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EQT Outlines Scaled-Back 2016 Budget; Plans Deep Utica Program

EQT Corp. said Monday that it plans to spend $1 billion on exploration and production (E&P) next year, mainly on Marcellus Shale drilling, but it also budgeted for a five well deep Utica Shale program following successful results in southwest Pennsylvania earlier this year.

Next year's budget would be about $1 billion less than this year's. Heading into 2015, the company had budgeted $2.5 billion, but later scaled-back and cut that forecast by $450 million to save more during the commodities downturn (see Shale DailyFeb. 5Dec. 8, 2014). The E&P budget does not include spending for business development, land acquisitions or midstream capital associated with dropdowns to EQT Midstream Partners LP (EQM) planned for next year.

Under its current plan, EQT would drill 72 Marcellus wells with an average lateral length of 7,000 feet, "all of which will be on multi-well pads to maximize operational efficiency and well economics," the company said. In August, EQT said it would phase-out its Upper Devonian Shale drilling program and redirect more capital to the Utica after a 72.9 MMcf/d test of the formation in southwest Pennsylvania’s Greene County (see Shale Daily, Aug. 3July 23). At the end of the third quarter, management said they hoped to have a 10-15 well Utica program next year (see Shale DailyOct. 22).

The company said on Monday that it would drill five deep Utica wells with an average lateral length of 5,200 feet. Based on those results, it could drill up to five more Utica wells next year. The company was working on its second deep Utica well in southwest Pennsylvania at the end of the third quarter, which is expected to be online by the end of year. It is testing the Utica in West Virginia, too.

The company also said that due to declining volumes and cash flow trajectory, its Huron Shale gathering system would not be dropped to EQM. The company has reduced its drilling there in recent years with the fall in oil and gas prices.

EQT is targeting 2016 production of 700-720 Bcfe, up from the 575-600 Bcfe it forecast for this year. The company said it has 236 Bcfe of natural gas hedged next year at an average price of $3.88/Mcf.

Affiliate EQM said it would spend $715-755 million next year on some of its marquee projects such as the Ohio Valley Connector and the Mountain Valley Pipeline. A significant portion of expenditures would also go toward transmission expansion and gathering projects, among other things, EQM said.

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