EQT Corp. said Thursday that it has acquired 220,000 core Marcellus Shale acres since the beginning of last year, more than any other Appalachian operator since 2015, adding that it plans to continue consolidating assets this year.
The company closed on 99,000 net acres in Pennsylvania and West Virginia during the first quarter from Stone Energy Corp. and an undisclosed seller. Those deals came after the company acquired Trans Energy Inc. and purchased all of Statoil ASA's operated West Virginia properties last year. While it has allayed investor concerns about its drilling inventory in the process, management sees a long-term strategy.
"The next wave of efficiencies will come from consolidation of the scattered acreage positions in Appalachia. This consolidation will drive longer laterals, more wells per pad, improved water and operating logistics, and more efficient gathering and transmission pipelines," said CEO Steve Schlotterbeck on Thursday during his first earnings call as chief executive since David Porges retired in March. "These advantages will be more difficult to replicate, and the consolidators will hold a competitive advantage that will yield higher returns."
EQT now has nearly 1.4 million Marcellus, Utica and Upper Devonian acres. Schlotterbeck said the company would continue to focus on acquiring properties near its core acreage. Consolidation, he added, has enabled the company to extend the average lateral lengths of its Marcellus wells from 5,900 feet in 2015 to more than 8,000 feet in 2017. Schlotterbeck said EQT is optimistic about this year's deal flow and management believes attractive asset packages will be on the market.
The company produced 189.9 Bcfe in the first quarter, which came in just under its 190-195 Bcfe guidance for the period and missed the Street's expectations. While year/year production increased from 179.9 Bcfe in 1Q2016, it was down from 198.4 Bcfe in 4Q2016. David Schlosser, who was appointed in March as president of exploration and production to replace Schlotterbeck, said the period's production missed internal expectations as well.
"This was primarily driven by completing fewer wells than planned, as we did not add frack crews as quickly as anticipated, due to the tighter than expected market," he said. EQT had 183 drilled but uncompleted (DUC) wells and 20 that were complete but not online at the end of the first quarter. It acquired some of those DUCs in recent acquisitions.
Higher commodity prices helped the company's balance sheet. But additional contracted capacity, higher utilization and more natural gas liquids production pushed up transmission, gathering and processing expenses. EQT reported an average realized price, including cash-settled derivatives, of $3.50/Mcfe for the first quarter. That's compared to an average price of $2.63/Mcfe in the year-ago period. CFO Robert McNally said the company expects commodity prices to continue firming as more pipelines come online in the basin.
Consolidated revenue was up considerably during the first quarter, going from $545 million in 1Q2016 to $897.5 million. The company reported net income of $164 million (95 cents/share), compared to net income of $5.6 million (4 cents) in the year-ago quarter.
The company still plans to drill 119 Marcellus, 81 Upper Devonian and 7 deep Utica wells this year. As management has said on prior calls, however, the company does not plan on sharing any more individual well results as it keeps testing the deep, dry Utica.