Antero Resources Corporation · NYSE:AR

Antero Resources — Investor Presentation (February 2015)

54 slides from Antero Resources's investor presentation, February 2015

  1. Slide 1: Company Overview February 2015

    Company Overview February 2015

  2. Slide 2: Forward-Looking Statements

    FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this presentation that addre

  3. Slide 3: Outstanding Reserve Growth

    OUTSTANDING RESERVE GROWTH PROVED RESERVE GROWTH(1) 2014 RESERVE ANNOUNCEMENT • Proved reserves increased 66% to 12.7 Tcfe (Tcfe) 15 Key Drivers • 3P reserves increased 16% to 40.7 Tcfe 12.7 • Successful 12 0.6 • Replaced 1,465% of 2014 production drilling 7.6 • SSL results • All-in finding and deve

  4. Slide 4: Antero Resources – 2015 Guidance

    ANTERO RESOURCES – 2015 GUIDANCE Key Operating & Financial Assumptions Key Variable 2015 Guidance Range Net Daily Production (MMcfe/d) 1,400 Net Residue Natural Gas Production (MMcf/d) 1,175 Net Liquids Production (Bbl/d) 33,000 Net Oil Production (Bbl/d) 4,000 Natural Gas Realized Price Differentia

  5. Slide 5: Leading Unconventional Business Model

    LEADING UNCONVENTIONAL BUSINESS MODEL Most Active Highest Growth Land Organization Large Cap E&P in Appalachia 2 3 Growth Land Largest Liquids-Rich Most Active Operator 1 4 Core Position in in Appalachia Liquids-Rich Appalachia Drilling Premier Appalachian E&P Company Highest Realizations MLP (NYSE:

  6. Slide 6: Catalysts

    CATALYSTS 1 Large, low cost core Marcellus and Utica natural gas drilling inventory Sustainability of with associated liquids generates attractive returns supported by long- Antero’s Integrated term natural gas hedges, takeaway portfolio and downstream LNG and Business Model NGL sales agreements 2 P

  7. Slide 7: Drilling – Most Active Operator in Appalachia

    DRILLING – MOST ACTIVE OPERATOR IN APPALACHIA COMBINED TOTAL – 12/31/14 RESERVES Assumes Ethane Rejection Net Proved Reserves 12.7 Tcfe Net 3P Reserves 40.7 Tcfe Pre-Tax 3P PV-10 $22.8 Bn SW Marcellus & Utica(2) Net 3P Reserves & Resource 51.8 Tcfe 25 Net 3P Liquids 1,026 MMBbls 20 % Liquids – Net 3

  8. Slide 8: Growth – Highest Growth Large Cap E&P

    GROWTH – HIGHEST GROWTH LARGE CAP E&P  Antero’s 40% production growth target for 2015 leads the U.S. large cap E&P industry(1) 45% 40.0% 40% 35% 30% 27.3% 26.8% 25% 23.6% 21.1% 20.0% 19.3% 19.1% 20% 16.2% 15% 12.4% 10% 8.5% 5.3% 5.1% 5% 3.8% 2.1% 1.8% (0.3%) (2.8%) 0% -5% (2) (2) Appalachian Peers

  9. Slide 9: Growth – Strong Track Record

    GROWTH – STRONG TRACK RECORD NET PROVED SEC RESERVES (Bcfe) AVERAGE NET DAILY PRODUCTION (MMcfe/d) Marcellus Utica Marcellus Utica Guidance 14,000 1,800 12,683 12,000 1,400 10,000 1,200 8,000 7,632 1,007 6,000 4,283 4,000 600 522 2,844 2,000 239 677 124 0 30 (1) (1) 0 2010 2011 2012(1) 2013 2014 201

  10. Slide 10: Land – Most Active Land Organization in Appalachia

    LAND – MOST ACTIVE LAND ORGANIZATION IN APPALACHIA  Assembled a 543,000 net acre position in the core of the Marcellus and Utica shale plays over the past 6 years Dec 2008 Dec 2011 Dec 2014 December 2008 December 2011(1) December 2014(1) Net Acreage 118,000 Net Acreage 213,000 Net Acreage 543,000 N

  11. Slide 11: Liquids-Rich – Largest Core Position

    LIQUIDS-RICH – LARGEST CORE POSITION  Antero has the largest liquids-rich core position in Appalachia ≈371,000 net acres (> 1100 Btu) Source: Core outlines and peer net acreage positions based on peer presentations, news releases and 10-K/10-Qs. 10

  12. Slide 12: Midstream – MLP Highlights Substantial Value

    MIDSTREAM – MLP (NYSE: AM) HIGHLIGHTS SUBSTANTIAL VALUE IN MIDSTREAM BUSINESS Corporate Structure Overview(1) Antero Resources Corporation (NYSE: AR) $13.0 Billion Enterprise Value(1) Ba3/BB Corporate Rating 70% Limited Partner Interest = $2.4 Billion Market Valuation(1) $1.5 Billion Derived Valuati

  13. Slide 13: Takeaway – Largest Firm Transportation and Processing Portfolio

    TAKEAWAY – LARGEST FIRM TRANSPORTATION AND PROCESSING PORTFOLIO IN APPALACHIA Antero Long Term Firm Processing & Takeaway Position (2018) – Accessing Favorable Markets Mariner East II 4 Bcf/d Chicago(1) 62 MBbl/d Commitment(2) +$0.23 / Firm Gas $(0.08) Marcus Hook Export Takeaway Dom South(1) $(1.38

  14. Slide 14: Liquidity – Largest Gas Hedge Position + Strong Financial Liquidity

    LIQUIDITY – LARGEST GAS HEDGE POSITION IN U.S. E&P + STRONG FINANCIAL LIQUIDITY  ~$1.6 billion mark-to-market unrealized gain based on 12/31/2014 prices  1.8 Tcfe hedged from January 1, 2015 through year-end 2020 and 262 Bcf of TCO basis hedges from 2015 to 2017 COMMODITY HEDGE POSITION BBtu/d Hed

  15. Slide 15: Realizations – Highest Realizations & Margins

    REALIZATIONS – HIGHEST REALIZATIONS & MARGINS AMONG LARGE-CAP APPALACHIAN PEERS 3Q & 4Q 2014 Natural Gas Realizations ($/Mcf) Average Average Gas Average Realized Gas Realized NYMEX Average Average Discount to Hedge Realized Premium/ Liquids Equivalent Equivalent Price Differential(1) BTU Upgrade NY

  16. Slide 16: Realizations – Realized Price Road Map

    REALIZATIONS – REALIZED PRICE “ROAD MAP”  Antero is forecasting realized gas prices including hedges at a premium to NYMEX for 2015, assuming current strip pricing,(1) current basis differentials, existing firm transportation and hedges $1.35/Mcfe in estimated hedge gains(1) 85% exposure to favorab

  17. Slide 17: Sector Positioning

    SECTOR POSITIONING 16

  18. Slide 18: Premier Position in Low-Cost Rich Gas Plays

    PREMIER POSITION IN LOW-COST RICH GAS PLAYS  Over 70% of Antero’s 4,243 Marcellus and Utica undeveloped 3P locations are rich gas locations which have the lowest breakeven prices for both oil and natural gas compared to other U.S. shale plays North American Breakeven Oil Prices ($/Bbl)(1) $100 Ante

  19. Slide 19: Multi-Year Drilling Inventory Supports Low Risk, High Return Growth

    MULTI-YEAR DRILLING INVENTORY SUPPORTS LOW RISK, HIGH RETURN GROWTH PROFILE  Antero is well positioned in the core of the highest return shale projects in the U.S. in the current commodity price environment MARCELLUS SSL WELL ECONOMICS(1) UTICA WELL ECONOMICS(1) 60% 1,200 60% 289 300 1,010 248 46%

  20. Slide 20: 20 Bcf/d of Incremental Gas Demand by 2020

    20 Bcf/d OF INCREMENTAL GAS DEMAND BY 2020  Significant demand growth expected for U.S. Projected Incremental Natural Gas Demand Through 2020 natural gas (Bcf/d) 9.5 Bcf/d of the 20 Bcf/d of 20 incremental demand is 20  More than 65% of the 20 Bcf/d in incremental expected to come from gas demand

  21. Slide 21: LNG Exports by Project – Expected Start Up

    LNG EXPORTS BY PROJECT – EXPECTED START UP LNG Exports by Project Through 2020  Assuming 9.5 Bcf/d of LNG exports by 2020, the U.S. would be the world’s 3rd largest LNG LNG Exports by Project Antero Supplied exporter (behind Qatar and Australia) (in Bcf/d) − 7.7 Bcf/d (81%) of the 9.5 Bcf/d of expe

  22. Slide 22: Marcellus/Utica Driving Gas Supply Growth

    MARCELLUS/UTICA DRIVING GAS SUPPLY GROWTH Lower 48 Gas Supply by Area  Of the 23 Bcf/d of expected incremental gas (MMcf/d) supply from 2009 to 2015, ~18 Bcf/d, or 78%, is expected to be generated from Marcellus 18,000 and Utica production Nov-12 Nov-13 Nov-14  Marcellus and Utica gross gas produc

  23. Slide 23: Asset Overview

    ASSET OVERVIEW 22

  24. Slide 24: World Class Marcellus Shale Development Project

    WORLD CLASS MARCELLUS SHALE DEVELOPMENT PROJECT 100% operated RJ SMITH PAD Operating 13 drilling rigs BEE LEWIS PAD 30-Day Rate including 5 intermediate rigs 30-Day Rate 4-well combined MHR COLLINS UNIT 4-well combined 30-Day Rate of 395,000 net acres in 30-Day Rate 30-Day Rate of 56 MMcfe/d 67 M

  25. Slide 25: Antero's Marcellus Shale Type Curve

    ANTERO’S MARCELLUS SHALE TYPE CURVE  Antero has over five years of production history to support its Non-SSL type curve  Antero has one and a half years of production history to support its SSL type curve: 1.7 Bcf/1,000’ with only 10% to 15% higher well costs vs. Non-SSL  Lack of faulting and con

  26. Slide 26: Increasing Recoveries and Low Variance in Marcellus

    INCREASING RECOVERIES AND LOW VARIANCE IN MARCELLUS  Antero’s Marcellus average 30-day rates have increased by 64% over the past two years as the Company increased per well lateral lengths by 20% and shortened stage lengths by 43% 30-Day Rates – 343 Marcellus Wells(1) 25 2014 – 13.1 MMcfe/d 20 2013

  27. Slide 27: Marcellus Well Performance Improvements

    MARCELLUS WELL PERFORMANCE IMPROVEMENTS  Increasing recoveries and efficiencies, through longer laterals, shorter stage lengths and faster drilling  SSL completions drove a 21% decline in estimated development costs in 2014 while lower service costs are expected to drive further development cost r

  28. Slide 28: Marcellus ROR% and Gas Price Sensitivity

    MARCELLUS ROR% AND GAS PRICE SENSITIVITY  Large portfolio of Highly-Rich Gas/Condensate to Dry Gas locations  Focused on drilling highly economic rich gas locations – rig symbols represent current rig location by Btu regime  Assumes 12/31/2014 WTI strip pricing for 2015-2020, flat thereafter; NGL

  29. Slide 29: Leading Utica Shale Core Position Delivers Condensate and NGLs

    LEADING UTICA SHALE CORE POSITION DELIVERS CONDENSATE AND NGLS Utica Shale Industry Activity(1)  100% operated Cadiz  Operating 8 rigs including 3 intermediate rigs GULFPORT Processing 24-Hour IP Plant  148,000 net acres in the core rich gas/ Wagner 1-28H, Shugert 1-1H, 1-12H condensate window (7

  30. Slide 30: Utica Well Performance Improvements

    UTICA WELL PERFORMANCE IMPROVEMENTS  Increasing recoveries and efficiencies, through longer laterals, shorter stage lengths and faster drilling  Lower service costs are expected to drive development cost reductions in 2015 (1) Lateral Length Improvements (1) Increasing Frac Stages per Well 10,000

  31. Slide 31: Utica ROR% and Gas Price Sensitivity

    UTICA ROR% AND GAS PRICE SENSITIVITY  Large portfolio of Condensate to Dry Gas locations  Focused on drilling highly economic rich gas locations – rig symbols represent current rig location by Btu regime  Assumes 12/31/2014 WTI strip pricing for 2015-2020, flat thereafter; NGL price 55% of WTI NY

  32. Slide 32: Large Utica Shale Dry Gas Position

    LARGE UTICA SHALE DRY GAS POSITION Utica Shale Dry Gas Acreage in OH/WV/PA(1)  Antero has 212,000 net acres of exposure to Utica dry gas play Rice Hess Chesapeake Range − 42,000 net acres in Ohio with net 3P reserves of 2.4 Tcf as of Bigfoot 9H Porterfield 1H-17 Hubbard BRK #3H Claysville SC #1 3,5

  33. Slide 33: Fresh Water Distribution Systems

    FRESH WATER DISTRIBUTION SYSTEMS Projected Midstream Infrastructure(1) Marcellus Utica Shale Shale Total YE 2015E Cumulative Fresh Water System Capex ($MM) $338 $112 $450 Water Pipelines (Miles) 226 90 316 Water Storage Facilities 24 14 38 Marcellus Fresh Water Distribution System • Provides fresh w

  34. Slide 34: Firm Transportation and Firm Sales Portfolio

    FIRM TRANSPORTATION AND FIRM SALES PORTFOLIO Columbia Tennessee Momentum III EQT REX/MGT/ANR 7/26/2009 – 9/30/2025 11/1/2015– 9/30/2030 9/1/2012 – 12/31/2023 8/1/2012 – 6/30/2025 7/1/2014 – 12/31/2034 ANR Local Distribution Firm Sales #1 Firm Sales #2 Firm Sales #3 3/1/2015– 2/28/2045 11/1/2015 – 9/

  35. Slide 35: Firm Transportation Reduces Appalachian Basis Exposure

    FIRM TRANSPORTATION REDUCES APPALACHIAN BASIS EXPOSURE  Antero’s firm transportation (FT) portfolio increases visibility on production growth and increases exposure to Gulf Coast and Midwest pricing, with little incremental cost per Mcf  Reduces weighted average basis by $0.28 per MMBtu compared t

  36. Slide 36: Antero Firm Transportation Designed to Accommodate Growth

    ANTERO FIRM TRANSPORTATION APPROPRIATELY DESIGNED TO ACCOMMODATE GROWTH Marketable FT (BBtu/d) (3) % FT Utilization • Antero’s firm transport (FT) is well (BBtu/d) Firm Transportation / Firm Sales (BBtu/d) (including utilized during 2015 (72%) marketable FT): 2,500 Risked Gross Gas Production Target

  37. Slide 37: Health, Safety, Environment & Community

    HEALTH, SAFETY, ENVIRONMENT & COMMUNITY Antero Core Values: Protect Our People, Communities And The Environment Strong West Virginia Keys to Execution Presence  Antero has more than 3,500 employees and contract personnel working full-time  79% of all Antero Marcellus for Antero in West Virginia. 7

  38. Slide 38: Clean Fleet & CNG Technology Leader

    CLEAN FLEET & CNG TECHNOLOGY LEADER ● Antero has contracted for two clean completion fleets to enhance the economics of its completion operations and reduce the environmental impact ● Replaces diesel engines (for pressure pumping) with electric motors powered by natural gas-fired electric generators

  39. Slide 39: Antero Midstream Asset Overview

    Antero Midstream (NYSE: AM) Asset Overview 38

  40. Slide 40: Substantial Investment in Midstream MLP

    SUBSTANTIAL INVESTMENT IN MIDSTREAM MLP (NYSE: AM) Midstream Assets Utica • Gathering and compression assets in core of rapidly Shale growing Marcellus and Utica Shale plays – Acreage dedication of ~412,000 net leasehold acres for gathering and compression services – 100% fixed fee long term contrac

  41. Slide 41: Antero Midstream Assets – Rich Gas Marcellus

    ANTERO MIDSTREAM ASSETS – RICH GAS MARCELLUS Marcellus Gathering & Compression • Provides Marcellus gathering and compression services − Liquids-rich gas is delivered to MWE’s Sherwood Complex for processing • Significant growth projected over the next twelve months as set out below: YE 2014 YE 2015

  42. Slide 42: Antero Midstream Assets – Rich & Dry Gas Utica

    ANTERO MIDSTREAM ASSETS – RICH & DRY GAS UTICA Utica Gathering • Provides Utica natural gas and condensate gathering services − Liquids-rich gas delivered into MWE’s Seneca Complex for processing − Condensate delivered to centralized stabilization and truck loading facilities • Significant growth pr

  43. Slide 43: Appendix

    APPENDIX 42

  44. Slide 44: Pro Forma Capitalization

    PRO FORMA CAPITALIZATION ($ in millions) 9/30/2014 Pro Forma $1.15 Bn AM IPO(4) 9/30/2014 Cash $6 $256 Senior Secured Revolving Credit Facility 1,505 662 6.00% Senior Notes Due 2020 525 525 5.375% Senior Notes Due 2021 1,000 1,000 5.125% Senior Notes Due 2022 1,100 1,100 Net Unamortized Premium 8 8

  45. Slide 45: Lowest Finding & Development Cost Among U.S. Producers

    LOWEST FINDING & DEVELOPMENT COST AMONG U.S. PRODUCERS  Antero ranks as the most efficient finder and developer of reserves, on a per Mcfe basis, based on a 2011-2013 average all-in F&D cost analysis prepared by Credit Suisse 3-Year All-In F&D Cost – Excluding Revisions ($/Mcfe) through 2013 AR $0.

  46. Slide 46: Marcellus Single Well Economics – In Ethane Rejection

    MARCELLUS SINGLE WELL ECONOMICS – IN ETHANE REJECTION Assumptions Marcellus SSL Well Economics and Total Gross Locations(1)  Natural Gas – 12/31/2014 strip 60% 1,200  Oil – 12/31/2014 strip 1,010  NGLs – 55% of Oil Price 664 889 Total 3P Locations 45% 900 NYMEX WTI C3+ NGL(2) 42% 28% 628 ROR ($/M

  47. Slide 47: Utica Single Well Economics – In Ethane Rejection

    UTICA SINGLE WELL ECONOMICS – IN ETHANE REJECTION Assumptions Utica Well Economics and Gross Locations(1)  Natural Gas – 12/31/2014 strip 60% 400  Oil – 12/31/2014 strip Total 3P Locations 46%  NGLs – 55% of Oil Price 45% 289 300 248 254 31% 30% NYMEX WTI C3+ NGL(2) ROR ($/MMBtu) ($/Bbl) ($/Bbl)

  48. Slide 48: Low Development Cost Drives Best in Class Recycle Ratios

    LOW DEVELOPMENT COST DRIVES BEST IN CLASS RECYCLE RATIOS 3-Year Proved Development Costs ($/Mcfe) through 2013 $/Mcfe $6.00 Antero Appalachia-Focused Peers Other Peers $5.00 $4.00 $3.00 $2.00 $1.60 $1.15 $1.18 $1.21 $1.00 $0.00 Source: Proved developed F&D industry data based on company presentation

  49. Slide 49: Considerable Reserve Base with Ethane Optionality

    CONSIDERABLE RESERVE BASE WITH ETHANE OPTIONALITY  35 year proved reserve life based on 2014 production annualized  Reserve base provides significant exposure to liquids-rich projects – 3P reserves of over 2.5 BBbl of NGLs and condensate in ethane recovery mode; 32% liquids ETHANE REJECTION(1) ETH

  50. Slide 50: Positive Ratings Momentum

    POSITIVE RATINGS MOMENTUM Moody’s / S&P Historical Corporate Credit Ratings Moody’s Upgrade Criteria S&P Upgrade Criteria “An upgrade could be considered if debt / average daily production is “We could raise the ratings due to our assessment of an improvement in sustained below $20,000 per boe and d

  51. Slide 51: Pro Forma Offering – Balance Sheet Positioned for Long-Term Growth

    PRO FORMA OFFERING – BALANCE SHEET POSITIONED FOR LONG-TERM GROWTH  The recent bond offerings, at progressively lower coupons, have allowed Antero to reduce its cost of debt to approximately 5.0% and enhance liquidity while extending the pro forma average debt maturity to July 2021  Current cost o

  52. Slide 52: Marcellus & Utica – Advantaged Economics

    MARCELLUS & UTICA – ADVANTAGED ECONOMICS  Low cost, liquids-rich Utica and Marcellus Shales will remain attractive in most commodity price environments U.S. INCREMENTAL GAS SUPPLY BREAK-EVEN PRICE CURVE(1) 3,000 Antero Drilling Locations Needed to make up NE (Dry) for base declines in Marcellus Eag

  53. Slide 53: LNG Exports by Project – Current Status

    LNG EXPORTS BY PROJECT – CURRENT STATUS LNG Exports by Project – Current Status Dates of Key Milestones Send Out Non- DOE Non-FTA FERC FTA Permit Underlying Permit Construction Capacity Gas Demand Project Awarded Approval (Bcf/d) (Bcf/d) Contracts Offtakers Sabine Pass 1-4 05/20/11 04/16/12 2.20 2.4

  54. Slide 54: Cautionary Note

    CAUTIONARY NOTE Regarding Hydrocarbon Quantities The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserve estimates (collectively, “3P”). Antero has provided internally generated estimates for proved, probable and possible reserves

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