Deutsche Bank Upgrades Antero Resources (AR) to Buy
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Deutsche Bank upgraded Antero Resources (NYSE: AR) from Hold to Buy with a price target of $30. Analyst Josh Silverstein sees an attractive entry.
"The past two months have proven to be a challenge for producers and the commodity alike as concerns around winter weather are peaking while pipeline delays are reducing expectations for Northeast realized prices. Add to it improving Marcellus well productivity, the re-emergence of the Haynesville (hello 30+MMcfpd IP rates), and accelerating activity across the oil focused basins, we can see plenty of reasons to question the 2016 rally. However, the non-weather demand side of the equation has also proven to be stronger, keeping us of the view that the l-t range of $3.00-3.50/mmbtu still holds, providing a better risk adjusted entry point for the equities that imply ~$2.90," said Silverstein.
"We have consistently viewed AR as one of the best positioned producers from a growth, hedge book and asset base standpoint but remained on the sidelines due to the premium valuation (12x vs. 9.5x 2017 EV/DACF) AR historically traded at, cash flow outspend (~35% 2017), and more recently, the negative margin generated from having excess firm transport capacity (-$100MM annually 2016-19). However, we now see the risk/reward at AR as turning positive particularly when shifting the focus towards 2018, but with the caveat that they also offer the best protection for winter 2017 as they remain fully hedged," added the analyst.
Shares of Antero Resources closed at $24.95 yesterday.
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