2019 has been an exciting year for many different markets, as tech IPOs, mega-mining mergers, and overall rising commodity prices have opened up many opportunities for investors to make money.
The energy sector, in particular, has had a number of developments of its own. Besides a six-month record-setting oil price and a growing shale surplus from America, the sector has also seen a number of acquisitions.
Often times, small, under-the-radar companies have tremendous growth potential as potential merger targets themselves. Goldman Sachs analysts have announced that they picked two of these low-profile energy companies, Antero Resources (NYSE: AR) and EQT Corp (NYSE: EQT), as having the most potential to skyrocket in 2019.
Goldman Sachs analyst Brian Singer went on to say that these two companies were solid investment opportunities. Both firms are natural-gas-focused drillers that are well-positioned precisely because of their already low valuations and smart cash management. Antero recently posted better-than-expected earnings figures on Wednesday, something the markets didn’t respond much to as shares fell shortly after.
“We believe the Street is not giving credit for EQT’s ability to generate positive free cash flow while growing production by mid-single digits; improving capital efficiency can further support a narrowed discount relative to peers, in our view,” Singer wrote. As for Antero, the company is trading twice as cheap as it’s competitors, as Singer went on to say that he believed “longer-term concerns over AR’s ability to generate growth without rising leverage as hedges roll off are overdone.”
The analyst went on to write that drilling companies have been focused on paying off debt and saving money. In contrast, larger oil companies have typically spent too much on new wells when oil prices were high only to end up in debt and struggling to stay afloat when prices fell. Many energy companies have given up entire aspects of their business, such as Canadian Husky Energy (TSE: HSE), which ended up selling off its entire retail business of over 500 stores due to financial struggles.
Shares of both companies reacted little in the face of this recommendation from Goldman Sachs. Antero Resources stock price increased a modest 1.12 percent, while EQT dropped around 17 percent. Both companies have market caps within the 2-5 billion range, and both have seen their values steadily decline over the past year.
EQT Company Profile
EQT Corp is a natural gas producer that operates through its subsidiaries: EQT Production and EQT Midstream. Operating out of the Appalachian Basin, EQT Production produces natural gas by using lateral horizontal and completion drilling technologies.
By using longer laterals and multiwell pads, the company is able to develop acreage in an economically profitable manner. The company is also able to reduce its environmental footprint by using its multiwell pads in unison with completion techniques.
Alongside advanced drilling techniques, the company offers midstream header connectivity to interstate pipelines throughout the eastern United States under EQT Midstream. – Warrior Trading News
Antero Resources Company Profile
Antero Resources, based in Denver, engages in the exploration for and production of natural gas and NGLs in the United States and Canada. At the end of 2018, the company reported proven reserves of 18 trillion cubic feet of natural gas equivalent. Daily production averaged approximately 2,708 mmcfe a day in 2018, at a ratio of 28% liquids and 72% natural gas. – Warrior Trading News