Antero Resources Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2025

Key Takeaways

  • Positive Sentiment: Antero raised its 2025 production guidance by 5% while cutting maintenance capital by 26%, achieving the lowest capex per Mcfe ($0.53) among peers.
  • Positive Sentiment: The company hedged approximately 20% of its 2026 natural gas volumes with costless collars at a $3.14 floor and $6.31 ceiling, lowering its 2026 free cash flow breakeven to $1.75/Mcf.
  • Positive Sentiment: Antero’s realized C3+ price averaged $37.92/bbl in Q2, and it expects NGL premiums of $1–$2.50/bbl in H2, with double-digit export lock-ins sustaining strong margins.
  • Positive Sentiment: Near- and medium-term demand is set to rise meaningfully, driven by Plaquemines LNG’s accelerated ramp, 8 Bcf/d of new LNG capacity by 2026, and ~5 Bcf/d of announced Appalachian power projects.
  • Positive Sentiment: In Q2, Antero generated $260 million of free cash flow, used $200 million to reduce debt, and repurchased $150 million of shares at an 8% discount, cutting debt 30% YTD.
AI Generated. May Contain Errors.
Earnings Conference Call
Antero Resources Q2 2025
00:00 / 00:00

There are 8 speakers on the call.

Speaker 4

Greetings and welcome to the Antero Resources second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to our host, Brendan Krueger, Vice President of Finance. Thank you. You may begin.

Speaker 6

Good morning. Thank you for joining us for Antero Resources' second quarter 2025 investor conference call. We'll spend a few minutes going through the financial and operating highlights, and then we'll open it up for Q and A. I would also like to direct you to the homepage of our website at www.anteroresources.com where we have provided a separate earnings call presentation that will be reviewed during today's call. Today's call may contain certain non-GAAP financial measures.

Operator

Please refer to our earnings press release.

Speaker 6

For important disclosures regarding such measures, including.

Speaker 1

Reconciliations to the most comparable GAAP financial measures.

Speaker 6

Joining me on the call today are Paul Rady, Chairman, CEO and President, Michael Kennedy, CFO, Dave Cannelongo, Senior Vice President of Liquids Marketing and Transportation, and Justin Fowler.

Speaker 1

Fowler, Senior Vice President of Natural Gas Marketing.

Speaker 6

I will now turn the call over to Paul.

Speaker 1

Thank you, Brendan, and good morning everyone. Let's start on slide number three, titled Efficiencies Reduce Maintenance Capital, which highlights the tangible benefit of our best-in-class capital efficiency. For the second consecutive year, we have increased our production guidance while decreasing CapEx. Looking at the chart on the left side of the slide, since the year 2023, our maintenance production target has increased 5% from under 3.3 BCF equivalent per day to over 3.4 BCF equivalent a day. During that same time, our maintenance capital requirements declined by 26% from $900 million to $663 million. The chart on the right-hand side of the slide highlights this capital efficiency. Relative to our peers, Antero Resources has the lowest maintenance CapEx per MCFE of its peer group at just $0.53 per MCFE. This is 27% below the peer average of $0.73 per MCFE.

Speaker 1

Now let's turn to slide number four to discuss our updated hedges. During the quarter, we added additional wide natural gas costless collars for the year 2026. These wide collars lock in attractive rates of return with a floor price of $3.14 and a ceiling of $6.31. With these new hedges in place, we have hedged approximately 20% of our expected natural gas volumes through 2026. Our hedge book allows us to protect the downside while maintaining significant exposure to rising natural gas prices. These hedges lower our 2026 free cash flow break-even to $1.75 per MCF. Now to touch on the current liquids and NGL fundamentals, I'm going to turn it over to our Senior Vice President of Liquids Marketing and Transportation, Dave Cannelongo, for his comments.

Speaker 6

Dave, thanks Paul.

Speaker 5

I'll start on slide number five titled NGL pricing premium. During the second quarter, Antero's realized C3+ price averaged $37.92 per barrel. Looking ahead, we continue to expect realizations to be at attractive premiums to the NGL benchmark in the second half of the year. As a reminder, these differentials are firm in our existing term agreements and therefore we have high confidence that differentials will improve going into the third and fourth quarters of this year as winter heating and gasoline blending season ramp up. Additionally, our domestic basis improves for butane beginning in September and for propane beginning in October. Although we reduced our full year NGL price guidance slightly, this was primarily a reflection of our second quarter actuals that was impacted by inventory adjustments.

Speaker 5

We continue to expect premiums in the second half of this year to average in the range of $1.50 to $2.50 per barrel, with the fourth quarter anticipated to realize the strongest premium of the year. I will also point out that Antero's C3+ realizations improved year over year as a percentage of WTI, showing strengthening underlying fundamentals in NGL markets. In the second quarter of 2025, Antero's C3+ realizations averaged 59% of WTI compared to the second quarter of 2024 when realizations were 50% of WTI. On the export side, Antero has locked in a substantial portion of our export volume at double-digit premiums to Mont Belvieu, and we continue to benefit from those deals. As we've talked about in prior earnings calls, when dock capacity is viewed as sufficient and export premiums are modest, benchmark NGL prices typically rise.

Speaker 5

This was clearly evident during the second quarter as reflected in the relative NGL strength versus WTI. We anticipate that new trade deals signed in the coming weeks and months will increase confidence in the reliability of U.S. LPG supply and help strengthen export volumes and benchmark pricing. Further uncertainty surrounding trade negotiations had a significant but transitory impact on the global NGL market during the quarter. For LPG, the market saw a shift in trade flows with relatively more U.S. barrels going to Japan, South Korea, and Indonesia, and China sourcing more LPG from the Middle East and Canada. These changes were largely anticipated by the market, as we discussed on last quarter's earnings call. Despite the destination reshuffling, overall U.S. propane exports remained strong and increased year over year.

Speaker 5

Exports have averaged over 1.8 million barrels per day, which is 6% higher than the same period last year as shown on slide number six, titled New Capacity to Increase Exports. New Gulf Coast export capacity that has just been placed in service is expected to lead to higher exports, a rebalancing of inventories, and further strengthening of Mont Belvieu NGL prices. With that, I'll now turn it over to our Senior Vice President of Natural Gas Marketing, Justin Fowler, to discuss the natural gas market.

Speaker 6

Thanks Dave.

Operator

We continue to see the positive demand trends for natural gas both near term and long term. Starting first with the near term demand growth, the first half of 2025 saw a significantly faster ramp at Venture Global's Plaquemines LNG facility.

Speaker 6

This July, the facility achieved a daily.

Operator

Record for feed gas at over 2.9 BCF per day, which represents 120% of phase one nameplate capacity. Now Venture Global is starting LNG production at phase two of the terminal, which will increase nameplate capacity to 3.6 BCF. This initial production is ahead of prior expectations with full phase two in service expected in late 2025. This accelerated ramp has led to higher demand along our TGP 500 leg firm transport and driven a higher premium at that delivery point relative to Henry Hub as shown on slide number seven titled Not All Transport to the U.S. Gulf Coast is Equal. Maintenance along the pipeline restricted the amount of volume that captured that premium during the second quarter. However, we anticipate our premium realizations will improve in the second half of 2025 and in 2026.

Operator

As a reminder, Antero has 570 MMCF a day of capacity on the TGP 500 leg. Slide number eight dives a bit further into the LNG market. Over the next 30 months, LNG demand is expected to increase by another 8 BCF a day, driven by the startup of Plaquemines Phase 2, Golden Pass, Corpus Christi, and Calcasieu Pass Phase 2. Combined with the continued power demand growth, the natural gas market is expected to be materially undersupplied during this period, which we expect to support higher prices next year. Now let's shift topics from near-term LNG demand to the medium-term Appalachian regional power demand trends. Turning to slide number nine titled Regional Natural Gas Demand. The first version of this slide was created for our first quarter earnings call in April. At that time, approximately 3 BCF of regional power demand had been announced.

Operator

A short 90 days later, we are now up to almost 5 BCF of announced projects within our region. While we certainly acknowledge there is a lot of work to be done, we anticipate the acceleration of power demand announcements to continue, resulting in significant opportunities for Antero. Antero remains advantaged in this power demand story. With our extensive resource base, integrated midstream assets, and investment-grade balance sheet through our firm transportation to the U.S. Gulf Coast, we are uniquely positioned as the only natural gas company that can meaningfully participate in both the LNG export growth strategy and the expected regional power demand growth. With that, I will turn it over to Michael Kennedy, CFO of Antero Resources.

Speaker 6

Thanks Justin. We continue to execute on our plan while doing so in a more capital efficient manner. During the second quarter this execution led to $260 million of free cash flow, nearly $200 million of which we used to reduce debt. Once again, we continued our opportunistic share repurchases, accelerating our buybacks during periods when the stock does not reflect the underlying fundamentals. This was highlighted by our activity April through July when our average share repurchase price came in at an 8% discount to the volume weighted average price during that same period. Our return of capital strategy is anchored by our low absolute debt position that provides us with substantial flexibility. With this flexibility we can pivot between share buybacks or debt reduction depending on market conditions.

Speaker 6

Year to date we have now reduced total debt by 30% or $400 million while also repurchasing $150 million of shares. Let's turn to slide number 10 titled Antero has the highest exposure to NYMEX-linked pricing. Justin already highlighted the significant demand that is coming later this year and continuing through the end of this decade. We expect regional pricing will remain volatile with sustained periods trading at a steep discount to NYMEX due to pipeline constraints and seasonality impacts. This chart highlights Antero's peer-leading exposure to NYMEX.

Operator

While all of our peers forecast realized.

Speaker 6

Prices well back of NYMEX due to in-basin exposure, we expect realized prices at a premium to NYMEX. Looking forward, we plan to continue to target maintenance capital, future growth opportunities from regional demand increases. Any future growth would be tied to a direct demand at attractive prices. Given our firm transportation capacity that sells our natural gas at premiums to NYMEX, we are unlikely to spend growth capital for in-basin pricing. Slide number 11 illustrates that over the last 10 years, any regional basis tightening has been short lived given robust Appalachian supply and pipeline takeaway constraints. However, if regional demand were to lead to a sustained improvement in in-basin pricing, we have over 10 years of dry gas drilling inventory where we could accelerate activity to grow volumes in a short time frame and capture that higher regional pricing.

Speaker 6

With that, I will now turn the call over to the operator for questions.

Speaker 4

Thank you. At this time, we will conduct our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star followed by two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Arun Jayaram with JPMorgan. Please state your question.

Speaker 4

Yeah, good morning, gentlemen. Maybe for Dave.

Speaker 6

Dave, I wanted to see if you could maybe elaborate on slide six, where we're going to see some additions to Gulf Coast LPG export capacity. Your thoughts on the implications for Mont Belvieu.

Speaker 6

Belvieu pricing and just the international versus.

Speaker 6

Mont Belvieu spread next year and how this will maybe shape some of your marketing efforts.

Operator

Yeah.

Speaker 5

Good morning, Arun. You know, we've seen this dynamic play out a few times as you see in the chart going back to 2020, 2021, where you have a sizable buildout of new export capacity we've talked about in the past. During those times, you see the dock premiums be fairly modest and tied to Mont Belvieu pricing. The result of that is Mont Belvieu is as closely linked to the international price as it can be. That's what we expect with the buildout that you see there from parties just there through 2026. Obviously, there's another consortium that's working on another large export project in the Gulf Coast. A significant amount of export dock capacity coming online in the U.S. really should debottleneck us for the foreseeable future.

Speaker 5

As a result of that, I think the premiums at the docks will be more modest going forward, but we'll see overall higher benchmark as a result, which for Antero Resources, with the domestic exposure that we have, in the end, higher Mont Belvieu prices is net, net better for us than strong arbs.

Speaker 6

Got it, got it.

Speaker 6

Maybe one for Mike. You guys continue to kind of walk and chew gum in terms of reducing.

Speaker 6

You're already low debt balances and buy back stock based on your view, Mike and Paul, of the fundamental picture.

Speaker 6

How do.

Speaker 6

You gauge the mix of maybe buybacks and debt reduction going forward? Sure. We came into the year thinking that first $600 million of the free cash flow is going to be used to reduce debt. We saw some market dislocations over the past four or five months, which really the Antero Resources stock price was not reflecting our strong fundamentals. We took advantage of that and started to buy back early. We'll continue to do that, be opportunistic. We continue to want to reduce debt. We're at $1.1 billion. We'd like to reduce that further, of course, but also if there's continued dislocations in the stock, we'll continue to buy that. It's kind of a mix, just depending on market conditions. We were happy to be able to buy in stock where we have so far this year. Great. I'll turn it back.

Speaker 4

Your next question comes from John Freeman with Raymond James. Please state your question.

Speaker 1

Thanks.

Operator

Good morning.

Speaker 1

You all highlighted the last few years you all have been able to meaningfully reduce the maintenance CapEx while still moving the production higher, just at a high level. Just how we should think about maybe 2026. Do you have the ability, directionally, to keep pushing that maintenance CapEx lower?

Speaker 6

Yes, we do. You know, this year I think our well costs are down 3% year over year and we continue to drill them in a quick and complete them in a very quick fashion. That 3% decline, and that's on a per foot basis, is actually on a bit shorter laterals and it's typical for us. We're kind of more in the 13,000 foot range this year, but that returns next year more to the 14,000 and 15,000 foot range. Just assuming all things equal, service costs equal, no more efficiencies, which I don't expect to happen, that would lead to a further 3% decline in well costs next year.

Operator

So.

Speaker 6

Costs continue to decline, and we continue to drill them faster. I think that continues in 2026.

Speaker 1

That's great. My final question, some of your peers this earnings season have talked about kind of the pretty big uplift to cash flow due to the tax impact, the recent tax changes. Are y'all able to sort of talk to that?

Speaker 6

Yeah, we have a similar uplift from that as well. We have a lot of tax attributes, a lot of NOLs from the past, a lot of R&D tax credits. With the new bill, you're able to expense all the R&D expenses without some limitations. There's better interest expense treatment. It's 30% of EBITDA versus EBIT. Also, 100% bonus depreciation on lease and well equipment. You combine all that with our tax attributes that we carried forward, and we do not expect to pay any material cash taxes for the next three years. It's pushed out at least until 2028 based on today's commodity prices.

Speaker 1

Great, thanks, appreciate it.

Speaker 4

Your next question comes from Doug Leggate with Wolfe Research. Please state your question.

Speaker 4

Good morning, guys. Thanks for having me on the call. I wonder if I could just follow up on the last questions very quickly. I want to make sure we understand this correctly so you can understand the context. One of your large peers talked about 10 years of significant deferred tax. Is it fair to say that you guys are not subject to the AMT, the corporate alternative minimum tax, which basically means that the treatment is probably a little different? Am I thinking about that the wrong way?

Speaker 6

Yeah, we're not subject to AMT. We're aware of the treatment. We don't qualify. I think you have to have a three-year average of $1 billion of TI. We're not in that bucket. This bill also makes IDCs deductible for AMT purposes, which further helps. That may be what they're suggesting, but we are not subject to AMT and do not forecast to be subject to AMT.

Speaker 6

That's very helpful. That wasn't actually my primary question. I'm just opportunistic given the last one. My primary question is actually back to the sustaining capital issue. We've watched this from afar for quite some time, get better every year. My question is, is there anything in mix here that is changing as it relates to what you're targeting? As perhaps the macro gets a little better on the gas side as opposed to on the liquid side. I guess my end goal here is to try and figure out how much. Is that like a target or a level? You can say we think it can get to this level on a sustaining basis going forward. Any color on the magnitude of any continued improvement would be really helpful.

Speaker 6

Yeah, actually maintenance capital should continue to improve. Everything else equal, mentioned the lateral lengths, but also every year you're at maintenance capital, your decline rate comes down. I think we're in the low 20% now. Every year ticks down by about 1%. When you actually look in the out years to maintain this, you're below where we're at and you continue to go lower each year. That should continue on target mix. We continue to favor the liquids $12.75. We had some DUC dry gas pads or lean gas pads that we completed in late first quarter and early third quarter, which has that mix, at least the condensate, a bit off, but that should return to kind of in that high around 10,000 barrels a day in the Q4 with liquids staying the same. The mix really just continues to target 1275 BTU.

Speaker 6

Our maintenance capital continues to tick lower not only from our capital efficiencies but from longer laterals and also lower declines.

Speaker 6

That's a great message, guys. Thanks so much.

Operator

Thank you.

Speaker 4

Your next question comes from Greta Dreska with Goldman Sachs. Please state your question.

Speaker 4

Good morning and thank you for taking my questions. I first just wanted to touch on hedging here a little bit given that you leaned into some more callers this quarter. Given the volatility of the forward curve that we've seen in the past couple months, what's your current view on potentially layering in incremental hedges in 2026 or 2027 if the forward curve does give you that opportunity?

Speaker 6

Good question. 2026 was unique. Never seen in my career where you could get a 2 to 1 call skew on a contango curve that's a dollar higher in the front. We took advantage of that. We had lean gas pads that I just mentioned, but we also have some lean gas pads going forward. We wanted to lock in. That was kind of the original program. We've added to that in the second quarter now up to 500 million a day. Just opportunistic. Putting in, you know, the $3.25 downside, the $7 upside. That was attractive. If that dynamic would present itself in 2027, that'd be something we're interested in. We have low debt. We don't have any in-basin price exposure. We have the lowest maintenance capital. It's not something that's needed.

Speaker 6

If you get those type of dynamics in the gas market, it seems prudent to put some hedges on. We're only 20% hedged but have upside to $7. That was a good trade.

Speaker 6

Great. I appreciate that color. Let's just touch on capital returns a little bit more as you continue to make progress on deleveraging while also returning cash to shareholders through buybacks. Is there a debt level or leverage point at which you would consider ramping up Antero Resources' return of capital maybe towards 75% or so?

Speaker 6

Yeah, we'd ramp up really on the stock price compared to underlying fundamentals. We're now in a position where we could use all of our free cash flow to do that if that was an opportunity for us. We do want to continue to have lower debt. We do have a 2030 note that is $600 million at 5.375%. That's a good piece of paper. We'd like to keep that in our capital structure. We only really have $500 million of debt that we would pay down right now. It will just depend on market conditions. We're very happy to continue to accelerate our share buyback and actually go higher if there's an opportunity.

Speaker 6

Great, thank you.

Speaker 4

Your next question comes from David Deckelbaum with Cowen. Please state your question.

Speaker 6

Morning everyone. Thanks for taking my questions today. Mike, not to belabor the point, but maybe just like if I were to summarize just the return of capital.

Speaker 1

Thoughts?

Speaker 6

Just considering the fact that your outstanding notes are all callable and you can redeem some of those $29 million notes, should we just think about it as opportunistically every quarter with free cash, you'll just be considering the implied return on paying down debt or sort of redeeming those notes versus buying back shares. Yeah. You know what we also look at, David, is just on a forward basis with commodity prices. What's our kind of cash flow outlook, free cash flow outlook, and then compare that to how the valuation is of Antero Resources. If that's an opportunity for us, we'll act on that. That's really what we think about. We could call those notes in right now just under the credit facility. We have so much room under the facility, it's basically undrawn today. We could call it in, no problem, continue to buy back.

Speaker 6

Like I said, we're really just trying to be opportunistic and it is an opportunity when you see the stock at these levels versus the underlying business. Appreciate that. Maybe if Dave can take this one. I was curious, Dave, with the benefits in the second half of this year.

Operator

On.

Speaker 6

C3+ realizations with the added LPG capacity, is the anticipation that that premium Mont Belvieu is pretty sustainable into 2026, where there'd be perhaps just a greater mix going international.

Speaker 5

Kind of remains to be contracted. We'll be in the market getting what those prevailing prices are at that time, and we do expect it'll be lower than what we saw here in 2025. We talked about double-digit premiums in 2025. You don't typically see that with ample dock capacity. If you go back to 2020 to 2022, you're probably averaging $0.06 to $0.07 premiums during that time period. That'll certainly be reflected in our realizations next year. I would expect that to come down modestly in 2026 versus 2025.

Speaker 6

Appreciate it, guys.

Speaker 4

Thank you. Just a reminder to ask a question, press star one. Your next question comes from Kevin McCarthy with Pickering Energy Partners. Please state your question.

Speaker 6

Hey, good morning. Production in 2Q was a little gassier.

Operator

Compared to the prior quarters, and it.

Speaker 6

Looks like the production raise was most related to gas volumes. Do you have any comments on what drove the mix this quarter and any thoughts on how that kind of mix could change throughout the year and into next year? Yeah, we brought on two DUC pads that we've talked about quite a lot over the past conference calls. One of them was brought on at the end of the first quarter and these were lean gas pads, more in the 1200 BTU range. The second one was brought on in July. Second and third quarter are always expected to be a bit gassier. That reverses, like I mentioned, in the fourth quarter you get back to that 10,000 barrel per day as condensate and liquids continues to increase. Going forward, all the pads we're bringing on for the remainder of the year are more like the 1275 BTU.

Speaker 6

That will reverse going into the fourth quarter. Got it. Appreciate the detail on that. As a follow up on the collars, that was a very impressive skew on the 2026 collars. Does that echo your internal view on gas with the more upside to downside in 2026 and just wanted to get your current thoughts on or any changes to your medium term macro view based on how storage and production has trended this summer. Yeah, that made sense to us just because the skew is definitely to the upside. The margins today are razor thin. There are no volumes that are shut in. Everything's producing full out. You've had a lack of investment in the gas development over the last two years. Rig counts are still subdued. Anything could tip this to the upside.

Speaker 6

If you have an early winter, if you have any sort of winter next year, you could definitely see the gas going much, much higher. It did make sense to us. Locking in 20% and taking advantage of that, basically funding your capital program while still maintaining upside to $7 and still maintaining 80% upside exposure was something that appealed to us, lowering our free cash flow break-even, already the lowest, down to $1.75. We thought we should take advantage of that. Like I mentioned, I've never seen that in my 30 plus year career. That kind of call skew on a contango strip. If that would present itself again, I think we just continue to act because it's so attractive but definitely skewed to the upside. Appreciate that, thank you.

Speaker 4

Sure. Your next question comes from Leo Mariani with ROTH Capital Partners. Please state your question.

Speaker 6

Yeah, hi.

Speaker 6

Obviously you guys mentioned some of the in-basin demand projects. Really appreciate that slide there. Obviously some new projects recently announced by one of your competitors here. Can you maybe provide some color on where Antero Resources is in that sort of scheme here? I assume that you guys are also talking to new in-basin sources of demand. Can you give us a bit of an update on where you guys stand there?

Speaker 6

Yeah, no. Good question. First, we've seen that incremental 2 BCF a day of natural gas demand just in the last quarter. That's exciting to us and that's why we kind of put that slide out. That's well ahead of ours and probably everyone's expectation. How does Antero Resources play a role? We're so uniquely positioned. Some of the attributes we have, we have the integration between the upstream and midstream, one stop shop there. Also, importantly, that no one's kind of focusing on, but it's a huge attribute for us and kind of sets us apart, is we have the water systems and the water that the data centers require and the turbines require. That is unique to us and that kind of puts us in a different position.

Speaker 6

As we always mention, we have the 500,000 acres, decades of core Marcellus inventory right there, HBP legacy production, so able to satisfy that. We have what we think is the best natural gas marketing team in the business. You've got exposure to Justin Fowler. They're terrific over there, so they'll be able to capture any opportunities. We also have the investment-grade balance sheet, which is important for long-term kind of arrangements. With it being a long-term deal, we're really not attracted to any deals that are based on local pricing. It's going to have to be accretive to our overall store and our overall pricing. Doing deals just at local has never been exciting for us. We would always be cautious around putting hundreds of millions of dollars behind development to fund a local pricing deal.

Speaker 6

This is thought, it's kind of driven our whole strategy from day one and what's created our firm transportation portfolio strategy. We put that slide there. Anytime there's been local tightening of basis, it's always been met with incremental supply and incremental development because there's really no barriers to entry to feed that local gas and how prolific the Marcellus is. Anything that we would do would have to be NYMEX based or accretive to our pricing. If we're wrong and there is attractive local pricing for sustained periods, we'll just grow into it. With our 10 plus years of dry gas inventory, we can turn that on quick. Paths are already built, infrastructure's already there. We will be a participant. We're uniquely advantaged, like I mentioned, with all those attributes. It's going to have to be accretive to the story. Okay, I appreciate that.

Speaker 6

Just wanted to follow up on that there though. Are you guys maybe in any somewhat advanced discussions with in-basin demand sources, and you think there's potential for some announcements in the near future? Call it a matter of months as opposed to years.

Speaker 4

Just trying to see if we can.

Speaker 4

Get a little more color around where.

Speaker 6

You guys are in the process. We wouldn't put any timing around that. We have set up an internal team. We have a lot of efforts on it, a lot of discussions, not going to put any timing on that. To remind you, we have all the firm transport, the vast majority of it on a % basis to the Gulf Coast and that's where the demand.

Operator

Is going to come.

Speaker 6

The LNG and natural gas demand growth over the kind of short to midterms. You know we're unique, we have that exposure, but we also are going to have exposure to the local demand from the data center growth. It's not like we need to announce deals around that. We'll be cautious and announce at the appropriate time and enter in the appropriate deals and not rush to enter into any.

Speaker 6

Okay, very helpful on that point. Just quickly on shareholder returns here, obviously you don't have that much more debt to pay off as you've enumerated somewhere around $500 million or so. When that's sort of done, are we going to see just a much more meaningful return of capital because obviously at that point leverage will be so low and if gas stays healthy, you'll just be building a lot of cash. Should people expect that? Obviously you've done the buyback, but could there be a dividend in place at some point as well?

Speaker 6

Yes, I think you're already seeing us. We basically already are at the point where we don't need to reduce debt any further. It's more just being driven by market conditions. We'll continue to do that, and yeah, we continue to buy back in size as we move forward. Having thought about a dividend, that's also going to be market based, and market conditions really just been focused on the debt reduction and getting the share count as low as we can. Thank you.

Speaker 4

Your next question comes from Philip Jungwirth with BMO Capital Markets. Please state your question. Thanks.

Speaker 6

Good morning. You noted how Cal 2026 for the TPG 500 leg has increased to $0.60. That's higher year on year, up from your last update. Just with Plaquemines ramping further into next year, wondering if there's a theoretical ceiling you guys think about for how high this premium could get considering the LNG demand pull and where global gas prices sit. Is there anything to keep in mind as far as incremental supply going to this price point?

Operator

Good morning, Philip. Justin Fowler here. As we look out at the next couple of years, we definitely think that Plaquemines plus the local power gen could.

Speaker 5

Continue to pull that basis up.

Operator

We saw that basis accelerate so quickly. When we think about our other delivery points, for example, Columbia Gulf onshore, which is also correlated with Plaquemines LNG, we've already seen those basis locations at CGT onshore, ANR Southeast start to trade a premium as we look out in the forward. If you just look at history there and understand that there's only a finite amount of gas that can get to Plaquemines and then the other LNG facilities that we can again highly correlate to Antero's 2 BCF of FT delivery to the Gulf Coast, we definitely think that there could be additional upward movement as these new projects come on with new liquefaction capacity. You just continue to hear all the deals out of Europe, Asia on long-term LNG contracts. We do think yes, it could support that.

Operator

When you think about the Gulf Coast and the New York City gates, for example, you start seeing this high demand in certain specific locations and it can drive those specific basis points much higher versus Henry Hub if you think about it as a city gate type equivalent. Yes, definitely thinking there could be some additional upside here.

Speaker 1

Okay, great.

Speaker 6

On Appalachia differential still $0.90 back in future years despite a bullish in-basin demand outlook, we have seen a lot of consolidation versus the last 10 years. I know you guys do some of the best work on remaining inventory not just for Antero Resources but the overall basin. I am just wondering if you think it could be different this time in terms of the industry supply response just given we do have a lot fewer players and generally less runway as far as core inventory. Yeah, it could be a good point. We will continue to see what transpires. It always seems to be Appalachian supply to meet any local demand. It is a fair point of yours and if that occurs we are just very well positioned.

Speaker 6

Like I said, our original purchase of the Marcellus was really in this dry gas area window and it is all HPP and we have over 10 years plus drilling locations of the highest quality. Hopefully you are right but we are not going to plan on that. Thanks.

Speaker 4

Your next question comes from Betty Jiang with Barclays. Please state your question.

Speaker 4

Good morning. Thank you for taking my question. I have a follow up to Paul, your comment earlier about pricing on the power supply deal that anything would need to be NYMEX based. Is there appetite from the customer standpoint to sign a NYMEX linked deal? If from our understanding is that the market dynamic for Gulf Coast is very different than local where they source that gas. Just wondering how competitive is that pricing discussion and appetite for a NYMEX linked deal.

Speaker 6

We saw how much demand, like we mentioned, it's over 5 BCF a day. Ultimately, they're going to have to secure their supply, and we're the second largest producer in the basin with all those attributes that I talked about. I think there's only two investment-grade counterparties as well, and only two with upstream and midstream together. If they want to secure the supply and be with that type of producer, obviously we would have leverage because all of our other pricing is on NYMEX and really don't need to sell anything at a local basis.

Speaker 6

Got it. Thanks. Would you mind talking a bit about the power dynamic going on in the West Virginia area just because we have seen all the deals happening in Pennsylvania? I understand there's legislature that's being signed that's supporting power development in West Virginia as well. Does that position you guys specifically for the opportunities arising in the region?

Speaker 6

They just passed that microgrid bill in West Virginia to allow for more ease of development around these data centers and the AI buildout. That was in direct response to this. They are trying to position West Virginia favorably, and I think we are in a favorable position.

Speaker 6

Okay, got it. Thanks.

Operator

Betty.

Speaker 4

Thank you. There are no further questions at this time. I'll hand it back to Brendan Krueger for closing remarks.

Speaker 6

Yes. Thank you for joining us on today's call. Please reach out with any further questions. Thank you.

Speaker 4

This concludes today's conference. All parties may disconnect. Have a good day.

Powered by Quartr