Cabot O&G announced continued achievement of milestones in the Marcellus, drilling success in the Eagle Ford and agreements in principle for its Haynesville joint venture effort. "We continue to build momentum in our two areas of focus for 2011," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "Additionally, we have streamlined our east Texas operation with arrangements that are accretive to Cabot."
In the Marcellus, the Company ended the quarter producing at a curtailed rate of 320 Mmcf gross per day. This represents a production increase since year-end of 90 Mmcf per day as the benefits of the Lathrop expansion began to show up in production.
Contributing to these totals was the completion of several multi-well pads that were turned in line, albeit at curtailed rates. Cabot's first six-well pad added 51 Mmcf gross per day, although infrastructure limits are restricting its full productive capacity. A two-well pad with 29 completion stages is producing 36 Mmcf gross per day. "The productivity we have seen repeatedly for the last 18 months provides a great deal of confidence in our program," commented Dinges. "Tempering this excitement is the 'blocking and tackling' in the trenches to get the infrastructure in place timely to exploit these results."
In regards to the infrastructure build-out, all seven compressors at Lathrop are installed, and the Company is working on additional dehydration and more piping to reach full functionality. This effort will afford Cabot 450 Mmcf per day of takeaway capacity from this station and together with the Teel station provides a total of 550 Mmcf per day of capacity. "In conjunction with this growing capacity of Lathrop, we have identified and secured markets throughout the summer that will allow us to utilize a portion of this additional capacity," stated Dinges. "However, we will still have excess production capacity until the Springville pipeline to Transco becomes operational, which is scheduled during the third quarter."
To highlight the productivity of Cabot's Marcellus acreage, last week Cabot achieved 100 Bcf of cumulative production in Susquehanna – a feat that took just under three years. At the current production rate, it will take less than one year to achieve the next 100 Bcf of cumulative production.
In other North Region news, the Pennsylvania Department of Environmental Protection (PaDEP) has requested the industry to stop disposing of frac flowback fluids at certain approved sites. "We fully support this action by the PaDEP and the Pennsylvania administration," said Dinges. "Since late 2009, we have been recycling 100 percent of our frac fluid returns. We are committed to performing all our operations using best practices and endorse continuing improvements in those practices to minimize impact on the environment and communities in which we operate."
"Additionally, we converted our drilling operation to utilize a closed loop system by the fourth quarter of 2010. This eliminates the need for open pits at drill sites and significantly enhances our fluid management capabilities," added Dinges.
In the Eagle Ford shale, the Company added three more successful operated completions with 24-hour initial production rates ranging from 345 to 958 barrels of oil per day equivalent. "This range of results highlights the variability as we continue to evaluate completion techniques in the early stages of development in this play," stated Dinges. "Presently we have three more wells drilled, cased and in the queue for completion in our Buckhorn area."
At the Haynesville area, Cabot has signed two deals with industry peers that provide the Company with a carried interest in the initial well for 24 units. In the third deal, Cabot has elected to sell several non-operated units producing 4 Mmcf per day. This deal is signed and under the normal due diligence evaluation. Closing is scheduled for early May with approximately $50 to $55 million in proceeds expected from all these transactions.
"We are pleased with the joint venture outcome as we accomplished our goal of being carried by selling one-third of our acreage and eliminating the need for near term capital allocation in this area," said Dinges.
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