Antero Resources' Q2 results came in below my forecast, but thanks to rising natural gas and NGL prices they remain on track to generate outstanding operating cash flow from operations this year. Their high BTU gas gets a nice premium to NYMEX gas prices (~$0.20/mcf). Their hedges are settled against NYMEX strip prices, so they keep the premium on 100% of their dry gas sales. Rising NGL production and prices are also a positive. A large chunk of their "Bad Hedges" expire at year-end.
On 7-27-2021 Raymond James analyst J.R. Weston upgraded Antero Resources (NYSE: AR) from Outperform to Strong Buy with a price target of $19.00 (from $12.00). The Wall Street Gang's forecasts have moved much closer to my forecast model since April. TipRanks' average price target is now $18.21.
As we move through the year, I gain more confidence in my models and in my 2022 forecast assumptions. I am lowering my valuation of AR to $24/share, but if they stay focused on debt reduction, AR's valuation will deserve a higher multiple of operating cash flow. There is a lot more upside on this one if we have a cold start to the winter heating season. The PV10 value of their proved reserves (P1) will go way up at year-end.
My updated forecast/valuation model will be posted to the EPG website this afternoon.
Antero Resources (AR) Q2 Results - July 31
Antero Resources (AR) Q2 Results - July 31
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group