Good morning and welcome to the Antero Resources First Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please also note, this event is being recorded. I would now like to turn the conference over to Michael Kennedy, Senior Vice President of Finance and Investor Relations. Please go ahead, sir.

Thank you for joining us for Antero’s first quarter 2016 investor conference call. I’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 Home Page of our website at www.anteroresources.com, where we have provided a separate earnings call presentation that will be reviewed during today’s call. Before we start our comments, I would 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’s control. Actual outcomes and results could materially differ from what is expressed, implied, or forecast in such statements. Joining me on the call today are Paul Rady, Chairman and CEO; and Glen Warren, President and CFO. I will now turn the call over to Glen.

Thank you, Mike, and thank you to everyone for listening to the call today. In my comments, I’m going to highlight our first quarter financial results, including price realizations and EBITDAX margins, and then touch on the capital markets activity during the quarter, as well as our financial flexibility. Paul will then highlight the significant operational improvements we achieved during the quarter, including service cost reductions and operational efficiency gains that continue to drive down our overall development costs, and finally, discuss the operational flexibility of Antero. During our comments, both Paul and I will periodically refer you to a handful of slides that are located in a separate conference call presentation on the Home Page of our website titled, First-Quarter 2016 Earnings Call Presentation. This is separate from our Monthly Investor Presentation, also located on our website. So please make sure that you’re reviewing the correct slide deck during the call. Let’s begin with some of the key highlights from the quarter, as we had another tremendous quarter, both operationally and financially. Production averaged a record 1.758 Bcfe per day for the quarter, including over 68,000 barrels a day of liquids. This outperformance during the quarter, combined with the continued operational efficiencies we are seeing today enabled us to increase production guidance for the year to 1.75 Bcfe per day, while still maintaining our $1.3 billion drilling and completion budget. The liquids production during the quarter included approximately 12,000 barrels a day of ethane, which was a significant increase from the 2,179 barrels a day of ethane we recovered in the prior quarter. As this was the first full quarter following the installation of a de-ethanizer facility at the Sherwood complex in December of last year. While we are only recovering approximately 12,000 barrels a day of ethane today,…

Thanks, Glen. In my comments today, I’m going to discuss well costs and operational improvements we’ve seen during the first quarter, including highlighting several new Antero records that we have set. I will finish with a review of our well economics, which illustrates the benefit of deploying capital to generate strong rates of return. First, let’s discuss the significant improvements in well costs that we are seeing. As illustrated on Slide #9, titled Proven Track Record of Well Cost Reductions, current well costs in the Marcellus have declined to $0.95 million per 1,000 feet of lateral, or a 32% decline compared to the fourth quarter of 2014. As you can see on the bottom of the slide, we’ve seen similar success in the Utica with well costs totaling $1.14 million per 1,000 feet of lateral, or a 29% decline compared to the fourth quarter of 2014. Not only did the first quarter 2016 well costs represent significant reductions compared to the end of 2014, the Marcellus and Utica well costs represented a 17% and 13% reduction respectively compared to well costs assumed in our year-end 2015 reserves. The reduction in well cost is driven primarily by reduced service costs as legacy contracts continue to roll off and we begin to realize lower spot rates, as well as a number of operational efficiencies. ’: In the Utica, Drilling Days during the first quarter decreased from 31 days in 2015 to 24 days and stages completed per day increased from 3.7 stages per day in the prior year to 4.4 stages per day. Additionally, during the quarter, we set two new company records. First, we recently drilled and cased the longest lateral in company history at over 14,000 feet sideways. And second, we drilled 5,291 feet of lateral in a 24 hour…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Neal Dingmann of SunTrust. Please go ahead.

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Makes sense, thank you all.

Thank you.

And our next question comes from Phillip Jungwirth of BMO Capital Markets. Pleas go ahead.

Yes, good morning.

Good morning.

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Okay, great. And then you had mentioned reducing your stake in the LP units of Antero Midstream, which was the first time since IPO. So two questions, one, how important is it to maintain over 50% ownership of the LP? And then two, if ownership were to drop below 50%, would AM still be consolidated by Antero Resources?

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Yes that’s a good question. So we have virtually never unwound hedges. So the track record of those that who have materially unwound them has not been so great. And so we consider that our protection, but that’s right. We have a lot of flexibility, if we are slightly over hedged in a certain year, well as we get close and we look at our projections – the projections change from time to time from year-to-year. So you never know whether by the time we get close to that year whether we will be over hedged or not, but you’re right. We can also through spread trades move the hedges back and forth, and so move them to further out years. It’s pretty simple and pretty liquid market to move some of those volumes out to later years, if we wanted to.

Great. Thanks.

Thank you..

And our next question comes from Brian Singer of Goldman Sachs. Please go ahead.

Thank you. Good morning.

Good morning, Brian.

I recognized you haven’t made any official changes to your tight curve, but can you talk to – with the efficiencies that you are seeing and an expectations for further efficiencies? How would is that all this would change your strategy regarding what price you would need to see to accelerate activity? What price at which you would want to sign new contracts for take away? I know in the very near-term we are kind of talking about delays, but sign new long-term contracts for takeaway and how low of a price longer-term you would feel comfortable hedging?

So, in terms of tight curves, I think we can say we are encouraged by our results over the last year and the improvements, but we are pretty conservative. And so it’s going to take with our reserve engineering group probably a year anyway of many wells demonstrating an uptick before we would change the tight curve. But certainly better results means that one can develop at lower prices, if we wanted to. We are not really looking to sign on for anymore FT at this point. We’ve got a number of projects that are coming on and we project that we will fill them in due course through calendar 2019, we will be pretty full. I think rather than sign contracts with new projects, the new projects generally are quite a bit more expensive than the ones that we have now, because they’re new builds, whereas a lot of ours were either reversals, first of all, back hauls, then reversals where the molecules flow in a different direction, or compression projects. So that’s when lot of our – that’s why we have such a low FT relative to new builds. And so what would we do if we needed more capacity even to accelerate beyond what we have now? Odds are that there are a number of more distressed parties that have signed onto plenty of future projects that are in distress and probably won’t be using their capacity. So it’s always a first alternative would be to look at what’s called release capacity, where you sublet their capacity. And if they do it in a formal way, it’s put out on a bulletin board and sometimes those are discounted pretty heavily. Sometimes it’s a premium, but if pipes are under filled and we needed more, then we would look to be able to use somebody else’s space at a discounted rate. That would probably be the first direction we would go.

Got it. And then the hedging side of things, then if you’ve got – if your break-evens increasingly moving below $2, and I don’t know whether that’s how you think about it on a corporate level, or a well level, I mean, do you start to have more comfort with a long-term gas price of $3, or lower and hedging at those levels?

Well, the way we look at hedging right now, we are fortunate that we have such a substantial hedge position. So we are fully hedged in 2016 and 2017 and more than 80% hedged in 2018 and 2019. So we feel very secure. We also have hedges out in the 2020, 2021, and 2022 area, but we have the luxury right now of just watching. And we’ve been watching for a while now for several months and have seen the curves moving up. So we’re not really looking to jump anytime soon at locking in more. The lowest hedges we have put in place in many years have been in the $2.75 range. And so is that an ideal price? No. If you asked us today, where do we think longer-term gas prices are going to be, somewhere in that $2.75 to $3.50, or even $3.75 range. So we might be looking towards those. I think we can develop that quite a bit lower prices than they have. But that – and withstand those, but we’re looking for higher prices and we’re extremely well protected over the next four years. So I don’t think you will see us going – CAL 17 right now is hovering right at about $3, and I don’t think anytime soon we will be going and hedging below that. I think we are looking for higher prices yet and probably on the outer part of the curve. CAL 22 this morning was $3.40, so you can see we are inching up toward that $3.50 range and we will be looking towards the outer part of the curve, but not necessarily real soon.

Got it. And then I guess lastly, I think you mentioned early on or in one of your presentations the balance sheet doesn’t get incrementally more leverage potentially the opposite as you go about your growth strategy. But can you talk about interest levels beyond letting that play out in deleveraging, particularly from material asset sales or equity at the apparent level?

Yes, I think all we can say on that front is stable leverage this year and we expect to drive that down over time. So the nice thing is, we’re in a very opportunistic position, where we don’t have to do anything right now. We have a great hedge position, as Paul said, fully hedged, fully sold out essentially on our gas over the next two years, and most of our propane over the next two years, so we’re in good shape there. We can be optimistic. And then I think you’ve probably heard the guidance that over time we want to drive that down well under three times leverage.

Great. Thank you.

Thank you very much.

Thank you.

And our next question comes from James Sullivan of Alembic Global Advisors. Please go ahead.

Hey, good morning, guys.

Hi, James.

Could you guys comment just very quickly. We know there’s lots of talk about last quarter, but on your kind of evolving ethane and geo-marketing strategy for incremental volumes. I know, obviously, you have got ATEX and the Mariner East and so on. But how do you guys see that market developing, number one. And number two, I know would it seem like an out there question six months ago, but has there been any talk on ATEX capacity expansion yet, or do you think the appetite is greater for kind of nearer-in markets like Sarnia and so on?

Yes, so the ethane market certainly is improving. Why is that? Well it’s in part, people are foreseeing over the next couple of years the petro chem demand in the U.S., as well as exports becoming a reality in the arbed [ph] places like Northwest Europe are positive. So you can see more and more interest in that. I haven’t heard any talk yet of ATEX expansion. It’s still probably running 50% to 60% full. And so, yes, maybe one would explore, if we were looking for more FT, would it be Mariner East, or more of ATEX, but unexpanded or the local markets, as you say, there’s still three cracker projects that are out there, ethane cracker projects in Appalachia that have not gone FID. And certainly, as if things got healthier, then we would definitely look at those and pursue those a little bit more. We would be supportive of those, so we would look locally. But yes there has been a lot of positive dynamic. If you look at gas value of ethane right now, it’s in the mid to high-teens, whereas the futures market you’re seeing 2017 and 2018 now in the $0.26 to $0.28. So there’s definitely a premium developing beyond gas value for ethane and so the market is definitely seeing shortages and more demand.

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Okay, guys. Thanks so much.

Thank you.

And our next question comes from Ben Wyatt, of Stephens. Please go ahead.

Hey, good morning, guys. Just quick question on Slide 10 here, you have some information here just kind of on rigs and crews? And just curious if you guys could give us any color on how you see that shaking out maybe over the next couple of years, kind of that ratio of rigs to crews? And then your thoughts around, if you were to ramp in 2017 and 2018, any tightness on the oilfield services side considering the downturn?

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Very good, that was it from me. Thanks, guys.

Thank you.

And our next question is a follow-up from James Sullivan, of Alembic Global Advisors. Please go ahead.

Thank you, guys. Thanks for letting me on one more time, real quick I just wanted to clarify, I think you had said this, but in your maintenance and growth capital assumptions on Slide 6 of the presentations, are you guys using your 2015 F&D per Mcfe numbers or are you using them for the Q1 2016 numbers, which are the lower ones?

We’re using sort of year end assumptions around reserves per well and the production that comes from those wells. So there is upside to those production forecasts if we continue to see 2 Bcfe per 1,000 or 2 Bcf per 1,000 at the wellhead or greater over time. So you do see some production upside there with the same dollar spending.

Great, thanks. And then just last one here. On the 10,000 foot lateral slide and this may be me reading a little too much into your graphic here, but it looks like there’s a little bit more dispersion from the mean in the well results as you go out past 10,000 feet. Is that just noise or do you think it has anything to do with the relative difficulty of landing and zone when you go out that long? And where does the risk/reward kind of become unattractive for the super-long laterals?

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All right, great. Thanks, guys very much.

Thank you.

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Thank you for joining us on our conference call today, and please feel free to reach out to us if you have any further questions. Thanks again.

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