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Antero Breaks Output Record Despite Compression Startup Delays

One of the most active drillers in the Appalachian Basin, Antero Resources, hit a record 750 MMcfe/d net-plus during the final three months of 2013, with gross output from the Marcellus Shale alone crossing the 750 MMcfe/d threshold, the independent reported Monday.

Net production in 4Q2013 averaged 675-680 MMcfe, with an organic growth rate of 20% sequentially and 87% from the year-ago period.

Even with delayed startups for two third-party compressor stations in the Utica Shale, the quarterly numbers were above the midpoint of guidance, said CEO Paul Rady. One of the reasons for the strong numbers is the transition to shorter stage lengths (SSL) on nearly all of the Marcellus wells, he said.

Antero transitioned to shorter stage length (SSL) completions on nearly all of it Marcellus wells during the quarter.

"We recently set a company record high net production level of 750 MMcfe/d as a result of the continued success of our SSL program in the Marcellus, and the start-up of first Utica compression, along with several new wells in the Utica in late January," said Rady.

Based on forecasts for higher activity, Antero in the final quarter increased its total firm takeaway capacity contracts by 175 MMcf/d and now is forecasting production to hit 1.477 Bcf/d by the end of 2014.

 "The robust nature of our highly economic drilling program allows us to generate one of the strongest growth profiles in the industry. This growth should continue well into the future."

Since 2009, the operator has drilled 242 horizontal wells into the Appalachian Basin. It became a publicly traded operator in 2013; estimated proved, probable and possible reserves are 28 Tcfe in the two shale plays (see Shale Daily, Oct. 11, 2013). Net proved reserves are estimated at 6.3 Tcfe.

Wells completed with SSLs and reduced cluster spacing don't have a lot of production history. However, management is encouraged by early results in the southwestern core of the Marcellus.

As of Monday, Antero had completed and placed online 22 Marcellus wells using SSLs.  Over a 30-day period, the 22 wells had average production rates of 10 MMcf/d, a 31% increase from non-SSL wells at the end of June 2013; the 120-day rate for the same wells was 7.9 MMcf/d, a 27% gain. Average costs for SSL wells, whose stage lengths were less than 225 feet, are higher by about 12% from the comparable wells without SSLs whose average stage lengths are 350 feet.

Fifteen rigs are running in the Marcellus today, with 60 net horizontals either being drilled, completed or waiting on completion. Two dedicated hydraulic fracturing (fracking) crews are working in West Virginia along with three spot frack crews. For portions of this year, Antero plans to use seven fracking crews "to accommodate the additional inventory from increased rig activity, drilling productivity and the transition to SSL completions. The increased frack crew activity will also allow the company to fill increasing takeaway capacity."

In the sister Utica, five wells have been completed and tested since the beginning of October, with average 24-hour peak processing rates of 32.2 MMcfe/d. Wellhead gas from the set of wells averaged 14.2 MMcf/d, with condensate averaging 1,601 b/d and liquids averaging 1,897 b/d, Antero said.

However, production could be higher, according to management.

MarkWest Utica EMG LLC was contracted in late 2012 to build for Antero three compressor stations with a combined capacity of 340 MMcf/d, and three stabilization facilities with combined capacity of 16,000 b/d at the Seneca complex in Noble County, OH, and in Monroe County (see Shale Daily, Nov. 7, 2012).

Rich gas from Utica wells going into the Seneca complex has been constrained to wait on more compression capacity. The gas has been flowing against 1,100 pounds per square inch (psi) of line pressure; expected line pressure with compression is 175-250 psi.

"The first two compressor stations and condensate stabilization facilities were expected to be completed and placed in service during the fourth quarter of 2013," officials said. "However, these two facilities were delayed with the first 120 MMcf/d compressor station just recently coming on line in late January," and now operating at about 67% of capacity. Six of nine units are operating.

The remaining units are scheduled to be in service over the next week or so. A second 120 MMcf/d compressor station "is now expected to be completed late in the first quarter of 2014."

Five rigs now are working the Utica, with 13 net horizontals drilling, being completed or waiting on pipeline/compression. Two spot frack crews are in place, with a third crew to run various periods over this year to accommodate more activity.

Analysts with Tudor, Pickering, Holt & Co. said it was hard to make a call on Antero’s overall performance given that some of its production is constrained, but they said the initial production rates “continue to impress.”

BMO Capital Markets Corp. said the update was positive, with quarterly production above midpoint guidance and current production positioning Antero for a “strong 2014.” Phillip Jungwirth said in a note Marcellus estimated ultimate recoveries “are likely to be increased and SSL costs are lower than previously estimated.” The initial rates from Utica wells also were “encouraging, given high line pressures.”

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