Antero Resources (AR)

Antero Resources. This company is a natural gas producer working in the area of the upper Ohio River, in the Marcellus and Utica shale formations where Pennsylvania, Ohio, and West Virginia come together. This area, in the heart of Appalachia, has long been known as one of the richest natural gas basins in the US. Antero boasts well over half a million net acres of productive holdings, with more than 17.7 trillion cubic feet of proven natural gas reserves.

The company’s net production during 3Q22 was 3.2 billion cubic feet per day of natural gas, a total that includes 171 thousand barrels per day of natural gas liquids. This brought in a net cash from operations of $1.1 billion, a free cash flow of $797 million, and a non-GAAP adjusted net income of $531 million.

Antero does not pay out a dividend, but the company has a strong share buyback program – which saw the company buy back over $382 million shares during the third quarter. In Antero’s Q3 financial release, the company announced that it was increasing its buyback authorization by $1 billion, to a new total of $2 billion.

In addition to supporting the share price through repurchases, Antero is also committed to reducing debt, and the company paid of $404 million during the quarter. As of September 30, Antero had $1.17 billion in outstanding debt, a total that is down nearly $1 billion so far this year.

Freeman sees Antero benefiting from continued increases in natural gas demand, and his forecast for next year paints a pretty picture of the company’s prospects.

“While 2023 guidance remains a quarter away, RJe 2023 production of ~3.4 Bcfe/d (~in line with Street) represents a ~5% increase y/y, which sets them apart from most of their Marcellus peers driven by both 1) increased ethane production via Shell’s Petrochemical Complex and 2) a net-gain of ~3.75% WI on each well drilled post-March 2023, following conclusion of AR’s Quantum joint venture,” Freeman noted.

“Currently,” the analyst added, “AR trades at just a ~3.7X forward EBITDA multiple and sports a 22% 2023 FCF yield — both best among large-caps.”

Quantifying his stance, Freeman gives Antero’s stock a Strong Buy rating with a price target of $55, which indicates his confidence in a 72% upside over the next 12 months.

All in all, there are 8 recent analyst reviews on file for Antero, and they include 5 Buys and 3 Holds – which gives the stock a Moderate Buy consensus rating. Meanwhile, the average price target of $50.14 implies a 57% upside from the current trading price of $31.82.