On Friday, JPMorgan updated its outlook on Antero Resources (NYSE:AR), raising the price target to $39.00 from $35.00, while reiterating an Overweight rating on the stock. This adjustment comes as Antero Resources continues to demonstrate robust quarterly performance driven by operational efficiency gains.
The company has notably shifted to a new continuous pumping technology, enabling the completion of six wells at once, which contributed to a record 11.3 completion stages per day in the first quarter of 2024.
Antero Resources has fully integrated this new technology across its operations and aims to sustain this level of productivity. For the second quarter of 2024, JPMorgan projects the company will produce 3.38 billion cubic feet equivalent per day (Bcfe/d) with capital expenditures under $195 million, aligning with the street's estimate of 3.38 Bcfe/d at $190 million in capital expenditures.
The firm forecasts Antero's second-quarter gas realizations before hedging at $1.91 per thousand cubic feet (Mcf), which includes a slight premium over the Henry Hub benchmark price. Additionally, they predict second-quarter C3+ natural gas liquids (NGL) realizations at $40.58 per barrel, approximately 50% of the West Texas Intermediate (WTI) crude price. Despite these projections, JPMorgan anticipates second-quarter earnings per share (EPS) and cash flow per share (CFPS) at -$0.22 and $0.32 respectively, which is below the street's estimates of -$0.13 EPS and $0.46 CFPS.
The analysis also includes a lower EBITDAX (earnings before interest, taxes, depreciation, amortization, and exploration expenses) forecast for the second quarter at $134 million, compared to the street's estimate of $177 million. They expect a free cash flow (FCF) outflow of $95 million for the quarter.
Nevertheless, JPMorgan has increased its full-year EBITDAX estimates for 2024 and 2025 by 16% and 12%, to $1.20 billion and $1.98 billion respectively, compared to the street's estimates of $1.09 billion for 2024 and $2.00 billion for 2025.
In other recent news, Antero Resources has been the subject of attention from two major analyst firms. Barclays initiated coverage on Antero Resources, assigning the stock an Equal Weight rating and setting a price target of $32.00. Their analysis indicates that Antero Resources' cash flow is highly sensitive to gas price fluctuations and notes that the company's significant exposure to natural gas liquids (NGLs) comprises about 50% of its revenue.
Despite some advantages, Barclays voiced concern over Antero Resources' long-term competitiveness, pointing out that its liquids-rich Marcellus inventory depth is below average. They also highlighted that Antero Resources' shares are trading at a premium on enterprise value to EBITDA compared to other exploration and production companies.
Meanwhile, Mizuho Securities adjusted its outlook on Antero Resources, raising the stock's price target to $29.00 from $28.00, while maintaining a Neutral stance on the shares. This adjustment followed an analysis that anticipates an approximately 8% shortfall in EBITDA and a cash overspend for the first quarter of 2024.
InvestingPro Insights
In light of JPMorgan's updated outlook on Antero Resources, current metrics from InvestingPro provide additional context to the company's financial position and market performance. Antero's market capitalization stands at $10.14 billion, reflecting investor confidence in the company's growth prospects. Despite a high P/E ratio of 133.85 for the last twelve months as of Q1 2024, Antero Resources has experienced a significant 6-month price total return of 42.26%, indicating strong investor optimism about the company's future.
InvestingPro Tips suggest that while Antero Resources trades at a high earnings multiple, indicating a premium valuation, the stock has also shown a large price uptick over the last six months. Additionally, analysts predict the company will be profitable this year, which may further justify the stock's current valuation. For investors seeking a more in-depth analysis, InvestingPro offers additional tips on Antero Resources at https://www.investing.com/pro/AR. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the 7 additional InvestingPro Tips that can guide your investment decisions.
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