Antero Resources (AR)

[dan_s]

This is the time of year when I roll forward my forecast models for each one of our model portfolio companies. I go over the Net Income and Cash Flow Statement models line-by-line and err on the conservative side, primarily because most of the companies have not provided guidance for 2018. That should come when they release Q4 results.

Today I am starting with Antero Resources, one of our "gassers". AR is trading at $19.59 at the time of this post.

In the last 3 months, 9 ranked analysts set 12-month price targets for AR. The average price target among the analysts is $23.78, but there is a wide range of opinions. These nine, well respected Wall Street firms, value the stock in a range of $20.00 to $33.00.

The primary things to remember about Antero are:
> They have more than 100% of their forecast gas production for 2018 hedged at $3.50/MMBtu and
> They produce a lot of high btu gas that sells at a premium.
> They have very little of their oil and NGLs hedged, which is a good thing since liquids prices are moving higher.

Antero is going to get a nice big check for their in-the-money hedges in Q4 2017. My SWAG is about $70 Million. Not too bad for a paper trade.

BTW they also have more than 90% of their 2019 natural gas production hedged at $3.50 as well.

My updated forecast/valuation model will be posted to the EPG website later today.

Based on my forecast, AR should generate $4.50 to $5.00 operating cash flow per share in 2018 (First Call's forecast is $5.07), so the stock is trading for less than 5X operating CFPS. That is a very low multiple for a company with this much running room. For more details, read the Antero Resources profile under the Sweet 16 tab on the EPG website.

[dan_s]

Good news for the gassers: https://www.cnbc.com/2017/12/28/natural ... -snap.html

Keep in mind that natural gas prices are determined on regional markets. The North American regions is MUCH TIGHTER than most people think it is and that will become quite clear over the next few weeks.