Appalachian heavyweight Antero Resources Corp. finished 2018 by surpassing the 3 Bcfe/d production mark, volumes underpinned by a massive position in the southwestern core of the Marcellus and Utica shales that’s once again expected to drive double-digit output growth this year as other operators scale back. 

The pure-play is slashing 2019 spending partly in response to the money it forked over during the fourth quarter to set up some of this year’s development and other market signals, such as weakening demand and lower strip prices. At the same time, the company expects year/year production to increase by up to 20%, well above some peers in the basin that are currently guiding for single-digit growth.

The company entered the year as the largest natural gas liquids (NGL) producer and fifth largest gas producer in the country, according to its calculations. CEO Paul Rady said Antero holds 40% of the core undrilled liquids-rich locations in Appalachia, or more than two-and-a-half times that of its closest competitor.

“This scale across both commodities provides us with the ability to manage through commodity price volatility and prosper with any increase in either commodity,” he said of the company’s position. Rady’s comments came on Thursday during a year-end earnings call with analysts. The comments echoed those he made last month when the company released its 2019 guidance.

Antero produced a record 3.2 Bcfe/d in 4Q2018, up 37% year/year and 18% sequentially. Liquids production of 162,077 b/d accounted for 30% of the quarterly volumes and were up 51% from 4Q2017. Full-year production averaged 2.7 Bcfe/d, or 20% more than in 2017.

NGL and oil production is expected to increase by 26% this year at the high-end of the 154,000-164,000 b/d guidance range. Incentivized by higher oil prices, Antero suspended drilling and completion (D&C) operations in Ohio last year to focus entirely on the liquids-rich Marcellus of West Virginia. That is to continue this year, with no plans for the Ohio Utica. Antero plans to drill 120 Marcellus wells and place up to 125 to sales.

The company also received a boost in December when the Mariner East (ME) 2 liquids pipeline finally entered partial service after roughly two years of legal and regulatory delays. Sunoco Pipeline LP was forced to start up limited service with a smaller converted pipeline that once moved refined products after Pennsylvania regulators halted work on a stretch of the mainline when sinkholes formed near it.

CFO Glen Warren said Antero has been flowing 40,000-50,000 b/d on the new line, which he said has capacity of 145,000 b/d until the full 275,000 b/d can come online when regulatory issues are resolved. The company’s full 50,000 b/d commitment, Rady said, would allow it to move nearly half of its expected 2019 NGL production.

ME 2 moves NGLs from processing facilities in Ohio, Pennsylvania and West Virginia to the Marcus Hook Industrial Complex near Philadelphia. Rady said that, based on current contracts and the market, the company expects to receive a premium to Mont Belvieu pricing of at least 5 cents/gallon at Marcus Hook.

While the year/year production forecast is robust, the company curbed longer-term production growth targets to better align capital expenditures with cash flow. Antero is now targeting a 10-15% compound annual growth rate from 2020 through 2023, down from guidance last year of 24% through 2020 and 20-24% in 2021 and 2022. 

Rady said market trends could provide additional savings this year.

“We expect the D&C capital cost reductions by multiple public operators to date to lead to deflationary pressure on service and material costs,” he said. “All that being said, it’s important to point out that our 2019 budget does not assume any of these additional operational or deflationary savings.”

Antero reported a net loss of $122 million for the fourth quarter (minus 39 cents/share), compared with net income of $487 million ($1.54) in the year-ago period. Revenue was flat over the same time at about $1 billion.

For the full year, Antero reported a net loss of $398 million (minus $1.26), versus a 2017 profit of $615 million ($1.94). Revenue increased to $4.1 billion in 2018 from $3.7 billion in 2017.