EQT 3Q Completed Wells & Production Drops, but Profits Rise
EQT faced some strong headwinds during the third quarter of 2022, but the company still came out on top. The headwinds included third-party (mainly pipeline) outages beyond EQT’s control, as well as droughts that decreased the volume of water the company could lay hands on for fracking. As a result, the company brought online to sales just 16 new wells instead of the 22 to 32 forecasted. Production slipped too, to 488 Bcfe (billion cubic feet equivalent), down 7% from last year’s 3Q. That 488 Bcfe calculates out to be 5.30 Bcfe/d. On the plus side, the company generated net income of $684 million in 3Q22 vs. losing $1.98 billion in 3Q21, and it generated free cash flow of $591 million.
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Antero Resources is one of the largest drillers in the Marcellus/Utica (with major assets in West Virginia). The company is the fifth largest natgas producer in the country and the second largest LNG exporter. Antero provided its third quarter 2022 update yesterday. Like other major M-U drillers, Antero had a great quarter financially. Antero’s 3Q22 net income was $560 million (adjusted net Income was $531 million), versus losing $549 million in 3Q21. Free cash flow was a whopping $797 million in 3Q. Antero produced an average of 3.2 billion cubic feet equivalent per day (Bcfe/d), including 171,000 barrels per day (Bbl/d) of liquids. That’s down just a hair from 3.247 Bcfe/d produced in 3Q21.
Yesterday, the Ohio Chamber of Commerce held its “Energy Supply Chain: Present & Future” conference at the Ohio Statehouse Atrium in Columbus. Participants and speakers included oil and natural gas producers, pipeline operators, policymakers, renewable companies, and more. Questions largely centered on the energy transition and how various resources fit into a so-called sustainable future. The upshot was that Ohio’s natural gas (mostly Utica, some Marcellus) is front and center as a driving force for Ohio energy, and the Ohio economy.
Another weak and pathetic number of new shale drilling permits were issued for the week of Oct. 17-23 in the Marcellus/Utica. Pennsylvania had only 10 new permits, with six of them going to Range Resources in Beaver County. Ohio had just one new permit, for Southwestern Energy in Monroe County. And West Virginia had a big, fat, goose egg. No new permits. Bummer.
Two days ago, Range Resources issued its third quarter 2022 update, and yesterday the company held a conference call for upper management to brief analysts. By all accounts, Range had a great 3Q. Range produced an average of 2.13 billion cubic feet equivalent per day (Bcfe/d), with approximately 70% of it as natural gas and the rest in NGLs. Range only spent $138 million to drill, but cash flow from operations was a staggering $550 million–the highest in company history. The company drilled 7 wells and completed 22 wells during 3Q. Range brought 12 wells online to sales in the southwestern part of PA, and it brought 6 wells online to sales in northeastern PA.
A court case decided in late April in Pennsylvania Superior Court appears (to us) to have significant ramifications for landowners and drillers with respect to deducting post-production expenses. The case is Dressler Family, LP v. PennEnergy Resources, LLC (copy of the decision below), and it addresses “market enhancement” royalty clauses found in many PA leases. Market enhancement clauses typically prohibit the deduction of post-production costs that are incurred when transforming gas into a marketable form. Some drillers ignore such clauses and deduct all “post-production costs” from the landowner’s royalty based on the drillers’ incorrect assumption that gas is “marketable” at the wellhead. This case and decision helped clear up definitions of what is and is not marketable gas.
Banpu is Thailand’s largest coal mining company. But Banpu is far more than just a coal company. It has multiple subsidiaries in various energy industries scattered around the globe. For example, here in the U.S., Banpu partners with Kalnin Ventures and operates BKV Corporation (
Expectations play a big role in investing. The financial markets do a lot of anticipating and forecasting and guessing about where a company or entire sector is heading. Such is the game being played right now with expectations for Marcellus/Utica shale gas companies and their forthcoming third quarter financial updates. Given the high price of natural gas during 3Q22, analysts expect shale gas companies to be swimming in free cash flow. The natural follow-on question is, what will they do with all of that extra cash?
According to law firm Houston Harbaugh, P.C., deducting fuel costs from landowner royalties continues to be an ongoing and widespread practice. Some leases allow the use of a portion of the raw gas recovered at a well to “fuel” well-pad operations (processing of the gas). Not only are landowners denied a royalty on the fuel gas volume, they also have that same “cost” deducted from their production royalty! According to Houston Harbaugh, this practice of deducting fuel costs must be closely monitored by all landowners.
Yesterday the Pennsylvania Independent Oil & Gas Association (PIOGA) held its annual Marcellus to Market conference at Hollywood Casino at The Meadows in Washington, PA. The event explored efforts to promote manufacturing in Pennsylvania, natural gas as a transportation fuel, the future of the long-rumored Appalachian Storage Hub, and the latest regarding pipelines and other means of delivering natural gas to market. A key focus for the event and topic for a panel discussion in the morning was workforce recruiting, development, and retention. MDN friend Charlie Schliebs, Chairman of the Energy Innovation Center Institute and Managing Director of Stone Pier Capital Advisors, moderated this lively panel.
The First Amendment of the U.S. Constitution says: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.” New Jersey is attempting to abridge the freedom of speech for Exxon Mobil, Shell Oil, Chevron, BP, ConocoPhillips, and the American Petroleum Institute (API). NJ has sued those entities claiming they knew that the products they manufacture and promote (oil and gas) have caused global warming and that these entities have lied, and continue to lie, about knowing. NJ wants to muzzle the right of the API and Exxon, et al., to freely defend themselves and stick up for fossil energy, claiming to do so endangers the public and harms the residents of NJ. It’s the most outlandish thing you’ve ever heard.
In December 2020, Dan Rice IV, former CEO of Rice Energy and a member of the EQT board of directors, launched a “blank check” acquisition firm, called Rice Acquisition Corp., to invest in various energy ventures. Dan found his something-to-invest-in just a few months later in the form of acquiring and merging together Archaea Energy and Aria Energy into a single company focused on providing renewable natural gas (RNG) and “green” hydrogen (see 
The Pennsylvania Dept. of Environmental Protection (DEP) has assessed a $670,000 fine plus extra “cost recovery” charges of nearly $30,000 against the Shell Pipeline Company for work done between 2019 and 2021 on Shell’s Falcon ethane pipeline project. The DEP says that a series of inspections showed “failure to comply” with this paperwork requirement and that paperwork requirement. There were a few instances of erosion into “waters of the commonwealth.” But in the end, the DEP acknowledges, “no visual aquatic impacts were observed.” No muddy water. No dead fishies. No dead salamanders. No dead nothing. In other words, the DEP fined Shell for nothing–no lasting impacts on the environment from the work done to construct the Falcon pipeline.