Founded
in 2004 by its Chairman and CEO Paul Rady and President and CFO Glen Warren,
Antero Resources (AR) is an independent oil and gas exploration and development
company. It has a market cap of just over $14 billion and engages in the
acquisition, exploration, and development of onshore, unconventional resources
in Appalachia and Ohio regions.
Antero
holds some of the highest returning assets in U.S. Shale. The company’s asset
base is comprised of 329,000 net acres in the southwestern Marcellus Shale in
liquids-rich window of West Virginia and 102,000 net acres in the emerging
Utica Shale of Ohio. AR has an estimated total 3P reserves of 27.7 Tcfe (86%
gas), including 6.3 Tcfe of proved reserves (23% developed, 91% gas), which
represent a 28% increase over 2012.
AR
has built an enviable position in the key area of the Marcellus shale play,
which provides 15 years of drilling inventory at the current pace of
development with RORs ranging from 40% up to 100%. AR’s large inventory of
liquids-rich, low-cost drilling opportunities provide strong long-term growth
opportunities. The company has identified more than 4,500 potential drilling
locations, including 2,941 in the Marcellus shale and 720 in the Utica shale,
and in the next two years production is expected to grow by 76% and 47%,
respectively.
Moving
from delineation and holding acreage to development, outperformers in the
E&P space will have scale and capital efficiency which Antero has captured
in two of the highest return resource plays in the U.S. The contiguous nature
of Antero’s acreage lends itself to longer laterals, faster cycle times between
pads, and effective use of field infrastructure and facilities. Moreover,
significant infrastructure investments by Antero’s wholly-owned subsidiary
Antero Midstream along with third-party agreements support Antero’s long-term
development plans. The infrastructure including water handling systems and
gathering pipelines allow for a high allocation of the capital budget to
drilling and completion and reduces risks to growth.
Leading
Growth Story
Among
its peers, AR offers investors one of the strongest growth profiles. Production
is expected to grow by 76% in 2014 and 47% in 2015. With 15 rigs currently
drilling in the Marcellus, Antero is currently the most active operator in the
play. In addition to that, third-party processing and pipeline infrastructure
is now available in Ohio, allowing the prolific Utica shale to contribute to a
full year of growth from next year with 4 drilling rigs currently active. AR’s
acreage in the core liquids windows of both plays not only provides higher
initial production and EURs to support growth, but a pricing uplift from the
liquids content.
Low
Costs Adding to Attractive Operating Margins
AR’s
low cost structure together with liquids exposure supports strong operating
margins. In the past two years (2010-2012), the company had a finding and
development cost of $1.14 per Mcfe, and going forward the company expects
development costs to drop further to $0.90 per Mcfe for its proved undeveloped
reserves. In addition, AR’s reserve replacement costs over the past three years
have been the lowest among its peers in the Marcellus Shale.
The
company has also mitigated a big portion of its natural gas risk using fixed
price swaps. As of September 30, 2013, AR has hedged a total of 1,104 Bcf and
1.5 MMBbl through 2019 at an average price of $4.71 per MMBtu and $98.50 per
Bbl, respectively. Antero’s valuable natural gas hedges provide a buffer to
cash flows, through the medium term.
Conclusion
AR
has built an enviable position in the two of the key shale plays in North
America and is well-positioned to deliver peer-leading production growth from
the Marcellus and Utica shales for many years to come. While Marcellus shale
should allow the company to post industry leading returns and production growth
for many years, AR’s liquids-rich Utica shale assets should allow it to grow
production and the liquids mix over time. AR also benefits from an experienced
management team; both Paul Rady and Glen Warren have more than 30 years of
experience in the oil and gas sector and prior to AR have successfully built
and sold two companies.
AR
trades at a premium to its peers but the company’s strong production growth
profile, high quality asset base, long reserve life, strong and experienced
management team, and exposure to potentially growing resource in Marcellus and
Utica justify the premium.
For
more information about Antero Resources, please visit:
http://www.anteroresources.com
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