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M-U Drillers Producing Same as 2022, Spending 9% More in 2023
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.
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The difference between the Susquehanna River Basin Commission (SRBC) and the Delaware River Basin Commission (DRBC) is stark. The former is well-run and rational, the latter is disorganized and irrational. At least with respect to fracking. Over the weekend, the SRBC published a notice in the Pennsylvania Bulletin to announce that during the month of January, the agency approved 38 requests for daily water use on shale well pads in the SRBC’s jurisdictional territory in Pennsylvania, totaling some 233.5 million gallons. Put another way, this is a handy list of where drilling will soon happen in northeastern PA.
New shale permits issued for Feb. 5-12 in the Marcellus/Utica increased nicely last week. There were 40 new permits issued in total last week, including 25 new permits for Pennsylvania, 11 new permits for Ohio, and four permits issued in West Virginia. The week before, there were only 26 new permits issued. Last week the top receiver of new permits was Seneca Resources, with six new permits for Tioga County, PA. Coterra Energy received five permits for Susquehanna County, PA. In Ohio, Encino Energy and Ascent Resources both received four new permits–in Carroll and Harrison counties, respectively.
National Fuel Gas Company (NFG), headquartered in Buffalo, NY, is the parent company for Marcellus/Utica driller Seneca Resources and the parent of midstream company Empire Pipeline. Last week NFG (and Seneca and Empire) issued its latest quarterly update. NFG operates on a weird fiscal year system. This latest update for NFG is its first quarter 2023 update, which would be everybody else’s fourth quarter update. Don’t get confused. So what did the update (and conference call) reveal about Seneca and Empire? Seneca’s M-U natural gas production was 90.6 Bcfe for the quarter (just shy of 1 Bcf/d), an increase of 9.2 Bcfe, or 11%, higher than the prior year, and 3% higher than fiscal 2022 fourth quarter.
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?
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?