Antero Resources Corp (AR)

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2 Under-the-Radar(make it 3 NGL) Energy Stocks That Are Set to Climb, According to Goldman Sachs -- Barrons.com
1:35 pm ET May 2, 2019 (Dow Jones) Print
By Avi Salzman

High stakes mergers and acquisitions may be the hot news in energy these days, but Goldman Sachs analyst Brian Singer found two under-the-radar drillers that he thinks could be smart investments.

Singer wrote in a note on Thursday that natural-gas-focused drillers EQT (ticker: EQT) and Antero Resources (AR) are well-positioned to rise because of low valuations and smart cash management. Antero posted better-than-expected earnings after the market closed on Wednesday, but the stock fell more than 3% on Thursday.

Singer notes that drillers have been particularly focused on conserving cash and paying off debt -- two attributes that appeal to investors in the current market. In the past, oil companies have spent too much on new wells when prices are high, only to be saddled with debt when prices fall.

EQT drills for natural gas in Appalachia and other areas. It's been dealing with a tough proxy battle brought by some of its shareholders. Singer says investors are overlooking its attributes, causing it to trade at a 20% discount to peers based on one earnings measure.

"We believe the Street is not giving credit for EQT's ability to generate positive free cash flow while growing production by mid-single digits; improving capital efficiency can further support a narrowed discount relative to peers, in our view," Singer writes.

Singer thinks EQT can rise to $24. It was trading at $19.85 on Thursday afternoon.

Antero is twice as cheap as peers, even though Singer believes "longer-term concerns over AR's ability to generate growth without rising leverage as hedges roll off are overdone." He thinks shares can rise to $10.50. They were trading at $6.90 on Thursday afternoon.

Write to Avi Salzman at [e-mail]

(END) Dow Jones Newswires

May 02, 2019 13:35 ET (17:35 GMT)