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    AR
    Earnings call· Jun 2026(Q2 FY26)

    ANTERO RESOURCES Q2 FY26 earnings call AR

    Jul 30, 2026 Source

    Executive summary

    Antero Resources Q2 FY26 — Record Production & Significant Cost Reduction Initiative

    Antero Resources delivered a strong quarter with record production and substantial adjusted EBITDAX growth, driven by structural margin improvements and cost reductions. The company is strategically shifting towards a more balanced dry gas development and in-basin sales model, capitalizing on emerging regional demand and expiring firm transportation commitments. This pivot aims to reduce earnings volatility and enhance future cash flow, positioning Antero to be highly selective in future project partnerships.

    Highlights

    5

    • Adjusted EBITDAX increased 57% year-over-year, reaching $220 million of free cash flow.

    • Quarterly production was a company record at over 4.1 Bcfe a day, an increase of 21% year-over-year.

    • Cash operating costs declined $0.29 per Mcfe, or 11% from the year-ago period, reaching the low end of guidance.

    • Dry gas pad delivered a 67% improvement in EUR and a nearly 30% decrease in cost per foot, with 90-day cumulative production rates increasing more than 3x.

    • Acquired assets for $315 million, adding 125 million cubic feet a day equivalent of net production and 15 net drilling locations at 4x EBITDAX and over 20% FCF yield.

    Concerns

    2

    • VLGC freight rates have been elevated since Epic Fury, creating headwinds for U.S. LPG exports, though the order book is robust.

    • Cost reduction initiative includes a $0.35 per Mcfe offset from lower price realizations as more product is sold in-basin.

    Guidance & targets

    4
    CategoryTargetConfidence
    Cash cost reduction target
    Decline by over 25% to $2 per Mcfe
    high materiality
    High
    Annual margin improvements
    $300 million
    high materiality
    High
    Net production exit rate
    4.5 Bcfe a day
    medium materiality
    High
    Total annual margin improvements (extended timeline)
    $600 million to $700 million
    medium materiality
    Medium

    Operational metrics

    36
    Adjusted EBITDAX
    57%YoY increase
    Q2 FY26

    Increased due to structural margin improvement, increased scale, product diversity, and lower cash operating expense.

    Production volume
    4.1 Bcfe a day21% YoY increase
    Q2 FY26

    Exceeded guidance range.

    Cash operating costs
    $0.29 per Mcfe11% YoY decline
    Q2 FY26

    First full quarter incorporating HG Energy acquisition.

    Dry gas well EUR improvement
    67%
    Q2 FY26

    Achieved on the first dry gas pad spud in over 12 years, exceeding internal expectations.

    Dry gas well cost per foot decrease
    nearly 30%
    Q2 FY26

    Achieved on the first dry gas pad, despite increased lateral lengths and sand use.

    Dry gas well 90-day cumulative production
    more than 3x
    Q2 FY26

    Increased compared to previous dry gas wells, exceeding internal expectations.

    C3+ realized price
    $44.26up $6.41 YoY
    Q2 FY26

    Strong pricing influenced by geopolitical events and international demand.

    U.S. propane exports
    2.03 millionincrease of 170,000 barrels/day YoY
    Q2 FY26

    Driven by international buyers replacing Middle East cargoes and recently added terminal capacity.

    U.S. propane weekly exports
    2.63 millionnew weekly high
    May & July 2026

    Surpassed previous record by 300,000 barrels a day, demonstrating ability to reach unseen export levels.

    Normal butane monthly exports
    815,000new monthly record
    April 2026

    Surpassing previous record of 661,000 barrels a day set in March.

    China LPG imports from U.S. market share
    51%up from 10% in June 2025
    Q2 FY26

    Rebounded due to disruption in Middle East supplies, reaching levels not seen since before liberation date.

    China PDH demand increase
    40%
    April to July 2026

    Forecast to increase further in August, returning to all-time high levels.

    VLGC fleet additions
    84
    H2 2026 and all of 2027

    Robust order book expected to provide relief to shipping costs.

    VLGC fleet increase
    31%
    through 2029

    Expected to facilitate more cargoes leaving the U.S. and support Mont Belvieu prices.

    U.S. natural gas demand growth (data center and power)
    19 Bcf
    through 2030

    Based on projects announced to date.

    U.S. natural gas demand growth (LNG and Mexico exports)
    23 Bcf
    through 2030

    Represents 37% of total main growth for natural gas by end of decade.

    Appalachian regional power project demand
    9 Bcf per day
    to date

    Publicly announced projects.

    Appalachian regional power project demand (additional)
    3 Bcf
    additional

    From additional projects discussed by the company.

    Appalachian regional power projects (FID or under construction)
    6 Bcf
    to date

    Increases visibility into project fruition.

    Midwest and Southern power project demand
    7 Bcf per day
    forecasted

    Opportunities accessible via Antero's long-haul firm transportation capacity.

    Acquisition value
    $315 million
    Q2 FY26

    Assets acquired in core West Virginia Marcellus footprint.

    Net production growth (2025 to 2026 exit)
    36%
    2025 to 2026 exit

    Accomplished through accretive transactions and organic growth without impacting basin's gross production.

    Basin gross production
    35.5 Bcf a dayremained essentially flat
    2025 to 2026

    Antero's net production growth has not increased overall basin production.

    Share repurchase program
    $38 million
    Q2 FY26

    Accelerated using a portion of free cash flow.

    Annualized cash flow uplift (overriding royalty interest)
    $60 million
    beginning Q3 FY26

    Resulting from the Martica entity dissolution after the return threshold was met in Q2 2026.

    Annualized cash flow uplift (VPP expiration)
    $30 million
    July 2027

    Expected upon the expiration of the VPP.

    Margin improvements from liquids firm transport optimization
    $105 million
    end 2028

    Includes limited recontracting of ethane transport and refinement of LPG firm transport.

    Margin improvements from natural gas firm transport optimization and dry gas development
    $105 million
    2028

    Primarily driven by increased demand for natural gas shifting to a demand-pull market.

    Margin improvement components (liquids, VPP, override, half gas optimization)
    $250 million
    2028

    Component of the total $300 million margin improvement target.

    Margin improvement per Mcfe (optimization component)
    $0.20
    2028

    Portion of the $0.35/Mcfe total margin pickup from the $300 million initiative.

    Margin improvement per Mcfe (HG/dry gas shift component)
    $0.15
    2028

    Portion of the $0.35/Mcfe total margin pickup from the $300 million initiative, driven by the shift to dry gas and HG.

    NGL barrel price (current)
    $45
    current

    Current NGL barrel price, well above the $35-$40 range for growth capital hurdle.

    Apex contract charge
    $0.24-$0.25
    expiring

    Price charged by the Apex contract for 20,000 barrels a day, which is uneconomic compared to current ethane prices.

    2027 natural gas hedging
    34%
    2027

    Ahead of previous year's hedging levels for the same period. Acquisitions are hedged upon closing.

    Natural gas demand (local example)
    200 million
    current

    Example of demand volume from potential buyers in specific areas.

    Lean gas curtailment potential
    50-100 million
    current

    Pads that are uneconomic at low prices, now flexible to curtail due to expiring MVCs.

    Industry KPIs

    6
    MetricValueDetails
    D c efficiency rig activitynearly 30%%
    Realized price differential$44.26USD/barrel
    Basin level production volume4.1 BcfeBcfe/d
    Cost of supply unit cash cost$0.29USD/Mcfe
    FCF shareholder distributions$220 millionUSD
    Take or pay contract structure—

    Deals & partnerships

    1
    Multiple sellersAcquisition of assets in core West Virginia Marcellus footprint$315 million

    These transactions immediately add net production and drilling locations, contributing to Antero's production growth and consolidating acreage around the East Side Express.

    Capital programs

    1
    East Side Express Pipelineunderway

    Benefit: covers over 30 miles of dry gas acreage

    First interstate regional pipeline for Antero Midstream, covering Antero Resources' dry gas acreage in West Virginia. Antero Midstream is positioned as the builder for these regional pipelines.

    Risks & headwinds

    3
    VLGC freight ratescurrent

    elevated

    Mitigation: Robust order book for new VLGCs (84 vessels in H2 2026-2027, 138 ships by 2029) expected to provide relief to shipping costs.

    Lower price realizations from in-basin salesongoing as strategy shifts

    $0.35 per Mcfe offset

    Mitigation: Partially offset by $0.70 per Mcfe reduction in cash costs, resulting in a net margin improvement. Company expects to do better than this assumption by securing premiums.

    Uncertainty in pricing, timing, and execution of new power dealsongoing

    Did not meet return hurdles for a recent local power deal

    Mitigation: Antero maintains a highly selective approach, requiring projects to be accretive on a risk-adjusted basis, competing with broader energy markets and existing firm transport/liquids production.

    What to watch in Q3 FY26

    4

    Dry gas well completions

    Q4 FY26
    Current2 dry gas pads (DadinWalters) drilling
    TargetCompletion of wells if gas prices are above $3/Mcf

    Why it matters

    Indicates the company's commitment to dry gas development and its sensitivity to natural gas prices, impacting future production mix and capital deployment.

    But I fully anticipate completing them, if it's $3 gas plus, and we can hedge that and also hedge kind of local basis at very attractive levels. So right now, based on the markets that we're looking at, you would assume that those would be completed.

    Q&A highlights

    7

    How does Antero view its gas marketing portfolio, and what would incentivize more aggressive long-term sales agreements, especially with new power deals and data centers?

    Antero is in an advantaged position due to expiring firm transport, allowing selection of best paths. New power deals must compete with broader energy markets and Antero's existing premium sales along the LNG fairway. A recent local power deal didn't meet Antero's return hurdles due to uncertainty in pricing, timing, and execution.

    “So when we look at projects, it has to meet all of those 3, and that one just wasn't attractive to us.”

    asked by Kevin MacCurdy · answered by Michael Kennedy

    3 min read6 chapters

    Detailed Narrative

    01

    Structural Margin Improvement & Cost Reduction Initiative

    Antero Resources is undergoing a significant structural margin improvement, evidenced by a 57% increase in adjusted EBITDA despite a 16% decline in Henry Hub prices year-over-year. The company announced a cost reduction initiative targeting a 25% decline in cash costs to $2 per Mcfe by year-end 2028. This is driven by a shift to a more balanced rich and dry gas development program and increased in-basin sales, moving from a producer-push to a demand-pull market.

    02

    Liquids Market Dynamics & Export Strength

    Antero achieved strong C3+ pricing of $44.26 per barrel in Q2 2026, up $6.41 year-over-year, its highest since 2022. U.S. propane exports averaged 2.03 million barrels a day in Q2 2026, up 170,000 barrels a day, with new weekly highs of 2.63 million barrels a day in May and July. China's LPG imports from the U.S. have rebounded, with U.S. market share rising to an average of 51% in Q2 2026, and China PDH demand increasing 40% from April to July, supporting higher U.S. imports.

    03

    Natural Gas Demand Outlook & Regional Opportunities

    The company highlights a strong fundamental outlook for natural gas through 2030, with forecasted U.S. demand growth of 19 Bcf from data centers and power projects, and another 23 Bcf from LNG and Mexico exports. In the Appalachian Basin, publicly announced power projects represent over 9 Bcf per day of demand, with 6 Bcf of projects already FID or under construction. Antero's long-haul firm transportation capacity provides unique optionality to participate in Midwest and Southern power projects, totaling another 7 Bcf per day of demand.

    04

    Dry Gas Drilling Success & Acreage Acquisitions

    Antero reported successful results from its first dry gas pad in over 12 years, achieving a 67% improvement in EUR and a nearly 30% decrease in cost per foot, with 90-day cumulative production rates increasing more than 3x. The company also invested $315 million in core West Virginia Marcellus assets, adding 125 million cubic feet a day of net production and 15 net drilling locations. These acquisitions were made at a combined valuation of 4x EBITDAX and a free cash flow yield over 20%.

    05

    Capital Allocation & Shareholder Returns

    The company generated $220 million of free cash flow in Q2 2026, using a portion to repurchase 1.1 million shares for $38 million. Management indicated an elevated ranking for buybacks given the current equity price. Antero's net production is expected to grow 36% from early 2025 to a 2026 exit rate of 4.5 Bcfe a day, while total debt is projected to return to pre-HG Energy acquisition levels in coming quarters.

    06

    East Side Express Pipeline & Midstream Strategy

    Antero Midstream is developing the East Side Express Pipeline, the first interstate regional line covering over 30 miles of Antero Resources' dry gas acreage in West Virginia. This project, along with future planned north-south pipelines, aims to connect Antero's million-acre Tier 1 Marcellus position to various demand centers and long-haul pipes. Antero Midstream is positioned as the industrial builder for these regional pipelines, leveraging its balance sheet and expertise.

    AI-generated summary of the company’s earnings call. Not investment advice.