AR - Valens Credit Report - 2024 05 17
Credit markets are overstating credit risk with a YTW of 6.513% relative to an Intrinsic YTW of 5.723%. Meanwhile, credit markets are overstating the firm's fundamental credit risk, with its Ba1 credit rating three notches lower than Valens' IG4+ (Baa1) credit rating.Incentives Dictate Behavior™ analysis highlights positive signals for credit holders. AR's compensation metrics framework should drive management to focus on all three value drivers, margins, asset efficiency and growth, which should lead to Uniform ROA expansion and increased cash flows to service debt obligations. In addition, the firm's devoted leverage metrics should focus management on limiting risk to credit holders. Furthermore, management has low change-in-control compensation relative to their annual compensation, indicating they may not be incentivized to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
Earnings Call Forensics™ analysis of the firm's Q1 2024 (04/24/2024) earnings call highlights that management is confident they have over 20 years of premium inventory and that they have elected to sell a greater portion of their waterborne barrels in the spot market rather than enter long-term contracts.
Antero Resources is an oil and natural gas company engaged in the exploration, development and production of natural gas, natural gas liquids (NGLs), and oil properties. The company focuses on unconventional reservoirs, which can generally be characterized as fractured shale formations. The company's drilling operations are focused in the Marcellus Shale and Utica Shale of the Appalachian Basin. The company's industry segments are: the exploration, development, and production of natural gas, NGLs, and oil; marketing of excess firm transportation capacity; and the gathering and processing of natural gas. All of the company's operations are conducted in the United States.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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