EQT 2Q: $936M Loss on Derivatives; New Era of “Sustainable Shale”
Yesterday EQT, the largest natural gas producer in the U.S., issued its second quarter 2021 update. There’s a lot to unpack. While the company produced 4.7 Bcfe/d of natural gas and liquids in 2Q and $155 million in free cash flow, the company lost $936 million during 2Q21 versus losing just $263 million in 2Q20. The loss came from a bet on derivatives gone bad that cost the company $1.3 billion. Oops. There was plenty of talk about “sustainable shale” and ESG efforts. CEO Toby Rice touted the recent successful acquisition of Alta Resources, which closed on July 21.
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Antero Resources, which drills almost exclusively in the West Virginia Marcellus/Utica, issued its second quarter 2021 update yesterday. Antero is the third-largest natural gas producer in the U.S. and the second-largest NGL producer. Big company. Important company. Antero is one of the best hedgers (preselling production at a set price) in the business. However, like EQT (see today’s lead story), Antero fumbled with a derivatives bet in 2Q and ended up posting a $523 million loss for 2Q21, versus losing $463 million in 2Q20. On the positive side, Antero generated $105 million in free cash flow during 2Q21.
As they have done in the past few quarters, CNX Resources again issued a quarterly update without an accompanying summary/overview. We have the raw numbers (below), and we have excerpts from the conference call with analysts. One observation from the numbers: It seems major M-U drillers collectively went over the derivatives cliff in 2Q21. CNX, like Antero and EQT (see those stories in today’s update) posted a 2Q loss of $354 million based on a derivatives loss of $539 million. The company did manage to generate free cash flow of $117 million and pay down another $89 million in debt.
Seneca Resources, the drilling arm of utility giant National Fuel Gas Company, is conducting its first experiment with electric fracking. We’re aware of at least three other Marcellus/Utica drillers that currently use electric fracking: Range Resources, CNX Resources, and Olympus Energy (former Huntley & Huntley). Seneca, like Range, will use U.S. Well Services to provide e-fracking. Seneca is conducting a field trial for a 6-well pad in Lycoming County, PA.
It seems to be the season of not only second quarter updates, but also 2020 ESG (environmental, social, governance) updates, often referred to as corporate sustainability or social responsibility reports. There are half a dozen different phrases and terms used to describe the same thing. Yesterday Equitrans Midstream Corporation (the former EQT Midstream) issued its 2021 Corporate Sustainability Report, covering activity for the calendar year 2020.
The latest weekly Enverus U.S. rig count shows total rigs in use retreating just a bit. For the week ending July 28, the rig count stood at 599, down 5 rigs from last week’s post-pandemic high of 604 (see 
OTHER U.S. REGIONS: Tellurian finalizes offtake agreements for first phase of Driftwood LNG; NATIONAL: Former natural gas exec weighs climate controversy; DUC clock ticks on cheap production: low-cost cash flow won’t last; Critical U.S. pipelines remain stopped, as Russian pipelines are greenlighted; Hijacking natural gas #1 (video); INTERNATIONAL: Big Oil shows confidence that big profits era is back.