Shale oil producer Coterra trims reserves estimates, shares sink

Shares of shale oil and gas producer Coterra Energy fell as much as 8% on Friday after the company cut its estimate of proven oil reserves, a key measure of future production growth.

Coterra, which formed a year ago through the merger of Cimarex Energy and Cabot Oil & Gas, said proved reserves on its books will drop roughly 15% to 20% year-over-year at December 31, 2022.

The decline was driven by a roughly 32% to 36% decline to gas reserves in its Marcellus shale properties in the Eastern United States that came with the Cabot acquisition. That decline was offset by an increase of roughly 8% to 12% to its Permian and Anadarko basin assets.

The change will have “little to modest financial impact,” CEO Thomas Jorden said during an earnings call on Friday. Some of the downward revision was being driven by the “behavior of infill wells,” he added, referencing secondary wells that can reduce the production volumes of original wells.

Shares were down about 8.5% in midday trading to $28.01.

Coterra also warned that its well costs could increase as much as 20% on a per foot basis year over year due to higher service and equipment costs. For 2022, it anticipates hitting the top-end of spending guidance amid inflationary pressures.

Rival U.S. shale oil producer EOG Resources said oilfield costs could increase by 10% next year, on top of a 7% increase in 2022, as inflation continues to snarl the energy industry.

EOG, which this week announced it had extended operations into Ohio, said it will maintain low single-digit oil production growth next year. Including gas and liquids, its output will rise at a low double-digit percentage rate, executives told investors on Friday.

It will run 28 to 30 drilling rigs next year, up to a 3-rig increase, and eight to ten hydraulic fracturing fleets, up about one or two from 2022.

The company anticipates selling some 250,000 barrels per day of oil at a Brent-linked price during the fourth quarter. The ability to sell natural gas and crude at export-based pricing added some $700 million of revenue uplift compared with domestic sells, President Billy Helms said on Friday.

Shares of EOG were up about 2% to $141.19 in midday trading.

EOG also said it had begun construction on a 36-inch pipeline which will move natural gas out of its Dorado field in south Texas to points near Corpus Christi, Texas.