Cabot Oil & Gas Keeps Production Going in Marcellus, Eagle Ford Amid Weak Prices, Sets 2015 Capex at $900 Million

Researched by Industrial Info Resources (Sugar Land, Texas)--Cabot Oil & Gas Corporation (NYSE:COG) (Houston, Texas), a leading producer of natural gas, saw its profits tumble in the first quarter of 2015 as the effects of low oil and gas prices offset the company's solid production gains, including significantly higher volumes in the Marcellus and Eagle Ford shales. Net income for the quarter was reported to be $40.26 million, compared with $107.03 million in first-quarter 2014.

Industrial Info is tracking more than $400 million in active projects involving Cabot, including the company's $200 million Susquehanna County Leases Drilling Program for 2015 in Pennsylvania. Cabot plans to drill 75 to 100 new natural gas wells to an average vertical depth of 7,000 feet, with a total well production capacity of 1.2 billion cubic feet per day. Successful wells will be connected to production gathering system. Patterson UTI is serving as drilling contractor. The program is expected to finish in November.

Total operating revenues stood at $464.77 million, an 8.83% decrease from the same period last year. The decline was attributed largely to lower realized natural gas prices, which fell 34%. Nonetheless, production remained strong at a total of 171.4 billion cubic feet equivalent, a 43% increase. Crude oil, condensate and natural gas liquids production hit 1.6 million barrels, a 132% increase.

Net production in the Marcellus Shale averaged 1.73 billion cubic feet per day in the first quarter, a 43% increase from first-quarter 2014. Gains were attributed to increased seasonal demand and favorable natural gas sales contracts for the winter heating season. Cabot also saw a 15% to 20% decrease in drilling and completion expenses, and its three operating rigs in the Marcellus are expected to continue operating for the remainder of the year.

Net production in the Eagle Ford Shale averaged 17,831 barrels of oil equivalent per day in the first quarter, a 145% increase from the same period last year, including 17,017 barrels of liquids per day, a 149% increase. Cabot placed 20 wells in production during the quarter; six of these wells, plus four others put into production during fourth-quarter 2014, were located on land acquired last year and outperformed the previous operator's production by more than 50% on average. Cabot's Eagle Ford program also saw a 20% to 30% decrease in drilling and completion costs.

Capital expenditures were reported to total $395.24 million during first-quarter 2015, compared with $338.7 million in first-quarter 2014. Cabot's operating expense declined in every major category except transportation and gathering, which increased largely due to the heavier activity in the Marcellus Shale.

"During the first quarter, the state of Pennsylvania began reporting monthly production data, and did report for both January and February [that] Cabot was the top producer in Pennsylvania, which is not bad for a company that has never operated more than six rigs in the state," said Dan Dinges, the chairman, president and chief executive officer of Cabot, in a conference call.

Capital expenditures for full-year 2015 are expected to be about $900 million, about 65% of which will be incurred in the first half of the year amid an increase in completion activity. Net production growth for the full year is expected to be between 10% and 18%, with the second quarter expected to yield between 1.36 billion and 1.43 billion cubic feet per day of natural gas, and 17.5 billion and 1825 billion barrels per day of liquids. The company plans to reduce its output in the Marcellus to between 1.55 billion and 1.6 billion cubic feet per day in the second quarter, largely due to the Appalachian market, and to shutter one of its two operational rigs in the Eagle Ford Shale.

"We have reduced our production volumes for the second quarter relative to the first quarter, in response to our expectation of continued weakness in pricing during the second quarter, some of which is being driven by numerous maintenance and construction projects directly related to our downstream market," Dinges said in the conference call. "Virtually all of the pipelines our production reaches have planned or scheduled projects during the second quarter. Most notably is the new looping of the Transco-Leidy Line, in conjunction with the Leidy Southeast expansion project."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.