In an asset swap that lands EQT Corp. smack in the middle of Texas, the Downtown-based company is trading its coal-bed methane assets in Virginia for 73,000 acres and 900 wells currently owned by Range Resources in Texas’ Permian basin.
Texas-based Range Resources already owns a 50 percent interest in EQT’s assets in the Nora field in Virginia, an area that EQT has been shopping around without success for two years.
As part of the deal, Range will become full owner of 138,000 net acres and 1,200 miles of gathering pipes and compression there. EQT also will pay Range $145 million in cash as part of the transaction.
EQT spokeswoman Linda Robertson said the company’s entrance into Texas is part of its growth and diversification strategy. EQT said it plans to drill two wells there this year and up to 30 wells next year. The estimated cost per well is $7.5 million, with 75 percent of the production expected to be oil or natural gas liquids.
Jerry Grantham, a Range vice president, said the Nora field acquisition will bring 145 jobs to Virginia and catapult Range to one of the state’s most active oil and gas producers.
The assets are close to growing markets for natural gas, including southeastern U.S. states, and present the opportunity for Range to drill into multiple gas-bearing layers.
EQT Corp. has said the same of its new acreage in Texas.
The Pittsburgh company also announced Tuesday that it is selling another natural gas gathering system to its spinoff, EQT Midstream Partners, in a $1.18 billion deal. The Jupiter Gathering System consists of 35 miles of gas lines and two compressor stations. The midstream company is expected to pump another $106 million into expanding the system’s capacity this year. Another $76 million will be spent in 2015.
EQT has signed a 10-year agreement with EQM to feed its Marcellus and Upper Devonian gas into the system.
This marks the second time EQT has “dropped down” midstream assets to its sister company. EQT’s CEO David Porges said Tuesday that drop-downs will likely come once a year as the company narrows its focus on growing its oil and gas production.
Mr. Porges spoke after the company’s annual shareholder meeting Downtown, predicting the price of natural gas would likely remain at current levels and probably will never hit the spikes of 2008 again.
And that’s all right for EQT, he said. The company is developing its Marcellus acreage profitably while re-prioritizing some of its other assets.
EQT is considering what to do with its Huron shale assets in Kentucky, where drilling resumed this year after a two-year hiatus due to low natural gas prices.
EQT also holds sizable positions in the dry and wet Utica Shale areas in Ohio. Last week, the company said it was disappointed with the results of several wells it drilled in Guernsey County, Ohio, where the gas is rich with natural gas liquids and has suspended the drilling program there until after this year. As for its dry acreage in eastern Ohio and West Virginia, EQT is following the results of other companies drilling there, Mr. Porges said.
“We’d like to not have to pay full tuition for every lesson we learn,” he said.
Anya Litvak: email@example.com, 412-263-1455 First Published April 30, 2014 4:55 PM