Antero Resources (AR) 27 Oct 222022 Q3 Earnings call transcript

Greetings, and welcome to Antero Resources Third Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brendan Krueger, Vice President of Finance. Thank you.

You may begin.

operator. you, Thank joining conference for Antero's quarter third Thank us investor call. XXXX you for a through for We'll operating minutes few spend going then open highlights, the we'll it up Q&A. and and financial to direct www.anteroresources.com, presentation at have that I would be we also you the during our where earnings homepage separate a reviewed to provided will website of call call. like today's financial contain may call measures. certain non-GAAP Today's financial disclosures the to refer our GAAP Please most such to including reconciliations release important earnings measures, regarding for comparable measures. press

on CFO; Senior me and Michael of Rady, Transportation. Senior today Chairman, CEO Paul and Joining Marketing Cannelongo, Marketing the are and Vice call and Gas Liquids President Transportation; Dave President; Vice Kennedy, and Fowler, of Justin President

will some We off call Mike. start today's with for initial comments

Brendan. you, Thank

top between and return percentages is return improve our peers who this sheets. several consistent more that balance of years was prepared our sheet continue thought cash on to returning to capital return balanced #X taking of The best-in-class we our the our to an their distinction free of we debt efforts a capital and year the ago, deliver cash by Slide performance discussing cash our many by back our having debt will into flow so important significant repeatable important position of stated to slide expect reduction the to order start in balance shareholders. progress you on from our quarter reduction approach remarks, illustrates it while compared higher our consistency as in financial of debt reducing and continue results shareholders. summarizes Antero's goals This highlighted quarterly need get to we a on the now we Antero because each to focusing to through year-to-date increasing can return also aggressively we began Before of are program. in

slide, year. of total our beginning Since we continue of you billion. brings shares more have of to program this of top million of during year-to-date months slide, of billion bottom our a to reduction can This $X XXXX, now by third the total debt $X.X fourth million on in the see the quarter $XXX reduction reduce from end alone. reduced billion this to for $X.X debt million At nearly $XXX at in purchased billion quarter. quarter we aggressively $X.X than the nine debt, including you we have less than debt As the see the XX.X first of the the the

Just in ability have share yesterday, Antero's $X turn highlights bringing Paul increase billion. program, and the our to continued our President, the amount a to repurchase shares of predictability confidence billion significant to our the we Chairman, the XXXX. in a call Rady. total announced and CEO of $X program that, now business in This will increase With repurchase we over I

to premium-priced costs. breakeven strong a sheet, access position utilizing firm Also core large product This just markets business Mike. important model inventory to incorporates Mike with Thanks, balance mix results that portfolio. scale is delivering discussed our low transportation with diverse predictable a a and repeatable

is that Mcf. by the based to they producers of This turn X below Low per Slide $X Appalachia Enverus ranks inventory cost Inventory. Largest analysis. breakeven # have Let's Cost a with titled chart It on amount recent Marcellus

our continue Antero to basin, inventory locations drive see, amount has can consistent which will than into the of more you the future. As well performance XXX greatest future low-cost the in

Now depth. to discuss expand inventory Antero's on predictable model, our let's business

with acquisitions third million have our emphasis location. lease during acquisitions. years the to industry, the private acreage we've public and close this focus on increase alone. corporate over Over of last footprint spending Acquisitions, gas organic see $X Land across several These oil we on particular Turning the quarter maintain and core acquisitions were large in our couple we to larger Slide #X an continued titled transactions seen Organic that a per both including time, of to capital

dilute our As we opposed to equity, preferred see to a well our our in up we results. continue lever Virginia, stock pick position tailored to on larger acreage liquids-rich more the create overhang balance transactions packages that can and sheet where West large have smaller, tremendous within core

land, we per portion XX million quarter, add which on of location. an used drilling than spent $XX As additional locations example, to $X was a the less during million at

Antero's cost of XXXX, of essentially lessens months approximately average M&A million We large adds at our plan of than the per strategy, $X added believe XX has first layer year. capital this offsetting drilling XX leasing the program maintenance inventory extending This locations During an our wells cost-efficient less XX approach organic leasing another to per that program most any average make the nine assumes an to to need transaction. it position. organic is core a predictability of business approach and our to location

gas they the to turn on directly Senior President Vice and our current Antero, Transportation, I'm how over touch natural fundamentals it Gas of Justin to and to favor Fowler. Now Marketing going

transportation Thanks, demonstrates than Paul. Antero's business firm Nothing predictable more portfolio. our

to which X.X capacity Slide slide To basis to constraints owns to titled Antero's regional day firm wide transport per This Exposure basis Mcf Antero midline quarter wide saw realized Premium transportation differentials third again the ability Bcf in LNG Markets. This the Coast the pitfalls despite industry. terminal, allowed avoid of Antero's per to highlights turn #X during of quarter. we NYMEX Point the represents of into the the discounts, and once Antero Let's Gulf gas unique by production. Peer-Leading U.S. to Henry fairway Antero's Hub $X.XX premium Cove natural a XX% approximately LNG the achieve which firm total

outlets be capacity do growth was Permian expected XX highlighted basis reaching to Haynesville or until In XXXX, negative we from differentials cash transport and completed. expect discounts when firm regional the price pipeline is in quarter Basin nine constraints. The price, it to as in position price years. meaningful important remain Looking capacity. of capacity Permian, to Appalachia, deeper the regional of Waha in the the This lack next Permian supply the week through a Basin lowest we incremental volatility to markets the over absolute the to the basis basis with improvement is the Having pipeline similar in this ahead expect third Haynesville XXXX the two wide months pipeline constrained due awaits incremental not pipeline capacity blowouts. is avoiding

our years. see by Appalachian pricing sell The Antero Conversely, into local has that sell deteriorated its many peers differential access the into primary that negative as can important improvement to as premium-priced you slide of their have equally Henry hubs that However, last $X.XX approximately having $X gas to illustrates that seen below the basis gas all Hub. few hubs. the NYMEX the over

terminals sell As trains of positive the completed, additional larger and see basis that gas majority LNG expect premiums we hubs our and larger where in will are we the pricing NYMEX.

an link Antero's in more will supply, U. environment With This increase S. the overall dramatically position will these to on directly price expected hubs further believe provide exports, LNG as than of increase markets. and relative percentage they we NYMEX support absolute international strategic see premium to today LNG prices. both accessing

growth President with the constraints infrastructure that a Historically, equipment tightness storage to will continue suggests that going gas low our we along labor leading prices outlook With arbitrage switching LNG for forward. for comments. exports wide ahead, and the challenging. will will winter natural and for Liquids of believe I Transportation, natural this global inability his make Looking gas coal to spread over Senior supports and remain Vice at Dave positive utilization turn Marketing it above our maximum that, Cannelongo to

Justin. Thanks,

the of to prices worldwide. two inflation pricing U.S. and immediately the NGL chain prices weighs China's policy, supply GDP over few highs invasion levels oil the the growth macroeconomic drop liquids months, currency impacting as quarters. against has Over risk. concerns Ukraine, CX+ volatile mirrored supply retreated and market have largely geopolitical uncertainty seen values the bottlenecks this of past spring have Oil due and been following high past continued in elevated COVID-Zero the from

inventories #X third Market average the that five-year with now Looking line in titled at the during propane levels. injections sizable are specifically, Slide and propane Propane saw quarter shows Fundamentals

will winter average. demand of we off builds of leveled supply the days the season. rate start stock has that reasonably five-year remains the However, And of below note in are importantly, entering we as XX%

to Turning LPG #X Production Export. versus Slide titled Global NGL

for with environment downside rest over the risks supply in graph of to highlights growth Looking U.S. NGL XXXX, while that declining compared stagnant in forecast anticipating period production with further same growing additional from production from the year-over-year rest cuts. of a side expected U.S. supply the OPEC+ XXXX on world the show world. the the X% NGL from lower on Industry the left X% the decline production to

the #X, quarter season in third in of export shows a picture Continuing on injection right during and propane. and graph the for relative the that in and market on supply NGLs the normalization for growth year observed and Taken weakness expected demand the the NGL this together, of second Slide the levels U.S. anticipated bullish rest the decline pricing. the quarter fueled of world, strong

globally. return anticipate quarters eventually next a more healthier we the years over export a return to However, to environment we demand and as volumes several normalized

is levels important and Slide on will elevated that right-hand Pressure markets. the to growth promising the strong trend York is well and Unresolved China's normalized logistical somewhat that severe today. still margins. show COVID-Zero petrochemical slide zero above some supply which constraints Supply economic the normalizing. such was indicates coming also illustrates back global Fed's raw nationwide at been reducing Albeit It is or as markets graph towards production This and for prices. restrictions demand being data a is NGL lower the on growth getting value average this months levels supply that the There Global XX% are so deviations pressure putting have Turning petrochemical NGL for over was volumes in congestion eventually pressure the that is and that of demand #X this seen volumes Mike. standard macroeconomic a impact The consumers is supply levels. increasing curtailed Index petrochemical With These XXXX New lately disconnects The the for experienced. improve norms. to suggests longer metric GDP positive our be industry side resulted historical Antero to graph this side, from that lifted. much many shows net chains metric positive that, unhedged, GDP in and quarters note inefficiencies left has chain tailwinds being creating how With the of bottlenecks, are the near-term year-over-year to products, all due are challenges Chain lockdowns, the the term. chain is our to over it of Recent quarterly of value Potentially data currently of prevented signs NGL shows are its average finished alleviated, substantially. policy. other to NGL exported will this positioned the showing that NGL over a for representative on and benefit over the as volume I NGL of turn production supply the demand materials likely chain level, which from back of

Thanks, Dave.

to Free the in history. Antero's strongest Cash position in company Slide financial turn titled #XX Flow Antero Profile. Let's

flow, approximately $XXX $XXX which mentioned by stock, generated During in to million million remarks. opening we cash purchase was of used $XXX and the debt over in to I free as my quarter, million reduce third

during completion greater offer tender than of our million third be the free of the targeting the we Following now used repurchase program. quarter, through cash are flow XX% share to $XXX

XXXX. will cash taxes to on we to the on flow. shareholders expected flow cash commodity $X generate the similar strip cash enable in by Based to chart, to $XX paid free XXXX also do of off billion over we development substantial our in be prices with pay hedges to us today's shown plan XXXX. debt. XXXX, cash returning cash continuing while of XXXX roll free This capital flow being backwardated X, majority first despite taxes expect expect not to As continue as just prices, to the down million January our pay free is Antero's In vast

Turning to Slide #XX.

discuss initiatives. ESG the on progress Let's our continued

steps significant climate targets. XXXX took achieving we XXXX, our During towards

initial We leak XXXX have our surpassing of XX% reduction. by now our a rate methane loss reduced XX%, target

X on Our been GHG and by target emissions well intensity both reduced to XX%, And by Scope we operational X Scope Scope has initial net reduction with remain X initiatives. zero of of a ahead GHG be XXXX date on by XX%. XX% track lastly, our driven to XXXX,

intensity can the see peers. Slide lowest #XX, is for ranked #X our to GHG that Antero you Turning among

to we the ESG I While With proud now are call to maintaining we years to accomplishments our peer-leading these date, for that, ahead. questions. turn forward operator of over look incredibly will the in position the

first Our comes Dingmann Neal with question Instructions] from line [Operator the Truist. of

As the Northeast. you've job Haynesville referenced, in accurately good in the think, you seen done as I we've the constraints a all as well very

wondering I'm would So be at guiding differentials we higher particularly, 'XX? turn that say maybe you're higher guess, just -- to to it would expecting as into to you it X, or safe looking safe Slide all be I are say differentials

similar differentials what but Higher for industry; be we very the to in us, 'XX. it experienced will for

see would point would any change has same? good are we guess you quite I think Yes, just obviously Or more thinking in that's improvement same, was which takeaway? based be be is all I for the what right. you for could exactly you the an Or on all. of been you there at, getting your

of more be It the Yes, same. a premium. will

year will similar be this in third the the in premium, a was think quarter. $X.XX quarter, I it it fourth or

a gas, Next I would NYMEX. to assume $X.XX on more premium than year $X

more you Great. the maybe really or buybacks same? about job high obviously if for type of the returns And with have now obviously, When is quite time, all guys back this forward. you still amount just it I to embracing done it 'XX? have your up, good into E&Ps -- that -- thoughts Paul, you a then, production a material been enough with at new any accelerating gas maybe continues Or environment given accurately of look going focus move been is there described having market's the this some buyback the fantastic the this potential, inventory, in

we're that would our come yes, say along to level fractionation, that to, Neal, a few in that to can quite right capital maintenance than say, of more have do you're pretty more we a go Yes, impressive I line. but that the the very same, processing, we inventory higher go all committed creates commitments,

and we're paydowns and path to the really at debt happy share clear have level a So buybacks. this

the So near that's for pretty much our term. strategy

Our next the comes of Benchmark. from question with Chandra line Subhash

Slide on cash Yes, type here And some talk we've ask flow next with there some the had free detail Maybe for outlook. Any or color peers XX% XX. inflation for color CapEx? there some year. about

any variable? on items OpEx, might So And that? on thoughts if of which have you then the you OpEx consider versus sticky

Thanks, see the don't Subhash. We XX% level.

the 'XX XX% based we variable Really, some on think around And on in natural do have we 'XX. I gas components. more prices. OpEx, level for versus see then inflation they're the

of our needed on fuel it pipe transport the long-haul variable costs. compress Just a the to and gas little bit adds then

off costs will production into we up going saw the but that Costs to taxes back in $X and quarter. think Those the GP&T approximately the you when retreat I quarter at come saw $X, the level. to in went up quarter. those second a $X.XX $X level fourth to So in third were from gas $X.XX the

seems $X.XX about dollar of it prices. every natural component gas based would So there variable be on

Okay. Excellent. uses on free And then cash flow. of

I stock in repurchase your back feel buying cash, a companies, that they're terms the I do you do you debt level about and have. of But think, better have express to you how stockpiling for But formula wording looking guess, cash Some any a ambitions. at lack of do then think that? still need term. finally, in But you've some guys the even, expressed formula, of

down what free buy use our the in then debt No. flow are around stockpile pay going take shares. not or rather flow by we cash look to and of Every We our free a program back shares. estimates paying cash back design be buying try to quarter, at down to We'd it that maximizing use cash. debt first

down of reversed. that the we're Now those billion $X.X debt,

we shares as we those then open debt can reduction to well. it's and on Now buying back towards the execute more majority whatever in the find going try of transactions market,

the JPMorgan. Our line Jayaram comes with next question from Arun of

soft if you no kind land want maybe taxes, just or year? general volume comments get expecting spend next I any maybe commentary I for heard on with your on of cash wondering provide could XXXX. to on now We your thoughts on CapEx, you. Mike, start thoughts was thoughts guidance and but

year. we think so first not terrific those locations, I this and Yes, right But versus be we've the I'm year. has But expecting which we'll next think we hopefully, talked could have about successful been of XX% capital, we land inflation great been probably spend thought now, successful 'XX quite repeat won't then Probably, much a year, this land, more and we this adding lower. that. as year, than

sort And maintenance-type be Got program? would that it. of largely

Yes, three maintenance capital, two crews. completion rigs,

questions. bullets hedge to your I did deck of use in hedging terms portfolio on But of on you a hate my one Mike, my post last night. slide

give a and on the accounting just I should So the how ORRI? to sense for -- VPPs how be the we wanted the hedges of us

they on for transactions. obviously XXXX, were those the Those entered put at that of into and timeframe length hedges

So 'XX and the ORRI VPP the goes or yes, through through goes 'XX. 'XX --

them hedges but they are hedges So on place. account, put Those our we in consolidate in results. their

model should should you you those in and include our forward, the those going estimates drive hedges when get estimates. estimates our hedges you So

Choudhary Our next comes with Goldman question from Sachs. Umang line the of

XXXX to what cost My first sticky question to as sticky all cost, how as the cost relates next you portion on more prices gathering, be kind up I on structure and the can we a give will which numbers? CPI costs pieces then should year, you CPI? processing on diesel prices, increase on linked, moving variable that is And and comment wanted cash given to cash follow of about gas think -- the read-through of especially cost. cost costs guess, structure versus transportation I believe a was do to it us

Yes.

in more I $XX about of to the transport So do have the But West to I Virginia. we the that's facility come as on our cash it because think they'll America then it's when down And NGLs. around the about and $X X% production versus compression it's say, State Sherwood comes what well. similar realized in North fourth consumer Smithburg costs fuel and to are quarter of we'll taxes and electricity will processing price, gas be X% 'XX, in the and in and variable, would see of largest X.X% costs then greatest variable

So well. we to have costs exposure as do there electricity

So you that back a add gas would it it's variable in dollar means $X.XX starting we're levels, a if it cost should should gas come 'XX, natural unhedged goes prices. it up that hope about down lower prices said, commodity come because January be at and all would up, be down here QX. like in just go due these to to X, starting I and higher more I it continue But elevated prices. for per gas terrific to QX level of but natural

in to XX the understand in XXXX, the be next cadence moving then to like trying the spending XX right, really tails XXXX, the quarter. the understand I'm expect given Got activity following or your in trying take this your activity fourth change just we year when year? production comes helpful. and That's production levels just as to to it. accelerating about Should all to you think And it the lower pieces similar path will to your

in a percent level. contribute I have and QX, of similar growth going pad have that's accelerated come on. Yes, to really There QX was into to production late wells in the XXXX. these December we'll growth same a to and of then amount couple in but continue just

it's to a we but flat maintenance it forward. So level, up capital going call

MacCurdy from next Our line with Partners. Pickering Kevin comes Energy question of the

bit first it of I quarter little Just in a next you fourth that. quarter on the wells the follow year. pull wondered completing could those instead about decision add into up your if to talk activity a of and that forward

December rigs had in Well, moving development completion the two made have noted and agreements forward, year, longer-term complete sense to our November wells sign completion. the the in with just then we around And rig to our Yes. to and that order and doing it completion is normally to drill and crews. keep and we've throughout program not three what the crew typical continue holiday

terrific So just seems new 'XX entirety contracts of advantage up that's like competitive with running. wells continue with And our for very our to and it program, crew our are our to on, our efficient, and wells the 'XX, get a completion development and have of Midstream's contracts service and that particular rig it's us. ability to with signed them for Antero

as continue efficiently enjoy on bring So to that, and continue we possible. as we'll to wells

be have right, than bit if otherwise been? that implies production So a will reading that XXXX higher kind that I'm of little would into it

getting would Pad production. in extra 'XX production or on than be production. come have But higher should 'XX month yes, January a of maybe

any amount limitations heading heading Great. each your And $XXX similar of buybacks liquidity on as quarter kind expect that follow-up, million do a a you forwards? forward? can roughly you do Or that

cash free the back on will flow, buying the of be but free cash flow the depend shares. majority Will

actually is stock Our liquid. very

no it around us there back. So liquidity are constraints buying

next question Deckelbaum line from with Our Cowen. of the David comes

a of of Should ethane modeling to we I in Shell any I the quick quarter? fourth the expecting be in how commissioning Cracker? wanted on regards many ask just incremental sort the guess, barrels confirmation. Could you're guidance you to just give

that commissioning the ethane approach right for quarter, we're going it is fourth the looks fairly day XX,XXX well. should barrels have should like in -- of third barrels now, a We Yes, quarter. XX,XXX the around

And Perfect, then Mike. revisit it. Okay. just to

that say it's debt but couple years? is reduction kind call your earliest $X with debt over or think done where issuance XXXX, given in to guess I your next debt now the it is you billion, you're goals of at next fair that roughly I of can

liquid. open we've market, down or be of because even it's to debt. very to try to majority they're majority at the the we'll But of continue available the paid if transact not the vast Obviously, opportunistic, looking David, it really

continue ability if any is there's are the weighted the But see buying back our going forward towards more really those thoughts that we'll limited, us. opportunities to for but to get it's going So be to in shares.

difficult this of maybe you do those bit is a capital additional a question on a use or view picking land at some looked your spend of then you year, a own valuation And But shares? of of better answer. locations to some the basis more this repurchasing when up little

Part of the land, land stick. -- each

think I prices today's million it $XX at looked we were at to $XX million.

all if $X location to million of you're our we spending So costs net of drilling development per generates the million after do, it heart can and $XX in and $XX the million that’s best probably area. it's

efficient as and it's we the So Midstream we capital there. spend as can possible have all

We the have transport. all the infrastructure, all

We that just and inventory. it processing have lengthens the

to we best we So continue the That's that. spend. prioritize can capital

it. that 'XX? replicate I you necessarily in guess able spend be Hence, the suggestion wouldn't Got to

yes. -- we can That's achieve hopefully, we'll but guide doubt I 'XX that, results. to

Our question follow-up question is Chandra. a next from Subhash

Yes. Two questions.

maybe cash what on scale you strip on of know of commentary. taxes 'XX. First but expect the it's do out cash there, I sort based in tax

all full close your some other a -- mean, but you deduct expense stock capital some comes it have full, you It that XX%. and I to deductions, comes comp to deduct close and can obviously

Got it.

ask gross or consumption? Shell were Those commentary. Okay. gross clarification the on And sales should a

No. Net ethane us. for

XX,XXX. net. You're about barrels to quarter XX,XXX Fourth going talking and it’s

Net.

Okay.

call like closing hand back the are queue. There to the to remarks. in questions for no management I'd further

day. joining Please reach Yes. Thank today's you good any out a call. Have further for with questions.

today's participation. you your conclude teleconference. does this gentlemen, for Thank and Ladies

a may and You day. at this time, have your wonderful lines disconnect