Northeast gas producers eye well efficiency

Some Appalachian natural gas producers are eyeing ways to increase well efficiency as prices remain too low to stoke increased drilling.

One method to boost efficiency at the wellhead is increasing the lateral length of a horizontal well, allowing the producer to drill further into the shale.

With Henry Hub gas prices averaging between $2.44/mmBtu and $3.42/mmBtu this year, prices have recovered from a fall to as low as $1.49/mmBtu in 2016. But prices this year were at their highest levels in the second quarter and averaged below the $3/mmBtu mark during the third quarter. Appalachian regional prices averaged at a discount to the Henry Hub amid prolific shale production and constrained takeaway capacity, leading many producers there to focus on improving efficiency as they await upcoming pipeline expansions.

Independent producer Range Resources increased its average drilled lateral length by 90pc in the third quarter compared with a year earlier, to average 11,700 feet. The producer also lowered its drilling costs per lateral foot by 33pc year over year. Five of the company's top-ten longest laterals were drilled in the quarter, and it plans for its laterals to average more than 10,000 feet in 2018.

"We literally do have thousands more of these to do and the lateral lengths are getting longer and the teams are getting better," chief operating officer Ray Walker said during an earnings call.

EQT touted the longer laterals the company can achieve with its acquisition of Rice, a transaction that closed today following a shareholder approval vote, making EQT the largest producer in the US. EQT laterals average at 8,000 feet today, but the producer will increase that length by 50pc with its new acreage.

"Our competitors may be able to replicate things like new drilling technology or new drilling techniques, but they cannot replicate an acreage position that supports 12,000-foot laterals in the core of the Marcellus," EQT chief executive Steve Schlotterbeck said in October.

EQT said it plans for its lateral lengths to average at least 12,700 feet in 2018.

Antero Resources said it holds more than 30pc of the long-lateral inventory (at higher than 10,000 feet) in Appalachia, "outpacing our closest peer by a wide margin," chief executive Paul Rady said during an earnings call.

Nearly 900 of Antero's wells were drilled at an average length of 8,250 feet, and 230 of those were drilled with lengths longer than 10,000 feet.

"The ability to continue pushing the average lateral length of our locations has been a key factor in the capital savings we have achieved," Rady said, citing a projected $1.5bn in savings through 2020.