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Rating Action:

Moody's reviews Antero Resources' ratings for downgrade

21 Oct 2019

Approximately $3.45 billion of rated debt affected

NOTE: On October 22, 2019, the press release was corrected as follows: The last sentence of the first paragraph of the RATINGS RATIONALE section was changed to: “Moody’s expects that the review may result in a one or two notch downgrade of Antero’s ratings.” Revised release follows.

New York, October 21, 2019 -- Moody's Investors Service ("Moody's") placed all ratings of Antero Resources Corporation (Antero) on review for downgrade, including its Ba2 Corporate Family Rating (CFR), Ba2-PD Probability of Default Rating (PDR), Ba3 senior unsecured notes, as well as Antero Resources Finance Corporation's senior unsecured notes. The Speculative Grade Liquidity Rating was downgraded to SGL-3 from SGL-2.

"These actions were prompted by Antero's increased refinancing risk and reduced cash flow generation prospects through 2020 as a result of the general weakness in natural gas and NGLs prices," said Sajjad Alam, Moody's Senior Analyst. "We believe Antero's refinancing efforts will face challenges given the weak fundamentals of the US natural gas industry and the lack of investor participation in the speculative grade E&P space since late-2018."

Outlook Actions:

.Issuer: Antero Resources Corporation

...Outlook, Changed to Ratings Under Review from Positive

.Issuer: Antero Resources Finance Corporation

...Outlook, Changed to Ratings Under Review from Positive

Ratings Downgraded:

.Issuer: Antero Resources Corporation

...Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-2

Ratings under review for downgrade:

.Issuer: Antero Resources Corporation

...Corporate Family Rating, Placed on Review for Downgrade, currently Ba2

...Probability of Default Rating, Placed on Review for Downgrade, currently Ba2-PD

...Senior Unsecured Notes, Placed on Review for Downgrade, currently Ba3 (LGD4)

.Issuer: Antero Resources Finance Corporation

...Senior Unsecured Notes, Placed on Review for Downgrade, currently Ba3 (LGD4)

RATINGS RATIONALE

The rating review will focus on Antero's plans and ability to refinance its 2021 and 2022 notes in a timely manner; further reduce operating and capital costs, including midstream costs; sell assets; and reduce debt. The review will also consider Antero's credit metrics more broadly and under stressed price scenarios given the increased likelihood that low energy prices and tight capital market conditions could prevail for an extended period of time. Moody’s expects that the review may result in a one or two notch downgrade of Antero’s ratings.

Antero's growth has been slowing and the company's 2019 cash flow performance has lagged Moody's expectations as a result of lower commodity prices. Low natural gas and NGL prices have restrained Antero's ability to hedge, accelerate growth and delever the balance sheet. While the company has undertaken a series of cost cutting measures, the loss in revenues due to lower NGLs prices has been a key drag on performance. Additionally, the company will likely have to pay over $200 million for unutilized firm transportation commitments in 2020, which management is trying to minimize by boosting production.

Antero has adequate liquidity, which is reflected in the SGL-3 rating. Moody's expects breakeven to slightly negative free cash flow through 2020 with minimal incremental draws on the revolving credit facility. At June 30, 2019, Antero had $175 million of borrowings and $701 million in outstanding letters of credits leaving $1.62 billion of availability under its $2.5 billion committed revolving credit facility. The revolver has a $4.5 billion borrowing base which in redetermined annually, and Moody's does not anticipate any material reduction to the borrowing base next April. Antero's revolver will mature the earlier of: (i) October 26, 2022, and (ii) the date that is 91 days to the earliest stated redemption of any series of Antero's senior notes, unless such series of notes is refinanced. Consequently, Antero will need to push out the 2021 and 2022 note maturities to be able to extend the revolver maturity beyond 2022. The credit agreement requires that Antero maintain a minimum current ratio of 1x and a minimum interest coverage ratio of 2.5x, parameters that can be met comfortably. Given its sizeable land position in Appalachia and 31% equity interest in the publicly traded Antero Midstream Partners LP, Antero has the ability to raise alternate liquidity, if needed.

Antero's ratings will likely be downgraded if the company is unable to substantially reduce its refinancing risks, generates significant negative free cash flow or fails to maintain the ratio of retained cash flow to debt above 20%. A positive rating action is unlikely over the near term and would be contingent on Antero's ability to produce free cash flow on a consistent basis, eliminate refinancing risk and reduce leverage leading to a sustainable retained cash flow to debt ratio above 35%.

Antero Resources Corporation is a leading natural gas and natural gas liquids producer in the Marcellus and Utica Shales in West Virginia, Ohio and Pennsylvania.

The principal methodology used in these ratings was Independent Exploration and Production Industry published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Sajjad Alam
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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