Antero Resources Corporation · NYSE:AR
Antero Resources — Antero Midstream Partners — Credit Suisse Annual Energy Summit 2019
40 slides from Antero Resources's conference presentation, Feb 12, 2019
Slide 1: Legal Disclaimer
Legal Disclaimer No Offer or Solicitation This presentation includes a discussion of a proposed simplification transaction (the “Transaction”) between Antero Midstream and AMGP. This presentation is for informational purposes only and does not constitute an offer to sell or the solicitation of an of
Slide 2: Legal Disclaimer Continued
Legal Disclaimer Continued This presentation includes “forward-looking statements.” Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond AR’s control. All statements, except for statements of historical fact, made in this presentation regarding
Slide 3: The Size and Scale to Capitalize on the Resource
The Size and Scale to Capitalize on the Resource 4 Antero Resources credit suisse annual energy summit Market Cap . ........... Enterprise Value(1) . Corporate Debt Ratings Stand-alone Leverage(2) ..... 2019 Net Production Guidance Liquids................................ 3P Reserves .. ........... C
Slide 4: Antero's Integrated Strategy
Antero’s Integrated Strategy The Most Integrated Natural Gas and NGL Platform in the U.S. A World Class E&P Operator in Appalachia What’s new: Midstream simplification creating C-Corp and eliminating MLP and IDRs A Leading Northeast Infrastructure Platform 31%(1) $7 Billion Enterprise Value(1) Ba2 /
Slide 5: Recent Developments/Near-Term Catalysts
Recent Developments/Near-Term Catalysts Antero Announces 2019 Capital Budget and Production Guidance (January 2019) Disciplined plan with >20% reduction in D&C capital spending relative to 2018, within cash flow(1), while targeting 17% - 20% year-over-year production growth in 2019 Long-term outlook
Slide 6: Resilient and Flexible Development Plan
Resilient and Flexible Development Plan 7 Lower Prices Higher Prices Lower Prices: $50 Oil / $2.85 Gas 10% Production CAGR (2019-2023) <2x Stand-alone leverage by 2022 Free Cash Flow neutrality 100% hedged on 2019 production guidance and 55%-60% hedged on 2020 outlook Antero’s flexible development p
Slide 7: Disciplined Development Plan: Production Growth Scenarios
10% Production CAGR 8 Disciplined Development Plan Antero Resources credit suisse annual energy summit <2x Standalone Leverage by 2022 Free Cash Flow Neutrality $50 / $2.85 15% Production CAGR <1x Standalone Leverage by 2021 $2.5 - $3.0 Bn Free Cash Flow $65 / $3.15 Note: Production CAGR ranges appl
Slide 8: Simplification Transaction – A Near Term Catalyst
Simplification Transaction – A Near Term Catalyst Results in C-corp Structure for Both Tax and Governance Simplifies the Organizational Structure and Unlocks Shareholder Value Maintains Antero’s Integrated Strategy & Long-Term Outlook Further Aligns the Interest of All Antero Equity Holders and Mana
Slide 9: Status Quo vs Simplified Pro Forma Structure
Status Quo Structure Antero Simplified Pro Forma Structure Simplified Pro Forma Structure 53% 100% Incentive Distribution Rights (IDRs) Sponsors/ Management Public Public 23% 77% Sponsors/ Management Public 57% 43% 47% 23% 77% 31% Midstream simplification transaction results in one publicly traded m
Slide 10: Antero Hedge Position
Antero Hedge Position 11 Antero Hedge Profile Realized $357 MM in proceeds from hedge restructuring while remaining 100% hedged on gas in 2019 and 55%-60% hedged in 2020 at ~$3.00/MMBtu Monetize + maintain upside to call price 30% Swaps 30% Swaps 30% Swaps 1) Based on 01/31/2018 strip pricing . $2.5
Slide 11: Antero's NGL Pricing Uplift from Mariner East
Antero’s NGL Pricing Uplift from Mariner East 2 31 Mont Belvieu Conway Europe Netback 2019 NWE Price ($/Gal) $0.80 Pipeline, Terminal & Shipping Cost (1) $(0.22) NWE Netback $0.58 Blended Conway / MB Netback $0.52 Uplift vs. YTD 2018 Average Differential +$0.06 Asia Netback 2019 FEI Price ($/Gal) $0
Slide 12: Firm Transportation Portfolio Provides Visibility
Firm Transportation Portfolio Provides Visibility 13 All of Antero Resources’ contracted firm capacity is now in-service, providing visible production growth and sales to diversified markets Antero Resources Firm Transportation Portfolio vs. Gross Gas Production (MMcf/d) Appalachia (M2/Dom S.) – 625
Slide 13: Expected Natural Gas Price Realization Improvement
Note: Local index represents a blend of Dominion South and TETCO M2 pricing. Midwest index represents a blend of Chicago and MichCon pricing. Gulf Coast index represents a blend of Gulf and Nymex-based pricing. 2018 represents YTD actuals through November and projected volumes for December. 2018 pri
Slide 14: Sustainable and De-risked Business Model
Sustainable and De-risked Business Model 15 Firm Transportation Portfolio Allows Antero Resources to achieve: Effectively Hedge NYMEX Index Allows Antero to directly hedge the absolute price Premium Price Certainty Eliminates basis risk by delivering to NYMEX-related markets Hedge Portfolio Supports
Slide 15: Vertical Integration is Critical in Shale Development
Vertical Integration is Critical in Shale Development 16 Antero’s integrated strategy has resulted in peer-leading realized prices and margins for 6 straight years and consistent results through commodity cycles All-in Pricing Realizations ($/Mcfe) Stand-alone E&P Adjusted EBITDAX Margins ($/Mcfe) S
Slide 16: Diversified Natural Gas & NGL Platform with Integrated Strategy
Diversified Natural Gas & NGL Platform with Integrated Strategy
Slide 17: Antero is the Largest NGL Producer in the U.S.
Antero is the Largest NGL Producer in the U.S. Undrilled Core Liquids-rich Inventory(2) Top U.S. C2+ NGL Producers - 2019E(1) Antero is the largest NGL producer in the U.S. and controls 40% of the core undrilled liquids-rich locations in Appalachia(2) Over 2.5x Inventory of closest Appalachian compe
Slide 18: Antero is a Top U.S. Natural Gas Producer
Antero is a Top U.S. Natural Gas Producer 19 Note: Data from company filings. Excludes international natural gas production where applicable. 1) SWN gas production is adjusted for the sale of the company’s Fayetteville assets, which closed on December 4, 2018. Top U.S. Natural Gas Producers (MMcf/d)
Slide 19: U.S. Gas Supply and Base Decline
U.S. Gas Supply and Base Decline 20 Current(1): 85 Bcf/d Source: S&P Global Platts. Note: Platts supply forecast through 2023 is within a 2% tolerance of EIA’s supply forecast over the same period. Current 2018 year end volumes represent Platts modeled 4Q 2018 average volumes and are not yet finaliz
Slide 20: U.S. Gas Supply and New Supply Wedge
U.S. Gas Supply and New Supply Wedge 21 Current(1): 85 Bcf/d Source: S&P Global Platts. Platts supply forecast through 2023 is within a 2% tolerance of EIA’s supply forecast over the same period. Current 2018 year end volumes represent Platts modeled 4Q 2018 average volumes and are not yet finalized
Slide 21: New Gas Supply Breakdown
New Gas Supply Breakdown 22 Rest of US Permian Appalachian Rich Greater Haynesville DJ Eagle Ford Bakken 47% of new gas supply needed in the 2019-2023 period is forecast to come from plays with breakeven gas prices that are higher than the long-term 2020-2023 strip ~$2.67/MMBtu Economic Non-Economic
Slide 22: Antero Natural Gas Breakeven Prices
Antero Natural Gas Breakeven Prices 23 Breakeven analysis based on same parameters as J.P. Morgan Equity Research calculation with the exception of the WTI oil price, Antero uses strip WTI. Antero drilling inventory as of 12/31/18. Breakeven price is defined as half cycle pre-tax ROR of 25%. Assumes
Slide 23: Does Natural Gas Strip Reflect Current Fundamentals?
Does Natural Gas Strip Reflect Current Fundamentals? 24 Nymex Natural Gas Pricing (2017-2023) Nymex natural gas prices averaged ~$3.10/MMBtu in 2017 and 2018 $2.72/MMBtu average Nymex gas strip price from 2019-2023 not expected to stimulate enough drilling to meet the forecasted demand growth Antero
Slide 24: Midstream Driving Value for AR Since Inception
Midstream Driving Value for AR Since Inception 25 Takeaway assurance and reliable project execution AM Midstream Buildout Midstream Ownership Benefits Never missed a completion date with fresh water delivery system Unparalleled downstream visibility Attractive return on investment (4.2x ROI for AR)
Slide 25: Long Track Record Of Success
Long Track Record Of Success 26 Distributable Cash Flow(1): $53 MM $680 MM - $730 MM $67 MM $870 MM - $920 MM Adjusted EBITDA(1): +1,201% +1,235% New AM Dividend Per Share and DCF Coverage Since IPO IPO Year - 2014 2019 Guidance Adjusted EBITDA and Distributable Cash Flow are non-GAAP measures. For
Slide 26: Long-Term Outlook – New AM
Long-Term Outlook – New AM 27 18% Distributable Cash Flow CAGR Declining Leverage Profile to low to mid 2x Supports Previously Communicated Dividend Growth Targets $50 / $2.85 25% Distributable Cash Flow CAGR Declining Leverage Profile to low to mid 2x Supports Previously Communicated Dividend Growt
Slide 27: DCF Profile Supports Growing Return of Capital
DCF Profile Supports Growing Return of Capital 28 Distributable Cash Flow vs. Growth Capex ($MM) Antero Midstream’s distributable cash flow growth, self-funding business model, and leverage profile supports an increase in return of capital to shareholders 25% DCF CAGR Target Note: Distributable Cash
Slide 28: Antero: Not Just a Natural Gas Producer
Antero: Not Just a Natural Gas Producer Diversified Commodity Mix Enhances Value Proposition Top NGL producer in the U.S. Controlled Resource Development Mitigated Commodity Risk Just-in-time midstream Investment by AM 100% hedged on natural gas in 2019 @ $3.00/MMBtu floor on average Disciplined Foc
Slide 29: Antero: Not Just a Natural Gas Producer
Antero: Not Just a Natural Gas Producer abroiero Diversified Commodity Mix Enhances Value Proposition Shareholder Value 9.1 MM shares repurchased in 4Q 2018 Top NGL producer inthe US. Liquids-Rich Resource and Scale Return of Capital Just-in-time midstream Investment by AM <2.2x Pro Forma Maintain 9
Slide 30: Antero Capitalization – Pro forma as of 9/30/18
Antero Capitalization – Pro forma as of 9/30/18 Status Quo Pro Forma Antero Resources credit suisse annual energy summit 31 As of September 30, 2018 ($MM) Antero Midstream Antero Resources (Standalone) Antero Resources (Consolidated) Cash $0 $0 $0 Debt Revolving Credit Facility $875 $547 $1,422 5.37
Slide 31: 2019 Capital Plan and Guidance
Antero Resources credit suisse annual energy summit 2019 Capital Plan and Guidance Stand-alone Consolidated Net Production (Bcfe/d) 3.15 – 3.25 Net Natural Gas Production (Bcf/d) 2.225 – 2.275 Net Liquids Production (Bbl/d) 154,000 – 164,000 Net Oil, C3+ and Ethane Production (Bbl/d) Oil: 8,500 – 9,
Slide 32: Antero Resources D&C Capital
Antero Resources D&C Capital 33 Antero Resources Stand-alone Marcellus Well Cost ($MM/1,000’ assuming 12,000’ Lateral) Through negotiating contracts and self sourcing sand, Antero was able to mitigate a majority of inflationary pressures on D&C capital for 2019 Drilling, water hauling, and productio
Slide 33: Drilling and Completion Efficiencies
34 Drilling and Completion Efficiencies Average Lateral Feet per Day Drilling Days Average Lateral Length per Well Completion Stages per Day Antero Resources credit suisse annual energy summit 8,206 72% Increase 28% Increase 228% Increase Note: Utica 3Q 2018 results reflect YTD results, as Antero is
Slide 34: Appendix Disclosures & Reconciliations: Antero Definitions
35 Appendix disclosures & reconciliations Antero Definitions Consolidated Adjusted EBITDAX: Represents net income or loss from continuing operations, including noncontrolling interests, before interest expense, interest income, derivative fair value gains or losses (excluding net cash receipts or pa
Slide 35: Antero Non-GAAP Measures
36 Antero Non-GAAP Measures Stand-alone Adjusted Operating Cash Flow and Free Cash Flow Free Cash Flow as presented in this release and defined by the Company represents Stand-alone Adjusted Operating Cash Flow, less Stand-alone Drilling and Completion capital, less Land Maintenance Capital. Stand-a
Slide 36: Antero Non-GAAP Measures Continued
37 Antero Non-GAAP Measures Continued Adjusted EBITDAX and Stand-alone Adjusted EBITDAX Adjusted EBITDAX as defined by the Company represents net income or loss, including noncontrolling interests, before interest expense, interest income, derivative fair value gains or losses, but including net cas
Slide 37: Antero Resources Standalone Adjusted EBITDAX Reconciliation
Antero Resources Standalone Adjusted EBITDAX Reconciliation Stand-alone LTM Adjusted EBITDAX Reconciliation Appendix disclosures & reconciliations 38 Stand-alone Twelve months ended September 30, (in thousands) 2018 Net income attributable to Antero Resources Corporation $ 210,898 Commodity derivati
Slide 38: Antero Resources Stand-alone Adjusted EBITDAX Per Mcfe
Antero Resources Stand-alone Adjusted EBITDAX Per Mcfe Appendix disclosures & reconciliations 39 Stand-alone Adjusted EBITDAX per Mcfe Reconciliation (Annual) 2013 2014 2015 2016 2017 1Q2018 2Q2018 3Q2018 ($/Mcfe) Natural Gas, Oil, Ethane and NGL sales 4.31 $ 4.74 $ 2.53 $ 2.60 $ 3.35 $ 3.56 $ 3.35
Slide 39: Antero Midstream Non-GAAP Measures
Antero Midstream Non-GAAP Measures 40 The following table reconciles net income to Adjusted EBITDA for the twelve months ended September 30, 2018 as used in this presentation (in thousands): The following table reconciles consolidated total debt to consolidated net debt (“Net Debt”) as used in this
Slide 40: Antero Midstream Non-GAAP Measures
» Antero Midstream Non The following table reconcil GAAP Measures {in thousands) ‘September 30, 2018, Bank credit facility s 875,000 5.375% AM senior notes due 2024 650,000 Net unamortized debt issuance costs Consolidated total debt 5 ‘Cash and cash equivalents Consolidated net debt The following ta
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