Morningstar Analyst likes Antero Resources (AR)

[dan_s]

Antero Resources (AR)
Star Rating: 4 Stars
Fair Value Estimate: $32 < Compares to my valuation of $47

Antero Resources is the most active driller in the Appalachia region (Marcellus and Utica plays). We believe it is also one of the most attractively priced. The stock currently trades at a 25% discount to our fair value estimate. Although natural gas still constitutes around 75% of the firm's production, a substantial portion of its acreage is situated in areas with a fairly high liquids content, differentiating the company from its peers that are predominantly targeting dry gas.
The profitability of Antero's inventory continues to trend higher. Drilling and completion costs have declined steadily over the past two years in the Marcellus and Utica plays, and there is scope for further efficiency gains that could lower costs further. Meanwhile, the productivity of Antero's wells is likely to increase across the portfolio, due to the widespread adoption of high-intensity completions (using at least 1,300 pounds per foot of proppant). Finally, despite perennially weak natural gas prices in the Appalachia region, Antero's extensive firm transport and sales portfolio is enabling it to sell the majority of its production at premium, out-of-basin prices (the firm's realized third-quarter natural gas price was $0.05 above Henry Hub).

Read: http://news.morningstar.com/articlenet/ ... 4&SR=Yahoo

Antero has more than 100% of their 2017 natural gas production hedged at $3.63/MMBtu, therefore it has zero exposure to changes in the Henry Hub gas price. What will really help Antero is if NGL prices improve. Q4 NGL production is estimated at 80,000 barrels per day, ramping up to 94,000 barrels per day in 2017. Crude oil production is only ~5,000 barrels per day, with only 1,000 BOPD hedged at $51.90 in 2017. Antero's production increased 22% YOY in 2016 and should increase by about the same rate in 2017. Over 100% of forecast natural gas production for 2018 is already hedged at $3.91/MMBtu. IMO, with minimal commodity price risk, AR deserves to trade at a much higher multiple than 6X operating cash flow per share.

[jb2257]

I am glad that some analyst is positive but the stock price can't seem to find a floor. My hope is fading as I continue to lose money on that one.

[dan_s]

Hang tough, Wall Street will figure this out eventually. Natural gas and NGL prices are going to firm up nicely in Q1.