UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q ...
[Pages:92]Table of Contents
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, 2019 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
ANTERO RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization)
80-0162034 (IRS Employer Identification No.)
1615 Wynkoop Street, Denver, Colorado (Address of principal executive offices)
(303) 357-7310 (Registrant's telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act:
80202 (Zip Code)
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 Emerging Growth Company
Smaller Reporting 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 309,221,992 shares of common stock outstanding as of July 26, 2019.
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
47
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
68
Item 4.
Controls and Procedures
70
PART II--OTHER INFORMATION
70
Item 1.
Legal Proceedings
70
Item 1A.
Risk Factors
70
Item 2.
Unregistered Sales of Equity Securities
71
Item 6.
Exhibits
71
SIGNATURES
72
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS The information in this Quarterly Report on Form 10-Q includes "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. These forward looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. 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 belief, based on currently available information, as to the outcome and timing of future events. Forward looking statements may include statements about: business strategy; reserves; financial strategy, liquidity, and capital required for our development program; natural gas, natural gas liquids ("NGLs"), and oil prices; timing and amount of future production of natural gas, NGLs, and oil; hedging strategy and results; our ability to successfully complete our share repurchase program; our ability to meet minimum volume commitments and to utilize or monetize our firm transportation commitments; future drilling plans; competition and government regulations; 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; general economic conditions; credit markets; uncertainty regarding our future operating results; and plans, objectives, expectations, and intentions. 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, the uncertainty inherent in
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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, and the other risks described under the heading "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2018 (the "2018 Form 10-K") 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 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.
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PART I--FINANCIAL INFORMATION ANTERO RESOURCES CORPORATION
Condensed Consolidated Balance Sheets December 31, 2018 and June 30, 2019
(Unaudited) (In thousands, except per share amounts)
Current assets: Accounts receivable Accrued revenue Derivative instruments Other current assets Total current assets
Property and equipment: Oil and gas properties, at cost (successful efforts method): Unproved properties Proved properties Water handling and treatment systems Gathering systems and facilities Other property and equipment
Less accumulated depletion, depreciation, and amortization Property and equipment, net
Operating leases right-of-use assets Derivative instruments Investments in unconsolidated affiliates Other assets
Total assets
Assets
December 31, 2018
$
51,073
474,827
245,263
35,450
806,613
1,767,600
12,705,672
1,013,818
2,470,708
65,842
18,023,640
(4,153,725)
13,869,915
--
362,169
433,642
47,125
$
15,519,464
Current liabilities:
Liabilities and Equity
Accounts payable
Accounts payable, related parties
Accrued liabilities
Revenue distributions payable Derivative instruments
Short-term lease liabilities Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt
Deferred income tax liability Long-term lease liabilities
Other liabilities
Total liabilities
Commitments and contingencies (Notes 13 and 14)
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; 308,594 shares and 309,123 shares issued and
outstanding at December 31, 2018 and June 30, 2019, respectively
Additional paid-in capital
Accumulated earnings
Total stockholders' equity Noncontrolling interests in consolidated subsidiary
Total equity
Total liabilities and equity
$
66,289
--
465,070
310,827
532
2,459
8,363
853,540
5,461,688 650,788 2,873 63,098
7,031,987
--
3,086
6,485,174
1,177,548
7,665,808
821,669
8,487,477
$
15,519,464
See accompanying notes to the unaudited condensed consolidated financial statements.
June 30, 2019
49,994 308,761 346,894
7,400 713,049
1,585,355 13,357,733
-- 17,825 69,676 15,030,589 (4,115,187) 10,915,402 3,330,795 369,548 1,967,203 34,883 17,330,880
44,758 98,570 358,680 301,032
274 413,691
4,102 1,221,107
3,602,379 1,188,975 2,920,754
57,965 8,991,180
--
3,091 6,138,130 2,198,479 8,339,700
-- 8,339,700 17,330,880
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ANTERO RESOURCES CORPORATION Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
Three Months Ended June 30, 2018 and 2019 (Unaudited)
(In thousands, except per share amounts)
Revenue and other: Natural gas sales Natural gas liquids sales Oil sales Commodity derivative fair value gains Gathering, compression, water handling and treatment Marketing Marketing derivative fair value losses Other income
Total revenue
Operating expenses: Lease operating Gathering, compression, processing, and transportation Production and ad valorem taxes Marketing Exploration Impairment of oil and gas properties Impairment of gathering systems and facilities Depletion, depreciation, and amortization Loss on sale of assets Accretion of asset retirement obligations General and administrative (including equity-based compensation expense of $19,071 and $6,549 in 2018 and 2019, respectively) Contract termination and rig stacking
Total operating expenses
Operating income (loss)
Other income (expenses): Equity in earnings of unconsolidated affiliates Interest expense, net
Total other expenses
Income (loss) before income taxes Provision for income tax (expense) benefit
Net income (loss) and comprehensive income (loss) including noncontrolling interests Net income and comprehensive income attributable to noncontrolling interests
Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation
Three Months Ended June 30,
2018
2019
$
473,540
255,985
38,873
55,336
5,518
160,202
(110)
--
989,344
553,372 303,963 49,062 328,427
-- 63,080
-- 1,760
1,299,664
30,164 307,786
25,891 213,420
1,471 134,437
8,501 238,050
-- 700
40,857 566,834 30,968 137,539
314 130,999
-- 242,302
951 918
61,687 --
1,022,107 (32,763)
42,382 5,604
1,199,668 99,996
9,264
(69,349)
(60,085)
(92,848)
25,573
(67,275)
69,110
$
(136,385)
13,585 (54,164)
(40,579)
59,417 (17,249)
42,168 --
42,168
Earnings (loss) per common share--basic
$
(0.43)
0.14
Earnings (loss) per common share--assuming dilution
$
(0.43)
0.14
Weighted average number of shares outstanding: Basic Diluted
316,992 316,992
309,062 309,137
See accompanying notes to the unaudited condensed consolidated financial statements.
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ANTERO RESOURCES CORPORATION Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
Six Months Ended June 30, 2018 and 2019 (Unaudited)
(In thousands, except per share amounts)
Revenue and other:
Natural gas sales
$
Natural gas liquids sales
Oil sales
Commodity derivative fair value gains
Gathering, compression, water handling and treatment
Marketing
Marketing derivative fair value gains
Other income
Total revenue and other
Operating expenses:
Lease operating
Gathering, compression, processing, and transportation
Production and ad valorem taxes
Marketing
Exploration
Impairment of oil and gas properties
Impairment of gathering systems and facilities
Depletion, depreciation, and amortization
Loss on sale of assets
Accretion of asset retirement obligations
General and administrative (including equity-based compensation expense of $40,227 and $15,452 in 2018 and 2019,
respectively)
Contract termination and rig stacking
Total operating expenses
Operating income
Other income (expenses):
Equity in earnings of unconsolidated affiliates
Interest expense, net
Gain on deconsolidation of Antero Midstream Partners LP
Total other income (expenses)
Income (loss) before income taxes
Provision for income tax (expense) benefit
Net income and comprehensive income including noncontrolling interests
Net income and comprehensive income attributable to noncontrolling interests
Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation
$
Six Months Ended June 30,
2018
2019
971,203 490,155
69,146 77,773 10,453 304,591 94,124
--
2,017,445
1,210,638 617,648 97,114 251,059 4,479 154,266 -- 1,867
2,337,071
56,886 599,724
51,714 409,159
3,356 184,973
8,501 466,294
-- 1,390
82,589 991,363 66,646 300,623
440 212,243
6,982 482,503
951 1,894
121,717 --
1,903,714 113,731
110,584 13,964 2,270,782 66,289
17,126 (133,775)
--
(116,649)
(2,918) 16,453
13,535 135,087
(121,552)
27,666 (126,114) 1,406,042
1,307,594
1,373,883 (305,959)
1,067,924 46,993
1,020,931
Earnings (loss) per common share--basic
Earnings (loss) per common share--assuming dilution
Weighted average number of shares outstanding: Basic Diluted
$
(0.38)
$
(0.38)
316,733 316,733
3.31 3.30
308,879 309,082
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ANTERO RESOURCES CORPORATION
Condensed Consolidated Statements of Equity
Three and Six Months Ended June 30, 2018
(Unaudited)
(In thousands)
Additional
Common Stock
paid-
Shares
Amount
in capital
Balances, December 31, 2017
316,379 $ 3,164
6,570,952
Issuance of common stock upon vesting of equity-based compensation
awards, net of shares withheld for income taxes
145
1
(1,067)
Issuance of common units in Antero Midstream Partners LP upon vesting of
equity-based compensation awards, net of units withheld for income taxes
--
--
(50)
Equity-based compensation
--
--
18,802
Net income and comprehensive income
--
--
--
Effects of changes in ownership interests in consolidated subsidiaries
--
--
(555)
Distributions to noncontrolling interests
--
--
--
Other
--
--
--
Balances, March 31, 2018
316,524 $ 3,165
6,588,082
Issuance of common stock upon vesting of equity-based compensation
awards, net of shares withheld for income taxes
528
6
(5,589)
Issuance of common units in Antero Midstream Partners LP upon vesting of
equity-based compensation awards, net of units withheld for income taxes
--
--
(4,007)
Equity-based compensation
--
--
16,930
Net income (loss) and comprehensive income (loss)
--
--
--
Effects of changes in ownership interests in consolidated subsidiaries
--
--
2,121
Distributions to noncontrolling interests
--
--
--
Other
--
--
--
Balances, June 30, 2018
317,052 $ 3,171
6,597,537
Accumulated earnings 1,575,065
--
-- -- 14,833 -- -- -- 1,589,898
--
-- -- (136,385) -- -- -- 1,453,513
Noncontrolling interests 726,955
--
32 2,354 65,977
555 (55,915)
(5) 739,953
--
2,707 2,141 69,110 (2,121) (63,108)
8 748,690
See accompanying notes to the unaudited condensed consolidated financial statements.
Total equity 8,876,136
(1,066)
(18) 21,156 80,810
-- (55,915)
(5) 8,921,098
(5,583)
(1,300) 19,071 (67,275)
-- (63,108)
8 8,802,911
7
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