Subsidiary Guarantors

6 Months Ended

Jun. 30, 2020

Subsidiary Guarantors

Subsidiary Guarantors

(19) 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 June 30, 2020, and the related Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2020, and Condensed Consolidating Statements of Cash Flows for the six months ended June 30, 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 non-guarantor subsidiaries as of and for the three months ended June 30, 2020 represent Martica. 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 affiliate		243,048		812,129		—		—		1,055,177
Investments in consolidated affiliate		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 (loss)		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
June 30, 2020
(In thousands)

	Parent		Guarantor		Non-Guarantor
	(Antero)		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Assets
Current assets:
Cash	$	(6,793)		—		6,793		—		—
Accounts receivable		57,013		—		—		—		57,013
Accounts receivable, related parties		—		365,255		12,523		(377,778)		—
Accrued revenue		249,201		—		5,662		—		254,863
Derivative instruments		521,459		—		—		—		521,459
Other current assets		8,942		—		—		—		8,942
Total current assets		829,822		365,255		24,978		(377,778)		842,277
Property and equipment:
Oil and gas properties, at cost (successful efforts method):
Unproved properties		1,231,051		—		46,425		—		1,277,476
Proved properties		11,168,728		—		820,574		—		11,989,302
Gathering systems and facilities		5,802		—		—		—		5,802
Other property and equipment		72,649		—		—		—		72,649
		12,478,230		—		866,999		—		13,345,229
Less accumulated depletion, depreciation, and amortization		(3,406,859)		—		(1,240)		—		(3,408,099)
Property and equipment, net		9,071,371		—		865,759		—		9,937,130
Operating leases right-of-use assets		2,562,945		—		—		—		2,562,945
Derivative instruments		103,514		—		—		—		103,514
Investment in unconsolidated affiliate		68,134		211,671		—		—		279,805
Investments in consolidated affiliates		795,965		—		—		(795,965)		—
Other assets		18,319		—		—		—		18,319
Total assets	$	13,450,070		576,926		890,737		(1,173,743)		13,743,990
Liabilities and Equity
Current liabilities:
Accounts payable	$	33,323		—		3,413		—		36,736
Accounts payable, related parties		447,284		—		3,869		(377,778)		73,375
Accrued liabilities		339,388		—		—		—		339,388
Revenue distributions payable		173,759		—		—		—		173,759
Derivative instruments		2,905		—		747		—		3,652
Short-term lease liabilities		230,499		—		—		—		230,499
Other current liabilities		6,831		—		—		—		6,831
Total current liabilities		1,233,989		—		8,029		(377,778)		864,240
Long-term liabilities:
Long-term debt		3,518,076		—		—		—		3,518,076
Deferred income tax liability		529,598		—		—		—		529,598
Derivative instruments		967		—		1,591		—		2,558
Long-term lease liabilities		2,334,227		—		—		—		2,334,227
Other liabilities		62,312		—		—		—		62,312
Total liabilities		7,679,169		—		9,620		(377,778)		7,311,011
Equity:
Stockholders' equity:
Common stock		2,684		—		879,070		(879,070)		2,684
Additional paid-in capital		4,970,105		1,341,780		—		(213,718)		6,098,167
Accumulated earnings (loss)		798,112		(764,854)		2,047		—		35,305
Total stockholders' equity		5,770,901		576,926		881,117		(1,092,788)		6,136,156
Noncontrolling interest		—		—		—		296,823		296,823
Total liabilities and equity	$	13,450,070		576,926		890,737		(1,173,743)		13,743,990

Condensed Consolidating Statement of Operations and Comprehensive Income

Three Months Ended June 30, 2019
(In thousands)

	Parent		Guarantor		Non-Guarantor
	(Antero)		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Revenue and other:
Natural gas sales	$	553,372		—		—		—		553,372
Natural gas liquids sales		303,963		—		—		—		303,963
Oil sales		49,062		—		—		—		49,062
Commodity derivative fair value gains		328,427		—		—		—		328,427
Marketing		63,080		—		—		—		63,080
Other income		1,760		—		—		—		1,760
Total revenue and other		1,299,664		—		—		—		1,299,664
Operating expenses:
Lease operating		40,857		—		—		—		40,857
Gathering, compression, processing, and transportation		566,834		—		—		—		566,834
Production and ad valorem taxes		30,968		—		—		—		30,968
Marketing		137,539		—		—		—		137,539
Exploration		314		—		—		—		314
Impairment of oil and gas properties		130,999		—		—		—		130,999
Depletion, depreciation, and amortization		242,302		—		—		—		242,302
Loss on sale of assets		951		—		—		—		951
Accretion of asset retirement obligations		918		—		—		—		918
General and administrative		42,382		—		—		—		42,382
Contract termination and rig stacking		5,604		—		—		—		5,604
Total operating expenses		1,199,668		—		—		—		1,199,668
Operating income (loss)		99,996		—		—		—		99,996
Other income (expenses):
Equity in earnings of unconsolidated affiliates		4,410		9,175		—		—		13,585
Interest expense, net		(54,164)		—		—		—		(54,164)
Total other income (expenses)		(49,754)		9,175		—		—		(40,579)
Income before income taxes		50,242		9,175		—		—		59,417
Provision for income tax expense		(17,249)		—		—		—		(17,249)
Net income and comprehensive income attributable to Antero Resources Corporation	$	32,993		9,175		—		—		42,168

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

Three Months Ended June 30, 2020
(In thousands)

	Parent		Guarantor		Non-Guarantor
	(Antero)		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Revenue and other:
Natural gas sales	$	363,975		—		3,440		—		367,415
Natural gas liquids sales		210,251		—		1,946		—		212,197
Oil sales		7,965		—		357		—		8,322
Commodity derivative fair value losses		(165,676)		—		(2,339)		—		(168,015)
Marketing		64,285		—		—		—		64,285
Other income		745		—		—		(38)		707
Total revenue and other		481,545		—		3,404		(38)		484,911
Operating expenses:
Lease operating		24,742		—		—		—		24,742
Gathering, compression, processing, and transportation		631,845		—		—		—		631,845
Production and ad valorem taxes		19,913		—		79		—		19,992
Marketing		113,053		—		—		—		113,053
Exploration		231		—		—		—		231
Impairment of oil and gas properties		37,350		—		—		—		37,350
Depletion, depreciation, and amortization		212,795		—		1,240		—		214,035
Accretion of asset retirement obligations		1,111		—		—		—		1,111
General and administrative		38,403		—		38		(38)		38,403
Contract termination and rig stacking		11,071		—		—		—		11,071
Total operating expenses		1,090,514		—		1,357		(38)		1,091,833
Operating income (loss)		(608,969)		—		2,047		—		(606,922)
Other income (expenses):
Equity in earnings of unconsolidated affiliates		355		19,873		—		—		20,228
Transaction expense		(6,138)		—		—		—		(6,138)
Interest expense, net		(51,811)		—		—		—		(51,811)
Gain on early extinguishment of debt		39,171		—		—		—		39,171
Total other income (expenses)		(18,423)		19,873		—		—		1,450
Income (loss) before income taxes		(627,392)		19,873		2,047		—		(605,472)
Provision for income tax benefit		142,404		—		—		—		142,404
Net income (loss) and comprehensive income (loss) including noncontrolling interests		(484,988)		19,873		2,047		—		(463,068)
Net income and comprehensive income attributable to noncontrolling interests		—						236		236
Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation	$	(484,988)		19,873		2,047		(236)		(463,304)

Condensed Consolidating Statement of Operations and Comprehensive Income

Six Months Ended June 30, 2019
(In thousands)

	Parent		Guarantor		Non-Guarantor
	(Antero)		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Revenue and other:
Natural gas sales	$	1,210,638		—		—		—		1,210,638
Natural gas liquids sales		617,648		—		—		—		617,648
Oil sales		97,114		—		—		—		97,114
Commodity derivative fair value gains		251,059		—		—		—		251,059
Gathering, compression, water handling and treatment		—		—		218,360		(213,881)		4,479
Marketing		154,266		—		—		—		154,266
Other income		3,518		—		—		(1,651)		1,867
Total revenue and other		2,334,243		—		218,360		(215,532)		2,337,071
Operating expenses:
Lease operating		83,826		—		64,818		(66,055)		82,589
Gathering, compression, processing, and transportation		1,101,849		—		—		(110,486)		991,363
Production and ad valorem taxes		65,706		—		—		940		66,646
Marketing		300,623		—		—		—		300,623
Exploration		440		—		—		—		440
Impairment of oil and gas properties		212,243		—		—		—		212,243
Impairment of midstream assets		—		—		6,982		—		6,982
Depletion, depreciation, and amortization		460,796		—		21,707		—		482,503
Loss on sale of asset		951								951
Accretion of asset retirement obligations		1,831		—		63		—		1,894
General and administrative		92,290		—		18,793		(499)		110,584
Contract termination and rig stacking		13,964		—		—		—		13,964
Accretion of contingent acquisition consideration		—		—		1,928		(1,928)		—
Total operating expenses		2,334,519		—		114,291		(178,028)		2,270,782
Operating income (loss)		(276)		—		104,069		(37,504)		66,289
Other income (expenses):
Equity in earnings of unconsolidated affiliates		4,999		10,403		12,264		—		27,666
Interest expense, net		(109,299)		—		(16,815)		—		(126,114)
Equity in earnings of affiliates		15,021		—		—		(15,021)		—
Gain on deconsolidation of Antero Midstream Partners LP		1,205,705		200,337		—		—		1,406,042
Total other expenses		1,116,426		210,740		(4,551)		(15,021)		1,307,594
Income before income taxes		1,116,150		210,740		99,518		(52,525)		1,373,883
Provision for income tax expense		(305,959)		—		—		—		(305,959)
Net income and comprehensive income including noncontrolling interests		810,191		210,740		99,518		(52,525)		1,067,924
Net income and comprehensive income attributable to noncontrolling interests		—		—		—		46,993		46,993
Net income and comprehensive income attributable to Antero Resources Corporation	$	810,191		210,740		99,518		(99,518)		1,020,931

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Six Months Ended June 30, 2020
(In thousands)

	Parent		Guarantor		Non-Guarantor
	(Antero)		Subsidiaries		Subsidiaries		Eliminations		Consolidated
Revenue and other:
Natural gas sales	$	775,057		—		3,440		—		778,497
Natural gas liquids sales		467,924		—		1,946		—		469,870
Oil sales		43,611		—		357		—		43,968
Commodity derivative fair value gains (losses)		400,157		—		(2,339)		—		397,818
Marketing		110,358		—		—		—		110,358
Other income		1,543		—		—		(38)		1,505
Total revenue and other		1,798,650		—		3,404		(38)		1,802,016
Operating expenses:
Lease operating		50,386		—		—		—		50,386
Gathering, compression, processing, and transportation		1,220,469		—		—		—		1,220,469
Production and ad valorem taxes		45,612		—		79		—		45,691
Marketing		206,326		—		—		—		206,326
Exploration		441		—		—		—		441
Impairment of oil and gas properties		126,570		—		—		—		126,570
Depletion, depreciation, and amortization		412,472		—		1,240		—		413,712
Accretion of asset retirement obligations		2,215		—		—		—		2,215
General and administrative		69,624		—		38		(38)		69,624
Contract termination and rig stacking		11,071		—		—		—		11,071
Total operating expenses		2,145,186		—		1,357		(38)		2,146,505
Operating income (loss)		(346,536)		—		2,047		—		(344,489)
Other income (expenses):
Equity in loss of unconsolidated affiliates		(39,957)		(67,870)		—		—		(107,827)
Impairment of equity investment		(143,849)		(466,783)		—		—		(610,632)
Transaction expense		(6,138)		—		—		—		(6,138)
Interest expense, net		(104,913)		—		—		—		(104,913)
Gain on early extinguishment of debt		119,732		—		—		—		119,732
Total other expenses		(175,125)		(534,653)		—		—		(709,778)
Income (loss) before income taxes		(521,661)		(534,653)		2,047		—		(1,054,267)
Provision for income tax benefit		252,389		—		—		—		252,389
Net income (loss) and comprehensive income (loss) including noncontrolling interests		(269,272)		(534,653)		2,047		—		(801,878)
Net income and comprehensive income attributable to noncontrolling interests		—		—		—		236		236
Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation	$	(269,272)		(534,653)		2,047		(236)		(802,114)

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 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	$	810,191		210,740		99,518		(52,525)		1,067,924
Adjustments to reconcile net income to net cash provided by operating activities:		—
Depletion, depreciation, amortization, and accretion		462,627		—		21,770		—		484,397
Impairments		212,243		—		6,982		—		219,225
Commodity derivative fair value gains		(251,059)		—		—		—		(251,059)
Gains on settled commodity derivatives		141,791		—		—		—		141,791
Deferred income tax expense		304,963		—		—		—		304,963
Loss on sale of assets		951		—		—		—		951
Equity-based compensation expense		12,975		—		2,477		—		15,452
Equity in earnings of affiliates		(15,021)		—		—		15,021		—
Equity in earnings of unconsolidated affiliates		(4,999)		(10,403)		(12,264)		—		(27,666)
Distributions/dividends of earnings from unconsolidated affiliates		47,922		—		12,605		—		60,527
Gain on deconsolidation of Antero Midstream Partners LP		(1,205,705)		(200,337)		—		—		(1,406,042)
Distributions from Antero Midstream Partners LP		94,391		—		—		(94,391)		—
Other		(43,002)		—		750		47,922		5,670
Changes in current assets and liabilities		134,740		—		(10,573)		16,808		140,975
Net cash provided by operating activities		703,008		—		121,265		(67,165)		757,108
Cash flows provided by (used in) investing activities:
Additions to unproved properties		(56,814)		—		—		—		(56,814)
Drilling and completion costs		(700,653)		—		—		20,565		(680,088)
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		(3,567)		—		(1,062)		—		(4,629)
Investments in unconsolidated affiliates		—		—		(25,020)		—		(25,020)
Proceeds from the Antero Midstream Partners LP Transactions		296,611		—		—		—		296,611
Change in other assets		(1,617)		—		(3,357)		—		(4,974)
Proceeds from sale of assets		1,983								1,983
Net cash used in investing activities		(464,057)		—		(102,225)		20,696		(545,586)
Cash flows provided by (used in) financing activities:
Issuance of senior notes		—		—		650,000		—		650,000
Borrowings (repayments) on bank credit facility, net		(235,379)		—		90,379		—		(145,000)
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		(2,266)		—		(29)		—		(2,295)
Other		(515)		—		(845)		—		(1,360)
Net cash provided by (used in) financing activities		(238,951)		—		600,492		46,469		408,010
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
Six Months Ended June 30, 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	$	(269,272)		(534,653)		2,047		—		(801,878)
Adjustment to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation, amortization, and accretion		414,687		—		1,240		—		415,927
Impairment of oil and gas properties		126,570		—		—		—		126,570
Commodity derivative fair value (gains) losses		(400,157)		—		2,339		—		(397,818)
Gains on settled commodity derivatives		524,838		—		—		—		524,838
Equity-based compensation expense		11,302		—		—		—		11,302
Deferred income tax benefit		(252,389)		—		—		—		(252,389)
Gain on early extinguishment of debt		(119,732)		—		—		—		(119,732)
Equity in loss of unconsolidated affiliates		39,957		67,870		—		—		107,827
Impairment of equity investment		143,849		466,783		—		—		610,632
Distributions/dividends of earnings from unconsolidated affiliates		85,511		—		—		—		85,511
Other		4,433		—		—		—		4,433
Changes in current assets and liabilities		7,043		—		(5,626)		—		1,417
Net cash provided by operating activities		316,640		—		—		—		316,640
Cash flows provided by (used in) investing activities:
Additions to unproved properties		(21,672)		—		—		—		(21,672)
Drilling and completion costs		(552,227)		—		—		—		(552,227)
Additions to other property and equipment		(1,234)		—		—		—		(1,234)
Settlement of water earnout		125,000		—		—		—		125,000
Change in other assets		525		—		—		—		525
Net cash used in investing activities		(449,608)		—		—		—		(449,608)
Cash flows provided by (used in) financing activities:
Repurchases of common stock		(43,443)		—		—		—		(43,443)
Repayment of senior notes		(496,541)		—		—		—		(496,541)
Borrowings on bank credit facility, net		374,000		—		—		—		374,000
Sale (purchase) noncontrolling interests		(6,793)		—		306,793		—		300,000
(Distributions) proceeds to interest holders		300,000		—		(300,000)		—		—
Employee tax withholding for settlement of equity compensation awards		(331)		—		—		—		(331)
Other		(717)		—		—		—		(717)
Net cash provided by financing activities		126,175		—		6,793		—		132,968
Net increase in cash and cash equivalents		(6,793)		—		6,793		—		—
Cash and cash equivalents, beginning of period		—		—		—		—		—
Cash and cash equivalents, end of period	$	(6,793)		—		6,793		—		—