Antero Resources Corporation (NYSE:AR) Q2 2022 Earnings Conference Call July 28, 2022 11:00 AM ET
Company Participants
Brendan Krueger – Vice President, Finance
Paul Rady – Chairman, Chief Executive Officer & President
Dave Cannelongo – Senior Vice President, Liquids Marketing & Transportation
Michael Kennedy – Chief Financial Officer
Justin Fowler – Senior Vice President, Gas Marketing & Transportation
Conference Call Participants
Arun Jayaram – JPMorgan
Neal Dingmann – Truist
Umang Choudhary – Goldman Sachs
Subash Chandra – Benchmark Company
Kevin MacCurdy – Pickering
David Deckelbaum – Cowen
Vin Lovaglio – Mizuho
Operator
Greetings and welcome to the Antero Resources 2Q 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded.
It is now my pleasure to introduce your host Brendan Krueger, Vice President of Finance. You may begin.
Brendan Krueger
Thank you operator. Thank you for joining us for Antero’s second quarter 2022 investor conference call. We’ll spend a few minutes going through the financial and operating 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. 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, CEO, and President; Michael Kennedy, CFO; Justin Fowler, Senior Vice President of Gas Marketing and Transportation; and Dave Cannelongo, Senior Vice President of Liquids Marketing and Transportation.
I will now turn the call over to Paul.
Paul Rady
Thanks Brendan. The second quarter was an exceptional quarter for Antero both operationally and financially. We delivered quarterly company records for adjusted EBITDAX and free cash flow. We reduced debt by nearly $400 million while also accelerating capital returns to our shareholders. Behind these excellent results is consistently strong well performance.
I’d like to begin the call by highlighting some outstanding well results from recent pads that we placed to sales during this year. The plots on slide number three show the cumulative equivalent production over the first 100 to 180 days of the well. As you can see the pads we have recently placed to sales have outperformed the average production from our average 2018 through average 2021 wells.
One of our pads located in the Ohio Utica is comprised of six wells with an average lateral length of over 15,000 feet and they averaged on a per well basis 29 million cubic feet equivalent per day for the first 60 days of production, including a company record 1750 barrels a day of liquids per well.
Just to emphasize the magnitude of this pads production this totals 175 million a day and over 10,000 barrels of liquids for the total pad. This is 28% higher than the 2020 average and 25% higher than the 2021 average. Another pad located in the Marcellus also comprised of six wells with an average lateral length of 14,500 feet averaged over 32 million cubic feet equivalent per day per well in the first 60 days including 1,630 barrels of liquids per well.
Again this pad totals over 180 million cubic feet a day and 9,000 barrels of liquids. This is 36% and 33% higher than the 2020 and 2021 averages respectively. Most notably both these pads are projected to have payout periods of less than five months from the date that they returned to sales. One of the factors driving this impressive performance is the strong liquids volume.
Turning to slide number four, I’d like to point out the progression of our average wells cumulative C3+ NGL and oil production for the first 150 to 180 days by year since 2018. The average per well liquids production of our 2022 wells for the first 100 days represents a 23% increase from the previous year and a 109% increase from 2018.
The performance of the recent wells and the continued improvement year-over-year is a testament to the quality and depth of our liquids-rich core position and our — on the development of this inventory. These pads are located in the liquids-rich fairway of Tyler and Wetzel Counties where our five-year development plan is focused.
Turning to slide five titled Marcellus Peer Well Performance Comparison, let’s take a look at how our wells stack up against some of our close peers on an equivalent production basis based on a recent Enverus report that has just recently been published. The plot on the page compares Antero’s average cumulative production per well since 2020 to that of our Southwest Marcellus peers.
As illustrated on the page, Antero’s average cumulative equivalent production per well is 22% greater than the peer average since 2020. This is another testament to the quality and depth of our core liquids-rich position. Further, while some peers may be experiencing inventory exhaustion, we have tremendous confidence in our five-year plan and beyond, as we have been drilling some of the best wells in company history.
Now, to expand on the discussion of inventory, let’s turn to slide number six, titled Organic Land Acquisition. Across the oil and gas industry, we have seen an increase in both public and private corporate acquisitions over the last couple of years. During this time, we’ve continued to maintain our focus on our core acreage footprint, with a particular emphasis on spending capital on organic lease acquisitions.
As opposed to larger transactions that can dilute your equity, create a large overhang on your stock or lever up your balance sheet, we preferred to pick up smaller, more tailed acreage packages within our core liquids-rich position in West Virginia, where we continue to see very strong well results. As an example, during the quarter, we spent $49 million on land, a portion of which was used to add 25 additional drilling locations at less than $1 million per location.
Since 2019, we have added approximately 100 drilling locations in these liquids rich window of Tyler and Wetzel Counties, which equates to 1.5 years of drilling inventory at an average of 65 wells per year under our maintenance capital plan. We believe this approach is much more cost-effective relative to many of the recent larger M&A transactions that averaged $1.5 million to $3 million per location. What makes this even more attractive, these locations are in our core areas, where we are currently focused, providing further liquids rich development runway, and improving our overall operating efficiencies.
Now, let me turn to commodities and our hedging strategy. We continue to see a supportive macro outlook for all of our products, whether it be natural gas, NGLs or oil. We have a strong balance sheet that gets stronger by the day. And we’re confident in our drilling inventory and our ability to deliver our results. This leads us to our current view that we are not planning to add hedges on any of our products for the foreseeable future.
Now, to expand on the current gas fundamentals and how they directly benefit Antero, I’m going to turn the call over to our Senior Vice President of Gas Marketing and Transportation, Justin Fowler.
Justin Fowler
Thanks, Paul. Despite some inter-quarter volatility, driven primarily by the Freeport LNG facility outage in Texas, natural gas prices are higher today, than at the time of our last conference call. A combination of strong industrial demand, LNG exports that are 20% above last year, even with the Freeport outage and record power generation demand continue to push natural gas prices higher. In addition, the supply response continues to underwhelm, due to pipeline constraints in the major gas-producing basins, along with labor and equipment tightness that makes it difficult to grow US natural gas production.
Now, let’s turn to slide number seven, titled Antero’s Peer-Leading Exposure To Premium Markets. This slide highlights the Antero’s unique ability to benefit from rising NYMEX prices and the premium hubs accessed by the Antero Firm transportation portfolio. Antero owns 2.3 Bcf a day of firm transportation to the US Gulf Coast LNG fairway and to the Mid-Atlantic Cove Point LNG terminal, which represents approximately 75% of Antero’s total natural gas production.
Driven by the LNG export build-out in recent years, basis differentials at these premium hubs have improved dramatically. On the Tennessee Gas 500 Line, where Antero owns 570 MMcf a day of firm transport, the fourth quarter 2022 forecast implies the basis will improve by $0.24 to a $0.17 premium to NYMEX, since the end of 2020.
On the ANR pipeline, where Antero ships 600 MMcf a day of southbound to the US Gulf Coast, basis improved by $0.10 to a $0.07 premium to NYMEX. This increase in positive basis differentials directly led to the increase in our natural gas price realization guidance to a premium of NYMEX plus $0.30 to $0.40 in 2022.
Conversely, you can see the local negative pricing differential that many of our Appalachian peers sell their gas into has deteriorated by $0.41 to $1.10 below NYMEX.
As additional LNG trains and terminals are completed, we expect that the pricing hubs where we sell the majority of our gas to see larger and larger basis premiums to NYMEX. With the expected increase in LNG exports, both on an absolute and relative percentage of overall US supply we believe these premium hubs will see price increases more dramatically than NYMEX as they are linked directly to international prices. This environment will provide further support to Antero’s strategic position today accessing LNG markets.
Next, let’s turn to slide eight titled Historically High Power Burn Demand. We continue to see very strong US demand across industrials, power generation and LNG exports. Looking specifically at power generation relative to the five-year average, demand is up more than four Bcf in the past three months. So far in July demand is up 9% from a year ago and 11% from the five-year average.
Low coal supplies leading to the inability for switching, combined with the summer heat, is expected to keep natural gas demand high despite rising natural gas prices. Recently a 50 Bcf power burn was recorded on July 21, 2022. This strong demand growth, combined with numerous supply constraints, supports our positive outlook for natural gas prices going forward.
With that, I will turn it over to Mike.
Dave Cannelongo
Thanks Justin. This is Dave here. Paul and Justin already discussed our positive outlook for natural gas, so I’ll keep my remarks brief this morning, but will be available for questions following our prepared remarks.
Turning to slide number nine titled Propane Market Fundamentals, highlights the supportive environment for propane prices today. Propane inventories are 4% below the year ago level and 13% below the five-year average. At the same time, we are beginning to see propane exports accelerate, driven primarily by China reopening its economy.
In recent weeks, we have seen PDH plant utilization in China increase to nearly 80% from the low levels of the second quarter that averaged under 70%. As China reopens further this utilization rate is expected to climb to the upper 80% range.
This higher utilization rate, combined with an estimated 500,000 barrels per day of new PDH capacity coming online in China and over 100,000 barrels per day of new capacity in Europe and North America over the next 18 months, is expected to lead to a tightening propane market as we enter winter, with over 50% of our NGL volumes being exported. Antero is well positioned to benefit from increasing NGL demand.
With that, I will turn it over to Mike.
Michael Kennedy
Thanks, Dave. Antero is in the strongest financial position in company history. During the second quarter, we generated over $650 million in free cash flow, which was used to reduce debt by nearly $400 million and purchased $250 million of stock.
I’ll start on slide number 10 titled Strong and Sustainable Balance Sheet. During the quarter we paid down our credit facility by $317 million and were able to repurchase $64 million of our higher cost 2026 and 2029 senior notes in the open market.
During the second quarter of 2022, we also purchased 6.7 million shares at an average weighted price of $36.66 per share for $247 million. For the first six months of 2022, Antero purchased 11 million shares at a weighted average price of $32.44 per share for $358 million, a more than 15% discount to the today’s share price.
With the credit facility being paid off in July and based on our current commodity prices, we are targeting greater than 50% of free cash flow to be used for the share repurchase program in the second half of 2022.
For the full year 2022, we now expect to be at or above the high end of our initial target of returning 25% to 50% of annual free cash flow to our shareholders. When the initial $1 billion share repurchase plan is fully utilized, we will likely announce an additional buyback program by year-end.
The next slide highlights our free cash flow targets. Antero’s 2022 development plan is expected to generate over $2.5 billion of free cash flow. We are also expecting higher free cash flow in 2023 despite the backwardated strip prices as our hedges roll off.
This brings our current five-year cumulative free cash flow target to over $10 billion. This substantial free cash flow will enable us to continue returning capital to our shareholders while also continuing to pay down debt.
Slide number 12 titled Five-Year Corporate Free Cash Flow Yield highlights the attractiveness of repurchasing our shares at today’s valuation. Over the past 18 months, we have cut our debt in half while our five-year corporate free cash flow yield increased from 38% to 80-plus percent. The key takeaway here is that, despite the stock price more than doubling since the fourth quarter of 2021, and debt being reduced by over $500 million, our five-year free cash flow yield is higher today.
Our stock is cheaper today than it was six months ago, and that is why we’ll continue to focus on share buybacks as the primary method for returning capital to shareholders.
Turning to slide number 13, and the continued emphasis on our ESG initiatives. We are proud to report that the Rystad Energy recently released its annual ESG scorecard and Antero was ranked number one for the environment. Antero was recognized for having industry-leading emissions performance and zero routine flaring.
Our ranking also benefited from our 2025 net zero commitment and water management strategy. While we are happy that our team’s efforts were recognized in this scorecard we look forward to keeping this momentum going with the publication of our 2021 ESG report later this quarter.
To summarize on slide number 14, titled, Antero Investment Highlights. Antero is well positioned to execute Shale 3.0. Antero has the strongest balance sheet in Appalachia, with $1.6 billion of debt and 0.6 times leverage. We have significant scale it’s the fifth largest natural gas producer, and second largest NGL producer in the US providing product diversity at attractive prices and unmatched drilling inventory, including more than a decade of premium core liquids-rich locations.
Our limited hedge position and industry-leading firm transport portfolio, provides direct exposure to rising natural gas and liquids prices driven by rising global demand. Lastly, with the lowest leverage and highest free cash flow yield of our peer group, and a trading multiple well below four times, we believe Antero is uniquely positioned to continue to deliver attractive multiple expansion and value to our shareholders.
With that, I will now turn the call over to the operator for questions.
Question-and-Answer Session
Operator
Thank you. We will now be conducting question-and-answer session. [Operator Instructions] Our first question today comes from Arun Jayaram of JPMorgan. Please proceed with your question.
Arun Jayaram
Yeah. My first question is perhaps for Mike. Mike, you mentioned, how you continue to see buybacks as a good use or an attractive use of free cash flow. I know, you did paid out some debt in 2Q. But I guess, our first question would be just the potential trajectory of buybacks in the second half. In our model, we have about $1.6 billion of free cash flow in the second half. And given, how you don’t have a lot more debt to pay down, we’re wondering, if there’s potential to completely exhaust the $1 billion buyback and perhaps potentially reload, if the strip holds?
Michael Kennedy
Yeah. Good question. We do plan to continue to pay down that Arun. In the third quarter, right now, we’re targeting that $70 million that we had on the credit facility and plus as we’ve mentioned in the past we are contemplating a $200 million to $300 million tender for those – for the bonds outstanding. And we don’t have anything that’s currently callable but hopeful to get some in that way.
So assuming we’re at the midpoint of that so call it $250 million plus the $70 million on the credit facility, we do plan on paying down approximately $320 million of debt, in Q3. You look at our current free cash flow for that quarter. Based on today’s prices, it’s $700 million plus. So that would result in call, it high 300s of share buybacks just based on today’s current commodity prices for the quarter. And then heading into Q4 that would leave the majority for further share buybacks although we probably would still try to repurchase some bonds in the open market. So we are forecasting to exhaust that $1 billion authorization from the Board sometime in Q4 and would most likely reload it then.
Arun Jayaram
Great. Thanks for that color. I had a follow-up, and I wanted to go through the well productivity slide that you released. I want to ask you about slide 4. I wanted to see, if you could maybe talk about what’s driving that? Is the data lateral length adjusted, but just give us a sense of what’s driving that as a completion design? Just want to get more thoughts on that.
Michael Kennedy
I think, it’s – we’re going up to trend up in that Tyler and Wetzel County more and more, and it represents a greater proportion of each of these years plan. And that’s getting higher BTU levels to 1,275 to 1,300 Btu. So we’re seeing higher BTUs on average per well and we’re actually seeing a big increase in gross wellhead gas from those wells when we were just assuming that would be similar gross wellhead gas. So I believe it’s similar completions just better rock.
Arun Jayaram
Okay, great. Thanks a lot.
Michael Kennedy
Yeah.
Operator
The next question is from Neal Dingmann of Truist. Please proceed with your question.
Neal Dingmann
Good morning all. First question just on LNG. I’m just wondering specifically Paul for you or Mike, do you all anticipate be able to complete or arrange further deals or contracts to boost, what I think you already have a sizable existing contracts to the Gulf. I’m just wondering are you seeing anything — is it too early to tell, or — is that a focus on trying to add some more of those contracts down with the Gulf and contract some things down there?
Paul Rady
Hi Neal, it’s Paul here. Well, we’ve been a leader in tying up firm transportation to quality areas as you’re aware. So both Cove Point on Mid-Atlantic and then LNG facilities down in the Gulf there are other projects and expansions that are put out there. We follow them. We may be interested depending on where it takes us and at what tariff of course. So we keep our eye on it, but I feel pretty good right now with the portfolio that we have transportation portfolio taking us to quality markets. So very little of our gas is left behind in Appalachia, and so we’ll follow it but it remains to be seen whether we sign on for anything more.
Neal Dingmann
Great. And then Paul just a follow-up on I guess would be on M&A specifically. When you and Mike look at and continue to talk about it and stress the buybacks, does that still look like a better value, cheaper value? It sounds like to me there’s some deals out there even in Appalachia, obviously, you guys have done some things. One, are there some things still available out there? And if so though is buying your stock back still a better return in your opinion?
Paul Rady
Yeah. We like buying our stock back and we like organic leasing and taking leases on other people’s minerals or buying minerals ourselves. I think both of those are better bargains for us. And so even though yes there is M&A out there, whether it’s in other basins, of course, we follow all that whether at Haynesville or other things that come up for sale. But we really do plan to stay in our backyard. We know it so well. And really understand the land quite well. So we see more opportunity in organic leasing and just adding to our inventory or adding to our NRI on the wells that we do drill and really don’t plan on doing anything else in other basins for a long time.
Neal Dingmann
So I was hoping to hear it. Thanks guys. Great strategy.
Paul Rady
Thanks.
Operator
Next question is from Umang Choudhary of Goldman Sachs. Please proceed with your question.
Umang Choudhary
Hi, good morning and thank you for taking my questions. My first question was on the 2023 plans. Great to see the strong results, any initial thoughts around spending and production growth for next year? And also can you remind us when you — when we should expect the overriding royalty to be reconvened back to the company?
Michael Kennedy
Yeah. No good point on the override. That’s something definitely to look forward to in 2023 that they stop participating wells anything after March 31, 2023. So our NRI will increase by approximately 4% for wells after that. So that’s definitely something we’re looking forward to. On 2023, it will be a similar capital program this year and it will be maintenance capital and it’ll be flat to that second half of 2022 production levels in that 3.3% to 3.4% range.
Umang Choudhary
Got you. Any initial color on the spending side like given the inflation what are we looking for on a D&C spend next year? Is it up 10%, or is it a more…
Michael Kennedy
It remains to be seen. That 7% that we raised for this year captures the completion contracts that we entered into that go through the end of 2023. So there won’t be any more inflation around that or maybe a little bit on the drilling rig side and it’s to be determined on the other components, but really dependent on commodity prices and diesel and fuel and hopefully if those are high next year that will obviously translate into substantial free cash flow for us. So to be determined yet, but probably up a little bit from 2022.
Umang Choudhary
Got you. That’s helpful. And then I appreciate all the macro color. I wanted your perspective on propane prices, which have come off a bit here. As we head into the propane winter heating season, do you see a setup, which is very similar to last year acknowledging that there might still be risk to demand here?
Paul Rady
Thanks for the question Umang. And let me turn it over to Dave Cannelongo. You heard from him earlier in the call that he’s our VP of Liquids Marketing. And so I’ll throw it to you Dave.
Dave Cannelongo
Yeah, it’s a great question. Starting looking at it from the supply side first, we saw a lot of incremental LPG come on over the last year as OPEC was winding down, it’s voluntary cuts. So that dynamic looks stable going forward. There’s been a fair amount of US LPG production growth this year, but — also I would say a very moderate pace of that expected going forward, and a tremendous amount of demand expectations coming.
You know, we saw here in the second quarter if you look at mobility and use — daily flights in China is an indicator that the lockdowns that they went through here in the second quarter where nearly identical in terms of the number of flights — reductions on a daily basis is what we saw from the Wuhan lockdowns back in 2020. So they’ve not yet recovered to the levels that they were really in 2021 leading into these latest measures that they’ve taken.
We’ve got about 270,000 barrels a day of PDH capacity. It’s coming online here just in the second half of 2022 in China about 170,000 in 2023 and then projects in Canada, Poland, Belgium, the US all over the next 1.5 years. So things set up very well, and the other piece I would remind everybody is last year we had a very mild winter here in the US. And so that remains to be seen as to what type of res com demand will have at this winter.
But certainly the potential is there. I think the markets not paying as close of attention to it this year as they did last year. I think there’s a lot of distracting factors maybe paying more attention to gas here in the immediate term, which has certainly been rising strongly through the year. So we’re optimistic that we’re going to see propane prices rally into the winter season.
Umang Choudhary
Got it. Very helpful. Thank you.
Paul Rady
Thank you.
Operator
The next question is from Subash Chandra of Benchmark Company. Please proceed with your question.
Subash Chandra
Yes. Thanks. On the QL capital drilling partnership. Is there any change to that in the 2023 program what we saw or what we will see with the override reverting?
Michael Kennedy
That QL is a separate transaction that will continue into 2023 and 2024. It ends at the end of 2024. It is an annual election whether they from Antero — solely by Antero whether they participate in 15% to 20% level. This year in 2022 we elected 15%. Obviously, where commodity prices are that would tell you that we would elect for them to participate at the same level at 15% in 2023 and 2024. And then it ends at after 2024.
Subash Chandra
Okay. Got it. And I guess seeing the Utica update today. I presume that’s West Virginia not a Point Pleasant..
Michael Kennedy
No.
Paul Rady
No, Subhash. That is actually Ohio, Utica. It’s the Point Pleasant, but it’s over in Noble County so in South Central of the Utica fairway. And so we still have inventory that is quality. And so this was an example of it. We drilled a few pads over there in this last year and through the first half of 2022, with good results and so we were just citing an example of one of our new pads where we focus more on the liquid side.
Liquids with a substantial amount of gas with it. So it’s not to say that we’re going to shift a major part of our budget over to the Utica. We still have good inventory and good infrastructure over there, including processing and fractionation capacity. So can go over there when we want to but really 90%, 95% of our budget will be directed towards Marcellus and the liquids-rich fairway mostly in Tyler and Wetzel counties.
Subash Chandra
Got it. So, sort of, seen this liquid that — you show in the slides. You just kind of remind us what your, I guess, liquids handling capacity is currently how fully utilized or not it might be. And I assume the Shell cracker gives wiggle room there too, but how dependent it is to the Shell cracker…
Michael Kennedy
It’s not dependent on the Shell cracker. We have 2.8 Bs, a day of processing in the Marcellus. It’s relatively full give a little bit of capacity, but that processing is relatively full. Utica we do have some.
Paul Rady
Yes we have about 600 million a day. We’re utilizing maybe half of it right now 600 million a day of rich gas processing capacity. And so we do have the capability of open capacity there that we can go through. And then the liquids the Y-grade will flow up to Hopedale and get fractionated there. There’s capacity there with MPLX. So we have the ability to do it. Everything is in line. We don’t have MVCs on that idle capacity. It’s paid for in kind of a basket case with Marcellus mixed in. So have open capacity there to do what we want there. We don’t have to add any commitments. So it’s just up to us as to when we want to feather in a rich Utica pad or not as we go on.
Subash Chandra
Got it. Thanks so much guys.
Operator
The next question is from Kevin MacCurdy of Pickering. Please proceed with your question.
Kevin MacCurdy
Hey, good morning guys and great free cash flow outlook for the back half of this year. My question is given the delay of the Shell cracker are there any key milestones that are holding up that start?
Dave Cannelongo
Yeah. This is Dave. I maybe want to clarify in our earnings release it may have implied some kind of a delay. But really it was just an updating of our guidance. When we first put that in place and they had announced to the market a second half 2022 starts. So I think we kind of erred on the front side of that. You will have seen in their earnings call slides this morning they reported completion and construction on that cracker. So it’s really just in the commissioning phase and how long that takes and what volume they call on from each producer on any given day will vary until it reaches commercial operation.
And what we’ve seen with other facilities in the industry is that commissioning phase can take anywhere from a handful of months to worst case with some of them found equipment challenges or errors it’s taken over a year. Right now, we don’t expect anything like that with the Shell asset. But really just us updating kind of stale forecast there around when we would start recovering significantly more ethane related to that. And we have other ethane customers that we were ramping up volume with here in 2022 as well as in 2023 that all play a role in that forecast as well.
Kevin MacCurdy
Great. That’s nice to hear. And my next question is under what conditions do you not max out the buyback authorization this year?
Michael Kennedy
We’d just be dependent on commodities. We’re already at our debt goals truly trying to be opportunistic around the debt as well. So around the free cash flow generation it’s really at $320 million of debt and the remainder is really share buyback. So we just have to be commodity prices come off where we have less than $1 billion of free cash flow in the second half of 2022.
Kevin MacCurdy
Thanks for taking my questions.
Paul Rady
Sure. Yeah. Thanks, Kevin.
Operator
The next question is from David Deckelbaum of Cowen. Please proceed with your question.
David Deckelbaum
Thanks for your time this morning guys. Just had a few quick ones for you.
Paul Rady
Yes.
David Deckelbaum
Just one as you envision reloading a buyback program should we always think about Antero communicating sort of a one-year targeted buyback, or is there sort of a specific time reference when you think about initiating an authorization?
Michael Kennedy
No. There’s generally no time around it. It’s to be determined. This one I think just happened to be one where we were able to complete it within a year. So we really don’t have a formula or methodology predetermined. We just look at the markets and whatever seems reasonable at the time is what we discussed with the Board and get authorization for.
David Deckelbaum
Yeah. And then just on some of the land and mineral acquisitions. When these scenarios happen is it typically a reactive process, or is this proactivity on the part of AR to try to acquire minerals or wherever their core areas are?
Paul Rady
It’s proactive. Yeah. We do get some inbounds but mostly it’s us touching base with. So we go through courthouse records and figure out who owns what and who to approach and all of that starting on our map. So it’s generated by Antero by our land department and then we all follow it pretty closely and decide what we want to do and what’s a good value and what’s not.
David Deckelbaum
And then my last one is just on the propane macro. I think you referenced some of the PDH plants in China operating at 70% of capacity during the COVID-initiated lockdowns in the second quarter and you’ve seen them rebound recently to 80%. Do you have a sense of what propane inventory levels were at these plants? And do you think that this is going to be kind of like a delayed response or due to working down inventory levels that might have been bloated, or do you think that inventory levels were already kind of managed down in the first and second quarters?
Dave Cannelongo
Yeah, I’ll take that one. There’s a number of factors. So everything from port congestion and challenges on the downstream resin side, how they were operating their refineries and the utilization rates of those around their export quotas. But we’ve seen them step back into the market in a pretty significant way here. Just in the last number of weeks, we’ve seen a utilization rate creep up. We’ve seen very little change to the PDH newbuild completion dates. I think one may have slipped two months was all. But no nothing — not expecting a significant overhang that could delay that.
I’d say 2021 was interesting just with we kind of entered the September with power rationing and things around the spike in LNG prices. Now we moved into Beijing Olympic related emissions controls and then expect it to be ramping up from there right into what became the significant COVID lockdown. So I would say it’s been kind of a tumultuous nine or 12 months in the world’s largest propane market for the industry. But seeing the tailwinds there for us and others as we’re coming out of these latest round of lockdowns.
David Deckelbaum
Yes. Thanks for responses guys.
Dave Cannelongo
Yes. Thanks, Dave.
Operator
The next question is from Vin Lovaglio of Mizuho. Please proceed with your question.
Vin Lovaglio
Yes. Thanks for the time. I guess this kind of links back to propane. World is clearly starving for energy molecules. I’m wondering if you guys have had any incremental conversations with potential international buyers of your NGL stream just for the sake of energy and thermal security. Thanks.
Dave Cannelongo
I’d say, we’re having conversations every day with buyers who want to buy our LPG for ethane for domestic or even export use. So I’d say to the marketing team it looks similar to what we’ve been seeing for quite some time now. The Mariner asset has really been a great program for us and we’ve enjoyed strong demand out of that facility really the entire time we’ve been shipping on it. So I would say, nothing that I would report different from what has just been very consistent interest in our commodities.
Paul Rady
Yes, I would add to that not only a desire on the NGL side, but on the natural gas side that Justin can attest to we get calls all the time whether we can double up on our cargoes, whether we can spare more into many different international countries. And so there is an appetite strong appetite out there.
Justin Fowler
Yes, that’s correct. Talking to multiple buyers at various LNG facilities in the US Gulf Coast that directly links with the Ontario firm transportation portfolio the Calcasieu pass facility from Venture Global and then our Tennessee Gas 500L deliveries should also match up nicely with the Plaquemines LNG facility. So, as offtake increases at those second wave projects continuing to have discussions with multiple potential international buyers.
Vin Lovaglio
Got it. Good to hear. And I mean I guess my follow-up is kind of tied to that. It was good to see the bump in gas price realizations guide linked to the Gulf Coast demand. I was wondering if you had any thoughts to share conceptually as to how the market for the gas and the Gulf Coast could evolve those demand kind of becomes more and more weighted to the export centers there? Thanks.
Paul Rady
Sure. So as we mentioned in the earnings transcript, we’ve been witnessing basis appreciation in several locations one being the 500L location that has — it used to trade minus 6% versus NYMEX. We’ve seen it trade as high as plus 25% plus 40% since recently. So we feel that we are starting to see that Gulf basis evolve into a premium market and we just continue to see basis improvement and physical gas demand across that Louisiana and Mississippi region for molecules. So, our outlook is as we go into the winter we could continue to see the basis rise at those Gulf locations as the international prices in Europe and Asia also climb.
Vin Lovaglio
Great. Thanks guys.
Paul Rady
Yes. Thanks, Vin.
Operator
We have a follow-up question from Subash Chandra of the Benchmark Company. Please proceed with your question.
Subash Chandra
Yes. Hi, guys. So a question first. Are you seeing yet sort of a premium market? They’re developed on your pipelines maybe Tennessee gas. And then second is on the LPG side initiatives you might take for sort of better butane price capture?
Michael Kennedy
I’ll take the first part. We have yet to see the RSG pricing, but we are working on a couple of initiatives internally. So stay tuned on that one that could result in premium pricing and then I’ll turn it over to butane question to Dave.
Dave Cannelongo
Yes. We’re not looking ourselves at any type of butane upgrade projects like you’ve seen some other folks invest in the Gulf Coast. I would say the biggest thing we do on a routine basis is the butane that we produce gets fractionated into purity iso and purity normal. And so when you’ve seen the wide iso butane spreads to normal this summer we’ve enjoyed all of that. So that’s probably the main thing that we do for butane price enhancement. And then also just around how we flex what we shipped during the summer and winter on the Mariner East pipeline to try and optimize the value for both propane and butane on seasonality the basis that we see seasonality with those two products to try and find the optimum recipe for what we set out that line.
Subash Chandra
Okay. Thanks guys. Very helpful.
Dave Cannelongo
Thanks, Subash.
Operator
There are no further questions at this time. I’d like to turn the floor back over to Brendan Krueger for closing comments.
Brendan Krueger
Yes. Thank you for joining us on today’s conference call. Please reach out with any further questions. Thank you.
Operator
This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
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