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Antero Resources (AR) Q4 Earnings Miss, Proved Reserves Fall

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Antero Resources Corporation (AR - Free Report) reported fourth-quarter 2020 adjusted loss per share of 3 cents against the Zacks Consensus Estimate of earnings of 2 cents. The company’s year-ago loss was 2 cents per share.

Total revenues of $1,309.1 million beat the Zacks Consensus Estimate of $1,072 million. Moreover, the top line increased substantially from the year-ago quarter’s $952.7 million.

The weak earnings were caused by higher processing and transportation costs. The decline in realized liquids prices added to the negatives. This was partially offset by higher natural gas equivalent production volumes and realized prices.

The company has formed a drilling partnership with QL Capital Partners worth $500-$550 million, which will fund 60 incremental wells starting from 2021 till 2024. The move is expected to enable Antero Resources to fill unutilized transportation capacity. Moreover, it will likely provide low pressure gathering fee rebates.

Overall Production

Total production through the December quarter was recorded at 336 billion cubic feet equivalent (Bcfe), which rose 15% from 293 Bcfe a year ago. Natural gas production (accounting for 67.3% of total output) increased to 226 Bcf from 205 Bcf in fourth-quarter 2019.

Production of oil for the fourth quarter was 1,104 thousand barrels (MBbls), up 36% from 809 MBbls in the prior-year period. Its production of 5,023 MBbls of C2 Ethane was 16% higher than 4,325 MBbls in the year-ago quarter. The company’s output of 12,174 MBbls of C3+ NGLs for the quarter was 27% higher than 9,603 MBbls a year ago.

Realized Prices (Excluding Derivatives Settlements)

Weighted natural gas equivalent price realization for the quarter was $2.96 per thousand cubic feet equivalent (Mcfe), in line with the year-earlier figure. Realized prices for natural gas rose 5% to $2.63 per Mcf from $2.50 a year ago.

The company’s oil price realization for the quarter was $30.83 per Bbl, down 37% from $49.29 a year ago. Its realized price for C3+ NGLs declined to $27.64 per Bbl from $29.61 in the prior-year quarter. Realized price for C2 Ethane also dropped 25% to $5.56 per Bbl from $7.44 a year ago.

Operating Expenses

Total operating expenses for the quarter under review increased to $1,163.9 million from $1,020.2 million in the year-ago period.

Average lease operating costs for the quarter were 8 cents per Mcfe, down 11% from the year-ago period’s 9 cents. The same for gathering and compression fell 2% year over year to 65 cents per Mcfe. Moreover, general and administrative costs were down 20% year over year to 8 cents per Mcfe for the reported quarter.

However, processing costs rose 2% year over year to 63 cents per Mcfe. Moreover, transportation expenses inched up 10% from the prior-year quarter to 67 cents per Mcfe.

Capex & Financials

For drilling and completion operations, the company spent $84 million through fourth-quarter 2020, reflecting a 69% decline from the year-ago period.

As of Dec 31, 2020, Antero Resources had no cash and cash equivalents. It had an adjusted available liquidity of $900 million and a long-term debt of $3,001.6 million. It has a debt to capitalization of 33%. 

Proved Reserves

As of 2020-end, Antero Resources had an estimated proved reserve base of 17.6 trillion cubic feet of gas equivalent, reflecting a 7% decrease from 2019 levels. About 57% of the proved reserve was natural gas, with 42% NGLs and 1% crude oil. Of the total estimated proved reserve base, 67% was classified as proved developed.

Guidance

The company expects 2021 net natural gas equivalent production within 3,300-3,400 MMcfe/d, indicating a decline from the 2020 figure of 3,578 MMcfe/d. Liquids production for the ongoing year is expected in the range of 170-175 MBbls/d.

Antero Resources expects 2021 net drilling and completion capital to be $590 million, indicating a 21% decline from 2020 levels. This upside will be supported by the company’s increasing operating efficiency. Total 2021 exploration and production capital is estimated at $635 million. Moreover, it expects to generate more than $500 million in free cash flow this year.

The company expects net marketing expenses in the range of 8-10 cents per Mcfe for 2021, indicating a decline from 12 cents and 22 cents in 2020 and 2019, respectively. G&A expense is expected in the range of 8-10 cents per Mcfe for 2021. The metric came in at 8 cents per share in 2020.

Zacks Rank & Other Key Picks

The company currently has a Zacks Rank #2 (Buy). Other top-ranked players in the energy space include Cactus, Inc. (WHD - Free Report) , ConocoPhillips (COP - Free Report) and Altus Midstream Company (ALTM - Free Report) , each holding a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cactus’ bottom-line estimates for 2021 have witnessed two upward revisions and no downward movement in the past 60 days.

ConocoPhillips’ sales for 2021 are expected to increase 54% year over year.

Altus Midstream’s bottom line for 2021 is expected to increase 380.5% year over year.

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