Aegis weekly replay
Posted: Fri Jun 24, 2022 2:02 pm
VERY GOOD as usual.
MY TAKE on the pullback in natural gas price is
> Freeport outage caused the first wave.
> Since we don't have a supply shortage TODAY, the HOT MONEY traders moved out of the market. Some LONGs got hammered the initial announcement of the explosion at Freeport and then got hammered again when the 90-days offline was announced.
> Weather is still bullish and I don't see the storage deficit getting narrowed this summer.
> So, what if Freeport comes back online early in Q4 and we are still looking at a deep deficit in storage? I can see a big spike in the Bidding War for gas supply between the utilities.
> Remember that the 2nd La Nina in a row has been responsible for some of the coldest winters ever for the U.S.
To respond to the question about Antero Resources (AR) on today's webinar. If you go to my forecast model and put in the HH gas price of $6.00 for Q3 & Q4 2022, the Company still generates $3.5 Billion of Operating Cash Flow and $2.7 Billion of FCF this year. If I assume their realized gas price is $4.00 for 2023 (keep in mind that Q1 2023 gas price will surely be much higher), AR should still generate over $3.2 Billion of Operating Cash Flow. I don't see NGL prices going a lot lower unless oil prices go quite a bit lower.
Antero's balance sheet will be in GREAT SHAPE at year-end 2022 and based on even $4.00 gas forever, the stock deserves a $50 to $55 price target.
Keep in mind that all of our large-cap gassers (AR, CRK, CTRA, EQT and RRC) have very good marketing teams that can get their non-dedicated gas to spot markets that will have to pay big premiums in the event of weather-related demand spikes. If winter starts with storage over 300 Bcf below the 5-year average, Old Man Winter can cause some big gas price spikes. LNG prices are $41 in Europe and $37 in Asia.
FEAR of the Fed is definitely a concern. In talking to Mike Churchill before the webinar he did show me a few charts that might give the Fed cover to not be as aggressive on the interest rate hikes. I hope so.