Antero Resources (AR) Update - Dec 28

[dan_s]

Since AR announced the following on December 18th, four analysts have submitted new forecasts to Reuters. Their valuations of AR range from $19 to $21 per share. AR is trading for $9.47 this morning.
Note that AR is paying off large chunks of debt and they expect to generate over $400 million of free cash flow from operations in 2019 that will be used to pay off more debt and fund a stock repurchase plan.
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From AR's 12/18/2018 press release:

Hedge Monetization Details

Antero monetized a portion of its natural gas hedge portfolio for $235 million in net proceeds via an early settlement of 68% of its April through December 2019 swaps, replacing the monetized volumes with collars. The 1.575 Bcf/d of new collars for the April through December 2019 period have a $2.50 per MMBtu floor and a ceiling ranging from $3.31 to $3.54 per MMBtu. The monetization allows Antero to maintain a low risk profile with a floor of $2.50 per MMBtu during the period, while enabling the Company to participate in the upside to current strip pricing during that period. The Company also reset 70% of its 2020 fixed price swaps from $3.25 per MMBtu to $3.00 per MMBtu for proceeds of $122 million. Proceeds from the monetization were used to repay a portion of borrowings under Antero's revolving credit facility. Total volume hedged remains unchanged, with approximately greater than 70% of the Company's targeted 2019 and 2020 natural gas production hedged. Antero plans for 2019 drilling and completion capital spend to remain within cash flow from operations assuming current strip pricing.

Share Repurchase Activity

Quarter-to-date, Antero has repurchased 9.1 million shares for $129 million, comprising about 3% of shares outstanding. The weighted average repurchase price was $14.10 per share. The previously announced $600 million open market share repurchase program is authorized through the first quarter of 2020, subject to leverage thresholds. Leverage reduction continues to be a priority and Antero is forecasting stand-alone leverage below 2.2x at yearend-2018.
The $600 million program is expected to be funded with cash proceeds from the following:
•At least $300 million in expected cash proceeds related to the midstream simplification, which is expected to close in the first quarter of 2019 (cash amount may be increased depending on the cash election of AM public unitholders) < See our recent profile on Antero Midstream (AM). - Dan.
•Expected free cash flow generated during 4Q 2018 through 1Q 2020
•The first $125 million tranche of Antero Midstream water earn-out payments expected in early 2020

Fourth Quarter 2018 Update

On November 3, 2018, the ET Rover Pipeline lateral to the Sherwood processing complex in West Virginia entered into service, increasing Antero's access to premium-priced Midwest markets with no additional transport fees. Antero projects that approximately 30% of its natural gas will be sold into the Midwest market during the fourth quarter of 2018, an increase from 16% before the Rover Sherwood Lateral in-service date. In addition to the increased sales into premium-priced Midwest markets, Antero expects to produce approximately 400 MMcf/d of unhedged natural gas volumes during the fourth quarter. The positive impacts from the increased exposure to rising natural gas prices and Midwest regional pricing during the quarter substantially offset the decline in oil and NGL prices.
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Antero's 2019 production mix (my forecast) is approximately 71.0% natural gas, 26.5% NGLs and 2.5% crude oil.