As of last week, producer earnings for the 4th quarter 2023 and production and capital expenditure guidance for 2024 have been released for all publicly traded oil and natural gas producers. One pattern emerging is that barring any production curtailments, Lower 48 independent producer capital expenditures (CapEX) for 2024 are going to be down significantly while their production is going to be roughly flat year-on-year (YOY). CapEx for the Lower 48 independent oil and natural gas producers is estimated to be down by ~6% YOY for 2024.
Lower 48 independent natural gas producers are experiencing rougher times as their 2024 CapEX guidance is estimated to be down 14% YOY.
At the same time, most independent oil and natural gas producers are guiding towards flat overall production in 2024 compared to a year ago. Natural gas producers are the exception due to the implementation of curtailments, choke backs, and deferred TILs from EQT and Chesapeake Energy.
Lower capital expenditures in 2024 are a combination of some deflation in costs for producers and YOY efficiency gains from shorter drilling and completion times in addition to increased usage of simulfracing and trimulfracing. The reduction in CapEx in combination of flat YOY production is some welcome news for producers in a difficult natural gas pricing environment.
CNX Resources Production Guidance Update
On March 12th, 2024, CNX Resources Corporation announced an update to its previously stated plans for the year. This press release comes less than two months after its Q4 2023 earnings call on January 25th, 2024, in which the company detailed operational plans and presented estimates for 2024 production and capital expenditures.
Acknowledging the weak price environment for natural gas, CNX stated that this update comes “in response to the continued lower outlook for near term natural gas prices”. CNX specified that it “will delay completions activities on three upcoming Marcellus Shale pads consisting of 11 wells to avoid bringing incremental volumes into the current oversupplied market”.
The original guidance for FY2024 production volumes had been between 570-590 Bcfe. With the delays of their Marcellus completions activities, the range for production volumes has been revised down to 540-560 Bcfe, a decrease of 5.2% between the midpoints of each range. Despite the change to this year’s expected production volumes, CNX stated in its press release that it “maintains the flexibility to return to its previously stated long term production volume target of approximately 580 Bcfe in 2025”.
In its annual 10-K SEC filing on February 8th, 2024, the company reported that as of January 5th, 2024, 82% of its total 2024 natural gas production had been hedged at an average price of $2.53 per Mcf, or $2.44/MMBtu. Looking at the remainder of the year, the company’s production for Q2-Q4 has been hedged at a weighted average price of $2.51 per Mcf, or $2.42/MMBtu. For comparison, the March 12th Henry Hub natural gas futures settlement price averaged $2.43/MMBtu for April through December 2024.
In its previous earnings call presentation, CNX indicated the company expects to spend between $575-625MM in total capital expenditures with $430-$450MM or approximately 73% allocated to drilling and completions. The updated expectations have been revised down to $575-$625MM, a decrease of 8.3% between the midpoints of each range.
