Cabot 2Q17: New Production Record, Making Big $, Pipelines Coming

Late last week Cabot Oil & Gas, one of our favorite big Marcellus drillers, released their second quarter 2017 update. And man oh man, was it full of interesting items! Daily natural gas production was up 14% over the same period last year. During 2Q17, Cabot averaged 1.77 billion cubic feet (Bcf) per day of net Marcellus production (2.1 Bcf/d gross operated production). Also during 2Q17, Cabot drilled 13.7 net Marcellus wells, completed 8.0 net wells and placed 6.0 net wells on production. Financially, the company continues to be a cash-making machine, generating positive free cash flow for the fifth consecutive quarter. During the first half of this year, it cost Cabot an average of $2.01 per thousand cubic feet (Mcf) to extract and sell the gas. That’s all expenses. And Cabot made an average of $2.51/Mcf selling that gas. That’s a profit of $0.50/Mcf (or 20% profit). If we could invest $1 and get back $1.20 for every dollar invested, we’d be happy to do that all day long! Cabot is currently operating two drilling rigs and one completion crew in the Marcellus. One of the most interesting (and underreported) parts of the Cabot conference call last Friday is CEO Dan Dinges’ comments on the long-delayed Constitution Pipeline. He said, “we feel more optimistic about this project coming online in the next few years than we did say a year ago.” It seems Cabot (and Williams, the builder of the Constitution) are closely watching what happens with the Millennium Pipeline and Millennium’s request to FERC to override the New York Dept. of Environmental Conservation (DEC), which is blocking the Millennium(and the Constitution). Although the Constitution awaits a court decision from the U.S. Second Circuit Court, they are planning other strategies. Dinges also addressed the PennEast Pipeline project, now stalled in New Jersey. Below is last week’s update, excerpts from the conference call, and the Cabot slide deck full of good information…
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MPLX/MarkWest 2Q17: Utica Descending, Marcellus Ascending

MPLX, which is the midstream subsidiary of Marathon Petroleum (essentially MarkWest renamed, since the merger), issued its second quarter 2017 update last week–and wow what an update! MPLX’s profit in 2Q17 is up 10x from 2Q16–to $190 million. Revenue is up 31% in 2Q17 from a year earlier–to $916 million. It pays to be in the midstream. The company processed 4.7 billion cubic feet per day (Bcf/d) of Marcellus/Utica gas and liquids, which is up 14% over the same period last year. Just one more bit of evidence that the industry is picking up again. This past quarter MPLX started up a 20,000-barrels-per-day fractionation train (de-ethanization) at the Bluestone complex (in Butler County, PA) in June to support growing natural gas liquids (NGL) production in the Marcellus shale. However, not all areas were up equally. Of particular note, MPLX saw a decrease in processing volumes in the Utica, and an increase in the Marcellus. On the conference call, MPLX CFO Pam Beall said right now the Utica is their “weak spot” because some producers are shifting their spending away from some areas in the Utica–spending more in other areas, including the Marcellus. However, MPLX president Mike Hennigan believes the Utica “weakness” is temporary and will pick up again. Below are excerpts from last week’s conference call, the full 2Q17 MPLX update, and the slide deck used on the conference call…
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Bunch of Old Hippies Arrested in Mass. for Blocking Pipeline Work

Very early on when MDN editor Jim Willis began to write Marcellus Drilling News and he attended local meetings where fracking (and later pipelines) were discussed, he noticed a strange phenomenon: Many in the audience appeared to be old hippies–men with no hair on top, but long (gray) hair on the sides, still braided in a ponytail, all these years later, like it was back in the day when they smoked weed and protested the Vietnam war. Whenever Jim raises that observation he almost always gets vitriolic emails–because he hits a nerve. A little too much truth in what Jim writes. It is with some amusement we report more old hippies protesting once again. This time it’s in Massachusetts. On Saturday Massachusetts State Troopers arrested 22 people. When you look at their ages (and the pictures), you quickly come to the conclusion that this is yet another group of old hippies trying to relive the glory days. Their last chance to “make a difference” and protest “the man.” Only this time they’re protesting a 2-mile pipeline through a state forest–part of Kinder Morgan’s TGP Connecticut Expansion project. As we stated in a previous post, “Perhaps if pipelines flowed marijuana instead of fossil fuels, they’d feel differently about them?”…
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FERC Issues Favorable Final EIS for Mountaineer/Gulf XPress Pipes

In February the Federal Energy Regulatory Commission (FERC) issued a draft final environmental impact statement (DEIS) for two important pipeline upgrades to carry more Marcellus/Utica gas to southern markets–Mountaineer XPress and Gulf XPress (see FERC Issues Favorable Enviro Report for Mountaineer & Gulf XPress). It’s always a good sign when you get a favorable DEIS, because it almost always means you’ll get a favorable final EIS. MDN previously reported on Mountaineer XPress, which includes 165 miles of new pipeline with approximately 2.7 billion cubic feet (Bcf) per day of transportation capacity from existing and future points of receipt along or near the Columbia pipeline system–most of it located in West Virginia (see Details on Columbia Pipeline Mountaineer XPress Pipeline Project). Gulf XPress consists of constructing seven new midpoint compressor stations along the existing Columbia pipeline system in Kentucky, Tennessee and Mississippi, with the aim of moving an additional 875 million cubic feet (MMcf) of Marcellus/Utica gas per day southward, to the Gulf Coast region. Good news. FERC issued a favorable final EIS on Friday…
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Canadian Mainline Pipeline to Flow More Canadian, Marcellus Gas

Click for larger version

Last Friday TransCanada Corporation announced a plan to expand capacity along their Canadian Mainline System through its Maple Compressor Station near Vaughan, Ontario. The $160 million project is supported by 15-year contracts and will increase capacity to the southern Ontario market plus enable delivery to Atlantic Canada via the Trans Quebec & Maritimes Pipeline (TQM) and Portland Natural Gas Transmission (PNGTS) Systems. According to TransCanada, both Canadian and U.S. (i.e. Marcellus/Utica) gas will help fill the extra capacity, some 80 million cubic feet per day (MMcf/d). TransCanada hopes to have the project done and online by Nov. 1, 2019…
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Railroads See Uptick in Hauling Marcellus/Utica NGLs, Frac Sand

Pipeline projects are facing still opposition from nutty/radical environmentalists who seem to have plenty of money to litigate and attempt to tie up projects for as long as possible. Ultimately, at least in most cases, pipelines prevail and get built. But it does take longer, no doubt about that. In the meantime, railroads have stepped in to take up some of the slack. We’re suckers for a good railroad story. We spotted one about rail giant CSX and how the company has seen an uptick in hauling natural gas liquids in the Marcellus/Utica region. Stuff like propane (LPG, or liquefied petroleum gas). CSX is also seeing an uptick in hauling frac sand. All of which points to one thing: drilling in the Marcellus/Utica has/is picking up…
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Duke Energy Building $1.5B Gas-Fired Plant in FL – Marcellus Gas?

Duke Energy Crystal River plant – click for larger version

According to the Tampa Bay Times, Duke Energy has “quietly” been building a new $1.5 billion natural gas-fired electric generating plant in Citrus County, FL. The project has 2,000 workers busy building it. When done, it will be Duke’s largest combined cycle gas-fired plant, generating a whopping 1,640 megawatts–enough electricity to power roughly 1.3 million homes. Wait, what does that have to do with the Marcellus/Utica? What gas do you think will feed this beast?…
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NC Fracking Remains in Limbo, 5 Yrs After Legislature Approved It

In 2012 the North Carolina legislature cleared the way for the state to allow horizontal fracking of shale (see NC Law to Legalize (and Encourage) Fracking Advances). The law gave state officials two years to come up with rules and regulations to govern fracking in NC. Along the way a lawsuits were launched, slowing things down (see Judge Puts NC Fracking on Hold Pending Outcome of Lawsuit). That case was resolved in January 2016. However, the NC Department of Environment and Natural Resources (DENR) didn’t let the lawsuit stop them from drilling a series of test holes in Stokes, Scotland, Hoke and Cumberland counties to see whether shale gas is present in those locations (see Lawsuit Won’t Stop NC Agency from Drilling Test Holes in Shale). Unfortunately test results showed that three of the four counties have no measurable presence of Triassic shale and therefore are not suitable for drilling (see Whatever Happened to Fracking in North Carolina?). Even if a company wanted to begin drilling, members of the North Carolina’s Oil & Gas Commission who would approve applications have not been sworn in. Nine commissioners were appointed by outgoing Republican Gov. Pat McCrory and the Republican legislature–but new Gov. Roy Cooper (Democrat) refuses to swear in the commissioners and allow fracking to begin. One more Democrat who acts like a dictator. Where have we seen that before?…
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Marcellus & Utica Shale Story Links: Mon, Jul 31, 2017

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: More gas pipelines needed in OH for jobs, America’s energy future; Shell construction spawns 55 new jobs at concrete plant; Delaware Riverkeeper’s personal de-growth agenda; WV Northern Panhandle leads in production; NJ utilities upgrading thousands of miles of natgas pipelines; FL community switches to natgas garbage trucks; shale oil drillers scaling back some; will ‘lower for longer’ turn into ‘lower forever’?; radicals prepare to fight fracking in Quebec; Shell axing 400 jobs in Netherlands; and more!
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