Antero Resources(AR) - 2025 Q2 - Quarterly Report

Cautionary Statement Regarding Forward-Looking Statements This section outlines the nature of forward-looking statements within the report and the inherent risks that could cause actual results to differ materially - This report contains forward-looking statements concerning strategy, future operations, financial position, and other projections. These statements are identified by words like "may," "expect," "plan," and "project"[7] - Actual results could differ materially due to various risk factors, including but not limited to: natural gas, NGLs, and oil prices; ability to execute business and financial strategies; production levels and reserves; geopolitical events; hedging results; and regulatory changes[7][9] - The company cautions that reserve estimates are inherently uncertain and depend on data quality, interpretation, and assumptions. Revisions may occur due to drilling results or changes in commodity prices[10] PART I—FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the period ended June 30, 2025, reflect a significant turnaround to profitability driven by higher natural gas revenues, substantial increases in operating cash flow, and a stronger balance sheet with reduced debt and increased equity, alongside a correction for a prior period depletion error Condensed Consolidated Balance Sheets As of June 30, 2025, total assets decreased to $12.77 billion from $13.01 billion at year-end 2024, while total liabilities decreased to $5.28 billion from $5.79 billion due to reduced long-term debt, resulting in an increase in total equity from $7.22 billion to $7.48 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2024 | June 30, 2025 | | :--- | :--- | :--- | | Total Current Assets | $507,546 | $427,534 | | Property and Equipment, net | $9,687,550 | $9,655,880 | | Total Assets | $13,010,050 | $12,766,073 | | Total Current Liabilities | $1,445,927 | $1,404,729 | | Long-Term Debt | $1,489,230 | $1,098,669 | | Total Liabilities | $5,793,517 | $5,281,566 | | Total Stockholders' Equity | $7,021,650 | $7,305,622 | | Total Equity | $7,216,533 | $7,484,507 | Condensed Consolidated Statements of Operations The company reported a significant shift from net losses to net income, with $156.6 million in net income for Q2 2025 (vs. $79.8 million net loss in Q2 2024) and $364.6 million for H1 2025 (vs. $57.1 million net loss in H1 2024), primarily driven by increased natural gas sales revenue Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2024 | Q2 2025 | H1 2024 | H1 2025 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $978,654 | $1,297,493 | $2,100,925 | $2,650,200 | | Operating Income (Loss) | ($80,086) | $204,883 | ($32,347) | $476,355 | | Net Income (Loss) Attributable to Antero | ($79,806) | $156,585 | ($57,076) | $364,556 | | Diluted EPS | ($0.26) | $0.50 | ($0.19) | $1.16 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash from operating activities more than doubled to $950.1 million from $405.1 million in the prior-year period due to higher revenues, funding stable investing activities at $405.4 million and a significant $544.7 million net use in financing for debt and share repurchases Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2024 | 2025 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $405,109 | $950,097 | | Net Cash Used in Investing Activities | ($414,125) | ($405,380) | | Net Cash Provided by (Used in) Financing Activities | $9,016 | ($544,717) | Notes to Financial Statements The notes detail accounting policies and line items, disclosing a new 2025 drilling partnership, significant debt reduction and share repurchases, derivative positions, a legal contingency for royalty lawsuits with a potential $400 million loss, and a corrected prior period depletion error - On December 11, 2024, the company entered into a new drilling partnership for 2025 with an unaffiliated third-party, who will fund a share of development capital for a 15% working interest in wells spud during 2025[40] - During H1 2025, the company redeemed the remaining $97 million of its 8.375% senior notes due 2026 and repurchased $42 million of its 7.625% senior notes due 2029[59][60] - The company faces a legal contingency from royalty underpayment lawsuits. Following a West Virginia Supreme Court ruling, the company estimates a reasonably possible loss of up to $400 million for leases not at issue in the specific case but potentially impacted by the ruling[125][126] - An immaterial error in the quarterly calculation of depletion expense for prior periods was identified and corrected, decreasing retained earnings as of December 31, 2023, by $80 million and revising the previously reported Q2 2024 net loss from $65.7 million to $79.8 million[144][145][147] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the significant financial improvement in H1 2025 to higher realized natural gas prices, enabling continued capital returns via debt reduction and share repurchases, supported by strong operating cash flow and a revised downward capital budget, while acknowledging minimal hedge positions and ongoing commodity price and inflationary risks Financing Highlights In H1 2025, the company extended its Unsecured Credit Facility maturity to July 30, 2030, continued debt reduction by redeeming $97 million of 2026 Notes and repurchasing $42 million of 2029 Notes, and bought back $85 million in common stock - The maturity date of the Unsecured Credit Facility was extended by one year to July 30, 2030[153] - In H1 2025, the company redeemed the remaining $97 million of its 2026 Notes and repurchased $42 million of its 2029 Notes[154] - Under its share repurchase program, the company bought back approximately 2.5 million shares for $85 million in H1 2025, with $966 million of capacity remaining as of June 30, 2025[155] Results of Operations Q2 2025 revenue significantly increased due to a 77% rise in realized natural gas prices, leading to $205 million operating income (vs. $80 million loss in Q2 2024), with similar trends for H1 2025 showing a 72% natural gas price increase driving a shift to $476 million operating income (vs. $32 million loss in H1 2024), despite modest increases in operating costs Production and Realized Prices (Q2 2024 vs Q2 2025) | Metric | Q2 2024 | Q2 2025 | % Change | | :--- | :--- | :--- | :--- | | Daily Production (MMcfe/d) | 3,420 | 3,430 | * | | Avg. Realized Gas Price ($/Mcf) | $1.92 | $3.39 | 77% | | Avg. Realized C3+ NGLs Price ($/Bbl) | $40.27 | $37.92 | (6)% | | Avg. Realized Oil Price ($/Bbl) | $66.66 | $50.15 | (25)% | | Weighted Avg. Price ($/Mcfe) | $2.98 | $3.85 | 29% | - Natural gas sales revenue for Q2 2025 increased by $314 million (84%) year-over-year, primarily driven by higher commodity prices[173] - Gathering, compression, processing, and transportation expenses increased by $39 million (6%) in Q2 2025 compared to Q2 2024, mainly due to higher fuel costs from increased natural gas prices and annual CPI-based rate adjustments[181][182] - A loss contingency of $11 million was recorded in Q2 2025, contributing to an increase in contract termination and settlement expenses[189] Capital Resources and Liquidity The company's liquidity, primarily from operating cash flow and its credit facility, saw H1 2025 operating cash flow surge to $950 million from $405 million, funding $405 million in investing activities and $545 million net use in financing for debt and share repurchases, leading to a revised $725-$775 million 2025 net capital budget due to efficiencies Cash Flow Summary (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2024 | 2025 | | :--- | :--- | :--- | | Net cash provided by operating activities | $405,109 | $950,097 | | Net cash used in investing activities | ($414,125) | ($405,380) | | Net cash provided by (used in) financing activities | $9,016 | ($544,717) | - The revised 2025 net capital budget is $725 million to $775 million, a decrease reflecting drilling and completion efficiencies, with a plan to complete 60 to 65 net horizontal wells[240] - Total consolidated capital expenditures for H1 2025 were $387 million, including $328 million for drilling and completion[241] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is commodity price volatility for natural gas, NGLs, and oil, with minimal hedging at 4% of production for H1 2025, alongside interest rate risk on its variable-rate credit facility and credit risk from counterparties, where sensitivity analyses indicate a $0.10/MMBtu gas price decrease would reduce revenue by $74 million and a 1% interest rate increase would raise interest expense by $1 million for H1 2025 - The company's production is largely unhedged, with only 4% of production hedged for the six months ended June 30, 2025[251] - A hypothetical $0.10 decrease per MMBtu in natural gas prices and a $1.00 decrease per Bbl in oil and NGLs prices would have decreased revenues by $74 million for the six months ended June 30, 2025[253] - The company is exposed to interest rate risk on its Credit Facility, where a 1.0% increase in average interest rates for H1 2025 would have increased interest expense by an estimated $1 million[260] - Credit risk exposure includes $368 million in receivables from the sale of production and $2 million in derivative assets as of June 30, 2025[256] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025, with no material changes to internal control over financial reporting during Q2 2025 - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of June 30, 2025[261] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[262] PART II—OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings, with details on environmental matters and significant royalty underpayment lawsuits incorporated by reference from Note 14 of the financial statements - Information regarding legal proceedings is detailed in Note 14—Contingencies to the unaudited condensed consolidated financial statements[264] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have occurred to the risk factors described in the 2024 Form 10-K[265] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased a total of 2,478,661 shares at an average price of $34.37 per share, encompassing shares under its publicly announced plan and those withheld for employee tax obligations Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Avg. Price Paid | Shares Repurchased Under Plan | Approx. Value Remaining in Plan ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | April 2025 | 1,826,936 | $33.76 | 1,593,290 | $986,867 | | May 2025 | 486,570 | $35.70 | 415,077 | $972,034 | | June 2025 | 165,155 | $37.29 | 163,771 | $965,935 | | Total | 2,478,661 | $34.37 | 2,172,138 | N/A | - The company's board has authorized a share repurchase program for up to $2.0 billion of its outstanding common stock[267] Other Information Effective July 30, 2025, the company extended the maturity date of its Unsecured Credit Facility by one year from July 30, 2029, to July 30, 2030, utilizing the first of two available one-year extensions - Effective July 30, 2025, the maturity date of the Unsecured Credit Facility was extended by one year to July 30, 2030[268] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications required by Sarbanes-Oxley Sections 302 and 906, and financial statements formatted in iXBRL - The filing includes CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and iXBRL data files for the financial statements[270] Signatures - The report is duly authorized and signed on July 30, 2025, by Michael N. Kennedy, Chief Financial Officer and Senior Vice President – Finance[272][273]