After reporting second-quarter results, Appalachian shale gas producers discovered again how choosy investors can be, as the magic elixir of share buybacks returning cash to investors lost appeal.

Investors pummeled the nation's largest gas producer, EQT Corp., after reporting capital spending guidance increases without production gains, in addition to a new $500 million buyback program. EQT shares were down 11% after earnings were released, as of the Aug. 13 close, and down 22% over the past year.

Adding to EQT's headwinds are a regulatory halt to its Mountain Valley Pipeline LLC project, which the company hopes will bring better realized gas prices, and its ongoing process of splitting up into separate midstream and upstream components.

"While historically investors have been rewarding stocks that demonstrate free cash flow and investor friendly themes such as share buybacks," Stifel Nicolaus & Co. gas analyst Jane Trotsenko said July 26, "nobody likes a production guide shifted down."

"In other words, it is quite challenging to make investors happy nowadays," Trotsenko said, with some understatement. The market is not giving EQT full value, she said. "We would be buyers into weakness."

Despite no news about a critical multibillion-dollar sale of its Fayetteville Shale operations in Arkansas, Southwestern Energy Co. is the top performer after second-quarter earnings announcements.

Analysts were looking to hear about the progress toward Southwestern's sale of the Fayetteville, but the company dodged the bullet of no news by serving the equivalent of a free lunch: increased production, driven by natural gas liquids production and prices, with no increase in capital spending.

Southwestern's shares were up 9% from its earnings release through Aug. 13 but are flat for the full year.

B. Riley FBR Inc.'s long-time oil and gas analyst Rehan Rashid thinks Southwestern's stock and operational performance will zoom once the driller is unshackled from the Fayetteville. He estimated that a sale would put more than $2 billion in Southwestern's pocket, which would cure all kinds of ailments.

"Our thesis on the story simply has been that because of balance sheet constraints, the company's Appalachian assets have lagged industry standards and now, with stability of balance sheet and capital deployment, asset performance will catch up with industry metrics," Rashid told his clients Aug. 3. "We believe that investors continue to underappreciate and not reward this unfolding "catch up" in performance as the stand-alone Appalachian assets trade at 3.1 times 2019 [total enterprise value] multiple vs 5.8-times for peer group."

Total enterprise value is the combined value of a company's stock, debt and cash.

Appalachia's malaise is part of a larger industry trend, Goldman Sachs oil and gas analyst Brian Singer said Aug. 10. "Almost three fourths of covered E&Ps saw their share price fall in response to greater CapEx and/or weaker [second-half 2018] production outlook," Singer said. "The Street's focus on capital discipline may make companies more hesitant for further budget increases without more substantial demonstration of [free cash flow]/corporate returns/EBITDA impact."

However, the Street's negativity is overdone, Goldman said, particularly in the case of northeastern Pennsylvania driller Cabot Oil & Gas Corp. Cabot is buying back shares and paying a dividend and is cash flow positive in front of the arrival of Williams Cos. Inc. subsidiary Transcontinental Gas Pipe Line Co. LLC's 1.7-Bcf/d Atlantic Sunrise pipeline this month. Cabot is signed up for 1 Bcf/d of the line's capacity.

Cabot's shares are off 6% since it trimmed its production guidance while saying it spent more than expected when it announced second-quarter earnings on July 27. The company hoped to sweeten the medicine by tripling the size of its share buyback program to 30.1 million shares.

Goldman Sachs said there is even more juice to be squeezed from Cabot's fruit as more gas volumes sent to market on Atlantic Sunrise generate even more free cash for shareholders. "We believe the Street is overlooking the company's differentiated low-cost asset base," Goldman told its clients Aug. 10.