Appalachian heavyweights Cabot Oil & Gas Corp. and Range Resources Corp. both plan to keep spending and production flat this year despite an improving outlook for natural gas. 

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“While a warmer start to the winter heating season and higher storage levels resulted in wider than anticipated differentials across the Appalachian Basin during the fourth quarter, we remain optimistic that the improving outlook for lower end-of-season inventories will provide tailwinds for regional natural gas prices during 2021,” said Cabot CEO Dan Dinges on Thursday after the fourth quarter results were issued.

Full-year natural gas price realizations, including hedges, were $1.68/Mcf, down 31% from 2019. Cabot produces 100% natural gas. 

The company, which operates only in Susquehanna County, PA, said 2021 production would average 2.35 Bcfe/d on a capital spending program of $530-540 million. That compares with 2.34 Bcfe/d produced in 2020 on a budget of $570 million. Cabot produced 2.37 Bcfe/d in 2019. 

The company said fourth quarter production was 2.38 Bcfe/d, down from 2.45 Bcfe/d in the year-ago period. 

Cabot, like other Appalachian operators, has been scaling back its operations in recent years as commodity prices have fallen and investors demand more from the upstream sector. The company expects 1Q2021 production to average 2.25-2.30 Bcfe/d. The decline from 4Q2020 volumes is expected to be driven by a decrease in operating activity levels and capital spending during the second half of 2020. 

Dinges said U.S. dry gas production is still well below prior year levels, and the company doesn’t expect a “significant rebound in volumes throughout the year as producers across the industry are focused on free cash flow generation, balance sheet repair and capital returns to shareholders over production growth.” 

Cabot plans to continue focusing on its lower Marcellus Shale assets. However, five upper Marcellus wells that were placed online last year are exceeding expectations with average estimated ultimate recoveries of 2.9 Bcf per 1,000 lateral feet. Management expects to begin fully developing the upper Marcellus later this decade. 

Cabot reported fourth quarter net income of $131.2 million (33 cents/share), compared with profits of $146.9 million (36 cents) in the year-ago period. For the full-year, net income was $200.5 million (50 cents/share), compared with $681.1 million ($1.64) in 2019.

Range Disciplined

Range also intends to stay in maintenance mode this year, announcing a $425 million all-in capital budget for 2021 that will keep year/year production flat at 2.15 Bcfe/d. Last year’s budget came in at $411 million, or $109 million less than originally planned. 

“These results reflect the organization’s continuing focus on capital discipline and further strengthening our financial position,” CEO Jeff Ventura said.

Range expects to turn 59 Marcellus wells to sales this year mainly on its liquids-rich acreage. The company also continues to focus on cutting debt to implement a cash return program for its shareholders.  

Range reduced outstanding debt by $86 million in 2020, bringing total debt reduction to $1 billion since 2017.  At the end of last year, Range had total debt outstanding of $3.1 billion. Average realized prices fell by 19% in 2020 to $2.36/Mcfe.

The company produced 2.1 Bcfe/d in the fourth quarter, down from 2.3 Bcfe/d in the year-ago period. The company curtailed production during 4Q2021 because of low prices and infrastructure maintenance. 

Range reported fourth quarter net income of $38 million (16 cents/share), compared with a net loss of $1.8 billion (minus $7.27) in the year-ago period when it reported a steep impairment on proved properties. Full-year net loss was $711.7 million (minus $2.95/share), compared with a net loss of $1.7 billion (minus $6.92) in 2019.