Antero Resources Corporation · NYSE:AR
Antero Resources — Antero Midstream Partners — Merger or Acquisition (December 2018)
40 slides from Antero Resources's merger presentation, Dec 19, 2018
Slide 1: Legal Disclaimer
Legal Disclaimer NO OFFER OR SOLICITATION This presentation includes a discussion of a proposed business combination transaction (the “Transaction”) between AM and AMGP. This presentation is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to b
Slide 2: Legal Disclaimer
Legal Disclaimer 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 activitie
Slide 3: The Size and Scale to Capitalize on the Resource
The Size and Scale to Capitalize on the Resource 4 Antero Resources december 2018 presentation Market Cap . ........... Enterprise Value(1) . Corporate Debt Ratings Stand-Alone Leverage(2) Net Production (2018E) ....... Liquids................................ 3P Reserves .. ........... C2+ NGLs(3)..
Slide 4: Recent Developments / Near-Term Catalysts
Recent Developments/ Near-Term Catalysts Hedge Monetizations and Restructuring (December 2018) Generated Proceeds of $357 million to repay debt Monetized 68% of Apr-Dec 2019 natural gas fixed price swaps Replaced with collars ($2.50/MMBtu floor and an average $3.38/MMBtu ceiling) Reset 70% of 2020 f
Slide 5: 2019 Hedge Restructuring
2019 Hedge Restructuring 6 Antero 2019 Natural Gas Hedge Profile Total hedged volume remains unchanged at 100% of expected natural gas production for 2019 Antero monetized 1.575 Bcf/d of swaps generating approximately $235 MM in proceeds April – December 2019 swaps monetized at attractive NYMEX leve
Slide 6: 2020 Hedge Restructuring
2020 Hedge Restructuring 7 Antero 2020 Natural Gas Hedge Profile Total hedged volume remains unchanged Antero reset 2020 swaps at slightly lower prices generating approximately $122 MM in proceeds NYMEX swap price reduced from $3.25/MMBtu to $3.00/MMBtu in 2020 No change to overall hedged volumes Pr
Slide 7: Natural Gas Price Realizations Provide 4Q18 Uplift
Natural Gas Price Realizations Provide 4Q18 Uplift 8 AR’s 400 MMcf/d of unhedged natural gas production in 4Q18 provides exposure to recent natural gas price surge Rover Sherwood Lateral was placed into service in November unlocking 550 MMcf/d exposure to Midwest & Gulf Coast markets Rover Pipeline
Slide 8: Expected Natural Gas Price Realization Improvement
Note: Q4 2018 based on October and November actuals and a combination of first of month and gas daily pricing for December 2018. 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
Slide 9: Simplification Transaction – A Near Term Catalyst
Simplification Transaction – A Near Term Catalyst Achieves a “Win-Win-Win” Transaction Across the Antero Family Simplifies the Structure and Unlocks Shareholder Value Maintains Antero’s Integrated Strategy & Long-Term Outlook Further Aligns the Interest of All Antero Equity Holders and Management Mi
Slide 10: Status Quo Structure 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 11: Diversified Business Reduces Commodity Risk
Diversified Business Reduces Commodity Risk 12 Positive Variance: NYMEX HH Price 16% 400 MMcf/d unhedged exposure AR realized premium to NYMEX HH 45% +550 MMcf/d to premium priced Chicago market via Rover Negative Variance: WTI Oil Price 10% Net Loss on hedging contracts due to natural gas spike Nat
Slide 12: The Value Proposition
Antero Resources December 2018 Presentation 13 The Value Proposition Future Liquids and Natural Gas Prices: Up 5-10% (2) Q4 Free Cash Flow Generation & Simplified Corporate Structure (3) Adj. EBITDAX, Production and Reserves: Up ~20%(1) Total Net Debt: Down 18%(1) Yet Trading Multiples & Market Cap:
Slide 13: Natural Gas Liquids Update: Leading Position
Natural Gas Liquids Update: Leading Position
Slide 14: Largest NGL Producer
Largest NGL Producer Undrilled Core Liquids-rich Inventory(1) Top U.S. C2+ NGL Producers - 2018E(2) Antero is the largest NGL producer in the U.S. and controls 40% of the core undrilled liquids-rich locations in Appalachia Over 2.5x inventory of closest Appalachian competitor Most exposure to NGL pr
Slide 15: A Leader in Realized Pricing and Adj. EBITDAX Margins
A Leader in Realized Pricing and Adj. EBITDAX Margins Antero’s integrated strategy has resulted in peer-leading realized prices and margins for 6 straight years and consistent results through price cycles All-in Pricing Realizations ($/Mcfe) Standalone E&P Adj. EBITDAX Margins ($/Mcfe) Source: SEC f
Slide 16: Antero's Ethane Exposure: All Upside
Antero’s Ethane Exposure: All Upside 17 Antero’s balanced approach to ethane sales results in 50% of contracts tied to purity ethane prices vs. natural gas value +$0.10/gal ethane price change equates to $40 MM in incremental revenue Ethane Revenue Uplift ($MM) Ethane sensitivity: +$0.10/gallon x 20
Slide 17: Powerful C3+ NGL Pricing Upside Exposure
Pre-Hedge Revenue Sensitivity to C3+ NGL Pricing ($MM) Note: Represents 11/30/2018 strip Mont Belvieu pricing. 2019 volumes assume 20% liquids growth vs. 2018 C3+ guidance of 77,500 Bbl/d. Assumes C3+ barrel weightings of: propane 57%, normal butane 16%, isobutane 10%, pentanes 17% and reflects diff
Slide 18: 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) $0.78 Pipeline, Terminal & Shipping Cost (1) $(0.24) NWE Netback $0.54 Blended Conway / MB Netback $0.46 Uplift vs. YTD 2018 Average Differential +$0.08 Asia Netback 2019 FEI Price ($/Gal) $0
Slide 19: Liquids-Rich Resource + Capital Efficiency = Free Cash Flow
Liquids-Rich Resource + Capital Efficiency = Free Cash Flow
Slide 20: Drilling and Completion Efficiencies
22 Drilling and Completion Efficiencies Average Lateral Feet per Day Drilling Days Average Lateral Length per Well Completion Stages per Day Liquids resource + capital efficiency = free cash flow cost efficiency drivers 8,206 72% Increase 28% Increase 228% Increase Note: Utica 3Q 2018 results reflec
Slide 21: Integrated Business Strategy Drives Peer Leading Margins
Integrated Business Strategy Drives Peer Leading Margins
Slide 22: Midstream Driving Value for AR Since Inception
Midstream Driving Value for AR Since Inception 24 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 (4.7x ROI for AR)
Slide 23: Antero Midstream At A Glance – Status Quo
Antero Midstream At A Glance – Status Quo 25 Market Cap ....... Enterprise Value ......... . LTM Adjusted EBITDA(1) .. % Gathering/Compression % Water .. .. .. .. .. Net Debt/LTM Adj. EBITDA . Corporate Debt Rating . $4.7B $6.3B $665 MM 65% 35% 2.3x Ba2 / BB+ /BBB- Note: Equity market data as of 12/
Slide 24: Antero: Not Just a Natural Gas Producer
Antero: Not Just a Natural Gas Producer Liquids-Rich Resource and Scale Diversified Commodity Mix Enhances Shareholder Value Top NGL producer in the U.S. Control Resource Development Mitigate Commodity Risk Just-in-time midstream investment 100% hedged on natural gas in 2019 @ $3.00/MMbtu floor on a
Slide 25: Antero: Not Just a Natural Gas Producer
Antero: Not Just a Natural Gas Producer abitrrsero Diversified Commodity Mix Enhances Shareholder Value Shareholder Value $600MM share Top NGL producer repurchase program in the U.S. Liquids-Rich Resource and Scale Return of Capital Just-in-time midstream investment Control Maintain <2.2x by YE 2018
Slide 26: Antero Pro Forma Hedge Position
Antero Pro Forma Hedge Position 28 Antero Hedge Profile Total proceeds from hedge restructuring of $357 MM in proceeds Monetize + maintain upside to call price 30% Swaps 30% Swaps 30% Swaps 1) Based on 12/17/2018 strip pricing . $2.50 $3.44 appendix pro forma hedge position (MMcf/d) ($/MMBtu) 1,149
Slide 27: Compelling Full Cycle Well Economics
Compelling Full Cycle Well Economics 29 Single Well Economics Bridge to Corporate Level Returns Fully Burdened Corporate Level Well Economics are Outstanding Note: See slide #33 for further detail behind full cycle and half cycle single well economics; WACC calculated using CAPM. ROR (D&C only) burd
Slide 28: Debt Maturity Profile
9/30/2018 Debt Maturity Profile Liquidity & Debt Term Structure AR Credit Facility AM Credit Facility AR Senior Notes AM Senior Notes New credit facilities for AR and AM have allowed Antero to extend its average debt maturity out to 2022 30 Appendix consolidated liquidity and balance sheet No maturi
Slide 29: Delevering is Driving Ratings Momentum
Delevering is Driving Ratings Momentum 31 Appendix Trending towards investment grade Corporate Credit Ratings History Corporate Credit Rating (Moody’s / S&P / Fitch) Ba3 / BB- B1 / B+ B2 / B B3 / B- Ba2 / BB Ba1 / BB+ Caa1 / CCC+ / CCC Baa3 / BBB- 2010 Investment Grade Rating: BBB- Fitch Jan. 2018 S
Slide 30: Cost Efficiency Drivers: Well Cost Reduction
32 Appendix Cost Efficiency Drivers: Well cost Reduction Dramatically Lower F&D Cost F&D Cost per Mcfe(1)(2) Ethane rejection assumed. F&D cost is defined as current D&C cost per 1,000’ lateral divided by net EUR per 1,000’ lateral assuming 85% NRI in Marcellus and 81% NRI in Utica. Please see “Ante
Slide 31: Antero Assumptions: Single Well Economics
Antero Assumptions: Single Well Economics 33 Appendix single well economics SWE Cost Type Description of Cost Half Cycle Full Cycle Well Costs Drilling and completion costs Assumes well costs for a 12,000’ lateral, 2,000 lbs of proppant per lateral foot and both fresh and flowback water Utica Conden
Slide 32: Appendix Disclosures & Reconciliations: Antero Definitions
34 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 33: Antero Non-GAAP Measures
35 Antero Non-GAAP Measures Consolidated Adjusted EBITDAX, Stand-Alone Adjusted EBITDAX, Consolidated Adjusted Operating Cash Flow, Stand-Alone Adjusted Operating Cash Flow and Free Cash Flow are financial measures that are not calculated in accordance with U.S. generally accepted accounting princip
Slide 34: 2018 Guidance
Appendix 2018 guidance 2018 Guidance Stand-Alone Consolidated Net Daily Production (Bcfe/d) ~2.7 Net Liquids Production (BBl/d) ~130,000 Natural Gas Realized Price Differential to Nymex $0.05 to $0.10 Premium C3+ NGL Realized Price (% of Nymex WTI) 57.5% – 62.5% Cash Production Expense ($/Mcfe) $2.0
Slide 35: Stand-Alone Adjusted 4Q18 EBITDAX Reconciliation
Antero Resources Stand-Alone Adjusted 4Q18 EBITDAX Reconciliation Appendix disclosures & reconciliations 37 Antero has not included a reconciliation of fourth quarter 2018 Stand-Alone Adjusted EBITDAX to their nearest GAAP financial measures for the fourth quarter of 2018 because it cannot do so wit
Slide 36: Antero Non-GAAP Measures
38 Appendix II disclosures & reconciliations Antero Non-GAAP Measures Antero has not included a reconciliation of Consolidated Adjusted EBITDAX or Stand-alone E&P Adjusted EBITDAX to their nearest GAAP financial measures for 2018 because it cannot do so without unreasonable effort and any attempt to
Slide 37: Standalone Adjusted EBITDAX Reconciliation
Antero Resources Standalone Adjusted EBITDAX Reconciliation Standalone LTM Adjusted EBITDAX Reconciliation Appendix disclosures & reconciliations 39 Stand-Alone Twelve months ended September 30, (in thousands) 2018 Net income attributable to Antero Resources Corporation $ 210,898 Commodity derivativ
Slide 38: Stand-alone Adjusted EBITDAX Per Mcfe
Antero Resources Stand-alone Adjusted EBITDAX Per Mcfe Appendix disclosures & reconciliations 40 Standalone 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 41 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-GAAP Measures The following table reconcil {in thousands): 's consolidated total debt to consolidated net debt ("Net Debt") as used in this presentation September 30, 2018, Bank credit facility s 5.375% AM senior notes due 2024 Net unamortized debt issuance costs Consolidated
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