Cabot O&G 2016 – Production Grows from 3.8 to 4.4 Bcf per 1K Feet
Cabot Oil & Gas, one of our favorite Marcellus drillers, turned in their fourth quarter and full year 2016 update on Friday. In something of a surprise (for us), the company reports losing $417 million in 2016, up from losing $114 million in 2015. However, when you dig into the numbers, you find that it’s a paper loss. Cabot reports “impairments” (i.e. loss of value) in their assets of $435 million for the year. Some $275 million of that was a write-down in the value of oil and gas properties, including pipelines, in West Virginia and Virginia. Cabot drilled 40 gross (38.0 net) wells and completed 76 gross (76.0 net) wells in 2016, exiting the year with 51 gross (45.2 net) drilled and uncompleted wells, of which 29 gross (26.2 net) were in the Marcellus Shale and 22 gross (19.0 net) were in the Eagle Ford Shale. What’s ahead in 2017? Cabot plans to spend more money this year than they did last year–to drill in both the Marcellus and Eagle Ford. Cabot plans to spend $610 million on drilling, completion, and facility capital in 2017. Of that, two-thirds (67%) will go to the Marcellus and one-third (33%) will go to the Eagle Ford. With that money they plan to drill and complete 90 net wells. On the earnings call with Cabot’s top brass, we learn about their “Gen 4” completions in the Marcellus, which have increased estimated ultimate recovery (EUR) rates from 3.8 billion cubic feet (Bcf) per 1,000 feet of lateral well to 4.4 Bcf. Translation: Cabot gets double the gas per lateral foot of well than some of its competitors, which is why they consistently have something like 15 of the top 20 producing wells in the state. Here’s the Cabot update…
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In September, MDN brought you research on 10 of the largest Marcellus/Utica drillers that have “hedged” their 2017 production (see 
We can’t say enough good things about Rusty Braziel and 
We spotted a press release issued yesterday by Cabot Oil & Gas, providing an update for the Williams Atlantic Sunrise Pipeline project. Which kind of surprised us. Why would Cabot issue an update on someone else’s pipeline? Is Cabot an investor in the project? We asked–the answer is “no.” However, Cabot is the major shipper that will use the Central Penn Line portion of the Atlantic Sunrise project. And that’s what the announcement was about. Cabot said the Federal Energy Regulatory Commission (FERC) has announced it is actively reviewing two alternative routes for the Central Penn Line, accepting public comment until Nov. 14. OK, so that sometimes happens. Is it worth a press release? Then we read that this development means yet another delay for the Atlantic Sunrise project–and investors immediately punished the stock for both Williams and Cabot. Ah, now we understand! The press release is to reassure investors that Cabot believes FERC, while slowing things down a little, won’t delay things too long. THAT’S what the press release is really all about…
Last week Cabot Oil & Gas CEO Dan Dinges issued a company-wide memo to observe a very important milestone in the life of the company–the 10th anniversary of the start of drilling at the company’s very first Marcellus Shale well in Susquehanna County, PA. With a quick stroll down memory lane to recount other major milestones reached over the past 18 months, Dinges then makes this powerhouse prediction: In the “next couple of years” when new pipelines (like the Constitution) finally go online, Cabot plans to hit 4 billion cubic feet (Bcf) of Marcellus Shale production–per day! Going from memory, that would vault Cabot to the position of #1 Marcellus gas producer, ahead of the current #1, Chesapeake Energy. Put into context, the U.S. produces around 71-72 Bcf/d right now. If Cabot begins producing 4 Bcf/d, that represents 5.5% of the entire production of natural gas in our country–from a single driller in a single county in northeastern PA. Behold the miracle of the Marcellus! MDN adds our own hearty congratulations to our friends at Cabot (Buddy, George, Bill and Brittany)…
One of the interesting tidbits to come out of yesterday’s first day of the Shale Insight conference in Pittsburgh was an off-the-cuff remark from Pennsylvania Gov. Tom Wolf’s special assistant for infrastructure, Yesenia Bane, who said that Gov. Wolf is “willing to talk” with New York Gov. Andrew Cuomo to ask him to approve the Williams Constitution Pipeline project in the Empire State. Bane said Wolf has met with Williams and other stakeholders in the Constitution project, and apparently Wolf was impressed enough that he’s willing to add his own voice to those calling for an approval of the Constitution. Democrat on Democrat. Mano a mano. Should be interesting, if Wolf ever gets up the nerve to do it…
It’s no secret that Marcellus and Utica drillers need new pipelines–and they need those pipelines urgently. Especially in Pennsylvania where lack of pipelines is keeping inventories high and prices for natural gas the lowest in the country. However, drillers must deal with reality as it is–today. Pipelines take time to build, and recent efforts to block pipelines are delaying important projects like the Constitution and PennEast pipeline projects. The good news is that some pipeline projects *are* being built in the northeast, some of which are almost done. Drillers like Range Resources are ramping up new drilling now, about six months in advance of when new pipelines are due to go online. That’s about how long it takes to put the pieces in motion. The other good news is that some drillers, like Cabot, are finding new markets that DON’T require new pipelines–like selling a tremendous volume of natgas to new gas-fired electric generating plants situated in close proximity to Cabot’s wells. Here’s an update on which drillers are picking up the pace with the prospect of new pipelines (or new nearby markets), and which drillers are waiting a little longer before they pick up the pace…
There’s certainly more than one way to make money on fracking in the Marcellus/Utica. Billionaire hedge fund manager David Tepper (Appaloosa Management) has found such a way. Tepper knows a good company, or four, when he sees them. In the fourth quarter of 2015, when Marcellus/Utica company stocks were at one of their lowest points, Tepper loaded up, buying stock in four leading northeast drillers. Half a year later he turned around and sold that stock, for a 100%+ return on his investment. He doubled his money. Smart man. Which drillers’ stocks did Tepper buy and then sell?…
As you have no doubt noticed, we are in the midst of quarterly reports season. Public companies (those with stocks) must file quarterly financial reports with the Securities and Exchange Commission. Along with those filings comes a version of the same news constructed for consumption by investors and the general public. The overall “feel” of reports coming from most Marcellus/Utica drillers has been upbeat. The obvious trend is that the big drillers–EQT, Cabot, Southwestern, others–plan to drill more wells in 2Q16 than originally forecast. However, given the recent severe downturn, most drillers are sounding notes of caution as a balance to the good news that more drilling is on the way. Perhaps “cautiously optimistic” is the best way to put it…
