A rise in commodity prices bolstered first-quarter earnings and increased cash flow for E&P companies in the U.S., including Appalachia shale gas producer Cabot Oil & Gas Corp.  

The swift comeback of oil prices from the massive sell-off in December was surprising, but global demand and oil consumption has continued to rise. U.S. crude supplies increased by 5.5 million barrels for the week ended April 19, according to a report by the Energy Information Administration on April 24.

Range Resources Corp., EQT Corp., QEP Resources Inc. and Southwestern Energy Co. also reported earnings last week.

Range Resources

Range Resources, a Fort Worth, Texas-based company whose production is mainly in the Appalachian and North Louisiana regions, reported it generated organic free cash flow during the first quarter, which it used to pay down roughly $48 million on its credit facility.

In Appalachia, Range is focused on development of the Marcellus, Utica and Upper Devonian formations in Pennsylvania. The company also has about 140,000 net acres in North Louisiana, where it plans to spend minimal capital for the next five years.

CEO Jeff Ventura said in its earnings statement on April 22 hat the company is focusing on improving its  
balance sheet towards its longer-term target of under two times debt-to-EBITDAX and pursuing multiple asset sales to lower its debt levels.

Range has about $3.8 billion of outstanding net debt as of March 31, according to a company presentation.

During the first quarter, Range’s production averaged roughly 2.3 billion cubic feet equivalent per day (Bcfe/d) comprising 31% liquids. Particularly, the company’s southwest Pennsylvania production focused on core Marcellus development increased 14% over the prior-year period to 1,915 Bcfe/d.

Adjusted net income fell year-over-year $90.7 million. or $0.36 per share, in first-quarter 2019 vs. $113 million, or $0.46 per share. The company also reported cash flow provided from operating activities of $261 million.

Range is expected to increase its free cash flow to $150 million in 2019 from $28 million last year, according to Paige Marcus, an equity research analyst at the Center for Financial Research & Analysis LLC (CFRA).

“These estimates follow three straight years of free cash flow deficits and are supported by stronger pricing,” Marcus wrote in an April 23 research report. “We think investors want to see asset sales, but with no debt maturities until 2021 and free cashflow meanwhile, we see ample time to pay down debt.”

Range has a positive outlook, Marcus said. CFRA has a 12-month target price of $11 with a buy rating on the Range stock. The company’s EBITDA margins are forecasted to be 35.3% in 2019 and 36.5% in 2020, she added.

EQT

EQT, a Pittsburgh-based producer of shale gas in Appalachia, on April 25 reported strong first quarter production on in-line capex. The company’s production sales volume from the first quarter of 383 Bcfe was up 13% year-over-year when adjusted for divestitures.

The company’s sales of natural gas, oil and NGL increased $45 million as a result of a 7% increase in sales volumes in 2019, which was more than offset by a loss on derivatives not designated as hedges in 2019.

Income from continuing operations was $191 million or $0.75 per diluted share, compared to a loss of $1.6 billion, or $5.96 per share, a year prior. The company’s net cash provided by operating activities decreased by 4%.

Notably, however, EQT’s adjusted free cash flow increased by 92% in the first quarter. Adjusted free cash flow in the quarter was $171 million, unadjusted for an $8 million litigation reserve and $4 million of proxy and transaction costs.

EQT also drove down its debt during the quarter as a result of working capital dynamics and positive adjusted free cash flow over the past two quarters. The company reported a roughly $500 million net reduction to its net debt.

Though, the battle for control of EQT continues between the company and a team led by Toby Rice, co-founder of Rice Energy which EQT acquired in 2017.

RELATED: Things Get ‘Awkward’ For Rice Brothers Thanks To EQT Feud

Rice brothers, Toby and Derek, have claimed EQT has underperformed, which has been supported by EQT shareholders D.E. Shaw and Elliott Management Corp. The brothers own 3.1% shares of the company and have nominated nine directors to replace the current board members.

Toby Rice also filed a lawsuit on April 25 against EQT on behalf of the Rice team. The suit claims EQT and its board are manipulating the company’s upcoming shareholder election to thwart the Rice team’s proxy campaign.

EQT CEO Rob McNally told Reuters the Rice lawsuit was timed to distract the market from EQT’s first-quarter earnings, which he described as “a good set of results from the company.”

Southwestern Energy

Southwestern Energy on April 25 generated solid first-quarter results in its first time reporting as a single-basin Appalachia producer.

The company, based in Spring, Texas, exited the Fayetteville Shale in Arkansas last year. Private equity backed Flywheel Energy LLC had agreed to acquire Southwestern’s Fayetteville business for more than $2 billion in a transaction that closed December 2018

Southwestern now operates soley in Appalachia with a roughly 480,000 net-acre position across Pennsylvania and West Virginia.

During the first quarter, Southwestern drilled five wells of 15,000 ft, including a18,683-ft state record lateral in Pennsylvania.

The company’s Appalachia production rose by 14% in the first quarter to 182 Bcfe, with liquids up 34% year-over-year. Its Appalachia revenue also increased by 13%. 

On April 25, Southwestern reported $2.2 billion of liquidity, including cash of $366 million. The company completed a $200 million share buyback during the first quarter.

Southwestern reported adjusted EBITDA of $319 million, net cash provided by operating activities of $442 million and net cash flow of $309 million while invested capital totaled $325 million in the quarter.

Adjusted net income of $145 million, or $0.27 per share, was down year-over-year from $162 million, or $0.28 per share, in first-quarter 2018.

As of March 31, Southwestern had $2.3 billion of outstanding, long-term, fixed rate notes, however, the company said there were no material senior note maturities before 2025. The company also has no borrowings under its $2 billion secured credit facility with a borrowing base that was recently reaffirmed.

Cabot Oil & Gas

Houston-based natural gas producer Cabot Oil & Gas on April 26 reported results focused on returns and free cash flow and not production growth.

Cabot’s E&P operations are primarily concentrated in the Marcellus Shale in northeast Pennsylvania, where the company plans to spend about $800 million in 2019. For the full year 2019, Cabot plans to drill and complete 85 to 90 net wells and place 80 to 85 net wells on production, according to the company’s website.

The company’s first quarter volumes of 2.276 billion cubic feet per day, which rose by 21% year-over-year, were “just above the top end of guidance but in line with expectations,” according to William Featherston, a Credit Suisse analyst.

During the first quarter, Cabot generating roughly $308.4 million in free cash flow, of which the company has said it plans to return 50% of to shareholders. As a result, Cabot on April 26 increased its dividend by 29%—the company’s fourth dividend increase in the past two years.

Cabot’s first quarter earnings per share beat consensus, “likely on favorable hedging impact,” Featherston wrote in a research report on April 26.

“Clean [earnings per share/[cash flow per share] of $0.73/$1.17 came in well above consensus of $0.65/$1.08,” he said noting Credit Suisse were looking for higher at $0.79/$1.27. 

Adjusted net income of $307.8 million, or $0.73 per share, was up year-over-year from $128.5 million, or $0.28 per share, in first-quarter 2018. 

Featherston has a neutral rating and price target of $25 for Cabot. The company’s EBITDAX of $513 million, which was a 69% increased year-over-year, was about 7% above consensus.

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