Antero Resources added additional acreage and dozens of drilling locations in the Marcellus Shale through first-quarter A&D, the company recently reported.

Denver-based Antero invested $72 million on land during the quarter, the company reported in first-quarter earnings. That’s just under half of the $150 million Antero has set aside for land acquisitions during 2023.

Paul Rady, Antero’s chairman, president and CEO, said the company’s land investment was centered mostly in the liquids-rich core of the Marcellus.

“Our leasing efforts are primarily focused near our current development plan, where we are achieving these excellent drilling, completion and well performance results,” Rady said on an April 27 earnings call.

Antero added about 12,000 net acres and more than 50 equivalent incremental drilling locations at an average cost of $1 million per location. The company said the additional locations helps offset its maintenance capital plan, which calls for an average of 60 to 65 wells per year.

Last year, Antero added about 80 equivalent drilling locations in liquids-rich areas in Appalachia.

Antero had anticipated spending roughly half of its land budget during the first quarter. Michael Kennedy, CFO and senior vice president of finance, said the company’s pace of land spending should slow to about $25 million per quarter for the rest of the year.

"We knew that first quarter was going to be a large one because a lot of these deals that you land take 60 days to close,” Kennedy said. “So we knew in November and December, we had some large packages that we were able to execute on were going to close in January and February."

As of the end of March, Antero held about 512,000 net acres in the Appalachian Basin, primarily in West Virginia and Ohio, according to regulatory filings.

Liquids production up

Antero’s net production averaged 3.27 billion cubic feet equivalent per day (Bcfe/d) in the first quarter, a 3% increase from the same period a year ago.

Natural gas production averaged 2.15 Bcf/d, down 3% year over year. Production of liquids, including crude oil, NGL and ethane averaged 187,000 bbl/d — a 17% increase from first-quarter 2022.

Crude oil production came in at 9,233 bbl/d for the quarter. Production of certain NGLs averaged 109,522 bbl/d, and ethane production averaged 68,238 bbl/d, Antero reported.

Antero said revenues generated from its liquids products contributed 45% of the company’s total product revenue for the quarter.

Antero 2023E Liquids Revenue
Liquids product revenue accounted for about 45% of Antero’s total product revenue generated in the first quarter. (Source: Antero Resources Q1 2023 investor presentation)

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Kennedy said the company’s free cash flow (FCF) breakeven prices benefit from a notable liquids uplift and premium natural gas pricing Antero receives by selling 100% of its gas out of the basin.

Gas-weighted Antero is able to take advantage of liquids-rich fairways in Appalachia during periods of depressed natural gas prices. Other companies, such as Range Resources, have shifted to a similar strategy. Antero estimates that operators in the gas-rich Haynesville Shale are not able to generate FCF in today’s pricing environment due to a limited liquids revenue uplift and higher maintenance costs.

“We've already begun to see a moderation of activity from these producers through the gas-directed rig declines in recent weeks,” Kennedy said.

Antero Appalachia vs Haynesville Operators
Antero estimates that many Haynesville operators are unable to generate free cash flow at today’s natural gas prices due to limited liquids revenue uplift and higher maintenance capital costs. (Source: Antero Resources Q1 2023 investor presentation)

Gas producers capitalized on high prices in 2022 but have been pressured by oversupply, high levels of storage inventories and weaker-than-expected demand so far this year.

Henry Hub natural gas prices are expected to average $2.94 per MMBtu in 2023, down over 50% from an average of $6.42/MMBtu last year, according to the U.S. Energy Information Administration’s latest outlook.

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