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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, 2022

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: 001-36120

Graphic

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)

(303357-7310

(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 306,119,105 shares of common stock outstanding as of July 22, 2022.

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

37

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

54

Item 4.

Controls and Procedures

55

PART II—OTHER INFORMATION

56

Item 1.

Legal Proceedings

56

Item 1A.

Risk Factors

56

Item 2.

Unregistered Sales of Equity Securities

56

Item 4.

Mine Safety Disclosures

56

Item 6.

Exhibits

57

SIGNATURES

58

1

Table of Contents

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;
our ability to execute our share repurchase program;
natural gas, natural gas liquids (“NGLs”) and oil prices;
impacts of geopolitical events and 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, including with respect to water handling services provided by Antero Midstream Corporation (“Antero Midstream”);
competition;
government regulations and changes in laws;
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;
our ability to achieve our greenhouse gas reduction targets and the costs associated therewith;
general economic conditions;
credit markets;

2

Table of Contents

uncertainty regarding our future operating results; and
our other plans, objectives, expectations and intentions contained in this Quarterly Report on Form 10-Q.

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 or changes in law, 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, the state of markets for, and availability of, verified quality carbon offsets 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, 2021 (the “2021 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

Table of Contents

PART I—FINANCIAL INFORMATION

ANTERO RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

December 31,

June 30,

  

2021

  

2022

Assets

Current assets:

  

Accounts receivable

$

78,998

25,375

Accrued revenue

591,442

952,054

Derivative instruments

757

578

Other current assets

14,922

37,490

Total current assets

686,119

1,015,497

Property and equipment:

Oil and gas properties, at cost (successful efforts method):

Unproved properties

1,042,118

1,014,497

Proved properties

12,646,303

12,910,737

Gathering systems and facilities

5,802

5,802

Other property and equipment

116,522

126,807

13,810,745

14,057,843

Less accumulated depletion, depreciation, and amortization

(4,283,700)

(4,466,297)

Property and equipment, net

9,527,045

9,591,546

Operating leases right-of-use assets

3,419,912

3,355,622

Derivative instruments

14,369

7,058

Investment in unconsolidated affiliate

232,399

229,095

Other assets

16,684

13,882

Total assets

$

13,896,528

14,212,700

Liabilities and Equity

Current liabilities:

  

Accounts payable

$

24,819

87,860

Accounts payable, related parties

76,240

72,871

Accrued liabilities

457,244

496,677

Revenue distributions payable

444,873

485,039

Derivative instruments

559,851

773,357

Short-term lease liabilities

456,347

506,724

Deferred revenue, VPP

37,603

34,107

Other current liabilities

11,140

18,769

Total current liabilities

2,068,117

2,475,404

Long-term liabilities:

Long-term debt

2,125,444

1,577,213

Deferred income tax liability, net

318,126

483,722

Derivative instruments

181,806

393,139

Long-term lease liabilities

2,964,115

2,849,598

Deferred revenue, VPP

118,366

103,215

Other liabilities

54,462

56,546

Total liabilities

7,830,436

7,938,837

Commitments and contingencies

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; 313,930 and 308,812 shares issued and outstanding as of December 31, 2021 and June 30, 2022, respectively

3,139

3,088

Additional paid-in capital

6,371,398

6,119,645

Accumulated deficit

(617,377)

(119,125)

Total stockholders' equity

5,757,160

6,003,608

Noncontrolling interests

308,932

270,255

Total equity

6,066,092

6,273,863

Total liabilities and equity

$

13,896,528

14,212,700

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(In thousands, except per share amounts)

Three Months Ended June 30,

  

2021

  

2022

 

Revenue and other:

Natural gas sales

$

626,520

1,558,994

Natural gas liquids sales

464,381

702,388

Oil sales

51,906

89,185

Commodity derivative fair value losses

(831,840)

(265,662)

Marketing

165,453

106,150

Amortization of deferred revenue, VPP

11,279

9,375

Other income (loss)

(619)

1,255

Total revenue

487,080

2,201,685

Operating expenses:

Lease operating

21,645

25,253

Gathering, compression, processing and transportation

641,362

656,212

Production and ad valorem taxes

33,694

81,842

Marketing

198,994

131,298

Exploration and mine expenses

5,638

1,394

General and administrative (including equity-based compensation expense of $4,249 and $8,171 in 2021 and 2022, respectively)

32,177

44,439

Depletion, depreciation and amortization

187,330

173,395

Impairment of oil and gas properties

9,303

23,363

Accretion of asset retirement obligations

1,331

804

Contract termination

844

2,096

(Gain) loss on sale of assets

(2,288)

71

Total operating expenses

1,130,030

1,140,167

Operating income (loss)

(642,950)

1,061,518

Other income (expense):

Interest expense, net

(49,963)

(34,213)

Equity in earnings of unconsolidated affiliate

17,477

14,713

Loss on early extinguishment of debt

(23,065)

(4,414)

Loss on convertible note equitization

(11,731)

Transaction expense

(185)

Total other expense

(67,467)

(23,914)

Income (loss) before income taxes

(710,417)

1,037,604

Income tax benefit (expense)

175,966

(225,571)

Net income (loss) and comprehensive income (loss) including noncontrolling interests

(534,451)

812,033

Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests

(10,984)

46,898

Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation

$

(523,467)

765,135

Income (loss) per share—basic

$

(1.70)

2.46

Income (loss) per share—diluted

$

(1.70)

2.29

Weighted average number of shares outstanding:

Basic

307,879

310,535

Diluted

307,879

334,561

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(In thousands, except per share amounts)

Six Months Ended June 30,

  

2021

  

2022

Revenue and other:

Natural gas sales

$

1,346,889

2,554,786

Natural gas liquids sales

904,700

1,362,693

Oil sales

96,592

152,479

Commodity derivative fair value losses

(1,009,596)

(1,277,042)

Marketing

330,243

175,188

Amortization of deferred revenue, VPP

22,429

18,647

Other income

21

1,774

Total revenue

1,691,278

2,988,525

Operating expenses:

Lease operating

46,192

43,033

Gathering, compression, processing and transportation

1,246,439

1,246,490

Production and ad valorem taxes

78,391

134,650

Marketing

361,071

230,194

Exploration and mine expenses

5,857

2,292

General and administrative (including equity-based compensation expense of $9,891 and $12,820 in 2021 and 2022, respectively)

76,251

80,130

Depletion, depreciation and amortization

381,356

341,783

Impairment of oil and gas properties

43,365

45,825

Accretion of asset retirement obligations

2,119

3,248

Contract termination

935

2,104

(Gain) loss on sale of assets

(2,288)

1,857

Total operating expenses

2,239,688

2,131,606

Operating income (loss)

(548,410)

856,919

Other income (expense):

Interest expense, net

(92,706)

(71,926)

Equity in earnings of unconsolidated affiliate

36,171

39,891

Loss on early extinguishment of debt

(66,269)

(15,068)

Loss on convertible note equitizations

(50,777)

Transaction expense

(2,476)

Total other expense

(176,057)

(47,103)

Income (loss) before income taxes

(724,467)

809,816

Income tax benefit (expense)

178,912

(172,479)

Net income (loss) and comprehensive income (loss) including noncontrolling interests

(545,555)

637,337

Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests

(6,589)

28,621

Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation

$

(538,966)

608,716

Income (loss) per share—basic

$

(1.78)

1.95

Income (loss) per share—diluted

$

(1.78)

1.81

Weighted average number of shares outstanding:

Basic

302,343

312,300

Diluted

302,343

337,589

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

Common Stock

Paid-in

Accumulated

Noncontrolling

Total

  

Shares

  

Amount

  

Capital

  

Deficit

  

Interests

  

Equity

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)

Equity-based compensation

5,642

5,642

Distributions to noncontrolling interests

(24,699)

(24,699)

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)

Equity-based compensation

4,249

4,249

Distributions to noncontrolling interests

(21,329)

(21,329)

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

Balances, December 31, 2021

313,930

$

3,139

6,371,398

(617,377)

308,932

6,066,092

Equity component of 2026 Convertible Notes, net

(24,411)

3,229

(21,182)

Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes

780

8

(10,385)

(10,377)

Repurchases and retirements of common stock

(3,690)

(37)

(74,745)

(25,263)

(100,045)

Equity-based compensation

4,649

4,649

Distributions to noncontrolling interests

(35,757)

(35,757)

Net loss and comprehensive loss

(156,419)

(18,277)

(174,696)

Balances, March 31, 2022

311,020

3,110

6,266,506

(795,830)

254,898

5,728,684

Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes

2,112

21

(54,463)

(54,442)

Conversion of 2026 Convertible Notes

921

9

3,955

3,964

Repurchases and retirements of common stock

(5,241)

(52)

(104,524)

(88,430)

(193,006)

Equity-based compensation

8,171

8,171

Distributions to noncontrolling interests

(31,541)

(31,541)

Net income and comprehensive income

765,135

46,898

812,033

Balances, June 30, 2022

308,812

$

3,088

6,119,645

(119,125)

270,255

6,273,863

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,

    

2021

  

2022

 

Cash flows provided by (used in) operating activities:

Net income (loss) including noncontrolling interests

$

(545,555)

637,337

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depletion, depreciation, amortization and accretion

383,475

345,031

Impairments

43,365

45,825

Commodity derivative fair value losses

1,009,596

1,277,042

Losses on settled commodity derivatives

(64,951)

(844,713)

Payments for derivative monetizations

(4,569)

Deferred income tax expense (benefit)

(178,912)

171,707

Equity-based compensation expense

9,891

12,820

Equity in earnings of unconsolidated affiliate

(36,171)

(39,891)

Dividends of earnings from unconsolidated affiliate

74,040

62,569

Amortization of deferred revenue

(22,429)

(18,647)

Amortization of debt issuance costs, debt discount and debt premium

7,877

2,515

Settlement of asset retirement obligations

(886)

(Gain) loss on sale of assets

(2,288)

1,857

Loss on early extinguishment of debt

66,269

15,068

Loss on convertible note equitizations

50,777

Changes in current assets and liabilities:

Accounts receivable

(7,687)

53,623

Accrued revenue

(68,425)

(360,612)

Other current assets

631

(22,566)

Accounts payable including related parties

6,681

50,378

Accrued liabilities

64,499

37,203

Revenue distributions payable

69,809

40,166

Other current liabilities

16,349

22,559

Net cash provided by operating activities

872,272

1,488,385

Cash flows provided by (used in) investing activities:

Additions to unproved properties

(29,473)

(72,072)

Drilling and completion costs

(273,956)

(393,506)

Additions to other property and equipment

(2,320)

(11,162)

Proceeds from asset sales

2,351

195

Change in other assets

597

1,711

Change in other liabilities

(77)

Net cash used in investing activities

(302,878)

(474,834)

Cash flows provided by (used in) financing activities:

Repurchases of common stock

(293,051)

Issuance of senior notes

1,800,000

Repayment of senior notes

(1,234,698)

(658,906)

Borrowings (repayments) on bank credit facilities, net

(1,017,000)

70,800

Payment of debt issuance costs

(22,440)

Distributions to noncontrolling interests in Martica Holdings LLC