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Linn Energy, LLC (LINE) Message Board

  • rlp2451 rlp2451 Oct 22, 2012 12:56 PM Flag

    Major Companies Conitnue to Expand in Marcellus Despite Low Gas Prices Elsewhere

    Range Resources Corp.: Range Resources is one of the largest natural gas and NGL producers in the Marcellus. Our ratings incorporate Range's aggressive production growth plans from the Marcellus shale, which are now primarily focused on the wet gas areas. Range's Marcellus production reached 500 mmcfe/d net at the end of the second quarter of 2012, accounting for about 70% of its total equivalent production, and the company remains on track to reach 600 mmcfe/d by year-end (up from 300 mmcfe/d on average in 2011). The company holds over 750,000 net acres in the Marcellus fairway, about 45% of which are in the liquids-rich southwest regions. The company is directing more than 85% of its $1.6 billion 2012 capital budget toward the Marcellus shale, which will be Range's primary growth driver for the next several years. Range also holds 190,000 net acres in the Utica shale, which could add further liquids growth over the medium term. Range's expected Marcellus production growth provides positive momentum for the rating.

    EQT Corp.: EQT is a diversified energy company exclusively focused on the Appalachian region. Our ratings on EQT incorporate the company's aggressive production growth plans from the Marcellus shale, along with its development of infrastructure to facilitate this growth. EQT's Marcellus production averaged 295 mmcf/d during the three months ended March 31, 2012, which represented 50% of its total equivalent production. The company holds 530,000 net acres prospective for the Marcellus, about 35% of which is in the liquids rich areas. While the company decided to suspend drilling in its dry gas Huron shale acreage (also in Appalachia) in January due to low natural gas prices, it continues to drill in the Marcellus as reduced service costs, better performance, and a liquids component keep drilling in the play economic. EQT's midstream business is also benefitting from the development of the play, with the company on track to add 445 mmcf/d of gathering capacity (85% of its year-end 2011 total) in 2012. The company also plans to expand its Equitrans Pipeline this year by 70%, as this pipeline runs right through the Marcellus shale and is operating near full capacity.

    National Fuel Gas Co.: National Fuel Gas (NFG) is a diversified energy company primarily focused in the Appalachian region. Our ratings on NFG primarily reflect the cash flow diversification and stability benefits of the company's regulated pipeline and storage and utility businesses, which mitigate its exposure to higher-risk oil and gas E&P activities through its subsidiary, Seneca Resources Corp. NFG has a long operating history in the Appalachian region and holds one of the largest positions in our rated company universe in the Marcellus play—745,000 net acres. NFG's net Marcellus production reached 200 mmcf/d in July 2012, accounting for over 65% of the company's total volumes.
    More than 1,000 drilled wells are waiting to be hooked up to pipelines in the Marcellus - about 700 above the norm - thanks to a busy drilling program in the region since 2009 that ran ahead of the infrastructure needed to move the gas to market, including pipelines, processing facilities and compressor stations.

    Statoil has about 400 wells that are waiting for new pipelines, the company said at the release of its second quarter financial results. Anadarko has about 200 and Range Resources (RRC) and Penn Virginia (PVA) about 50 each, according to recent company calls with analysts.

    Not all these wells will start producing at once and the prospects for the Marcellus depends on how willing producers are to bring new cheap gas to market.

    Anadarko said it plans to bring about 20 to 30 wells online per quarter, which could increase if the gas price rises.

    "It is highly dependent on how many wells are ready to be completed and the operators' planned schedule for bringing those wells on line," said Randall Collum, analyst at Genscape in Houston, who estimates there will be between 0.5 bcfd and 1 bcfd of extra flows from the Marcellus this year and 1.5 bcfd next.

    "I don't think producers will bring on those wells at once unless they want to see really low prices," said Collum.

    Still, even more conservative estimates for supply growth show strong output. Citi analysts see up to 2.4 bcfd of additional production if all the 1,000-odd wells came online over the next 12 months. That alone is an additional 3.5 percent of daily supply.

12.24+0.26(+2.17%)Dec 19 4:00 PMEST

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