In order to evaluate AM I first have to update my forecast model of Antero Resources (AR).
AR's Q2 Highlights Include:
Net production averaged 3,521 MMcfe/d (67% natural gas by volume) during the second quarter, a 9% increase over the prior year period < My forecast was 3,390 MMcfe/day.
Realized natural gas equivalent price including hedges averaged $2.81 per Mcfe during the second quarter < My forecast was $2.60/mcf for ngas and $2.70/mcfe.
Drilling and completion capital spend was $180 million, the lowest quarterly spend since Antero's IPO in 2013
Monetized 100 MMBtu/d of 2021 natural gas hedges in July for $29 million to align hedges and 2021 projected net volumes, adjusting for the volumes associated with the previously announced ORRI transaction.
Asset sales announced to date total $531 million, relative to the $750 to $1 billion asset sale target for 2020
Repurchased an additional $279 million notional amount of senior notes through July 24th at an 18% weighted average discount
Liquidity was $1.0 billion as of June 30, 2020 pro forma for the hedge monetization and senior note repurchases
Paul Rady , Chairman and Chief Executive Officer of Antero Resources commented, "We have made considerable progress towards our $750 to $1 billion asset sale target having closed $531 million of transactions to date. The asset sale proceeds received to date have enabled Antero to reduce total debt by $365 million since the start of the bond repurchase program in the fourth quarter of 2019, capturing a meaningful discount on our outstanding senior notes and significantly addressing our upcoming debt maturities. On the operating front, we continue to see momentum on well cost savings, setting a new quarterly record with an average of 8.7 completion stages per day. We also set a U.S. horizontal well record during the quarter, drilling 11,253 lateral feet in a 24-hour period. These well cost savings helped to deliver our lowest quarterly drilling and completion capital spend since the company's IPO in 2013 and drove well costs to below $700 per lateral foot in May and June. We are incredibly proud of all of our employees who have safely delivered these results despite the ongoing uncertainty and challenges surrounding the COVID-19 pandemic. The combination of a successful asset sale program with repurchasing debt at a discount and significant capital efficiencies have materially improved Antero's credit profile and outlook."
Glen Warren , CFO and President of Antero Resources said, "Over the last nine months we have delivered on our commitment to reduce debt through a combination of asset sales and debt repurchased at a discount. This successful debt repurchase program has resulted in an $888 million reduction in near-term maturities. Further, we have completed 69 of our 105 projected wells for the year and expect drilling and completion capital spend to be substantially lower during the second half of the year. The low capital spend projected for the second half of 2020 is expected to result in over $175 million in Free Cash Flow based on today's strip prices, providing additional liquidity for debt retirement. Longer term, we are committed to maximizing Free Cash Flow and further reducing total debt."
Asset Sale Program Update
Since the announcement of the Company's $750 million to $1 billion asset sale target in December 2019, Antero has closed $531 million of transactions. This total includes the sale of $100 million of Antero Midstream common stock in December 2019, the $402 million ORRI transaction announced in June 2020, which includes $102 million of contingent payments that may be earned based on volume thresholds in the third quarter of 2020 and the first quarter of 2021, and the $29 million hedge monetization announced today. Proceeds received to date have been used to repurchase debt at a discount. Pro forma for the hedge monetization and senior note repurchases, Antero had $1.0 billion in liquidity as of June 30, 2020 .
Antero Midstream (AM) Q2 Results - July 31
Antero Midstream (AM) Q2 Results - July 31
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Antero Midstream (AM) Q2 Results - July 31
AR's hedging program is what saved the company. In the first half of 2020 they have received cash on their hedges of $524.8 million, which compares to their total cash flow from operations for 1H 2020 of just $315.2 million. For 2H 2020 AR has ~93% of their natural gas hedged at $2.87/MMBtu and their gas has a high BTU content so it sells at a premium.
Note that proceeds from asset sales are being used to buy back debt at a discount and shore up the balance sheet.
The great news for this gasser is that for 2021 strong cash flow is locked in because ~97% of my forecast gas production is hedged at $2.80/MMBtu.
AR has not provided guidance for 2021, so they might produce more gas than my forecast (2,460,000 mcfpd) if gas prices move higher than expected.
This year's capex program was front end loaded, so going forward cash flow from operations should more than cover capex.
None of the Wall Street Gang has updated their price targets for AR since the Q2 earnings release.
It is a good bet that a few will rate it a BUY now that the chance of AR going bankrupt is close to zero.
My forecast/valuation model for AR has been posted to the EPG website.
Note that proceeds from asset sales are being used to buy back debt at a discount and shore up the balance sheet.
The great news for this gasser is that for 2021 strong cash flow is locked in because ~97% of my forecast gas production is hedged at $2.80/MMBtu.
AR has not provided guidance for 2021, so they might produce more gas than my forecast (2,460,000 mcfpd) if gas prices move higher than expected.
This year's capex program was front end loaded, so going forward cash flow from operations should more than cover capex.
None of the Wall Street Gang has updated their price targets for AR since the Q2 earnings release.
It is a good bet that a few will rate it a BUY now that the chance of AR going bankrupt is close to zero.
My forecast/valuation model for AR has been posted to the EPG website.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Antero Midstream (AM) Q2 Results - July 31
DENVER, July 15, 2020 /PRNewswire/ -- Antero Midstream Corporation (NYSE: AM) ("Antero Midstream") today announced that the Board of Directors of Antero Midstream declared a cash dividend of $0.3075 per share for the second quarter of 2020. In addition, Antero Midstream announced plans to issue their second quarter 2020 earnings on Wednesday, July 29, 2020 after the close of trading on the New York Stock Exchange. If AM holds quarterly dividends at $0.3075 the annual yield is 21.9% based on today's share price. < AM is a C-Corp.
AM Q2 results beat my forecast and the outlook continues to improve.
Denver, Colorado, July 29, 2020—Antero Midstream Corporation (NYSE: AM) (“Antero Midstream” or the “Company”) today released its second quarter 2020 financial and operating results. In addition, Antero Midstream announced a reduction of its 2020 capital budget and increase in its Free Cash Flow guidance. The relevant consolidated financial statements are included in Antero
Midstream’s quarterly report on Form 10-Q for the three months ended June 30, 2020.
Second Quarter 2020 Highlights:
> Net income was $88 million, or $0.19 per share, a 36% increase compared to the prior year quarter
> Adjusted Net Income was $106 million, or $0.22 per share, a 36% increase compared to the prior year quarter
> Adjusted EBITDA was $201 million, a 2% decline compared to the prior year quarter
> Distributable Cash Flow was $152 million, resulting in 1.0x DCF coverage on the previously declared dividend of $0.3075 per share < DCF s/b higher in Q3 and Q4.
> Capital expenditures were $59 million, a 63% decrease compared to the prior year quarter
> Free Cash Flow before return of capital and changes in working capital was $108 million compared to $15 million in
the prior year quarter (non-GAAP measure)
> Received $39 million of the $55 million tax refund related to net operating losses in prior tax years under the CARES Act; remaining $16 million expected to be received by year-end 2020
> Repurchased 3.2 million shares at an average price of $2.77 per share for approximately $8.9 million
> Total debt as of June 30, 2020 was $3.1 billion, unchanged from March 31, 2020
Updated 2020 Capital Budget & Free Cash Flow Guidance:
> Further decreased capital budget to a range of $200 to $215 million from the original budget of $300 to $325 million and previously revised budget of $215 to $240 million. A 67% decrease compared to 2019 capital expenditures
> Increased Free Cash Flow guidance (before return of capital and changes in working capital) to $445 to $475 million from the original guidance of $375 to $425 million and previously revised guidance of $420 to $450 million. Increase driven by capital budget reduction with no change to previously provided Adjusted EBITDA guidance of $800 to $830 million
Paul Rady, Chairman and CEO said, “Antero Midstream delivered a strong quarter with no material volume curtailments due to the
coordinated efforts and planning of Antero Midstream and Antero Resources. As a result, Antero Midstream’s gathering and
compression volumes increased 8% year-over-year and 6% sequentially during the second quarter. We are incredibly proud of all of
our employees who have safely delivered these results despite the ongoing uncertainty and challenges surrounding the COVID-19
pandemic. This operational excellence, combined with our continued reduction in capital expenditures, resulted in Free Cash Flow of
$108 million compared to $15 million the second quarter of 2019.”
Mr. Rady further added, “Due to the just-in-time nature of our capital investments with no long-term major capital projects, Antero
Midstream has been able to reduce its capital budget by over $100 million in 2020. This has in-turn improved our Free Cash Flow
guidance by $60 million in 2020 compared to our original guidance and allows Antero Midstream to maintain a strong balance sheet
with significant liquidity and financial flexibility.”
AM Q2 results beat my forecast and the outlook continues to improve.
Denver, Colorado, July 29, 2020—Antero Midstream Corporation (NYSE: AM) (“Antero Midstream” or the “Company”) today released its second quarter 2020 financial and operating results. In addition, Antero Midstream announced a reduction of its 2020 capital budget and increase in its Free Cash Flow guidance. The relevant consolidated financial statements are included in Antero
Midstream’s quarterly report on Form 10-Q for the three months ended June 30, 2020.
Second Quarter 2020 Highlights:
> Net income was $88 million, or $0.19 per share, a 36% increase compared to the prior year quarter
> Adjusted Net Income was $106 million, or $0.22 per share, a 36% increase compared to the prior year quarter
> Adjusted EBITDA was $201 million, a 2% decline compared to the prior year quarter
> Distributable Cash Flow was $152 million, resulting in 1.0x DCF coverage on the previously declared dividend of $0.3075 per share < DCF s/b higher in Q3 and Q4.
> Capital expenditures were $59 million, a 63% decrease compared to the prior year quarter
> Free Cash Flow before return of capital and changes in working capital was $108 million compared to $15 million in
the prior year quarter (non-GAAP measure)
> Received $39 million of the $55 million tax refund related to net operating losses in prior tax years under the CARES Act; remaining $16 million expected to be received by year-end 2020
> Repurchased 3.2 million shares at an average price of $2.77 per share for approximately $8.9 million
> Total debt as of June 30, 2020 was $3.1 billion, unchanged from March 31, 2020
Updated 2020 Capital Budget & Free Cash Flow Guidance:
> Further decreased capital budget to a range of $200 to $215 million from the original budget of $300 to $325 million and previously revised budget of $215 to $240 million. A 67% decrease compared to 2019 capital expenditures
> Increased Free Cash Flow guidance (before return of capital and changes in working capital) to $445 to $475 million from the original guidance of $375 to $425 million and previously revised guidance of $420 to $450 million. Increase driven by capital budget reduction with no change to previously provided Adjusted EBITDA guidance of $800 to $830 million
Paul Rady, Chairman and CEO said, “Antero Midstream delivered a strong quarter with no material volume curtailments due to the
coordinated efforts and planning of Antero Midstream and Antero Resources. As a result, Antero Midstream’s gathering and
compression volumes increased 8% year-over-year and 6% sequentially during the second quarter. We are incredibly proud of all of
our employees who have safely delivered these results despite the ongoing uncertainty and challenges surrounding the COVID-19
pandemic. This operational excellence, combined with our continued reduction in capital expenditures, resulted in Free Cash Flow of
$108 million compared to $15 million the second quarter of 2019.”
Mr. Rady further added, “Due to the just-in-time nature of our capital investments with no long-term major capital projects, Antero
Midstream has been able to reduce its capital budget by over $100 million in 2020. This has in-turn improved our Free Cash Flow
guidance by $60 million in 2020 compared to our original guidance and allows Antero Midstream to maintain a strong balance sheet
with significant liquidity and financial flexibility.”
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Antero Midstream (AM) Q2 Results - July 31
I have posted my forecast/valuation model for AM to the EPG website.
Conclusion: AM s/b able to hold their dividend at $0.3075/quarter. My stock valuation is $7.50/share.
AM is a C-Corp.
Conclusion: AM s/b able to hold their dividend at $0.3075/quarter. My stock valuation is $7.50/share.
AM is a C-Corp.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group