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Msg  266 of 287  at  7/12/2022 12:59:59 PM  by

jerrykrause


Shale gas stocks outperform indexes in H1'22 but dip after Freeport fire

from SNL Daily Gas Report
 
 

Shale gas stocks outperform indexes in H1'22 but dip after Freeport fire

 
 
Byline: Bill Holland
 
 

Pure-play shale gas stocks continued to outperform broader indexes in the first half of 2022. But despite upstream companies' boosted returns to shareholders, there was little correlation between equity performance and increasing cash returns.

The top-performing stock among the set, Antero Resources Corp., pays no dividends and has no share repurchase program. The worst-performing stock in the group, integrated gas company National Fuel Gas Co., has been paying dividends for 120 years and has raised the dividend annually for 52 years.

The entire sector rose sharply in early June only to retreat in line with a steep decline in natural gas futures prices after a fire at Freeport LNG Development LP's Texas liquidation plant removed that export facility and its near-term future cargos from the demand picture. Still, the shale shares outperformed the broader markets in the first half, with the benchmark S&P 500 off 20% for the year.

"Upstream stocks, which had been defying gravity for most of the year, hit a serious air pocket this month as investors seemed to have shifted firmly into 'recession imminent' camp," Matt Portillo, Tudor Pickering Holt & Co. managing director for equity research, told clients June 24. Investors are sitting on the sidelines until the future is clearer, the company said.

"That said, we are firmly in the camp the recent move in equities will set up for a compelling value proposition versus the broader market when things finally do bottom," Portillo said. Portillo expects that June's decline in share values will cause more firms to take advantage of the market pullback and the start of increased share buyback plans. For instance, Chesapeake Energy Corp. and Southwestern Energy Co. each added $1 billion to their buyback authorizations in June after gas futures prices fell sharply.

The change this year is a shift away from Appalachia as the driver of U.S. gas growth to the Haynesville Shale on the Texas-Louisiana border due to pipeline constraints and Haynesville's location near liquefied natural gas terminals along the Gulf Coast.

"The capital investment and regulatory appetite for hydrocarbon development in the Northeast has largely dried up, particularly in light of the challenges faced by Mountain Valley Pipeline and other greenfield projects," Sheetal Nasta, RBN Energy's managing editor, told clients June 14.

The number of rigs in Appalachia is up 11 over 2021 to 55 as of June 29, while the number of Haynesville rigs is up 19 to 71 rigs, according to Enverus' Rig Data.

"Steadily increasing natural gas prices starting last year along with growing acknowledgment that Appalachian production was off-take constrained [led] to another round of increased activity and a wave of mergers and acquisitions," Mizuho Securities USA LLC analyst Vincent Lovaglio said June 22. Lovaglio listed Southwestern's acquisition of private drillers Indigo Resources LLC and GEP Haynesville LLC in the past year, as well as Chesapeake's addition of Vine Energy Inc. to its existing Haynesville position.

With a climbing rig count and growing numbers of drilled but uncompleted wells, Haynesville will be the driver of gas production in the next five years, Mizuho said.

 


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