EQT Corp.’s decision to focus development operations in the Marcellus Shale appears to be paying off, as the company reported last Thursday that 1Q2013 production sales volumes increased by 47% over last year’s quarter, with production sales volumes from the Marcellus alone increased by 103%.

EQT’s production segment posted 1Q2013 sales volumes of 79.4 Bcfe in the first quarter 2013, compared to 54.1 Bcfe during 1Q2012. Sales volumes from the Marcellus averaged 606 MMcfe/d for 1Q2013, up from 295 MMcfe per day in 1Q2012. Following 1Q results, the company now expects sales volumes for full-year 2013 to be between 340 and 350 Bcfe, approximately 33% higher than in 2012.

“We had a very solid operational quarter including record produced natural gas sales as well as record gathering volumes at midstream,” said CFO Philip P. Conti during an earnings conference call. “The story of the first quarter at EQT was strong volume growth coupled with lower unit cash costs in both the production and midstream businesses, which were partially offset by lower realized commodity prices. Even though Nymex was 22% higher than the previous year, we realized a lower effective natural gas price after accounting for the effect of our hedges as a number of higher-priced swaps and collars rolled off at the end of 2012.”

With its previously announced plans for 153 Marcellus wells in 2013, EQT drilled 33 gross wells in the Marcellus during the first quarter, with an average length of pay of 4,898 feet. The company also drilled two Utica wells and six Upper Devonian wells in the quarter.

During the 1Q analyst call, EQT CEO David Porges said one Utica well is shut-in and awaiting gathering line, which is on schedule for midyear, while the second Utica well is expected to be hydraulically fractured soon, and a third Utica well is to be spudded this month.

Porges said the company also is excited about its West Virginia operations. “We’ve been bullish on West Virginia for some time,” he said. “Our drilling activity there, which represents 55% of our 2013 Marcellus drilling, is focused in our liquid-rich acreage in Doddridge, Ritchie and Wetzel counties where we have approximately 80,000 acres. We have begun implementing reduced-cluster spacing in Doddridge and Ritchie with tremendous initial success.”

Strong production, sales and midstream activity resulted in EQT posting 1Q2013 earnings of $100.3 million, or 66 cents/diluted share, up from 1Q2012 earnings of $72 million, or 48 cents.

In addition to strong Marcellus Shale production, earnings were also boosted by increased midstream income. The business segment’s net gathering revenues increased 18% to $81.8 million in 1Q2013, primarily due to a 42% increase in gathered volumes; however, at lower average gathering rates. Net transmission revenues totaled $37.3 million, a 63% increase over the 2012 quarter, primarily due to sales of new capacity associated with the Sunrise and Marcellus expansion projects, as well as higher volumes.

Net storage, marketing and other revenues totaled $9.8 million, which was a $5.2 million decrease from last year’s quarter due to lower margins and reduced activity resulting from lower seasonal price spreads.

As a result of the strong overall 1Q performance put in by the midstream segment, EQT has increased its projected full-year 2013 midstream earnings before interest, taxes, depreciation, and amortization guidance from $335 million to between $350 million and $355 million.

In December, EQT made the decision to reorganize the company’s focus by getting out of the local distribution company business, freeing up more time and money to devote to the Marcellus Shale (see NGI, Dec. 24, 2012). The company entered a definitive agreement for the transfer of its natural gas distribution segment, Equitable Gas Co., to Peoples Natural Gas, subject to receipt of regulatory approvals, which EQT hopes to have by year’s end.

Coming in as the eighth largest Marcellus acreage holder with 532,000 net acres, EQT is working to assume a leadership role in the play. Last month the company said it would be one of the founding members of the newly formed Center for Sustainable Shale Development, which is a diverse group of stakeholders, including environmental groups, philanthropic organizations and energy companies that hopes to certify producers in the Appalachian Basin for adherence to a set of 15 standards, or best practices (see NGI, April 15; March 25).

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