EQT boosts spending amid midstream delays

Independent producer EQT is boosting its 2018 capital spending budget by 14pc to $2.5bn because of inclement weather and delays in new takeaway capacity that slowed the company's drilling activity.

Extremely cold weather in the US northeast during the first quarter of 2018 disrupted EQT's plans to have consistent hydraulic fracturing and drilling activity throughout the year, EQT executive vice president of production Erin Centofanti said today on an earnings call. Delays on new pipeline projects also limited EQT's takeaway capacity early in the year.

The two factors resulted in EQT ramping up from nine to 12 fracturing crews in the second quarter to meet its planned output level.

While the company's efforts to pick up the pace during the second quarter led to a record growth in the number of wells connected to sales, "the ramp in fracturing crews, robust pace and concentration of activity all placed stress on our supply chain, logistics and pad operations," Centofanti said.

A tight market for Appalachian fracturing crews, water hauling operations and trucks in the first half of 2018 also added to the company's costs.

EQT plans to shift its focus away from meeting production volume targets in favor of better capital efficiency in 2019, with plans to reach consistent levels of activity at a moderate pace that is better coordinated with infrastructure.

EQT said the $4.6bn, 1.9 Bcf/d (54mn m³) Mountain Valley pipeline project, of which EQT is funding about $2.2bn, is still expected to begin service in the fourth quarter of 2019. The US Army Corps of Engineers this month suspended water crossing authorizations for the project in West Virginia following a federal ruling that said the corps had erred in its authorization.

The producer's realized natural gas prices in the third quarter averaged $2.76/1,000 cf, flat from a year-earlier but at a narrower discount to Nymex this year of 47¢/mmBtu compared with an 85¢/mmBtu discount in the third quarter of 2017.

The company produced 4 Bcf/d of natural gas equivalent (Bcfe/d) during the quarter, within EQT's guidance range and up by 82pc from a year earlier as a result of its 2017 acquisition of Rice Energy, which made the company the top natural gas producer in the US by volume.