Equinor Ends U.S. Onshore Operatorship with EQT Asset Swap

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Norwegian energy company Equinor (NYSE:EQNR) (Stavanger) said it has completed its exit from controlling stakes in U.S. inland reserves following an asset swap with EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania) in the Appalachian shale natural gas basin.

From wind to offshore operations in the U.S. Gulf of Mexico, the Norwegian energy company has a broad, global footprint. But it said it would swap its 100% interest in Appalachian acreage in Ohio in exchange for 40% of the non-operated interest that EQT has in the shale basin in Pennsylvania, ending its operatorship onshore.

"The proposed swap improves portfolio robustness with an expected reduction in well break-evens and upstream carbon intensity," said Philippe Mathieu, an executive vice president for international upstream operations at Equinor. "This also means that we have now fully exited all operated positions onshore U.S."

The U.S. Energy Information Administration (EIA), the statistical arm of the Department of Energy, lumps the Utica and Marcellus shale reserves together in the broader Appalachia Basin.

The basin is by far the largest inland shale natural gas producer in the United States. The EIA estimates the reservoir will yield about 36.2 billion cubic feet per day (Bcf/d) on average this month, besting the second-largest gas producer, the Permian Basin, by some 11 Bcf/d.

Equinor will pay about $500 million to EQT for the transaction and, in turn, increase its working interest in the Pennsylvanian acreage from 15.7% to 25.7%, the company said. This acreage is operated by Chesapeake Energy, one of the major players in U.S. shale-based natural gas.

"With this transaction, we continue to high-grade the U.S. portfolio and improve profitability by strengthening our gas position in the most robust part of the Appalachian Basin," Mathieu continued. "These assets are well positioned to leverage anticipated positive developments in the U.S. gas market."

Chesapeake reported net production in the fourth quarter of 3.43 Bcf/d and used nine rigs to drill 45 wells and place another 52 into production. As of February, the company had four rigs working in the Appalachian Basin, but it said it had plans to drop a rig later this year.

"The company expects to drill 95 to 115 wells and place 30 to 40 wells on production in 2024," Chesapeake said.

Rig counts are not the determining factor they were during the dawn of the shale boom in the middle aughts as drilling becomes more efficient due to multiple and extended laterals. Counts nevertheless serve as a loose barometer of upstream activity.

Upstream services firm Baker Hughes Company (NASDAQ:BKR) (Houston, Texas) reported the rig count in the Appalachian Basin was 17% below year-ago levels as of April 12. The EIA, meanwhile, is expecting net gas production to decline slightly from April levels.

Equinor stressed this was not a reflection, however, of its overall commitment to U.S. operations.

"The U.S. is a core area for Equinor where we're building a broad energy business within offshore and onshore oil and gas, offshore wind, and new low-carbon value chains," said Mathieu.

EQT, the largest producer of natural gas in the United States, had no immediate comment on the transaction.

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