Gulfport Drilling Marcellus (Not Utica) Wells in Belmont Co., OH
Gulfport Energy, the third-largest driller in the Ohio Utica Shale (by the number of wells drilled), emerged from bankruptcy in May 2021 with a new board and top management. In January of this year, the company appointed a new CEO, John Reinhart, the former President and CEO of M-U driller Montage Resources Corporation before that company was gobbled up by Southwestern Energy (see Marcellus Veteran John Reinhart Joins Gulfport Energy as CEO). Yesterday Gulfport issued its second quarter 2023 update. The company made $78 million in net income during 2Q23 versus $216 million in 2Q22, down 64%, which tracks with similar decreases seen in other major M-U drillers.
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We’re trying not to sound too PO’d (personally offended) here, but once again, in what seems to be an every month or two occurrence, the Pennsylvania Dept. of Environmental Protection’s (DEP) online oil and gas permitting database is throwing an error. So, we are left with no permit numbers for PA for the week of July 10-16. Neither the Ohio Dept. of Natural Resources (ODNR) reporting system nor the West Virginia DEP reporting system have these problems. It is only the PA DEP that routinely goes “off the air.” Why is that? [Rant over] Even without PA’s numbers, OH and WV combined issued 17 permits last week, versus the pathetic 11 total from the prior week that included PA.
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?
The Ohio Dept. of Natural Resources (ODNR) recently released production numbers for the first quarter of 2023, and wow! What a surprise! Oil production in the northern Utica Shale skyrocketed, led by wells drilled by Encino Energy. According to an analysis by the Youngstown Business Journal, four shale wells drilled by Encino in Columbiana County have “shattered previous production figures in the county.” Adding up all oil production by all drillers, Encino had the most oil production in the state, with 53.7% of the total oil produced in the Utica/Point Pleasant during the first quarter. It certainly looks like Encino has cracked the oil code in the Buckeye State!
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…
Gulfport Energy, the third-largest driller in the Ohio Utica Shale (by the number of wells drilled), emerged from bankruptcy in May 2021 with a new board and new top management. In January of this year, the company appointed a new CEO, John Reinhart, the former President and CEO of Marcellus/Utica driller Montage Resources Corporation before that company was gobbled up by Southwestern Energy (see 
The sharp analysts at RBN Energy have sifted through the announcements and “guidance” statements from 42 of the country’s major publicly-traded oil and natural gas drillers for 2023. Among them are 11 gas-focused drillers, nine of which have operations in the Marcellus/Utica region. Looking at the list of 11 gas-focused drillers, RBN finds production will be just about the same in 2023 as it was in 2022–projecting a dip of 1% this year. The analysis also finds collectively that the 11 gas-focused drillers will spend around 9% more on drilling this year due to Bidenflation. Spending more to produce the same–not a winning formula for a politician to run on.
John Reinhart is the former President and CEO of M-U driller Montage Resources Corporation before that company was gobbled up by Southwestern Energy in 2020 (see