Antero Res. Tells Stockholders: We’re Working on Low Share Price
We spotted a press release from Antero Resources which says, in essence, “We’re working on it.” What are they working on? Antero’s leadership is working on a way to boost the stock price. The press release begins this way: “Antero Resources announced today that the Company and its Board of Directors are working with its financial and legal advisors to evaluate various potential measures to address the discount in trading value of Antero’s stock relative to some of the premier U.S. large capitalization upstream independents that have a similar profile in terms of leverage, capital efficiency, production growth and free cash flow generation.” Translation: We know our stock price isn’t has high as other companies in our league. We’re working on ways to fix it.” What might those ways be? They don’t say. It has been our observation that companies with a perceived “discount in trading value” are often targets of corporate raiders, aka “activist investors,” who buy up 6-7% of a company’s outstanding shares and proceed to bully the company into laying off people and selling assets in an effort to make the stock price pop. We suspect Antero is positioning itself to fend off such an effort. You know, “He who gets there with the bad news first, wins” kind of thing. Antero is admitting there’s a problem and that they’re working on it (and they don’t need the help of someone like Carl Ichan, thank you very much)…
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Yesterday Antero Resources, one of the biggest and best drillers in the Marcellus/Utica (concentrating on just those two plays), released highlights of their 2017 performance and “guidance” for 2018–their plan for what they will do in 2018. In 2017 the company reports average net daily gas equivalent production was 2.3 billion cubic feet per day, an 18% increase over the same quarter in 2016. In 2018, Antero plans to spend $1.45 billion. What will that buy them? In the PA and WV Marcellus, Antero will run five rigs and drill 120-125 wells, with an average lateral length of 9,300 feet. The company says they will average 9 wells per well pad this year. In the Ohio Utica, Antero will operate one rig and drill 20-25 wells with an average lateral of 11,600 feet. In both the Marcellus and Utica, Antero says the cost to drill those wells will go down another 9% this year over what it cost them last year. Antero continues to be one of (if not THE) best “hedgers” in the business–realizing more money for their gas and NGLs than any other driller in the region…
The Marcellus/Utica Shale industry is changing underneath our feet–literally! Last time we checked, most well pads in the Marcellus/Utica sported an average of maybe 3-4 wells–with a dozen wells on a pad being “big.” Something has changed, dramatically, in the gas fields of PA, OH and WV. The “new normal” are supersized well pads–holding as many as (gasp) 40 wells! We hasten to add no such pad yet exists–a pad with 40 wells drilled from it. However, there is an EQT well pad in Allegheny County (near Pittsburgh) with 38 wells permitted (9 of which have been drilled so far). EQT says it now averages drilling 17-18 wells per pad. Antero Resources is drilling an average of 10 wells per pad–up from 3-4 “just a few years ago.” The trend now is more wells per pad, and longer laterals–meaning fewer well pads overall. That’s good for the environment, and good for the bottom line (less money spent pushing dirt around developing pads). Here’s an update on the trend to supersize well pads in the Marcellus/Utica…
By our reckoning, Antero Resources’ $275 million wastewater recycling facility in Doddridge County, WV is now operational (see 
Yesterday MDN updated you on Eclipse Resources’ program of drilling looooong laterals–the horizontal part of shale wells (see 
By our reckoning, Antero Resources’ $275 million wastewater recycling facility in Doddridge County, WV is either already operational, or will be within the next few days (sometime this week). In 2015 Antero hired Veolia Water Technologies Inc. to build a new shale wastewater recycling facility in Doddridge County (see 
Antero Resources turned in their third quarter 2017 update earlier this week. On the ubiquitous analyst phone call, Antero CEO Paul Rady spoke at length about the company’s long laterals. Antero has been a leader in drilling long laterals with nearly 900 wells drilled at an average lateral length of 8,250 feet–with some 230 of those drilled with a lateral length longer than 10,000 feet. Of all the shale wells drilled in the Marcellus/Utica that are over 10,000 feet, Antero has drilled more than 30% of those wells. According to Rady: “Longer laterals at 9,000 plus feet generate materially higher well economics.” But long laterals aren’t the whole story. Antero is also bumping up the amount of sand they use in fracking. In 2016 they used 1,500 pounds per square foot. From there they moved to 1,875. Today? They use 2,500 pounds per foot. The company continues to be one of the best in the business with hedging, or pre-selling their gas on long-term contracts for prices higher than they would get on the day-to-day spot market. After hedging, Antero got $3.39 per thousand cubic feet (Mcf) for gas and equivalents (oil, NGLS) last quarter. Antero drilled and brought online 31 Marcellus wells and 6 Utica wells in 3Q17. Below is the full update, extracts from the analyst phone call, and the the latest slide deck…
Ever hear the word “delevering” used in a sentence? How about this: “Antero Resources announces completion of $1 billion delevering program.” Yeah, financial mumbo jumbo. What the heck is delevering? We’re not quite sure. But we can interpret Antero Resources’ announcement yesterday for you, which included the aforementioned sentence. Here’s the translation: Antero has raised $1 billion by selling new units (think shares of stock) in its pipeline subsidiary ($311 million raised), and by monetizing its natural gas hedge portfolio ($750 million raised). Yes, back into the financial lingo weeds to figure out what is meant by “monetizing” the company’s “hedge portfolio.” We’ll take a stab at explaining it, below. Bottom line up here at the top: Antero figured out how to raise another $1 billion, used to pay off money Antero had borrowed under its massive $4 billion line of credit. Antero is one of the biggest (and best) drillers in the Marcellus/Utica, which is why we care about where and how they raise money…
Lawsuits filed against Antero Resources in both Ohio and West Virginia seek class action status. Both lawsuits make similar claims: Namely that Antero has improperly deducted post-production expenses from royalty checks (not allowed under lease terms), and that Antero has avoided, with creative accounting, paying royalties on natural gas liquids (NGLs) produced. The OH lawsuit was first filed in January of this year, followed by a lawsuit filed in WV in May. We have copies of both complaints below, so you can read the language for yourself. In the case of the OH lawsuit, Antero filed a motion to dismiss. The landowners amended the complaint and Antero dropped their motion to dismiss. The OH lawsuit, and as near as we can tell, the WV lawsuit, are both moving forward. Here’s our summary of both lawsuits–the MDN Cliffs Notes version…
Antero Resources is back in the market looking to raise more money for their Antero Midstream subsidiary. It was only April that Antero floated an initial public offering (IPO) for Antero Midstream with hopes of raising $930 million (see 
When a driller sinks a hole in the ground looking for one hydrocarbon–like natural gas–other hydrocarbons also come out of the ground. Sometimes its oil. Sometimes condensate. Sometimes natural gas liquids (NGLs), including ethane, propane, butane, pentane, etc. In northeast and central Pennsylvania where the Marcellus Shale is prolific, most of what comes out of the ground is just methane–or natural gas. However, in the southwestern portion of PA, and in the northern panhandle of WV and on into eastern OH, it’s a different story. They are considered “wet gas” areas because (depending on the county) the wells are prolific NGL producers. Most NGLs, like propane, fetch much higher prices than plain old methane. Typically ethane is the NGL that mostly comes out of the ground, but for many drillers ethane can’t (yet) be sold, so it’s considered a “waste” product, mixed into the methane stream to get rid of it. But that’s changing. There are now pipelines to carry ethane to facilities in both Philadelphia and to a cracker plant in Canada. There’s even a pipeline for ethane (and other NGLs) that goes all the way to the Gulf Coast (ATEX, Appalachia to Texas). Some of the largest Marcellus/Utica drillers now have markets for their NGLs, so they are ramping up production and selling more NGLs. In fact, six of the eight largest M-U drillers increased their NGL production in the second quarter of 2017 compared to 2Q16. Which six increased, and which two decreased NGL production last quarter?…
Of the three Marcellus/Utica producing states–Pennsylvania, Ohio and West Virginia–only WV reports well production on an annual basis. Not frequent enough! In July WV published production numbers for 2016. The exciting news is that on average, initial production (IP) of Marcellus/Utica shale wells surged 20% over 2015. IP is the amount of gas (or oil or NGLs) flowing from a well. However, when you dig into the numbers, you learn that IP rates did not go up universally across the state. Some counties had big increases, other counties went the other way. The same with drillers. Some drillers (like Antero) saw a big bump up in average IP rates. Other’s (like Southwestern Energy) saw a dip in IP rates from 2015 to 2016…
The heads of both WVONGA (West Virginia Oil and Natural Gas Association) and IOGA WV (Independent Oil and Gas Association of West Virginia) teamed up to write a column in the Charleston Gazette-Mail by touting (defending?) Antero Resources’ Clearwater Facility–a $275 million frack wastewater recycling facility due to go online later this year. WVONGA and IOGA WV use the Clearwater Facility as evidence of the industry’s efforts at becoming more “green” (environmentally friendly) year in and year out. They point out that our air is getting cleaner, and our water is getting cleaner too. Last fall Antero responded to so-called environmentalists who were criticizing the facility (see