Antero Resources Corporation · NYSE:AR
Antero Resources — Investor Presentation (June 2015)
59 slides from Antero Resources's investor presentation, Jun 10, 2015
Slide 1: Company Overview June 2015
Company Overview June 2015
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this presentation that addre
Slide 3: Changes since May 2015 presentation
2 changes since May 2015 presentation Updated AR slide showing 2015 production growth forecast vs. large capitalization E&P industry Slide 6 Updated AR consolidated enterprise value and AM equity value as of 5/29/2015 Slide 11 Updated catalysts slide highlighting receipt of private letter ruling (PL
Slide 4: Leadership in Appalachian basin
Leadership in Appalachian basin 3 Top Producers in Appalachia (Net MMcfe/d) – 1Q 2015(1)(2) Top 12 U.S. Natural Gas Producers (Net MMcf/d) – 1Q 2015(1) Appalachian Producers by Proved Reserves (Bcfe) – YE 2014(1)(2) Appalachian Producers by Core Net Acres (000’s) – YE 2014(4)(5) Based on company fil
Slide 5: Premier Appalachian E&P Company Run by Co-Founders
4 Most Active Operator in Appalachia Largest Firm Transport and Processing Portfolio in Appalachia Largest Gas Hedge Position in U.S. E&P + Strong Financial Liquidity Highest Growth Large Cap E&P Largest Core Liquids-Rich Position in Appalachia Highest Realizations and Margins Among Large Cap Appala
Slide 6: Drilling – Most active operator in Appalachia
Note: 2014 SEC prices were $4.07/MMBtu for natural gas and $81.48/Bbl for oil on a weighted average Appalachian index basis. All net acres allocated to the WV/PA Utica Shale Dry Gas and Upper Devonian Shale are included among the net acres allocated to the Marcellus Shale as they are stacked pay for
Slide 7: Growth – Highest growth large cap E&P
6 Appalachian Peers Source: Represents median of Wall Street research estimates for 2015E production growth vs. 2014 actual production. Includes all North American E&P companies with a market capitalization greater than $9.0 billion. Based on publicly announced 2015 production growth target of 40%+.
Slide 8: Growth – Debt-adjusted per share production
Growth – Debt-adjusted per share Production 7 Based on the strength of its drilling program, and focus on the highly prolific Marcellus and Utica Shale core areas, Antero has delivered 51% compounded annual growth in net debt-adjusted production per share since its IPO in October 2013 Antero’s net d
Slide 9: Growth – Strong track record
Assumes ethane rejection. Based on Company guidance. 8 AVERAGE NET DAILY PRODUCTION (MMcfe/d) 117% CAGR Growth – Strong track record OPERATED GROSS WELLS COMPLETED 40%+ Growth Guidance NET PROVED RESERVES (Bcfe) AVERAGE NET DAILY LIQUIDS PRODUCTION (Bbl/d) + (2) (2) 0 10,000 20,000 30,000 40,000 201
Slide 10: Liquids-rich – Largest core position
9 Liquids-rich – Largest core position Source: Core outlines and peer net acreage positions based on investor presentations, news releases and 10-K/10-Qs. Rig information per RigData as of 3/27/2015. Based on company filings and presentations. Peer group includes AEP, CHK, CNX, COG, CVX, EQT, NBL, R
Slide 11: Well economics – low break-even price economics
Well economics – low break-even price economics North American Gas Resource Play Breakeven Natural Gas Price(3) 10 North American Breakeven Oil Prices ($/Bbl)(1) 2015 NYMEX Strip: $3.01/MMBtu(2) 2015 WTI Strip: $56.26/Bbl(2) Marcellus and Utica undeveloped 3P rich-gas locations have the lowest break
Slide 12: Midstream – MLP highlights substantial value in midstream business
Midstream – mlp (NYSE: AM) highlights substantial value in midstream business AR enterprise value excludes AM minority interest and cash. Market values as of 5/29/2015. Based on 276.8 million AR shares outstanding and 151.9 million AM units outstanding. 11 Antero Resources Corporation (NYSE: AR) $15
Slide 13: Takeaway – Largest firm transportation and processing portfolio in Appalachia
Takeaway – Largest Firm transportation and processing portfolio in appalachia Odebrecht / Braskem 30 MBbl/d Commitment Ascent Cracker (Pending Final Investment Decision) Antero Long Term Firm Processing & Takeaway Position (2018) – Accessing Favorable Markets Mariner East II 62 MBbl/d Commitment Mar
Slide 14: Takeaway – NGL Marketing Geographically Diverse
Takeaway – NGL Marketing Geographically Diverse As an anchor shipper on Mariner East II, Antero has the right to expand its NGL commitment with notice to operator. 2015 NGL production assumes ethane rejection. 13 (2) Mariner East II 61,500 Bbl/d AR Commitment(1) 4Q 2016 In-Service MarkWest currently
Slide 15: Hedging – Integral to business model
14 hedging – Integral to business model 14 2Q 2015 – 4Q 2020 hedge gains based on current mark-to-market hedge gains. Based on NYMEX strip as of 3/31/2015. Hedging is a key component of Antero’s business model due to its large, repeatable drilling inventory Antero has realized $1.1 billion of gains
Slide 16: Liquidity – strong financial liquidity and debt term structure
15 Liquidity – strong financial liquidity and debt term structure 15 AR LIQUIDITY POSITION ($MM) AM LIQUIDITY POSITION ($MM) Over $3.9 billion of combined AR and AM financial liquidity as of 3/31/2015 No leverage covenant in AR bank facility, only interest coverage and working capital covenants Seni
Slide 17: Realizations by region and peer comparison
Region 1Q 2015 % Sales Average NYMEX Price Average Differential(2) Average BTU Upgrade Hedge Effect Average 1Q 2015 Realized Gas Price(3) NYMEX Premium/ Discount TCO 42% $2.98 $(0.22) $0.29 $0.14 $3.19 $0.21 Dom South/TETCO 36% $2.98 $(1.06) $0.20 $0.73 $2.85 $(0.13) Gulf Coast(1) 12% $2.98 $0.06 $0
Slide 18: Realizations – realized price road map
($/Mcf) 2015E NYMEX Strip Price(1) $3.09 Basis Differential to NYMEX(1) $(0.46) BTU Upgrade(6) $0.26 Estimated Realized Hedge Gains $1.35 Realized Gas Price with Hedges $4.24 Premium to NYMEX +$1.15 Liquids Impact +$0.39 Premium to NYMEX w/ Liquids +$1.54 Realized Gas-Equivalent Price $4.63 Represen
Slide 19: Realizations – NGL realizations and propane hedges
realizations – NGL Realizations and Propane Hedges 18 Based on 2015 NGL and WTI strip prices as of 6/5/2015, net of local transportation. In ethane rejection, a minimal amount of ethane is produced and sold as propane. 2015 NGL% of WTI of 33% represents midpoint of updated 2015 guidance. As of 6/5/2
Slide 20: Catalysts
Downstream LNG and NGL Sales Production and Cash Flow Growth 19 Antero has 175,000 net acres in WV and PA prospective for Utica dry gas – adjacent to current industry activity with highly encouraging initial results catalysts 40%+ production growth targeted for 2015 with 94% hedged at $4.42/MMBtu; c
Slide 21: Sector Positioning
abtctero SECTOR POSITIONING
Slide 22: Marcellus and Utica well economics
MARCELLUS WELL ECONOMICS(1) Marcellus Shale – SW Liquids-Rich Marcellus Shale – SW Dry Gas Utica Shale – Rich Gas Marcellus Shale – Super-Rich Utica Shale – Condensate Multi-Year Drilling Inventory Supports Low Risk, High Return Growth Profile Large 3P Drilling Inventory of High Return Projects(2) P
Slide 23: Significant demand growth expected for U.S. natural gas
20 BCF/D of Incremental gas Demand by 2020 Significant demand growth expected for U.S. natural gas More than 65% of the 20 Bcf/d in incremental gas demand forecast by 2020 is expected to be generated from exports: LNG: 9.5 Bcf/d (~48%) Mexico/Canada: 3.5 Bcf/d (~18%) Of the 9.5 Bcf/d of expected inc
Slide 24: LNG Exports by Project – Expected Start Up
LNG Exports by Project – Expected Start UP Assuming 9.5 Bcf/d of LNG exports by 2020, the U.S. will be the world’s 3rd largest LNG exporter behind Qatar and Australia 7.7 Bcf/d (81%) of the 9.5 Bcf/d of expected LNG exports have secured US DOE non-FTA (Free Trade Agreement) permit approval 6.7 Bcf/d
Slide 25: Asset Overview
Asset Overview 24
Slide 26: World Class Marcellus Shale Development
World Class Marcellus shale Development Project 100% operated Operating 7 drilling rigs including 2 intermediate rigs 401,000 net acres in Southwestern Core (74% includes processable rich gas assuming an 1100 Btu cutoff) 50% HBP with additional 29% not expiring for 5+ years 400 horizontal wells comp
Slide 27: Prolific, predictable results across Marcellus position
Antero’s Marcellus well performance has continued to improve over time with a tight statistical range of results across its entire acreage position Prolific Predictable Results across entire Marcellus Position 26 Marcellus PDP Locations (As of 12/31/14) (1) Source: IHS; 3rd party producing wells inc
Slide 28: Increasing recoveries and low variance in Marcellus
Antero’s Marcellus average 30-day rates have increased by 63% over the past two years as the Company increased per well lateral lengths by 18% and shortened stage lengths by 48% Increasing recoveries and low variance in marcellus Processed rates converting C3+ NGLs and condensate at 6:1. Ethane reje
Slide 29: Marcellus well performance improvements
28 Marcellus well performance improvements Increasing recoveries and efficiencies, through longer laterals, shorter stage lengths and faster drilling SSL completions drove a 21% decline in development costs in 2014 while lower service costs are expected to drive further development cost reductions i
Slide 30: Marcellus ROR% and gas price sensitivity
Marcellus ROR% and gas price sensitivity 29 Assumes 12/31/2014 strip pricing, market differentials and relevant transportation cost; 9,000’ lateral. Large portfolio of Highly-Rich Gas/Condensate to Dry Gas locations Focused on drilling highly economic rich gas locations – rig symbols represent curre
Slide 31: Utica Shale development project
Note: Antero acreage position reflects townships in which greater than 3,000 net acres are held. Antero 30-day rates in ethane rejection. 30-day rate reflects restricted choke regime. 100% operated Operating 4 drilling rigs 149,000 net acres in the core rich gas/ condensate window (72% includes proc
Slide 32: Utica well performance improvements
31 utica well performance improvements Increasing recoveries and efficiencies through longer laterals, shorter stage lengths and faster drilling Lower service costs and focus on liquids-rich locations expected to drive development cost reductions in 2015 2015 reflects Antero guidance per 1/20/2015 p
Slide 33: Utica ROR% and gas price sensitivity
utica ROR% and gas price sensitivity 32 NYMEX Flat Price Sensitivity(1) 94 Locations ROR% at Flat 2015-2024 Strip Price Condensate: 14% Highly-Rich Gas/Condensate: 44% Highly-Rich Gas: 64% Rich Gas: 51% Dry Gas: 58% Large portfolio of Condensate to Dry Gas locations Focused on drilling highly econom
Slide 34: Large Utica shale dry gas position
Large Utica shale dry gas position 33 Antero has 217,000 net acres of exposure to Utica dry gas play 42,000 net acres in Ohio with net 3P reserves of 2.4 Tcf as of 12/31/2014 175,000 net acres in West Virginia and Pennsylvania with net resource of 11.1 Tcf as of 12/31/2014 (not included in 40.7 Tcfe
Slide 35: Antero water business
Antero water business 34 Marcellus Fresh Water System Provides fresh water to support Marcellus well completions Year-round water supply sources: Ohio River and local rivers Ozone Water treatment facility to be completed by 3Q 2015 Significant asset growth in 2015 as summarized below: Note: Antero a
Slide 36: Firm Transportation and Firm Sales Portfolio
Firm Transportation and Firm Sales Portfolio 35 MMBtu/d Columbia 7/26/2009 – 9/30/2025 Firm Sales #1 10/1/2011– 10/31/2019 Firm Sales #2 10/1/2011 – 5/31/2017 Firm Sales #3 1/1/2013 – 5/31/2022 Momentum III 9/1/2012 – 12/31/2023 EQT 8/1/2012 – 6/30/2025 REX/MGT/ANR 7/1/2014 – 12/31/2034 Tennessee 11
Slide 37: Keys to Execution
Keys to Execution Local Presence Antero has more than 3,500 employees and contract personnel working full-time for Antero in West Virginia. 79% of these personnel are West Virginia residents. Land office in Ellenboro, WV District office in Bridgeport, WV 221 (48%) of Antero’s 465 employees are locat
Slide 38: Clean fleet & CNG technology leader
Clean fleet & CNG technology leader Antero has contracted for two clean completion fleets to enhance the economics of its completion operations and reduce the environmental impact Replaces diesel engines (for pressure pumping) with electric motors powered by natural gas-fired electric generators A c
Slide 39: Antero Midstream Asset Overview
38 Antero Midstream (NYSE: AM) Asset Overview
Slide 40: Antero Midstream gathering and compression assets
Represents inception to date actuals as of 12/31/2014 and midpoint of 2015 guidance. Includes $12.5 million of maintenance capex at midpoint of 2015 guidance. 39 Gathering and compression assets in core of rapidly growing Marcellus and Utica Shale plays Acreage dedication of ~419,000 net leasehold a
Slide 41: Antero Midstream high growth
Antero Midstream High growth Throughput Low Pressure Gathering (MMcf/d) Compression (MMcf/d) High Pressure Gathering (MMcf/d) Antero Midstream Partners EBITDA ($MM) 182% Y-O-Y Growth 894% Y-O-Y Growth 800% Y-O-Y Growth 326% Y-O-Y Growth 40 $1 $5 $7 $8 $11 $19 $28 $36 $0 $5 $10 $15 $20 $25 $30 $35 $4
Slide 42: Significant Financial Flexibility
significant Financial Flexibility 41 Undrawn $1 billion revolver in place to fund future growth capital (5x Debt/EBITDA Cap) $162 million of cash at 3/31/2015 Sponsor (NYSE: AR) has Ba2/BB corporate ratings AM Liquidity (3/31/2015) AM Peer Leverage Comparison(1) ($ in millions) Revolver Capacity $1,
Slide 43: Appendix
42 APPENDIX 42
Slide 44: Capitalization and financial statistics
($ in millions) 3/31/2015 Cash $185 Senior Secured Revolving Credit Facility 790 6.00% Senior Notes Due 2020 525 5.375% Senior Notes Due 2021 1,000 5.125% Senior Notes Due 2022 1,100 5.625% Senior Notes Due 2023 750 Net Unamortized Premium 7 Total Debt $4,172 Net Debt $3,987 Financial & Operating St
Slide 45: 2015 capital budget
2015 capital budget By Area 44 $3.5 Billion - 2014 By Segment ($MM) By Area $1.8 Billion – 2015 By Segment ($MM) Antero’s 2015 capital budget is $1.8 billion, a 49% decrease from 2014 capital expenditures of $3.5 billion 49% 177 Completions 130 Completions $2,477 $197 $841 Drilling & Completion Wate
Slide 46: Completion deferrals – optimizing pricing
45 Plan to defer 50 Marcellus well completions into 2016 to achieve higher gas price realizations Regional gathering pipeline expected in-service late 2015 will connect incremental Marcellus production to CGTLA (Gulf Coast) and TCO pricing Results in estimated pre-tax IRR of 57% vs. 39% from 2015 TE
Slide 47: Antero Resources – updated 2015 guidance
Antero resources – updated 2015 guidance Key Variable 2015 Guidance Net Daily Production (MMcfe/d) 1,400 Net Residue Natural Gas Production (MMcf/d) 1,175 Net Liquids Production (Bbl/d) 33,000 Net Oil Production (Bbl/d) 4,000 Natural Gas Realized Price Differential to NYMEX Henry Hub Before Hedging
Slide 48: Antero Midstream – 2015 guidance
Antero midstream – 2015 guidance Key Variable 2015 Guidance Adjusted EBITDA ($MM) $150 - $160 Distributable Cash Flow ($MM) $135 - $145 Year-over-Year Distribution Growth(2) 28% - 30% Low Pressure Pipelines Added (Miles) 44 High Pressure Pipelines Added (Miles) 20 Compression Capacity Added (MMcf/d)
Slide 49: Outstanding reserve growth
outstanding Reserve growth 2012, 2013 and 2014 reserves assuming ethane rejection. 2014 SEC prices were $4.07/MMBtu for natural gas and $81.48/Bbl for oil on a weighted average Appalachian index basis. 48 3P RESERVES BY VOLUME – 2014(1) 3P RESERVE GROWTH(1) NET PROVED RESERVES (Tcfe)(1) 2014 RESERVE
Slide 50: Considerable reserve base with ethane optionality
Considerable Reserve Base with Ethane Optionality 35 year proved reserve life based on 2014 production annualized Reserve base provides significant exposure to liquids-rich projects 3P reserves of over 2.5 BBbl of NGLs and condensate in ethane recovery mode; 32% liquids Ethane rejection occurs when
Slide 51: Marcellus single well economics – in ethane rejection
Marcellus single Well Economics – In Ethane Rejection 50 DRY GAS LOCATIONS RICH GAS LOCATIONS HIGHLY RICH GAS LOCATIONS Assumptions Natural Gas – 12/31/2014 strip Oil – 12/31/2014 strip NGLs – 32.5% of Oil Price 2015-2016; 50% of Oil Price 2017+ NYMEX ($/MMBtu) WTI ($/Bbl) C3+ NGL(2) ($/Bbl) 2015 $3
Slide 52: Utica single well economics – in ethane rejection
UTICA single Well Economics – in Ethane Rejection 51 DRY GAS LOCATIONS RICH GAS LOCATIONS HIGHLY RICH GAS LOCATIONS Utica Well Economics and Gross Locations(1) Classification Condensate Highly-Rich Gas/ Condensate Highly-Rich Gas Rich Gas Dry Gas Modeled BTU 1275 1235 1215 1175 1050 EUR (Bcfe): 9.4
Slide 53: Commodity hedge position
52 Average Index Hedge Price(1) Hedged Volume Current NYMEX Strip(2) COMMODITY HEDGE POSITION ~$2.2 billion mark-to-market unrealized gain based on 3/31/2015 prices 2.4 Tcfe hedged from April 1, 2015 through year-end 2020 and 259 Bcf of TCO basis hedged from 2015 to 2017 $569 MM $591 MM $290 MM $399
Slide 54: Rapid growth in LPG exports and capacity
Rapid growth in lpg exports and capacity 53 22% CAGR U.S. Total LPG Export Capacity vs. Export Volumes U.S. Total LPG Exports by Destination Includes 11.5 MBbl/d of ethane, 15 MBbl/d of butane, 35 MBbl/d of propane. 58% CAGR Excess export capacity to support growing LPG export volumes Marcus Hook LP
Slide 55: All-in firm transportation costs
All-in Firm Transportation Costs(1) Firm transportation reduces Appalachian basis exposure 2013 Firm Transportation – 647 MMcf/d Average All-in FT Cost $0.25/MMBtu 2016 Firm Transportation – 3.1 Bcf/d Average All-in FT Cost $0.46/MMBtu + $0.18/MMBtu Antero’s firm transportation (FT) portfolio increa
Slide 56: Antero Firm Transportation
Antero Firm Transportation Appropriately designed to accommodate growth 55 Assumes 1100 BTU residue sales gas. Represents excess firm transportation that is deemed marketable to 3rd parties based on a positive differential between the receipt and delivery points of the FT capacity, less variable tra
Slide 57: Positive ratings momentum
Positive ratings momentum Moody’s / S&P Historical Corporate Credit Ratings “We could raise the ratings due to our assessment of an improvement in the company's financial profile. An improvement in the financial profile would include maintaining FFO to debt of greater than 45% and narrowing the amou
Slide 58: Antero EBITDAX reconciliation
Antero EBITDAX reconciliation 57 EBITDAX Reconciliation ($ in millions) Quarter Ended LTM Ended 3/31/2015 3/31/2015 EBITDAX: Net income (loss) including noncontrolling interest $399.2 $1,167.5 Commodity derivative fair value (gains) (759.6) (1,876.7) Net cash receipts (payments) on settled derivativ
Slide 59: Cautionary Note
Cautionary Note The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserve estimates (collectively, “3P”). Antero has provided internally generated estimates for proved, probable and possible reserves in this presentation in accordanc