Fee

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36120

ANTERO RESOURCES CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		80-0162034
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1615 Wynkoop Street, Denver, Colorado		80202
(Address of principal executive offices)		(Zip Code)

(303) 357-7310

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	AR	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒		Accelerated Filer ☐
Non-accelerated Filer ☐		Smaller Reporting Company ☐
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes ☒ No

The registrant had 313,864,919 shares of common stock outstanding as of July 23, 2021.

Table of Contents

TABLE OF CONTENTS


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		2
PART I—FINANCIAL INFORMATION		4
Item 1.	Financial Statements (Unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	58
Item 4.	Controls and Procedures	60

PART II—OTHER INFORMATION		61
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities	61
Item 6.	Exhibits	62
SIGNATURES		63

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. Words such as “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential,” or “continue,” and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. When considering these forward-looking statements, investors should keep in mind the risk factors and other cautionary statements in this Quarterly Report on Form 10-Q. These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

●

our ability to execute our business strategy;

●

our production and oil and gas reserves;

●

our financial strategy, liquidity and capital required for our development program;

●

our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;

●

natural gas, natural gas liquids (“NGLs”), and oil prices;

●

impacts of world health events, including the coronavirus (“COVID-19”) pandemic;

●

timing and amount of future production of natural gas, NGLs, and oil;

●

our hedging strategy and results;

●

our ability to meet minimum volume commitments and to utilize or monetize our firm transportation commitments;

●

our future drilling plans;

●

our projected well costs and cost savings initiatives, including with respect to water handling services provided by Antero Midstream Corporation;

●

competition and government regulations;

●

pending legal or environmental matters;

●

marketing of natural gas, NGLs, and oil;

●

leasehold or business acquisitions;

●

costs of developing our properties;

●

operations of Antero Midstream Corporation;

●

general economic conditions;

●

credit markets;

●

uncertainty regarding our future operating results; and

●

our other plans, objectives, expectations and intentions contained in this Quarterly Report on Form 10-Q.

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We caution investors that these forward-looking statements are subject to all of the risks and uncertainties incidental to our business, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, availability of drilling, completion, and production equipment and services, environmental risks, drilling and completion and other operating risks, marketing and transportation risks, regulatory changes, the uncertainty inherent in estimating natural gas, NGLs, and oil reserves and in projecting future rates of production, cash flows and access to capital, the timing of development expenditures, conflicts of interest among our stockholders, impacts of world health events (including the COVID-19 pandemic), cybersecurity risks and the other risks described or referenced under the heading “Item 1A. Risk Factors” herein, including the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), which is on file with the Securities and Exchange Commission (“SEC”).

Reserve engineering is a process of estimating underground accumulations of natural gas, NGLs, and oil that cannot be measured in an exact manner. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data, and the price and cost assumptions made by reservoir engineers. In addition, the results of drilling, testing, and production activities, or changes in commodity prices, may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of natural gas, NGLs, and oil that are ultimately recovered.

Should one or more of the risks or uncertainties described or referenced in this Quarterly Report on Form 10-Q occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

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PART I—FINANCIAL INFORMATION

ANTERO RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)


			(Unaudited)
	December 31,		June 30,
	2020		2021
Assets
Current assets:
Cash and cash equivalents	$	—		4,541
Accounts receivable		28,457		36,145
Accrued revenue		425,314		493,740
Derivative instruments		105,130		1,056
Other current assets		15,238		14,958
Total current assets		574,139		550,440
Property and equipment:
Oil and gas properties, at cost (successful efforts method):
Unproved properties		1,175,178		1,076,562
Proved properties		12,260,713		12,479,785
Gathering systems and facilities		5,802		5,802
Other property and equipment		74,361		77,231
		13,516,054		13,639,380
Less accumulated depletion, depreciation, and amortization		(3,869,116)		(4,095,539)
Property and equipment, net		9,646,938		9,543,841
Operating leases right-of-use assets		2,613,603		2,486,044
Derivative instruments		47,293		19,396
Investment in unconsolidated affiliate		255,082		237,668
Other assets		13,790		10,944
Total assets	$	13,150,845		12,848,333

Liabilities and Equity
Current liabilities:
Accounts payable	$	26,728		39,612
Accounts payable, related parties		69,860		85,471
Accrued liabilities		343,524		433,050
Revenue distributions payable		198,117		267,926
Derivative instruments		31,242		733,994
Short-term lease liabilities		266,024		269,611
Deferred revenue, VPP		45,257		41,453
Other current liabilities		2,302		11,980
Total current liabilities		983,054		1,883,097
Long-term liabilities:
Long-term debt		3,001,593		2,415,163
Deferred income tax liability		412,252		214,292
Derivative instruments		99,172		204,525
Long-term lease liabilities		2,348,785		2,217,336
Deferred revenue, VPP		156,024		137,322
Other liabilities		59,694		58,184
Total liabilities		7,060,574		7,129,919
Commitments and contingencies (Notes 13 and 14)
Equity:
Stockholders' equity:
Preferred stock, $0.01 par value; authorized - 50,000 shares; none issued		—		—
Common stock, $0.01 par value; authorized - 1,000,000 shares; 268,672 shares and 313,527 shares issued and outstanding as of December 31, 2020 and June 30, 2021, respectively		2,686		3,135
Additional paid-in capital		6,195,497		6,363,774
Accumulated deficit		(430,478)		(969,444)
Total stockholders' equity		5,767,705		5,397,465
Noncontrolling interests		322,566		320,949
Total equity		6,090,271		5,718,414
Total liabilities and equity	$	13,150,845		12,848,333

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended June 30,
	2020		2021
Revenue and other:
Natural gas sales	$	367,415		626,520
Natural gas liquids sales		212,197		464,381
Oil sales		8,322		51,906
Commodity derivative fair value losses		(168,015)		(831,840)
Marketing		64,285		165,453
Amortization of deferred revenue, VPP		—		11,279
Gain on sale of assets		—		2,288
Other income (loss)		707		(619)
Total revenue		484,911		489,368
Operating expenses:
Lease operating		24,742		21,645
Gathering, compression, processing, and transportation		631,845		641,362
Production and ad valorem taxes		19,992		33,694
Marketing		113,053		198,994
Exploration		231		5,638
Impairment of oil and gas properties		37,350		9,303
Depletion, depreciation, and amortization		214,035		187,330
Accretion of asset retirement obligations		1,111		1,331
General and administrative (including equity-based compensation expense of $7,973 and $4,249 in 2020 and 2021, respectively)		38,403		32,177
Contract termination and rig stacking		11,071		844
Total operating expenses		1,091,833		1,132,318
Operating loss		(606,922)		(642,950)
Other income (expense):
Equity in earnings of unconsolidated affiliate		20,228		17,477
Transaction expense		(6,138)		(185)
Interest expense, net		(51,811)		(49,963)
Gain (loss) on early extinguishment of debt		39,171		(23,065)
Loss on convertible note equitization		—		(11,731)
Total other income (expense)		1,450		(67,467)
Loss before income taxes		(605,472)		(710,417)
Provision for income tax benefit		142,404		175,966
Net loss and comprehensive loss including noncontrolling interests		(463,068)		(534,451)
Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests		236		(10,984)
Net loss and comprehensive loss attributable to Antero Resources Corporation	$	(463,304)		(523,467)

Loss per share—basic	$	(1.73)		(1.70)
Loss per share—diluted	$	(1.73)		(1.70)

Weighted average number of shares outstanding:
Basic		268,386		307,879
Diluted		268,386		307,879

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except per share amounts)


	Six Months Ended June 30,
	2020		2021
Revenue and other:
Natural gas sales	$	778,497		1,346,889
Natural gas liquids sales		469,870		904,700
Oil sales		43,968		96,592
Commodity derivative fair value gains (losses)		397,818		(1,009,596)
Marketing		110,358		330,243
Amortization of deferred revenue, VPP		—		22,429
Gain on sale of assets		—		2,288
Other income		1,505		21
Total revenue		1,802,016		1,693,566
Operating expenses:
Lease operating		50,386		46,192
Gathering, compression, processing, and transportation		1,220,469		1,246,439
Production and ad valorem taxes		45,691		78,391
Marketing		206,326		361,071
Exploration		441		5,857
Impairment of oil and gas properties		126,570		43,365
Depletion, depreciation, and amortization		413,712		381,356
Accretion of asset retirement obligations		2,215		2,119
General and administrative (including equity-based compensation expense of $11,302 and $9,891 in 2020 and 2021, respectively)		69,624		76,251
Contract termination and rig stacking		11,071		935
Total operating expenses		2,146,505		2,241,976
Operating loss		(344,489)		(548,410)
Other income (expense):
Interest expense, net		(104,913)		(92,706)
Equity in earnings (loss) of unconsolidated affiliate		(107,827)		36,171
Gain (loss) on early extinguishment of debt		119,732		(66,269)
Loss on convertible note equitizations		—		(50,777)
Impairment of equity method investment		(610,632)		—
Transaction expense		(6,138)		(2,476)
Total other expenses		(709,778)		(176,057)
Loss before income taxes		(1,054,267)		(724,467)
Provision for income tax benefit		252,389		178,912
Net loss and comprehensive loss including noncontrolling interests		(801,878)		(545,555)
Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests		236		(6,589)
Net loss and comprehensive loss attributable to Antero Resources Corporation	$	(802,114)		(538,966)

Loss per share—basic	$	(2.90)		(1.78)
Loss per share—diluted	$	(2.90)		(1.78)

Weighted average number of shares outstanding:
Basic		276,306		302,343
Diluted		276,306		302,343

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands)


					Additional		Accumulated
	Common Stock				Paid-in		Earnings		Noncontrolling		Total
	Shares		Amount		Capital		(Deficit)		Interests		Equity
Balances, December 31, 2019		295,941	$	2,959		6,130,365		837,419		—		6,970,743
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		178		2		(34)		—		—		(32)
Repurchases and retirements of common stock		(27,193)		(272)		(42,418)		—		—		(42,690)
Equity-based compensation		—		—		3,329		—		—		3,329
Net loss and comprehensive loss		—		—		—		(338,810)		—		(338,810)
Balances, March 31, 2020		268,926		2,689		6,091,242		498,609		—		6,592,540
Issuance of common units in Martica Holdings, LLC		—		—		—		—		300,000		300,000
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		464		5		(305)		—		—		(300)
Distributions to noncontrolling interest		—		—		—		—		(3,413)		(3,413)
Repurchases and retirements of common stock		(1,000)		(10)		(743)		—		—		(753)
Equity-based compensation		—		—		7,973		—		—		7,973
Net income (loss) and comprehensive income (loss)		—		—		—		(463,304)		236		(463,068)
Balances, June 30, 2020		268,390	$	2,684		6,098,167		35,305		296,823		6,432,979

Balances, December 31, 2020		268,672	$	2,686		6,195,497		(430,478)		322,566		6,090,271
Issuance of common shares		31,388		314		238,551		—		—		238,865
Issuance of common units in Martica Holdings, LLC		—		—		—		—		51,000		51,000
Equity component of 2026 Convertible Notes, net		—		—		(116,381)		—		—		(116,381)
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		1,130		11		(5,656)		—		—		(5,645)
Distributions to noncontrolling interest		—		—		—		—		(24,699)		(24,699)
Equity-based compensation		—		—		5,642		—		—		5,642
Net income (loss) and comprehensive income (loss)		—		—		—		(15,499)		4,395		(11,104)
Balances, March 31, 2021		301,190		3,011		6,317,653		(445,977)		353,262		6,227,949
Issuance of common shares		11,588		116		125,262		—		—		125,378
Equity component of 2026 Convertible Notes, net		—		—		(79,497)		—		—		(79,497)
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes		749		8		(3,893)		—		—		(3,885)
Distributions to noncontrolling interest		—		—		—		—		(21,329)		(21,329)
Equity-based compensation		—		—		4,249		—		—		4,249
Net loss and comprehensive loss		—		—		—		(523,467)		(10,984)		(534,451)
Balances, June 30, 2021		313,527	$	3,135		6,363,774		(969,444)		320,949		5,718,414

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2020		2021
Cash flows provided by (used in) operating activities:
Net loss including noncontrolling interests	$	(801,878)		(545,555)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depletion, depreciation, amortization, and accretion		415,927		383,475
Impairments		737,202		43,365
Commodity derivative fair value losses (gains)		(397,818)		1,009,596
Gains (losses) on settled commodity derivatives		524,838		(64,951)
Payments for derivative monetizations		—		(4,569)
Gain on sale of assets		—		(2,288)
Equity-based compensation expense		11,302		9,891
Deferred income tax benefit		(252,389)		(178,912)
Equity in (earnings) loss of unconsolidated affiliate		107,827		(36,171)
Dividends of earnings from unconsolidated affiliate		85,511		74,040
Amortization of deferred revenue		—		(22,429)
Amortization of debt issuance costs, debt discount, debt premium and other		4,433		7,877
(Gain) loss on early extinguishment of debt		(119,732)		66,269
Loss on convertible note equitizations		—		50,777
Changes in current assets and liabilities:
Accounts receivable		(27,329)		(7,687)
Accrued revenue		63,023		(68,425)
Other current assets		789		631
Accounts payable including related parties		(21,182)		6,681
Accrued liabilities		15,722		64,499
Revenue distributions payable		(29,560)		69,809
Other current liabilities		(46)		16,349
Net cash provided by operating activities		316,640		872,272
Cash flows provided by (used in) investing activities:
Additions to unproved properties		(21,672)		(29,473)
Drilling and completion costs		(552,227)		(273,956)
Additions to other property and equipment		(1,234)		(2,320)
Settlement of water earnout		125,000		—
Proceeds from asset sales		—		2,351
Change in other liabilities		—		(77)
Change in other assets		525		597
Net cash used in investing activities		(449,608)		(302,878)
Cash flows provided by (used in) financing activities:
Repurchases of common stock		(43,443)		—
Issuance of senior notes		—		1,800,000
Repayment of senior notes		(496,541)		(1,234,698)
Borrowings (repayments) on bank credit facilities, net		374,000		(1,017,000)
Payment of debt issuance costs		—		(22,440)
Sale of noncontrolling interest		300,000		51,000
Distributions to noncontrolling interests in Martica Holdings LLC		—		(46,028)
Employee tax withholding for settlement of equity compensation awards		(331)		(9,530)
Convertible note equitizations		—		(85,648)
Other		(717)		(509)
Net cash provided by (used in) financing activities		132,968		(