Stock: AR
Rating: Good
Author: Waleed M. Tariq
Company Overview
- Antero Resources is the 5th largest US natural gas and NGL producer.
- The company averaged 3.2 Bcfe per day in 2022.
- AR owns 29.1% of Antero Midstream, which services AR’s production and completion.
Bullish
- The company’s cash flow should double from 2021 to 2022.
- Geopolitical conflicts are projected to raise commodities prices, supporting AR’s revenue growth.
- High cash generation, strengthening debt position, and hopeful Natural Gas market make me bullish.
Bearish
- The company missed Q4 2021 EPS by 42%, producing $0.19.
Hedging market prices
- Due to geopolitical tension between Ukraine and Russia, oil prices have surged to approximately $100. AR is on course for its highest annual C3+ price.
- At $2.50 Henry Hub, 52% of gas production is hedged. Hedge strip gets $844 million. 2023: All goods will be unhedged. Hedging costs decrease cash flow.
Cash Flows and Debt
- Gas, NGL, and oil sales up 15% to $6.65b. FCF is $1.85 billion from AM dividends, hedges, NCI payments, anticipated CapEx, and operations. 10% error=$1.66 billion.
Valuation
- The company’s expected ahead P/E ratio is 6.7, P/S is 1.2, and P/B is 1.2. The stock’s low price ratio suggests further gains.
- CFO: FCF yield to Market Cap is 22%. Price to FCF is 4.25 with $1.6B in FCF and 300M shares outstanding.
Conclusion
- Despite rising prices, investors can still enter the market without buying pricey shares. Growth investors should buy the stock.