Cabot Oil & Gas Corp. on Sunday announced that for the first time in its history total proved reserves exceeded 2 Tcfe (2.06 Tcfe) on the strength of 450 percent drill bit production replacement.
"There is a wide range of outcomes that we have seen from our peers relating to the new SEC rules established for reserve disclosures," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "The one obvious point for Cabot is with the resource potential in our portfolio, our future ability to book significant reserves is robust."
In 2009 Cabot added 463 Bcfe through its drilling operations and produced a record 103 Bcfe. Due to the new SEC rules, revisions to the overall reserve portfolio were more complex for 2009 and fall into three categories - price, performance and rule changes. Below highlights the impact of each of these:
Revisions (Bcfe): Performance 21.9 Pricing (new SEC rules) (101.6) Re-categorized PUDs (under new SEC rules) (120.4) ------ (200.1) ======
"Under the new SEC rules, which include average annual pricing, five year time frame for PUD development, and expansion of the PUD definitions, Cabot grew reserves six percent. However, staying consistent with the previous methodology, year-over-year Cabot's year-end reserves for 2009 would be approximately 2.27 Tcfe, or up about 17 percent," stated Dinges. "Additionally, by removing our sold Canadian reserves from the baseline comparison these two growth figures are eight percent and 19 percent, respectively."
Dinges added, "While we have seen varying degrees of reserve bookings, we have positioned ourselves with a proved portfolio that can easily be drilled within the five-year regulatory environment. Our PUD percentage moved up five percent to 36 percent and based on early results, will more than likely fall in the top quartile of our peer group for the lowest percent attributable to PUDs."
In a year when Cabot once again invested heavily in acreage (23 percent of the overall investment program), finding costs remained very competitive. "As a frame of reference our drill bit only finding cost for the Company was $0.83 per Mcfe and only $0.51 per Mcfe for the drill bit in the Marcellus alone," commented Dinges. For additions only (which include all the invested capital in 2009 over reserve adds), the Company reported finding costs of $1.28 per Mcfe and for all-in (additions, revisions and purchases), $2.26 per Mcfe. "Again to highlight the sensitivity of the new SEC rules, this all-in figure is $1.26 per Mcfe under the previous standard," stated Dinges.
"Clearly, Cabot has a significant resource base and under the new SEC rules more of these low-risk locations could be potentially booked as PUDs," said Dinges. "We chose to be prudent in this effort and as a result, we have a high degree of confidence we can drill this inventory in the five-year designated time frame. The future development cost for this effort is $1.1 billion, which approximates two years of current cash flow."
Cabot Oil & Gas Corp., headquartered in Houston, Texas is a leading independent natural gas producer, with its entire resource base located in the continental United States.
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