4 M-U Drillers are in Top 10 ESG Oil & Gas Companies; EQT is #1
We’ve noticed nearly all of the public companies (and many private companies) in the oil and gas space are talking about their ESG (environmental, social, governance) programs. There’s a lot of hot air surrounding ESG programs. How does one separate out fact from fiction? Enverus, the company that produces (in our opinion) the best and most accurate weekly rig count numbers, has a solution. Enverus has developed a new framework/system to compare one oil/gas company’s ESG efforts against its competitors. Of the top 10 best ESG programs in the oil and gas industry are four companies (drillers) in the Marcellus/Utica. Coming in at the #1 position is none other than the largest natural gas driller in the country: EQT.
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Each quarter NGI (Natural Gas Intelligence) runs the numbers and publishes a list of the 25 top natural gas marketers in the U.S. These are not necessarily the top 25 producers of natural gas (although in some cases they are), but the top 25 sellers (vendors, jobbers) of natural gas. NGI’s latest quarterly report shows overall the biggest sellers of natgas lost ground once again in 2Q21, which continues a 2+ year trend of year over year declines in the amount of gas sold.
Although the price of natural gas has rocketed this year and cash flows for Marcellus/Utica drillers have ballooned, showering drillers with plenty of free cash flow, M-U drillers are spending less (19% less) on capital expenditures than they did in 2020. Production in the M-U is up slightly by 4% so far in 2021 vs. 2020. The experts at RBN Energy have dived into this latest twist in the shale story to help explain what’s going on and why.
Not only is gas so-called “responsible gas” if it’s extracted from the ground in a certain way, it’s even more “responsible” if it flows through a pipeline a certain way. That’s the theory anyway. In June of this year, Southwestern Energy announced it was working with Project Canary to certify all of its Marcellus/Utica gas production as responsible (see 
Because of the soaring price of natural gas (see our companion post today), and because gas drillers have shown remarkable restraint and a real effort to scale back capital spending in an effort to generate free cash flow, investors have taken note and like what they’ve seen. The share price in most pure-play shale gas producers (mainly those in the M-U) posted double-digit gains in value over the past month.
Last week Pennsylvania issued 18 permits for new shale well drilling scattered across the state. Ohio (for the eighth week in a row) did not issue any new shale permits. Are we missing something with Ohio? Are they late in updating their online database? West Virginia issued 2 permits for new shale well drilling last week.
Southwestern Energy, which is one of the biggest Marcellus/Utica drillers, previously applied for a conditional use permit from the City of Weirton, WV that would allow them to build a well pad and drill several wells on it all within the city limits of Weirton. The request came before the Weirton Zoning Board of Appeals in August but the board delayed a decision until this month, September. Following almost three hours of comments and testimony yesterday, the Zoning Board of Appeals unanimously voted down Southwestern’s request–a decidedly unfriendly gesture by the normally gas-friendly municipalities in WV.
In early June Southwestern Energy Company announced it would no longer be a pureplay Marcellus/Utica driller. Southwestern said it was buying Indigo Natural Resources, which drills for natural gas in the Louisana Haynesville Shale, for $2.7 billion (see 
It’s been our observation since beginning to write about the shale energy space in 2009 that every year or two most drillers, at least the publicly traded drillers, issue new notes (what we call IOUs) to pay off already-issued notes coming due within a few years. And if there’s any money left over from the new tranch of notes issued, they use it to pay down other debts or “for other corporate purposes.” The latest swap-new-notes-for-old-notes comes from a major Marcellus/Utica driller, Southwestern Energy, which last week floated $1.2 billion of new notes to help pay off what amounts to $1.4 billion of older notes coming due in the next few years.
During the second quarter (May through June), ten of the largest oil and gas producers covered by S&P Global Market Intelligence saw their NGL (natural gas liquids) revenues grow substantially from the same period a year ago. Those ten companies, half of them drillers in the Marcellus/Utica region, saw NGL prices increase from 104% to as high as 261%. The extra money from NGLs made what turned out to be a down quarter financial-wise (because of bad bets on hedges) better than it would have otherwise been.
Southwestern Energy issued its second quarter 2021 update last Friday. Southwestern produced 276 billion cubic feet equivalent (Bcfe) during 2Q, up from 201 Bcfe in 2Q20 (before it acquired Montage Resources). That works out to be 3.0 Bcf/d, of which 79% (2.4 Bcf/d) was natural gas and the rest was liquids (NGLs). Like EQT, Antero, and other major M-U drillers, Southwestern blew it on “unsettled derivatives” during the quarter. The company posted a $608 million loss for the quarter overall, losing $772 million on derivatives.
Expectations coming from Wall Street are that pure-play drillers, like many in the Marcellus/Utica, will show a turnaround in their financials for the second quarter of 2021. According to S&P, investors took drillers at their word last year that they won’t “drill baby drill” the way they have in years gone by. The stock prices of nearly all major M-U drillers have soared over the past 12 months as a result. The biggest turnaround has been Antero Resources. Its stock price is up nearly 400% over the past 12 months! Range Resources’ stock price is up 140%.