Antero Resources Corporation

Greetings and welcome to the Antero Resources second quarter 2021 earnings conference call. At this time all participants are in a listen only mode. The 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 this conference is being recorded. I will now turn the conference over to our host, Brendan Krueger, Vice President of Finance and Treasurer of Antero Resources. Thank you. You may begin.

Thank you, Operator. Thank you for joining us for Antero's second 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 would also like to direct you to the homepage of our website at www.anteroresources.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, 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, President, and CEO, Michael Kennedy, CFO, and Dave Canalongo, Vice President of Liquids Marketing and Transportation. I will now turn the call over to Paul.

Thanks, Brendan. Let's begin with slide number three, titled Best Exposure to Rising Commodity Prices. During the second quarter, our business model delivered EBITDAX of $319 million and a free cash flow of $105 million. Our financial results highlight the significant leverage we have to rising natural gas and C3 plus NGL prices. During the second quarter, our C3 plus NGL price averaged $40.32 per barrel, a 159% increase from the year-ago period. Our firm transportation portfolio led to an unhedged realized natural gas price at an 18 cent per MCF premium to NYMEX. Further, these strong realizations led to an increase in guidance for our realized price premium relative to NYMEX. Despite widening differentials in the Appalachian Basin, we now expect to realize a premium to NYMEX in the range of 15 cents to 25 cents per MCF for the full year 2021, which is five cents higher than our previous guidance. Our firm transportation portfolio not only provides flow assurance to NYMEX-based markets during periods of pipeline capacity constraints, but delivers premium realized prices. Looking ahead, we are currently the least hedged in our company history on the natural gas side entering 2022 and have very little NGLs hedged and no propane after October 1st of this year, 2021. This is a testament to our commodity fundamentals teams that have remained bullish on the outlook for both natural gas and NGLs heading into this winter. The combination of our FT portfolio and our low hedge profile makes Antero the most efficient way to gain direct exposure to Dymex and Montvalue prices. Now let's turn to slide number four, which illustrates the benefits of Antero's firm transportation portfolio. As illustrated on the chart, our FT portfolio has significantly reduced realized pricing volatility especially when compared to Appalachian basis differentials. During the second quarter, this competitive advantage resulted in price realizations that were $0.90 per MCF better than in-basin Appalachian pricing, which was $0.72 per MMBTU back of NYMEX. This premium pricing and liquids-rich focus has allowed Antero to consistently generate peer-leading EBITDAX margins and capture upside from both natural gas and NGL prices. Importantly, this basis volatility over the last year has been occurring in an overall no-growth environment in Appalachia, and we see the potential for wide basis to continue into the future. Slide number five details the historical and future Appalachian basis differentials in green compared to the net gas production, which is shown in red, versus takeaway capacity, shown in green. As you can see, when overall production exceeds the takeaway capacity, the basis blows out. Looking at last year, you see, circled in yellow, that basis has been very volatile even in this no-growth environment. As depicted on the right-hand side of the page, futures prices continue to widen due to tight takeaway capacity and the uncertainty of future projects like MVP. What we expect to see is price-related shut-ins or realized prices at a wide discount to NYMEX by our Appalachian peers who are short firm transportation. These attributes result in Antero being the best way to gain direct exposure to rising NYMEX prices. Turning to slide number six, let's discuss the dramatic drilling and completion efficiency gains that are helping to drive our well cost lower. Starting with the chart in the top left, during the second quarter, our average lateral length drilled per well continued its steady progression higher. averaging 13,908 lateral feet per well. This represents an 11% increase compared to the average lateral length in 2020. Note also our new record lateral length of just under 19,000 feet, which is a record for us in both Marsalis and Utica. Moving to the chart on the top right, we averaged more than 6,600 lateral feet drilled per day during the second quarter. Our completion efficiency also continued to improve, averaging 9.8 stages per day during the quarter, which was a company record for a quarter and a 23% increase compared to the 2020 average. Finally, our average drill-out feet per day has continued to increase each year and averaged 4,092 feet per day in the second quarter. With that, I'm going to turn it over to our Vice President of Liquids Marketing and Transportation, Dave Cantalongo, for his comments.