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Why Is Antero Resources (AR) Down 9.3% 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 9.3% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Antero Resources Q1 Earnings Miss, Sales Beat Estimates

Antero Resources reported adjusted first-quarter 2019 earnings per share of 43 cents, missing the Zacks Consensus Estimate of 45 cents. The bottom line was down by 1 cent from the year-ago level.

Total operating revenues amounted to $1,212 million, beating the Zacks Consensus Estimate of $1,162 million. Moreover, the top line improved from the year-ago quarter’s $1,028 million.

The lower-than-expected earnings can be attributed to higher operating expenses, partially offset by higher natural gas equivalent production and prices.

Production Rises

Total production through first-quarter 2019 was recorded at 279 billion cubic feet equivalent (Bcfe) — almost 71.3% natural gas — which is 30% higher than 214 Bcfe a year ago. Natural gas production increased to 199 billion cubic feet (Bcf) from 158 Bcf in the March quarter of 2018.

Production of oil in first-quarter 2019 was reported at 1,017 thousand barrel (MBbl), up 92% from 530 MBbl in the prior-year quarter. Its production of 3,509 MBbl of C2 Ethane was 16% higher than 3,029 MBbl in the year-ago quarter. The company’s output of 8,794 MBbl of C3+ NGLs in the March quarter of 2019 was 54% higher than 5,693 MBbl a year ago.

Realized Prices (Excluding Derivatives Settlements)

Natural gas-equivalent price realization in the quarter was $3.65 per thousand cubic feet equivalent (Mcfe), up 3% from $3.56 in the year-earlier quarter. The realized prices for natural gas increased 5% to $3.30 per thousand cubic feet from $3.14 a year ago.

The company’s oil price realization in the quarter was reported at $47.23 per Bbl, down 17% from $57.14 a year ago. The company’s realized price for C3+ NGLs declined to $31.63 per Bbl from $36.38 in the prior-year quarter. However, the realized price for C2 Ethane jumped 13% to $10.12 per Bbl from $8.94 a year ago.

Operating Expenses Surge

Total expenses in the quarter under review skyrocketed to $1,071.1 million from $881.6 million in the year-ago quarter. This was supported by a 56.2% jump in lease operating expenses to roughly $42 million.

The increase in gathering, compression, processing and transportation expenses of 45.4% drove total operating costs.

Financials & Capital Spending

As of Mar 31, 2019, the company reported no cash and cash equivalents. It had long-term debt of $3,476 million, with a debt-to-capitalization ratio of 29.5%. 

For drilling and completion operations, the company spent $368.7 million through the first quarter of 2019.

Guidance

The company projects net natural gas equivalent production through 2019 in the range of 3.15-3.25 (Bcfe/D).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Antero Resources has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Antero Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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