Investment Thesis
AR has 584K net acreage position in the core of the Appalachian Basin. Based on our updated “Forced Ranker” and our more constructive stance on NGLs vs. gas, we are upgrading AR to OW (from UW), as we see the company at a FCF inflection point given improving NGL fundamentals, particularly C3+ pricing given shale declines and robust international LPG demand, particularly in Asia that is providing an uplift to propane and Butane prices. We are modeling $500 MM+ in FCF over the next two years, which should support deleveraging and the addressing of near-term maturities.
Valuation
Using our NAV methodology, we calculate a net asset value of $6 per share for Antero. We establish a Dec-21 price target of $6 per share, which is at parity with our updated NAV and implies ~50% upside from current levels.