Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Antero Resources Corp (AR, Financial) achieved significant improvements in drilling and completion efficiencies, reducing well costs by 8% since last year.
- The company reduced its 2024 capital budget by 28% compared to 2023 while maintaining production levels.
- Antero Resources Corp (AR) realized strong export premiums for LPG sales, benefiting from US Gulf Coast export dock constraints.
- The company has a low free cash flow breakeven level of approximately $2.20, supported by low maintenance capital requirements and high exposure to liquids.
- Antero Resources Corp (AR) is well-positioned to benefit from expected increases in natural gas demand due to its strategic location and firm transportation portfolio.
Negative Points
- Antero Resources Corp (AR) faces challenges with current natural gas prices, which averaged just $2.10 through the first nine months of 2024.
- The company is deferring the completion of certain dry gas pads due to low natural gas prices, which could impact near-term production levels.
- Antero Resources Corp (AR) remains unhedged in a volatile natural gas market, which could expose it to price fluctuations.
- The company has a small outspend year-to-date, indicating potential financial strain compared to peers with higher breakeven levels.
- Antero Resources Corp (AR) is delaying some capital expenditures and well completions, which may affect future production growth.
Q & A Highlights
Q: What are Antero Resources' views on building a backlog of DUCs (Drilled but Uncompleted Wells) to potentially benefit from higher future prices?
A: Michael Kennedy, CFO, explained that Antero has built two DUC pads with 12 wells that are not being completed this year. The decision to complete these wells will depend on natural gas prices, and they are not planning to build a larger backlog beyond these two pads.
Q: Could you elaborate on Antero's buyback strategy, especially considering the current gas market conditions?
A: Michael Kennedy stated that Antero achieved investment grade this year, and the first $600 million of free cash flow will be used to reduce debt. After that, the majority of free cash flow will be allocated to buybacks.
Q: How does Antero plan to sustain the LPG export premium advantage, and what is the timeline for Gulf Coast export capacity increases?
A: David Cannelongo, SVP of Liquids Marketing & Transportation, noted that the first capacity increase is expected around mid-2025, with another in early 2026. Until then, Antero expects to continue benefiting from robust export premiums due to current constraints.
Q: What conditions would prompt Antero to complete the deferred DUCs, and how does this relate to current gas prices?
A: Michael Kennedy mentioned that the deferred DUCs require higher natural gas prices, around $2.50 or higher, to be economically viable. Antero is cautious and will monitor the market closely before deciding to complete these wells.
Q: Can you provide insights into Antero's maintenance capital strategy and expected production levels for next year?
A: Michael Kennedy indicated that Antero's maintenance capital is centered around $700 million to maintain production levels between 3.3 to 3.4 Bcfe per day. Efficiencies have allowed them to reduce capital expenditure while maintaining production.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
