Natural Gas Prices To Rise Into Heating Season: Potential Rebound For Antero Resources In Q4

Benchmark analyst Subash Chandra reiterated a Buy rating on Antero Resources Corporation AR, lowering the price target to $32 from $36.

The company plans to issue its second-quarter earnings release on July 26, 2023, after the close of trading on the New York Stock Exchange.

The company’s weekly pricing update shows C3+ realizations of NGL down 19% sequentially (and still falling), the analyst notes.

The analyst lowered the realized gas and NGL price expectations to $2.15/$24 from $2.60/$28.

According to the analyst, Antero Resources will likely outspend $190 million this quarter. They will likely outspend again in 3Q before generating FCF in 4Q on a seasonal low for capex.

The analyst deducted the forecasted net debt of $1.1 billion ($4 per share) and added the $1.2 billion value of AM units ($4 per share, net of taxes). 

The analyst expects natural gas prices to trend higher into the heating season. 

FEI and European propane prices are also in contango (a situation where the futures price of a commodity is higher than the spot price) through year-end. 

A rebound in product prices could coincide with a seasonal decline in capex (4Q is the lowest) and deflationary costs in ’24.

Based on the above, the analyst lowered the 2Q EPS/EBITDA estimate to ($0.26)/$86 million from $0.10/$220 million on lower m-t-m natural gas and NGL prices.

Price Action: AR shares are trading lower by 4.12% to $22.57 on the last check Friday.