Amid Market Downturn, Equinor Buys Up More U.S. Gas Assets

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--As many U.S. energy companies are posting a drop in revenues due to natural gas markets, energy major Equinor ASA (NYSE:EQNR) (Stavanger, Norway) said it's now in control of the entire working interest held by EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania) in the Appalachian Shale basin.

Equinor signed an agreement with EQT last week to acquire additional non-operated interest in the Marcellus Shale, within the broader Appalachian Shale. The Norwegian company paid $1.25 billion for the remaining interest, which gives Equinor 100% control over the EQT's former holdings. The acreage is operated primarily by Expand Energy Corporation (NASDAQ:EXE) (Oklahoma City, Oklahoma), formerly known as Chesapeake Energy.

"We continue to high-grade Equinor's international portfolio in line with our strategy, improving robustness by adding more natural gas volumes in a core market where we produce with low break-evens and low-intensity upstream emissions," said Philippe Mathieu, an executive vice president for exploration and production at Equinor, last week.

Equinor believes the transaction will add 80,000 barrels of oil equivalent per day in production to its near-term potential in the U.S., a world leader in natural gas production.

The Appalachian Shale covers two reservoirs, the Utica and Marcellus shale plays, though the federal government lumps them together because of geological similarities. The entire basin is by far the largest inland natural gas producer in the U.S., accounting for about 30% of the output from the Lower 48 states.

Total U.S. natural gas production, however, may be plateauing. Appalachian gas production levels are stable relative to year-ago levels and forecasts point to incremental growth, if any.

The Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, expects total U.S. gas production to increase 1% next year relative to the expected 2024 average to reach 114.4 billion cubic feet per day (Bcf/d). Appalachian levels are forecast to remain unchanged next year.

In September, before it closed on a merger with Southwestern Energy Company to become Expand, Chesapeake said its guidance on production would remain unchanged. It already had shown a dip in production, meanwhile, reporting a 14% drop in output from first quarter levels to average 2.75 Bcf/d during the three months ending June 30.

During the three months to September 30, Expand reported that production from its Appalachian assets was down 11% from year-ago levels. Total revenue for the third quarter was $648 million, a 57% decline from year-ago levels.

Ample supplies, lackluster demand and warmer-than-normal weather conditions in the Northern Hemisphere have combined to keep a lid on natural gas prices this year, bruising the financial performance of energy companies.

Henry Hub, the U.S. benchmark for the price of natural gas, flirted with $10 per million British thermal units (MMBtu) in 2022, when the invasion of Ukraine by gas-rich Russia upended global markets. With the U.S. taking up much of the slack, prices have fallen ever since.

On Monday, Henry Hub was trading at around $2.77/MMBtu. The Department of Energy is expecting Henry Hub to average $2.28/MMBtu this year and climb to $3.06/MMBtu by next year.

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