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3Q Financial Health of Top Marcellus/Utica Drillers Troubling
Capital expense (capex) investments made by drillers in the Marcellus/Utica during the third quarter of 2020 were the lowest in at least six years according to a new report (full copy below) from the Institute for Energy Economics and Financial Analysis (IEEFA). The report looks at nine of the top drillers in the M-U and finds collectively they cut capex investment by more than one-third in 3Q20 over 3Q19. And yet those same nine collectively spent a half-billion dollars more during 3Q on drilling and building projects than they earned in revenue from selling oil and gas. That’s troubling.
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Last week Pennsylvania issued 12 new shale well drilling permits with a mix of permits issued in both the southwest (wet gas) and northeast (dry gas) regions of the state. Ohio issued 7 new permits, all of them except one in the same county (Jefferson). West Virginia was a goose egg–no new permits issued last week.
An article in yesterday’s Wall Street Journal says there is a “split reality” emerging for U.S. shale drillers. Shale oil drillers are struggling to survive, while shale gas drillers, particularly in the Marcellus/Utica, are slowly seeing signs of financial recovery. The upshot is that you should consider investing in shale gas drillers (and not shale oil drillers).
Range Resources issued its third-quarter 2020 update on Friday. The company, the very first driller to sink a well in the Marcellus, lost $680 million in 3Q. Most of the loss was a one-time charge called “exit and termination” related to the company’s sale of their Louisiana Haynesville Shale assets in August. The update didn’t state how many new wells were drilled in the Marcellus, but it does say Range connected 19 new wells to sales in 3Q with plans to add another 7 wells to sales by the end of the year.
Range Resources is the company that started it all in the Marcellus by drilling the very first Marcellus Shale gas well back in 2004. Range also was the first to drill in the Upper Devonian and Utica layers. Over the years Range, like many other M-U drillers, has invited folks to go on tours of their drilling sites. If you’ve never been on a rig tour, take one! At least, when they begin again. Due to the coronavirus, Range, like other drillers, stopped in-person rig tours. However, Range now conducts virtual (live) rig tours instead.
We spotted a couple of stories, one in Barron’s the other in the Wall Street Journal, about the pickup in the futures price of natural gas over the past week, and how those recent gains have led to impressive gains in the share price for Marcellus/Utica drillers. Yesterday the NYMEX Henry Hub futures price closed up 4.11% to $2.74/Mcf. The rising tide lifts all boats.
Earlier this week we brought you a post exploring whether or not PTT Global Chemical will, in the end, actually build a $10 billion ethane cracker plant in Belmont County, Ohio (see 
Range Resources issued its annual Corporate Sustainability Report (CSR) this morning (full copy below). The report lays out the company’s performance on key issues. It also sets so-called greenhouse gas reduction targets. Of particular note, Range has set a target to achieve net-zero emissions by 2025. If they do, they would be the first oil and gas company to achieve a net-zero threshold by 2025–less than five years from now.
Most of the layoffs during this particularly brutal (and historic) downturn in the oil and gas market have taken place in oilfield services companies like Halliburton, Baker Hughes and Sclumberger. But exploration & production companies are not immune. Chevron is laying off workers in their Marcellus/Utica operation because the company is selling all of its Appalachian assets and leaving the region (see