EQT eyes low natgas drilling costs in Utica

Independent natural gas producer EQT said the company's drilling program in the Utica shale could compete with or even surpass the economics of its Marcellus shale program in the near future.

A few operators in the Marcellus and Utica shales in Appalachia have pledged in recent months to increase drilling activity on the back of stronger commodity prices. But weak demand and low natural gas prices in effect earlier this year, combined with limited takeaway capacity from the region, have left some producers wary. It has prompted them to adopt strategies to lower costs, narrow focus or operate within cash flow without tapping equity markets.

EQT said in July that it planned to drill 30 more wells in the Marcellus without raising its capital expenditures budget. The producer earlier this week said it had expanded its operations there with the acquisition of an additional 60,000 acres in the shale.

But EQT said today that initial estimates show the per-unit costs for its Utica program could turn out to be about half that of its Marcellus program. The company has almost lowered its costs in the Utica to its target range of $12mn-$13mn per well and plans to drill between six and eight wells there next year.

The company needs to ensure it can effectively move gas from the Utica to a market before it further develops its program there, so it has been working on gathering system designs, president Steve Schlotterbeck said on the company's earnings call.

The company's production sales volume in the third quarter was about 2.2 Bcf of natural gas equivalent per day (Bcfe/d) (62mn m³e/d), up by 26pc from the year earlier. EQT's realized price was $2.20/1,000 cf, down by 14pc from the third quarter of last year.

In the earnings call chief executive David Porges said he will retire early next year and become executive chairman. Schlotterbeck will succeed him as chief executive.