Stifel's Update on Antero Resources (AR) - July 3
Posted: Wed Jul 03, 2019 11:56 am
Antero Resources Corporation (AR, $5.27, Buy; Target $14.00)
Shorts Should Head for Cover by Jane Trotsenko at Stifel
"Mont Belvieu's NGL price per barrel is down 15% q/q in 2Q19. Based on our experience with quarterly positioning, investors would be inclined to short AR and RRC into the quarter on that NGL theme. Short-selling AR into the earnings could be quite risky, in our view, as we are projecting a production beat and very healthy natural gas price realizations.
Based on pipeline flows, AR should deliver at least 5% q/q production growth compared to Consensus modeling a slight production decline.
Additionally, we are also projecting a slight beat on natural gas price realizations. We believe that Consensus continues to use daily average natural gas prices for their price decks, which were $0.13/MMbtu lower than Henry Hub settled prices. Importantly, AR plans to provide a guidance update with its 2Q19 earnings, which makes this quarter particularly tricky. That said, we expect positive operational momentum to continue in this challenging macro environment."
I do expect AR to report a BIG mark-to-market gain on their hedges, which may raise a few eyebrows. Reported earnings should be way above the current First Call forecast of $0.06 EPS for Q2. AR is on-track to generate about $100 million of FCF from operations in 2019, which is locked in by hedges.
All four of the "gassers" in the Sweet 16 should be profitable in Q2 and for all of 2019 because of their hedges and very low operating expenses.- Dan
Shorts Should Head for Cover by Jane Trotsenko at Stifel
"Mont Belvieu's NGL price per barrel is down 15% q/q in 2Q19. Based on our experience with quarterly positioning, investors would be inclined to short AR and RRC into the quarter on that NGL theme. Short-selling AR into the earnings could be quite risky, in our view, as we are projecting a production beat and very healthy natural gas price realizations.
Based on pipeline flows, AR should deliver at least 5% q/q production growth compared to Consensus modeling a slight production decline.
Additionally, we are also projecting a slight beat on natural gas price realizations. We believe that Consensus continues to use daily average natural gas prices for their price decks, which were $0.13/MMbtu lower than Henry Hub settled prices. Importantly, AR plans to provide a guidance update with its 2Q19 earnings, which makes this quarter particularly tricky. That said, we expect positive operational momentum to continue in this challenging macro environment."
I do expect AR to report a BIG mark-to-market gain on their hedges, which may raise a few eyebrows. Reported earnings should be way above the current First Call forecast of $0.06 EPS for Q2. AR is on-track to generate about $100 million of FCF from operations in 2019, which is locked in by hedges.
All four of the "gassers" in the Sweet 16 should be profitable in Q2 and for all of 2019 because of their hedges and very low operating expenses.- Dan