Antero Resources (AR) Q1 Results - April 28

[dan_s]

First Quarter 2021 Highlights Include:

Net production averaged 3,322 MMcfe/d, including 170,000 Bbl/d of liquids < Below my forecast of 3,480 MMcfe/d.
Realized natural gas equivalent price averaged $4.03 per Mcfe, a $1.34 per Mcfe premium to NYMEX pricing
Realized C3+ NGL prices averaged $40.72 per barrel, or 70% of WTI, a 91% increase from the year ago period < This is where they crushed my forecast. My forecast realized NGL price was $30/bbl which compares to Q4 actual NGL price of $22.01/bbl.
Net loss was $15 million; Adjusted Net Income was $183 million (Non-GAAP) < Compares to my net income forecast of $155.8 million.
Adjusted EBITDAX was $519 million (Non-GAAP); net cash provided by operating activities was $564 million
Drilling and completion capital expenditures were $141 million, a 54% decrease compared to the prior year period
Free Cash Flow was $416 million (Non-GAAP) < HUGE improvement.
Net Debt at quarter end was $2.57 billion, a $433 million reduction from year end 2020 (Non-GAAP)
Net Debt to last twelve months Adjusted EBITDAX declined to 2.0x
Borrowing base under the credit facility remains unchanged at $2.85 billion
Established a new U.S. record for lateral feet drilled in 24 hours at 12,118 feet
Completion stages per day increased 19% from the 2020 average of 8.0 stages per day to 9.5 stages per day

Paul Rady, Chairman and Chief Executive Officer of Antero Resources commented, "Antero's first quarter financial results highlight our significant exposure to rising commodity prices. As the second largest NGL producer and the largest NGL exporter in the U.S., our results benefited from strong international demand for LPG that resulted in C3+ NGL prices that were nearly double the prices realized last year. This quarter's exceptional financial performance also benefited from our natural gas firm transportation portfolio that enabled us to sell natural gas at a $0.41 per Mcf premium to NYMEX."

Mr. Rady continued, "Antero's differentiated business model focuses on liquids rich development and a firm transportation portfolio that provides flow assurance and enables best in class price realizations. In combination, these structural advantages generated Free Cash Flow of more than $400 million during the first quarter. Based on today's strip prices, we forecast over $600 million in Free Cash Flow in 2021, which we will use for additional debt reduction."

Glen Warren, President, and Chief Financial Officer of Antero Resources said, "Since the start of our debt reduction program in the fourth quarter of 2019 we have reduced debt by $1.2 billion, including $433 million during the first quarter of 2021 alone. This rapid debt repayment has allowed us to reduce our leverage to 2.0x this quarter and positions us to be well below 2-times in the coming quarters. Additionally, we expect to achieve our goal of absolute debt under $2 billion in 2022, based on today's strip prices. Once these balance sheet objectives are accomplished, we will be opportunistic in further debt pay down and begin to return capital to our shareholders."

This is a BIG DEAL:
In order to lock in 2021 Free Cash Flow, Antero added C3+ NGL hedges focused on the summer months of this year. The summer months historically experience lower seasonal demand and weaker pricing. Hedges were executed on propane, normal butane, isobutane and pentane volumes. Antero has hedged approximately 45% of expected C3+ NGL volumes during the second and third quarters of 2021 at an average price of $36 per barrel as of March 31, 2021. This compares to a C3+ average realized price of approximately $18.75 per barrel during the second and third quarters of 2020. Antero is unhedged on the majority of its fourth quarter 2021 and all 2022 C3+ NGL production as fundamentals remain strong for improved pricing during these periods.

There is NO REASON that AR should be trading below book value. This stock should double.

[dan_s]

I may adjust it tomorrow, but I am increasing my valuation by $3.50 to $19.50. This is still below book value, so lots more upside here if natural gas and NGL prices hold up.

[Fraser921]

Ar got whacked today . TD Securities put out a Hold which is code word for sell.

The storage came in +15 which I think is solid and NG got whacked as well. Profit taking is certainly a factor

Been adding on the way down.

[dan_s]

Buy the dip. See my comments about today's natural gas storage report.

My updated forecast/valuation model for AR has been posted under the Sweet 16 tab on our website.

[dan_s]

From Neal Dingmann at Truist Financial 4-29-2021

Antero Resources Corporation (AR)
1Q21 Beat and 2021 Production/Spend Unchanged Though More FCF Expected as Prices Improve

Antero reported higher than Truist Securities/Street estimated earnings/FCF driven by
notably higher natural gas and NGL prices among other things. Though 2021 production and
CAPEX remained unchanged, the company remains confident in its upcoming FCF, which
was increased by ~$100mm driven by prices and strong FT. AR put a solid dent in debt with
1Q21 FCF and expects to have well under 2x soon despite the large amount of natural gas
hedges; we expect the stock to outperform tomorrow on the beat and strong FCF.

Free Cash Flow
The company officially increased its FY21 FCF guidance from "over $500mm" to "over
$600mm". With no changes to the capital program we assume the majority of the
improvement came from increasing prices. We expect the company to continue to pay down
debt in the near-term, shifting its target to shareholder returns after it reaches sub-$2b in
debt.

MY TAKE: I know this sounds like a broken record, but I see NOTHING that justifies this very profitable company trading below book value. The Wall Street Gang has a track record of leaving companies in the "penalty box" too long.