EQT’s Marcellus economics
EQT Corporation’s (EQT) plans to drill longer laterals in the Marcellus are also expected to result in improved returns in that region.
Its after-tax IRR (internal rate of return) is expected to increase from 49% in an eight-well pad that is 8,000 feet lateral to 71% in a 12-well pad that is 14,000 feet lateral, at $2.50 NYMEX (New York Mercantile Exchange) natural gas prices. At natural gas prices of $2.00 and $3.00, these returns are expected to increase to 29% and 140%, respectively, from the previous 19% and 96%.
EQT’s press release stated the following: “The foundation of the transaction with Rice was the ability to realize significant synergies on SG&A expenses, as well as capture improved capital returns resulting from the ability to drill longer laterals on its much larger contiguous acreage position.”
Continue to the next part of this series for a closer look at what the new midstream company will mean for the industry.