Given that it isn’t as deep or hard as the Marcellus, the Upper Devonian doesn’t require the millions of gallons of water, sand and other chemicals. Given the ease of fracking the formation — sometimes as little as about 50 feet below the surface — several producers in West Virginia has actually used straight hydrogen to get the job done.
And unlike several other fields — like the Bakken — getting Devonian production to market will be a much easier task. As the Marcellus as grown, so have the number of pipelines and gathering systems in the region. Upper Devonian producers should have no problems tapping into this growing network of midstream infrastructure.
While there have been no official reserve estimates or predictions from the Energy Information Administration, the potential for the Devonian to pay off big time for producers is certainly there. Only about 20 or so wells have been drilled into the formation, so this play is still in its infancy.
So Who Is Going To Win?
Chesapeake (CHK), small-cap Rex Energy (REXX) and coal/natural gas producer CONSOL Energy (CNX) have all begun tapping the Devonian with great success, while the previously mentioned Range Resources has started on a project to drill through the Devonian, Marcellus and the Utica all from a single drill pad. Any of these firms could be big winners from the field.
However, the biggest could be EQT (EQT).
After great results from early test wells — an average estimated ultimate recovery of 1.2 billion cubic feet per 1,000 feet drilled — the E&P firm has made the Upper Devonian a major contributor to its future drilling and production plans. Like RRC, EQT is planning on drilling both the Marcellus and Devonian from a single well pad and has recently doubled the number of wells its plans to drill in the region to 22.
Yet there is still plenty of room for EQT to grow in the Devonian as well as the Marcellus.
Across the Appalachian Basin, the firm has drilling rights on nearly 3.5 million acres. That’s a huge amount of land for prospecting. More importantly, EQT estimates that its proven and probable reserves for its Upper Devonian holdings sit at an impressive 2.4 trillion cubic feet. Adding in the company’s low cost structure and existing midstream assets in the region — through its EQT Midstream Partners, LP (EQM) subsidiary — and you have a recipe for success.
It’s easy to see why analysts have share price targets for EQT roughly $15 higher than today.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.