EQT executives made it clear in their February 19 earnings call that the producer is sticking to its strategy of capital discipline and measured production growth, even as gas prices strengthen. CEO Toby Rice emphasized that EQT will only increase production if it sees sustainable demand to support it, a mindset that marks a departure from days gone by when producers would boost volumes at the first sign of higher prices. This echoes a broader shift among Appalachian producers that RBN highlighted in our June 2023 blog and accompanying webcast (see I Walk the Line) which detailed how the pipeline-constrained Northeast market forced producers to become more surgical with their drilling and production decisions. EQT’s stance aligns with this evolved approach: growth is no longer about riding the price wave, but about ensuring there is sufficient downstream demand and capacity to avoid the pitfalls of oversupply and basis blowouts.
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Just in Time - Chesapeake Counters Gas-Price Nadir With Output Slash, Innovative Inventory Build
Faced with sustained sub-$2/MMBtu natural gas prices and dim prospects for significant gas-demand growth until sometime next year, a number of major gas-focused E&Ps have been tapping the brakes on production and trimming their planned 2024 capex. But one company — Chesapeake Energy, slated to become the U.S.’s largest gas producer thanks to a recently announced acquisition — has taken a more dramatic step, implementing a novel strategy that will slash production by 25% but leave the E&P ready to quickly ramp up its output as soon as demand and prices warrant. In today’s RBN blog, we’ll review the 2024 guidance of the major U.S. gas producers and delve into the analysis of Chesapeake’s unusual approach.
I Walk the Line - The New Appalachian Gas Producer Playbook in a Pipeline-Constrained World
The Fiscal Responsibility Act (FRA) revived Mountain Valley Pipeline’s (MVP) prospects of being completed this year, but the outlook for new, large-scale natural gas takeaway projects in the Northeast beyond MVP hasn’t changed. What has changed, however, is how Appalachian natural gas-focused producers respond to pipeline constraints and lower prices. Gone are the days of drilling with abandon, crushing supply prices and assuming the necessary pipeline capacity will eventually get built. Instead, producers have demonstrated a willingness to slow drilling activity, delay completions and choke back producing wells in the short-term to manage their inventory during periods of lower gas prices. In today’s RBN blog, we lay out our view of what that shift in producer behavior will mean for Northeast supply, demand and pricing trends in the long-term.
Dance With the One That Brought You - E&Ps Trim 2024 Capex, Stalling Growth to Prioritize Free Cash Flow and Returns
When legendary University of Texas football coach Darrell Royal was asked how he approached important games, he frequently said, “You dance with the one who brung ya,” which meant sticking with the strategy that produced previous success. After struggling through a period of extreme price volatility in 2014-20, U.S. E&Ps finally locked onto a game plan that works: They wooed back investors and regained financial stability by focusing on generating free cash flow and returning a lot of that bounty to shareholders. In today’s RBN blog, we analyze E&Ps’ 2024 capex and production guidance, which shows that producers have embraced Royal’s concept of sticking with what works.
