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, 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…
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 
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…
In 2012 the North Carolina legislature cleared the way for the state to allow horizontal fracking of shale (see 
Events related (or of interest) to the Marcellus and Utica Shale, primarily pro-drilling events.
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!
Yesterday the Pennsylvania Senate voted 26-24 to pass a so-called compromise budget bill that adopts a Marcellus-killing severance tax. What’s most distressing about the situation is the betrayal of Senators like Gene Yaw, of northeastern PA. The bill not only raises taxes on drillers, slapping a severance tax on top of the existing impact fee, it also slaps a 5.7% gross receipt tax (GRT, or “usage tax”) on natural gas used by homes and businesses, meaning PA gas bills will go up starting August 1st (if the bill passes the House). What happens next? The bill has gone to the PA House for consideration. The pressure on the House, and Speaker Mike Turzai, is intense. The Senate has done a big disservice to the House by not getting agreement ahead of time. But we deal with the cards in our hand. What’s going to happen now?…
As part of the horrible severance tax bill the Pennsylvania Senate passed yesterday (see today’s companion story), Republican Senators placed into the bill what they hope is “an olive branch” (more like a withered twig) by including reforms to the regulatory process they say the drilling industry has been asking for. Senators included a provision to have third party contractors (people outside of the Dept. of Environmental Protection) review applications at the DEP, including permits for oil and gas drilling, when the DEP can’t review those applications in a timely manner. There’s also a provision that certain permits, like those granted to drillers for sediment and erosion, will automatically be granted if the DEP drags its feet and doesn’t grant the permit by the current, specified deadline (45 days, with a possible 15 day extension). Those permits are currently taking up to 200 days to be granted. Enough. If the DEP can’t get it done, the permit gets granted automatically or goes to someone on the outside who can get it done. There are other provisions in the severance tax bill as well. Of course these proposed changes have antis in an uproar. You see, “compromise” for antis and Democrats means “you do it all our way, and we give you nothing in return.” That Republicans actually want something in return for voting for a horrible tax bill is beyond belief for antis, who are now squealing like stuck pigs. Here’s what we’ve been able to find out about the proposed changes, the “olive branch” offered by traitorous Republicans, as part of the newly passed severance tax bill…
In June, a group of radical “environmental” organizations filed a lawsuit in the U.S. Court of Appeals for the Fourth Circuit against the West Virginia Dept. of Environmental Protection–for doing their job (see 
My how times change. Just last October EQT indicated that in the not-too-distant future the company would be primarily a Utica Shale driller (see 
Each month MDN tracks how many rigs oilfield services company Patterson-UTI Energy reports operating–as a proxy for when/if the drop in rig counts for the Marcellus/Utica turns around. Patterson operates a number of rigs in the northeast, as well as other areas of the continental United States (and Canada). Patterson’s rig count kept sinking month by month until June 2016 when things finally turned around. Since last June, Patterson has reactived and began running new rigs (a higher rig count) in each successive month. In April, Patterson completed a merger/buyout of Seventy Seven Energy, the new name for the former Chesapeake Oilfield Operating company (see