How the Rice Acquisition Could Affect EQT’s Marcellus Economics
EQT’s Marcellus position
As we saw in the previous part, pro forma for the contiguous acreage position of the pending Rice Energy (RICE) transaction, EQT (EQT) expects its Marcellus wells in Greene and Washington counties to average at least 12,000 feet from the current average of 8,000 feet.
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Following the close of the Rice acquisition, EQT’s Marcellus acreage would increase from 813,000 to 1.0 million.
Speaking about the drilling and completion best practices the company will gain from the combined EQT-RICE company, EQT’s management commented in the 2Q17 earnings conference, “Between the two companies we’ve got a lot of data on completion practices in this core area of the Marcellus and both companies have independently done a lot of science and analysis and gathered tremendous amounts of data.”
Improving Marcellus margins
EQT also expects to see improved returns in the Marcellus from the RICE acquisition. Its after-tax IRR (internal rate of return) is expected to rise from 21.0% in an eight-well pad 8,000 feet lateral to 28.0% in a 12-well pad 12,000 feet lateral at $2 NYMEX (New York Mercantile Exchange) natural gas prices. At $2.50 and $3 natural gas prices, these returns are expected to rise to 70.0% and 137.0%, respectively, from the previous 52.0% and 101.0%, respectively.