One might think that having a founder of the shale revolution in Mark Papa could be a good thing, but despite the hype and once hurrah, Centennial Resources has become a prime example of all things wrong with the shale industry despite being a Delaware-basin focused producer in the heart of the glorified Permian.
Last year, Centennial had to issue even higher interest senior notes, at 8.5% due in 2026 to pay near term maturities and fund capex.
From Q1 2018 to Q1 2019, their debt increased from US$400M to US$900M, while their BOE/d of production increased to about 17,000, the oil weighted portion dropped to only 56% from 59%, while their overall revenues fell despite the massive increase in production (and debt!)
Centennial Resources is as much of a gas producer as an oil producer, as they are nearly weighted 50-50 between gas/liquids and crude oil.
Texas natural gas realized prices have been amongst the worst in the world, only legitimately challenged by Alberta's pitiful AECO hub, while NGL pricing has also collapsed. For the moment, West Texas selling differentials have normalized, but WTI prices have collapsed which leaves Centennial in a very deep, cash flow negative situation. Before, oil-focused producers in Permian were able to compensate poor natural gas prices (sometimes negative) by higher crude and/or liquids revenues, which is no longer the case as the market faces a glut in all three categories, especially high API light crude oil.
Even with better takeaway ahead, I don't see a happy ending for Centennial Resources.
CDEV offers plenty more downside potential ahead unless natural gas and crude rise significantly, and soon.
Last year, Centennial had to issue even higher interest senior notes, at 8.5% due in 2026 to pay near term maturities and fund capex.
From Q1 2018 to Q1 2019, their debt increased from US$400M to US$900M, while their BOE/d of production increased to about 17,000, the oil weighted portion dropped to only 56% from 59%, while their overall revenues fell despite the massive increase in production (and debt!)
Centennial Resources is as much of a gas producer as an oil producer, as they are nearly weighted 50-50 between gas/liquids and crude oil.
Texas natural gas realized prices have been amongst the worst in the world, only legitimately challenged by Alberta's pitiful AECO hub, while NGL pricing has also collapsed. For the moment, West Texas selling differentials have normalized, but WTI prices have collapsed which leaves Centennial in a very deep, cash flow negative situation. Before, oil-focused producers in Permian were able to compensate poor natural gas prices (sometimes negative) by higher crude and/or liquids revenues, which is no longer the case as the market faces a glut in all three categories, especially high API light crude oil.
Even with better takeaway ahead, I don't see a happy ending for Centennial Resources.
CDEV offers plenty more downside potential ahead unless natural gas and crude rise significantly, and soon.