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Antero to keep gas output in check after Q1 results defy bearish Appalachia prices

Antero Resources will focus more in the near term on reducing debt, watching the natural gas curve and hedging commodity price risk when possible than growing Appalachian Basin output, executives said April 29th. The cautious approach comes after the fourth-largest US natural gas producer narrowed its first-quarter loss thanks in part to the benefit from firm gas transportation contracts and NGLs demand strength.

Appalachian spot gas prices had a bearish January-March quarter, with robust gas production and increasingly limited takeaway capacity driving basis discounts lower. Dominion South averaged an 85-cent discount to cash Henry Hub for Q1, nearly triple the 31-cent discount averaged for the first quarter of 2020. By contrast, Antero’s portfolio allowed it to deliver gas volumes during the quarter that realized a 41 cents/Mcf premium to the NYMEX Henry Hub gas price “We like where we are positioned today with our firm FT portfolio that allows us to avoid these local price blowouts and sell our gas consistently at a premium to NYMEX,” CEO Paul Rady said during an

investor conference call.

Antero’s average realized natural gas price before hedging was $3.48/Mcf, representing a 76% increase compared with the prior-year period. For the full year 2021, Antero forecast gas realizations at a premium to NYMEX of 10 cents to 20 cents. With the trajectory of prices remaining uncertain and some hedges rolling off toward the end of the year, Antero plans to keep production in check.

“We’re committed to that maintenance mode,” Michael Kennedy, Antero’s senior vice president of finance, said during the call. Asked if that position might change after Antero reduces its debt below a $2 billion target, Kennedy said the company would reassess when it gets to that point in 2022.

“That's a much-accelerated time frame because of the terrific execution we've had in the commodity prices as well,” Kennedy said. “But right now, it's maintenance capital for the next three, four years, and we'll assess when we get there. But right now, we're really looking at further debt paydown and opportunistic return of capital.”

As of the end of the first quarter, Antero’s total debt was $2.57 billion. Antero’s net production in the first quarter averaged 3.3 Bcfe/d, a decrease of 1% from the prior-year period.

Strategic plans

In the Marcellus, Antero placed 14 horizontal wells to sales during the first quarter with an average lateral length of 14,297 feet. Antero said it is currently operating three drilling rigs and two completion crews.

Looking ahead, Kennedy said on the call that the company is not currently reconsidering its previous decision not to combine Antero Resources and Antero Midstream.

“When we went through that simplification in 2019, that was one scenario that we definitely had heavy consideration for, and everyone went through in all the conflict committees and independent board directors went through and looked at it, and the best course of action was to make Antero Midstream a C-corp and have two fully

independent companies,” Kennedy said. “So we're not looking at that right now. I mean, I think what you're really talking about is, the leverage profile is really reducing both AR and AM, that becomes a lot more feasible, but we're not entertaining that.”

By Harry Weber, Kelsey Hallahan @ Platts

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