Energy Prospectus

At the time of this post AR was trading at $34.65.

I have updated my forecast/valuation model for AR's strong Q1 2025 results and updated guidance, which has not changed since February. Since AR's Q1 production volume was much higher than my forecast, I now think their full year production will be at or above the high end of the Company's guidance, which is 3,450,000 mcfepd.
AR's production mix is approximately 64% natural gas, 34.25% NGLs and 1.75% condensate that sells at a $12 to $16 discount to WTI oil.

AR only has some basis differentials hedged for 2025 and 2026 natural gas collars with floors of $3.07 and ceilings of $5.96 per MMBtu.

My valuation stays at $48/share for now, but the back half of 2025 and all of 2026 looks very good if EIA's natural gas price forecasts of $4.30 for 2025 and $4.60 for 2026 come to pass. At the time of this post the JAN26 futures contract for HH natural gas was trading at $5.016/MMBtu. JAN26 will be the front month NYMEX contract at the end of November.

TipRanks: "In the last 3 months, 17 ranked analysts set 12-month price targets for AR. The average price target among the analysts is $44.80." < The 17 price targets range from $38 to $56.

We will continue to see lots of volatility in the front month NYMEX contracts because the "Paper Traders" are getting very active in the futures market because they see that the physical market is tighter than it was leading up to the summer demand surge that sent HH Ngas to $9.30 in August 2022. To see for yourself go here and pull up a 5-year chart > https://tradingeconomics.com/commodity/natural-gas

What you will see on the 5-year chart is that in the summer of 2022 there were two large spikes, the first one in June when natural gas demand for power generation was just getting started and the 2nd wave in August when the utilities were afraid of not having enough gas in storage to meet space heating demand when winter arrived.

My observation of natural gas price spikes over many years is that they never last long and are typically followed by a steep fall in prices. I am bullish on gas fundamentals but the industry has typically never exercised discipline and it seems the only constraint on overproduction is low prices and takeaway capacity.

I agree that the BIG natural gas price spikes never last.
As I have posted here many times, they are caused by "Bidding Wars" between the utilities that must rebuild storage before the next winter arrives. Recently the LNG exporters have joined the Bidding War in the futures market. They also need to have lots of gas in storage AND the AI data center rapidly increasing electricity demand, have significantly improved the fundamentals for U.S. natural gas.

HH gas in the $2.50 range was only justified by all the associated gas coming from the shale plays.

IMO the fundamentally "Right Price" for U.S. natural gas is in the $4.00 to $6.00 range. Eventually, as U.S. LNG export continues to grow, the "Right Price" might go as high as 10% of the global price.

Natural gas prices in Asia and Europe are now around $11.00/MMBtu.

Also, natural gas prices are "Regional". The Northeast U.S. is going to be short on supply soon due to the rapid build out of AI data centers. This is very bullish for the Appalachia Gassers (AR, EQT, RRC and to a lesser extent CTRA).

AR has some good slides on how tight the U.S. gas market is going to be.

I think your "right price" is spot on. It also seems consistent with the spread of the 2026 collars placed on Antero's production from their planned "lean gas" pads they are planning on drilling this year. The collars have a floor of 3.07 and a ceiling of 5.96 with the strip for 2026 at $4.13. These prices might even make Jerry Jones smile with his western Haynesville monster wells (both cost and production; Olajuwan well recently IPed at 44 mmcf per day.