What changed in this filing

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Item 1. Financial Statements

2020-10-28 compared with 2020-07-29 · 479 added, 608 removed, 931 unchanged (54% of the section changed)

24 unchanged sentences

● our future drilling plans;

● our projected well costs and cost savings initiatives, including with respect to water handling and treatment services provided by Antero Midstream Corporation;

● our projected well costs and cost savings initiatives, including with respect to water handling services provided by Antero Midstream Corporation;

● competition and government regulations;

23 unchanged sentences

Condensed Consolidated Balance Sheets

December 31, 2019 and June 30, 2020

December 31, 2019 and September 30, 2020

(In thousands)

September 30,

Current assets:

26 unchanged sentences

Short-term lease liabilities

Deferred revenue, VPP

Other current liabilities

5 unchanged sentences

Long-term lease liabilities

Deferred revenue, VPP

Other liabilities

6 unchanged sentences

authorized - 1,000,000 shares;

295,941 shares and 268,390 shares issued and outstanding at December 31, 2019 and June 30, 2020, respectively

295,941 shares and 268,549 shares issued and outstanding at December 31, 2019 and September 30, 2020, respectively

Additional paid-in capital

Accumulated earnings

Accumulated earnings (deficit)

Total stockholders' equity

3 unchanged sentences

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Three Months Ended June 30, 2019 and 2020

Condensed Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended September 30, 2019 and 2020

(In thousands, except per share amounts)

Three Months Ended June 30,

Three Months Ended September 30,

Revenue and other:

2 unchanged sentences

Commodity derivative fair value gains (losses)

Amortization of deferred revenue, VPP

Total revenue

4 unchanged sentences

Impairment of oil and gas properties

Impairment of midstream assets

Depletion, depreciation, and amortization

Loss on sale of assets

Accretion of asset retirement obligations

2 unchanged sentences

Total operating expenses

Operating income (loss)

Other income (expenses):

Equity in earnings of unconsolidated affiliates

Operating loss

Other income (expense):

Equity in earnings (loss) of unconsolidated affiliates

Transaction expense

1 unchanged sentence

Gain on early extinguishment of debt

Total other income (expenses)

Income (loss) before income taxes

Provision for income tax (expense) benefit

Net income (loss) and comprehensive income (loss) including noncontrolling interests

net income and comprehensive income attributable to noncontrolling interests

Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation

Income (loss) per share—basic

Income (loss) per share—diluted

Total other income (expense)

Loss before income taxes

( 1,151,491 )

Provision for income tax benefit

Net loss and comprehensive income loss including noncontrolling interests

net loss and comprehensive loss attributable to noncontrolling interests

Net loss and comprehensive loss attributable to Antero Resources Corporation

Loss per share—basic

Loss per share—diluted

Weighted average number of shares outstanding:

2 unchanged sentences

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Six Months Ended June 30, 2019 and 2020

Nine Months Ended September 30, 2019 and 2020

(In thousands, except per share amounts)

Six Months Ended June 30,

Nine Months Ended September 30,

Revenue and other:

1 unchanged sentence

Natural gas liquids sales

Commodity derivative fair value gains

Commodity derivative fair value gains (losses)

Gathering, compression, water handling and treatment

Amortization of deferred revenue, VPP

Total revenue

11 unchanged sentences

Total operating expenses

Operating income (loss)

Other income (expenses):

Equity in earnings (loss) of unconsolidated affiliates

Operating loss

( 1,098,598 )

Other income (expense):

Equity in loss of unconsolidated affiliates

Impairment of equity investment

8 unchanged sentences

Net income (loss) and comprehensive income (loss) including noncontrolling interests

net income and comprehensive income attributable to noncontrolling interests

( 1,355,724 )

net income (loss) and comprehensive income (loss) attributable to noncontrolling interests

Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation

( 1,337,727 )

Income (loss) per share—basic

3 unchanged sentences

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statement of Equity

Six Months Ended June 30, 2019

Condensed Consolidated Statement of Stockholders’ Equity

Nine Months Ended September 30, 2019

(In thousands)

13 unchanged sentences

Balances, June 30, 2019

Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes

Repurchases and retirements of common stock

Equity-based compensation

Net loss and comprehensive loss

Balances, September 30, 2019

See accompanying notes to unaudited condensed consolidated financial statements.

ANTERO RESOURCES CORPORATION

Condensed Consolidated Statement of Equity

Six Months Ended June 30, 2020

Condensed Consolidated Statement of Stockholders’ Equity

Nine Months Ended September 30, 2020

(In thousands)

13 unchanged sentences

Balances, June 30, 2020

Issuance of common units in Martica Holdings, LLC

Equity component of 2026 Convertible Notes, net

Issuance of common stock upon vesting of equity-based compensation awards, net of shares withheld for income taxes

Distributions to noncontrolling interest

Equity-based compensation

Net loss and comprehensive loss

Balances, September 30, 2020

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2019 and 2020

Nine Months Ended September 30, 2019 and 2020

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows provided by (used in) operating activities:

Net income (loss) including noncontrolling interests

( 1,355,724 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

2 unchanged sentences

Impairment of midstream assets

Commodity derivative fair value gains

Commodity derivative fair value (gains) losses

Gains on settled commodity derivatives

Proceeds from derivative monetizations

Loss on sale of assets

2 unchanged sentences

Gain on early extinguishment of debt

Equity in (earnings) loss of unconsolidated affiliates

Equity in loss of unconsolidated affiliates

Impairment of equity investment

2 unchanged sentences

Distributions/dividends of earnings from unconsolidated affiliates

Amortization of deferred revenue

Amortization of debt issuance costs, debt discount debt premium and other

Changes in current assets and liabilities:

17 unchanged sentences

Proceeds from asset sales

Proceeds from VPP sale, net

Change in other assets

3 unchanged sentences

Issuance of senior notes

Issuance of convertible notes

Repayment of senior notes

3 unchanged sentences

Distributions to noncontrolling interests in Antero Midstream Partners LP

Distributions to noncontrolling interests in Martica Holdings LLC

Employee tax withholding for settlement of equity compensation awards

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Effect of deconsolidation of Antero Midstream Partners LP

8 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

December 31, 2019 and September 30, 2020

(1) Organization

7 unchanged sentences

These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, and, accordingly, do not include all of the information and footnotes required by GAAP for complete consolidated financial statements.

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Company’s financial position as of December 31, 2019 and June 30, 2020, its results of operations for the three and six months ended June 30, 2019 and 2020 and its cash flows for the six months ended June 30, 2019 and 2020.

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly the Company’s financial position as of December 31, 2019 and September 30, 2020, its results of operations for the three and nine months ended September 30, 2019 and 2020 and its cash flows for the nine months ended September 30, 2019 and 2020.

The Company has no items of other comprehensive income or loss;

therefore, its net income or loss is equal to its comprehensive income or loss.

Operating results for the period ended June 30, 2020 are not necessarily indicative of the results that may be expected for the full year because of the impact of fluctuations in prices received for natural gas, NGLs, and oil, natural production declines, the uncertainty of exploration and development drilling results, fluctuations in the fair value of derivative instruments, the impacts of COVID-19 and other factors.

Operating results for the period ended September 30, 2020 are not necessarily indicative of the results that may be expected for the full year because of the impact of fluctuations in prices received for natural gas, NGLs, and oil, natural production declines, the uncertainty of exploration and development drilling results, fluctuations in the fair value of derivative instruments, the impacts of COVID-19 and other factors.

Principles of Consolidation

1 unchanged sentence

Through March 12, 2019, Antero Midstream Partners LP (“Antero Midstream Partners”), a publicly traded limited partnership, was included in the consolidated financial statements of Antero.

Prior to the Closing (defined in Note 3—Deconsolidation of Antero Midstream Partners LP to the unaudited condensed consolidated financial statements), our ownership of Antero Midstream Partners common units represented approximately a 53 % limited partner interest in Antero Midstream Partners, and we consolidated Antero Midstream Partners’ financial position and results of operations into our consolidated financial statements.

The Transactions (defined in Note 3—Deconsolidation of Antero Midstream Partners LP to the unaudited condensed consolidated financial statements) resulted in the exchange of the limited partner interest we owned in Antero Midstream Partners for common stock of Antero Midstream Corporation, par value $ 0.01 per share (the “Antero Midstream Corporation common stock”), representing an approximate 31 % interest in Antero Midstream Corporation.

As a result, our controlling interest in Antero Midstream Partners was converted to an interest in Antero Midstream Corporation that provides significant influence, but not control, over Antero Midstream Corporation.

Prior to the Closing (defined in Note 3—Deconsolidation of Antero Midstream Partners LP to the unaudited condensed consolidated financial statements), the Company’s ownership of Antero Midstream Partners common units represented approximately a 53 % limited partner interest in Antero Midstream Partners, and Antero Resources consolidated Antero Midstream Partners’ financial position and results of operations into its consolidated financial statements.

The Transactions (defined in Note 3—Deconsolidation of Antero Midstream Partners LP to the unaudited condensed consolidated financial statements) resulted in the exchange of the limited partner interest Antero Resources owned in Antero Midstream Partners for common stock of Antero Midstream Corporation, par value $ 0.01 per share (the “Antero Midstream Corporation common stock”), representing an approximate 31 % interest in Antero Midstream Corporation.

As a result, Antero Resources’ controlling interest in Antero Midstream Partners was converted to an interest in Antero Midstream Corporation that provides significant influence, but not control, over Antero Midstream Corporation.

Thus, effective March 13, 2019, Antero no longer consolidates Antero Midstream Partners in its consolidated financial statements and accounts for its interest in Antero Midstream Corporation using the equity method of accounting.

See Note 3—Deconsolidation of Antero Midstream Partners LP to the unaudited condensed consolidated financial statements for further discussion on the Transactions.

For the three months and six months ended June 30, 2020, we have determined that Martica Holdings LLC (“Martica”) is a VIE for which Antero is the primary beneficiary.

For the three months and nine months ended September 30, 2020, the Company determined that Martica Holdings LLC (“Martica”) is a VIE for which Antero is the primary beneficiary.

Therefore, Martica’s accounts are consolidated in the Company’s consolidated financial statements.

Antero is the primary beneficiary of Martica based on its power to direct the activities that most significantly

Antero is the primary beneficiary of Martica based on its power to direct the activities that most

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

impact Martica’s economic performance, and its obligation to absorb losses of, or right to receive benefits from, Martica that could be significant to Martica.

December 31, 2019 and September 30, 2020

significantly impact Martica’s economic performance, and its obligation to absorb losses of, or right to receive benefits from, Martica that could be significant to Martica.

In reaching such determination that Antero is the primary beneficiary of Martica, the Company considered the following:

1 unchanged sentence

● substantially all of Martica’s revenues are derived from production from the Company’s natural gas, NGLs, and oil properties in the Appalachian Basin in West Virginia and Ohio;

● Antero owns the Class B Units in Martica, which entitle Antero to receive distributions in respect of the Incremental Override (as defined in Note 4—Conveyance of Overriding Royalty Interest);

● Antero owns the Class B Units in Martica, which entitle Antero to receive distributions in respect of the Incremental Override (as defined in Note 4—Transactions);

● Antero provides accounting, administrative and other services to Martica under a Management Services Agreement.

All significant intercompany accounts and transactions have been eliminated in the Company’s unaudited condensed consolidated financial statements.

The noncontrolling interest in the Company’s unaudited condensed consolidated financial statements for the six months ended June 30, 2019 represents the interests in Antero Midstream Partners that were owned by the public prior to the Transactions, and the incentive distribution rights in Antero Midstream Partners.

The noncontrolling interest in the Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2020 represents the interest in Martica owned by third parties.

See Note 4—Conveyance of Overriding Royalty Interest for more information on the sale of this noncontrolling interest.

Martica is a discrete entity and the assets and credit of Martica are not available to satisfy the debts and obligations of the Company or its other subsidiaries.

The noncontrolling interest in the Company’s unaudited condensed consolidated financial statements for the nine months ended September 30, 2019 represents the interests in Antero Midstream Partners that were owned by the public prior to the Transactions, and the incentive distribution rights in Antero Midstream Partners.

The noncontrolling interest in the Company’s unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2020 represents the interest in Martica owned by third parties.

See Note 4—Transactions for more information on the sale of this noncontrolling interest.

Martica is a discrete entity and the assets and credits of Martica are not available to satisfy the debts and obligations of the Company or its other subsidiaries.

Investments in entities for which the Company exercises significant influence, but not control, are accounted for under the equity method.

15 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

December 31, 2019 and September 30, 2020

Risks and Uncertainties

7 unchanged sentences

The Company classifies book overdrafts in accounts payable and revenue distributions payable within its unaudited condensed consolidated balance sheets, and classifies the change in accounts payable and revenue distributions payable associated with book overdrafts as an operating activity within its unaudited condensed consolidated statements of cash flows.

As of December 31, 2019, the book overdraft included within accounts payable and revenue distributions payable were $ 7 million and $ 18 million, respectively.

As of June 30, 2020, the book overdraft included within revenue distributions payable was $ 5 million and no overdraft was included in accounts payable.

As of December 31, 2019, the book overdraft included within accounts payable and revenue distributions payable was $ 7 million and $ 18 million, respectively.

As of September 30, 2020, the book overdraft included within accounts payable and revenue distributions payable was $ 8 million and $ 13 million, respectively.

Oil and Gas Properties

5 unchanged sentences

The Company reviews exploration costs related to wells-in- progress at the end of each quarter and makes a determination, based on known results of drilling at that time, whether the costs should continue to be capitalized pending further well testing and results, or charged to expense.

The Company incurred no such charges to expense during the three and six months ended June 30, 2019 and 2020.

The Company incurred no such charges to expense during the three and nine months ended September 30, 2020.

During the nine months ended September 30, 2019, the Company recorded an impairment charge of $ 26 million for design and initial costs related to pads that are no longer planned to be placed into service.

The sale of a partial interest in a proved property is accounted for as a cost recovery, and no gain or loss is recognized as long as this treatment does not significantly affect the units-of- production amortization rate.

1 unchanged sentence

Unproved properties are assessed for impairment on a property-by- property basis, and any impairment in value is charged to expense.

Impairment is assessed based on remaining lease terms, commodity price outlooks, and future plans to develop acreage, as well as drilling results, and reservoir performance of wells in the area.

Impairment is assessed based on remaining lease terms, commodity price outlooks, future plans to develop acreage, drilling results and reservoir performance of wells in the area.

Unproved properties and the related costs are transferred to proved properties when reserves are discovered on, or otherwise attributed to, the property.

Proceeds from sales of partial interests in unproved properties are accounted for as a recovery of cost without recognition of any gain or loss until the cost has been recovered.

For the three months ended June 30, 2019 and 2020, impairment of oil and gas properties was $ 131 million and $ 37 million, respectively.

For the six months ended June 30, 2019 and 2020, impairment of oil and gas properties was $ 212 million and $ 127 million, respectively.

For the three months ended September 30, 2019 and 2020, impairment of unproved properties was $ 160 million and $ 29 million, respectively.

For the nine months ended September 30, 2019 and 2020, impairment of unproved properties was $ 347 million and $ 156 million, respectively.

The Company evaluates the carrying amount of its proved natural gas, NGLs, and oil properties for impairment on a geological reservoir basis whenever events or changes in circumstances indicate that a property’s carrying amount may not be recoverable.

If the carrying amount exceeds the estimated undiscounted future cash flows, the Company would estimate the fair value of its properties and record an impairment charge for any excess of the carrying amount of the properties over the estimated fair value of the properties.

If the carrying amount exceeds the estimated undiscounted future cash flows, the Company would estimate the fair value of its properties and record an impairment expense for any excess of the carrying amount of the properties over the estimated fair value of the properties.

Factors used to estimate fair value may include estimates of proved reserves, estimated future commodity prices, future production estimates, and anticipated capital expenditures, using a commensurate discount rate.

Derivative Financial Instruments

In order to manage its exposure to natural gas, NGLs, and oil price volatility, the Company enters into derivative transactions from time to time, which may include commodity swap agreements, basis swap agreements, collar agreements, and other similar

Because estimated undiscounted future net cash flows based on future commodity prices as of September 30, 2019 exceeded the carrying amount of our proved properties in the Marcellus Shale as of September 30, 2019, management did not further evaluate our Marcellus proved properties for impairment.

However, the carrying amount of the Company’s proved properties in the Utica

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

agreements related to the price risk associated with the Company’s production.

December 31, 2019 and September 30, 2020

Shale exceeded the estimated undiscounted future cash flows based on future commodity prices as of September 30, 2019.

The Company estimated the fair value of the Utica Shale assets based on sales of other properties, estimates of proved reserves, estimated future commodity prices and future production estimates.

As a result, the Company recorded an impairment expense of $ 881 million related to proved properties in the Utica Shale during the three months ended September 30, 2019.

The Company did not incur any impairment expenses related to proved properties in the Utica Shale for the nine months ended September 30, 2020.

The Company did not record any impairment expenses associated with its proved properties in the Marcellus Shale during the nine months ended September 30, 2019 and 2020.

Derivative Financial Instruments

To the extent legal right of offset exists with a counterparty, the Company reports derivative assets and liabilities on a net basis.

11 unchanged sentences

The liability is accreted at the end of each period through charges to operating expense.

Deferred Revenue

Under the terms of the VPP (as defined below in Note 4—Transactions), the Company is obligated to deliver certain natural gas volumes from specified wells to an overriding royalty interest owner over the term of the arrangement.

The Company has accounted for the VPP as a conveyance under Accounting Standard Codifications (“ASC”) Topic 932, Extractive Industries—Oil and Gas (“ASC 932”), which requires the net proceeds to be recognized as deferred revenue due to the Company’s future performance obligations.

Deferred revenue is recognized as volumes are delivered using the units-of-production method over the term of the VPP in Amortization of deferred revenue on the Company’s unaudited condensed consolidated statements of operations.

See Note 4—Transactions for further discussion of the VPP transaction.

Natural Gas, NGLs, and Oil Revenues

Our revenues are primarily derived from the sale of natural gas and oil production, as well as the sale of NGLs that are extracted from our natural gas.

The Company’s revenues are primarily derived from the sale of natural gas and oil production, as well as the sale of NGLs that are extracted from our natural gas.

Sales of natural gas, NGLs, and oil are recognized when we satisfy a performance obligation by transferring control of a product to a customer.

Payment is generally received in the month following the sale.

Under our natural gas sales contracts, we deliver natural gas to the purchaser at an agreed upon delivery point.

Natural gas is transported from our wellheads to delivery points specified under sales contracts.

To deliver natural gas to these points, Antero Midstream Corporation or other third parties gather, compress, process and transport our natural gas.

We maintain control of the natural gas during gathering, compression, processing, and transportation.

Our sales contracts provide that we receive a specific index price adjusted for pricing differentials.

We transfer control of the product at the delivery point and recognize revenue based on the contract price.

Under the Company’s natural gas sales contracts, it delivers natural gas to the purchaser at an agreed upon delivery point.

Natural gas is transported from the wellheads to delivery points specified under sales contracts.

To deliver natural gas to these points, Antero Midstream Corporation or other third parties gather, compress, process and transport the Company’s natural gas.

The Company maintains control of the natural gas during gathering, compression, processing, and transportation.

The Company’s sales contracts provide that it receives a specific index price adjusted for pricing differentials.

The Company transfers control of the product at the delivery point and recognizes revenue based on the contract price.

The costs incurred to gather, compress, process and transport natural gas are recorded as Gathering, compression, processing and transportation expense.

NGLs, which are extracted from natural gas through processing, are either sold by us directly or by the processor under processing contracts.

For NGLs sold by us directly, our sales contracts primarily provide that we deliver the product to the purchaser at an agreed upon delivery point and that we receive a specific index price adjusted for pricing differentials.

We transfer control of the product to the purchaser at the delivery point and recognize revenue based on the contract price.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

NGLs, which are extracted from natural gas through processing, are either sold by the Company directly or by the processor under processing contracts.

For NGLs sold by the Company directly, the sales contracts primarily provide that the Company delivers the product to the purchaser at an agreed upon delivery point and that it receives a specific index price adjusted for pricing differentials.

The Company transfers control of the product to the purchaser at the delivery point and recognizes revenue based on the contract price.

The costs incurred to process and transport NGLs are recorded as Gathering, compression, processing, and transportation expense.

For NGLs sold by the processor, our processing contracts provide that we transfer control to the processor at the tailgate of the processing plant and we recognize revenue based on the price received from the processor.

Under our oil sales contracts, we generally sell oil to purchasers and collect a contractually agreed upon index price, net of pricing differentials.

We recognize revenue based on the contract price when we transfer control of the product to a purchaser.

For NGLs sold by the processor, the Company’s processing contracts provide that the Company transfers control to the processor at the tailgate of the processing plant and it recognizes revenue based on the price received from the processor.

Under the Company’s oil sales contracts, Antero Resources’ generally sells oil to purchasers and collects a contractually agreed upon index price, net of pricing differentials.

The Company recognizes revenue based on the contract price when it transfers control of the product to a purchaser.

When applicable, the costs incurred to transport oil to a purchaser are recorded as Gathering, compression, processing and transportation expense.

1 unchanged sentence

Marketing revenues are derived from activities to purchase and sell third-party natural gas and NGLs and to market excess firm transportation capacity to third parties.

We retain control of the purchased natural gas and NGLs prior to delivery to the purchaser.

We have concluded that we are the principal in these arrangements and therefore, we recognize revenue on a gross basis, with costs to purchase and transport natural gas and NGLs presented as marketing expenses.

Contracts to sell third party gas and NGLs are generally subject to similar terms as contracts to sell our produced natural gas and NGLs.

We satisfy performance obligations to the purchaser by transferring control of the product at the delivery point and recognize revenue based on the contract

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

price received from the purchaser.

The Company retains control of the purchased natural gas and NGLs prior to delivery to the purchaser.

The Company has concluded that it is the principal in these arrangements and therefore, the Company recognizes revenue on a gross basis, with costs to purchase and transport natural gas and NGLs presented as marketing expenses.

Contracts to sell third party gas and NGLs are generally subject to similar terms as contracts to sell the Company’s produced natural gas and NGLs.

The Company satisfies performance obligations to the purchaser by transferring control of the product at the delivery point and recognizes revenue based on the contract price received from the purchaser.

Fees generated from the sale of excess firm transportation marketed to third parties are included in Marketing revenue.

15 unchanged sentences

(1) the exploration, development, and production of natural gas, NGLs, and oil;

(2) marketing and utilization of excess firm transportation capacity;

(2) marketing and utilization of excess firm transportation

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

and (3) our equity method investment in Antero Midstream Corporation.

7 unchanged sentences

Earnings (loss) per common share—basic for each period is computed by dividing net income (loss) attributable to Antero by the basic weighted average number of shares outstanding during the period.

Earnings (loss) per common share—assuming dilution for each period is computed after giving consideration to the potential dilution from outstanding equity awards, calculated using the treasury stock method.

The Company includes performance share unit awards in the calculation of diluted weighted average shares outstanding based on the number of common shares that would be issuable if the end of the period was also the end of the performance period required for the vesting of the awards.

During periods in which the Company incurs a net loss, diluted weighted

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

average shares outstanding are equal to basic weighted average shares outstanding because the effect of all equity awards is anti-dilutive.

Earnings (loss) per common share—assuming dilution for each period is computed after giving consideration to the potential dilution from outstanding equity awards and shares of common stock issuable upon conversion of the 2026 Convertible Notes (as defined below in Note 8—Long-Term Debt), calculated using the treasury stock method.

The Company includes restricted stock unit (“RSUs”) awards, performance share unit (“PSUs”) awards and stock options in the calculation of diluted weighted average shares outstanding based on the number of common shares that would be issuable if the end of the period was also the end of the performance period required for the vesting of the awards.

During periods in which the Company incurs a net loss, diluted weighted average shares outstanding are equal to basic weighted average shares outstanding because the effect of all equity awards is anti-dilutive.

The following is a reconciliation of the Company’s basic weighted average shares outstanding to diluted weighted average shares outstanding during the periods presented (in thousands):

Three months ended June 30,

Six months ended June 30,

Three months ended

Nine months ended

September 30,

Basic weighted average number of shares outstanding

Dilutive effect of restricted stock units

Dilutive effect of RSUs

Dilutive effect of outstanding stock options

Dilutive effect of performance stock units

Dilutive effect of PSUs

Diluted weighted average number of shares outstanding

Weighted average number of outstanding equity awards excluded from calculation of diluted earnings per common share (1) :

Restricted stock units

Weighted average number of outstanding securities excluded from calculation of diluted earnings per common share (1) :

Outstanding stock options

Performance stock units

2026 Convertible Notes (2)

(1) The potential dilutive effects of these awards were excluded from the computation of earnings (loss) per common share—assuming dilution because the inclusion of these awards would have been anti-dilutive.

(2) In August 2020 and September 2020, the Company issued $ 287.5 million in aggregate principal amount of 4.25 % convertible senior notes due September 1, 20206 (the “2026 Convertible Notes”).

The Company intends to settle the principal amount of the 2026 Convertible Notes in cash upon conversion.

As a result, only the amount by which the conversion value exceeds the aggregate principal amount of the 2026 Convertible Notes is considered in the diluted earnings per share computation under the treasury stock method.

As of September 30, 2020, the conversion value did not exceed the principal amount of the notes, and accordingly, there was no impact to diluted earnings per share for the periods presented.

See Note 8—Long-Term Debt.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

Treasury Share Retirement

2 unchanged sentences

The portion allocable to additional paid-in capital is determined by applying a percentage, determined by dividing the number of shares to be retired by the number of shares outstanding, to the balance of additional paid-in capital as of retirement.

Recently Issued Accounting Standard

On August 5, 2020, the Financial Accounting Standards Board issued Accounting Standards Update No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which eliminates the cash conversion model in ASC 470-20, Debt with Conversion and Other Options , that require separate accounting for conversion features that is currently being applied to the 2026 Convertible Notes, and instead, allows the debt instrument and conversion features to be accounted for as a single debt instrument.

The new standard becomes effective for the Company on January 1, 2022, and early adoption is permitted.

The Company is evaluating its plans for adoption, including the adoption date and transition method.

Upon adoption of this new standard, the Company expects to reclassify $ 62 million, net of deferred income taxes and equity issuance costs, to long-term debt and deferred income tax liability, as applicable, from stockholders’ equity.

Additionally, annual interest expense for the 2026 Convertible Notes will be based on an effective interest rate of 4.8 % as compared to 11.7 % for the three and nine months ended September 30, 2020 in the statement of operations and the weighted average diluted shares outstanding will increase from zero as of September 30, 2020 under the treasury-stock method to 66 million under the if-converted method.

T he Company does not believe that adoption of the standard will impact its operational strategies or growth prospects .

(3) Deconsolidation of Antero Midstream Partners LP

8 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

December 31, 2019 and September 30, 2020

(4) Transactions

Conveyance of Overriding Royalty Interest

On June 15, 2020, the Company announced the consummation of a transaction with an affiliate of Sixth Street Partners, LLC (“Sixth Street”) relating to certain overriding royalty interests across the Company’s existing asset base (the “ORRIs”).

In connection with the transaction, the Company contributed the ORRIs to Martica and Sixth Street contributed $ 300 million in cash (subject to customary adjustments) and agreed to contribute up to an additional $ 102 million in cash if certain production targets attributable to the ORRIs are achieved.

All cash contributed by Sixth Street was distributed to the Company.

All cash contributed by Sixth Street at the initial closing was distributed to the Company.

As of September 30, 2020, the Company determined it met the production threshold related to the third quarter of 2020 whereby it became entitled to receive a $ 51 million cash distribution that will be paid in the fourth quarter of 2020.

The ORRIs include an overriding royalty interest of 1.25 % of the Company’s working interest in all of its proved operated developed properties in West Virginia and Ohio, subject to certain excluded wells (the “Initial PDP Override”), and an overriding royalty interest of 3.75 % of the Company’s working interest in all of its undeveloped properties in West Virginia and Ohio (the “Development Override”).

2 unchanged sentences

The Incremental Override (or a portion thereof, as applicable) may be re-conveyed to the Company (at the Company’s election) if certain production targets attributable to the ORRIs are achieved through March 31, 2023.

Any portion of the Incremental Override that may not be re-conveyed to the Company based on the Company achieving such production volumes through March 31, 2023 will remain with Martica.

Any portion of the Incremental Override that may not be re-conveyed to the Company based on the Company failing to achieve such production volumes through March 31, 2023 will remain with Martica.

Prior to Sixth Street achieving an internal rate of return of 13 % and 1.5 x cash-on-cash return (the “Hurdle”), Sixth Street will receive all distributions in respect of the Initial PDP Override and the Development Override, and the Company will receive all distributions in respect of the Incremental Override, unless certain production targets are not achieved, in which case Sixth Street will receive some or all of the distributions in respect of the Incremental Override.

2 unchanged sentences

As a result, the contributed ORRIs have been recorded by Martica at their historical cost.

Volumetric Production Payment Transaction

On August 10, 2020, the Company completed a volumetric production payment transaction and received net proceeds of approximately $ 215 million (the "VPP").

In connection with the VPP, the Company entered into a purchase and sale agreement, together with a conveyance agreement and production and marketing agreement, with J.P.

Morgan Ventures Energy Corporation ("JPM-VEC") to convey, effective July 1, 2020, an overriding royalty interest in dry gas producing properties in West Virginia (the "VPP Properties") equal to 136,589,000 MMBtu over the expected seven-year term of the VPP.

The Company has accounted for the VPP as a conveyance under ASC 932, and the net proceeds were recognized as deferred revenue as of September 30, 2020.

Deferred revenue is recognized as volumes are delivered using the units-of-production method over the term of the VPP.

Under the production and marketing agreement, Antero and its affiliates provide certain marketing services as JPM-VEC’s agent, and any income or expenses related to these services will be recorded as marketing revenue or marketing expenses (as the case may be).

Contemporaneously with the VPP transaction, the Company executed a call option related to the production volumes associated with its retained interest in the VPP properties, which is collateralized by a mortgage on the VPP properties.

Additionally, the production and marketing agreement contains an embedded put option related to the production volumes for the Company’s

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

December 31, 2019 and September 30, 2020

retained interest in the VPP properties, which has been bifurcated from the production and marketing arrangement and accounted for as a derivative instrument recorded at fair value as of September 30, 2020.

See Note 12—Derivative Instruments.

(a) Disaggregation of Revenue

2 unchanged sentences

For more information on reportable segments, see Note 18—Segment Information.

Three months ended June 30,

Six months ended June 30,

Segment to which

Three months ended

Nine months ended

September 30,

(in thousands)

revenues relate

Reportable segment

Revenues from contracts with customers:

7 unchanged sentences

Gathering and compression (1)

Equity method investment in AMC

Equity method investment in Antero Midstream Corporation

Water handling and treatment (1)

Equity method investment in AMC

Equity method investment in Antero Midstream Corporation

Total revenue from contracts with customers

Income from derivatives and other sources

Income (loss) from derivatives and other sources

Total revenue and other

2 unchanged sentences

(b) Transaction Price Allocated to Remaining Performance Obligations

For our product sales that have a contract term greater than one year, we have utilized the practical expedient, which does not require the disclosure of the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation.

Under our product sales contracts, each unit of product delivered to the customer represents a separate performance obligation;

For the Company’s product sales that have a contract term greater than one year, the Company utilized the practical expedient, which does not require the disclosure of the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation.

Under the Company’s product sales contracts, each unit of product delivered to the customer represents a separate performance obligation;

therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.

For our product sales that have a contract term of one year or less, we have utilized the practical expedient, which does not require the disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

For the Company’s product sales that have a contract term of one year or less, the Company utilized the practical expedient, which does not require the disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

Under our sales contracts, we invoice customers after our performance obligations have been satisfied, at which point payment is unconditional.

Accordingly, our contracts do not give rise to contract assets or liabilities.

At December 31, 2019 and June 30, 2020, our receivables from contracts with customers were $ 318 million and $ 255 million, respectively.

Under the Company’s sales contracts, the Company invoices customers after the Company’s performance obligations have been satisfied, at which point payment is unconditional.

Accordingly, the Company’s contracts do not give rise to contract assets or liabilities.

At December 31, 2019 and September 30, 2020, the Company’s receivables from contracts with customers were $ 318 million and $ 339 million, respectively.

(6) Equity Method Investments

At June 30, 2020, the Company owned approximately 29.2 % of Antero Midstream Corporation’s common stock, which is reflected in Antero’s consolidated financial statements using the equity method of accounting.

As of September 30, 2020, the Company owned approximately 29.2 % of Antero Midstream Corporation’s common stock, which is reflected in Antero’s consolidated financial statements using the equity method of accounting.

See Note 3—Deconsolidation of Antero Midstream Partners to the unaudited condensed consolidated financial statements for further discussion on the Transactions.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

The following table is a reconciliation of investments in unconsolidated affiliates for the six months ended June 30, 2020 (in thousands):

December 31, 2019 and September 30, 2020

The following table is a reconciliation of investments in unconsolidated affiliates for the nine months ended September 30, 2020 (in thousands):

Antero Midstream

Balance at December 31, 2019

Balance as of December 31, 2019

Equity in loss of unconsolidated affiliates

2 unchanged sentences

Elimination of intercompany profit

Balance at June 30, 2020

Balance as of September 30, 2020

(1) Other-than-temporary impairment of investment in Antero Midstream Corporation.

2 unchanged sentences

Balance Sheet

September 30,

(in thousands)

8 unchanged sentences

March 13, 2019

Nine months ended

(in thousands)

June 30, 2019

June 30, 2020

September 30, 2019

September 30, 2020

Operating expenses

Income (loss) from operations

Net income (loss) attributable to the equity method investment

Loss from operations

Loss attributable to the equity method investment

(7) Accrued Liabilities

Accrued liabilities as of December 31, 2019 and June 30, 2020 consisted of the following items (in thousands):

Accrued liabilities as of December 31, 2019 and September 30, 2020 consisted of the following items (in thousands):

September 30,

Capital expenditures

2 unchanged sentences

Interest expense, net

Accrued taxes

Total accrued liabilities

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

December 31, 2019 and September 30, 2020

(8) Long-Term Debt

Long-term debt as of December 31, 2019 and June 30, 2020 consisted of the following items (in thousands):

Long-term debt as of December 31, 2019 and September 30, 2020 consisted of the following items (in thousands):

September 30,

Credit Facility (a)

3 unchanged sentences

5.00 % senior notes due 2025 (e)

Net unamortized premium

Net unamortized debt issuance costs

4.25 % convertible senior notes due 2026 (f)

Total principal

Unamortized premium (discount), net

Unamortized debt issuance costs

Long-term debt

2 unchanged sentences

Borrowings under the Credit Facility are subject to borrowing base limitations based on the collateral value of Antero Resources’ assets and are subject to regular semi-annual redeterminations.

The borrowing base is $ 2.85 billion and lender commitments are $ 2.64 billion.

The next redetermination of the borrowing base is scheduled to occur in October 2020.

The borrowing base was re-affirmed in October 2020 at $ 2.85 billion and lender commitments are $ 2.64 billion.

The next redetermination of the borrowing base is scheduled to occur in April 2021.

The maturity date of the Credit Facility is the earlier of (i) October 26, 2022 and (ii) the date that is 91 days prior to the earliest stated redemption date of any series of Antero Resources’ senior notes then outstanding.

As of June 30, 2020, Antero Resources had an outstanding balance under the Credit Facility of $ 926 million, with a weighted average interest rate of 3.32 %, and outstanding letters of credit of $ 730 million.

The Company intends to extinguish the 2021 Notes on or prior to August 2, 2021 with proceeds from its asset sales program, cash flow from operations and available borrowings under the Credit Facility.

Consequently, the Company has classified the Credit Facility as long-term debt.

The classification of the Credit Facility does not impact any of the Company’s financial covenants.

As of September 30, 2020, Antero Resources had an outstanding balance under the Credit Facility of $ 827 million, with a weighted average interest rate of 3.28 %, and outstanding letters of credit of $ 730 million.

As of December 31, 2019, Antero Resources had an outstanding balance under the Credit Facility of $ 552 million, with a weighted average interest rate of 3.28 %, and outstanding letters of credit of $ 623 million.

13 unchanged sentences

The 2022 Notes rank pari passu to Antero Resources’ other outstanding senior notes.

The 2022 notes are guaranteed on a full and unconditional and joint and several senior unsecured basis by Antero Resources’ wholly owned subsidiaries and certain of its future restricted subsidiaries.

The 2022 Notes are guaranteed on a full and unconditional and joint and several senior unsecured basis by Antero Resources’ wholly owned subsidiaries and certain of its

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

future restricted subsidiaries.

Interest on the 2022 Notes is payable on June 1 and December 1 of each year.

1 unchanged sentence

If Antero Resources undergoes a change of control followed by a rating decline, the holders of the 2022 Notes will have the right to require Antero Resources to repurchase all or a portion of the notes at a price equal to 101 % of the principal amount of the 2022 Notes, plus accrued and unpaid interest.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

(d) 5.625 % Senior Notes Due 2023

14 unchanged sentences

If Antero Resources undergoes a change of control followed by a rating decline, the holders of the 2025 Notes will have the right to require Antero Resources to repurchase all or a portion of the notes at a price equal to 101 % of the principal amount of the 2025 Notes, plus accrued and unpaid interest.

(f) Debt Repurchase Program

During the three and six months ended June 30, 2020, Antero Resources repurchased $ 236 million and $ 619 million, respectively, principal amount of debt at a weighted average discount of 17 % and 19 % , respectively, which purchases included a portion of the 2021 notes, the 2022 notes, the 2023 notes and the 2025 notes.

The Company recognized a gain of approximately $ 39 million and $ 120 million for the three and six months ended June 30, 2020, respectively, on the early extinguishment of the debt repurchased.

(f) 4.25 % Convertible Senior Notes Due 2026

On August 21, 2020, Antero Resources issued $ 250 million in aggregate principal amount of 2026 Convertible Notes.

On September 2, 2020, Antero Resources issued an additional $ 37.5 million of the 2026 Convertible Notes.

The 2026 Convertible Notes were issued pursuant to an indenture and are senior, unsecured obligations of Antero Resources.

The 2026 Convertible Notes bear interest at a fixed rate of 4.25 % per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on March 1, 2021.

Proceeds from the issuance of the 2026 Convertible Notes totaled $ 278.6 million, net of initial purchasers’ fees and issuance cost of $ 8.9 million.

Each capitalized term used in this subsection but not otherwise defined in this Quarterly Report on Form 10-Q has the meaning as set forth in the indenture governing the 2026 Convertible Notes.

The initial conversion rate is 230.2026 shares of Antero Resources’ common stock per $1,000 principal amount of 2026 Convertible Notes, subject to adjustment upon the occurrence of specified events.

The 2026 Convertible Notes will mature on September 1, 2026, unless earlier repurchased, redeemed or converted.

Before May 1, 2026, note holders will have the right to convert their 2026 Convertible Notes only upon the occurrence of the following events:

● during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on September 30, 2020, if the Last Reported Sale Price per share of Antero Resources’ common stock exceeds 130 % of the Conversion Price for each of at least 20 Trading Days (whether or not consecutive) during the 30 consecutive Trading Days ending on, and including, the last Trading Day of the immediately preceding calendar quarter;

● during the five consecutive Business Days immediately after any 10 consecutive trading day period (such 10 consecutive Trading Day period, the “Measurement Period”) if the trading Price per $1,000 principal amount of 2026 Convertible Notes, as determined following a request by a noteholder in accordance with the procedures set forth below, for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price per share of common stock on such trading day and the conversion rate on such trading day;

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

● if Antero Resources calls any or all of the 2026 Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;

● upon the occurrence of certain specified corporate events as set forth in the indenture governing the 2026 Convertible Notes.

From and after May 1, 2026, noteholders may convert their 2026 Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

Upon conversion, Antero Resources may satisfy its conversion obligation by paying and/or delivering, as the case may be, cash, shares of Antero Resources’ common stock or a combination of cash and shares of Antero Resources’ common stock, at Antero Resources’ election, in the manner and subject to the terms and conditions provided in the indenture governing the 2026 Convertible Notes.

Antero Resources’ current intent is to settle the principle amount of the 2026 Convertible Notes in cash upon conversion.

At no point since issuance of the 2026 Convertible Notes has the conditions allowing holders of the 2026 Convertible Notes to exercise their conversion right been met.

The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the indenture governing the 2026 Convertible Notes.

In addition, following certain corporate events, as described in the indenture governing the 2026 Convertible Notes, that occur prior to the maturity date, Antero Resources will increase the conversion rate for a holder who elects to convert its 2026 Convertible Notes in connection with such a corporate event.

If certain corporate events that constitute a Fundamental Change occur, then noteholders may require Antero Resources to repurchase their 2026 Convertible Notes at a cash repurchase price equal to the principal amount of the 2026 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

The definition of Fundamental Change includes certain business combination transactions involving Antero Resources and certain de-listing events with respect to Antero Resources’ common stock.

Upon issuance, the Company separately accounted for the liability and equity components of the 2026 Convertible Notes.

The liability component was recorded at the estimated fair value of a similar debt instrument without the conversion feature.

The difference between the principal amount of the 2026 Convertible Notes and the estimated fair value of the liability component was recorded as a debt discount and will be amortized to interest expense over the term of the 2026 Convertible Notes using the effective interest method, with an effective interest rate of 10.8 % per annum.

As of the issuance date, the fair value of the 2026 Convertible Notes was estimated at $ 203 million, resulting in a debt discount at inception of $ 85 million.

The equity component, representing the value of the conversion option, was computed by deducting the fair value of the liability component from the initial proceeds of the 2026 Convertible Notes issuance.

This equity component was recorded, net of deferred taxes and issuance costs, in additional paid-in capital within the unaudited consolidated statement of stockholders’ equity and will not be remeasured as long as it continues to meet the conditions for equity classification.

Transaction costs related to the 2026 Convertible Notes issuance were allocated to the liability and equity components based on their relative fair values.

Issuance costs attributable to the liability component were recorded within debt issuance costs on the unaudited consolidated balance sheet and are amortized over the term of the 2026 Convertible Notes using the effective interest method.

Issuance costs attributable to the equity component were recorded as a charge to additional paid-in capital within the unaudited consolidated statement of stockholders’ equity.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

The 2026 Convertible Notes consist of the following as of September 30, 2020 (in thousands):

Liability component:

unamortized note discount

unamortized debt issuance costs

Net carrying value

Equity component (1)

(1) Recorded in additional paid-in capital, net of $ 3 million of issuance costs and $ 20 million of deferred taxes.

Interest expense recognized on the 2026 Convertible Notes related to the stated interest rate and amortization of the debt discount totaled $ 2.3 million for the three months ended September 30, 2020.

(g) Debt Repurchase Program

During the three and nine months ended September 30, 2020, Antero Resources repurchased $ 461 million and $ 1.1 billion, respectively, principal amount of debt at a weighted average discount of 13 % and 17 % , respectively, which purchases included a portion of the 2021 Notes, 2022 Notes, 2023 Notes and 2025 Notes.

The Company recognized a gain of $ 56 million and $ 175 million for the three and nine months ended September 30, 2020, respectively, on the early extinguishment of the debt repurchased.

Repurchases of the principal amount of debt during the three and nine months ended September 30, 2020 include repurchases of $ 367 million on the 2021 Notes, 2022 Notes and 2023 Notes through previously disclosed tender offers at a weighted average discount of 10 %.

(9) Asset Retirement Obligations

The following is a reconciliation of the Company’s asset retirement obligations for the six months ended June 30, 2020 (in thousands):

The following is a reconciliation of the Company’s asset retirement obligations for the nine months ended September 30, 2020 (in thousands):

Asset retirement obligations—December 31, 2019

2 unchanged sentences

Settlement of obligations

Asset retirement obligations—June 30, 2020

Asset retirement obligations—September 30, 2020

Asset retirement obligations are included in other liabilities on the Company’s unaudited condensed consolidated balance sheets.

1 unchanged sentence

On June 17, 2020, Antero Resources’ stockholders approved the Antero Resources Corporation 2020 Long-Term Incentive Plan (the “2020 Plan”), which replaced the Antero Resources Corporation Long-Term Incentive Plan (the “2013 Plan”), and the 2020 Plan became effective as of such date.

The 2020 Plan provides for grants of stock options (including incentive stock options), stock appreciation rights, restricted stock awards, restricted stock unit awards, vested stock awards, dividend equivalent awards, and other stock-based and cash awards.

The 2020 Plan provides for grants of stock options (including incentive stock options), stock appreciation rights, restricted stock awards, RSU awards, vested stock awards, dividend equivalent awards, and other stock-based and cash awards.

The terms and conditions of the awards granted are established by the Compensation Committee of Antero Resources’ Board of Directors.

Employees, officers, non-employee directors and other service providers of the Company and

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

its affiliates are eligible to receive awards under the 2020 Plan.

Employees, officers, non-employee directors and other service providers of the Company and its affiliates are eligible to receive awards under the 2020 Plan.

No further awards will be granted under the 2013 Plan on or after June 17, 2020.

1 unchanged sentence

The share recycling provisions allow for all or any portion of an award (including an award granted under the 2013 Plan that was outstanding as of June 17, 2020) that expires or is cancelled, forfeited, exchanged, settled for cash, or otherwise terminated without actual delivery of the shares to be considered not delivered and thus available for new awards under the 2020 Plan.

Further, any shares withheld or surrendered in payment of any taxes relating to awards that were outstanding under either the 2013 Plan as of June 17, 2020 or are granted under the 2020 Plan (other than stock options and stock appreciation rights) will again be available for new awards under the 2020 Plan.

A total of 10,050,833 shares were available for future grant under the 2020 Plan as of June 30, 2020.

Further, any shares withheld or surrendered in payment of any taxes relating to awards that were outstanding under either the 2013 Plan as of June

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

17, 2020 or are granted under the 2020 Plan (other than stock options and stock appreciation rights) will again be available for new awards under the 2020 Plan.

A total of 7,149,371 shares were available for future grant under the 2020 Plan as of September 30, 2020.

Antero Midstream Partners’ general partner was authorized to grant up to 10,000,000 common units representing limited partner interests in Antero Midstream Partners under the Antero Midstream Partners LP Long-Term Incentive Plan (the “AMP Plan”) to non-employee directors of its general partner and certain officers, employees, and consultants of Antero Midstream Partners and its affiliates (which includes Antero Resources).

As part of the Transactions, each outstanding phantom unit award under the AMP Plan, was assumed by Antero Midstream Corporation and converted into 1.8926 restricted stock units under the Antero Midstream Corporation Long Term Incentive Plan (the “AMC Plan”).

Each restricted stock unit award under the AMC Plan represents a right to receive one share of Antero Midstream Corporation common stock.

The Company’s equity-based compensation expense, by type of award, was as follows for the three and six months ended June 30, 2019 and 2020 (in thousands):

Three months ended June 30,

Six months ended June 30,

Restricted stock unit awards

As part of the Transactions, each outstanding phantom unit award under the AMP Plan, was assumed by Antero Midstream Corporation and converted into 1.8926 RSUs under the Antero Midstream Corporation Long Term Incentive Plan (the “AMC Plan”).

Each RSU award under the AMC Plan represents a right to receive one share of Antero Midstream Corporation common stock.

The Company’s equity-based compensation expense, by type of award, was as follows for the three and nine months ended September 30, 2019 and 2020 (in thousands):

Three months ended September 30,

Nine months ended September 30,

Stock options

Performance share unit awards

Antero Midstream Partners phantom unit awards (1)

7 unchanged sentences

Restricted Stock Unit Awards

A summary of restricted stock unit award activity for the six months ended June 30, 2020 is as follows:

A summary of RSU award activity for the nine months ended September 30, 2020 is as follows:

intrinsic value

1 unchanged sentence

Total awarded and unvested—December 31, 2019

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

Total awarded and unvested—June 30, 2020

( 1,045,771 )

Total awarded and unvested—September 30, 2020

Intrinsic values are based on the closing price of Antero Resources’ common stock on the referenced dates.

As of June 30, 2020, there was approximately $ 24 million of unamortized equity-based compensation expense related to unvested restricted stock units.

As of September 30, 2020, there was approximately $ 26 million of unamortized equity-based compensation expense related to unvested RSUs.

That expense is expected to be recognized over a weighted average period of approximately 2.3 years.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

Stock Options

A summary of stock option activity for the six months ended June 30, 2020 is as follows:

A summary of stock option activity for the nine months ended September 30, 2020 is as follows:

(in thousands)

Outstanding at December 31, 2019

Outstanding at June 30, 2020

Vested or expected to vest as of June 30, 2020

Exercisable at June 30, 2020

Outstanding as of December 31, 2019

Outstanding at September 30, 2020

Vested or expected to vest as of September 30, 2020

Exercisable as of September 30, 2020

Intrinsic values are based on the exercise price of the options and the closing price of Antero Resources’ common stock on the referenced dates.

As of June 30, 2020, all stock options were fully vested resulting in no unamortized equity-based compensation expense.

As of September 30, 2020, all stock options were fully vested resulting in no unamortized equity-based compensation expense.

Performance Share Unit Awards

The Company had 458,485 performance share units (“PSUs”) forfeited in the six months ended June 30, 2020, and the target number of PSUs outstanding at June 30, 2020 was 2,078,798 at a weighted average grant date fair value of $ 14.85 .

As of June 30, 2020, there was approximately $ 11 million of unamortized equity-based compensation expense related to unvested PSUs.

Performance Share Unit Awards Based on Total Shareholder Return (“TSR”)

In July 2020, the Company granted PSU awards to certain of its executive officers that vest based on Antero Resources’ absolute total shareholder return (“TSR”) determined as of the last day of each of three one-year performance periods ending on April 15, 2021, April 15, 2022, and April 15, 2023, and one cumulative three-year performance period ending on April 15, 2023, in each case, subject to the executive officer’s continued employment through April 15, 2023.

The number of shares of common stock that may ultimately be earned following the end of the cumulative three-year performance period ranges from zero to 150 % of the target number of PSUs granted.

Expense related to these PSUs is recognized on a graded-vested basis over approximately three years .

Forfeitures are accounted for as they occur by reversing the expense previously recognized for awards that were forfeited during the period.

Additionally, in July 2020, the Company granted PSUs to certain of its executive officers that vest based on Antero Resources’ TSR relative to the TSR of certain peer companies determined as of the last day of each of three one-year performance periods ending on April 15, 2021, April 15, 2022, and April 15, 2023, and one cumulative three-year performance period ending on April 15, 2023, in each case, subject to the executive officer’s continued employment through April 15, 2023.

The number of shares of common stock that may ultimately be earned following the end of the cumulative three-year performance period ranges from zero to 150 % of the target number of PSUs granted.

Expense related to these PSUs is recognized on a graded-vested basis over approximately three years .

Forfeitures are accounted for as they occur by reversing the expense previously recognized for awards that were forfeited during the period.

A summary of PSUs activity for the nine months ended September 30, 2020 is as follows:

average grant

date fair value

Total awarded and unvested—December 31, 2019

Cancelled (unearned)

Total awarded and unvested—September 30, 2020

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

The following table presents information regarding the weighted average fair values for market-based PSUs granted during the nine months ended September 30, 2019 and 2020, and the assumptions used to determine the fair values:

Nine months ended

September 30,

Dividend yield

Risk-free interest rate

Weighted average fair value of awards granted—Return on Capital Employed

Weighted average fair value of awards granted—Absolute TSR

Weighted average fair value of awards granted—Relative TSR

As of September 30, 2020, there was approximately $ 10 million of unamortized equity-based compensation expense related to unvested PSUs.

That expense is expected to be recognized over a weighted average period of approximately 1.4 years.

In January 2020, the Company granted cash awards of approximately $ 3.3 million to certain executives under the 2013 Plan.

Compensation expense for these awards is recognized ratably over the vesting period for each of three tranches through January 20, 2023.

As of June 30, 2020, the Company has accrued approximately $ 1.2 million in Other liabilities in the unaudited condensed consolidated balance sheet related to such cash awards.

In January 2020, the Company granted cash awards of approximately $ 3.3 million to certain executives under the 2013 Plan, and compensation expense for these awards is recognized ratably over the vesting period for each of three tranches through January 20, 2023.

In July 2020, the Company granted additional cash awards on the aggregate of $ 2.6 million to certain non-executive employees under the 2020 Plan that vest ratably over four years .

As of September 30, 2020, the Company has accrued approximately $ 2.2 million in Other liabilities in the unaudited condensed consolidated balance sheet related to cash awards.

Antero Midstream Partners Phantom Unit Awards and Antero Midstream Corporation Restricted Stock Unit Awards

A summary of Antero Midstream Corporation restricted stock unit awards for the six months ended June 30, 2020 is as follows:

A summary of Antero Midstream Corporation RSU awards for the nine months ended September 30, 2020 is as follows:

intrinsic value

1 unchanged sentence

Total awarded and unvested—December 31, 2019

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

Total awarded and unvested—June 30, 2020

Total awarded and unvested—September 30, 2020

Intrinsic values are based on the closing price of shares of Antero Midstream Corporation common stock.

As of June 30, 2020, there was approximately $ 4 million of unamortized equity-based compensation expense related to unvested phantom unit awards.

As of September 30, 2020, there was approximately $ 3 million of unamortized equity-based compensation expense related to unvested phantom unit awards.

That expense is expected to be recognized over a weighted average period of approximately 1.2 years.

(11) Financial Instruments

The carrying values of accounts receivable and accounts payable at December 31, 2019 and June 30, 2020 approximated market values because of their short-term nature.

The carrying values of the amounts outstanding under the Credit Facility at December 31, 2019 and June 30, 2020 approximated fair value because the variable interest rates are reflective of current market conditions.

Based on Level 2 market data inputs, the fair value of senior notes was approximately $ 2.8 billion and $ 1.8 billion at December 31, 2019 and June 30, 2020, respectively.

The carrying values of accounts receivable and accounts payable at December 31, 2019 and September 30, 2020 approximated market values because of their short-term nature.

The carrying values of the amounts outstanding under the Credit Facility at December 31, 2019 and September 30, 2020 approximated fair value because the variable interest rates are reflective of current market conditions.

Based on Level 2 market data inputs, the fair value of senior notes was approximately $ 2.8 billion and $ 1.6 billion at December 31, 2019 and September 30, 2020, respectively.

The fair value of the 2026 Convertible Notes was approximately $ 235 million as of September 30, 2020 based on Level 2 market data inputs.

See Note 12—Derivative Instruments to the unaudited condensed consolidated financial statements for information regarding the fair value of derivative financial instruments.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

(12) Derivative Instruments

The Company is exposed to certain risks relating to its ongoing business operations, and it uses derivative instruments to manage its commodity price risk.

In addition, the Company periodically enters into contracts that contain embedded features that are required to be bifurcated and accounted for separately as derivatives.

(a) Commodity Derivative Positions

3 unchanged sentences

This market risk exposure is generally offset by the change in market prices of natural gas, NGLs, and oil recognized upon the ultimate sale of the Company’s production.

The Company was party to various fixed price commodity swap contracts that settled during the six months ended June 30, 2019 and 2020.

The Company was party to various fixed price commodity swap contracts that settled during the nine months ended September 30, 2019 and 2020.

The Company enters into these swap contracts when management believes that favorable future sales prices for the Company’s production can be secured.

10 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

As of June 30, 2020, the Company’s fixed price natural gas, oil and NGL swap positions from July 1, 2020 through December 31, 2023 were as follows (abbreviations in the table refer to the index to which the swap position is tied, as follows:

December 31, 2019 and September 30, 2020

As of September 30, 2020, the Company’s fixed price natural gas, oil and NGL swap positions from October 1, 2020 through December 31, 2023 were as follows (abbreviations in the table refer to the index to which the swap position is tied, as follows:

NYMEX=Henry Hub;

3 unchanged sentences

average index

Six months ending December 31, 2020:

Three months ending December 31, 2020:

NYMEX ($/MMBtu)

12 unchanged sentences

A portion of the NYMEX-WTI ($/Bbl) in 2020 combined with the Mont Belvieu Natural Gasoline to NYMEX-WTI are intended to fix the price of Natural Gasoline.

In addition, we have a call option agreement, which entitles the holder the right, but not the obligation, to enter into a fixed price swap agreement on December 21, 2023 to purchase 427,500 MMBtu per day at a price of $ 2.77 per MMBtu for the year ending December 31, 2024.

As of June 30, 2020, the Company’s natural gas basis swap positions, which settle on the pricing index to basis differential of the Columbia Gas Transmission pipeline (“TCO”) to the NYMEX Henry Hub natural gas price were as follows:

In addition, the Company has a call option agreement, which entitles the holder the right, but not the obligation, to enter into a fixed price swap agreement on December 21, 2023 to purchase 427,500 MMBtu per day at a price of $ 2.77 per MMBtu for the year ending December 31, 2024.

As of September 30, 2020, the Company’s natural gas basis swap positions, which settle on the pricing index to basis differential of the Columbia Gas Transmission pipeline (“TCO”) to the NYMEX Henry Hub natural gas price were as follows:

average hedged

Six months ending December 31, 2020:

Three months ending December 31, 2020:

NYMEX to TCO ($/MMBtu)

9 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

As of June 30, 2020, the Company had NGL contracts for July 1, 2020 through December 31, 2021 that fix the Mont Belvieu index price for natural gasoline to percentages of WTI as follows:

Six months ending December 31, 2020:

Mont Belvieu Natural Gasoline to NYMEX-WTI

December 31, 2019 and September 30, 2020

As of September 30, 2020, the Company had NGL contracts for January 1, 2021 through December 31, 2021 that fix the Mont Belvieu index price for natural gasoline to percentages of WTI as follows:

Year ending December 31, 2021:

Mont Belvieu Natural Gasoline to NYMEX-WTI

A portion of the Mont Belvieu Natural Gasoline to NYMEX-WTI combined with the NYMEX-WTI ($/Bbl) in 2020 are intended to fix the price of Natural Gasoline.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

As of June 30, 2020, the Company’s consolidated subsidiary Martica’s fixed price natural gas, oil and NGL swap positions from July 1, 2020 through March 31, 2025 were as follows (abbreviations in the table refer to the index to which the swap position is tied, as follows:

December 31, 2019 and September 30, 2020

As of September 30, 2020, the Company’s fixed price natural gas, oil and NGL swap positions from October 1, 2020 through March 31, 2025 for Martica, the Company’s consolidated subsidiary, were as follows (abbreviations in the table refer to the index to which the swap position is tied, as follows:

NYMEX=Henry Hub;

4 unchanged sentences

average index

Six months ending December 31, 2020:

Three months ending December 31, 2020:

NYMEX ($/MMBtu)

13 unchanged sentences

OPIS Ethane Mt Belv ($/Gal)

NYMEX-WTI ($/Bbl)

Year ending December 31, 2022:

NYMEX ($/MMBtu)

OPIS Natural Gasoline Mt Belv Non-TET

NYMEX-WTI ($/Bbl)

10 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

The following table presents a summary of the fair values of the Company’s derivative instruments and where such values are recorded in the consolidated balance sheets as of December 31, 2019 and June 30, 2020.

December 31, 2019 and September 30, 2020

Embedded Derivatives

The VPP includes an embedded put option tied to NYMEX pricing for the production volumes associated with the Company’s retained interest in the VPP properties of 120,667,000 MMBtu remaining through December 31, 2026 at a weighted average strike price of $ 2.60 per MMBtu that is not clearly and closely related to the host contract.

Therefore, the Company bifurcated this embedded put option and reflected it at fair value in the unaudited condensed consolidated financial statements.

None of the Company’s derivative instruments are designated as hedges for accounting purposes and the fair value of derivative instruments was determined using Level 2 inputs.

December 31, 2019

June 30, 2020

September 30, 2020

Balance sheet

6 unchanged sentences

Derivative instruments

Embedded derivatives—current

Derivative instruments

Commodity derivatives—noncurrent (1)

1 unchanged sentence

Derivative instruments

Embedded derivatives—noncurrent

Derivative instruments

Total asset derivatives

7 unchanged sentences

Total liability derivatives

Net derivatives

(1) Approximately $ 2 million of commodity derivative liabilities are attributable to our consolidated VIE, Martica.

Net derivatives assets (liabilities)

(1) Approximately $ 16 million of commodity derivative liabilities, including $ 8 million of current commodity derivatives and $ 8 million of noncurrent commodity derivatives, are attributable to our consolidated VIE, Martica.

The following table presents the gross values of recognized derivative assets and liabilities, the amounts offset under master netting arrangements with counterparties, and the resulting net amounts presented in the consolidated balance sheets as of the dates presented, all at fair value (in thousands):

December 31, 2019

June 30, 2020

September 30, 2020

Gross amounts

11 unchanged sentences

Commodity derivative assets

Embedded derivative assets

Commodity derivative liabilities

The following is a summary of derivative fair value gains and losses and where such values are recorded in the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2019 and 2020 (in thousands):

Three months ended June 30,

Six months ended June 30,

Commodity derivative fair value gains (losses)

In July 2020, the Company monetized certain natural gas derivatives, prior to their contractual settlement dates, for proceeds of approximately $ 29 million.

The monetization reduced the fixed volumes hedged on certain natural gas swap contracts maturing in 2021.

The Company leases certain office space, processing plants, drilling rigs and completion services, gas gathering lines, compressor stations, and other office and field equipment.

Leases with an initial term of 12 months or less are considered short-term

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

and are not recorded on the balance sheet.

December 31, 2019 and September 30, 2020

The following is a summary of derivative fair value gains and losses and where such values are recorded in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and 2020 (in thousands):

Three months ended

Nine months ended

September 30,

Commodity derivative fair value gains (losses)

Embedded derivative fair value gains (losses)

The Company leases certain office space, processing plants, drilling rigs and completion services, gas gathering lines, compressor stations, and other office and field equipment.

Leases with an initial term of 12 months or less are considered short-term and are not recorded on the balance sheet.

Instead, the short-term leases are recognized in expense on a straight-line basis over the lease term.

12 unchanged sentences

Currently, the Company is only applying this expedient to certain office space agreements.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

Supplemental Balance Sheet Information Related to Leases

The Company’s lease assets as of December 31, 2019 and June 30, 2020 consisted of the following items (in thousands):

The Company’s lease assets as of December 31, 2019 and September 30, 2020 consisted of the following items (in thousands):

December 31, 2019

June 30, 2020

September 30, 2020

Operating Leases

8 unchanged sentences

Total right-of-use assets

(1) Gas gathering lines and compressor stations leases includes $ 0.9 billion related to Antero Midstream Corporation as of December 31, 2019 and June 30, 2020.

(1) Gas gathering lines and compressor stations leases includes $ 1.1 billion related to Antero Midstream Corporation as of December 31, 2019 and September 30, 2020.

See “—Related party lease disclosure” for additional discussion.

(2) Financing lease assets are recorded net of accumulated amortization of $ 9 million and $ 3 million as of December 31, 2019 and June 30, 2020, respectively.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

The Company’s lease liabilities as of December 31, 2019 and June 30, 2020 consisted of the following items (in thousands):

(2) Financing lease assets are recorded net of accumulated amortization of $ 9 million and $ 3 million as of December 31, 2019 and September 30, 2020, respectively.

The Company’s lease liabilities as of September 30, 2020 consisted of the following items (in thousands):

December 31, 2019

June 30, 2020

September 30, 2020

Operating Leases

6 unchanged sentences

Total lease liabilities

The processing plants, gathering lines and compressor stations that are classified as lease liabilities are classified as such under ASC 842 because Antero is the sole customer of the assets and because Antero makes the decisions that most impact the economic performance of the assets.

The processing plants, gathering lines and compressor stations that are classified as lease liabilities are classified as such under ASC Topic 842, Leases , because Antero is the sole customer of the assets and because Antero makes the decisions that most impact the economic performance of the assets.

Supplemental Information Related to Leases

Costs associated with operating leases were included in the statement of operations and comprehensive income (loss) for the three and six months ended June 30, 2019 and 2020 (in thousands):

Three months ended June 30,

Six months ended June 30,

Costs associated with operating leases were included in the statement of operations and comprehensive income (loss) for the three and nine months ended September 30, 2020 (in thousands):

Three months ended

Nine months ended

September 30,

Statement of Operations Location

3 unchanged sentences

Total lease expense

Costs associated with finance leases of less than $ 1 million for each of the three months and six months ended June 30, 2019 and 2020 were included in interest expense.

For the three months ended June 30, 2019 and 2020, we capitalized $ 53 million and $ 26 million, respectively, of costs related to operating leases and less than $ 1 million of costs related to finance leases.

For the six months ended June 30, 2019, and 2020, we capitalized $ 108 million and $ 59 million, respectively, of costs related to operating leases and less than $ 1 million of costs related to finance leases.

Short-term lease costs that are more than one month but less than 12 months are excluded from the above amounts and total $ 39 million and $ 29 million, respectively, for the three months ended June 30, 2019 and 2020 and $ 74 million and $ 92 million, respectively, for the six months ended June 30, 2019 and 2020.

Costs associated with finance leases of less than $ 1 million for each of the three months and nine months ended September 30, 2019 and 2020 were included in interest expense.

For the three months ended September 30, 2019 and 2020, the Company capitalized $ 53 million and $ 32 million, respectively, of costs related to operating leases and less than $ 1 million of costs related to finance leases.

For the nine months ended September 30, 2019, and 2020, the Company capitalized $ 161 million and $ 91 million, respectively, of costs related to operating leases and less than $ 1 million of costs related to finance leases.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

Short-term lease costs that are more than one month but less than 12 months are excluded from the above amounts and total $ 41 million and $ 16 million, respectively, for the three months ended September 30, 2019 and 2020 and $ 115 million and $ 108 million, respectively, for the nine months ended September 30, 2019 and 2020.

Supplemental Cash Flow Information Related to Leases

The following is the Company’s supplemental cash flow information related to leases for the three and six months ended June 30, 2019 (in thousands):

Three months ended June 30, 2019

Six months ended June 30, 2019

The following is the Company’s supplemental cash flow information related to leases for the three and nine months ended September 30, 2019 (in thousands):

Three months ended

Nine months ended

September 30, 2019

Operating Leases

9 unchanged sentences

Right of use assets obtained in exchange for financing lease liabilities

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

The following is the Company’s supplemental cash flow information related to leases for the three and six months ended June 30, 2020 (in thousands):

Three months ended June 30, 2020

Six months ended June 30, 2020

The following is the Company’s supplemental cash flow information related to leases for the three and nine months ended September 30, 2020 (in thousands):

Three months ended

Nine months ended

September 30, 2020

Operating Leases

9 unchanged sentences

Right of use assets obtained in exchange for financing lease liabilities

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

Maturities of Lease Liabilities

The table below is a schedule of future minimum payments for operating and financing lease liabilities as of June 30, 2020 (in thousands):

The table below is a schedule of future minimum payments for operating and financing lease liabilities as of September 30, 2020 (in thousands):

(in thousands)

7 unchanged sentences

Lease Term and Discount Rate

The table below is the Company’s weighted-average remaining lease term and discount rate as of June 30, 2020:

June 30, 2020

The table below is the Company’s weighted-average remaining lease term and discount rate as of September 30, 2020:

September 30, 2020

Operating Leases

4 unchanged sentences

The Company has a gathering and compression agreement with Antero Midstream Corporation, whereby Antero Midstream Corporation receives a low-pressure gathering fee per Mcf, a high-pressure gathering fee per Mcf and a compression fee per Mcf, in each case subject to adjustments based on the consumer price index.

If and to the extent we request that Antero Midstream Corporation construct new high pressure lines and compressor stations, the gathering and compression agreement contains minimum volume commitments that require Antero Resources to utilize or pay for 75 % and 70 %, respectively, of the requested capacity of such new construction for 10 years .

If and to the extent the Company requests that Antero Midstream Corporation construct new high pressure lines and compressor stations, the gathering and compression agreement contains minimum volume commitments that require Antero Resources to utilize or pay for 75 % and 70 %, respectively, of the requested capacity of such new construction for 10 years .

In December 2019, the Company and Antero Midstream Corporation agreed to extend the initial term of the gathering and compression agreement to 2038 and established a growth incentive fee program whereby low pressure gathering fees will be reduced from 2020 through 2023 to the extent the Company achieves certain volumetric targets at certain points during such time.

Upon completion of the initial contract term, the gathering and compression agreement will continue in effect from year to

Upon completion of the initial contract term, the gathering and compression agreement will continue in effect from year to year until such time as the agreement is terminated, effective upon an anniversary of the effective date of the agreement, by either the Company or Antero Midstream Corporation on or before the 180 th day prior to the anniversary of such effective date.

The Company achieved the volumetric targets during each quarter in the three and nine months ended September 30, 2020, and Antero Midstream Corporation provided a rebate of $ 12 million in each such quarter.

Antero Midstream Corporation has provided rebates of $ 36 million for the nine months ended September 30, 2020.

For the three and nine months ended September 30, 2019, gathering and compression fees paid by Antero related to this agreement were $ 171 million and $ 486 million, respectively.

For the three and nine months ended September 30, 2020, gathering and compression fees paid by Antero related to this agreement were $ 181 million and $ 503 million, respectively.

As of December 31, 2019 and September 30, 2020, $ 57 million and $ 56 million was included within Accounts payable, related parties, respectively, on the condensed consolidated balance sheet as due to Antero Midstream Corporation related to this agreement.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

year until such time as the agreement is terminated, effective upon an anniversary of the effective date of the agreement, by either the Company or Antero Midstream Corporation on or before the 180 th day prior to the anniversary of such effective date.

The Company achieved the volumetric targets for the three months ended March 31, 2020 and June 30, 2020, and Antero Midstream Corporation provided a rebate of $ 12 million in each period.

For the three and six months ended June 30, 2019, gathering and compression fees paid by Antero related to this agreement were $ 163 million and $ 315 million, respectively.

For the three and six months ended June 30, 2020, gathering and compression fees paid by Antero related to this agreement were $ 166 million and $ 321 million, respectively.

As of December 31, 2019 and June 30, 2020, $ 57 million and $ 53 million was included within Accounts payable, related parties, respectively, on the Condensed Consolidated Balance Sheet as due to Antero Midstream Corporation related to this agreement.

December 31, 2019 and September 30, 2020

(14) Commitments

The table below is a schedule of future minimum payments for firm transportation, drilling rig and completion services, processing, gathering and compression, and office and equipment agreements, which include leases that have remaining lease terms in excess of one year as of June 30, 2020 (in thousands).

gathering and

21 unchanged sentences

None of these agreements were determined to be leases.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

(d) Leases, including imputed interest

The Company has obligations under contracts for services provided by drilling rigs and completion fleets, processing, gathering, and compression services agreements, and office and equipment leases.

The values in the table represent the gross amounts that we are committed to pay;

however, we will record in our financial statements our proportionate share of costs based on our working interests.

The values in the table represent the gross amounts that Antero Resources is committed to pay;

however, the Company will record in its financial statements its proportionate share of costs based on its working interests.

Refer to Note 13—Leases to the unaudited condensed consolidated financial statements for more information on the Company’s operating and finance leases.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

(15) Contingencies

4 unchanged sentences

Separately, in June 2018, we received an information request from EPA Region III pursuant to Section 114(a) of the Clean Air Act relating to the facilities that were inspected in September 2017 as well as additional Antero Resources facilities for the purpose of determining if the additional facilities have the same alleged compliance issues that were identified during the September 2017 inspections.

We have separately received an NOV from West Virginia Department of Environmental Protection (“WVDEP”) alleging violations relating to the same issues being investigated by the EPA.

Subsequently, West Virginia Department of Environmental Protection (“WVDEP”) conducted its own inspections, and we have received NOVs from WVDEP alleging violations relating to similar issues being investigated by the EPA.

We continue to negotiate with EPA and WVDEP to resolve the issues alleged in the NOVs and the information request;

19 unchanged sentences

The Company is also actively engaged in pursuing cover damages against WGL based on WGL’s failure to take receipt of all of the agreed quantities of gas required under the Contracts.

WGL’s failure to take the gas volumes specified in the Contracts is

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

directly related to WGL’s lack of primary firm transportation rights at the Delivery Point.

WGL’s failure to take the gas volumes specified in the Contracts is directly related to WGL’s lack of primary firm transportation rights at the Delivery Point.

The failures by WGL to take the full contracted volumes of gas began in April 2017 and continued each month through December 2017 in varying quantities.

2 unchanged sentences

Further, the Contracts expressly prohibit a Force Majeure claim in circumstances in which the gas purchaser does not have primary firm transportation agreements in place to transport the purchased gas.

In each instance that WGL failed to receive the quantity of gas required under the Contracts, the Company resold the quantities not taken and invoiced WGL for cover damages pursuant to the terms of the Contracts.

In each instance that WGL failed to receive the quantity of gas required under the Contracts, the

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

Company resold the quantities not taken and invoiced WGL for cover damages pursuant to the terms of the Contracts.

WGL refused to pay for the invoiced cover damages as required by the Contracts and also short paid the Company for, among other things, certain amounts of gas received by WGL.

5 unchanged sentences

On August 16, 2019, WGL appealed the judgment and the appeal is currently pending before the Colorado Court of Appeals.

Effective February 1, 2018, as a result of a recent amendment to its firm gas sales contract with WGL Midstream, Inc.

In the appeal, briefing has been completed and oral argument is scheduled for November 4, 2020.

Effective February 1, 2018, as a result of an amendment to its firm gas sales contract with WGL Midstream, Inc.

that was executed on December 28, 2017, the total aggregate volumes to be delivered to WGL at the Braxton delivery point were reduced from 500,000 MMBtu/day to 200,000 MMBtu/day and in November 2018, the total aggregate contract volumes to be delivered to WGL at a delivery point in Loudoun County, Virginia increased by 330,000 MMBtu/day.

5 unchanged sentences

The Company incurs costs associated with the delay or cancellation of drilling and completion contracts with third-party contractors.

These costs are recorded in Contract termination and rig stacking and included in the statement of operations and comprehensive income (loss) for the three and six months ended June 30, 2019 and 2020 (in thousands):

Three months ended June 30,

Six months ended June 30,

These costs are recorded in Contract termination and rig stacking and included in the statement of operations and comprehensive income (loss) for the three and nine months ended September 30, 2019 and 2020 (in thousands):

Three months ended September 30,

Nine months ended September 30,

Contract termination and rig stacking

5 unchanged sentences

See Note 18—Segment Information to the unaudited condensed consolidated financial statements for the operating results of the Company’s reportable segments.

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

(18) Segment Information

2 unchanged sentences

Through March 12, 2019, the results of Antero Midstream Partners were included in the consolidated financial statements of Antero Resources.

Effective March 13, 2019, the results of Antero Midstream Partners are no longer consolidated in Antero Resources’ results;

however, the Company’s segment disclosures include the results of our unconsolidated affiliates due to their significance to the Company’s operations.

Effective March 13, 2019, the results of Antero Midstream Partners are no longer consolidated in Antero Resources’

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

however, the Company’s segment disclosures include the results of the Company’s unconsolidated affiliates due to their significance to the Company’s operations.

See Note 3—Deconsolidation of Antero Midstream Partners LP to the unaudited condensed consolidated financial statements for further discussion on the Transactions.

6 unchanged sentences

Accounting policies for each segment are the same as the Company’s accounting policies described in Note 2—Summary of Significant Accounting Policies to the unaudited condensed consolidated financial statements.

The operating results and assets of the Company’s reportable segments were as follows for the three months ended June 30, 2019 and 2020 (in thousands):

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

The operating results and assets of the Company’s reportable segments were as follows for the three months ended September 30, 2019 and 2020 (in thousands):

Equity Method

3 unchanged sentences

unconsolidated

Three months ended June 30, 2019:

Three months ended September 30, 2019:

Sales and revenues:

7 unchanged sentences

Operating income (loss)

Equity in earnings of unconsolidated affiliates

Equity in earnings (loss) of unconsolidated affiliates

Investments in unconsolidated affiliates

( 1,186,161 )

Segment assets

1 unchanged sentence

Capital expenditures for segment assets

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

Equity Method

3 unchanged sentences

unconsolidated

Three months ended June 30, 2020:

Three months ended September 30, 2020:

Sales and revenues:

11 unchanged sentences

Capital expenditures for segment assets

The operating results and assets of the Company’s reportable segments were as follows for the six months ended June 30, 2019 and 2020 (in thousands):

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and September 30, 2020

The operating results and assets of the Company’s reportable segments were as follows for the nine months ended September 30, 2019 and 2020 (in thousands):

Equity Method

3 unchanged sentences

unconsolidated

Six months ended June 30, 2019:

Nine months ended September 30, 2019:

Sales and revenues:

7 unchanged sentences

Operating income (loss)

Equity in earnings of unconsolidated affiliates

Equity in earnings (loss) of unconsolidated affiliates

Investments in unconsolidated affiliates

( 1,186,161 )

Segment assets

3 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

December 31, 2019 and September 30, 2020

Equity Method

3 unchanged sentences

unconsolidated

Six months ended June 30, 2020:

Nine months ended September 30, 2020:

Sales and revenues:

6 unchanged sentences

General and administrative

Operating loss

Operating income (loss)

( 1,098,598 )

Equity in earnings (loss) of unconsolidated affiliates

8 unchanged sentences

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 following tables present summarized financial information of Antero and its guarantor subsidiaries.

The Company’s wholly owned subsidiaries are not restricted from making distributions to the Company.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

Condensed Consolidating Balance Sheet

December 31, 2019

(In thousands)

Non-Guarantor

Current assets:

Accounts receivable, net

Accounts receivable, related parties

Accrued revenue

Derivative instruments

Other current assets

Total current assets

Property and equipment:

Oil and gas properties, at cost (successful efforts method):

Unproved properties

Proved properties

Gathering systems and facilities

Other property and equipment

Less accumulated depletion, depreciation, and amortization

( 3,327,629 )

Property and equipment, net

Operating leases right-of-use assets

Derivative instruments

Investments in unconsolidated affiliate

Investments in consolidated affiliate

( 1,111,579 )

Liabilities and Equity

Current liabilities:

Accounts payable

Accounts payable, related parties

Accrued liabilities

Revenue distributions payable

Derivative instruments

Short-term lease liabilities

Other current liabilities

Total current liabilities

Long-term liabilities:

Long-term debt

Deferred income tax liability

Derivative instruments

Long-term lease liabilities

Other liabilities

Total liabilities

Stockholders' equity:

Additional paid-in capital

Accumulated earnings (loss)

Total stockholders' equity

Total liabilities and equity

( 1,111,579 )

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

Condensed Consolidating Balance Sheet

June 30, 2020

December 31, 2019 and September 30, 2020

Balance Sheet

September 30,

(in thousands)

Non-Guarantor

Current assets:

Accounts receivable

Accounts receivable, non-guarantor subsidiaries

Accounts receivable, related parties

Accrued revenue

Derivative instruments

Other current assets

Total current assets

Property and equipment:

Oil and gas properties, at cost (successful efforts method):

Unproved properties

Proved properties

Gathering systems and facilities

Other property and equipment

Less accumulated depletion, depreciation, and amortization

( 3,406,859 )

( 3,408,099 )

Property and equipment, net

Operating leases right-of-use assets

Derivative instruments

Investment in unconsolidated affiliate

Investments in consolidated affiliates

( 1,173,743 )

Liabilities and Equity

Current liabilities:

Accounts payable

Noncurrent assets

Accounts payable, non-guarantor subsidiaries

Accounts payable, related parties

Accrued liabilities

Revenue distributions payable

Derivative instruments

Short-term lease liabilities

Other current liabilities

Total current liabilities

Long-term liabilities:

Long-term debt

Deferred income tax liability

Derivative instruments

Long-term lease liabilities

Other liabilities

Noncurrent liabilities

Total liabilities

Stockholders' equity:

Additional paid-in capital

Accumulated earnings (loss)

Total stockholders' equity

( 1,092,788 )

Noncontrolling interest

Total liabilities and equity

( 1,173,743 )

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

Condensed Consolidating Statement of Operations and Comprehensive Income

Three Months Ended June 30, 2019

(In thousands)

Non-Guarantor

Revenue and other:

Natural gas sales

Natural gas liquids sales

Commodity derivative fair value gains

Total revenue and other

Operating expenses:

Lease operating

Gathering, compression, processing, and transportation

Production and ad valorem taxes

Impairment of oil and gas properties

Depletion, depreciation, and amortization

Loss on sale of assets

Accretion of asset retirement obligations

General and administrative

Contract termination and rig stacking

Total operating expenses

Operating income (loss)

Other income (expenses):

Equity in earnings of unconsolidated affiliates

Interest expense, net

Total other income (expenses)

Income before income taxes

Provision for income tax expense

Net income and comprehensive income attributable to Antero Resources Corporation

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

Three Months Ended June 30, 2020

(In thousands)

Non-Guarantor

Revenue and other:

Natural gas sales

Natural gas liquids sales

Commodity derivative fair value losses

Total revenue and other

Operating expenses:

Lease operating

Gathering, compression, processing, and transportation

Production and ad valorem taxes

Impairment of oil and gas properties

Depletion, depreciation, and amortization

Accretion of asset retirement obligations

General and administrative

Contract termination and rig stacking

Total operating expenses

Operating income (loss)

Other income (expenses):

Equity in earnings of unconsolidated affiliates

Transaction expense

Interest expense, net

Gain on early extinguishment of debt

Total other income (expenses)

Income (loss) before income taxes

Provision for income tax benefit

Net income (loss) and comprehensive income (loss) including noncontrolling interests

Net income and comprehensive income attributable to noncontrolling interests

Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

Condensed Consolidating Statement of Operations and Comprehensive Income

Six Months Ended June 30, 2019

Noncontrolling interests

Statement of Operations

Nine months ended

September 30,

(in thousands)

Non-Guarantor

Revenue and other:

Natural gas sales

Natural gas liquids sales

Commodity derivative fair value gains

Gathering, compression, water handling and treatment

Total revenue and other

Operating expenses

Lease operating

Gathering, compression, processing, and transportation

Production and ad valorem taxes

Impairment of oil and gas properties

Impairment of midstream assets

Depletion, depreciation, and amortization

Loss on sale of asset

Accretion of asset retirement obligations

General and administrative

Contract termination and rig stacking

Accretion of contingent acquisition consideration

Total operating expenses

Operating income (loss)

Other income (expenses):

Equity in earnings of unconsolidated affiliates

Interest expense, net

Equity in earnings of affiliates

Gain on deconsolidation of Antero Midstream Partners LP

Total other expenses

Income before income taxes

Provision for income tax expense

Income (loss) from operations

Net income and comprehensive income including noncontrolling interests

Net income and comprehensive income attributable to noncontrolling interests

Net income and comprehensive income attributable to Antero Resources Corporation

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

Six Months Ended June 30, 2020

(In thousands)

Non-Guarantor

Revenue and other:

Natural gas sales

Natural gas liquids sales

Commodity derivative fair value gains (losses)

Total revenue and other

Operating expenses:

Lease operating

Gathering, compression, processing, and transportation

Production and ad valorem taxes

Impairment of oil and gas properties

Depletion, depreciation, and amortization

Accretion of asset retirement obligations

General and administrative

Contract termination and rig stacking

Total operating expenses

Operating income (loss)

Other income (expenses):

Equity in loss of unconsolidated affiliates

Impairment of equity investment

Transaction expense

Interest expense, net

Gain on early extinguishment of debt

Total other expenses

Income (loss) before income taxes

( 1,054,267 )

Provision for income tax benefit

Net income (loss) and comprehensive income (loss) including noncontrolling interests

Net income and comprehensive income attributable to noncontrolling interests

Net income (loss) and comprehensive income (loss) attributable to Antero Resources Corporation

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2019

(In thousands)

Non-Guarantor

Cash flows provided by (used in) operating activities:

Net income including noncontrolling interests

Adjustments to reconcile net income to net cash provided by operating activities:

Depletion, depreciation, amortization, and accretion

Commodity derivative fair value gains

Gains on settled commodity derivatives

Deferred income tax expense

Loss on sale of assets

Equity-based compensation expense

Equity in earnings of affiliates

Equity in earnings of unconsolidated affiliates

Distributions/dividends of earnings from unconsolidated affiliates

Gain on deconsolidation of Antero Midstream Partners LP

( 1,205,705 )

( 1,406,042 )

Distributions from Antero Midstream Partners LP

Changes in current assets and liabilities

Net cash provided by operating activities

Cash flows provided by (used in) investing activities:

Additions to unproved properties

Drilling and completion costs

Additions to water handling and treatment systems

Additions to gathering systems and facilities

Additions to other property and equipment

Investments in unconsolidated affiliates

Proceeds from the Antero Midstream Partners LP Transactions

Change in other assets

Proceeds from sale of assets

Net cash used in investing activities

Cash flows provided by (used in) financing activities:

Issuance of senior notes

Borrowings (repayments) on bank credit facility, net

Payments of deferred financing costs

Distributions to noncontrolling interests in Antero Midstream Partners LP

Employee tax withholding for settlement of equity compensation awards

Net cash provided by (used in) financing activities

Effect of deconsolidation of Antero Midstream Partners LP

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

ANTERO RESOURCES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2019 and June 30, 2020

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2020

(In thousands)

Non-Guarantor

Cash flows provided by (used in) operating activities:

Net income (loss) including noncontrolling interests

Adjustment to reconcile net income (loss) to net cash provided by operating activities:

Depletion, depreciation, amortization, and accretion

Impairment of oil and gas properties

Commodity derivative fair value (gains) losses

Gains on settled commodity derivatives

Equity-based compensation expense

Deferred income tax benefit

Gain on early extinguishment of debt

Equity in loss of unconsolidated affiliates

Impairment of equity investment

Distributions/dividends of earnings from unconsolidated affiliates

Changes in current assets and liabilities

Net cash provided by operating activities

Cash flows provided by (used in) investing activities:

Additions to unproved properties

Drilling and completion costs

Additions to other property and equipment

Settlement of water earnout

Change in other assets

Net cash used in investing activities

Cash flows provided by (used in) financing activities:

Repurchases of common stock

Repayment of senior notes

Borrowings on bank credit facility, net

Sale (purchase) noncontrolling interests

(Distributions) proceeds to interest holders

Employee tax withholding for settlement of equity compensation awards

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements