The above chart depicts an average of capital expenditures, production volumes, and per unit operating costs for major gas producers Antero, Cabot, and EQT.
Prior to COVID-19 demand destruction, natural gas producers announced 2020 outlooks with robust capital expenditures and consistent YOY increases in gas production volumes. In April of 2020, oil and gas producers alike announced revised 2020 guidance, slashing capital expenditures (visualized above in blue) while maintaining flat production (above orange bar). Now that we are nearing the end of 2020, it is clear that dry gas-focused producers in Appalachia were able to achieve this goal. But how?
In recent years, producers have been able to consistently decrease the per unit operating costs of their natural gas volumes (green line above). Additionally, as noted, DUC well inventories have decreased in recent months as they have been converted into completed wells, enabling producers to maintain production at a relatively low cost. Producers are starting to release their 2021 outlooks which contain similar sentiments on capex cuts and stagnant production volumes. With higher natural gas prices expected next year and more supply eventually necessary, it is unclear if producers will continue on their path of capital restraint or find new ways to generate growth and capture higher prices.
