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Ebb and Flow - Commodity Pricing Currents Trigger Significant Regional Shifts in 2023 E&P Investment

The pandemic-induced shackles on U.S. E&P capital spending were shattered by rising commodity prices in 2022, and total investment for the 42 producers we follow rose a dramatic 54% over 2021. But E&Ps haven’t abandoned the fiscal discipline or focus on cash-flow generation that allowed them to survive COVID-related demand destruction and resuscitate investor interest. Their 2023 capital budgets generally sustain the pace of Q4 2022 spending and reflect a modest 17% increase over full-year 2022. However, commodity price trends and changes in investment opportunities have resulted in significant shifts in the allocation of the total investment among the major U.S. unconventional plays. In today’s RBN blog, we’ll analyze 2023 capital spending, region by region.

Figure 1 shows the regional allocation of the $71.3 billion in estimated 2023 capex for the 42 publicly traded E&Ps we cover. (That group includes every publicly held U.S. E&P with a market capitalization over $500 million, but not integrated energy companies like ExxonMobil and Chevron.) As it has for several years, the Permian Basin (dark-blue slice) garners by far the largest share of total investment at 43%. The total capital budgeted for the play is expected to rise by 17%, matching the overall capex increase. However, the allocations for other regions reflect significant changes. Investment in the Eagle Ford (gray slice), Bakken (aqua slice), and Rocky Mountains (light-blue slice) is expected to increase by 32%, 36% and 26%, respectively. On the other hand, Appalachia capex (green slice), which increased 64% in 2022, will rise by just 9%, while Haynesville Shale spending (pink slice) will be flat from the previous year. Below, we review the changes in spending and the reasons behind them for each U.S. unconventional play.

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