A 40 percent drop in natural gas prices is eroding profits at EQT Corp. despite continued increases in production.
Net income at the Downtown-based company fell by 95 percent to $5.5 million, or 4 cents per share, during the quarter that ended June 30, compared to $110.9 million, or 73 cents per share, during the same period last year, EQT announced early Thursday.
Business in its pipeline company remains strong, though, and company officials touted a 16 percent cut in drilling costs, a very productive Utica shale well in Greene County, a pipeline deal with Range Resources and $2 billion in cash on hand to explore potential purchases.
“If there are opportunities to enhance our current acreage position, we want to be prepared to take advantage of that,” CEO David Porges told analysts on a conference call.
EQT stock was up 2.6 percent to $74.21 at noon.
The first major Marcellus shale gas producer to report earnings for the second quarter showed results of a trend in the market that began late last fall. Companies continue to pull more gas from shale as prices drop, feeding a glut that is worsening with low demand from utilities and a shortage of pipelines to move the gas to markets.
Early results from the Utica well EQT drilled from a Marcellus pad show huge productivity — at an initial rate of nearly 73 million cubic feet per day it topped the 59 million cubic feet that a Range well tested at this year — though the well was very expensive, topping $30 million to spend.
“Though this is clearly a phenomenal well, we need to get our costs down … and understand what the economics are,” said Steven T. Schlotterbeck, executive vice president for exploration and production. EQT will drill another Utica well in nearby Wetzel County, W. Va., to continue figuring out how to tap the deeper shale layer more effectively and cheaply.
During the quarter, EQT, Pennsylvania’s fifth largest shale gas producer by volume, boosted production by a third over the same period last year while drilling 48 Marcellus and Upper Devonian wells during the quarter. Yet operating revenue slid by more than 17 percent to $433.2 million. A boost in revenue in its midstream pipeline business kept it from dropping further.
Its spinoff company EQT Midstream Partners said it plans to build a $250 million, 32-mile “header” system for fellow producer Range Resources to connect wells in southwestern Pennsylvania to pipeline hubs. It will be complete in two phases starting in the fall of 2016.
“Our growing pipeline footprint distinctly positions us to provide cost-effective midstream services to Appalachian Basin producers; and with this project in particular, we are pleased to build upon our relationship with Range Resources,” said Randy Crawford, chief operating officer of the midstream company.
This article was written by DAVID CONTI from The Pittsburgh Tribune-Review and was legally licensed through the NewsCred publisher network.