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EQT 1Q output low amid limited crews

27 Apr 2017 22:22 (+01:00 GMT)
EQT 1Q output low amid limited crews

Houston, 27 April (Argus) — Natural gas producer EQT's first quarter output came in lower than expected because of a lack of available fracturing crews in Appalachia, the company said during an earnings call today.

In some cases, crews broke contracts with EQT and paid a penalty to the producer in order to accept more lucrative work in the Permian basin in Texas, EQT executives said.

The company produced 2.11 Bcf/d of natural gas equivalent (Bcfe/d) (59mn m³) during the quarter, which was at the lower end of its guidance for the quarter of 2.11-2.16 Bcfe/d, but represents a 6pc increase from a year earlier. The low output was primarily driven by completing fewer wells in the Marcellus and Utica than planned as the company did not add fracturing crews as quickly as anticipated, president of production David Schlosser said.

EQT had reduced its drilling in 2016 amid low natural gas prices, but began to ramp up activity toward the end of that year and into early 2017 as prices recovered. But the company was only able to run two to three crews during the first quarter because it was selective on service providers, Schlosser said.

"We were trying to pair the right mix of quality and price, and the market tightened up, I think, as everybody knows, quicker than we expected, driven a lot by Permian activity," he said.

EQT's contracts with its suppliers had penalty clauses that if they decided to leave they would owe the producer some money, chief executive Steve Schlotterbeck said during the call.

"A couple of our contractors decided to pay us the penalties to take their crews to jobs that were more profitable," he said. "So we will get some penalty fees, but that obviously is far less than the value of having the wells [fractured] on schedule."

But Schlotterbeck said the crews issue is a "temporary phenomenon" amid the quick rebound in activity in the Permian. The company is seeking to increase the number of crews to six by June, and to seven sometime in the third or fourth quarter.

EQT executives said they expect the company will be able to meet its full-year 2017 guidance of 2.6 Bcfe/d, despite coming in low in the first quarter.

Oilfield services company Halliburton earlier this week said its losses have narrowed amid the drilling recovery in the US, and that its fleet of pressure pumping equipment is already fully utilized.