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Why Is Antero Resources (AR) Down 5.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Antero Resources (AR - Free Report) . Shares have lost about 5.4% 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 Beats on Q4 Earnings, Sales Miss

Antero Resources reported adjusted fourth-quarter 2018 earnings per share of 46 cents, beating the Zacks Consensus Estimate of 38 cents and improving from the year-ago quarter’s 23 cents on an increase in natural gas and oil production. The positives were, however, partially offset by a surge in lease operating expenses.

The upstream energy player’s total operating revenues in the fourth quarter amounted to $1,237.4 million, missing the Zacks Consensus Estimate of $1,286 million.

However, the top line improved from the year-ago quarter’s $919.8 million on an increase in oil and natural gas realized prices.

Production Rises

Total production through fourth-quarter 2018 was recorded at 296 billion cubic feet equivalent (Bcfe) — comprising almost 70% natural gas — which is 37% higher than 216 Bcfe a year ago. Natural gas production increased to 206 billion cubic feet (Bcf) from 157 Bcf in the December quarter of 2017.

Production of oil in fourth-quarter 2018 was reported at 1,125 thousand barrel (MBbl), up 97% from 571 MBbl in the prior-year quarter. Its production of 4,323 MBbl of C2 Ethane was 50% higher than 2,891 MBbl in the year-ago quarter. The company’s output of 9,463 MBbl of C3+ NGLs in the December quarter of 2018 was 47% higher than 6,422 MBbl in the year-earlier quarter.

Realized Prices (Excluding Derivatives Settlements)

Natural gas-equivalent price realization in the quarter was $4.05 per thousand cubic feet equivalent (Mcfe), up 17% from $3.46 in the year-earlier quarter. The realized prices for natural gas increased 37% to $3.83 per thousand cubic feet from $2.80 a year ago.

The company’s oil price realization in the quarter was reported at $51.83 per Bbl, up 5% from $49.37 a year ago. The realized price for C2 Ethane jumped 31% to $13.12 per Bbl from $10.02 in the year-ago quarter. However, the company’s realized price for C3+ NGLs declined to $30.92 per Bbl from $39.16 in the prior-year quarter.

Operating Expenses Surge

Total expenses in the quarter under review skyrocketed to $1,092.3 million from $834.7 million in the year-ago quarter. This was supported by a 30% jump in lease operating expenses to roughly $43 million.

The increase in gathering, compression, processing and transportation expenses of 48% also drove total operating costs.

Financials & Capital Spending

As of Dec 31, 2018, the company reported no cash and cash equivalents. It had a long-term debt of $5,461.7 million, with a debt-to-capitalization ratio of 39.2%. 

For drilling and completion operations, the company spent $273 million through the fourth quarter of 2018.

Proved Reserves Grow

Through 2018, the company’s proved reserves grew 4% to 18 trillion cubic feet equivalent (Tcfe).

Guidance

The company projects net natural gas equivalent production through 2019 in the range of 3.15-3.25 (Bcfe/D). For drilling and completion activities, Antero Resources expects consolidated capital spending between $1,100 million and $1,250 million.

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 -51.56% due to these changes.

VGM Scores

Currently, Antero Resources has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 indicates a downward shift. Notably, Antero Resources has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.




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