Shares of Antero Resources (NYSE:AR) jumped 10% by 10:30 a.m. EDT on Monday. Fueling the natural gas stock was a royalty transaction. That deal also helped fuel shares of its midstream affiliate Antero Midstream (NYSE:AM), which, likewise, leaped more than 10% in early morning trading.
Antero Resources closed an overriding royalty interest (ORRI) transaction with Sixth Street Partners. The deal will bring in up to $402 million in cash, which Antero will use to repay borrowings under its revolving credit facility. The company received an initial $300 million at closing and will get up to $102 million over the next 12 months if it reaches certain volume thresholds.
The company also noted that it repurchased $196 million of its 2021 senior notes during the second quarter at a 17% discount. It now only has $540 million of those notes still outstanding.
As a result of these transactions, Antero currently has $745 million drawn on its credit facility, leaving it with $1.2 billion of remaining liquidity.
This deal puts Antero well on its way toward achieving its 2020 asset sales target of between $650 million and $900 million. Those additional asset sales, as well as the company's expected free cash flow, will enable it to reduce debt further this year.
This asset sale will provide a boost to Antero's balance sheet. That's easing concerns about the company's finances, which has been weighing on its stock as well as shares of Antero Midstream.
However, Antero's not out of the wood just yet. It still has to come up with the financing to address the remainder of the notes that mature next year, as well as those coming due in 2022. Because of that, both Antero entities remain very risky.