Equitable Resources, Inc. (EQT)

carbonates (72.47) Submitted: 6/30/08 6:54 PM : Start Price: $67.80 EQT Score: -20.44

EQT appears to be one of the most efficient operators in the Appalachian gas shale play. They are targeting the Huron, a shallower shale than the Marcellus in the same region. They have grown proven, probable, and possible reserves by 26% to 7.2 Tcf in 2007. They have 300 wells planned for drilling this year, with 12 rigs operating and 4 more to be added soon. Costs of $1.2 million per well with 1.5 Bcfe estimated recovery will yield very good profits. At $12/mcf gas that is $18 M per well. While I have no figures on the production rates, even with a long hyperbolic payout, the NPV should not kill those kinds of numbers. Combined with the highest gas price market in the US they appear to be in better position than most US gas producers. With 3.3 million acres of leases in the Appalachians they could surpass even Chesapeake who has slightly over 1 million acres in the Marcellus play. They are currently advancing the technology by air-drilling multilaterals instead of using the more commonly applied single-borehole artificially fractured wells that most operators in gas shales are using. They may be able to produce similar production results with even cheaper drilling costs. On a resource play drilling costs are the key factor to economics, since so many wells are drilled. EQT appears to be the leader in the region both in technology and lease position.

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