Market Overview

BMO Downgrades Antero Resources Following LNG Price Rally

BMO Downgrades Antero Resources Following LNG Price Rally

A rise in natural gas liquids prices has boosted Antero Resources Corp (NYSE: AR) stock by more than 17 percent since early September, but one Wall Street analyst now says the Antero rally has run out of steam.

The Analyst

BMO Capital Markets analyst Phillip Jungwirth downgraded Antero from Outperform to Market Perform and reiterated a $21 price target.

The Thesis

The rally in NGL prices is fully priced into Antero shares, and the stock is lacking an obvious long-term catalyst, Jungwirth said in the Friday downgrade note. (See his track record here.) 

“While a mark to market of the NGL strip (vs. 8/13) results in a 12-percent/6-percent increase to our 2019/20 EBITDAX estimates, the sustainability of the rally is less certain, while weak 2020-forward natural gas prices remain a drag on net asset value,” the analyst said. 

Although Antero is up just 2.4 percent in overall in 2018, the stock has outperformed dry-gas peers EQT Corporation (NYSE: EQT) and Cabot Oil & Gas Corporation (NYSE: COG) by more than 20 percent year-to-date.

At its current price, Jungwirth said Antero is now valued in-line with the rest of the Marcellus group.

It may be difficult for Antero to hit both its 2019 production targets and spending targets, Jungwirth said. While the company’s ongoing performance review could result in a roughly $500-million buyback plan, Jungwirth said the company’s primary goal of simplification will likely not be a bullish catalyst for the stock.

Price Action

Antero stock traded lower by 3.6 percent on Friday following the downgrade.

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Latest Ratings for AR

Mar 2019Tudor PickeringDowngradesBuyHold
Dec 2018Raymond JamesDowngradesUnderperform
Nov 2018Credit SuisseMaintainsNeutralNeutral

View More Analyst Ratings for AR
View the Latest Analyst Ratings

Posted-In: BMO Capital Markets Phillip JungwirthAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


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