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Eagle Ford, Marcellus-Focused E&P Cuts Capex, Lowers Production Guidance

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Houston-based independent E&P Cabot Oil and Gas said Friday that it expects to allocate 80% of its reduced 2015 budget on drilling and completion activities in its Marcellus and Eagle Ford core areas. The company forecasts increased drilling and completion activity this year, even with relatively flat capital spending amid the lower price environment. Cabot says this is attributable to the measures it has taken to emphasize capital efficiency.

Reduced Capex, Production Guidance

Based on budgeted price realizations of $2.45 per Mcf for natural gas and $55.00 per Bbl for crude oil, Cabot O&G is lowering its 2015 capex by 40%- to $900 million from the $1.53 to $1.6 billion outlook it projected last October.

The company also lowered its expected production growth to 10% to 18% from its previous guidance of 20% to 30% growth. “However, we will remain flexible and may call an audible, if necessary, if our outlook changes throughout the year,” the company said in its 4Q14 investor presentation.

About 80% of the budget will be used for drilling and completion operations, with 60% to be allocated in the Marcellus Shale and 40% earmarked to the Eagle Ford Shale, Cabot said. “The updated production guidance range assumes a modest level of operational and price-related curtailments in the Marcellus at certain points during the year,” the earnings statement said.

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Source: Investor Presentation

Cabot CEO Dan O. Dinges said, “With this revised plan we expect to deliver double-digit growth, maintain our operating efficiencies and meet our near-term drilling obligations, all while preserving the flexibility to call audibles throughout the year as we see fit.” He added, “We are currently modeling another year of growth in 2016; however, the level of growth will ultimately depend on how 2015 progresses.”

Marcellus Plans: Placing 65-70 Wells In Production In 2015

Cabot is currently operating 5 rigs in the Marcellus Shale and plans to decrease to 3 rigs by the end of 2Q15. The company plans to drill approximately 70 wells in the Marcellus Shale and place 65-70 wells on production this year, while exiting 2015 with approximately 45 wells either waiting on pipeline or waiting on completion.

The average drilling and completion cost for Cabot’s 2015 program is expected to range between $6 million and $6.5 million per well for an average lateral length of 5,300 feet. This “reflects the impact of recent operating efficiency gains and recently negotiated reductions in service costs,” the company said.

Eagle Ford: “Remaining Flexible”

Cabot is now operating three rigs in South Texas’ Eagle Ford Shale and plans to decrease to one rig by the end of 2Q15. The Company plans to drill approximately 45 wells in the Eagle Ford Shale and place 40-45 wells on production this year, while exiting 2015 with approximately 20 wells waiting on completion.

Further, the average drilling and completion cost for Cabot’s 2015 program is expected to range between $6.0 million and $6.5 million per well for an average lateral length of 7,700 feet and, as is the case in the Marcellus, “reflects the impact of recent operating efficiency gains and recently negotiated reductions in service costs.”

“Similar to our updated operating program in the Marcellus, while we are decreasing our planned level of activity in the Eagle Ford in response to lower commodity prices, we will remain flexible throughout the year and will consider increasing our level of activity if we see a sustained recovery in oil prices sooner than we are currently forecasting,” Dinges said.

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Cabot CEO Dan O. Dinges; Source: scrantonchamber.com

4Q14 Results

Cabot reported a loss of $221.8 million, or 54 cents a share, in 4Q14, from a profit of $77.9 million, or 19 cents a share, a year earlier. These results were inclusive of a $771 million write-down of some of the company’s oil and gas properties, principally in East Texas. Cabot said it has decided not to engage in further activity in those areas in light of the current oil price environment.

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