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Antero Resources (AR) Surges 243.3% YTD: What's Driving It?
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Antero Resources Corporation’s (AR - Free Report) shares have jumped 243.3% year to date (YTD) compared with 111.3% growth of the composite stocks belonging to the industry. The Zacks Rank #3 (Hold) stock has witnessed upward estimate revision in the past 60 days.
Image Source: Zacks Investment Research
Let’s delve into the factors behind the stock’s price appreciation.
What’s Favoring the Stock?
Antero Resources is among the fast-growing natural gas producers in the United States. As natural gas price have skyrocketed more than 50% so far this year, Antero Resources is well-positioned to capitalize on the rising commodity price.
The massive improvement in natural gas price is a boon for Antero Resources’ upstream operations. It is well poised for growth on the back of long reserve-life properties of Appalachian Basin acreages. AR’s core acreage position enables it to capitalize on significant long lateral drilling opportunities and capital efficiencies.
The upstream energy company boasts 451,000 and 91,000 net acres in Marcellus and Utica shales, respectively, which positions it well to boost production. Given the fact that it has an inventory of more than 2,000 premium, undeveloped drilling locations in the core of the Appalachian Basin, the company’s production outlook seems bright. It plans to drill a total of 80-85 gross wells, including 70 in the Marcellus and 10-15 in the Ohio Utica. This is expected to increase AR’s well cost savings and profitability.
Antero Resources is benefiting from declining well cost in the Marcellus play. Being a leading natural gas producer, the firm emits lower greenhouse gases as compared to major oil-producing companies. AR plans to complete 65-70 gross wells this year, with well costs amounting to $660 per lateral foot on average during the first half of 2021. The costs are likely to decline to $635 per lateral foot in the second half due to its sand and completion initiatives.
Antero Resources expects 2021 net drilling and completion capital to be $590 million, indicating a 20% decline from 2020 levels. This upside will be supported by its increasing operating efficiency. Moreover, it expects to generate more than $900 million in free cash flow this year.
Antero Resources, with a market cap of $5.9 billion, is engaged in creating long-term value for shareholders.
Drawbacks in Development Path
However, there are certain factors that are a concern.
Explorers and producers are not getting enough incentives to ramp up hydrocarbon production volumes as the pandemic is still affecting major economies in Asia. Antero Resources is facing great uncertainty as a new coronavirus variant is hitting major energy importers, which might keep its profits under pressure.
The upstream player’s lack of geographic diversification is concerning since its entire asset base is located in the Appalachian region. As such, Antero Resources is more vulnerable to basin-specific delays and interruptions in production from wells, which can potentially hamper growth.
Final View
Despite significant prospects, Antero Resources’ lack of geographic diversification and pandemic-related uncertainties are a headwind. Nevertheless, we believe that a systematic and strategic plan of action will drive its long-term growth.
PetroChina Company Limited is the largest integrated oil company in China. PetroChina is one of the largest producers of crude oil and natural gas in the world. The company’s natural gas business offers lucrative growth prospects in the coming years as China moves from coal to natural gas.
PetroChina is expected to see an earnings growth of 411% in 2021. PTR currently holds a Zacks Style Score of A for Value. In the first six months of 2021, PetroChina's upstream segment posted an operating income of RMB 30.9 billion, nearly trebling from the year-ago profit of RMB 10.4 billion.
Schlumberger (SLB - Free Report) is the largest oilfield services player, with a presence in every energy market across the globe. Being the leading provider of complex oilfield projects technology, the company is better positioned than most peers to take up new offshore projects in the shallow water basins outside North America.
Schlumberger is expected to see an earnings growth of 85.3% in 2021. SLB anticipates completing this year with robust momentum. Additionally, its disciplined capital spending will likely benefit shareholders over the long term.
RPC, Inc. (RES - Free Report) is among the leading providers of advanced oilfield services, and equipment to almost all prospective oil and gas shale plays in the United States. The company derives strong and stable revenues via diverse oilfield services that include pressure pumping, coiled tubing and rental tools.
RPC is expected to see an earnings growth of 100% in 2021. With no debt load, the company had cash and cash equivalents of $80.8 million at third quarter-end. This reflects its strong balance sheet that will provide the company with massive financial flexibility. It allows RPC to remain afloat during tough times.
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Antero Resources (AR) Surges 243.3% YTD: What's Driving It?
Antero Resources Corporation’s (AR - Free Report) shares have jumped 243.3% year to date (YTD) compared with 111.3% growth of the composite stocks belonging to the industry. The Zacks Rank #3 (Hold) stock has witnessed upward estimate revision in the past 60 days.
Let’s delve into the factors behind the stock’s price appreciation.
What’s Favoring the Stock?
Antero Resources is among the fast-growing natural gas producers in the United States. As natural gas price have skyrocketed more than 50% so far this year, Antero Resources is well-positioned to capitalize on the rising commodity price.
The massive improvement in natural gas price is a boon for Antero Resources’ upstream operations. It is well poised for growth on the back of long reserve-life properties of Appalachian Basin acreages. AR’s core acreage position enables it to capitalize on significant long lateral drilling opportunities and capital efficiencies.
The upstream energy company boasts 451,000 and 91,000 net acres in Marcellus and Utica shales, respectively, which positions it well to boost production. Given the fact that it has an inventory of more than 2,000 premium, undeveloped drilling locations in the core of the Appalachian Basin, the company’s production outlook seems bright. It plans to drill a total of 80-85 gross wells, including 70 in the Marcellus and 10-15 in the Ohio Utica. This is expected to increase AR’s well cost savings and profitability.
Antero Resources is benefiting from declining well cost in the Marcellus play. Being a leading natural gas producer, the firm emits lower greenhouse gases as compared to major oil-producing companies. AR plans to complete 65-70 gross wells this year, with well costs amounting to $660 per lateral foot on average during the first half of 2021. The costs are likely to decline to $635 per lateral foot in the second half due to its sand and completion initiatives.
Antero Resources expects 2021 net drilling and completion capital to be $590 million, indicating a 20% decline from 2020 levels. This upside will be supported by its increasing operating efficiency. Moreover, it expects to generate more than $900 million in free cash flow this year.
Antero Resources, with a market cap of $5.9 billion, is engaged in creating long-term value for shareholders.
Drawbacks in Development Path
However, there are certain factors that are a concern.
Explorers and producers are not getting enough incentives to ramp up hydrocarbon production volumes as the pandemic is still affecting major economies in Asia. Antero Resources is facing great uncertainty as a new coronavirus variant is hitting major energy importers, which might keep its profits under pressure.
The upstream player’s lack of geographic diversification is concerning since its entire asset base is located in the Appalachian region. As such, Antero Resources is more vulnerable to basin-specific delays and interruptions in production from wells, which can potentially hamper growth.
Final View
Despite significant prospects, Antero Resources’ lack of geographic diversification and pandemic-related uncertainties are a headwind. Nevertheless, we believe that a systematic and strategic plan of action will drive its long-term growth.
Key Picks
Investors interested in the energy sector might also look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PetroChina Company Limited is the largest integrated oil company in China. PetroChina is one of the largest producers of crude oil and natural gas in the world. The company’s natural gas business offers lucrative growth prospects in the coming years as China moves from coal to natural gas.
PetroChina is expected to see an earnings growth of 411% in 2021. PTR currently holds a Zacks Style Score of A for Value. In the first six months of 2021, PetroChina's upstream segment posted an operating income of RMB 30.9 billion, nearly trebling from the year-ago profit of RMB 10.4 billion.
Schlumberger (SLB - Free Report) is the largest oilfield services player, with a presence in every energy market across the globe. Being the leading provider of complex oilfield projects technology, the company is better positioned than most peers to take up new offshore projects in the shallow water basins outside North America.
Schlumberger is expected to see an earnings growth of 85.3% in 2021. SLB anticipates completing this year with robust momentum. Additionally, its disciplined capital spending will likely benefit shareholders over the long term.
RPC, Inc. (RES - Free Report) is among the leading providers of advanced oilfield services, and equipment to almost all prospective oil and gas shale plays in the United States. The company derives strong and stable revenues via diverse oilfield services that include pressure pumping, coiled tubing and rental tools.
RPC is expected to see an earnings growth of 100% in 2021. With no debt load, the company had cash and cash equivalents of $80.8 million at third quarter-end. This reflects its strong balance sheet that will provide the company with massive financial flexibility. It allows RPC to remain afloat during tough times.