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.

©Copyright 2010 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.