EQT Corporation (NYSE:EQT) will move to increase its development of the Marcellus Shale over the next few years, at the expense of other prospective oil and gas formations on its acreage in the Appalachian Basin.
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2010 Summary
In 2010, EQT Corporation drilled 326 horizontal wells, with 90 wells targeting the Marcellus Shale, and 236 into the Huron play. The company considers the Huron to include several different formations on its acreage, including the Lower Huron, Cleveland and Berea. EQT Corporation also drilled 95 vertical wells in the Nora Field, where the company is targeting coal bed methane. The Nora Field is a prolific, yet relatively unknown field in the Appalachian Basin. Range Resources (NYSE:RRC) is also involved in development here.

Future Plans
EQT Corporation has 500,000 net acres in West Virginia and Pennsylvania that are prospective for the Marcellus Shale, and will shift more development towards this formation over the next few years. The company plans to drill 86 wells here in 2011, at an average cost of $5.3 million each. Other companies involved in the Marcellus Shale include Stone Energy (NYSE:SGY), which has 75,000 net acres and plans to drill between 16 and 18 horizontal wells in 2011. Not every company is increasing development here in 2011. Talisman Energy (NYSE:TLM) has allocated $800 million in 2011, but will reduce its rig count during the year from 12 to 9 rigs.

EQT Corporation will significantly reduce the development of the Huron play in 2011, and estimates that it will drill 58 wells at an average cost of $1.4 million. The company will also reduce the development of its coal bed methane assets in the Nora Field.

EQT Corporation is investing in midstream infrastructure needed to transport and process natural gas from the Marcellus Shale. The company plans to add gathering capacity of 130 million cubic feet per day.

Reserve Report
EQT Corporation removed 603 Bcfe Huron and coal bed methane reserves from the proved undeveloped category at the end of 2010. This was necessitated by the company's shift in development away from these formations and into the Marcellus Shale. The Securities and Exchange Commission (SEC) requires exploration and production companies to remove proved undeveloped reserves if they can't be developed within a five-year period.

EQT Corporation removed all of its coal bed methane PUDs from the proved undeveloped category at the end of 2010, as these are no longer economical to develop at current natural gas prices. Only some of the Huron PUDs were removed, as the higher returns here make parts of this formation economical to develop.

The Bottom Line
While most of the exploration and production industry flees from natural gas, EQT Corporation is sticking with the Marcellus Shale and shifting more capital here in 2011. The company will free up capital through less development of other parts of its portfolio. (For related reading, take a look at How Does Crude Affect Gas Prices?)

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Tickers in this Article: EQT, RRC, TLM, SGY

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