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Although NatGas Prices Soar, Major M-U Drillers Lose Money
An article in the Pittsburgh Post-Gazette highlights and focuses on the financial performance for four of the Marcellus/Utica’s largest publicly-traded companies, including EQT Corp., Antero Resources, Range Resources, and CNX Resources, during first quarter 2022. Even though the price natural gas is fetching is higher than it’s been in 14 years, M-U drillers are losing money. Why? Hedges and derivatives–bad bets on where the price of gas would go and locking in prices much lower than what the market currently supports.
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Antero Resources, one of the largest drillers in the Marcellus/Utica (with major assets in West Virginia) issued its first quarter 2022 update yesterday. We’ve often marveled at Antero’s ability to make money on its natural gas and NGLs with hedging–preselling gas and NGLs at prices that beat whatever the current market price is at the time (see 
Last week Pennsylvania issued 12 new shale well permits, down three from the prior week. Coterra Energy (formerly Cabot Oil & Gas) had the most permits with four, all on the same pad in Susquehanna County. Southwestern had three permits all on the same pad in Susquehanna County. Chesapeake Energy also had a permit in Susquehanna County, making that county the top spot for new permits with eight last week. Ohio had no new shale permits issued last week. Bummer. West Virginia had just two permits, one for Southwestern Energy in Ohio County, and one for Antero Resources in Tyler County.
In a court case that stretches back to 2019, Antero Resources, the biggest driller in West Virginia, challenged how its wells had been valued for tax purposes in Doddridge and Richie counties for 2016 and 2017. Antero said the combined value of its wells for those years should have been $1.488 billion. The state tax commissioner reckoned the value to be $1.513 billion. The controversy of well valuations not only for Antero but other drillers led to a reworking of how the state law values shale wells (see 
One of the hottest of the hot sectors in which to invest (right now) is shale energy. That’s according to multiple sources, including a veteran finance writer, investor, engineer, and researcher. In an article appearing on the OilPrice.com website, Alex Kimani talks up mid-cap energy stocks as outperforming the supermajors. Among two of Kimani’s top three picks are two Marcellus/Utica drillers, who are having a stellar year in stock performance. We went looking for the stock performance of other M-U drillers too. We have a list to share showing just how much each driller’s share price has increased this year.
Since Russia illegally and immorally invaded Ukraine on February 24, the stock price for Marcellus/Utica natural gas drillers has skyrocketed based on the fear that Russia will cut off natural gas to Europe in response to their response to the war (sanctions on Russia). The Russia/Ukraine war has stoked concerns that Europe will need much more natgas from the U.S. and therefore the U.S. will have to drill and pump more gas to supply it, making gas drillers an attractive investment.
According to S&P Global, shale gas producers behaved themselves during the fourth quarter of 2021 and didn’t, even as the price of gas went sky high, do anything more than maintain current production. Gas drillers kept spending in check, didn’t do any more drilling than was necessary to maintain production, and plowed free cash flow back into dividends and stock buybacks. The result? Investors loved it and share prices soared.
Two years ago Yale University sold off its $80 million equity stake in Marcellus/Utica fracker Antero Resources. You know, Antero is an evil fossil fuel company and the woke children attending Yale demanded divestment. But a funny thing happened on the way to the forum… according to Yale University’s latest 13F form filed with the Securities and Exchange Commission, as of Dec. 31, 2021, the University owns $41 million of Antero Resources stock once again!
Holy smokes! What just happened? For months (and months and months) the cumulative number of weekly permits issued to drill new shale wells in the Marcellus/Utica has fluctuated from the low teens to perhaps 30 total on the upper end. Last week, from Jan. 17-23, an amazing 61 permits were issued to drill new shale wells. Double the usual. Wow! Pennsylvania issued 24 new permits, Ohio issued 9, and blow-the-doors-off-we’ve-never-seen-so-many-permits-issued-in-one-week for West Virginia, the Mountain State issued 28 new shale permits.