Antero Gears Up for NGL Growth
Its liquids-rich drilling inventory will enable it to outperform peers if NGL prices continue to strengthen.
Antero Resources (AR) produces natural gas from the Marcellus Shale in West Virginia and the Utica Shale in eastern Ohio. Henry Hub prices are close to our midcycle estimate of $3 per thousand cubic feet, which is well above the company’s cost of production. Though basis differentials in Appalachia remain far wider than historical norms, Antero is managing this with its extensive firm transport portfolio, enabling it to sidestep takeaway bottlenecks and sell into premium markets outside the basin. Consequently, we expect the company to earn a slight premium over Henry Hub until at least 2020. That’s much better than what most peers can achieve, even after adjusting for the incremental cost of $0.50-$0.60/mcf.
Another advantage that separates Antero from other operators is leverage to liquids. Realized prices were disappointing in 2016, but the outlook is brighter as a result of increasing domestic demand, slower production growth, and more exports. We expect the natural gas liquids/crude price ratio to improve gradually over the next two to three years, and Antero, with 40% of the entire basin’s undeveloped liquids-rich acreage, is better positioned to capture this upside than its peers. Roughly 25% of its current production is NGLs and condensate, and half of its 3,500-plus future drilling opportunities will deliver significant liquids volumes (at least 20% of each well’s production).
Dave Meats does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.