To fund increased drilling in core areas of the Marcellus Shale and Piceance Basin, Antero Resources has added $126 million to its capital budget for 2011.

The Denver-based driller said Tuesday the revised capital budget, which now totals $685 million, allocates $519 million for drilling and completion, $86 million to construct gathering pipelines and facilities, and $80 million to acquire more land.

CEO Paul M. Rady said “most of the budgeted drilling increase takes place in the fourth quarter of 2011, which along with the increased infrastructure and leasehold acquisition expenditures sets the stage for a further ramp-up in development drilling and production in 2012.”

Of the $126 million increase to the budget, more than half (53%) is for drilling, with more than one-third (35%) to be spent on gathering pipeline expansion and 12% to acquire more acreage.

Most of the new spending is to add gathering infrastructure and increase acreage in the Marcellus. Antero now has about 183,000 net acres in northern West Virginia and southwestern Pennsylvania, all in the southwestern core of the shale play.

Almost three-quarters (71%) of the total 2011 capital budget is allocated to the Marcellus Shale, with 17% directed to the Piceance Basin and 12% for the Woodford and Fayetteville shales.

Antero currently has 143 MMcf/d gross-operated production (106 MMcf/d net) in the Marcellus Shale and is operating five drilling rigs. To date it has drilled and completed about 37 horizontal wells and is in the process of drilling and completing nine additional wells. Two completed wells are “waiting on pipeline,” the producer noted.

Antero now is operating five rigs in the Marcellus and plans to add a sixth rig in late summer.

In the Piceance Basin of Colorado Antero has about 64,000 net acres on the Western Slope. The leasehold now produces about 36 MMcf/d gross-operated output (33 MMcfe/d net including nonoperated production).

One rig is operating on the leasehold in the Piceance. Antero has drilled and completed more than 170 vertical and directional wells in the basin and is in the process of drilling and completing 17 additional vertical wells.

Antero’s Arkoma Basin leasehold includes 70,000 net acres in the Woodford Shale and 5,600 net acres in the Fayetteville Shale. The company has drilled and completed about 125 horizontal wells in the basin and has one rig in operation in the Woodford Shale.

Woodford production currently is about 57 MMcf/d gross (66 MMcfe/d net including nonoperated production). Antero also has 7 MMcf/d of nonoperated net production in the Fayetteville Shale.

“Antero has a large drilling inventory of low-risk, low-development cost locations, which combined with our long-dated hedge position and increasing liquids production in all three of our operated basins, positions the company for outstanding growth in production and cash flow through 2012 and beyond,” said Rady.

The increase to the capital budget is expected to be funded internally from operating cash flow, through the use of the undrawn capacity under Antero’s bank credit facility and through noncore asset sales. About $15 million in noncore upstream and midstream asset sales were completed in the second quarter, the producer said. At the end of the quarter Antero had $561 million of available borrowing capacity under its bank credit facility.

Antero said operated net development costs “across all basins” averaged an estimated $1.11/Mcf over the past 18 months and less than $1.10/Mcf in 2011 to date. Operated average net development costs were calculated based on actual costs/completed well, net of working interest, divided by estimated reserves developed/completed well, adjusted by net revenue interest, aggregated for the period. Exploration wells are excluded from the calculation; in 2011 five have been drilled in the Piceance.

Antero’s assumptions and outlook for 2011 are based on New York Mercantile Exchange (Nymex) gas prices averaging $4.50/Mcf and West Texas Intermediate oil prices of $100/bbl.

From the beginning of March through the end of 2015 Antero said it has hedged 461 Bcfe using simple fixed-price swaps at an average Nymex-equivalent price of $5.94/MMBtu. More than 80% of estimated production for the last nine months of 2011 is hedged at a Nymex-equivalent price of $5.87/MMBtu and almost 60% of 2012 estimated production is hedged at $5.93/MMBtu.