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Released September 06, 2017 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Cabot Oil & Gas Corporation (NYSE:COG) (Houston, Texas), the dominant natural gas producer in the Marcellus Shale, expects to nearly double gas production there by the end of next year, assuming power plant and pipeline projects under development come online as scheduled, Scott Schroeder, the company's executive vice president and chief financial officer (CFO), told ENERCOM's The Oil & Gas Conference August 14. The conference, held in Denver, Colorado, drew more than 2,000 bankers, analysts, financiers, Oil & Gas producers and a variety of professional services firms.
Most of Cabot's reserves and production are in the Marcellus Shale, though it also maintains a sizable presence in the Eagle Ford Shale. The company recently announced plans to sell non-core assets in West Virginia, Virginia and Ohio for about $41.3 million.
"When assets don't have economic returns, we have no problem peeling them off," Schroeder told the ENERCOM event. "We pursue economic growth, not growth for growth's sake. We look to hit singles and doubles, not home runs. As our industry goes through cycles, (cost) discipline goes away when prices go up and (cost) discipline returns when prices go down. We've been disciplined whether gas is priced at $3.50 per thousand cubic feet (Mcf) or $1.50 per Mcf."
That cost discipline, which has allowed Cabot to continue operating in the Marcellus when prices were low, is starting to pay off now that gas prices are rising. In its second-quarter earnings report, released July 27, Cabot said its realized prices for natural gas across its system rose 46% compared with the comparable year-earlier quarter. That allowed the company to post a $64 million profit, excluding non-recurring items, compared with a loss of $30.2 million for the second quarter of 2016. Cash flow from operating activities rose 206%, to $260.6 million compared with $85.2 million in the second quarter of last year.
The company expects to see full-year production from its Marcellus and Eagle Ford assets this year to increase 8-12% compared to 2016, to between 677 billion cubic feet of gas equivalent (Bcfe) and 702 Bcfe, Schroeder predicted. The company still has more than 3,000 undrilled locations in the Marcellus. Based on Cabot's 2017 production there, the company can continue drilling in the Marcellus for about 50 years, he added.
Click on the image at right for a chart on Cabot's gas production from the Marcellus Shale.
The producer, already the low-cost provider in the Marcellus, is expecting to capture "step changes" in efficiency there, the Cabot CFO continued, which should further lower its costs and fatten its bottom line. Further profit plumping is expected when big power plants in the area and outbound pipeline projects come into service, Schroeder added.
Click on the image to see a chart on Cabot's finding and development costs in the Marcellus Shale.
The year 2018 will be "an inflection point for Cabot," he told the ENERCON attendees. "We have the ability to double our Marcellus production based on future firm transportation and firm sales additions." The company's Marcellus gas reserves have soared in recent years.
Click on the image at right to see Cabot's rising proved gas reserves in the Marcellus Shale.
Two large gas-fired power plants under construction, Moxie Freedom and Lackawanna Energy Center, will be purchasing gas from Cabot. When those plants come online in mid-2018, Cabot's sales will increase by more than 400 million cubic feet of gas per day (MMcf/d), a jump of more than 20%. Next year at this time, when the Atlantic Sunrise pipeline is scheduled to be operating, Cabot's sales will increase by another 1 billion cubic feet per day (Bcf/d). Smaller gains are expected when two other pipeline projects being developed by units of Kinder Morgan Incorporated (NYSE:KMI) (Houston, Texas) and UGI Corporation (NYSE:UGI) (King of Prussia, Pennsylvania) come online in late 2017 and late 2018, respectively, Schroeder predicted.
He said those production estimates exclude any potential increase tied to the proposed Constitution pipeline, which was denied a permit by New York environmental regulators last year. The pipeline's owners are litigating that decision. For more on that project, see May 8, 2017, article - Williams Companies Committed in New York Fight Over Constitution Pipeline. For more on Cabot's equity investments in outbound pipeline capacity from the Marcellus Shale, see January 12, 2017, article - Then & Now: Cabot Oil & Gas Keeps Growing Production, Waits for Pipelines.
If the owners of the Constitution pipeline project, which in addition to Cabot includes units of Williams Partners LP (NYSE:WPZ) (Tulsa, Oklahoma), Piedmont Natural Gas Company (NYSE:PNY) (Charlotte, North Carolina) and WGL Holdings Incorporated (NYSE:WGL) (Washington, D.C.), are able to permit and build that project, it could add another 500 MMcf/d to Cabot's gas sales, Schroeder said. If all the legal and regulatory stars align for that proposed pipeline project, gas sales are not expected to begin until the first half of 2019, he added. The company's estimate of gas sales from the Marcellus Shale is expected to reach about 3.7 Bcf/d by yearend 2018, rising to roughly 4.2 Bcf/d in 2019 if the Constitution pipeline is permitted and built.
Cabot's total planned spending this year is expected to be about $845 million this year. Most of that, about 72%, will be spent on drilling, completions and facilities. Two-thirds of the company's drilling and completion spending, about $409 million, will be directed to the Marcellus, while the Eagle Ford will draw about $201 million in capital investments. The company's planned capital outlays this year also include a $70 million equity investment in the Atlantic Sunrise pipeline.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Most of Cabot's reserves and production are in the Marcellus Shale, though it also maintains a sizable presence in the Eagle Ford Shale. The company recently announced plans to sell non-core assets in West Virginia, Virginia and Ohio for about $41.3 million.
"When assets don't have economic returns, we have no problem peeling them off," Schroeder told the ENERCOM event. "We pursue economic growth, not growth for growth's sake. We look to hit singles and doubles, not home runs. As our industry goes through cycles, (cost) discipline goes away when prices go up and (cost) discipline returns when prices go down. We've been disciplined whether gas is priced at $3.50 per thousand cubic feet (Mcf) or $1.50 per Mcf."
That cost discipline, which has allowed Cabot to continue operating in the Marcellus when prices were low, is starting to pay off now that gas prices are rising. In its second-quarter earnings report, released July 27, Cabot said its realized prices for natural gas across its system rose 46% compared with the comparable year-earlier quarter. That allowed the company to post a $64 million profit, excluding non-recurring items, compared with a loss of $30.2 million for the second quarter of 2016. Cash flow from operating activities rose 206%, to $260.6 million compared with $85.2 million in the second quarter of last year.
The company expects to see full-year production from its Marcellus and Eagle Ford assets this year to increase 8-12% compared to 2016, to between 677 billion cubic feet of gas equivalent (Bcfe) and 702 Bcfe, Schroeder predicted. The company still has more than 3,000 undrilled locations in the Marcellus. Based on Cabot's 2017 production there, the company can continue drilling in the Marcellus for about 50 years, he added.
The producer, already the low-cost provider in the Marcellus, is expecting to capture "step changes" in efficiency there, the Cabot CFO continued, which should further lower its costs and fatten its bottom line. Further profit plumping is expected when big power plants in the area and outbound pipeline projects come into service, Schroeder added.
The year 2018 will be "an inflection point for Cabot," he told the ENERCON attendees. "We have the ability to double our Marcellus production based on future firm transportation and firm sales additions." The company's Marcellus gas reserves have soared in recent years.
Two large gas-fired power plants under construction, Moxie Freedom and Lackawanna Energy Center, will be purchasing gas from Cabot. When those plants come online in mid-2018, Cabot's sales will increase by more than 400 million cubic feet of gas per day (MMcf/d), a jump of more than 20%. Next year at this time, when the Atlantic Sunrise pipeline is scheduled to be operating, Cabot's sales will increase by another 1 billion cubic feet per day (Bcf/d). Smaller gains are expected when two other pipeline projects being developed by units of Kinder Morgan Incorporated (NYSE:KMI) (Houston, Texas) and UGI Corporation (NYSE:UGI) (King of Prussia, Pennsylvania) come online in late 2017 and late 2018, respectively, Schroeder predicted.
He said those production estimates exclude any potential increase tied to the proposed Constitution pipeline, which was denied a permit by New York environmental regulators last year. The pipeline's owners are litigating that decision. For more on that project, see May 8, 2017, article - Williams Companies Committed in New York Fight Over Constitution Pipeline. For more on Cabot's equity investments in outbound pipeline capacity from the Marcellus Shale, see January 12, 2017, article - Then & Now: Cabot Oil & Gas Keeps Growing Production, Waits for Pipelines.
If the owners of the Constitution pipeline project, which in addition to Cabot includes units of Williams Partners LP (NYSE:WPZ) (Tulsa, Oklahoma), Piedmont Natural Gas Company (NYSE:PNY) (Charlotte, North Carolina) and WGL Holdings Incorporated (NYSE:WGL) (Washington, D.C.), are able to permit and build that project, it could add another 500 MMcf/d to Cabot's gas sales, Schroeder said. If all the legal and regulatory stars align for that proposed pipeline project, gas sales are not expected to begin until the first half of 2019, he added. The company's estimate of gas sales from the Marcellus Shale is expected to reach about 3.7 Bcf/d by yearend 2018, rising to roughly 4.2 Bcf/d in 2019 if the Constitution pipeline is permitted and built.
Cabot's total planned spending this year is expected to be about $845 million this year. Most of that, about 72%, will be spent on drilling, completions and facilities. Two-thirds of the company's drilling and completion spending, about $409 million, will be directed to the Marcellus, while the Eagle Ford will draw about $201 million in capital investments. The company's planned capital outlays this year also include a $70 million equity investment in the Atlantic Sunrise pipeline.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
