Antero Resources (AR) Valuation Update - Oct 27

[dan_s]

Depending on how bullish I feel about natural gas and NGL prices at the end of December, there is a good chance that I will add AR back to the Sweet 16 for 2024.

They are getting premium pricing for some of their gas that can be delivered to the Gulf Coast LNG exporters. By this time next year, Gulf Coast ngas prices could get a boost from a "Bidding War" between LNG exporters since more than 4 Bcfpd of new LNG export capacity will soon be coming online. This is also bullish for CRK which already sells lots of gas to the LNG exporters.

AR's Q3 results beat my forecast, primarily due to higher NGL prices than I used in my forecast. A colder than normal November should put upward price pressure on propane.

TipRanks: "Since AR released Q3 results and updated guidance for Q4, 6 respected energy sector analysts have updated their price targets to an average price of $33.67. The 6 price targets range from $32 to $38."

For those of you that are new EPG members, AR is a large-cap "gasser" with all of their production in Appalachia (Marcellus & Utica Shale). Current production is just under 3.5 Bcf per day, which includes over 190,000 bpd of NGLs that now sell for about $27/bbl. In 2022, AR's average realized NGL price was $43.29/bbl. If the NGL market returns to those "Good Old Days", AR could become a $50 stock.

At the time of this post AR was trading at $28.25.

My current valuation is now $33.00, which is based on 6X annualize operating cash flow. My updated forecast for AR has been posted to the EPG website.

We will be publishing updated profiles on AR and Antero Midstream (AM) in November.