Subsidiary Guarantors

3 Months Ended

Mar. 31, 2020

Subsidiary Guarantors

Subsidiary Guarantors

(18) Subsidiary Guarantors

Each of the Company’s wholly owned subsidiaries has fully and unconditionally guaranteed Antero Resources’ senior notes.  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 Antero (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 that 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, 2019 and March 31, 2020, and the related Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2019 and 2020, and Condensed Consolidating Statements of Cash Flows for the three months ended March 31, 2019 and 2020 present financial information for Antero Resources 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. The Company’s wholly owned subsidiaries are not restricted from making distributions to the Company.

Condensed Consolidating Balance Sheet
December 31, 2019

(In thousands)

	Parent		Guarantor		Non-Guarantor
	(Antero)		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Assets
Current assets:
Accounts receivable, net	$	46,419		—		—		—		46,419
Accounts receivable, related parties		125,000		299,450		—		(299,450)		125,000
Accrued revenue		317,886		—		—		—		317,886
Derivative instruments		422,849		—		—		—		422,849
Other current assets		10,731		—		—		—		10,731
Total current assets		922,885		299,450		—		(299,450)		922,885
Property and equipment:
Oil and gas properties, at cost (successful efforts method):
Unproved properties		1,368,854		—		—		—		1,368,854
Proved properties		11,859,817		—		—		—		11,859,817
Gathering systems and facilities		5,802		—		—		—		5,802
Other property and equipment		71,895		—		—		—		71,895
		13,306,368		—		—		—		13,306,368
Less accumulated depletion, depreciation, and amortization		(3,327,629)		—		—		—		(3,327,629)
Property and equipment, net		9,978,739		—		—		—		9,978,739
Operating leases right-of-use assets		2,886,500		—		—		—		2,886,500
Derivative instruments		333,174		—		—		—		333,174
Investments in unconsolidated affiliates		243,048		812,129		—		—		1,055,177
Investments in consolidated affiliates		812,129		—		—		(812,129)		—
Other assets		21,094		—		—		—		21,094
Total assets	$	15,197,569		1,111,579		—		(1,111,579)		15,197,569
Liabilities and Equity
Current liabilities:
Accounts payable	$	14,498		—		—		—		14,498
Accounts payable, related parties		397,333		—		—		(299,450)		97,883
Accrued liabilities		400,850		—		—		—		400,850
Revenue distributions payable		207,988		—		—		—		207,988
Derivative instruments		6,721		—		—		—		6,721
Short-term lease liabilities		305,320		—		—		—		305,320
Other current liabilities		6,879		—		—		—		6,879
Total current liabilities		1,339,589		—		—		(299,450)		1,040,139
Long-term liabilities:
Long-term debt		3,758,868		—		—		—		3,758,868
Deferred income tax liability		781,987		—		—		—		781,987
Derivative instruments		3,519		—		—		—		3,519
Long-term lease liabilities		2,583,678		—		—		—		2,583,678
Other liabilities		58,635		—		—		—		58,635
Total liabilities		8,526,276		—		—		(299,450)		8,226,826
Equity:
Stockholders' equity:
Common stock		2,959		—		—		—		2,959
Additional paid-in capital		5,600,714		1,341,780		—		(812,129)		6,130,365
Accumulated earnings		1,067,620		(230,201)		—		—		837,419
Total stockholders' equity		6,671,293		1,111,579		—		(812,129)		6,970,743
Total liabilities and equity	$	15,197,569		1,111,579		—		(1,111,579)		15,197,569

Condensed Consolidating Balance Sheet
March 31, 2020
(In thousands)

	Parent		Guarantor		Non-Guarantor
	(Antero)		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Assets
Current assets:
Accounts receivable	$	91,944		—		—		—		91,944
Accounts receivable, related parties		—		332,353		—		(332,353)		—
Accrued revenue		201,320		—		—		—		201,320
Derivative instruments		816,444		—		—		—		816,444
Other current assets		10,313		—		—		—		10,313
Total current assets		1,120,021		332,353		—		(332,353)		1,120,021
Property and equipment:
Oil and gas properties, at cost (successful efforts method):
Unproved properties		1,289,770		—		—		—		1,289,770
Proved properties		12,154,162		—		—		—		12,154,162
Gathering systems and facilities		5,802		—		—		—		5,802
Other property and equipment		72,312		—		—		—		72,312
		13,522,046		—		—		—		13,522,046
Less accumulated depletion, depreciation, and amortization		(3,527,306)		—		—		—		(3,527,306)
Property and equipment, net		9,994,740		—		—		—		9,994,740
Operating leases right-of-use assets		2,814,539		—		—		—		2,814,539
Derivative instruments		284,461		—		—		—		284,461
Investments in unconsolidated affiliates		67,289		224,700		—		—		291,989
Investments in consolidated affiliates		224,700		—		—		(224,700)		—
Other assets		20,039		—		—		—		20,039
Total assets	$	14,525,789		557,053		—		(557,053)		14,525,789
Liabilities and Equity
Current liabilities:
Accounts payable	$	37,909		—		—		—		37,909
Accounts payable, related parties		421,247		—		—		(332,353)		88,894
Accrued liabilities		367,444		—		—		—		367,444
Revenue distributions payable		174,654		—		—		—		174,654
Short-term lease liabilities		295,658		—		—		—		295,658
Other current liabilities		7,315		—		—		—		7,315
Total current liabilities		1,304,227		—		—		(332,353)		971,874
Long-term liabilities:								—
Long-term debt		3,707,787		—		—		—		3,707,787
Deferred income tax liability		672,002		—		—		—		672,002
Derivative instruments		215		—		—		—		215
Long-term lease liabilities		2,520,939				—		—		2,520,939
Other liabilities		60,432		—		—		—		60,432
Total liabilities		8,265,602		—		—		(332,353)		7,933,249
Equity:
Stockholders' equity:								—
Common stock		2,689		—		—		—		2,689
Additional paid-in capital		4,974,162		1,341,780		—		(224,700)		6,091,242
Accumulated earnings		1,283,336		(784,727)		—		—		498,609
Total stockholders' equity		6,260,187		557,053		—		(224,700)		6,592,540
Total liabilities and equity	$	14,525,789		557,053		—		(557,053)		14,525,789

Condensed Consolidating Statement of Operations and Comprehensive Income

Three Months Ended March 31, 2019
(In thousands)

	Parent		Guarantor		Non-Guarantor
	(Antero)		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Revenue and other:
Natural gas sales	$	657,266		—		—		—		657,266
Natural gas liquids sales		313,685		—		—		—		313,685
Oil sales		48,052		—		—		—		48,052
Commodity derivative fair value losses		(77,368)		—		—		—		(77,368)
Gathering, compression, water handling and treatment		—		—		218,360		(213,881)		4,479
Marketing		91,186		—		—		—		91,186
Other income		1,758		—		—		(1,651)		107
Total revenue and other		1,034,579		—		218,360		(215,532)		1,037,407
Operating expenses:
Lease operating		42,969		—		64,818		(66,055)		41,732
Gathering, compression, processing, and transportation		535,015		—		—		(110,486)		424,529
Production and ad valorem taxes		34,738		—		—		940		35,678
Marketing		163,084		—		—		—		163,084
Exploration		126		—		—		—		126
Impairment of oil and gas properties		81,244		—		—		—		81,244
Impairment of midstream assets		—		—		6,982		—		6,982
Depletion, depreciation, and amortization		218,494		—		21,707		—		240,201
Accretion of asset retirement obligations		913		—		63		—		976
General and administrative		49,908		—		18,793		(499)		68,202
Contract termination and rig stacking		8,360		—		—		—		8,360
Accretion of contingent acquisition consideration		—		—		1,928		(1,928)		—
Total operating expenses		1,134,851		—		114,291		(178,028)		1,071,114
Operating income (loss)		(100,272)		—		104,069		(37,504)		(33,707)
Other income (expenses):
Equity in earnings of unconsolidated affiliates		589		1,228		12,264		—		14,081
Equity in earnings of affiliates		15,021		—		—		(15,021)		—
Interest expense, net		(55,135)		—		(16,815)		—		(71,950)
Gain on deconsolidation of Antero Midstream Partners LP		1,205,705		200,337		—		—		1,406,042
Total other expenses		1,166,180		201,565		(4,551)		(15,021)		1,348,173
Income before income taxes		1,065,908		201,565		99,518		(52,525)		1,314,466
Provision for income tax expense		(288,710)		—		—		—		(288,710)
Net income and comprehensive income including noncontrolling interests		777,198		201,565		99,518		(52,525)		1,025,756
Net income and comprehensive income attributable to noncontrolling interests		—		—		—		46,993		46,993
Net income and comprehensive income attributable to Antero Resources Corporation	$	777,198		201,565		99,518		(99,518)		978,763

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended March 31, 2020
(In thousands)

	Parent		Guarantor		Non-Guarantor
	(Antero)		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Revenue and other:
Natural gas sales	$	411,082		—		—		—		411,082
Natural gas liquids sales		257,673		—		—		—		257,673
Oil sales		35,646		—		—		—		35,646
Commodity derivative fair value gains		565,833		—		—		—		565,833
Marketing		46,073		—		—		—		46,073
Other income		798		—		—		—		798
Total revenue and other		1,317,105		—		—		—		1,317,105
Operating expenses:
Lease operating		25,644		—		—		—		25,644
Gathering, compression, processing, and transportation		588,624		—		—		—		588,624
Production and ad valorem taxes		25,699		—		—		—		25,699
Marketing		93,273		—		—		—		93,273
Exploration		210		—		—		—		210
Impairment of oil and gas properties		89,220		—		—		—		89,220
Depletion, depreciation, and amortization		199,677		—		—		—		199,677
Accretion of asset retirement obligations		1,104		—		—		—		1,104
General and administrative		31,221		—		—		—		31,221
Total operating expenses		1,054,672		—		—		—		1,054,672
Operating income		262,433		—		—		—		262,433
Other income (expenses):
Equity in earnings of unconsolidated affiliate		(40,312)		(87,743)		—		—		(128,055)
Impairment of equity investment		(143,849)		(466,783)		—		—		(610,632)
Interest expense, net		(53,102)		—		—		—		(53,102)
Gain on early extinguishment of debt		80,561		—		—		—		80,561
Total other expenses		(156,702)		(554,526)		—		—		(711,228)
Income (loss) before income taxes		105,731		(554,526)		—		—		(448,795)
Provision for income tax benefit		109,985		—		—		—		109,985
Net income (loss) and comprehensive income (loss)	$	215,716		(554,526)		—		—		(338,810)

Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2019
(In thousands)

	Parent		Guarantor		Non-Guarantor
	(Antero)		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Cash flows provided by (used in) operating activities:
Net income including noncontrolling interests	$	777,198		201,565		99,518		(52,525)		1,025,756
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion, depreciation, amortization, and accretion		219,407		—		21,770		—		241,177
Impairments		81,244		—		6,982		—		88,226
Commodity derivative fair value losses		77,368		—		—		—		77,368
Gains on settled commodity derivatives		97,092		—		—		—		97,092
Deferred income tax expense		287,854		—		—		—		287,854
Equity-based compensation expense		6,426		—		2,477		—		8,903
Equity in earnings of consolidated subsidiaries		(15,021)		—		—		15,021		—
Equity in earnings of unconsolidated affiliates		(589)		(1,228)		(12,264)		—		(14,081)
Distributions of earnings from unconsolidated affiliates		—		—		12,605		—		12,605
Gain on deconsolidation of Antero Midstream Partners LP		(1,205,705)		(200,337)		—		—		(1,406,042)
Distributions from Antero Midstream Partners LP		46,469		—		—		(46,469)		—
Other		10,331		—		750		—		11,081
Changes in current assets and liabilities		102,830		—		(10,573)		16,808		109,065
Net cash provided by operating activities		484,904		—		121,265		(67,165)		539,004
Cash flows provided by (used in) investing activities:
Additions to unproved properties		(27,463)		—		—		—		(27,463)
Drilling and completion costs		(389,252)		—		—		20,565		(368,687)
Additions to water handling and treatment systems		—		—		(24,547)		131		(24,416)
Additions to gathering systems and facilities		—		—		(48,239)		—		(48,239)
Additions to other property and equipment		(2,066)		—		(1,062)		—		(3,128)
Investments in unconsolidated affiliates		—		—		(25,020)		—		(25,020)
Proceeds from the Antero Midstream Partners LP Transactions		296,611		—		—		—		296,611
Change in other assets		(1,118)		—		(3,357)		—		(4,475)
Net cash used in investing activities		(123,288)		—		(102,225)		20,696		(204,817)
Cash flows provided by (used in) financing activities:
Issuance of senior notes		—		—		650,000		—		650,000
Borrowings (repayments) on bank credit facility, net		(360,379)		—		90,379		—		(270,000)
Payments of deferred financing costs		(791)		—		(7,468)		—		(8,259)
Distributions to noncontrolling interests in Antero Midstream Partners LP		—		—		(131,545)		46,469		(85,076)
Employee tax withholding for settlement of equity compensation awards		(450)		—		(29)		—		(479)
Other		4		—		(845)		—		(841)
Net cash provided by (used in) financing activities		(361,616)		—		600,492		46,469		285,345
Effect of deconsolidation of Antero Midstream Partners LP		—		—		(619,532)		—		(619,532)
Net increase (decrease) in cash and cash equivalents		—		—		—		—		—
Cash and cash equivalents, beginning of period		—		—		—		—		—
Cash and cash equivalents, end of period	$	—		—		—		—		—

Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2020

(In thousands)

	Parent		Guarantor		Non-Guarantor
	(Antero)		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Cash flows provided by (used in) operating activities:
Net income (loss) including noncontrolling interests	$	215,716		(554,526)		—		—		(338,810)
Adjustment to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation, amortization, and accretion		200,781		—		—		—		200,781
Impairment of oil and gas properties		89,220		—		—		—		89,220
Commodity derivative fair value gains		(565,833)		—		—		—		(565,833)
Gains on settled commodity derivatives		210,926		—		—		—		210,926
Equity-based compensation expense		3,329		—		—		—		3,329
Deferred income tax benefit		(109,985)		—		—		—		(109,985)
Gain on early extinguishment of debt		(80,561)		—		—		—		(80,561)
Equity in loss of unconsolidated affiliates		40,312		87,743		—		—		128,055
Impairment of equity investment		143,849		466,783		—		—		610,632
Distributions/dividends of earnings from unconsolidated affiliates		42,756		—		—		—		42,756
Other		2,440		—		—		—		2,440
Changes in current assets and liabilities		7,727		—		—		—		7,727
Net cash provided by operating activities		200,677		—		—		—		200,677
Cash flows provided by (used in) investing activities:
Additions to unproved properties		(10,357)		—		—		—		(10,357)
Drilling and completion costs		(300,483)		—		—		—		(300,483)
Additions to other property and equipment		(771)		—		—		—		(771)
Settlement of water earnout		125,000		—		—		—		125,000
Change in other assets		(70)		—		—		—		(70)
Net cash used in investing activities		(186,681)		—		—		—		(186,681)
Cash flows provided by (used in) financing activities:
Repurchases of common stock		(42,690)		—		—		—		(42,690)
Repayment of senior notes		(300,835)		—		—		—		(300,835)
Borrowings on bank credit facility, net		330,000		—		—		—		330,000
Employee tax withholding for settlement of equity compensation awards		(32)		—		—		—		(32)
Other		(439)		—		—		—		(439)
Net cash used in financing activities		(13,996)		—		—		—		(13,996)
Net increase in cash and cash equivalents		—		—		—		—		—
Cash and cash equivalents, beginning of period		—		—		—		—		—
Cash and cash equivalents, end of period	$	—		—		—		—		—