Antero Resources LLC expects Appalachian-centered production to average 925-975 MMcfe/d net this year, a 75-85% increase over 2013, with around 18 rigs running in the Marcellus and Utica shales -- two more than a year ago.
The total number of wells planned to spud is set at 193, well ahead of the 157 in 2014. The forecast is based on organic growth, but the independent said it still is looking for more acreage to explore.
The Denver-based operator, whose reserves primarily are in West Virginia, Pennsylvania and Ohio, said late Wednesday it plans to spend $2.6 billion on capital projects this year, with $1.8 billion set aside for drilling and completion (D&C), $600 million budgeted for expanded midstream facilities and $200 million targeted to acquire more acreage. Last year Antero spent close to $450 million on property purchases.
Natural gas production is seen averaging 780-820 MMcf/d, ahead of last year's output, with liquids production averaging 24,000-26,000 b/d net.
All of the D&C spending, up from $1.55 billion in 2013, represents Antero-only operated drilling, with nearly all of the funds allocated to liquids-rich horizontal locations using shorter stage length (SSL) completions. Last Monday Antero management credited SSLs for record-breaking output in 4Q2013 (see Shale Daily, Jan. 28).
Close to three-quarters of the D&C budget would be allocated to the Marcellus, with the remaining 25% spent in the Utica.
Of the 14 drilling rigs planned for the Marcellus, three intermediate rigs are scheduled to drill vertical sections of some horizontals to the kick-off point. Four additional rigs would be Utica-based. Antero plans to spud 144 horizontals in the Marcellus with average lateral lengths of 7,700 feet. Another 49 wells in the Utica would have average lengths of 7,300 feet. The forecast is to complete 140 Marcellus wells and 41 Utica wells.
Deep Utica formation rights are held by Antero on about 126,000 net acres in the West Virginia Marcellus leasehold, and an exploratory Utica dry gas well is planned for the second half of this year. Two three-well density pilots also are budgeted for Ohio's Utica leasehold, with one pilot using a 500-foot inter-lateral distance; the other would use a 750-foot distance. A 500-foot pilot in the Utica was completed last year. Antero's estimated Utica reserves and identified drilling locations are currently booked using 1,000-foot inter-lateral distance between horizontal laterals.
"A series of successful increased density pilots could result in a material increase in estimated reserves and identified drilling locations on all or a portion of Antero's Utica Shale acreage," said company executives.
For midstream activities, the budget this year, down from $650 million in 2013, provides for 100 miles of of new gathering pipelines in the Marcellus, another 43 miles are planned in the Utica. Last year Antero built around 54 miles of low-pressure pipelines and 60 miles of high-pressure pipe. Five Marcellus compressor stations would be expanded to add 305 MMcf/d of capacity.
"Further, the midstream budget includes 73 miles of permanent pipeline for Antero's fresh water distribution system," said management. Last summer the company began building a 150-mile-long water sourcing and distribution pipeline to feed drilling sites in West Virginia and Ohio (see Shale Daily, Aug. 15, 2013).
The midstream budget assume that an initial public offering of Antero's master limited partnership (MLP) is completed, which would own all of the midstream assets. That IPO would follow on Antero becoming a public company last year (see Shale Daily, Oct. 11, 2013).
Antero plans to fund the capital budget with internal cash flow and some of its bank credit facility. The anticipated proceeds from the launch of the MLP IPO also would provide some capital.
Analysts weren't bowled over by the guidance numbers, with some seeing it as a slight positive or slight negative.
Tudor, Pickering, Holt & Co. analysts were down on the slight negative side but said the timing of the guidance likely was related to Utica growth versus expectations, which were 975 MMcfe/d, the high end of Antero's guidance. They expect the spin of midstream assets mid-year would "crystallize value."
David Tameron of Wells Fargo Securities said the outlook was slightly positive. Wells Fargo had been modeling less capital spending ($2.4 billion), but it was modeling higher spending for land ($350 million versus Antero's $200 million).
"Offsetting this increase in spend, in our view, was 2014 production guidance of plus-75-85% year/year; we were previously at the lower end of this range, but have now moved to the midpoint of 950 MMcfe/d. Street appears to have been in the upper end of the range already, but we note there were a few high outliers. The mix is tilted a bit more gassy, at 84% versus our prior 82%, but don't think investors care at this point."
BMO Capital Markets analysts said the guidance is mixed, with takeaway constraints skewing it negatively. "That said, we expect the midstream MLP to bridge the 2014 funding gap..."