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Antero Surges After Shale Gas Producer’s $1.57 Billion IPO (2)

October 10, 2013

Antero Surges After $1.57 Billion IPO Raised More Than Expected

Marcellus is the largest U.S. shale gas resource, holding the equivalent of 394 trillion cubic feet of the heating and power-plant fuel, according to Investment Technology Group Inc., a Calgary-based advisory firm and brokerage. Photographer: Daniel Acker/Bloomberg

Antero Resources Corp. (AR:US), the natural-gas company backed by Warburg Pincus LLC, jumped in its trading debut after raising $1.57 billion in a larger-than-expected U.S. initial public offering.

The stock rose more than 18 percent to $52.01 as of 4 p.m. in New York. Antero sold 35.7 million shares for $44 each, according to a statement yesterday.

Antero, which produces gas in West Virginia, Ohio and Pennsylvania, is the most active driller in the Marcellus Shale with 15 rigs in operation, according to company data compiled by Bloomberg Industries. Investors are betting on high growth at Antero to continue, while low production costs keep wells profitable even after gas prices fell about 45 percent over the past five years.

“The growth rate behind this company is phenomenal,” Neal Dingmann, a Houston-based analyst for Suntrust Robinson Humphrey Inc., said today in a telephone interview. “They’ll double production in a year and increase it at least 50 percent plus the year after that.”

Dingmann, who rates the shares at buy with a $52.50 price target, doesn’t own any of the stock.

Antero, which had offered 30 million shares for $38 to $42, boosted the price range to $43 to $45 apiece before the IPO, according to Brean Capital LLC. The share sale is the largest U.S. energy IPO this year, data compiled by Bloomberg show.

Marcellus Shale

Sales of natural gas at Denver-based Antero tripled to $294.3 million in the first half of the year compared with the same period in 2012, according to regulatory filings. The company’s output rose 20 percent in the past quarter to the equivalent of 458 million cubic feet per day. Antero plans to use the net proceeds from the offering to repay debt.

The Marcellus, which stretches from West Virginia to southern New York, is the largest U.S. shale gas resource, holding the equivalent of 394 trillion cubic feet of the heating and power-plant fuel, according to Investment Technology Group Inc. (ITG:US), a Calgary-based advisory firm and brokerage.

Antero, the seventh-largest public leaseholder in the Marcellus deposit, with control of 329,000 acres, is also drilling for gas in the Utica resource in Ohio.

“Antero Resources will become a ‘must-own’ exploration and production name due to its dominant position in the core of Utica and Marcellus shale,” Adam Michael, a New York-based analyst for Miller Tabak & Co., wrote today in a note to clients. Michael has a buy rating and $62.50 price target on the stock.

Warburg’s Stake

Funds affiliated with Warburg Pincus will have more than 38 percent of the voting interests in Antero Resources Investment LLC, which will own 87 percent of the company after the offering, the prospectus shows. Yorktown Partners LLC and Trilantic Capital Partners also have stakes in Antero.

Barclays Plc, Citigroup Inc., JPMorgan Chase & Co., Credit Suisse Group AG, Jefferies Group LLC and Wells Fargo & Co. managed the offering.

The company is listed on the New York Stock Exchange under the symbol AR.

To contact the reporters on this story: Leslie Picker in New York at lpicker2@bloomberg.net; Jim Polson in New York at jpolson@bloomberg.net

To contact the editor responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net


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Companies Mentioned

  • AR
    (Antero Resources Corp)
    • $44.01 USD
    • 0.96
    • 2.18%
  • ITG
    (Investment Technology Group Inc)
    • $20.27 USD
    • -0.10
    • -0.49%
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