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Marcellus/Utica Driller Stock Prices Soar Over Past 30 Days
Because of the soaring price of natural gas (see our companion post today), and because gas drillers have shown remarkable restraint and a real effort to scale back capital spending in an effort to generate free cash flow, investors have taken note and like what they’ve seen. The share price in most pure-play shale gas producers (mainly those in the M-U) posted double-digit gains in value over the past month.
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Last week Pennsylvania issued 18 permits for new shale well drilling scattered across the state. Ohio (for the eighth week in a row) did not issue any new shale permits. Are we missing something with Ohio? Are they late in updating their online database? West Virginia issued 2 permits for new shale well drilling last week.
During the second quarter (May through June), ten of the largest oil and gas producers covered by S&P Global Market Intelligence saw their NGL (natural gas liquids) revenues grow substantially from the same period a year ago. Those ten companies, half of them drillers in the Marcellus/Utica region, saw NGL prices increase from 104% to as high as 261%. The extra money from NGLs made what turned out to be a down quarter financial-wise (because of bad bets on hedges) better than it would have otherwise been.
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.
Expectations coming from Wall Street are that pure-play drillers, like many in the Marcellus/Utica, will show a turnaround in their financials for the second quarter of 2021. According to S&P, investors took drillers at their word last year that they won’t “drill baby drill” the way they have in years gone by. The stock prices of nearly all major M-U drillers have soared over the past 12 months as a result. The biggest turnaround has been Antero Resources. Its stock price is up nearly 400% over the past 12 months! Range Resources’ stock price is up 140%.
For all the chatter about ESG and environmental yada yada, at the end of the day every Marcellus and Utica driller drills for and extracts hydrocarbons. Fossil fuels. As the de facto leader of all natural gas drillers, it’s important and instructive to watch what EQT and its young CEO, Toby Rice, actually do AND say. EQT and Rice are leading the charge to defend our industry against the crazies who want to end the use of all fossil fuels. In a recent column appearing in a West Virginia newspaper, Rice makes the case that natural gas is good for the economy and good for the environment.
A relatively short jury trial last week in a Belmont County, OH court resulted in a quick, three-and-a-half-hour decision in favor of a landowner against Rice Drilling (now EQT) and Gulfport Energy in a trespass case. The jury awarded the landowner, Tera LLC (owned by Thomas Shaw), a $40 million judgment. It’s believed to be the single largest jury award in Belmont County history.
According to an analysis done by S&P Global Market Intelligence, the five largest drillers in the Pennsylvania Marcellus Shale resumed their drilling in June in a big way. S&P’s analysis shows those five drillers were responsible for 51% of the new drilling permits issued last month, up from 28% of new permits issued in May. Perhaps we know why. The price of natgas at regional hubs in PA rocketed over the past month. At the Leidy Hub in the northeast’s dry gas window (centered on Susquehanna County, PA), cash prices went from a low of 93.7 cents/MMBtu on May 3 to $3.07/MMBtu at the end of June.