Antero Resources Corp. late Wednesday unveiled an ambitious plan for the next four years, guiding for double-digit production growth driven by robust cash flow, a strong firm transportation portfolio and an Appalachian asset base that continues to expand.
Net production is expected to average 2.16-2.25 Bcfe/d this year, or up to 25% year/year growth. The company has budgeted $1.5 billion, including $1.3 billion for drilling and completion (D&C) and $200 million for core leasehold additions and extensions. That's up from the $1.4 billion Antero guided for in 2016, and it would precede a moderate increase in D&C spending in 2018.
Antero has been a leading acreage consolidator in the basin, with 629,000 net acres now spanning Ohio and West Virginia, spending in recent years to expand its core and build more development opportunities into the horizon. The company said 70% of its D&C budget this year would be allocated to the Marcellus Shale in West Virginia, with the rest set for the Ohio Utica, where Antero plans to get more active than it was in 2016.
The company plans to average four drilling rigs in the Marcellus throughout the year and expects to complete 135 wells. Forty of those were drilled but uncompleted last year and would be carried over. In the Utica, where the company has faced midstream limitations, it is guiding for an average of three drilling rigs and 35 completed wells. That's up from the two rigs and 30 completed wells budgeted in 2016.
Antero said its Utica activity would be "contingent on the construction timetable" for the Rover Pipeline, for which it's an anchor shipper. If the project is delayed beyond the second half 2017 in-service date, then the company would shift capital back to the Marcellus, where D&C costs are lower and where it has more firm transportation capacity.
Looking ahead, the Appalachian pure-play said it would target 20-22% annual production growth from 2018-2020. That long-term growth, Antero said, would be delivered within consolidated cash flow from operations.
"This is driven by a modest annual increase in drilling and completion capital beginning in 2018, while maintaining significant liquidity and a declining leverage profile," CEO Paul Rady said of the company' outlook, adding that Antero's drilling inventory, hedge book and firm transportation enable it. The company’s firm takeaway capacity is contracted to increase to 4.85 Bcf/d by year-end 2018.
"While we plan to live within cash flow from a drilling and completion capital standpoint in 2017, we are forecasting a more than 50% increase in consolidated cash flow from operations in 2018," CFO Glen Warren said. "This significant cash flow step-up is driven by targeted production growth in 2018 of 20% to 22%, assuming current strip pricing, with over 70% of production hedged in 2018 at $3.91/MMBtu."
At the end of the third quarter, Antero had $4.1 billion in liquidity. Net liquids production this year is also forecast to growth by 27% year/year to an average of 92,500 b/d, driven in part by an ethane export agreement.
The company's capital budget does not include Antero Midstream Partners LP, which announced $525 million on Wednesday for gathering pipelines, compressor stations and water services. Antero said too that its land budget does not include funds for possible acquisitions.