In a Jan. 8 research note, analyst Jane Trotsenko reported that Antero Resources Corp. (AR:NYSE) revised its 2019 guidance to reflect a more dour outlook, lowering expected production and raising cash costs and marketing expenses.
As for projected commodity prices for 2019, the company decreased projection for natural gas liquids (NGL) as a percent of West Texas Intermediate to 62.5% from 72%. It increased the anticipated differential for crude oil prices to $7.50 per barrel from $5.50.
Trotsenko explained that less favorable NGL pricing looking forward led the company to lower its expected 2019 production by 3% to 3.2 billion of cubic feet equivalent per day from 3.3 at the midpoint. In 2019 versus 2018, Antero's NGL production is forecasted to increase 28% year whereas crude oil production is expected to decrease 5%, ultimately resulting in a "slightly higher amount of revenue in 2019 than in 2018," the analyst wrote.
Regarding capex in 2019, Antero guides to about $2 billion, consistent with that of 2018. However, Trotsenko commented, "the company plans to continue to focus on liquids-rich assets, as those still deliver stronger economics despite the recent decline in liquids pricing."
Not all the news is negative, Trotsenko indicated. For one, Antero expects to garner a greater premium to Henry Hub pricing, $0.15–0.20 per million cubic feet as opposed to its previous $0.00–0.10 per million cubic feet, due to its now greater Gulf Coast and Midwest exposure.
Also, two of Antero's peers, Cabot and EQT, also revised production guidance downward, Trotsenko pointed out. "Should other natural gas (and crude oil) producers follow suit, the natural gas (crude oil and NGL) macro outlook for 2019+ could improve substantially."
Stifel has a Buy rating and a $21.60 per share target price on Antero. The company's share price (currently about $10.58) could face pressure, Trotsenko noted, when consensus decreases its estimates on the company.[NLINSERT]
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Disclosures from Stifel, Antero Resources Corp., January 8, 2019
I, Jane Trotsenko, certify that the views expressed in this research report accurately reflect my personal views about the subject securities or issuers; and I, Jane Trotsenko, certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Our European Policy for Managing Research Conflicts of Interest is available at www.stifel.com.
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Prior to March 22, 2017, a different Stifel research analyst provided research coverage of Antero Resources Corporation and its securities. Antero Resources Corporation's price chart for the period prior to March 22, 2017 reflects the rating and price target history of the former Stifel research analyst for such issuer and its securities.
Prior to May 22, 2018, a different Stifel research analyst provided research coverage of Antero Resources Corporation and its securities. Antero Resources Corporation's price chart for the period prior to May 22, 2018 reflects the rating and price target history of the former Stifel research analyst for such issuer and its securities.
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