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Keep Drivin' - Gas Producers Boost Their Already Bold 2017 Production Outlook

An analysis of mid-year 2017 guidance shows that the nine natural gas-focused exploration and production companies we’ve been tracking are still fully committed to the very aggressive exploration and development spending they outlined at the beginning of the year. These Gas-Weighted E&Ps slightly upped their total 2017 capital budgets to $8.87 billion, a whopping 59% boost from their 2016 investment — well above the 44% and 29% increases announced by the Oil-Weighted and Diversified E&P peer groups, respectively. The gas-focused producers also increased their 2017 production guidance by 1% to 1.046 billion barrels of oil equivalent (Bboe), in contrast to the mid-year reductions in 2017 output announced by the other two peer groups. Today, we continue our review of updated capital spending plans by 43 U.S.-based E&Ps, this time with a look at companies that focus on natural gas.

How We Got Here

Monitoring the capital spending plans and production forecasts of a sizable and representative group of U.S. E&P is helpful in assessing the status and outlook of the energy sector as a whole. In Piranha!, our market study of 43 top U.S.-based E&Ps, we examined the strategies that the companies are adopting to thrive in a world of $50/bbl crude oil and $3/MMBtu natural gas. Of that universe of companies, 21 focus on oil (60%+ liquids reserves), nine are gas-weighted producers (60%+ natural gas reserves) and 13 are diversified producers. An update of our 43 companies’ 2017 capex plans and production forecast is timely now that the E&Ps have wrapped up their second-quarter/first-half earnings announcements and conference calls. We started in Rock Steady with a big-picture look at all the companies we track. Then, in Sail On and Hold the Line, we analyzed the individual investment and production guidance for the Oil-Weighted and Diversified E&P peer groups, respectively. Today, we’re finishing up this blog series by analyzing the mid-year guidance of the Gas-Weighted Peer Group.

Where We’re Going

As seen in Figure 1, our nine gas-focused E&Ps are now budgeting $8.9 billion in upstream capital expenditures in 2017 (red rectangle), up marginally from an initial $8.8 billion. The total is a remarkable 59% higher than the $5.6 billion invested by the peer group in 2016, though it is a little more than half the $15.7 billion in outlays in 2014. Only one company, Rice Energy (which is being acquired by EQT Corp.), announced a mid-year reduction in its 2017 guidance, cutting exploration and development expenditures by $70 million. That cut was more than offset by two E&Ps that increased their budgets by a total of $118 million; six companies left their initial guidance unchanged.

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