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Fee

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                   

Commission file number: 001-36120

GRAPHIC

ANTERO RESOURCES CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

80-0162034

(State or other jurisdiction of
incorporation or organization)

(IRS Employer Identification No.)

1615 Wynkoop Street, Denver, Colorado

80202

(Address of principal executive offices)

(Zip Code)

(303357-7310

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

AR

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes   No

The registrant had 313,864,919 shares of common stock outstanding as of July 23, 2021.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. Words such as “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential,” or “continue,” and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. When considering these forward-looking statements, investors should keep in mind the risk factors and other cautionary statements in this Quarterly Report on Form 10-Q. These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

our ability to execute our business strategy;
our production and oil and gas reserves;
our financial strategy, liquidity and capital required for our development program;
our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
natural gas, natural gas liquids (“NGLs”), and oil prices;
impacts of world health events, including the coronavirus (“COVID-19”) pandemic;
timing and amount of future production of natural gas, NGLs, and oil;
our hedging strategy and results;
our ability to meet minimum volume commitments and to utilize or monetize our firm transportation commitments;
our future drilling plans;
our projected well costs and cost savings initiatives, including with respect to water handling services provided by Antero Midstream Corporation;
competition and government regulations;
pending legal or environmental matters;
marketing of natural gas, NGLs, and oil;
leasehold or business acquisitions;
costs of developing our properties;
operations of Antero Midstream Corporation;
general economic conditions;
credit markets;
uncertainty regarding our future operating results; and
our other plans, objectives, expectations and intentions contained in this Quarterly Report on Form 10-Q.

2

We caution investors that these forward-looking statements are subject to all of the risks and uncertainties incidental to our business, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, commodity price volatility, inflation, availability of drilling, completion, and production equipment and services, environmental risks, drilling and completion and other operating risks, marketing and transportation risks, regulatory changes, the uncertainty inherent in estimating natural gas, NGLs, and oil reserves and in projecting future rates of production, cash flows and access to capital, the timing of development expenditures, conflicts of interest among our stockholders, impacts of world health events (including the COVID-19 pandemic), cybersecurity risks and the other risks described or referenced under the heading “Item 1A. Risk Factors” herein, including the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), which is on file with the Securities and Exchange Commission (“SEC”).

Reserve engineering is a process of estimating underground accumulations of natural gas, NGLs, and oil that cannot be measured in an exact manner. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data, and the price and cost assumptions made by reservoir engineers. In addition, the results of drilling, testing, and production activities, or changes in commodity prices, may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of natural gas, NGLs, and oil that are ultimately recovered.

Should one or more of the risks or uncertainties described or referenced in this Quarterly Report on Form 10-Q occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

3

PART I—FINANCIAL INFORMATION

ANTERO RESOURCES CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

December 31,

June 30,

  

2020

  

2021

Assets

Current assets:

  

Cash and cash equivalents

$

4,541

Accounts receivable

28,457

36,145

Accrued revenue

425,314

493,740

Derivative instruments

105,130

1,056

Other current assets

15,238

14,958

Total current assets

574,139

550,440

Property and equipment:

Oil and gas properties, at cost (successful efforts method):

Unproved properties

1,175,178

1,076,562

Proved properties

12,260,713

12,479,785

Gathering systems and facilities

5,802

5,802

Other property and equipment

74,361

77,231

13,516,054

13,639,380

Less accumulated depletion, depreciation, and amortization

(3,869,116)

(4,095,539)

Property and equipment, net

9,646,938

9,543,841

Operating leases right-of-use assets

2,613,603

2,486,044

Derivative instruments

47,293

19,396

Investment in unconsolidated affiliate

255,082

237,668

Other assets

13,790

10,944

Total assets

$

13,150,845

12,848,333

Liabilities and Equity

Current liabilities:

  

Accounts payable

$

26,728

39,612

Accounts payable, related parties

69,860

85,471

Accrued liabilities

343,524

433,050

Revenue distributions payable

198,117

267,926

Derivative instruments

31,242

733,994

Short-term lease liabilities

266,024

269,611

Deferred revenue, VPP

45,257

41,453

Other current liabilities

2,302

11,980

Total current liabilities

983,054

1,883,097

Long-term liabilities:

Long-term debt

3,001,593

2,415,163

Deferred income tax liability

412,252

214,292

Derivative instruments

99,172

204,525

Long-term lease liabilities

2,348,785

2,217,336

Deferred revenue, VPP

156,024

137,322

Other liabilities

59,694

58,184

Total liabilities

7,060,574

7,129,919

Commitments and contingencies (Notes 13 and 14)

Equity:

Stockholders' equity:

Preferred stock, $0.01 par value; authorized - 50,000 shares; none issued

Common stock, $0.01 par value; authorized - 1,000,000 shares; 268,672 shares and 313,527 shares issued and outstanding as of December 31, 2020 and June 30, 2021, respectively

2,686

3,135

Additional paid-in capital

6,195,497

6,363,774

Accumulated deficit

(430,478)

(969,444)

Total stockholders' equity

5,767,705

5,397,465

Noncontrolling interests

322,566

320,949

Total equity

6,090,271

5,718,414

Total liabilities and equity

$

13,150,845

12,848,333

See accompanying notes to unaudited condensed consolidated financial statements.

4

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended June 30,

  

2020

  

2021

 

Revenue and other:

Natural gas sales

$

367,415

626,520

Natural gas liquids sales

212,197

464,381

Oil sales

8,322

51,906

Commodity derivative fair value losses

(168,015)

(831,840)

Marketing

64,285

165,453

Amortization of deferred revenue, VPP

11,279

Gain on sale of assets

2,288

Other income (loss)

707

(619)

Total revenue

484,911

489,368

Operating expenses:

Lease operating

24,742

21,645

Gathering, compression, processing, and transportation

631,845

641,362

Production and ad valorem taxes

19,992

33,694

Marketing

113,053

198,994

Exploration

231

5,638

Impairment of oil and gas properties

37,350

9,303

Depletion, depreciation, and amortization

214,035

187,330

Accretion of asset retirement obligations

1,111

1,331

General and administrative (including equity-based compensation expense of $7,973 and $4,249 in 2020 and 2021, respectively)

38,403

32,177

Contract termination and rig stacking

11,071

844

Total operating expenses

1,091,833

1,132,318

Operating loss

(606,922)

(642,950)

Other income (expense):

Equity in earnings of unconsolidated affiliate

20,228

17,477

Transaction expense

(6,138)

(185)

Interest expense, net

(51,811)

(49,963)

Gain (loss) on early extinguishment of debt

39,171

(23,065)

Loss on convertible note equitization

(11,731)

Total other income (expense)

1,450

(67,467)

Loss before income taxes

(605,472)

(710,417)

Provision for income tax benefit

142,404

175,966

Net loss and comprehensive loss including noncontrolling interests

(463,068)

(534,451)

Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests

236

(10,984)

Net loss and comprehensive loss attributable to Antero Resources Corporation

$

(463,304)

(523,467)

Loss per share—basic

$

(1.73)

(1.70)

Loss per share—diluted

$

(1.73)

(1.70)

Weighted average number of shares outstanding:

Basic

268,386

307,879

Diluted

268,386

307,879

See accompanying notes to unaudited condensed consolidated financial statements.

5

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except per share amounts)

Six Months Ended June 30,

  

2020

  

2021

Revenue and other:

Natural gas sales

$

778,497

1,346,889

Natural gas liquids sales

469,870

904,700

Oil sales

43,968

96,592

Commodity derivative fair value gains (losses)

397,818

(1,009,596)

Marketing

110,358

330,243

Amortization of deferred revenue, VPP

22,429

Gain on sale of assets

2,288

Other income

1,505

21

Total revenue

1,802,016

1,693,566

Operating expenses:

Lease operating

50,386

46,192

Gathering, compression, processing, and transportation

1,220,469

1,246,439

Production and ad valorem taxes

45,691

78,391

Marketing

206,326

361,071

Exploration

441

5,857

Impairment of oil and gas properties

126,570

43,365

Depletion, depreciation, and amortization

413,712

381,356

Accretion of asset retirement obligations

2,215

2,119

General and administrative (including equity-based compensation expense of $11,302 and $9,891 in 2020 and 2021, respectively)

69,624

76,251

Contract termination and rig stacking

11,071

935

Total operating expenses

2,146,505

2,241,976

Operating loss

(344,489)

(548,410)

Other income (expense):

Interest expense, net

(104,913)

(92,706)

Equity in earnings (loss) of unconsolidated affiliate

(107,827)

36,171

Gain (loss) on early extinguishment of debt

119,732

(66,269)

Loss on convertible note equitizations

(50,777)

Impairment of equity method investment

(610,632)

Transaction expense

(6,138)

(2,476)

Total other expenses

(709,778)

(176,057)

Loss before income taxes

(1,054,267)

(724,467)

Provision for income tax benefit

252,389

178,912

Net loss and comprehensive loss including noncontrolling interests

(801,878)

(545,555)

Less: net income (loss) and comprehensive income (loss) attributable to noncontrolling interests

236

(6,589)

Net loss and comprehensive loss attributable to Antero Resources Corporation

$

(802,114)

(538,966)

Loss per share—basic

$

(2.90)

(1.78)

Loss per share—diluted

$

(2.90)

(1.78)

Weighted average number of shares outstanding:

Basic

276,306

302,343

Diluted

276,306

302,343

See accompanying notes to unaudited condensed consolidated financial statements.

6

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands)

Additional

Accumulated

Common Stock

Paid-in

Earnings

Noncontrolling

Total

  

Shares

  

Amount

  

Capital

  

(Deficit)

  

Interests

  

Equity

Balances, December 31, 2019

295,941

$

2,959

6,130,365

837,419

6,970,743

Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes

178

2

(34)

(32)

Repurchases and retirements of common stock

(27,193)

(272)

(42,418)

(42,690)

Equity-based compensation

3,329

3,329

Net loss and comprehensive loss

(338,810)

(338,810)

Balances, March 31, 2020

268,926

2,689

6,091,242

498,609

6,592,540

Issuance of common units in Martica Holdings, LLC

300,000

300,000

Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes

464

5

(305)

(300)

Distributions to noncontrolling interest

(3,413)

(3,413)

Repurchases and retirements of common stock

(1,000)

(10)

(743)

(753)

Equity-based compensation

7,973

7,973

Net income (loss) and comprehensive income (loss)

(463,304)

236

(463,068)

Balances, June 30, 2020

268,390

$

2,684

6,098,167

35,305

296,823

6,432,979

Balances, December 31, 2020

268,672

$

2,686

6,195,497

(430,478)

322,566

6,090,271

Issuance of common shares

31,388

314

238,551

238,865

Issuance of common units in Martica Holdings, LLC

51,000

51,000

Equity component of 2026 Convertible Notes, net

(116,381)

(116,381)

Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes

1,130

11

(5,656)

(5,645)

Distributions to noncontrolling interest

(24,699)

(24,699)

Equity-based compensation

5,642

5,642

Net income (loss) and comprehensive income (loss)

(15,499)

4,395

(11,104)

Balances, March 31, 2021

301,190

3,011

6,317,653

(445,977)

353,262

6,227,949

Issuance of common shares

11,588

116

125,262

125,378

Equity component of 2026 Convertible Notes, net

(79,497)

(79,497)

Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes

749

8

(3,893)

(3,885)

Distributions to noncontrolling interest

(21,329)

(21,329)

Equity-based compensation

4,249

4,249

Net loss and comprehensive loss

(523,467)

(10,984)

(534,451)

Balances, June 30, 2021

313,527

$

3,135

6,363,774

(969,444)

320,949

5,718,414

See accompanying notes to unaudited condensed consolidated financial statements.

7

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Six Months Ended June 30,

    

2020

  

2021

 

Cash flows provided by (used in) operating activities:

Net loss including noncontrolling interests

$

(801,878)

(545,555)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depletion, depreciation, amortization, and accretion

415,927

383,475

Impairments

737,202

43,365

Commodity derivative fair value losses (gains)

(397,818)

1,009,596

Gains (losses) on settled commodity derivatives

524,838

(64,951)

Payments for derivative monetizations

(4,569)

Gain on sale of assets

(2,288)

Equity-based compensation expense

11,302

9,891

Deferred income tax benefit

(252,389)

(178,912)

Equity in (earnings) loss of unconsolidated affiliate

107,827

(36,171)

Dividends of earnings from unconsolidated affiliate

85,511

74,040

Amortization of deferred revenue

(22,429)

Amortization of debt issuance costs, debt discount, debt premium and other

4,433

7,877

(Gain) loss on early extinguishment of debt

(119,732)

66,269

Loss on convertible note equitizations

50,777

Changes in current assets and liabilities:

Accounts receivable

(27,329)

(7,687)

Accrued revenue

63,023

(68,425)

Other current assets

789

631

Accounts payable including related parties

(21,182)

6,681

Accrued liabilities

15,722

64,499

Revenue distributions payable

(29,560)

69,809

Other current liabilities

(46)

16,349

Net cash provided by operating activities

316,640

872,272

Cash flows provided by (used in) investing activities:

Additions to unproved properties

(21,672)

(29,473)

Drilling and completion costs

(552,227)

(273,956)

Additions to other property and equipment

(1,234)

(2,320)

Settlement of water earnout

125,000

Proceeds from asset sales

2,351

Change in other liabilities

(77)

Change in other assets

525

597

Net cash used in investing activities

(449,608)

(302,878)

Cash flows provided by (used in) financing activities:

Repurchases of common stock

(43,443)

Issuance of senior notes

1,800,000

Repayment of senior notes

(496,541)

(1,234,698)

Borrowings (repayments) on bank credit facilities, net

374,000

(1,017,000)

Payment of debt issuance costs

(22,440)

Sale of noncontrolling interest

300,000

51,000

Distributions to noncontrolling interests in Martica Holdings LLC

(46,028)

Employee tax withholding for settlement of equity compensation awards

(331)

(9,530)

Convertible note equitizations

(85,648)

Other

(717)

(509)

Net cash provided by (used in) financing activities

132,968

(564,853)

Net increase in cash and cash equivalents

4,541

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

$

4,541

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$

101,885

58,126

Increase (decrease) in accounts payable and accrued liabilities for additions to property and equipment

$

(61,305)

42,589

See accompanying notes to unaudited condensed consolidated financial statements.

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Organization

Antero Resources Corporation (individually referred to as “Antero” and together with its consolidated subsidiaries “Antero Resources,” or the “Company,”) is engaged in the development, production, exploration and acquisition of natural gas, NGLs, and oil properties in the Appalachian Basin in West Virginia and Ohio. The Company targets large, repeatable resource plays where horizontal drilling and advanced fracture stimulation technologies provide the means to economically develop and produce natural gas, NGLs, and oil from unconventional formations. The Company’s corporate headquarters is located in Denver, Colorado.

(2) Summary of Significant Accounting Policies

(a)

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim financial information and should be read in the context of the Company’s December 31, 2020 consolidated financial statements and notes thereto for a more complete understanding of the Company’s operations, financial position, and accounting policies. The Company’s December 31, 2020 consolidated financial statements were included in Antero Resources’ 2020 Annual Report on Form 10-K, which was filed with the SEC.

These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, and, accordingly, do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Company’s financial position as of December 31, 2020 and June 30, 2021 and its results of operations for the three and six months ended June 30, 2020 and 2021 and cash flows for the six months ended June 30, 2020 and 2021. The Company has no items of other comprehensive income or loss; therefore, its net income or loss is equal to its comprehensive income or loss. Operating results for the period ended June 30, 2021 are not necessarily indicative of the results that may be expected for the full year because of the impact of fluctuations in prices received for natural gas, NGLs, and oil, natural production declines, the uncertainty of exploration and development drilling results, fluctuations in the fair value of derivative instruments, the impacts of COVID-19 and other factors.

(b)

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Antero Resources Corporation, its wholly owned subsidiaries, and its variable interest entity (“VIE”), Martica Holdings LLC, (“Martica”), for which the Company is the primary beneficiary. The noncontrolling interest reflected in the Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2020 and 2021 represents the Company’s interest in Martica owned by third parties. See Note 3—Transactions to the unaudited condensed consolidated financial statements for more information on Martica.

(c)

Cash and Cash Equivalents

The Company considers all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments. From time to time, the Company may be in the position of a “book overdraft” in which outstanding checks exceed cash and cash equivalents. The Company classifies book overdrafts in accounts payable and revenue distributions payable within its unaudited condensed consolidated balance sheets, and classifies the change in accounts payable associated with book overdrafts as an operating activity within its unaudited condensed consolidated statements of cash flows. As of December 31, 2020, the book overdrafts included within accounts payable and revenue distributions payable were $11 million and $15 million, respectively.

(d)

Earnings (Loss) Per Common Share

Earnings (loss) per common share—basic for each period is computed by dividing net income (loss) attributable to Antero by the basic weighted average number of shares outstanding during the period. Earnings (loss) per common share—diluted for each period is computed after giving consideration to the potential dilution from outstanding equity awards and shares of common stock issuable upon conversion of the 2026 Convertible Notes (as defined below in Note 7—Long-Term Debt), calculated using the if-converted method. The Company includes restricted stock unit (“RSUs”) awards, performance share unit (“PSUs”) awards and stock

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

options in the calculation of diluted weighted average shares outstanding based on the number of common shares that would be issuable if the end of the period was also the end of the performance period required for the vesting of the awards. During periods in which the Company incurs a net loss, diluted weighted average shares outstanding are equal to basic weighted average shares outstanding because the effects of all equity awards and the 2026 Convertible Notes are anti-dilutive.

The following is a reconciliation of the Company’s basic weighted average shares outstanding to diluted weighted average shares outstanding during the periods presented (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

   

2020

   

2021

   

2020

   

2021

Basic weighted average number of shares outstanding

268,386

307,879

276,306

302,343

Add: Dilutive effect of RSUs

Add: Dilutive effect of outstanding stock options

Add: Dilutive effect of PSUs

Add: Dilutive effect of 2026 Convertible Notes

Diluted weighted average number of shares outstanding

268,386

307,879

276,306

302,343

Weighted average number of outstanding securities excluded from calculation of diluted earnings per common share (1):

RSUs

6,165

6,642

5,697

6,767

Outstanding stock options

454

380

454

404

PSUs

1,595

2,769

1,595

2,584

2026 Convertible Notes

18,778

18,778

(1) The potential dilutive effects of these awards were excluded from the computation of diluted earnings (loss) per common share because the inclusion of these awards would have been anti-dilutive.

(e)

Income Taxes

The Company recognizes deferred tax assets and liabilities for temporary differences resulting from net operating loss carryforwards for income tax purposes and the differences between the financial statement and tax basis of assets and liabilities. The effect of changes in tax laws or tax rates is recognized in income during the period such changes are enacted.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

During the three months ended June 30, 2021, West Virginia enacted a new tax law that is effective January 1, 2022 on a prospective basis that is expected to reduce the Company’s net income or loss that is apportioned to West Virginia.  As a result of this tax law change, the Company’s deferred income tax liability was reduced by $34 million as of June 30, 2021, which includes a $48 million increase in deferred tax assets, partially offset by a $14 million increase in valuation allowance. 

(f)

Recently Issued Accounting Standards

Convertible Instruments

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which eliminates the cash conversion model in Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options, that require separate accounting for conversion features, and instead, allows the debt instrument and conversion features to be accounted for as a single debt instrument. The new standard becomes effective for the Company on January 1, 2022, and early adoption is permitted. The Company is evaluating the transition method it plans to use for adoption on January 1, 2022. However, the Company has utilized the modified retrospective approach to quantify the expected impact of this standard on its financial statements.

Upon adoption of this new standard, the Company expects to reclassify between $15 million and $30 million, net of deferred income taxes and equity issuance costs, to long-term debt and deferred income tax liability, as applicable, from stockholders’ equity, which amount is subject to adjustment for any conversions or other transactions until adoption of this new standard. Additionally,

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

annual interest expense for the 2026 Convertible Notes will be based on an effective interest rate of 4.8% as compared to 15.1% for the three and six months ended June 30, 2021. The Company does not believe that adoption of the standard will impact its operational strategies or development prospects.

Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. This ASU removes certain exceptions to the general principles in ASC 740, Income Taxes (“ASC 740”) and also simplifies portions of ASC 740 by clarifying and amending existing guidance. It is effective for interim and annual reporting periods after December 15, 2020. The Company adopted this ASU on January 1, 2021, and it did not have a material impact on the Company's unaudited condensed consolidated financial statements.

(3) Transactions

(a)

Conveyance of Overriding Royalty Interest

On June 15, 2020, the Company announced the consummation of a transaction with an affiliate of Sixth Street Partners, LLC (“Sixth Street”) relating to certain overriding royalty interests across the Company’s existing asset base (the “ORRIs”). In connection with the transaction, the Company contributed the ORRIs to Martica and Sixth Street contributed $300 million in cash (subject to customary adjustments) and agreed to contribute up to an additional $102 million in cash if certain production thresholds attributable to the ORRIs are achieved in the third quarter of 2020 and first quarter of 2021. All cash contributed by Sixth Street at the initial closing was distributed to the Company. The Company met the applicable production thresholds related to the third quarter of 2020 and first quarter of 2021 as of September 31, 2020 and March 31, 2021, respectively. The Company received a $51 million cash distribution during each of the fourth quarter of 2020 and the second quarter of 2021.

The ORRIs include an overriding royalty interest of 1.25% of the Company’s working interest in all of its proved operated developed properties in West Virginia and Ohio, subject to certain excluded wells (the “Initial PDP Override”), and an overriding royalty interest of 3.75% of the Company’s working interest in all of its undeveloped properties in West Virginia and Ohio (the “Development Override”). Wells turned to sales after April 1, 2020 and prior to the later of (a) the date on which the Company turns to sales 2.2 million lateral feet (net to the Company’s interest) of horizontal wells burdened by the Development Override and (b) the earlier of (i) April 1, 2023 and (ii) the date on which the Company turns to sales 3.82 million lateral feet (net to the Company’s interest) of horizontal wells are subject to the Development Override.

The ORRIs also include an additional overriding royalty interest of 2.00% of the Company’s working interest in the properties underlying the Initial PDP Override (the “Incremental Override”). The Incremental Override (or a portion thereof, as applicable) may be re-conveyed to the Company (at the Company’s election) if certain production targets attributable to the ORRIs are achieved through March 31, 2023. Any portion of the Incremental Override that may not be re-conveyed to the Company based on the Company failing to achieve such production volumes through March 31, 2023 will remain with Martica.

 Prior to Sixth Street achieving an internal rate of return of 13% and 1.5x cash-on-cash return (the “Hurdle”), Sixth Street will receive all distributions in respect of the Initial PDP Override and the Development Override, and the Company will receive all distributions in respect of the Incremental Override, unless certain production targets are not achieved, in which case Sixth Street will receive some or all of the distributions in respect of the Incremental Override. Following Sixth Street achieving the Hurdle, the Company will receive 85% of the distributions in respect of the ORRIs to which Sixth Street was entitled immediately prior to the Hurdle being achieved.

The conveyance of the ORRIs from the Company to Martica was accounted for as a transaction between entities under common control.  As a result, the contributed ORRIs have been recorded by Martica at their historical cost.  

(b)

Volumetric Production Payment Transaction

On August 10, 2020, the Company completed a volumetric production payment transaction and received net proceeds of approximately $216 million (the "VPP").  In connection with the VPP, the Company entered into a purchase and sale agreement, together with a conveyance agreement and production and marketing agreement, with J.P. Morgan Ventures Energy Corporation ("JPM-VEC") to convey, effective July 1, 2020, an overriding royalty interest in dry gas producing properties in West Virginia (the "VPP Properties") equal to 136,589,000 MMBtu over the expected seven-year term of the VPP.

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

The Company has accounted for the VPP as a conveyance under ASC 932, Extractive Activities—Oil and Gas (“ASC 932”), and the net proceeds were recorded as deferred revenue in the unaudited condensed consolidated balance sheet as of the transaction closing. Deferred revenue is recognized as volumes are delivered using the units-of-production method over the term of the VPP. Under the production and marketing agreement, Antero and its affiliates provide certain marketing services as JPM-VEC’s agent, and any income or expenses related to these services will be recorded as marketing revenue or marketing expenses as appropriate.

Contemporaneously with the VPP, the Company executed a call option related to the production volumes associated with its retained interest in the VPP properties, which is collateralized by a mortgage on the VPP properties. Additionally, the production and marketing agreement contains an embedded put option related to the production volumes for the Company’s retained interest in the VPP properties, which has been bifurcated from the production and marketing arrangement and accounted for as a derivative instrument recorded at fair value. See Note 11—Derivative Instruments to the unaudited condensed consolidated financial statements for more information on the Company’s derivative instruments.

(c)

Drilling Partnership

On February 17, 2021, Antero Resources announced the formation of a drilling partnership with QL Capital Partners (“QL”), an affiliate of Quantum Energy Partners, for the Company’s 2021 through 2024 drilling program. Under the terms of the arrangement, each year in which QL participates represents an annual tranche, and QL will be conveyed a working interest in any wells spud by Antero Resources during such tranche year. For 2021, Antero Resources and QL agreed to a capital budget for such annual tranche, and for each subsequent year through 2024, Antero Resources will propose a capital budget and estimated internal rate of return (“IRR”) for all wells to be spud during such year and, subject to the mutual agreement of the parties that the estimated IRR for the year exceeds a specified return, QL will be obligated to participate in such tranche. Antero Resources develops and manages the drilling program associated with each tranche, including the selection of wells. Additionally, for each annual tranche in which QL participates, Antero Resources and QL will enter into an assignment, bill of sale and conveyance pursuant to which QL will be conveyed a proportionate working interest percentage in each well spud in that year, which conveyance will not be subject to any reversion.

Under the terms of the arrangement, QL will fund 20% of development capital for wells spud in 2021 and is expected to fund between 15% and 20% of development capital for wells spud from 2022 through 2024, which funding amounts represent QL’s proportionate working interest in such wells. Additionally, Antero Resources may receive a carry in the form of a one-time payment from QL for each annual tranche if the IRR for such tranche exceeds certain specified returns, which will be determined no earlier than December 31 following the end of each tranche year. Capital costs in excess of, and cost savings below, a specified percentage of budgeted amounts for each annual tranche will be for Antero Resources’ account. Subject to the preceding sentence, for any wells included in a tranche, QL is obligated and responsible for its working interest share of costs and liabilities, and is entitled to its working interest share of revenues, associated with such wells for the life of such wells. If Antero Resources presents a capital budget for an annual tranche with an estimated IRR equal to or exceeding a specified return that QL in good faith believes is less than such specified return and QL elects not to participate, Antero Resources will not be obligated to offer QL the opportunity to participate in subsequent annual tranches.

The Company has accounted for the drilling partnership as a conveyance under ASC 932 and such conveyances are recorded in the unaudited condensed consolidated financial statements as QL obtains its proportionate working interest in each well. No gain or loss was recognized for the interests conveyed during the three and six months ended June 30, 2021.

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(4) Revenue

(a)

Disaggregation of Revenue

The table set forth below presents revenue disaggregated by type and the reportable segment to which it relates (in thousands). See Note 16—Reportable Segments for more information on reportable segments.

Three Months Ended June 30,

Six Months Ended June 30,

   

2020

   

2021

   

2020

   

2021

   

Reportable Segment

Revenues from contracts with customers:

Natural gas sales

$

367,415

626,520

778,497

1,346,889

Exploration and production

Natural gas liquids sales (ethane)

26,644

43,417

53,440

79,527

Exploration and production

Natural gas liquids sales (C3+ NGLs)

185,553

420,964

416,430

825,173

Exploration and production

Oil sales

8,322

51,906

43,968

96,592

Exploration and production

Marketing

64,285

165,453

110,358

330,243

Marketing

Total revenue from contracts with customers

652,219

1,308,260

1,402,693

2,678,424

Income (loss) from derivatives, deferred revenue and other sources

(167,308)

(818,892)

399,323

(984,858)

Total revenue

$

484,911

489,368

1,802,016

1,693,566

(b)

Transaction Price Allocated to Remaining Performance Obligations

For the Company’s product sales that have a contract term greater than one year, the Company utilized the practical expedient in ASC 606, Revenue from Contracts with Customers (“ASC 606”), which does not require the disclosure of the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under the Company’s product sales contracts, each unit of product delivered to the customer represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required. For the Company’s product sales that have a contract term of one year or less, the Company utilized the practical expedient in ASC 606, which does not require the disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

(c) Contract Balances

Under the Company’s sales contracts, the Company invoices customers after its performance obligations have been satisfied, at which point payment is unconditional. Accordingly, the Company’s contracts do not give rise to contract assets or liabilities. As of December 31, 2020 and June 30, 2021, the Company’s receivables from contracts with customers were $425 million and $494 million, respectively.

(5) Equity Method Investment

(a)

Summary of Equity Method Investment

As of June 30, 2021, Antero owned approximately 29.2% of Antero Midstream Corporation’s common stock, which is reflected in Antero’s unaudited condensed consolidated financial statements using the equity method of accounting.

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

The following table sets forth a reconciliation of Antero’s investment in unconsolidated affiliate for the six months ended June 30, 2021 (in thousands):

Balance as of December 31, 2020 (1)

$

255,082

Equity in earnings of unconsolidated affiliate

36,171

Dividends from unconsolidated affiliate

(74,040)

Elimination of intercompany profit

20,455

Balance as of June 30, 2021 (1)

$

237,668

(1) The Company’s investment in Antero Midstream Corporation as of December 31, 2020 and June 30, 2021 was $1.1 billion and $1.4 billion, respectively, based on the quoted market share price of Antero Midstream Corporation.

(b)

Summarized Financial Information of Antero Midstream Corporation

The tables set forth below present summarized financial information of Antero Midstream Corporation (in thousands).

Balance Sheet

December 31,

June 30,

   

2020

   

2021

Current assets

$

93,931

92,438

Noncurrent assets

5,516,981

5,448,304

Total assets

$

5,610,912

5,540,742

Current liabilities

$

94,005

117,837

Noncurrent liabilities

3,098,621

3,094,469

Stockholders' equity

2,418,286

2,328,436

Total liabilities and stockholders' equity

$

5,610,912

5,540,742

Statement of Operations

Six Months Ended June 30,

   

2020

   

2021

Revenues

$

463,444

456,908

Operating expenses

847,882

171,922

Income (loss) from operations

(384,438)

284,986

Net income (loss)

(304,492)

163,664

(6) Accrued Liabilities

Accrued liabilities as of December 31, 2020 and June 30, 2021 consisted of the following items (in thousands):

December 31,

June 30,

    

2020

    

2021

Capital expenditures

$

32,372

 

43,532

Gathering, compression, processing, and transportation expenses

152,724

150,465

Marketing expenses

68,193

75,496

Interest expense, net

 

25,645

 

64,345

Accrued production and ad valorem taxes

37,371

34,404

Derivative settlements payable

3,425

29,720

Other

 

23,794

 

35,088

Total accrued liabilities

$

343,524

 

433,050

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(7) Long-Term Debt

Long-term debt as of December 31, 2020 and June 30, 2021 consisted of the following items (in thousands):

December 31,

June 30,

   

2020

    

2021

Credit Facility (a)

$

1,017,000

5.125% senior notes due 2022 (b)

660,516

5.625% senior notes due 2023 (c)

574,182

5.00% senior notes due 2025 (d)

590,000

590,000

8.375% senior notes due 2026 (e)

500,000

7.625% senior notes due 2029 (f)

700,000

5.375% senior notes due 2030 (g)

600,000

4.25% convertible senior notes due 2026 (h)

287,500

81,570

Total principal

3,129,198

2,471,570

Unamortized premium (discount), net

(111,886)

(29,782)

Unamortized debt issuance costs

(15,719)

(26,625)

Long-term debt

$

3,001,593

2,415,163

(a) Senior Secured Revolving Credit Facility

Antero Resources has a senior secured revolving credit facility (the “Credit Facility”) with a consortium of bank lenders. Borrowings under the Credit Facility are subject to borrowing base limitations based on the collateral value of Antero Resources’ assets and are subject to regular semi-annual redeterminations. As of June 30, 2021, the borrowing base under the Credit Facility was $2.85 billion and lender commitments were $2.64 billion. The borrowing base was re-affirmed in the semi-annual redetermination in April 2021. The next redetermination of the borrowing base is scheduled to occur in October 2021. The Credit Facility is scheduled to mature on October 26, 2022.

Antero Resources was in compliance with all of the financial covenants under the Credit Facility as of December 31, 2020 and June 30, 2021.

As of June 30, 2021, Antero Resources did not have an outstanding balance under the Credit Facility and had outstanding letters of credit of $742 million. As of December 31, 2020, Antero Resources had an outstanding balance under the Credit Facility of $1.0 billion, with a weighted average interest rate of 3.26%, and outstanding letters of credit of $730 million. Commitment fees on the unused portion of the Credit Facility are due quarterly at rates ranging from 0.300% to 0.375% (subject to certain exceptions) of the unused portion based on utilization.

(b) 5.125% Senior Notes Due 2022

On May 6, 2014, Antero Resources issued $600 million of 5.125% senior notes due December 1, 2022 (the “2022 Notes”) at par. On September 18, 2014, Antero Resources issued an additional $500 million of the 2022 Notes at 100.5% of par. The Company repurchased or otherwise redeemed all of the 2022 Notes between 2019 and the first quarter of 2021. The 2022 Notes were unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2022 Notes ranked pari passu to Antero Resources’ other outstanding senior notes. The 2022 Notes were guaranteed on a full and unconditional and joint and several senior unsecured basis by Antero Resources’ existing subsidiaries that guarantee the Credit Facility and certain of its future restricted subsidiaries. Interest on the 2022 Notes was payable on June 1 and December 1 of each year. See “—Debt Repurchase Program” below for further details on 2022 Notes repurchases.

(c) 5.625% Senior Notes Due 2023

On March 17, 2015, Antero Resources issued $750 million of 5.625% senior notes due June 1, 2023 (the “2023 Notes”) at par. The Company repurchased or otherwise fully redeemed all of the 2023 Notes between 2020 and the second quarter of 2021. The 2023 Notes were unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2023 Notes ranked pari passu to Antero Resources’ other outstanding senior notes. The 2023 Notes were guaranteed on a full and unconditional and joint and several senior unsecured basis by Antero Resources’ existing subsidiaries that

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

guarantee the Credit Facility and certain of its future restricted subsidiaries. Interest on the 2023 Notes was payable on June 1 and December 1 of each year. See “—Debt Repurchase Program” below for further details on 2023 Notes repurchases and redemption.

(d) 5.00% Senior Notes Due 2025

On December 21, 2016, Antero Resources issued $600 million of 5.00% senior notes due March 1, 2025 (the “2025 Notes”) at par. The Company repurchased $10 million of the 2025 Notes from time to time during 2020, and as of June 30, 2021, $590 million principal amount of the 2025 Notes remained outstanding. The 2025 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2025 Notes rank pari passu to Antero Resources’ other outstanding senior notes. The 2025 Notes are guaranteed on a full and unconditional and joint and several senior unsecured basis by Antero Resources’ existing subsidiaries that guarantee the Credit Facility and certain of its future restricted subsidiaries. Interest on the 2025 Notes is payable on March 1 and September 1 of each year. Antero Resources may redeem all or part of the 2025 Notes at any time at redemption prices ranging from 102.5% currently to 100.00% on or after March 1, 2023. If Antero Resources undergoes a change of control followed by a rating decline, the holders of the 2025 Notes will have the right to require Antero Resources to repurchase all or a portion of the notes at a price equal to 101% of the principal amount of the 2025 Notes, plus accrued and unpaid interest.

(e) 8.375% Senior Notes Due 2026

On January 4, 2021, Antero Resources issued $500 million of 8.375% senior notes due July 15, 2026 (the “2026 Notes”) at par. The 2026 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2026 Notes rank pari passu to Antero Resources’ other outstanding senior notes. The 2026 Notes are guaranteed on a full and unconditional and joint and several senior unsecured basis by Antero Resources’ existing subsidiaries that guarantee the Credit Facility and certain of its future restricted subsidiaries. Interest on the 2026 Notes is payable on January 15 and July 15 of each year. Antero Resources may redeem all or part of the 2026 Notes at any time on or after January 15, 2024 at redemption prices ranging from 104.188% on or after January 15, 2024 to 100.00% on or after January 15, 2026. In addition, on or before January 15, 2024, Antero Resources may redeem up to 35% of the aggregate principal amount of the 2026 Notes, but in an amount not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 108.375% of the principal amount of the 2026 Notes, plus accrued and unpaid interest. At any time prior to January 15, 2024, Antero Resources may also redeem the 2026 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2026 Notes plus a “make-whole” premium and accrued and unpaid interest. If Antero Resources undergoes a change of control followed by a rating decline, the holders of the 2026 Notes will have the right to require Antero Resources to repurchase all or a portion of the notes at a price equal to 101% of the principal amount of the 2026 Notes, plus accrued and unpaid interest.

(f) 7.625% Senior Notes Due 2029

On January 26, 2021, Antero Resources issued $700 million of 7.625% senior notes due February 1, 2029 (the “2029 Notes”) at par. The 2029 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2029 Notes rank pari passu to Antero Resources’ other outstanding senior notes. The 2029 Notes are guaranteed on a full and unconditional and joint and several senior unsecured basis by Antero Resources’ existing subsidiaries that guarantee the Credit Facility and certain of its future restricted subsidiaries. Interest on the 2029 Notes is payable on February 1 and August 1 of each year. Antero Resources may redeem all or part of the 2029 Notes at any time on or after February 1, 2024 at redemption prices ranging from 103.813% on or after February 1, 2024 to 100.00% on or after February 1, 2027. In addition, on or before February 1, 2024, Antero Resources may redeem up to 35% of the aggregate principal amount of the 2029 Notes, but in an amount not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 107.625% of the principal amount of the 2029 Notes, plus accrued and unpaid interest. At any time prior to February 1, 2024, Antero Resources may also redeem the 2029 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2029 Notes plus a “make-whole” premium and accrued and unpaid interest. If Antero Resources undergoes a change of control followed by a rating decline, the holders of the 2029 Notes will have the right to require Antero Resources to repurchase all or a portion of the notes at a price equal to 101% of the principal amount of the 2029 Notes, plus accrued and unpaid interest.

(g) 5.375% Senior Notes Due 2030

On June 1, 2021, Antero Resources issued $600 million of 5.375% senior notes due March 1, 2030 (the “2030 Notes”) at par. The 2030 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility. The 2030 Notes rank pari passu to Antero Resources’ other outstanding senior notes. The 2030 Notes are

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

guaranteed on a full and unconditional and joint and several senior unsecured basis by Antero Resources’ existing subsidiaries that guarantee the Credit Facility and certain of its future restricted subsidiaries. Interest on the 2030 Notes is payable on March 1 and September 1 of each year. Antero Resources may redeem all or part of the 2030 Notes at any time on or after March 1, 2025 at redemption prices ranging from 102.688% on or after March 1, 2025 to 100.00% on or after March 1, 2028. In addition, on or before March 1, 2025, Antero Resources may redeem up to 35% of the aggregate principal amount of the 2030 Notes, but in an amount not greater than the net cash proceeds of certain equity offerings, if certain conditions are met, at a redemption price of 105.375% of the principal amount of the 2030 Notes, plus accrued and unpaid interest. At any time prior to March 1, 2025, Antero Resources may also redeem the 2030 Notes, in whole or in part, at a price equal to 100% of the principal amount of the 2030 Notes plus a “make-whole” premium and accrued and unpaid interest. If Antero Resources undergoes a change of control followed by a rating decline, the holders of the 2030 Notes will have the right to require Antero Resources to repurchase all or a portion of the notes at a price equal to 101% of the principal amount of the 2030 Notes, plus accrued and unpaid interest.

(h) 4.25% Convertible Senior Notes Due 2026

On August 21, 2020, Antero Resources issued $250 million in aggregate principal amount of 4.25% convertible senior notes due 2026 (the “ 2026 Convertible Notes”). On September 2, 2020, Antero Resources issued an additional $37.5 million of the 2026 Convertible Notes. During the six months ended June 30, 2021, the Company completed the equitization transactions described below under “—Partial Equitizations of 2026 Convertible Notes,” that extinguished $206 million principal amount of the 2026 Convertible Notes, and as of June 30, 2021, $82 million principal amount of the 2026 Convertible Notes remained outstanding. The 2026 Convertible Notes were issued pursuant to an indenture and are senior, unsecured obligations of Antero Resources. The 2026 Convertible Notes bear interest at a fixed rate of 4.25% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on March 1, 2021. Proceeds from the issuance of the 2026 Convertible Notes totaled $278.5 million, net of initial purchasers’ fees and issuance cost of $9 million. Each capitalized term used in this subsection but not otherwise defined in this Quarterly Report on Form 10-Q has the meaning as set forth in the indenture governing the 2026 Convertible Notes.

The initial conversion rate is 230.2026 shares of Antero Resources’ common stock per $1,000 principal amount of 2026 Convertible Notes, subject to adjustment upon the occurrence of specified events. As of June 30, 2021, the if-converted value of the 2026 Convertible Notes was $283 million, which exceeded the principal amount of the 2026 Convertible Notes by $201 million. The 2026 Convertible Notes will mature on September 1, 2026, unless earlier repurchased, redeemed or converted. Before May 1, 2026, note holders will have the right to convert their 2026 Convertible Notes only upon the occurrence of the following events:

during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on September 30, 2020, if the Last Reported Sale Price per share of Antero Resources’ common stock exceeds 130% of the Conversion Price for each of at least 20 Trading Days (whether or not consecutive) during the 30 consecutive Trading Days ending on, and including, the last Trading Day of the immediately preceding calendar quarter (the “Stock Price Condition”);
during the five consecutive Business Days immediately after any 10 consecutive trading day period (such 10 consecutive Trading Day period, the “Measurement Period”) if the trading Price per $1,000 principal amount of 2026 Convertible Notes, as determined following a request by a noteholder in accordance with the procedures set forth below, for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of common stock on such trading day and the conversion rate o