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14 New Shale Well Permits Issued for PA-OH-WV Sep 4 – 10
New shale permits issued for Sep 4 – 10 in the Marcellus/Utica continued to be in the crapper. There were 14 new permits issued last week, up 1 from 13 issued two weeks ago, and down from the 16 issued three weeks ago. Not so long ago we routinely saw 30+ issued each week. Last week’s permit tally included 8 new permits in Pennsylvania, no new permits in Ohio, and 6 new permits in West Virginia. The top permittee for the week was Antero Resources, which received six permits in WV.
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Antero Resources and Antero Midstream have donated a massive $4 million to West Virginia University’s Benjamin M. Statler College of Engineering and Mineral Resources to help train the next generation of petroleum and natural gas engineers. Antero’s gift is the largest philanthropic donation to the school to date. It will support undergraduate and graduate students in the petroleum and natural gas engineering program.
For individuals, discretionary income is what’s left after you pay your taxes and fixed costs like housing, food, and clothing. For shale drillers, the equivalent to discretionary income is cash flow from operating activities (CFOA), which is the net income a company generates adjusted for non-cash expenses like depreciation and stock-based compensation, and for changes in working capital. Drillers can use their extra cash to grow production by spending more for drilling new wells (capital expenditures or capex). Or drillers can send some of the extra cash back to investors via share buybacks and dividends. How did Marcellus/Utica drillers spend their CFOA during the first quarter of 2023?
It’s possible to track which institutional investors (big investors like BlackRock) are buying or selling shares in various companies by reviewing Securities and Exchange Commission (SEC) Form 13F filings. S&P Global Market Intelligence performed a 13F review of which companies bought, and which sold (and how much) shares of stocks for shale gas drillers during the first quarter of 2023. The topmost active shale gas driller having its stock purchased by institutional investors was Comstock Resources, which drills exclusively in the Haynesville Shale. The reason Comstock came out on top, postulates S&P, is because the Haynesville is located close to the Gulf Coast and LNG export plants. However, it was the rest of the list that interested us.
It’s been a wild ride for shale energy companies from the beginning of the shale revolution around 20 years ago. Here in the Marcellus/Utica, the very first Marcellus well was sunk by Range Resources in 2004. Until a few years ago, most shale drillers were not profitable, eating through investors’ money like candy. Just before the beginning of the pandemic, shale drillers got the “free cash flow” religion and began to pull back on new drilling in favor of profitability for shareholders. The pandemic, followed by Russia’s war against Ukraine, added new market gyrations. Bottom line: Last year, shale oil and gas drillers saw historic revenues and profitability. This year, the bottom is dropping out once again…
We are currently in the latest quarterly update season. In fact, we are about done with quarterly updates for the first quarter. Most (if not all) of the publicly traded Marcellus/Utica drillers have turned in their quarterly updates, as well as gas drillers from other plays (like the Haynesville). If you review the statements made by U.S. gas drillers in this latest round of updates, you’ll find the sentiment expressed that although we’re currently in the price basement for natural gas, most drillers don’t think it’s going last long. They think low prices for natgas are short-lived and that a rebound awaits us in 2024.
Yesterday Antero Resources, which is 100% focused on the Marcellus/Utica with over 500,000 net acres under lease (and the largest M-U driller in West Virginia), issued its first quarter 2023 update. The company reports net production averaged 3.3 billion cubic feet equivalent per day (Bcfe/d), an increase of 3% year-over-year. Of that production, liquids (NGLs) averaged 187 thousand barrels per day (MBbl/d), an increase of 17% from the year-ago period. Natural gas production averaged 2.2 Bcf/d, a decline of 3% from the year-ago period.