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Antero Resources Unveils 2019 Capital & Production Projection

Zacks Equity Research

Antero Resources Corporation AR released capital budget and production forecast for 2019. The guidance has been prepared assuming $50 per barrel WTI oil and $3.00 per million british thermal units (MMBtu) NYMEX natural gas.

Amid the recent oil and natural gas liquid (NGL) price decline, the company lowered 2019 drilling and completion capital budget in the range of $1.1-$1.25 billion on a consolidated basis and in the band of $1.3-$1.45 billion on a stand-alone basis.

The total exploration and production capital budget is estimated in the range of $1.17-$1.35 billion on a consolidated basis and in the band of $1.37-$1.55 billion on a stand-alone basis.

For 2019, production is projected to average 3,150 million cubic feet equivalent per day (MMcfe/d) to 3,250 MMcfe/d, up 17-20% from 2018 production guidance.

Liquids volumes, including NGLs and oil are expected to average 154,000-164,000 barrels per day (Bbl/d), up 18-26% from 2018 estimates. This includes 9,000 Bbl/d of oil, 100,000 Bbl/d of C3+ NGLs and 50,000 Bbl/d of recovered ethane at the midpoint. Net daily natural gas production is expected in the range of 2,225-2,275 MMcf/d, while net daily ethane production is expected in the range of 48,000-52,000 Bbl/d.

In 2019, Antero Resources has hedged 100% of its natural gas production forecasted.

The company projected natural gas price realizations before hedges at a $0.15-$0.20/Mcf premium to Henry Hub and C3+ NGL realizations at 60-65% of WTI oil prices.

During 2019, the company intends to operate an average of five drilling rigs and four completion crews, down one to two crews from 2018. In 2019, Antero Resources plans on 115 to 125 well completions with an average lateral length of 10,200 feet. It also expects to drill 120-130 wells with an average lateral length of 11,900 feet.

Antero Resources expects cash production expenses in the range of $1.65-$1.75 per Mcfe on a consolidated basis and in the band of $2.15-$2.25 per Mcfe on a stand-alone basis. Marketing expenses, net of marketing revenue is expected in a range of 17.5 cents to 22.5 cents per Mcfe on a consolidated basis as well as on a stand-alone basis. General & Administration expense are projected in the range of 12.5 cents -17.5 cents per Mcfe on a consolidated basis and in the band of 10 cents -14 cents per Mcfe on a stand-alone basis.

During the fourth quarter of 2018, Antero initiated $600-million share repurchase program. Through year-end 2018, Antero returned $129 million of cash to shareholders by repurchasing 9.1 million shares and reducing shares outstanding by 3%.  

Under the 11,500 Bbl/d 10-years export agreement with Borealis, Antero Resources began delivering ethane in November 2018. The ethane is being delivered via Mariner East 1 to Marcus Hook and loaded for shipment to Borealis' steam cracker in Sweden. The Mariner East 2 pipeline was commissioned on Dec 29, 2018, facilitating the company to transport about 50,000 Bbl/d of propane and butane to Marcus Hook for export. Mariner East 2 is anticipated to improve propane and butane netbacks by about $2.00 to $4.00 per barrel on an annual basis.

In the fourth quarter of 2018, Antero Resources accomplished first supply agreement with a premier sand supplier to directly source sand requirements for completions.  The company anticipates well cost savings of about $200,000 compared with 2018 levels due to sand self-sourcing.

Antero Resources expects cash production expenses to increase due to rise in transportation expenses. The increase in transportation expenses stems from Antero Resources’ firm commitment on the Mariner East 2 project and is estimated to be more than offset by the premium pricing at Marcus Hook.

Subject to commodity price environment, Antero Resources expects to production to witness a CAGR of 10-15% from 2020 through 2023. 

Zacks Rank & Key Picks

Currently, Antero Resources carries a Zacks Rank #3 (Hold).

A few better-ranked players in the energy space are SunCoke Energy, Inc SXC, Shell Midstream Partners, L.P SHLX and Unit Corporation UNT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SunCoke acquires, owns and operates coke making as well as coal mining operations. The company delivered average positive earnings surprise of 302.6% in the last four quarters.

Headquartered in Houston, TX, Shell Midstream Partners owns, operates, develops and acquires pipelines as well as other midstream assets. The company is expected to witness year-over-year earnings growth of 18.7% in 2018.

Unit Corp is a diversified energy company. The company has an average positive surprise of 21.2% in the last four quarters.

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