ANTERO RESOURCES Corp Q4 FY2024 earnings call

• Reduced Maintenance Capital: In 2024, full drilling and completion capital was $620 million, $55 million (8%) below initial guide and nearly $300 million below 2023. Production was 2% above initial guidance, averaging over 3.4 Bcf equivalent per day.
• Drilling and Completion Efficiencies: In 2024, drilling time was reduced to 10 days (nearly 30% improvement from 2022), completion stages averaged 12.2 per day (53% increase from 2022), and cycle time was 123 days (25% below 2022). This allowed running a lean program with 2 rigs and over 1 completion crew to hold production flat.
• Liquids/NGL Fundamentals: 2024 had record differentials to Mont Belvieu driven by high LPE export premiums and strong domestic price differentials. For 2025, high annual export premiums are expected, with domestic marketing efforts driving higher pricing.
• Natural Gas Market: Storage balance is lower than the five-year average. Power burn and residential/commercial demand are at record levels. Plaquemines LNG startup has led to increased pricing, with the TGP500L basis improving.
• Free Cash Flow Breakeven: 2024 unhedged free cash flow breakeven was ~$2.20, and $73 million of positive free cash flow was generated. 2025 guidance is over $1.6 billion of free cash flow, with plans to pay down debt then return to 50-50 debt reduction and capital return.

Liquids/NGLs

• In 2024, Antero realized a $1.41 per barrel premium over Mont Belvieu, the best C3 plus differentials in company history. The fourth quarter of 2024 had an average premium to Mont Belvieu of $3.09 per barrel. For 2025, guidance for C3 plus NGLs is a range of $1.50 to $2.50 per barrel premium to Mont Belvieu prices.

Natural Gas

• Since the third quarter conference call, natural gas storage balance has moved lower relative to the five-year average. Currently, it's 111 Bcf below the five-year average and nearly 200 Bcf below the same time last year. Power burn and residential/commercial demand for natural gas are high, and the startup of Plaquemines LNG has impacted pricing, with the TGP500L basis increasing as the facility ramps up.

• For 2025, C3 plus NGLs guidance is a range of $1.50 to $2.50 per barrel premium to Mont Belvieu prices.
• 2025 natural gas premium to NYMEX is expected to be in the range of $0.10 to $0.20, up from $0.02 in 2024.
• 2025 free cash flow is expected to be over $1.6 billion.

• Tariffs on imported materials and raw materials could impact CapEx, with a potential $5-10 million increase in capital if tariffs lead to 25% higher costs.
• Volatility in natural gas and NGL markets, including potential changes in European pricing and LNG export dynamics, which could affect pricing and market conditions.

Q: Arun Jayaram with JPMorgan asks about the ability of the Appalachia basin and Antero to respond to an increase in gas demand.

A: Michael Kennedy responds that maintenance capital is where they're comfortable, all firm transport is filled, and they're not selling local gas.

Q: John Freeman with Raymond James asks about picking up incremental takeaway contracts as peers do.

A: Michael Kennedy responds that Antero has a full portfolio and is a virtual mover, happy with their current position and filling current firm transport.

Q: Carlos with Wolfe Research asks about the liquids runway and completions outlook.

A: Michael Kennedy responds that Antero has a good inventory, can replace drilled locations, and lateral lengths are around 13-14 thousand feet, which are some of the longest in the basin.

Q: Bert Donnes with Truist Security asks about changes in free cash flow assumptions and hedging.

A: Michael Kennedy responds that they use sensitivities where every $0.10 equivalent pricing is $100 million plus of free cash flow, and hedging is strategic for lean gas pads with wide collars for upside.

Q: Neil Mehta with Goldman Sachs Asset Management asks about US gas balance linkage to European pricing.

A: Michael Kennedy kicks it to Justin Fowler, who states spreads are healthy and supportive, with Europeans setting FSRUs to bring in additional gas volumes.

Q: Kevin McCarthy with Pickering Energy Partners asks about well costs and ethane production.

A: Michael Kennedy responds that well costs are lower in 2025 due to service cost efficiencies and pre-bought materials, and Dave Cannelongo mentions strong ethane production in Q4 with improved differentials for 2025.

Q: Leo Mariani with ROTH MKM asks about CapEx guidance and JV math.

A: Michael Kennedy explains the JV's role in maintaining a consistent program and getting opportunistic terms, with the program being around maintenance capital.

Q: Kalei Akamina with Bank of America asks about production guidance and return of capital.

A: Michael Kennedy responds that production increase is within the basin, and once debt is paid down, Antero will start share buybacks.

Q: David Deckelbaum with TD Cowen asks about lateral lengths and commercial agreements.

A: Michael Kennedy responds that efficiencies offset any reduction in lateral length, and Antero retains optionality with transport to benefit from gas price movements.

Q: Roger Read with Wells Fargo asks about tariffs and CapEx contingency.

A: Michael Kennedy responds that tariffs are well within the capital guidance band, with a potential $5-10 million impact being manageable.

Q: Betty Jiang with Barclays asks about liquids mix evolution and propane outlook.

A: Michael Kennedy and Dave Cannelongo respond that liquids mix is strong, with 2024 having a record 38% liquids mix, and propane outlook benefits from strong demand and hedging efforts.

Q: Paul Diamond with Citi asks about hedging for lean gas production and TGP500L pricing trend.

A: Michael Kennedy responds that hedging for lean gas pads is strategic with a three-dollar floor and wide collars, and TGP500L pricing is expected to be more to the upside due to high Gulf Coast demand.

Q: Nitin Kumar with Mizuho Securities asks about service costs and capital plan trajectory.

A: Michael Kennedy responds that service costs are flat, and the capital plan accounts for ethane contract changes and economic benefits of new contracts.