Q1 2021 Antero Resources Corp Earnings Call
Greetings welcome to Antero resources first quarter 2021 earnings conference call.
At this time, all participants will be in a listen only mode. A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.
Please note this conference is being recorded.
At this time I'll turn the conference over to Mr. Michael Kennedy Senior Vice President of Finance Mr. Kennedy you may begin.
Thank you for joining us for Antero <unk> first quarter 2021 Investor Conference call.
We'll spend a few minutes going through the financial and operational highlights and then we'll open it up for Q&A.
I would also like to direct you to the homepage of our website at Www Dot Antero resources Dot com.
We have provided a separate earnings call presentation that will be reviewed during today's call.
Before we start our comments I'd like to first remind you that during this call Antero management will make forward looking statements such statements are based on our current judgments regarding factors that will impact the future performance of Antero.
And are subject to a number of risks and uncertainties many of which are beyond antero is control.
Actual outcomes and results could materially differ from what is expressed implied or forecast in such statements.
Today's call May also contain certain non-GAAP financial measures. Please refer to our earnings press release for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.
Joining me on the call today are Paul Rady, Chairman and CEO.
Glen Warren President and CFO, and Dave kind of along the vice president of liquids marketing and transportation.
I will now turn the call over to Paul.
Thank you Mike.
Let's begin with slide number three titled.
That's exposure to rising commodity prices.
During the first quarter, our business model delivered.
EBITDAX of $519 million in free cash flow of $416 million on.
Our financial results highlight the significant leverage we have to rising commodity prices in particular C III, plus NGL prices, which averaged over $40 per barrel during the quarter.
Approximately 40% of Antero as revenue is generated from liquids, which is primarily by C. III plus Ngls.
However, it is not.
Only strong NGL prices that drove the quarterly financial records during the first quarter, our firm transportation portfolio led to an unhedged realized gas price.
41 cents per Mcf premium to Nymex.
Our firm transportation portfolio provides flow assurance during periods of pipeline capacity constraints and during periods of high prices in other regions of the U S.
And our firm transportation portfolio enables us to deliver on our gas to those markets and realized prices at a premium to Nymex.
For the full year 2021, we forecast antero gas realizations.
At a premium to Nymex of 10 to 20.
Moving to slide number four titled.
F T protect space and provides flow assurance, we have highlighted the street strategic advantage of our ft. Historically.
As illustrated on the chart Ar's ft portfolio has significantly reduced realized reduced realized pricing volatility, especially when compared to Appalachian basis differentials.
During the first quarter as competitive advantage led to Antero price realizations that were 92 cents better than in basin pricing.
You can see this detail on the right hand side of the chart that highlights Antero has 41 cents per mcf premium compared to in basin price.
In the in basin price traded at a discount of 51 cents per Mcf.
Yeah.
Now as we look ahead at the strategic advantage of our ft portfolio, let's turn to slide number five.
This slide gives you some insights on how the Appalachian basin indices trade going forward with two key takeaways first when you look at Appalachian takeaway capacity today pipelines are essentially full.
This is what led to the basis blow out in 'twenty 'twenty that is circled in yellow.
And force many of our peers to shut in volume.
Our sales at highly discounted prices.
The takeaway is on the outlook for our local pricing given the many questions around the uncertainty of MB M V P or the Mountain Valley project.
As you can see on the far right portion of this chart in the Orange and Green dotted lines.
In the last 12 months basis has widened further by approximately 30 cents per M and btu as traders are risking the likelihood of new takeaway capacity.
We like where we are positioned today with our firm ft portfolio that allows us to avoid these local price blowout and sell our gas consistently at a premium to NAV.
Yeah.
Turning to slide number six.
Titled drilling and completion efficiencies.
Okay.
Let's discuss the dramatic drilling and completion efficiency gains that are helping to drive our well costs lower.
Starting with the chart on the top left quadrant of the page during the first quarter, our average lateral length drilled per well continued its steady progression higher averaging 12839 feet per well moving to the chart on the top right, we averaged more than 7500 lateral feet drilled.
<unk> per day during the quarter, which is a 17% increase over the average in 2020.
Further antero and established a new U S record drilling of 12118 feet of lateral during a 24 hour period.
Our completion efficiency also continued to improve averaging nine five stages per day during the quarter, which is a 19% increase compared to the 2020 average share.
Important to note that this was accomplished during a winter quarter, a time that is typically more challenging for our completions.
Completion stages per day during the quarter benefit benefited from our first simultaneous completion process on a pad, which allows us to separate wells to be completed at the same time.
Finally, our average drill out feet per day has continued to increase each year and average 3800 83 feet in the first quarter.
Before turning the call over to Dave I want to congratulate Glen on his upcoming retirement and thank him for all of his contributions to the Tuesday antero entities over the years Glen.
And I have been partners for over 20 years dating back to Coalbed methane exploration and production in the powder River basin. Since then.
We became early shale pioneers adapting horizontal drilling and multi stage completions in the Barnett shale and have built antero into the one into one of the largest and most integrated NGL and natural gas producers in the U S.
Over the last year Glen was instrumental in successfully executing the series of strategic transactions and capital market activities, which allowed us to navigate the challenging environment and put us in the position we're in today.
As we look ahead, a R and M are in the strongest financial positions since inception, both generating significant free cash flow with strong balance sheets and leverage profiles.
Well Glen will be missed.
I'm very excited about internally back filling his positions with Mike Kennedy and Brandon Krueger, which highlights the deep bench that we have here on antero.
With that I'll turn the call over to our vice president of liquids marketing and transportation, Dave can long ago for his comments.
Thanks, Paul.
The performance of NGL prices in the first quarter was welcomed but not at all surprising the fundamentals have been shaping up since the start of the pandemic as a market that would suffer from a supply demand imbalance during the winter months.
Effect of that imbalance on U S. Propane inventories was witnessed by a withdrawal of roughly 60 million barrels. This season, despite mild U S temperatures for most of the winter and leaves US now sitting at record low days of supply.
Propane days of supply is currently sitting 34% below the five year average while inventories are 30% below the year ago level.
As illustrated on slide number seven titled Propane market fundamentals.
U S domestic propane buyers will need to outfit export markets. This summer to build sufficient inventories for this upcoming winter that in turn will drive U S and international LPG pricing higher.
Without an adequate build on propane inventories through the fall the world on the U S will be ill prepared an under supply for even a normal winter.
In order to meet demand, we believe that significant incremental LPG supply will need to come on line through the U S shale OPEC and increased refinery runs in order to balance demand for next winter given the current macro market conditions and oil price environment. This needed growth in LPG production is unlikely to materialize and we believe we could see another.
Significant market imbalance this upcoming winter season.
With that said, we have protected ourselves from any seasonal weakness and sluggish pandemic recovery by adding NGL hedges over the summer months slide number eight details the NGL hedges, we have put in place to lock in 2021 free cash flow and crystallize further balance sheet improvement.
Importantly, we are hedging at incredibly attractive prices during the summer around $35, a barrel, which is approximately double the price we realized at this time last year.
We remain unhedged on the majority of our fourth quarter volumes and have zero hedges in 2022, given our bullish outlook for next winter that I just discussed.
The stumbled on U S sales production subsequent capital discipline and ample U S export capacity as illustrated on slide number nine titled NGL supply and demand fundamentals provides for a structural change in long term outlook for Ngls to return to more historical levels of pricing witnessed before.
And during the early stages of the shale Revolution.
The addition of U S export capacity for Lpg's enough to meet market needs for years to come we will allow for tight arbs and strong U S prices the ability for propane and butane the price on petrochemical value on distressed by excess U S shale growth in the summer and rely on residential commercial demand has set the price and the winter provides us.
Backdrop for 60% to 70% of <unk> plus pricing realizations on an annual average basis.
This NGL strength relative to <unk> as shown on slide number 10, titled NGL price strength.
While antero has access to the international market through our capacity on Mariner East and has benefited from the strong export arbs in previous years relative to our competitors NGL realizations Antero sees the greatest net benefit to our own realized pricing from a strong Mont belvieu indices, given our still sizable exposure to domestic sales.
Well over 1 billion vaccine shots had been administered around the globe to date about 13% of the global population uncertainty with respect to the COVID-19 pandemic remains several large economies around the world such as India are experiencing elevated our record levels of COVID-19 within their populations as we are.
Experienced numerous times over the last year Lockdown measures to combat these surges impact demand for transportation fuels and refined products more severely than Ngls, resulting in reduced refinery runs an increased need for LPG imports into these markets. The current situation is expected to result in increased spot cargos procured under there.
<unk> to offset the decline in refinery produced LPG, adding pressure to global and U S propane inventories, which are attempting to build adequate levels by this fall with that I will turn it over to Glen.
Thank you Dave.
Like to start on slide number 11, highlighting the significant improvements on antero over the last quarter.
Over the last 12 months, we successfully executed our asset sale program and rebalanced Antero Senior note maturity profile. The first quarter of 2021 marked another significant step in improving our financial strength as we generated over $400 million of free cash flow.
As depicted on the top left portion of this slide this free cash flow was used to reduce total debt by $433 million. During the first quarter $202 6 billion total debt now the top right quadrant of this slide illustrates the LTM EBITDA improvement from 1 billion to one.
$3 billion now this improvement was a direct result of Antero has differentiated business strategy that Paul discussed earlier with a focus on liquids development and our firm transportation portfolio that provides best in class price realizations.
Debt reduction combined with an improvement in LTM EBITDAX decreased leverage by over a turn to two times for the first quarter.
Lastly, during the spring Redetermination period.
Antero is borrowing base was reaffirmed at $2 $85 billion.
Supported by the significant PDP base and deep drilling inventory of liquids rich location.
And antero portfolio. This.
This reaffirmation along with the $700 million senior note issuance and debt reduction during the quarter resulted in liquidity doubling to $1 $8 billion. As we look ahead, we expect to continue maximizing free cash flow and reducing our total debt, which is expected to result in a completely undrawn credit.
<unk> balance over the next couple of quarters, our leverage is expected to fall below two times during the same timeframe and our focus will shift to achieving our absolute debt target of below $2 billion.
Now to put first quarter financial results in perspective, let's turn to slide number 12 titled peer comparisons.
Since we are early in the reporting cycle. Most of these figures are based on consensus estimates the top of the slide highlights our balance sheet positioning on the left you see our $2 $5 7 billion of total debt ranks third among our peers. However, the chart on the right hand side of the page shows that our net debt to EBITDAX of two times.
Second against our Appalachian peers, some are still on the three to four point.
Five times range the bottom of the page focuses on financial performance or $519 million of EBITDAX in the first quarter ranked second in the peer group and well above our other peers.
Looking at free cash flow on $416 million during the first quarter is dramatically above all of our peers and highlights the financial torque we have in a rising commodity price environment.
This year will also be an exciting year for Antero is ESG initiatives as we make progress toward our 2025 best in class goals.
These are shown on slide number 13 include achieving net zero carbon emissions, reducing our industry, leading <unk> intensity and methane leak loss rates. We also plan to complete and publish our Tcf day analysis with our 2020 ESG performance results later in 2021.
To summarize.
<unk> team has delivered exceptional execution over the last 12 months slide number 12, titled key investment highlights summarized a position of strength that we're in today. Following this execution, we have significant scale as the third largest natural gas producer and second largest NGL producer, providing attractive exposure to strengthening commodity prices.
As you saw in this first quarter since the beginning of our deleveraging program, we reduced total debt by approximately $1 $3 billion.
Issued $1 $5 billion of new senior notes and redeemed our 2021 and 2022 maturities.
This leaves just $574 million of senior note maturities due through 2024, which can easily be addressed with our projected free cash flow over that time, we expect to achieve our leverage target of under two times during the second quarter of 2021, and our absolute debt goal of under $2 billion in 2022.
Our $1 8 billion of liquidity is bolstered even further by expected free cash flow of more than $600 million. This year, assuming today's backward dated strip prices. These operational financial and ESG metrics place Antero among a small elite group of E&ps with significant scale low.
Leverage sustained free cash flow generation and leading ESG performance now for a couple of additional comments first.
Thank you to all of you that follow us those who are invested antero. It was a phenomenal quarter on a gratifying send off for me. The antero companies have never been better position. The outlook is bright secondly, thank you to our management team and employees, we built a differentiated company together that should drive in the coming years, there are a lot of challenges.
Out there, but the antero companies are on the leading edge and we will overcome those challenges as we always have.
I appreciate all of your hard work and dedication is nothing short of best in class and finally, thank you to Paul My business partner for 22 years, it's been the honor of my career to be at the helm and building several successful companies together I appreciate your drive to termination integrity, there's never been a better qualify under thanks for that.
Memories I'll be watching some sidelines and remain on long term shareholder wishing you all the best.
With that operator, we'll turn it over to the.
Audience for questions.
Thank you.
Well now be conducting a question and answer session.
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Okay.
Once again it is star one to ask a question.
Thank you and our first question is coming from the line of Sebastian Chandra with Northland. Please proceed with your question.
Yeah. Thanks first of all Glen too bad.
On your retirement well deserved.
Thanks Suraj.
So the first question I guess is.
He is on the ESG front have you guys looked at or have any thoughts on this.
Responsibly sourced gas and sort of certifications out there that.
I guess and in some instances can get you.
Sort of premium realizations.
That is true theoretically and it is something that we're looking at very seriously.
I would say we are sort of taking our time with it and analyzing to make sure that we come up with the best approach. So it's something we'll continue to look at to certify our gas is very clean green and clean.
First off and then.
Other RSP and all that.
<unk> I guess that that's something that's probably further down the road spot, but yes, you can bet on looking at it and we just hired a director of sustainability. So we've got somebody now who every day their job is to be focused on all of these types of <unk>.
<unk>, so we're very serious about it.
Okay. Thanks.
Then on the operations until the final Frac I guess that the hesitancy before had been.
Mainly safety oriented if.
If I if I understood correctly. So how do you feel about that now and what do you think if you were to widely adopt similar what could it do for you know.
It's timing and operations.
Yes, two Bosch.
<unk>.
It affects it improves all of those things cost timing.
Turnaround time and so on.
The consideration is it mainly or do we have large enough pad size to put.
Essentially two frac spreads out there, we save a little room with only one blender instead of a couple but.
With lots of pump trucks et cetera.
Very efficient for us, but we can only do it on some pads and so we're working to expand certain pads. So we can do it mark we really like the economic benefits, particularly the cycle time so.
Definitely a part of our future.
We aren't able to implement it across the board quite yet.
Got it okay and the final one maybe for Dave.
Thank you.
Sort of.
You had an opinion on how underpriced L. P. G R I think.
Based on global NAPCO markets et cetera, but could you maybe provide a real time opinion on on how long the price do you think the curve might be.
Well great timing for the question, we've seen quite a run up here just recently in propane prices for for April balance of the month and then for the summer. So you are seeing the markets start to respect that dynamic and.
Youre seeing propane price in the summer time closer to petrochemical lot breakeven margins for those those buyers that are looking at switching between LPG or naphtha.
Looking into the fourth quarter index, where the current curve is still.
Secondly, undervalued relative to what we would expect to see the P.
Pricing.
You'll get for LPG on the wintertime in the destination markets relative to naphtha, which is often what sets the price in the summer.
Is dramatically different and you can go from 90% of naphtha in the summer to a 115, 225% on naphtha on the winter so.
The current curve would suggest 90 per cent or below for fourth quarter, and first quarter, and obviously a lot of realistic upside to that.
Excellent. Thank.
Thanks, everyone.
Our next question is from the line of Arun Jairam with J P. Morgan. Please proceed with your questions.
Yes, good morning.
Glen Let me start with you you know our team is filled with a decent number of buy side.
<unk> on your decision to retire.
As a founder I know you did put out a release, but just you know just for the spirit of the buy side.
Maybe you could.
You can go into the decision and why was this the right timing.
Yeah, well thanks Ben.
For a long time, and we've had a lot of successes with the past year was particularly.
Challenging and we met all of those challenges in the tables totally reset and so it's a good time for me to step aside we built a great succession team here with Mike Kennedy stepping into my CFO role and then Brendan Kruger stepping into his CFO role.
So we have the team to replace me.
I'll be out there available at anytime for consultation that's for sure and a long term shareholder, but we're just a good time for me personally have a lot of things I want to focus on kind of the five apps for my family farming fitness fishing philanthropy.
Yeah, So that's realized.
What's going to keep you busy for the time being so but thanks for the question. Okay got it got it.
And then my second one.
Is just this.
Around.
Once you get to year $2 billion or less debt target.
Thoughts on the potential shift to a cash return kind of strategy and then whats your initial thoughts around that.
Perhaps for Michael or even Glen.
Yes, no we're thinking about that obviously on watching the debt levels closely as he mentioned our first initiative is to get it under $2 billion, but once that occurs and will definitely be analyzing the various return of capital.
<unk> employed by other companies and how they are valued.
A long history of buying back shares we bought back significant amount of shares last year, we bought back significant it am I also have a long history of paying a significant dividend. So we're well schooled on those two different forms of return on capital, but it will be something we monitor in on <unk>.
22, now is our forecast when we get below that $2 billion.
We will pay close attention to and have some more information on.
Fair enough. Thanks, a lot.
Thank you Rob.
The next question is coming from the line of Neal Dingmann with <unk>. Please proceed with your question.
Good morning, all and thanks for all the details. My first question is really just you guys continue have a great.
Yes, it's a inventory 6000, I think plus.
Premium Utica and Marcellus locations and so my question is assuming investors remain free cash flow driven any thoughts on trying to pull the value of some of this board either I don't know maybe more partnerships asset monetization.
When you're out there on the table.
Okay.
Yes, I can I can address that one first I mean I think that.
We don't need to do anything from a labor standpoint, so we don't need any further asset sales or monetization. So the cash flow stream looks terrific to free cash flow stream. So I don't think we don't have the initiatives like that underway today.
Obviously, it's heresy to talk about growth right now so thats not something were considering but I think as you get further out.
As it becomes evident to kind of free cash flow that we can generate in returns and and then the ESG story.
Those sort of chosen few companies I think will be allowed to to show some growth over time, but that's just my perspective, Paul Yeah I agree good answer.
Yeah, I would agree with well glad as Glen I mean, you guys are looking at it that way and then just as a follow up.
Really like to see what NGL prices benefited it's helped you all on others. Just wanted I forget the slide you all pointed out nice slide that shows your NGL hedges I'm just wondering how how how clean are you able to hedge that and I'm. Just wondering how liquid is that market. If you wanted to hedge out I don't know a year or two on that.
Yes, great.
Great question, Neil on all of the hedges that we've been able to put in place do perfect. The physical exposure that we have to those indices. So.
Very clean.
Dirty hedges at this point with R&D on portfolio as.
Far as the liquidity really beyond 2021.
In 2022 is pretty pretty limited.
I know, there's just a lack of a need for buyers to step on to that market right now.
Given given the alternatives for them to just ride with the prices as they come versus risk risk hedging. So that's kind of always been the case with Ngls.
Steeply backward dated offered for a number of years.
We'll continue to ride the front.
Okay.
Thank you.
Our next question is from the line of Matt <unk> with Goldman Sachs. Please proceed with your questions.
Thank you.
First of oil congratulations Glenn on your retirement.
My question is really building on the Ngls fundamental question can you provide any incremental color on the LPG demand trends.
Clearly our roundup petrochemical complex in Asia.
Yes, sure happy to.
If you look right now I mean, most commonly we'll talk about China, that's been the big growth engine for our petrochemical demand. So you've got one facility around 30000 barrels a day of PTH facility that has come on line already this year and four possibly five others are yet to come online that in aggregate will be about 115000.
120000 barrels a day of PTH growth in 2021, and then some additional projects still coming in 2022.
Separately from that on the petrochemical side there are projects in the Western Hemisphere, We've got one in Canada that's imminent.
Another one in northwest Europe for 2022, and then in the U S Gulf Coast for 2023, and some steam cracker additions around the world.
More importantly, we've seen the rest kind of markets.
<unk> performed very well GDP for the globe is going to be pre pandemic levels here. This summer.
That bodes very well for LPG restaurant demand as well as petrochemical.
<unk> markets as well, you're seeing very strong margins and those petrochemical markets for both consumer and durable goods.
Looking at the probably the most critical rescue market to us India, they've done a spectacular job over the last several years.
Improving LPG penetration into that market.
So virtually all households, now have access to the LPG canisters for for home use but there is still a significant portion that are not using it as their primary cooking source and so if you look at virtually all of the northern states. Their average annual refill rate is less than half of what the national Indian averages so tremendous.
Amount of opportunity there easy now to reach those markets given that the penetration has been so high but a lot of opportunity there for for easy LPG <unk> com growth.
As those markets start to.
Reach more normal levels of of refill rates on the canisters.
But that's really helpful. Thank you and my next question is on on hedging and natural gas hedging.
Charlie and data is on this are.
Our hedged on a bulk of its production further forward.
Looking at where we need to currently around 50% hedged can you talk to your expectations on on gas pricing and any thoughts on on hedging.
Yes.
Well you are right of course.
Historically, we've always gone into.
The next year pretty much fully hedged and thats paid paid off well.
Youre correct of course that we've hedged about half were watching the gas curve or up into the low $2 70 per ml btu for calculating too.
That is a price that begins to get interesting, but where are we.
Switching the momentum and so there's it wont be.
It's still going to be part of our strategy to try and be almost fully hedged as we get close to Cal 'twenty, two so watching it and looking for our opportunities.
Great. Thank you so much for a day.
Thank you.
Our next question is from the line of Holly Stewart with Scotia, Howard Weil. Please proceed with your questions.
Good morning, gentlemen.
Glen Let me start off as well by congratulating you on I Love all the App. So that was that was cash.
Yeah.
It's been a pleasure over the last eight or so eight or so years. So good luck.
Good luck on your retirement, that's wonderful day here. Thank you Holly.
Let me start with you.
If we just kind of looking at the debt reduction we've seen over the last couple of quarters. It looks like now that the revolver is is less than about $115 million drawn. So is that the first place skill for further debt reduction or how should we be thinking about that going forward.
Yes, I mean, we definitely we paid down the revolver.
We do have on 23 maturities. So we'll be looking at that as well because that goes to par call. This.
This summer so we'll be tracking that and just look at the liability management I will turn on the keys over the team to <unk>.
To do that but a lot of options there or what you might see us build up cash on the balance sheet for the time being but.
It's great to have so much free cash flow potential here over the next minute.
Many many quarters that day.
All of that also add that last year, when we bought back a lot of those bonds in the open market. So that's something we're very comfortable doing and are set up to execute on so that could be an option as well.
Okay. Okay. That's helpful.
And maybe this one's for you, Mike, but I'm just I'm looking at that 14 pills during.
During the first quarter that suggest a bit of a pick up.
I think here over the next couple of quarters. So can you just maybe talk about about cadence.
For both from a spending and a production standpoint.
Yes, so the spending will pick up a little bit.
As you recall Halloween drilling joint venture was announced in February and so we added a rig there in March.
In our completion crew I think our total gross.
Locations will be around 75 locations.
Net to us that's around 60, so that 14.
It's a little bit under but not terribly dissimilar to the level seen in the second third and fourth quarter and our capital is $140 million on the first quarter. Our guidance is $5 90, if you annualize that you're at 560 so.
The upcoming quarters, maybe $150 million to $160 million somewhere around that but not too dissimilar to the first quarter.
Okay. That's helpful and just maybe to follow up on that in terms of.
Kind of thinking about it.
The sequential decline quarter, obviously given.
Given the completions in <unk> and then <unk>. So how should we think about that that trajectory.
Its flat going forward.
In our guidance to three three to three four we're at 332 so it'll.
It'll be in and around 335 net.
Next quarters.
Okay, So no real kind of Lumpiness.
Now very flat maintenance capital.
Got it alright, I appreciate the time.
Thanks Alley.
Our next question is coming from the line of Harry Halbach with Raymond James. Please proceed with your question.
Hey, guys congrats on the great quarter.
Thanks, Eric Thank you.
You know one of the things I noticed is.
You all had a net marketing premium in this quarter, but you reiterated your kind of eight to 10 since net marketing expense guide is that just mainly conservatism or do you kind of expect it to run above that kind of guidance range for the next three quarters.
Yeah, we didn't really just any guidance I would say would be on the low end of that range.
We could have probably taken down the range to make that the midpoint, but since we were at the low end, we just left it per se.
Okay. Thanks for that color and then my next question is there any thought you know once you get underneath that $2 billion debt target of kind of.
Putting some money back into sort of grow production like low single digits are on government really committed to that maintenance mode.
We're committed to that maintenance mode.
We will assess when we get there it is going to be 22, that's much accelerated timeframe because it is terrific execution, we've had on the commodity price as well.
But right now its maintenance capital for the next three or four years and will assess when we get there, but right now really looking at further debt paydown and opportunistic return on capital.
Great. Thanks for the color.
Thanks Mary.
Thank you. Our next question is from the line of Gregg Brody with Bank of America. Please proceed with your question.
Good morning, guys.
Hi, Greg.
I wanted to congratulate Mike Congrats on the promotions and of course wish.
Once Glen what could work with us.
Yes.
I appreciate it.
Really appreciate the follow on you guys. Since you were private it's because you were telling the story how are you guys starting together.
Thanks.
Cut back too many years ago.
So good luck.
Thank you, Greg, Yes, youre there on our first high yield the Arctic.
Yep.
Well, it's nice to see you leaving on top.
It's interesting now when we when we asked you.
Maybe a year ago, if you would consider component Antero resources and Antero midstream it didn't seem like there was a possibility considering the stocks or bonds or beat up on.
There was a big difference between western for trading.
If you're rethinking that all of that is if there is possibility of combining the two.
Yes, no we're not rethinking if you recall, Greg when we went through that simplification in 2019 hours one scenario that we definitely.
At heavy consideration for and.
Everyone went through and all of the conflict committees and independent Board directors went through and looked at it and the best course of action was to.
Making taro midstream a C corp, and up to fully independent company. So we're not looking at that right now I mean, I think what you're really talking about it.
Leverage profile is really reducing on both a R&M that becomes a lot more feasible, but.
We're not we're not entertaining that right now are looking at that.
And just on just one just if you think.
Think about your.
The NGL outlook clearly, there's a lot of Polish things moving on if you were to if you were to think about it.
You mentioned, India is potentially helps you in terms of LPG demand.
Do you think there's anything negative there.
Do you worry about that we should be thinking about.
Yes, Greg on the on the fundamentals no not really I mean I think the.
You go back to a year ago with negative price oil a day or two on April those things certainly can can surprise you, but we don't see the risk of a situation like that playing out again as the oil.
All of us learn more about how to how to manage through this pandemic. So.
I don't see it.
Don't see any negative on the horizon.
I'm, just concerned about having adequate enough supply for this upcoming winter and.
Price shocks or Kevin can be damaging long term demand, but good in the short term. So I guess that would be the downside as prices get too high.
Could cause folks to rethink investments many years out.
Have you.
Have you thought about the <unk>.
Propane or I guess increased demand related to COVID-19.
Trade is there.
You have a sense of how much that could impact demand.
There has been I'd say, a little bit of some petrochemical markets that have benefited from a lot of the materials that have been been used here during the pandemic, but.
Again, we're not expecting or planning on.
Gross of those day necessarily keep pace with GDP in the years to come and even at a much reduced rate, it's still still looks a very well balanced.
Balance for the LPG sector. So so no not concerned about that.
Out of the refinery LPG production has already come back online it really did by the end of last year.
The talk of the increases coming out of OPEC and her on her overall fairly marginal just given the backdrop of the demand that's coming on line at the same time, so I think.
The focus will be on this upcoming winter and then we get enough built.
But.
Some of those things that those headwinds that you hear about are.
Still are still not quite enough to keep pace.
I appreciate all the answers.
Thanks for the time.
Thanks, Gregg on correct.
At this time, we've reached the end of the question and answer session I will now turn the call over to Michael Kennedy for closing remarks.
I want to thank everyone for participating on our call today. If there are any further questions. Please feel free to reach out to us. Thanks again.
Thank you. This will conclude today's conference. Thank you for your participation you may now disconnect your lines at this time.