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Antero Forms Committee to Probe Company Structure, Enhance Value

Appalachian pure-play Antero Resources Corp. said Monday that it has taken another step to address its stock discount by forming a special board committee to evaluate ways that would better reflect the company’s overall worth and enhance value for shareholders.

The committee, Antero said, is in the process of hiring financial and legal advisors to assist with the review. The move builds on an announcement last month, in which the company said it was working with the board to address the discount in its trading value compared to some of its large-cap peers that have a similar profile related to  leverage, capital efficiency and production growth.

“Antero is unique among its Appalachian peers and much of the large capitalization upstream sector with regard to shareholder alignment, in that Antero is run by co-founders who own a significant stake in the company,” CEO Paul Rady said last month. “This evaluation of potential measures to address our valuation discount is a high priority within our organization and we intend to pursue it with rigor.”

Antero has also been soliciting feedback from its larger shareholders in recent months about how it can improve the corporate structure and compensation. At its analyst day last month, the company said it would “redesign” the 2018 compensation plan in response to that feedback. Management also appears to be bowing to a broader trend that finds shareholders expecting more from the upstream sector as shale development matures, highlighting plans to tighten spending, reduce leverage and generate more free cash flow, among other things.

Monday’s announcement comes a week after another Appalachian juggernaut, EQT Corp., said it would streamline its corporate structure and split the midstream and upstream businesses in a way that would yield better returns for shareholders.

Chapter IV Investors LLC, a firm that has been outspoken in pushing other Appalachian producers to enhance value, urged Antero last month to simplify its corporate structure into upstream and midstream segments by eliminating the incentive distribution rights owned by Antero Midstream GP LP. Chapter IV once had a stake in the company, but no longer does.

“My opinion stems in part from my recognition that master limited partnership (MLP) investors are increasingly demanding the elimination of GP incentive distribution rights, and MLP sponsors are increasingly choosing to pursue these simplifications,” wrote the firms CEO W. Barnes Hauptfuhrer in the letter.

Since it went public in 2013, Antero has continued to grow, aggressively consolidating its Marcellus and Utica shale positions, which now span more than 600,000 net acres. The company produced about 2.3 Bcfe/d last year and is targeting 2.7 Bcfe/d this year. It is also the nation’s largest natural gas liquids producer, according to its own review of public disclosures, averaging 105,470 b/d last year.

Antero said the measures it’s evaluating include the “the return of capital to shareholders.” EQT formed a board committee late last year after it acquired Rice Energy Inc. to make value-enhancing recommendations ahead of last week’s announcement. Antero has not said when the committee might finish its work.

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