Independent producer EQT will shut its drilling program in the deep, dry-gas portion of the Utica shale for now in order to focus on new, more contiguous acreage across the Marcellus shale as a result of its acquisition of Rice Energy.
EQT announced in June that it would pay $6.7bn in cash and shares to acquire Rice to become the largest US natural gas producer by output, supplanting ExxonMobil. The deal is expected to close in the fourth quarter and EQT is eyeing the benefits it will be able to take advantage of with a more continuous acreage footprint in the Marcellus shale and weighing that against the costs of developing the deep, dry Utica.
Only two deep Utica wells in EQT's portfolio are able to compete with Marcellus in terms of profit, so the producer has decided to suspend its program there, president of production David Schlosser said during an earnings call today.
EQT is employing seven fracturing crews and should continue to do so through the end of the year. The company expects to bring 55 Marcellus and Upper Devonian wells on line in the third quarter, and another 58 wells on line in the fourth quarter. The Upper Devonian shale lies atop the Marcellus and Utica.
The company had production sales volume of nearly 2.2 Bcf/d of natural gas equivalent (Bcfe/d) (62mn m³e/d) during the second quarter, up by 7pc from a year earlier and slightly ahead of the higher end of its guidance. EQT's realized price for the quarter was $2.86/1,000 cf, up by 36pc from the second quarter in 2016.
Gathering expenses have risen because of production growth and increased acreage, and the company's transmission expenses ran nearly 38pc higher than a year earlier on Rockies Express and the Ohio Valley Connector. The company is paying for capacity on Rockies Express pipeline that it cannot use, chief financial officer Robert McNally said. Executives expect that increased takeaway capacity will improve the company's transportation options in the future.
"We continue to expect improvements in realized price as incremental pipeline projects come on line, including the Mountain Valley pipeline, that allow access to premium markets," McNally said.
The 2 Bcf/d Mountain Valley pipeline is expected to enter service in 2018.
