What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-07-28 compared with 2021-04-28 · 309 added, 118 removed, 311 unchanged (58% of the section changed)

14 unchanged sentences

Our drilling opportunities are focused in the Marcellus Shale and Utica Shale of the Appalachian Basin.

As of March 31, 2021, we held approximately 513,000 net acres of rich gas and dry gas properties located in the Appalachian Basin in West Virginia and Ohio.

As of June 30, 2021, we held approximately 513,000 net acres of rich gas and dry gas properties located in the Appalachian Basin in West Virginia and Ohio.

Our corporate headquarters are in Denver, Colorado.

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In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.

Governments have tried to slow the spread of the virus by imposing social distancing guidelines, travel restrictions and stay-at-home orders, among other actions, which have caused a significant decrease in activity in the global economy and the demand for oil and, to a lesser extent, natural gas and NGLs.

The imbalance between the supply of and demand for oil, as well as the uncertainty around the extent and timing of an economic recovery, have caused extreme market volatility and a substantial adverse effect on commodity prices.

The COVID-19 pandemic, commodity market volatility and resulting financial market instability are variables beyond our control and may adversely impact our generation of funds from operating cash flows, distributions from unconsolidated affiliate, available borrowings under our senior secured revolving credit facility (the “Credit Facility”) and our ability to access the capital markets.

Governments tried to slow the spread of the virus by imposing social distancing guidelines, travel restrictions and stay-at-home orders, among other actions, which caused a significant decrease in activity in the global economy and the demand for oil and, to a lesser extent, natural gas and NGLs.

The imbalance between the supply of and demand for oil, as well as the uncertainty around the extent and timing of an economic recovery, caused extreme market volatility and a substantial adverse effect on commodity prices in 2020.

As vaccines have become widely available, social distancing guidelines, travel restrictions and stay-at-home orders have eased, activity in the global economy has increased and commodity prices have improved.

However, new variants of the virus could cause further commodity market volatility and resulting financial market instability, and these are variables beyond our control that may adversely impact our generation of funds from operating cash flows, distributions from unconsolidated affiliate, available borrowings under our senior secured revolving credit facility (the “Credit Facility”) and our ability to access the capital markets.

As a producer of natural gas, NGLs and oil, we are recognized as an essential business under various federal, state and local regulations related to the COVID-19 pandemic.

We have continued to operate as permitted under these regulations while taking steps to protect the health and safety of our employees and contract workers.

As such, we have continued to operate throughout the pandemic as permitted under these regulations while taking steps to protect the health and safety of our employees and contract workers.

We have implemented protocols to reduce the risk of an outbreak within our field operations, and these protocols have not reduced production or efficiency in a significant manner.

A substantial portion of our non-field level employees continue to operate in remote work from home arrangements, and we have been able to maintain a consistent level of effectiveness through these arrangements, including maintaining our day-to-day operations, our financial reporting systems and our internal control over financial reporting.

While a substantial portion of our non-field level employees operated in remote work from home arrangements through June 30, 2021, we expect to be transitioning to full-time in-office arrangements during the third quarter of 2021.

We have been able to maintain a consistent level of effectiveness through these arrangements, including maintaining our day-to-day operations, our financial reporting systems and our internal control over financial reporting.

Our natural gas, NGLs and oil producing properties are located in the liquids-rich Appalachian Basin.

We have hedged through fixed price contracts the sale of 2.2 Bcf per day of natural gas at a weighted average price of $2.76 per MMBtu in 2021.

We have hedged through fixed price contracts the sale of 2.2 Bcf per day of natural gas at a weighted average price of $2.77 per MMBtu for the remainder of 2021.

Our hedges cover a substantial majority of our expected natural gas production for the remainder of 2021.

1 unchanged sentence

All of our hedges are financial hedges and do not have physical delivery requirements.

As such, any decreases in anticipated production, whether as a result of decreased development activity, shut-ins, or through transactions under our asset sale plan, will not impact our ability to realize the benefits of the hedges.

As such, any decreases in anticipated production, such as a result of decreased development activity, will not impact our ability to realize the benefits of our hedges.

Our supply chain has not experienced any significant interruptions.

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Our next semi-annual borrowing base redetermination is in October 2021, which could impact our available borrowings and liquidity.

As of June 30, 2021, we had no borrowings under our Credit Facility and had outstanding letters of credit of $742 million.

In addition, our borrowing capacity is directly impacted by the amount of financial assurance we are required to provide in the form of letters of credit to third parties, primarily pipeline capacity providers.

The amount of financial assurance we must provide has not increased during the COVID-19 pandemic and, thus far, we have not experienced any losses due to counterparty risk.

The amount of financial assurance we provided has not increased during the COVID-19 pandemic and, thus far, we have not experienced any losses due to counterparty risk.

However, our ability to limit any additional financial assurance we are required to provide, as well as to protect ourselves from the counterparty risk of our financial hedges, may be limited in the future.

Since the onset of the COVID-19 pandemic, we have timely serviced our debt and other obligations, and we have not implemented or requested any concessions or materially modified the terms of any agreements.

Since the onset of the COVID-19 pandemic, we have timely serviced our debt and other obligations, and we have not materially modified the terms of any agreements.

Financing and Asset Sales Program Highlights

Redemption of 2022 Notes

Redemption of Senior Notes

We fully redeemed all of our outstanding 5.125% senior notes due December 1, 2022 (the “2022 Notes”) at par, plus accrued and unpaid interest in the first quarter of 2021.

During the second quarter of 2021, we fully redeemed all of our outstanding 5.625% senior notes due June 1, 2023 (the “2023 Notes”) at par, plus accrued and unpaid interest.

On July 1, 2021, we redeemed $175 million of the principal amount of our 8.375% senior notes due July 15, 2026 (the “2026 Notes”) at a redemption price of 108.375% of the principal amount thereof, plus accrued and unpaid interest, which was funded with borrowings on our Credit Facility.

Immediately following the redemption, there were $325 million aggregate principal amount of 2026 Notes outstanding.

The $15 million premium to the principal amount redeemed along with the write-off of a proportional amount of unamortized debt issuance costs will be included in our loss on early debt extinguishment during the third quarter of 2021.

See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements for more information.

Issuance of Senior Notes

On January 4, 2021, we issued $500 million of 8.375% senior notes due July 15, 2026 (the “2026 Notes”) at par.

On January 4, 2021, we issued $500 million of our 2026 Notes at par.

On January 26, 2021, we issued $700 million of 7.625% senior notes due February 1, 2029 (the “2029 Notes”) at par.

The 2026 Notes and 2029 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility.

The 2026 Notes and 2029 Notes rank pari passu to our other outstanding senior notes.

The 2026 Notes and 2029 Notes are guaranteed on a full and unconditional and joint and several senior unsecured basis by our existing subsidiaries that guarantee the Credit Facility and certain of our future restricted subsidiaries.

On June 1, 2021, we issued $600 million of 5.375% senior notes due March 1, 2030 (the “2030 Notes”).

The 2026 Notes, 2029 Notes and 2030 Notes are unsecured and effectively subordinated to the Credit Facility to the extent of the value of the collateral securing the Credit Facility.

The 2026 Notes, 2029 Notes and 2030 Notes rank pari passu to our other outstanding senior notes.

The 2026 Notes, 2029 Notes and 2030 Notes are guaranteed on a full and

unconditional and joint and several senior unsecured basis by our existing subsidiaries that guarantee the Credit Facility and certain of our future restricted subsidiaries.

See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements for more information.

Convertible Notes Equitization

On January 12, 2021, we completed a registered direct offering (the “Share Offering”) of an aggregate of 31.4 million shares of our common stock at a price of $6.35 per share to certain holders of our 4.25% convertible senior notes due 2026 (the “2026 Convertible Notes”).

We used the proceeds from the Share Offering and approximately $63 million of borrowings under the Credit Facility to repurchase from such holders $150 million aggregate principal amount of the 2026 Convertible Notes in privately

negotiated transactions (the “Convertible Note Repurchase,” and, collectively with the Share Offering, the “Equitization Transactions”).

Convertible Notes Equitizations

On January 12, 2021, we completed a registered direct offering (the “January Share Offering”) of an aggregate of 31.4 million shares of our common stock at a price of $6.35 per share to certain holders of our 4.25% convertible senior notes due 2026 (the “2026 Convertible Notes”).

We used the proceeds from the January Share Offering and approximately $63 million of borrowings under the Credit Facility to repurchase from such holders $150 million aggregate principal amount of the 2026 Convertible Notes in privately negotiated transactions (the “January Convertible Note Repurchase,” and, collectively with the January Share Offering, the “January Equitization Transactions”).

On May 13, 2021, we completed a registered direct offering (the “May Share Offering”) of an aggregate of 11.6 million shares of our common stock at a price of $11.01 per share to certain holders of our 2026 Convertible Notes.

We used the proceeds from the May Share Offering and approximately $26 million of borrowings under the Credit Facility to repurchase from such holders $56 million aggregate principal amount of the 2026 Convertible Notes in privately negotiated transactions (the “May Convertible Note Repurchase,” and, collectively with the May Share Offering, the “May Equitization Transactions”).

See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements for more information.

Drilling Partnership

On February 17, 2021, we announced the formation of a drilling partnership with QL Capital Partners (“QL”), an affiliate of Quantum Energy Partners, for the our 2021 through 2024 drilling program.

On February 17, 2021, we announced the formation of a drilling partnership with QL Capital Partners (“QL”), an affiliate of Quantum Energy Partners, for our 2021 through 2024 drilling program.

Under the terms of the arrangement, each year in which QL participates represents an annual tranche, and QL will be conveyed a working interest in any wells spud by us during such tranche year.

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We met the applicable production thresholds related to the third quarter of 2020 and first quarter of 2021 as of September 31, 2020 and March 31, 2021, respectively.

We received a $51 million cash distribution during in the fourth quarter of 2020 and expect to receive an additional $51 million cash distribution that will be paid during the second quarter of 2021.

We received a $51 million cash distribution during each of the fourth quarter of 2020 and the second quarter of 2021.

See Note 3—Transactions to the unaudited condensed consolidated financial statements for more information.

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

As of March 31, 2021, our fixed price natural gas, oil and NGL swap positions excluding Martica, our consolidated variable interest entity, were as follows:

The table below excludes derivative instruments attributable to Martica, our consolidated variable interest entity (“VIE”), since all gains or losses from such contracts are fully attributable to the noncontrolling interests in Martica.

As of June 30, 2021, our fixed price natural gas, oil and NGL swap positions excluding Martica, our consolidated VIE, were as follows:

Commodity / Settlement Period

Contracted Volume

April-December 2021

July-December 2021

January-December 2022

January-December 2023

April-December 2021

July-October 2021

Mont Belvieu Propane-OPIS TET

April-December 2021

July-December 2021

Mont Belvieu Butane-OPIS Non-TET

April-December 2021

July-December 2021

Mont Belvieu Butane-OPIS TET

Natural Gasoline

April-December 2021

July-December 2021

Mont Belvieu Natural Gasoline-OPIS Non-TET

April-June 2021

July-December 2021

Mont Belvieu Isobutane-OPIS Non-TET

April-December 2021

July-December 2021

West Texas Intermediate

In addition, we have a call option agreement, which entitles the holder, if exercised, to enter into a fixed price swap agreement for approximately 156 Bcf at a price of $2.77 per MMBtu in 2024.

As of March 31, 2021, our 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:

As of June 30, 2021, our 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:

Weighted Average

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Hedged Differential

April-December 2021

July-December 2021

January-December 2022

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January-December 2024

As of March 31, 2021, we had natural gas and NGL contracts that fix the Mont Belvieu index price for natural gasoline to percentages of WTI as follows:

As of June 30, 2021, we had natural gas and NGL contracts that fix the Mont Belvieu index price for natural gasoline to percentages of WTI as follows:

Weighted Average

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Contracted Volume

April-December 2021

July-December 2021

Mont Belvieu Natural Gasoline to WTI

As of March 31, 2021, we also had an embedded put option tied to NYMEX pricing for the production volumes associated with our retained interest in the VPP (as defined below) properties of 106 Bcf remaining through December 31, 2026 at a weighted average strike price of $2.59 per MMBtu.

As of June 30, 2021, we also had an embedded put option tied to NYMEX pricing for the production volumes associated with our retained interest in the VPP (as defined below) properties of 100 Bcf remaining through December 31, 2026 at a weighted average strike price of $2.58 per MMBtu.

We believe our hedge position provides some certainty to cash flows supporting our future operations and capital spending plans.

As of March 31, 2021, the estimated fair value of our commodity derivative contracts was a net liability of approximately $1 70

As of June 30, 2021, the estimated fair value of our commodity derivative contracts was a net liability of approximately $918 million.

Please see Note 11—Derivative Instruments to the unaudited condensed consolidated financial statements for more information.

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See Note 16—Reportable Segments to the unaudited condensed consolidated financial statements.

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2021

The operating results of our reportable segments were as follows for the three months ended March 31, 2020 and 2021 (in thousands):

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2021

The operating results of our reportable segments were as follows for the three months ended June 30, 2021 and 2021 (in thousands):

Three Months Ended June 30, 2020

Equity Method

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Natural gas liquids sales

Commodity derivative fair value losses

Gathering, compression, water handling and treatment

Other income (loss)

Operating expenses:

Lease operating

Gathering and compression

Transportation

Production and ad valorem taxes

Impairment of oil and gas properties

Depletion, depreciation, and amortization

Accretion of asset retirement obligations

General and administrative (excluding equity-based compensation)

Equity-based compensation

Contract termination and rig stacking and other expenses

Operating income (loss)

Equity in earnings of unconsolidated affiliates

Three Months Ended June 30, 2021

Equity Method

Elimination of

Investment in

Transactions and

Unconsolidated

Revenue and other:

Natural gas sales

Natural gas liquids sales

Commodity derivative fair value losses

Gathering, compression, water handling and treatment

Amortization of deferred revenue, VPP

Gain on sale of assets

Other income (loss)

Operating expenses:

Lease operating

Gathering and compression

Transportation

Production and ad valorem taxes

Impairment of oil and gas properties

Depletion, depreciation, and amortization

Accretion of asset retirement obligations

General and administrative (excluding equity-based compensation)

Equity-based compensation

Contract termination and rig stacking and other expenses

Operating income (loss)

Equity in earnings of unconsolidated affiliates

Exploration and Production Segment

The following table sets forth selected operating data of the exploration and production segment for the three months ended June 30, 2020 compared to the three months ended June 30, 2021:

Three Months Ended

Production data (1) :

Natural gas (Bcf)

C2 Ethane (MBbl)

C3+ NGLs (MBbl)

Combined (Bcfe)

Daily combined production (MMcfe/d)

Average prices before effects of derivative settlements (2) :

Natural gas (per Mcf)

C2 Ethane (per Bbl)

C3+ NGLs (per Bbl)

Oil (per Bbl)

Weighted Average Combined (per Mcfe)

Average realized prices after effects of derivative settlements (2) :

Natural gas (per Mcf)

C2 Ethane (per Bbl)

C3+ NGLs (per Bbl)

Oil (per Bbl)

Weighted Average Combined (per Mcfe)

Average costs (per Mcfe):

Lease operating

Gathering and compression

Transportation

Production taxes

Marketing, net

Depletion, depreciation, amortization and accretion

General and administrative (excluding equity-based compensation)

(1) Production data excludes volumes related to the volumetric production payment transaction (the “VPP”).

Please see Note 3— Transactions to the unaudited condensed consolidated financial statements for more information.

(2) Average sales prices shown in the table reflect both the before and after effects of our settled commodity derivatives.

Our calculation of such after effects includes gains on settlements of commodity derivatives, which do not qualify for hedge accounting because we do not designate or document them as hedges for accounting purposes.

Oil and NGLs production was converted at 6 Mcf per Bbl to calculate total Bcfe production and per Mcfe amounts.

This ratio is an estimate of the equivalent energy content of the products and does not necessarily reflect their relative economic value.

Natural gas sales .

Revenues from sales of natural gas increased from $367 million for the three months ended June 30, 2020 to $627 million for the three months ended June 30, 2021, an increase of $260 million, or 71%.

Lower natural gas production volumes during the three months ended June 30, 2021 accounted for an approximate $11 million decrease in year-over-year natural gas sales revenue (calculated as the change in year-to-year volumes times the prior year average price), and increases in commodity prices (excluding the effects of derivative settlements) accounted for an approximate $271 million increase in year-over-year gas sales revenue (calculated as the change in the year-to-year average price excluding the net proceeds from the litigation times current year production volumes).

Revenues from sales of NGLs increased from $212 million for the three months ended June 30, 2020 to $464 million for the three months ended June 30, 2021, an increase of $252 million, or 119% (calculated as the change in year-over-year volumes times the change in year-to-year average price).

Lower NGLs production volumes accounted for an approximate $25 million decrease in year-over-year NGL revenues (calculated as the change in year-to-year volumes times the prior year average price), and increases in commodity prices, excluding the effects of derivative settlements, accounted for an approximate $277 million increase in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Revenues from sales of oil increased from $8 million for the three months ended June 30, 2020 to $52 million for the three months ended June 30, 2021, an increase of $44 million, or 524% (calculated as the change in year-over-year volumes times the change in year-to-year average price).

Lower oil production volumes accounted for less than $1 million decrease in year-over-year oil revenues (calculated as the change in year-to-year volumes times the prior year average price), and increases in commodity prices, excluding the effects of derivative settlements, accounted for an approximate $44 million increase in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Commodity derivative fair value gains (losses).

To achieve more predictable cash flows, and to reduce our exposure to price fluctuations, we enter into fixed for variable price swap contracts, basis swap contracts and collar contracts when management believes that favorable future sales prices for our production can be secured.

Because we do not designate these derivatives as accounting hedges, they do not receive hedge accounting treatment.

Consequently, all mark-to-market gains or losses, as well as cash receipts or payments on settled derivative instruments, are recognized in our statements of operations.

For the three months ended June 30, 2020 and 2021, our commodity hedges resulted in derivative fair value losses of $168 million and $832 million, respectively.

For the three months ended June 30, 2020, commodity derivative fair value losses included $314 million of cash proceeds for gains on settled derivatives.

For the three months ended June 30, 2021, commodity derivative fair value losses included $70 million of cash payments on commodity settled derivatives losses as well as $5 million for payments on derivative monetizations.

Commodity derivative fair value gains or losses vary based on future commodity prices and have no cash flow impact until the derivative contracts are settled or monetized prior to settlement.

Derivative asset or liability positions at the end of any accounting period may reverse to the extent future commodity prices increase or decrease from their levels at the end of the accounting period, or as gains or losses are realized through settlement.

We expect continued volatility in commodity prices and the related fair value of our derivative instruments in the future.

Amortization of deferred revenue, VPP.

The three months ended June 30, 2021 includes amortization of $11 million of deferred revenues associated with the VPP that closed during the third quarter of 2020, which relate to the production volumes delivered under the terms of the agreement during such period at approximately $1.61 per MMBtu.

See Note 3—Transactions to the unaudited condensed consolidated financial statements for more information on this transaction.

Lease operating expense .

Lease operating expense decreased from $25 million for the three months ended June 30, 2020 to $22 million for the three months ended June 30, 2021, a decrease of $3 million or 13%.

On a per unit basis, lease operating expenses were $0.08 per Mcfe for the three months ended June 30, 2020 decreased to $0.07 per Mcfe for each of the three months ended June 30, 2021 primarily due to cost savings initiatives.

Gathering, compression, processing, and transportation expense.

Gathering, compression, processing, and transportation expense increased from $632 million for the three months ended June 30, 2020 to $641 million for the three months ended June 30, 2021, an increase of $9 million or 2%.

This increase is primarily a result of higher gathering and compression and transportation costs, partially offset by lower processing costs between periods.

Gathering and compression costs increased from $0.63 per Mcfe for the three months ended June 30, 2020 to $0.74 per Mcfe for the three months ended June 30, 2021, primarily due to higher fuel costs as a result of increased natural gas prices and $12 million in incentive fee rebates from Antero Midstream Corporation received during the three months ended June 30, 2020 that were not received during the three months ended June 30, 2021.

Processing costs decreased from $0.76 per Mcfe for the three months ended June 30, 2020 to $0.69 per Mcfe for the three months ended June 30, 2021, due to lower terminal fees between periods.

Transportation costs increased from $0.58 per Mcfe for the three months ended 2020 to $0.69 per Mcfe for the three months ended June 30, 2021 primarily due to increased usage on the Rockies Express Pipeline.

Production and ad valorem tax expense.

Production and ad valorem taxes increased from $20 million for the three months ended June 30, 2020 to $34 million for the three months ended June 30, 2021, an increase of $14 million, or 69% primarily due to higher commodity prices between periods.

Production and ad valorem taxes as a percentage of natural gas revenues was relatively consistent at 5% in each of the three months ended June 30, 2020 and 2021.

Impairment of oil and gas properties .

Impairment of oil and gas properties decreased from $37 million for the three months ended June 30, 2020 to $9 million for the three months ended June 30, 2021, a decrease of $28 million, or 75%, primarily related to lower impairments of expiring leases between periods.

During both periods, we recognized impairments primarily related to expiring leases and initial costs related to pads we no longer plan to place into service.

Depletion, depreciation, and amortization expense .

DD&A expense decreased from $214 million for the three months ended June 30, 2020 to $187 million for the three months ended June 30, 2021, a decrease of $27 million, or 12%, primarily as a result of increased proved reserve volumes due to higher commodity prices as well as lower production volumes between periods.

expense decreased from $0.67 per Mcfe for the three months ended June 30, 2020 to $0.62 per Mcfe for the three months ended June 30, 2021, primarily as a result of increased proved reserve volumes between periods.

General and administrative expense .

General and administrative expense (excluding equity-based compensation expense) decreased from $30 million for the three months ended June 30, 2020 to $28 million for the three months ended June 30, 2021, a decrease of $2 million, or 8%.

The decrease was primarily due to lower employee headcount during 2021.

We had 524 and 504 employees as of June 30, 2020 and 2021, respectively.

On a per-unit basis, general and administrative expense excluding equity-based compensation was $0.09 per Mcfe for both the three months ended June 30, 2020 and 2021, respectively.

Equity-based compensation expense .

Noncash equity-based compensation expense decreased from $8 million for the three months ended June 30, 2020 to $4 million for the three months ended June 30, 2021, primarily due to equity award forfeitures partially offset by new awards granted to employees.

When an equity award is forfeited, expense previously recognized for the award is reversed.

Please see Note 9—Equity Based Compensation and Cash Awards to the unaudited condensed consolidated financial statements for more information on equity-based compensation awards.

Marketing Segment

Where feasible, we purchase and sell third-party natural gas and NGLs and market our excess firm transportation capacity, or engage third parties to conduct these activities on our behalf, to optimize the revenues from these transportation agreements.

We have entered into long-term firm transportation agreements for a significant portion of our current and expected future production to secure guaranteed capacity to favorable markets.

Net marketing expenses decreased from $49 million, or $0.15 per Mcfe, for the three months ended June 30, 2020 to $34 million, or $0.11 per Mcfe, for the three months ended June 30, 2021.

The decrease in net marketing expense was driven by higher marketing volumes and margins that mitigated some of our excess firm transportation expense.

Marketing revenues increased from $64 million for the three months ended June 30, 2020 to $165 million for the three months ended June 30, 2021, an increase of $101 million.

Marketing expenses increased from $113 million for the three months ended June 30, 2020 to $199 million for the three months ended June 30, 2021, an increase of $86 million, or 76%.

Marketing expenses include firm transportation costs related to current excess firm capacity as well as the cost of third-party purchased gas and NGLs.

Firm transportation costs included in the expenses above were $41 million and $19 million for the three months ended June 30, 2020 and 2021, respectively.

Equity Method Investment in Antero Midstream Corporation

Antero Midstream Corporation.

Revenue from the Antero Midstream Corporation segment increased from $220 million for the three months ended June 30, 2020 to $233 million for the three months ended June 30, 2021, an increase of $13 million, or 6%, primarily due to higher gathering and compression revenues as a result of increased throughput between periods, partially offset by lower water handling revenue as a result of operational efficiencies.

Total operating expenses related to the segment decreased from $85 million for the three months ended June 30, 2020 to $81 million for the three months ended June 30, 2021, primarily due to lower water handling operating expenses as a result of operational efficiencies, partially offset by increased gathering and compression expenses due to higher throughput volumes.

Items Not Allocated to Segments

Interest expense.

Our interest expense decreased from $52 million for the three months ended June 30, 2020 to $50 million for the three months ended June 30, 2021, a decrease of $2 million or 4%, primarily due to the reduction in debt as a result of the repurchase of certain our unsecured senior notes and increased interest income between periods, partially offset by interest that accrued on the 2026 Convertible Notes, 2026 Notes, 2029 Notes and 2030 Notes, each of which was issued after June 30, 2020.

Gain (loss) on early extinguishment of debt.

During the three months ended June 30, 2020, we recognized a gain on early extinguishment of debt of $39 million related to $236 million principal amount of debt that we repurchased at a weighted average discount of 17%.

During the three months ended June 30, 2021, we equitized $56 million aggregate principal amount of our 2026 Convertible Notes in the May Equitization Transactions and as a result, we recognized a loss of $21 million which represents the difference between the fair value of the liability component of the 2026 Convertible Notes and the carrying value of such notes.

Additionally, during the three months ended June 30, 2021, we redeemed the remaining balance of $574 million of our 2023 Notes at

par, plus accrued and unpaid interest and recognized a $2 million loss on early extinguishment of debt.

See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements for more information.

Loss on convertible note equitization.

During the three months ended June 30, 2021, we recognized a loss of $12 million for the May Equitization Transactions, which represents the consideration paid in excess of the original terms of the 2026 Convertible Notes.

See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements for more information.

Transaction expense.

We incurred transaction expense of $6 million for the three months ended June 30, 2020, which expenses included legal and transaction fees associated with the sale of our overriding royalty interest and the creation of Martica.

See Note 3—Transactions to the unaudited condensed consolidated financial statements for more information on this transaction.

Income tax benefit .

Income tax benefit increased from $142 million, with an effective tax rate of 24%, for the three months ended June 30, 2020 to $176 million, with an effective tax rate of 25%, for the three months ended June 30, 2021, an increase of $34 million.

The increase was primarily due to a higher loss before income taxes between periods.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2021

The operating results of our reportable segments were as follows for the six months ended June 30, 2020 and 2021 (in thousands):

Six Months Ended June 30, 2020

Equity Method

Elimination of

Investment in

Transactions and

Unconsolidated

Revenue and other:

Natural gas sales

Natural gas liquids sales

Commodity derivative fair value gains

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Equity-based compensation

Operating income (loss)

Contract termination and rig stacking and other expenses

Operating loss

Equity in earnings (loss) of unconsolidated affiliates

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Equity Method

9 unchanged sentences

Amortization of deferred revenue, VPP

Gain on sale of assets

Operating expenses:

13 unchanged sentences

Exploration and Production Segment

The following table sets forth selected operating data of the exploration and production segment for the three months ended March 31, 2020 compared to the three months ended March 31, 2021:

Three Months Ended March 31,

The following table sets forth selected operating data of the exploration and production segment for the six months ended June 30, 2020 compared to the six months ended June 30, 2021:

Six Months Ended June 30,

Production data (1) (2) :

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This ratio is an estimate of the equivalent energy content of the products and does not necessarily reflect their relative economic value.

(3) The average realized price for the three months ended March 31, 2021 includes $85 million of net litigation proceeds related to a favorable litigation judgment.

(3) The average realized price for the six months ended June 30, 2021 includes $85 million of net litigation proceeds related to a favorable litigation judgment.

See Note 14—Contingencies to the unaudited condensed consolidated financial statements for further discussion on the litigation proceeds.

1 unchanged sentence

Natural gas sales .

Revenues from sales of natural gas increased from $411 million for the three months ended March 31, 2020 to $720 million, which included litigation proceeds of $85 million, for the three months ended March 31, 2021, an increase of $309 million, or 75%.

Revenues from sales of natural gas increased from $778 million for the six months ended June 30, 2020 to $1.3 billion, which included litigation proceeds of $85 million, for the six months ended June 30, 2021, an increase of $568 million, or 73%.

Please see Note 14— Contingencies to the unaudited condensed consolidated financial statements for more information on the litigation proceeds.

Excluding net litigation proceeds, lower natural gas production volumes during the three months ended March 31, 2021 accounted for an approximate $3 million decrease in year-over-year natural gas sales revenue (calculated as the change in year-to-year volumes times the prior year average price excluding the net proceeds from the litigation), and increases in our prices (excluding the effects of derivative settlements and net proceeds from the litigation) accounted for an approximate $226 million increase in year-over-year gas sales revenue (calculated as the change in the year-to-year average price excluding the net proceeds from the litigation times current year production volumes).

Revenues from sales of NGLs increased from $258 million for the three months ended March 31, 2020 to $440 million for the three months ended March 31, 2021, an increase of $182 million, or 71% (calculated as the change in year-over-year volumes times the change in year-to-year average price).

Lower NGLs production volumes accounted for an approximate $21 million decrease in year-over-year NGL revenues (calculated as the change in year-to-year volumes times the prior year average price), and changes in our prices, excluding the effects of derivative settlements, accounted for an approximate $203 million increase in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Revenues from sales of oil increased from $36 million for the three months ended March 31, 2020 to $45 million for the three months ended March 31, 2021, an increase of $9 million, or 25% (calculated as the change in year-over-year volumes times the change in year-to-year average price).

Higher oil production volumes accounted for a $1 million increase in year-over-year oil revenues (calculated as the change in year-to-year volumes times the prior year average price), and changes in our prices, excluding the effects of derivative settlements, accounted for an approximate $8 million increase in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Excluding net litigation proceeds, lower natural gas production volumes during the six months ended June 30, 2021 accounted for an approximate $14 million decrease in year-over-year natural gas sales revenue (calculated as the change in year-to-year volumes times the prior year average price excluding the net proceeds from the litigation), and increases in commodity prices (excluding the effects of derivative settlements) accounted for an approximate $497 million increase in year-over-year gas sales revenue (calculated as the change in the year-to-year average price excluding the net proceeds from the litigation times current year production volumes).

Revenues from sales of NGLs increased from $470 million for the six months ended June 30, 2020 to $905 million for the six months ended June 30, 2021, an increase of $435 million, or 93% (calculated as the change in year-over-year volumes times the change in year-to-year average price).

Lower NGLs production volumes accounted for an approximate $47 million decrease in year-over-year NGL revenues (calculated as the change in year-to-year volumes times the prior year average price), and increases in commodity prices, excluding the effects of derivative settlements, accounted for an approximate $482 million increase in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Revenues from sales of oil increased from $44 million for the six months ended June 30, 2020 to $97 million for the six months ended June 30, 2021, an increase of $53 million, or 120% (calculated as the change in year-over-year volumes times the change in year-to-year average price).

Lower oil production volumes accounted for a $1 million decrease in year-over-year oil revenues (calculated as the change in year-to-year volumes times the prior year average price), and increases in commodity prices, excluding the effects of derivative settlements, accounted for an approximate $54 million increase in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Commodity derivative fair value gains (losses).

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Consequently, all mark-to-market gains or losses, as well as cash receipts or payments on settled derivative instruments, are recognized in our statements of operations.

For the three months ended March 31, 2020, our commodity hedges resulted in derivative fair value gains of $566 million.

For the three months ended March 31, 2021, our commodity hedges resulted in derivative fair value loss of $178 million.

The commodity derivative fair value gains (losses) included $211 million and $5 million of cash proceeds on gains on settled derivatives for the three months ended March 31, 2020 and 2021, respectively.

For the six months ended June 30, 2020, our commodity hedges resulted in derivative fair value gains of $398 million.

For the six months ended June 30, 2021, our commodity hedges resulted in derivative fair value loss of $1.0 billion.

Commodity derivative fair value losses included $525 million of cash proceeds for gains on settled derivatives for the six months ended June 30, 2020.

For the six months ended June 30, 2021, commodity derivative fair value losses included $65 million of cash payments on commodity derivative losses as well as $5 million for payments on derivative monetizations.

Commodity derivative fair value gains or losses vary based on future commodity prices and have no cash flow impact until the derivative contracts are settled or monetized prior to settlement.

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Amortization of deferred revenue, VPP.

The three months ended March 31, 2021 includes amortization of $11 million of deferred revenues associated with the VPP, which relate to the production volumes delivered under the terms of the agreement during such period at approximately $1.61 per MMBtu.

The six months ended June 30, 2021 includes amortization of $22 million of deferred revenues associated with the VPP that closed during the third quarter of 2020, which relate to the production volumes delivered under the terms of the agreement during such period at approximately $1.61 per MMBtu.

See Note 3—Transactions to the unaudited condensed consolidated financial statements for more information on this transaction.

Other income .

Other income remained relatively consistent at less than $1 million for each of the three months ended March 31, 2020 and 2021.

Lease operating expense .

Lease operating expense remained relatively consistent at $26 million and $25 million for the three months ended March 31, 2020 and 2021, respectively.

On a per unit basis, lease operating expenses were $0.08 per Mcfe for each of the three months ended March 31, 2020 and 2021.

Lease operating expense decreased from $50 million for the six months ended June 30, 2020 to $46 million for the six months ended June 30, 2021, a decrease of $4 million or 8% primarily due to cost savings initiatives.

On a per unit basis, lease operating expenses were $0.08 per Mcfe for each of the six months ended June 30, 2020 and 2021.

Gathering, compression, processing, and transportation expense.

Gathering, compression, processing, and transportation expense increased from $589 million for the three months ended March 31, 2020 to $605 million for the three months ended March 31, 2021, an increase of $16 million or 3%.

This is primarily a result of higher gathering and compression and transportation costs.

Gathering and compression costs increased from $0.63 per Mcfe for the three months ended March 31, 2020 to $0.74 per Mcfe for the three months ended March 31, 2021, primarily due to higher fuel costs as a result of increased natural gas prices and $12 million in incentive fee rebates from Antero Midstream Corporation received during the three months ended March 31, 2020 that were not received during the three months ended March 31, 2021.

Processing costs decreased from $0.69 per Mcfe for the three months ended March 31, 2020 to $0.62 per Mcfe for the three months ended March 31, 2021, due to a reduction in terminal fees on Mariner East II pipeline.

Transportation costs increased from $0.61 per Mcfe for the three months ended March 31, 2020 to $0.67 per Mcfe for the three months ended March 31, 2021 primarily due to increased usage on the Rockies Express Pipeline.

Gathering, compression, processing, and transportation expense remained relatively flat at $1.2 billion for both the six months ended June 30, 2020 and 2021.

Gathering and compression costs increased from $0.63 per Mcfe for the six months ended June 30, 2020 to $0.74 per Mcfe for the six months ended June 30, 2021, primarily due to higher fuel costs as a result of increased natural gas prices and $24 million in incentive fee rebates from Antero Midstream Corporation received during the six months ended June 30, 2020 that were not received during the six months ended June 30, 2021.

Processing costs decreased from $0.72 per Mcfe for the six months ended June 30, 2020 to $0.65 per Mcfe for the six months ended June 30, 2021, due to lower terminal fees between periods.

Transportation costs increased from $0.59 per Mcfe for the six months ended June 30, 2020 to $0.68 per Mcfe for the six months ended June 30, 2021 primarily due to increased usage on the Rockies Express Pipeline.

Production and ad valorem tax expense.

Production and ad valorem taxes increased from $26 million for the three months ended March 31, 2020 to $45 million for the three months ended March 31, 2021, an increase of $19 million, or 74% primarily due to higher commodity prices between periods and $5 million for the litigation judgment.

Production and ad valorem taxes as a percentage of natural gas revenues was relatively consistent at 6% in each of the three months ended March 31, 2020 and 2021.

Production and ad valorem taxes increased from $46 million for the six months ended June 30, 2020 to $78 million for the six months ended June 30, 2021, an increase of $32 million, or 72% primarily due to higher commodity prices between periods and $5 million for the litigation judgment.

Production and ad valorem taxes as a percentage of natural gas revenues was relatively consistent at 6% in each of the six months ended June 30, 2020 and 2021.

Impairment of oil and gas properties .

Impairment of oil and gas properties decreased from $89 million for the three months ended March 31, 2020 to $34 million for the three months ended March 31, 2021, a decrease of $55 million, or 62%, primarily related to lower impairments of expiring leases between periods.

During both periods, we recognized impairments primarily related to expiring leases and to design and initial costs related to pads we no longer plan to place into service.

Impairment of oil and gas properties decreased from $127 million for the six months ended June 30, 2020 to $43 million for the six months ended June 30, 2021, a decrease of $84 million, or 66%, primarily related to

lower impairments of expiring leases between periods.

During both periods, we recognized impairments primarily related to expiring leases as well as design and initial costs related to pads we no longer plan to place into service.

Depletion, depreciation, and amortization expense .

DD&A expense decreased from $200 million for the three months ended March 31, 2020 to $194 million for the three months ended March 31, 2021, a decrease of $6 million, or 3%, primarily as a result of increased proved reserve volumes between periods.

DD&A per Mcfe remained relatively consistent at $0.66 per Mcfe and $0.65 per Mcfe during the three months ended March 31, 2020 and 2021, respectively.

DD&A expense decreased from $414 million for the six months ended June 30, 2020 to $381 million for the six months ended June 30, 2021, a decrease of $33 million, or 8%, primarily as a result of increased proved reserve volumes between periods due to higher commodity prices as well as lower production volumes between periods.

DD&A per Mcfe remained relatively consistent at $0.66 per Mcfe and $0.64 per Mcfe during the six months ended June 30, 2020 and 2021, respectively.

General and administrative expense .

General and administrative expense (excluding equity-based compensation expense) increased from $28 million for the three months ended March 31, 2020 to $38 million for the three months ended March 31, 2021, an increase of $10 million, or 38%.

General and administrative expense (excluding equity-based compensation expense) increased from $58 million for the six months ended June 30, 2020 to $66 million for the six months ended June 30, 2021, an increase of $8 million, or 14%.

The increase was primarily due to higher salary and wage expense between periods, which includes our annual incentive program that was significantly reduced during 2020.

We had 531 employees as of March 31, 2020 and 520 employees as of March 31, 2021.

On a per-unit basis, general and administrative expense excluding equity-based compensation increased by $0.04 per Mcfe, from $0.09 per Mcfe during the three months ended March 31, 2020 to $0.13 per Mcfe during the three months ended March 31, 2021 as a result of lower production volumes and higher overall costs between periods.

We had 524 and 504 employees as of June 30, 2020 and 2021, respectively.

On a per-unit basis, general and administrative expense excluding equity-based compensation increased by $0.02 per Mcfe, from $0.09 per Mcfe during the six months ended June 30, 2020 to $0.11 per Mcfe during the six months ended June 30, 2021 as a result of lower production volumes and higher overall costs between periods.

Equity-based compensation expense .

Noncash equity-based compensation expense increased from $3 million for the three months ended March 31, 2020 to $6 million for the three months ended March 31, 2021, primarily due to an increase in the total value of awards to officers and employees in 2021, which impacts future expense recognition, partially offset by equity award forfeitures.

Noncash equity-based compensation expense decreased from $11 million for the six months ended June 30, 2020 to $10 million for the six months ended June 30, 2021, primarily due to equity award forfeitures partially offset by new awards granted to employees.

When an equity award is forfeited, expense previously recognized for the award is reversed.

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We have entered into long-term firm transportation agreements for a significant portion of our current and expected future production to secure guaranteed capacity to favorable markets.

The net effect of our marketing segment changed from net marketing expense of $47 million, or $0.15 per Mcfe, for the three months ended March 31, 2020 to net marketing income of $3 million, or $0.01 per Mcfe, for the three months ended March 31, 2021.

The change was driven by higher marketing volumes and margins that mitigated some of our excess firm transportation expense.

Marketing revenues increased from $46 million for the three months ended March 31, 2020 to $165 million for the three months ended March 31, 2021, an increase of $119 million.

Marketing expenses increased from $93 million for the three months ended March 31, 2020 to $162 million for the three months ended March 31, 2021, an increase of $69 million, or 74%.

Net marketing expenses decreased from $96 million, or $0.15 per Mcfe, for the six months ended June 30, 2020 to $31 million, or $0.05 per Mcfe, for the six months ended June 30, 2021.

The decrease was driven by higher marketing volumes and margins that mitigated some of our excess firm transportation expense.

Marketing revenues increased from $110 million for the six months ended June 30, 2020 to $330 million for the six months ended June 30, 2021, an increase of $220 million.

Marketing expenses increased from $206 million for the six months ended June 30, 2020 to $361 million for the six months ended June 30, 2021, an increase of $155 million, or 75%.

Marketing expenses include firm transportation costs related to current excess firm capacity as well as the cost of third-party purchased gas and NGLs.

Firm transportation costs included in the expenses above were $47 million and $34 million for the three months ended March 31, 2020 and 2021, respectively.

Firm transportation costs included in the expenses above were $88 million and $53 million for the six months ended June 30, 2020 and 2021, respectively.

Equity Method Investment in Antero Midstream Corporation

Antero Midstream Corporation.

Revenue from the Antero Midstream Corporation segment decreased from $244 million for the three months ended March 31, 2020 to $224 million for the three months ended March 31, 2021, a decrease of $20 million, or 8%, primarily due to lower fresh water delivery revenue as a result of decreased well completions period-over-period, partially offset by higher gathering and compression revenues as a result of increased throughput between periods.

Total operating expenses related to the segment decreased from $763 million for the three months ended March 31, 2020 to $91 million for the three months ended March 31, 2021, was primarily due to impairments by Antero Midstream Corporation during the three months ended March 31, 2020 of $89 million on its freshwater pipelines and equipment and impairment of goodwill of $575 million.

Antero Midstream Corporation’s impairment expense was $1 million for the three months ended March 31, 2021 due to a lower of cost of market adjustment for pipe inventory.

Revenue from the Antero Midstream Corporation segment decreased from $463 million for the six months ended June 30, 2020 to $457 million for the six months ended June 30, 2021, a decrease of $6 million, or 1%, primarily due to lower fresh water delivery revenue as a result of decreased well completions period-over-period, partially offset by higher gathering and compression revenues as a result of increased throughput between periods.

Total operating expenses related to the segment decreased from $848 million for the six months ended June 30, 2020 to $172 million for the six months ended June 30, 2021, was primarily due to impairments by Antero Midstream Corporation during the six months ended June 30, 2020 of $89 million on its freshwater pipelines and equipment and impairment of goodwill of $575 million.

Antero Midstream Corporation’s impairment expense was $1 million for the six months ended June 30, 2021 due to a lower of cost of market adjustment for pipe inventory.

Items Not Allocated to Segments

Interest expense.

Our interest expense decreased from $53 million for the three months ended March 31, 2020 to $43 million for the three months ended March 31, 2021 primarily due to the reduction in debt as a result of our debt repurchases of our unsecured senior notes and increased interest income between periods, partially offset by interest that accrued on the newly issued 2026 Convertible Notes, 2026 Notes and 2029 Notes.

Our interest expense decreased from $105 million for the six months ended June 30, 2020 to $93 million for the six months ended June 30, 2021 primarily due to the reduction in debt as a result of our debt repurchases of our unsecured

senior notes and increased interest income between periods, partially offset by interest that accrued on the 2026 Convertible Notes, 2026 Notes, 2029 Notes and 2030 Notes, each of which was issued after June 30, 2020.

Impairment of equity investment .

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The fair value of the equity method investment in Antero Midstream Corporation was based on the quoted market share price of Antero Midstream Corporation as of March 31, 2020.

There was no such impairment for the six months ended June 30, 2021.

Gain (loss) on early extinguishment of debt.

During the three months ended March 31, 2020, we recognized a gain on early extinguishment of debt of $81 million related to $383 million principal amount of debt that we repurchased at a weighted average discount of 21%.

During the three months ended March 31, 2021, we equitized $150 million aggregate principal amount of our 2026 Convertible Notes in privately negotiated transactions in exchange and as a result, we recognized a loss of $41 million which represents the difference between the fair value of the liability component of the 2026 Convertible Notes and the carrying value of such notes.

Additionally, during the three months ended March 31, 2021, we redeemed $661 million of our 2022 Notes at par, plus accrued and unpaid interest and recognized a $2 million loss on early extinguishment of debt.

As result, the 2022 Notes were fully retired as of February 10, 2021.

During the six months ended June 30, 2020, we recognized a gain on early extinguishment of debt of $120 million related to $619 million principal amount of debt that we repurchased at a weighted average discount of 19%.

During the six months ended June 30, 2021, we equitized $206 million aggregate principal amount of our 2026 Convertible Notes in privately negotiated exchange transactions and as a result, we recognized a loss of $61 million which represents the difference between the fair value of the liability component of the 2026 Convertible Notes and the carrying value of such notes.

Additionally, during the six months ended June 30, 2021, we redeemed the remaining balance of $661 million of our 2022 Notes at par, plus accrued and unpaid interest and the remaining balance of $574 million of our 2023 Notes at par, plus accrued and unpaid interest and recognized a $5 million loss on early extinguishment of debt.

See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements for more information.

Loss on convertible note equitization.

During the three months ended March 31, 2021, we recognized a loss of $39 million for the Equitization Transactions, which represents the consideration paid in excess of the original terms of the 2026 Convertible Notes.

During the six months ended June 30, 2021, we recognized a loss of $51 million for the January Equitization Transactions and the May Equitization Transactions, which represents the consideration paid in excess of the original terms of the 2026 Convertible Notes.

See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements for more information.

Transaction expense.

We incurred transaction expense of $2.3 million for the three months ended March 31, 2021, which expenses included legal and transaction fees associated with the drilling partnership.

Transaction expense decreased from $6 million for the six months ended June 30, 2020 to $2 million for the six months ended June 30, 2021, a decreased of $4 million or 66%.

Transaction expenses for the six months ended June 30, 2020 included legal and transaction fees associated with the sale of our overriding royalty interest and the creation of Martica.

For the six months ended June 30, 2021, transaction expense included legal and transaction fees associated with the drilling partnership.

See Note 3—Transactions to the unaudited condensed consolidated financial statements for more information on this transaction.

Income tax benefit .

Income tax benefit decreased from $110 million, with an effective tax rate of 24%, for the three months ended March 31, 2020 to $3 million, with an effective tax rate of 21%, for the three months ended March 31, 2021, a decrease of $107 million.

Income tax benefit decreased from $252 million, with an effective tax rate of 24%, for the six months ended June 30, 2020 to $179 million, with an effective tax rate of 25%, for the six months ended June 30, 2021, a decrease of $73 million.

The decrease was primarily due to lower loss before income taxes between periods.

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For information about the impacts of COVID-19 on our capital resources and liquidity, see “—COVID-19 Pandemic.”

Based on strip prices as of March 31, 2021, we believe that net cash provided by operating activities, distributions from unconsolidated affiliate, available borrowings under the Credit Facility, or capital market transactions and the effects of the drilling partnership will be sufficient to meet our cash requirements, including normal operating needs, debt service obligations, capital expenditures, and commitments and contingencies for at least the next 12 months.

Based on strip prices as of June 30, 2021, we believe that net cash provided by operating activities, distributions from unconsolidated affiliate, available borrowings under the Credit Facility, capital market transactions and the effects of the drilling partnership will be sufficient to meet our cash requirements, including normal operating needs, debt service obligations, capital expenditures, and commitments and contingencies for at least the next 12 months.

2021 Capital Budget and Capital Spending

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We do not include acquisitions in our capital budget.

We periodically review our capital expenditures and adjust our budget and its allocation based on commodity prices, takeaway constraints, operating cash flow and liquidity.

For the three months ended March 31, 2021, our total consolidated capital expenditures, which excludes QL’s working interest share of such costs, were approximately $159 million, including drilling and completion costs of $141 million, leasehold acquisitions of $15 million, and other capital expenditures of $3 million.

The following table summarizes our cash flows for the three months ended March 31, 2020 and 2021:

Three Months Ended March 31,

We periodically review our capital expenditures and adjust our budget and its allocation based on commodity prices, takeaway constraints, operating cash flow and liquidity, and on July 28, 2021, we announced a $22.5 million increase for our leasehold expenditures to $65

million for 2021 to reflect accelerated leasing activity focused on organically expanding our core liquids rich inventory.

As a result, our total net capital budget for 2021 was revised to $657.5 million .

For the six months ended June 30, 2021, our total consolidated capital expenditures, which excludes QL’s working interest share of such costs, were approximately $341 million, including drilling and completion costs of $307 million, leasehold acquisitions of $31 million, and other capital expenditures of $3 million.

The following table summarizes our cash flows for the six months ended June 30, 2020 and 2021:

Six Months Ended June 30,

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Operating Activities.

Net cash provided by operating activities was $201 million and $564 million for the three months ended March 31, 2020 and 2021, respectively.

Net cash provided by operating activities increased primarily due to increases in commodity prices both before and after the effects of settled commodity derivatives, partially offset by increases in gathering, compression and transportation costs.

Net cash provided by operating activities was $317 million and $872 million for the six months ended June 30, 2020 and 2021, respectively.

Net cash provided by operating activities increased primarily due to increases in commodity prices both before and after the effects of settled commodity derivatives, decreased net marketing expense as well as decreased cash utilized for working capital, partially offset by increases in gathering, compression and transportation costs and production and ad valorem taxes between periods.

Our net operating cash flows are sensitive to many variables, the most significant of which is the volatility of natural gas, NGLs, and oil prices, as well as volatility in the cash flows attributable to settlement of our commodity derivatives.

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Investing Activities.

Cash flows used in investing activities decreased from $187 million for the three months ended March 31, 2020 to $123 million for the three months ended March 31, 2021, primarily due to a decrease in capital expenditures of $191 million during the three months ended March 31, 2020 as compared to the same period in 2021, which was partially offset by $125 million in settlement of the water earnout impacting the three months ended March 31, 2020.

Cash flows used in investing activities decreased from $450 million for the six months ended June 30, 2020 to $303 million for the six months ended June 30, 2021, primarily due to a decrease in capital expenditures of $269 million during the six months ended June 30, 2020 as compared to the same period in 2021, which was partially offset by $125 million in settlement of the water earnout impacting the six months ended June 30, 2020.

Financing Activities .

Net cash flows used in financing activities increased from $14 million for the three months ended March 31, 2020 to $441 million for the three months ended March 31, 2021.

During the three months ended March 31, 2021, we issued $500 million aggregate principal amount of 2026 Notes and $700 million aggregate principal amount of 2029 Notes (net of $15 million of aggregate debt issuance costs), of which proceeds were used to (i) redeem $661 million aggregate principal amount of our 2022 Notes, which were fully retired, (ii) and partially repay borrowings on our Credit Facility.

Also, during the three months ended March 31, 2021, we completed the Share Offering and used the proceeds and approximately $63 million of borrowings under the Credit Facility to repurchase $150 million aggregate principal amount of the 2026 Convertible Notes in privately negotiated transactions.

Additionally, during the three months ended March 31, 2021, we distributed $25 million to the noncontrolling interest in Martica.

During the three months ended March 31, 2020, we repurchased (i) $383 million principal amount of debt at a weighted average discount of 21% for $301 million of cash and (ii) $43 million of our common stock at weighted average price of $1.57 per share.

Net cash flows provided by (used in) financing activities changed from $133 million net cash flows provided by financing activities for the six months ended June 30, 2020 to $565 million net cash used in financing activities for the six months ended June 30, 2021.

During the six months ended June 30, 2021, we issued $500 million aggregate principal amount of 2026 Notes, $700 million aggregate principal amount of 2029 Notes and $600 million aggregate principal amount of 2030 Notes (net of $22 million of aggregate debt issuance costs), of which proceeds were used to (i) redeem $661 million aggregate principal amount of our 2022 Notes, which were fully retired, (ii) redeem $574 million of our 2023 Notes, which were fully retired and (iii) partially repay borrowings on our Credit Facility.

Also, during the six months ended June 30, 2021, we completed the January Share Offering and the May Share Offering and used the proceeds and approximately $89 million of borrowings under the Credit Facility to repurchase $206 million aggregate principal amount of the 2026 Convertible Notes in privately negotiated transactions.

Additionally, during the six months ended June 30, 2021, we received a $51 million payment from Martica and distributed $46 million to the noncontrolling interest in Martica.

Further, we repaid the remaining outstanding balance on our Credit Facility with net cash provided by operating activities.

During the six months ended June 30, 2020, we repurchased (i) $619 million principal amount of debt at a weighted average discount of 19% for $497 million of cash and (ii) $43 million of our common stock at weighted average price of $1.54 per share.

Debt Agreements

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Borrowings under the Credit Facility are subject to borrowing base limitations based on the collateral value of our assets and are subject to regular redeterminations.

The borrowing base was re-affirmed at $2.85 billion in the semi-annual redetermination in April 2021.

The borrowing base was re-affirmed

at $2.85 billion in the semi-annual redetermination in April 2021.

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

The Credit Facility is scheduled to mature on October 26, 2022.

As of March 31, 2021, we had $143 million of borrowings and $742 million of letters of credit outstanding under the Credit Facility.

We were in compliance with the applicable covenants and ratios as of December 31, 2020 and March 31, 2021.

As of March 31, 2021, our current ratio was 3.07 to 1.0 and our interest coverage ratio was 10.25 to 1.0.

As of June 30, 2021, we had no borrowings and had $742 million of letters of credit outstanding under the Credit Facility.

We were in compliance with the applicable covenants and ratios as of December 31, 2020 and June 30, 2021.

As of June 30, 2021, our current ratio was 3.0 to 1.0 and our interest coverage ratio was 13.8 to 1.0.

For more information on the terms, conditions, and restrictions under the Credit Facility, please refer to the 2020 Form 10-K.

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Non-GAAP Financial Measures

Adjusted EBITDAX is a non-GAAP financial measure that we define as net income (loss), including noncontrolling interests, before interest expense, interest income, gains or losses from commodity derivatives and marketing derivatives, amortization of deferred revenue, but including net cash receipts or payments on derivative instruments included in derivative gains or losses other than proceeds from derivative monetizations, income taxes, impairments, depletion, depreciation, amortization, and accretion, exploration expense, equity-based compensation, gain (loss) on early extinguishment of debt, contract termination and rig stacking costs, equity in earnings (loss) of unconsolidated affiliate, transaction fees and loss on convertible note equitization.

Adjusted EBITDAX is a non-GAAP financial measure that we define as net income (loss), including noncontrolling interests, before interest expense, interest income, gains or losses from commodity derivatives, amortization of deferred revenue, gain on sale of assets but including net cash receipts or payments on derivative instruments included in derivative gains or losses other than payments from derivative monetizations, income taxes, impairments, depletion, depreciation, amortization, and accretion, exploration expense, equity-based compensation, gain (loss) on early extinguishment of debt, contract termination and rig stacking costs, equity in earnings (loss) of unconsolidated affiliate, transaction fees and loss on convertible note equitization.

Adjusted EBITDAX as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP.

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There are significant limitations to using Adjusted EBITDAX as a measure of performance, including the inability to analyze the effects of certain recurring and non-recurring items that materially affect our net income or loss, the lack of comparability of results of operations of different companies, and the different methods of calculating Adjusted EBITDAX reported by different companies.

The following table represents a reconciliation of our net income (loss), including noncontrolling interest, to Adjusted EBITDAX and a reconciliation of our Adjusted EBITDAX to net cash provided by operating activities per our unaudited condensed consolidated statements of cash flows, in each case, for the three months ended March 31, 2020 and 2021 (in thousands).

The following table represents a reconciliation of our net income (loss), including noncontrolling interest, to Adjusted EBITDAX and a reconciliation of our Adjusted EBITDAX to net cash provided by operating activities per our unaudited condensed consolidated statements of cash flows, in each case, for the three and six months ended June 30, 2020 and 2021 (in thousands).

Adjusted EBITDAX also excludes the noncontrolling interests in Martica and these adjustments are disclosed in the table below as Martica related adjustments.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Reconciliation of net loss to Adjusted EBITDAX:

Net loss and comprehensive loss attributable to Antero Resources Corporation

Net income and comprehensive income attributable to noncontrolling interests

Unrealized commodity derivative (gains) losses

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

Unrealized commodity derivative losses

Payments for derivative monetizations

Amortization of deferred revenue, VPP

Gain on sale of assets

Interest expense, net

Loss (gain) on early extinguishment of debt

Loss on convertible note equitization

Loss on convertible note equitizations

Provision for income tax benefit

17 unchanged sentences

Transaction expense

Payments for derivative monetizations

Net cash provided by operating activities

8 unchanged sentences

Our more significant accounting policies and estimates include the successful efforts method of accounting for our production activities, estimates of natural gas, NGLs, and oil reserve quantities and standardized measures of future cash flows, and impairment of proved properties.

We provide an expanded discussion of our more significant accounting policies, estimates and judgments in the 2020 Form 10-K.

We provide an expanded discussion of our more significant accounting policies,

estimates and judgments in the 2020 Form 10-K.

We believe these accounting policies reflect our more significant estimates and assumptions used in the preparation of our unaudited condensed consolidated financial statements.

2 unchanged sentences

Under GAAP for successful efforts accounting, if the carrying amount exceeds the estimated undiscounted future net cash flows (measured using future prices), we estimate the fair value of our proved properties and record an impairment charge for any excess of the carrying amount of the properties over the estimated fair value of the properties.

Based on future prices as of March 31, 2021, the estimated undiscounted future net cash flows exceeded the carrying amount and no further evaluation was required.

We have not recorded any impairment expenses associated with our proved properties during the three months ended March 31, 2020 and 2021.

Based on future prices as of June 30, 2021, the estimated undiscounted future net cash flows exceeded the carrying amount and no further evaluation was required.

We have not recorded any impairment expenses associated with our proved properties during the three and six months ended June 30, 2020 and 2021.

Estimated undiscounted future net cash flows are very sensitive to commodity price swings at current commodity price levels and a relatively small decline in prices could result in the carrying amount exceeding the estimated undiscounted future net cash flows at the end of a future reporting period, which would require us to further evaluate if an impairment charge would be necessary.

If future prices decline from March 31, 2021, the fair value of our properties may be below their carrying amounts and an impairment charge may be necessary.

If future prices decline from June 30, 2021, the fair value of our properties may be below their carrying amounts and an impairment charge may be necessary.

We are unable, however, to predict future commodity prices with any reasonable certainty.

2 unchanged sentences

Off-Balance Sheet Arrangements

As of March 31, 2021, we did not have any off balance sheet arrangements other than contractual commitments for firm transportation, gas processing and fractionation, gathering, and compression services and land payment obligations.

As of June 30, 2021, we did not have any off balance sheet arrangements other than contractual commitments for firm transportation, gas processing and fractionation, gathering, and compression services and land payment obligations.

Please refer to Note 13—Commitments to the unaudited condensed consolidated financial statements for further information on off balance sheet arrangements.

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 2. Management’s Discussion and Analysis