Cabot: 2018 “Inflection Year” with 1.5 Bcf/d of New Demand Coming

Cabot Oil & Gas, one of the biggest and best drillers in the Marcellus Shale, released its fourth quarter and full year 2017 update today. Cabot continues to be the low cost leader. Cabot’s cost to find and develop shale gas in northeastern PA is an amazingly low $0.22 per thousand cubic feet (Mcf). Breakeven price for Cabot in the Marcellus in 2017 was ~$1.05/Mcf, meaning any sales above that amount is profit. Cabot sold its gas for an average of $2.31/Mcf in 2017, a 36% increase over 2016. You can see why they’re profitable, even with low gas prices in NEPA. Cabot produced 685.3 billion cubic feet equivalent (or 1.9 Bcfe/d) in 2017. Most of that came from a single county, Susquehanna County, PA. Like many shale companies, Cabot lost money in 2016 ($417 million), but they turned it around last year by making a $100 million profit. Cabot has now drilled in NEPA for the past 10 years. Have they run out of places to drill? Nope. Looking at a chart in Cabot’s most recent slide deck, they still have around 3,000 locations left where they can drill on existing leased acreage. At the end of last year Cabot owned 561 producing Marcellus wells. There’s plenty more to come! In this update Cabot indicates that 2018 will be “an inflection year” for the company. Why? Several large projects will come online in PA this year that will sop up a considerable amount of Cabot’s gas: (1) Moxie Freedom Power Plant, (2) Lackawanna Energy Center Power Plant, and (3) Atlantic Sunrise Pipeline. You can likely add a fourth to the list–the startup of the PennEast Pipeline. Take all of those together, and Cabot will get new demand to sell an additional 1.5 Bcf/d of gas they don’t sell now. In other words, Cabot will just about have to double their production to meet the new demand–which they are quite capable of doing. All eyes are on Cabot in 2018 as they hit an inflection point…

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