Q3 2025 Antero Resources Corp Earnings Call
Greetings and welcome to the Antero Resources Third Quarter 2025 Earnings Call.
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 star zero on your telephone keypad,
Please note this conference is being recorded.
I will now turn the conference over to your host Dan katzenberg, director of and restoration. Thank you, you may begin.
Thank you for joining us in terros. Third quarter, 2025 investor conference call. We'll spend a few more, a few minutes going through the financial and operating 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 into a resources.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. Please refer to our earnings press release for an important disclosures regarding such measures.
Joining me on the call today are Michael Kennedy CEO and President. Biden Krueger CFO. Dave Canal Longo senior vice, president of Liquid Marketing and transportation. And Justin Fowler, senior vice president of Natural Gas marketing. I will now turn the call over to Mike
Thank you, Dan, and good morning everyone. I'd like to start on slide. Number 3, titled onto strategic initiatives.
We are entering an exciting time period for the natural gas market. Rarely have, we witnessed such a visible step change in demand.
The significant demand growth is driven by increasing U.S. LNG exports combined with a surge in natural gas power generation. That is accelerating from the buildout of new data centers.
And to employed the benefit from the structural demand changes. Through our long-term vision, and recent strategic initiatives, which includes adding to our core Marcellus position in West Virginia, we accomplished this through, both Bolton transactions and continuing our organic leasing program to increase our position in the West Virginia, Marcellus Fairway.
Returning to West Virginia, dry, gas development. To highlight our ability to quickly respond to the regional demand, that is beginning to show up in Appalachia.
You can either Supply directly into future demand projects or grow into a local market if the local basis Titans.
Also, use hedging as a tool to lock in attractive, free cash flow yields to support our dry and million gas development program, and our efforts to be counter, sickle and transactions and share repurchases.
We believe the execution of these strategic initiatives will enhance our ability to capitalize. On a significant demand increases are expected for natural gas over the long term.
Now let's turn the slide number 4, which highlights our third quarter operating results.
Continuing our trend of improving our Drilling and completion results. The third quarter was our most impressive operating performance. Today, we sent numerous company records and achieved significant progress.
The right hand side of the slide highlights, the various company records. We
5000 ft.
On the completion side, our completion stages per day continue to climb higher, averaging another quarterly record of 14.5 stages per day or 2,900 ft per day.
And as Patterson ETI, highlighted on the call. Last week we set what we believe to be a world record for continuous pumping hours.
15 days of non-stop pumping hours. A truly remarkable feat.
Our additional land investment is driven by the ongoing success. We are seeing from our development plan and on the ground from our organic leasing effort.
Strong. Well, performance continues to expand our view of where the Marcellus core boundaries extend.
the map on the left of this slide depicts, what we believe the BMR Marcellus core at the time of our IPO in 2013
As you can see, we built our position focused on Doddridge and Harrison counties, which we believe will deliver the best drilling results.
However, over the past decade as our development, Focus shifted into the neighboring, counties and our well performance continued to strengthen.
These results. That's driven an increase of organic leasing program, into those counties.
Organic leasing efforts have been a tremendous success over the years, we continue to acquire acreage at attractive levels per location with the incremental locations more than offsetting our annual turning lines.
Further this program allows us to maintain our development focus in close proximity to our current footprint reducing geologic risk while leveraging the benefits of entero Midstream.
Now, to touch on the current liquids and NGL fundamentals, I'm going to turn it over to our senior vice president, president of liquids, marketing and transportation. Dave kalongo for his comments.
Thanks Mike.
Several market trends are pointing to improving NGL fundamentals and higher prices in the coming quarters.
Following several years of substantial year-over-year, Supply increases multiple third-party data. Providers are forecasting. A slowing of NGL production growth across the US due to the current low oil price environment and sharp reduction in oil directed rate counts.
Subdued drilling activity and oil basins will have an impact on Associated Rich gas and NGL production, particularly in the perusse Permian Basin, which accounts, for more than half of total us C3, plus Supply.
As shown on slide number 6, titled USC. 3+ Supply growth slows the chart on the left shows, projected NGL Supply growth in the puran, slowing down dramatically in 2026 compared to previous years. At the same time, the chart on the right shows total uc3 plus production growth in 2026 is nearly flat with only 11,000 barrels. A day of incremental Supply expected.
This indicates that while the Parian should continue to rise albeit at a slower rate. This increase is being offset by even slower growth or outright declines, and less economic tier 2 producing regions, including the bakan Rockies and Midcontinent.
The declining expectations for C3 plus Supply. Growth comes at a time when exports from the US are now able to ramp up dated by a debottlenecking of terminal capacity.
Year-to-date propane exports have increased by over 120,000 barrels a day, averaging 1.85 million barrels compared to 1.72 million.
This increase occurred despite current global trade uncertainty illustrating, the continued call on us barrels.
At the same time, LPG, export terminal, expansions have started to come online beginning this summer and ample export capacity will be available for the foreseeable future as shown on slide number 7, titled, new capacity to ramp up exports.
Going forward unconstrained. Doc capacity will allow us barrels to efficiently. Clear, the market and bring Moc Belleview prices as close as possible to premium International LPG prices.
In the past, Ontario is often benefited during times of us Gulf Coast terminal constraints with our ability to export barrels, out of Marcus Hook and capture. I do premiums
The ability to execute this strategy is served as a differentiator for Intero versus almost all other NGL producers in the US.
However, it is important to remember that in Taro benefits, more from higher MB prices than from high DO premiums.
This is because higher month belly prices, lift both our export sales and all of our domestic sales, the latter of which are exclusively priced on a mop Belleview index.
And Tarot on average exports less than 45% of its gross C3 plus production and sells the remainder of its C3 plus volumes in the domestic Market.
Therefore, an uplifting domestic sales. Prices is much more impactful for Ontario's, NGL realizations.
In conclusion, the key challenges of 2025 all Trend in our favor, moving forward, as reduced producer, activity, combined with higher, export capacity, and international demand pool is expected to bring propane storage inventories from the top of the 5-year range to near the 5-year average by early 2026.
These fundamentals will support Mont. Belby prices in 202026 and strengthen C3 plus prices as a percentage of WTI with that. I'll now turn it over to our senior vice president of Natural Gas marketing. Justin foward to discuss the natural gas market.
Thanks, Dave, as we approach winter, we see seasonal and overall positive fundamental demand demand Trends coming from natural gas.
I'll start on slide number 8, titled tgp, 500L basis Street.
LNG, export demand is expected to increase by 4 and a half BCF.
From the beginning of 2025 to exit 2025.
This increase is almost entirely due to the successful and quick ramp up of the plaque men's LNG facility.
Definitely 3.9 BCF per day.
With the first 18 trains. Now, complete Venture Global will begin placing 2 which will increase the capacity by an incremental 2.4 BCF per day.
With the first phase in 2026, followed by the second phase in 2027.
The significant demand pool for this LNG facility has led to higher demand along our tgp 500L firm transport path and is driven a higher premium at that delivery point relative to Henry hub.
Looking ahead to the winner, this premium to Henry Hub has increased to nearly 80 cents and in 2026, the premium is now at 64 cents.
For the full calendar year, the highest levels seen today.
As a reminder approximately 25% of interios, gross, natural gas is sold at the tgp's, 500 pricing hub.
Our exposure to TTP 500L is expected to lead to higher natural gas realizations.
Slide number 9 takes a closer look at the significant natural gas demand surge that is coming over the next 24 months from the new LNG capacity additions.
Over this short period LNG demand is expected to increase by another 10 BCF per day.
Driven by the startup of plaque and 2.
Golden pass.
Corpus Christi 3 and kalashi pass 2.
These new LNG facilities are expected to continue to drive higher price premiums along the LNG. Fairway. Hubs
Where we sell 75% of our national gas.
In addition to the substantial LNG demand growth, power demand is also expected to increase significantly over the next 5 years.
The map on site number 10.
On announcements that have been made to date. Regional demand is expected to increase by 8 BCF per day.
As Mike has discussed in the past in Tariff, we have 1,000 gross, drying gas locations that we could accelerate activity on if there is a regional call for higher supply.
Along our firm Transportation. Fairway there has been more than 3 BCF of power demand projects announced today.
Additionally, there is an incremental 13 Bcf per day of expected demand between LNG facilities and power projects announced along the LNG Gulf Coast fairway.
All of these projects will be competing for natural gas, supply. That could phase Supply challenges in that short time frame.
Onto is uniquely positioned to participate in each of these 3 regions with our ability to increase dry, gas activity for local demand, or use our firm Transportation portfolio to access, increasing demand all the way down to the LNG. Fairway.
With that, I will turn it over to Brendan Krueger, CFO of Antero Resources.
Thanks, Justin. Our capital-efficient program that Mike highlighted resulted in an attractive free cash flow of over $90 million during the quarter.
Year to date. We have generated almost 600 million of free cash flow.
Slide, 11 highlights. The uses of our 2025 free cash flow.
Year to date. We have paid down debt by approximately 180 million.
Purchased $163 million of stock and invested $242 million in asset acquisition.
We believe this portfolio approach to use as a free cash flow will drive attractive, shareholder, value creation as we continue to compound this effort going forward.
As we've proven historically, we will be disciplined in our transactions. The transactions. We completed during the third quarter were created to the key metrics that we prioritize including free cash flow and net asset value per share.
Importantly we were able to fund this activity entirely with our free cash flow in 2025 and therefore did not have to issue Equity at today's levels in our financing efforts.
Now, let's turn to slide 12 to discuss our updated hedge program.
During the quarter, we added natural gas swaps for the fourth quarter of 2025 and full years 2026 and 2027. We also restructured our wide natural gas collars for 2026 raising the floor price as Mike touched on during his comments. These Hedges support our strategic initiatives
Expected natural gas volumes in 2026 with swaps at 3.82 cents per mmbtu and 28% with wide collars between 3.22 and 5.83 cents per mmbtu.
Our hedging book allows us to protect the downside by locking in a portion of our free cash flow. Yield, this is illustrated on slide number 13, titled "Reduced Cash Flow Volatility." Our hedges are locked in base-level free cash flow yields of 6% to 9% at natural gas prices between $2 and $3, while at the same time, we maintain significant exposure to rising natural gas prices.
Further, these headers result in a 2026 free cash flow break, even at just $1.75 per Mcf. Assuming year-to-date NGL prices.
Looking forward, our return of capital in transactions is anchored by our low absolute debt position, which provides us with substantial flexibility to pivot between creative transactions in our core Marcellus West Virginia footprint.
Debt reduction and share repurchases.
We will continue to evaluate the creative opportunities to increase our net production and core inventory. While importantly waiting to increase gross volumes until the broader natural gas market calls for it.
While we continue to Target maintenance Capital, we are well, positioned with substantial dry, gas inventory for future growth opportunities from the regional demand increases that are expected.
With that, I will now turn the call over to the operator for questions.
Thank you. And ladies and gentlemen, at this time, we will conduct our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad,
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1 moment, please while we pull for questions.
And your first question comes from a room gyro with JP Morgan, please State your questions,
Yeah, good morning. Uh, gentlemen. I wanted to maybe start with the decision.
To.
Commence a DNC operations, um, uh, on the gas side and Harrison County. I was wanting to know. If you could talk about, what the Catalyst was for that kind of decision and you know, did data centers power deals down the road did that play into kind of the calculus about you know, doing something you had done in in 10 years or so.
yeah, that's exactly kind of the Catalyst we've been active in those discussions and
Became clear to us. All this discussion is really related, kind of the Eastern portion of our acreage position, and where those opportunities would be located. Also, where the, the local demand is. And so we thought, looking at our position, we have 100,000 acres, we have significant historical activity. There we have the Midstream infrastructure. Uh, so we have a proof of concept pad so already a pad that exists as well as going south. So with the drill North and it'll be very uh low cost wells in in the highly productive and uh we're excited to get back at it at the in the Harrison County area.
Got it. Um, and then maybe my follow-up, you know, just given Mike this, you know, doing a little bit more kind of gas drilling. Um, the thoughts on
You know, how you're thinking about?
A 2026 program. And and to, um,
And, you know, obviously, historically around this time, you, you have decided to do a call at a drilling, uh, partnership which is defrayed some of the costs. But how are you, what, what is your, your, your thinking around 2026 at at this point understanding is still probably early in the budgeting process? Yeah, it's still early but we're still at maintenance Capital around, this is just 1 pad.
Uh really the fourth quarter production level. We're in the 35 to 3525 range that's level a little hold. Uh generally in 26.
Uh so we're still there. This is just more of a proof of concept pad um on the drilling TV that's still to be determined.
Uh, we'll see where kind of the market is related to that and we could have, uh, we could continue that in the 26, but we haven't made that decision yet. All right, great. I'll turn it back.
Your next question comes from.
John Freeman with Raymond James, please State your question.
You uh, just a a follow-up on on a range question with the uh, following, you know, the Acquisitions and the and the higher production level. Now that you you cited that you're going to have him in 4 q. Just kind of, how does that impact? How the the prior commentary about maintenance capex? I just think previously, you'll kind of talked about kind of flattish capex to maintain production, just wondering if this has an impact.
I just had the same ratio that the increase, you know, the production increase by 30%. So,
It's logical to expect a 3% increase in your maintenance capital, so that's like an incremental $20 million from that $675 million level.
Got it. Thanks. And then, um, looking at the uh, the Acquisitions the the the 260 million of Acquisitions in the quarter, uh, just trying to get a better feel for if, if this is not kind of a bigger focus of the company or was this sort of kind of 1 off in nature and just it happen to have all these sort of transactions, Domino, uh, during the quarter, just kind of have to think about that going forward.
Yeah, I don't know if it's a bigger focus. I just think with our position in the West Virginia Marcellus, these types of transactions come to us and are available to us if.
You know, that makes sense at the time. Uh, when you look at our, our acreage position continuous make, uh, nature of it. We are the liquids developer in West Virginia.
And so we get opportunities from time to time, and we evaluate them, and these ones made sense.
Thanks Mike. Yep.
Your next question comes from David Deco bomb with TD Cowen, please State your question.
Thanks for taking my questions, guys.
um,
My guess is as we get into 2026, um, you know, obviously you guys just drilled a record lateral length. Um, we saw the impacts to the average lateral length in the quarter. Um,
I guess just given some of the land spends that you have this year. Um, how do you see that progressing on average into into 26? Given that you guys have had some pretty significant efficiency gains.
Yeah. Now it actually goes up, you know, it's a good. Uh, I think it goes up to 14,000. I think we're generally around that in this year, in the low 13,000.
um, next year's up a thousand but you highlighted the
Very efficient nature of our leasing program; that's exactly what it's doing, and he's trying to optimize those lateral links and also expand our position. So, uh, next year is up about a thousand feet through. Well,
Yeah, I I guess I appreciate that color Mike. Um, my follow-up is just uh, we saw obviously the acquisition this quarter. It looked like it was an increase and, and existing, working interests, which, which I guess is, you know, I don't, I don't know if you would be that as, as aberrational, um, or if you view this as a, as a, as a trend that likely continues perhaps into next year,
I don't know if we'll have.
It was 30 separate transactions at all, like, with working interest.
Another 1 royalty interest Miller 1 with uh more acreage based.
But hopefully, they continue in the next year. However, it's hard to forecast. But like I mentioned, we have such a dominant position in this area of the Marcellus.
Uh, these types of transactions tend to be available to us if they make sense in the third period.
Appreciate it, guys.
Your next question comes from. Kevin murie with Pickering Energy Partners, please stay your questions.
Hey, good morning, uh the hedges. You added this quarter were unlike past quarters and that you aggressively hedge the next quarter or fourth quarter in this instance and you opted for swaps uh for next year of the wide collars before, has your strategy on hedging changed, or was this just opportunistic and we should we expect you to have a certain Edge level heading forward from here.
I think it's probably both um you know, if we could replicate what we have next year? Where it's these, approximate numbers, a quarter with wide collars protecting at 325 with exposure up to 6. And a quarter in that High 3 dollar 4 dollar range.
Uh, and then 50% unhatched. That's actually a good model for us. I don't know if that'll be available going forward, but that's a good level for us. When we looked at...
Uh, the program is, as Brendan mentioned in his comments, the ability to lock in above 5% free cash flow yields.
I think it's 6 to 9% in the 23 dollar range but then expose ourselves completely to the upside up to 20%, free cash flow yield.
Uh, you know, that that feels like a prudent way to manage business.
On price and volume this quarter. Uh, was that just due to sales timing? Or is there any sustainability to that be?
Yeah, Kevin. This is
Really, just a function of customers and and when they're, they're up and and running and taking full volumes and then also uh, our or the spreads into the uh, the Gulf Coast on atex have been improving here in the back half of the year so just taking advantage of our capacity on that system.
Great. Thank you.
Your next question comes from. Philip jungle with BMO Capital markets. Please do your questions.
Uh, thanks. Good morning on the dry, gas, acreage in in Harrison County. There there's been a lot of operational improvements and advancements and Drilling and completion Technologies since the last drilled here. Um, so I was wondering if you could talk to your expectations as to how much of an uplift, um, you'd expect versus kind of the historical type curves from, from the wells that you had had drilled here previously,
yeah, we expect about a 50% Improvement, the old wells in that area was more like 1.3 BCF per day but with
Uh today, you know, after 12 years, we've gotten a lot better at it. And I think we have approximately 1500 Wells now and those are 1 of our first. So we're excited about optimizing the completion in.
The uh of those Wells and so was 1.3 BCF per day. Expectation is 2 BCF. I mean uh uh 2 BCF uh per thousand foot now.
Okay, great. And then wanted to come back to something you referenced last quarter. Um, but with your, with your water systems was wondering, if you could expand upon the, the data center cooling opportunity for Intel resources and then to Midstream, um, just what would this look like and and how would you look to play a role?
Yeah, I think just the building.
order. Um, you know, we think we think we
Positioned.
Upstream Midstream integration being uh, bit largest gas producer in Appalachia. Uh, We've invested about 600 million dollars or so in the water system. Um, so that that provides Appalachia in West Virginia, in particular, with uh, with an advantage, I think relative to other areas. You know, the terrain is a bit more difficult in West Virginia, but we think the advantages of being close to fuel supply, being close to water um, having the Upstream Midstream integration really do position in Tarot. Well, um, so having a lot of discussions there, nothing nothing to announce that this this time, but, uh, continue to have, uh, quite a bit of discussions there. Um, and then I
You know, I think in terms of uh, as we look at just the the regional demand overall, you know, I think we we view this as it could take a few different forms, you know, you've got either behind the meter power for data centers. There's been quite a few announcements just on natural gas fired, power generation, both in West Virginia and the region at large. Um and then I think just local prices tightening to the extent. You have Regional demand and uh, local prices tightening of Mike had mentioned. You know. We've got that significant dry gas, inventory to take advantage of all those those various opportunities. Um, the the other thing I would just note is, you know, we we we are intentionally being a bit patient on on this as well. I mean, I think as you look at our LNG portfolio, for example, you know, we had many opportunities on pla, for example, to do long-term deals at at certain prices with plaque and that were much lower than what, we're seeing basis trade at, as that facility as that, uh, LG facility is ramped up. So we do think
Patience is a bit of a key here. And and as you, uh, as you let this play out and the scarcity of Supply continues to build, we think the, uh, the ability to do, you know, margin enhancing deals. Uh, we'll, we'll become greater for anteros, so, um, having a lot of discussions, but but also taking a patient approach and we want to do the right thing versus just coming out with announcement. Just for the sake of coming out with an with an announcement.
Very helpful. Thanks guys.
Your next question comes from Doug liate with wolf research. Please State your question,
Uh, thanks, uh, for having me on, uh, Mike. I I wonder if I could pick up on this, uh, topic of not, you know, not seeding market share if you like in the in the Basin, uh, what, what's your decision point for growth? And I, I guess I'd kind of frame. The question, like, um, what what are the conditions you need to see? Do you need to see basis improve? Or is it just about local demand, increasing, uh, before you decide to step into dry, gas growth in the, in your backyard?
Yeah, that would be interesting question. You know, we've been talking about that, obviously, this is a proof of concept, so we'll see the results from this but we're highly encouraged.
Um so you you mentioned seating the base and you know we are the dominant producer in West Virginia. I think we produce over 40% of the state's Natural Gas.
Uh, we are the, do we have the dominant acreage position? We have the Midstream, we have the acreage HPP, we have investment grade balance sheet, I mean, everything you'd want.
Uh, for developing it. So why why shouldn't we develop it? Uh, so it's proof of concept. We will prove out the resource and then when you look local demand, absolutely uh, with encourage us to, to grow into that. Also if you kind of look out the curve, if you get, you know, 4 dollar 9x natural gas, and you could, you could hedge basis in the, the future years that may be something we we would entertain as well. So, a lot of, uh, kind of different decision points there. But like I said, we're uniquely positioned for this when we're. We're very encouraged and we look forward to this pad.
I, I appreciate that. And of course, given the depth of the inventory, you have you've got a lot of optionality, but it does raise the question and you got to forgive me for this 1 about the the the rest of your portfolio on the you know the potential for asset sales. And you know what I'm going with this in the in Ohio can you offer any color confirmatory or otherwise otherwise as to where you are in that process?
Yeah, we're just in the middle of that process. Doug, we're highly encouraged there, as well as you can imagine. I mean, that's a highly desirable or coveted asset with the.
contiguous acreage position. Uh, all the midstreams in place, the ability to access the, The Firm transport to, to price it outside of the Basin, uh, the liquids portion, the dry gas portion, you know, it's kind of a ready-made asset for companies. So also all the data centers over in Ohio, as well, and all the power demand over there. So it's it's highly coveted. So that's kind of why we wanted to do a market check. We're we're just in the middle of it, but uh, we are encouraged
So thanks so much guys.
Your next question comes from Betty Jiang with Barkley's, please State your question.
Good morning. Um, I want to go back to the the data center proof of concept. It's seems to me that uh, you don't need to prove to the market that you can grow dry gas, and grow it, very cost-effectively. And so this proof of concept is really for the customers and people you're speaking to on the other hand. So my question is,
That these customers and entities. What are they looking to digress with your proof of concept pad? Is it the speed of which you can deliver volume? Is it the capacity of resources that you can deliver to. And once that
Pad is online. Could that catalyze?
The conversation that you're having on the power and data center side.
I think the proof proof of concept is 2 full for us and then I'll let Brandon talked about his discussions uh, with the counterparties. But for us, it's 1. You know. What's the eu's? What's the deliverability? Uh, just so we know. We haven't drilled a well over here in 12 years.
Um, so is it? The 2 BCF? Is it higher than that? Is it lower? Um, so so we'll see. And and how to optimize that development but also in the Midstream, you know,
A lot of Midstream capacity over there showing that we can flow it into these, uh, local kind of sites where these, uh, data centers are, uh, potentially being located. Just the ease of our ability to deliver gas, straight to the actual facility, but I'll let Brendan talk about other the customers. Yeah, I think, I think just to add on on top of that. Um, you know, I think from the standpoint we haven't, we haven't, uh, drilled a well over here in 10 years, it just, it just shows. Um, you know, we've got the inventory over here, it'll give them good perspective on the ability to quickly ramp up. Um, and I think you know, having having the ability uh, to have that residue gas not
Not only at the processing facilities and, uh, in the Eastern, uh, or I'm sorry in the western part of our play, but but also on the eastern part of the play where you're seeing some announcements out there on on gas fire generation, it provides just more flexibility and discussions um you know like as I mentioned we're having multiple discussions and so um the ability to have flexibility around these discussions and and what could, um, what could be best for Antero as it relates to kind of margin enhancement. Um, this just gives us more flexibility having different parts of the play um producing in in larger ways.
To define a score and can you just speak to the attractiveness of the organic leasing initiative versus potentially what you see in the private space in that area?
Yeah, you know, we generally go, you know, so our our kind of Base organic leasing is always kind of looking out the next 24 months, and trying to enhance those the working interests or the lateral links, uh, like we discussed earlier and that's generally up to the 75, you know, 50 to 75 million level and then above that is the expansion. And you know, what are we seeing a particular year? So we go into generally in the year and that 75 to 100 million dollar range and that's where we've been the last 3 years.
This year, we've just seen a lot of opportunities because our wells continue to strengthen in these these areas that that uh we're developing and there's more acreage you know in those areas than there there have been kind of in the middle of the field. So our uh opportunity set continues to grow as our as our wells and our uh, continue to support that. So, you know, right now, I'd probably go in the next year and I think most people's models have about a hundred million dollars, but if we continue to see opportunities throughout next year that that could be higher um kind of in the back half of 26, if this level of activity continues,
Got it. Okay, thank you.
Your next question comes from. Jacob Roberts with tph, please, State your question.
Good morning.
Good morning, good morning. I wanted I wanted to ask about, uh, uh, cash taxes. I think on the last update you gave the market, it was a 2028 time frame, uh, those commodity prices. Just wondering if that math has changed at all given where we sit today,
No, no change there. No no material cash taxes um through through 2027 to 2028 would be that. That first year we'd expect to pay some
Okay, perfect and and then circling back to the dry gas activity.
This 6-well pad, or the activity going on currently, is aimed at achieving that 50% uplift relative to a decade ago. Should we be expecting some iterative completion design, or is this ready to go into manufacturing mode?
All right. Ready to go. I mean,
Like I mentioned, I think we've since that time drill over a thousand. Well so it was it was primitive back in 2013 when you look at it. So it would just be doing our typical, you know, 36 barrels of water per foot 200 feet stages.
Uh, in the spacing on it, is it like 830 foot spacing? So lateral between the laterals. So, just our typical design in the liquids, but just applying it to the dry gas for the first time in 12 years,
great, appreciate the time.
Sure.
Your next question comes from nitin Kumar with mizuho Securities. Please State your question,
Hey guys. Uh, good morning and thanks for taking my questions. Um, I'm going to start on the hedging, uh, you addressed earlier, it's a little bit more prudent, um, sort of financial management, and, and I agree. Um, as you've kind of, put a floor on your free cash flow yield. What are your thoughts on the on the cash return profile? You know, you you you kind of not not a dividend, uh, like of some of your peers at your stabilizing, your cash flow is that part of the discussion, uh, going forward,
I don't think a dividend but I think, you know, we can be
Very counter cyclical and share repurchases uh, with locking that in also evaluating transactions, even in a low commodity price environment, you know, we always want to be counter cyclical and we have really no debt for very low debt. No maturity for years and years. So we want to be counter cyclical but if you don't have the hedges in place when the counter is cyclicality, happens and low commodity prices. The free cash flow is not there as well. So we wanted to lock in a baseline of free cash flow and then be able to use it for Cherry purchase.
Purchases or transactions is is where we're thinking.
Great great. I appreciate that and um you've the topic of m&a has been covered quite a bit but you you you confirmed earlier that you're marketing, the Ohio assets, just curious.
As you mentioned you don't have a lot of um um near-term debt or or a big balance sheet. Um, what do you think would be the use of proceeds if you were successful in in getting the price you want?
Yeah, no. It's
And that's why it's a high moment.
See, in the most likely case I would
Case. But
but, uh, the, the the marketing goes, but, uh, the use of proceeds right now, is like, you mentioned in the last square at 1.3 billion at that, we have
29. That's kind of callable at par. So we really only have 700 million of free payable debt that they're 600 million. So 2030 maturity, I think 5 and 38. So that's a good piece of paper.
Um, so that but then, you know, you also look at where our Equity trades.
And, uh, the type of valuations that you're going to see here in Utica are also in excess of where equity trades.
so that could be a a use of proceeds as well as, you know, it wouldn't be a a
Bad trade. If you sell your Utica for, well, in excess of where your equity trades and use that to buy the shares.
Appreciate it. Good luck.
Sure.
Your next question comes from Leo Mariani with Ross MKM. Please, go ahead with your questions.
Yeah, hi. I just wanted to um, follow up a bit more on this concept of growing net volumes, uh, without growing uh, you know, sort of gross. Uh, you know, when the near-term obviously you you talked about uh, m&a sounds like you're undecided on the the drilling uh, you know, partnership here but just in terms of the the m&a strategy other than undeveloped, baggage are there opportunities to, you know, continue to pick up minerals. Uh you know, working interests are you you generally trying to do this kind of ahead of the drill bit over the next kind of 12 to 24 months. I mean, you said that these 3 deals kind of came up recently. Um,
Are you are you seeing just kind of more deals in the Basin? Just want to get a little bit more color around some specifics on kind of the m&a strategy here and and kind of growing uh, the net without growing the growth.
Yeah, I think you hit on it. These are all small.
On transactions, uh, increasing interest.
You know, when we talk about growth versus Net, our you know all of our processing is full. I think we're at 106 of processing capacity, all the FPS full so on the liquid side,
Uh, it's it's a challenge to grow growth because all the facilities are full. Um, so in order to grow that, then that you have to look to the working interests and the royalty and all of these are highly free, cash flow and creative.
Uh, so that's where I had that. So as they come up, we we've assessed them and see if it makes sense.
Based on that. And then like, we we've been talking about a lot in this call the ability to grow. The dry gas is really dependent on Regional demand and local basis. And so that is an opportunity for for growth there. But um, really just trying to grow the net and maintain the uh, maintain the growth volumes.
Okay that's helpful. And then you obviously highlighted a number of kind of operational records on the quarter uh with just some very, you know, strong improvements uh in terms of bra stages and cycle times and everything. Can you just give us uh, you know, any any thoughts on whether or not you think there's, you know, a decent amount of more Improvement to come here, or do you think you're starting to kind of maybe bump up on some of the
Limits, I guess 15 days in a, in a row without stopping in the Frac side, seems like maybe hard to do a lot better than that.
Yeah, if we continue that. So when you get those days you're doing,
States a day, and we averaged 14 and a half during the quarter. Uh, so if we get more, continuous pumping, uh, throughout which is our, which is our goal, I think you can see that go go a bit higher but, you know, right now I think if, if we had a a pad, uh, and had this type of uh, performance you you could average, you know, on the 15 stages kind of per day. So a little bit of improvement but you know the 14 and a half stages is is is really high.
Okay, thank you. Mhm.
Thanks and your next question comes from clay akamine with Bank of America. Please State your question,
Hey, good morning, guys. Um, maybe to start, I'd like to talk to you about slide number 5 and the one that illustrates the expansion of what you consider to be core in the Marcellus. So, activity in the east, in areas like what's in Tyler, that's been robust for quite a while, and it's easy to see how that is now core. But activity to the south and the east has been a little bit less frequent. What gives you confidence that the core is expanding to those areas?
Our our recent well performance is, you know, we Tyler and Wessel but it's also been in the kind of in the Eastern portion of Richie and uh northern part of Gilmore. And you look at some other competitors and they've had good results down in the Gilmore Lewis area. So you've seen that and then like we talked about on the dry gas, that's in Harrison County.
So, I appreciate that for my second.
Visibility on, maybe new ft opportunities to push more gas into that region. And then it feels like given the demand pull. There's increased competition in the Gulf to lock these volumes down. Do you see any direct to Consumer opportunities along this route that you could that you could participate in?
Okay I think I got some correct me. I think we had a 2.1 BCF a day going down in the Gulf. Yep. And we've intentionally been floating like Brendan's comments suggesting you know we've carried this for quite some time. We're going to see where the actual basis goes. And when you look at these type of
Opportunities and demand growth: 25 BCF a day, with 17 of that being in the Gulf Coast or along that path.
We think there'll be a lot of opportunities, but I can adjust and expand on that. Yeah, good morning. This is Justin power. Um,
So, the way we think about this, you know, on Mike and Bond's previous comments.
The local demand, if all these projects go forward, is going to be there. So that's going to drain gas out of, you know, various local pipes and various local pools.
and then to Mike's point when you think about the anterior 2.1 or so BCF of cell phone,
There was approximately 10 BCF reversed, you know, over the years since the Shale Revolution took off. So right there we're about 20% of that that volume heading cells. And then when you really zoom in on some of our pipelines, which we're calling mid path, um and Tara owns rights, you know, power
Those potential projects as well. So we are evaluating different projects in Kentucky, Tennessee, Mississippi, you know, where we cross. And then to your point on just the LNG market. Yes.
You know, the the LNG groups are going to have to potentially start to lock in Supply just as there will be scarcity across, you know, the summer season. Winter season Etc, that could cause Peak situations. So, um, we have been talking to a lot of those groups as well. But to Brandon's Point, patience is key at the moment and there's a lot still to be developed. Um, if I understood your first part of your question correctly, in terms of new capacity, uh, being added itself down. It's just such high cost and any of those projects are going to be, you know, toward the end of the decade. So, uh, and to is in a good situation here to continue to watch the basis locally and just that behavior locally. And then also, um, just working with, you know, these various groups in the mid path, uh, delivery points of those projects, uh, move forward. And the only thing I would add just on the, uh, on the, on the point of
End users. That there has seemed to be a bit of a shift in terms of the demand pole side of things. You know, in the Basin took off, it was more of a producer push there has been a lot more uh significant interest from a demand pulse perspective and and folks um wanting to get um wanting to get the actual Supply due to some of that scarcity of Supply that I think is starting to take hold in the market.
Sounds like a good opportunity to set. Thanks guys.
Thank you, thanks.
You're next question comes from Neil Mehta with Goldman Sachs. Please state your question.
Yeah, good, good morning team, um and and Mike. Congratulations on stepping into to the CEO Roa. Just love your, your perspective early on. It's been a couple months now of just observations and as you step into this new role and uh, you know, the business is is done very well over the last couple of years particularly coming out of Co. But what do you think the next Frontiers are from a strategy perspective? As you look to the next in the end of this decade? Yeah, I think you saw them as strategic initiatives, you know, the, you know, we have such a terrific asset and, you know, the best rock some best rocks in North America. Definitely the best rock for liquids development.
Midstream access, Midstream capacity, balance sheet, investment grade.
Uh, so it kind of ticks all the boxes somehow, the Strategic initiatives going forward, you're just trying to enhance that, you know, doing bolt-on, Acquisitions in West Virginia, trying to enhance our exposure there.
Some dry gas development. Like we talked about, uh, that's a good opportunity for us and then using hedging, um, as a tool. You know, that's 1 thing that like I mentioned, we want to be counter cyclical. The only way to do that is perhaps some sort of certainty of cash flow during low commodity price times. So that's kind of the, the next Trend here that we're looking at, um, and, but we're excited about it. And like I mentioned, we, we are at the dominant position in West Virginia, so we should expand upon that.
Um I guess not so bad when you look at it as a percentage of WTI but on absolute basis is pretty challenging. So you know just talk about the path for Recovery in 2060. I think that recovery is going to be more Supply driven or demand driven on on the supply side I saw you you put out some interesting numbers in terms of volume growth was probably below where I think consensus is for volume, volume growth in the puran, for NGL next year. So, you know, is that is that not a consensus view that you guys have that. Um, we can offset sort of the, the prevailing view that even if black oil is flat, that ngls will still be growing significantly.
Yeah, Neil, this is uh Dave catalog. I'll take that 1 for the 2026. Um, you know, certainly it it oil prices, do play a key role in what happens with NGL pricing. And as you alluded to, as a percentage of WTI, it's been been improving here in 2025, despite some of the, uh, the market headwinds that were out there. So we kind of look back at 2024, um,
So through through the first 9 months of the year a little less than 54% of WTI, 60% WTI here in 2025. So that really kind of speaks to the value for NGL is is still there driven by rescom, you know, in elasticity and and PCM demand. Um, looking forward to 26. Obviously, we're very optimistic about, um, the trade uncertainties is getting getting results here. Obviously some announcements here this morning that we think will will certainly th some of that if you look back to, um, the you know, what was being exported in particular to China.
Got um, prior to the, the pair of announcements in the early April was around 600,000 barrels a day or a third of of us LPG exports headed that direction or propane exports. And in June, it was a little less than 100,000 barrels a day and since rebounded to about 300. So certainly some thawing there. But, um, you know, we'd like to see that continue to improve that that'll help with efficiencies on freight pricing, which will also Drive mob Belleview higher. Um, so those are kind of, the key things we're looking to, you know, don't know how long, um, you know, the world can sustain at a, a 50 something dollar per barrel WTI as well. So we're, you know, we expect at some point that's going to resolve itself. Um, and also become a Tailwind for NGL prices on a absolute basis. Um, coming back to the supply picture and your questions on that. You know, that view is a third-party view that we put in our presentation. Um, I think that, you know, there's a lot of different groups that are out there and spend some consolidation in the third party, analytical groups. Um, so there aren't as many people out there, providing providing you
Use, um, seems to be a belief around, uh, Gasol ratios increasing. And that really seems to be what's behind some of the, the higher, um, NGL Supply growth views. But undoubtedly, I don't think anybody's disputing in this oil price environment and lower rate, count environment. That NGL Supply growth is going to be as strong as it was you know if you're looking at the chart in the prior the prior years
19, appreciate it.
And your next question comes from Paul diamond with City, please State your question.
Uh thank you. Good morning. Thanks for taking the call. Just wanted to touch quickly on kind of capital allocation given current conditions. You know with your hedge book. You guys put out pretty decent 4 under free cash flow next year and I've used kind of split evenly between stock or purchases debt, repayment, and Acquisitions. I guess in a in kind of a bull scenario. How much cash would you be willing to build if you want to really maintain kind of a assuming that you have limited debt to really buy back now? And, you know, if your stock starts to run,
Because that what level of cash is comfortable.
Yeah, that that'll be a good problem to have.
I think I mentioned earlier, we have 700
Buying shares all along that way as well. So, um, in a real bold case scenario where you get into a couple billion dollars of free cash flow a year, you know, you would start to build some cash. But I think, yeah, you’d be, unless you didn’t really have any other transaction opportunities, I think you’d kind of be where we’re at right now, where it’s kind of like a third repay of debt, a third equity purchases, and a third in transactions.
Got it. Um, just kind of switching to the other side of that coin. Some of your peers have really started to do, you know, production management, whether through curtailment or choking or anything along those lines. Um, given your FT, I know it's a lot less of an opportunity for you, but just wanted to see if you saw, you know, how to play in that and on the margins. Is that something you haven't looked into?
Well, when we do it, we just don't talk about it. It's already built into kind of our guidance, and it's really kind of...
You mentioned them with the FB and the liquids.
Uh, we don't really have that much local basis exposure. Um, but we do have it from time to time. However, we always build that into the risk in our guidance.
Got it, understood. Appreciate the clarity. I'll leave it there.
Thank you, and ladies and gentlemen. There are no further questions at this time, so I'll turn the floor back to Dan kattenburg for a closing remarks. Thank you.
Thank you, and thanks everyone for joining the call today. Please feel free to reach out with any questions that you have. Have a good day.
This concludes today's call, all parties. You may disconnect. Have a good day.