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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--When reviewing the recent financial performance of U.S. gas-oriented independent oil and gas producers, one recalls the famous first line of Charles Dickens' Tale of Two Cities: "It was the best of times, it was the worst of times, ... it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair."
For four large U.S. independent producers--EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania), Coterra Energy Incorporated (NYSE:CTRA) (Houston, Texas), Range Resources Corporation (NYSE:RRC) (Fort Worth, Texas) and Antero Resources Corporation (NYSE:AR) (Denver, Colorado)--2022 was one of the better years, as Russia's invasion of Ukraine helped push up U.S. natural gas spot prices by over 60% compared to 2021's average prices.
Click on the image at right to see annual average spot prices and predictions for natural gas at Henry Hub, Louisiana.
The demand for liquefied natural gas (LNG) to offset the sharp reduction in gas exports from Russia was only one factor pushing U.S. gas prices upward last year. Strong demand growth for gas from Electric Power Producers and Chemical Processors also helped fatten the fortunes of U.S. independent gas producers. High crude oil prices also helped a bit, though the four companies examined here are predominantly gas producers.
In 2022, all four producers reported billion-dollar-plus net earnings for the year, according to Generally Accepted Accounting Principles (GAAP). Since all four companies also engaged in hedging, each reported sizable one-time charges, which caused the companies to emphasize "adjusted" earnings, which stripped out non-recurring items.
Click on the image at right to see a comparison of full-year 2022 and 2021 GAAP earnings.
But what the markets giveth, they also can take away. As gas prices plummeted in the second half of 2022, fourth-quarter earnings slid from the year-earlier quarter for three companies: EQT, Range and Antero. Gas prices peaked at $9.14 per thousand cubic feet (Mcf) in August 2022, then fell steadily to about $5.74 per Mcf in December.
Click on the image at right to see a year-over-year comparison of fourth-quarter GAAP earnings for four large independent gas-oriented producers.
The slide in gas prices accelerated in early 2023, falling to an estimated $2.50 per Mcf in March. Overall, the U.S. Energy Information Administration (EIA) (Washington, D.C.) expects gas prices to average $3.02 per Mcf in 2023, rising to a yearly average about $3.89 in 2024, according to the EIA's March Short-Term Energy Outlook.
Here is a run-down of fourth-quarter 2022 and full-year 2022 financial performance by four large independent gas drillers.
EQT
The Pittsburgh-based driller, which operates mostly in the Appalachian Basin, bulked up in 2022 by acquiring THQ Appalachia I, LLC ("Tug Hill's upstream assets") and THQ-XcL Holdings I, LLC ("XcL Midstream") gathering and processing assets for approximately $5.2 billion in a cash-and-stock last September.
The Tug Hill assets are expected to add approximately 90,000 core net acres to EQT's core acreage in West Virginia, approximately 800 million cubic feet of gas equivalent per day (MMcfe/d) of production and 11 years of inventory. The XcL Midstream assets are anticipated to add 95 miles of owned and operated midstream gathering systems that connect to every major long-haul interstate pipeline in southwest Appalachia.
For the full-year 2022, EQT earned $1.7 billion, a reversal from 2021, when it posted GAAP losses of $1.1 billion. In the fourth quarter, it announced plans to double its 2022-2023 stock repurchase authorization to $2 billion and increased its debt pay-down goal to $4 billion from $2.5 billion.
The company reported 2022 total proved reserves of 25 trillion cubic feet of gas equivalent (Tcfe), an increase of 41 billion cubic feet of gas equivalent (Bcfe). In 2023, it said its capital expenditures (CapX), excluding noncontrolling interests, to total $1.7 billion to $1.9 billion, mainly for reserve development.
In reporting fourth-quarter and full-year 2022 returns on February 15, President and Chief Executive Officer Toby Rice said: "EQT achieved an impressive suite of milestones in 2022 across all aspects of our business. We generated significant free cash flow, materially improved our balance sheet and returned meaningful capital to shareholders via our base dividend and share repurchases. ... We also completed our pneumatic device replacement program a full year ahead of schedule and at a cost of approximately $6 per metric ton of CO2 equivalent abated, which materially de-risks our path to net zero by 2025."
Industrial Info Resources is tracking about $1.91 billion of capital projects that EQT is involved with, mostly relating to the Mountain Valley Pipeline. For more on that pipeline project, see December 23, 2022, article - West Virginia Sees $3.8 Billion in Projects Under Construction. Industrial Info is tracking six EQT projects worth $1.91 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Pipelines Project Database can click here for the list of project reports.
Coterra Energy
In reporting fourth-quarter and full-year 2022 earnings on February 22, Coterra Energy, formed in 2021 through the merger of Cabot Oil & Gas Corporation and Cimarex Energy Company, Thomas Jorden, chairman, chief executive officer and president, said, "Coterra delivered a strong 2022. Outstanding execution led to value creation, outsized shareholder returns and further improvement of our industry-leading balance sheet. Combining our track record of execution with our deep inventory of high-quality assets, Coterra is positioned to succeed through commodity cycles."
For the full-year 2022, the company earned $4.1 billion compared to $1.6 billion in 2021. The company's main areas of operation are the Permian Basin and the Marcellus Shale, with a small percentage of business in Texas' Anadarko Basin.
In its February earnings announcement, Coterra also unveiled a 33% increase to the annual base dividend, to $0.80 per share from $0.60 per share. The company completed its $1.25-billion share buyback program during 2022 and approved a new $2 billion stock buyback program, starting February 21, 2023.
For 2023, Coterra has a planned capital budget of $2 billion to $2.2 billion, most of which is expected to be deployed in drilling and completion activities.
Range Resources
Like its peers, Range reported better earnings in 2022 compared to 2021: Full-year GAAP earnings rose to $1.2 billion from $412 million in 2021. For the fourth quarter, earnings dipped to $814 million from $891 million in the comparable year-earlier quarter. Range operates exclusively in the Appalachian Basin.
Commenting on the company's 2022 results, Jeff Ventura, Range's chief executive officer, said, "The company successfully managed a great market opportunity in 2022-- generating record free cash flow, materially strengthening our financial foundation and returning significant capital to shareholders. We reduced debt by over $1 billion and expanded our return of capital program with $400 million in share repurchases and an annualized dividend of $0.32 per share."
"As we enter 2023," he continued, "the progress made during the past year both financially and operationally puts Range in the strongest position in company history. We are excited about the opportunity to develop Range's world-class inventory over the coming decades into a growing market for natural gas and natural gas liquids."
The company ended 2022 with net production averaging about 2.1 Bcfe/d of production. Capital spend was $492 million and proved reserves totaled 18.1 Tcfe, with an after-tax discounted future net cash flow of $24.5 billion.
For 2023, Range estimated its 2023 capital budget of $570 million to $615 million. Production is expected to remain stable at slightly over 2 Bcfe/d.
Antero
Denver-based Antero lowered its debt by $942 million in 2022 while also buying back about $940 million of its stock. Its estimated proved reserves increased to 17.8 Tcfe at year-end 2022. It set a goal of returning 50% of free cash flow to shareholders in 2023. Like Range, Antero operates exclusively in the Appalachian Basin.
For the full-year 2022, earnings skyrocketed to $1.9 billion from a loss of $187 million in 2021. For the fourth-quarter 2022, the company had GAAP earnings of $733 million, down from $901.4 million in the comparable year-earlier quarter. In 2023, Antero's capital budget will increase about 10%, to slightly over $1 billion. The driller expects to produce about 3.25 Bcfe/d to 3.3 Bcfe/d.
In announcing fourth-quarter and full-year 2022 earnings on February 15, Paul Rady, chairman, chief executive and president of Antero, said, "2022 was a transformative year for Antero. We reduced debt by approximately $1 billion, bringing our total debt reduction since 2019 to over $2.5 billion. We also executed our return of capital program by purchasing over 25 million shares."
He continued: "Antero's differentiated strategy of liquids-rich development and utilization of firm transportation to sell our gas along the LNG corridor is expected to drive continued premium price realizations in the quarters ahead."
Added Chief Financial Officer Michael Kennedy, "In 2023, we plan to continue to focus on reducing debt and returning capital to our shareholders. Our aggressive focus on debt reduction will allow us to maintain low leverage throughout various commodity cycles, while still returning free cash flow to our shareholders."
Industrial Info is tracking nine capital projects that Antero is involved with, totaling about $210 million in total investment value (TIV). Subscribers can click here for the list of project reports.
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).
For four large U.S. independent producers--EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania), Coterra Energy Incorporated (NYSE:CTRA) (Houston, Texas), Range Resources Corporation (NYSE:RRC) (Fort Worth, Texas) and Antero Resources Corporation (NYSE:AR) (Denver, Colorado)--2022 was one of the better years, as Russia's invasion of Ukraine helped push up U.S. natural gas spot prices by over 60% compared to 2021's average prices.
The demand for liquefied natural gas (LNG) to offset the sharp reduction in gas exports from Russia was only one factor pushing U.S. gas prices upward last year. Strong demand growth for gas from Electric Power Producers and Chemical Processors also helped fatten the fortunes of U.S. independent gas producers. High crude oil prices also helped a bit, though the four companies examined here are predominantly gas producers.
In 2022, all four producers reported billion-dollar-plus net earnings for the year, according to Generally Accepted Accounting Principles (GAAP). Since all four companies also engaged in hedging, each reported sizable one-time charges, which caused the companies to emphasize "adjusted" earnings, which stripped out non-recurring items.
But what the markets giveth, they also can take away. As gas prices plummeted in the second half of 2022, fourth-quarter earnings slid from the year-earlier quarter for three companies: EQT, Range and Antero. Gas prices peaked at $9.14 per thousand cubic feet (Mcf) in August 2022, then fell steadily to about $5.74 per Mcf in December.
The slide in gas prices accelerated in early 2023, falling to an estimated $2.50 per Mcf in March. Overall, the U.S. Energy Information Administration (EIA) (Washington, D.C.) expects gas prices to average $3.02 per Mcf in 2023, rising to a yearly average about $3.89 in 2024, according to the EIA's March Short-Term Energy Outlook.
Here is a run-down of fourth-quarter 2022 and full-year 2022 financial performance by four large independent gas drillers.
EQT
The Pittsburgh-based driller, which operates mostly in the Appalachian Basin, bulked up in 2022 by acquiring THQ Appalachia I, LLC ("Tug Hill's upstream assets") and THQ-XcL Holdings I, LLC ("XcL Midstream") gathering and processing assets for approximately $5.2 billion in a cash-and-stock last September.
The Tug Hill assets are expected to add approximately 90,000 core net acres to EQT's core acreage in West Virginia, approximately 800 million cubic feet of gas equivalent per day (MMcfe/d) of production and 11 years of inventory. The XcL Midstream assets are anticipated to add 95 miles of owned and operated midstream gathering systems that connect to every major long-haul interstate pipeline in southwest Appalachia.
For the full-year 2022, EQT earned $1.7 billion, a reversal from 2021, when it posted GAAP losses of $1.1 billion. In the fourth quarter, it announced plans to double its 2022-2023 stock repurchase authorization to $2 billion and increased its debt pay-down goal to $4 billion from $2.5 billion.
The company reported 2022 total proved reserves of 25 trillion cubic feet of gas equivalent (Tcfe), an increase of 41 billion cubic feet of gas equivalent (Bcfe). In 2023, it said its capital expenditures (CapX), excluding noncontrolling interests, to total $1.7 billion to $1.9 billion, mainly for reserve development.
In reporting fourth-quarter and full-year 2022 returns on February 15, President and Chief Executive Officer Toby Rice said: "EQT achieved an impressive suite of milestones in 2022 across all aspects of our business. We generated significant free cash flow, materially improved our balance sheet and returned meaningful capital to shareholders via our base dividend and share repurchases. ... We also completed our pneumatic device replacement program a full year ahead of schedule and at a cost of approximately $6 per metric ton of CO2 equivalent abated, which materially de-risks our path to net zero by 2025."
Industrial Info Resources is tracking about $1.91 billion of capital projects that EQT is involved with, mostly relating to the Mountain Valley Pipeline. For more on that pipeline project, see December 23, 2022, article - West Virginia Sees $3.8 Billion in Projects Under Construction. Industrial Info is tracking six EQT projects worth $1.91 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Pipelines Project Database can click here for the list of project reports.
Coterra Energy
In reporting fourth-quarter and full-year 2022 earnings on February 22, Coterra Energy, formed in 2021 through the merger of Cabot Oil & Gas Corporation and Cimarex Energy Company, Thomas Jorden, chairman, chief executive officer and president, said, "Coterra delivered a strong 2022. Outstanding execution led to value creation, outsized shareholder returns and further improvement of our industry-leading balance sheet. Combining our track record of execution with our deep inventory of high-quality assets, Coterra is positioned to succeed through commodity cycles."
For the full-year 2022, the company earned $4.1 billion compared to $1.6 billion in 2021. The company's main areas of operation are the Permian Basin and the Marcellus Shale, with a small percentage of business in Texas' Anadarko Basin.
In its February earnings announcement, Coterra also unveiled a 33% increase to the annual base dividend, to $0.80 per share from $0.60 per share. The company completed its $1.25-billion share buyback program during 2022 and approved a new $2 billion stock buyback program, starting February 21, 2023.
For 2023, Coterra has a planned capital budget of $2 billion to $2.2 billion, most of which is expected to be deployed in drilling and completion activities.
Range Resources
Like its peers, Range reported better earnings in 2022 compared to 2021: Full-year GAAP earnings rose to $1.2 billion from $412 million in 2021. For the fourth quarter, earnings dipped to $814 million from $891 million in the comparable year-earlier quarter. Range operates exclusively in the Appalachian Basin.
Commenting on the company's 2022 results, Jeff Ventura, Range's chief executive officer, said, "The company successfully managed a great market opportunity in 2022-- generating record free cash flow, materially strengthening our financial foundation and returning significant capital to shareholders. We reduced debt by over $1 billion and expanded our return of capital program with $400 million in share repurchases and an annualized dividend of $0.32 per share."
"As we enter 2023," he continued, "the progress made during the past year both financially and operationally puts Range in the strongest position in company history. We are excited about the opportunity to develop Range's world-class inventory over the coming decades into a growing market for natural gas and natural gas liquids."
The company ended 2022 with net production averaging about 2.1 Bcfe/d of production. Capital spend was $492 million and proved reserves totaled 18.1 Tcfe, with an after-tax discounted future net cash flow of $24.5 billion.
For 2023, Range estimated its 2023 capital budget of $570 million to $615 million. Production is expected to remain stable at slightly over 2 Bcfe/d.
Antero
Denver-based Antero lowered its debt by $942 million in 2022 while also buying back about $940 million of its stock. Its estimated proved reserves increased to 17.8 Tcfe at year-end 2022. It set a goal of returning 50% of free cash flow to shareholders in 2023. Like Range, Antero operates exclusively in the Appalachian Basin.
For the full-year 2022, earnings skyrocketed to $1.9 billion from a loss of $187 million in 2021. For the fourth-quarter 2022, the company had GAAP earnings of $733 million, down from $901.4 million in the comparable year-earlier quarter. In 2023, Antero's capital budget will increase about 10%, to slightly over $1 billion. The driller expects to produce about 3.25 Bcfe/d to 3.3 Bcfe/d.
In announcing fourth-quarter and full-year 2022 earnings on February 15, Paul Rady, chairman, chief executive and president of Antero, said, "2022 was a transformative year for Antero. We reduced debt by approximately $1 billion, bringing our total debt reduction since 2019 to over $2.5 billion. We also executed our return of capital program by purchasing over 25 million shares."
He continued: "Antero's differentiated strategy of liquids-rich development and utilization of firm transportation to sell our gas along the LNG corridor is expected to drive continued premium price realizations in the quarters ahead."
Added Chief Financial Officer Michael Kennedy, "In 2023, we plan to continue to focus on reducing debt and returning capital to our shareholders. Our aggressive focus on debt reduction will allow us to maintain low leverage throughout various commodity cycles, while still returning free cash flow to our shareholders."
Industrial Info is tracking nine capital projects that Antero is involved with, totaling about $210 million in total investment value (TIV). Subscribers can click here for the list of project reports.
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).
