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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Rising natural gas prices have not lifted all boats equally. In contrast to supermajor integrated oil companies, who have seen profits soar on rising prices and strong demand, large independent gas-oriented drillers have had a rockier time. Several made significant--and incorrect--bets on natural gas prices, leading to the perverse outcome in the first quarter when rising prices depressed revenue or earnings.
Some of these large companies are working to unwind those hedges that proved so disastrously wrong. In recently released second-quarter earnings, four large independent U.S.-based gas-oriented producers--EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania), Coterra Energy Incorporated (NYSE:CTRA) (Houston, Texas), Antero Resources Corporation (NYSE:AR) (Denver, Colorado) and Range Resources Corporation (NYSE:RRC) (Fort Worth, Texas)--reported improved revenue and earnings compared to the year-earlier quarter.
Click on the image at right to see a snapshot of second-quarter 2022 financial results for the four companies compared to year-earlier period.
One of these four companies used a merger to climb upward in production, acreage, revenue and earnings: Coterra is the successor name of last October's combination of Cabot Oil & Gas Corporation and Cimarex Energy.
To survive in what has traditionally been a low-price environment for natural gas, these companies have had to become experts at cost management. That's a job that never really ends, and it's even more important now as acreage portfolios evolve with asset sales and acquisitions and the rising cost of oilfield services and skilled labor.
These four companies reported second-quarter earnings in late July and early August.
For more on the strategic opportunities and challenges facing domestic gas producers, including meeting increased global demand for liquefied natural gas (LNG) and working around the unexpected outage at the Freeport LNG terminal, one of the country's largest, see August 4, 2022, article - In the U.S., Big Gas Following Footsteps of Big Oil.
EQT
Pittsburgh-based EQT, currently the largest independent gas producer in the U.S., operates exclusively in the Appalachian Basin (which includes the Marcellus and Utica shales), the largest gas-producing area of the country. But it's one where producers have had trouble getting their product to market as existing pipelines are fully subscribed and some proposed projects are in legal limbo.
The Appalachian Basin is the country's largest gas-producing formation, with daily production estimated at 35.3 billion cubic feet per day Bcf/d), roughly one-third of all U.S. gas production. The region has very little crude oil production, and production from new gas wells peaked in 2021, according to the U.S. Energy Information Administration (EIA).
Click on the image at right to see gas production from the Appalachian Basin.
EQT is not relying on size alone to succeed, so it's focusing on becoming what it calls the best producer by creating long-term value for all stakeholders, including employees, landowners, communities, industry partners and investors. The company acquired Alta Resources last year, boosting its acreage and production.
The company increased production about 19% during the second quarter and got nearly $1 per thousand cubic feet of gas equivalent more for its product than the comparable year-earlier quarter.
But EQT is still trying to extricate itself from its derivative bets, which lowered revenue $845 million in the just-completed period, down from $1.3 billion in revenue reductions for the year-earlier quarter.
Overall, EQT earned $891 million during the quarter on $2.5 billion of sales. The company feels enough confidence in its future that it increased its dividend 20% in the just-completed quarter.
"We had a solid operational quarter, with material gains in completion efficiency despite a continued tight oilfield service backdrop," Toby Z. Rice, president and chief executive, said July 27 in announcing earnings. The company also announced plans to accelerate debt repayment over the 2022-2023 period by $1 billion, to $2.5 billion.
Industrial Info is tracking six active EQT projects in the U.S. valued at about $1.6 billion. Most of these projects are part of the proposed but long-stalled Mountain Valley Pipeline, which was included in the "Inflation Reduction Act" deal recently struck between U.S. Sen. Joe Manchin (D-W.Va.) and the Democratic leadership of the Senate. Subscribers to Industrial Info's Global Market Intelligence (GMI) Pipelines Project Database can click here for related reports.
Coterra Energy
Coterra's net income soared in the second quarter, to about $1.2 billion on $2.6 billion in revenue. For the comparable year-earlier quarter, the company earned $30 million on $324 million in revenue. The creation of Coterra from the merger of Cabot and Cimarex created a much larger company.
Commenting on the quarter's results, released August 2, Thomas E. Jorden, president and chief executive, noted that capital costs had risen 20% to 25% year over year. Still, he noted, "Coterra delivered another strong quarter as we remain focused on capital efficiency, operational execution and shareholder returns through our base dividend, variable dividend, share repurchase program and debt reduction (programs). I am excited by the progress our new organization has made less than a year after the merger, and we are eager to build on our track record of execution."
For the quarter, Coterra produced about 632,000 barrels of oil equivalent per day, and both oil and gas production exceeded the high end of guidance.
Jorden said, "We remain committed to capital discipline and our updated guidance continues to assume we will invest less than 30% of our 2022 projected cash flow from operations," leaving plenty free to repay debt and increase shareholder returns. "At the recent commodity strip (price)," he added, "we expect to generate free cash flow of approximately $4.5 billion in 2022."
Prior to announcing results, the Coterra board approved a quarterly dividend of 65 cents per share, comprised of a 15-cents-per-share base dividend and a 50-cents-per-share variable dividend.
Coterra has operations in the Permian Basin, Marcellus Shale and Anadarko Basin.
Antero Resources
Denver-based Antero used increased quarterly cash flow stemming from strong demand for gas and natural gas liquids (NGLs) to accelerate debt repayment and increase its stock-buyback program. The company operates in the Appalachian Basin, in spots where there is a higher proportion of oil and NGLs, and is seeking to increase its proportion of oil in its portfolio.
In an earnings release July 27, Paul Rady, chairman, president and chief executive, said the company's second-quarter performance "benefited from outstanding operations that included higher premiums to benchmark pricing and excellent well performance. Strong demand for natural gas along the LNG fairway has led to as much as a $0.25 per (million British thermal units) increase in positive basis pricing on the Gulf Coast since the beginning of 2022. As additional LNG facilities are placed in service, we anticipate the premium in basis pricing relative to NYMEX Henry Hub to increase further. We are uniquely positioned to directly benefit from increasing NYMEX prices with 75% of our natural gas being sold at these premium priced hubs in the LNG corridor."
Industrial Info is tracking nine active projects under development by Antero Resources. All are located in the Appalachian Basin. The value of these proposed projects is about $250 million. All of these projects are part of the Antero Midstream Utica/Marcellus Gathering System. Subscribers to Industrial Info's Production Project Database can click here for the project reports.
Range Resources
In the second quarter, approximately 70% of the company's production of 2.1 billion cubic of gas equivalent per day (Bcfe/d) was natural gas, the Fort Worth, Texas-based company reported.
Like its brethren Big Gas firms, Range used record free cash flow to buy back stock and increase debt repayment. More of that may be coming, the company projected: "As we rapidly approach our long-term balance sheet targets over the coming quarters, we will be well positioned to return additional capital to shareholders in the form of dividends and continued share repurchases."
In a July 25 earnings release, Jeff Ventura, Range's chief executive said, "In the midst of a global energy crisis, the need for oil and gas production from the United States is more important than ever. In order for U.S. supply to meet growing domestic and global demand, however, there must be support for the required infrastructure, including permit approvals and construction of pipelines, compression, processing facilities and LNG export terminals."
He added: "Range is well positioned to serve and benefit from this call on American natural gas supply given our access to multiple domestic and international markets for natural gas and NGLs and, more importantly, our multi-decade core inventory life in Appalachia."
The company's outlays for drilling and completions (D&C) in the just-completed period was $119 million. For full-year 2022, the company reiterated its capital spending guidance of $460 million to $480 million, "with expectations at the upper end of the guidance." It told investors it expected to hold production flat this year at slightly over 2 Bcfe/d. Roughly 30% of its 2022 production is expected to be liquids (crude oil and NGLs).
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
Some of these large companies are working to unwind those hedges that proved so disastrously wrong. In recently released second-quarter earnings, four large independent U.S.-based gas-oriented producers--EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania), Coterra Energy Incorporated (NYSE:CTRA) (Houston, Texas), Antero Resources Corporation (NYSE:AR) (Denver, Colorado) and Range Resources Corporation (NYSE:RRC) (Fort Worth, Texas)--reported improved revenue and earnings compared to the year-earlier quarter.
Click on the image at right to see a snapshot of second-quarter 2022 financial results for the four companies compared to year-earlier period. One of these four companies used a merger to climb upward in production, acreage, revenue and earnings: Coterra is the successor name of last October's combination of Cabot Oil & Gas Corporation and Cimarex Energy.
To survive in what has traditionally been a low-price environment for natural gas, these companies have had to become experts at cost management. That's a job that never really ends, and it's even more important now as acreage portfolios evolve with asset sales and acquisitions and the rising cost of oilfield services and skilled labor.
These four companies reported second-quarter earnings in late July and early August.
For more on the strategic opportunities and challenges facing domestic gas producers, including meeting increased global demand for liquefied natural gas (LNG) and working around the unexpected outage at the Freeport LNG terminal, one of the country's largest, see August 4, 2022, article - In the U.S., Big Gas Following Footsteps of Big Oil.
EQT
Pittsburgh-based EQT, currently the largest independent gas producer in the U.S., operates exclusively in the Appalachian Basin (which includes the Marcellus and Utica shales), the largest gas-producing area of the country. But it's one where producers have had trouble getting their product to market as existing pipelines are fully subscribed and some proposed projects are in legal limbo.
The Appalachian Basin is the country's largest gas-producing formation, with daily production estimated at 35.3 billion cubic feet per day Bcf/d), roughly one-third of all U.S. gas production. The region has very little crude oil production, and production from new gas wells peaked in 2021, according to the U.S. Energy Information Administration (EIA).
Click on the image at right to see gas production from the Appalachian Basin.EQT is not relying on size alone to succeed, so it's focusing on becoming what it calls the best producer by creating long-term value for all stakeholders, including employees, landowners, communities, industry partners and investors. The company acquired Alta Resources last year, boosting its acreage and production.
The company increased production about 19% during the second quarter and got nearly $1 per thousand cubic feet of gas equivalent more for its product than the comparable year-earlier quarter.
But EQT is still trying to extricate itself from its derivative bets, which lowered revenue $845 million in the just-completed period, down from $1.3 billion in revenue reductions for the year-earlier quarter.
Overall, EQT earned $891 million during the quarter on $2.5 billion of sales. The company feels enough confidence in its future that it increased its dividend 20% in the just-completed quarter.
"We had a solid operational quarter, with material gains in completion efficiency despite a continued tight oilfield service backdrop," Toby Z. Rice, president and chief executive, said July 27 in announcing earnings. The company also announced plans to accelerate debt repayment over the 2022-2023 period by $1 billion, to $2.5 billion.
Industrial Info is tracking six active EQT projects in the U.S. valued at about $1.6 billion. Most of these projects are part of the proposed but long-stalled Mountain Valley Pipeline, which was included in the "Inflation Reduction Act" deal recently struck between U.S. Sen. Joe Manchin (D-W.Va.) and the Democratic leadership of the Senate. Subscribers to Industrial Info's Global Market Intelligence (GMI) Pipelines Project Database can click here for related reports.
Coterra Energy
Coterra's net income soared in the second quarter, to about $1.2 billion on $2.6 billion in revenue. For the comparable year-earlier quarter, the company earned $30 million on $324 million in revenue. The creation of Coterra from the merger of Cabot and Cimarex created a much larger company.
Commenting on the quarter's results, released August 2, Thomas E. Jorden, president and chief executive, noted that capital costs had risen 20% to 25% year over year. Still, he noted, "Coterra delivered another strong quarter as we remain focused on capital efficiency, operational execution and shareholder returns through our base dividend, variable dividend, share repurchase program and debt reduction (programs). I am excited by the progress our new organization has made less than a year after the merger, and we are eager to build on our track record of execution."
For the quarter, Coterra produced about 632,000 barrels of oil equivalent per day, and both oil and gas production exceeded the high end of guidance.
Jorden said, "We remain committed to capital discipline and our updated guidance continues to assume we will invest less than 30% of our 2022 projected cash flow from operations," leaving plenty free to repay debt and increase shareholder returns. "At the recent commodity strip (price)," he added, "we expect to generate free cash flow of approximately $4.5 billion in 2022."
Prior to announcing results, the Coterra board approved a quarterly dividend of 65 cents per share, comprised of a 15-cents-per-share base dividend and a 50-cents-per-share variable dividend.
Coterra has operations in the Permian Basin, Marcellus Shale and Anadarko Basin.
Antero Resources
Denver-based Antero used increased quarterly cash flow stemming from strong demand for gas and natural gas liquids (NGLs) to accelerate debt repayment and increase its stock-buyback program. The company operates in the Appalachian Basin, in spots where there is a higher proportion of oil and NGLs, and is seeking to increase its proportion of oil in its portfolio.
In an earnings release July 27, Paul Rady, chairman, president and chief executive, said the company's second-quarter performance "benefited from outstanding operations that included higher premiums to benchmark pricing and excellent well performance. Strong demand for natural gas along the LNG fairway has led to as much as a $0.25 per (million British thermal units) increase in positive basis pricing on the Gulf Coast since the beginning of 2022. As additional LNG facilities are placed in service, we anticipate the premium in basis pricing relative to NYMEX Henry Hub to increase further. We are uniquely positioned to directly benefit from increasing NYMEX prices with 75% of our natural gas being sold at these premium priced hubs in the LNG corridor."
Industrial Info is tracking nine active projects under development by Antero Resources. All are located in the Appalachian Basin. The value of these proposed projects is about $250 million. All of these projects are part of the Antero Midstream Utica/Marcellus Gathering System. Subscribers to Industrial Info's Production Project Database can click here for the project reports.
Range Resources
In the second quarter, approximately 70% of the company's production of 2.1 billion cubic of gas equivalent per day (Bcfe/d) was natural gas, the Fort Worth, Texas-based company reported.
Like its brethren Big Gas firms, Range used record free cash flow to buy back stock and increase debt repayment. More of that may be coming, the company projected: "As we rapidly approach our long-term balance sheet targets over the coming quarters, we will be well positioned to return additional capital to shareholders in the form of dividends and continued share repurchases."
In a July 25 earnings release, Jeff Ventura, Range's chief executive said, "In the midst of a global energy crisis, the need for oil and gas production from the United States is more important than ever. In order for U.S. supply to meet growing domestic and global demand, however, there must be support for the required infrastructure, including permit approvals and construction of pipelines, compression, processing facilities and LNG export terminals."
He added: "Range is well positioned to serve and benefit from this call on American natural gas supply given our access to multiple domestic and international markets for natural gas and NGLs and, more importantly, our multi-decade core inventory life in Appalachia."
The company's outlays for drilling and completions (D&C) in the just-completed period was $119 million. For full-year 2022, the company reiterated its capital spending guidance of $460 million to $480 million, "with expectations at the upper end of the guidance." It told investors it expected to hold production flat this year at slightly over 2 Bcfe/d. Roughly 30% of its 2022 production is expected to be liquids (crude oil and NGLs).
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
