Antero Resources Corp. posted a net loss but continues to strengthen its drilling and operational efficiencies, picking up additional inventory in an active second quarter.

The company added approximately 8,000 net acres, representing over 27 incremental drilling locations — an average cost of $1 million per location — in a $36 million leasing program. 

For the quarter, Antero posted an $83 million net loss  compared to its second-quarter 2022 net income of $765 million while also achieving operational records, the company announced July 26

Unlike Appalachian Basin peers Range Resources and EQT Corp., Antero is essentially unhedged and felt the full brunt of low gas and NGL prices in the second quarter, TD Cowen analyst David Deckelbaum wrote in a July 26 report.

“Antero had a strong quarter operationally, while commodity prices weighed on the company's results,” Deckelbaum said.

However, the company upped its performance and efficiency in the field. 

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“Production of 3.4 Bcfe/d was 3% above consensus while realized gas prices came in at $2.14/Mcf which was 13% below consensus of $2.46,” Deckelbaum said. “Total capex for the quarter came in at $283 million, which was 11% higher than consensus of $256 million.”

Speaking during a July 27 conference call discussing the Denver-based operator’s quarterly results, Paul Rady, chairman, CEO and president, said the company averaged more than 11 completion stages per day, which was a 40% improvement over the 2022 average and a 90% increase from 2019 levels.

Drill outs, he said, reached similar success. 

“Drill outs [averaged] over 4,000 ft per day during the second quarter, up 9% from the 2022 average and over 50% increase from the 2019 levels. Faster drill outs and completion times have resulted in significantly shorter cycle times,” he said. “Since 2019, our cycle times have decreased by 65% and averaged just 151 days. In the second quarter in June, we had the fastest cycle times in our company history at 129 days.”

In short, he said, that cycle time represents the first spud on a pad to the point of “turning the entire pad to sales,” and shorter cycle times mean higher capital efficiency.

“These capital efficiency gains also reduce our maintenance capital budget,” he said.

Antero averaged six wells per visit per pad, and the company completed about 60% of its budgeted completion stages during the first half of the year, Rady said. The company’s cumulative equivalent production per well was about 20% higher than the peer average, he added.

“Faster cycle times and improving well performance led to the increase in our 2023 production guidance,” he said. 

The operator’s net production in the quarter averaged 3.4 billion cubic feet equivalent per day (Bcfe/d), representing a 5% growth in total production. The company expects 10% lower drilling and completions capital in 2024, driven by operational efficiency gains, Rady said.

Michael Kennedy, CFO and senior vice president of finance, said that by definition, higher capital efficiency must target a maintenance capital program while driving either higher production volumes for the same capital or lower capital with the same production volume.

“Antero’s volumes actually grew 5% compared to the year ago period. Conversely, when our peer group attempted to target a maintenance capital program, their volumes actually declined by 4% year-over-year,” he said.

Antero increased its full-year 2023 production guidance from 3.35 Bcfe/d to 3.4 Bcfe/d, an increase at the midpoint of 100 MMcfe/d, or 3%. 

During the second quarter in the Marcellus Shale, Antero placed online 26 horizontal wells with an average lateral length of 12,800 ft. Of those wells, 20 had been online for at least 60 days, and the average 60-day rate per well was 26.5 MMcfe/d with approximately 1,236 bbl/d of liquids per well, assuming 25% ethane recovery. The remaining six wells were completed in early June. 

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Antero said the second quarter’s drilling and completion activity set company records for average stages per day for the quarter at 11.2 stages per day, average stages per day of an entire pad of 12.1 stages per day, and in June, a one-day record of 16 stages per day. Drilling performance improved during the quarter, averaging 6,055 lateral feet per day in the second quarter, up 8% from the first quarter 2023 average.

Antero achieved seven of its top 12 lateral feet per day records in 2023, including a high of 12,340 lateral feet per day.

“Our wells continue to lengthen in lateral (length), so we'll have a bit longer in [20]24 than we did in [20]23, pretty much every year to go a tad longer,” Kennedy said.

In the second quarter, Antero's drilling and completion capex was $247 million.

Kennedy said Antero is “one upgrade away” from being investment grade. 

“We are investment grade from one of the three, and one of the others we're on double B plus positive watch,” he said, adding that assuming the commodity price deck comes to realization, “we will be investment grade sometime next year.”

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