Antero Resources - Don't be fooled

Antero Resources has repurchased 10% of their company stock over the last 2 years. This from a company who is supposedly at risk of going bankrupt! Are these guys crazy or are they CRAZY LIKE A FOX?
Buying back shares with cash accomplishes two things for Antero.

1. Repurchasing assets for $0.07 on the dollar to what they originally paid. This is a good deal for stockholders as I find it hard to believe that although these are tough times in the natural gas world, their assets should be selling at a 93% discount. 500 million dollar market cap versus 7 billion in assets after you take out the debt equals 7 cents on the dollar. Good for the stockholders, including Antero insiders who owns 16% of the stock.

2. buying back shares with cash also serves to make the balance sheet appear weaker from a liquidity perspective, which in turn makes the bonds even cheaper.

Then it turns into a bit of a negative feedback loop. The lower Bond ratings have an effect on the stock price which allows a company to buy even more stock at a lower price which takes more cash off the balance sheet which makes the bonds go even lower and so on and so on. They just have to be careful because to a certain extent they are picking up pennies in front of a steamroller. More accurately they are buying dollars for $0.07 in front of a steamroller, that is if you are following me.

So in theory, they keep doing this until The jig is up. They announce their plan to deal with the long-term debt, be it a royalty sale, monetization of hedge book, sale of midstream assets or something else. But at that point they have drastically reduced the shares outstanding and reduced the cost of dealing with the debt.

Everybody's happy. If it all falls into place. Including the Antero insiders who owns 16% of the company. But not including the shorts who will need to buy back 18% of the company :-)

Important to remember Paul rady is no dummy, he is a self-made man. He's also got a significant stake in Antero. And faced on their hatching success, they know how to strategically deploy capital

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