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Major U.S. Shale Drillers Hedged 2H23 Gas Production Avg. $3.35
According to an analysis by S&P Global Commodity Insights, large U.S. shale gas drillers (namely Marcellus/Utica drillers) have hedged (pre-sold at a specific price) an average of 50% of anticipated shale gas production for the second half of 2023. The average price of the hedges is $3.35/Mcf, far above the average NYMEX Henry Hub price that has been bumping along between $2.25 and $2.75. CNX Resources is the top hedger, hedging 80% of its production in 2H23 at $3.04/Mcf.
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In August, the Executive Director of the Susquehanna River Basin Commission (SRBC) approved 34 water-use permits for individual shale gas well drilling pads in Bradford, Lycoming, Sullivan, Susquehanna, and Tioga counties. We’re just learning of the action via an official notice published in the Sept. 23 edition of the Pennsylvania Bulletin. The approvals, which are NOT subject to public review according to SRBC regulations, are general water permits. Each site will be required to receive a specific water withdrawal approval at a later date.
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 
New shale permits issued for Sep 11 – 17 in the Marcellus/Utica rebounded. There were 22 new permits issued last week, up from 14 issued two weeks ago. But the increase came from an unlikely source. Last week’s permit tally included 9 new permits in Pennsylvania, 1 new permit in Ohio, and 12 new permits in West Virginia. WV is typically on the low end of permits, not the high end. The top permittee for the week was Antero Resources, which received 6 permits in WV. EQT was a close second with 5 permits in WV.
Last week, MDN told you about Gulfport Energy drilling three Utica Shale wells in Ohio (with a fourth underway) that are massive 4-mile wells (see 
Quick history lesson. In 2004, Range Resources was the first company to drill and frack the first Marcellus Shale gas well, which happened in Mt. Pleasant Township (Washington County), PA. It was love at first sight. Over the past almost 20 years, Range has added a few other counties to the list of place where it drills, and the company remains headquartered in Fort Worth, Texas. However, Range considers Washington County, PA, “our core, our home, the DNA of our company.” The bond of love is still strong all these years later.
Funny how a couple of miles can make all the difference. In West Deer, a township in Allegheny County, PA (near Pittsburgh), Olympus Energy faces organized opposition to every project it proposes. Some Olympus well pads get approved, and some don’t. Every Olympus pad is vigorously opposed by anti-fossil fuelers. Yet in the township immediately next door, Frazer (also Allegheny County), Range Resources appears to have no opposition. We hope we don’t jinx it for them! Range has just received a permit for the company’s fifth multi-well pad. No hew and cry from the crazy left–no nothing. Just business as usual.
Range Resources’ new CEO, Dennis Degner, told analysts yesterday during a quarterly update that he doesn’t think the commodity price of natural gas and the overall demand for natgas will increase for the rest of this year and most of next year. So Degner will keep the company’s drilling program active enough to keep production at the current level of 2.1 Bcf/d. Range must drill 60-65 new wells yearly to maintain production.
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.