Antero Resources (AR) - Possible return to the Sweet 16
Posted: Mon Nov 20, 2023 9:52 am
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).
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).