(12)Subsidiary Guarantors

Antero’s wholly-owned subsidiaries each have fully and unconditionally guaranteed Antero’s senior notes. Antero Midstream and its subsidiaries have been designated as unrestricted subsidiaries under the Credit Facility and the indentures governing Antero’s senior notes, and do not guarantee any of Antero’s obligations (see Note 5). In the event a subsidiary guarantor is sold or disposed of (whether by merger, consolidation, the sale of a sufficient amount of its capital stock so that it no longer qualifies as a “Subsidiary” of the Company (as defined in the indentures governing the notes) or the sale of all or substantially all of its assets (other than by lease)) and whether or not the subsidiary guarantor is the surviving entity in such transaction to a person which is not Antero or a restricted subsidiary of Antero, such subsidiary guarantor will be released from its obligations under its subsidiary guarantee if the sale or other disposition does not violate the covenants set forth in the indentures governing the notes.

In addition, a subsidiary guarantor will be released from its obligations under the indentures and its guarantee, upon the release or discharge of the guarantee of other Indebtedness (as defined in the indentures governing the notes) that resulted in the creation of such guarantee, except a release or discharge by or as a result of payment under such guarantee; if Antero designates such subsidiary as an unrestricted subsidiary and such designation complies with the other applicable provisions of the indentures governing the notes or in connection with any covenant defeasance, legal defeasance or satisfaction and discharge of the notes.

The following Condensed Consolidating Balance Sheets at December 31, 2016 and June 30, 2017, and the related Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2016 and 2017 and Condensed Consolidating Statements of Cash Flows for the six months ended June 30, 2016 and 2017 present financial information for Antero on a stand-alone basis (carrying its investment in subsidiaries using the equity method), financial information for the subsidiary guarantors, financial information for the non-guarantor subsidiaries, and the consolidation and elimination entries necessary to arrive at the information for the Company on a consolidated basis. Antero’s wholly-owned subsidiaries are not restricted from making distributions to the Parent.

Condensed Consolidating Balance Sheet

December 31, 2016

(In thousands)


	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Assets
Current assets:
Cash and cash equivalents	$	17,568		—		14,042		—		31,610
Accounts receivable, net		28,442		—		1,240		—		29,682
Intercompany receivables		3,193		—		64,139		(67,332)		—
Accrued revenue		261,960		—		—		—		261,960
Derivative instruments		73,022		—		—		—		73,022
Other current assets		5,784		—		529		—		6,313
Total current assets		389,969		—		79,950		(67,332)		402,587
Property and equipment:
Natural gas properties, at cost (successful efforts method):
Unproved properties		2,331,173		—		—		—		2,331,173
Proved properties		9,726,957		—		—		(177,286)		9,549,671
Water handling and treatment systems		—		—		744,682		—		744,682
Gathering systems and facilities		17,929		—		1,705,839		—		1,723,768
Other property and equipment		41,231		—		—		—		41,231
		12,117,290		—		2,450,521		(177,286)		14,390,525
Less accumulated depletion, depreciation, and amortization		(2,109,136)		—		(254,642)		—		(2,363,778)
Property and equipment, net		10,008,154		—		2,195,879		(177,286)		12,026,747
Derivative instruments		1,731,063		—		—		—		1,731,063
Investments in subsidiaries		(420,429)		—		—		420,429		—
Contingent acquisition consideration		194,538		—		—		(194,538)		—
Investments in unconsolidated affiliates		—		—		68,299		—		68,299
Other assets, net		21,087		—		5,767		—		26,854
Total assets	$	11,924,382		—		2,349,895		(18,727)		14,255,550

Liabilities and Equity
Current liabilities:
Accounts payable	$	21,648		—		16,979		—		38,627
Intercompany payable		64,139		—		3,193		(67,332)		—
Accrued liabilities		332,162		—		61,641		—		393,803
Revenue distributions payable		163,989		—		—		—		163,989
Derivative instruments		203,635		—		—		—		203,635
Other current liabilities		17,134		—		200		—		17,334
Total current liabilities		802,707		—		82,013		(67,332)		817,388
Long-term liabilities:
Long-term debt		3,854,059		—		849,914		—		4,703,973
Deferred income tax liability		950,217		—		—		—		950,217
Contingent acquisition consideration		—		—		194,538		(194,538)		—
Derivative instruments		234		—		—		—		234
Other liabilities		54,540		—		620		—		55,160
Total liabilities		5,661,757		—		1,127,085		(261,870)		6,526,972
Equity:
Stockholders' equity:
Partners' capital		—		—		1,222,810		(1,222,810)		—
Common stock		3,149		—		—		—		3,149
Additional paid-in capital		5,299,481		—		—		—		5,299,481
Accumulated earnings		959,995		—		—		—		959,995
Total stockholders' equity		6,262,625		—		1,222,810		(1,222,810)		6,262,625
Noncontrolling interest in consolidated subsidiary		—		—		—		1,465,953		1,465,953
Total equity		6,262,625		—		1,222,810		243,143		7,728,578
Total liabilities and equity	$	11,924,382		—		2,349,895		(18,727)		14,255,550

Condensed Consolidating Balance Sheet

June 30, 2017

(In thousands)


	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Assets
Current assets:
Cash and cash equivalents	$	22,657		—		17,533		—		40,190
Accounts receivable, net		15,257		—		1,237		—		16,494
Intercompany receivables		2,989		—		79,062		(82,051)		—
Accrued revenue		218,621		—		—		—		218,621
Derivative instruments		452,005		—		—		—		452,005
Other current assets		8,279		—		294		—		8,573
Total current assets		719,808		—		98,126		(82,051)		735,883
Property and equipment:
Natural gas properties, at cost (successful efforts method):
Unproved properties		2,309,839		—		—		—		2,309,839
Proved properties		10,767,934		—		—		(274,002)		10,493,932
Water handling and treatment systems		—		—		840,183		—		840,183
Gathering systems and facilities		17,929		—		1,866,783		—		1,884,712
Other property and equipment		48,537		—		—		—		48,537
		13,144,239		—		2,706,966		(274,002)		15,577,203
Less accumulated depletion, depreciation, and amortization		(2,454,668)		—		(312,690)		—		(2,767,358)
Property and equipment, net		10,689,571		—		2,394,276		(274,002)		12,809,845
Derivative instruments		1,600,165		—		—		—		1,600,165
Investments in subsidiaries		603,549		—		—		(603,549)		—
Contingent acquisition consideration		201,654		—		—		(201,654)		—
Investments in unconsolidated affiliates		—		—		259,697		—		259,697
Other assets, net		26,793		—		9,838		—		36,631
Total assets	$	13,841,540		—		2,761,937		(1,161,256)		15,442,221

Liabilities and Equity
Current liabilities:
Accounts payable	$	36,490		—		15,077		—		51,567
Intercompany payable		79,062		—		2,989		(82,051)		—
Accrued liabilities		341,256		—		77,096		—		418,352
Revenue distributions payable		203,151		—		—		—		203,151
Derivative instruments		3,279		—		—		—		3,279
Other current liabilities		16,507		—		204		—		16,711
Total current liabilities		679,745		—		95,366		(82,051)		693,060
Long-term liabilities:
Long-term debt		4,346,524		—		945,449		—		5,291,973
Deferred income tax liability		1,100,382		—		—		—		1,100,382
Contingent acquisition consideration		—		—		201,654		(201,654)		—
Derivative instruments		172		—		—		—		172
Other liabilities		53,257		—		515		—		53,772
Total liabilities		6,180,080		—		1,242,984		(283,705)		7,139,359
Equity:
Stockholders' equity:
Partners' capital		—		—		1,518,953		(1,518,953)		—
Common stock		3,154		—		—		—		3,154
Additional paid-in capital		6,435,047		—		—		—		6,435,047
Accumulated earnings		1,223,259		—		—		—		1,223,259
Total stockholders' equity		7,661,460		—		1,518,953		(1,518,953)		7,661,460
Noncontrolling interests in consolidated subsidiary		—		—		—		641,402		641,402
Total equity		7,661,460		—		1,518,953		(877,551)		8,302,862
Total liabilities and equity	$	13,841,540		—		2,761,937		(1,161,256)		15,442,221

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

Three Months Ended June 30, 2016

(In thousands)


	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue:
Natural gas sales	$	229,787		—		—		—		229,787
Natural gas liquids sales		94,713		—		—		—		94,713
Oil sales		16,740		—		—		—		16,740
Gathering, compression, water handling and treatment		—		—		136,809		(133,515)		3,294
Marketing		90,902		—		—		—		90,902
Commodity derivative fair value losses		(684,634)		—		—		—		(684,634)
Other income		3,899		—		—		(3,899)		—
Total revenue		(248,593)		—		136,809		(137,414)		(249,198)
Operating expenses:
Lease operating		12,257		—		34,317		(34,531)		12,043
Gathering, compression, processing, and transportation		267,738		—		6,997		(68,675)		206,060
Production and ad valorem taxes		16,175		—		1,283		—		17,458
Marketing		125,977		—		—		—		125,977
Exploration		1,109		—		—		—		1,109
Impairment of unproved properties		19,944		—		—		—		19,944
Depletion, depreciation, and amortization		173,222		—		24,140		—		197,362
Accretion of asset retirement obligations		620		—		—		—		620
General and administrative		47,167		—		13,306		(371)		60,102
Accretion of contingent acquisition consideration		—		—		3,461		(3,461)		—
Total operating expenses		664,209		—		83,504		(107,038)		640,675
Operating income (loss)		(912,802)		—		53,305		(30,376)		(889,873)
Other income (expenses):
Equity in earnings of unconsolidated affiliates		—		—		484		—		484
Interest		(58,910)		—		(3,878)		193		(62,595)
Equity in net income of subsidiaries		(1,026)		—		—		1,026		—
Total other expenses		(59,936)		—		(3,394)		1,219		(62,111)
Income (loss) before income taxes		(972,738)		—		49,911		(29,157)		(951,984)
Provision for income tax benefit		376,494		—		—		—		376,494
Net income (loss) and comprehensive income (loss) including noncontrolling interests		(596,244)		—		49,911		(29,157)		(575,490)
Net income and comprehensive income attributable to noncontrolling interests		—		—		—		20,754		20,754
Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation	$	(596,244)		—		49,911		(49,911)		(596,244)

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

Three Months Ended June 30, 2017

(In thousands)


	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue:
Natural gas sales	$	454,257		—		—		—		454,257
Natural gas liquids sales		170,819		—		—		—		170,819
Oil sales		26,512		—		—		—		26,512
Gathering, compression, water handling and treatment		—		—		193,767		(190,575)		3,192
Marketing		49,968		—		—		—		49,968
Commodity derivative fair value gains		85,641		—		—		—		85,641
Other income		3,911		—		—		(3,911)		—
Total revenue		791,108		—		193,767		(194,486)		790,389
Operating expenses:
Lease operating		17,189		—		41,444		(41,641)		16,992
Gathering, compression, processing, and transportation		353,216		—		9,910		(96,379)		266,747
Production and ad valorem taxes		21,599		—		954		—		22,553
Marketing		77,421		—		—		—		77,421
Exploration		1,804		—		—		—		1,804
Impairment of unproved properties		15,199		—		—		—		15,199
Depletion, depreciation, and amortization		170,670		—		30,512		—		201,182
Accretion of asset retirement obligations		649		—		—		—		649
General and administrative		49,531		—		14,789		(221)		64,099
Accretion of contingent acquisition consideration		—		—		3,590		(3,590)		—
Total operating expenses		707,278		—		101,199		(141,831)		666,646
Operating income		83,830		—		92,568		(52,655)		123,743
Other income (expenses):
Equity in earnings of unconsolidated affiliates		—		—		3,623		—		3,623
Interest		(59,735)		—		(9,015)		168		(68,582)
Equity in net income (loss) of subsidiaries		(10,408)		—		—		10,408		—
Total other expenses		(70,143)		—		(5,392)		10,576		(64,959)
Income before income taxes		13,687		—		87,176		(42,079)		58,784
Provision for income tax expense		(18,819)		—		—		—		(18,819)
Net income (loss) and comprehensive income (loss) including noncontrolling interests		(5,132)		—		87,176		(42,079)		39,965
Net income and comprehensive income attributable to noncontrolling interests		—		—		—		45,097		45,097
Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation	$	(5,132)		—		87,176		(87,176)		(5,132)

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

Six Months Ended June 30, 2016

(In thousands)


	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue and other:
Natural gas sales	$	484,563		—		—		—		484,563
Natural gas liquids sales		167,778		—		—		—		167,778
Oil sales		26,919		—		—		—		26,919
Gathering, compression, water handling and treatment		—		—		272,882		(265,744)		7,138
Marketing		190,118		—		—		—		190,118
Commodity derivative fair value losses		(404,710)		—		—		—		(404,710)
Other income		7,724		—		—		(7,724)		—
Total revenue and other		472,392		—		272,882		(273,468)		471,806
Operating expenses:
Lease operating		23,589		—		75,031		(75,284)		23,336
Gathering, compression, processing, and transportation		535,183		—		14,167		(134,552)		414,798
Production and ad valorem taxes		34,202		—		2,540		—		36,742
Marketing		263,910		—		—		—		263,910
Exploration		2,123		—		—		—		2,123
Impairment of unproved properties		35,470		—		—		—		35,470
Depletion, depreciation, and amortization		340,981		—		47,963		—		388,944
Accretion of asset retirement obligations		1,218		—		—		—		1,218
General and administrative		90,719		—		26,397		(727)		116,389
Accretion of contingent acquisition consideration		—		—		6,857		(6,857)		—
Total operating expenses		1,327,395		—		172,955		(217,420)		1,282,930
Operating income (loss)		(855,003)		—		99,927		(56,048)		(811,124)
Other income (expenses):
Equity in earnings of unconsolidated affiliates		—		—		484		—		484
Interest		(118,733)		—		(7,582)		436		(125,879)
Equity in net income of subsidiaries		758		—		—		(758)		—
Total other expenses		(117,975)		—		(7,098)		(322)		(125,395)
Income (loss) before income taxes		(972,978)		—		92,829		(56,370)		(936,519)
Provision for income tax benefit		371,679		—		—		—		371,679
Net income (loss) and comprehensive income (loss) including noncontrolling interests		(601,299)		—		92,829		(56,370)		(564,840)
Net income and comprehensive income attributable to noncontrolling interests		—		—		—		36,459		36,459
Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation	$	(601,299)		—		92,829		(92,829)		(601,299)

Condensed Consolidating Statement of Operations and Comprehensive Income

Six Months Ended June 30, 2017

(In thousands)


	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue and other:
Natural gas sales	$	920,921		—		—		—		920,921
Natural gas liquids sales		365,471		—		—		—		365,471
Oil sales		53,472		—		—		—		53,472
Gathering, compression, water handling and treatment		—		—		368,536		(362,740)		5,796
Marketing		115,892		—		—		—		115,892
Commodity derivative fair value gains		524,416		—		—		—		524,416
Other income		8,351		—		—		(8,351)		—
Total revenue and other		1,988,523		—		368,536		(371,091)		1,985,968
Operating expenses:
Lease operating		32,931		—		80,066		(80,454)		32,543
Gathering, compression, processing, and transportation		700,984		—		18,024		(185,432)		533,576
Production and ad valorem taxes		45,574		—		1,772		—		47,346
Marketing		167,414		—		—		—		167,414
Exploration		3,911		—		—		—		3,911
Impairment of unproved properties		42,098		—		—		—		42,098
Depletion, depreciation, and amortization		345,863		—		58,048		—		403,911
Accretion of asset retirement obligations		1,286		—		—		—		1,286
General and administrative		100,587		—		29,246		(1,036)		128,797
Accretion of contingent acquisition consideration		—		—		7,116		(7,116)		—
Total operating expenses		1,440,648		—		194,272		(274,038)		1,360,882
Operating income		547,875		—		174,264		(97,053)		625,086
Other income (expenses):
Equity in earnings of unconsolidated affiliates		—		—		5,854		—		5,854
Interest		(117,738)		—		(17,851)		337		(135,252)
Equity in net income of subsidiaries		(16,708)		—		—		16,708		—
Total other expenses		(134,446)		—		(11,997)		17,045		(129,398)
Income before income taxes		413,429		—		162,267		(80,008)		495,688
Provision for income tax expense		(150,165)		—		—		—		(150,165)
Net income and comprehensive income including noncontrolling interests		263,264		—		162,267		(80,008)		345,523
Net income and comprehensive income attributable to noncontrolling interests		—		—		—		82,259		82,259
Net income and comprehensive income attributable to Antero Resources Corporation	$	263,264		—		162,267		(162,267)		263,264

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2016

(In thousands)


	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Net cash provided by operating activities	$	465,719		—		168,599		(55,612)		578,706
Cash flows used in investing activities:
Additions to unproved properties		(58,195)		—		—		—		(58,195)
Drilling and completion costs		(765,586)		—		—		55,612		(709,974)
Additions to water handling and treatment systems		—		—		(78,625)		—		(78,625)
Additions to gathering systems and facilities		(331)		—		(96,969)		—		(97,300)
Additions to other property and equipment		(1,296)		—		—		—		(1,296)
Investments in unconsolidated affiliates		—		—		(45,044)		—		(45,044)
Change in other assets		(44,835)		—		(3,090)		—		(47,925)
Distributions from non-guarantor subsidiary		51,296		—		—		(51,296)		—
Net cash used in investing activities		(818,947)		—		(223,728)		4,316		(1,038,359)
Cash flows provided by financing activities:
Issuance of common stock		752,599		—		—		—		752,599
Sale of common units in Antero Midstream Partners LP by Antero Resources Corporation		178,000		—		—		—		178,000
Borrowings (repayments) on bank credit facility, net		(567,000)		—		140,000		—		(427,000)
Payments of deferred financing costs		(96)		—		—		—		(96)
Distributions		—		—		(82,977)		51,296		(31,681)
Employee tax withholding for settlement of equity compensation awards		(4,802)		—		(17)		—		(4,819)
Other		(2,496)		—		(76)		—		(2,572)
Net cash provided by financing activities		356,205		—		56,930		51,296		464,431
Net increase in cash and cash equivalents		2,977		—		1,801		—		4,778
Cash and cash equivalents, beginning of period		16,590		—		6,883		—		23,473
Cash and cash equivalents, end of period	$	19,567		—		8,684		—		28,251

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2017

(In thousands)


	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Net cash provided by operating activities	$	509,364		—		234,938		(96,716)		647,586
Cash flows used in investing activities:
Additions to proved properties		(179,318)		—		—		—		(179,318)
Additions to unproved properties		(129,876)		—		—		—		(129,876)
Drilling and completion costs		(726,024)		—		—		96,716		(629,308)
Additions to water handling and treatment systems		—		—		(95,451)		—		(95,451)
Additions to gathering systems and facilities		—		—		(155,365)		—		(155,365)
Additions to other property and equipment		(6,564)		—		—		—		(6,564)
Investments in unconsolidated affiliates		—		—		(191,364)		—		(191,364)
Change in other assets		(7,648)		—		(4,804)		—		(12,452)
Net distributions from subsidiaries		63,145		—		—		(63,145)		—
Other		2,156		—		—		—		2,156
Net cash used in investing activities		(984,129)		—		(446,984)		33,571		(1,397,542)
Cash flows provided by financing activities:
Issuance of common units by Antero Midstream Partners LP		—		—		246,585		—		246,585
Borrowings on bank credit facility, net		490,000		—		95,000		—		585,000
Distributions		—		—		(125,014)		63,145		(61,869)
Employee tax withholding for settlement of equity compensation awards		(7,501)		—		(932)		—		(8,433)
Other		(2,645)		—		(102)		—		(2,747)
Net cash provided by financing activities		479,854		—		215,537		63,145		758,536
Net decrease in cash and cash equivalents		5,089		—		3,491		—		8,580
Cash and cash equivalents, beginning of period		17,568		—		14,042		—		31,610
Cash and cash equivalents, end of period	$	22,657		—		17,533		—		40,190