ANTERO RESOURCES Corp Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Drilling and Completion: High efficiencies in drilling and completion, allowing a lean program with 2 rigs and ~1 completion crew to sustain 3.4 Bcfe/day production.
• Hedging: Added wide collars for 2026 lean gas volumes to secure returns, hedging 9% of natural gas volumes through 2026.
• NGLs: Strong NGL pricing premium, with 90%+ of export and domestic C3+ volumes locked in premiums, supporting guidance. U.S. propane exports at record highs.
• Natural Gas: Faster LNG ramp boosted Gulf Coast pricing, and the Appalachian region's growth in data centers and power plants drives demand.
• Financials: First quarter production at midpoint of guidance, $157M drilling/completion capital (23% of full-year), $337M free cash flow, $92M share repurchase, and debt reduced by >$200M.

Segment Performance

• Drilling and Completion: Increased completed feet per day to an average of 2,452 (15% increase from 2023) and completion stages per day to 12.3, with a record 18 stages per day in March. This allowed maintaining 3.4 Bcf equivalent per day production with 2 rigs and ~1 completion crew.
• Hedges: Added wide natural gas collars for 2026 on lean gas volumes (≈1,200 Btu or less), locking in floor $3.07 and ceiling $5.96, hedging ~9% of expected natural gas volumes through 2026.
• NGLs: NGL pricing premium remains strong, with 90% of export volumes and over 90% of C3+ barrels locked in premiums to Mont Belvieu. U.S. propane exports at record highs, 7% above year ago.
• Natural Gas: Faster ramp of Venture Global Plaquemines LNG facility lifted Gulf Coast pricing, with Antero having 570 MMcf per day firm transport on TGP 500L pool. Appalachian region sees growth in data centers and power plants driving natural gas demand.

Guidance

• Production: First quarter production at midpoint of guidance (3.4 Bcfe/day).
• Hedging: Added wide collars for 2026 lean gas volumes, hedging ~9% of natural gas volumes through 2026.
• Free Cash Flow: Generated $337M free cash flow, used for share repurchase and debt reduction.
• Share Repurchase: Accelerated share repurchase, buying $92M of stock year-to-date.
• Debt Reduction: Reduced debt by >$200M in the first quarter.

Risks

• Tariffs: Potential impact on LPG exports, but Antero's marketing strategy limits impact via firm sales agreements and geographic advantages.
• Market Volatility: Fluctuations in natural gas and NGL prices could affect financial performance.
• Infrastructure Constraints: Any constraints on midstream could impact production and marketing.

Question and Answer

Q: Clarify LPG marketing agreement scope and cost A: 90% of export volumes locked in premiums, domestic sales also mostly locked in. Domestic deals are annual term contracts; export deals are opportunistic, sometimes term, sometimes spot.

Q: Inorganic investment opportunities A: Strong organic leasing program with low cost, no immediate need for M&A unless highly accretive.

Q: Buyback strategy A: Opportunistic, pivoted to share buybacks due to favorable share valuation, aiming for 50-50 debt reduction and buybacks.

Q: NGL inventory breakeven and activity A: Breakeven compared to natural gas prices; Antero generates strong free cash flow even in lower oil/C3+ price scenarios due to diverse product mix and low debt.

Q: In-basin demand and volume growth A: Growth depends on local demand meeting supply; current maintenance capital supports firm transport and processing, with potential participation in future local demand projects.

Q: Gas market dynamics and in-basin pricing A: Natural gas demand growth supported by LNG and electrification; Haynesville costs rising, global gas market netbacks support continued growth.

Q: C3+ premium guidance and GP&T A: $0.15 premium on export propane, GP&T variable with natural gas price, ~$0.10 increase per $1 natural gas price increase.