Cabot Oil & Gas Corporation announced success in its initial Pearsall effort, continued Marcellus momentum and a breakthrough in long-awaited gathering permits.
"This year has seen many new ideas and ongoing efforts come to fruition, including a joint venture with an international company and innovations with well and frac spacing in key plays, that have translated into continued industry-leading production growth," said Dan O. Dinges, Chairman, President and Chief Executive Officer.
Pearsall / Marmaton / Eagle Ford
Cabot's initial short lateral well in the Pearsall was successfully completed in 11 stages and had an initial production rate of more than 1,400 barrels of oil equivalent (boe) per day. In 20 days of production, the well averaged more than 900 boe per day, roughly 50 percent oil. Currently, Cabot is completing a second well and drilling three additional wells. "We are excited about this initial exploration success and pleasantly surprised with the product mix," stated Dinges. "We are cautiously optimistic and expect more completions to further delineate this discovery."
In other regional activity, the first extended lateral Marmaton well was drilled with a lateral length of approximately 9,500 feet and completed with 30 frac stages. This well has just started flowing back. Cabot's second Marmaton extended lateral well is drilled and scheduled for completion by the end of October. "Additionally, we continue to see impressive results in our Eagle Ford area," commented Dinges. "We have completed another well with an initial production rate just under 1,000 boe per day, with a 95 percent oil mix." The Company plans to complete 16 net wells in the fourth quarter between the Pearsall, Marmaton and Eagle Ford, roughly half of these will be completed in December.
The Company continues to find ways to exploit this already prolific resource base. "We recently began producing two new wells in the Zick area, bringing the total well count in this area to seven," said Dinges. "These two wells combined had a peak production rate of more than 43 million cubic feet (MMcf) of natural gas per day and a 20-day production rate of over 32 MMcf per day from a total of 25 narrower spaced frac stages - slightly less than 200 feet apart per stage." Cabot implemented this pilot program this summer to explore the merits of reduced spacing between frac stages. The Company currently has a sample group of wells that have used the tighter frac spacing, which has enhanced efficiencies with higher initial production rates, increased 30-day rates and generated higher expected estimated ultimate recoveries (EURs) per foot of lateral.
Related to infrastructure, the Company has been notified by Williams that it has received 90 percent of the 2012 gathering line permits. With this news, there are currently numerous construction crews in the field, which should allow for approximately 30 wells to begin producing during the fourth quarter, roughly half of these will occur in December.
The Company has revised its 2013 Marcellus program to reflect tighter frac spacing. This was the main catalyst for the increase in the low end of production guidance and for the slight increase in program spending to cover this initiative. Guidance detail can be found on the Company's website under the Investor Relations tab. "Even with this change, we will still be cash flow positive at our budget prices of $3.50 and $90.00 for 2013," affirmed Dinges. "For 2012 we have narrowed production guidance (moving the lower-end higher and the top-end lower) due to delayed receipt of the gathering permits and the current schedule to begin producing our wells. Also, we have reaffirmed that there were no changes to our 2012 capital plans."
"We continued to move forward on all fronts with new drilling initiatives showing enhanced results, be it new plays or new techniques," said Dinges. "Our ability to provide significant production growth with free cash flow in the near-term is a differentiating factor for Cabot."
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