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Antero Resources tweaks 2019 production outlook after oil prices slump

With oil and natural gas prices slumping, Antero Resources Corp (AR) cut its 2019 drilling and completion budget. On a standalone basis, it now sees $1.3 to $1.45 billion, while it is expected to be $1.1 to $1.25 billion on a consolidated basis.

The explorer, however, bumped up its FY2019 production. It now expects 17-20% more than a year ago at 3,150 MMcfe/d to 3,250 MMcfe/d. Liquids volumes — including NGLs and oil — are expected to average 154,000 to 164,000 Bbl/d, 18-26% over 2018 liquids guidance.

Antero plans to operate an average of 5 drillings rigs and 4 completion crews in the year. 115-125 well completions with an average lateral length of 10,200 feet are expected in 2019, along with 120-130 wells with an average lateral length of 11,900 feet.

CEO Paul Rady commented, “Our 2019 drilling and completion plan reflects the impacts from efficiencies that continue to improve our development program. These efficiencies allow us to forecast attractive, double-digit production growth despite fewer completion crews budgeted for 2019.”

“To the extent that commodity prices strengthen, we expect capital allocation to reflect an appropriate mix of growth and return of capital to shareholders while continuing to maintain a strong balance sheet,” he added.

Commenting on the 2019 outlook, CFO and President Glen Warren weighed in, “Long-term, we remain committed to a strategy of spending within cash flow, maintaining a strong balance sheet that includes an appropriate amount of commodity price hedging and returning the majority of free cash flow to shareholders.”

During the fourth quarter of 2018, Antero initiated a $600-million share repurchase program, where it returned $129 million cash to shareholders by repurchasing 9.1 million shares. Antero also monetized $357 million of its hedge position.

In November 2018, Antero started delivering ethane under its 11,500 Bbl/d ten-year export agreement with Borealis.

In December, the Mariner East 2 pipeline was placed in service to transport up to 50,000 Bbl/d of propane and butane to Marcus Hook for export. Mariner East 2 is expected to improve propane and butane netbacks by about $2.00 to $4.00 per barrel on an annual basis.

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

Looking into the future, Antero Resources plans to grow production at a 10-15% compound annual growth rate (CAGR) from 2020 through 2023.

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