Antero Poised to Benefit from Second Wave of LNG

Antero Resources Corp. is not worried about the future of LNG in the U.S., despite all the handwringing over the Biden administration’s recent pause on exporting permits.

"2024 is expected to be a transformational year for our sector as we enter the second wave of LNG export facility buildouts,” Paul Rady, Antero chairman, CEO and president, said in the company’s fourth quarter 2023 earnings report.

The Biden administration’s recent delay of new LNG export project approvals has impacted projects awaiting final investment decision (FID) and faced criticism from industry groups and energy industry CEOs.

Antero is expecting “very little impact” on LNG demand to the end of the decade, Justin Fowler, senior vice president of natural gas marketing, said on the company’s Feb. 15 earnings call. Out of 16 LNG facilities in the U.S., Antero notes only three are still awaiting FID and could be affected by the pause, regardless of its duration, he said.

Remaining LNG projects would result in more than 10 Bcf of natural gas demand by the end of 2027, bringing the current 14.5 Bcf/d of U.S. LNG capacity to 25 Bcf/d, Fowler said. And by 2025, total exports, including LNG and Mexico pipeline flows, are expected to increase by nearly 8 Bcf/d.

“This is a substantial demand increase that we expect to tie U.S. natural gas prices more closely to the higher international prices,” Fowler said. “Antero is uniquely positioned to benefit from these higher expected U.S. natural gas prices, particularly prices linked to LNG demand growth near Henry Hub.”

Fowler cited Antero’s transportation portfolio, which delivers 100% of natural gas out of the Appalachian Basin—75% destined for the LNG fairway and into Tier 1 Gulf Coast pricing points. The company also holds more than 20 years of what the company described as premium core locations to meet demand.

Due to Antero’s firm transportation delivery locations, Antero currently sells 90% of its gas at Tier 1 price points. As LNG facilities are placed into service, Antero expects LNG export capacity to increase by nearly 6 Bcf and Tier 3 pricing to widen, Fowler said.

Delays on downstream pipelines in the Haynesville Shale into 2026 will also make existing Antero firm transportation more valuable as LNG facilities compete for supply, he said.

Antero doesn’t plan on signing up for long-term Henry Hub deals either, CFO Michael Kennedy said in the earnings call.

“We're just going to flow our gas down to [the LNG] corridor and let people compete for it, and we'll see what the price is, but we think we'll realize a lot of that uplift without having this kind of international-linked pricing,” Kennedy said on the call.

The company is also not planning on divesting its 22 years-worth of low-cost inventory, partly built through approximately $340 million of organic leasing since 2021, Kennedy said.

Asked by an analyst if potentially higher prices factored into M&A discussions with buyers, Kennedy said the company is focused on organic leasing that adds the most value.

“We're not really in those type of negotiations when you're doing the brick-by-brick, ground game of organic leasing, you're just dealing with leaseholders,“ he said.

Antero is a consolidator of the liquids fairway in West Virginia, Kennedy said. With half liquids and half dry gas options, the company can switch between the most accretive—liquids being the most accretive at the moment at $1.10 uplift compared to Henry Hub, he said.

“With our scale and the liquids midstream [infrastructure] we own and the transport, the barriers to entry are very high,” Kennedy said. “No one really could develop that outside of having those attributes. So we continue to consolidate and look to own more and more of the inventory.”

Record execution for Antero

Antero improved completion efficiencies and cycle times in 2023, hitting multiple company records according to the company’s earnings presentation.

The company significantly reduced its average cycle time per pad, hitting a record 122 days compared to 427 days per pad in 2019.

Antero also increased its average number of completion stages per day by 34% compared to 2022, setting another daily record of 16 stages per day. The company also reduced its average number of days per 10,000 lateral feet drilled by 10% compared to 2022, hitting a record of 4.2 days per 10,000 ft.

Fourth-quarter 2023’s average lateral length was 17,000 ft per well, a quarterly company record. In 2024, completed lateral lengths are expected to average 15,500 ft, 2,000 ft longer than the 2023 average.

In fourth-quarter 2023, net production increased by 6% from the same time a year ago to 3.4 Bcfe/d. In 2024, management expects liquids production to increase 2% from the previous year.

Antero’s 2024 drilling and completion capital budget is estimated to range between $650 million and $700 million, with net production expected to average between 3.3 Bcfe/d and 3.4 Bcfe/d.