Antero Resources Corporation this week announced its 2019 capital budget and production guidance, reflecting a disciplined plan with Stand-alone drilling and completion capital spending at Stand-alone Adjusted Operating Cash Flow levels assuming $50 per barrel WTI oil and $3.00 per MMBtu NYMEX natural gas, while generating double digit production growth.  

Guidance Highlights: 

• In response to recent oil and NGL price declines, the Company has reduced its 2019 drilling and completion capital budget relative to 2018 to a range of $1.1 to $1.25 billion on a consolidated basis and a range of  $1.3 to $1.45 billion on a Stand-alone basis 
• Full year 2019 production is expected to average 3,150 MMcfe/d to 3,250 MMcfe/d, a 17% to 20% increase over 2018 production guidance 
• Liquids volumes, including NGLs and oil are expected to average 154,000 to 164,000 Bbl/d, 18% to 26% over 2018 liquids guidance, including 9,000 Bbl/d of oil, 100,000 Bbl/d of C3+ NGLs and 50,000 Bbl/d of recovered ethane, at the midpoint 
• Plan to operate an average of 5 drilling rigs and 4 completion crews, down 1 to 2 crews from 2018 
• Includes 115 to 125 well completions in 2019 with an average lateral length of 10,200 feet and 120 to 130 wells drilled with an average lateral length of 11,900 feet 
• Forecasting Antero natural gas price realizations before hedges at a $0.15-$0.20/Mcf premium to Henry Hub and C3+ NGL realizations at 60-65% of WTI oil prices 
• Mariner East 2 recently placed in-service enabling the first exports of C3+ NGLs on Antero's 50,000 Bbl/d firm commitment 
• Natural gas production guidance is 100% hedged in 2019 

Paul Rady, Chairman and Chief Executive Officer of Antero Resources commented, 
"Our 2019 drilling and completion plan reflects the impacts from efficiencies that continue to improve our development program.  These efficiencies allow us to forecast attractive, double digit production growth despite fewer completion crews budgeted for 2019.  We remain focused on capital discipline and have the operational and financial flexibility to adjust our development plan with changing commodity prices.  Our diversified production mix along with our industry-leading hedge book and firm transportation portfolio have enabled us to effectively reduce commodity price risk including local basis risk.  We believe these attributes will continue to provide Antero with a competitive advantage moving forward.  To the extent that commodity prices strengthen, we expect capital allocation to reflect an appropriate mix of growth and return of capital to shareholders while continuing to maintain a strong balance sheet."

Commenting on the 2019 outlook, Glen Warren, President, and Chief Financial Officer of Antero Resources said, 
"The strength of our balance sheet gives us flexibility with respect to our 2019 and future development plans, which is critical given the recent commodity price volatility. Going forward, our strategy will be focused on low leverage, prudent capital spending and a mix of production growth and return of capital to shareholders.  If commodity prices deteriorate further, we have built in the flexibility to adjust our development plan accordingly.  Long-term, we remain committed to a strategy of spending within cash flow, maintaining a strong balance sheet that includes an appropriate amount of commodity price hedging and returning the majority of free cash flow to shareholders." 

Recent Developments

During the fourth quarter of 2018 Antero initiated its $600 million share repurchase program. As previously announced, through year-end 2018, Antero returned $129 million of cash to shareholders by repurchasing 9.1 million shares, thereby reducing shares outstanding by 3%.  Additionally, during the fourth quarter, Antero monetized $357 million of its hedge position allowing the Company to further deleverage while maintaining upside to the natural gas strip in 2019.  

In November 2018, Antero began delivering ethane under its 11,500 Bbl/d ten-year export agreement with Borealis.  The ethane is being delivered through Mariner East 1 to Marcus Hook and loaded for shipment to Borealis' steam cracker in Sweden. The Mariner East 2 pipeline was placed in service on December 29, 2018, enabling Antero to transport up to 50,000 Bbl/d of propane and butane to Marcus Hook for export.  Mariner East 2 is expected to improve propane and butane netbacks by approximately $2.00 to $4.00 per barrel on an annual basis. 

In the fourth quarter of 2018, Antero executed its first supply agreement with a premier sand supplier to directly source its sand needs for completions. The first shipment of sand was received in mid-November. The Company expects to directly source high quality, low-cost sand for over 70% of its 2019 development program through similar agreements with additional sand suppliers. Antero anticipates well cost savings of approximately $200,000 per well compared to 2018 levels due to sand self-sourcing.

2019 Capital Budget and Guidance

The following is a summary of Antero Resources' 2019 consolidated and Stand-alone capital budgets for drilling and completion and land capital.

Long-Term Outlook 

Depending on the commodity price environment, Antero Resources plans to grow production at a 10% to 15% compound annual growth rate ("CAGR") from 2020 through 2023.  Antero has a clear path to this production growth profile due to its Appalachian Basin-leading firm transportation portfolio for natural gas.  The Company's activity level and production growth will vary on an annual basis depending on natural gas, oil and NGL price expectations with the objective of maintaining Stand-alone drilling and completion capital spending within Stand-alone Adjusted Operating Cash Flow levels, keeping leverage low while also maximizing the return of capital to shareholders.  

Assuming flat $50 per barrel WTI oil prices and $2.85 per MMBtu NYMEX natural gas prices from 2020 through 2023, Antero Resources expects to grow production at the lower end of the production growth range, invest at levels that result in approximate Free Cash Flow neutrality and maintain leverage in the low 2x area declining below 2x leverage in the final two years of the outlook period (defined as Stand-alone Net Debt to Stand-alone Adjusted EBITDAX).  

Assuming Wall Street analyst consensus commodity pricing of flat $65 per barrel WTI oil and $3.15 per MMBtu NYMEX natural gas prices from 2020 through 2023, Antero Resources expects to grow production at the high end of its production CAGR range, generate $2.5 to $3.0 billion of Free Cash Flow through 2023 and be in a position to both substantially reduce leverage and return significant capital to shareholders.