Cabot Oil & Gas Corporation provided a recap of recent achievements for the Marcellus, Eagle Ford and Marmaton. At the same time, the Company discussed changing market dynamics and the impact on near-term plans for Cabot.
Cabot's Marcellus effort created a further step change as the Company exited 2011 with field production at 600 Mmcf per day, up from 236 Mmcf per day at the end of 2010 and up nine-fold since the end of 2009. This performance was driven by superior drilling results, including a dozen wells with initial production rates of more than 20 Mmcf per day, and a year where many of Cabot's wells stood out as the top performing wells in Pennsylvania's regulatory filings. For the year, Cabot completed 66 Marcellus wells with a total of 904 frac stages.
Specifically, in data just released by the Pennsylvania Department of Environmental Protection (PaDEP) on cumulative production for the last six months of 2011, Cabot had eight of the top 10 performing wells. In addition, for two of the identified wells, Cabot booked initial estimated ultimate recoverys (EURs) in excess of 20 Bcf each. These two wells, on one pad, have been on production for about 275 days and have cumulative production of 4.5 Bcf each. The Company does have one other well that has exceeded 5.0 Bcf of production since being placed on-line in the summer of 2010. "Also of note, is the result from our first pad drilling effort, which to date has produced 12.5 Bcf in less than 500 days and is still producing about 16 Mmcf per day from three wells," said Dan O. Dinges, Chairman, President and Chief Executive Officer.
Cabot's Eagle Ford activity drove the 68 percent increase in the Company's oil and liquids production between full years 2011 and 2010. This growth came from 29 net wells primarily located in the Company's Buckhorn area in South Texas. Of ten recent well successes, the 24-hour peak production rate for half of the wells has exceeded 1,000 barrels of oil per day, with a 30-day average increasing to around 575 barrels of oil per day. "We have continued our science efforts here to improve realizations in the play with a degree of success including increased EURs, higher reserves per foot completed and increases to initial maximum output rates," commented Dinges. "From these results we expect our oil resource potential to rise again in 2012 as we continue to enhance the play further by exploiting our ability to down-space locations in the field."
The Company's Marmaton operations are currently continuing with a one rig program that was commenced late last year. To date, three wells have been completed with results producing an average 24-hour initial production rate of 430 barrels of oil equivalent, with a current completed well cost of $3.5 million. Cabot is currently completing two more wells and drilling one well.
"We continue to have success in the basin where we have drilled wells in areas with more extensive fracturing," stated Dinges. "As we integrate the recent well data from operated and non-operated drilling, our efforts will be to permit additional locations in the areas where fracturing exists. Until this work is completed we will move the rig from the Marmaton to the Eagle Ford to initiate the down-spacing drilling program."
"We have made it no secret that due to our conservative nature, fiscal discipline and the soft gas price market, we would be exploring the best path forward for Cabot and its level of investment for 2012," commented Dinges. "Even though the Marcellus delivers returns competitive with a vast majority of oil plays, we believe it is appropriate to reduce our total capital program by approximately $100 million for 2012, with the cuts coming entirely from our natural gas program in order to reduce investments and to fund a slight increase in oil related activity."
This will produce a plan for the year that will be within five to ten percent of anticipated cash flow on a $3.00 price deck from the new growth expectations.
"Overall, we expect oil and liquids growth of 55 to 65 percent under this new capital allocation," added Dinges. "We were successful managing our capital in 2011 and it is our plan to manage prudently in 2012. We will continue to recognize opportunities that the market presents. Regardless, our 35 to 50 percent growth expectation remains in the top tier for this market."
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