarily driven by more stages completed per day, improved lateral footage drilled per day, and service cost deflation. We're expecting well costs to average $715 per lateral foot for the remainder of 2020. Now, turning to slide number five, titled Marcellus Drilling and Completion Efficiencies, let's discuss in more detail the drilling and completion efficiency gains that are helping drive our well costs slower. During the first quarter, we have averaged 6400 feet drilled per day sideways when drilling the lateral portion of the well, an 11% increase compared to the 2019 average. We averaged only 10.7 days to drill in case a 12,000 foot lateral from spud to rig release. Further, the reduction in fresh water used in our completions and the move to mostly 100 mesh sand has increased our completion efficiency to an average 7.1 stages per day during the quarter, an increase of 22% relative to the 2019 average. Last week, our three completion crews averaged 9.7 stages per day, including an Antero record for most stages in a day at 13 stages. Finally, we believe we have a pathway to take our well costs to $650 per lateral foot over the next 12 months. Antero's operating team has done a terrific job optimizing our drilling and completion operations and delivering cost reductions. These integrated efforts have allowed us to now reduce our D&C capital budget production profile and maximizing free cash flow. As you can see on slide number six, titled Cost Savings Momentum Leads to Lower Capital, our new capital budget is 41% below the 2019 capital budget and 35% below the initial 2020 budget set in February of this year. We anticipate a decline in capital spending each subsequent quarter in 2020, reflecting continued efficiencies, the broader impact from service cost deflation, and the release of three drilling rigs and two completion crews in the second quarter. Importantly, we are projecting $175 million of free cash flow in 2020 based on today's script prices. With that, I'll turn it over to Dave Cantalongo for his comments. Dave is our Vice President of Liquids Marketing and Transportation.