Natural Gas Liquids Fundamentals - MARCH 2022 - cloudfront.net
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Natural Gas Liquids Fundamentals MARCH 2022
Legal Disclaimer
This presentation includes “forward-looking statements.” Such forward-looking statements are subject
to a number of risks and uncertainties, many of which are beyond AR’s control. All statements, except
for statements of historical fact, made in this presentation regarding activities, events or developments
are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All forward-looking statements speak only as of
the date of this presentation. Although AR believes that the plans, intentions and expectations
reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that
these plans, intentions or expectations will be achieved. Therefore, actual outcomes and results could
materially differ from what is expressed, implied or forecast in such statements. To the extent a
forward-looking statement contained in this presentation speaks as of a period covered by prior
guidance, the information in this presentation is intended to supersede, and investors should not rely
on, such prior guidance.
AR cautions you that these forward-looking statements are subject to all of the risks and uncertainties,
most of which are difficult to predict and many of which are beyond the AR’s control, incident to the
exploration for and development, production, gathering and sale of natural gas, NGLs and oil. These
risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and
production equipment and services, environmental risks, drilling and other operating risks, regulatory
changes, the uncertainty inherent in estimating natural gas and oil reserves and in projecting future
rates of production, cash flow and access to capital, the timing of development expenditures, and the
other risks described under the heading "Item 1A. Risk Factors" in AR’s Annual Report on Form 10-K
for the year ended December 31, 2021.
2
Strong NGL Price Momentum
NGLs today are globally priced commodities, with the pricing outlook benefiting from
moderate supply growth and strong demand, particularly from Asia. Storage levels at five
year lows provide an attractive set up for 2022.
U.S. NGL Market Overview and Outlook
Supply
• U.S. NGL supply growth has been moderate, due to significant barriers to entry that require long term
commitments in processing plants and other infrastructure
• Producer capital discipline and maintenance level capital programs result in a low growth outlook
• Record setting LPG exports have driven U.S. propane inventories below the 5-year average
Demand
• Resilient domestic and international demand from petrochem and residential/commercial sectors
• New LPG demand continues to come online, including over 500 MBbl/d of new PDH demand
expected in China through 2023
• Rising living standards in developing countries, particularly in Asia, create an inelastic demand pull
for LPG and NGL derivative products
Outlook for NGLs
• The impact of a decline in shale oil activity on “associated NGL” production has been even more
pronounced than the impact on associated gas production while global NGL demand increases
• U.S. NGL export capacity expansions tighten Mont Belvieu differentials to premium Brent-linked
international pricing
• Bullish – Robust demand and flat supply has already driven C3+ pricing from an average of
~$21/Bbl in 2020 to over $70/Bbl in early 2022
Sources: February EIA Short Term Energy Outlook, S&P Global Platts estimates and J.P. Morgan Commodities Strategy Team Research. LPG is comprised of NGL components propane and butane.
3
U.S. NGL Production vs. LPG Export
3% +50%
MODEST C2+ NGL PRODUCTION GROWTH IN LPG
GROWTH FORECAST FOR 2022 EXPORTS 2019-2021
U.S. C2+ NGL Production Forecast (MBbl/d) U.S. Waterborne LPG Exports (MBbl/d)
10,000,000 1,900
2022E: 1,700
8,000,000
3% growth
1,500
6,000,000 1,300
1,100
4,000,000
900 Limited export growth
in 2022, supply forecast
2,000,000 to stay “home” to
700 rebuild historically low
inventories
- 500
Source: Platts Analytics data as of 3/7/2022. 4
Propane Storage at Historical Lows
A repeat of the same weekly withdrawals as last winter would result in the U.S.
ending withdrawal season with only about 12 million barrels in storage,
significantly below 5-year minimum storage level
U.S. Propane Inventories (MMBbls) Propane Days of Supply (Days)
120 100
90
100
80
70
80
60
MMBbls
2021
Days
60 50
40
40
30
2022
20 2021
20
10
2022
- -
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
5-Year Range 2022 2021 5-Year Average 2017-2021 5-Year Min 2022 2021 5-Year Average 2017-2021
Source: EnVantage Inc. and Energy Information Administration (EIA) as of 03/16/2022. 5
NGL Price Strength
Antero continues to benefit from the strength in NGL prices
AR Monthly Realized C3+ NGL Price
($/Bbl) (% of WTI)
$120 100%
$73.81/Bbl
90%
$100
% of WTI
80%
CURRENT AR C3+ NGL
70%
$80 WTI Price SPOT PRICE
60%
$60 50% 72%
40% OF WTI PRICE
$40
30%
20%
$20
AR C3+ Price 10%
$0 0%
Source: Bloomberg actuals through March 2022. Forecasted C3+ pricing based ICE pricing and on Antero C3+ NGL component barrel consisting of 56% C3 (propane), 10% isobutane (Ic4), 17% normal butane
(Nc4) and 17% natural gasoline (C5+). Assumes blended sales of 50% domestic and 50% international. 6
Strong NGL Price Recovery
Domestic and international LPG prices have improved on a relative basis to crude
oil, driven by resilient global demand for LPG from petrochemicals and res/comm
C3+ NGL Prices & % of WTI (1) Far East Index (FEI) Propane Prices & % of Brent
($/Bbl) % of WTI MB C3+ NGL ($/Bbl) ($/Bbl) % of Brent FEI Propane ($/Bbl)
C3+ Price as FEI Propane Price
$70 100% $70 100%
Historical MB % of WTI as % of Brent
C3+/WTI%
5-year avg: 90% 90%
$60 ~64% $60 82%
80%
80% 79% 80%
76%
77%
72%
$50 67% $50 67% 68% 70%
70%
63%
60% 60%
$40 $40 FEI Propane Price
C3+ NGL Price 50% 50%
$30 $30
40% 40%
30% $20 30%
$20
20% 20%
$10 $10
10% 10%
$0 0% $0 0%
1Q21A 2Q21A 3Q21A 4Q21A 2022E 1Q21A 2Q21A 3Q21A 4Q21A 2022E
7
Source: ICEdata Mont Belvieu, Far East Index, WTI and Brent strip pricing as of 3/16/2022.
1) Based on Antero C3+ NGL component barrel consists of 56% C3 (propane), 10% isobutane (Ic4), 17% normal butane (Nc4) and 17% natural gasoline (C5+).
The Impact of the U.S. Shale Revolution
The Shale Revolution dramatically changed the NGL landscape, turning the U.S. into
a net exporter after decades of importing NGL products
U.S. NGL Production (MBbl/d) (1) U.S. NGL Exports / (Imports) (MBbl/d)
6,000 2,500
5,000 2,000
Driven primarily by
shale oil development
with high oil prices
4,000 1,500
MBbl/d
MBbl/d
3,000 1,000
Pentane Net importer of NGLs
2,000 500
IsoButane
Butane
1,000 -
Propane
Ethane(1)
0 (500)
1984 1990 1996 2002 2008 2014 2020 1984 1990 1996 2002 2008 2014 2020
8
1) Includes recovered ethane volumes and natural gasoline (C5).
Source: U.S. Energy Information Administration 1984-2021. NGL exports/imports includes ethane, propane, normal butane, isobutane and natural gasoline.LPG Exports
U.S. exports surpassed the entire Middle East region combined starting in 2019
LPG Exports: U.S. versus Middle East
1,800
U.S. is the incremental
1,600 supplier for growing world
demand.
1,400
1,200
MBb/d
1,000
800 Supply from Middle East nations flat,
OPEC policies limit growth potential
600
400
200
0
US Qatar UAE Saudi Arabia Kuwait Iran
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Platts.
Notes: Propane and Butane exports only based on cFlow ship tracking data. U.S. Exports do not include exports via land to Canada and Mexico. 2022 YTD through March 1, 2022. 9U.S. NGL Demand
NGL demand growth driven primarily by exports of LPG (propane/butane)
U.S. C3+ Demand by Sector (MMBbl/d) Estimated U.S. C3+ Demand – 2024
4.5
4.0 Exports in
2016: of
26%Total
3.5
Petrochemical
3.0 14%
MMBbl/d
2.5 Exports 2019-2024 Growth: +20% Exports Refining/
Blending
2.0 50% 18%
1.5
Refining/Blending 2019-2024 Growth: +4%
1.0 Residential/
Residential/Commercial 2019-2024 Growth: +3% Commercial
0.5
17%
Petrochemicals 2019-2024 Growth: +2%
0.0
2016 2017 2018 2019 2020 2021 2022 2023 2024
Source: S&P Global Platts as of 3/01/2022 10China Crackers and PDH Plant Outlook
China is adding more than 360,000 Bbl/d of petrochemical
propane demand in 2020-2022
11LPG Export Capacity: Unconstrained Outlook
High utilization rates prompted next round of buildout of LPG propane/ butane
export capacity, resulting in unconstrained exports beginning in 2020 and positive
outlook for Mont Belvieu pricing relative to international pricing
U.S. Gulf Coast LPG Exports vs. Capacity (MBbl/d)
PADD 3 Existing Capacity Targa Galena Park ET Nederland LPG Export Forecast
2,000
Targa
1,800 Galena Park- ET Nederland - 300 MBbl/d
150 MBbl/d
1,600
1,400
1,200
MBbl/d
1,000
800
600
400
200
-
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24
Source: S&P Global Platts as of 3/01/2022. 12Northeast NGL Producers are Advantaged
Producer Disadvantaged: Producer Advantaged & Unconstrained:
E&Ps in Permian, Rockies, Mid-Con & Bakken Antero Resources in Appalachia
AR is the largest C3+ producer
with the most international
exposure in Appalachia
Mariner East Anchor shipper on ME2
FROM ROCKIES Conway Who Captures the Arb at Marcus Hook?
Answer: AR and other Appalachian E&P’s
• Direct sales to most attractive international
(ARA & FEI) & domestic markets
• Fixed terminal rates
• Local fractionation & marketing to sell purity
products in-basin for local demand
Results in “Mont Belvieu plus” pricing
netbacks captured “at the dock” by AR
Mont
Belvieu Who Captures the Arb at the Gulf Coast?
Answer: Midstream & LPG off-takers (not E&P’s)
• No direct E&P access to international markets (i.e.
producers only receive Mont Belvieu linked pricing)
• No local fractionation to sell marketable purity
products in-basin
Results in “Mont Belvieu Minus” pricing
“before the dock”
13C3+ NGLs: Northeast Market Dynamics and Supply
Antero’s C3+ blended differential to Mont Belvieu has improved with the Mariner
East 2 export takeaway and ability to access international markets
Northeast C3+ NGL Supply Northeast C3+ NGL Takeaway
600
Pentanes Midwest/
500 Conway
400 IsoButane
MBbl/d
Cornerstone Mariner East 1
300 Normal Butane
70 MBbl/d
200 Export
Propane Markets
100
0 Mariner East 2
~275 MBbl/d
~195 MBbl/d of Northeast C3+ demand vs.
U.S. Gulf Mariner East 2, placed in
~455 MBbl/d of Northeast supply in 2021 Coast service at YE 2018 and fully
- Resulted in 43% of production consumed locally completed in 2022, provides
- Remainder moved primarily by rail and exported additional baseload demand
and access to international
Differentials to Mont Belvieu LPG markets
tightened in 2019 as ~165+ MBbl/d of
LPG exported via Mariner East 2
Source: S&P Global Platts as of 3/01/2022. 14LPG: Northeast Supply & Demand
Northeast LPG markets became oversupplied in 2015 and were forced to transport
via rail, which was relieved by Mariner East 2 in 2019
Northeast LPG NGL Supply vs. Demand & Takeaway Capacity (Excluding Rail)
Long Local Demand and Short Local Demand & ME2 Realized
Pipeline Capacity Pipeline Capacity Effect =
500 = Tight Differentials = Wide Differentials +$4.00/bbl
~$(2.00)/Bbl vs. Mont ~$(6.00)/Bbl vs. Mont Differential
450 Improvement
Belvieu Belvieu
400
350 Rail fills short
term gaps
300
MBbl/d
250
Mariner East System
200
150
100
Regional Demand
50
0
Source: S&P Global Platts, Antero Company Estimates. 15Ethane: Northeast Market Dynamics & Supply
Antero’s ethane has a natural gas value pricing floor; pricing improvements from
additional petrochemical and takeaway demand is all “Upside”
~205 MBbl/d of ethane current rejected in Northeast Ethane Takeaway and Capacities
Northeast (~38% of potentially recoverable ethane)
Antero is an anchor supplier to Shell’s Shell Cracker
cracker expected in-service in 2022 Mariner West 105 MBbl/d (2022)
50 MBbl/d
Utopia East Mariner East
Antero ethane firm sales contracts ~50% 50 MBbl/d 70 MBbl/d
gas-linked and ~50% Mont Belvieu-linked.
Northeast Ethane Supply (MBbl/d) Mariner East 2X:
~200 MBbl/d
800 Full Ethane Recovery
700 ME2X
Actual Ethane Recovery
600 Shell Cracker
500
Utopia
MBbl/d
400
300 Mariner East
200 Mariner West
100 ATEX
0
-100
Source: S&P Global Platts. 16Ethane: Export Market Pulls Barrels Overseas
The ethane market continues to develop and creates opportunities for ethane
sales outside of the domestic cracker pool
Ethane Export Suppliers and Customers
Europe
Borealis
Marcus INEOS
U.S. Gulf Hook ExxonMobil
Coast Sabic
South Asia
Reliance
Mexico Southeast
Pemex Asia
FEI
SP Chem
Nanshan
Satellite
South America
Braskem
U.S. Terminals Export ISD
Capacity
(MBbl/d)
New Build crackers in ETP Marcus Hook 70 2016
Europe, Asia looking to EPD Morgan’s Point 200 2016
U.S. C2 for supply ETP/Satellite 175 2021
Total 445
Source: S&P Global Platts , Company Reports. 17Summary
Historically low NGL inventory, disciplined producer activity, and “inelastic”
international LPG demand provide bullish backdrop for NGL prices
Moderate U.S. C3+ NGL production growth expected in
2022 as producers remain disciplined
Propane days of supply at 5-year lows could result in
an undersupplied U.S. market in 2022
Inelastic global NGL demand growth driven by
improvements in living standards and subsidies
U.S. NGL differentials have tightened vs. global prices as
exports provide uplift with premium Brent-linked pricing
Price outlook for U.S. LPG exports is strong as global
demand grows and export supply growth from the middle
east and the U.S. subsides
Appalachian producers are geographically advantaged vs.
U.S. Gulf Coast producers – captures the international
pricing uplift by selling at the export dock (Marcus Hook) 18Appendix
Focus on Liquids Rich Drilling
Antero currently recovers only 30% of the ethane in its rich gas stream while
rejecting 70% of the ethane, sending it to pipeline sales in the natural gas stream
Antero NGL Barrel Composition (2022 Guidance)
Remaining 70% of ethane
Natural Gas 1100 BTU Gas stays in natural gas stream
Processing and enhances gas BTU Ethane (C2)
~110,000 Bbl/d of C2 63,500 Bbl/d
171,000 Bbl/d C2+ NGLs
1250 BTU Rich Gas
AR recovers ~30% of ethane ~107,500 Bbl/d C3+ NGLs
in its rich gas stream
Ethane
~63,500 Bbl/d
35% of Barrel
Propane (C3) 56%
Liquids
Rich
Production C3+ NGLs
~107,500 Bbl/d
65% of Barrel Normal Butane (C4) 17%
IsoButane (iC4) 10%
Pentanes (C5+) 17%
AR’s C2+ NGL Barrel
Composition AR’s C3+ NGL Barrel
Composition
20
Note: Based on Antero 2022 production guidance. Antero C3+ NGL component barrel consists of 56% C3 (propane), 10% isobutane (Ic4),
17% normal butane (Nc4) and 17% natural gasoline (C5+).Natural Gas Liquids Primer
Natural Gas Liquids “NGLs” are contained in the rich natural gas stream, but after
processing, condense into liquid form for storage, shipping and consumption
Purity Products
Y-Grade De- Ethane
Ethane*
ethanization
Wellhead
Gas Propane*
Processing C3+ Raw
NGLs Butane*
Rich Gas
(>1100 Btu) Fractionation Isobutane
Pentane
Dry Gas
LNG and
Pipeline Export
Markets
Natural Gas Domestic Export
Dry Gas
Dry Gas Pipeline Consumption Markets
(Natural Gas Liquids Primer
NGLs play an essential role in the domestic and international industrial, residential,
commercial and transportation industries
Gas Linked Pricing Crude Linked Pricing
Iso-
Methane Ethane Propane Butane Butane Pentane
Natural Gas C2 C3 C4 IC4 C5
Industrial
Primary Chemical Residential Industrial
All Industrial Transportation
Sectors Industrial Commercial, Transportation
Chemical
Heating,
Ethylene Winter Alkylate feed
Primary Crop drying, Gasoline blend
Power Production Gasoline to produce
Uses Commercial, and diluent
(For plastics) Blending gasoline
Propylene
Higher Heating Value
1000 Btu 4000 Btu
22Antero’s Ethane Export
• Antero’s 11,500 Bpd C2 sales contract with Borealis commenced on November 1, 2018
• Expect to load ~1 ship per month, bound for Borealis’ steam cracker in Stenungsund,
Sweden, for duration of 10-year contract
23Appendix and Supporting Information
This material is intended for benchmark pricing estimates only and does not reflect Antero actual contracted prices
Key Terms and Definitions:
• ARA – “Amsterdam-Rotterdam-Antwerp.” ARA is a port and refining area in the Belgian-Dutch region of Europe.
• CIF - “Cost, Insurance, Freight.” CIF means that the seller delivers the goods on board the vessel or procures the goods already so
delivered. Note that the CIF ARA LPG prices represent a delivered cargo into Europe.
• FEI – “Far East Index.” The Argus Far East Index is the average of the Argus Japan CFR propane quotation and the Argus South China
CFR propane quotation. Note that the FEI LPG prices represent a delivered cargo into Asia
• CFR - “Cost and Freight.” CFR means that the seller delivers the goods on board the vessel or procures the goods already so delivered.
• Baltic Index - The Baltic LPG Index is a shipping cost estimate based on a voyage from Ras Tanura, Saudi Arabia to Chiba, Japan round
trip, laden (full) on the outbound journey and ballast (empty) on the return trip, carrying a fully refrigerated cargo of 44,000 MT (+/-
5%) propane, butane, or a mixture. The index is published by the Baltic Exchange.
Intercontinental Exchange (ICE) provides the benchmark pricing Information used in this presentation. For more information, visit
https://www.theice.com/energy/natural-gas-liquids
ICE DEFINITION
ANTERO LABEL HUB PRODUCT
ARA C3 CIF ARA Propane Argus Futures
ARA C4 CIF ARA Butane Argus Futures
FEI C3 Far East Propane Argus Futures
FEI C4 Far East Butane Argus Futures
MB C3 MT.B-ENT Propane OPIS Futures
MB C4 MT.B-ENT Normal Butane OPIS Futures
Relevant Conversions:
• Propane = 521 gallons per metric ton
• Butane = 453 gallons per metric ton
Antero Internal Shipping Estimates are derived by Antero using several sources, including Baltic LPG Index Futures and broker estimates.
• Rates are adjusted based on travel time from Marcus Hook, PA to Northwest Europe (Amsterdam-Rotterdam-Antwerp Region) and
Marcus Hook, PA to Asia (Chiba, Japan).
• Antero’s actual shipping rates may differ from these estimates.
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