An Alabama-based oil company no owns 11,000 gas wells previously belonging to EQT Corp. following a $575 million agreement.
Diversified Gas & Oil, of Birmingham, Ala., announced last month it completed the deal to acquire 11,000 wells in Kentucky, Virginia and West Virginia, as well as 6,400 miles of pipe and 59 compressor stations. Diversified Gas & Oil will also take in 250 employees, 100 of which work in West Virginia.
The acquisition doubles the company’s oil production to more than 60,000 barrels of oil equivalent per day, making the Diversified Gas & Oil the largest conventional producer of oil in Appalachia.
“As we started out and really growing the business over the last couple of years, one of the premium assets we saw out there in the conventional oil and gas space was this EQT asset,” said Rusty Hutson, CEO of Diversified Gas & Oil. “We’ve had our eyes on it for a while.”
According to Hutson, the company believed the EQT properties would come up for divestment as EQT began focusing more on the Marcellus Formation.
“When it came on the market, we made a play for it,” he said on MetroNews “Talkline” last week.
The wells are used for conventional oil and gas drilling, a market that Diversified Gas & Oil is focused on using.
“This is a big asset,” Hutson said. “With this deal alone, we picked up 2.5 million drillable acres in Kentucky, West Virginia and a small part of Virginia. There is a big opportunity for us, especially as gas prices start to recovery, to start to develop a lot of assets.”
Hutson said the company will look to develop the asset and consider drilling wells profitable for the company that larger corporations may overlook.
As for prices, Hutson said a reasonable range would be between $3 and $4 per thousand cubic feet.
“I feel like if we have any kind of winter at all, you could see a pretty hefty rebound in pricing,” he said.
Diversified Gas & Oil closed on the assets on July 18.