Cabot Spins Gold from Hay with Low Cost Drilling

Cabot Oil & Gas is, so far, the only driller to attain 1 billion cubic feet per day of natural production in the Marcellus Shale (see Who’s a Member of the Marcellus “1 Bcf/d” Club?). Perhaps the most astonishing part of their story is that all of Cabot’s drilling happens in rural northeastern Susquehanna County, PA. Although Cabot is some 10 times smaller than Chesapeake Energy, the value of their stock (market capitalization) recently surpassed Chesapeake (see Guest Post: Corporate Hubris Humbles Chesapeake – Cabot Soars Sure & Steady).

Cabot’s ability to spin gold from hay is in no small part because of their Marcellus operation in Susquehanna County…

At a recent conference, Cabot made an investor presentation (full copy below) that shows, in part, why they’re so profitable—even in a low commodity price environment. As we’re writing this story, the commodity price of natural gas is exactly $4 per thousand cubic feet. Depending on geography, the cost to produce natural gas approaches $4/Mcf for many drillers. But for Cabot? Their average cost per Mcf in 2012 was $1.67, and for 2013 they estimate it will go even lower (see slide 10 below).

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