Cabot Extends Success in East Texas Program
Cabot Oil & Gas has completed transactions with two major oil companies in its east Texas operating area that provide opportunities on an incremental 44,000 gross acres. "High-quality acreage is the lifeblood of our organic program," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "Because of our successes in the region, we were able to partner with these two organizations in an effort to enhance value to all the domestic programs."
In the first transaction, the Company added 8,325 gross acres to its position at County Line with rights down to and including the James and Pettet formations. This increases Cabot's County Line holdings to 26,000 gross acres at an average working interest of 92 percent.
"Initially, we expect about 50-70 horizontal James opportunities on this additional acreage alone," stated Dinges. "Combine this with our existing acreage, and the James location inventory is increased to 170-220 James locations. A similar inventory of Pettet locations has also been identified, which will be exploited as our infrastructure expands."
At County Line, the first two horizontal James wells had a combined initial production rate in excess of 17 Mmcf per day. The Company is continuing its efforts to expand take away capacity for the field. Current field operations include the completion of the third James horizontal well with two rigs drilling James horizontal wells. "Based on our quality acreage position, our recent successes and the initial production rate we are seeing from these wells, the stage is set for County Line to be an impactful area of operation for Cabot for the foreseeable future," commented Dinges.
In another recent east Texas transaction, Cabot secured drilling rights on 28,000 acres in the Trawick Field, Nacogdoches County, Texas. These rights augment an earlier 8,000-acre acquisition in the field area. This project will entail the continued development of the five primary producing horizons in the field from the James limestone to the Haynesville formation, with a focus on the sparsely drilled deeper objectives. "We plan an aggressive program of in-fill drilling, horizontal exploitation and deeper pool wildcatting to evaluate this acreage. Our analysis suggests that the position has the potential to support multiple-year drilling programs with several hundred potential drill sites on an unrisked basis," added Dinges.
Reserve potential could be substantial and may represent a significant addition to Cabot's total reserve picture. At a minimum, Cabot will maintain a 50 percent working interest and operate the drilling and completion phase of the program. "This deal was two years in the making and will be an important part of our expanding east Texas efforts," commented Dinges. "We are already drilling on the acreage, and the activity here combined with the County Line effort will account for a significant portion of our 2008 Gulf Coast Region drilling program."
Cabot is pleased to announce that it has reached a preliminary settlement related to its class action lawsuit with royalty owners in the east. The settlement fell within Cabot's existing financial reserves and therefore will not impact third quarter numbers.
Also, Cabot has completed its annual impairment analysis of its long-lived assets resulting in approximately a $2.9 million after-tax impairment of proved properties related to the Castor Field in north Louisiana. This will be a third quarter event.
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