EQT Corp. said Thursday that work to learn more about the deep Utica Shale in Pennsylvania and West Virginia continues, with the aim of establishing a development program in 2018 that could overshadow its core Marcellus Shale assets.
The company highlighted plans in July to slow down in the deep Utica so that it could better analyze data and work more closely on its costs and completion designs in the play (see Shale Daily, July 28). Management said it expects a one rig Utica program next year to drill six to eight wells in the play.
"We are becoming more confident that we will achieve lower costs with higher estimated ultimate recoveries (EUR) per foot that will result in similar if not better economics than our core Marcellus." President Steve Schlotterbeck said during a call to discuss the company's third quarter results. "We believe this level of drilling will allow us to achieve our cost and productivity objectives, as well as to begin delineation of the economic extent of the deep Utica, with the goal of establishing a deep Utica development program in 2018."
Schlotterbeck, who was named president late last year, will become the company's new CEO after David Porges retires early next year.Porges joined the company in 1998 and became CEO in 2010, helping the company navigate through the shale boom and subsequent downturns. Schlotterbeck took the reigns on Thursday's call and did most of the talking.
"Ceramic [proppant] does play a big role. Our current plan is to use ceramics for all [Utica] wells in the future. Beyond that we have been doing a lot of technical work on our drilling and completion techniques; the typical stuff you would think about, types of sand, loading schedules, pump rates, targeting in the reservoir, all that kind of stuff," Schlotterbeck said of the Utica. "As we learn more, just as we saw in the Marcellus, we're seeing continuous improvement."
He added that the company is getting close to its desired price for each Utica well of $12-13 million, saying the company would need 3-3.5 Bcf EURs per 1,000 feet of lateral to get similar returns to the Marcellus. He declined to say what else was working for the company in the Utica. EQT wants to keep some things proprietary because it's one of the only companies spending significantly on the play outside of Ohio, Schlotterbeck said.
EQT also has been busy consolidating its acreage in Appalachia, adding 143,000 acres at a cost of $1.2 billion this year, mainly in larger deals with Statoil ASA and Trans Energy Inc. (see Shale Daily, Oct. 25; May 3). Most of that land, Schlotterbeck said, would be developed starting later next year as certain locations need to be re-permitted to extend laterals.
"We'll incorporate that acreage into our land process, and we will allocate capital based on the best returns available starting with our 2017 plan," Schlotterbeck said. "One of the main drivers behind all of these acquisitions is our desire to extend laterals."
EQT produced 196 Bcfe in the third quarter, up from 156.3 Bcfe in 3Q2015 and 184.5 Bcfe in 2Q2016. The company drilled 24 gross wells during the third quarter, including 21 in the Marcellus, two in the Upper Devonian and one in the Utica. EQT has drilled six deep Utica wells to date.
The company's average realized prices fared better when compared to the second quarter. It reported $2.20/Mcfe for the third quarter, versus $2.11/Mcfe in 2Q2016. Third quarter prices, however, were down from $2.55/Mcfe in the year-ago period. Revenue slid as a result, going from $584 million in 3Q2015 to $556.7 million. The company also reported an impairment of $1.4 million on its oil and gas properties.
EQT reported a net loss of $8 million (minus 5 cents/share), compared to net income of $40.8 million (27 cents/share) in the year-ago period.