Integrated energy player
) has inked a definitive agreement worth $113 million with
Chesapeake Energy Corporation
) and its partners for Marcellus acreage and ten wells in
Pennsylvania. The transaction is likely to close on May 30, 2013.
CHESAPEAKE ENGY (CHK): Free Stock Analysis
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The acquisition comprises of about 67,000 net acres in Marcellus
and 32,000 net acres in dry Utica play. The total acreage of
99,000 in southwestern Pennsylvania is to cost $60 million while
the remaining $53 million is for the 10 Marcellus wells in
Of the total acreage in Marcellus, around 25,000 acres, which
lies in the core Marcellus development areas of Washington,
Greene, and Allegheny counties, will be developed through
multi-well pad drilling and extended laterals. The remaining
42,000 Marcellus acres are likely to face hindrances in
developments at present due lease expirations in the near-term or
a scattered footprint.
Of EQT's purchase of 10 Marcellus wells, only 3 are producing
currently. The remaining 7 are estimated to add about 1.0 billion
cubic feet equivalent (Bcfe) to the company's sales volume, once
it comes online by end of 2013. These existing wells represent
approximately 54.0 Bcfe of proved developed reserves in total and
possess an average lateral length of 4,200 feet.
On the completion of the transaction, EQT proposes to drill
around 4 wells on the new acreage towards the end of 2013. These
drilling activities are not expected to have a major impact on
the company's 2013 capital budget or the sales volume guidance,
which was recently, raised to 340 - 350 Bcfe.
EQT holds a Zacks Rank #2 (short term Buy rating). However, there
are other Zacks Ranked #1 (Strong Buy) stocks in the oil and gas
Newpark Resources Inc.
) , and
EPL Oil & Gas, Inc.
) that appear more attractive in the short term.