Antero Resources (AR) Update - July 21
Posted: Wed Jul 21, 2021 11:02 am
At the time of this post AR is trading for $13.90 per share. My valuation is $25.00.
Over the last 30 days three analysts have updated their forecasts and price targets for AR. Keep in mind that ngas price have moved a lot higher this week.
> On 6/29/2021 Aaron Bilkoski at TD Securities rated it a Buy with a price target of $18.50
> On 7/7/2021 Nitin Kumar at Wells Fargo rated it a Buy with a price target of $17.00
> On 7/13/2021 Vincent Lovaglio at Mizuho Securities rated it a Hold with a price target of $19.00 < How is a HOLD justified on a stock trading at such a large discount to your valuation???
For Q1 2021 Antero's realized natural gas price net of regional differentials and cash settlements on their hedges was $3.56/mcf. How is this possible when the Company has ~92% of their dry gas hedged for $2.76/MMBtu in 2021?
> Antero sells their gas into the physical market at posted prices. They get a $0.10 to $0.20 per mcf premium because their gas has a high BTU content.
> Physical market prices spiked in February because of Winter Storm Uri's impact on supply and Antero's marketing people took advantage.
> Antero's hedges are "paper transactions" that are settled based on NYMEX futures contracts not on regional physical prices. They actually were paid $5.322 million cash settlements on their hedges in Q1 or $0.0257/mcf.
I am sure that Antero had to pay cash to settle their hedges in Q2, so my forecast assumes a "realized" dry gas price of $2.85 for Q2. However, the physical gas market is going to get extremely tight in 2H 2021 and Q1 2022. I tell you this because I now think Antero's realized gas prices in Q3 and Q4 could be much higher than what I am using in my forecast model. Plus, NGL prices are also likely to be higher. There is a good chance that Antero will generate over $1 Billion of free cash flow from operations in 2021.
Over the last 30 days three analysts have updated their forecasts and price targets for AR. Keep in mind that ngas price have moved a lot higher this week.
> On 6/29/2021 Aaron Bilkoski at TD Securities rated it a Buy with a price target of $18.50
> On 7/7/2021 Nitin Kumar at Wells Fargo rated it a Buy with a price target of $17.00
> On 7/13/2021 Vincent Lovaglio at Mizuho Securities rated it a Hold with a price target of $19.00 < How is a HOLD justified on a stock trading at such a large discount to your valuation???
For Q1 2021 Antero's realized natural gas price net of regional differentials and cash settlements on their hedges was $3.56/mcf. How is this possible when the Company has ~92% of their dry gas hedged for $2.76/MMBtu in 2021?
> Antero sells their gas into the physical market at posted prices. They get a $0.10 to $0.20 per mcf premium because their gas has a high BTU content.
> Physical market prices spiked in February because of Winter Storm Uri's impact on supply and Antero's marketing people took advantage.
> Antero's hedges are "paper transactions" that are settled based on NYMEX futures contracts not on regional physical prices. They actually were paid $5.322 million cash settlements on their hedges in Q1 or $0.0257/mcf.
I am sure that Antero had to pay cash to settle their hedges in Q2, so my forecast assumes a "realized" dry gas price of $2.85 for Q2. However, the physical gas market is going to get extremely tight in 2H 2021 and Q1 2022. I tell you this because I now think Antero's realized gas prices in Q3 and Q4 could be much higher than what I am using in my forecast model. Plus, NGL prices are also likely to be higher. There is a good chance that Antero will generate over $1 Billion of free cash flow from operations in 2021.