Founders’ Message To Our Stakeholders

Founders’ Message

Since we embarked on this incredible journey as shale gas pioneers in 2003, we have remained true to our values of creating a sustainable business model and a resilient company. Our company culture is based on core business principles of safety for our employees, contractors and the community, integrity, performance, stewardship of the land and environment, and relentless innovation. These values and principles are ingrained in our corporate DNA.

Our core sustainability programs strengthen our business and inspire confidence in our employees, investors, creditors and contractors, as well as with regulatory agencies and within the communities in which we operate. We take a highly proactive approach to develop and implement work practices and technologies to deliver natural gas,natural gas liquids and oil in the most ethical, environmentally and socially responsible way possible.

Natural gas is key to the energy transition and to our ability to address the risks associated with climate change. If produced and transported properly, natural gas development should be supported by the investment and regulatory communities. As the lightest and least greenhouse gas (GHG) intensive hydrocarbon, natural gas is expected to play a fundamental role as both the U.S. and global economies transition to a lower carbon future. Natural gas is part of the solution and can be produced and transported with almost zero leakage and loss.

Environment

We recognize the growing concern over climate change and are committed to proactively managing our business to reduce GHG emissions and limit the environmental impact of our operations.

For instance, while the flaring of natural gas globally hit a 10-year peak in 20191, Antero did not flare any produced gas in 2019 and has not flared produced natural gas since the infancy of the Marcellus and Utica shale projects in West Virginia and Ohio. Further, Antero has utilized green completions in all of its well completions, and implemented a rigorous leak detection and repair (LDAR) program on all of its permitted facilities and pipelines for many years. These best practices have resulted in our industry-leading GHG intensity and leak loss rate numbers. Antero actively participates in a number of voluntary programs that focus on reducing emissions. In 2018, Antero became a member of ONE Future, an industry collective focused on voluntarily reducing methane emissions across the natural gas supply chain. Antero’s GHG performance metrics demonstrate that natural gas can live up to its promise as a transition fuel and reduce GHG emissions by more than half, as compared to coal.

Our GHG intensity decreased by 39% from 3.7 metric tons of CO2e per 1,000 barrels of oil equivalent (MBOE) of production in 2016 to 2.3 metric tons CO2e/MBOE in 2019. Our methane leak loss rate, calculated per the ONE Future protocol, dropped to 0.046% in 2019, well below ONE Future industry and sector targets of 1.00% and 0.280%, respectively. Going forward, we aim to improve our emissions metrics further, with a goal to reduce our methane leak loss rate by 50% to under 0.025%, and reduce our GHG intensity by 10% by 2025. We also endeavor to achieve net zero carbon emissions by 2025 through operational improvements and the purchase of carbon offsets.

Water is a critical resource that is utilized in shale completion operations. Antero Midstream has the most extensive fresh water pipeline network in the industry, which is used to deliver water to well pads for completion operations. Each year our fresh water pipeline system eliminates the need for hundreds of thousands of water truckloads traversing local roads in and around the communities where we operate. Our fresh water pipeline system has a tremendously positive impact on emissions reduction and safety.

Further, due to a major shift away from centralized produced water treatment to field level blending and treatment, over 13 million barrels of water has been recycled and reused in 2020. This amounts to about 88% of our total produced water, which includes produced and flowback water, generated year to date in 2020. This shift has materially reduced fresh water use.

Safety

Safety performance starts with culture, and we have built a strong safety culture and dedicated environmental stewardship that starts at the top of the organization. We are laser-focused on health, safety, security, and preservation of the environment (HSSE). Importantly, we empower everyone on the job site, employee or contractor, with Stop Work Authority. We believe that our HSSE success is partly due to continuous incident and risk evaluation and improvements to our safety leadership, management and systems. We have earned a reputation as an industry leading safe and environmentally responsible operator through continuous emphasis on our HSSE performance. This reputation also makes Antero an employer of choice in Appalachia.

In 2019, we continued to focus on the health and safety of our employees and the public, managing greenhouse gas emissions and recycling produced water from Antero Resources’ operations to reduce fresh water use. We focused on enhancing our safety and environmental management systems and continued open, honest, and transparent dialogues with our shareholders, communities, industry peers, and regulators. Our plan for 2020 includes continued improvement of our management systems, developing a disclosure strategy to align with both the Task Force for Climate-related Financial Disclosures (TCFD) guidelines and the Sustainability Accounting Standards Board (SASB).

Every day, the safety of our employees and contractors is our top priority. In 2019, Antero Resources work locations experienced zero employee or contractor fatalities and an employee and contractor Lost Time Incident Rate (LTIR) of 0.026, an 83% reduction since 2016. Similarly, the Antero employee and contractor Total Recordable Incident Rate (TRIR) of 0.285, represents a 53% improvement since 2016. In comparison, the 2019 ISNetworld onshore oil and gas benchmark averages for our industry are 0.32 LTIR and 0.95 TRIR. These results significantly outperformed the 2018 U.S. Bureau of Labor Statistics benchmark averages for our industry. Antero’s highly successful HSSE team guides us toward our stated goal of “Zero Incidents, Zero Harm and Zero Compromise.”

Governance

We have worked aggressively to ensure appropriate alignment among all our constituents. As part of the 2019 combination of two of our publicly-traded midstream entities, Antero Midstream eliminated its Incentive Distribution Rights (IDRs), converted into a C-Corp and redesigned its board to include a majority of independent directors; together these actions represented the most comprehensive governance changes among such “Simplification” transactions. Subsequently, we have added a number of new directors to both the Antero Resources and the Antero Midstream boards. We are excited about the many years of industry technical and leadership experience which our directors bring to the board. We are also focused on gender diversity, as two of our nine directors at both companies are women. In addition, we are proud to note that the head of our operations, geology, accounting, legal and land administration departments are all women. We also recently formed Environmental, Sustainability, and Social Governance (ESG) committees of the board for both Antero Resources and Antero Midstream which further reinforces our emphasis on the importance of accelerating the agenda on environmental sustainability, safety, and governance topics.

The Energy Transition

There is growing momentum to identify and implement solutions to reduce GHG emissions without sacrificing economic and humanitarian imperatives such as a rising standard of living for much of the underdeveloped world. Stable and affordable energy supplies will make it possible for more people to access healthcare, transportation and education that contribute to improved living standards and a higher quality of life. Embrace of the energy transition to a lower carbon environment is ubiquitous across government, industry, investor, creditor and the public sectors. We believe that it is critical for Antero to be a leader in the global energy transition and to be part of the solution.

For context, the world consumes almost 600 exajoules (EJ) of primary energy per year, the vast majority of which is derived from hydrocarbons (Figure 1 World Consumption). Natural gas consumption has been increasing for the last 25 years, while renewables began to increase at a rapid rate about 15 years ago (Figure 2 Shares of Global Primary Energy). Natural gas and renewables are slowly displacing oil and coal in the energy mix. Much of that displacement is a result of the electrification that has occurred over the past 20 years.

Figure 3, entitled World Energy Demand by Source, forecasts energy consumption through 2050, where hydrocarbons still comprise about 55% of energy demand.

Figure 4, entitled World Final Energy Demand by Carrier, converts some of the global energy consumption to electricity. The reduction in scale and change in composition between Figure 3 and 4 reflects the impact of conversion losses and the fact that a significant amount of primary energy is used to generate electricity. The displacement trend is forecast to continue over the next 30 years as the consumption of oil and coal eventually decline and global natural gas consumption grows slowly. Overall energy consumption is forecast to continue to grow due to an expanding global economy and population until efficiency gains slow growth around 2030.

Within the final energy demand stack, electricity demand is expected to accelerate and more than double during the next 30 years as the manufacturing, commercial building, and transport sectors rely more heavily on electricity as opposed to direct fossil fuels as an energy source (Figure 5 World Electricity Generation Mix). Meeting this increased electricity demand with zero and lower carbon electricity generation alternatives such as solar, wind, and natural gas, is the key to the success of the energy transition. In the International Energy Administration (IEA) forecast in Figure 5, renewables are expected to grow from a single digit contribution to almost two-thirds of electricity supply by 2050, while natural gas consumption grows slightly and coal use for electricity generation declines to very low levels. Fulfillment of these objectives will require a mix of both lower carbon conventional supply and zero carbon new builds over the next few decades along with policy support from governments around the world, as well as a significant amount of capital.

Most recently, the 2015 Paris Agreement aims to hold the increase in global average temperatures to well below 2 degrees Celsius above pre-industrial levels. The IEA, in turn, has developed two long term projections for energy supply and demand. The importance of these projections cannot be overstated as even under the IEA’s Sustainable Development Scenario, which is “Paris Agreement-aligned”, natural gas consumption is forecast to grow slightly between 2018 and 2040 as its share of the global energy demand mix increases from 22.9% to 23.8% (Figure 6 Energy Demand Mix by Source). Moreover, under the IEA’s Stated Policy Scenerio, natural gas consumption is forecast to increase by 35.8% and contribute 25.1% of the global energy demand mix by 2040. Given the scale of global energy demand and the capital and incentives required to meaningfully shift the mix, decarbonize does not mean eliminate all hydrocarbons over the next 20 years.

Summary

In short, investors, creditors, the communities in which we operate, and employees can be stakeholders in a hydrocarbon business that is natural gas focused while at the same time meeting high environmental sustainability, safety, and governance (ESG) standards. Antero meets or beats all of those standards. It is clear that the only way to reduce the carbon footprint while addressing the needs of a growing global economy and population is to transition to an energy supply stack with much less coal, eventually less oil and a growing baseload of natural gas and renewables, primarily delivered in the form of electricity.

Our outstanding ESG performance exemplifies our unwavering commitment to make every effort to do the right thing, take accountability for our actions and maintain our position as a world-class sustainable energy producer, partner, and employer of choice. We are dedicated to adapting and leading and operating ethically and responsibly. This commitment is evident in our performance and culture as we proactively care for our employees, contractors, community, and the environment. In sum, we are intensely focused on, and have unwavering confidence that the Antero companies are doing the right things, the right way, for the right reasons.

Signature
Paul M. Rady

Chairman and CEO
Co-Founder

Signature
Glen C. Warren, Jr.

President, CFO and Director
Co-Founder