Antero Resources LLC (“Antero” or “the Company”) updated its shorter stage length completion results, revised its 2013 capital budget and provided a hedging update.
Shorter Stage Length Completion Results
During the second quarter of 2013, Antero began to complete most of its liquids-rich Marcellus Shale wells with shorter stage lengths (“SSL”). Antero's traditional frac design resulted in stage lengths averaging 350 feet per stage compared to the recent SSL completions which ranged from 150 to 250 feet per stage. While Antero’s wells utilizing SSL completions have limited production history, the Company is encouraged by the well results as well as those of other operators in the southwestern core of the Marcellus Shale that have implemented shorter stage lengths and reduced cluster spacing. Based on the first 17 wells completed with SSL, the average increase in initial production rates was 25% to 35% when compared to similar wells within the same geographic area. Antero estimates that the incremental cost of the additional frac stages per 7,000 foot of lateral is 20% or $1.5 to $2.0 million per well assuming 200 foot stage lengths.
2013 Capital Budget
Antero’s Board of Directors has approved a $500 million increase in the company’s 2013 capital budget to $2.45 billion, including $1.45 billion for drilling and completion, $400 million for land and $600 million for midstream infrastructure including the construction of a water pipeline system and gas gathering pipelines and facilities. Antero’s 2013 capital expenditures totaled $1.2 billion as of June 30, 2013.
The drilling and completion capital budget increased by $250 million in order to use SSL completions for 36 liquids-rich Marcellus Shale wells, to drill three and four additional horizontal wells in the Marcellus and Utica Shale, respectively, and to fund additional pad construction costs associated with future drilling. Additionally, Antero will increase the lateral length of certain 2013 Marcellus and Utica Shale horizontal wells due to successful leasing efforts, resulting in an additional four equivalent net wells.
All of the $1.45 billion drilling and completion budget is allocated to Antero-operated drilling, and over 95% is allocated to drilling liquids-rich acreage. Approximately 85% of the drilling and completion budget is allocated to the Marcellus Shale and the remaining 15% is allocated to the Utica Shale. Antero plans to drill approximately 135 gross (128 net) Marcellus and 26 gross (20 net) Utica horizontal wells in 2013. The Company currently has 52 wells in the Marcellus Shale and eight wells in the Utica Shale that are in various stages of drilling, waiting on completion and completing. The Company is currently operating 15 drilling rigs in the Marcellus Shale and four drilling rigs in the Utica Shale.
The land capital budget was increased by $150 million to fund the acquisition of approximately 30,000 additional leasehold acres in the core of the Marcellus and Utica liquids-rich shale plays in the second half of 2013. Antero held 320,000 net acres in the Marcellus Shale and 100,000 net acres in the Utica Shale as of June 30, 2013 and currently holds 329,000 net acres in the Marcellus and 102,000 net acres in the Utica. The midstream capital budget was increased by $100 million primarily to fund approximately 25 miles of additional low-pressure and high-pressure gas gathering infrastructure to be constructed in 2013 as well as to fund higher capital costs incurred in some areas due to above-average rainfall during the spring and early part of the summer. The 2013 capital budget is expected to be funded internally from operating cash flow, through the use of the undrawn capacity under Antero’s bank credit facility and through potential future capital markets transactions.
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