Valens Equity Weekly Insights for July 5, 2022

July 5, 2022

  • Antero Resources (AR) has a low-cost, unhedged inventory of high-quality natural gas. Uniform Accounting highlights what the company’s returns could look like during a strong natural gas cycle, something that the market is not pricing in. That makes Antero a compelling buy.
  • When natural gas prices have been above breakeven, Antero’s Uniform ROA has historically gotten above 10%, as high as 22%. The company is set to get back to those levels in the current market, as has the capacity to extract most of its reserves with limited incremental investment, and hedge very little of its portfolio, betting on a strong natural gas market.
  • Antero’s management is aligned to focus on profitable growth and careful leverage management, which should help management take advantage of the natural gas cycle without overinvesting.
  • Earnings Call Forensics of the Q1 earnings call highlights management’s confidence about their pricing, natural gas prices, and free cash flow generation, suggesting strong execution.

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