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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, 2022

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 306,119,105 shares of common stock outstanding as of July 22, 2022.

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;
our ability to execute our share repurchase program;
natural gas, natural gas liquids (“NGLs”) and oil prices;
impacts of geopolitical events and 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, including with respect to water handling services provided by Antero Midstream Corporation (“Antero Midstream”);
competition;
government regulations and changes in laws;
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;
our ability to achieve our greenhouse gas reduction targets and the costs associated therewith;
general economic conditions;
credit markets;

2

uncertainty regarding our future operating results; and
our other plans, objectives, expectations and intentions contained in this Quarterly Report on Form 10-Q.

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 or changes in law, 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, the state of markets for, and availability of, verified quality carbon offsets 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, 2021 (the “2021 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,

  

2021

  

2022

Assets

Current assets:

  

Accounts receivable

$

78,998

25,375

Accrued revenue

591,442

952,054

Derivative instruments

757

578

Other current assets

14,922

37,490

Total current assets

686,119

1,015,497

Property and equipment:

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

Unproved properties

1,042,118

1,014,497

Proved properties

12,646,303

12,910,737

Gathering systems and facilities

5,802

5,802

Other property and equipment

116,522

126,807

13,810,745

14,057,843

Less accumulated depletion, depreciation, and amortization

(4,283,700)

(4,466,297)

Property and equipment, net

9,527,045

9,591,546

Operating leases right-of-use assets

3,419,912

3,355,622

Derivative instruments

14,369

7,058

Investment in unconsolidated affiliate

232,399

229,095

Other assets

16,684

13,882

Total assets

$

13,896,528

14,212,700

Liabilities and Equity

Current liabilities:

  

Accounts payable

$

24,819

87,860

Accounts payable, related parties

76,240

72,871

Accrued liabilities

457,244

496,677

Revenue distributions payable

444,873

485,039

Derivative instruments

559,851

773,357

Short-term lease liabilities

456,347

506,724

Deferred revenue, VPP

37,603

34,107

Other current liabilities

11,140

18,769

Total current liabilities

2,068,117

2,475,404

Long-term liabilities:

Long-term debt

2,125,444

1,577,213

Deferred income tax liability, net

318,126

483,722

Derivative instruments

181,806

393,139

Long-term lease liabilities

2,964,115

2,849,598

Deferred revenue, VPP

118,366

103,215

Other liabilities

54,462

56,546

Total liabilities

7,830,436

7,938,837

Commitments and contingencies

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; 313,930 and 308,812 shares issued and outstanding as of December 31, 2021 and June 30, 2022, respectively

3,139

3,088

Additional paid-in capital

6,371,398

6,119,645

Accumulated deficit

(617,377)

(119,125)

Total stockholders' equity

5,757,160

6,003,608

Noncontrolling interests

308,932

270,255

Total equity

6,066,092

6,273,863

Total liabilities and equity

$

13,896,528

14,212,700

See accompanying notes to unaudited condensed consolidated financial statements.

4

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(In thousands, except per share amounts)

Three Months Ended June 30,

  

2021

  

2022

 

Revenue and other:

Natural gas sales

$

626,520

1,558,994

Natural gas liquids sales

464,381

702,388

Oil sales

51,906

89,185

Commodity derivative fair value losses

(831,840)

(265,662)

Marketing

165,453

106,150

Amortization of deferred revenue, VPP

11,279

9,375

Other income (loss)

(619)

1,255

Total revenue

487,080

2,201,685

Operating expenses:

Lease operating

21,645

25,253

Gathering, compression, processing and transportation

641,362

656,212

Production and ad valorem taxes

33,694

81,842

Marketing

198,994

131,298

Exploration and mine expenses

5,638

1,394

General and administrative (including equity-based compensation expense of $4,249 and $8,171 in 2021 and 2022, respectively)

32,177

44,439

Depletion, depreciation and amortization

187,330

173,395

Impairment of oil and gas properties

9,303

23,363

Accretion of asset retirement obligations

1,331

804

Contract termination

844

2,096

(Gain) loss on sale of assets

(2,288)

71

Total operating expenses

1,130,030

1,140,167

Operating income (loss)

(642,950)

1,061,518

Other income (expense):

Interest expense, net

(49,963)

(34,213)

Equity in earnings of unconsolidated affiliate

17,477

14,713

Loss on early extinguishment of debt

(23,065)

(4,414)

Loss on convertible note equitization

(11,731)

Transaction expense

(185)

Total other expense

(67,467)

(23,914)

Income (loss) before income taxes

(710,417)

1,037,604

Income tax benefit (expense)

175,966

(225,571)

Net income (loss) and comprehensive income (loss) including noncontrolling interests

(534,451)

812,033

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

(10,984)

46,898

Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation

$

(523,467)

765,135

Income (loss) per share—basic

$

(1.70)

2.46

Income (loss) per share—diluted

$

(1.70)

2.29

Weighted average number of shares outstanding:

Basic

307,879

310,535

Diluted

307,879

334,561

See accompanying notes to unaudited condensed consolidated financial statements.

5

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(In thousands, except per share amounts)

Six Months Ended June 30,

  

2021

  

2022

Revenue and other:

Natural gas sales

$

1,346,889

2,554,786

Natural gas liquids sales

904,700

1,362,693

Oil sales

96,592

152,479

Commodity derivative fair value losses

(1,009,596)

(1,277,042)

Marketing

330,243

175,188

Amortization of deferred revenue, VPP

22,429

18,647

Other income

21

1,774

Total revenue

1,691,278

2,988,525

Operating expenses:

Lease operating

46,192

43,033

Gathering, compression, processing and transportation

1,246,439

1,246,490

Production and ad valorem taxes

78,391

134,650

Marketing

361,071

230,194

Exploration and mine expenses

5,857

2,292

General and administrative (including equity-based compensation expense of $9,891 and $12,820 in 2021 and 2022, respectively)

76,251

80,130

Depletion, depreciation and amortization

381,356

341,783

Impairment of oil and gas properties

43,365

45,825

Accretion of asset retirement obligations

2,119

3,248

Contract termination

935

2,104

(Gain) loss on sale of assets

(2,288)

1,857

Total operating expenses

2,239,688

2,131,606

Operating income (loss)

(548,410)

856,919

Other income (expense):

Interest expense, net

(92,706)

(71,926)

Equity in earnings of unconsolidated affiliate

36,171

39,891

Loss on early extinguishment of debt

(66,269)

(15,068)

Loss on convertible note equitizations

(50,777)

Transaction expense

(2,476)

Total other expense

(176,057)

(47,103)

Income (loss) before income taxes

(724,467)

809,816

Income tax benefit (expense)

178,912

(172,479)

Net income (loss) and comprehensive income (loss) including noncontrolling interests

(545,555)

637,337

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

(6,589)

28,621

Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation

$

(538,966)

608,716

Income (loss) per share—basic

$

(1.78)

1.95

Income (loss) per share—diluted

$

(1.78)

1.81

Weighted average number of shares outstanding:

Basic

302,343

312,300

Diluted

302,343

337,589

See accompanying notes to unaudited condensed consolidated financial statements.

6

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands)

Additional

Common Stock

Paid-in

Accumulated

Noncontrolling

Total

  

Shares

  

Amount

  

Capital

  

Deficit

  

Interests

  

Equity

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)

Equity-based compensation

5,642

5,642

Distributions to noncontrolling interests

(24,699)

(24,699)

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)

Equity-based compensation

4,249

4,249

Distributions to noncontrolling interests

(21,329)

(21,329)

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

Balances, December 31, 2021

313,930

$

3,139

6,371,398

(617,377)

308,932

6,066,092

Equity component of 2026 Convertible Notes, net

(24,411)

3,229

(21,182)

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

780

8

(10,385)

(10,377)

Repurchases and retirements of common stock

(3,690)

(37)

(74,745)

(25,263)

(100,045)

Equity-based compensation

4,649

4,649

Distributions to noncontrolling interests

(35,757)

(35,757)

Net loss and comprehensive loss

(156,419)

(18,277)

(174,696)

Balances, March 31, 2022

311,020

3,110

6,266,506

(795,830)

254,898

5,728,684

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

2,112

21

(54,463)

(54,442)

Conversion of 2026 Convertible Notes

921

9

3,955

3,964

Repurchases and retirements of common stock

(5,241)

(52)

(104,524)

(88,430)

(193,006)

Equity-based compensation

8,171

8,171

Distributions to noncontrolling interests

(31,541)

(31,541)

Net income and comprehensive income

765,135

46,898

812,033

Balances, June 30, 2022

308,812

$

3,088

6,119,645

(119,125)

270,255

6,273,863

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,

    

2021

  

2022

 

Cash flows provided by (used in) operating activities:

Net income (loss) including noncontrolling interests

$

(545,555)

637,337

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depletion, depreciation, amortization and accretion

383,475

345,031

Impairments

43,365

45,825

Commodity derivative fair value losses

1,009,596

1,277,042

Losses on settled commodity derivatives

(64,951)

(844,713)

Payments for derivative monetizations

(4,569)

Deferred income tax expense (benefit)

(178,912)

171,707

Equity-based compensation expense

9,891

12,820

Equity in earnings of unconsolidated affiliate

(36,171)

(39,891)

Dividends of earnings from unconsolidated affiliate

74,040

62,569

Amortization of deferred revenue

(22,429)

(18,647)

Amortization of debt issuance costs, debt discount and debt premium

7,877

2,515

Settlement of asset retirement obligations

(886)

(Gain) loss on sale of assets

(2,288)

1,857

Loss on early extinguishment of debt

66,269

15,068

Loss on convertible note equitizations

50,777

Changes in current assets and liabilities:

Accounts receivable

(7,687)

53,623

Accrued revenue

(68,425)

(360,612)

Other current assets

631

(22,566)

Accounts payable including related parties

6,681

50,378

Accrued liabilities

64,499

37,203

Revenue distributions payable

69,809

40,166

Other current liabilities

16,349

22,559

Net cash provided by operating activities

872,272

1,488,385

Cash flows provided by (used in) investing activities:

Additions to unproved properties

(29,473)

(72,072)

Drilling and completion costs

(273,956)

(393,506)

Additions to other property and equipment

(2,320)

(11,162)

Proceeds from asset sales

2,351

195

Change in other assets

597

1,711

Change in other liabilities

(77)

Net cash used in investing activities

(302,878)

(474,834)

Cash flows provided by (used in) financing activities:

Repurchases of common stock

(293,051)

Issuance of senior notes

1,800,000

Repayment of senior notes

(1,234,698)

(658,906)

Borrowings (repayments) on bank credit facilities, net

(1,017,000)

70,800

Payment of debt issuance costs

(22,440)

Distributions to noncontrolling interests in Martica Holdings LLC

(46,028)

(67,298)

Employee tax withholding for settlement of equity compensation awards

(9,530)

(64,819)

Convertible note equitizations

(85,648)

Other

(509)

(277)

Net cash used in financing activities

(564,853)

(1,013,551)

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

$

58,126

89,326

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

$

42,589

(3,504)

See accompanying notes to unaudited condensed consolidated financial statements.

8

Table of Contents

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, 2021 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, 2021 consolidated financial statements were included in Antero Resources’ 2021 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, 2021 and June 30, 2022, results of operations for the three and six months ended June 30, 2021 and 2022 and cash flows for the six months ended June 30, 2021 and 2022. 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, 2022 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. All significant intercompany accounts and transactions have been eliminated in the Company’s unaudited condensed consolidated financial statements.

(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 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, 2021, the book overdrafts included within accounts payable and revenue distributions payable were $5 million and $52 million, respectively. As of June 30, 2022, the book overdrafts included within accounts payable and revenue distributions payable were $63 million and $50 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 (i) outstanding equity awards using the treasury stock method and (ii) shares of common stock issuable upon conversion of the 2026 Convertible Notes (as defined below in Note 7—Long-Term Debt) using the if-converted method. The Company includes restricted stock unit (“RSU”) awards, performance share unit

9

Table of Contents

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(“PSU”) awards and stock 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 earnings (loss) attributable to common stockholders for basic and diluted earnings (loss) per share (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

  

2021

  

2022

  

2021

  

2022

Net income (loss) attributable to Antero Resources Corporation—common shareholders

$

(523,467)

765,135

(538,966)

608,716

Add: Interest expense for 2026 Convertible Notes

967

1,934

Less: Tax-effect of interest expense for 2026 Convertible Notes

(224)

(449)

Net income (loss) attributable to Antero Resources Corporation—common shareholders and assumed conversions

$

(523,467)

765,878

(538,966)

610,201

Income (loss) per share—basic

$

(1.70)

2.46

(1.78)

1.95

Income (loss) per share—diluted

$

(1.70)

2.29

(1.78)

1.81

Weighted average common shares outstanding—basic

307,879

310,535

302,343

312,300

Weighted average common shares outstanding—diluted

307,879

334,561

302,343

337,589

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,

   

2021

   

2022

   

2021

   

2022

Basic weighted average number of shares outstanding

307,879

310,535

302,343

312,300

Add: Dilutive effect of RSUs

3,161

3,629

Add: Dilutive effect of PSUs

2,108

2,892

Add: Dilutive effect of stock options

Add: Dilutive effect of 2026 Convertible Notes

18,757

18,768

Diluted weighted average number of shares outstanding

307,879

334,561

302,343

337,589

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

RSUs

6,642

6,767

PSUs

2,769

2,584

Stock options

380

351

404

351

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)

Recently Issued Accounting Standards

Convertible Debt 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 required separate accounting for conversion features, and instead, allows the debt instrument and conversion features to be accounted for as a single debt instrument. It is effective for interim and annual reporting periods beginning after December 31, 2021. The Company adopted

10

Table of Contents

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

the standard effective January 1, 2022 under the modified retrospective transition method, which impacts only the debt instruments outstanding on the adoption date.

Upon adoption of this new standard, the Company reclassified $24 million, net of deferred income taxes and equity issuance costs, from additional paid-in capital and increased long-term debt by $27 million, reduced deferred income tax liability by $6 million and reduced accumulated deficit by $3 million as of January 1, 2022. Additionally, annual interest expense for the 2026 Convertible Notes beginning January 1, 2022 is based on an effective interest rate of 4.9% as compared to 15.1% for the three and six months ended June 30, 2021.

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 beginning 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 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 the first quarter of 2021 as of September 30, 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.

(b)

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 and 2022, Antero Resources and QL agreed to the estimated internal rate of return (“IRR”) of the Company’s capital budget for each annual tranche, and QL agreed to participate in the 2021 and 2022 tranches. For each subsequent year through 2024, Antero Resources will propose a capital budget and estimated 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 assignments, bills of sale and conveyances pursuant to which QL will be conveyed a proportionate working interest percentage in each well spud in that year, which conveyances will not be subject to any reversion.

Under the terms of the arrangement, QL funded 20% of development capital for wells spud in 2021, and will fund 15% in 2022 and between 15% and 20% of development capital spending for wells spud on an annual basis in 2023 and 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 October 31 and no later than December 1 following the end of each tranche year. All of the wells spud during each calendar year period will be a separate annual tranche. 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

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

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 and 2022.

(4) Revenue

(a)

Disaggregation of Revenue

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

Three Months Ended June 30,

Six Months Ended June 30,

   

2021

   

2022

   

2021

   

2022

   

Reportable Segment

Revenues from contracts with customers:

Natural gas sales

$

626,520

1,558,994

1,346,889

2,554,786

Exploration and production

Natural gas liquids sales (ethane)

43,417

90,230

79,527

157,293

Exploration and production

Natural gas liquids sales (C3+ NGLs)

420,964

612,158

825,173

1,205,400

Exploration and production

Oil sales

51,906

89,185

96,592

152,479

Exploration and production

Marketing

165,453

106,150

330,243

175,188

Marketing

Total revenue from contracts with customers

1,308,260

2,456,717

2,678,424

4,245,146

Loss from derivatives, deferred revenue and other sources, net

(821,180)

(255,032)

(987,146)

(1,256,621)

Total revenue

$

487,080

2,201,685

1,691,278

2,988,525

(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, 2021 and June 30, 2022, the Company’s receivables from contracts with customers were $591 million and $952 million, respectively.

(5) Equity Method Investment

(a)

Summary of Equity Method Investment

As of June 30, 2022, Antero owned approximately 29.1% of Antero Midstream Corporation’s (“Antero Midstream”) common stock, which is reflected in Antero’s unaudited condensed consolidated financial statements using the equity method of accounting.

12

Table of Contents

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

The following table sets forth a reconciliation of Antero’s investment in unconsolidated affiliate (in thousands):

Balance as of December 31, 2021 (1)

$

232,399

Equity in earnings of unconsolidated affiliate

39,891

Dividends from unconsolidated affiliate

(62,569)

Elimination of intercompany profit

19,374

Balance as of June 30, 2022 (1)

$

229,095

(1) The fair value of the Company’s investment in Antero Midstream as of December 31, 2021 and June 30, 2022 was $1.3 billion based on the quoted market share price of Antero Midstream.

(b)

Summarized Financial Information of Antero Midstream

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

Balance Sheet

(Unaudited)

December 31,

June 30,

   

2021

   

2022

Current assets

$

83,804

77,057

Noncurrent assets

5,460,197

5,508,444

Total assets

$

5,544,001

5,585,501

Current liabilities

$

114,009

123,772

Noncurrent liabilities

3,143,294

3,231,610

Stockholders' equity

2,286,698

2,230,119

Total liabilities and stockholders' equity

$

5,544,001

5,585,501

Statement of Operations

Six Months Ended June 30,

   

2021

   

2022

Revenues

$

456,908

447,398

Operating expenses

171,922

189,848

Income from operations

284,986

257,550

Net income

$

163,664

159,435

(6) Accrued Liabilities

Accrued liabilities consisted of the following items (in thousands):

(Unaudited)

December 31,

June 30,

    

2021

    

2022

Capital expenditures

$

46,983

 

45,767

Gathering, compression, processing and transportation expenses

164,900

168,756

Marketing expenses

50,589

64,753

Interest expense, net

 

65,093

 

45,714

Production and ad valorem taxes

44,298

47,001

General and administrative expense

27,740

24,699

Derivative settlements payable

35,202

79,269

Other

 

22,439

 

20,718

Total accrued liabilities

$

457,244

 

496,677

13

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ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

(7) Long-Term Debt

Long-term debt consisted of the following items (in thousands):

(Unaudited)

December 31,

June 30,

   

2021

    

2022

Credit Facility (a)

$

70,800

5.00% senior notes due 2025 (d)

584,635

8.375% senior notes due 2026 (e)

325,000

311,767

7.625% senior notes due 2029 (f)

584,000

534,000

5.375% senior notes due 2030 (g)

600,000

600,000

4.25% convertible senior notes due 2026 (h)

81,570

77,570

Total principal

2,175,205