Quarterly report pursuant to Section 13 or 15(d)

Organization

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Organization
3 Months Ended
Mar. 31, 2015
Organization  
Organization

(1)Organization

 

(a)Business and Organization

 

Antero Resources Corporation (individually referred to as “Antero”) and its consolidated subsidiaries (collectively referred to as the “Company”) are engaged in the exploitation, development, and acquisition of natural gas, natural gas liquids (“NGLs”), and oil properties in the Appalachian Basin in West Virginia, Ohio, and Pennsylvania.  The Company targets large, repeatable resource plays where horizontal drilling and advanced fracture stimulation technologies provide the means to economically develop and produce natural gas, NGLs, and oil from unconventional formations.  The Company has fresh water distribution operations in the Appalachian Basin, as well as gathering and compression operations through its consolidated subsidiary, Antero Midstream Partners LP (“Antero Midstream”), a publicly-traded limited partnership.  The Company’s corporate headquarters are in Denver, Colorado.

 

(b)Corporate Reorganization

 

Prior to October 16, 2013, the Company’s predecessor, Antero Resources LLC, filed reports with the Securities and Exchange Commission.  Antero Resources LLC was formed in October 2009 by members of the Company’s management team and its sponsor investors.  Antero Resources LLC owned 100% of the outstanding shares of Antero Resources Appalachian Corporation, which was formed in March 2008 and renamed Antero Resources Corporation in June 2013.  In connection with an initial public offering (“IPO”) completed on October 16, 2013, all of the ownership interests in Antero Resources LLC were exchanged for similar interests in a newly formed limited liability company, Antero Resources Investment LLC (“Antero Investment”), and Antero Resources LLC was merged into Antero Resources Corporation.  As a result of this reorganization, Antero Investment owned 100% of the 224,375,000 shares of common stock of Antero Resources Corporation issued and outstanding prior to the IPO.

 

On October 16, 2013, Antero Resources Corporation issued 37,674,659 additional shares of its common stock at $44.00 per share in the IPO, resulting in proceeds to the Company, net of underwriter discounts and expenses of the offering, of approximately $1.6 billion.

 

(c)Profits Interests Awards

 

In connection with its formation in October 2009, Antero Resources LLC issued profits interests to Antero Resources Employee Holdings LLC (“Employee Holdings”), which is owned solely by certain of the Company’s officers and employees.  These profits interests provide for the participation in distributions upon liquidation events meeting certain requisite financial return thresholds.  In turn, Employee Holdings issued membership interests to certain of the Company’s officers and employees.  The Employee Holdings interests in Antero Resources LLC were exchanged for similar interests in Antero Investment in connection with the corporate reorganization on October 16, 2013.

 

The limited liability company agreement of Antero Investment provides a mechanism that demonstrates how the shares of the Company’s common stock will be allocated among the members of Antero Investment, including Employee Holdings. As a result of the adoption of the Antero Investment Limited Liability company agreement, the satisfaction of all performance and service conditions relative to the profits interest awards held by Employee Holdings in Antero Investment became probable.  Accordingly, the Company has recognized approximately $463 million of equity-based compensation expense for the vested profits interests through March 31,  2015 and will recognize approximately $23 million over the remaining service period.  Equity-based compensation expense for the profits interests during the three months ended March 312014 and 2015 was $28.7 and $14.7 million, respectively.  Because consideration for the profits interest awards is deemed given by Antero Investment, the charge to equity-based compensation expense is accounted for as a capital contribution by Antero Investment to the Company and credited to additional paid-in capital.  All available profits interest awards were made prior to the date of the IPO, and no additional profits interest awards will be made.