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Marcellus/Utica Drillers (All Gas Drillers) Had Fantastic 3Q22
Gas-focused drillers in the U.S. tracked by RBN Energy (most of them with major operations in the Marcellus/Utica region) had a stellar third quarter financially. The group of 11 publicly-traded drillers that RBN tracks tripled their earnings on average, and cash flows were up 150% over the same quarter last year. EQT Corp., now helmed by Toby Rice, was the most profitable company on the list, earning $2.6 billion in Q3 while generating $3.1 billion in cash flow. What about the others?
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Last week (Nov. 14-20) saw a total of 31 new shale permits issued across the Marcellus/Utica, up slightly from 26 permits the week before. Pennsylvania received the most permits, with 26 new permits issued. Ohio received five new permits, and West Virginia got skunked with no new permits last week.
Being a “pure-play” or “single play” (as the Brits call it) shale driller has its advantages. It also, in a changing world, can have its risks, or disadvantages. That is the point made in a new analysis by global research and consultancy Wood Mackenzie. Wood specializes in doling out advice on oil, gas, LNG, power, renewables, chemicals, and metals & mining. In an excellent article delving into the advantages and disadvantages of being a pure-play driller, Wood makes the following observation: “Five US operators – EQT, Pioneer, Antero, Diamondback and Range – have amassed single-basin positions on a global scale.” Yeah, three of the five are M-U pure-play drillers, and the assets they have “amassed” rival (produce more) than many of the Majors’ non-shale assets. It is a truly amazing feat.
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.
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?
Drillers (exploration and production companies, or E&Ps) were thrilled with record-high earnings and cash flow in the second quarter of this year. Soaring commodity prices and “strict financial discipline” on the part of oil and gas drillers resulted in pre-tax operating earnings and cash flows surging by 29% and 22%, respectively, from 1Q22. And 1Q22 was up too! So what did drillers, especially drillers in the Marcellus/Utica, do with all that extra cash? Did they pay down debt? Buy back shares of company stock? Issue higher dividends? Something else?
Oil and gas companies have fallen into line over the past few years, bowing to pressure to play the silly games the left sets up, including generating reports on how much greenhouse gases (GHG) a company produces. The federal Environmental Protection Agency (EPA), an extremely arrogant organization, declares itself to be the arbiter of what is and is not acceptable for carbon dioxide and methane emissions. When oil and gas companies begin to play the game a little too well (winning the game), the left gets torqued off and attacks. Attack of the Big Green clones. Here’s an example from the Marcellus/Utica, involving Range Resources, of how Big Green attacks when companies begin to win the game…