Antero Resources Corporation

Greetings. Welcome to Antero Resources' first quarter 2021 earnings conference call. At this time, all participants will be in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. At this time, I'll turn the conference over to Mr. Michael Kennedy, Senior Vice President of Finance. Mr. Kennedy, you may begin.

Thank you for joining us for Antero's first quarter 2021 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.anteroresources.com, where we provided a separate earnings call presentation that will be reviewed during today's call. Before we start our comments, I'd like to first remind you that during this call, Antero management will make forward-looking statements. Such statements are based on our current judgments regarding factors that will impact the future performance of Antero and are subject to a number of risks and uncertainties, many of which are beyond Antero'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, Glenn Warren, President and CFO, and Dave Canalongo, Vice President of Liquids Marketing and Transportation. I will now turn the call over to Paul.

Thank you, Mike. Let's begin with slide number three, titled Best Exposure to Rising Commodity Prices. During the first quarter, our business model delivered EBITDAX of $519 million and free cash flow of $416 million. Our financial results highlight the significant leverage we have to rising commodity prices. In particular, C3 plus NGL prices, which averaged over $40 per barrel during the quarter. Approximately 40% of Antero's revenue is generated from liquids, which is primarily by C3 plus NGLs. However, it is not only strong NGL prices that drove the quarterly financial records. During the first quarter, our firm transportation portfolio led to an unhedged realized gas price of 41 cents per MCF, premium to NYMEX. Our firm transportation portfolio provides flow assurance during periods of pipeline capacity constraints and during periods of high prices in other regions of the U.S., And our firm transportation portfolio enables us to deliver our gas to those markets and realize prices at a premium to NYMEX. For the full year 2021, we forecast Entero gas realizations at a premium to NYMEX of 10 to 20 cents. Moving to slide number four, titled FT protects basis and provides flow assurance. we have highlighted the strategic advantage of our FT historically. As illustrated on the chart, AR's FT portfolio has significantly reduced realized pricing volatility, especially when compared to Appalachian Basin differentials. During the first quarter, this competitive advantage led to Antero price realizations that were 92 cents better than in-basin pricing. You can see this detail on the right-hand side of the chart that highlights Antero's $0.41 per MCF premium compared to the InBasin price that traded at a discount of $0.51 per MCF. Now, as we look ahead at the strategic advantage of our FT portfolio, let's turn to slide number five. This slide gives you some insights on how the Appalachian Basin indices trade going forward with two key takeaways. First, when you look at Appalachian takeaway capacity today, pipelines are essentially full. This is what led to the basis blowout in 2020 that is circled in yellow and forced many of our peers to shut in volume or sell at highly discounted prices. The second takeaway is on the outlook for local pricing given the many questions around the uncertainty of MVP for the Mountain Valley project. As you can see on the far right portion of this chart in the orange and green dotted lines, in the last 12 months, basis has widened further by approximately 30 cents per MMBTU. as traders are risking the likelihood of new takeaway capacity. We like where we are, positioned today with our firm FT portfolio that allows us to avoid these local price blowouts and sell our gas consistently at a premium to nine months. Turning to slide number six, titled Drilling and Completion Efficiencies. Let's discuss the dramatic drilling and completion efficiency gains that are helping to drive our well cost lower. Starting with the chart on the top left quadrant of the page, during the first quarter, our average lateral length drill per well continued its steady progression higher, averaging 12,839 feet per well. Moving to the chart on the top right, we averaged more than 7,500 lateral feet drilled per day during the quarter, which is a 17% increase over the average in 2020. Further, Antero established a new U.S. record drilling of 12,118 feet of lateral during a 24-hour period. Our completion efficiency also continued to improve, averaging nine and a half stages per day during the quarter, which is a 19% increase compared to the 2020 average. It's important to note that this was accomplished during the winter quarter, a time that is typically more challenging for completions. Completion stages per day during the quarter benefited from our first SimulFRAC completion process on a pad which allows two separate wells to be completed at the same time. Finally, our average drill-out feet per day has continued to increase each year, an average 3,883 feet in the first quarter. Before turning the call over to Dave, I want to congratulate Glenn on his upcoming retirement and thank him for all of his contributions to the Antero entities over the years. Glenn and I have been partners for over 20 years, dating back to coal bed methane exploration and production in the Powder River Basin. Since then, we became early shale pioneers, adopting horizontal drilling and multistage completions in the Barnett Shale, and have built Antero into one of the largest and most integrated NGL and natural gas producers in the U.S., Over the last year, Glenn was instrumental in successfully executing the series of strategic transactions and capital market activities, which allowed us to navigate the challenging environment and put us in the position we're in today. As we look ahead, AR and AM are in the strongest financial positions since inception, both generating significant free cash flow with strong balance sheets and leverage profiles. While Glenn will be missed, I'm very excited about internally backfilling his positions with Mike Kennedy and Brendan Krueger, which highlights the deep bench that we have here at Antero. With that, I'll turn the call over to our Vice President of Liquids, Marketing, and Transportation, Dave Canalongo, for his comments.