Intrinsic value of Antero Resources Corporation - AR

Previous Close

$7.98

  Intrinsic Value

$6.21

stock screener

  Rating & Target

sell

-22%

Previous close

$7.98

 
Intrinsic value

$6.21

 
Up/down potential

-22%

 
Rating

sell

We calculate the intrinsic value of AR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
  4.87
Revenue, $m
  4,235
  4,344
  4,466
  4,602
  4,750
  4,912
  5,087
  5,276
  5,478
  5,695
  5,926
  6,172
  6,434
  6,711
  7,005
  7,317
  7,646
  7,994
  8,361
  8,749
  9,157
  9,588
  10,042
  10,520
  11,023
  11,553
  12,111
  12,697
  13,314
  13,963
Variable operating expenses, $m
  3,380
  3,467
  3,564
  3,672
  3,791
  3,920
  4,060
  4,210
  4,372
  4,545
  4,729
  4,925
  5,134
  5,356
  5,590
  5,839
  6,101
  6,379
  6,672
  6,981
  7,307
  7,651
  8,013
  8,395
  8,797
  9,219
  9,664
  10,132
  10,625
  11,142
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  3,380
  3,467
  3,564
  3,672
  3,791
  3,920
  4,060
  4,210
  4,372
  4,545
  4,729
  4,925
  5,134
  5,356
  5,590
  5,839
  6,101
  6,379
  6,672
  6,981
  7,307
  7,651
  8,013
  8,395
  8,797
  9,219
  9,664
  10,132
  10,625
  11,142
Operating income, $m
  856
  878
  902
  930
  960
  992
  1,028
  1,066
  1,107
  1,150
  1,197
  1,247
  1,300
  1,356
  1,415
  1,478
  1,544
  1,615
  1,689
  1,767
  1,850
  1,937
  2,028
  2,125
  2,227
  2,334
  2,446
  2,565
  2,689
  2,820
EBITDA, $m
  1,853
  1,901
  1,954
  2,013
  2,078
  2,149
  2,226
  2,308
  2,397
  2,492
  2,593
  2,701
  2,815
  2,936
  3,065
  3,201
  3,345
  3,498
  3,658
  3,828
  4,007
  4,195
  4,394
  4,603
  4,823
  5,055
  5,299
  5,556
  5,825
  6,109
Interest expense (income), $m
  239
  306
  316
  327
  340
  354
  370
  387
  406
  426
  447
  470
  495
  521
  549
  578
  610
  643
  678
  714
  753
  795
  838
  884
  932
  983
  1,036
  1,092
  1,151
  1,214
  1,279
Earnings before tax, $m
  550
  562
  575
  589
  605
  622
  640
  660
  681
  703
  727
  752
  778
  807
  837
  868
  902
  937
  974
  1,014
  1,055
  1,099
  1,145
  1,193
  1,244
  1,298
  1,354
  1,413
  1,476
  1,541
Tax expense, $m
  148
  152
  155
  159
  163
  168
  173
  178
  184
  190
  196
  203
  210
  218
  226
  234
  244
  253
  263
  274
  285
  297
  309
  322
  336
  350
  366
  382
  398
  416
Net income, $m
  401
  410
  420
  430
  442
  454
  467
  482
  497
  513
  530
  549
  568
  589
  611
  634
  658
  684
  711
  740
  770
  802
  836
  871
  908
  947
  989
  1,032
  1,077
  1,125

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  15,862
  16,270
  16,728
  17,235
  17,791
  18,397
  19,053
  19,760
  20,518
  21,329
  22,195
  23,116
  24,096
  25,135
  26,237
  27,403
  28,636
  29,939
  31,314
  32,766
  34,297
  35,910
  37,610
  39,401
  41,286
  43,270
  45,358
  47,555
  49,865
  52,295
Adjusted assets (=assets-cash), $m
  15,862
  16,270
  16,728
  17,235
  17,791
  18,397
  19,053
  19,760
  20,518
  21,329
  22,195
  23,116
  24,096
  25,135
  26,237
  27,403
  28,636
  29,939
  31,314
  32,766
  34,297
  35,910
  37,610
  39,401
  41,286
  43,270
  45,358
  47,555
  49,865
  52,295
Revenue / Adjusted assets
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
Average production assets, $m
  13,866
  14,222
  14,623
  15,066
  15,552
  16,082
  16,655
  17,273
  17,936
  18,645
  19,402
  20,207
  21,064
  21,972
  22,935
  23,954
  25,032
  26,171
  27,374
  28,643
  29,981
  31,391
  32,877
  34,442
  36,090
  37,825
  39,650
  41,571
  43,590
  45,714
Working capital, $m
  -296
  -304
  -313
  -322
  -333
  -344
  -356
  -369
  -383
  -399
  -415
  -432
  -450
  -470
  -490
  -512
  -535
  -560
  -585
  -612
  -641
  -671
  -703
  -736
  -772
  -809
  -848
  -889
  -932
  -977
Total debt, $m
  5,635
  5,841
  6,073
  6,329
  6,611
  6,917
  7,249
  7,607
  7,991
  8,401
  8,839
  9,305
  9,801
  10,327
  10,884
  11,474
  12,098
  12,758
  13,454
  14,188
  14,963
  15,779
  16,639
  17,545
  18,499
  19,503
  20,560
  21,671
  22,840
  24,070
Total liabilities, $m
  8,026
  8,233
  8,464
  8,721
  9,002
  9,309
  9,641
  9,998
  10,382
  10,793
  11,231
  11,697
  12,193
  12,719
  13,276
  13,866
  14,490
  15,149
  15,845
  16,580
  17,354
  18,171
  19,031
  19,937
  20,891
  21,895
  22,951
  24,063
  25,232
  26,461
Total equity, $m
  7,836
  8,037
  8,263
  8,514
  8,789
  9,088
  9,412
  9,761
  10,136
  10,537
  10,964
  11,420
  11,903
  12,417
  12,961
  13,537
  14,146
  14,790
  15,469
  16,186
  16,943
  17,740
  18,579
  19,464
  20,395
  21,375
  22,407
  23,492
  24,634
  25,834
Total liabilities and equity, $m
  15,862
  16,270
  16,727
  17,235
  17,791
  18,397
  19,053
  19,759
  20,518
  21,330
  22,195
  23,117
  24,096
  25,136
  26,237
  27,403
  28,636
  29,939
  31,314
  32,766
  34,297
  35,911
  37,610
  39,401
  41,286
  43,270
  45,358
  47,555
  49,866
  52,295
Debt-to-equity ratio
  0.720
  0.730
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.810
  0.820
  0.830
  0.840
  0.850
  0.860
  0.860
  0.870
  0.880
  0.880
  0.890
  0.900
  0.900
  0.910
  0.910
  0.920
  0.920
  0.930
  0.930
Adjusted equity ratio
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494
  0.494

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  401
  410
  420
  430
  442
  454
  467
  482
  497
  513
  530
  549
  568
  589
  611
  634
  658
  684
  711
  740
  770
  802
  836
  871
  908
  947
  989
  1,032
  1,077
  1,125
Depreciation, amort., depletion, $m
  998
  1,023
  1,052
  1,084
  1,119
  1,157
  1,198
  1,243
  1,290
  1,341
  1,396
  1,454
  1,515
  1,581
  1,650
  1,723
  1,801
  1,883
  1,969
  2,061
  2,157
  2,258
  2,365
  2,478
  2,596
  2,721
  2,853
  2,991
  3,136
  3,289
Funds from operations, $m
  1,399
  1,433
  1,472
  1,514
  1,561
  1,611
  1,666
  1,724
  1,787
  1,854
  1,926
  2,003
  2,084
  2,170
  2,261
  2,357
  2,459
  2,567
  2,681
  2,801
  2,927
  3,061
  3,201
  3,349
  3,505
  3,669
  3,841
  4,023
  4,213
  4,414
Change in working capital, $m
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
Cash from operations, $m
  1,405
  1,441
  1,480
  1,524
  1,571
  1,622
  1,678
  1,737
  1,801
  1,870
  1,942
  2,020
  2,102
  2,189
  2,281
  2,379
  2,482
  2,591
  2,706
  2,828
  2,956
  3,091
  3,233
  3,382
  3,540
  3,706
  3,880
  4,064
  4,257
  4,459
Maintenance CAPEX, $m
  -975
  -998
  -1,023
  -1,052
  -1,084
  -1,119
  -1,157
  -1,198
  -1,243
  -1,290
  -1,341
  -1,396
  -1,454
  -1,515
  -1,581
  -1,650
  -1,723
  -1,801
  -1,883
  -1,969
  -2,061
  -2,157
  -2,258
  -2,365
  -2,478
  -2,596
  -2,721
  -2,853
  -2,991
  -3,136
New CAPEX, $m
  -313
  -356
  -400
  -443
  -486
  -530
  -573
  -618
  -663
  -709
  -757
  -806
  -856
  -909
  -963
  -1,019
  -1,078
  -1,139
  -1,203
  -1,269
  -1,338
  -1,410
  -1,486
  -1,565
  -1,648
  -1,735
  -1,825
  -1,920
  -2,020
  -2,124
Cash from investing activities, $m
  -1,288
  -1,354
  -1,423
  -1,495
  -1,570
  -1,649
  -1,730
  -1,816
  -1,906
  -1,999
  -2,098
  -2,202
  -2,310
  -2,424
  -2,544
  -2,669
  -2,801
  -2,940
  -3,086
  -3,238
  -3,399
  -3,567
  -3,744
  -3,930
  -4,126
  -4,331
  -4,546
  -4,773
  -5,011
  -5,260
Free cash flow, $m
  117
  87
  57
  28
  1
  -26
  -52
  -78
  -104
  -130
  -156
  -182
  -208
  -235
  -262
  -290
  -319
  -348
  -379
  -410
  -443
  -477
  -512
  -548
  -586
  -625
  -666
  -709
  -754
  -801
Issuance/(repayment) of debt, $m
  173
  206
  232
  257
  282
  307
  332
  358
  384
  411
  438
  466
  496
  526
  557
  590
  624
  659
  696
  734
  775
  816
  860
  906
  954
  1,004
  1,057
  1,112
  1,169
  1,230
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  4
  13
  23
  33
  43
  53
  64
  75
Cash from financing (excl. dividends), $m  
  173
  206
  232
  257
  282
  307
  332
  358
  384
  411
  438
  466
  496
  526
  557
  590
  624
  659
  696
  734
  775
  816
  864
  919
  977
  1,037
  1,100
  1,165
  1,233
  1,305
Total cash flow (excl. dividends), $m
  290
  293
  289
  285
  282
  280
  279
  279
  280
  281
  282
  285
  288
  291
  295
  300
  305
  311
  317
  324
  332
  340
  353
  371
  391
  412
  433
  456
  479
  504
Retained Cash Flow (-), $m
  -170
  -201
  -226
  -251
  -275
  -299
  -324
  -349
  -375
  -401
  -428
  -455
  -484
  -513
  -544
  -576
  -609
  -644
  -680
  -717
  -756
  -797
  -840
  -885
  -931
  -980
  -1,031
  -1,085
  -1,141
  -1,200
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  120
  92
  63
  34
  7
  -19
  -45
  -70
  -95
  -120
  -145
  -171
  -196
  -222
  -249
  -276
  -304
  -333
  -362
  -393
  -425
  -457
  -487
  -513
  -540
  -569
  -598
  -630
  -662
  -696
Discount rate, %
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
  113
  82
  52
  27
  5
  -12
  -27
  -38
  -46
  -52
  -56
  -57
  -56
  -55
  -51
  -47
  -43
  -38
  -33
  -28
  -23
  -19
  -15
  -11
  -9
  -6
  -4
  -3
  -2
  -1
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.9
  99.7
  99.5
  99.2
  98.8
  98.5
  98.0

Antero Resources Corporation is an oil and natural gas company. The Company is engaged in the exploration, development and acquisition of natural gas, natural gas liquids (NGLs) and oil properties located in the Appalachian Basin. The Company's segments include the exploration, development and production of natural gas, NGLs and oil; gathering and processing; water handling and treatment, and marketing of excess firm transportation capacity. The Company's subsidiary, Antero Midstream Partners LP (Antero Midstream) is a master limited partnership, which owns, operates and develops midstream energy infrastructure primarily to service its production and completion activity. Its exploration and development activities are supported by the natural gas gathering and compression assets of its subsidiary, Antero Midstream, as well as by third party gathering and compression arrangements. It also has access to additional low-pressure and high-pressure pipelines.

FINANCIAL RATIOS  of  Antero Resources Corporation (AR)

Valuation Ratios
P/E Ratio -3
Price to Sales 1.5
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 2
Price to Free Cash Flow -2
Growth Rates
Sales Growth Rate -58.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 6.3%
Cap. Spend. - 3 Yr. Gr. Rate -1.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 75.1%
Total Debt to Equity 75.1%
Interest Coverage -4
Management Effectiveness
Return On Assets -5%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital -7.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.7%
Return On Equity -13.9%
Return On Equity - 3 Yr. Avg. 7.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 92.9%
Gross Margin - 3 Yr. Avg. 95.2%
EBITDA Margin -11.8%
EBITDA Margin - 3 Yr. Avg. 38.9%
Operating Margin -60.3%
Oper. Margin - 3 Yr. Avg. 10.9%
Pre-Tax Margin -75.7%
Pre-Tax Margin - 3 Yr. Avg. 1.8%
Net Profit Margin -51.5%
Net Profit Margin - 3 Yr. Avg. -0.9%
Effective Tax Rate 39.9%
Eff/ Tax Rate - 3 Yr. Avg. 38.9%
Payout Ratio 0%

AR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AR stock intrinsic value calculation we used $4140 million for the last fiscal year's total revenue generated by Antero Resources Corporation. The default revenue input number comes from 0001 income statement of Antero Resources Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AR stock valuation model: a) initial revenue growth rate of 2.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.6%, whose default value for AR is calculated based on our internal credit rating of Antero Resources Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Antero Resources Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AR stock the variable cost ratio is equal to 79.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.6% for Antero Resources Corporation.

Corporate tax rate of 27% is the nominal tax rate for Antero Resources Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AR are equal to 327.4%.

Life of production assets of 13.9 years is the average useful life of capital assets used in Antero Resources Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AR is equal to -7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $7665.808 million for Antero Resources Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 308.789 million for Antero Resources Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Antero Resources Corporation at the current share price and the inputted number of shares is $2.5 billion.

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