M-U Earnings Down 50% from 2022 Due to Low Price of NatGas
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…
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New shale permits issued for May 1-7 in the Marcellus/Utica rose slightly from the prior week. There were 20 new permits issued last week, up from 18 in the prior week. Last week’s tally included 15 new permits for Pennsylvania, 5 new permits for Ohio, and no new permits in West Virginia. Last week the top receiver of new permits was PennEnergy Resources, with 5 permits issued in Armstrong County, PA. Chesapeake Energy was second-highest, with 4 permits issued in Bradford County, PA.
Last November, MDN told you about a lawsuit filed by a family in Washington County, PA, against Chevron (now EQT) for drilling and fracking done in 2011-2012 near the family’s home (see 
Investors in shale oil and gas companies suffered for years with little or no returns for the money they invested. Five of eight large Marcellus/Utica drillers saw their share prices decrease by an astonishing 85% or more from 2008 to 2019 (see 
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.
Last September, EQT Corporation announced it is buying privately-owned Tug Hill Operating’s West Virginia shale assets for $5.2 billion (see 
EQT Corporation, the largest natural gas producer in the U.S., issued its first quarter 2023 update yesterday. The company reported a profit of $1.2 billion in net income during 1Q23 versus losing $1.5 billion in the same quarter a year ago. That’s nearly a $3 billion swing in one year! The company generated $774 million in free cash flow in 1Q. Production was 459 Bcfe (billion cubic feet equivalent) for the quarter, which works out to be 5.1 Bcfe/d, down 7% from last year’s 1Q, which was 492 Bcfe (or 5.47 Bcfe/d).
Free cash flow (FCF) refers to a company’s available cash repaid to creditors and as dividends and interest to investors. Companies typically use FCF to buy back shares of stock, pay fatter dividends, or pay off creditors. When the price of natural gas went through the roof last year, natural gas drillers were rolling in the FCF. Now with natgas commodity prices in the basement, FCF money has been wiped off the table. How much? For six large natural gas-focused drillers (five of them focused on the Marcellus/Utica, one on the Haynesville), some $8 billion of FCF is “now off the table” according to an article by Bloomberg.
Yesterday MDN told you about the recently-filed application by the State of Pennsylvania to attract one of 6 to 10 so-called hydrogen hubs to the Keystone State (see 
These days oil and gas companies (and other types of companies, too) have to “prove” they are helping to make Mom Earth better by achieving (giggle) “net-zero” carbon emissions. We giggle because net-zero is a myth. It’s a sham. And everybody knows it. But, these are the games people play now. Every night and every day now. Never meanin’ what they say now. Never sayin’ what they mean. (Whoops! Back to center.) Our own Marcellus/Utica companies, including the largest natural gas producer in the country, EQT, are forced to play the games too. Yesterday, EQT announced the company’s first “nature-based carbon offset initiative.” EQT will pay for trees to be planted in a Wheeling, WV park as atonement for emitting (sinning) CO2.