Antero Resources Corporation · NYSE:AR
Antero Resources — J.P. Morgan Global High Yield & Leveraged Finance Conference 2012
34 slides from Antero Resources's conference presentation, Feb 28, 2012
Slide 1: J.P. Morgan Global High Yield & Leveraged Finance Conference
February 28, 2012 J.P. Morgan Global High Yield & Leveraged Finance Conference
Slide 2: 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 address activities, events or de
Slide 3: SEC reserve disclosure notice
The U.S. Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserve estimates (3P). Antero has provided internally generated estimates for proved, probable and possible reserves in this presentation in
Slide 4: Presenters
Presenters Glen C. Warren, Jr. President and Chief Financial Officer, Board of Directors Co-founder Chad Green Finance Director 3
Slide 5: Antero Resources Snapshot
Antero Resources Snapshot Private E&P company headquartered in Denver, focused on unconventional resource plays Drilled and operated over 300 horizontal shale wells in Barnett, Woodford and Marcellus Shales Diversified asset base – Marcellus Shale, Upper Devonian Shale, Piceance Mesaverde and Mancos
Slide 6: Marcellus Midstream Sale
Marcellus Midstream Sale 5 Marcellus Midstream Sale – On February 27, 2012, Antero announced the sale of Marcellus Shale gathering system assets to Crestwood for $375 million in cash Area of Dedication – covers 104,000 net acres or almost 50% of Antero’s 220,000 net acres in the Marcellus Shale play
Slide 7: Reserves, production and acreage by area
Proved Reserves (1) 74 Bcfe Total 3P (1, 2) 111 Bcfe Net Production 10 MMcfe/d Net Acreage 5,300 Fayetteville Shale Proved Reserves (1) 1,502 Bcfe Total 3P (1, 2) 2,873 Bcfe Total 3P Liquids (1, 2) 94 MMBbls Net Production 63 MMcfe/d Net Acreage 63,000 Piceance–Mesaverde/Mancos Shale Proved Reserves
Slide 8: 2011 Reserve Growth
2011 Reserve Growth 55% year-over-year increase 2,429% reserve replacement $0.42/Mcfe all-in finding and development cost 2,162 Bcfe of proved reserves added includes 86 million Bbls of NGLs primarily added due to the signing of processing and ethane takeaway agreements in Appalachia 346 Bcfe of neg
Slide 9: Antero Unrisked Net Resource Potential
Antero Unrisked Net Resource Potential Area Resource Gas (Tcf)(1) Liquids (MMBbls)(1) Net Resource Potential (Tcfe)(1) Undrilled Operated Locations Appalachia Upper Devonian Shale 4 – 5 240 – 350 6 – 7 1,288 Appalachia Marcellus Shale 10 609 14 2,309 Piceance Mesaverde(2) 2 96 2.5 2,868 Piceance Man
Slide 10: Appalachian Shale-Focused Resource Base
28 Tcfe Appalachian Shale-Focused Resource Base Net Unrisked Resource Potential Over 70% of Antero’s resource base is in the Appalachian Basin 23% of resource base is liquids by volume 28 Tcfe By Area 12/31/2011 By Product 12/31/2011 9 All 3P reserves as of 12/31/2011. 1.6 Tcfe of Mesaverde resource
Slide 11: Strong Track Record of Growth
Strong Track Record of Growth Proved reserves for 2006, 2007 and 2008 were determined using previously effective SEC methodology. 2009, 2010 and 2011 reserves based on current SEC methodology and pricing. Average Net Daily Production Net Proved SEC Reserves (1) Antero Capital Allocation Operated Wel
Slide 12: Industry Leading Finding Costs
Industry Leading Finding Costs Industry 3-Year All-in Finding Costs through 2010(1) 3-Year Comp Median = $1.33/Mcfe(4) 3-year Antero all-in finding costs were $0.59/Mcfe through 2010(2) Estimated 2011 Antero all-in finding costs were $0.42/Mcfe Estimated 3-year Antero all-in finding costs were $0.36
Slide 13: Industry Leading Development Costs
2010 Industry Development Costs(1) Antero – 2011(3) 2010 Comp Median = $2.17(2) 2011 estimated development cost of $1.08/Mcfe(1), a 26% improvement on 2010 results $ / Mcfe Per mcfe development costs excluding land is a better measure of capital efficiency than finding costs Antero was a leader in d
Slide 14: Marcellus Shale Position
Marcellus Shale Position Antero 2 horizontals completed Strong results Antero 64 horizontals completed Strong results 6 rigs currently running 13 Southwestern and Northeastern Cores Rich Gas Window in Southwestern Core Representation of key acreage positions from Company presentations. Upper Devonia
Slide 15: Marcellus acreage and rich gas processing potential
Majority of acreage has rich gas processing potential 220,000 net acres of leasehold in heart of the play 61% HBP and additional 23% not expiring for 5+ years, 100% operated 2.8 Tcfe of proved reserves / 13.5 Tcfe of 3P reserves 180 MMcf/d current net operated production Surrounded by key Range, Che
Slide 16: Strong Marcellus Growth
Strong Marcellus Growth Antero has rapidly grown its Marcellus production over the past two years while building out midstream infrastructure Antero Gross Operated Marcellus Production 15 Bobcat Lateral online September 2010 Jarvisville Lateral online June 2011 Tichenal Lateral online September 2011
Slide 17: Marcellus type curve support
16 Antero has over 2 years of production history to support its 1.46 Bcf/1,000’ of lateral recovery assumption as demonstrated by the graph and table below DeGolyer & MacNaughton (D&M), Antero’s third party reserve auditor, supports this type curve 24-hour peak 30-day avg. rate 90-day avg. rate 180-
Slide 18: Marcellus Shale Well Economics – Horizontal Lean Gas
Marcellus Shale Well Economics – Horizontal Lean Gas Lateral Length Well Cost ($ MM) EUR (Bcf) Net F&D ($/Mcf) 6,320 $7.4 9.2 $0.92 Fixed NYMEX gas prices with appropriate basis adjustment to the Marcellus area. 87% NRI assumed. Defined as 10% before tax rate-of-return. Assumes 1050 Btu gas – no pro
Slide 19: Marcellus Shale Well Economics – Horizontal Rich Gas
Marcellus Shale Well Economics – Horizontal Rich Gas Lateral Length Well Cost ($ MM) EUR (Bcf) Net F&D ($/Mcf) 6,320 $7.4 9.2 $0.92 Antero Average for First 66 Horizontal Wells 18 Well Cost ($MMs) EUR (Bcf) F&D ($Mcf) NYMEX Breakeven(4) $7.00 8.0 $1.01 $1.51 $7.00 9.0 $0.89 $1.17 $7.00 10.0 $0.80 $0
Slide 20: Improved returns by processing higher BTU gas
Dramatic improvement in returns by processing higher BTU gas – Antero Marcellus leasehold spans the 1050 to 1350 Btu spectrum 19 Fixed NYMEX gas price of $5.50/MMBtu with appropriate basis adjustment to the Marcellus area, $95/Bbl WTI and current NGL price correlations. 87% NRI assumed. C2 Recovery
Slide 21: Upper Devonian Potential
Upper Devonian Potential Per Range Resources’ YE 2011 earnings call. Per Range Resources’ 2Q 2011 earnings call. Calculated using a pre-processed EUR of 4 Bcf. Upper Devonian, found at slightly shallower depths than the Marcellus Shale, around 6,500 feet true vertical depth Expected to be rich gas w
Slide 22: Piceance Basin – A Rich Gas Play
Piceance Basin – A Rich Gas Play Rich processable gas from Mesaverde 63,000 net acres – 40% HBP 1.5 Tcfe of proved reserves / 2.9 Tcfe of 3P reserves 63 MMcfe/d net production including 3,200 Bbls/d of NGLs and oil Drilled and completed over 200 wells with a 99% success rate 2012 Program: 1 rig dril
Slide 23: Arkoma Basin
Arkoma Basin Antero Woodford Shale Acreage Position Woodford Shale Summary East Rockpile Area Torpedo Junction Area Northern Front Area 23 Rich processable gas from west side of play Lean gas on east side 599 Bcfe of net proved reserves / 910 Bcfe 3P reserves 67,000 net acres – 85% HBP Drilled and o
Slide 24: Low Break Even Natural Gas Prices
Antero Piceance Valley – Liquids Rich(2) Marcellus Shale – SW Fayetteville Shale Woodford Shale - Arkoma Marcellus Shale – SW Liquids Rich Source: Credit Suisse report dated 2/06/2012 – Break even price is for 15% after tax rate-of-return. Antero Piceance Valley – Liquids Rich incorporates Antero-sp
Slide 25: Realized gains on commodity hedges
Antero has realized over $330 million of gains on commodity hedges over the past four years Gains realized in 15 of last 16 quarters $MMs $/Mcfe Historical Antero Hedging Results 25 YE2011 results are subject to a year-end financial audit (unaudited).
Slide 26: Strong Hedge Position
Strong Hedge Position Antero will realize over $1 billion(1) of hedge gains over the next five years from its 710 Bcfe hedge book assuming current STRIP prices Protects future cash flow thereby supporting drilling plans and production growth Antero Hedge Position – 2012 through 2016(2) Natural Gas S
Slide 27: 2011E and 2012E Capital Budget
2011E Capex Budget by Type 2011E Capex Budget by Basin Total: $904MM Total: $904MM 2012E Capex Budget by Type(1) 2012E Capex Budget by Basin(1) Total: $861MM Total: $861MM 2011E and 2012E Capital Budget 27 1. Does not include budget for acquisitions except for $100 million of land primarily designat
Slide 28: Summary operating results and balance sheet
Adjusted for midstream sale(5) AUDITED UNAUDITED 12 mos. 12 mos. 12 mos. 12 mos. 12 mos. $ millions 2008 2009 2010 2011(4) 2011(4) Summary Operating Results Production (Bcfe) 32 38 49 89 89 EBITDAX $207 $153 $198 $341 $341 Cash interest expense (1) $38 $36 $56 $68 $68 Proved reserves (Bcfe) (2) 680
Slide 29: Key Credit Strengths
Key Credit Strengths Significant reserve potential diversified across three of the key U.S. shale plays Ability to allocate capital to most profitable projects based on commodity prices, basis differentials and local cost dynamics Growing liquids exposure Diversified, stable asset base Large invento
Slide 30: Appendix
Appendix 30
Slide 31: Marcellus Shale Well Economics – Horizontal Super-Rich Gas
Marcellus Shale Well Economics – Horizontal Super-Rich Gas Lateral Length Well Cost ($ MM) EUR (Bcf) Net F&D ($/Mcf) 6,320 $7.4 9.2 $0.92 Assumes 1250 Btu gas and includes processing margin at $95/Bbl oil and current NGL price correlations (1) Antero Average for First 66 Horizontal Wells 31 Well Cos
Slide 32: Firm Transportation Coverage
Firm Transportation Coverage 32 Assumes August 1, 2012 in-service date. Assumes September 1, 2012 in-service date. Antero has firm transportation in place to cover its gross production growth until late 2013 – pursuing additional firm transportation alternatives now Firm Sales #1 10/1/2011 – 10*31/2
Slide 33: Marcellus Midstream Sale – Enhances Liquidity
Marcellus Midstream Sale – Enhances Liquidity 33 Pro forma for the Marcellus midstream sale, Antero’s liquidity at 12/31/2011 will be almost $1.2 billion. Liquidity Detail As adjusted for midstream sale $ Millions 12/31/2011(1) 12/31/2011(1) Liquidity Current revolver commitment $850 $850 Less: outs
Slide 34: EBITDAX Reconciliation
EBITDAX Reconciliation EBITDAX Year Ended $ thousands 12/31/2010 12/31/2011(1) EBITDAX: Net income (loss) 228,628 392,678 Unrealized loss (gain) on commodity derivative contracts (170,571) (559,596) Gain on sale of Oklahoma midstream assets (147,559) Interest expense and other 59,140 74,498 Provisio
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