Wednesday, April 25, 2012

QEP Update

QEP Resources (formerly Questar) reported earnings today. It gave a brief update on its Haynesville operations, brief mainly because activities there have slowed down tremendously. The company currently runs one rig, down from two in February, and will remove that rig in the third quarter if natural gas prices don't pick up. The company didn't specify a threshold gas price, but given the current market, I would expect them to pull it unless something big happens this summer.  The rig would be pulled once the company figures out its spacing unit configuration.

QEP's capital budget in the Haynesville be around 11% of $1.35-$1.5 billion, or around $148-165 million. That Haynesville budget figure likely would go down significantly if the last rig is pulled. Haynesville production in the first quarter was down a bit from last year to 262 million, but that reflected reduced flow rates and some operational issues about getting wells on line. The company is drilling one well right now and has two waiting for completion.


Anonymous said...


After reading this article, I thought about your comments about the EPA and the other agencies that are going to be regulating gas companies from one of your previous post....

How can you trust these agencies? I can't

Robert Hutchinson said...

I think you might be missing my point (or I am not expressing myself clearly). I think the recent EPA clean air regs are actually good for the industry and are something that the industry should have done on its own. But sometimes it takes a regulator to get everyone in the industry to do it so that not just a few responsible parties have an additional economic cost. There is no more "business as usual" in this world. The industry has to think one step ahead.

My point about the President's working group to consolidate natural gas policy is that it is better to have multiple agencies involved, moderating one another, rather than having one (specifically the EPA) taking the lead.

My fear is that the EPA tries to go overboard concerning water and oversight of fracking. To me, that's where a larger working group will help moderate policy. The administration recognizes that they have a golden goose in natural gas (no matter how many pundits and slick video say otherwise) and they need to nurture it.

Regulation has to run a tricky balance between balancing the free market and defending the rights of the people. If the industry is responsible, government should err on the side of doing nothing. The problem is that the energy industry is not exactly known for being entirely responsible. They can change that reputation through their actions, but the temptation is always to dig a trench and fight.