East Daley Analytics – Dissecting the Energy Value Chain
Energy Insights and News

ETRN Volumes Fall as EQT Shuts 1 Bcf/d of Production

Comments: 0

Leading Appalachian producer EQT has shut-in ~1 Bcf/d of natural gas production in response to low prices. Equitrans Midstream (ETRN) is bearing the brunt of the production cuts, and East Daley expects the company to post lower 1Q and 2Q23 earnings as a result.

Separately, EQT and ETRN have reached a deal for EQT to buy back its former midstream unit in an all-stock deal, the companies announced Monday (March 11). EDA will cover the EQT-ETRN merger and its implications in a future post.

EQT announced the gas supply curtailments in a March 4 press release. The producer said it expects the well closures to last at least through the end of March, when it will reassess market conditions.

tdn 3.11

EQT started shutting down wells on February 24, according to flow samples East Daley tracks in the Northeast. Based on our tagging of G&P pipeline data, the producer appears to have curtailed production exclusively in the Southwest Pennsylvania (SW-PA) region of the Marcellus, where EQT normally produces ~3.1 Bcf/d of gross gas. The shut-ins have reduced production in the region by ~30%. Most of the decline (~750 MMcf/d) has occurred on Equitrans’ (ETRN) Pennsylvania gathering system (see red line in the figure).

Using the ETRN Financial Blueprint, users can estimate the impact of the curtailments to asset performance. East Daley ran a scenario analysis assuming a 300 MMcf/d cut in 1Q24 volumes (average); the lower flows result in an 8% hit to our current 1Q24 forecast for EBITDA ($21MM).

We assume EQT will keep its wells closed through the low-demand spring and return to normal operations starting in June ’24. Based on this scenario, we estimate a 500 MMcf/d cut in 2Q24 volumes, which according to the ETRN Financial Blueprint would drop earnings by 9% ($29MM) for the quarter.

ETRN’s potential downside is limited by minimum volume commitments (MVCs) with EQT. ETRN has 3 Bcf/d of MVCs on the Pennsylvania gathering system, and current throughput is ~4 Bcf/d. The MVCs step up to 3.5 Bcf/d when MVP comes online, and then to 4 Bcf/d after another 12 months, effectively removing this curtailment risk.

EQT employed a similar strategy in 2020, shutting in ~1.4 Bcf/d when Appalachian prices fell below $1.50/MMBtu. The producer brought supply back three months later, only to reduce volumes once again in September ’23. EQT restarted full production heading into the winter after prices recovered above $1.50 (see red line in figure below).

We estimate EQT will begin bringing back production in May, ahead of the expected start of Mountain Valley Pipeline (MVP). Historically it has taken EQT about two months to restore production after restarting wells. This would mean recovery to EQT’s 2023 production levels by the end of June ‘24.

ETRN expects MVP to start service on June 1, and EQT holds over 1 Bcf/d of capacity on the new pipeline. The start of MVP should help Dominion South spot pricing and give EQT further incentive to restore operations. In our Macro Supply and Demand Forecast, EDA forecast Henry hub prices will recover to $2.50/MMBtu by July 2024, providing additional uplift to Appalachian prices – Alex Gafford Tickers: EQT, ETRN.



New CAPEX Dashboard Creates Superior Visibility into Midstream Budgets

East Daley is excited to launch our latest product, the CAPEX Dashboard, offering superior visibility into midstream investing. The CAPEX Dashboard provides detailed breakdown on capital projects by commodity, geography and asset type, allowing users to effectively track market trends, analyze individual or multiple companies and track sector-wide trends. Learn more about the CAPEX Dashboard here.


New EDA Product: West Coast Supply & Demand

The West Coast Supply & Demand report is your go-to resource for mastering the energy market from the California coast to the western Colorado Rockies. This dynamic product offers extensive regional coverage, precise production forecasts for key basins, and in-depth pricing analysis, specifically examining the Colorado pricing spread from CIG Mainline to NW Pipeline Rockies.

Stay ahead of the competition with strategic insights, ensuring you make informed decisions and capitalize on emerging opportunities. Elevate your business with unparalleled market intelligence – invest in the West Coast Supply & Demand report today.


New EDA Product: Houston Ship Channel Supply & Demand

The Houston Ship Channel Supply & Demand report allows users to dive deep in understanding, and monitoring Houston Ship Channel natural gas dynamics. The product contains monthly updates of relevant price spreads, pipeline flows, production and demand estimates affecting the South Texas market, with forecasts extending 5 years into the future. Learn more about the Houston Ship Channel Supply & Demand report.


Energy Data Studio

East Daley Analytics has launched Energy Data Studio, a platform for our industry-leading midstream data and commodity production forecasts. All clients have access to the new client portal. If you have not yet logged in, please fill out the form to request a registration email be resent.

Energy Data Studio leverages our G&P data set for insights into midstream assets across every major oil and gas basin in North America. Users can navigate detailed visual dashboards by region, pipeline, or individual asset to understand crude oil, natural gas and NGL supply at the most granular level.

Energy Data Studio is available through data downloads from the visual interface, in Excel files, or as a direct feed delivered into subscribers’ workflow via secure file transfer. To learn more about Energy Data Studio, please contact insight@eastdaley.com.

The Daley Note

Subscribe to The Daley Note (TDN) for midstream insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices and EDA research likely to affect markets in the short term.

About the AuthorEast Daley Analytics