Fee
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (IRS Employer Identification No.) | |
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act: | ||||
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. ☒
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). ☒
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.
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)
The registrant had
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 38 | |||
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1
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. |
2
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.
3
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 | $ | — | | ||||
Accounts receivable | |
| | ||||
Accrued revenue | | | |||||
Derivative instruments | | | |||||
Other current assets | | | |||||
Total current assets | | | |||||
Property and equipment: | |||||||
Oil and gas properties, at cost (successful efforts method): | |||||||
Unproved properties | | | |||||
Proved properties | | | |||||
Gathering systems and facilities | | | |||||
Other property and equipment | | | |||||
| | ||||||
Less accumulated depletion, depreciation, and amortization | ( | ( | |||||
Property and equipment, net | | | |||||
Operating leases right-of-use assets | | | |||||
Derivative instruments | | | |||||
Investment in unconsolidated affiliate | | | |||||
Other assets | | | |||||
Total assets | $ | | | ||||
Liabilities and Equity | |||||||
Current liabilities: |
| ||||||
Accounts payable | $ | |
| | |||
Accounts payable, related parties | | | |||||
Accrued liabilities | | | |||||
Revenue distributions payable | | | |||||
Derivative instruments | | | |||||
Short-term lease liabilities | | | |||||
Deferred revenue, VPP | | | |||||
Other current liabilities | | | |||||
Total current liabilities | | | |||||
Long-term liabilities: | |||||||
Long-term debt | | | |||||
Deferred income tax liability | | | |||||
Derivative instruments | | | |||||
Long-term lease liabilities | | | |||||
Deferred revenue, VPP | | | |||||
Other liabilities | | | |||||
Total liabilities | | | |||||
Commitments and contingencies (Notes 13 and 14) | |||||||
Equity: | |||||||
Stockholders' equity: | |||||||
Preferred stock, $ | |||||||
Common stock, $ | | | |||||
Additional paid-in capital | | | |||||
Accumulated deficit | ( | ( | |||||
Total stockholders' equity | | | |||||
Noncontrolling interests | | | |||||
Total equity | | | |||||
Total liabilities and equity | $ | | |
See accompanying notes to unaudited condensed consolidated financial statements.
4
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 | $ | | | ||||
Natural gas liquids sales | | | |||||
Oil sales | | | |||||
Commodity derivative fair value losses | ( | ( | |||||
Marketing | | | |||||
Amortization of deferred revenue, VPP | — | | |||||
Gain on sale of assets | — | | |||||
Other income (loss) | | ( | |||||
Total revenue | | | |||||
Operating expenses: | |||||||
Lease operating | | | |||||
Gathering, compression, processing, and transportation | | | |||||
Production and ad valorem taxes | | | |||||
Marketing | | | |||||
Exploration | | | |||||
Impairment of oil and gas properties | | | |||||
Depletion, depreciation, and amortization | | | |||||
Accretion of asset retirement obligations | | | |||||
General and administrative (including equity-based compensation expense of $ | | | |||||
Contract termination and rig stacking | | | |||||
Total operating expenses | | | |||||
Operating loss | ( | ( | |||||
Other income (expense): | |||||||
Equity in earnings of unconsolidated affiliate | | | |||||
Transaction expense | ( | ( | |||||
Interest expense, net | ( | ( | |||||
Gain (loss) on early extinguishment of debt | | ( | |||||
Loss on convertible note equitization | — | ( | |||||
Total other income (expense) | | ( | |||||
Loss before income taxes | ( | ( | |||||
Provision for income tax benefit | | | |||||
Net loss and comprehensive loss including noncontrolling interests | ( | ( | |||||
Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests | | ( | |||||
Net loss and comprehensive loss attributable to Antero Resources Corporation | $ | ( | ( | ||||
Loss per share—basic | $ | ( | ( | ||||
Loss per share—diluted | $ | ( | ( | ||||
Weighted average number of shares outstanding: | |||||||
Basic | | | |||||
Diluted | | |
See accompanying notes to unaudited condensed consolidated financial statements.
5
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 | $ | | | ||||
Natural gas liquids sales | | | |||||
Oil sales | | | |||||
Commodity derivative fair value gains (losses) | | ( | |||||
Marketing | | | |||||
Amortization of deferred revenue, VPP | — | | |||||
Gain on sale of assets | — | | |||||
Other income | | | |||||
Total revenue | | | |||||
Operating expenses: | |||||||
Lease operating | | | |||||
Gathering, compression, processing, and transportation | | | |||||
Production and ad valorem taxes | | | |||||
Marketing | | | |||||
Exploration | | | |||||
Impairment of oil and gas properties | | | |||||
Depletion, depreciation, and amortization | | | |||||
Accretion of asset retirement obligations | | | |||||
General and administrative (including equity-based compensation expense of $ | | | |||||
Contract termination and rig stacking | | | |||||
Total operating expenses | | | |||||
Operating loss | ( | ( | |||||
Other income (expense): | |||||||
Interest expense, net | ( | ( | |||||
Equity in earnings (loss) of unconsolidated affiliate | ( | | |||||
Gain (loss) on early extinguishment of debt | | ( | |||||
Loss on convertible note equitizations | — | ( | |||||
Impairment of equity method investment | ( | — | |||||
Transaction expense | ( | ( | |||||
Total other expenses | ( | ( | |||||
Loss before income taxes | ( | ( | |||||
Provision for income tax benefit | | | |||||
Net loss and comprehensive loss including noncontrolling interests | ( | ( | |||||
Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests | | ( | |||||
Net loss and comprehensive loss attributable to Antero Resources Corporation | $ | ( | ( | ||||
Loss per share—basic | $ | ( | ( | ||||
Loss per share—diluted | $ | ( | ( | ||||
Weighted average number of shares outstanding: | |||||||
Basic | | | |||||
Diluted | | |
See accompanying notes to unaudited condensed consolidated financial statements.
6
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 | | $ | | | | — | | ||||||||||||
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes | | | ( | — | — | ( | |||||||||||||
Repurchases and retirements of common stock | ( | ( | ( | — | — | ( | |||||||||||||
Equity-based compensation | — | — | | — | — | | |||||||||||||
Net loss and comprehensive loss | — | — | — | ( | — | ( | |||||||||||||
Balances, March 31, 2020 | | | | | — | | |||||||||||||
Issuance of common units in Martica Holdings, LLC | — | — | — | — | | | |||||||||||||
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes | | | ( | — | — | ( | |||||||||||||
Distributions to noncontrolling interest | — | — | — | — | ( | ( | |||||||||||||
Repurchases and retirements of common stock | ( | ( | ( | — | — | ( | |||||||||||||
Equity-based compensation | — | — | | — | — | | |||||||||||||
Net income (loss) and comprehensive income (loss) | — | — | — | ( | | ( | |||||||||||||
Balances, June 30, 2020 | | $ | | | | | | ||||||||||||
Balances, December 31, 2020 | | $ | | | ( | | | ||||||||||||
Issuance of common shares | | | | — | — | | |||||||||||||
Issuance of common units in Martica Holdings, LLC | — | — | — | — | | | |||||||||||||
Equity component of 2026 Convertible Notes, net | — | — | ( | — | — | ( | |||||||||||||
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes | | | ( | — | — | ( | |||||||||||||
Distributions to noncontrolling interest | — | — | — | — | ( | ( | |||||||||||||
Equity-based compensation | — | — | | — | — | | |||||||||||||
Net income (loss) and comprehensive income (loss) | — | — | — | ( | | ( | |||||||||||||
Balances, March 31, 2021 | | | | ( | | | |||||||||||||
Issuance of common shares | | | | — | — | | |||||||||||||
Equity component of 2026 Convertible Notes, net | — | — | ( | — | — | ( | |||||||||||||
Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes | | | ( | — | — | ( | |||||||||||||
Distributions to noncontrolling interest | — | — | — | — | ( | ( | |||||||||||||
Equity-based compensation | — | — | | — | — | | |||||||||||||
Net loss and comprehensive loss | — | — | — | ( | ( | ( | |||||||||||||
Balances, June 30, 2021 | | $ | | | ( | | |
See accompanying notes to unaudited condensed consolidated financial statements.
7
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 | $ | ( | ( | ||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depletion, depreciation, amortization, and accretion | | | |||||
Impairments | | | |||||
Commodity derivative fair value losses (gains) | ( | | |||||
Gains (losses) on settled commodity derivatives | | ( | |||||
Payments for derivative monetizations | — | ( | |||||
Gain on sale of assets | — | ( | |||||
Equity-based compensation expense | | | |||||
Deferred income tax benefit | ( | ( | |||||
Equity in (earnings) loss of unconsolidated affiliate | | ( | |||||
Dividends of earnings from unconsolidated affiliate | | | |||||
Amortization of deferred revenue | — | ( | |||||
Amortization of debt issuance costs, debt discount, debt premium and other | | | |||||
(Gain) loss on early extinguishment of debt | ( | | |||||
Loss on convertible note equitizations | — | | |||||
Changes in current assets and liabilities: | |||||||
Accounts receivable | ( | ( | |||||
Accrued revenue | | ( | |||||
Other current assets | | | |||||
Accounts payable including related parties | ( | | |||||
Accrued liabilities | | | |||||
Revenue distributions payable | ( | | |||||
Other current liabilities | ( | | |||||
Net cash provided by operating activities | | | |||||
Cash flows provided by (used in) investing activities: | |||||||
Additions to unproved properties | ( | ( | |||||
Drilling and completion costs | ( | ( | |||||
Additions to other property and equipment | ( | ( | |||||
Settlement of water earnout | | — | |||||
Proceeds from asset sales | — | | |||||
Change in other liabilities | — | ( | |||||
Change in other assets | | | |||||
Net cash used in investing activities | ( | ( | |||||
Cash flows provided by (used in) financing activities: | |||||||
Repurchases of common stock | ( | — | |||||
Issuance of senior notes | — | | |||||
Repayment of senior notes | ( | ( | |||||
Borrowings (repayments) on bank credit facilities, net | | ( | |||||
Payment of debt issuance costs | — | ( | |||||
Sale of noncontrolling interest | | | |||||
Distributions to noncontrolling interests in Martica Holdings LLC | — | ( | |||||
Employee tax withholding for settlement of equity compensation awards | ( | ( | |||||
Convertible note equitizations | — | ( | |||||
Other | ( | ( | |||||
Net cash provided by (used in) financing activities | | ( |