RBN Energy

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. 

Analyst Insights

Analyst Insights are unique perspectives provided by RBN analysts about energy markets developments. The Insights may cover a wide range of information, such as industry trends, fundamentals, competitive landscape, or other market rumblings. These Insights are designed to be bite-size but punchy analysis so that readers can stay abreast of the most important market changes.

By John Abeln - Monday, 3/04/2024 (12:45 pm)

The largest natural gas producer in the U.S., Appalachian pure-play producer EQT, announced on Monday that it had already begun implementing what it termed a “strategic production curtailment.” The curtailment has been underway since late in February, but is being announced publicly for the first

By RBN Team - Monday, 3/04/2024 (10:00 am)

In December 2023, EIA started reporting inventory for purity propane separately from propane entrained in unfractionated y-grade NGL mix. The new data is a huge improvement in the visibility into propane market conditions. 

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Daily Energy Blog

The drivers behind most upstream M&A the past couple of years have been consistent — namely, to gain scale (mostly in the Permian) and the economies that come with it, boost free cash flow (and share more with shareholders), and replenish reserves to keep the good times rollin' into the 2030s. There are hints of all that in California Resources’ recently announced $2.1 billion agreement to acquire Aera Energy, creating what would be California’s largest crude oil producer. But in other ways the deal is as different as, well, California and Texas themselves. In today’s RBN blog, we examine the planned acquisition, what it reveals about the companies, and the pros and cons of operating in the nation’s most populous, least-friendly-to-hydrocarbons state. 

A Super Bowl game (and halftime show) for the ages followed up only hours later by a made-in-heaven combination of two of the largest, most admired E&Ps in the super-hot Permian? It doesn’t get any better than this, unless you’re a Taylor Swift fan too — in which case, it may be impossible for you to “shake it off.” In today’s RBN blog, we examine the newly announced plan by Diamondback Energy and Endeavor Energy Resources to combine into a Travis Kelce-sized Permian pure play with more than 800 Mboe/d of crude oil-focused production and more than 6,000 well locations with breakevens of $40/bbl or less. 

Brutal arctic cold may have chilled broad swaths of the U.S. last month, but the scorching pace of upstream M&A activity continued to be red hot, with nearly $20 billion in deals announced in January after a record-setting 2023. Last year’s transaction value totaled an astounding $192 billion, a mark 79% higher than the previous 10-year high and more than the previous three years combined. Why the surge? A wide range of factors influenced corporate decisions to grow through acquisitions rather than organic investment, including commodity prices, equity values, debt levels, operating costs, and production trends. In today’s RBN blog, we’ll analyze M&A trends through several statistical lenses and provide some insights into 2024 activity. 

A lot of energy-industry M&A activity lately has been focused on the acquiring company gaining scale in a shale play or region where it’s already very active, usually the Permian. The latest multibillion-dollar deal in the energy space is different: Sunoco LP (stock ticker symbol SUN), which is primarily involved in fuel distribution east of the Mississippi and in Texas, is buying NuStar Energy (ticker NS), a midstream company with a mix of pipelines (crude oil, products and ammonia) and terminals, most of them within the U.S.’s midsection. As we discuss in today’s RBN blog, the combined company will have a massive footprint, with all kinds of opportunities for synergies and growth. 

In a deal the energy industry had been whispering about for months, Chesapeake Energy and Southwestern Energy will combine to form what will be the largest natural gas producer in the U.S., with 7.3 Bcf/d of production in the Marcellus/Utica and the Haynesville and ready access to the Northeast and the LNG export market — assuming the merger passes muster with federal regulators. In today’s RBN blog, we discuss the merger and why it makes sense for both E&Ps. 

Permian this and Permian that. For several years now, acreage and production in that sprawling, crude-oil-focused shale play in West Texas and southeastern New Mexico have been at the center of so much M&A activity. And the deals keep coming! Just last week, APA Corp. — the international E&P formerly known as Apache — announced that it will be acquiring Callon Petroleum, which in recent years has become a Permian pure play with significant holdings in both the Delaware and Midland basins. In today’s RBN blog, we discuss the APA/Callon deal, the drivers behind it, and why the acquisition makes sense for both companies. 

There’s been a lot of M&A activity the past couple of years among oil and gas producers — midstreamers too. That makes sense. Joining forces can provide all kinds of opportunities: for synergy, economies of scale, and expansion within (or into) key production areas, to name just a few. Well, energy-industry consolidation isn’t limited to E&Ps and midstream companies. Just recently, two major providers of contract compression services — critical to the gathering and processing of natural gas in the Permian and other plays — announced that they will be combining to form what they say will be the largest firm in that space. In today’s RBN blog, we’ll look at the gas compression services sector and the plan by Kodiak Gas Services to acquire CSI Compressco LP. 

The end of one year and the start of another provides a perfect opportunity to take stock — in this case, to examine total shareholder returns for the institutional and individual investors holding stock in oil and gas producers. As it turns out, 2023 was a mixed bag, with gas-focused E&Ps generally benefiting from a rebound in gas prices (current and future), oil-focused companies taking a hit, and diversified producers ending up somewhere in between. In today’s RBN blog, we continue our review of E&Ps’ total shareholder returns (TSR) with a look at Gas-Weighted and Diversified E&Ps. 

According to the World Wildlife Fund, the Javan rhino and the Amur leopard top the global list of most endangered species. Broadening the scope, in 2014-20 we probably would have added the E&P investor to the list, as shareholder returns plunged deep into negative territory for seven consecutive years on volatile commodity prices and massive industry overspending. Almost miraculously, a combination of higher prices and a strategic shift to distribute cash flow to equity holders resulted in record shareholder returns that brought investors back into the fold. However, weakening prices and significant increases in investment have dramatically shrunk returns this year. As we discuss in today’s RBN blog, total shareholder returns in 2023 were mixed: good for gas-focused E&Ps but less so for diversified and oil-focused producers. 

It may be considerably smaller in scale than the recent ExxonMobil/Pioneer and Chevron/Hess megadeals, but Occidental Petroleum’s announcement that it will acquire privately held CrownRock LP for $12 billion is remarkable in its own right. Among other things, the deal will give Delaware Basin-focused Oxy a strong foothold in the absolute core of the Midland Basin, supercharge its free cash flow and — despite increasing Oxy’s debt in the short term — provide a pathway for the company to return much more money to shareholders via dividends and stock buybacks in the years ahead. In today’s RBN blog, we examine Oxy’s planned acquisition of CrownRock and what it means for the acquiring company and the Permian itself. 

Despite dreams of a white Christmas and a “soft landing” for the U.S. economy, there’s a lot going on in the world — much of it upsetting and even gut-wrenching. As for energy, crude oil prices have been sagging after a brief rise and natural gas prices, while up from their lows, remain less than stellar — and it seems things could get far worse in the blink of an eye. All of that has combined to make folks cautious and wary, and that’s impacting how oil and gas producers spend — or hoard — their money. In today’s RBN blog, we analyze U.S. E&Ps’ increasingly conservative cash allocation despite rising returns in Q3 2023. 

The cacophony of Black Friday promotions may make us all wonder if the “giving thanks” part of the fourth Thursday of November has been subsumed by rampant consumerism. But we suspect that E&P executives sat down to more traditional celebrations of gratitude as the upstream part of the oil and gas industry rebounded nicely in Q3 from five consecutive periods of declining profits and cash flows. In today’s RBN blog, we analyze Q3 2023 E&P earnings and cash flows and provide some perspective on the past and future profitability of U.S. oil and gas producers. 

Much like their upstream counterparts, midstream companies have shifted to fiscal conservatism over the past few years, focusing less on growth and capital investment and more on shareholder returns, acquisitions and debt reduction. But there are significant differences between the strategies of midstream companies set up as traditional corporations, or C-corps, and those established as master limited partnerships, or MLPs. In today’s RBN blog, we continue our short series on midstream company cash flow allocation with an analysis of their reinvestment rates vs. their shareholder payouts. 

Over the past four years, we’ve documented the strategic transformation of upstream oil and gas producers from growth at all costs to the fiscally conservative concentration on accumulating free cash flow to accelerate shareholder returns. Much like their upstream counterparts, midstream corporations and master limited partnerships (MLPs) have shifted to fiscal conservatism, focusing less on growth and capital investment and more on shareholder returns, acquisitions and debt reduction. In today’s RBN blog, we examine the cash flow allocation of a representative baker’s dozen of midstream companies as they compete for investor support. 

Rumors about potential oil and gas mergers are always swirling, but the announcement of ExxonMobil’s record-breaking deal to acquire Pioneer Natural Resources a couple of weeks ago generated a fever pitch of speculation about potential matchups. In the past week, we’ve seen media reports of possible courtships between Devon Energy and Marathon Oil and then Chesapeake Energy and Southwestern Energy. However, it was Chevron that shocked the oil patch by swiping right on former integrated oil company Hess Corp., opting for a $60 billion acquisition of an E&P with no Permian Basin exposure. In today’s RBN blog, we analyze the drivers and implications of what is now the second-largest U.S. upstream transaction ever.