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Baupost Group opens position in Antero Resources in 3Q14

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Dec. 4 2014, Updated 12:01 p.m. ET

Baupost adds position in Antero Resources

The Baupost Group added a stake in Antero Resources Corp. (AR) that accounted for 2.64% of the fund’s total third-quarter portfolio.

AR

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Overview of Antero Resources

Antero Resources Corporation is an independent oil and natural gas company engaged in the exploitation, development, and acquisition of natural gas, NGLs, and oil properties. It focuses on unconventional reservoirs that can generally be characterized as fractured shale formations.

The oil and natural gas company, which is controlled by private equity firm Warburg Pincus LLC, said its drilling opportunities are focused in the Marcellus Shale and the Utica Shale of the Appalachian Basin.

Major oil and gas producers in the Marcellus include Cabot Oil & Gas Corporation (COG), Anadarko Petroleum Corporation (APC), and Antero Resources Corporation (AR). Many of these producers are also part of the Energy Select SPDR ETF (or XLE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

As of September 30, 2014, Antero Resources held approximately 516,000 net acres of gas and dry gas properties located in the Appalachian Basin in West Virginia, Ohio, and Pennsylvania. As of June 30, 2014, its estimated proved reserves were approximately 9.1 trillion cubic feet equivalents, consisting of 7.9 trillion cubic feet of natural gas, 186 million barrels of NGLs, and 16 million barrels of oil. This represents a 19% increase from proved reserve volumes as of December 31, 2013.

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Antero Midstream Partners sees strong trading debut

In November, Antero Midstream Partners LP (AM), the master limited partnership (or MLP) of Antero Resources, had its trading debut and raised $1.1 billion. The company sold 40,000,000 common shares, representing limited partner interests in the partnership at $25.00 per share.

The MLP will initially own gathering and compression assets that service Antero’s natural gas, natural gas liquids, and condensate production. A release said the MLP used $843 million to repay debt due to Antero for certain capital expenditures incurred. It will retain $250 million of the net proceeds for general partnership purposes.

Third-quarter results miss estimates

Antero’s 3Q14 results missed estimates. Its third-quarter net income of $203.9 million, or $0.78 per share, grew from $120.9 million, or $0.46 per share. in the same period a year ago. Revenue was up to $762.5 million from $384.5 million in 3Q13.

Its net daily gas equivalent production averaged 1,080 million cubic feet equivalent per day, a 91% increase over the same quarter last year. Its net daily liquids production of 25,000 barrels per day was a 217% increase over the same quarter last year.

Baupost’s holdings in 3Q14

Seth Klarman’s fund added new positions in Ocwen Financial Corp. (OCN), Antero Resources Corp. (AR), and Veritiv Corporation (VRTV). It raised its positions in Cheniere Energy, Inc. (LNG),  eBay Inc. (EBAY), Keryx Biopharmaceuticals, Inc. (KERX), and PBF Energy Inc. (PBF). The fund slightly lowered its position in Theravance Inc. (THRX). It didn’t sell any positions during 3Q14.

The next part of this series will review Baupost’s new position in Veritiv Corporation.

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