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Antero Resources Shuffles Hedge Portfolio, Buys Back Shares

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Antero Resources Corporation (AR - Free Report) recently announced that the company has monetized part of its natural gas hedge position. Moreover, it has bought back $129 million worth of its outstanding shares in the fourth quarter. The company has also provided an update for fourth-quarter 2018 operations.

Monetized Hedge Position

Antero Resources received $357 million for the monetization of its hedge position. Net proceeds from the move were $235 million, which includes 68% of the company’s April-December 2019 swaps. The company has replaced its monetized part of 1,575 million cubic feet per day (MMcf/d) with collars.

For the April-December period of 2019, the monetized volume is expected to have a floor price of $2.50 per million British thermal units (MMBtu) and a ceiling in the range of $3.31-$3.54 per MMBtu.

While the floor price enables the company to keep a low-risk profile, the price ceiling can help it take advantage of a price rise. Notably, the company’s total production through third-quarter 2018 was recorded at 250 billion cubic feet equivalent, comprising 71.6% natural gas. Also, per Energy Information Administration, Henry Hub natural gas spot price in 2019 is expected to average $2.98 per MMBtu, lower than the expected average of $3.01 for the current year.

Antero Resources has also reset 70% of its 2020 fixed price swaps from $3.25 to $3.00 per MMBtu and received $122 million in proceeds, which were used to repay a debt in its revolving credit facility. The company has more than 70% of its 2019 and 2020 natural gas targeted output hedged.

Additionally, the company plans to keep its 2019 capital spending for drilling and completion within its operating cash flows. Antero Resources expects the restructuring and monetizing of a portion of its hedge portfolio to strengthen the balance sheet. While the company started 2017 with a stand-alone leverage ratio of 3.2, it targets to reduce the same to 2.2 by the end of 2018.

Share Repurchase

The company bought back 9.1 million shares so far in the fourth quarter, representing 3% of its outstanding shares, for $14.10 each. The company primarily used its fourth-quarter free cash flow to fund the $129-million share repurchase. Notably, Antero Resources has a $600-million share repurchase program that is sanctioned through first-quarter 2020.

The company wants to fund the program through $300-million cash proceeds earned from midstream simplification, free cash flow generation from operations and a $125 million tranche payment related to Antero Midstream’s (AM - Free Report) water earn-out settlement.

Fourth-Quarter Update

Since part of the Rover pipeline of Energy Transfer LP (ET - Free Report) came online on Nov 3, reaching premium-priced Midwest markets became easier for Antero Resources. The company expects around 30% of its natural gas output to be sold in the Midwest market in the fourth quarter.

It also anticipates its un-hedged natural gas output to reach the 400-MMcf/d mark in the fourth quarter. It expects the positives from the increased access to Midwest markets and improved gas prices to offset the effects of a decline in liquids’ prices.

Price Performance

Antero Resources has lost 47.4% in the past year compared with the 33.2% collective decline of the industry it belongs to.

 

Zacks Rank & A Stock to Consider

The company currently carries a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for a better-ranked stock as given below:

Cabot Oil & Gas Corp. is an independent oil and gas exploration company with producing properties mainly in the continental United States. The Houston, TX-based company has a Zacks Rank #1 (Strong Buy) and its bottom line for 2018 is expected to surge more than 118% year over year. You can see the complete list of today’s Zacks #1 Rank stocks here.

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