Natural Gas Production Issues: $$ Losses, High Costs, Debt Increases, Asset Sales, Staff Cuts

by Duane Nichols on March 5, 2020

Utica shale is deeper still, below the Marcellus shale

Southwestern Energy expects production to climb, despite spending cuts

From a Summary by Sara Welch, Shale Gas Reporter, March 3, 2020

Despite implementing a plan to cut year-over-year spending by 20% in 2020, Southwestern Energy Co. expects annual production to climb by 10%. The increase in production is driven by the company’s investment in the Appalachian Basin.

The company forecasts capital expenditures of $860-940 million and anticipates overall production of 830-865 Bcfe. Although it expects to bring up to 110 wells to sales this year, mostly in West Virginia, the company’s oil and natural gas production is forecast to increase by 25% and 10%, respectively.

In its continued effort to cut costs, Southwestern managed to cut well costs to $824 per lateral foot last year — a 27% drop. This year, it expects well costs to average $730 per foot — a 10% reduction.


EQT reacts to low natural gas prices, selling assets and cutting costs

From a Summary by Sara Welch, Shale Gas Reporter, March 3, 2020

Last week EQT announced it renegotiated its gas transportation rates and sold half its stake in pipeline company Equitrans Midstream Corp.

These moves are the company’s response to low natural gas prices.

In the fourth quarter, EQT recorded a $1.6 billion non-cash impairment charge. With U.S. natural gas prices trading at its lowest in nearly two decades, the country’s largest natural gas producer has been forced to find ways to mitigate prices.

In addition to selling its stake in the pipeline operator and renegotiating gas transportation rates, EQT has refined its hedging strategy and cut annual capital expenditure. The company expects 2020 capital expenditure between $1.15 billion and $1.25 billion, compared with a prior outlook of between $1.25 billion and $1.35 billion.


CHEVRON to cut 320 jobs in Pennsylvania, markets assets

From a Summary by Sara Welch, Shale Gas Reporter, March 3, 2020

The next step in Chevron’s plan to liquidate its Appalachian Basin assets and close its Appalachian Mountain Business is to eliminate 320 jobs.

“We are taking active steps to reduce job loss and will facilitate the placement of as many impacted employees as we can with other Chevron business units,” said a Feb. 6 letter Chevron company officials sent to state Department of Labor & Industry.

In addition to attempting to reduce job loss, the company said it’s providing advance notice of layoffs to government stakeholders and employees.

The first round of layoffs is scheduled for April 6, although some employees will be offered temporary assignments with extended layoff dates, potentially through Dec. 31. Chevron’s office locations in Moon and Mount Braddock in Penna. will be affected as 320 workers combined will be laid off.


Range Resources hit by $2.3 Billion in Fourth Quarter impairments

From an Article by Kallanish Energy News, March 2, 2020

Texas-based Range Resources reported a fourth quarter 2019 net loss of $1.81 billion, or $7.27 per share on revenue of $605.6 million. That compares to profit of $1.76 billion, or $7.15 per share in Q4 2018.

Fourth quarter earnings include $2.3 billion in impairments, including unproven properties in North Louisiana.

For full-year 2019, Range reported a net loss of $1.72 billion, or $6.92 per share, on revenue of $2.82 billion. That compares to a $1.74 billion net loss, or $7.10 per share, in full-year 2018.

“Range made solid progress on key strategic objectives in 2019,” said CEO Jeff Ventura, in a statement. “For the year, we reduced absolute debt, lowered well costs, improved our cost structure and delivered our operational plan for $28 million less than budgeted.”

The company, a major player in the Appalachian Basin, expects to spend $520 million in its 2020 capital budget and that will maintain production at about 2.3 billion cubic feet-equivalent per day (Bcfe/d). That includes $490 million on drilling and recompletions and $30 million on leases. About 30% of that production will be liquids.

The company expects to turn to sales 72 Marcellus Shale wells in 2020, with an expected average lateral length of 11,200 feet. Range anticipates drilling about 810,000 feet of lateral in 2020 while turning to sales about 806,400 feet of lateral in the year. That will keep in-progress well inventory nearly unchanged going into 2021.

It expects 2020 well costs to average less than $610 per lateral foot, the lowest rate in the Appalachian Basin.

In 2019, the company spent $728 million on capital spending, about $28 million less than its original budget. The company also sold assets worth $785 million in 2019 to reduce debt.

Range reported Q4 2019 production was 2.35 Bcfe/d. The company’s average realized price after hedges was $2.76 per thousand cubic feet-equivalent (Mcfe), with roughly 60% of gas production hedged.

Production in southwest Appalachia averaged 2.06 net Bcfe/d, a 16% increase from Q4 2018. The assets in northeast Pennsylvania averaged 98 net million cubic feet-equivalent per day (Mmcfe/d) in the quarter, including 10 net Mmcf/d of legacy acreage production.

The company brought on line 23 wells in southwest Appalachia in Q4 2019: six in the super-rich area, 10 in the wet area and seven in the dry area, Range said. Half of the wells turned to production in 2020 are from well pads with existing production.

In full-year 2019, the company turned to sales 84 Marcellus wells with an average lateral length of 10,550 feet and seven wells in Louisiana.


See also: Energy Companies Face Looming Debt Burden – Wall Street Journal, February 19, 2020

The fortunes of exploration and production companies depend on oil and gas prices, which determine the value of their reserves and how much money they are able to borrow.

U.S. natural-gas producers face the highest hurdle, according to Moody’s. Antero Resources Corp. and EQT Corp. have the largest looming debt maturities by 2024, with $2.6 billion and $2.5 billion due, respectively.

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