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Crude Inventory Building As Antero Wrestles With Appalachian Trucking Constraints

A lack of licensed trucks and drivers in Appalachia has left more than 100,000 bbl of crude oil produced by Antero Resources Corp. in West Virginia’s Marcellus Shale to pile up as the volumes wait for transportation, and has forced the company to curtail 100 MMcfe/d of production.

The curtailments, Antero said late Wednesday in a second quarter earnings release, include 4,000 b/d of natural gas liquids (NGL) and 2,000 b/d of crude oil. Calling it a “common issue industry-wide,” the company said its “crude buyers have been challenged” to secure transportation for the inventory.

“With truck capacity expected to match oil production beginning in September, Antero anticipates that the production curtailment will be alleviated” in 4Q2018, management said.

One of the nation’s largest NGL producers, Antero produced more than 2.5 Bcfe/d in the second quarter, including 113,581 b/d of liquids. Overall, production was up 15% from the year-ago period and 6% from 1Q2018.

An increase in oil prices has spurred more liquids-directed drilling in Appalachia after years of dry gas focus. While it placed five Utica Shale wells online in the second quarter and plans to place another 15 wells to sales there in the coming months, Antero said it does not plan to operate any drilling rigs or completion crews in Ohio for the remainder of the year. Moreover, management said the company’s current five year plan does not include any drilling and completion in the state next year, as the focus shifts to liquids-rich locations in the Marcellus.

“Capital is weighted toward the first half of the year, and production growth is weighted toward the back half of the year,” CFO Glen Warren said of the company’s 2018 program. Antero expects to place up to 75 wells to sales this quarter, well above the 51 it placed online during the first six months of the year.

Antero also said that the ongoing delay of in-service on Sunoco Pipeline LP’s Mariner East 2 pipeline has forced it to lower guidance on realized liquids prices as a percentage of the West Texas Intermediate benchmark from a range of 62.5-67.5% to a new range of 57.5-62.5%.

The company now expects the pipeline, which would move Appalachian ethane, propane and butane to the Marcus Hook Industrial Complex near Philadelphia, to be online sometime in 4Q2018. But the project has been hamstrung by regulatory snags and legal challenges. Construction on a portion of the system, which is nearly complete, has been suspended in Southeast Pennsylvania for weeks over safety concerns. Regulators on Thursday partially lifted the suspension, but some construction remains on hold.

As the focus continues to narrow on West Virginia, Antero also reported a record-setting 15,100-foot lateral. It is the longest ever drilled in the state’s Marcellus.

Second quarter realized prices increased too, going from $3.41/Mcfe in 2Q2017 to $3.77/Mcfe. That helped boost revenue to $989 million, compared to $790 million in the year-ago period.

Antero reported a net loss of $136 million (minus 43 cents/share), versus a net loss of $5 million (minus 2 cents) in 2Q2017. The results included a $16 million loss on settled marketing derivatives.

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