What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-04-24 compared with 2023-10-25 · 109 added, 330 removed, 218 unchanged (67% of the section changed)

14 unchanged sentences

Our drilling opportunities are focused in the Appalachian Basin.

As of September 30, 2023, we held approximately 515,000 net acres in the Appalachian Basin.

As of March 31, 2024, we held approximately 517,000 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 and nine months ended September 30, 2023 as compared to the same periods of 2022.

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

Natural gas benchmark prices decreased significantly while NGLs and oil benchmark prices remained consistent during the three months ended March 31, 2024 as compared to the same period of 2023.

As a result of the lower benchmark natural gas prices, we experienced a decrease in price realizations for natural gas and ethane products during the three months ended March 31, 2024.

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 conflicts in Ukraine and in the Middle East, among others.

2 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Henry Hub (1) ($/Mcf)

4 unchanged sentences

Antero Resources (Excluding Martica)

We are exposed to certain commodity price risks relating to our ongoing business operations, and we use derivative instruments as we deem necessary to manage such risks.

We are exposed to certain commodity price risks relating to our ongoing business operations, and we use derivative instruments when circumstances warrant to manage such risks.

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

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 and nine months ended September 30, 2022, 31% and 34%, respectively, of our production was hedged through fixed price commodity swaps as compared to 1% for both the three and nine months ended September 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.

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

For the three months ended March 31, 2023 and 2024, 2% and 1%, respectively, of our production was 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 September 30, 2023, our fixed price natural gas swap positions excluding Martica were as follows:

As of March 31, 2024, our fixed price NGLs swap positions excluding Martica were as follows:

Commodity / Settlement Period

Contracted Volume

October-December 2023

As of September 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:

April-December 2024

Mont Belvieu Propane-OPIS TET

As of March 31, 2024, 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

3 unchanged sentences

Hedged Differential

October-December 2023

January-December 2024

April-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 September 30, 2023, our call option and embedded put option arrangements were as follows:

As of March 31, 2024, our call option and embedded put option arrangements were as follows:

Commodity / Settlement Period

Contracted Volume

October-December 2023

January-December 2024

April-December 2024

January-December 2025

January-December 2026

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

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 September 30, 2023, the estimated fair value of our commodity derivative contracts, excluding Martica, was a net liability of $60 million.

As of March 31, 2024, the estimated fair value of our commodity derivative contracts, excluding Martica, was a net liability of $27 million.

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

1 unchanged sentence

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

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

As of March 31, 2024, Martica’s fixed price natural gas and oil swap positions were as follows:

Commodity / Settlement Period

Contracted Volume

October-December 2023

January-December 2024

April-December 2024

January-March 2025

Natural Gasoline

October-December 2023

Mont Belvieu Natural Gasoline-OPIS Non-TET

October-December 2023

West Texas Intermediate

January-December 2024

April-December 2024

West Texas Intermediate

1 unchanged sentence

West Texas Intermediate

As of September 30, 2023, the estimated fair value of Martica’s commodity derivative contracts was a net liability of $15 million.

As of March 31, 2024, the estimated fair value of Martica’s commodity derivative contracts was a net liability of $2 million.

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

Economic Indicators

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 three quarters of 2023.

For example, the Consumer Price Index (“CPI”) for all urban consumers increased 8% from September 2021 to September 2022 and an additional 4% from September 2022 to September 2023 as compared to the Federal Reserve’s stated goal of 2%.

For example, the Consumer Price Index (“CPI”) for all urban consumers increased 5% from March 2022 to March 2023 and an additional 3% from March 2023 to March 2024 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 July 2023, the Federal Reserve increased the federal funds interest rate by 5.25%.

Between March 2022 and March 2024, the Federal Reserve increased the federal funds interest rate by 5.25%.

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

4 unchanged sentences

Inflationary pressures, particularly as they relate to certain of our long-term contracts with CPI-based adjustments, and supply chain disruptions have and could continue to result in increases to our operating and capital costs that are not fixed.

For example, our 2023 capital budget reflects an approximate 10% increase in service cost inflation as compared to the year ended December 31, 2022.

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

6 unchanged sentences

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 were 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 September 30, 2022 Compared to Three Months Ended September 30, 2023

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2024

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

Three Months Ended September 30, 2022

Three Months Ended March 31, 2023

Equity Method

5 unchanged sentences

Natural gas liquids sales

Commodity derivative fair value losses

Commodity derivative fair value gains

Gathering, compression and water handling

15 unchanged sentences

Contract termination, loss contingency and other operating expenses

Loss (gain) on sale of assets

Gain on sale of assets

Total operating expenses

1 unchanged sentence

Equity in earnings of unconsolidated affiliates

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

Equity Method

16 unchanged sentences

Production and ad valorem taxes

Exploration and mine expenses

General and administrative (excluding equity-based compensation)

3 unchanged sentences

Accretion of asset retirement obligations

Loss (gain) on sale of assets

Loss on sale of assets

Contract termination, loss contingency and other operating expenses

5 unchanged sentences

Three Months Ended

September 30,

Production data (1) (2) :

24 unchanged sentences

Depletion, depreciation, amortization and accretion

* Not meaningful

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

2 unchanged sentences

(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 September 30, 2023 includes $6 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 $10.88 per Bbl.

Our calculation of such after effects includes gains (losses) on settlements of commodity derivatives (but does not include proceeds from the derivative monetizations in 2023), 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, 2023 and 2024 includes $6 million and $2 million, respectively, 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 for the three months ended March 31, 2023 and 2024 would have been $10.76 per Bbl and $9.07 per Bbl, respectively.

Natural gas sales .

Revenues from sales of natural gas decreased from $1.7 billion for the three months ended September 30, 2022 to $516 million for the three months ended September 30, 2023, a decrease of $1.2 billion, or 70%.

Lower commodity prices (excluding the effects of derivative settlements) during the three months ended September 30, 2023 accounted for an approximate $1.3 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).

Revenues from sales of natural gas decreased from $668 million for the three months ended March 31, 2023 to $474 million for the three months ended March 31, 2024, a decrease of $194 million, or 29%.

Lower commodity prices (excluding the effects of derivative settlements) during the three months ended March 31, 2024 accounted for an approximate $222 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).

Higher natural gas production volumes accounted for an approximate $28 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 $621 million for the three months ended September 30, 2022 to $483 million for the three months ended September 30, 2023, a decrease of $138 million, or 22%.

Lower commodity prices (excluding the effects of derivative settlements) during the three months ended September 30, 2023 accounted for an approximate $230 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 increased from $495 million for the three months ended March 31, 2023 to $518 million for the three months ended March 31, 2024, an increase of $23 million, or 5%.

Higher NGLs production volumes accounted for an approximate $38 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 $67 million for the three months ended September 30, 2022 to $63 million for the three months ended September 30, 2023, a decrease of $4 million, or 7%.

Lower oil prices, excluding the effects of derivative settlements, accounted for an approximate $14 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 September 30, 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).

Commodity derivative fair value gains (losses).

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

Lower commodity prices (excluding the effects of derivative settlements) during the three months ended March 31, 2024 accounted for an approximate $15 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 oil increased from $52 million for the three months ended March 31, 2023 to $65 million for the three months ended March 31, 2024, an increase of $13 million, or 25%.

Higher oil production volumes during the three months ended March 31, 2024 accounted for an approximate $13 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.

Our commodity derivatives included fixed 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 September 30, 2022 and 2023, our commodity hedges resulted in derivative fair value losses of $531 million and fair value gains of $3 million, respectively.

For the three months ended September 30, 2022, commodity derivative fair value losses included $640 million of cash payments on settled commodity derivatives losses.

For the three months ended September 30, 2023, commodity derivative fair value gains included $6 million of cash payments on settled commodity derivatives losses.

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 and comprehensive income.

For the three months ended March 31, 2023 and 2024, our commodity hedges resulted in derivative fair value gains of $126 million and $9 million, respectively.

For the three months ended March 31, 2023, commodity derivative fair value gains included $14 million of net cash payments for settled commodity derivative losses and a $202 million cash payment for the early settlement of our swaption.

For the three months ended March 31, 2024, commodity derivative fair value gains included $1 million of net cash proceeds on settled commodity derivatives 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.

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

Amortization of deferred revenues associated with the VPP decreased from $8 million for the three months ended March 31, 2023 to $7 million for the three months ended March 31, 2024, a decrease of $1 million, or 11%, 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 $27 million, or $0.09 per Mcfe, for the three months ended September 30, 2022 to $33 million, or $0.10 per Mcfe, for the three months ended September 30, 2023, an increase of $6 million, primarily due to higher water disposal costs and workover expense between periods.

Lease operating expense remained consistent between periods at $29 million for both the three months ended March 31, 2023 and 2024.

On a per unit basis, lease operating expense decreased from $0.10 per Mcfe for the three months ended March 31, 2023 to $0.09 per Mcfe for the three months ended March 31, 2024, primarily due to higher production volumes between periods.

Gathering, compression, processing and transportation expense.

Gathering, compression, processing and transportation expense decreased from $716 million for the three months ended September 30, 2022 to $672 million for the three months ended September 30, 2023, a decrease of $44 million, or 6%.

This fluctuation primarily resulted from the following:

● Gathering and compression costs decreased from $0.81 per Mcfe for the three months ended September 30, 2022 to $0.68 per Mcfe for the three months ended September 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 $0.82 per Mcfe for the three months ended September 30, 2022 to $0.83 per Mcfe for the three months ended September 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 $0.80 per Mcfe for the three months ended September 30, 2022 to $0.60 per Mcfe for the three months ended September 30, 2023 primarily due to lower fuel costs as a result of lower commodity prices and demand fees between periods.

Gathering, compression, processing and transportation expense increased from $645 million for the three months ended March 31, 2023 to $672 million for the three months ended March 31, 2024, an increase of $27 million, or 4%.

This fluctuation primarily resulted from higher production volumes between periods and the following:

● Gathering and compression costs on a per unit basis remained relatively consistent at $0.72 per Mcfe for both the three months ended March 31, 2023 and 2024.

● Processing costs increased from $0.81 per Mcfe for the three months ended March 31, 2023 to $0.82 per Mcfe for the three months ended March 31, 2024, primarily due to increased costs for NGLs processing, which includes an annual CPI-based adjustment during the first quarter of 2024 and higher NGLs transportation fees.

● Transportation costs decreased from $0.66 per Mcfe for the three months ended March 31, 2023 to $0.62 per Mcfe for the three months ended March 31, 2024 primarily due to lower demand fees and fuel costs as a result of lower commodity prices between periods.

Production and ad valorem tax expense.

Total production and ad valorem taxes decreased from $93 million for the three months ended September 30, 2022 to $32 million for the three months ended September 30, 2023, a decrease of $61 million, or 65%, 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 three months ended September 30, 2022 to 6% for the three months ended September 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.

Production and ad valorem taxes increased from $49 million for the three months ended March 31, 2023 to $58 million for the three months ended March 31, 2024, an increase of $9 million, or 18%, primarily due to higher ad valorem taxes and production volumes between periods, partially offset by lower natural gas prices during the three months ended March 31, 2024.

Production and ad valorem taxes as a percentage of natural gas revenues increased from 7.4% for the three months ended March 31, 2023 to 12.3% for the three months ended March 31, 2024, primarily as a result of higher ad valorem taxes, which 2024 ad valorem taxes are based on commodity prices during 2022.

General and administrative expense .

General and administrative expense (excluding equity-based compensation expense) increased from $33 million for the three months ended September 30, 2022 to $40 million for the three months ended

September 30, 2023, an increase of $7 million, or 23% , primarily due to higher salary and wage expense and software license costs between periods.

We had 554 and 605 employees as of September 30, 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 September 30, 2022 to $0.13 per Mcfe for the three months ended September 30, 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) decreased from $44 million for the three months ended March 31, 2023 to $40 million for the three months ended March 31, 2024, a decrease of $4 million, or 10% , primarily due to lower professional service fees between periods.

General and administrative expense on a per unit basis (excluding equity-based compensation) decreased from $0.15 per Mcfe for the

three months ended March 31, 2023 to $0.13 per Mcfe for the three months ended March 31, 2024 as a result of higher production volumes and lower overall costs between periods.

Equity-based compensation expense .

Noncash equity-based compensation expense increased from $10 million for the three months ended September 30, 2022 to $18 million for the three months ended September 30, 2023, an increase of $8 million, or 77%, 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.

Noncash equity-based compensation expense increased from $13 million for the three months ended March 31, 2023 to $16 million for the three months ended March 31, 2024, an increase of $3 million, or 23%.

This increase was primarily due to annual equity awards granted in March 2023 that were outstanding for the entire first quarter of 2024 and annual equity awards granted during March 2024, partially offset by prior year awards that were fully vested during the year ended December 31, 2023.

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

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

DD&A expense increased from $170 million, or $0.58 per Mcfe, to $176 million, or $0.55 per Mcfe, for the three months ended September 30, 2022 and 2023, respectively.

This increase in DD&A expense was primarily due to higher production volumes between periods, partially offset by higher reserve volumes during the three months ended September 30, 2023.

DD&A expense increased from $168 million for the three months ended March 31, 2023 to $173 million for the three months ended March 31, 2024, an increase of $5 million, or 3%, primarily due to higher production volumes between periods.

On a per unit basis, DD&A expense remained relatively consistent at $0.57 and $0.56 per Mcfe for the three months ended March 31, 2023 and 2024, respectively.

Impairment of property and equipment .

Impairment of oil and gas properties decreased from $34 million for the three months ended September 30, 2022 to $13 million for the three months ended September 30, 2023, a decrease of $21 million, or 60%, 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.

Contract termination, loss contingency and other operating expenses .

Contract termination, loss contingency and other operating expenses of $18 million for the three months ended September 30, 2022 were primarily due to a payment for the cancellation of the Smithburg 2 gas processing plant.

Contract termination, loss contingency and other operating expenses of $14 million for the three months ended September 30, 2023 were primarily due to a loss contingency .

Impairment of oil and gas properties decreased from $16 million for the three months ended March 31, 2023 to $5 million for the three months ended March 31, 2024, a decrease of $11 million, or 67%, primarily due 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 utilize.

Marketing Segment

1 unchanged sentence

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 September 30, 2022 to $16 million, or $0.05 per Mcfe, for the three months ended September 30, 2023, primarily due to lower firm transportation commitments.

Net marketing expense decreased from $23 million, or $0.08 per Mcfe, for the three months ended March 31, 2023 to $11 million, or $0.04 per Mcfe, for the three months ended March 31, 2024, primarily due to lower firm transportation commitments.

Marketing revenue.

Marketing revenue decreased from $160 million for the three months ended September 30, 2022 to $53 million for the three months ended September 30, 2023, a decrease of $107 million, or 67%.

Marketing revenue decreased from $59 million for the three months ended March 31, 2023 to $49 million for the three months ended March 31, 2024, a decrease of $10 million, or 17%.

This fluctuation primarily resulted from the following:

● Natural gas marketing revenue decreased by $30 million between periods primarily due to lower natural gas prices and marketing volumes.

Lower natural gas prices accounted for a $100 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 lower natural gas marketing volumes accounted for an approximate $2 million decrease 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 $5 million for the three months ended September 30, 2022.

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

Marketing expense.

Marketing expense decreased from $185 million for the three months ended September 30, 2022 to $70 million for the three months ended September 30, 2023, a decrease of $115 million, or 62%.

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 $100 million, $5 million and $1 million, respectively, between periods.

The total cost of third-party commodity purchases decreased primarily

due to lower commodity prices and marketing volumes between periods.

Firm transportation costs were $35 million for the three months ended September 30, 2022 and $26 million for the three months ended September 30, 2023, a decrease of $9 million due to the reduction in firm transportation commitments between periods.

Antero Midstream Segment

Antero Midstream revenue.

Revenue from the Antero Midstream segment increased from $231 million for the three months ended September 30, 2022 to $264 million for the three months ended September 30, 2023, an increase of $33 million, primarily due to higher low pressure gathering, compression and fresh water delivery revenues as a result of increased throughput and higher rates from annual CPI-based adjustments between periods.

Antero Midstream operating expense.

Total operating expense related to the Antero Midstream segment increased from $93 million for the three months ended September 30, 2022 to $102 million for the three months ended September 30, 2023, an increase of $9 million.

This increase was primarily due to gathering, compression and water handling expenses (“direct operating expenses”) for 12 compressor stations that were acquired during the fourth quarter of 2022 and higher fresh water delivery volumes between periods.

Discussion of Items Not Allocated to Segments

Interest expense.

Interest expense increased from $28 million for the three months ended September 30, 2022 to $32 million for the three months ended September 30, 2023, an increase of $4 million, or 12%, primarily due to higher benchmark interest rates during the three months ended September 30, 2023 and higher Credit Facility borrowings between periods, partially offset by 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 three months ended September 30, 2022, we repurchased $208 million of our 2026 Notes at a weighted average of 109% of the principal amount thereof, plus accrued and unpaid interest, and $118 million of our 2029 Notes at a weighted average of 107% of the principal amount thereof, plus accrued and unpaid interest, which resulted in a loss on early debt extinguishment of $30 million.

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

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

Income tax expense .

For the three months ended September 30, 2022, we had an income tax expense of $136 million, with an effective tax rate of 19%, due to income before income taxes of $730 million.

For the three months ended September 30, 2023, we had an income tax expense of $14 million, with an effective tax rate of 30%, due to income before income taxes of $46 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 each of the three months ended March 31, 2023 and September 30, 2023, resulted in a 17% effective tax rate for the nine months ended September 30, 2023.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2023

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

Nine Months Ended September 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, loss contingency and other operating expenses

Loss (gain) on sale of assets

Total operating expenses

Operating income (loss)

Equity in earnings of unconsolidated affiliates

Nine Months Ended September 30, 2023

Equity Method

Investment in

Elimination of

Unconsolidated

Revenue and other:

Natural gas sales

Natural gas liquids sales

Commodity derivative fair value gains

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, loss contingency 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:

Nine Months Ended

September 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.

(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 nine months ended September 30, 2023 includes $13 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 $9.77 per Bbl.

Natural gas sales .

Revenues from sales of natural gas decreased from $4.3 billion for the nine months ended September 30, 2022 to $1.6 billion for the nine months ended September 30, 2023, a decrease of $2.7 million, or 62%.

Lower commodity prices (excluding the effects of derivative settlements) during the nine months ended September 30, 2023 accounted for an approximate $2.7 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 $29 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 $2.0 billion for the nine months ended September 30, 2022 to $1.4 billion for the nine months ended September 30, 2023, a decrease of $0.6 billion, or 31%.

Lower commodity prices (excluding the effects of derivative settlements) during the nine months ended September 30, 2023 accounted for an approximate $811 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 $203 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 $220 million for the nine months ended September 30, 2022 to $172 million for the nine months ended September 30, 2023, a decrease of $48 million, or 21%.

Lower oil prices, excluding the effects of derivative settlements, accounted for an approximate $73 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 nine months ended September 30, 2023 accounted for an approximate $25 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, swaptions, 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 nine months ended September 30, 2022 and 2023, our commodity hedges resulted in derivative fair value losses of $1.8 billion and fair value gains of $138 million, respectively.

For the nine months ended September 30, 2022, commodity derivative fair value losses included $1.5 billion of cash payments on settled commodity derivative losses.

For the nine months ended September 30, 2023, commodity derivative fair value gains included $17 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.

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.

Additionally, substantially all of our production is currently unhedged for 2023 and beyond, which limits our exposure to volatility in the fair value of our derivative instruments related to commodity price changes in the future.

Amortization of deferred revenue, VPP.

Amortization of deferred revenues associated with the VPP decreased from $28 million for the nine months ended September 30, 2022 to $23 million for the nine months ended September 30, 2023, a decrease of $5 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 $70 million, or $0.08 per Mcfe, for the nine months ended September 30, 2022 to $92 million, or $0.10 per Mcfe for the nine months ended September 30, 2023, an increase of $22 million or $0.02 per Mcfe, primarily due to higher oilfield service, workover and produced water handling costs.

Gathering, compression, processing and transportation expense.

Gathering, compression, processing and transportation expense remained consistent at $2.0 billion for each of the nine months ended September 30, 2022 and 2023.

This was primarily a result of the following:

● Gathering and compression costs on a per unit basis decreased from $0.76 per Mcfe for the nine months ended September 30, 2022 to $0.69 per Mcfe for the nine months ended September 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 $0.75 per Mcfe for the nine months ended September 30, 2022 to $0.83 per Mcfe for the nine months ended September 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 $0.74 per Mcfe for the nine months ended September 30, 2022 to $0.62 per Mcfe for the nine months ended September 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 $228 million for the nine months ended September 30, 2022 to $118 million for the nine months ended September 30, 2023, a decrease of $110 million, or 48%, 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 nine months ended September 30, 2022 to 7% for the nine months ended September 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 $100 million for the nine months ended September 30, 2022 to $125 million for the nine months ended September 30, 2023, an increase of $25 million, or 25%, primarily due to higher salary and wage expense, professional service fees, software license costs and office operating costs between periods.

We had 554 and 605 employees as of September 30, 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 nine months ended September 30, 2022 to $0.13 per Mcfe for the nine months ended September 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 $23 million for the nine months ended September 30, 2022 to $45 million for the nine months ended September 30, 2023, an increase of $22 million, primarily due to an increase in the annual equity awards granted during the fourth quarter of 2022 and first three quarters 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.

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 remained relatively consistent at $511 million, or $0.59 per Mcfe, and $515 million, or $0.56 per Mcfe, for the nine months ended September 30, 2022 and 2023, respectively.

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

Impairment of property and equipment .

Impairment of oil and gas properties decreased from $80 million for the nine months ended September 30, 2022 to $45 million for the nine months ended September 30, 2023, a decrease of $35 million, or 44%, 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.

Contract termination, loss contingency and other operating expenses .

Contract termination, loss contingency and other operating expenses attributable to our exploration and production segment of $20 million for the nine months ended September 30, 2022 were primarily due to a payment for the cancellation of the Smithburg 2 gas processing plant.

Contract termination, loss contingency and other operating expenses attributable to our exploration and production segment of $24 million for the nine months ended September 30, 2023 were primarily due to a loss contingency and the early termination of certain completion contracts.

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 (calculated as marketing revenues less marketing expense) decreased from $80 million, or $0.09 per Mcfe, for the nine months ended September 30, 2022 to $62 million, or $0.07 per Mcfe, for the nine months ended September 30, 2023, primarily due to lower firm transportation commitments, partially offset by lower marketing margins between periods.

M arketing revenue.

Marketing revenue decreased from $335 million for the nine months ended September 30, 2022 to $155 million for the nine months ended September 30, 2023, a decrease of $180 million, or 54%.

This fluctuation primarily resulted from the following:

● Natural gas marketing revenue decreased by $145 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 $156 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 $11 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 $37 million for the nine months ended September 30, 2022.

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

● 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 $19 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 $17 million decrease in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

Lower natural gas marketing volumes accounted for a $24 million decrease in year-over-year marketing revenues (calculated as the change in year-to-year volumes times the prior year average price), and lower natural gas prices accounted for a $6 million decrease in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

● Oil marketing revenue increased by $16 million between periods primarily due to higher oil marketing volumes and prices.

Higher oil marketing volumes accounted for an $8 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 $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).

● NGLs marketing revenues were $3 million for the three months ended March 31, 2024.

There were no NGLs marketing revenues for the three months ended March 31, 2023.

Marketing expense.

Marketing expense decreased from $415 million for the nine months ended September 30, 2022 to $217 million for the nine months ended September 30, 2023, a decrease of $198 million, or 48%.

Marketing expense decreased from $81 million for the three months ended March 31, 2023 to $60 million for the three months ended March 31, 2024, a decrease of $21 million, or 26%.

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 $150 million and $24 million, respectively, partially offset by oil purchase increases of $3 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 during the nine months ended September 30, 2023.

Firm transportation costs were $109 million for the nine months ended September 30, 2022 and $82 million for the nine months ended September 30, 2023, a decrease of $27 million due to the reduction in firm transportation commitments and higher third-party marketing volumes between periods.

The cost of third-party natural gas, oil and NGLs purchases decreased $9 million between periods, primarily due to lower natural gas prices and marketing volumes between periods, partially offset by higher oil and NGLs marketing volumes and prices between periods.

Firm transportation costs were $29 million for the three months ended March 31, 2023 and $17 million for the three months ended March 31, 2024, a decrease of $12 million due to the reduction in firm transportation commitments between periods.

Contract termination, loss contingency and other operating expenses.

Our marketing segment did not incur any contract termination, loss contingency and other operating expenses for the nine months ended September 30, 2022.

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

Contract termination, loss contingency and other operating expenses 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.

Our marketing segment did not incur any contract termination loss contingency and other operating expenses for the three months ended March 31, 2024.

Antero Midstream Segment

Antero Midstream revenue.

Revenue from the Antero Midstream segment increased from $678 million for the nine months ended September 30, 2022 to $782 million for the nine months ended September 30, 2023, an increase of $104 million, primarily due to increased throughput and water handling volumes between periods, as well as higher gathering, compression and fresh water delivery fees primarily as a result of an annual CPI-based adjustments and higher other fluid handling fees primarily due to increased costs partially due to inflationary pressures between periods that impact the cost plus 3% and cost of service rates.

Revenue from the Antero Midstream segment increased from $259 million for the three months ended March 31, 2023 to $279 million for the three months ended March 31, 2024, an increase of $20 million.

This increase is primarily due to higher gathering and processing revenues of $28 million as a result of the expiration of the growth incentive fee rebate program on December 31, 2023 and increased throughput between periods, partially offset by lower water handling revenues of $8 million primarily due to decreased water trucking volumes and fewer wells serviced by fresh water deliveries between periods.

Antero Midstream operating expense.

Total operating expense related to the Antero Midstream segment increased from $283 million for the nine months ended September 30, 2022 to $325 million for the nine months ended September 30, 2023, an increase of $42 million, primarily due to increased direct operating and equity-based compensation expenses, partially offset by lower general and administrative expenses (excluding equity-based compensation) between periods.

Direct operating expenses increased between periods primarily due to 12 compressors that were acquired during the fourth quarter of 2022 and increased heavy maintenance expense between periods.

Equity-based compensation increased between periods primarily due to an increase in the annual equity awards granted during 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.

Antero Midstream’s equity awards vest over three or four year service periods, and its equity incentive program began returning to normal levels in 2021.

General and administrative expenses (excluding equity-based compensation expense) decreased between periods primarily due to lower legal costs.

Items Not Allocated to Segments

Total operating expense related to the Antero Midstream segment remained relatively consistent at $111 million and $113 million for the three months ended March 31, 2023 and 2024, respectively.

Discussion of Items Not Allocated to Segments

Interest expense.

Interest expense decreased from $100 million for the nine months ended September 30, 2022 to $85 million for the nine months ended September 30, 2023, a decrease of $15 million or 15%, 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 benchmark interest rates during the nine months ended September 30, 2023 and higher Credit Facility borrowings between periods.

Loss on early extinguishment of debt.

During the nine months ended September 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 $221 million of our 2026 Notes at a weighted average of 109% of the principal amount thereof, plus accrued and unpaid interest, and $168 million of our 2029 notes at a weighted average of 107% of the principal amount thereof, plus accrued and unpaid interest, which resulted in a loss on early debt extinguishment of $45 million.

There were no debt redemptions or repurchases during the nine months ended September 30, 2023.

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

Interest expense increased from $26 million for the three months ended March 31, 2023 to $30 million for the three months ended March 31, 2024, an increase of $4 million, or 17%, primarily due to higher average Credit Facility borrowings between periods and higher benchmark interest rates during the three months ended March 31, 2024, partially offset by the conversion or inducement of $39 million aggregate principal amount of our 2026 Convertible Notes between periods.

Income tax expense .

For the nine months ended September 30, 2022, we had an income tax expense of $308 million, with an effective tax rate of 20%, due to income before income taxes of $1.5 billion.

For the nine months ended September 30, 2023, we had income tax expense of $46 million, with an effective tax rate of 17%, due to income before income taxes of $272 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.

Income tax expense decreased from $62 million for the three months ended March 31, 2023 to $10 million for the three months ended March 31, 2024, a decrease of $52 million, or 84%, primarily due to lower income before taxes of $265 million between periods.

Our effective tax rate remained relatively consist for the three months ended March 31, 2023 and 2024 at 19% and 17%, respectively.

Capital Resources and Liquidity

Sources and Uses of Cash

Our primary sources of liquidity have been through net cash provided by operating activities, borrowings under our Credit Facility, issuances of debt and equity securities and additional contributions from our asset sales program, including our drilling partnership .

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.

Based on strip prices as of September 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.

Our future success in developing 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, 2024, 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):

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash provided by operating activities

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Operating activities.

Net cash provided by operating activities was $2.6 billion and $682 million for the nine months ended September 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 higher contract termination expenses, general and administrative expenses (excluding equity-based compensation expense) and lease operating expenses.

These operating cash flow decreases were partially offset by higher production and changes in working capital and lower payments for commodity derivative settlements, net marketing expense and interest expense between periods.

Net cash provided by operating activities was $344 million and $262 million for the three months ended March 31, 2023 and 2024, respectively.

Net cash provided by operating activities decreased between periods primarily due to lower natural gas prices, changes in working capital and higher gathering, compression, processing and transportation expenses, partially offset by a $202 million payment for early settlement of our swaption agreement in the three months ended March 31, 2023, higher production volumes and lower net marketing 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 $718 million for the nine months ended September 30, 2022 to $914 million for the nine months ended September 30, 2023, primarily due to an increase in capital expenditures of $191 million between periods.

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

Net cash used in investing activities decreased from $351 million for the three months ended March 31, 2023 to $227 million for the three months ended March 31, 2024, primarily due to a decrease in drilling activity, drilling rig count, completions stages and leasing activity between periods.

Financing activities.

Net cash used in financing activities was $1.9 billion during the nine months ended September 30, 2022, as compared to net cash provided by financing activities of $232 million during the nine months ended September 30, 2023.

During the nine months ended September 30, 2022, we redeemed $585 million aggregate principal amount of our 2025 Notes, repurchased $221 million aggregate principal amount of our 2026 Notes and $168 million aggregate principal amount of our 2029 Notes at a total cost of $1.0 billion.

We also repurchased approximately 19 million shares of our common stock at a total cost of approximately $675 million, distributed $114 million to the noncontrolling interest in Martica and paid $65 million in employee withholding taxes for vested equity-based awards.

Additionally, we borrowed $9 million, net, on our Credit Facility during the nine months ended September 30, 2022.

During the nine months ended September 30, 2023, we

borrowed $439 million, net, on our Credit Facility, partially offset by distributions to the noncontrolling interests in Martica of $104 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.

Net cash provided by financing activities was $7 million for the three months ended March 31, 2023.

Net cash used in financing activities was $35 million for the three months ended March 31, 2024.

This change between periods is primarily due to lower net borrowings on our Credit Facility of $147 million between periods, partially offset by decreased share repurchases of $75 million and decreased distributions to the noncontrolling interests in Martica of $28 million between periods.

2024 Capital Budget and Capital Spending

On February 15, 2023, we announced a net capital budget for 2023 of $1.025 billion to $1.075 billion.

On February 14, 2024, we announced a net capital budget for 2024 of $725 million to $800 million.

Our budget includes:

a range of $875 million to $925 million for drilling and completion and $150 million for leasehold expenditures.

a range of $650 million to $700 million for drilling and completion and $75 million to $100 million for leasehold expenditures.

We do not budget for acquisitions.

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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 September 30, 2023, our total consolidated capital expenditures were $262 million, including drilling and completion costs of $231 million, leasehold acquisitions of $27 million and other capital expenditures of $4 million.

For the nine months ended September 30, 2023, our total consolidated capital expenditures were $890 million, including drilling and completion costs of $745 million, leasehold acquisitions of $134 million and other capital expenditures of $11 million.

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 March 31, 2024, our total consolidated capital expenditures were $219 million, including drilling and completion costs of $187 million, leasehold acquisitions of $26 million and other capital expenditures of $6 million.

Debt Agreements

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2023 Form 10-K for information on our senior notes.

Critical Accounting Policies and Estimates

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP.

The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

Certain accounting policies involve judgments and uncertainties to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used.

Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been included in Note 2—Summary of Significant Accounting Policies to our unaudited condensed consolidated financial statements.

The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities.

Accounting estimates and assumptions are considered to be critical if there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used.

We evaluate our estimates and assumptions on a regular basis.

We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported amounts in our unaudited condensed consolidated financial statements that are not readily apparent from other sources.

Actual results may differ from these estimates and assumptions used in preparation of our unaudited condensed consolidated financial statements.

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

We provide an expanded discussion of our more significant accounting policies, estimates and judgments in the 2022 Form 10-K.

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

Also, see Note 2—Summary of Significant Accounting Policies to the consolidated financial statements, included in the 2022 Form 10-K, for a discussion of additional accounting policies and estimates made by management.

We evaluate the carrying amount of our proved natural gas, NGLs and oil properties for impairment for the Utica and Marcellus Shale properties, by property, when events or changes in circumstances indicate that a property’s carrying amount may not be recoverable.

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 September 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 nine months ended September 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 September 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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2023 Form 10-K for information on our critical accounting estimates.

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

If the carrying amount of our proved properties exceeds the estimated undiscounted future net cash flows (measured using futures prices at the balance sheet date), we further evaluate our proved properties and record an impairment charge if the carrying amount of our proved properties exceeds the estimated fair value of the properties.

Based on future prices as of March 31, 2024, 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, 2023 and 2024.

We believe that the estimates and assumptions related to our undiscounted future net cash flows and the fair value of our proved properties are critical because different natural gas, NGLs and oil pricing, cost assumptions or discount rates, as applicable, may affect the recognition, timing and amount of an impairment and, if changed, could have a material effect on the Company's financial position and results of operations.

New Accounting Pronouncements

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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