Business Strategy and Outlook| Dave Meats, CFA |
Antero Resources produces natural gas from the Marcellus and Utica shales in West Virginia and Ohio. It is concentrating on areas with a relatively high liquids content; natural gas liquids and condensate account for about 30% of its production. That means the firm is well positioned to capitalize on soaring prices for ethane, propane, and butane. Overseas demand for these petrochemical feedstocks is robust, and Antero benefits disproportionately as an anchor shipper on the Mariner East 2 pipeline, which offers direct access to East Coast export facilities. Likewise, we think acreage and infrastructure constraints will chronically limit U.S. natural gas supply growth in the next few years, putting a higher floor under prices than we've gotten used to. For Antero, that translates to higher margins and free cash flows, which gives the firm the flexibility to start returning cash to shareholders.