Appalachian pure-play Antero Resources Corp. said Tuesday it is lopping $1.25 billion from its capital expenditures this year, a 41% reduction from 2014 spending, to weather declining commodity prices and wait for regional takeaway capacity to strengthen weak basis.
The company plans to rely on drilling efficiencies to maximize its budget and grow year-over-year production from 1 Bcfe/d to 1.4 Bcfe/d (see Shale Daily, Jan. 16). The capital budget this year is set at $1.8 billion, down from last year’s $3.05 billion, but the Marcellus and Utica shale program would still be a robust one that calls for 14 rigs to drill 130 horizontal wells.
"Our production and capital budget guidance assumes the deferral of completions in the Marcellus during the second and third quarters of 2015 in order to limit natural gas volumes sold into unfavorable pricing markets” that include Texas Eastern (Tetco) and Dominion South, said CEO Paul Rady. Fifty completions in the basin would be delayed given the limits of regional takeaway that isn't expected to increase until the fourth quarter.
"We will continue to monitor commodity prices throughout the year and may revise the capital budget lower if conditions warrant," Rady added.
The company drilled and completed 179 wells last year, when it had 21 rigs running. Antero has remained heavily focused on extending its reach, consistently adding firm transportation to more favorable markets in the Midwest and Gulf Coast. In August, company officials said the portfolio would provide 3.4 Bcf/d of takeaway by 2016 (see Shale Daily, Aug. 8, 2014).
This year's budget includes $1.6 billion for drilling and completions, and $150 million for land acquisitions, down from last year's $2.4 billion and $450 million, respectively. Nine rigs are to run in West Virginia's Marcellus Shale to drill 80 horizontal wells, and five rigs are planned in Ohio's Utica Shale, where it’s planning for 50 horizontal wells.
The company said reduced service costs related to declining commodity prices, fewer drilling days, increased lateral lengths and avoiding areas without adequate midstream infrastructure, among other things, would help keep costs down while driving production up.
Analysts at Tudor, Pickering, Holt & Co. said the spending plan is par for the course in the basin, given weak natural gas realizations and the broader uncertainties surrounding oil prices. Antero's hedge book, valued at $1.6 billion at year-end 2014, is "rock solid," and the company has an "enviable" position headed into 2015.