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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, 2023

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 300,383,794 shares of common stock outstanding as of July 21, 2023.

Table of Contents

TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    

1

PART I—FINANCIAL INFORMATION

3

Item 1.

    

Financial Statements (Unaudited)

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

51

Item 4.

Controls and Procedures

52

PART II—OTHER INFORMATION

53

Item 1.

Legal Proceedings

53

Item 1A.

Risk Factors

53

Item 2.

Unregistered Sales of Equity Securities

53

Item 4.

Mine Safety Disclosures

53

Item 6.

Exhibits

54

SIGNATURES

55

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 acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
our ability to execute our return of capital program;
natural gas, natural gas liquids (“NGLs”) and oil prices;
impacts of geopolitical events, including the Russia-Ukraine conflict, and world health events;
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;
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 Corporation (“Antero Midstream”);
our ability to achieve our greenhouse gas reduction targets and the costs associated therewith;
general economic conditions;
credit markets;

1

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, supply chain or other disruption, availability and cost 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 geopolitical and world health events, 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, 2022 (the “2022 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.

2

Table of Contents

PART I—FINANCIAL INFORMATION

ANTERO RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)

December 31,

June 30,

  

2022

  

2023

Assets

Current assets:

Accounts receivable

$

35,488

36,887

Accrued revenue

707,685

323,440

Derivative instruments

1,900

3,099

Prepaid expenses and other current assets

42,452

21,302

Total current assets

787,525

384,728

Property and equipment:

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

Unproved properties

997,715

1,017,828

Proved properties

13,234,777

13,615,891

Gathering systems and facilities

5,802

5,802

Other property and equipment

83,909

91,255

14,322,203

14,730,776

Less accumulated depletion, depreciation and amortization

(4,683,399)

(4,854,565)

Property and equipment, net

9,638,804

9,876,211

Operating leases right-of-use assets

3,444,331

3,262,253

Derivative instruments

9,844

7,934

Investment in unconsolidated affiliate

220,429

218,196

Other assets

17,106

17,488

Total assets

$

14,118,039

13,766,810

Liabilities and Equity

Current liabilities:

  

Accounts payable

$

77,543

60,911

Accounts payable, related parties

80,708

95,360

Accrued liabilities

461,788

366,038

Revenue distributions payable

468,210

359,487

Derivative instruments

97,765

35,509

Short-term lease liabilities

556,636

553,953

Deferred revenue, VPP

30,552

28,878

Other current liabilities

1,707

6,728

Total current liabilities

1,774,909

1,506,864

Long-term liabilities:

Long-term debt

1,183,476

1,492,270

Deferred income tax liability, net

759,861

792,149

Derivative instruments

345,280

59,224

Long-term lease liabilities

2,889,854

2,711,735

Deferred revenue, VPP

87,813

74,337

Other liabilities

59,692

61,903

Total liabilities

7,100,885

6,698,482

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; 297,393 shares issued and 297,359 outstanding as of December 31, 2022, and 300,359 shares issued and outstanding as of June 30, 2023

2,974

3,004

Additional paid-in capital

5,838,848

5,803,634

Retained earnings

913,896

1,019,256

Treasury stock, at cost; 34 shares and zero shares as of December 31, 2022 and June 30, 2023, respectively

(1,160)

Total stockholders' equity

6,754,558

6,825,894

Noncontrolling interests

262,596

242,434

Total equity

7,017,154

7,068,328

Total liabilities and equity

$

14,118,039

13,766,810

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,

  

2022

  

2023

 

Revenue and other:

Natural gas sales

$

1,558,994

437,130

Natural gas liquids sales

702,388

397,733

Oil sales

89,185

57,962

Commodity derivative fair value gains (losses)

(265,662)

8,284

Marketing

106,150

43,793

Amortization of deferred revenue, VPP

9,375

7,618

Other revenue and income

1,255

785

Total revenue

2,201,685

953,305

Operating expenses:

Lease operating

25,253

28,748

Gathering, compression, processing and transportation

656,212

663,975

Production and ad valorem taxes

81,842

36,158

Marketing

131,298

66,175

Exploration and mine expenses

1,394

743

General and administrative (including equity-based compensation expense of $8,171 and $13,512 in 2022 and 2023, respectively)

44,439

53,901

Depletion, depreciation and amortization

173,395

171,406

Impairment of property and equipment

23,363

15,710

Accretion of asset retirement obligations

804

1,204

Contract termination

2,096

4,441

Loss (gain) on sale of assets

71

(220)

Total operating expenses

1,140,167

1,042,241

Operating income (loss)

1,061,518

(88,936)

Other income (expense):

Interest expense, net

(34,213)

(27,928)

Equity in earnings of unconsolidated affiliate

14,713

19,098

Loss on early extinguishment of debt

(4,414)

Total other expense

(23,914)

(8,830)

Income (loss) before income taxes

1,037,604

(97,766)

Income tax benefit (expense)

(225,571)

29,833

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

812,033

(67,933)

Less: net income and comprehensive income attributable to noncontrolling interests

46,898

15,151

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

$

765,135

(83,084)

Income (loss) per share—basic

$

2.46

(0.28)

Income (loss) per share—diluted

$

2.29

(0.28)

Weighted average number of shares outstanding:

Basic

310,535

300,141

Diluted

334,561

300,141

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In thousands, except per share amounts)

Six Months Ended June 30,

  

2022

  

2023

Revenue and other:

Natural gas sales

$

2,554,786

1,105,445

Natural gas liquids sales

1,362,693

893,168

Oil sales

152,479

109,773

Commodity derivative fair value gains (losses)

(1,277,042)

134,476

Marketing

175,188

102,322

Amortization of deferred revenue, VPP

18,647

15,151

Other revenue and income

1,774

1,318

Total revenue

2,988,525

2,361,653

Operating expenses:

Lease operating

43,033

58,069

Gathering, compression, processing and transportation

1,246,490

1,309,147

Production and ad valorem taxes

134,650

85,434

Marketing

230,194

147,536

Exploration and mine expenses

2,292

1,506

General and administrative (including equity-based compensation expense of $12,820 and $26,530 in 2022 and 2023, respectively)

80,130

111,162

Depletion, depreciation and amortization

341,783

338,988

Impairment of property and equipment

45,825

31,270

Accretion of asset retirement obligations

3,248

2,082

Contract termination

2,104

33,991

Loss (gain) on sale of assets

1,857

(311)

Other operating expense

225

Total operating expenses

2,131,606

2,119,099

Operating income

856,919

242,554

Other income (expense):

Interest expense, net

(71,926)

(53,628)

Equity in earnings of unconsolidated affiliate

39,891

36,779

Loss on early extinguishment of debt

(15,068)

Loss on convertible note inducement

(86)

Total other expense

(47,103)

(16,935)

Income before income taxes

809,816

225,619

Income tax expense

(172,479)

(32,350)

Net income and comprehensive income including noncontrolling interests

637,337

193,269

Less: net income and comprehensive income attributable to noncontrolling interests

28,621

62,922

Net income and comprehensive income attributable to Antero Resources Corporation

$

608,716

130,347

Income per share—basic

$

1.95

0.44

Income per share—diluted

$

1.81

0.42

Weighted average number of shares outstanding:

Basic

312,300

298,461

Diluted

337,589

311,488

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

Retained Earnings

Common Stock

Paid-in

(Accumulated

Treasury Stock

Noncontrolling

Total

  

Shares

  

Amount

  

Capital

  

Deficit)

Shares

  

Amount

  

Interests

  

Equity

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 Stockholders’ Equity (Unaudited)

(In thousands)

Additional

Common Stock

Paid-in

Retained

Treasury Stock

Noncontrolling

Total

Shares

  

Amount

  

Capital

  

Earnings

Shares

  

Amount

  

Interests

  

Equity

Balances, December 31, 2022

297,393

$

2,974

5,838,848

913,896

(34)

$

(1,160)

262,596

7,017,154

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

514

5

(11,464)

(11,459)

Conversion of 2026 Convertible Notes

4,030

40

17,132

17,172

Repurchases and retirements of common stock

(2,616)

(26)

(51,503)

(24,987)

34

1,160

(75,356)

Equity-based compensation

13,018

13,018

Distributions to noncontrolling interests

(51,339)

(51,339)

Net income and comprehensive income

213,431

47,771

261,202

Balances, March 31, 2023

299,321

2,993

5,806,031

1,102,340

259,028

7,170,392

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

1,038

11

(15,909)

(15,898)

Equity-based compensation

13,512

13,512

Distributions to noncontrolling interests

(31,745)

(31,745)

Net income (loss) and comprehensive income (loss)

(83,084)

15,151

(67,933)

Balances, June 30, 2023

300,359

$

3,004

5,803,634

1,019,256

$

242,434

7,068,328

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,

    

2022

  

2023

 

Cash flows provided by (used in) operating activities:

Net income including noncontrolling interests

$

637,337

193,269

Adjustments to reconcile net income to net cash provided by operating activities:

Depletion, depreciation, amortization and accretion

345,031

341,070

Impairments

45,825

31,270

Commodity derivative fair value losses (gains)

1,277,042

(134,476)

Losses on settled commodity derivatives

(844,713)

(10,787)

Payments for derivative monetizations

(202,339)

Deferred income tax expense

171,707

32,288

Equity-based compensation expense

12,820

26,530

Equity in earnings of unconsolidated affiliate

(39,891)

(36,779)

Dividends of earnings from unconsolidated affiliate

62,569

62,569

Amortization of deferred revenue

(18,647)

(15,151)

Amortization of debt issuance costs, debt discount and debt premium

2,515

1,732

Settlement of asset retirement obligations

(886)

(633)

Loss (gain) on sale of assets

1,857

(311)

Loss on early extinguishment of debt

15,068

Loss on convertible note inducement