Antero Resources Corporation · NYSE:AR

Antero Resources — Investor Presentation (March 2015)

61 slides from Antero Resources's investor presentation, March 2015

  1. Slide 1: Company Overview March 2015

    Company Overview March 2015

  2. 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

  3. Slide 3: Changes Since Prior March 2015 Presentation

    CHANGES SINCE PRIOR MARCH 2015 PRESENTATION New slide showing geographically diverse nature of Slide 5 NGL marketing options for AR New slide showing NGL realizations and propane Slide 6 hedging for AR Updated AR slide showing 2015 production growth rate Slide 10 vs. peers Updated liquids-rich core

  4. Slide 4: 2015 Capital Budget

    2015 CAPITAL BUDGET  Antero’s 2015 capital budget is $1.8 billion, a 49% decrease from 2014 capital expenditures of $3.5 billion $3.5 Billion - 2014 $1.8 Billion – New 2015 By Segment ($MM) By Segment ($MM) $50 $150 $841 49% $197 $2,477 $1,600 177 Completions 130 Completions Drilling & Completion W

  5. Slide 5: Antero Resources – 2015 Guidance

    ANTERO RESOURCES – 2015 GUIDANCE Key Operating & Financial Assumptions(1) 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 t

  6. Slide 6: Current NGL Marketing – Geographically Diverse

    CURRENT NGL MARKETING – GEOGRAPHICALLY DIVERSE  MarkWest currently processes all of Antero’s rich gas and markets all NGLs Mariner East II 61,500 Bbl/d AR Commitment(1) 4Q 2016 In-Service 2015 NGL Marketing by Region Export 15% Gulf Northeast Coast 43% 13% Midwest 10% Ontario 3% Edmonton Mid- 10% A

  7. Slide 7: Attractive NGL Realizations and Propane Hedges

    ATTRACTIVE NGL REALIZATIONS AND PROPANE HEDGES Realized NGL Prices as % of WTI 2015E NGL Price Road Map (1) (WTI) (% of NGL Bbl) Realized NGL C3+ Price WTI Wtd. Avg. $120.00 1% Ethane 100% Mont Belvieu NGL Strip (1) % of C3+ Price Per $100.00 $94.10 $98.01 $93.03 ($/gal) ($/Bbl) Barrel Barrel 80% Et

  8. Slide 8: Leading Unconventional Business Model

    LEADING UNCONVENTIONAL BUSINESS MODEL Largest Liquids-Rich Highest Growth Core Position in Large Cap E&P Appalachia 2 3 Growth Liquids-Rich Most Active Operator Low Break-Even in Appalachia 1 4 Well Price Economics Drilling Economics Premier Appalachian E&P Company Highest Realizations 5 MLP (NYSE:

  9. Slide 9: Catalysts

    CATALYSTS 1 Large, low cost core Marcellus and Utica natural gas drilling inventory Sustainability of with associated liquids generates attractive returns supported by long- Antero’s Integrated term natural gas hedges, takeaway portfolio and downstream LNG and Business Model NGL sales agreements 2 P

  10. Slide 10: Drilling – Most Active Operator in Appalachia

    DRILLING – MOST ACTIVE OPERATOR IN APPALACHIA COMBINED TOTAL – 12/31/14 RESERVES Assumes Ethane Rejection Net Proved Reserves 12.7 Tcfe Net 3P Reserves 40.7 Tcfe Pre-Tax 3P PV-10 $22.8 Bn SW Marcellus & Utica(2) Net 3P Reserves & Resource 51.8 Tcfe 12 Net 3P Liquids 1,026 MMBbls 10 % Liquids – Net 3

  11. Slide 11: Growth – Highest Growth Large Cap E&P

    GROWTH – HIGHEST GROWTH LARGE CAP E&P  Antero’s 40% production growth target for 2015 leads the U.S. large cap E&P industry(1) 45% 40.0% 35% 25.6% 25% 23.8% 20.0% 19.1% 17.7% 15.1% 15% 9.3% 7.0% 5% 3.9% 2.3% (1.5%) (1.8%) (2.3%) -5% (2.6%) (7.7%) (8.6%) -15% (13.8%) (2) -25% Appalachian Peers Sourc

  12. Slide 12: Growth – Strong Track Record

    GROWTH – STRONG TRACK RECORD NET PROVED RESERVES (Bcfe) AVERAGE NET DAILY PRODUCTION (MMcfe/d) Marcellus Utica Marcellus Utica Guidance 15,000 1,800 12,683 12,000 1,400 1,200 9,000 1,007 7,632 6,000 4,283 600 522 2,844 3,000 239 677 124 30 0 0 (1) (1) (1) 2010 2011 2012 2013 2014 2010 2011 2012 2013

  13. Slide 13: Liquids-Rich – Largest Core Position

    LIQUIDS-RICH – LARGEST CORE POSITION • Antero has the largest liquids-rich core position in Appalachia with ≈375,000 net acres (> 1100 Btu) • Represents over 21% of liquids-rich core acreage in Marcellus and Utica plays combined • 2x its closest competitor Source: Core outlines and peer net acreage

  14. Slide 14: Well Economics – Low Break-Even

    WELL ECONOMICS – LOW BREAK-EVEN PRICE ECONOMICS  Over 3,000 of Antero’s Marcellus and Utica undeveloped 3P locations are rich gas locations which have the lowest breakeven prices for both oil and natural gas compared to other U.S. shale plays North American Breakeven Oil Prices ($/Bbl)(1) Antero Pr

  15. Slide 15: Midstream – MLP Highlights Substantial Value

    MIDSTREAM – MLP (NYSE: AM) HIGHLIGHTS SUBSTANTIAL VALUE IN MIDSTREAM BUSINESS Corporate Structure Overview(1) Antero Resources Corporation (NYSE: AR) $13.5 Billion Enterprise Value(1) Ba2/BB Corporate Rating 70% Limited Partner Interest = $2.6 Billion Market Valuation(1) $1.5 Billion Derived Valuati

  16. Slide 16: Takeaway – Largest Firm Transportation and Processing Portfolio in Appalachia

    TAKEAWAY – LARGEST FIRM TRANSPORTATION AND PROCESSING PORTFOLIO IN APPALACHIA Antero Long Term Firm Processing & Takeaway Position (2018) – Accessing Favorable Markets Chicago(1) Mariner East II 4.1 Bcf/d 62 MBbl/d Commitment +$0.02 / Firm Gas $(0.06) Marcus Hook Export Takeaway Dom South(1) $(1.00)

  17. Slide 17: Liquidity – Largest Gas Hedge Position in U.S. E&P

    LIQUIDITY – LARGEST GAS HEDGE POSITION IN U.S. E&P + STRONG FINANCIAL LIQUIDITY  ~$2.4 billion mark-to-market unrealized gain based on 3/16/2015 prices  2.4 Tcfe hedged from January 1, 2015 through year-end 2020 and 294 Bcf of TCO basis hedges from 2015 to 2017 COMMODITY HEDGE POSITION BBtu/d Hedg

  18. Slide 18: Realizations – Highest Realizations & Margins Among Large-Cap Appalachian Peers

    REALIZATIONS – HIGHEST REALIZATIONS & MARGINS AMONG LARGE-CAP APPALACHIAN PEERS 4Q 2014 Natural Gas Realizations ($/Mcf) Average 4Q 2014 Average Average Average Hedge Average 4Q 2014 Premium/ Region % Sales NYMEX Price Differential(2) BTU Upgrade Effect Realized Gas Price(3) Discount TCO 42% $4.00 $

  19. Slide 19: Realizations – Realized Price Road Map

    REALIZATIONS – REALIZED PRICE “ROAD MAP”  Antero’s exposure to favorable gas price indices like Chicago, Gulf Coast, NYMEX and TCO is expected to increase to 94% by 2017 71% exposure to favorable price indices 85% exposure to favorable price indices 94% exposure to favorable price indices 2015 2015

  20. Slide 20: Sector Positioning

    SECTOR POSITIONING 19

  21. Slide 21: Multi-Year Drilling Inventory Supports Low Risk, High Return Growth Profile

    MULTI-YEAR DRILLING INVENTORY SUPPORTS LOW RISK, HIGH RETURN GROWTH PROFILE  Antero has over 3,000 undrilled liquids-rich Marcellus and Utica locations with an average lateral length of 6,831 feet MARCELLUS SSL WELL ECONOMICS(1) UTICA WELL ECONOMICS(1) 60% 1,200 60% 52% 289 300 1,010 248 254 43% 88

  22. Slide 22: Rapid Growth in LPG Exports and Capacity

    RAPID GROWTH IN LPG EXPORTS AND CAPACITY Marcus Hook LPG Exports - 2014 U.S. Total LPG Export Capacity vs. Export Volumes Africa 2% 1800 Excess export 1600 capacity to support 1400 growing LPG export Antero access to export North 1200 volumes markets increases America MBbl/d 1000 dramatically in lat

  23. Slide 23: 20 Bcf/d of Incremental Gas Demand by 2020

    20 BCF/D OF INCREMENTAL GAS DEMAND BY 2020  Significant demand growth expected for U.S. Projected Incremental Natural Gas Demand Through 2020 natural gas (Bcf/d) 9.5 Bcf/d of the 20 Bcf/d of 20 incremental demand is 20  More than 65% of the 20 Bcf/d in incremental expected to come from gas demand

  24. Slide 24: LNG Exports by Project – Expected Start Up

    LNG EXPORTS BY PROJECT – EXPECTED START UP LNG Exports by Project Through 2020  Assuming 9.5 Bcf/d of LNG exports by 2020, LNG Exports by Project Antero Supplied the U.S. will be the world’s 3rd largest LNG exporter behind Qatar and Australia (in Bcf/d) − 7.7 Bcf/d (81%) of the 9.5 Bcf/d of expecte

  25. Slide 25: Marcellus/Utica Driving Gas Supply Growth

    MARCELLUS/UTICA DRIVING GAS SUPPLY GROWTH Lower 48 Gas Supply by Area  Of the 23 Bcf/d of expected incremental gas (MMcf/d) supply from 2009 to 2015, ~18 Bcf/d, or 78%, is expected to be generated from Marcellus 18,000 and Utica production Nov-12 Nov-13 Nov-14  Marcellus and Utica gross gas produc

  26. Slide 26: Asset Overview

    ASSET OVERVIEW 25

  27. Slide 27: World Class Marcellus Shale Development Project

    WORLD CLASS MARCELLUS SHALE DEVELOPMENT PROJECT 100% operated RJ SMITH PAD Operating 7 drilling rigs including BEE LEWIS PAD 30-Day Rate 2 intermediate rigs 30-Day Rate 4-well combined 4-well combined 30-Day Rate of 400,000 net acres in 30-Day Rate of 56 MMcfe/d 67 MMcfe/d Southwestern Core (74%

  28. Slide 28: Prolific Predictable Results Across Entire Marcellus Position

    PROLIFIC PREDICTABLE RESULTS ACROSS ENTIRE 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 Marcellus PDP Locations Average Antero Marcellus Well (As of 12/31/14) 2014 Actual 2015 Bu

  29. Slide 29: Increasing Recoveries and Low Variance in Marcellus

    INCREASING RECOVERIES AND LOW VARIANCE IN MARCELLUS  Antero’s Marcellus average 30-day rates have increased by 64% over the past two years as the Company increased per well lateral lengths by 20% and shortened stage lengths by 43% Antero 30-Day Rates – 343 Marcellus Wells(1) 25 2014 – 13.1 MMcfe/d

  30. Slide 30: Marcellus Well Performance Improvements

    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

  31. Slide 31: Marcellus ROR% and Gas Price Sensitivity

    MARCELLUS ROR% AND GAS PRICE SENSITIVITY  Large portfolio of Highly-Rich Gas/Condensate to Dry Gas locations  Focused on drilling highly economic rich gas locations – rig symbols represent current rig location by Btu regime  Assumes 12/31/2014 WTI strip pricing for 2015-2020, flat thereafter; NGL

  32. Slide 32: Leading Utica Shale Core Position Delivers Prolific Liquids-Rich Wells

    LEADING UTICA SHALE CORE POSITION DELIVERS PROLIFIC LIQUIDS-RICH WELLS  100% operated Cadiz  Operating 4 drilling rigs Processing Plant  148,000 net acres in the core rich gas/ condensate window (72% includes processable rich gas assuming an 1100 Btu cutoff) – 20% HBP with additional 79% not expi

  33. Slide 33: Utica Well Performance Improvements

    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 (1) Increasing Lateral Lengths(1) Increasing

  34. Slide 34: Utica ROR% and Gas Price Sensitivity

    UTICA ROR% AND GAS PRICE SENSITIVITY  Large portfolio of Condensate to Dry Gas locations  Focused on drilling highly economic rich gas locations – rig symbols represent current rig location by Btu regime  Assumes 12/31/2014 WTI strip pricing for 2015-2020, flat thereafter; NGL price 50% of WTI NY

  35. Slide 35: Large Utica Shale Dry Gas Position

    LARGE UTICA SHALE DRY GAS POSITION Utica Shale Dry Gas Acreage in OH/WV/PA(1)  Antero has 216,000 net acres of exposure to Utica dry gas play Rice Hess Chesapeake Range − 42,000 net acres in Ohio with net 3P reserves of 2.4 Tcf as of Bigfoot 9H Porterfield 1H-17 Hubbard BRK #3H Claysville SC #1 3,5

  36. Slide 36: Antero Water Business

    ANTERO WATER BUSINESS  Antero has built an integrated water business to serve upstream’s water needs including fresh water distribution for completions as well as water handling, treating and recycling Projected Fresh Water Infrastructure(1) Marcellus Utica Shale Shale Total YE 2015E Cumulative Fre

  37. Slide 37: Firm Transportation and Firm Sales Portfolio

    FIRM TRANSPORTATION AND FIRM SALES PORTFOLIO Columbia Tennessee Momentum III EQT REX/MGT/ANR 7/26/2009 – 9/30/2025 11/1/2015– 9/30/2030 9/1/2012 – 12/31/2023 8/1/2012 – 6/30/2025 7/1/2014 – 12/31/2034 ANR Local Distribution Firm Sales #1 Firm Sales #2 Firm Sales #3 3/1/2015– 2/28/2045 11/1/2015 – 9/

  38. Slide 38: Firm Transportation Reduces Appalachian Basis Exposure

    FIRM TRANSPORTATION REDUCES APPALACHIAN BASIS EXPOSURE  Antero’s firm transportation (FT) portfolio increases visibility on production growth and increases exposure to Gulf Coast and Midwest pricing, with little incremental cost per Mcf  Reduces weighted average basis by $0.28 per MMBtu compared t

  39. Slide 39: Antero Firm Transportation Appropriately Designed to Accommodate Growth

    ANTERO FIRM TRANSPORTATION APPROPRIATELY DESIGNED TO ACCOMMODATE GROWTH Marketable FT (BBtu/d) (2) (3) % FT Utilization • Antero’s firm transport (FT) is well (BBtu/d) Firm Transportation / Firm Sales (BBtu/d) (including utilized during 2015 (72%) marketable FT): 2,500 Risked Gross Gas Production Ta

  40. Slide 40: Health, Safety, Environment & Community

    HEALTH, SAFETY, ENVIRONMENT & COMMUNITY Antero Core Values: Protect Our People, Communities And The Environment Strong West Virginia Keys to Execution Presence  Antero has more than 3,500 employees and contract personnel working full-time  79% of all Antero Marcellus for Antero in West Virginia. 7

  41. Slide 41: 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

  42. Slide 42: Antero Midstream Asset Overview

    Antero Midstream (NYSE: AM) Asset Overview 41

  43. Slide 43: Antero Midstream – 2015 Guidance

    ANTERO MIDSTREAM – 2015 GUIDANCE Key Operating & Financial Assumptions Key Variable 2015 Guidance Adjusted EBITDA ($MM) $150 - $160 Distributable Cash Flow ($MM) $135 - $145 Year-over-Year Distribution Growth 28% - 30% Low Pressure Pipelines Added (Miles) 44 High Pressure Pipelines Added (Miles) 20

  44. Slide 44: Antero Midstream Partners Overview

    ANTERO MIDSTREAM PARTNERS OVERVIEW Midstream Assets Utica • Gathering and compression assets in core of rapidly Shale growing Marcellus and Utica Shale plays – Acreage dedication of ~417,000 net leasehold acres for gathering and compression services – 100% fixed fee long term contracts • AR owns 70%

  45. Slide 45: High Growth Throughput

    HIGH GROWTH THROUGHPUT Low Pressure Gathering (MMcf/d) Compression (MMcf/d) 1,000 250 Marcellus 222 Utica Marcellus 800 738 200 600 533 150 116 386 400 100 331 281 216 200 50 40 36 41 26 31 108 0 0 2Q '13 3Q '13 4Q '13 1Q '14 2Q '14 3Q '14 4Q '14 2Q '13 3Q '13 4Q '13 1Q '14 2Q '14 3Q '14 4Q '14 High

  46. Slide 46: Significant Financial Flexibility

    SIGNIFICANT FINANCIAL FLEXIBILITY AM Liquidity (12/31/2014) Financial Flexibility • Unfunded $1 billion revolver in place to fund future growth ($ in millions) capital (5x Debt/EBITDA Cap) Revolver Capacity $1,000 • $230 million of cash at 12/31/2014 Less: Borrowings - • Sponsor (NYSE: AR) has Ba2/B

  47. Slide 47: Appendix

    APPENDIX 46

  48. Slide 48: Pro Forma Capitalization – Consolidated

    PRO FORMA CAPITALIZATION – CONSOLIDATED Pro Forma Pro Forma Senior Notes(3) Equity(4) ($ in millions) 12/31/2014 12/31/2014 12/31/2014 Cash $246 $246 $246 Senior Secured Revolving Credit Facility 1,730 991 512 6.00% Senior Notes Due 2020 525 525 525 5.375% Senior Notes Due 2021 1,000 1,000 1,000 5.1

  49. Slide 49: Outstanding Reserve Growth

    OUTSTANDING RESERVE GROWTH NET PROVED RESERVES (Tcfe)(1) 2014 RESERVE ADDITIONS • 3P reserves increased 16% to 40.7 Tcfe at 12/31/14 with a (Tcfe) Marcellus Utica PV-10 of $22.8 billion 14.0 − Estimated 10% well cost reduction since YE 2014 results 12.7 12.0 in $2.0 billion increase in 3P PV-10 10.0

  50. Slide 50: Completion Deferrals – Optimizing Pricing

    COMPLETION DEFERRALS – OPTIMIZING PRICING  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 esti

  51. Slide 51: 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(1) ETH

  52. Slide 52: Most Active Land Organization in Appalachia

    MOST ACTIVE LAND ORGANIZATION IN APPALACHIA  Assembled a 543,000 net acre position in the core of the Marcellus and Utica shale plays over the past 6 years Dec 2008 Dec 2011 Dec 2014 December 2008 December 2011(1) December 2014(1) Net Acreage 118,000 Net Acreage 213,000 Net Acreage 543,000 Net Prod

  53. Slide 53: Marcellus Single Well Economics – In Ethane Rejection

    MARCELLUS SINGLE WELL ECONOMICS – IN ETHANE REJECTION Assumptions Marcellus SSL Well Economics and Total Gross Locations(1)  Natural Gas – 12/31/2014 strip 60% 1,010 1,050  Oil – 12/31/2014 strip 889 900  NGLs – 50% of Oil Price 43% Total 3P Locations 45% 750 628 NYMEX WTI C3+ NGL(2) 664 29% 600

  54. Slide 54: Utica Single Well Economics – In Ethane Rejection

    UTICA SINGLE WELL ECONOMICS – IN ETHANE REJECTION Assumptions Utica Well Economics and Gross Locations(1)  Natural Gas – 12/31/2014 strip 289 60% 300 248 52%  Oil – 12/31/2014 strip 254 Total 3P Locations 250  NGLs – 50% of Oil Price 45% 37% 38% 200 ROR NYMEX WTI C3+ NGL(2) 139 ($/MMBtu) ($/Bbl)

  55. Slide 55: Historical Antero Hedging Results

    HISTORICAL ANTERO HEDGING RESULTS  Antero has realized over $900 million of gains on commodity hedges over the past 7 years – Gains realized in 26 of last 28 quarters Quarterly Realized Gains/(Losses) $MMs 1Q '08 - 4Q '14 $/Mcfe $100.0 $4.00 $82.5 $78.0 $3.50 $80.0 $80.0 $3.00 $2.50 $58.7 $54.0 $58

  56. Slide 56: Completion Deferrals – Optimizing Pricing

    COMPLETION DEFERRALS – OPTIMIZING PRICING  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 esti

  57. Slide 57: Balance Sheet Positioned for Long-Term Growth

    BALANCE SHEET POSITIONED FOR LONG-TERM GROWTH  The recent bond and equity offerings have allowed Antero to reduce its cost of debt to 5.0% and significantly enhance liquidity while extending the pro forma average debt maturity to December 2021 − Pro forma for the recent $750 million 5.625% Senior N

  58. Slide 58: Positive Ratings Momentum

    POSITIVE RATINGS MOMENTUM Moody’s / S&P Historical Corporate Credit Ratings Moody’s Upgrade Rationale S&P Upgrade Criteria "The upgrade reflects Moody's expectation that Antero will continue to “We could raise the ratings due to our assessment of an improvement in report strong production growth and

  59. Slide 59: Marcellus & Utica – Advantaged Economics

    MARCELLUS & UTICA – ADVANTAGED ECONOMICS  Low cost, liquids-rich Utica and Marcellus Shales will remain attractive in most commodity price environments U.S. INCREMENTAL GAS SUPPLY BREAK-EVEN PRICE CURVE(1) 3,037 Antero Drilling Locations Needed to make up NE (Dry) for base declines in Marcellus Eag

  60. Slide 60: LNG Exports by Project – Current Status

    LNG EXPORTS BY PROJECT – CURRENT STATUS LNG Exports by Project – Current Status Dates of Key Milestones Send Out Non- DOE Non-FTA FERC FTA Permit Underlying Permit Construction Capacity Gas Demand Project Awarded Approval (Bcf/d) (Bcf/d) Contracts Offtakers Sabine Pass 1-4 05/20/11 04/16/12 2.20 2.4

  61. Slide 61: Cautionary Note Regarding Hydrocarbon Quantities

    CAUTIONARY NOTE Regarding Hydrocarbon Quantities 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

Antero Resources — Investor Presentation (March 2015) on 6ix