Antero Resources AM (disclosure: long) and Midstream AM (disclosure: position only indirectly via AR) attended the vitual Wells Fargo Symposium and gave some great details. A couple of notes (there might be some errors):
every dollar free cash flow goes to debt repayment for AR
would like to see AR debt from $3B to $2B before any growth considerations
going to be active in the bond market in 2021 (refinancing, etc)
tremendous support from lenders (banks)
good standing with ratings agencies especially with positive commodity price outlook
$40 oil is goldilocks scenario for AR (low associated gas production, high NGL/gas prices)
$2 change in NGLs makes $100M difference in free cash flow
$100M fee savings from transport capacities from 2021
Capex efficiency has been tremendous, some of it logistical and water usage
tremendous drilling an completion efficiency’
together savings of $300M in terms of maintenance capex; 80% of which at least are sustainable
2021 $600M capex planned, 175-200M less than 2020
seeing this continued into 2022 etc
no divestiture of AM stake planned at AR
AM going to keep up dividend, targeting a leverage neutral basis
no AR M&A planned, but other companies will engage in it most likely to reduce overall G&A
So to recap: AR wants to delever, AM not, since as long as AR is alive AM cannot go bust. AM can therefore keep all the leverage while AR has most to gain from firming up the balance sheet. In that sense AM is a play on the dividend and possible rerating to a more normal dividend yield (higher). There is no direct commodity price exposure. AR is a bet on deleveraging and commodity prices. It is maximally levered to NGLs and fully hedged on NatGas. AR is also strongly financially levered and the reduction of debt will accrue to the equity. AR also owns a huge chunk of AM so there is also a “sum of the parts” argument.
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