Antero Resources Corporation (AR) Q1 2021 Earnings Report, Transcript and Summary

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. [Operator Instructions] 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's 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'd 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'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's 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 Cannelongo, 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 3 titled best exposure to rising commodity prices. During the first quarter, our business model delivered EBITDAX of $519 million and free cash flow of $416 million. Our financial results highlight the significant leverage we have to rising commodity prices in particular C3+ NGL prices, which averaged over $40 per barrel during the quarter. Approximately 40% of Antero's revenue is generated from liquids, which is primarily by C3+ 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 of $0.41 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 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 $0.10 to $0.20. Moving to Slide number 4 titled FT protects basis and provides flow assurance. We have highlighted the strategic advantage of our FT historically. As illustrated on the chart, AR's FT portfolio has significantly reduced realized pricing volatility, especially when compared to Appalachian basis differentials. During the first quarter is competitive advantage led to Antero price realizations that were $0.92 better than in basin pricing. You can see this detail on the right hand side of the chart that highlights Antero's $0.41 per Mcf premium compared to in-basin price – the in-basin price that traded at a discount of $0.51 per Mcf. Now as we look ahead at the strategic advantage of our FT portfolio, let's turn to Slide number 5. 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 blowout in 2020 that is circled in yellow and for us many of our peers to shut in volume or sell at highly discounted prices. The second takeaway is on the outlook for local pricing, given the many questions around the uncertainty of MVP 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 $0.30 per MMBtu 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 blowouts and sell our gas consistently at a premium to NYMEX. Turning to Slide number 6 titled drilling and completion efficiencies. Let's discuss the dramatic drilling and completion efficiency gains that are helping to drive our well cost 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 12,839 feet per well. Moving to the chart on the top right, we averaged more than 7,500 lateral feet drilled per day during the quarter, which is a 17% increase over the average in 2020. Further Antero established a new U.S. record drilling of 12,118 feet of lateral during a 24 hour period. Our completion efficiency also continued to improve averaging 9.5 stages per day during the quarter, which is a 19% increase compared to the 2020 average. It's important to note that this was accomplished during the winter quarter a time that is typically more challenging for completions. Completion stages per day during the quarter benefited from our first simulfrac completion process on a path, which allows two separate wells to be completed at the same time. Finally, our average drill out feet per day has continued to increase each year and averaged 3,883 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 Antero entities over the years. Glen and I have been partners for over 20 years dating back to coal bed 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 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, AR and AM are in the strongest financial positions since inception, both generating significant free cash flow with strong balance sheets and leverage profiles. While Glen will be missed, I'm very excited about internally back-filling his positions with Mike Kennedy and Brendan Krueger, which highlights the deep bench that we have here at Antero. With that I'll turn the call over to our Vice President of Liquids, Marketing and Transportation, Dave Cannelongo, for his comments.

Thanks, Paul. The performance of NGL prices in the first quarter was welcoming, 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. The 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 7 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 and propane inventories through the fall, the world and the U.S. will be ill-prepared and under supply for even a normal winter. In order to meet demand, we believe that significant incremental LPG supply will need to come online 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 and 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 8, details the NGL hedges we have put in place to lock in 2021 free cash flow and crystallized 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 at zero hedges in 2022, given our bullish outlook for next winter that I just discussed. The stumble in U.S. sale production, subsequent capital discipline, and ample U.S. export capacity as illustrated on Slide number 9, 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 LPGs enough to meet market needs for years to come will allow for tight arms and strong U.S. The ability for propane and butane to price on petrochemical value under stress by excess U.S. shale growth in the summer, and rely on residential commercial demand to set the price in the winter provides a backdrop for 60% to 70% at WTI C3+ pricing realizations on an annual average basis. This NGL strength relative to WTI is shown on Slide number 10, titled NGL price strength, while Antero has access to the international market through our capacity on Mariner East; it is benefited from the strong export arms in previous years, relative to our competitors NGL realizations. Antero sees the greatest net benefit to our own realized pricing from strong Mont Belvieu indices, given our still sizable exposure to domestic sales However 1 billion vaccine shots have 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 or record levels of COVID-19 within their populations. As we've 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 and increased need for LPG imports into these markets. The current situation is expected to resolve and increase spot cargoes procured into their ports 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. I'd like to start on Slide number 11, highlighting the significant improvements in Antero over the last quarter. Over the last 12 months, we successfully executed our assets sale program and rebalanced Antero's 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 the slide illustrates the LTM EBITDA improvement from $1 billion to $1.3 billion now, this improvement was a direct result of Antero's differentiated business strategy that Paul discussed earlier. With a focus on liquids development and a firm transportation portfolio that provides best in class price realizations. Total debt reduction, combined with an improvement in LTM EBITDAX decreased leveraged by over a term to two times for the first quarter. Lastly, during the spring redetermination period, Antero's borrowing was reaffirmed at $2.85 billion supported by the significant PDP base and deep drilling inventory of liquids rich location in Antero's portfolio. 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 facility balance over the next couple of quarters. Our leverage is expected to fall below 2 times during the same timeframe and our focus will shift to achieving our absolute debt target of below $2 billion. Now to put the first quarter financial results in perspective, let's turn to Slide number 12, titled peer comparison. 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 $2.57 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 2 times ranked second against our Appalachian peers. Some are still in the 3 to 4.5 times range. The bottom of the page focuses on financial performance. Our $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 our $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's ESG initiatives as we make progress toward our 2025 best in class goals. These are shown in Slide number 13 and include achieving net zero carbon emissions, reducing our industry leading GHG intensity and methane leak loss rates. We also plan to complete and publish our TCFD analysis with our 2020 ESG performance results later in 2021. To summarize the Antero team has delivered exceptional execution over the last 12 months. Slide number 12, title key investment highlights, summarizes the 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 and exposure to strengthening commodity prices as you saw in this first quarter. Since the beginning of our de-leveraging 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 2 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 back-wardated stripped prices. These operational, financial and ESG metrics placed Antero among a small elite group of AMPs with significant scale, low leverage, sustained free cash flow generation and leading ESG performance. Now for couple of additional comments; first, thank you to all of you who follow-us, those who are invested in Antero it was a phenomenal quarter and a gratifying sendoff for me. The Antero companies had never been better positioned outlook is bright. Secondly, thank you to our management team and employees we built a differentiated company together that should thrive in the coming years. There are a lot of challenges out there, but the Antero companies are on the leading edge and will overcome those challenges as we always have. Sure, appreciate all of your hard work and dedication; it's 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 of building several successful companies together. I appreciate your drive, determination, integrity. There's never been a better [indiscernible]. Thanks for the memories. I'll be watching from sidelines and remain a long-term shareholder, wishing you all the best. With that, operator we'll turn over to the audience for questions.

Thank you. [Operator Instructions] Thank you. And our first question is coming from the line of Subash Chandra with Northland. Please proceed with your question.

Thanks. First of all, Glen, congrats on your retirement, well deserved.

Thanks, Subash.

So the first question, I guess, is on the ESG front. Have you guys looked at or have any thoughts on this responsibly sourced gas and sort of the certifications out there that I guess in some instances can get you sort of premium realizations?

That's true theoretically and it is something that we're looking at very seriously. I'd 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 as very green and clean first off and then other RSP and all that – RSG, I guess. That's something that's probably further down the road, Subash. But yeah, you can bet we're 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 kinds of topics. So, we're very serious about it.

Okay, thanks. And then on the operations, so the simulfrac, I guess, the hesitancy before had been mainly safety oriented if I understood correctly. So how do you feel about that now? And what do you think if you were to widely adopt simulfracs? What could it do for costs, timing and operations?

Yes, Subash, it affects. It improves all of those things, cost, timing and that turnaround time and so on. The considerations mainly are do we have large enough pad size to put in 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. It's 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 more. We really like the economic benefits, particularly the cycle time. So it's definitely a part of our future, but we aren't able to implement it across the board quite yet.

Got it, okay. And the final one, it's maybe for Dave. I think you sort of had an opinion on how underpriced LPGs are, I think, based on global naphtha markets, et cetera. But could you maybe provide a real-time opinion on how underpriced 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 April balance of the month and then for the summer. So, you are seeing the market start to respect that dynamic and you're seeing propane price in the summertime closer to petrochemical breakeven margins for those buyers that are looking at switching between LPG or naphtha. Looking into the fourth quarter and next winter, the curve is still significantly undervalued relative to what we would expect to see – the pricing that we get for LPG in the winter time and the destination markets relative to naphtha, which is often what sets the price in the summer is dramatically different. You can go from 90% of naphtha in the summer to 115%, 125% of naphtha in the winter. So, current curve would suggest 90% or below for fourth quarter and first quarter and obviously a lot of realistic upside to that.

Excellent. Thanks everyone.

Our next question is from the line of Arun Jayaram with JPMorgan. Please proceed with your question.

Yes, good morning. Glen, let me start with you. Our team has fielded a decent number of buy-side questions on your decision to retire as a founder. I know you did put out a release, but just for the spirit of the buy-side, maybe you could go into the decision and why was this is the right timing?

Yes. Well, thanks. I've been in it for a long time and we've had a lot of successes, but the past year was particularly challenging and we met all those challenges and the tables totally reset. 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 Krueger stepping into his CFO role at AM. So we had the team to replace me. I'll be out there available at any time for consultation that's for sure and a long-term shareholder, but it's just a good time for me, personally have a lot of things I want to focus on kind of the 5Fs for me: family, farming, fitness, fishing, philanthropy so that's really 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 color around – you're – once you get to your $2 billion or less debt target, you know, thoughts on the potential shift to a cash return kind of strategy. And then what's your initial thoughts around that perhaps for Michael or even Glen?

Yes, now, we're thinking about that obviously and watching the debt levels closely, as you mentioned, our first initiative is to get in under $2 billion, but once that occurs, then we'll definitely be analyzing the various return of capital being employed by other companies and how they're valued. We have a long history of buying back shares. We bought back significant amount of shares last year. We bought back significant at AM. We also have a long history of paying significant dividends. So we're well-schooled on those two different forms of return of capital, but it will be something we monitor and 2022 now is our forecast when we get below that $2 billion, we'll pay close attention to it and have some more information then.

Fair enough. Thanks a lot.

Thank you, Arun.

Next question is coming from the line of Neal Dingmann with Truist. Please proceed with your question.

Good morning all. Thanks for all the details. My first question is really just – you guys continue to have a great depth of inventory, 6,008 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 forward either through, I don't know, maybe more partnerships, asset monetizations, anything out there on the table?

Yes, I can address that one first. I mean I think that we don't need to do anything from a leverage standpoint, so we don't need any further asset sales or monetizations. So the cash flow stream looks terrific, the free cash flow stream. So I don't think – we don't have any initiatives like that underway today. Obviously, it's heresy to talk about growth right now, so that's not something we're considering, but I think as you get further out as it becomes evident the kind of free cash flow that we can generate in returns and then the ESG story. Those sort of chosen few companies I think will be allowed to show some growth over time, but that's just my perspective. Paul, what do you think?

Yes, I agree. Good answer.

I would agree as well. Glad to hear you guys are looking at that way. And then just as a follow-up really like to see what NGL prices has benefited, it's helped you all and others. Just wondering – I forget the slide you all pointed out, nice slide that shows your NGL hedges. I'm just wondering how clean are you able to hedge that? And then I'm just wondering how liquid is that market if you want to hedge out, I don't know, a year or two in that?

Yes, all – great question, Neal. All 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. No dirty hedges at this point with our NGL portfolio. As far as the liquidity, really beyond 2021 – our liquidity in 2022 is pretty limited. Again, I think, there's just a lack of a need for buyers to step out into that market right now, just given the alternatives for them to just ride with the prices as they come versus risk hedging. So that's kind of always been the case with NGLs, steeply backward-dated for a number of years and we'll continue to ride the front.

Thank you. Our next question is from the line of [indiscernible] with Goldman Sachs. Please proceed with your questions.

Thank you. First of all, congratulations Glen on your retirement.

Thank you.

My first question is really building on the NGL's fundamental question. Can you provide any incremental color on the LPG demand trends particularly around the petrochemical complex in Asia?

Yes, sure, we're happy to. If you look right now, I mean, most commonly we'll talk about China that's been the big growth engine for petrochemical demand. So you've got one facility around 30,000 barrels a day, a PDH facility that has come online already this year and four possibly five others yet to come online that in aggregate will be about 115,000, 120,000 barrels a day of PDH 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 eminent, 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 res/com markets continue to perform very well. GDP for the globe is going to be pre-pandemic levels here this summer and that bodes very well for LPG res/com demand as well as petrochemical markets as well. We're seeing very strong margins in those petrochemical markets for both consumer and durable goods. Looking at probably the most critical res/comm. market to us India, they've done a spectacular job over the last several years in improving LPG penetration into that market. So virtually all households now have access to the LPG canisters for home use, but there's 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 easy LPG res/comm growth as those markets start to reach more normal levels of refill rates on the canisters.

Got it. That's really helpful. Thank you. And my next question is on hedging and natural gas hedging. Historically, Antero always hedged a bulk of its production for the forward year. Looking at 2022 you are currently around 50% hedged. Can you talk to your expectations around gas placing and any thoughts around hedging?

Yes. Well, you're right. Of course, historically we've always gone into the next year pretty much fully hedged and that's paid-off well correct, of course, that we've had about half. We're watching the gas curve. We're up in the low 2.70 per MMBtu for Cal '22. It's that is a price that begins to get interesting, but we're watching the momentum and so there's – it won't be at that. It's still going to be part of our strategy to try and be almost fully hedged as we get close to Cal '22. So watching it and looking for our opportunities.

Great. Thank you so much for your time.

Thank you.

The 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 and I love all the Fs. So that was – that was great. It's been a pleasure over the last eight or so years, so good luck – good luck on your retirement, that's wonderful.

Thank you. Thank you, Holly.

Let me start with you. If we're just kind of looking at the debt reduction we've seen over the last couple of quarters, it looks like now the revolver is less than about $150 million drawn. So is that the first place still 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 a 23 maturity, so we'll be looking at that as well. I think that goes to park all this, this summer. So we'll be tracking that and just looking at the liability management and I'll turn the keys over to the team to do that. But a lot of options there or you may just 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 many, many quarters.

Yes, and I'll also add that last year we bought back a lot of those bonds in the open market, so that's something we're very comfortable doing and they're 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 looking at the 14 tills during the first quarter that suggests a bit of a pickup. I think here over the next couple of quarters. So can you just maybe talk about cadence for both from a spending and a production standpoint?

Yes. So the spending will pick-up a little bit as you recall Holly. A drilling joint venture was announced in February and so we added a rig there in March and a completion crew; I think our total growth locations will be around 75 locations net to us that's around 60. So that 14 is a little bit on there, but not terribly dissimilar to the level we'll see in the second, third and fourth quarter. Our capital is $140 million in the first quarter. Our guidance is $590 million. If you annualize that you had $560 million, so the upcoming quarters might be $150 million, $160 million somewhere around that, but not to somewhere in the first quarter.

Okay. That's helpful. And just maybe to follow-up on that in terms of kind of thinking about, we had a sequential decline quarter; obviously given completions in 4Q and then 1Q. So how should we think about that trajectory?

That's flat going forward. I think in our guidance 3.34, we're at 3.32. So we'll be in and around 3.35 next quarters.

Okay. So no real kind of lumpiness to think through?

No, very flat maintenance capital.

Got it. Alright. Well, I appreciate the time.

Thanks, Holly.

Our next question is coming from the line of Harry Halbach of Raymond James. Please proceed with your question.

Hey guys, congrats on the great quarter.

Thanks, Harry. Thank you.

One of the things I noticed is you will had a net marketing premium in this quarter, but you reiterated your kind of $0.08 to $0.10 net marketing expense guide. Is that just mainly conservatism or do you kind of expected to run above that kind of guidance range for the next three quarters?

Yes. We didn't really adjust any guidance, I would say would be in the low-end of that range. We could have probably taken down the range, make that the midpoint, but since we were at the low-end we just left it the same.

Okay. Thanks for that color. And then my next question, is there any thought once you get underneath that $2 billion debt target of kind of putting some money back into sort of grow productions, like low-single-digits or are you really committed to that maintenance mode?

We're committed to that maintenance mode? We'll assess when we get there. It is going to be 2022, that's a much accelerated timeframe, because it’s a terrific execution we've had in the commodity prices as well. But right now its maintenance capital for the next three, four years and we'll assess when we get there, but right now we're really looking at further debt pay down and opportunistic return of capital.

Great. Thanks for the color.

Thank you. Our next question is from the line of Gregg Brody of Bank of America. Please proceed with your question.

Good morning guys.

Hi, Gregg.

I wanted to congratulate Mike and Brendan on the promotions and of course wish Glen good luck with his 5Fs and really appreciate the following guys, since you were private, as you were telling the story. How you got started together, I can jump back to some many years ago, so good luck.

Thank you, Gregg. Yes, you were there on our first high yield deal, I think in 2009.

Yes. It's yes. Well, it's nice to see you living on top and it's interesting now when we – when we asked you maybe a year ago, if you'd consider combining Antero resources and Antero midstream, it didn't seem like it was a possibility considering the stocks were beat up, bonds were beat up. There was a big difference between the way things were trading. I'm curious if you're rethinking that a little bit, if there is a possibility of combining the two?

Yes. Now we're not rethinking if you were to call Gregg when we went through that simplification in 2019 that was one scenario that we definitely had heavy consideration for. And everyone went through and all the conflict committees and independent board directors went through and looked at it in the best course of action was to make Antero midstream a C Corp and have two fully independent companies. So we're not looking at that right now. I mean, I think what you're really talking about is, with the leverage profile is really reducing it both AR and AM that becomes a lot more feasible, but we're not entertaining that right now. We're looking at that.

Alright. And just one, just if you think about your NGL outlook, clearly there's a lot of bullish things on. If you were to think about, you mentioned India is potentially helps you in terms of LPG demand. Do you think there's anything negative there that we said that you worry about that we should be thinking about?

Yes. Gregg, on the fundamentals. No, not really. I mean, I think the – yes, you go back to a year ago with negative price oil, a day or two in April, those things certainly can surprise you, but we don't see that the risk of a situation like that playing out again as the, though I was learning more about how to manage through this pandemic. So no, don't see – don't see any negatives on the horizon, again just concerned about having an adequate enough supply for this upcoming winter and price shocks can be damaging long-term to demand, but good in the short-term. So I guess that would be the downside if prices get too high that could cause folks to rethink investments many years out.

Have you thought about the increased propane or I guess the increased demand related to COVID that to fade? Is there – you have a sense of how much that can impact demand?

There's been, I'd say a little bit of some petrochemical markets that have benefited from a lot of the materials that have been used here during the pandemic. But again, we're not expecting or planning on growth of those to necessarily keep pace with GDP in the years to come. And even at a much reduced rate, it still looks very well balanced for the LPG sector. So not concerned about that. A lot 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 Iran are overall fairly marginal. Just given the backdrop of the demand that's coming online at the same time. So I think the focus will be on this upcoming winter and did we get enough built? But some of those things that those headwinds that you hear about are still not quite enough to keep pace.

I appreciate all the insights and thanks for the time.

Thanks, Gregg.

Thanks, Gregg.

At this time we've reached the end of our question-and-answer session. I'll now turn the call over to Michael Kennedy for closing remarks.

I want to thank everyone for participating in 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.