It has been about a month since the last earnings report for Antero Resources (AR - Free Report) . Shares have added about 17% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Antero Resources due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Antero Resources Misses Q2 Earnings on Lower Gas Prices
Antero Resources Corporation reported second-quarter 2020 adjusted loss per share of 37 cents, wider than the Zacks Consensus Estimate of a loss of 16 cents. Further, the bottom line deteriorated from the year-ago quarter loss of 25 cents per share.
Total operating revenues of $484.9 million also missed the Zacks Consensus Estimate of $948 million. Moreover, the top line substantially decreased from the year-ago quarter’s $1,299.7 million.
The weak results can be attributed to significantly lower realized commodity prices, partially offset by an increased natural gas equivalent production and a decline in operating expenses.
Since the earnings release on Jul 29, the stock has risen 10.4% as the company’s production outlook is encouraging despite the current market uncertainty. The company has announced asset sales of $531 million so far, in line with its divestment program of $750-$1,000 million by 2020-end.
Overall Production Rises
Total production through the June quarter was recorded at 320 billion cubic feet equivalent (Bcfe), which rose 9% from 294 Bcfe a year ago. Natural gas production (accounting for almost 67.2% of total output) increased to 215 Bcf from 208 Bcf in the June quarter of 2019.
Production of oil in the second quarter was 1,004 thousand barrels (MBbls), up 7% from 940 MBbls in the prior-year period. Its production of 4,622 MBbls of C2 Ethane was 24% higher than 3,720 MBbls in the year-ago quarter. The company’s output of 11,935 MBbls of C3+ NGLs in the June quarter was 25% higher than 9,576 MBbls a year ago.
Realized Prices (Excluding Derivatives Settlements) Decline
Weighted natural gas equivalent price realization in the quarter was $1.83 per thousand cubic feet equivalent (Mcfe), down 41% from $3.09 in the year-earlier period. Realized prices for natural gas plunged 36% to $1.71 per Mcf from $2.66 a year ago.
The company’s oil price realization in the quarter was $8.29 per Bbl, down 84% from $52.19 a year ago. Its realized price for C3+ NGLs declined to $15.55 per Bbl from $28.57 in the prior-year quarter. Realized price for C2 Ethane also dropped 29% to $5.76 per Bbl from $8.16 a year ago.
Total Operating Expenses Fall
Total expenses in the quarter under review declined to $1,091.8 million from $1,199.7 million in the year-ago period.
Average lease operating costs in the quarter were 8 cents per Mcfe, down 43% from the year-ago period’s 14 cents. The same for gathering and compression fell 13% year over year to 63 cents per Mcfe. Moreover, general and administrative costs were down 25% year over year to 9 cents per Mcfe in the reported quarter. However, processing costs rose 15% year over year to 76 cents per Mcfe. Also, transportation expenses inched up 4% to 58 cents per Mcfe from the year-ago level of 56 cents.
The company bought back $279 million notional amount of 2021 and 2023 senior unsecured notes at an 18% weighted average discount price from Apr 1 to Jul 24. This move reduced the company’s total debt by $51 million.
Capex & Financials
For drilling and completion operations, the company spent $180 million through second-quarter 2020. This marks the lowest quarterly spending by the company since its IPO in 2013.
As of Jun 30, 2020, Antero Resources had no cash and cash equivalents. It had an adjusted available liquidity of $1 billion and a long-term debt of $3,518.1 million. It has debt-to-capitalization of 35.4%.
Even though the company intends to curb capital spending for 2020, it retained its current-year net natural gas equivalent production guidance at 3,500 MMcfe/d, indicating a 9% rise from the year-ago quarter’s reported figure. Liquids production for the ongoing year is also reiterated at 187,500 Bbls/d.
Antero Resources expects 2020 drilling and completion capital to be $750 million compared with $1.15 billion expected initially. This upside will be supported by the company’s increasing operating efficiency. Backed by the same, it trimmed its rig count to one for the rest of the year. Moreover, aided by the company’s drilling and completion capital budget cut, management had earlier announced its plan to generate $175 million in free cash flow this year. It expects net marketing expense for the ongoing year to be 10-12 cents per Mcfe.
It plans to keep a strong hedging position for the coming days. Notably, 100% of its projected 2021 natural gas production is hedged at $2.77 per MMBtu.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -102.94% due to these changes.
Currently, Antero Resources has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Antero Resources has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.