Antero Resources (AR) Price Target - June 16

[dan_s]

Antero Resources Corporation (NYSE: AR)
Outlook Remains Unmatched Despite Gas Pullback; Reiterate Strong Buy (Strong Buy 1 | $60.00 target)
John Freeman , CFA (RJA)

Given the pullback in natural gas this week, we’re taking a chance to 1) discuss Freeport
LNG’s impact on AR; 2) look at AR’s longer-term LNG options; and 3) update estimates on
our top gas name. First, let’s examine AR’s updated 2022 and 2023 outlooks. After updating
for current strip, RJe 2022 production of ~3.3 Bcfe/d nets FCF of ~$3.2B, equating to a ~25%
FCF yield, second highest among RJ mid/large-caps (~18% average). Entering 2023, AR’s
outlook looks even better as gas hedges dissipate (~50% in 2022 versus just ~2% in 2023).
RJe production of ~3.4 Bcfe/d equates to ~$3.4B in FCF, a ~27% FCF yield — which is the
highest among mid/large-caps. Despite surging over 120% YTD, AR trades at only ~3.4x 2022E
EV/EBITDA multiple and ~2.6x for 2023E, both amongst the lowest in our mid/large cap
coverage. Given AR’s leading FCF yield, minimal leverage (~0.2x by YE22) and below-average
EBITDA multiple, we reiterate our Strong Buy rating and raise our price target to $60/share
(from $52/share).

[Fraser921]

Unbelievable value!

[dan_s]

I pulled up my forecast model for AR.

If HH ngas averages $7.00 in Q3 & Q4 and $5.00 in 2023 it lowers my valuation of AR by $9 to $58.
> Because AR has a lot of their gas hedged in 2022, the dip in ngas prices only reduces this year's operating cash flow from $4.0 to $3.7 billion.
> AR's free cash flow would still be ~$3 billion in 2022 and 2023 at the lower HH prices above.
> If AR's realized ngas price averages $6.50/mcf in 2023 (more likely IMO), the Company's operating cash flow should top $5.2 billion ($17.50/share).

I have built macro driven forecast models for all of the Sweet 16, so you can download them and see how commodity price changes impact their earnings, operating cash flow and stock valuation. All you have to do is download them to Excel from the EPG website.

My goal is to provide EPG members with some tools they can use to cut through the FEAR-based selloff noise. Computers are generating a high volume of today's NYMEX futures trades.

[Fraser921]

I added today on the dip.

This shake out is perfect time to buy

[Fraser921]

I just reviewed AR Q1 earning report.
They are committed to using 25 per cent of FCF for buybacks and bought 100 m
In q1. They should have a similar amount in q2 maybe more
Once the revolver is paid of 300 m they then step buybacks to 50 percent
They assumed the FCF would be 2.5 b for 2022 based on the strip in April
Ng prices have soared and Fcf could be 3 b for 2022

I need to spend some time on dans model

The dip to 34 from 50 is a great buying opportunity for the company and us, imho
I like a 20 per cent plus FCF yield

I added significantly to the name on Friday

[dan_s]

I focus on AR at the end of my podcast.

[Fraser921]

I saw that..very helpful!

Anything can happen, but I don't see how the name stays at $ 34 unless NG craters to 4-5 range