What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-07-27 compared with 2022-04-27 · 304 added, 106 removed, 238 unchanged (63% of the section changed)

14 unchanged sentences

Our drilling opportunities are focused in the Appalachian Basin.

As of March 31, 2022, we held approximately 501,000 net acres of rich gas and dry gas properties located in the Appalachian Basin in West Virginia and Ohio.

As of June 30, 2022, we held approximately 503,000 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.

2 unchanged sentences

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 demand for oil, natural gas and NGLs and related commodity pricing, has 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 Credit Facility (defined below in “—Capital Resources and Liquidity—Debt Agreements—Senior Secured Revolving Credit Facility”) and our ability to access the capital markets.

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 Credit Facility (defined below in “—Capital Resources and Liquidity—Sources and Uses of Cash”) and our ability to access the capital markets.

We have continued to operate throughout the pandemic, in some cases subject to federal, state and local regulations, and we are taking steps to protect the health and safety of our workers.

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

A substantial portion of our non-field level employees currently 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.

We continue to monitor the COVID-19 environment in order to (i) protect the health and safety of our employees and contract workers and (ii) to determine when a return to in-office working arrangements will be appropriate.

A substantial portion of our non-field level employees currently operate in a hybrid working arrangement that involves a combination of in-office and remote work-from-home arrangements.

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.

We continue to monitor the COVID-19 environment in order to protect the health and safety of our employees and contract workers.

Our supply chain has not experienced any significant interruptions as a result of the COVID-19 pandemic.

12 unchanged sentences

In addition, our borrowing capacity is directly impacted by the amount of financial assurance that 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 provided 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 as of June 30, 2022, our outstanding letters of credit decreased by $26 million since December 31, 2021.

Therefore, 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.

As of March 31, 2022, we had $388 million of borrowings under our Credit Facility (defined below in “—Capital Resources and Liquidity—Sources and Uses of Cash”) and had outstanding letters of credit of $531 million .

See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements and “—Capital Resources and Liquidity—Debt Agreements— Senior Secured Revolving Credit Facility.” Since the onset of the COVID-19 pandemic, we have timely serviced our debt and other obligations.

As the global economy continues to recover from the effects of the COVID-19 pandemic, economic indicators have continued to strengthen.

However, the economy has begun to experience elevated inflation levels as a result of global supply and demand imbalances.

For example, the United States Bureau of Labor and Statistics (“BLS”) Consumer Price Index (“CPI”) for all urban consumers increased 9% from March 2021 to March 2022 as compared to the average historical 10-year rate of 2%.

Additionally, employment activity has also begun to strengthen as demonstrated by the United States BLS unemployment rate declining from a high of 15% in April 2020 to 4% in March 2022.

Inflationary pressures and labor shortages could result in increases to our operating and capital costs that are not fixed, renegotiation of contracts and/or supply agreements and higher labor costs, among others.

As of June 30, 2022, we had $71 million of borrowings under our Credit Facility (defined below in “—Capital Resources and Liquidity—Sources and Uses of Cash”) and had outstanding letters of credit of $505 million .

See Note 7—Long-Term Debt to the unaudited condensed consolidated financial statements and “—Capital Resources and Liquidity—Debt Agreements.” Since the onset of the COVID-19 pandemic, we have timely serviced our debt and other obligations.

The global economy continues to be impacted by the effects of the COVID-19 pandemic and global events, among other factors .

Employment activity has strengthened as demonstrated by the United States Bureau of Labor and Statistics (“BLS”) unemployment rate declining from a high of 15% in April 2020 to 4% in June 2022.

However, the economy is also experiencing elevated inflation levels as a result of global supply and demand imbalances.

For example, the BLS Consumer Price Index (“CPI”) for all urban consumers increased 9% from June 2021 to June 2022 as compared to the average annual increase of 3% over the previous 10 years.

Inflationary pressures, particularly as they relate to certain of our long-term contracts with CPI-based adjustments, and labor shortages could result in increases to our operating and capital costs that are not fixed, renegotiation of contracts and/or supply agreements and higher labor costs, among others.

These economic variables are beyond our control and may adversely impact our business, financial condition, results of operations and future cash flows.

For example, we announced a 7% increase to our drilling and completion capital budget, which primarily reflects higher diesel and steel costs and development optimization through the retention of preferred crews through 2022.

See “—Capital Resources and Liquidity—2022 Capital Budget and Capital Spending” for more information.

Financing Highlights

Debt Repurchase Program

During the three months ended March 31, 2022, we fully redeemed the remaining $585 million of our remaining outstanding 5.00% senior notes due March 1, 2025 (the “2025 Notes”) at a redemption price of 101.25% of the principal amount thereof, plus accrued and unpaid interest.

During the six months ended June 30, 2022, we fully redeemed the remaining $585 million of our outstanding 5.00% senior notes due March 1, 2025 (the “2025 Notes”) at a redemption price of 101.25% of the principal amount thereof, plus accrued and unpaid interest.

Additionally, we repurchased on the open market (i) $13 million of our 8.375% senior notes due July 15, 2026 (the “2026 Notes”) and (ii) $50 million of our 7.625% senior notes due February 1, 2029 (the “2029 Notes”).

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

3 unchanged sentences

The timing, as well as the number and value of shares repurchased under the program, will be determined by us at our discretion and will depend on a variety of factors, including the market price of our common stock, general market and economic conditions and applicable legal requirements.

During the three months ended March 31, 2022 , we repurchased 3.7 million shares of our common stock at a total cost of $100 million.

During the three and six months ended June 30, 2022, we repurchased approximately 5 million shares at a total cost of $193 million and approximately 9 million shares of our common stock at a total cost of $293 million, respectively.

2026 Convertible Notes Conversion

On June 29, 2022, a noteholder elected to convert $4 million in aggregate principal amount of the 4.25% convertible senior notes due 2026 (“2026 Convertible Notes”) pursuant to their terms.

We elected to settle this conversion by issuing approximately 1 million shares of common stock to the noteholder.

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

Hedge Position (Excluding Martica)

2 unchanged sentences

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 March 31, 2022, our fixed price natural gas, oil and NGL swap positions excluding Martica were as follows:

As of June 30, 2022, our fixed price natural gas, oil and NGL swap positions excluding Martica were as follows:

Commodity / Settlement Period

Contracted Volume

April-December 2022

July-December 2022

January-December 2023

In addition, we have a swaption agreement, which entitles the counterparty the right, but not the obligation, to enter into a fixed price swap agreement for approximately 156 Bcf at a price of $2.77 per MMBtu for the year ending December 31, 2024.

As of March 31, 2022, 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, 2022, 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

3 unchanged sentences

Hedged Differential

April-December 2022

July-December 2022

January-December 2023

January-December 2024

As of March 31, 2022, 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 83 Bcf remaining through December 31, 2026 at a weighted average strike price of $2.54 per MMBtu.

As of June 30, 2022, 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 78 Bcf remaining through December 31, 2026 at a weighted average strike price of $2.55 per MMBtu.

We maintain a hedging program designed to mitigate volatility in commodity prices and to protect certain of our expected future cash flows for our future operations and capital spending plans.

As of March 31, 2022, the estimated fair value of our commodity derivative contracts, excluding Martica, was a net liability of approximately $1.4 billion.

As of June 30, 2022, the estimated fair value of our commodity derivative contracts, excluding Martica, was a net liability of $1.1 billion.

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

8 unchanged sentences

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

Three Months Ended March 31, 2021 Compared to March 31, 2022

Three Months Ended June 30, 2021 Compared to June 30, 2022

The operating results of our reportable segments were as follows (in thousands):

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Elimination of

9 unchanged sentences

Amortization of deferred revenue, VPP

Other income (loss)

Total revenue

8 unchanged sentences

Impairment of oil and gas properties

Impairment of midstream assets

Accretion of asset retirement obligations

Contract termination and other expenses

Gain on sale of assets

Total operating expenses

Operating income

Operating income (loss)

Equity in earnings of unconsolidated affiliates

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Elimination of

16 unchanged sentences

Production and ad valorem taxes

Exploration and mine expenses

General and administrative (excluding equity-based compensation)

2 unchanged sentences

Impairment of oil and gas properties

Impairment of midstream assets

Accretion of asset retirement obligations

39 unchanged sentences

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.

(4) 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.

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

Excluding the effect of the litigation proceeds received, the average realized price for natural gas would have been $3.07 per Mcf for the three months ended March 31, 2021.

Natural gas sales .

Revenues from sales of natural gas increased from $720 million, which included net litigation proceeds of $85 million, for the three months ended March 31, 2021 to $996 million for the March 31, 2022, an increase of $276 million, or 38%.

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

Excluding net litigation proceeds, higher commodity prices (excluding the effects of derivative settlements) during the three months ended March 31, 2022 accounted for an approximate $391 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).

Lower natural gas production volumes accounted for an approximate $30 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).

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

Revenues from sales of NGLs increased from $440 million for the three months ended March 31, 2021 to $660 million for the three months ended March 31, 2022, an increase of $220 million, or 50%.

Higher commodity prices (excluding the effects of derivative settlements) during the three months ended March 31, 2022 accounted for an approximate $235 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 natural gas increased from $627 million for the three months ended June 30, 2021 to $1.6 billion for the three months ended June 30, 2022, an increase of $932 million, or 149%.

Higher commodity prices (excluding the effects of derivative settlements) during the three months ended June 30, 2022 accounted for an approximate $947 million increase in year-over-year natural gas sales revenue (calculated as the change in the year-to-year average price times current year production volumes).

Lower natural gas production volumes accounted for an approximate $15 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).

Revenues from sales of NGLs increased from $464 million for the three months ended June 30, 2021 to $702 million for the three months ended June 30, 2022, an increase of $238 million, or 51%.

Higher commodity prices (excluding the effects of derivative settlements) during the three months ended June 30, 2022 accounted for an approximate $253 million increase in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Lower NGLs production volumes accounted for an approximate $15 million decrease in year-over-year NGL revenues (calculated as the change in year-to-year volumes times the prior year average price).

Revenues from sales of oil increased from $45 million for the three months ended March 31, 2021 to $63 million for the three months ended March 31, 2022, an increase of $18 million, or 42%.

Revenues from sales of oil increased from $52 million for the three months ended June 30, 2021 to $89 million for the three months ended June 30, 2022, an increase of $37 million, or 72%.

Higher oil prices, excluding the effects of derivative settlements, accounted for an approximate $39 million increase in year-over-year oil revenues (calculated as the change in the year-to-year average price times current year production volumes).

Lower oil production volumes during the three months ended March 31, 2022 accounted for an approximate $11 million decrease in year-over-year oil revenues (calculated as the change in year-to-year volumes times the prior year average price).

Lower oil production volumes during the three months ended June 30, 2022 accounted for an approximate $2 million decrease in year-over-year oil revenues (calculated as the change in year-to-year volumes times the prior year average price).

Commodity derivative fair value losses.

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

To achieve more predictable cash flows, and to reduce our exposure to price fluctuations, we enter into fixed for variable price swap contracts, swaptions, basis swap contracts and collar contracts when we believe 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 March 31, 2021 and 2022, our commodity hedges resulted in derivative fair value losses of $178 million and $1.0 billion, respectively.

For the three months ended March 31, 2021, commodity derivative fair value losses included $5 million of cash proceeds for gains on settled derivatives.

For the three months ended March 31, 2022, commodity derivative fair value losses included $285 million of cash payments on commodity settled derivatives losses.

For the three months ended June 30, 2021 and 2022, our commodity hedges resulted in derivative fair value losses of $832 million and $266 million, respectively.

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

For the three months ended June 30, 2022, commodity derivative fair value losses included $559 million of cash payments for settled commodity derivatives.

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.

2 unchanged sentences

Amortization of deferred revenue, VPP.

Amortization of deferred revenues associated with the VPP decreased from $11 million for the three months ended March 31, 2021 to $9 million for the three months ended March 31, 2022, a decrease of $2 million or 17%, primarily due to a decrease in production volumes.

Amortization of deferred revenues associated with the VPP decreased from $11 million for the three months ended June 30, 2021 to $9 million for the three months ended June 30, 2022, a decrease of $2 million, or 17%, primarily due to a decrease in production volumes.

Under the terms of the agreement, the production volumes are delivered at approximately $1.61 per MMBtu over the contractual term.

Lease operating expense .

Lease operating expense decreased from $25 million for the three months ended March 31, 2021 to $18 million for the three months ended March 31, 2022, a decrease of $7 million or 28%, primarily due to lower production volumes.

On a per unit basis, lease operating expenses decreased from $0.08 per Mcfe for the three months ended March 31, 2021 to $0.06 per Mcfe for the three months ended March 31, 2022, primarily due to lower water disposal costs, partially offset by decreased production and higher workover expense.

Lease operating expense increased from $22 million for the three months ended June 30, 2021 to $25 million for the three months ended June 30, 2022, an increase of $3 million, or 17%, primarily due to higher oilfield service costs and water disposal costs, partially offset by lower production volumes between periods.

On a per-unit basis, lease operating expenses increased from $0.07 per Mcfe for the three months ended June 30, 2021 to $0.09 per Mcfe for the three months ended June 30, 2022, primarily due to higher oilfield service costs and water disposal costs.

Gathering, compression, processing and transportation expense.

Gathering, compression, processing, and transportation expense decreased from $605 million for the three months ended March 31, 2021 to $590 million for the three months ended March 31, 2022, a decrease of $15 million or 2%, primarily a result of lower production and decreased gathering and compression costs, partially offset by higher processing costs between periods.

Gathering and compression costs decreased from $0.74 per Mcfe for the three months ended March 31, 2021 to $0.71 per Mcfe for the three months ended March 31, 2022, primarily due to $12 million in incentive fee rebates earned from Antero Midstream during the three months ended March 31, 2022 that were not earned during the three months ended March 31, 2021.

Processing costs increased from $0.62 per Mcfe for the three months ended March 31, 2021 to $0.67 per Mcfe for the three months ended March 31, 2022, primarily due to increased costs for ethane transportation as well as increased processing fees as a result of an annual CPI-based adjustment during the first quarter of 2022.

Transportation costs increased from $0.67 per Mcfe for the three months ended March 31, 2021 to $0.70 per Mcfe for the three months ended March 31, 2022, primarily due to higher fuel costs between periods.

Gathering, compression, processing and transportation expense increased from $641 million for the three months ended June 30, 2021 to $656 million for the three months ended June 30, 2022, an increase of $15 million, or 2%, primarily a result of higher processing and transportation costs, partially offset by lower production between periods.

Gathering and compression costs increased from $0.74 per Mcfe for the three months ended June 30, 2021 to $0.76 per Mcfe for the three months ended June 30, 2022, primarily due to annual CPI-based adjustments between periods, partially offset by $12 million in incentive fee rebates earned from Antero Midstream during the three months ended June 30, 2022 that were not earned during the three months ended June 30, 2021.

Processing costs increased from $0.69 per Mcfe for the three months ended June 30, 2021 to $0.75 per Mcfe for the three months ended June 30, 2022, primarily due to increased costs for ethane transportation as well as increased processing fees as a result of an annual CPI-based adjustment during the first quarter of 2022.

Transportation costs increased from $0.69 per Mcfe for the three months ended June 30, 2021 to $0.73 per Mcfe for the three months ended June 30, 2022 primarily due to higher fuel costs between periods.

Production and ad valorem tax expense.

Total production and ad valorem taxes increased from $45 million for the three months ended March 31, 2021 to $53 million for the three months ended March 31, 2022, an increase of $8 million, or 18% primarily due to higher commodity prices between periods.

On a per Mcfe basis, production and ad valorem taxes increased from $0.15 per Mcfe for the three months ended March 31, 2021 to $0.19 per Mcfe for the three months ended March 31, 2022.

Production and ad

valorem taxes as a percentage of natural gas revenues remained relatively consistent at 6% and 5% for the three months ended March 31, 2021 and 2022, respectively.

Total production and ad valorem taxes increased from $34 million for the three months ended June 30, 2021 to $82 million for the three months ended June 30, 2022, an increase of $48 million, or 143%, primarily due to higher commodity prices between periods.

On a per Mcfe basis, production and ad valorem taxes increased from $0.11 per Mcfe for the three months ended June 30, 2021 to $0.28 per Mcfe for the three months ended June 30, 2022.

Production and ad valorem taxes as a percentage of natural gas revenues remained consistent at 5% for each of the three months ended June 30, 2021 and 2022.

General and administrative expense .

General and administrative expense (excluding equity-based compensation expense) decreased from $38 million for the three months ended March 31, 2021 to $31 million for the three months ended March 31, 2022, a decrease of $7 million, or 19% , primarily due to lower salary and wage expense between periods and lower professional service fees.

On a per-unit basis, general and administrative expense excluding equity-based compensation decreased from $0.13 per Mcfe for the three months ended March 31, 2021 to $0.11 per Mcfe for the three months ended March 31, 2022, primarily due to lower overall general and administrative expense between periods.

General and administrative expense (excluding equity-based compensation expense) increased from $28 million for the three months ended June 30, 2021 to $36 million for the three months ended June 30, 2022, an increase of $8 million, or 30% , primarily due to higher salary and wage expense, professional service fees and office operating costs between periods.

On a per-unit basis, general and administrative expense excluding equity-based compensation increased from $0.09

per Mcfe for the three months ended June 30, 2021 to $0.12 per Mcfe for the three months ended June 30, 2022, primarily due to higher overall general and administrative expense and lower production volumes between periods.

Equity-based compensation expense .

Noncash equity-based compensation expense decreased from $6 million for the three months ended March 31, 2021 to $5 million for the three months ended March 31, 2022, a decrease of $1 million or 18%, primarily due to lower restricted share unit awards granted during 2020 (which vest over a four year service period) and equity award forfeitures, partially offset by new awards granted to employees.

Noncash equity-based compensation expense increased from $4 million for the three months ended June 30, 2021 to $8 million for the three months ended June 30, 2022, an increase of $4 million, or 92%, primarily due to an increase in the annual equity awards granted during the second quarter of 2022 as compared to prior years, partially offset by equity award forfeitures.

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

1 unchanged sentence

Depletion, depreciation, and amortization expense .

Depletion, depreciation and amortization (“DD&A”) expense decreased from $194 million for the three months ended March 31, 2021 to $168 million for the three months ended March 31, 2022, a decrease of $26 million, or 13%, primarily as a result of increased proved reserve volumes due to higher commodity prices as well as lower production volumes between periods.

DD&A expense decreased from $0.65 per Mcfe for the three months ended March 31, 2021 to $0.60 per Mcfe March 31, 2022, primarily as a result of increased proved reserve volumes between periods.

Depletion, depreciation and amortization (“DD&A”) expense decreased from $187 million for the three months ended June 30, 2021 to $173 million for the three months ended June 30, 2022, a decrease of $14 million, or 7%, primarily as a result of increased proved reserve volumes due to higher commodity prices as well as lower production volumes between periods.

DD&A expense decreased from $0.62 per Mcfe for the three months ended June 30, 2021 to $0.59 per Mcfe June 30, 2022, primarily as a result of increased proved reserve volumes between periods.

Impairment of oil and gas properties .

Impairment of oil and gas properties decreased from $ 34 million for the three months ended March 31, 2021 to $ 22 million for the three months ended March 31, 2022 , a decrease of $ 12 million, or 34 %, primarily related to lower impairments of expiring leases between periods.

Impairment of oil and gas properties increased from $9 million for the three months ended June 30, 2021 to $23 million for the three months ended June 30, 2022, an increase of $14 million, or 151%, primarily related to higher 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.

2 unchanged sentences

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

The net effect of our marketing segment changes from net marketing income of $3 million, or $0.01 per Mcfe, for the three months ended March 31, 2021 to net marketing expenses of $30 million, or $0.10 per Mcfe, for the three months ended March 31, 2022, primarily due to lower volumes and lower gas marketing margins between periods.

Net marketing expense decreased from $34 million, or $0.11 per Mcfe, for the three months ended June 30, 2021 to $25 million, or $0.09 per Mcfe, for the three months ended June 30, 2022, primarily due to lower volumes partially offset by higher gas marketing margins between periods.

Marketing revenue.

Marketing revenue decreased from $165 million for the three months ended March 31, 2021 to $69 million for the three months ended March 31, 2022, a decrease of $96 million, or 58%, primarily due to lower marketing volumes between periods, partially offset by increased commodity prices between periods.

Lower natural gas marketing volumes accounted for a $115 million decrease in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), and changes in our natural gas prices accounted for an approximate $15 million increase in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

Higher oil marketing volumes accounted for a $4 million increase in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), and changes in our oil prices accounted for an approximate $5 million increase in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

Lower ethane marketing volumes accounted for a $3 million decrease in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), and changes in our ethane prices accounted for an approximate $5 million increase in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

Lower NGL marketing volumes between periods also contributed to decreased marketing revenues during the three months ended March 31, 2022.

Marketing revenue decreased from $165 million for the three months ended June 30, 2021 to $106 million for the three months ended June 30, 2022, a decrease of $59 million, or 36%, primarily due to lower marketing volumes between periods, partially offset by increased commodity prices between periods.

Lower natural gas marketing volumes accounted for a $285 million decrease in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), and higher natural gas prices accounted for an approximate $205 million increase in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

Higher oil marketing volumes accounted for a $3 million increase in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), and higher oil prices accounted for an approximate $8 million increase in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

Lower ethane marketing volumes accounted for a $2 million decrease in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), and higher ethane prices accounted for an approximate $12 million increase in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

Marketing expense.

Marketing expense decreased from $162 million for the three months ended March 31, 2021 to $99 million for the three months ended March 31, 2022, a decrease of $63 million, or 39%.

Marketing expense decreased from $199 million for the three months ended June 30, 2021 to $131 million for the three months ended June 30, 2022, a decrease of $68 million, or 34%.

Marketing expense includes the cost of third-party purchased natural gas, NGLs and oil as well as firm transportation costs, including costs related to current excess firm capacity.

The cost of third-party natural gas decreased approximately $54 million, which was partially offset by increased oil purchases of

approximately $8 million between periods.

The total costs decreased primarily due to decreased marketing volumes between periods, partially offset by increased commodity prices.

Firm transportation costs were $56 million for the three months ended March 31, 2021 and $38 million for the three months ended March 31, 2022, a decrease of $18 million due to the reduction in firm transportation commitments and third-party marketed volumes between periods.

The cost of third-party natural gas decreased approximately $67 million, which was partially offset by increased NGL and oil purchases of approximately $9 million and $10 million, respectively, between periods.

The total costs decreased primarily due to lower marketing volumes between periods, partially offset by increased commodity prices.

Firm transportation costs were $55 million for the three months ended June 30, 2021 and $35 million for the three months ended June 30, 2022, a decrease of $20 million due to the reduction in firm transportation commitments and third-party marketed volumes between periods.

Antero Midstream Segment

Antero Midstream revenue.

Revenue from the Antero Midstream segment decreased from $224 million for the three months ended March 31, 2021 to $218 million for the three months ended March 31, 2022, a decrease of $6 million, primarily due to a decrease in low pressure revenues due to higher fee rebates earned by us and lower water handling revenue as a result of decreased well completions period-over-period, partially offset by higher compression and high pressure gathering revenues due to increased throughput between periods as well as higher low pressure, compression and high pressure fees as a result of an annual CPI-based adjustment.

Revenue from the Antero Midstream segment decreased from $233 million for the three months ended June 30, 2021 to $229 million for the three months ended June 30, 2022, a decrease of $4 million, primarily due to a decrease in low pressure revenues due to higher fee rebates earned by us, partially offset by higher compression and high pressure gathering

revenues due to increased throughput between periods, as well as higher low pressure, compression, high pressure and water handling fees as a result of an annual CPI-based adjustment.

Antero Midstream operating expense.

Total operating expense related to the segment decreased from $91 million for the three months ended March 31, 2021 to $89 million for the three months ended March 31, 2022 primarily due to increased direct operating costs as a result of resuming fresh water deliveries to us in the Utica Shale and a loss on the sale of excess pipe inventory during the three months ended March 31, 2021 compared to a gain on asset sale of miscellaneous equipment and pipe inventory during the three months ended March 31, 2022.

Total operating expense related to the Antero Midstream segment increased from $81 million for the three months ended June 30, 2021 to $101 million for the three months ended June 30, 2022, an increase of $20 million, primarily due to an increase in depreciation expense during the three months ended June 30, 2022.

This increase is primarily a result of a phased early retirement of an underutilized compressor station, which allows Antero Midstream to relocate and reuse the compressor units and equipment to (i) expand an existing compressor station and (ii) contribute to a new compressor station.

There are certain costs associated with the underutilized compressor station that cannot be relocated or reused that will be depreciated over the remaining period of use.

Additionally, operating expenses were higher between periods due to increased direct operating costs as a result of higher gathering throughput volumes and two new compressor stations that came online between periods.

Discussion of Items Not Allocated to Segments

Interest expense.

Interest expense decreased from $43 million for the three months ended March 31, 2021 to $38 million for the three months ended March 31, 2022, a decrease of $5 million or 12%, primarily due to the reduction in debt as a result of the repurchase of certain of our unsecured senior notes between periods.

Interest expense includes approximately $5 million and $1 million of amortization of debt issuance costs and debt discounts and premiums for the three months ended March 31, 2021 and 2022, respectively.

Interest expense decreased from $50 million for the three months ended June 30, 2021 to $34 million for the three months ended June 30, 2022, a decrease of $16 million, or 32%, primarily due to the reduction in debt as a result of the repurchase of certain of our unsecured senior notes between periods.

Interest expense includes approximately $3 million and $1 million of amortization of debt issuance costs and debt discounts and premiums for the three months ended June 30, 2021 and 2022, respectively.

Loss on early extinguishment of debt.

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 senior secured revolving credit facility prior to October 26, 2021 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”).

Additionally, during the three months ended March 31, 2021, we redeemed $661 million of our 5.125% senior notes due December 1, 2022 (the “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 three months ended March 31, 2022, we redeemed the remaining $585 million aggregate principal amount of our 2025 Notes at a redemption price of 101.25% of par, plus accrued and unpaid interest, which resulted in a loss on early debt extinguishment of $11 million.

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

During the three months ended June 30, 2021, we equitized $56 million aggregate principal amount of our 2026 Convertible Notes 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 5.625% senior notes due June 1, 2023 (the “2023 Notes”) at par, plus accrued and unpaid interest, and recognized a $2 million loss on early extinguishment of debt.

During the three months ended June 30, 2022, we repurchased $50 million of our 2029 Notes and $13 million of our 2026 Notes , which resulted in a loss on early debt extinguishment of $4 million.

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 January Equitization Transactions, which represents the consideration paid in excess of the original terms of the 2026 Convertible Notes.

There were no equitization transactions during the three months ended March 31, 2022.

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

There were no equitization transactions during the three months ended June 30, 2022.

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

Income tax benefit .

Income tax benefit increased from $3 million, with an effective tax rate of 21%, for the three months ended March 31, 2021 to $53 million, with an effective tax rate of 23%, for the three months ended March 31, 2022, an increase of $50 million.

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

Income tax benefit (expense) .

For the three months ended June 30, 2021, we had an income tax benefit of $176 million, with an effective tax rate of 25%, due to a loss before income taxes of $710 million.

For the three months ended June 30, 2022, we had income tax expense of $226 million, with an effective tax rate of 22%, due to income before income taxes of $1.0 billion.

The decrease in the effective tax rate between periods was primarily due to an income tax benefit for the equity-based awards that vested during the three months ended June 30, 2022 and the impact of tax law changes in West Virginia enacted in 2021.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2022

The operating results of our reportable segments were as follows for the six months ended June 30, 2021 and 2022 (in thousands):

Six 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

Other income (loss)

Total revenue

Operating expenses:

Lease operating

Gathering and compression

Transportation

Production and ad valorem taxes

General and administrative (excluding equity-based compensation)

Equity-based compensation

Depletion, depreciation and amortization

Impairment of oil and gas properties

Impairment of midstream assets

Accretion of asset retirement obligations

Contract termination and other expenses

Loss (gain) on sale of assets

Total operating expenses

Operating income (loss)

Equity in earnings of unconsolidated affiliates

Six Months Ended June 30, 2022

Elimination of

Equity Method

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

Other income (loss)

Total revenue

Operating expenses:

Lease operating

Gathering and compression

Transportation

Production and ad valorem taxes

Exploration and mine expenses

General and administrative (excluding equity-based compensation)

Equity-based compensation

Depletion, depreciation and amortization

Impairment of oil and gas properties

Impairment of midstream assets

Accretion of asset retirement obligations

Loss (gain) on sale of assets

Contract termination and other expenses

Total operating 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 six months ended June 30, 2021 compared to the six months ended June 30, 2022:

Six Months Ended June 30,

Production data (1) (2) :

Natural gas (Bcf)

C2 Ethane (MBbl)

C3+ NGLs (MBbl)

Combined (Bcfe)

Daily combined production (MMcfe/d)

Average prices before effects of derivative settlements (3) :

Natural gas (per Mcf) (4)

C2 Ethane (per Bbl)

C3+ NGLs (per Bbl)

Oil (per Bbl)

Weighted Average Combined (per Mcfe)

Average realized prices after effects of derivative settlements (3) :

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 and ad valorem taxes

Marketing expense, net

Depletion, depreciation, amortization and accretion

General and administrative (excluding equity-based compensation)

* Not meaningful.

(1) Production data excludes volumes related to the VPP.

(2) 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 may not reflect their relative economic value.

(3) Average prices reflect the before and after effects of our settled commodity derivatives.

(4) 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.

Excluding the effect of the litigation proceeds received, the average realized price for natural gas would have been $3.04 per Mcf for the six months ended June 30, 2021.

Natural gas sales .

Revenues from sales of natural gas increased from $1.3 billion for the six months ended June 30, 2021 to $2.6 billion, which included litigation proceeds of $85 million, for the six months ended June 30, 2022, an increase of $1.3 billion, or 90%.

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

Excluding net litigation proceeds received during the six months ended June 30, 2021, higher commodity prices (excluding the effects of derivative settlements) during the six months ended June 30, 2022 accounted for an approximate $1.3 billion increase in year-over-year natural 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).

Lower natural gas production volumes accounted for an approximate $44 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).

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

Revenues from sales of NGLs increased from $905 million for the six months ended June 30, 2021 to $1.4 billion for the six months ended June 30, 2022, an increase of $458 million, or 51%.

Higher commodity prices (excluding the effects of derivative settlements) during the six months ended June 30, 2022 accounted for an approximate $488 million increase in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Lower NGLs production volumes accounted for an approximate $30 million decrease in year-over-year NGL revenues (calculated as the change in year-to-year volumes times the prior year average price).

Revenues from sales of oil increased from $97 million for the six months ended June 30, 2021 to $152 million for the six months ended June 30, 2022, an increase of $55 million, or 58%.

Higher oil prices, excluding the effects of derivative settlements, accounted for an approximate $69 million increase in year-over-year oil revenues (calculated as the change in the year-to-year average price times current year production volumes).

Lower oil production volumes during the six months ended June 30, 2022 accounted for an approximate $14 million decrease in year-over-year oil revenues (calculated as the change in year-to-year volumes times the prior year average price).

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, swaptions, basis swap contracts and collar contracts when we believe 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 six months ended June 30, 2021, our commodity hedges resulted in derivative fair value losses of $1.0 billion.

For the six months ended June 30, 2022, our commodity hedges resulted in derivative fair value losses of $1.3 billion.

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 gains on settled derivatives for the six months ended June 30, 2021.

For the six months ended June 30, 2022, commodity derivative fair value losses included $845 million of cash payments on commodity derivative losses.

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.

Amortization of deferred revenues associated with the VPP decreased from $22 million for the six months ended June 30, 2021 to $19 million for the six months ended June 30, 2022, a decrease of $3 million or 17%, primarily due to a decrease in production volumes.

Under the terms of the agreement, the production volumes are delivered at approximately $1.61 per MMBtu over the contractual term.

Lease operating expense .

Lease operating expense decreased from $46 million for the six months ended June 30, 2021 to $43 million for the six months ended June 30, 2022, a decrease of $3 million, or 7%, primarily due to lower production volumes and water disposal costs.

On a per-unit basis, lease operating expenses decreased from $0.08 per Mcfe for the six months ended June 30, 2021 to $0.07 per Mcfe for the six months ended June 30, 2022 primarily due to lower water disposal costs, partially offset by higher workover costs.

Gathering, compression, processing and transportation expense.

Gathering, compression, processing and transportation expense remained consistent at $1.2 billion for both the six months ended June 30, 2021 and 2022.

Gathering and compression costs decreased from $0.74 per Mcfe for the six months ended June 30, 2021 to $0.73 per Mcfe for the six months ended June 30, 2022, primarily due to $24 million in incentive fee rebates earned from Antero Midstream during the six months ended June 30, 2022 that were not earned during the six months ended June 30, 2021.

Processing costs increased from $0.65 per Mcfe for the six months ended June 30, 2021 to $0.71 per Mcfe for the six months ended June 30, 2022, primarily due to increased costs for ethane transportation as well as increased processing fees as a result of an annual CPI-based adjustment during the first quarter of 2022.

Transportation costs increased from $0.68 per Mcfe for the six months ended June 30, 2021 to $0.71 per Mcfe for the six months ended June 30, 2022 primarily due to higher fuel costs between periods.

Production and ad valorem tax expense.

Production and ad valorem taxes increased from $78 million for the six months ended June 30, 2021 to $135 million for the six months ended June 30, 2022, an increase of $57 million, or 72%, primarily due to higher commodity prices between periods partially offset by $5 million for the litigation judgment in 2021.

Production and ad valorem taxes as a percentage of natural gas revenues remained relatively consistent at 6% and 5% for the six months ended June 30, 2021 and 2022, respectively.

General and administrative expense .

General and administrative expense (excluding equity-based compensation expense) remained relatively consistent at $66 million and $67 million for the six months ended June 30, 2021 and 2022, respectively.

The slight increase in expense between periods is primarily due to higher professional service fees and office operating costs, partially offset by lower salary and wage expense.

On a per-unit basis, general and administrative expense excluding equity-based compensation increased from $0.11 per Mcfe during the six months ended June 30, 2021 to $0.12 per Mcfe during the six months ended June 30, 2022 as a result of lower production volumes and higher overall costs between periods.

Equity-based compensation expense .

Noncash equity-based compensation expense increased from $10 million for the six months ended June 30, 2021 to $13 million for the six months ended June 30, 2022, an increase of $3 million, or 30%, primarily due to an increase in the annual equity awards granted during the second quarter of 2022 as compared to prior years, partially offset by equity award forfeitures.

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

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

Depletion, depreciation, and amortization expense .

DD&A expense decreased from $381 million for the six months ended June 30, 2021 to $342 million for the six months ended June 30, 2022, a decrease of $39 million, or 10%, primarily as a result of increased proved reserve volumes due to higher commodity prices as well as lower production volumes between periods.

DD&A expense per Mcfe decreased from $0.64 per Mcfe for the six months ended June 30, 2021 to $0.60 per Mcfe for the six months ended June 30, 2022, primarily as a result of increased proved reserve volumes between periods.

Impairment of oil and gas properties .

Impairment of oil and gas properties increased from $43 million for the six months ended June 30, 2021 to $46 million for the six months ended June 30, 2022, an increase of $3 million, or 6%, primarily related to higher 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.

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, in order 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 in order to secure guaranteed capacity to favorable markets.

Net marketing expense increased from $31 million, or $0.05 per Mcfe, for the six months ended June 30, 2021 to $55 million, or $0.10 per Mcfe, for the six months ended June 30, 2022, primarily due to lower volumes partially offset by higher gas marketing margins between periods.

Marketing revenue.

Marketing revenue decreased from $330 million for the six months ended June 30, 2021 to $175 million for the six months ended June 30, 2022, a decrease of $155 million, or 47%, primarily due to lower marketing volumes between periods, partially offset by increased commodity prices between periods.

Lower natural gas marketing volumes accounted for a $865 million decrease in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), and higher natural gas prices accounted for an approximate $685 million increase in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

Higher oil marketing volumes accounted for a $7 million increase in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), and higher oil prices accounted for an approximate $13 million increase in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

Lower ethane marketing volumes accounted for a $43 million decrease in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), and higher ethane prices accounted for an approximate $54 million increase in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

Marketing expense.

Marketing expense decreased from $361 million for the six months ended June 30, 2021 to $230 million for the six months ended June 30, 2022, a decrease of $131 million, or 36%.

Marketing expense includes the cost of third-party purchased natural gas, NGLs and oil as well as firm transportation costs, including costs related to current excess firm capacity.

The cost of third-party natural gas decreased approximately $121 million, which was partially offset by increased oil and NGL purchases of approximately $18 million and $9 million, respectively, between periods.

The total costs decreased primarily due to decreased marketing volumes between periods, partially offset by increased commodity prices.

Firm transportation costs were $110 million for the six months ended June 30, 2021 and $73 million for the six months ended June 30, 2022, a decrease of $37 million due to the reduction in firm transportation commitments and third-party marketed volumes between periods.

Equity Method Investment in Antero Midstream

Antero Midstream revenue.

Revenue from the Antero Midstream segment decreased from $457 million for the six months ended June 30, 2021 to $447 million for the six months ended June 30, 2022, a decrease of $10 million, primarily due to a decrease in low pressure revenues due to higher fee rebates earned by us and lower fresh water delivery revenue as a result of decreased well completions period-over-period, partially offset by higher compression and high pressure gathering revenues due to increased throughput between periods as well as higher low pressure, compression and high pressure fees as a result of an annual CPI-based adjustment.

Antero Midstream operating expense.

Total operating expense related to the Antero Midstream segment increased from $172 million for the six months ended June 30, 2021 to $190 million for the six months ended June 30, 2022, an increase of $18 million, primarily due to an increase in depreciation expense during the six months ended June 30, 2022.

There are certain costs associated with the underutilized compressor station that cannot be relocated or reused that will be depreciated over the remaining period of use.

Additionally, operating expenses were higher between periods due to increased direct operating costs as a result of higher gathering throughput volumes, two new compressor stations and resuming fresh water deliveries to us in the Utica Shale.

Items Not Allocated to Segments

Interest expense.

Interest expense decreased from $93 million for the six months ended June 30, 2021 to $72 million for the six months ended June 30, 2022, a decrease of $21 million or 22%, primarily due to the reduction in debt as a result of the repurchase of certain of our unsecured senior notes between periods.

Loss on early extinguishment of debt.

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 5.125% senior notes due 2022 (“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.

D uring the six months ended June 30, 2022, we (i) redeemed the remaining $585 million aggregate principal amount of our 2025 Notes at a redemption price of 101.25% of par, plus accrued and unpaid interest and (ii) repurchased $50 million of our 2029 Notes and $13 million of our 2026 Notes, which resulted in a loss on early debt extinguishment of $15 million.

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

Loss on convertible note equitization.

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

There were no equitization transactions during the six months ended June 30, 2022.

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

Income tax benefit (expense) .

For the six months ended June 30, 2021, we had an income tax benefit of $179 million, with an effective tax rate of 25%, due to a loss before income taxes of $724 million.

For the six months ended June 30, 2022, we had income tax expense of $172 million, with an effective tax rate of 21%, due to income before income taxes of $810 million.

The decrease in the effective tax rate between periods was primarily due to an income tax benefit for the equity-based awards that vested during the six months ended June 30, 2022, partially offset by a higher amount of taxable income being apportioned to West Virginia.

Capital Resources and Liquidity

2 unchanged sentences

Our primary use of cash has been for the exploration, development and acquisition of oil and natural gas properties.

As we develop our reserves, we continually monitor what capital resources, including

equity and debt financings, are available to meet our future financial obligations, planned capital expenditure activities and liquidity requirements.

Our future success in growing our proved reserves and production will be highly dependent on net cash provided by operating activities and the capital resources available to us.

As we develop our reserves, we continually monitor what capital resources, including equity and debt financings, are available to meet our future financial obligations, planned capital expenditure activities and liquidity requirements.

Our future success in growing our proved reserves and production will be highly dependent on net cash provided by

operating activities and the capital resources available to us.

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, 2022, we believe that net cash provided by operating activities, distributions from our unconsolidated affiliate and available borrowings under the Credit Facility 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, 2022, we believe that net cash provided by operating activities, distributions from our unconsolidated affiliate and available borrowings under the Credit Facility 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.

The following table summarizes our cash flows (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Net cash provided by operating activities

3 unchanged sentences

Operating Activities.

Net cash provided by operating activities was $564 million and $566 million for the three months ended March 31, 2021 and 2022, 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 increased cash utilized for working capital, decreased production, increased net marketing expense and increased production and ad valorem taxes between periods.

Net cash provided by operating activities was $872 million and $1.5 billion for the six months ended June 30, 2021 and 2022, 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 decreased production and increased (i) cash utilized for working capital, (ii) net marketing expense and (iii) 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.

4 unchanged sentences

Investing Activities.

Net cash used in investing activities increased from $123 million for the three months ended March 31, 2021 to $215 million for the three months ended March 31, 2022 , primarily due to an increase in capital expenditures of $93 million between periods.

Net cash used in investing activities increased from $303 million for the six months ended June 30, 2021 to $475 million for the six months ended June 30, 2022, primarily due to an increase in capital expenditures of $171 million between periods.

Financing Activities .

Net cash flows used in financing activities decreased from $441 million for the three months ended March 31, 2021 to $351 million for the three months ended March 31, 2022.

During the three months ended March 31, 2021, we issued $500 million aggregate principal amount of 8.375% senior notes due July 15, 2026 and $700 million aggregate principal amount of 7.625% senior notes due February 1, 2029 (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 senior secured revolving credit facility.

Also, during the three months ended March 31, 2021, we completed the January Share Offering and used the proceeds and approximately $63 million of borrowings under the senior secured revolving 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, 2022, we (i) redeemed $585 million aggregate principal amount of our 2025 Notes (ii) repurchased 3.7 million shares of our common stock at a total cost of approximately $100 million and (iii) distributed $36 million to the noncontrolling interest in Martica.

Additionally, we borrowed $388 million, net, on our Credit Facility during the three months ended March 31, 2022.

Net cash flows used in financing activities increased from $565 million for the six months ended June 30, 2021 to $1.0 billion for the six months ended June 30, 2022.

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 5.375% senior notes due March 1, 2030 (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 the Credit Facility.

Also, during the six months ended June 30, 2021, we completed two equitization transactions 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 .

During the six months ended June 30, 2022, we (i) redeemed $585 million aggregate principal amount of our 2025 Notes and repurchased $13 million of our 2026 Notes and $50 million of our 2029 Notes (ii) repurchased approximately 9 million shares of our common stock at a total cost of approximately $293 million, (iii) distributed $67 million to the noncontrolling interest in Martica and (iv) paid $65 million in employee withholding taxes for vested equity-based awards.

Additionally, we borrowed $71 million, net, on our Credit Facility during the six months ended June 30, 2022.

2022 Capital Budget and Capital Spending

On February 16, 2022, we announced our net capital budget for 2022 is $740 million to $775 million.

Our budget includes:

On July 27, 2022, we announced a revised net capital budget for 2022 of $825 million to $860 million.

Our revised budget includes:

a range of $725 million to $750 million for drilling and completion and a range of $100 million to $110 million for leasehold expenditures.

1 unchanged sentence

During 2022, we plan to complete 60 to 65 net horizontal wells in the Appalachian Basin.

periodically review our capital expenditures and adjust our budget and its allocation based on liquidity, drilling results, leasehold acquisition opportunities and commodity prices.

For the three months ended March 31, 2022, our total consolidated capital expenditures were approximately $206 million, including drilling and completion costs of $175 million, leasehold acquisitions of $24 million, and other capital expenditures of $7 million.

We periodically review our capital expenditures and adjust our budget and its allocation based on liquidity, drilling results, leasehold acquisition opportunities and commodity prices.

For the three months ended June 30, 2022, our total consolidated capital expenditures were approximately $268 million, including drilling and completion costs of $217 million, leasehold acquisitions of $49 million, and other capital expenditures of $2 million.

For the six months ended June 30, 2022, our total consolidated capital expenditures were approximately $474 million, including drilling and completion costs of $392 million, leasehold acquisitions of $73 million, and other capital expenditures of $9 million.

Debt Agreements

14 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, 2022, 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, 2021 and 2022.

Based on future prices as of June 30, 2022, 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, 2021 and 2022.

Estimated undiscounted future net cash flows are sensitive to commodity price swings and a 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, 2022, 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, 2022, 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.

4 unchanged sentences

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