U.S. Markets close in 51 mins

Why Antero Resources Stock Is Slumping Today

Matthew DiLallo, The Motley Fool

What happened

Shares of Antero Resources (NYSE: AR) had slid more than 10% by 10:30 p.m. EDT on Friday. The energy company is getting hit by lower oil prices and an analyst downgrade.

So what

While shares of Antero Resources popped earlier this week thanks to higher oil prices, they've been on a seemingly never-ending downward slide over the past few years. In 2019 alone, shares have tumbled about 65%. Despite that much lower share price, an analyst at Goldman Sachs downgraded shares of the natural gas driller today from buy to neutral. The analyst made that move citing its less attractive valuation compared to its peers. In the analyst's estimation, Antero trades at 5.5 times its projected EBITDA for next year, which is largely in line with those of other gas-focused drillers.

A drilling rig with red and orange clouds in the background.

Image source: Getty Images.

Adding even more weight to Antero's slump today is some weakness in the oil market, where crude prices have fallen about 2%. That's mainly because of lower-than-expected growth in the U.S. jobs market, which hints at a potentially weaker economy that could weigh on oil demand. While Antero doesn't produce much crude, it is the nation's second-largest natural gas liquids (NGLs) producer. Since NGLs derive their price from oil, its slump will have a notable impact on Antero's cash flow. That's why its stock tends to ebb and flow with crude prices.

Now what

Oil and gas companies continue to grow their production even though demand seems to be slowing down. In Antero's case, it has to keep drilling since it signed up for capacity on new pipelines that it needs to fill. Because drillers plan to continue increasing production in an already saturated market, the pressure will remain on oil and gas prices until demand starts heating back up.

More From The Motley Fool

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com