Noting well results that have been better than expected, Pittsburgh-based EQT Corp. said lat Tuesday it will expand its position in the Marcellus Shale in Pennsylvania by acquiring about 58,000 net acres from a group of private operators and landowners.
The acreage is located primarily in the Pennsylvania counties of Cameron, Clearfield, Elk and Jefferson, and the deal includes a 200-mile gathering system with associated rights-of-way and about 100 producing vertical wells. EQT said it will pay about $280 million, 90% with EQT stock and 10% with cash. Following closing, which is expected by April 30, EQT will hold more than 500,000 net acres in the high-pressure Marcellus Shale fairway, the company said.
"We have extensive midstream assets and firm contracts to gather and transport natural gas to the lucrative eastern markets [see NGI, Jan. 11]," said EQT CEO Murry Gerber. "We are receiving a 93% net revenue interest on the acquired acreage, which is significantly higher than the 80% net revenue interest that has been typical of recent transactions. Approximately 88% of the acquired acreage will be held in fee or by production from existing vertical wells and the remainder of the acreage will be subject to leases with a weighted average 10-year term."
Gerber said Marcellus well results continue to exceed the company's expectations; "therefore we are increasing our average estimated ultimate recovery (EUR) per well from between 3.5 and 4 Bcfe to between 4 and 4.5 Bcfe across our 500,000 acres. We will continue to update our EUR estimates as we obtain additional well result data. At an average cost of $3 million per well, EQT's development cost is estimated to be less than 75 cents/Mcf, which is among the lowest in the industry."
The 30-day average initial production rate for the company's seven wells completed in 2010 averaged 7 MMcfe/d, ranging between 2.7 and 15.8 MMcfe/d. This includes results from the company's most recent well, well 170 in Greene County, PA, which has a 30-day average initial production rate of 15.8 MMcfe/d. The well is on the same pad as the previously announced well 167, which had a 30-day average initial production rate of 14.3 MMcfe/d.
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