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Why Is Antero Resources (AR) Down 18.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Antero Resources (AR - Free Report) . Shares have lost about 18.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Antero Resources due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Antero Resources Q3 Earnings Miss on Rising Costs

Antero Resources recently reported adjusted third-quarter 2018 earnings per share of 23 cents, missing the Zacks Consensus Estimate of 24 cents, due to a surge in lease operating expenses.

Antero Resources’ total operating revenues in the third quarter amounted to $1,074.6 million, missing the Zacks Consensus Estimate of $1,085 million. This occurred primarily due to lesser-than-expected revenues of $90 million from Marketing (lagging the Zacks Consensus Estimate of $160 million).

However, the top line was up from the year-ago quarter’s $775.3 million, primarily due to a surge in production and realized prices.

Production Rises

Total production through third-quarter 2018 was recorded at 250 billion cubic feet equivalent (Bcfe) —comprising 71.6% natural gas — which is 17% higher than 213 Bcfe a year ago. Natural gas production increased to 179 billion cubic feet (Bcf) from 151 Bcf in the July-to-September quarter of 2017.

Production of oil in third-quarter 2018 was reported at 978 thousand barrel (MBbl), up 57% from 624 MBbl in the prior-year quarter. Its production of 3,579 MBbl of C2 Ethane was 28% higher than 2,789 MBbl recorded in the year-ago quarter. The company’s output of 7,343 MBbl of C3+ NGLs in the July-to-September quarter of 2018 was 6% higher than 6,927 MBbl in the year-earlier quarter.

Realized Prices (Excluding Derivatives Settlements)

Natural gas-equivalent price realization in the quarter was $3.70 per thousand cubic feet equivalent (Mcfe), up 19% from $3.10 in the year-earlier quarter. The realized prices for natural gas increased 9% to $2.95 per thousand cubic feet from $2.71 recorded a year ago.

The company’s oil price realization in the quarter was reported at $61.06 per Bbl, up 44% from $42.50 a year ago. The realized price for C2 Ethane jumped 81% to $15.70 per Bbl from $8.68 in the year-ago quarter. Moreover, the company’s realized price for C3+ NGLs increased to $38.41 per Bbl from $28.92 in the prior-year quarter.

Operating Expenses Surge

Antero’s total expenses in the third quarter skyrocketed to $1,071.7 million from $719.9 million in the year-ago quarter. This was supported by almost a 54.4% jump in lease operating expenses to $36.3 million.

The increase in gathering, compression, processing and transportation expenses by 15.7% also drove total operating costs.

Financials & Capital Spending

As of Sep 30, 2018, the company reported no cash and cash equivalents. It had a long-term debt of $5,487 million, with a debt-to-capitalization ratio of 38.8% as of the same date.

For drilling and completion operations, the company spent $373 million through the third quarter of 2018.

Guidance

The company expects fourth-quarter 2018 drilling and completion operations to be backed by capital investment in the range of $200-$250 million. As such, the company expects full-year 2018 drilling and completion capital expenditures in the band of $1.35-$1.4 billion, reflecting a $50-$100 million increase from the prior guidance as a result of the McKim Pad acceleration.

For the fourth quarter, the company expects to receive $3.53 per million British Thermal Units of natural gas. Liquids production is expected at 32 MBBl per day. Antero Resources also expects to hedge the entire natural gas production through 2018 and 2019 at $3.50 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 6.6% due to these changes.

VGM Scores

Currently, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Antero Resources has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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