Antero Resources Corporation

Greetings and welcome to the Intero Resources 2Q 2022 Earnings Conference Call. At this time, all participants are 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 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brendan Krueger, Vice President of Finance. You may begin.

Brendan Krueger Thank you, operator. Thank you for joining us for Antero's second quarter 2022 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 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, CEO, and President, Michael Kennedy, CFO, Justin Fowler, Senior Vice President of Gas Marketing and Transportation, and Dave Canalongo, Senior Vice President of Liquid Marketing and Transportation. I will now turn the call over to Paul.

Thanks, Brendan. The second quarter was an exceptional quarter for Antero, both operationally and financially. We delivered quarterly company records for adjusted EBITDAX and free cash flow. We reduced debt by nearly $400 million while also accelerating capital returns to our shareholders. Behind these excellent results is consistently strong well performance. I'd like to begin the call by highlighting some outstanding well results from recent pads that we placed to sales during this year. The plots on slide number three show the cumulative equivalent production over the first 100 to 180 days of the well. As you can see, the pads we have recently placed to sales have outperformed the average production from our average 2018 through average 2021 wells. One of our pads located in the Ohio Utica is comprised of six wells with an average lateral length of over 15,000 feet. And they averaged on a per well basis, 29 million cubic feet equivalent per day for the first 60 days of production, including a company record 1,750 barrels a day of liquids per well. Just to emphasize the magnitude of this pads production, This totals 175 million a day and over 10,000 barrels of liquids for the total pad. This is 28% higher than the 2020 average and 25% higher than the 2021 average. Another pad located in the Marcellus, also comprised of six wells with an average lateral length of 14,500 feet, averaged over 32 million cubic feet equivalent per day per well in the first 60 days, including 1,630 barrels of liquids per well. Again, this pad totals over 180 million cubic feet a day and 9,000 barrels of liquids. This is 36% and 33% higher than the 2020 and 2021 averages, respectively. Most notably, both these pads are projected to have payout periods of less than five months from the date that they were turned to sales. One of the factors driving this impressive performance is the strong liquids volume. Turning to slide number four, I'd like to point out the progression of our average wells' cumulative C3 plus NGL and oil production for the first 150 to 180 days. by year since 2018. The average per well liquids production of our 2022 wells for the first 100 days represents a 23% increase from the previous year and a 109% increase from 2018. The performance of the recent wells and the continued improvement year over year is a testament to the quality and depth of our liquids-rich core position and our on the development of this inventory. These pads are located in the liquids-rich fairway of Tyler and Wetzel counties where our five-year development plan is focused. Turning to slide five, titled Marcellus Peer Well Performance Comparison, Let's take a look at how our wells stack up against some of our close peers on an equivalent production basis based on a recent Enveris report that has just recently been published. The plot on the page compares Antero's average cumulative production per well since 2020 to that of our southwest Marcellus peers. As illustrated on the page, Antero's average cumulative equivalent production per well is 22% greater than the peer average since 2020. This is another testament to the quality and depth of our core liquids-rich position. Further, while some peers may be experiencing inventory exhaustion, we have tremendous confidence in our five-year plan and beyond as we have been drilling some of the best wells in company history. Now, to expand on the discussion of inventory, let's turn to slide number six, titled Organic Land Acquisition. Across the oil and gas industry, we have seen an increase in both public and private corporate acquisitions over the last couple of years. During this time, we've continued to maintain our focus on our core acreage footprint with a particular emphasis on spending capital on organic lease acquisitions. As opposed to larger transactions that can dilute your equity, create a large overhang on your stock, or lever up your balance sheet, we've preferred to pick up smaller, more tailed acreage packages within our core liquids-rich position in West Virginia, where we continue to see very strong well results. As an example, during the quarter, we spent $49 million on land a portion of which was used to add 25 additional drilling locations at less than $1 million per location. Since 2019, we have added approximately 100 drilling locations in the liquids-rich window of Tyler and Wetzel counties, which equates to a year and a half of drilling inventory at an average of 65 wells per year under our maintenance capital plan. We believe this approach is much more cost effective relative to many of the recent larger M&A transactions that averaged $1.5 to $3 million per location. What makes this even more attractive, these locations are in our core areas where we are currently focused, providing further liquids-rich development runway and improving our overall operating efficiencies. Now let me turn to commodities and our hedging strategy. We continue to see a supportive macro outlook for all of our products, whether it be natural gas, NGLs, or oil. We have a strong balance sheet that gets stronger by the day, and we're confident in our drilling inventory and our ability to deliver our results. This leads us to our current view that we are not planning to add hedges on any of our products for the foreseeable future. Now, to expand on the current gas fundamentals and how they directly benefit Antero, I'm going to turn the call over to our Senior Vice President of Gas Marketing and Transportation, Justin Fowler.