What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-07-26 compared with 2023-04-26 · 293 added, 96 removed, 249 unchanged (61% of the section changed)

3 unchanged sentences

We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results, and the differences can be material.

Some of the key factors that could cause actual results to vary from our expectations include changes in natural gas, NGLs and oil prices, the timing of planned capital expenditures, our ability to fund our development programs, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as our ability to access them, impacts of world health events, including the COVID-19 pandemic, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting our business, as well as those factors discussed below, all of which are difficult to predict.

Some of the key factors that could cause actual results to vary from our expectations include changes in natural gas, NGLs and oil prices, the timing of planned capital expenditures, our ability to fund our development programs, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as our ability to access them, impacts of world health events and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting our business, as well as those factors discussed below, all of which are difficult to predict.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur.

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Our drilling opportunities are focused in the Appalachian Basin.

As of March 31, 2023, we held approximately 512,000 net acres in the Appalachian Basin.

As of June 30, 2023, we held approximately 516,000 net acres in the Appalachian Basin.

Market Conditions and Business Trends

1 unchanged sentence

Prices for natural gas, NGLs and oil that we produce significantly impact our revenues and cash flows.

Natural gas, NGLs and oil benchmark prices decreased significantly during the three months ended March 31, 2023 as compared to the same period of 2022.

As a result, we experienced a decrease in price realizations during the three months ended March 31, 2023.

Natural gas, NGLs and oil benchmark prices decreased significantly during the three and six months ended June 30, 2023 as compared to the same periods of 2022.

As a result, we experienced a decrease in price realizations during the three and six months ended June 30, 2023.

We monitor the economic factors that impact natural gas, NGLs and oil prices, including domestic and foreign supply and demand indicators, domestic and foreign commodity inventories, the actions of Organization of Petroleum Exporting Countries and other large producing nations and the current Russia-Ukraine conflict, among others.

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The following table details the average benchmark natural gas and oil prices:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Henry Hub (1) ($/Mcf)

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Due to our improved liquidity and leverage position as compared to past levels, the percentage of our expected production that we hedge has decreased.

For the three months ended March 31, 2022 and 2023, 36% and 2%, respectively, of our production was hedged through fixed price commodity swaps.

For the three and six months ended June 30, 2022, 34% and 35%, respectively, of our production was hedged through fixed price commodity swaps as compared to 1% and 2% for the three and six months ended June 30, 2023, respectively.

Assuming our 2023 production is the same as our production in 2022, 1% of our production for 2023 will be hedged through fixed price commodity swaps.

The tables and narrative below exclude derivative instruments attributable to Martica, our consolidated VIE, since all gains or losses from such contracts are fully attributable to the noncontrolling interests in Martica.

As of March 31, 2023, our fixed price natural gas swap positions excluding Martica were as follows:

As of June 30, 2023, our fixed price natural gas swap positions excluding Martica were as follows:

Commodity / Settlement Period

Contracted Volume

April-December 2023

As of March 31, 2023, our natural gas basis swap positions 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:

July-December 2023

As of June 30, 2023, our natural gas basis swap positions 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 2023

July-December 2023

January-December 2024

We have a call option and an embedded put option tied to NYMEX pricing for the production volumes associated with the Company’s retained interest in the VPP properties.

As of March 31, 2023, our call option and embedded put option arrangements were as follows:

As of June 30, 2023, our call option and embedded put option arrangements were as follows:

Commodity / Settlement Period

Contracted Volume

April-December 2023

July-December 2023

January-December 2024

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In January 2023, we executed an early settlement of this swaption agreement and made a cash payment of $202 million, which was funded by cash flows from operations and borrowings under our Credit Facility.

As of March 31, 2023, the estimated fair value of our commodity derivative contracts, excluding Martica, was a net liability of $70 million.

As of June 30, 2023, the estimated fair value of our commodity derivative contracts, excluding Martica, was a net liability of $67 million.

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

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As such, all gains and losses attributable to Martica’s derivative portfolio are fully attributable to the noncontrolling interests in Martica.

As of March 31, 2023, Martica’s fixed price natural gas, NGLs and oil swap positions were as follows:

As of June 30, 2023, Martica’s fixed price natural gas, NGLs and oil swap positions were as follows:

Commodity / Settlement Period

Contracted Volume

April-December 2023

July-December 2023

January-December 2024

1 unchanged sentence

Natural Gasoline

April-December 2023

July-December 2023

Mont Belvieu Natural Gasoline-OPIS Non-TET

April-December 2023

July-December 2023

West Texas Intermediate

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West Texas Intermediate

As of March 31, 2023, the estimated fair value of Martica’s commodity derivative contracts was a net liability of $19 million.

As of June 30, 2023, the estimated fair value of Martica’s commodity derivative contracts was a net liability of $17 million.

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

Economic Indicators

The economy is experiencing elevated inflation levels as a result of global supply and demand imbalances, where global demand continues to outpace current supplies.

For example, the BLS Consumer Price Index (“CPI”) for all urban consumers increased 5% from March 2022 to March 2023 as compared to the Federal Reserve’s stated goal of 2%.

In order to manage the inflation risk currently present in the United States’ economy, the Federal Reserve has utilized monetary policy in the form of interest rate increases in an effort to bring the inflation rate in line with its stated goal of 2% on a long-term basis.

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

The economy experienced elevated inflation levels as a result of global supply and demand imbalances, where global demand outpaced supplies beginning in 2021 and continuing through the first half of 2023.

For example, the Consumer Price Index (“CPI”) for all urban consumers increased 9% from June 2021 to June 2022 and an additional 3% from June 2022 to June 2023 as compared to the Federal Reserve’s stated goal of 2%.

In order to manage the inflation risk present in the United States’ economy, the Federal Reserve utilized monetary policy in the form of interest rate increases beginning in March 2022 in an effort to bring the inflation rate in line with its stated goal of 2% on a long-term basis.

Between March 2022 and May 2023, the Federal Reserve increased the federal funds interest rate by 5.0%.

While inflationary pressures in the United States’ economy have begun to subside, we continue to be impacted by the increased federal funds interest rate.

See “—Results of Operations” for more information.

The economy also continues to be impacted by the effects of global events.

These events have often caused global supply chain disruptions with additional pressure due to trade sanctions on Russia and other global trade restrictions, among others.

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All intersegment transactions were eliminated upon consolidation, including revenues from water handling services provided by Antero Midstream , which we capitalized as proved property development costs.

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

Marketing revenues are primarily derived from

activities to purchase and sell third-party natural gas and NGLs and to market and utilize excess firm transportation capacity.

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

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2023

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2023

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Equity Method

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Equity in earnings of unconsolidated affiliates

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Equity Method

22 unchanged sentences

Accretion of asset retirement obligations

Gain on sale of assets

Loss (gain) on sale of assets

Contract termination and other operating expenses

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The following table sets forth selected operating data of the exploration and production segment:

Three Months Ended March 31,

Three Months Ended

Production data (1) (2) :

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Marketing expense, net

General and administrative (excluding equity-based compensation)

Depletion, depreciation, amortization and accretion

* 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.

Our calculation of such after effects includes gains (losses) 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 June 30, 2023 includes $1 million of proceeds related to a take-or-pay contract.

Excluding the effect of these proceeds, the average realized price for ethane before and after the effects of derivatives would have been $7.65 per Bbl.

Natural gas sales .

Revenues from sales of natural gas decreased from $1.6 billion for the three months ended June 30, 2022 to $437 million for the three months ended June 30, 2023, a decrease of $1.2 billion, or 72%.

Lower commodity prices (excluding the effects of derivative settlements) during the three months ended June 30, 2023 accounted for an approximate $1.2 billion decrease in year-over-year natural gas sales revenue (calculated as the change in the year-to-year average price times current year production volumes).

Higher natural gas production volumes accounted for an approximate $6 million increase 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 decreased from $702 million for the three months ended June 30, 2022 to $398 million for the three months ended June 30, 2023, a decrease of $304 million, or 43%.

Lower commodity prices (excluding the effects of derivative settlements) during the three months ended June 30, 2023 accounted for an approximate $359 million decrease in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Higher NGLs production volumes accounted for an approximate $55 million increase in year-over-year NGLs revenues (calculated as the change in year-to-year volumes times the prior year average price).

Revenues from sales of oil decreased from $89 million for the three months ended June 30, 2022 to $58 million for the three months ended June 30, 2023, a decrease of $31 million, or 35%.

Lower oil prices, excluding the effects of derivative settlements, accounted for an approximate $38 million decrease in year-over-year oil revenues (calculated as the change in the year-to-year average price times current year production volumes).

Higher oil production volumes during the three months ended June 30, 2023 accounted for an approximate $7 million increase 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).

Our commodity derivatives included variable price swap contracts, basis swap contracts, call options and embedded put options.

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, 2022 and 2023, our commodity hedges resulted in derivative fair value losses of $266 million and fair value gains of $8 million, respectively.

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

For the three months ended June 30, 2023, commodity derivative fair value gains included $3 million of cash proceeds on settled commodity derivative gains.

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 $9 million for the three months ended June 30, 2022 to $8 million for the three months ended June 30, 2023, a decrease of $1 million, or 19%, primarily due to lower production volumes attributable to the VPP properties between periods.

Amortization of the deferred revenues associated with the VPP are recognized as the production volumes are delivered at $1.61 per MMBtu over the contractual term.

Lease operating expense .

Lease operating expense increased from $25 million, or $0.09 per Mcfe, for the three months ended June 30, 2022 to $29 million, or $0.09 per Mcfe, for the three months ended June 30, 2023, an increase of $4 million, primarily due to higher water disposal costs and workover expense.

On a per unit basis, our higher costs during the three months ended June 30, 2023 were fully offset by increased production volumes during the period.

Gathering, compression, processing and transportation expense.

Gathering, compression, processing and transportation expense increased from $656 million for the three months ended June 30, 2022 to $664 million for the three months ended June 30, 2023, an increase of $8 million, or 1%.

This fluctuation primarily resulted from the following:

● Gathering and compression costs decreased from $0.76 per Mcfe for the three months ended June 30, 2022 to $0.68 per Mcfe for the three months ended June 30, 2023, primarily due to due to lower fuel costs as a result of decreased commodity prices, partially offset by annual CPI-based adjustments between periods.

● Processing costs increased from $0.75 per Mcfe for the three months ended June 30, 2022 to $0.85 per Mcfe for the three months ended June 30, 2023, primarily due to increased costs for NGLs processing, which includes an annual CPI-based adjustment during the first quarter of 2023, and higher NGLs transportation fees.

● Transportation costs decreased from $0.73 per Mcfe for the three months ended June 30, 2022 to $0.61 per Mcfe for the three months ended June 30, 2023 primarily due to lower fuel costs as a result of lower commodity prices and demand fees between periods.

Production and ad valorem tax expense.

Total production and ad valorem taxes decreased from $82 million for the three months ended June 30, 2022 to $36 million for the three months ended June 30, 2023, a decrease of $46 million, or 56%, primarily due to lower commodity prices between periods.

Production and ad valorem taxes as a percentage of natural gas revenues increased from 5% for the three months ended June 30, 2022 to 8% for the three months ended June 30, 2023, primarily as a result of higher ad valorem taxes, which 2023 West Virginia ad valorem taxes are based on commodity prices during 2021.

General and administrative expense .

General and administrative expense (excluding equity-based compensation expense) increased from $36 million for the three months ended June 30, 2022 to $40 million for the three months ended June 30, 2023, an increase of $4 million, or 11% , primarily due to higher salary and wage expense and software license costs

between periods.

We had 530 and 604 employees as of June 30, 2022 and 2023, respectively.

General and administrative expense on a per unit basis (excluding equity-based compensation) increased from $0.12 per Mcfe for the three months ended June 30, 2022 to $0.13 per Mcfe for the three months ended June 30, 2023 as a result of our higher overall general and administrative costs, partially offset by increased production volumes between periods.

Equity-based compensation expense .

Noncash equity-based compensation expense increased from $8 million for the three months ended June 30, 2022 to $14 million for the three months ended June 30, 2023, an increase of $6 million, or 65%, primarily due to an increase in the annual equity awards granted during the fourth quarter of 2022 and the first half of 2023 as compared to prior years, which were temporarily and significantly reduced during 2020 and supplemented by our cash awards program.

Our equity awards vest over three or four year service periods, and our equity incentive program began returning to normal levels during 2021.

See Note 9—Equity Based Compensation and Cash Awards to the unaudited condensed consolidated financial statements for more information.

Depletion, depreciation, and amortization expense .

DD&A expense remained relatively consistent at $173 million, or $0.59 per Mcfe, and $171 million, or $0.56 per Mcfe, for the three months ended June 30, 2022 and 2023, respectively.

This decrease in DD&A expense per Mcfe between periods was primarily due to higher reserve volumes during the three months ended June 30, 2023.

Impairment of property and equipment .

Impairment of oil and gas properties decreased from $23 million for the three months ended June 30, 2022 to $16 million for the three months ended June 30, 2023, a decrease of $7 million, or 33%, 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.

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 decreased from $25 million, or $0.09 per Mcfe, for the three months ended June 30, 2022 to $22 million, or $0.07 per Mcfe, for the three months ended June 30, 2023, primarily due to lower firm transportation commitments, partially offset by lower marketing margins between periods.

Marketing revenue.

Marketing revenue decreased from $106 million for the three months ended June 30, 2022 to $44 million for the three months ended June 30, 2023, a decrease of $62 million, or 59%.

This fluctuation primarily resulted from the following:

● Natural gas marketing revenue decreased by $41 million between periods primarily due to lower natural gas prices, partially offset by higher natural gas marketing volumes.

Lower natural gas prices accounted for a $47 million decrease in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes), and higher natural gas marketing volumes accounted for an approximate $6 million increase in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price).

● Oil marketing revenue decreased by $1 million between periods primarily due to lower oil prices, partially offset by higher oil marketing volumes.

Lower oil prices accounted for an approximate $8 million decrease in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes), and 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).

● Ethane marketing revenues were $20 million for the three months ended June 30, 2022.

There were no ethane marketing revenues for the three months ended June 30, 2023.

Marketing expense.

Marketing expense decreased from $131 million for the three months ended June 30, 2022 to $66 million for the three months ended June 30, 2023, a decrease of $65 million, or 50%.

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, ethane and oil purchases decreased $44 million, $12 million and $1 million, respectively, between periods.

The total cost of third-party commodity purchases decreased primarily due to lower commodity prices, partially offset by higher marketing volumes between periods.

Firm transportation costs were $35 million for the three

months ended June 30, 2022 and $27 million for the three months ended June 30, 2023, a decrease of $8 million due to the reduction in firm transportation commitments and higher third-party marketing volumes between periods.

Antero Midstream Segment

Antero Midstream revenue.

Revenue from the Antero Midstream segment increased from $229 million for the three months ended June 30, 2022 to $258 million for the three months ended June 30, 2023, an increase of $29 million, primarily due to higher low pressure gathering, compression and high pressure gathering delivery revenues due to annual CPI-based adjustments and increased throughput between periods.

Antero Midstream operating expense.

Total operating expense related to the Antero Midstream segment increased from $101 million for the three months ended June 30, 2022 to $113 million for the three months ended June 30, 2023, an increase of $12 million, primarily due to 12 compressor stations that were acquired during the fourth quarter of 2022 and higher wastewater trucking costs and equity-based compensation expense between periods.

Discussion of Items Not Allocated to Segments

Interest expense.

Interest expense decreased from $34 million for the three months ended June 30, 2022 to $28 million for the three months ended June 30, 2023, a decrease of $6 million, or 18%, primarily due to the reduction in debt as a result of the repurchase of certain of our unsecured senior notes between periods and lower Credit Facility borrowings between periods, partially offset by higher benchmark interest rates during the three months ended June 30, 2023.

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.

There were no debt redemptions or repurchases during the three months ended June 30, 2023.

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

Income tax benefit (expense) .

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

For the three months ended June 30, 2023, we had an income tax benefit of $30 million, with an effective tax rate of 31%, due to a loss before income taxes of $98 million.

The increase in the effective tax rate between periods was primarily due to the net loss before income taxes during the three months ended June 30, 2023 that when taken together with net income before taxes during the three months ended March 31, 2023 results in a 14% effective tax rate for the six months ended June 30, 2023.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2023

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

Six Months Ended June 30, 2022

Equity Method

Investment in

Elimination of

Unconsolidated

Revenue and other:

Natural gas sales

Natural gas liquids sales

Commodity derivative fair value losses

Gathering, compression and water handling

Amortization of deferred revenue, VPP

Other revenue and income

Total revenue

Operating expenses:

Lease operating

Gathering and compression

Transportation

Water handling

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 property and equipment

Accretion of asset retirement obligations

Contract termination and other operating expenses

Loss on sale of assets

Total operating expenses

Operating income (loss)

Equity in earnings of unconsolidated affiliates

Six Months Ended June 30, 2023

Equity Method

Investment in

Elimination of

Unconsolidated

Revenue and other:

Natural gas sales

Natural gas liquids sales

Commodity derivative fair value losses

Gathering, compression and water handling

Amortization of deferred revenue, VPP

Other revenue and income

Total revenue

Operating expenses:

Lease operating

Gathering and compression

Transportation

Water handling

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 property and equipment

Accretion of asset retirement obligations

Loss (gain) on sale of assets

Contract termination and other operating 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:

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)

C2 Ethane (per Bbl) (4)

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) (4)

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

General and administrative (excluding equity-based compensation)

Depletion, depreciation, amortization and accretion

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

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(4) The average realized price for the three months ended March 31, 2023 includes $6 million of proceeds related to a take-or-pay contract.

(4) The average realized price for the six months ended June 30, 2023 includes $7 million of proceeds related to a take-or-pay contract.

Excluding the effect of these proceeds, the average realized price for ethane before and after the effects of derivatives would have been $9.17 per Bbl.

Natural gas sales .

Revenues from sales of natural gas decreased from $996 million for the three months ended March 31, 2022 to $668 million for the three months ended March 31, 2023, a decrease of $328 million, or 33%.

Lower commodity prices (excluding the effects of derivative settlements) during the three months ended March 31, 2023 accounted for an approximate $303 million decrease in year-over-year natural gas sales revenue (calculated as the change in the year-to-year average price times current year production volumes).

Revenues from sales of natural gas decreased from $2.6 billion for the six months ended June 30, 2022 to $1.1 billion for the six months ended June 30, 2023, a decrease of $1.5 million, or 57%.

Lower commodity prices (excluding the effects of derivative settlements) during the six months ended June 30, 2023 accounted for an approximate $1.4 billion decrease 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 $27 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 decreased from $660 million for the three months ended March 31, 2022 to $495 million for the three months ended March 31, 2023, a decrease of $165 million, or 25%.

Lower commodity prices (excluding the effects of derivative settlements) during the three months ended March 31, 2023 accounted for an approximate $214 million decrease 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 NGLs decreased from $1.4 billion for the six months ended June 30, 2022 to $893 million for the six months ended June 30, 2023, a decrease of $470 million, or 34%.

Lower commodity prices (excluding the effects of derivative settlements) during the six months ended June 30, 2023 accounted for an approximate $573 million decrease in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Higher NGLs production volumes accounted for an approximate $103 million increase in year-over-year NGLs revenues (calculated as the change in year-to-year volumes times the prior year average price).

Revenues from sales of oil decreased from $63 million for the three months ended March 31, 2022 to $52 million for the three months ended March 31, 2023, a decrease of $11 million, or 18%.

Revenues from sales of oil decreased from $152 million for the six months ended June 30, 2022 to $110 million for the six months ended June 30, 2023, a decrease of $42 million, or 28%.

Lower oil prices, excluding the effects of derivative settlements, accounted for an approximate $58 million decrease in year-over-year oil revenues (calculated as the change in the year-to-year average price times current year production volumes).

Higher oil production volumes during the three months ended March 31, 2023 accounted for an approximate $10 million increase in year-over-year oil revenues (calculated as the change in year-to-year volumes times the prior year average price).

Higher oil production volumes during the six months ended June 30, 2023 accounted for an approximate $16 million increase 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).

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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, 2022 and 2023, our commodity hedges resulted in derivative fair value losses of $1.0 billion and fair value gains of $126 million, respectively.

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 March 31, 2023, commodity derivative fair value gains included $14 million of cash payments on commodity derivative losses and $202 million cash payment for the early settlement of our swaption.

For the six months ended June 30, 2022 and 2023, our commodity hedges resulted in derivative fair value losses of $1.3 billion and fair value gains of $134 million, respectively.

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

For the six months ended June 30, 2023, commodity derivative fair value gains included $11 million of cash payments on settled commodity derivative losses and a $202 million cash payment for the early settlement of our swaption.

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 $9 million for the three months ended March 31, 2022 to $8 million for the three months ended March 31, 2023, a decrease of $1 million or 19%, primarily due to lower production volumes attributable to the VPP properties between periods.

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

Amortization of deferred revenues associated with the VPP decreased from $19 million for the six months ended June 30, 2022 to $15 million for the six months ended June 30, 2023, a decrease of $4 million or 19%, primarily due to lower production volumes attributable to the VPP properties between periods.

Amortization of the deferred revenues associated with the VPP are recognized as the production volumes are delivered at $1.61 per MMBtu over the contractual term.

Lease operating expense .

Lease operating expense increased from $18 million, or $0.06 per Mcfe, for the three months ended March 31, 2022 to $29 million, or $0.10 per Mcfe for the three months ended March 31, 2023, an increase of $11 million or $0.04 per Mcfe, primarily due to higher oilfield service and produced water handling costs.

Lease operating expense increased from $43 million, or $0.07 per Mcfe, for the six months ended June 30, 2022 to $58 million, or $0.10 per Mcfe for the six months ended June 30, 2023, an increase of $15 million or $0.03 per Mcfe, primarily due to higher oilfield service and produced water handling costs.

Gathering, compression, processing and transportation expense.

Gathering, compression, processing and transportation expense increased from $590 million for the three months ended March 31, 2022 to $645 million for three months ended March 31, 2023, an increase of $55 million, or 9%.

Gathering, compression, processing and transportation expense increased from $1.2 billion for the six months ended June 30, 2022 to $1.3 billion for the six months ended June 30, 2023, an increase of $0.1 billion, or 5%.

This fluctuation primarily resulted from the following:

● Gathering and compression costs on a per unit basis remained relatively consistent at $0.71 and $0.72 per Mcfe for the three months ended March 31, 2022 and 2023, respectively.

● Processing costs on a per unit basis increased from $0.67 per Mcfe for the three months ended March 31, 2022 to $0.81 per Mcfe for the three months ended March 31, 2023, primarily due to increased costs for NGLs processing and transportation, which include annual CPI-based and commodity based adjustments, as well as higher terminal fees and ethane transportation.

● Transportation costs on a per unit basis decreased from $0.70 per Mcfe for the three months ended March 31, 2022 to $0.66 per Mcfe for the three months ended March 31, 2023 primarily due to lower fuel costs as a result of lower commodity prices between periods.

● Gathering and compression costs on a per unit basis decreased from $0.73 per Mcfe for the six months ended June 30, 2022 to $0.70 per Mcfe for the six months ended June 30, 2023, primarily due to lower fuel costs as a result of decreased commodity prices, partially offset by annual CPI-based based adjustments between periods.

● Processing costs on a per unit basis increased from $0.71 per Mcfe for the six months ended June 30, 2022 to $0.83 per Mcfe for the six months ended June 30, 2023, primarily due to increased costs for NGLs processing and transportation, which include annual CPI-based and commodity based adjustments, as well as higher terminal fees and ethane transportation.

● Transportation costs on a per unit basis decreased from $0.71 per Mcfe for the six months ended June 30, 2022 to $0.64 per Mcfe for the six months ended June 30, 2023 primarily due to lower fuel costs as a result of lower commodity prices between periods.

Production and ad valorem tax expense.

Production and ad valorem taxes decreased from $53 million for the three months ended March 31, 2022 to $49 million for the three months ended March 31, 2023, a decrease of $4 million, or 7%, primarily due to lower commodity prices between periods, partially offset by higher production volumes between periods.

Production and ad valorem taxes as a percentage of natural gas revenues increased from 5.3% for the three months ended March 31, 2022 to 7.4% for the three months ended March 31, 2023 primarily as a result of higher ad valorem taxes, which 2023 ad valorem taxes are based on commodity prices during 2022.

Production and ad valorem taxes decreased from $135 million for the six months ended June 30, 2022 to $85 million for the six months ended June 30, 2023, a decrease of $50 million, or 37%, primarily due to lower commodity prices between periods, partially offset by higher production volumes between periods.

Production and ad valorem taxes as a percentage of natural gas revenues increased from 5% for the six months ended June 30, 2022 to 8% for the six months ended June 30, 2023 primarily as a result of higher ad valorem taxes, which 2023 West Virginia ad valorem taxes are based on commodity prices during 2021.

General and administrative expense .

General and administrative expense (excluding equity-based compensation expense) increased from $31 million for the three months ended March 31, 2022 to $44 million for the three months ended March 31, 2023, an increase of $13 million, or 43%, primarily due to higher salary and wage expense, professional service fees, office operating costs and software license costs between periods.

We had 521 and 599 employees as of three months ended March 31, 2022 and 2023, respectively.

General and administrative expense on a per unit basis (excluding equity-based compensation) increased from $0.11 per Mcfe for the three months ended March 31, 2022 to $0.15 per Mcfe for the three months ended March 31, 2023 as a result of our higher overall general and administrative costs, partially offset by increased production volumes between periods.

General and administrative expense (excluding equity-based compensation expense) increased from $67 million for the six months ended June 30, 2022 to $85 million for the six months ended June 30, 2023, an increase of $18 million, or 26%, primarily due to higher salary and wage expense, software license costs, office operating costs and professional service fees between periods.

We had 530 and 604 employees as of June 30, 2022 and 2023, respectively.

General and administrative expense on a per unit basis (excluding equity-based compensation) increased from $0.12 per Mcfe for the six months ended June 30, 2022 to $0.14 per Mcfe for the six months ended June 30, 2023 as a result of our higher overall general and administrative costs, partially offset by increased production volumes between periods.

Equity-based compensation expense .

Noncash equity-based compensation expense increased from $5 million for the three months ended March 31, 2022 to $13 million for the three months ended March 31, 2023, an increase of $8 million, primarily due to an increase in the annual equity awards granted during the fourth quarter of 2022 and first quarter of 2023 as compared to prior years, which were temporarily and significantly reduced during 2020 and supplemented by our cash awards program.

Noncash equity-based compensation expense increased from $13 million for the six months ended June 30, 2022 to $27 million for the six months ended June 30, 2023, an increase of $14 million, primarily due to an increase in the annual equity awards granted during the fourth quarter of 2022 and first half of 2023 as compared to prior years, which were temporarily and significantly reduced during 2020 and supplemented by our cash awards program.

Our equity awards vest over three or four year service periods, and our equity incentive program began returning to normal levels in 2021.

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Depletion, depreciation and amortization expense (“DD&A expense”) .

DD&A expense remained relatively consistent at $168 million, or $0.60 per Mcfe, and $168 million, or $0.57 per Mcfe, for the three months ended March 31, 2022 and 2023, respectively.

This decrease in DD&A expense per Mcfe between periods was primarily due to higher reserve volumes during the three months ended March 31, 2023.

Impairment of oil and gas properties .

Impairment of oil and gas properties decreased from $22 million for the three months ended March 31, 2022 to $16 million for the three months ended March 31, 2023, a decrease of $6 million, or 31%, primarily related to lower impairments of expiring leases between periods.

DD&A expense remained relatively consistent at $342 million, or $0.60 per Mcfe, and $339 million, or $0.56 per Mcfe, for the six months ended June 30, 2022 and 2023, respectively.

This decrease in DD&A expense per Mcfe between periods was primarily due to higher reserve volumes during the six months ended June 30, 2023.

Impairment of property and equipment .

Impairment of oil and gas properties decreased from $46 million for the six months ended June 30, 2022 to $31 million for the six months ended June 30, 2023, a decrease of $15 million, or 32%, 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.

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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 (calculated as marketing revenues less marketing expense) decreased from $30 million, or $0.10 per Mcfe, for the three months ended March 31, 2022 to $23 million, or $0.08 per Mcfe, for the three months ended March 31, 2023, primarily due to lower firm transportation commitments between periods.

Marketing revenue.

Marketing revenue decreased from $69 million for the three months ended March 31, 2022 to $59 million for the three months ended March 31, 2023, a decrease of $10 million, or 15%, primarily due to decreased commodity prices and ethane marketing volumes between periods, partially offset by higher natural gas and oil marketing volumes.

Lower ethane marketing volumes accounted for a $13 million decrease in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), partially offset by increased oil marketing revenues of $3 million.

Net marketing expense (calculated as marketing revenues less marketing expense) decreased from $55 million, or $0.10 per Mcfe, for the six months ended June 30, 2022 to $45 million, or $0.07 per Mcfe, for the six months ended June 30, 2023, primarily due to lower firm transportation commitments partially offset by lower marketing margins between periods.

M arketing revenue.

Marketing revenue decreased from $175 million for the six months ended June 30, 2022 to $102 million for the six months ended June 30, 2023, a decrease of $73 million, or 42%.

This fluctuation primarily resulted from the following:

● Natural gas marketing revenue decreased by $41 million between periods primarily due to lower natural gas prices, partially offset by higher natural gas marketing volumes.

Lower natural gas prices accounted for an approximate $57 million decrease in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes), and higher natural gas marketing volumes accounted for a $16 million increase in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price).

● Oil marketing revenue increased by $2 million between periods primarily due to higher marketing volumes, partially offset by lower oil prices.

Higher oil marketing volumes accounted for a $15 million increase in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), and lower oil prices accounted for an approximate $13 million decrease in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

Natural gas marketing revenue remained relatively consistent between periods with higher marketing volumes during the three months ended March 31, 2023 being fully offset by lower commodity prices during the same period.

● Ethane marketing revenues were $34 million for the six months ended June 30, 2022.

There were no third-party ethane marketing revenues for the six months ended June 30, 2023.

Marketing expense.

Marketing expense decreased from $99 million for the three months ended March 31, 2022 to $81 million for the three months ended March 31, 2023, a decrease of $18 million, or 18%.

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 purchases decreased $6 million primarily due to lower commodity prices between periods, partially offset by higher natural gas and oil marketing volumes.

Firm transportation costs were $32 million for the three months ended March 31, 2022 and $20 million for the three months ended March 31, 2023, a decrease of $12 million due to the reduction in firm transportation commitments and higher third-party marketed volumes between periods.

Contract termination expense .

Our marketing segment did not incur any contract termination expense for the three months ended March 31, 2022.

Contract termination expense attributable to our marketing segment for the three months ended

March 31, 2023, is due to a $24 million payment for the early termination of our firm transportation commitment of 200,000 MMBtu per day on the Equitrans pipeline.

Marketing expense decreased from $230 million for the six months ended June 30, 2022 to $148 million for the six months ended June 30, 2023, a decrease of $82 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 and ethane purchases decreased $49 million and $19 million, respectively, partially offset by oil purchase increases of $4 million.

The total cost of third-party commodity purchases decreased primarily due to lower commodity prices between periods, partially offset by higher third-party natural gas and oil marketing volumes.

Firm transportation costs were $73 million for the six months ended June 30, 2022 and $55 million for the six months ended June 30, 2023, a decrease of $18 million due to the reduction in firm transportation commitments and higher third-party marketing volumes between periods.

Contract termination and other operating expenses .

Our marketing segment did not incur any contract termination and other operating expenses for the six months ended June 30, 2022.

Contract termination and other operating expenses attributable to our marketing segment for the six months ended June 30, 2023, are due to a $24 million payment for the early termination of our firm transportation commitment of 200,000 MMBtu per day on the Equitrans pipeline.

Antero Midstream Segment

Antero Midstream revenue.

Revenue from the Antero Midstream segment increased from $218 million for the three months ended March 31, 2022 to $259 million for the three months ended March 31, 2023, an increase of $41 million, primarily due to increased throughput, fresh water delivery volumes and other fluid handling volumes between periods as well as higher low pressure, compression, high pressure and water handling fees primarily as a result of an annual CPI-based adjustments.

Revenue from the Antero Midstream segment increased from $447 million for the six months ended June 30, 2022 to $518 million for the six months ended June 30, 2023, an increase of $71 million, primarily due to increased throughput and water handling volumes between periods as well as higher low pressure, compression, high pressure and fresh water handling fees primarily as a result of an annual CPI-based adjustments and higher water handling fees primarily due to increased costs.

Antero Midstream operating expense.

Total operating expense related to the Antero Midstream segment increased from $89 million for the three months ended March 31, 2022 to $111 million for the three months ended March 31, 2023, an increase of $22 million, primarily due to increased direct operating costs and depreciation expense during the three months ended March 31, 2023, partially offset by lower general and administrative costs between periods Direct operating costs increased between periods primarily as a result of 12 compressors that were acquired during the fourth quarter of 2022 and higher water trucking expense between periods.

The increase in depreciation expense 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/or (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 first half of 2023.

Antero Midstream also had incremental depreciation expense related to asset acquisitions completed during the fourth quarter of 2022 and gathering, compression and water handling assets placed in service between periods.

Total operating expense related to the Antero Midstream segment increased from $190 million for the six months ended June 30, 2022 to $224 million for the six months ended June 30, 2023, an increase of $34 million, primarily due to increased direct operating costs, depreciation expense and equity-based compensation expense during the six months ended June 30, 2023, partially offset by lower general and administrative (excluding equity-based compensation) costs between periods Direct operating costs increased between periods primarily as a result of 12 compressors that were acquired during the fourth quarter of 2022, increased heavy maintenance expense and higher wastewater trucking expense between periods.

The increase in depreciation expense is primarily a result of the 12 compressors that were acquired during the fourth quarter of 2022 and a phased early retirement of an underutilized compressor station, which allowed 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 were certain costs associated with the underutilized compressor station that could not be relocated or reused that were fully depreciated over the first half of 2023.

Antero Midstream also had incremental depreciation expense related to gathering and compression assets acquired or placed in service between periods.

Items Not Allocated to Segments

Interest expense.

Interest expense decreased from $38 million for the three months ended March 31, 2022 to $26 million for the three months ended March 31, 2023, a decrease of $12 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, partially offset by higher Credit Facility borrowings and benchmark interest rates during the three months ended March 31, 2023.

Interest expense decreased from $72 million for the six months ended June 30, 2022 to $54 million for the six months ended June 30, 2023, a decrease of $18 million or 25%, primarily due to the reduction in debt as a result of the repurchase of certain of our unsecured senior notes between periods and lower Credit Facility borrowings between periods, partially offset by higher benchmark interest rates during the six months ended June 30, 2023.

Loss on early extinguishment of debt.

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.

There were no debt redemptions or repurchases during the three months ended March 31, 2023.

During the six months ended June 30, 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 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.

There were no debt redemptions or repurchases during the six months ended June 30, 2023.

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

Income tax benefit (expense) .

For the three months ended March 31, 2022, we had an income tax benefit of $53 million, with an effective tax rate of 23%, due to a loss before income taxes of $230 million.

For the three months ended March 31, 2023, we had income tax expense of $62 million, with an effective tax rate of 19%, due to income before income taxes of $323 million.

The decrease in the effective tax rate between periods was primarily due the impact of changes in state apportionment and a reduction to Pennsylvania’s corporate income tax rate enacted in the third quarter of 2022.

Income tax expense.

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

For the six months ended June 30, 2023, we had income tax expense of $32 million, with an effective tax rate of 14%, due to income before income taxes of $226 million.

The decrease in the effective tax rate between periods was primarily due to lower income before income taxes and the effects of noncontrolling interests.

Capital Resources and Liquidity

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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.

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.

Based on strip prices as of March 31, 2023, we believe that net cash provided by operating activities 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, 2023, we believe that net cash provided by operating activities 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

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Operating activities.

Net cash provided by operating activities was $566 million and $344 million for the three months ended March 31, 2022 and 2023, respectively.

Net cash provided by operating activities decreased primarily due to lower commodity prices, a $202 million payment for early settlement of our swaption agreement and increased gathering compression, processing and transportation expenses, lease operating expenses, general and administrative expenses (excluding equity-based compensation expense) and contract termination expense, partially offset by increased production and decreased net marketing expense and production and ad valorem taxes between periods.

Net cash provided by operating activities was $1.5 billion and $499 million for the six months ended June 30, 2022 and 2023, respectively.

Net cash provided by operating activities decreased primarily due to lower commodity prices, a $202 million payment for early settlement of our swaption agreement and increased gathering compression, processing and transportation expenses, contract termination expense, general and administrative expenses (excluding equity-based compensation expense) and lease operating expenses, partially offset by increased production and decreased net marketing expense, production and ad valorem taxes and interest expense 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.

Net cash used in investing activities increased from $215 million for the three months ended March 31, 2022 to $351 million for the three months ended March 31, 2023, primarily due to an increase in capital expenditures of $135 million between periods.

The increase in capital expenditures between periods is primarily due to increased completions activity, higher fresh water delivery and drilling costs and increased land purchases between periods.

Net cash used in investing activities increased from $475 million for the six months ended June 30, 2022 to $638 million for the six months ended June 30, 2023, primarily due to an increase in capital expenditures of $160 million between periods.

The increase in capital expenditures between periods is primarily due to increased drilling and completions activity and land purchases, as well as higher drilling and water costs between periods.

Financing activities.

Net cash flows used in financing activities for the three months ended March 31, 2022 were $351 million, as compared to $7 million in net cash flows provided by financing activities for the three months ended March 31, 2023.

During the three months ended March 31, 2022, we (i) redeemed $585 million aggregate principal amount of our 2025 Notes at 101.25% of the principal amount thereof, (ii) repurchased 4 million shares of our common stock at a total cost of $100 million, (iii) distributed $36 million to the noncontrolling interests in Martica and (iv) paid $10 million in employee withholding taxes for vested equity-based awards.

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

During the three months ended March 31, 2023, we borrowed $145 million, net, on our Credit Facility, partially offset by the repurchase of 3 million shares of our common stock at a total cost of $75 million, distributions to the noncontrolling interests in Martica of $51 million and payments for employee withholding taxes for vested equity-based awards of $11 million.

Net cash flows used in financing activities for the six months ended June 30, 2022 were $1.0 billion, as compared to $139 million in net cash flows provided by financing activities for the six months ended June 30, 2023.

During the six months ended June 30, 2022, we redeemed $585 million aggregate principal amount of our 2025 Notes, repurchased $50 million of our 2029 Notes and $13 million of our 2026 Notes, repurchased approximately 9 million shares of our common stock at a total cost of approximately $293 million, distributed $67 million to the noncontrolling interest in Martica and 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.

During the six months ended June 30, 2023, we borrowed $325 million, net, on our Credit Facility, partially offset by distributions to the noncontrolling interests in Martica of $83 million, repurchases of approximately 3 million shares of our common stock at a total cost of $75 million and payments for employee withholding taxes for vested equity-based awards of $27 million.

2023 Capital Budget and Capital Spending

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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 March 31, 2023, our total consolidated capital expenditures were $342 million, including drilling and completion costs of $267 million, leasehold acquisitions of $72 million, and other capital expenditures of $3 million.

For the three months ended June 30, 2023, our total consolidated capital expenditures were $287 million, including drilling and completion costs of $247 million, leasehold acquisitions of $36 million and other capital expenditures of $4 million.

For the six months ended June 30, 2023, our total consolidated capital expenditures were $628 million, including

drilling and completion costs of $514 million, leasehold acquisitions of $107 million and other capital expenditures of $7 million.

Debt Agreements

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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, 2023, 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, 2022 and 2023.

Based on future prices as of June 30, 2023, 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, 2022 and 2023.

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, 2023, 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, 2023, 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.

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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