Financial

As the clock approached midnight on December 31, E&P managements and shareholders likely clinked champagne flutes to celebrate a remarkable four years of prosperity for an industry that had been nearly shattered by two decades of periodic financial crisis. Soaring post-pandemic commodity prices and gold-plated balance sheets provided generous cash flows, enabling substantial shareholder payouts that restored investor support, but after a period of relative stability the outlook for the E&Ps we follow is uncertain. In today’s RBN blog, we’ll review the cash-allocation strategies used by U.S. oil and gas producers in 2024 and examine the factors that could dramatically impact the sector’s performance in 2025. 

We defy you to name an oil and gas producer that’s been on the buying side of more $1-billion-plus M&A than Permian pure play Diamondback Energy, which announced February 18 that it had agreed to purchase a chunk of Midland Basin assets from Double Eagle IV, one of the Permian’s largest privately held producers, for just under $4.1 billion. You’d be equally hard-pressed to find a team that’s assembled and flipped more Permian acreage and production than the folks at Double Eagle. In today’s RBN blog, we discuss the newly announced Diamondback/Double Eagle IV deal and what it gives Diamondback, the fourth-largest producer in the Permian after ExxonMobil, Chevron and Occidental Petroleum. 

One of the most important but elusive factors that drive movements in share prices is investor sentiment, a prevailing attitude toward anticipated future performance that past or current performance metrics may not justify. While the most extreme recent examples are social media-driven meme stocks like GameStop and AMC, no sector, including energy, is immune. Although we focus our E&P company analysis strictly on performance and price metrics, investor sentiment has and is playing a role in the share price movements among producer peer groups. In today’s RBN blog, we analyze the Q3 2024 results of the Diversified E&P peer group with an eye toward investor sentiment. 

After languishing since midsummer, the share prices of U.S. oil and gas producers surged after Election Day on a wave of optimism that the sector would flourish under the new administration. However, stocks quickly gave up most of the gains on lackluster Q3 2024 results and a great deal of uncertainty about how — or even if — President-elect Trump’s oft-quoted goal to “drill baby drill” to lower energy costs would impact the strategies and results of the publicly traded E&Ps, especially the 15 major Oil-Weighted producers we cover. In today’s RBN blog, we delve deeper into the impact of the Q3 results of the oil producers on shareholder returns, cash allocation, leverage and capital investment, including the first announcements of 2025 budgets. 

Boosting America’s hydrocarbon output was a major plank in the 2024 Republican platform, and Donald Trump’s recent victory has stimulated a lot of optimism about the U.S. upstream sector. The nomination of Liberty Energy CEO Chris Wright as Energy Secretary confirmed that “drill, baby, drill” will be a mantra in the new administration. However, over the past few years, U.S. producers have dramatically shifted their focus from growth at any cost to strict financial discipline focused on maximizing free cash flows and shareholder returns. In today’s RBN blog, we analyze the Q3 2024 results of the major U.S. E&Ps we follow and look for early clues about how their senior executives might react to the renewed federal enthusiasm to rapidly accelerate drilling. 

Just over three years ago, Cabot Oil & Gas — Coterra Energy’s corporate predecessor — was focused exclusively on producing natural gas in the Marcellus Shale. But unlike other gas-centric E&Ps like EQT Corp., Chesapeake Energy and Antero Resources, Cabot decided it was time to diversify. In October 2021, it merged with Cimarex Energy, an oil-and-gas producer in the Permian and the Anadarko, to form Coterra. Now, Coterra has doubled down on diversification with a plan to acquire oil-weighted Permian assets from privately held Franklin Mountain Energy and Avant Natural Resources for a total of $3.95 billion in cash and stock. In today’s RBN blog, we discuss the deals and why Cabot/Coterra decided to “go its own way.” 

The upcoming presidential election has filled the airways with discussions around crucial issues, some with dramatic short-term (yet highly variable) impacts and others that will play out over several years. The impact of the critical short-term issue facing oil and gas producers today — historically low natural gas prices — varies depending on the structure of individual company portfolios. In today’s RBN blog, the last of our four-part series, we analyze the effect of lower gas prices on the revenues, cash flows, investment, leverage and cash allocation of Oil-Weighted E&Ps and discuss how they are adapting.