EUR 850.00 For Business Accounts Only

Morningstar | Antero Sees NGL Pricing Uplift From Mariner East 2. See Updated Analyst Note from 24 May 2019

After taking a closer look at Antero's first-quarter operating and financial results we have reduced our fair value estimate to $10 (primarily due to a slight increase in our cost of capital assumption following the deconsolidation of Antero Midstream). Even after this reduction we still think shares look cheap at the current level.

As a reminder, the firm delivered production of 3,099 million cubic feet of natural gas equivalent in the first quarter, which was 4% lower sequentially but about 30% higher year over year. This compares with our forecast of 3,160 mmcfe/d, with most of the delta being explained by the decision to extract less ethane than planned from the gas stream (reducing net production by about 50 mmcfe/d). But there was no change to full-year guidance, even though the firm was able to shave about $50 million from its capital budget by reducing the rig and completion crew count. Due to ongoing efficiency gains, the remaining rigs and crews will enable the company to drill and complete the same number of wells this year as it originally planned to.

As expected, the firm’s financial results were boosted by the startup of the Mariner East 2 pipeline, which enables Antero to access international liquified petroleum gas markets (resulting in stronger pricing for C3+ NGLs that comprise about 20% of its production). Approximately 30% of its C3+ NGL output was exported, narrowing the discount against West Texas Intermediate crude from about 50% to less than 40%. Antero is an anchor shipper on the Mariner East 2 pipeline, with 50 mbbls/d firm capacity this year. For the remainder of 2019 the firm expects to export at least 50% of its C3+ NGL output, and this proportion will increase (likely after 2019) when the planned pipeline expansion is complete, doubling the firm’s firm capacity to 100 mbbls/d.