In our prior quarterly analysis of earnings calls for Exploration & Production (“E&P”) and Oilfield Services (“OFS”) companies, we noted that despite strong international demand, domestic natural gas prices were deflated which forced companies to focus on maximizing their efficiency. The earnings calls from the third quarter continued many of those themes, with a focus on technological efficiency, optimized capital allocation, and expectations for natural gas demand in the long term. We examine some notable quotes from recent earnings call transcripts to gain insights into how industry leaders are navigating current challenges and positioning themselves for the future in an evolving energy landscape.

Technology/Efficiency

Third-quarter earnings calls from energy companies highlight key trends shaping the industry as it adapts to new challenges and opportunities. Companies are showcasing their commitment to innovation, efficiency, and strategic growth, with a focus on advancing technologies, enhancing operational performance, and building partnerships to expand market potential.

• “Looking company-wide since the start of 2023, we have increased our drilled footage per motor run by over 20% versus third-party rental options. As we continue to test, learn and redesign our drilling motors, we see substantial upside to our future drilling performance as we expand motor innovation throughout our multi-basin portfolio.”
  – Jeffrey R. Leitzell Executive VP & COO, EOG Resources, Inc.
• “We are continuing to progress the early stages of commercialization for … opportunities with our joint venture partners. In conjunction with our joint venture partner, Deep Well Services, we continue to deploy AutoSep across our internal flowback operations and are currently expanding the equipment fleet to be able to deliver services to the wider market. Similarly, we are continuing to utilize our ZeroHP CNG technology on various internal applications and some early stage third party opportunities. We are excited for these technologies to be widely adopted by industry participants in the coming years”
  – CNX Resources Corporation Prepared Remarks
• “Looking ahead, I expect the Zeus’ platform and its constituent technologies to see continued adoption. I believe these technologies, working together seamlessly in an automated real-time environment, will create a path to greater fracture consistency, ever higher levels of efficiency and ultimately improved recovery. The potential value creation related to these technologies is significant. We are working today with several market-leading operators to advance this integrated application of the Zeus platform. I believe we are just at the beginning of what this technology will accomplish”
  – Jeff Miller, Chairman, President & CEO, Halliburton Company
• “From the Chemical Technologies segment, the entirety of the revenue impact in the third quarter resulted from decreased activity with our legacy pressure pumping customers. We continue, however, to generate strong free cash flow out of this segment, and we have clear visibility in market share gains and revenue growth in the fourth quarter with our E&P customers, supported by our new product development and technology performance.”
  – John D. Schmitz, President, CEO & Chairman, Select Water Solutions, Inc.

Recapitalization / Debt vs. Equity / Buybacks

Key players in the energy space are emphasizing disciplined capital allocation and shareholder returns as key components of their financial strategies, with a strong focus on share repurchase programs. Buybacks are being used to maximize long-term value, balance market cycles, and demonstrate a commitment to returning cash to investors. These approaches highlight the industry’s growing focus on strategic financial management in a dynamic and cyclical environment.

• “Our capital allocation strategy remains disciplined and we are focused on investing in our business to preserve future cash flows, while also continuing to return excess cash to shareholders. Year-to-date, we have repurchased approximately 1.5 million shares for a total of $15.5 million. This is nearly double the amount repurchased in 2023 and represents our steadfast commitment to allocate cash flows toward their highest return potential, which has been our own stock to date.”
  – Melissa Cougle, CFO, Ranger Energy Services
• “The countercyclicality of share repurchases has proven to be the right strategy in a commodity-based business. Our industry over the last 10 years probably has many instances where oil price was high, free cash flow was high and share repurchases were high. And then oil price cycle is down and you end up either issuing shares at the bottom or rather on the anticipated results. Like we were talking about on the flexibility of our return program, we try to learn from the past and not repeat any mistakes, and that’s certainly foundational to our share repurchase program.”
  – Travis D. Stice, CEO & Chairman of the Board, Diamondback Energy, Inc.
• “We really view buybacks as a systematic mechanism to return cash to shareholders. We look at it through cycles. So while there might be some short-term opportunities, to your point, around the current share prices, we tried not to be opportunistic per se, but view, again, stock buyback more as a through cycle mechanism to return cash.”
  – Eric Carre, Executive VP & CFO, Halliburton Company

Long-Term Outlook on Natural Gas Market

Amid lower natural gas prices broadly characterizing 2023, many executives are confident in longer term resilience of natural gas prices.  A key driver is the growth in demand for electricity from AI and data centers.

• “2025 is really going to be an inflection point, for North American gas demand with LNG beginning to come online and then coming online really ’25, ’26, ’27. And when we think about that, it’s — as we calculated about 10 to 12 Bcf a day of LNG that’s under construction and should come online in that time frame. And then above and beyond that, we actually see another almost 10 to 12 Bcf a day in demand growth between now and the end of the decade, that’s really associated with power demand, a little bit of industrial, some Mexico exports, but really, it’s power demand driven not only by new power demand from AI and electrification, but also coal power retirements.”
  – Ezra Y. Yacob CEO & Chairman, EOG Resources, Inc.
• “Looking ahead, we believe this trend of higher annual natural gas power burn will continue to be driven by demand growth from AI data centers, crypto mining and electric vehicles. This power demand growth provides an incremental uplift on top of the highly anticipated second wave of LNG demand that is expected to add in combination 20 Bcf of incremental demand by the end of the decade.”
  – Justin B. Fowler, Senior Vice President of Gas Marketing & Transportation, Antero Resources Corporation
• “[The demand for AI] is going to make the electricity growth instead of each year growing 0.5% a year, probably 3% or more each year.  And while a number of the mega techs have talked about nuclear because they want clean energy, being the supply source for the electricity, that’s a pipe dream, again, the same way it is in the energy transition. And the fuel of choice there is natural gas, whether it’s natural gas as a baseload or natural gas as the swing and resilient fuel to back up renewables.”
  – John Hess, CEO & Director, Hess Corporation
• “LNG demand or LNG export capacity is growing rapidly. Exactly how that demand manifests itself for the call on U.S. gas as a function of demand internationally as well as competing supply internationally… Demand domestically is clearly growing and growing faster than I think a lot of models we’re predicting … 1 to 2 years ago [due to] power generation. So that’s a pretty encouraging sign. A lot of the power [generation] around AI is going to take several more years to develop … so we expect that trend to be structural, long term, and provide a pretty important tailwind.”
  – Domenic Dell’Osso, President, CEO, & Director, Expand Energy Corporation

Conclusion

Mercer Capital has its finger on the pulse of the upstream market. As the oil and gas industry evolves through these pivotal times, we take a holistic perspective to bring you thoughtful analysis and commentary regarding the full hydrocarbon stream. This includes E&P operators, mineral aggregators, and ancillary service companies crucial to starting and maintaining the stream’s flow. For more targeted energy sector analysis to meet your valuation needs, please contact the Mercer Capital Oil & Gas Team for further assistance.