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Antero Resources Stays Focused on NGLs as It Waits For Commodities to Rebound

Appalachian pure-play Antero Resources Corp. focused heavily on natural gas liquids (NGL) production during the second quarter as part of its strategy to position itself for a rebound in prices.

The company is currently running seven rigs and five completion crews in the basin. It produced a record 1.762 Bcfe/d during the second quarter. Those volumes included record liquids production of 75,041 b/d, up 63% from the year-ago period.

"We control an estimated 39% of the NGL reserves in the liquids-rich core of the Marcellus and Utica combined, which translates to about 420,000 net for liquids-rich acres," CFO Glen Warren said last week during the company's second quarter earnings call. "In fact, we're currently running 58% of the rigs in the liquids-rich core areas. A key part of our strategy is to position ourselves for NGL price recovery."

Antero began recovering ethane in December 2015, and its volumes have spiked sharply since then. The company produced 17,373 b/d of ethane during the second quarter, up from 11,884 b/d in 1Q2016.

In June, the company acquired 66,500 net acres in West Virginia from Southwestern Energy Co. for $546 million (see Shale DailyJune 10). The properties are spread across eight counties, but the bulk of them are located in Antero's core of Wetzel, Tyler and Doddridge counties. CEO Paul Rady said that after the acquisition, the company estimates that it controls more than 50% of the southern rich-gas core in the state. Antero plans to put another rig to work on the newly acquired acreage next year.

Antero is also trying to boost returns in its condensate and rich-gas windows, testing higher proppant loads of 1,750-2,000 pounds of sand per lateral foot and higher water volumes. The company believes advanced completion techniques could lift estimated ultimate recoveries in the region above 2.3 Bcf.

Second quarter production increased from the 1.484 Bcfe/d the company reported in the year-ago period, but it was flat from 1Q2016 volumes of 1.758 Bcfe/d. The company was forced to shut-in 7.3 Bcfe during the quarter due to downtime at the Sherwood Processing plant in West Virginia after an NGL pipeline slip.

While other Appalachian operators have flocked to the dry gas Utica during the commodities downturn in favor of lower breakevens and better wells, Antero has long been focused on NGLs and has leaned on its firm transportation portfolio to back its production in the liquids window of the Marcellus. The dry gas Utica, management has said, remains constrained for the company on a lack of takeaway capacity that isn't expected to improve until next year when more projects come online (see Shale Daily, April 29).

Average realized prices during the second quarter, including hedges, improved from the year-ago period, going from $3.85/Mcfe to $3.95/Mcfe. The company took a hit, however, incurring a non-cash loss of $977 million on unsettled hedges due to an increase in commodity prices during the quarter. It also recorded a $20 million impairment on its unproved properties.

As a result, operating revenue dropped significantly to negative $249.2 million from $376.7 million in the year-ago period. Antero reported a second quarter net loss of $596 million (minus $2.12/share), compared to a net loss of $145 million (minus 52 cents) in 2Q2015.

Stay up to date on 2Q2016 earnings and projections for the remainder of the year withNGI's Earnings Call and Coverage sheet.

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