The oil price rally and demand recovery helped US oil and natural gas producers Diamondback Energy and Continental Resources report better-than-expected second-quarter earnings of $2.40 per share and 91 cents per share, respectively. Meanwhile, Pioneer Natural Resources posted results that were in line with analyst forecasts and unveiled a variable dividend of $1.51 per share to be paid in the third quarter.
Front-month US natural gas futures edged up 0.5% on Monday to $3.935 per million British thermal units, as "the market is looking ahead to what could be a very hot end to the summer, with the cooling degree days likely to go up a little bit," said Price Futures Group analyst Phil Flynn. Strong US liquefied natural gas exports and limited supply availability will continue to fuel the price rally, Flynn added.
With cash prices at Eastern Gas South climbing to an average of nearly $2.90 per million British thermal units in July, Appalachia's top natural gas producers are taking different routes to navigate the improved price environment. Southwestern Energy is taking a cautious approach that has so far involved hedging more than 65% of its estimated 2022 production, while Cabot Oil & Gas, in contrast, has decided against hedging any of its 2022 volumes and plans to increase quarterly output by 4% in the third quarter and 10% in the fourth quarter.
The Interior Department's report on its review of the federal oil and natural gas leasing program could call for royalty rate increases and the introduction of a cost-of-carbon fee on federal production. However, the report will likely stop short of requesting a permanent ban on new oil and gas leasing.
New Mexico's oil production grew by 4% to an all-time high of 1.22 million barrels per day in May, displacing North Dakota as the second-biggest onshore oil producing state for the third month in a row, government data show. Lower production costs give New Mexico a competitive edge over North Dakota.
The internal rates of returns in US dry gas plays have gotten a boost from strengthening Henry Hub futures in the past month, with Haynesville IRRs climbing to 29%, Marcellus IRRs at 31% in the wet window and 22% in the dry window, and Utica IRRs at 26% in the wet and 28% in the dry, according to S&P Global Platts Analytics. In the Haynesville, the rig count reached 56 in the week through July 28 and production is expected to increase by more than 300 million cubic feet per day from July to 13.2 billion cubic feet per day on average in August.
The 2-billion-cubic-foot-per-day Whistler natural gas pipeline running from the Waha hub in the Permian Basin to the Texas Gulf Coast has begun full commercial service on July 1. The 450-mile pipeline is owned by WhiteWater Midstream, MPLX, and a joint venture between Stonepeak Infrastructure Partners and West Texas Gas.
Haynesville Shale operator Vine Energy will work with Project Canary to certify its natural gas production as responsibly sourced. "In addition, Project Canary will deploy 'Canary X' continuous emissions monitoring devices across locations representing 25-30% of Vine's natural gas production which will target domestic and international RSG markets," the company said.
The US produced 11.23 million barrels per day of crude oil in May, an increase of 80,000 bpd, and a gross 103.4 billion cubic feet per day of natural gas, up 0.1 Bcf/d from April and marking a 14-month high, the Energy Information Administration reported. Gasoline consumption rose from 8.79 million bpd in April to 9.14 million bpd in May, while distillate demand fell slightly to 3.874 million bpd.
US oil giants ExxonMobil and Chevron remained profitable for a second consecutive quarter, reporting earnings of $4.7 billion and $3.1 billion, respectively, in the second quarter as the oil and gas price recovery gathered pace, but neither producer plans to boost capital spending. "We're realizing significant benefits from an improved cost structure, solid operating performance and low-cost-of-supply investments that, together, are generating attractive returns and strong cash flow to fund our capital program, pay the dividend and reduce debt," said Exxon Chairman and CEO Darren Woods.
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