Antero Resources (AR) Q4 Results - Feb 13

[dan_s]

Antero Resources (AR) came out with quarterly earnings of $0.46 per share, beating my forecast of $0.31 per share. This compares to earnings of $0.23 per share a year ago. These figures are adjusted for non-recurring items. Liquids production was much higher than my forecast. - Dan

Fourth Quarter 2018 Highlights:

Net daily gas equivalent production averaged a record 3,213 MMcfe/d (30% liquids), a 37% increase over the prior year period and an 18% increase sequentially
> Liquids production averaged 162,077 Bbl/d, a 51% increase over the prior year period and included oil production of 12,229 MBbl/d, C3+ NGL production of 102,860 MBbl/d and recovered ethane production of 46,988 MBbl/d
> Ethane production represented about 27% of the potential recoverable ethane, with 122,000 Bbl/d remaining in the gas stream
> Realized natural gas price averaged $3.83 per Mcf, a $0.19 premium to the NYMEX Henry Hub natural gas price per MMBtu before hedges
> Realized natural gas equivalent price averaged $4.05 per Mcfe before hedges, driven by a $0.22 per Mcfe uplift from liquids production and prices
> Reported $122 million net loss, or $0.39 per share, $145 million Adjusted Net Income, or $0.46 per diluted share, and $175 million Stand-alone Adjusted Net Income, or $0.56 per diluted share (adjusted items are non-GAAP measures)
> Reported $584 million of Adjusted EBITDAX and $475 million of Stand-alone Adjusted EBITDAX, representing a 34% and 27% increase over the prior year period, respectively (non-GAAP measures)
> Full year 2019 Stand-alone drilling and completion capital expenditures expected to be at low end of guidance range and a 20% reduction from 2018, due to fourth quarter 2018 pre-spend related to roads, pads and facilities to be utilized in 2019 and 2020

Full Year 2018 Highlights:

> Net daily gas equivalent production averaged 2,709 MMcfe/d (28% liquids), a 20% increase over the prior year
> Reported $398 million net loss, or $1.26 per share, $315 million Adjusted Net Income, or $1.00 per diluted share, and $365 million Stand-alone Adjusted Net Income, or $1.15 per diluted share (adjusted items are non-GAAP measures)
> Reported $2.0 billion of Adjusted EBITDAX and $1.7 billion of Stand-alone Adjusted EBITDAX, representing a 42% and 38% increase over the prior year period, respectively (non-GAAP measures)
> Proved reserves increased 4% to 18.0 Tcfe at year-end 2018 compared to year-end 2017
> Standardized measure of proved reserves increased 21% to $10.5 billion at year-end 2018 compared to year-end 2017
> SEC PV-10 proved reserve value increased 24% to $12.6 billion at year-end 2018 compared to year-end 2017
> Proved developed reserves increased 22% to 10.4 Tcfe at year-end 2018 compared to year-end 2017 and comprised 58% of total proved reserves
> Future development costs for 7.6 Tcfe of proved undeveloped reserves estimated to be $0.44 per mcfe
> The previously announced simplification transaction between Antero Midstream and AMGP expected to be completed in March 2019 results in a minimum of $300 million in cash proceeds to Antero Resources
> Following the simplification transaction, Antero Resources will no longer consolidate Antero Midstream's financial statements in Antero Resources' consolidated financial statements, but will account for its interest in New AM using the equity method of accounting
> Reduced Stand-alone Net Debt to trailing twelve months Stand-alone Adjusted EBITDAX to 2.2x at year-end 2018

Paul Rady, Chairman and CEO said, "2018 was a great year for the Antero family, as we significantly reduced leverage, grew production above the 3 Bcfe/d mark, and announced the midstream simplification. We enter 2019 with significant scale as the largest NGL producer and the 5th largest natural gas producer in the U.S. Driven by the fourth quarter capital invested on pads and roads, we expect to be in a position to invest at the low end of our 2019 drilling and completion guidance range. The 2019 budget represents a 20% reduction relative to capital spending in 2018. On the liquids front, we are excited that Mariner East 2 has been placed in service. Our commitment on this pipeline will allow us to move nearly half of our expected 2019 C3+ NGL production to the export market and realize stronger NGL netback pricing than we have received over the last several years. We believe that our 2019 plan will deliver superior returns to shareholders over the long-term while also keeping capital spending within cash flow. "

[dan_s]

Including the $370,365,000 cash received as a result of the monetization of some hedges in Q4, Antero generated $863,245,000 in cash flow from operations in Q4 and $2,107,410 for the year. That is $6.83 operating cash flow per share for a stock that is trading for less than $10/share.

[dan_s]

I am going to listen to Antero's conference call on Thursday morning, but this stock is trading at less than 2X operating cash flow per share and 100% of the natural gas is hedged for 2019.