What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-31 compared with 2024-04-24 · 289 added, 94 removed, 233 unchanged (62% of the section changed)

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Our drilling opportunities are focused in the Appalachian Basin.

As of March 31, 2024, we held approximately 517,000 net acres in the Appalachian Basin.

As of June 30, 2024, we held approximately 519,000 net acres in the Appalachian Basin.

Financing Highlights

Credit Facility

During the three months ended, June 30, 2024, we achieved an investment grade credit rating from S&P Global Inc.

As a result of this investment grade credit rating, on July 30, 2024, we entered into an amendment and restatement of our senior revolving credit facility with lender commitments of $1.65 billion that matures on July 30, 2029, subject to certain extension terms and conditions.

The New Credit Facility is unsecured and is not guaranteed by any of our subsidiaries.

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

Market Conditions and Business Trends

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

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.

Natural gas benchmark prices decreased significantly while NGLs and oil benchmark prices increased during the three and six months ended June 30, 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 and six months ended June 30, 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.

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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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(1) NYMEX first of month average natural gas price.

(2) Energy Information Administration calendar month average settled futures price.

(2) NYMEX calendar month average settled futures price.

Hedge Position

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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.

For the three and six months ended June 30, 2023 and 2024, substantially all of our production was unhedged.

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, 2024, our fixed price NGLs swap positions excluding Martica were as follows:

As of June 30, 2024, our fixed price NGLs swap positions excluding Martica were as follows:

Commodity / Settlement Period

Contracted Volume

April-December 2024

July-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:

As of June 30, 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

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Hedged Differential

April-December 2024

July-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, 2024, our call option and embedded put option arrangements were as follows:

As of June 30, 2024, our call option and embedded put option arrangements were as follows:

Commodity / Settlement Period

Contracted Volume

April-December 2024

July-December 2024

January-December 2025

January-December 2026

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

As of June 30, 2024, the estimated fair value of our commodity derivative contracts, excluding Martica, was a net liability of $37 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, 2024, Martica’s fixed price natural gas and oil swap positions were as follows:

As of June 30, 2024, Martica’s fixed price natural gas and oil swap positions were as follows:

Commodity / Settlement Period

Contracted Volume

April-December 2024

July-December 2024

January-March 2025

April-December 2024

July-December 2024

West Texas Intermediate

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West Texas Intermediate

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

As of June 30, 2024, the estimated fair value of Martica’s commodity derivative contracts was a net liability of $4 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 quarter of 2024.

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%.

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

Between March 2022 and June 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.

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

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

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2024

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

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Equity Method

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Accretion of asset retirement obligations

Contract termination, loss contingency and other operating expenses

Gain on sale of assets

Contract termination and other operating expenses

Loss (gain) on sale of assets

Total operating expenses

1 unchanged sentence

Equity in earnings of unconsolidated affiliates

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Equity Method

5 unchanged sentences

Natural gas liquids sales

Commodity derivative fair value gains

Commodity derivative fair value losses

Gathering, compression and water handling

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Accretion of asset retirement obligations

Loss on sale of assets

Loss (gain) on sale of assets

Contract termination, loss contingency and other operating expenses

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(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 (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.

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 and 2024 includes $1 million and $0.1 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 June 30, 2023 and 2024 would have been $7.65 per Bbl and $8.41 per Bbl, respectively.

Natural gas sales .

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 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%.

Revenues from sales of natural gas decreased from $437 million for the three months ended June 30, 2023 to $375 million for the three months ended June 30, 2024, a decrease of $62 million, or 14%.

Lower commodity prices (excluding the effects of derivative settlements) during the three months ended June 30, 2024 accounted for an approximate $43 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).

Lower natural gas production volumes accounted for an approximate $19 million decrease in year-over-year natural gas sales revenue (calculated as the change in year-to-year volumes times the prior year average price).

Revenues from sales of NGLs increased from $398 million for the three months ended June 30, 2023 to $489 million for the three months ended June 30, 2024, an increase of $91 million, or 23%.

Higher commodity prices (excluding the effects of derivative settlements) during the three months ended June 30, 2024 accounted for an approximate $69 million increase 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 $22 million increase in year-over-year NGLs revenues (calculated as the change in year-to-year volumes times the prior year average price).

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.

Revenues from sales of oil increased from $58 million for the three months ended June 30, 2023 to $63 million for the three months ended June 30, 2024, an increase of $5 million, or 9%.

Higher commodity prices (excluding the effects of derivative settlements) during the three months ended June 30, 2024 accounted for an approximate $6 million increase in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Lower oil production volumes during the three months ended June 30, 2024 accounted for an approximate $1 million decrease in year-over-year oil revenues (calculated as the change in year-to-year volumes times the prior year average price).

Commodity derivative fair value gains (losses).

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

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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 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.

For the three months ended June 30, 2023 and 2024, our commodity hedges resulted in derivative fair value gains of $8 million and fair value losses of $6 million, respectively.

For the three months ended June 30, 2023 and 2024, commodity derivative fair value gains (losses) included $3 million and $6 million, respectively, of net 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.

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Amortization of deferred revenue, VPP.

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 deferred revenues associated with the VPP decreased from $8 million for the three months ended June 30, 2023 to $7 million for the three months ended June 30, 2024, a decrease of $1 million, or 12%, 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 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.

Lease operating expense remained relatively consistent for the three months ended June 30, 2023 and 2024 at $29 million and $30 million, respectively.

On a per-unit basis, lease operating expense increased from $0.09 per Mcfe for the three months ended June 30, 2023 to $0.10 per Mcfe for the three months ended June 30, 2024 primarily due to increased oilfield services costs between periods.

Gathering, compression, processing and transportation expense.

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.

Gathering, compression, processing and transportation expense remained relatively consistent at $664 million and $663 million for the three months ended June 30, 2023 and 2024, respectively.

This was primarily a result of the following:

● Gathering and compression costs increased from $0.68 per Mcfe for the three months ended June 30, 2023 to $0.71 per Mcfe for the three months ended June 30, 2024, primarily due to the expiration of the growth incentive fee rebate program on December 31, 2023 and annual CPI-based adjustments between periods.

During the three months ended June 30, 2023, we earned a fee rebate of $12 million under this program.

● Processing costs increased from $0.85 per Mcfe for the three months ended June 30, 2023 to $0.87 per Mcfe for the three months ended June 30, 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 $0.61 per Mcfe for the three months ended June 30, 2023 to $0.55 per Mcfe for the three months ended June 30, 2024 primarily due to lower demand fees and fuel costs as a result of lower natural gas prices between periods.

Production and ad valorem tax expense.

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.

Production and ad valorem taxes increased from $36 million for the three months ended June 30, 2023 to $42 million for the three months ended June 30, 2024, an increase of $6 million, or 16%, primarily due to higher ad valorem taxes and production volumes between periods, partially offset by lower natural gas prices during the three months ended June 30, 2024.

Production and ad valorem taxes as a percentage of natural gas revenues increased from 8% for the three months ended June 30, 2023 to 11% for the three months ended June 30, 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) 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.

General and administrative expense (excluding equity-based compensation expense) increased from $40 million for the three months ended June 30, 2023 to $42 million for the three months ended June 30, 2024, an increase of $2 million, or 5% , primarily due to higher professional service fees between periods.

General and administrative expense on a per unit basis (excluding equity-based compensation) increased from $0.13 per Mcfe for the three months ended June 30, 2023 to $0.14 per Mcfe for the three months ended June 30, 2024 as a result of higher overall costs between periods.

Equity-based compensation expense .

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.

Noncash equity-based compensation expense increased from $14 million for the three months ended June 30, 2023 to $17 million for the three months ended June 30, 2024, an increase of $3 million, or 27%.

This increase was primarily due to annual equity-based awards granted during the first quarter of 2024.

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 $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.

DD&A expense remained relatively consistent at $171 million, or $0.56 per Mcfe, and $171 million, or $0.55 per Mcfe, for the three months ended June 30, 2023 and 2024, respectively.

Impairment of property and equipment .

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.

Impairment of oil and gas properties of $16 million for the three months ended June 30, 2023 primarily related to expiring leases we no longer plan to utilize.

Marketing Segment

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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 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.

Net marketing expense for the three months ended June 30, 2023 and 2024 remained relatively consistent at $22 million and $21 million, respectively, or $0.07 per Mcfe.

Marketing revenue.

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%.

Marketing revenue increased from $44 million for the three months ended June 30, 2023 to $49 million for the three months ended June 30, 2024, an increase of $5 million, or 13%.

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 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).

● Natural gas marketing revenue decreased by $16 million between periods primarily due to lower natural gas marketing volumes between periods.

● Oil marketing revenue increased by $21 million between periods primarily due to higher oil marketing volumes and prices.

Higher oil marketing volumes accounted for an $16 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 $5 million increase in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

● 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 $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 increased from $66 million for the three months ended June 30, 2023 to $71 million for the three months ended June 30, 2024, an increase of $5 million, or 7%.

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, 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.

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.

The cost of third-party natural gas, oil and NGLs purchases increased $5 million between periods, primarily due to higher oil marketing volumes and prices between periods, partially offset by lower natural gas marketing volumes and prices between periods.

Firm transportation costs remained consistent at $27 million for the three months ended June 30, 2023 and 2024.

Antero Midstream Segment

Antero Midstream revenue.

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.

Revenue from the Antero Midstream segment increased from $258 million for the three months ended June 30, 2023 to $270 million for the three months ended June 30, 2024, an increase of $12 million.

This increase is primarily due to higher gathering and processing revenues of $18 million, partially offset by lower water handling revenues of $6 million.

The increased gathering and processing revenues between periods is primarily a result of the expiration of the growth incentive fee rebate program on December 31, 2023, annual CPI-based gathering and compression rate adjustments and increased high pressure gathering throughput between periods.

The decreased water handling revenues between periods was primarily due to lower fresh water delivery volumes, partially offset by higher other fluid handing

volumes and an increased fresh water delivery rate due to an annual CPI-based adjustment during the three months ended June 30, 2024.

Antero Midstream operating expense.

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.

Total operating expense related to the Antero Midstream segment increased from $113 million for the three months ended June 30, 2023 to $117 million for the three months ended June 30, 2024, an increase of $4 million.

This increase is primarily due to higher direct operating expenses, equity-based compensation expenses and depreciation expense between periods, partially offset by lower interest expense.

Direct operating expenses increased by $3 million between periods primarily due to higher compression expense for the addition of two compressor stations that were acquired during the second quarter of 2024 and increased high pressure gathering volumes, partially offset by increased pipeline maintenance, repair and monitoring activities for the three months ended June 30, 2024.

Discussion of Items Not Allocated to Segments

Interest expense.

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 .

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.

Interest expense increased from $28 million for the three months ended June 30, 2023 to $33 million for the three months ended June 30, 2024, an increase of $5 million, or 17%, primarily due to higher average Prior Credit Facility borrowings between periods and higher benchmark interest rates during the three months ended June 30, 2024.

Income tax benefit .

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.

For the three months ended June 30, 2024, we had an income tax benefit of $13 million, with an effective tax rate of 18%, due to a loss before income taxes of $74 million.

The decrease in income tax benefit between periods of $17 million is primarily due to lower loss before income taxes between periods.

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

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2024

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

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 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

Contract termination and other operating expenses

Loss (gain) on sale of assets

Total operating expenses

Operating income (loss)

Equity in earnings of unconsolidated affiliates

Six Months Ended June 30, 2024

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

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 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:

Six Months Ended

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

* 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 (but do not include payments 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 six months ended June 30, 2023 and 2024 includes $7 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 six months ended June 30, 2023 and 2024 would have been $9.17 per Bbl and $8.72 per Bbl, respectively.

Natural gas sales .

Revenues from sales of natural gas decreased from $1.1 billion for the six months ended June 30, 2023 to $849 million for the six months ended June 30, 2024, a decrease of $257 million, or 23%.

Lower commodity prices (excluding the effects of derivative settlements) during the six months ended June 30, 2024 accounted for an approximate $255 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 $2 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 increased from $893 million for the six months ended June 30, 2023 to $1.0 billion for the six months ended June 30, 2024, an increase of $114 million, or 13%.

Higher commodity prices (excluding the effects of derivative settlements) during the six months ended June 30, 2024 accounted for an approximate $54 million increase in year-over-year revenues (calculated as the change in the year-to-year average price times current year production volumes).

Higher NGLs production volumes accounted for an approximate $60 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 increased from $110 million for the six months ended June 30, 2023 to $128 million for the six months ended June 30, 2024, an increase of $18 million, or 17%.

Higher oil prices, excluding the effects of derivative settlements, accounted for an approximate $7 million increase 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 six months ended June 30, 2024 accounted for an approximate $11 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 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 six months ended June 30, 2023 and 2024, our commodity hedges resulted in derivative fair value gains of $134 million and $4 million, respectively.

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.

For the six months ended June 30, 2024, commodity derivative fair value gains included $7 million of net cash proceeds for settled 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.

Additionally, substantially all of our production is currently unhedged for 2024 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 $15 million for the six months ended June 30, 2023 to $13 million for the six months ended June 30, 2024, a decrease of $2 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 $58 million for the six months ended June 30, 2023 to $59 million for the six months ended June 30, 2024, primarily due to higher oilfield service costs.

On a per-unit basis, lease operating expenses decreased from $0.10 per Mcfe for the six months ended June 30, 2023 to $0.09 per Mcfe for the six months ended June 30, 2024, primarily due to higher production volumes between periods, partially offset by higher overall costs during the six months ended June 30, 2024.

Gathering, compression, processing and transportation expense.

Gathering, compression, processing and transportation expense remained consistent at $1.3 billion for the six months ended June 30, 2023 and 2024.

This was primarily a result of the following:

● Gathering and compression costs on a per unit basis increased from $0.70 per Mcfe for the six months ended June 30 , 2023 to $0.72 per Mcfe for the six months ended June 30, 2024, primarily due to the expiration of the growth incentive fee rebate program on December 31, 2023 and annual CPI-based adjustments between periods.

During the six months ended June 30, 2023, we earned fee rebates of $24 million under this program.

● Processing costs on a per unit basis increased from $0.83 per Mcfe for the six months ended June 30, 2023 to $0.84 per Mcfe for the six months ended June 30, 2024, primarily due to increased costs for NGLs processing and transportation, which includes an annual CPI-based adjustment during the first quarter of 2024 and higher NGLs transportation fees.

● Transportation costs on a per unit basis decreased from $0.64 per Mcfe for the six months ended June 30, 2023 to $0.58 per Mcfe for the six months ended June 30, 2024 primarily due to lower demand fees and lower fuel costs as a result of lower natural gas prices between periods.

Production and ad valorem tax expense.

Production and ad valorem taxes increased from $85 million for the six months ended June 30, 2023 to $100 million for the six months ended June 30, 2024, an increase of $15 million, or 17%, primarily due to higher ad valorem taxes and production volumes between periods, partially offset by lower natural gas prices during the six months ended June 30, 2024.

Production and ad valorem taxes as a percentage of natural gas revenues increased

from 8% for the six months ended June 30, 2023 to 12% for the six months ended June 30, 2024, primarily as a result of higher ad valorem taxes, which 2024 West Virginia ad valorem taxes are based on commodity prices during 2022.

General and administrative expense .

General and administrative expense (excluding equity-based compensation expense) decreased from $85 million for the six months ended June 30, 2023 to $82 million for six months ended June 30, 2024, a decrease of $3 million, or 3%, primarily due to lower professional service fees between periods.

General and administrative expense on a per unit basis (excluding equity-based compensation) decreased from $0.14 per Mcfe for the six months ended June 30, 2023 to $0.13 per Mcfe for the six months ended June 30, 2024 as a result of lower overall costs and increased production volumes between periods.

Equity-based compensation expense .

Noncash equity-based compensation expense increased from $27 million for the six months ended June 30, 2023 to $33 million for the six months ended June 30, 2024, an increase of $6 million, or 25%.

This increase was primarily due to annual equity-based awards granted in the first quarters of 2023 and 2024, partially offset by equity-based awards granted in prior years that were fully vested between periods.

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

Depletion, depreciation and amortization expense.

DD&A expense increased from $339 million for the six months ended June 30, 2023 to $344 million for the six months ended June 30, 2024, an increase of $5 million, or 1%, primarily due to higher production volumes between periods.

On a per unit basis, DD&A expense remained relatively consistent at $0.56 and $0.55 per Mcfe for the six months ended June 30, 2023 and 2024, respectively.

Impairment of property and equipment .

Impairment of oil and gas properties decreased from $31 million for the six months ended June 30, 2023 to $6 million for the six months ended June 30, 2024, a decrease of $25 million, 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 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 decreased from $10 million for the six months ended June 30, 2023 to $5 million for the six months ended June 30, 2024.

This decrease was primarily due to lower expense associated with the early termination of certain completion contracts between periods.

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 $45 million, or $0.07 per Mcfe, for the six months ended June 30, 2023 to $33 million, or $0.05 per Mcfe, for the six months ended June 30, 2024, primarily due to lower firm transportation commitments between periods.

M arketing revenue.

Marketing revenue decreased from $102 million for the six months ended June 30, 2023 to $98 million for the six months ended June 30, 2024, a decrease of $4 million, or 4%.

This fluctuation primarily resulted from the following:

● Natural gas marketing revenue decreased by $46 million between periods primarily due to lower natural gas marketing volumes and prices.

Lower natural gas marketing volumes accounted for a $41 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 $5 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 $37 million between periods primarily due to higher oil marketing volumes and prices.

Higher oil marketing volumes accounted for a $24 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 a $13 million increase in year-over-year marketing revenues (calculated as the change in the year-to-year average price times current year marketing volumes).

● NGLs marketing revenues were $3 million for the six months ended June 30, 2024.

There were no NGLs marketing revenues for the six months ended June 30, 2023.

Marketing expense.

Marketing expense decreased from $148 million for the six months ended June 30, 2023 to $131 million for the six months ended June 30, 2024, a decrease of $17 million, or 11%.

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 purchases decreased $39 million, partially offset by oil and NGLs purchases increase of $31 million and $3 million, respectively.

The total cost of third-party commodity purchases decreased primarily due to lower natural gas marketing volumes and prices between periods, partially offset by higher oil prices and marketing volumes during the six months ended June 30, 2024.

Firm transportation costs decreased $12 million from $55 million for the six months ended June 30, 2023 to $43 million for the six months ended June 30, 2024, due to the reduction in firm transportation commitments between periods.

Contract termination, loss contingency and other operating expenses .

Contract termination, loss contingency and other operating expenses attributable to our marketing segment for the six months ended June 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.

Our marketing segment did not incur any contract termination, loss contingency and other operating expenses for the six months ended June 30, 2024.

Antero Midstream Segment

Antero Midstream revenue.

Revenue from the Antero Midstream segment increased from $518 million for the six months ended June 30, 2023 to $549 million for the six months ended June 30, 2024, an increase of $31 million.

This increase is primarily due to higher gathering and processing revenues of $46 million, partially offset by lower water handling revenues of $15 million.

The increased gathering and processing revenues between periods is primarily a result of the expiration of the growth incentive fee rebate program on December 31, 2023, increased throughput and annual CPI-based gathering and compression rate adjustments between periods.

The decreased water handling revenues between periods is primarily due to lower fresh water delivery volumes and lower water handling volumes that are billed at cost plus 3%, partially offset by higher blending volumes and an increased fresh water delivery rate due to an annual CPI-based adjustment during the six months ended June 30, 2024.

Antero Midstream operating expense.

Total operating expense related to the Antero Midstream segment increased from $224 million for the six months ended June 30, 2023 to $230 million for the six months ended June 30, 2024, an increase of $6 million.

This increase is primarily due to higher equity-based compensation expense and depreciation expense between periods, partially offset by lower interest expense during the six months ended June 30, 2024.

Items Not Allocated to Segments

Interest expense.

Interest expense increased from $54 million for the six months ended June 30, 2023 to $63 million for the six months ended June 30, 2024, an increase of $9 million or 17%, primarily due to higher average Prior Credit Facility borrowings between periods and higher benchmark interest rates during the six months ended June 30, 2024.

Income tax expense (benefit) .

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

For the six months ended June 30, 2024, we had an income tax benefit of $3 million, with an effective tax rate of 21%, related to our loss before income taxes of $15 million.

The increase in the effective tax rate between periods was primarily due to the effects of noncontrolling interests and our income (loss) before income taxes.

Capital Resources and Liquidity

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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.

Based on strip prices as of June 30, 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):

Three Months Ended March 31,

Six Months Ended June 30,

Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net increase in cash and cash equivalents

Operating activities.

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.

Net cash provided by operating activities was $499 million and $405 million for the six months ended June 30, 2023 and 2024, respectively.

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 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.

Net cash used in investing activities decreased from $638 million for the six months ended June 30, 2023 to $414 million for the six months ended June 30, 2024, primarily due to a decrease in drilling and completions activity as a result of lower rig and completion crew counts between periods, and decreased leasing activity during the six months ended June 30, 2024.

Financing activities.

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.

Net cash provided by financing activities decreased from $139 million for the six months ended June 30, 2023 to $9 million for the six months ended June 30, 2024.

The decrease between periods is primarily due to lower net borrowings on our Prior Credit Facility of $246 million, partially offset by decreased share repurchases of $75 million and decreased distributions to the noncontrolling interests in Martica of $40 million between periods.

2024 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 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.

For the three months ended June 30, 2024, our total consolidated capital expenditures were $188 million, including drilling and completion costs of $164 million, leasehold acquisitions of $21 million and other capital expenditures of $3 million.

For the six months ended June 30, 2024, our total consolidated capital expenditures were $407 million, including drilling and completion costs of $351 million, leasehold acquisitions of $47 million and other capital expenditures of $9 million.

Debt Agreements

See Note 7—Long Term Debt to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and to “Item 7.

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.

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

Critical Accounting Estimates

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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.

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.

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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.

Based on future prices as of June 30, 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 and six months ended June 30, 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.

4 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis