Surging Natural Gas Prices

How are the surging natural gas prices affecting drilling this year, and what about going into 2022?  Are the gas companies taking advantage of these higher prices?  What`s next?

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Permalink Reply by Ralph cramdon on March 22, 2022 at 8:31am

LNG indeed is hot but quick growth is not happening . Legal , planning , $$$ all come into play ....... 

The Greens just shut down a proposed plant in the northeast PA region ........  

NGL's are at multi year highs ,, Liquids , unhedged producers are PRINTING $$$$ this Qtr ...... OXY , AR , RRC are major producers ..... 

Balance Sheet repair is underway .... All three had been on shaky ground and are now making HUGE headway to becoming Investment Grade ....... 

 By the way CNX has performed better than expected , but still not  one  of the ones ,I want to own .....

Permalink Reply by farmgas on March 22, 2022 at 9:10am

It seems a common effort by gas companies is to buy back stock.  How will the rising stock values affect that plan?  Will improved balance sheets mean a more aggressive development future for these gas companies? 

Permalink Reply by Ralph cramdon on March 22, 2022 at 11:35am

Investors are Demanding Free cash Flows of 15% or  better ,, Hard to get those immediate returns if they spend a lot of money on growing production .... Takeaway capacity is another issue for producers in Appalachia ..... 

 Investors don't want growth they want great returns ......

Permalink Reply by farmgas on March 22, 2022 at 12:21pm

Is this same analysis applied to other industries too?  Steel, mining, chemical, power, etc....  Is a oil & gas production company just different?  What changed for the oil & gas industry from the old days? 

Permalink Reply by Ralph cramdon on March 22, 2022 at 9:00pm

Oil/Gas producers spent the last ten years chasing new Shale plays ...... The spent Gobs of $$$$ procuring leases , sometimes they ended with #1 properties , often they missed .... Big Bonuses during the Shale Rush became common , then to justify their typical 5 year lease they needed to drill to within 5 years , hence it got really expensive to build the infrastructure for the new wells ... Balance Sheets were destroyed , and share dilution hurt shareholders ...... Money got tight as the Credit Ratings worsened ,costing producers  to pay HIGH Interest Rates .......on new Borrowings ..... 

 Those days of the great Shale Race were Unsustainable.... Investors want returns , not weakened Balance Sheets and share Dilution ....... 

 Park Ave Investors now look  for Free Cash Flows of 15% or better ,,,,, and as of today it is possible to find select Producers ..... Of course other factors come into play as well ..... 

Permalink Reply by farmgas on April 3, 2022 at 10:17am

How are the Appalachian gas drillers doing today with demand for LNG rising significantly to meet Europe needs?   Stock prices remain at a high level.  Will the high stock prices meet greater FCF for investors?  Will the gas companies find a need to drill more aggressively after older wells decline in capacity?  Is there hope for landowners seeing new wells on their properties his year or 2023?  

Permalink Reply by Ralph cramdon on April 4, 2022 at 8:54am

AR got $64 for their Liquids in the 1st qtr ...... Excellent for AR and RRC .... 

 AR / RRC both state  their intent to keep levels the same .CTRA / CHK are constrained by lack of Pipe .. LNG demand is strong BUT there is NO extra Infrastructure to transport more gas ..... Their is more LNG capacity coming but it will take awhile ... Additionally the permian may contribute to additional gas supplies ... 

 

The current mindset in Washington is STRONGLY ANTI Pipeline , which will constrain any measurable Appalachian increase in production ..

 I sense your frustration Farmgas , especially in this High price environment.....  

Permalink Reply by farmgas on April 5, 2022 at 10:17am

Is there a forecast for busting out by gas companies to do more drilling?  Will it be 2022, 2023 or 2024?  At some point they will need to replenish their capability to supply gas. 

Permalink Reply by Ralph cramdon on April 5, 2022 at 10:41am

Farmgas ... There currently is no appetite for increased production for any of the major Appalachian producers ... 

 CHK will increase a bit due to its merge with Chief , but thats limited as well .. 

 

ESG policies out of Washington have reduced the number of Lenders willing to do Business with Drillers 

Permalink Reply by farmgas on April 5, 2022 at 3:20pm

Very discouraging news Ralph!

Permalink Reply by Ralph cramdon on April 5, 2022 at 8:58pm

Keep your head up Farmgas !!!! 

 Enjoy everyday to the Fullest ... 

 Best of Luck .......

Permalink Reply by farmgas on April 7, 2022 at 10:04am

Thanks Ralph, my head is always up.  I`m a glass half-full guy.  I`m optimistic for the future albeit prospects for drilling near me seem to be waning away.  Ah, what fun it was in the old days of the gas rush when it wasn`t a matter of "if" but "when" the drilling rig would arrive.  So OK times have changed for us all.  Some of us will smell the roses but most won`t!  Is there enough time for more drilling until renewables dominate our energy needs?  The aftermath of the Ukrainian/European & Russian energy settlements seem to be headed towards renewable energy sources for the future.  The world is changing!  Watching TV this morning on the current & future state of investor interests supports what Ralph has been telling us.  Investors want profit now from gas companies and not promises of future potential.  Will this change for us landowners, who knows?  

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