Why Hold Strategy is Apt for Antero Resources (AR) Stock Now
Antero Resources Corporation AR has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days.
The company, with a Zacks Rank #3 (Hold), has gained 25.1% over the past three months compared with 15.6% growth of the composite stocks belonging to the industry.
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Factors Working in Favor
Natural gas is trading at more than $2.61 per MMBtu, highlighting a handsome commodity pricing environment. Being a leading natural gas producer, Antero Resources is well-positioned to capitalize on the favorable commodity price.
Antero Resources’ strategic acreage position in the low-risk/long reserve-life properties of the Appalachian Basin is a major positive. Its core acreage position allows for significant long-lateral drilling opportunities and capital efficiencies. The company boasts that in the prolific basin, it has more than two decades of premium low-cost drilling inventory, representing a solid production outlook.
Looking at financial strength, Antero Resources has a strong and sustainable balance sheet. Compared to composite stocks of the industry, the company has significantly lower debt exposure, as reflected in the lower debt-to-capitalization ratio over the past few years.
AR is targeting a capital return program of 25-50% of free cash flow per year, beginning with the implementation of share repurchase program. Since the inception of the buyback plan in the first quarter of 2022, the company has repurchased 31.1 million shares for roughly $1 billion. The company currently has $1 billion of remaining capacity under the buyback program.
Demand for natural gas is expected to surpass supply growth over the next two years, driven by significant LNG export growth. AR is well-positioned to benefit from its leading firm transportation portfolio, which delivers the majority of its gas to the growing LNG demand markets. Also, the firm emits lower greenhouse gases than other major fossil fuel players.
Thus, Antero Resources, the fast-growing natural gas producer in the United States, is poised for an upside in the coming days.
Risks Responsible to Limit Growth
As an upstream energy firm, Antero Resources is highly exposed to volatility in commodity prices. Also, the company’s lack of geographic diversification adds to the concern since its entire asset base is located in the Appalachian region.
Key Picks
Some better-ranked players in the energy sector are USA Compression Partners, LP USAC, Enerplus Corporation ERF and Eni SpA E. Each of these companies currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
USA Compression Partners is one of the largest independent natural gas compression services providers across the United States in terms of fleet horsepower.
USA Compression Partners has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The consensus estimate for USAC’s 2023 and 2024 earnings per share is pegged at 30 cents and 58 cents, respectively.
Enerplus Corporation is an independent oil and gas production company with resources across Western Canada and the United States.
Enerplus Corporation has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The consensus estimate for ERF’s 2023 and 2024 earnings per share is pegged at $2.26 and $2.66, respectively.
Eni SpA, based in Rome, Italy, is among the leading integrated energy players in the world.The company announced a share buyback plan of €2.2 billion for the year, which commenced in May. It intends to return 25-30% of annual cash flow to shareholders.
Eni has witnessed upward earnings estimate revision for 2023 and 2024 in the past 30 days. The consensus estimate for E’s 2023 and 2024 earnings per share is pegged at $5.19 and $4.99, respectively.
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Eni SpA (E) : Free Stock Analysis Report
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Antero Resources Corporation (AR) : Free Stock Analysis Report
