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S&P upgrades Antero, citing plan to rely on cash flow to fund growth

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S&P upgrades Antero, citing plan to rely on cash flow to fund growth

S&P Global Ratings lifted its ratings on Antero Resources Corp., noting the exploration and production company's plan to live within its cash flow.

The agency raised Antero's corporate credit and issue-level ratings to BB+ from BB with a stable outlook, according to a Feb. 5 news release. BB+ is one notch below investment grade.

The company expects to rely on internally generated cash flow to fund its capital spending, rather than relying on debt and equity issuance or asset sale proceeds, leading to the upgrade. The raised ratings also reflect S&P's revised production growth rate and NGL price assumptions for the next two years, with expectations of raised NGL prices once the Mariner East 2 pipeline is in service.

Antero's midstream master limited partnership, Antero Midstream Partners LP, is still expected to rely on debt to finance increasing dividends over the next few years. S&P Global Ratings expects Antero to bank on its credit facility or external capital raises to fund growing distributions at Antero Midstream, which are projected to increase to about $450 million in 2018.

S&P expects 20% year-over-year production growth, based on Antero's spending level. The company plans to set aside $2.1 billion for capital spending in 2018, which is in line with the rating agency's projection for internally generated cash flow.

The stable outlook reflects the agency's expectation that Antero will continue to ramp up production and keep the ratio of funds from operations to debt above 35% and capital spending in line with cash flows for the next two years.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.