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Released February 27, 2024 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Sharpy lower natural gas prices hurt fourth-quarter and full-year 2023 revenue and earnings for four large U.S. gas-oriented independent oil and gas producers. Full-year 2023 results for 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) were lowered by gas prices that declined about 60% from comparable 2022 prices. Gas prices in 2022 were propelled sharply upward by Russia's invasion of Ukraine early in that year.
Click on the image at right to see historic and projected full-year average natural gas prices at Henry Hub, Louisiana.
Given last year's weaker price environment, in reporting earnings several producers focused on various other metrics aside from earnings, such as operational improvements, reserve additions, falling production costs, drivers of future gas demand (such as potential exports of liquefied natural gas or pipeline gas sales to Mexico), rising demand for natural gas liquids (NGLs), production gains and debt reductions. Several discussed 2024 planned capital spending. Some highlighted their environmental, social and governance (ESG) practices. One firm announced an increase in the dividend effective this quarter.
Owing to significant charges and one-time items, companies reported earnings on a generally accepted accounting principles (GAAP) basis and an "adjusted" basis, which removed those charges. "Adjusted" is not a GAAP measure.
Click on the image at right to see a comparison of fourth-quarter and full-year earnings for each company.
Here is a run-down of financial results for four large independent gas drillers.
EQT
The Pittsburgh-based driller reported earnings February 13. Its GAAP earnings reached $1.7 billion on slightly more than $5 billion of revenue. By contrast, revenue in 2022 was $12.1 billion, on which it earned about $1.8 billion.
The company, which operates mostly in the Appalachian Basin, said it retired about $1.1 billion in debt last year. EQT also closed on the strategic acquisitions of Tug Hill and XcL Midstream in 2023, which helped boost total proven reserves 10%, to about 27.6 trillion cubic feet of gas equivalent (Tcfe), and full-year sales volumes about 4%, to slightly more than 2 Tcfe from about 1.9 Tcfe in 2022.
In reporting fourth-quarter and full-year 2023 returns, President and CEO Toby Z. Rice said, "We set multiple drilling world records and achieved our highest completion efficiency pace ever." He also said the company improved its environmental, health and safety performance 22%.
Rice continued: "We signed the largest long-term physical supply deals ever executed in North America, highlighting EQT's unique ability to meet significant growth in U.S. gas-fired power demand while generating differentiated margin opportunities. This impressive list of achievements is a showcase of what is possible when you combine a world-class asset base with an industry-leading, digitally enabled operations team."
In its earnings statement, the company said it expected total sales volume of between 2.2 and 2.3 Tcf in 2024. It projected annual maintenance expenditures to total about $2 billion, with an additional spend of $200 million to $300 million for "strategic growth capital expenditures, which targets opportunistic, high-return water, midstream and other infrastructure and land opportunities."
Antero Resources
This Denver-based exploration and production company reported full-year 2023 GAAP earnings of $243 million on revenue of $4.7 billion. By comparison, the company had full-year 2022 GAAP earnings of $1.9 billion on revenue of $7.1 billion.
The company released earnings February 15. It said full-year 2023 production averaged 3.4 Bcfe/d, an increase of 6% from the prior year. Though Antero is oriented to gas, its liquids production last year rose to 193,000 barrels per day (BBL/d), a 14% gain over 2022. Antero operates in the Appalachian Basin. It also owns a midstream business, Antero Midstream (NYSE:AM).
Antero's earnings statement said it averaged 11 completion stages per day last year, a 39% increase from the prior year. Its estimated proved reserves increased in 2023, to 18.1 Tcfe.
Looking out to 2024, the company said production is expected to average 3.3 to 3.4 Bcfe/d, which includes 192,000 to 204,000 BBL/d, as a combination of crude oil and natural gas liquids. Antero plans to cut drilling and completion (D&C) capital spending 26% this year, to between $650 million and $700 million. Capital outlays for land this year will fall 41%, to between $75 million and $100 million.
The company said lower capital outlays were possible in 2024 due to "efficiency gains, a lower base decline rate, and an average lateral length increase of 2,000 feet per well."
Because of these efficiency gains, the company said it expects to spend about $234 million less in D&C this year to produce the same level of hydrocarbons as 2023.
Click on the image at right to see a snapshot of Antero's production and D&C actual and planned capital spend for 2023 and 2024.
Paul Rady, chairman, president and chief executive officer, said: "2023 was highlighted by significant capital efficiency improvements throughout the year. Our drilling and completions teams maintained a remarkable pace, setting numerous company records. This impressive performance led to faster cycle times across our development program."
He said he expected 2024 to be "a transformational year for our sector as we enter the second wave of LNG export facility buildouts. By the end of 2025, (the industry's) total (gas) exports, including LNG and Mexico pipeline flows, are expected to increase by nearly 8 Bcf/d, far outpacing supply growth during that time. Antero is uniquely positioned to benefit from this demand surge."
Chief Financial Officer Michael Kennedy added this: "Our significant leverage to NGL prices, which today are up over 15%, or $5 per barrel from the fourth quarter of 2023, also boosts our 2024 outlook. This reduced maintenance capital, combined with sharply higher NGL prices, is expected to generate Free Cash Flow in 2024, despite today's challenging natural gas strip" prices.
Range Resources
On February 21, this Fort Worth-based independent driller reported full-year 2023 GAAP earnings of $871 million, down 26% from 2022 earnings of $1.2 billion. Net production for 2023 was about 2.1 Bcfe/d, roughly 69% of which was natural gas. It projected that production would be at the same level in 2024.
Range operates exclusively in the Marcellus Shale. It has a reputation for low production costs, which makes it better equipped to weather a swoon in gas prices. The company lowered its debt by about $292 million last year and continued with its share-repurchase program.
In its earnings call with analysts, Range officials predicted natural gas demand would rise about 23 Bcf/d by 2028, driven by increased exports and industrial demand. They said gas would have a significant role as electric power demand grows due to initiatives to electrify transportation and buildings. Even if rising oil prices lead to increased oil drilling, they claimed "significant growth is still needed from gassy basins to meet future demand from electrification." But they cautioned that additional infrastructure is needed for supply to meet demand.
Turning to LNG, Range officials said there was about 12 Bcf/d of LNG export capacity under construction, and that these projects are not expected to be impacted by the Biden administration's LNG permit pause.
Click on the image at right to see historical and projected U.S. gas exports of LNG and pipeline gas to Mexico.
Commenting on Range's 2023 results and 2024 plans, Dennis Degner, the company's CEO said, "Range had a successful year--operating safely and efficiently, while generating free cash flow despite lower natural gas prices. Range's 2023 free cash flow was allocated towards debt reduction and shareholder returns, while also building operational flexibility into our program."
"With the strongest balance sheet in company history, consistent operational performance, and a low capital reinvestment rate, we are targeting resilient free cash flow in 2024 and beyond. As demand for domestic and international natural gas and NGLs continues to increase in coming years, we believe Range is well-positioned on the low-end of the cost curve with a globally competitive emissions intensity and a high-return, long-life inventory of de-risked wells, measured in decades."
Coterra Energy
Coterra Energy, formed in 2021 through the merger of Cabot Oil & Gas Corporation and Cimarex Energy Company, reported fourth-quarter and full-year 2023 earnings February 22. Full-year 2023 GAAP earnings plummeted to $1.6 billion, down 60% from 2022 earnings of slightly over $4 billion.
In announcing earnings, Coterra also increased its common-stock dividend 5%. Production of oil, gas and NGLs exceeded the high point of the company's guidance for 2023 while capital outlays were under the low end of its guidance. Production of hydrocarbons rose to about 667,000 barrels of oil equivalent per day (BOE/d) last year, up from 634,000 BOE/d in 2022. On a year-over-year basis, NGL production rose about 15% to about 90,200 BBL/d, from 78,600 BBL/d in 2022. Production of crude oil and natural gas had smaller year-over-year gains.
Tom Jorden, Coterra's chairman, chief executive and president, said, "Coterra's outstanding 2023 results were driven by our commitment to operational excellence, coupled with strong execution in the field," adding that "strong well productivity and field efficiency gains" drove results.
"As we look ahead, our 2024 capital plan underscores Coterra's ability to pivot capital as fundamentals in the commodity markets dictate. Our disciplined, economically driven approach reduces total capital investment by roughly 12% year over year driven by lower natural-gas focused investments partially offset by a modest increase of investment in our liquids-rich basins."
"Capital discipline, allocating capital to its most productive use, consistent, profitable growth, and maintaining a fortress balance sheet are key to Coterra's investment strategy and allow us to provide a robust shareholder return program through the cycles," he added.
Coterra operates in the Permian and Delaware basins and the Marcellus Shale.
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) platform 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 more than 200,000 current and future projects worth $17.8 trillion (USD).
Click on the image at right to see historic and projected full-year average natural gas prices at Henry Hub, Louisiana.Given last year's weaker price environment, in reporting earnings several producers focused on various other metrics aside from earnings, such as operational improvements, reserve additions, falling production costs, drivers of future gas demand (such as potential exports of liquefied natural gas or pipeline gas sales to Mexico), rising demand for natural gas liquids (NGLs), production gains and debt reductions. Several discussed 2024 planned capital spending. Some highlighted their environmental, social and governance (ESG) practices. One firm announced an increase in the dividend effective this quarter.
Owing to significant charges and one-time items, companies reported earnings on a generally accepted accounting principles (GAAP) basis and an "adjusted" basis, which removed those charges. "Adjusted" is not a GAAP measure.
Click on the image at right to see a comparison of fourth-quarter and full-year earnings for each company.Here is a run-down of financial results for four large independent gas drillers.
EQT
The Pittsburgh-based driller reported earnings February 13. Its GAAP earnings reached $1.7 billion on slightly more than $5 billion of revenue. By contrast, revenue in 2022 was $12.1 billion, on which it earned about $1.8 billion.
The company, which operates mostly in the Appalachian Basin, said it retired about $1.1 billion in debt last year. EQT also closed on the strategic acquisitions of Tug Hill and XcL Midstream in 2023, which helped boost total proven reserves 10%, to about 27.6 trillion cubic feet of gas equivalent (Tcfe), and full-year sales volumes about 4%, to slightly more than 2 Tcfe from about 1.9 Tcfe in 2022.
In reporting fourth-quarter and full-year 2023 returns, President and CEO Toby Z. Rice said, "We set multiple drilling world records and achieved our highest completion efficiency pace ever." He also said the company improved its environmental, health and safety performance 22%.
Rice continued: "We signed the largest long-term physical supply deals ever executed in North America, highlighting EQT's unique ability to meet significant growth in U.S. gas-fired power demand while generating differentiated margin opportunities. This impressive list of achievements is a showcase of what is possible when you combine a world-class asset base with an industry-leading, digitally enabled operations team."
In its earnings statement, the company said it expected total sales volume of between 2.2 and 2.3 Tcf in 2024. It projected annual maintenance expenditures to total about $2 billion, with an additional spend of $200 million to $300 million for "strategic growth capital expenditures, which targets opportunistic, high-return water, midstream and other infrastructure and land opportunities."
Antero Resources
This Denver-based exploration and production company reported full-year 2023 GAAP earnings of $243 million on revenue of $4.7 billion. By comparison, the company had full-year 2022 GAAP earnings of $1.9 billion on revenue of $7.1 billion.
The company released earnings February 15. It said full-year 2023 production averaged 3.4 Bcfe/d, an increase of 6% from the prior year. Though Antero is oriented to gas, its liquids production last year rose to 193,000 barrels per day (BBL/d), a 14% gain over 2022. Antero operates in the Appalachian Basin. It also owns a midstream business, Antero Midstream (NYSE:AM).
Antero's earnings statement said it averaged 11 completion stages per day last year, a 39% increase from the prior year. Its estimated proved reserves increased in 2023, to 18.1 Tcfe.
Looking out to 2024, the company said production is expected to average 3.3 to 3.4 Bcfe/d, which includes 192,000 to 204,000 BBL/d, as a combination of crude oil and natural gas liquids. Antero plans to cut drilling and completion (D&C) capital spending 26% this year, to between $650 million and $700 million. Capital outlays for land this year will fall 41%, to between $75 million and $100 million.
The company said lower capital outlays were possible in 2024 due to "efficiency gains, a lower base decline rate, and an average lateral length increase of 2,000 feet per well."
Because of these efficiency gains, the company said it expects to spend about $234 million less in D&C this year to produce the same level of hydrocarbons as 2023.
Click on the image at right to see a snapshot of Antero's production and D&C actual and planned capital spend for 2023 and 2024.Paul Rady, chairman, president and chief executive officer, said: "2023 was highlighted by significant capital efficiency improvements throughout the year. Our drilling and completions teams maintained a remarkable pace, setting numerous company records. This impressive performance led to faster cycle times across our development program."
He said he expected 2024 to be "a transformational year for our sector as we enter the second wave of LNG export facility buildouts. By the end of 2025, (the industry's) total (gas) exports, including LNG and Mexico pipeline flows, are expected to increase by nearly 8 Bcf/d, far outpacing supply growth during that time. Antero is uniquely positioned to benefit from this demand surge."
Chief Financial Officer Michael Kennedy added this: "Our significant leverage to NGL prices, which today are up over 15%, or $5 per barrel from the fourth quarter of 2023, also boosts our 2024 outlook. This reduced maintenance capital, combined with sharply higher NGL prices, is expected to generate Free Cash Flow in 2024, despite today's challenging natural gas strip" prices.
Range Resources
On February 21, this Fort Worth-based independent driller reported full-year 2023 GAAP earnings of $871 million, down 26% from 2022 earnings of $1.2 billion. Net production for 2023 was about 2.1 Bcfe/d, roughly 69% of which was natural gas. It projected that production would be at the same level in 2024.
Range operates exclusively in the Marcellus Shale. It has a reputation for low production costs, which makes it better equipped to weather a swoon in gas prices. The company lowered its debt by about $292 million last year and continued with its share-repurchase program.
In its earnings call with analysts, Range officials predicted natural gas demand would rise about 23 Bcf/d by 2028, driven by increased exports and industrial demand. They said gas would have a significant role as electric power demand grows due to initiatives to electrify transportation and buildings. Even if rising oil prices lead to increased oil drilling, they claimed "significant growth is still needed from gassy basins to meet future demand from electrification." But they cautioned that additional infrastructure is needed for supply to meet demand.
Turning to LNG, Range officials said there was about 12 Bcf/d of LNG export capacity under construction, and that these projects are not expected to be impacted by the Biden administration's LNG permit pause.
Click on the image at right to see historical and projected U.S. gas exports of LNG and pipeline gas to Mexico.Commenting on Range's 2023 results and 2024 plans, Dennis Degner, the company's CEO said, "Range had a successful year--operating safely and efficiently, while generating free cash flow despite lower natural gas prices. Range's 2023 free cash flow was allocated towards debt reduction and shareholder returns, while also building operational flexibility into our program."
"With the strongest balance sheet in company history, consistent operational performance, and a low capital reinvestment rate, we are targeting resilient free cash flow in 2024 and beyond. As demand for domestic and international natural gas and NGLs continues to increase in coming years, we believe Range is well-positioned on the low-end of the cost curve with a globally competitive emissions intensity and a high-return, long-life inventory of de-risked wells, measured in decades."
Coterra Energy
Coterra Energy, formed in 2021 through the merger of Cabot Oil & Gas Corporation and Cimarex Energy Company, reported fourth-quarter and full-year 2023 earnings February 22. Full-year 2023 GAAP earnings plummeted to $1.6 billion, down 60% from 2022 earnings of slightly over $4 billion.
In announcing earnings, Coterra also increased its common-stock dividend 5%. Production of oil, gas and NGLs exceeded the high point of the company's guidance for 2023 while capital outlays were under the low end of its guidance. Production of hydrocarbons rose to about 667,000 barrels of oil equivalent per day (BOE/d) last year, up from 634,000 BOE/d in 2022. On a year-over-year basis, NGL production rose about 15% to about 90,200 BBL/d, from 78,600 BBL/d in 2022. Production of crude oil and natural gas had smaller year-over-year gains.
Tom Jorden, Coterra's chairman, chief executive and president, said, "Coterra's outstanding 2023 results were driven by our commitment to operational excellence, coupled with strong execution in the field," adding that "strong well productivity and field efficiency gains" drove results.
"As we look ahead, our 2024 capital plan underscores Coterra's ability to pivot capital as fundamentals in the commodity markets dictate. Our disciplined, economically driven approach reduces total capital investment by roughly 12% year over year driven by lower natural-gas focused investments partially offset by a modest increase of investment in our liquids-rich basins."
"Capital discipline, allocating capital to its most productive use, consistent, profitable growth, and maintaining a fortress balance sheet are key to Coterra's investment strategy and allow us to provide a robust shareholder return program through the cycles," he added.
Coterra operates in the Permian and Delaware basins and the Marcellus Shale.
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) platform 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 more than 200,000 current and future projects worth $17.8 trillion (USD).
