Antero Resources (AR) - Possible return to the Sweet 16

[dan_s]

I am going to take a hard look at AR and AM this week. A significant increase in U.S. LNG and NGL export capacity is coming online in 2024, which I believe will benefit AR. Below is a not that I received from the Raymond James Energy Sector Research Team this morning.

Rain in Panama impacts BBQ prices in Texas and Oklahoma? Kind of!

As we begin winter 2023-24 with near seasonal record high U.S. propane inventories – and with drought-driven Panama Canal constraints generating significant headlines of late – we think it is time to highlight one of the more often overlooked corners of the domestic hydrocarbon markets, U.S. natural gas liquids (or NGLs) markets, with a specific emphasis on propane.

Today’s Stat addresses: 1) our latest supply/demand outlook for U.S. propane; 2) how increased U.S. liquefied petroleum gas (or LPG) exports may help solve some of the issues (or how current Panama Canal constraints pose a risk to that); 3) a recap of the major NGL logistics project “boom” underway in U.S. midstream; and 4) what this means for propane and NGL pricing vs. current expectations. We finish with what this means for the stocks.


Here’s the summary: U.S. NGL prices are already quite low (ex: Mont Belvieu propane pricing is only ~35% of WTI crude oil today) and constraints at the Panama Canal have been getting attention the last several weeks (3-5% of global seaborne trade passes through Panama). With weak sentiment/expectations, an out-of-consensus bearish (for supply) U.S. upstream model (which our E&P team has been discussing for quite some time), and a focus on the under-appreciated metric for U.S. propane of days of forward cover (which tightens as U.S. LPG exports grows), it is “intriguing” to “take a flyer” on U.S. NGLs and stocks with price exposure (largely E&Ps and midstream). However, Panama Canal traffic reductions and hemisphere-wide winter weather uncertainty pose unique risks. We’d recommend to high-grade exposure to integrated and well contracted players (these even have an outside chance for upside opportunities as global spreads widen).

[KGardiner]

If AR rejoins the Sweet 16, what would leave?

[dan_s]

After Christmas I will decide on the initial Sweet 16 for 2024. Today I am thinking about moving EOG and FANG to our High Yield Income Portfolio.