Most conversations and analyses around hydrocarbon prices tend to focus on crude oil, if for no other reason than the direct exposure we experience when filling up at the pump. After the commodity price crash in early 2020, which threatened the financial stability of U.S. E&Ps, a subsequent surge in oil prices drove a remarkable recovery, winning back investor confidence in the industry. Crude realizations have subsequently declined, slowly but steadily eroding producer results. Fortunately, the outlook for natural gas, which represents just under half the total output of our 38 U.S. E&Ps, has begun to brighten. In today’s RBN blog, we analyze Q4 2024 results for the major E&Ps we cover with a focus on the impact of rising natural gas prices.
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As shown in Figure 1 below, E&P pre-tax operating earnings (blue bars and left axis) rose to record highs in 2021 and 2022, then declined through 2023 and the first three quarters of 2024. The driver was a drop in crude oil prices from more than $100/bbl in mid-2022 to a $70-$80/bbl range over the last eight quarters. The quarterly average price reached a three-year low of $70.32/bbl in Q4 2024. Despite the substantial dip from $75.26/bbl in Q3 2024, the erosion in profits stopped, as pre-tax income for our universe rose 1.5%, from $10.72/boe to $10.89/boe. Natural gas prices rose from record lows in the first three quarters of 2024, which kept Q4 2024 revenue essentially flat at $35.60/boe despite the 7% decline in average WTI prices.
Figure 1. E&P Financial Results and Production, 2014-Q4 2024. Source: Oil & Gas Financial Analytics, LLC
The Henry Hub spot price increased from $1.99/MMBtu in August 2024 to $3.01/MMBtu in December. As a result, average realized natural gas prices for major producers increased. For example, EOG’s quarter-over-quarter gas realizations rose by 41%, Devon Energy’s increased by 50% and ConocoPhillips’ jumped by 77%. Permian producers that faced negative pricing at the Waha Hub for long stretches in mid-2024 (see Don’t Blame Me) benefited from a turn to the positive, as Diamondback Energy’s average realization pivoted from a $0.26/MMBtu loss in Q3 2024 to an $0.82/MMBtu gain in Q4 2024.
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About the song
“Turn the Beat Around” was written by Gerald Jackson and Peter Jackson and appears as the first song on side one of Vicki Sue Robinson’s debut studio album, Never Gonna Let You Go. Released as a single in February 1976, it went to #1 on the Billboard Hot Dance/Disco and #10 on the Billboard Hot 100 Singles charts. Laura Branigan would release the song as a single from her self-titled sixth studio album in 1990. Gloria Estefan recorded the song for the soundtrack to the film The Specialist in 1994 and included it on her fourth studio album, Hold Me, Thrill Me, Kiss Me. Released as a single in September 1994, it went to #1 on the Billboard Hot Dance/Club and #4 on the Billboard Hot 100 Singles charts. It has been certified Gold by the Recording Industry Association of America. Personnel on the Vicki Sue Robinson record were: Vicki Sue Robinson (lead, backing vocals), Ben Lanzarone (keyboards), Bob Rose, Dick Frank (guitar), Stuart Woods (bass), Jimmy Young, Roy Markowitz (drums), Curis Martin, Ray Armando (congas), George Devens (percussion), Tony Studd, Wayne Andre, Tom Malone (trombone), Burt Collins, Joe Shepley (trumpet), Art Kaplan (baritone sax, flute), George Young (tenor sax, flute), and Warren Schatz (string arrangements).
The album, Never Gonna Let You Go, was recorded between 1975-76 at RCA Studios in New York City and produced by Warren Schatz. Released in April 1976, it went to #45 on the Billboard 200 Albums chart. Three singles were released from the LP.
Vicki Sue Robinson was an American singer and actress known for her disco recordings. She released four albums and 20 singles. She appeared in four motion pictures and six Broadway theater productions. Robinson died in April 2000 in Wilton, CT, at the age of 45.
