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AR

ANTERO RESOURCES Corp (AR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered strong pricing and cash generation: weighted average realized price rose to $4.55/Mcfe, a $0.90/Mcfe premium to NYMEX; net operating cash flow was $458M and Free Cash Flow before working capital was $337M .
  • Liquids strategy remains a differentiator: the company locked in firm sales for ~90% of LPG at Marcus Hook with double‑digit cent/gal premiums, and continues to expect a full‑year C3+ premium of $1.50–$2.50/bbl vs Mont Belvieu .
  • Capital returns and leverage improved: AR repurchased 2.7M shares YTD for ~$92M and reduced debt by $204M, taking Net Debt to ~$1.29B; nearest maturity now 2029 .
  • Guidance narrative intact: maintenance program at ~3.35–3.45 Bcfe/d, best‑in‑class capital efficiency, and opportunistic 50/50 capital returns between buybacks and debt paydown cited as ongoing strategy .

What Went Well and What Went Wrong

What Went Well

  • Premium realizations: natural gas realized $4.01/Mcf (+$0.36 vs index) and weighted average $4.55/Mcfe (+$0.90 vs index), supported by Gulf Coast LNG basis strength; management highlighted faster Plaquemines ramp lifting TGP 500L basis by ~$0.11/MMBtu for 2025–2026 .
  • Liquids pricing resilience: pre‑hedge C3+ $45.65/bbl (+$1.66 vs Mont Belvieu); firm LPG deals (~90% of volumes) at Marcus Hook with no cancellation rights reduce tariff risk; very limited China exposure historically .
  • Cash generation and capital efficiency: Adjusted EBITDAX $549M, Free Cash Flow before working capital $337M, D&C capex $157M (23% of FY guidance) enabling accelerated buybacks .

“Antero is uniquely positioned for both LNG export growth and expected regional power demand through data center expansions” .

What Went Wrong

  • GAAP revenue and EPS optics weighed by derivative marks: commodity derivative fair value loss of $71.7M flowed through “Revenue and other,” compressing reported top line and GAAP EPS .
  • Cost inflation in GP&T: all‑in cash expense rose to $2.56/Mcfe (vs $2.44 in Q1 2024) driven by higher fuel costs as gas prices increased; management also noted GP&T’s variable component rises ~$0.10/Mcfe for each $1/Mcf gas price increase .
  • Oil price differential: oil realized at a $12.34/bbl discount to the index, modestly dampening liquids mix contribution despite strong C3+ premiums .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$1,122.3 $1,168.8 $1,352.7
Operating Income ($USD Millions)$47.7 $57.8 $271.5
Net Income attributable ($USD Millions)$22.7 $149.6 $208.0
GAAP Diluted EPS ($)$0.07 $0.48 $0.66
Net Income Margin (%)2.0% (22.7/1,122.3) 12.8% (149.6/1,168.8) 15.4% (208.0/1,352.7)
Adjusted EBITDAX ($USD Millions)$262.1 $331.9 $549.4
Net cash from operating activities ($USD Millions)$261.6 $278.0 $457.7
Free Cash Flow ($USD Millions)$15.5 $159.0 $235.6 (reported) / $336.6 (pre‑WC)
All‑in cash expense ($/Mcfe)$2.44 $2.45 $2.56

Segment/Revenue components:

Component ($USD Millions)Q1 2024Q4 2024Q1 2025
Natural gas sales$474.1 $543.8 $780.0
NGL sales$517.9 $555.7 $561.4
Oil sales$64.7 $49.1 $50.3
Marketing$48.5 $34.0 $25.6
Commodity derivative fair value gains (losses)$9.4 $(21.5) $(71.7)
Amortization of deferred revenue (VPP)$6.7 $6.8 $6.2
Other revenue and income$0.9 $2.5 $0.8

KPIs and price realization:

KPIQ1 2024Q4 2024Q1 2025
Daily combined production (MMcfe/d)3,426 3,431 3,397
Natural gas realized price (before hedges, $/Mcf)$2.35 $2.77 $4.01
C3+ NGL realized price (before hedges, $/Bbl)$43.05 $44.29 $45.65
Weighted average realized price (before hedges, $/Mcfe)$3.39 $3.64 $4.55
Premium/(discount) vs index (weighted, $/Mcfe)n/a$0.85 $0.90
D&C capital (accrual basis, $USD Millions)$187.2 $120.5 $157.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent UpdateChange
Net daily production (Bcfe/d)FY 20253.35–3.45 Q1 run‑rate ~3.4 Bcfe/d Maintained (in‑line)
Natural gas realized premium vs NYMEX ($/Mcf)FY 2025$0.10–$0.20 Q1 realized +$0.36/Mcf Maintained; realized tracking above range
C3+ premium vs Mont Belvieu ($/Bbl)FY 2025$1.50–$2.50 Expect $1.50–$2.50; ~90% LPG firm sales at Marcus Hook Maintained/clarified
D&C capital ($MM)FY 2025$650–$700 Q1 spend $157M (~23% of FY) Maintained
Land capital ($MM)FY 2025$75–$100 Q1 spend $30M, +6,000 net acres Maintained
Hedge program2026Prior collars minimal Added 320k MMBtu/d collars ($3.07–$5.96) Raised (new hedges)
Capital return202550/50 target after initial debt reduction Accelerated buybacks; $92M YTD; 50/50 pivot in March Accelerated buybacks

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
LNG corridor pricing/basisRecord C3+ premium; deferral of pads due to low gas prices Plaquemines LNG ramp improved TGP 500L basis by ~$0.11/MMBtu; ~25% of production on pool Strengthening pricing tailwind
LPG tariffs/macro & Marcus HookTight export capacity; rising spot international premiums 90% LPG volumes firm‑sold at Marcus Hook; no cancellations; minimal China exposure Contracted premiums; limited tariff risk
Data center/in‑basin demandOperational efficiencies; maintenance program focus Two power projects (~6.5 GW) could add ~1.2 Bcf regional demand; WV Micro Grid Bill signed Growing visibility; optionality post‑2025
Hedging strategy (lean gas)No new gas hedges in Q3’24 2026 wide collars added ($3.07–$5.96); ~9% volumes hedged 2026 Opportunistic collars; maintain upside
Capital returns & leverageIG rating; new unsecured facility; debt reduction focus 50/50 buybacks/debt reduction; opportunistic buybacks at ~10% below YTD VWAP More buybacks near term
GP&T variable costsCPI‑driven increases in 2024 Rule of thumb +$0.10/Mcfe per +$1/Mcf gas price; Q1 higher due to fuel costs Costs rise with price; manageable

Management Commentary

  • “Our first quarter 2025 results highlight the benefit of Antero’s differentiated strategy… record LNG demand… natural gas realizations at a $0.36 premium to NYMEX” — Paul Rady .
  • “We entered into firm sales agreements for approximately 90% of our LPG… expected to deliver ~$2.00/bbl premium to Mont Belvieu in 2025” — Paul Rady .
  • “Antero has the lowest maintenance capital per Mcfe… $0.54 per Mcfe… lowest breakeven at $2.29/Mcf” — Michael Kennedy .
  • “We called the remaining $97M of our 2026 senior notes… nearest maturity out to 2029… total debt just $1.3B” — Michael Kennedy .
  • “We’re uniquely positioned for both LNG export growth and regional power demand through data centers” — Justin Fowler .

Q&A Highlights

  • LPG firm sales scope: ~90% of export volumes locked at double‑digit premiums; domestic volumes also ~90% locked—confidence in C3+ premium guidance .
  • Buyback cadence: pivoted to 50/50 buybacks/debt reduction in March; opportunistic given disconnect vs fundamentals; expect buybacks to be a growing share as debt declines .
  • 2026 collars: wide collars secure returns on lean gas pads while retaining upside (e.g., ~$3 by ~$7+) .
  • In‑basin demand contracting: AR prefers Henry Hub‑linked pricing; cautious on local basis contracts without long‑term hedging certainty .
  • GP&T dynamics: variable component rises with gas prices (~$0.10/Mcfe per $1/Mcf); processing running above nameplate (~104%) per midstream report .

Estimates Context

Values retrieved from S&P Global.

Metric vs ConsensusQ1 2024Q4 2024Q1 2025
Revenue ($USD Billions)Actual: $1.122 vs Est: $1.060*Actual: $1.169 vs Est: $1.168*Actual: $1.353 vs Est: $1.398*
EPS (Adjusted/Primary) ($)Actual: ~$0.08 vs Est: $0.03*Actual: ~$0.58 vs Est: $0.29*Actual: ~$0.78 vs Est: $0.88*
EBITDA/EBITDAX ($USD Billions)Actual: $0.246 vs Est: $0.225*Actual: $0.284 vs Est: $0.344*Actual: $0.549 (EBITDAX) vs Est EBITDA: $0.557*

Notes:

  • Adjusted/Primary EPS approximated by Adjusted Net Income ($246.7M) / diluted shares (314.8M) ≈ $0.78 ; GAAP diluted EPS was $0.66 .
  • FY context: FY 2025 revenue consensus ~$5.14B*, vs FY 2024 actual ~$4.30B .

Key Takeaways for Investors

  • Premium pricing tailwinds: LNG corridor exposure (TGP 500L) and locked‑in LPG premiums at Marcus Hook should sustain above‑index realizations; Q1 delivered +$0.90/Mcfe vs NYMEX .
  • Cash return acceleration: with Net Debt at ~$1.29B and next maturity 2029, expect continued buyback activity under a flexible 50/50 framework .
  • Operational efficiency: lowest maintenance capital and strong cycle times support maintaining ~3.4 Bcfe/d with 2 rigs and ~1 completion crew .
  • Cost vigilance: GP&T variable costs rise with gas prices; monitor per‑Mcfe cash costs as Henry Hub improves .
  • Near‑term trading: positive catalysts include LNG basis strength and liquids premiums; derivative marks can affect GAAP optics—focus on underlying realizations and cash metrics .
  • Medium‑term thesis: optionality from regional power/data center projects (~1.2 Bcf demand) and lean gas hedging strategy underpin durable FCF through the cycle .
  • Guidance intact: maintenance production, liquids pricing premiums, and disciplined capital keep FY 2025 trajectory on track with potential upside to realized gas premiums .

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