Cabot O&G 3Q18: Production 2 Bcf/d, $122M Profit

Although Cabot Oil & Gas extracts natural gas from an area of Pennsylvania where gas fetches some of the lowest prices in the country, the company is making money hand over fist. The company made $122 million in profit during 3Q18 and estimates it will generate “free cash flow” (money in the bank) in the range of $650 million to $700 million in 2019. Cabot has moved from growth for growth’s sake to steady growth and higher dividends. A key part of their growth is the addition of new pipelines.
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By the Numbers – Revenue & Profitability for M-U Drillers

The expert analysts at RBN Energy have just published their “fourth and final” in a series of posts looking in detail at E&Ps (exploration & production companies, or “drillers”). One of the groups of E&Ps they examine are “gas-weighted” E&Ps–or drillers who mostly extract natural gas. In looking through the list, you immediately realize every one of them has operations in the Marcellus and/or Utica Shale region. Yes, a few also have operations in other plays, but they all have at least some operations here. The real value in the article is an accompanying spreadsheet comparing various financial metrics (apples to apples)–things like total revenue, lifting costs, production costs, and “pre-tax income,” meaning profitability. How do our drillers compare with each other?
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Cabot, Seneca Resources Grab 100% of New Transco Leidy Expansion

Williams is expanding its mighty, 10,500-mile Transcontinental Gas Pipe Line Co (Transco), again. Sometime this month Williams will prefile a request with the Federal Energy Regulatory Commission for the Leidy South expansion project. The new project will bump up “compression” (either build new compressors or refit existing compressors) and build new “looping” pipeline in Pennsylvania, in order to increase capacity of Transco in the northeast Marcellus region by another 580 million cubic feet per day (MMcf/d).
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Moxie Freedom Marcellus-Fired Plant Near Wilkes-Barre Online

Moxie Freedom

The 1,000-megawatt Moxie Freedom Marcellus-fired power plant located near Wilkes-Barre, PA is now “transitioning to commercial operation.” The plant is up and running and soon will be feeding the electricity it produces into the local power grid. In June 2014, MDN broke the news that Moxie Energy was in the hunt to begin a third new Marcellus gas-powered electric plant project in Pennsylvania, near Wilkes-Barre (see Moxie Energy in Hunt for Third Marcellus-Powered Electric Plant?). In November 2015, Moxie selected Gemma Power to build the plant, and construction began a month later (see Moxie Marcellus-Powered Electric Plant Breaks Ground in NEPA). In June 2017, Caithness Energy (the owner) issued an update to say the plant will go online in May of this year (see NEPA Moxie Freedom Power Plant on Track for May 2018 Launch). That didn’t happen. However, we spotted a local newspaper article that quotes plant officials as saying they are right now in the process of transitioning to commercial operation…
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Cabot O&G Fracks Its First OH Knox Well, Drilling 3rd OH Well

According to a news account from Ohio, Cabot Oil & Gas is either in the midst of, or just recently completed, fracking their very first shale well in central Ohio. The well is located in Ashland County’s Green Township. As we previously reported, Cabot is targeting the Knox formation (see Cabot O&G Opens Branch Office in OH – Hoping to Find Oil in Knox). Cabot has already drilled two wells, fracked one, and moved their drilling rig last week to Vermillion Township (also in Ashland County) to begin drilling a third well. The first three wells are all located in Ashland. As for the next two, Cabot isn’t 100% sure. Maybe another well in Ashland, but maybe a well in Richland County instead. Cabot’s George Stark says to stay tuned for the location of the final two test wells the company will drill. Cabot plans to have all five test wells drilled and fracked by the end of this year. “It should be a busy September and October,” according to Stark…
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Cabot Sets it Sights on Richland County, OH for 4th Test Well

Cabot Oil & Gas is drilling test wells in north central Ohio looking for “what’s next” after the Marcellus. So far Cabot, long known for its prolific production in the Marcellus Shale, has drilled two test wells and is in the process of permitting/drilling a third well, all in Ashland County, OH. Now Cabot is turning its sights on neighboring Richland County. Last Tuesday Cabot reps briefed Richland County commissioners on what they’re doing in Ashland County, and what they would like to do in Richland. Here’s the latest on Cabot’s effort to locate a new rock layer, hoping to spin straw into gold like they’ve done in Susquehanna County, PA…
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Cabot, Seneca, Chief Ramp Up Production for Atlantic Sunrise

According to a report from BTU Analytics, the top three shippers who will soon flow natural gas along Williams’ Atlantic Sunrise Pipeline (ASP)–Cabot Oil & Gas, Seneca Resources and Chief Oil & Gas–have “nearly doubled” their rig counts over the past few months leading up to the imminent startup of ASP. The pipeline is due to go online any day now–by the end of August (see Genscape Confirms Atlantic Sunrise Pipe Ready to Flow in August). Cabot has reserved 1 billion cubic feet per day (Bcf/d) of the 1.7 Bcf/d capacity of the new ASP. One third of Cabot’s 1 Bcf/d (350 million cubic feet per day, MMcf/d) will flow to Dominion’s Cove Point LNG export plant in Maryland–heading for Japan. Another 500 MMcf/d of Cabot’s gas will go to Washington Gas via ASP–meaning northeast PA Marcellus molecules will help heat, cool and power D.C. swamp dwellers. Joy. Here’s the great news that a single pipeline is stirring up a lot more drilling in northeastern PA…
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Cabot O&G Opens Branch Office in OH – Hoping to Find Oil in Knox

Stratigraphy showing Knox Unconformity – click for larger version

Cabot Oil & Gas is drilling test wells in north central Ohio looking for “what’s next” after the Marcellus. Cabot began to push dirt around on its first OH wellpad (in Ashland) in April, and began to drill a hole on that pad in June (see Cabot O&G to Begin Drilling in Ashland County, OH This Week). Cabot has also begun drilling at a second site, and has filed for a permit to drill at a third site, in Vermillion Township in Ashland County (see Cabot Files Permit #3 for Knox Formation Test Well in Ashland, OH). We’ve read comments by Cabot that the type of exploration they’re doing in OH just as often doesn’t pan out as it does–no doubt trying to manage and tamp down expectations. However, actions speak louder than words. On Monday Cabot held a ribbon-cutting ceremony for a new (albeit small) branch office located in Jeromesville (Ashland County). Sure looks to us like things are getting serious! You don’t just sign a lease for office space if things don’t look promising. In the past Cabot has been cagey about which rock layer they’re targeting in Ohio. We know it’s not the Utica. Devon Energy previously tried drilling the Utica in Ashland and it didn’t work. While both the Knox and the Rome layers have been mentioned in Cabot’s permits, it appears it is the Knox layer that Cabot is targeting. Although Cabot doesn’t admit what they hope to find (oil, gas, NGLs), it’s clear they’re hoping to find oil. Below we have more details on the new office space, and more on the Knox and Cabot’s approach to drilling in it…
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Cabot’s Lease Terms for Ohio Landowners + Antis Stage Tiny Rally

We spotted an article covering a “rally” of maybe 20 people (judging by the pictures) who gathered on the bank of the Clear Fork of the Mohican River in Ashland County, OH this past Sunday. The group was there to protest Cabot Oil & Gas drilling a few test wells in the area to see if there’s anything in the region worth drilling for. Out of state radicals calling themselves “pipeline fighters” who had engaged in illegal activities against the Dakota Access Pipeline where there to whip up the locals–maybe convince them to do something illegal too. That’s how this kind of insanity spreads–by human contact. Anywho, the most interesting part of the article for us was not about the machinations of antis and their big boasts of how they’ll stop fracking. Instead, the most interesting part was an explanation of how Cabot came by the acreage they’ve leased in central Ohio, and how much money Cabot is offering landowners to amend existing lease agreements…
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Cabot O&G 2Q18: Income Doubles, Drilled 24 Wells, Ends Permian

One of our favorite Marcellus drillers, Cabot Oil & Gas, issued their second quarter 2018 update on Friday. Some of the highlights include: net income doubling, from $21.5 million to $42.4 million year over year; drilled 24 and completed 23 wells (down just a tad y/y, from 27 drilled and 26 completed in 2Q17); and Marcellus production was 1.89 billion cubic feet per day (Bcf/d), a new all-time high, up 4% from first quarter 2018. Cabot’s CEO Dan Dinges talked about the company ending its dalliance with the Permian Basin, shutting down “exploratory area #1” in 2Q18, but continuing work on “exploratory area #2”–which is in central Ohio. He said more details on Ohio exploration will be forthcoming in the Q3 update. As we looked through the official update, the PowerPoint slide deck and a transcript of the conference call (all below), we found a few more items that caught our interest. (1) Cabot says they have another 35 years worth of drilling to do in the Marcellus, with the current leases they have in place. (2) The “break even” price at which they begin to make money has now gone all the way down to just under one dollar per Mcf. (3) The company’s plans still count on the Constitution Pipeline getting built. (4) Train 1 of the Lackawanna Energy Center (gas-fired electric plant near Scranton) is up and running and burning 70 Mmcf/d of Cabot’s Marcellus gas, train 2 will be online by October 1st, and train 3 by December 1st. Here’s the good news from Cabot…
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OH Antis Attack Loudonville for Selling Water to Cabot for Drilling

Little red dot indicates where Loudonville, OH is located

At the Loudonville Village Council meeting on Monday, a dozen anti-drilling kooks “assailed” Mayor Steve Stricklen and council members over selling water to Cabot Oil & Gas to use in drilling (not fracking) several test wells in the area. Cabot is exploring north central Ohio as a potential spot for “what’s next” after their wildly successful Marcellus drilling program in Susquehanna County, PA. In typical fashion, lies and fearmongering were used in an attempt to shame Loudonville officials over water sales to Cabot. Loudonville sits on the border of Ashland and Homles counties. The village sells water to anyone who wants to buy, for 0.65 cents per gallon (a little over half a cent per gallon). So far Cabot has purchased 650,000 gallons from the village ($4,358). One of the antis said she’s fearful Cabot will dump the used fracking wastewater “contaminated by chemicals” in nearby Charles Mill Lake. It’s an outrageous and scurrilous allegation. We’ve personally seen Cabot’s first-rate wastewater recycling center in Susquehanna County. They recycle 100% of the wastewater coming out of the ground. But antis don’t bother to check on the facts–not when any old lying allegation will do…
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Cabot Files Permit #3 for Knox Formation Test Well in Ashland, OH

As we have reported since late last year, Cabot Oil & Gas, long-known for the incredible amount of Marcellus natural gas they produce from Susquehanna County in northeastern Pennsylvania, is eyeing north central Ohio as a potential spot for “what’s next” after the Marcellus (see Cabot O&G Considers Drilling in Ashland County, OH). Cabot locked up leases with plans to drill a number of test wells in not only Ashland, but also Holmes, Knox, Richland and Wayne counties in the Buckeye State (see New Details Emerge on Cabot’s Shale Plans in Central Ohio). Cabot began to push dirt around on its first wellpad (in Ashland) in April, and last week began to drill a hole on that pad (see Cabot O&G to Begin Drilling in Ashland County, OH This Week). They also began pushing dirt around on a second wellpad site. And now, Cabot has filed for a third permit to drill–in Vermillion Township in Ashland County. Cabot plans to drill into the Knox formation vertically, and if they find anything worthwhile, they will then drill horizontally…
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Cabot O&G to Begin Drilling in Ashland County, OH This Week

Location of Cabot’s 2 initial test wells (in green), tan regions show gas storage fields – click for larger version

As we have reported since late last year, Cabot Oil & Gas, long-known for the incredible amount of Marcellus natural gas they produce out of a single northeastern Pennsylvania county (Susquehanna), is eyeing north central Ohio as a potential spot for “what’s next” after the Marcellus (see Cabot O&G Considers Drilling in Ashland County, OH). Cabot locked up leases and is planning to drill a number of test wells in not only Ashland, but also Holmes, Knox, Richland and Wayne counties in the Buckeye State (see New Details Emerge on Cabot’s Shale Plans in Central Ohio). The company doesn’t know exactly what it will find–gas, NGLs or perhaps even oil–but they’re about to find out. In April Cabot began pushing dirt around to construct its first wellpad in Ashland (see New Cabot Drilling Program Kicks Off This Week in Ashland, OH). Sometime this week, the company will spud (drill) its first hole in the ground. Buckle up! This is an exciting time for landowners in Ashland County. Here’s more on Cabot’s new program in Ohio…
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Who *Sells* the Most NatGas in the U.S.?

Who are the biggest natural gas sellers in the U.S.? You might be surprised to learn that the biggest sellers are not necessarily the biggest producers of natural gas. Oh, you might recognize some of the names of the top sellers (BP, Shell, ConocoPhillips). But others might be more of a mystery (Macquarie, Tenaska, Direct Energy). Would it surprise you to learn that BP (i.e. British Petroleum) is the #1 seller of natgas in the U.S., and has been for years? Last quarter BP sold 22.10 billion cubic feet per day of natural gas here in the colonies. That represents 18% of all natural gas bought and sold. Each quarter NGI (Natural Gas Intelligence) runs the numbers and publishes the list of 25 top natural gas marketers in the U.S. They recently published the first quarter 2018 list, which shows that for a second quarter in a row, overall volumes are up from the same quarter a year ago. Here’s the cool thing: NGI publishes the list absolutely free on their website! As we scan down the list of who sells (i.e. markets) the most natgas in the U.S., we can’t help but notice that many of them have operations in the Marcellus/Utica region…
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Financial Checkup for Marcellus/Utica Drillers

RBN Energy, headed by founder Rusty Braziel (co-founder of Bentek Energy), is, in our opinion, the premier oil and gas analytics firm out there. Smart people working at RBN. And they offer up some amazing content on their blog site–for free! At least it’s free for a while, then it goes behind a paywall. A few days ago RBN published a blog post on the financial health for the 44 major publicly-traded U.S. exploration and production companies (drillers). RBN groups them into three categories: Oil-Weighted, Diversified, and Gas-Weighted. We found the Gas-Weighted list of 10 companies and the information revealed about them to be fascinating and worth studying. Each of the companies has major operations in the Marcellus/Utica–some of them totally focused on our region. Among the data points shared: revenue, production costs, lifting costs and more. We think of the following as a handy financial health scorecard/checkup for 10 of the biggest drillers in the M-U, including Antero Resources, Cabot Oil & Gas, Chesapeake Energy, CNX Resources, EQT, Gulfport Energy, National Fuel Gas (Seneca Resources), Range Resources, Southwestern Energy, and Ultra Petroleum…
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UGI Expanding NEPA Gathering System to Flow More Cabot Gas

UGI, a large utility (and pipeline) company located in Pennsylvania, has announced they will expand a northeastern PA pipeline gathering system. UGI built what they call the Auburn Gathering System between 2011 and 2015–46 miles of pipe, two compressors stations and various other pipeline related facilities located in Susquehanna, Wyoming, and Luzerne counties (near Scranton). UGI spent $215 million to build the system, a system that currently flows 470 million cubic feet per day (MMcf/d) of natural gas. Much (most?) of that the gas comes from Cabot Oil and Gas in Susquehanna County. The new news is that UGI build two new compressor stations, adding to the existing two, which will increase flows through the system by another 150 MMcf/d–all of the increase coming from Cabot. Here’s the good news that more Cabot gas will soon flow through the Auburn System, connecting with two of the biggest pipeline systems in the country–the Tennessee Gas Pipeline (Kinder Morgan) and the Transco Pipeline (Williams)…
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