Antero Resources Corporation — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; the supplied filing text does not provide a clear standalone fourth-quarter results summary. Amounts below are U.S. dollars unless otherwise stated.
Business context
Antero explores for and produces natural gas, NGLs and oil, principally in West Virginia and Ohio’s Appalachian Basin. At year-end, it held approximately 502,000 net acres and owned 29.1% of Antero Midstream, which it accounts for using the equity method.
Financial and operating highlights
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $4.619 billion | $3.492 billion |
| Operating income (loss) | $23.9 million | $(953.4) million |
| Net loss attributable to Antero Resources | $(186.9) million | $(1.268) billion |
| Net cash provided by operating activities | $1.660 billion | $735.6 million |
| Net cash used in investing activities | $(710.8) million | $(530.1) million |
| Net cash used in financing activities | $(949.3) million | $(205.6) million |
| Long-term debt, carrying value | $2.125 billion | $3.002 billion |
- Oil and gas production totaled 1,194 Bcfe, or 3,271 MMcfe/d, down 9% from 2020. Production declined across natural gas, NGLs and oil.
- Average combined sales price before derivative settlements rose 106% to $4.85/Mcfe; after settlements it rose 31% to $3.88/Mcfe.
- Operating margin was approximately 0.5% of revenue in 2021, compared with a substantial operating loss in 2020. The filing does not present a separate gross margin figure.
- Cash generation improved, while investing outflows included $749 million of consolidated capital expenditures. Operating cash flow exceeded capital expenditures by approximately $911 million.
- At year-end, the New Credit Facility had a $3.5 billion borrowing base and $1.5 billion of lender commitments; Antero had no borrowings and $531 million of letters of credit outstanding. The company reported a 3.42x current ratio and 1.35x leverage ratio, and compliance with its covenants.
- Year-end principal debt was approximately $2.175 billion, down from $3.129 billion at the end of 2020. The company issued new notes and retired or repurchased debt during the year.
- Proved reserves were 17.729 Tcfe, up 0.5%; 72% were proved developed. The SEC standardized measure was $13.433 billion and PV-10 was $16.548 billion; PV-10 is a non-GAAP measure.
Changes versus 2020
- Total revenue increased 32%, mainly reflecting higher commodity prices. Natural gas, NGL and oil sales all rose, despite lower production volumes.
- Reported commodity derivative fair value losses were $1.937 billion, versus gains of $79.9 million in 2020. Net cash payments on settled derivatives were $1.183 billion in 2021, compared with net cash receipts of $795 million in 2020. These hedges reduced cash realization relative to unhedged market prices and caused substantial reported earnings volatility.
- Net loss narrowed markedly, as 2020 included a $611 million impairment of the Antero Midstream investment and $224 million of oil-and-gas property impairment. 2021 included $91 million of oil-and-gas property impairment, $93 million of debt-extinguishment losses and $51 million of losses on convertible-note equitizations.
- Interest expense decreased 9% to $181.9 million. Production and ad valorem taxes rose to $197.9 million, principally due to higher commodity prices.
- Capital spending and production declined year over year. The company attributed lower development spending partly to reduced activity and drilling efficiencies.
Outlook, management commentary and risks
- 2022 net capital budget: $740 million to $775 million, including $675 million to $700 million for drilling and completion and $65 million to $75 million for leasehold spending. Antero plans to complete 60 to 65 net horizontal wells and does not budget for acquisitions.
- Management said, based on December 31, 2021 strip prices, operating cash flow and available revolver borrowings should cover expected cash requirements for at least the next 12 months. Capital spending may be adjusted for prices, costs, liquidity and drilling results.
- For 2022, the company estimated approximately 54% of production would be hedged, assuming production matched 2021 levels. Hedging limits exposure to falling prices but also limits gains when market prices exceed hedge prices.
- Future development of proved undeveloped reserves is estimated to require about $1.5 billion over five years. Management noted lease-renewal exposure for acreage associated with 983 Bcfe of proved undeveloped reserves; it estimated that about 147 Bcfe might not be renewed based on historical renewal experience.
- Minimum-volume and related transportation, processing, gathering and compression commitments are significant. Firm transportation commitments alone totaled approximately $11.2 billion over their contract terms; the filing’s broader contractual-obligations table totals approximately $15.9 billion, including lease obligations.
- Key risks include volatile commodity prices, hedge-counterparty and customer credit risk, cost inflation, transport and processing constraints, undeveloped acreage and reserve-estimation uncertainty, and extensive environmental, methane-emissions and hydraulic-fracturing regulation. The company also identified climate-related litigation, capital-access and physical risks.
- The company was negotiating with regulators over environmental notices alleging air-permit issues at certain facilities; operations were not suspended, and management did not expect a material adverse effect. Other ordinary-course legal matters include West Virginia property-related claims; the filing refers to additional contingency details in its notes.
- Subsequent to year-end, the board authorized up to $1.0 billion of common-stock repurchases. Antero also announced that it would redeem the remaining approximately $585 million of 5.00% notes due 2025 on March 1, 2022, at a 101.25% redemption price plus accrued interest.
- KPMG issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective as of December 31, 2021.
Important facts for investors to verify
- Review the timing, price and cash-flow effects of derivative settlements, the $727 million net derivative liability, and the remaining hedge coverage.
- Confirm debt balances and maturities after the announced 2025-note redemption, and assess revolver availability after letters of credit and the April 2022 borrowing-base redetermination.
- Assess whether planned 2022 spending and well completions can be funded while managing inflation, lease renewals and substantial minimum-volume commitments.
- Review reserve assumptions and development progress, including the five-year schedule for proved undeveloped reserves and potential lease expirations.
- Check the status and potential financial exposure of environmental notices, property litigation and other contingencies in the full financial-statement notes.
- Evaluate execution of the $1.0 billion repurchase authorization alongside debt reduction, capital needs and commodity-price risk.