The price outlook for natural gas is currently worse than it was a year ago, thanks to rapidly growing U.S. output driven by associated gas from oil production. As of Dec. 9, the 12-month strip price for Henry Hub is $2.27/MMbtu compared to $3.29/MMbtu a year ago. The Energy Information Administration (EIA) estimates that U.S. production grew 10% in 2019 to 92.1 Bcf/d and will grow 3% in 2020 to 95.1 Bcf/d. Storage numbers are bearish, with the EIA estimating October through March withdrawals of 1.9 Tcf. This would be 8% less than the five-year average and would result in withdrawal season ending with 1.9 Tcf in storage. The weak outlook, combined with free cash flow targets, is driving down 2020 capex in Appalachia and resulting in low-growth or no-growth production targets.

CNX Resources revised its 2020 capex to $570-$650 million from $620-$720 million, with D&C capex lowered to $400-$450 million from $450-$520 million. D&C spending would be down 13% at midpoint versus 2018. The company also reduced its 2020 production target to 1.47-1.55 Bcfe/d from 1.56-1.63 Bcfe/d, which amounts to a 3% YoY growth target at midpoint. In contrast, growth in 2019 is expected to be approximately 11%.

Antero Resources plans to spend 9% less on D&C in 2020 compared to 2019. Overall capex is forecast at $1.20-$1.25 billion, with $1.15-$1.20 billion for D&C. The company plans to complete 110-120 wells in 2020 with laterals averaging 12,100 feet, compared to an expected 115-125 completions averaging 10,200-foot laterals in 2019. Although that could mean fewer new wells, anticipated completed lateral footage would actually be up 14%. Annual production growth is targeted at 8%-10% in 2020, whereas 2019 growth is expected to come in at 20%.

While Cabot Oil & Gas has not released its formal 2020 guidance, it has provided growth and maintenance scenarios. In the growth scenario, which targets a 5% increase in output, capex would be $700-$725 million. In the maintenance scheme, Cabot would keep 4Q20 production guidance flat YoY at the midpoint of 4Q19 guidance (2.375-2.425 Bcfe/d) and only require $575 million in spending. In 2019, Cabot is targeting 17% YoY production growth from capex of $800-$820 million.

EQT laid out its 2020 plans with an eye toward reduced costs and capex. Sales volumes are forecast to be roughly flat compared to 2019 at 1.45-1.50 Bcfe/d, while capital expenditures will be $525 million lower YoY at $1.3-$1.4 billion. Sales volumes are also expected to be flat YoY in 2019. In 2020, EQT expects about half of the wells it brings online and 80% of the wells it spuds next year to be set for combo development—properly spaced, large-scale projects involving 10-25 wells apiece with simultaneous drilling and completion operations on multiple pads. Lateral lengths will increase, especially in West Virginia where they are expected to average 8,900 feet in 2020 and 12,500 feet in 2021, compared to 4,900 feet in 2019.

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