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Goldman raises target price for Antero (AR.US) and National Fuel Gas (NFG.US) as long-term natural gas demand is anticipated to remain robust.

Market IntelFriday, Jan 24, 2025 4:10 am ET

1min read

Goldman published a research report stating that despite the continued volatility of natural gas prices in recent days, it expects strong long-term demand prospects, especially the key catalyst of the increase in LNG export capacity in 2025, and continues to be bullish on Antero Resources (AR.US) and National Fuel Gas (NFG.US) in the US natural gas exploration and production industry.

The firm maintains "buy" rating on Antero Resources and raises its 12-month target price to US$44 from US$39; maintains "neutral" rating on National Fuel Gas and raises its 12-month target price to US$76 from US$71.

Goldman said that the NYMEX natural gas futures prices rose significantly in the fourth quarter of last year, and capital discipline remains the focus amid market volatility, with many producers delaying related activities or production. However, the firm remains optimistic about the long-term demand prospects for natural gas, with the significant increase in LNG export capacity in 2025.

Goldman believes that Antero Resources is well-positioned to capture changes in natural gas prices, given its unhedged positions and exposure to the Plaquemines LNG plant in the Gulf Coast, and its exposure in the LNG sector will help mitigate the downside risk of natural gas prices.

The firm currently expects Antero Resources to generate 8.5% free cash flow in 2026, lower than its previous expectation of 9.5%, reflecting enhanced confidence in valuation, and raises its EBITDA expectations to US$872mn, US$1.52bn and US$2.308bn in 2024-2026 to reflect adjustments for commodity price changes.

Regarding National Fuel Gas, Goldman said that the company's risk and return profile is relatively balanced compared with its peers focused on natural gas exploration and production (its free cash flow yield in 2026 is 7%, lower than the industry average of 9%), and the firm expects its stock to be more defensive relative to the upstream natural gas industry.

The firm lowers its free cash flow yield expectation for National Fuel Gas in 2026 to 6.5% from 7.0% to reflect enhanced confidence in the long-term demand for natural gas, especially the cyclical growth in LNG demand and electricity demand, and its impact on the company's non-regulated business segment, and raises its EBITDA expectations to US$119mn, US$137mn and US$161mn in 2024-2026.

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