Antero Resources (AR) Update - June 24
Posted: Mon Jun 24, 2019 3:26 pm
As I post this note, AR is trading at $5.35/share.
This morning Stifel sent out a new report that included their price targets and NAV's on all of the upstream oil & gas companies that they cover.
Stifel's price target for AR has been lowered by $3 to $14/share. Their Net Asset Value (NAV) is $15.15/share.
AR is a "gasser". Wall Street is down on the energy sector and you can double the negativity for the "gassers". I am going to lower my valuation from $22 to $16/share. Nothing has really changed in my forecast/valuation model other than the fact that I am now using 3X operating CFPS to value AR (down from 4X). There is nothing to justify the lower multiple other than the overwhelming negativity for the sector.
AR:
> Has 100% of this year's gas production hedged. Therefore, solid gas revenues including cash settlements on their hedges are locked in.
> I did lower NGL prices quite a bit. As I mentioned in Saturday's podcast, the U.S. NGL market is now over-supplied.
> AR's Q2 "Reported Net Income" will include a very large mark-to-market adjustment on the value of their VERY LARGE hedge position. Reported EPS s/b approximately $0.30.
> Operating cash flow per share ($1.57 in Q1 2019) should be $4.50 to $5.00 for the year. < Yes, this stock is trading close to 1X operating CFPS.
> Even at the low natural gas and NGL prices expected in 2H 2019, Antero should cover 100% of their 2019 Capital Expenditure budget with cash flow from operations AND GENERATE ABOUT $100 MILLION of FREE CASH FLOW FROM OPERATIONS.
> The company's balance sheet is in much better shape than it was a year ago and they have plenty of liquidity.
In the last 3 months, 4 ranked analysts set 12-month price targets for AR that range from $10.50 to $17.00. The average price target among the analysts is $12.83.
Reuters: There are 20 analysts' reports included in the First Call price target of $12.25. Some of them are dated in 2018. I give more value to those submitted within the last 3 months.
Conclusion: The "gassers" are oversold, but I doubt they will draw any attention from investors until the next winter heating season arrives. The front month NYMEX contract for HH natural gas did move $0.114/MMBtu higher today because of the weather forecast for the Northeast (warmer than normal), which is expected to increase demand for power generation in that heavily populated area.
This morning Stifel sent out a new report that included their price targets and NAV's on all of the upstream oil & gas companies that they cover.
Stifel's price target for AR has been lowered by $3 to $14/share. Their Net Asset Value (NAV) is $15.15/share.
AR is a "gasser". Wall Street is down on the energy sector and you can double the negativity for the "gassers". I am going to lower my valuation from $22 to $16/share. Nothing has really changed in my forecast/valuation model other than the fact that I am now using 3X operating CFPS to value AR (down from 4X). There is nothing to justify the lower multiple other than the overwhelming negativity for the sector.
AR:
> Has 100% of this year's gas production hedged. Therefore, solid gas revenues including cash settlements on their hedges are locked in.
> I did lower NGL prices quite a bit. As I mentioned in Saturday's podcast, the U.S. NGL market is now over-supplied.
> AR's Q2 "Reported Net Income" will include a very large mark-to-market adjustment on the value of their VERY LARGE hedge position. Reported EPS s/b approximately $0.30.
> Operating cash flow per share ($1.57 in Q1 2019) should be $4.50 to $5.00 for the year. < Yes, this stock is trading close to 1X operating CFPS.
> Even at the low natural gas and NGL prices expected in 2H 2019, Antero should cover 100% of their 2019 Capital Expenditure budget with cash flow from operations AND GENERATE ABOUT $100 MILLION of FREE CASH FLOW FROM OPERATIONS.
> The company's balance sheet is in much better shape than it was a year ago and they have plenty of liquidity.
In the last 3 months, 4 ranked analysts set 12-month price targets for AR that range from $10.50 to $17.00. The average price target among the analysts is $12.83.
Reuters: There are 20 analysts' reports included in the First Call price target of $12.25. Some of them are dated in 2018. I give more value to those submitted within the last 3 months.
Conclusion: The "gassers" are oversold, but I doubt they will draw any attention from investors until the next winter heating season arrives. The front month NYMEX contract for HH natural gas did move $0.114/MMBtu higher today because of the weather forecast for the Northeast (warmer than normal), which is expected to increase demand for power generation in that heavily populated area.