Deutsche Bank Analyst Discusses Marcellus Data (WPX) (EQT)

Deutsche Bank analyst Stephen Richardson discussed natual gas supply growth and Pennsylvania DEP well data in a research note Friday. WPX Energy (NYSE: WPX) and EQT Corporation (NYSE: EQT) were mentioned positively in the report.

"Importantly, the backlog of drilled uncompleted wells (DUCs) in core SW counties grew 74% in 1H14 vs. 2H13, consistent with what we heard in 2Q from many Marcellus producers," said Richardson. "Following the infrastructure adds of 4Q13, PA production re-accelerated in 1H14 adding 1.55 Bcf/d (vs. a 1.41 Bcf/d add in 2H13) to see production top 10.7 Bcf/d. Surprising to us growth continued to be dominated by Northeastern counties despite transportation challenges. ~1 Bcf/d of 1H14 growth was from Northeast PA counties."

"In terms of well productivity, the number of high rate wells continues to grow with 77 wells over 10 mmcf/d reported to the state in 1H14 vs. 55 wells in 2H13. Finally, we would note the build in the backlog of DUCs in core SW PA counties (Greene & Washington) is consistent with operator disclosure and may foreshadow stronger SW PA growth as 4Q14 capacity adds provide opportunity. With activity shifting further south and west and growth likely accelerating from both West Virginia and Ohio into 2015, we fear the PA state data may provide only a partial view of Marcellus / Utica production trends. Based on a bottoms-up view of producer plans, we see 3.8-4.0 Bcf/d of Northeast supply growth in 2015 (vs. 2.9 Bcf/d in 2014)," he continued.

"The natural gas market has been hit with a confluence of negatives over the past 3 months, with CAL15 below $4/mmbtu we would be more prone to play seasonality in the equities into 4Q14.We acknowledge the 2015 outlook is very weather dependent as the market must absorb another year of above trend supply growth before the major demand elements of 2016+ arrive. The challenge for Marcellus producers will continue to be uncertainty surrounding 2015 margins and production growth likely continuing to pressure multiples. EQT remains a core holding for us, primarily due to a coming value unlock from an increasingly valuable and unique midstream business. Looking ahead, we think investors will increasingly look for commodity leverage outside of the northeast, and we highlight WPX as a restructuring play with renewed strategic focus on oil growth and operational performance with an interesting longer term option on natural gas," he added.

For an analyst ratings summary and ratings history on WPX Energy click here. For more ratings news on WPX Energy click here.

Shares of WPX Energy closed at $26.59 yesterday.

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