Antero Resources Corp. (NYSE: AR) has monetized over $1 billion of non-exploration and production assets including the previously announced sale of 10 million common units representing limited partner interests in Antero Midstream Partners LP (NYSE: AM) and the restructuring of a portion of its commodity hedge portfolio.
Summary of Antero’s pro forma natural gas hedge position as of June 30, 2017 (1. NYMEX strip pricing as of 9/19/2017)
- Sold $311 million of Antero Midstream common units
- Monetized approximately $750 million of its natural gas hedge portfolio
- Second half 2017 natural gas hedge prices and volumes remain unchanged at 1,860 BBtu/d at $3.64/MMBtu
- Restructured the hedge swap prices with no change to hedge volumes
- Antero's restructured portfolio has 80% of targeted gas production hedged through 2020 at $3.43/MMBtu
- Swap prices have been reset at $3.50/MMBtu for 2018 and 2019, $3.25/MMBtu for 2020 and $3.00/MMBtu in 2021 and 2022
- The pro forma value of the hedge portfolio after restructuring is $1.3 billion as of June 30, 2017 strip pricing
- Intends to utilize a portion of net operating losses carried forward to eliminate cash taxes on the realized gains
- Reduced pro forma standalone E&P net debt to last twelve months adjusted EBITDAX from 3.2x to 2.4x as of June 30, 2017
During the third quarter of 2017, Antero Resources monetized over $1 billion of non-E&P assets through a combination of the previously announced sale of Antero Midstream common units and the restructuring of its hedge portfolio. Proceeds from the monetization program were used to repay credit facility borrowings. Proceeds from the monetization program are not expected to result in cash taxes payable due to the utilization of a portion of Antero's $1.5 billion of net operating losses carried forward. Pro forma for the $311 million of net proceeds from the Antero Midstream secondary offering and approximate $750 million hedge portfolio restructuring proceeds, Antero Resources' standalone E&P net debt to last twelve months adjusted EBITDAX ratio and its consolidated net debt to last twelve months adjusted EBITDAX ratio were 2.4x and 2.7x, respectively, as of June 30, 2017. Additionally, on a pro forma basis as of June 30, 2017, the Company had no borrowings under its $4.0 billion revolving credit facility and $154 million of cash, resulting in over $3.4 billion of liquidity, net of letters of credit outstanding.
Sale of Antero Midstream common units
On September 6, 2017, Antero Resources announced the pricing of an underwritten public offering of 10 million common units representing limited partner interests in Antero Midstream held by Antero Resources at a price of $31.45 per common unit for aggregate net proceeds to Antero Resources of approximately $311 million after underwriting fees but before estimated offering expenses. After giving effect to the Offering and assuming no exercise of the underwriters' option to purchase 1.5 million additional common units, Antero Resources owns approximately 99 million common units, or 53% of Antero Midstream's outstanding common units.
Hedge portfolio monetization
During the third quarter of 2017, Antero Resources restructured a portion of its natural gas hedge portfolio for the years 2018 through 2022 to monetize approximately $750 million of the portfolio's $2.0 billion mark-to-market value as of June 30, 2017. The company has reduced the average fixed index price on its 2018 natural gas hedges to $3.50 per MMBtu while maintaining the total volume hedged in 2018, resulting in approximately 100% of the Company's targeted 2018 natural gas production hedged at price approximately 13% above current NYMEX strip pricing. Additionally, Antero has reduced the average fixed index price on its 2019 natural gas hedges to $3.50 per MMBtu and average fixed index price on its 2020 natural gas hedges to $3.25 per MMBtu while maintaining the total volume hedged. As a result, approximately 80% of the company's targeted 2018 through 2020 natural gas production is hedged at $3.43 per MMBtu, or approximately 16% above current NYMEX strip pricing. After deducting approximately $750 million of proceeds from the $2.0 billion mark-to-market value as of June 30, 2017, Antero Resources has 3.1 Tcfe hedged through 2023 with a pro forma value of approximately $1.3 billion.