7/31/2025

speaker
Conference Operator
Operator

Greetings and welcome to the Antero Resources Second Quarter 2025 Earnings 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. Please note, this conference is being recorded. I will now turn the conference over to our host, Brendan Krueger, Vice President of Finance. Thank you. You may begin.

speaker
Brendan Krueger
Vice President of Finance, Antero Resources

Good morning. Thank you for joining us for Antero's second quarter 2025 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. Today's call may 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, Dave Canalongo, Senior Vice President of Liquids Marketing and Transportation, and Justin Fowler, Senior Vice President of Natural Gas Marketing. I will now turn the call over to Paul.

speaker
Paul Rady
Chairman, CEO and President, Antero Resources

Thank you, Brendan, and good morning, everyone. Let's start on slide number three, titled Efficiencies Reduce Maintenance Capital, which highlights the tangible benefit of our best-in-class capital efficiency. For the second consecutive year, we have increased our production guidance while decreasing CapEx. Looking at the chart on the left side of the slide, Since the year 2023, our maintenance production target has increased 5% from under 3.3 BCF equivalent per day to over 3.4 BCF equivalent a day. During that same time, our maintenance capital requirements declined by 26%, from $900 million to $663 million. The chart on the right-hand side of the slide highlights this capital efficiency relative to our peers. Antero has the lowest maintenance cap per MCFE of its peer group at just 53 cents per MCFE. This is 27% below the peer average of 73 cents per MCFE. Now, let's turn to slide number four to discuss our updated hedges. During the quarter, we added additional wide natural gas costless collars for the year 2026. These wide collars lock in attractive rates of return with a floor price of $3.14 and a ceiling of $6.31. With these new hedges in place, we have hedged approximately 20% of our expected natural gas volumes through 2026. Our hedge book allows us to protect the downside while maintaining significant exposure to rising natural gas prices. These hedges lower our 2026 free cash flow breakeven to $1.75 per MCF. Now, to touch on the current liquids and NGL fundamentals, I'm going to turn it over to our Senior Vice President of Liquids Marketing and Transportation, and Canalongo for his comments. Dave?

speaker
Dave Canalongo
Senior Vice President of Liquids Marketing and Transportation, Antero Resources

Thanks, Paul. I'll start on slide number five, titled NGL Pricing Premium. During the second quarter, Montero's realized C3-plus propane beginning in October. Although we reduced our full-year NGL price guidance slightly, this was primarily a reflection of our second quarter actuals that was impacted by inventory adjustments. showing strengthening underlying fundamentals in NGL markets. In the second quarter of 2025, Antero's C3 Plus realizations averaged 59% of WTI compared to the second quarter of 2024 when realizations were 50% of WTI. On the export side, Antero has locked in a substantial portion of our export volume at double-digit premiums to Montpelier, and we continue to benefit from those deals. strength versus WTI. We anticipate that new trade deals signed in the coming weeks and months will increase confidence in the reliability of U.S. LPG supply and help strengthen export volumes and benchmark pricing further. Uncertainty surrounding trade negotiations had a significant but transitory impact on the global NGL market during the quarter. For LPG, the market saw a shift were largely anticipated by the market as we discussed on last quarter's earnings call. Despite the destination reshuffling, overall U.S. propane exports remained strong and increased year over year. Exports have averaged over 1.8 million barrels per day, which is 6% higher than the same period last year. natural gas market. Thanks, Dave.

speaker
Justin Fowler
Senior Vice President of Natural Gas Marketing, Antero Resources

We continue to see the positive demand trends for natural gas, both near-term and long-term. Starting first with the near-term demand growth, the first half of 2025 saw a significantly faster ramp at Venture Global's Plaquemine LNG facility. This July, the facility achieved a daily record for feed gas at over 2.9 BCF per day. which represents 120% of phase one nameplate capacity. Now, Venture Global is starting LNG production at phase two of the terminal, which will increase nameplate capacity to 3.6 BCF. This initial production is ahead of prior expectations with full phase two in service expected in late 2025. This accelerated ramp has led to higher demand along our TTP 500-leg firm transport and driven a higher premium at that delivery point relative to Henry Hub. As shown on slide number seven titled, not all transport to the U.S. Gulf Coast is equal. Maintenance along the pipeline restricted the amount of volume that captured that premium during the second quarter. However, we anticipate our premium realizations will improve in the second half of 2025 and and in 2026. As a reminder, Ontario has 570 MMCF a day of capacity on the TGP 500 leg. Slide number eight guides a bit further into the LNG market. Over the next 30 months, LNG demand is expected to increase by another eight BCF a day, driven by the startup of Plaquemines Phase II, Golden Pass, Corpus Christi, and Calcasieu Pass Phase II. Combined with the continued power demand growth, the natural gas market is expected to be materially undersupplied during this period, which we expect to support higher prices next year. Now let's shift topics from near-term LNG demand to the medium-term Appalachia regional power demand trends. Turning to slide number nine, titled Regional Natural Gas Demand, the first version of this slide was created for our first quarter earnings call in April. At that time, approximately three BCF of regional power demand had been announced. A short 90 days later, we are now up to almost five BCF of announced projects within our region. While we certainly acknowledge there is a lot of work to be done, we anticipate the acceleration of power demand announcements to continue, resulting in significant opportunities for ANTERO. Antero remains advantaged in this power demand story with our extensive resource base, integrated midstream assets, and investment grade balance sheet. Through our firm transportation to the U.S. Gulf Coast, we are uniquely positioned as the only natural gas company that can meaningfully participate in both the LNG export growth strategy and the expected regional power demand growth. With that, I will turn it over to Mike Kennedy, CFO of Antero Resources.

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Thanks, Justin. We continue to execute on our plan while doing so in a more capital efficient manner. During the second quarter, this execution led to $260 million of free cash flow, nearly $200 million of which we used to reduce debt. Once again, we continued our opportunistic share repurchases, accelerating our buybacks during periods when the stock does not reflect the underlying fundamentals. This was highlighted by our activity April through July when our average share repurchase price came in at an 8% discount to the volume weighted average price during that same period. Our return of capital strategy is anchored by our low absolute debt position that provides us with substantial flexibility. With this flexibility, we can pivot between share buybacks or debt reduction depending on market conditions. Year-to-date, we have now reduced total debt by 30%, or $400 million, while also repurchasing $150 million of shares. Let's turn to slide number 10, titled, Ontario has the highest exposure to NYMEX-linked pricing. Justin already highlighted the significant demand that is coming later this year and continuing through the end of this decade. We expect regional pricing will remain volatile. with sustained periods trading at a steep discount to NYMEX due to pipeline constraints and seasonality impacts. This chart highlights NTERRA's peer-leading exposure to NYMEX. While all of our peers forecast realized prices well back of NYMEX due to in-basin exposure, we expect realized prices at a premium to NYMEX. Looking forward, we plan to continue to target maintenance capital with future growth opportunities from regional demand increases. Any future growth would be tied to a direct demand at attractive prices. Given our firm transportation capacity that sells our natural gas at premiums to NYMEX, we are unlikely to spend growth capital for in-basin pricing. Slide number 11 illustrates that over the last 10 years, any regional basis tightening has been short-lived, given robust Appalachian supply and pipeline takeaway constraints. However, if regional demand were to lead to a sustained improvement in basin pricing, we have over 10 years of dry gas drilling inventory where we could accelerate activity to grow volumes in a short timeframe and capture that higher regional pricing. With that, I will now turn the call over to the operating questions.

speaker
Conference Operator
Operator

Thank you. And at this time, we will conduct our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star followed by 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Arun Jayaram with JP Morgan. Please state your question.

speaker
Arun Jayaram
Analyst, JP Morgan

Yeah, good morning, gentlemen. Maybe for Dave, Dave, I wanted to see if you could maybe elaborate on slide six where we're going to see some additions to Gulf Coast LPG export capacity. Your thoughts on the implications for Mont Bellevue pricing and just the international versus Mont Bellevue spread next year and how this will maybe shape some of your marketing efforts.

speaker
Dave Canalongo
Senior Vice President of Liquids Marketing and Transportation, Antero Resources

Yeah, good morning, Arun. You know, we've seen this dynamic play out a few times, as you see. and strong arms.

speaker
Arun Jayaram
Analyst, JP Morgan

Got it, got it. And maybe one for Mike. You guys continue to kind of walk and chew gum in terms of reducing your already low debt balances and buyback stock. Based on your view, Mike and Paul, of the fundamental picture, how do you gauge the mix of maybe buybacks and debt reduction going forward?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Sure. And we came into the year thinking that the first $600 million of the free cash flow is going to be used to reduce debt. Then we saw some market dislocations over the past four or five months, which really you know, the Ontario resources stock price was not reflecting our strong fundamentals. So we took advantage of that and started the buyback early. We'll continue to do that, be opportunistic. We continue to want to reduce debt. We're at $1.1 billion. We'd like to reduce that further, of course. But also, if there's continued dislocations in the stock, we'll continue to buy that. So it's kind of a mix, just depending on market conditions. But we are happy to be able to buy in stock where we have so far this year.

speaker
Arun Jayaram
Analyst, JP Morgan

Great. I'll turn it back.

speaker
Conference Operator
Operator

Your next question comes from John Freeman with Raymond James. Please state your question.

speaker
John Freeman
Analyst, Raymond James

Thanks. Good morning. You know, you all highlighted, you know, the last few years you've been able to meaningfully reduce the maintenance capex while still moving the production higher. Just at a high level, just how we should think about in maybe 2026, do you all have the ability, you know, directionally to keep pushing that maintenance capex lower?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, yes, we do. You know, this year, I think our well costs are down 3% year over year, and we continue to drill them in a quick and complete them in a very quick fashion. That 3% decline, and that's on a per foot basis, is actually on a bit shorter laterals than is typical for us. We're kind of more in the 13,000 foot range this year, but that returns next year more to the 14 and 15,000 foot range. So just assuming all things equal, service costs equal, no more efficiencies, which I don't expect to happen, that would lead to a further 3% decline in well costs next year. So our well costs continue to decline. and continue to drill them faster. And so I think that continues into 26.

speaker
John Freeman
Analyst, Raymond James

That's great. And then my final question, you know, some of your peers this earnings season have talked about kind of the pretty big uplift to cash flow due to the recent tax changes. Are you all able to sort of talk to that?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, we have a similar uplift from that as well. We have a lot of tax attributes, a lot of NOLs from the past, a lot of R&D tax credits. But with the new bill, you're able to expense all the R&D expenses without some limitations. There's better interest expense treatment. It's 30% of EBITDA versus EBIT. Also 100% bonus depreciation on lease and well equipment. So you combine all that with the tax attributes that we carried forward. And we do not expect to pay any material cash taxes for the next three years, so it's pushed out at least until 2028 based on today's commodity prices.

speaker
John Freeman
Analyst, Raymond James

Great. Thanks. Appreciate it.

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Sure, Doug.

speaker
Conference Operator
Operator

Your next question comes from Doug Legate with Wolf Research. Please state your questions.

speaker
Doug Legate
Analyst, Wolfe Research

Good morning, guys. Thanks for having me on the call. Actually, I wonder if I could just follow up on the last questions very quickly. I want to make sure we understand this correctly. And so you can understand the context. One of your large peers talked about 10 years of significant deferred tax. Is it fair to say that you guys are not subject to the AMT, the Corporate Alternative Minimum Tax, which basically means that the treatment is probably a little different, or am I thinking about that the wrong way?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, we're not subject to AMT. We're aware of the treatment. We don't qualify. I think you have to have a three-year average of a billion dollars of GI, so we're not in that bucket. This bill also makes IDCs deductible for AMT purposes, so that further helps. So that may be what they're suggesting, but we are not subject to AMT and do not forecast to be subject to AMT.

speaker
Doug Legate
Analyst, Wolfe Research

That's very helpful. That wasn't actually my primary question. I was just opportunistic given the last one. But my primary question is actually back to the sustaining capital issue. We've watched this from afar for quite some time get better every year. And my question is, Is there anything a mix here that is changing as it relates to what you're targeting as perhaps the macro gets a little better on the gas side as opposed to on the liquid side? And I guess my end goal here is to try and figure out How much is that like a target or a level you can say we think it can get to this level on a sustained basis going forward? Any color on the magnitude of any continued improvement would be really helpful.

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, actually, maintenance capital should continue to improve. Everything else equal. I mentioned the lateral links, but also every year you're at maintenance capital, your decline rate comes down. I think we're in the low 20% now. Every year it ticks down by about 1%. So when you actually look in the out years to maintain this, you're below where we're at. You continue to go lower each year. So that should continue. On target mix, we continue to favor the liquids, 1275. We had some duck dry gas pads or lean gas pads that we completed in late first quarter and early third quarter, which has that mix at least to condensate a bit off. But that should return to kind of in that high, around 10,000 barrels a day, and the Q4 with liquids staying the same. So the mix really just continues to target 1275 BTU, but our maintenance capital continues to take lower, not only from our capital efficiencies, but from longer laterals and also lower declines.

speaker
Doug Legate
Analyst, Wolfe Research

That's a great message, guys. Thanks so much.

speaker
Conference Operator
Operator

Your next question comes from Greta Dreska with Goldman Sachs. Please state your question.

speaker
Greta Dreska
Analyst, Goldman Sachs

Good morning and thank you for taking my questions. I first just wanted to touch on hedging here a little bit given that you leaned into some more callers this quarter. Given the volatility of the forward curve that we've seen in the past couple months, what's your current view on potentially layering in incremental hedges in 2026 or 2027 if the forward curve does give you that opportunity?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, good question. So 26 was unique. Never seen in my career where you could get a two-to-one call skew on a contango curve that's a dollar higher in the front. So we took advantage of that. We had lean gas pads that I just mentioned, but we also have some lean gas pads going forward, so we wanted to lock in. That was kind of the original program. We've added to that in the second quarter, now up to $500 million a day, just opportunistic. It's putting in, you know, the $3.25 downside to $7 upside. So that was attractive. If that dynamic would present itself in 27, that would be something we're interested in. But, you know, we have low debt. We don't have any in-basin price exposure. We have the lowest maintenance capital. So it's not something that's needed. But if you get those type of dynamics in the gas market, it seems prudent to, you know, put some hedges on. You know, we're only 20% hedged. But to have upside to $7, that was a good trade.

speaker
Greta Dreska
Analyst, Goldman Sachs

Great, I appreciate that, Collar. And let's just touch on capital returns a little bit more. As you continue to make progress on deleveraging while also returning cash to shareholders through buybacks, is there a debt level or leverage point at which you would consider ramping up Antero's return of capital maybe towards 75% or so?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, we'd ramp up really on the stock price compared to underlying fundamentals. We're now in a position where we could use all of our free cash flow to do that if that was an opportunity for us. We do want to continue to have a lower debt. We do have a 2030 note that it's $600 million at 5.38. So that's a good piece of paper. We'd like to keep that in our capital structure. So we only really have $500 million of debt that we would pay down right now. So it'll just depend on market conditions, but we're very happy to continue to accelerate our share buyback and actually go higher if there's an opportunity.

speaker
Greta Dreska
Analyst, Goldman Sachs

Great, thank you.

speaker
Conference Operator
Operator

Your next question comes from David Deckelbaum with Cowan. Please state your question.

speaker
David Deckelbaum
Analyst, Cowen

Morning, everyone. Thanks for taking my questions today. Mike, not to belabor the point, but maybe just like if I were to summarize just the returner capital thoughts, just considering the fact that your outstanding notes are all callable and you can redeem some of those 29 notes Should we just think about it as opportunistically every quarter with free cash, you'll just be considering the implied return on paying down debt or sort of redeeming those notes versus buying back shares?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, you know, what we also look at, David, is just on a forward basis, the commodity prices, what's our kind of cash flow outlook, free cash flow outlook, and then compare that to how the valuation is of Entero and if that's an opportunity for us. We'll act on that. So that's really what we think about. We could call those notes in right now just under the credit facility. We have so much room under the facility. It's basically undrawn today. So we could call it in, no problem, continue to buy back. But like I said, we're really just trying to be opportunistic, and it is an opportunity when you see the stock at these levels versus the underlying business.

speaker
David Deckelbaum
Analyst, Cowen

Appreciate that. Maybe if Dave can take this one. I'm just curious, Dave, with the benefits in the second half of this year on C3+, realizations, with the added LPG capacity, is the anticipation that that premium to Bellevue is pretty sustainable into 26, where there'd be perhaps just a greater mix going international?

speaker
Dave Canalongo
Senior Vice President of Liquids Marketing and Transportation, Antero Resources

and international. Appreciate it, guys.

speaker
David Deckelbaum
Analyst, Cowen

Thank you.

speaker
Conference Operator
Operator

Thank you, and just a reminder to ask a question, press star 1. Your next question comes from Kevin McCurdy with Pickering Energy Partners. Please state your question.

speaker
Kevin McCurdy
Analyst, Pickering Energy Partners

Hey, good morning. Production in 2Q was a little gassier compared to the prior quarters, and it looks like the production raise was most related to gas volumes. Do you have any comments on what drove the mix this quarter and any thoughts on how that kind of mix could change throughout the year and into next year?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, so we brought on two duct pads that we've talked about quite a lot over the past conference calls. One of them was brought on at the end of the first quarter, and these were lean gas pads, more in the 1,200 BTU range. And then the second one was brought on in July. So second and third quarter were always expected to be a bit gassier But that reverses, like I mentioned, into the fourth quarter. You get back to that 10,000 barrel day if condensate and liquids continues to increase. So, you know, going forward, all the pads we're bringing on for the remainder of the year are more like the 1,275 BTUs. So that will reverse going into the fourth quarter.

speaker
Kevin McCurdy
Analyst, Pickering Energy Partners

Got it. Appreciate the detail on that. And then as a follow-up on the, you know, on the collars, I mean, that was a very impressive skew on the 26 collars. Does that echo kind of your internal view on gas with the more upside to downside in 26? And just wanted to get your current thoughts on any changes to your medium-term macro view based on how kind of storage and production has trended this summer.

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, I don't know. That made sense to us just because the skew is definitely to the upside. The margins today are razor thin. There is no volumes that are shut in, everything's producing full out, you've had a lack of investment in the gas development over the last two years, rig counts are still subdued, so anything could tip this to the upside. If you have an early winter, if you have any sort of winter next year, you could definitely see the gas going much, much higher. So it did make sense to us, but just locking in 20% and taking advantage of that basically funding your capital program while still maintaining upside to $7 and still maintaining 80% upside exposure with something that appealed to us, lowering our free cash flow break even already the lowest down to $1.75. So we thought we should take advantage of that. And like I mentioned, I've never seen that in my 30-plus year career, that kind of call skew on a contango strip. Yeah. If that would present itself again, I think we'd just continue to act just because it's so attractive, but definitely skewed to the upside.

speaker
Kevin McCurdy
Analyst, Pickering Energy Partners

Appreciate that. Thank you.

speaker
Conference Operator
Operator

Sure. Your next question comes from Leo Mariani with Roth. Please state your question.

speaker
Leo Mariani
Analyst, Roth Capital Markets

Yeah, hi. Obviously, you guys mentioned some of the, you know, in-basin demand projects. Really appreciate that slide there. Obviously, some new projects recently announced by one of your competitors here. Can you maybe provide maybe some color on where Intero is in that, you know, sort of scheme here? I assume that you guys are also talking to new in-basin, you know, sources of demand. So can you kind of give us a bit of an update on kind of where you guys stand there?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, good question. First, we've seen that incremental two BCF a day of natural gas demand just in the last quarter, so that's exciting to us, and that's why we kind of put that slide out that's well ahead of ours and probably everyone's expectation. How does Ontario play a role? I mean, we're so uniquely positioned. Some of the attributes we have, we have the integration between the upstream and midstream one-stop shop there. Also, importantly, that no one's kind of focusing on, but it's a huge attribute for us and kind of sets us apart is we have the water systems and the water that the data centers require and the turbines require, so that is unique to us, and that kind of puts us in a different position. As we always mention, we have the 500,000 acres, you know, decades of core Marcellus inventory right there, HVP legacy production, so able to satisfy that. We have what we think is the best natural gas marketing team in the business. You've got exposure to Justin. They're terrific over there, so they'll be able to capture any opportunities. And we also have the investment-grade balance sheet, which is important for long-term kind of arrangements. But with it being a long-term deal, we're really not attracted to any deals that are based on local pricing. It's going to have to be accretive to our overall store and our overall pricing. Doing deals just at local has never been exciting for us. You know, we would always be cautious around putting hundreds of millions of dollars behind development to fund a local pricing deal. This thought has kind of driven our whole strategy from day one and what's created our firm transportation portfolio strategy today. We put that slide there. Any time there's been local tightening of basis, it's always been met with incremental supply and incremental development because there's really no barriers to entry to feed that local gas and how prolific the Marcellus is. Anything that we would do would have to be NYMEX-based or accretive to our pricing. If we're wrong, And there is attractive local pricing for sustained periods. We'll just grow into it with our 10 plus years of dry gas inventory. We can turn that on quick. Paths are already built. Infrastructure is already there. So we will be a participant. We're uniquely advantaged, like I mentioned, with all those attributes. But it's going to have to be accretive to the story.

speaker
Leo Mariani
Analyst, Roth Capital Markets

Okay. I appreciate that. Just wanted to follow up on that there, though. Are you guys maybe in any somewhat advanced discussions with in-basin demand sources? And do you think there's potential for some, you know, announcements in the near future, call it a matter of months as opposed to years, just trying to see if we can get a little more color around where you guys are in the process?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, we wouldn't put any timing around that. We have set up an internal team. We have a lot of efforts on it, a lot of discussions, but not going to put any timing on that. But to remind you, you know, we have all the firm transport or the vast majority of it on a percentage basis to the Gulf Coast. That's where the demand is going to come, the LNG and the natural gas demand growth over the short to mid-term. We're unique. We have that exposure, but we also are going to have exposure to the local demand from the data center growth. It's not like we need to announce deals around that. We'll be cautious and announcement at the appropriate time and enter in the appropriate deals and not rush to enter into any.

speaker
Leo Mariani
Analyst, Roth Capital Markets

Okay, very helpful on that point. And then just quickly on shareholder returns here, obviously you don't have that much more debt to pay off as you've enumerated, somewhere around $500 million or so. When that's sort of done, are we going to see just a much more meaningful return Return of capital, because obviously at that point, leverage will be so low, and if gas stays healthy, you'll just be building a lot of cash. So should people expect that? And obviously you've done the buyback, but could there be a dividend in place at some point as well?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, I think you're already seeing it. You know, we basically are already at the point where we don't need to reduce that any further. It's more just being driven by market conditions. So we'll continue to do that, and, yeah, we'll continue to buy back in size as As we move forward, having thought about a dividend, that's also going to be market-based and market conditions. Really just been focused on the debt reduction and getting the share count as low as we can.

speaker
Brendan Krueger
Vice President of Finance, Antero Resources

Thank you. Thank you.

speaker
Conference Operator
Operator

Your next question comes from Philip Jungwirth with BMO Capital Markets. Please state your question.

speaker
Philip Jungwirth
Analyst, BMO Capital Markets

Thanks. Good morning. You noted how Cal 26 for the TPG 500 leg has increased to $0.60. That's higher year on year up from your last update. Just with Plaquemines ramping further into next year, wondering if there's a theoretical ceiling you guys think about for how high this premium could get considering the LNG demand poll and where global gas prices sit and anything to keep in mind as far as incremental supply going to this price point?

speaker
Justin Fowler
Senior Vice President of Natural Gas Marketing, Antero Resources

Yeah, good morning, Phillip. Justin Fowler here. As we look out at the next couple of years, we definitely think that, you know, Plaquemine plus the local power gin could continue to pull that basis up. We saw that basis accelerate so quickly, and when we think about our other delivery points, for example, Columbia Gulf Onshore, which is also correlated with Plaquemine LNG, we've already seen Those basis locations at CTT Onshore and our southeast start to trade a premium as we look out in the forward. So if you just look at history there and understand that there's only a finite amount of gas that can get to Plaquemine and then the other LNG facilities that we can, again, highly correlate to Anteros, to BCF of FP delivery to the Gulf Coast. We definitely think that there could be additional upward movement as these new projects come on with new liquefaction capacity and you just continue to hear all the deals out of Europe, Asia on long-term. LNG contracts. So we do think, yes, it could support that. You know, when you think about the Gulf Coast and the New York City gates, for example, you start seeing this high demand in certain specific locations, and it can drive those specific basis points much higher versus Henry Hub if you think about it.

speaker
Philip Jungwirth
Analyst, BMO Capital Markets

know as a city gate type equivalent so yes um definitely thinking there could be some additional upside here okay great and then on appalachian differential still 90 cents back in in future years despite a bullish in base and demand outlook uh we have seen a lot of consolidation versus the last 10 years i know you guys do some of the best work around remaining inventory uh not just for entero but the overall basin so Just wondering if you think it could be different this time in terms of the industry supply response, just given we do have a lot fewer players and generally less runway as far as core inventory.

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, it could be. Good point. We'll continue to see what transpires. Always seems to be Appalachian supply to meet any local demand. But it's a fair point of yours, and if that occurs, we're just very well positioned. Like I said, our original purchase of The Marcellus was really in this dry gas area window and it's all HPP and we have over 10 years plus drilling locations of the highest quality. Hopefully you're right, but we're not going to plan on that.

speaker
Conference Operator
Operator

Thanks. Your next question comes from Betty Jung with Barclays. Please state your question.

speaker
Betty Jung
Analyst, Barclays

Good morning. Thank you for taking my question. I have a follow-up to Paul. You commented earlier about pricing on the power supply deal, that anything would need to be NIMAX-based. Is there an appetite from the customer standpoint to sign a NIMAX-linked deal if, from our understanding, the market dynamic for Gulf Coast is very different than local, where they source that gas? So just wondering, How competitive is that pricing discussion and appetite for a 9-max length deal?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

We saw how much demand, like we mentioned, it's over 5 BCF a day. So, ultimately, they're going to have to secure their supply, and we're the second largest producer in the basin with all those attributes that I talked about, and I think only there's only two investment-grade counterparties as well and only two with upstream and midstream together. So if they want to secure the supply and be with that type of producer, obviously we would have leverage because all of our other pricing is on NYMEX and really don't need to sell anything at a local basis.

speaker
Betty Jung
Analyst, Barclays

Got it. Thanks. And would you mind talking a bit about the power dynamic going on in the West Virginia area just because, We have seen all the deals happening in Pennsylvania by their sender's legislature that's being signed that's supporting power development in West Virginia as well. So does that position you guys specifically for the opportunities arising in the region?

speaker
Michael Kennedy
Chief Financial Officer, Antero Resources

Yeah, they just passed that micro-gid bill in West Virginia to allow for more ease of development around these data centers and the So I was in direct response to this, so they are trying to position West Virginia favorably, and I think we are in a favorable position.

speaker
Betty Jung
Analyst, Barclays

Okay, got it. Thanks. Thank you.

speaker
Conference Operator
Operator

Thank you, and there are no further questions at this time. I'll hand it back to Brendan Krueger for closing remarks.

speaker
Brendan Krueger
Vice President of Finance, Antero Resources

Yes, thank you for joining us on today's call. Please reach out with any further questions. Thank you.

speaker
Conference Operator
Operator

This concludes today's conference. All parties may disconnect. Have a good day.

Disclaimer

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Q2AR 2025

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