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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Four large independent U.S. natural gas -oriented producers reported healthy profits for the third quarter, a reversal from year-earlier results, when three of the four companies booked big losses. There were heavy charges for derivatives in both years for all four companies.
The four independent gas-oriented producers--Coterra Energy Incorporated (NYSE:CTRA) (Houston, Texas), EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania), Antero Resources Corporation (NYSE:AR) (Denver, Colorado) and Range Resources Corporation (NYSE:RRC) (Fort Worth, Texas)--all benefitted from sharply higher gas prices, strong demand and limited year-over-year gas production growth. Surging gas prices and strong global gas demand were partly the result of energy market disruptions stemming from Russia's invasion of Ukraine earlier this year.
Click on the image at right to see a year-over-year comparison of U.S. natural gas production from seven unconventional formations.
All four companies are gradually moving past the financial wreckage from the year-earlier and quarter-earlier periods, when several found themselves on the wrong side of financial hedges, believing gas prices would remain low when, in fact, they rose. For more on that, see August 9, 2022, article - Big Gas Companies Unwind Bad Bets, Profit from Rising Gas Prices. Third-quarter 2022 results were affected by hefty, though declining, derivative-related charges booked by all four companies.
Here is a summary of third-quarter financial results for the companies:
Coterra Energy
Coterra Energy, formed in late 2021 through the merger of Cabot Oil & Gas Corporation and Cimarex Energy Company, earned $1.2 billion on revenue of $2.5 billion for the third quarter. For the comparable year-earlier quarter, when the company operated as Cabot Oil & Gas, the company reported net income of $64 million on revenue of $440 million.
In its November 3 earnings release, Coterra Energy said it returned 74% of free cash flow generated during the quarter. It also increased the cash dividend 5%.
Predecessor company Cabot operated exclusively in the Appalachian Basin, but the 2021 merger added Cimarex's operations in the Permian and Anadarko basins. Combined gas production for the just-completed period was 258 billion cubic feet (Bcf), up from 217 Bcf in last year's third quarter. In addition, 8.1 million barrels of oil and 7.9 million barrels of natural gas liquids were produced in the third quarter of 2022.
On an oil-equivalent basis, quarterly production rose to 59 million barrels from 36.2 million in last year's third quarter.
Including the effect of hedges, Coterra received an average of $5.58 per thousand cubic feet (Mcf) of gas in the just-completed quarter, more than double the $2.65 it reaped in the comparable year-earlier period. Both periods included hefty charges for settling derivatives: $156 million in the just completed quarter compared to $201 million in last year's third quarter.
Thomas Jorden, the company's chief executive officer and president, said, "Coterra continues to execute and has delivered another strong operational quarter with outsized shareholder returns. Just over one year since the formation of this company, I am extremely proud of what we have accomplished and am excited for the future. I am proud of our employees' commitment to excellence and a culture that will continue to be a differentiated competitive advantage. As a low-cost operator of diversified, top-tier assets, and with a market-leading balance sheet, Coterra is positioned to succeed through cycles."
EQT
In reporting third-quarter earnings October 26, the Pittsburgh-based driller said it had doubled its share repurchasing program, to $2 billion over the 2022-23 period. EQT also said it accelerated debt repayment.
The company operates in the Marcellus and Utica shales, which are part of the Appalachian Basin. Including the effect of cash-settled derivatives, EQT received an average price of $3.28 per Mcf in the just-completed period, compared to $2.20 for the year-earlier quarter. Free cash flow zoomed upward, to $591 million from $99 million in last year's third quarter. The company's production of oil, gas and natural gas liquids all declined slightly in the just-completed period compared to year-earlier levels.
During the third quarter, EQT also announced plans to acquire two private companies active in the Appalachian Basin: driller Tug Hill Operating (Fort Worth, Texas) and XcL Midstream LLC (Canonsburg, Pennsylvania), for cash and stock valued at about $5.2 billion.
Industrial Info is tracking six active projects being developed by EQT valued at about $1.9 billion. Most of these projects are part of the partially built but long-stalled Mountain Valley Pipeline. For more on that pipeline project, see August 16, 2022, article - Manchin's Side Deal Seeks to Propel Mountain Valley Pipeline. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Pipelines Project Database can click here for a list of detailed project reports.
For the third quarter, EQT earned $684 million on revenue of $2.1 billion. Results for the just-completed period include a $1.6 billion loss on derivatives. By comparison, third-quarter 2021 results were a loss of $2 billion. In that quarter, a $3.3 billion derivatives charge against revenue exceeded the value of sales of gas, oil and natural gas liquids.
In commenting on third-quarter results, President and Chief Executive Officer Toby Rice highlighted the "bolt-on" acquisitions and the "material increases to both our debt reduction goals and stock buyback authorization."
Rice also noted that EQT is collaborating with the state of West Virginia and other parties to form the Appalachian Regional Clean Hydrogen Hub, or ARCH2. "Appalachia is ideally suited to lead the charge in clean hydrogen production in the United States and use of EQT's extremely low emissions natural gas can act as a strategic foundation for America's transition toward decarbonization."
Antero Resources
This Denver-based independent producer, which operates exclusively in the Appalachian Basin, reported third-quarter net income of $560 million on $2 billion of revenue. For the comparable year-earlier period, the company lost $549 million. Both periods had hefty charges to revenue related to derivatives: $530 million in the just-completed period compared to $1.250 billion in the third quarter of 2021.
In its October 26 quarterly earnings release, the company said it reduced total debt by $404 million during the just-completed period and repurchased $382 million of shares during the quarter.
Paul Rady, Antero's chairman, president and chief executive officer, said third-quarter results "reflect the company's core strengths that include access to premium priced markets through our firm transportation portfolio and low absolute debt." He also emphasized the improving outlook for liquefied natural gas (LNG) exports, as more terminals come online.
Rady continued, "We remain committed to maintaining our leadership position in ESG (environmental, social and governance). Our 2021 ESG achievements highlight our continued focus on the communities where we live and operate, while keeping our workforce safe. We have made tremendous progress on our commitment to achieve Net Zero Scope 1 and 2 GHG (greenhouse gas) emissions by 2025, already reducing our peer-leading GHG emissions by 36% since 2019. Our ability to provide lower-carbon energy to both our communities at home and abroad, directly improves the health, safety and livelihood for people living in energy poverty."
Industrial Info is tracking nine projects under development by Antero with a collective value of about $210 million. Subscribers to Industrial Info's GMI Oil & Gas and Pipelines project databases can click here for a list of detailed project reports.
Range Resources
Range Resources, which operates exclusively in the Appalachian Basin, on October 24 reported third-quarter earnings of $373 million on revenue of $1.1 billion, an improvement over third-quarter 2021 results, when it lost $380 million on $303 million. Both periods included heavy mark-to-market charges for derivatives.
Hydrocarbon production in the just-completed period increased 3% over second-quarter production, to about 2.13 billion cubic feet of gas equivalent (Bcfe) per day. The company said it expects a similar production increase in the fourth quarter.
Including derivative settlements and after third-party transportation costs, Range realized about $3.13 per Mcf for its gas in the third quarter, more than double the $1.49 per Mcf it received in the year-earlier period. Converting all of its oil and NGL production to a gas-equivalent basis, Range received $3.30 per Mcfe for its hydrocarbons in the just-completed period, up from $2 in the comparable year-earlier quarter.
In its earnings announcement, Range tripled its share-buyback program, to $1.5 billion.
Commenting on the quarter, Jeff Ventura, the company's chief executive officer, said, "Range delivered record free cash flow and cash flow per share in the third quarter, allowing us to reduce net debt while increasing returns of capital to shareholders. Range has unlocked a massive inventory of high-quality wells in the Marcellus, measured in decades, and translated that inventory into a business capable of generating healthy free cash flow and returns of capital through the cycles. ... This repeatable, low-risk, low-decline asset base underpins Range's peer-leading capital intensity and resilient free cash flow profile."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
The four independent gas-oriented producers--Coterra Energy Incorporated (NYSE:CTRA) (Houston, Texas), EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania), Antero Resources Corporation (NYSE:AR) (Denver, Colorado) and Range Resources Corporation (NYSE:RRC) (Fort Worth, Texas)--all benefitted from sharply higher gas prices, strong demand and limited year-over-year gas production growth. Surging gas prices and strong global gas demand were partly the result of energy market disruptions stemming from Russia's invasion of Ukraine earlier this year.
All four companies are gradually moving past the financial wreckage from the year-earlier and quarter-earlier periods, when several found themselves on the wrong side of financial hedges, believing gas prices would remain low when, in fact, they rose. For more on that, see August 9, 2022, article - Big Gas Companies Unwind Bad Bets, Profit from Rising Gas Prices. Third-quarter 2022 results were affected by hefty, though declining, derivative-related charges booked by all four companies.
Here is a summary of third-quarter financial results for the companies:
Coterra Energy
Coterra Energy, formed in late 2021 through the merger of Cabot Oil & Gas Corporation and Cimarex Energy Company, earned $1.2 billion on revenue of $2.5 billion for the third quarter. For the comparable year-earlier quarter, when the company operated as Cabot Oil & Gas, the company reported net income of $64 million on revenue of $440 million.
In its November 3 earnings release, Coterra Energy said it returned 74% of free cash flow generated during the quarter. It also increased the cash dividend 5%.
Predecessor company Cabot operated exclusively in the Appalachian Basin, but the 2021 merger added Cimarex's operations in the Permian and Anadarko basins. Combined gas production for the just-completed period was 258 billion cubic feet (Bcf), up from 217 Bcf in last year's third quarter. In addition, 8.1 million barrels of oil and 7.9 million barrels of natural gas liquids were produced in the third quarter of 2022.
On an oil-equivalent basis, quarterly production rose to 59 million barrels from 36.2 million in last year's third quarter.
Including the effect of hedges, Coterra received an average of $5.58 per thousand cubic feet (Mcf) of gas in the just-completed quarter, more than double the $2.65 it reaped in the comparable year-earlier period. Both periods included hefty charges for settling derivatives: $156 million in the just completed quarter compared to $201 million in last year's third quarter.
Thomas Jorden, the company's chief executive officer and president, said, "Coterra continues to execute and has delivered another strong operational quarter with outsized shareholder returns. Just over one year since the formation of this company, I am extremely proud of what we have accomplished and am excited for the future. I am proud of our employees' commitment to excellence and a culture that will continue to be a differentiated competitive advantage. As a low-cost operator of diversified, top-tier assets, and with a market-leading balance sheet, Coterra is positioned to succeed through cycles."
EQT
In reporting third-quarter earnings October 26, the Pittsburgh-based driller said it had doubled its share repurchasing program, to $2 billion over the 2022-23 period. EQT also said it accelerated debt repayment.
The company operates in the Marcellus and Utica shales, which are part of the Appalachian Basin. Including the effect of cash-settled derivatives, EQT received an average price of $3.28 per Mcf in the just-completed period, compared to $2.20 for the year-earlier quarter. Free cash flow zoomed upward, to $591 million from $99 million in last year's third quarter. The company's production of oil, gas and natural gas liquids all declined slightly in the just-completed period compared to year-earlier levels.
During the third quarter, EQT also announced plans to acquire two private companies active in the Appalachian Basin: driller Tug Hill Operating (Fort Worth, Texas) and XcL Midstream LLC (Canonsburg, Pennsylvania), for cash and stock valued at about $5.2 billion.
Industrial Info is tracking six active projects being developed by EQT valued at about $1.9 billion. Most of these projects are part of the partially built but long-stalled Mountain Valley Pipeline. For more on that pipeline project, see August 16, 2022, article - Manchin's Side Deal Seeks to Propel Mountain Valley Pipeline. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Pipelines Project Database can click here for a list of detailed project reports.
For the third quarter, EQT earned $684 million on revenue of $2.1 billion. Results for the just-completed period include a $1.6 billion loss on derivatives. By comparison, third-quarter 2021 results were a loss of $2 billion. In that quarter, a $3.3 billion derivatives charge against revenue exceeded the value of sales of gas, oil and natural gas liquids.
In commenting on third-quarter results, President and Chief Executive Officer Toby Rice highlighted the "bolt-on" acquisitions and the "material increases to both our debt reduction goals and stock buyback authorization."
Rice also noted that EQT is collaborating with the state of West Virginia and other parties to form the Appalachian Regional Clean Hydrogen Hub, or ARCH2. "Appalachia is ideally suited to lead the charge in clean hydrogen production in the United States and use of EQT's extremely low emissions natural gas can act as a strategic foundation for America's transition toward decarbonization."
Antero Resources
This Denver-based independent producer, which operates exclusively in the Appalachian Basin, reported third-quarter net income of $560 million on $2 billion of revenue. For the comparable year-earlier period, the company lost $549 million. Both periods had hefty charges to revenue related to derivatives: $530 million in the just-completed period compared to $1.250 billion in the third quarter of 2021.
In its October 26 quarterly earnings release, the company said it reduced total debt by $404 million during the just-completed period and repurchased $382 million of shares during the quarter.
Paul Rady, Antero's chairman, president and chief executive officer, said third-quarter results "reflect the company's core strengths that include access to premium priced markets through our firm transportation portfolio and low absolute debt." He also emphasized the improving outlook for liquefied natural gas (LNG) exports, as more terminals come online.
Rady continued, "We remain committed to maintaining our leadership position in ESG (environmental, social and governance). Our 2021 ESG achievements highlight our continued focus on the communities where we live and operate, while keeping our workforce safe. We have made tremendous progress on our commitment to achieve Net Zero Scope 1 and 2 GHG (greenhouse gas) emissions by 2025, already reducing our peer-leading GHG emissions by 36% since 2019. Our ability to provide lower-carbon energy to both our communities at home and abroad, directly improves the health, safety and livelihood for people living in energy poverty."
Industrial Info is tracking nine projects under development by Antero with a collective value of about $210 million. Subscribers to Industrial Info's GMI Oil & Gas and Pipelines project databases can click here for a list of detailed project reports.
Range Resources
Range Resources, which operates exclusively in the Appalachian Basin, on October 24 reported third-quarter earnings of $373 million on revenue of $1.1 billion, an improvement over third-quarter 2021 results, when it lost $380 million on $303 million. Both periods included heavy mark-to-market charges for derivatives.
Hydrocarbon production in the just-completed period increased 3% over second-quarter production, to about 2.13 billion cubic feet of gas equivalent (Bcfe) per day. The company said it expects a similar production increase in the fourth quarter.
Including derivative settlements and after third-party transportation costs, Range realized about $3.13 per Mcf for its gas in the third quarter, more than double the $1.49 per Mcf it received in the year-earlier period. Converting all of its oil and NGL production to a gas-equivalent basis, Range received $3.30 per Mcfe for its hydrocarbons in the just-completed period, up from $2 in the comparable year-earlier quarter.
In its earnings announcement, Range tripled its share-buyback program, to $1.5 billion.
Commenting on the quarter, Jeff Ventura, the company's chief executive officer, said, "Range delivered record free cash flow and cash flow per share in the third quarter, allowing us to reduce net debt while increasing returns of capital to shareholders. Range has unlocked a massive inventory of high-quality wells in the Marcellus, measured in decades, and translated that inventory into a business capable of generating healthy free cash flow and returns of capital through the cycles. ... This repeatable, low-risk, low-decline asset base underpins Range's peer-leading capital intensity and resilient free cash flow profile."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
