Utica shale gas wells in Ohio dismay EQT
EQT Corp. said on Thursday that it has had some disappointing results from wells at the edge of the Utica shale in Ohio and will stop drilling in the formation while it evaluates its prospects.
EQT's decision follows Antero Resources Corp.'s reduction 10 days earlier in what it predicts to get from wells in a similar area on the western edge of the play.
The Utica shale is viewed as the next front for gas drillers who benefited from booming production in the Marcellus shale and are looking to expand to other promising plays.
“The first wells we drilled were not where they needed to be,” Steve Schlotterbeck, an executive vice president at EQT, said during a conference call discussing an otherwise successful quarter for the Downtown company.
EQT reported its production from Marcellus wells increased by 30 percent in the January-March quarter. That contributed to a 92 percent increase in net income to $192.2 million, or $1.26 per share, compared with $100.3 million, or $0.66 per share, in the same period a year ago.
The company said it is focused on its Marcellus production and other plays outside of the Utica. EQT drilled 64 wells in the first quarter — 46 in the Marcellus — and plans 21 more in the Marcellus and the Upper Devonian formation.
It said it was unhappy with three Utica wells it completed and said it won't drill the 21 wells it planned there this year.
Antero Resources Corp., a Denver oil and gas company, cited uncertainty over what it can get from the wells in a financial update when it reduced production expectation in those areas by more than 30 percent.
It's no time to panic, though, observers said.
“Companies are pushing the envelope on how far west you can get,” said Andrew Byrne, an analyst in Boston with the information service IHS.
He said EQT and Antero had trouble drilling in a part of the shale that produces gas rich with condensates such as propane and butane. Companies including Antero are having better luck in wet gas and dry gas areas, he and others said.
“We're seeing some very positive results in the southern areas, but we've seen some areas where there's some hitting and missing,” said Mike Chadsey, spokesman for the Ohio Oil and Gas Association.
Houston-based Magnum Hunter Resources Corp. this month in a presentation to an investment symposium called the Utica, which lies below the better-known Marcellus, the “potentially best shale play” in the United States. This week, it said it was selling the last of its Canadian holdings to focus on getting gas from the Marcellus and the Utica in Ohio and West Virginia.
“There's always tweaking involved,” Chadsey said about drilling in the Utica, which began two years ago and has been heralded as the next big source of gas.
EQT officials said they would do just that as they explore techniques in moving five remaining wells into production in the Utica. Whether that works will dictate whether the company proceeds there in 2015.
“We'll learn a lot from those five wells,” Schlotterbeck said.
He said the company would watch how competitors do in the West Virginia portion of the Utica shale.
EQT benefited in the first quarter from lower costs per unit of gas produced — a 17 percent drop from the same quarter in 2013 — and higher gas prices. It got $5.34 per thousand cubic feet equivalent of gas sold, up from $4.16 last year.
That contributed to a 274 percent increase in production income to $277.2 million for the quarter. Higher sales pushed net operating revenue to $467.7 million, an 87 percent increase from last year.
The news sent the stock price up $2.59 to $108.17 when the market closed, setting an all-time high.
EQT also made money and plans further emphasis on its midstream pipeline operations.
Its spinoff EQT Midstream Partners announced $34.9 million in earnings for the quarter, up from $28.5 million in 2013. Revenue from midstream “gathering” from wells increased by 40 percent compared with the first quarter in 2013.
“Most of our efforts recently have been to ensure capacity on long-haul pipes to sell to other markets,” said CEO David Porges.
The company is building a $300 million, 35-mile pipeline into Ohio, where it can connect to lines that run north or to the Gulf Coast for potential export. And it's planning a second “Ohio Express” pipeline to go farther west.
“Our region is going to be a net exporter to other regions,” Porges said.
David Conti is a staff writer for Trib Total Media. He can be reached at 412-388-5802 or email@example.com.