It has been about a month since the last earnings report for Antero Resources (
AR Quick Quote AR - Free Report) . Shares have added about 24.4% 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 Q3 Earnings Beat Estimates, Revenues Miss
Antero Resources reported third-quarter 2020 adjusted earnings per share of 5 cents, compared favorably with the Zacks Consensus Estimate of a loss of 6 cents and the year-ago comparable quarter loss of 49 cents per share.
Total revenues of $381 million missed the Zacks Consensus Estimate of $1,035 million. Moreover, the top line decreased substantially from the year-ago quarter’s $1,119 million.
The strong earnings can be attributed to higher natural gas equivalent production volumes, partially negated by lower realized commodity prices. Notably, the company has announced asset sales of $751 million so far, in line with its divestment target of $750-$1,000 million that was announced in December 2019.
Overall Production Rises
Total production through the September quarter was recorded at 347 billion cubic feet equivalent (Bcfe), which rose 12% from 310 Bcfe a year ago. Natural gas production (accounting for almost 68% of total output) increased to 226 Bcf from 210 Bcf in the September quarter of 2019.
Production of oil in the third quarter was 1,367 thousand barrels (MBbls), up 58% from 865 MBbls in the prior-year period. Its production of 5,459 MBbls of C2 Ethane was 27% higher than 4,307 MBbls in the year-ago quarter. The company’s output of 13,400 MBbls of C3+ NGLs in the September quarter was 17% higher than 11,472 MBbls a year ago.
Realized Prices (Excluding Derivatives Settlements) Decline
Weighted natural gas equivalent price realization in the quarter was $2.30 per thousand cubic feet equivalent (Mcfe), down 16% from $2.74 in the year-earlier period. Realized prices for natural gas plunged 23% to $1.93 per Mcf from $2.50 a year ago.
The company’s oil price realization in the quarter was $25.07 per Bbl, down 47% from $46.86 a year ago. Its realized price for C3+ NGLs declined to $22.01 per Bbl from $22.53 in the prior-year quarter. Realized price for C2 Ethane also dropped 3% to $5.94 per Bbl from $6.15 a year ago.
Total Operating Expenses Fall
Total operating expenses in the quarter under review declined to $1,134.7 million from $2,104.8 million in the year-ago period.
Average lease operating costs in the quarter were 6 cents per Mcfe, down 50% from the year-ago period’s 12 cents. The same for gathering and compression fell 6% year over year to 64 cents per Mcfe. Moreover, general and administrative costs were down 30% year over year to 7 cents per Mcfe in the reported quarter. Also, processing costs fell 4% year over year to 71 cents per Mcfe. However, transportation expenses inched up 4% to 55 cents per Mcfe.
In the September quarter, the company bought back senior notes of $461 million principal amount at an 13% weighted average discount price.
Capex & Financials
For drilling and completion operations, the company spent $161 million through third-quarter 2020.
As of Sep 30, 2020, Antero Resources had no cash and cash equivalents. It had an adjusted available liquidity of $1.1 billion and a long-term debt of $3,158.2 million. It has a debt to capitalization of 34.5%.
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 2019 figure. Liquids production for the ongoing year has also been 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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -21.05% due to these changes.
At this time, Antero Resources has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Antero Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.