Marcellus Driller Cabot Oil & Gas: Wall Street’s NatGas “Unicorn”
Cabot Oil & Gas has long been one of our favorite Marcellus drillers. We are friends with several members of the Cabot team. We are impressed with their many acts of philanthropy in northeastern Pennsylvania–donating millions of dollars to worthy causes in the local community where they drill. As we’ve pointed out many times, Cabot somehow spins gold out of hay in Susquehanna County–producing something like 2.5% of all the natural gas that’s produced in the U.S. from a single county. They have some of the best rocks in the shale business. Cabot’s assets have not gone unnoticed on Wall Street, where investors and analysts call the company “a unicorn.” While the term unicorn as applied to a company can have several meanings, as applied to Cabot the meaning is clear: the company is rare, and desirable. In an Investor’s Business Daily article, several analysts gush about Cabot in light of the beginning of construction of the Atlantic Sunrise Pipeline project. Cabot will be the main shipper on the new pipeline. Analysts are predicting next year, in 2018, Cabot’s production will increase 23% from this year. And in 2019, one analyst says Cabot production will be up a whopping 47%! You begin to see why Cabot has a reputation as a unicorn on Wall Street…
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Williams representatives were on hand earlier this week in Tunhannock, PA (Wyoming County) to present a briefing to local politicians and community leaders on the status of the now-under construction Atlantic Sunrise Pipeline project. Atlantic Sunrise is a $3 billion, 198-mile natural gas pipeline project running through 10 Pennsylvania counties to connect Marcellus Shale natural gas from northeastern PA with the Williams’ Transco pipeline in southern Lancaster County. Much of the attention has focused on Lancaster County and a small group of antis who oppose the project there. However, Atlantic Sunrise will begin its journey to Lancaster in Susquehanna County, PA–in the northeastern tip of the state. Construction in Susquehanna and adjacent counties is scheduled to begin “very soon,” according to Williams rep Mike Atchie. When it does begin, some of the people working on it will come from the same counties where it’s getting built. Last week the Teamsters held a job fair in Harrisburg (see 
Reliance Industries Limited (RIL) is the single largest company in India, and one of the largest energy companies in the world. RIL invested $3.5 billion in a Marcellus joint venture with Atlas Energy in 2010, and later battled Chevron to buy Atlas–but Chevron won, so RIL became a jv partner with Chevron. RIL currently has 3 U.S. shale joint ventures: the Chevron jv in the Marcellus (owns 40% of that acreage), a jv with Carrizo Oil & Gas in the northeast PA Marcellus (owns 60% of that acreage), and a jv with Pioneer Natural Resources in the Texas Eagle Ford (owns 45% of that acreage). Back in 2015, RIL signaled they are looking to dump all of their U.S. shale assets (see 
Some big news that both Cabot Oil & Gas and the two families suing them seem to want to keep quiet: they’ve settled out of court. Brief background for those new to MDN and to the “Dimock” story: There were 14 families along the Carter Road area of Dimock Township, PA (Susquehanna County) that reportedly experienced turbidity in their water from methane migrating, supposedly from Cabot’s drilling operations nearby. The state Dept. of Environmental Protection (DEP) investigated in 2010 and declared Cabot guilty and imposed stiff fines and requirements, including a requirement to install permanent water treatment systems at each home and even an offer to each of the families to pay twice what their property was worth at the time (see 
Hoping to pressure the Republican legislature to adopt a budget with a new severance tax, Pennsylvania Gov. Tom Wolf (Democrat) visited two towns in northeast PA yesterday that are in the heart of Marcellus Shale country. One of those towns is the bucolic village of Tunkhannock, in Wyoming County. MDN editor Jim Willis visited Tunkhannock a few months ago to attend an Atlantic Sunrise Pipeline rally (see 
Iroquois Gas Transmission is not waiting for the Constitution Pipeline to get built–they’ve found a way around it. At least for some of the supply they hopped to get from the Constitution. Iroquois is a 416-mile interstate natural gas pipeline extending from the U.S.-Canadian border at Waddington, NY, through New York State and western Connecticut to a terminus in Commack, NY (Long Island), and from Huntington (on Long Island) to the Bronx, NY. It is an important pipeline in the Empire State. Iroquois was in line to receive some of the 650 million cubic feet per day (MMcf/d) of natural gas the Constitution would flow from northeast PA to Schoharie County, NY, where the Constitution would connect to both the Iroquois and Tennessee Gas Pipeline. We’re not sure how much of the 650 MMcf/d Iroquois was supposed to get, but right now and for the foreseeable future, they’re getting nothing, thanks to a corrupt governor who has corrupted New York’s environmental agency which has denied the Constitution a necessary permit to build. Iroquois has found a way to replace at least some of that volume–by trucking it in. That is, a “virtual pipeline” which is now feeding the Iroquois, and in-the-ground pipeline. Usually it’s the other way around! Iroquois is getting up to 50 MMcf/d from Xpress Natural Gas (XNG), which is trucking the gas from a facility in northeastern PA (Susquehanna County). Here’s a story you’ll read first (perhaps only) on MDN–of how a virtual pipeline is now feeding an interstate pipeline in New York State with fracked gas from Pennsylvania…
We have to confess, we are not only shocked, but somewhat distressed at news we are reading that Cabot Oil & Gas is considering all options, including a sale of its Marcellus acreage in Susquehanna County, PA. To be fair, and to keep it in balance, it seems that the company would prefer to add to its Marcellus acreage, rather than sell it. However, chief financial officer Scott Schroeder said at a conference in Denver yesterday that all options are on the table, including a Marcellus acreage sale “if the terms are right.” MDN editor Jim Willis lives next door to Susquehanna County (and regularly visits Montrose, PA), and knows landowners in the county signed with Cabot. You have to understand how fundamentally Cabot has changed the county, by investing $1.5 billion into the pockets of landowners over the past 10 years, along with spending another $3.1 billion to do the drilling (see 
In 2014 MDN told you about a rural school district in northeastern Pennsylvania–the Elk Lake School District in Susquehanna County–that had (gasp) drilled two Marcellus Shale wells right on the school campus (see 
It’s about time. Cabot Oil & Gas is tired of being sued, and slandered, by people like Dimock resident Ray Kemble and his ambulance-chasing lawyers. So Cabot has sued back–for $5 million. Kemble lives in Dimock Township, in Susquehanna County, PA. Kemble and other families claimed Cabot’s drilling in the area (nearly 10 years ago) caused problems with their water wells–a claim strongly refuted by Cabot. Cabot settled with most of the landowners, including Kemble.
Just when you thought we’d heard the last of “Dimock” and “fracking poisons water” nonsense, the storyline as pushed by mainstream fake news has come roaring back to life–thanks to the Trump Administration. Dimock, Pennsylvania was made famous in Josh Fox’s faux documentary Gasland, which aired on HBO a bizillion times. It was Fox’s 15 minutes of fame. He lied about fracking, painting it as an evil practice that polluted water wells around Dimock. His lies were later exposed by a real documentary called 
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…
“You never let a serious crisis go to waste.” That sentiment was famously mouthed by Rahm Emaneul, first chief of staff during Barack Hussein Obama’s reign of terror, later (and still) the highly unpopular mayor of Chicago. That philosophy also applies to other leftists, like anti-driller Ray Kemble, who lives in Dimock Township, PA. Kemble has been trying to shake down Cabot Oil & Gas for big bucks for years. Kemble, whose property has multiple junk cars on it, claims after Cabot began drilling (in 2008) his water well began producing black water. He blamed Cabot–even though junkyards are notorious for leaking nasty chemicals. Years ago Kemble, who has been seen at just about every anti-fracking rally from here to Timbuktu carrying a little brown jug of supposedly tainted well water, settled with Cabot. But a couple of Kemble’s neighbors did not settle. They sued and, in a sham trial, won a jury award of $4.2 million (see 
MDN first told you about IMG Midstream in August 2014 (see 
Big news broke Friday afternoon. Short history lesson for those who are new to MDN: There were 14 families along the Carter Road area of Dimock Township, PA (Susquehanna County) that reportedly experienced turbidity in their water from methane migrating, supposedly from Cabot’s drilling operations nearby. The state Dept. of Environmental Protection (DEP) investigated in 2010 and declared Cabot guilty and imposed stiff fines and requirements, including a requirement to install permanent water treatment systems at each home and even an offer to each of the families to pay twice what their property was worth at the time (see 
Cabot Oil & Gas is one of the premier drillers in the Marcellus Shale. They drill in a single Pennsylvania county–Susquehanna County. They consistently have 15 of the top 20 producing shale wells in PA. By our back-of-the-envelope estimation, Cabot, all by itself, drilling in one county, delivers something like 3% of all the natural gas produced in the entire country! It is an amazing story. What’s even more amazing is the big heart the company has. Woven into the Cabot DNA is giving back to the communities where they drill. It would take several posts to recount all of Cabot’s largess. We’ll mention just two cases. In 2012 Cabot donated $2 million and helped raise another $2.2 million (for a total of $4.2 million) to help build a new physicians clinic/hospital in Montrose, PA (see