Antero Resources (AR) Valuation Update - Feb 16

[dan_s]

At the time of this post AR was trading at $27.55.

I have updated by forecast/valuation model for their strong Q4 results and their detailed guidance for 2023.
My valuation declines by $4 to $46 per share.

Thing to consider:
> AR's balance sheet is in GREAT SHAPE with no near-term debt problems.
> 1H 2023 will be rough, but operating cash flow should cover their capex.
> If HH natural gas price moves back over $3.00 in Q3 (which is my forecast) then AR will once again be free cash flow positive.
> NGL prices dipped to $32/bbl in Q4, but they should rebound as U.S. exports of LPGs increases.
> If natural gas prices move over $4.00 in 2024 (which is my forecast), AR should generate over $1billion of free cash flow next year.

If you are long-term bullish on natural gas prices, building a position in AR while it is under $30 should be very rewarding within two years.

[ChuckGeb]

In their conference call today they were talking like they are expecting $500 million of FCF this year. Not sure how they get there and I was surprised to hear that. This conference call was short and sweet. Not sure what the buyout of their 2024 "swaptions" accomplished but apparently it was worth $200 million to do so.

[dan_s]

I think AR sees much higher NGL prices in 2H 2023. I have no way of estimating future NGL prices.

[Fraser921]

>2024 "swaptions" accomplished but apparently it was worth $200 million to do so.

It cost them 200 m, they arent getting 200 m. And btw , they are doing this in q1.

My take is they are cleaning up crap which means they expect a crap year. Sometime companies do that, so the future looks better.

Ironically, it would of cost less to settle that crap hedge if they waited another month, so = another screw up

FCF used to 2.5 billion for 2023. So if it is 500 m, the outlook has dropped TWO BILLION DOLLARS!!!

My outlook for AR with current crap NG is $ 15. I'm glad I liquidated. That's called doing due dillegence

[dan_s]

Note from Neal Dingmann at Truist Financial

Antero Resources Corporation (AR, $27.54, Buy) - Financial & Operational Setup Ensure Stable Program
- While Antero is exposed to continued gas volatility and moderate inflation, the company is positioned such that there is unlikely any scenario where the D&C activity is less than the current level, helping ensure what we forecast to be a minimum of $500mm (likely much more) in FCF this year. After adjusting our model for our updated oil & gas prices, costs, and volumes we are lowering our PT to $34 from $41. - Neal Dingmann