349 pages in a 10K is a lot to get through. But THESE 349 pages were a real page turner. Set primarily in West Virginia, our story begins on a dark and stormy night. Ante Ro, the first gender non specific hero to be featured in a DRW murder mystery, was depressed and lonely. Despite their wit, charm and incredible penetration rates (while drilling), they are unmarriable because of their spoiled children, named Debt, Leaseob and FT.

At an evening gala celebrating the Entrepreneur of the Year, they (Ante, gender non specific pronouns are difficult) are found dead, killed with a poison and everyone is brought in for questioning.

In Chapter 11, we discover that all the suspects (Excluding the children) hope that Ante’s gas wells will be shut in and U.S. supply will fall by 3 bcf/d and rebalance the market, but that’s not how death works in this Chapter (but we are getting ahead of ourselves).

Spoiler alert because it’s unlikely that you will read the full 10K. It turns out that the murder was actually a suicide!! Ante thought that the poison was a daily vitamin that would make them rich and so willingly administered the poison to themselves. And you know who dutifully fed it to Ante? The children! Can you believe it!? What a twist!

The children, of course, are the debt, lease obligations and firm transportation contracts that Antero committed to to ensure they were able to grow production indefinitely (the vitamin and the Poison). Spoiled and demanding, the children are both responsible and not guilty because they simply provided the means to the end, not the means itself.

It is a sad story but it does explain the 2020 plan which, under normal circumstances, you would assume that Ante had got a little too heavy into the puff puff at Union Station before approving it.

The quote of the press release is “by growing into our unutilized firm transportation commitments we reduce our cost structure by another $200 million by 2022.” Translation: because of contracts we signed, we are growing production in a $1.84/mcf price environment because that is more economic than paying the firm transportation fees.

$1.84 < $2.34 still, right?

I should probably stop writing but we haven’t even opened the 10K yet (did I mention it’s a murder mystery/horror genre? We will actually save the 10K fun for #ThirtyThursday because it’s just too much for one post).

To get you set, here’s a quick overview of Antero for those not familiar. They definitely have the best office location of any E&P, located in the heart of Union Station in downtown Denver with assets in Pennsylvania and Ohio producer. Like other great gas great growth stories of our time (And the cause of low gas prices and insane growth projections) is well performance that has been consistent through time on an EUR basis with higher IPs and steeper declines of late. See figure 1.

Let’s end today’s post on Antero’s best asset: their hedges. Hedges are a monetizable commodity put in place to guarantee cash flows… BUT those cash flows don’t need to be timed with production. The entire bet on the Antero (as we will see Thursday) is that gas prices CAN’T stay low forever which is a bet that the value of the hedges will drop as the strip price increases. Today, mark to market, the hedges are worth $746 million (figure 2) and easy recommendation #1 is sell them and put the proceeds 100% to paying down debt.

Join me on Thursday when we get to know the children and understand why a 10K needed to be 349 pages.