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EQT Grows Bullish On Utica, Possibly Eclipsing Core Marcellus Assets

EQT Corp. on Thursday continued to tout its deep, dry Utica Shale prospects in Southwest Pennsylvania and Northern West Virginia, and said for the first time some of the formation could meet or exceed the performance of its core Marcellus Shale assets.

Following a 72.9 MMcf/d test last year of its Scotts Run Utica well in Greene County, PA, the company recently tested its second deep Utica well in the state, the Pettit, at a 24-hour rate of 43 MMcf/d (see Shale DailyJuly 23, 2015). After installing permanent production facilities, the company brought the well online last month at a choke restricted rate of 20 MMcf/d with a flowing casing pressure of 8,700 psi. That well is also in Greene County, management said during a conference call to discuss fourth quarter earnings.

The Scotts Run well continues to produce at 30 MMcf/d, President Steven Schlotterbeck said. The company expects that rate to maintain until about mid-April before production begins to decline. The well's estimated ultimate recovery (EUR) now stands at 5.1-5.9 Bcfe per 1,000 feet of lateral.

Last March, the company idled its Permian Basin drilling program on low oil prices (see Shale DailyApril 23, 2015). It also has phased-out its Upper Devonian Shale drilling program in Pennsylvania to redirect more capital to testing the Utica's potential (see Shale DailyAug. 3, 2015). Plans are to drill up to 10 Utica wells this year. Management said the company is currently in the process of completing the Big 190 Utica well in Wetzel County, WV, and plans to turn it inline by early March. A fourth Utica well in Greene County, the Shipman, is currently being top set.

"We have two objectives for our 2016 Utica program," Schlotterbeck said. "One, get the cost per well down to target range, which we expect to achieve on our currently drilling Shipman well. And two, confirm the productivity of the reservoir within our core Utica focus of Southwestern Pennsylvania and Northern West Virginia."

If the company can do that, the core Utica assets "could be competitive with, or better than the core Marcellus," and EQT would begin planning for more development in future drilling programs. Outside of Ohio, the play is still in its infancy and EQT may be the most bullish about its prospects, particularly as far as Pennsylvania is concerned.

Consol Energy Inc. has tested two wells there at more than 61 MMcf/d each, but its approach has appeared more measured (see Shale DailyJan. 29). Range Resources Corp., which tested the first deep Utica well in Washington County, PA, at a rate of 59 MMcf/d in 2014, has since said that the formation's projected EURs and economics can't compete with its Marcellus assets (see Shale Daily ,Oct. 29, 2015). Rice Energy Inc. has tested the formation in Pennsylvania but has offered no results.

EQT's Scotts Run well cost about $30 million. While it ultimately hopes to get Utica well costs down to between $12.5-14 million in both states, it's still working on that target. Schlotterbeck said the Pettit well cost $17.3 million and the Big 190 well cost $15.4 million.

"One thing we've proven with the Scotts Run is clearly there's going to be some areas of the Utica that are exceptionally good, and with the costs that we've already achieved, the economics of those types of locations will be superior to probably any of the Marcellus opportunities that we have," he said. "But we need to define where those areas are, how big they are and how repeatable they are...It's going to take time and quite a few more wells to define."

Despite its bullishness on the Utica, the end of the year was marred by the commodities downturn. While EQT recorded its sixth straight year of more than 25% production growth, the company reported mixed results.

EQT produced a record 603.1 Bcfe in 2015, compared to the 476.3 Bcfe it produced in 2014. Fourth quarter production was 154.5 Bcfe, or 13% higher than the 136.7 Bcfe produced in the year-ago period. Fourth quarter volumes, however, were down when compared to third quarter production of 156.3 Bcfe.

Quarterly losses totaled $134.6 million (minus 88 cents/share), compared with year-ago net losses of $14.7 million (minus 10 cents). Fourth quarter revenues slid to $601.4 million from $703.2 million. The company recorded fourth quarter property impairments and one-time charges of $146.8 million.

Full-year profit in 2015 totaled $85.2 million (56 cents/share) versus $387 million ($2.54 cents) in 2014. Impairments and one-time charges for 2015 totaled $190.5 million. Revenue was $2.3 billion, compared with $2.5 billion in 2014. The company finished the year with no outstanding debt under its $1.5 billion credit facility and had more than $1 billion in cash on the balance sheet. 

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