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Latest facts from the Marcellus, Utica, and Permian, Eagle Ford Plays
EQT Focuses on Sustainable Shale. EQT Corp. CEO Toby Rice said Thursday the largest natural gas producer in the United States is positioning itself for a “new era of sustainable shale,” further shaping its strategy to evolve into a lower carbon future.
“As the largest producer of natural gas in the U.S., we’re able to forge new paths and open new markets to achieve sustainable growth,” Rice said. “This affords us the ability to pursue meaningful opportunities that smaller peers cannot.”
The board has approved $75 million to explore new venture opportunities, Rice told analysts during a call to discuss second quarter results. “This seed capital allows us to initiate several pilot programs over the next few years” aimed at further cutting emissions.
The company is aiming for net-zero Scope 1 and 2 greenhouse gas emissions by 2025. It has announced partnerships with Equitable Origin, MiQ and Project Canary to certify that about 4 Bcf/d from more than 200 wells in Pennsylvania is being responsibly produced under third-party environmental standards.
CFO David Khani said EQT continues to see demand from both domestic and international buyers for responsibly sourced gas (RSG) as the desire to reduce carbon footprints grows.
We’ve already entered into a couple of RSG contracts with premium pricing,” Khani said.
EQT’s position across the Appalachian Basin continues to grow. Rice said that can help to further reduce emissions in the Marcellus and Utica shales as the scale allows it to better execute its operational strategy.
EQT completed the acquisition of Alta Resources Development LLC last week, giving it another 300,000 net Marcellus Shale acres and entry to a dry gas stronghold in Northeast Pennsylvania.
The company plans to run a maintenance program on the assets. However, it expects total sales volumes to increase by up to 175 Bcfe this year as a result of the acquisition. The company is now guiding for up to 1.875 Tcfe of production this year. It also increased its capital expenditure guidance for the year to an estimated $1.100-1.175 billion from $1.025-1.125 billion.
While Rice said the company won’t chase short-term gains on the stronger price signals that have recently emerged, the growth aligns with a rosier outlook for the natural gas market.
“Looking forward, we expect 2021 and 2022 forward natural gas price curves to remain very sensitive to weather,” Khani said. “We see significant upside to the 2023 and 2024 curve from rising exports and increasing power demand for accelerating coal and modest nuclear retirements.”
The executive team faced questions over its hedging strategy this week. The stock price fell in Thursday trading. U.S. gas prices have charged higher in recent weeks, but EQT has only 70% of its 2022 volumes hedged at a floor price of $2.80/MMBtu. The prompt month Henry Hub benchmark was again trading above $4.00 on Thursday as the contract was further down the curve through early next year.
Moreover, 50% of EQT’s volumes are exposed to local Appalachian pricing for the remainder of the year. Northeast basis has widened considerably this summer because of curtailments on several pipeline systems. As a result, management increased differential guidance for the year. Still, exposure to local pricing is expected to vastly improve if the Mountain Valley Pipeline comes online next year as scheduled.
“With our open positions and collars, we will participate in the upside, while providing the appropriate level of protection to achieve our strategic goals,” Khani said. He added that the hedge position will keep the leverage ratio at a level that allows it to retire debt, provide returns to shareholders and allow more hedging flexibility in 2023 and beyond.
EQT produced 421 Bcfe during the second quarter, up from 415 Bcfe in the year-ago period when it made price-related curtailments. Volumes also increased from the acquisition of Chevron Corp.’s Appalachian assets last year.
Well costs also crept up to $710/lateral foot during 2Q2021 from $635 in the first quarter. The increase was attributed to longer laterals rather than service cost inflation. Through the first half of the year, well costs were $670/lateral foot, or below the $675 target for the year.
The Alta acquisition also deepened the debt, which grew to $5.5 billion at the end of the second quarter from $4.8 billion at the end of the first quarter.
EQT reported a net loss of $936 million (minus $3.35/share), compared with a year-ago net loss of $263 million (minus $1.03). The 2Q2021 result stemmed from a $1.3 billion loss on derivatives not designated as hedges. The fair market value of EQT’s swaps and options decreased as forward prices jumped during the period.
Average realized prices during the second quarter were $2.37/Mcfe, up slightly from $2.36/Mcfe in the year-ago period.
Range Hitting It Big with NGL’s. Range Resources reports highest ever NGL premium amid booming international demand. Appalachian pure-play Range Resources Corp. reported the highest natural gas liquids (NGL) premium to the Mont Belvieu, TX, benchmark in its history during the second quarter and recorded its best NGL price since 2014 as demand for fuels like ethane and propane has soared this year. Range’s unhedged realized NGL price for the quarter was $27.92/bbl, or a $2.24 premium to Mont Belvieu pricing.
Shale Oil Out May Return to Pre-Pandemic Levels. TotalEnergies CEO sees return to pre-pandemic U.S. shale output in 2022. Reuters. TotalEnergies’ chief executive said on Thursday he expected U.S. shale oil production levels could return to pre-pandemic levels next year and that the group’s capital expenditure in 2022 could reach $13-14 billion. CEO Patrick Pouyanne told analysts the group would most likely target short cycle projects.
Exxon Has Good Quarter. Exxon posts $4.7B in Q2 profit as demand for fuel rebounds. Associated Press. Exxon Mobil swung back to a profit and topped expectations on profit and revenue during the second quarter as demand for fuel recovered from lows reached earlier in the pandemic. Net income reached $4.69 billion, or $1.10 per share, after the company reported a loss last year during mass shutdowns that were endured to limit the spread of the virus.
New Permian NatGas Facility May Not Be Able to Meet Demand. Permian Basin increases gas capacity at Texas-side facility. Demand could outpace production. Energy companies continued to expand the capacity of the Permian Basin to develop oil and gas with construction beginning on a major natural gas process facility last week on the Texas side of the basin. Pinnacle Midstream announced the second phase of its Dos Picos System, adding 200 million cubic feet per day of gas process capacity to the facility that serves operators throughout the Permian from a location in Midland.
Lime Rock Buys Permian Assets. Lime Rock buys Texas assets for $500MM+. Lime Rock Resources has announced that it has reached a definitive agreement to buy oil and gas properties in the Delaware Basin of Texas for $508.3 million from “a private seller”. The acquired property, which is primarily in Loving County, Texas, was producing 15,163 barrels of oil equivalent per day as of the April 1 transaction effective date, Lime Rock Resources revealed. The transaction is expected to close on September 30.
Shell’s Moving into Renewables. Shell to buy renewable energy company. The Royal Dutch Shell oil and gas company will buy a renewable energy company as part of its goal of achieving net-zero emissions by 2050. The oil company’s Shell New Energies U.S. LLC unit is set to purchase Inspire Energy Capital LLC, a renewable energy company that serves around 235,000 U.S. customers in states including New Jersey, New York, Ohio and Washington, D.C, according to Reuters. The deal is expected to close by the fourth quarter of this year.
Manchin Presses Secretary of the Interior on Leases. Manchin grills Haaland over Biden oil and gas moratorium. Senate Energy Committee Chairman Joe Manchin (D-W.Va.) grilled Interior Secretary Deb Haaland on the status of the Biden administration’s moratorium on new oil and gas leases on public lands in a hearing Tuesday. “While I’ve supported administration’s desire to pause lease sales to make sure the American people are getting fair returns for our shared resources, we are now well — now into the early summer timeline when we were told the review would be completed,” Manchin said during a Tuesday hearing on the Interior Department’s fiscal 2022 budget request.
The U.S. Economy Needs the O&G Industry. U.S. economic recovery hinges on oil & gas industry: Study. America’s natural gas and oil industry will need to serve as a vital driver of the nation’s post-pandemic economic recovery, according to a new study. The industry counts as critical to every sector of the U.S. economy and supports millions of jobs across all 50 states, says a study by PricewaterhouseCoopers that compiles the latest available government data. The 134-page study, which explores the economic impact of the oil and natural gas industry, found that the business supported 11.3 million jobs and contributed nearly $1.7 trillion to the U.S. economy in 2019.
Plastics! We Cannot Get Enough. Insatiable demand for all things plastic has ethane skyrocketing. Ethane, a key component in plastic production, is trading at a nearly two-and-a-half-year high in the U.S., with demand surging as global economies recover from last year’s slump. Prices for the fuel, which is a byproduct of natural gas processing, have climbed 57% this year to 33 cents per gallon Monday in Mont Belvieu, Texas, the main trading hub for natural gas liquids in the U.S. Further stoking the rally is the fact that output of the fuel has stalled alongside oil and natural gas drilling, with drillers continuing to favor capital discipline over output growth.
Pioneer Has Major Derivatives Problem. U.S. independent shale producer Pioneer Natural Resources (PXD.N) on Tuesday warned it would be hit by an $832 million second-quarter loss on oil and gas derivatives.
Many producers locked in sales when oil prices rose above $40 a barrel last year, but are now facing losses after crude prices jumped above $60 a barrel during the quarter.
For the first half of the year, Pioneer will face $1.523 billion in total net losses on derivatives, the majority of which stem from oil contracts, it said in a regulatory filing.
During the first quarter, U.S. oil firms were expected to face an aggregate $7 billion in hedging losses, according to consultancy Enverus. Oil and gas producers use derivative instruments as a form of insurance to lock in prices for their future output.
Pioneer said it paid $570 million to settle contracts during the second quarter. The company had a non-cash derivative loss of $262 million related to changes in fair value of other contracts during that quarter, the filing said.
The company also anticipates reporting a non-cash loss of $25 million for its investment in hydraulic fracturing firm ProPetro Holding Corp (PUMP.N) for the second quarter. Pioneer owns 16.6 million shares of ProPetro.
Shares of Pioneer were down 2.05% to $141.70 in midday trading.
Pioneer will release its second-quarter earnings on Aug. 2.
Equitrans Release Sustainability Report. Equitrans Midstream releases 2021 corporate sustainability report. Equitrans Midstream Corporation released its annual corporate sustainability report, which was produced in accordance with the Global Reporting Initiative (GRI) Core option and also incorporated the Sustainability Accounting Standards Board (SASB) Oil & Gas – Midstream Standards. The report content reflects materiality assessment results, which identify the Environmental, Social, and Governance (ESG) topics most significant to the Company’s business and stakeholders. The report can be viewed online: Equitrans’ 2021 Corporate Sustainability Report.
U.S. Well Services Going All-Electric. U.S. Well Services wins electric fracturing work for Pioneer Natural. U.S. Well Services will be deploying an all-electric Clean Fleet to work for Pioneer Natural Resources to support Midland Basin completion operations in Q4. “We believe our Clean Fleet technology will enable Pioneer to reduce completion costs while also lowering the emissions intensity of its operations,” U.S. Well President and CEO Joel Broussard says. U.S. Well said earlier that it expects to have fully exited the diesel frac market by year-end 2021, becoming an all-electric hydraulic fracturing services provider.
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