EUR 850.00 For Business Accounts Only

Morningstar | Antero Produces NGLs and Natural Gas in Appalachia

Antero Resources produces natural gas from the Marcellus Shale in West Virginia and the Utica Shale in Ohio. It is concentrating on areas with a relatively high liquids content; natural gas liquids and condensate account for about 30% of its production. This was a headwind during 2014-16 because of weak liquids pricing. But the outlook is brighter, owing to increasing domestic and export demand for NGLs. Antero, with about 40% of the entire basin's undeveloped liquids-rich acreage, is better positioned to capture this upside than most of its peers.The company also benefits from very strong realized natural gas prices. It has a comprehensive hedge portfolio that limits its exposure to benchmark prices. Hedges currently run out to 2023, and 100% and 60% of expected volumes are protected in 2019 and 2020, respectively. The firm is also managing its basis exposure via its extensive firm transport portfolio, which enables it to sidestep bottlenecks and sell 90% of its output in premium markets outside the basin. Its gas has a high heat content, even after stripping out the NGLs and condensate from its production, which supports a further price uplift. The result is that while many gas producers contend with steep discounts to Nymex, Antero is consistently earning a slight premium.Securing strong prices also affects Antero on the expense side, however, as its transport and marketing costs are relatively high (especially when compared with dry gas producers that don't have to worry about processing costs). In 2018, its EBITDA margin was about $1.37 per thousand cubic feet of equivalent. In addition, finding and development costs averaged $0.53/mcfe (based on extensions and discoveries only and excluding revisions to proved reserves). In 2019, the company expects unit costs to remain around the same level, based on the midpoints of guided ranges.