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May 20, 2020updated 29 Nov 2021 6:14am

Assessing the impact of Covid-19 and weakened oil prices on independent US oil and gas companies

By GlobalData Energy

The GlobalData Upstream Impact Scorecard considers a number of factors that determine a company’s upstream business impact and associated risk to the short-term impacts of Covid-19 and weakened oil prices.

The oil and gas peer group analysed is a sample of American Independent Majors, focused primarily on the upstream sector and consisting of Antero Resources Corporation, Cabot Oil & Gas Corporation, Continental Resources Inc, EOG Resources Inc, EQT Corp, Marathon Oil Corporation, Occidental Petroleum Corporation, Pioneer Natural Resources Company, Range Resources Corporation, Southwestern Energy Company.

Since natural gas prices have had a less drastic drop than oil prices companies that have larger exposure to gas production, with low debt to equity ratio and a large portion of 2020 production hedged, generally score well in the current environment relative to peers. Continental Resources upstream business ranks as one of the most impacted by low oil prices in the selected sample due to low percentage of hedged production in 2020, high debt to equity ratio and oil-dominant portfolio. The company has announced the biggest capital expenditure (capex) and production cuts thus far.

By contrast, the company with the lowest upstream impact amongst the American Independent Majors peer group is EQT Corporation, as it has a strong reserves base, good amount of 2020 production hedged and a large footprint in a gas-rich Marcellus shale play. The company’s business is most likely to respond well to the current crisis due to these factors.

EQT Corporation has a strong reserves base, good amount of 2020 production hedged and a large footprint in a gas-rich Marcellus shale play. The company’s business is most likely to respond well to the current crisis due to these factors. Antero Resources’ lower capital expenditure cut is partly due to more efficient drilling and completion operations that resulted in a 26% decrease in well cost per lateral foot. The company is planning to maintain original production rate for 2020.

Similarly the associated impact of a Low Case oil price (WTI=$21 per bbl) scenario on upstream cashflow is significant for selected US independent companies. Pioneer Natural Resources has the highest reduction of 2020 post-tax cashflow in the Low Case oil price scenario of almost $9 per boe.

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The company is a Permian play only operator producing mainly crude oil, whose price has been highly volatile in the past two months. Both Marathon Oil and EOG Resources have the second-largest drop in 2020 post tax cashflow per boe in the group. Both companies have oil-focused portfolios and have international exposure. EQT Corp and Cabot Oil & Gas are anticipated to be less impacted by lower oil prices as they produce mostly gas from Marcellus and Utica formations in the US.

2020 post-tax cashflow per boe differences at Base Case ($28/bbl) and Low Case ($21/bbl) with respect to a reference price before the Covid-19 related crisis ($35/bbl)

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