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Appalachian frackers spill red ink in third quarter - again

December 01, 2020
Clark Williams-Derry and Tom Sanzillo and Kathy Hipple
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Key Findings

Nine fracking-focused gas companies in Appalachia reported $504 million negative free cash flow in Q3 2020

In aggregate, capital spending was $1.8 billion in the quarter, a 34% year-on-year drop

Capital investments during the quarter were the lowest in at least six years

Hedging provided significant sources of cash


An IEEFA analysis reveals that nine shale-focused gas producers in Appalachia slashed their capital expenditures (capex) in the third quarter by more than one-third compared to the prior year.

Despite the cuts, the nine companies spent $504 million more on drilling and other capital projects during the quarter than they generated by selling oil and gas, with six companies reporting negative free cash flows.

These results follow a dismal decade for the Appalachian frackers, culminating in bankruptcies for two key players. Gulfport Energy filed for bankruptcy protection in November. Chesapeake Energy, which had filed for bankruptcy earlier in the year, is currently restructuring its $7 billion debt.

All told, the nine companies in IEEFA’s sample made $1.8 billion in capital expenditures for the quarter—a 34% year-on-year drop, and the lowest quarterly total in more than six years.

Eight of the nine companies in the IEEFA sample slashed capital spending from the prior year’s level. Range Resources, for example, cut its quarterly capex to $72 million, down from $178 million in the third quarter of 2019.

Despite bullish statements from executives, EQT slashed its quarterly capex through the third quarter by more than 40% compared to the prior year. Only National Fuel increased its capital spending in the quarter, primarily as a result of acquiring Shell’s dry gas assets in July.

Clark Williams-Derry

Clark Williams-Derry is an Energy Finance Analyst focused on the finances of North America’s oil, gas, and coal industries.

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Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures.

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Kathy Hipple

Former IEEFA Financial Analyst Kathy Hipple is a founding partner of Noosphere Marketing and the finance professor at Bard’s MBA for Sustainability.

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