Aug 2 Oil and natural gas producers Cimarex Energy Co and Swift Energy Co are ramping up production of the more lucrative oil and natural gas liquids, but a fall in prices for the fuels weighed on second-quarter revenue.
Natural gas prices fell to their lowest in a decade in April due to mounting supplies of the fuel in the United States.
Exploration and production companies have in response started increasing output of crude oil and natural gas liquids (NGLs) like butane, propane and ethane that are sold for higher prices.
Swift Energy was drilling and completing more wells targeting crude oil, condensate and NGL production, Chief Executive Terry Swift said in a statement.
The company expects year-end reserves levels to rise 15 percent to 20 percent this year, up from its previous estimate of a 10 percent to 15 percent increase.
Swift said 40 percent of the year-end reserves will primarily be crude oil and NGL. The company, which now expects half of its year-end output to come from liquids, said it will spend more than it had previously budgeted this year.
Cimarex also said it was shifting its capital expenditure towards more oil and liquids-rich areas. The company expects third-quarter volumes to rise between 3 percent and 8 percent to average 610 million cubic feet equivalent per day (mmcfe/d) to 640 mmcfe/d.
With the supply of NGL liquids soaring, the profit edge companies were eying is diminishing.
U.S. crude oil prices fell 9 percent to average $93 per barrel in the April-June quarter. The fall in crude oil prices pressurized NGL prices, which have fallen about 15 percent from the first quarter.
Natural gas prices fell 46 percent from last year to average $2.4 per million British thermal unit in the quarter.
Cimarex, Swift and smaller peer PetroQuest Energy reported lower quarterly sales for the second time in a row, hurt by weak prices for oil, natural gas and NGL.
All three companies managed to ramp up production in the quarter, but that did not earn them higher revenue as lower commodity prices weighed.
Cimarex, which primarily operates in the Mid-Continent and Permian Basin areas, said oil and gas revenue in the second quarter fell 24 percent to $343.2 million. Revenue at Swift Energy fell 14 percent to $134.8 million.
Oil and gas sales at PetroQuest Energy fell 20 percent.
Denver-based Cimarex's net income more than halved to $64.3 million, or 74 cents per share in the second quarter.
Swift Energy's earnings from continuing operations fell 89 percent to $3 million, or 7 cents per share.