Tags: Cabot | Marcellus | Shale | COG

Cabot Reaps Rewards of Marcellus Shale

By    |   Tuesday, 15 Nov 2011 03:53 PM

The Marcellus Shale, which extends throughout much of the Appalachian Basin, now ranks as one of the most promising spots in the country for natural gas extraction. Cabot Oil & Gas (COG), an oil and natural gas producer that has long operated in Appalachia, has a major stake in the shale and is poised to reap the rewards.

Cabot is one of the biggest players there, with 200,000 net acres and close to 100 percent working interest, according to Morningstar. That offers the company plenty of drilling sites to boost production in coming years. Natural gas from the Marcellus formation should provide plentiful profits for Cabot, given strong flow rates from the wells and the convenient location of gas customers in the Northeast.

Marcellus can garner 100 percent returns with gas prices at $5 per thousand cubic feet and 60 percent at $3, according to Morningstar.

Production rates more than doubled at Cabot’s Marcellus wells over the past three years, as it lengthened them and added fracturing stages. The growth is likely to continue.

Oil progress

Cabot, which has more than 90 percent of its reserves and production in gas, also is making progress on the oil side. It has put together 60,000 acres in the profitable oil portion of the Eagle Ford Shale in Texas.

The company’s profit soared sevenfold in the third quarter to $28.5 million from $3.9 million a year earlier. Revenue gained 17 percent to $ 262.1 million.

Standard & Poor’s analyst Michael Kay has a neutral rating on Cabot shares. “COG's core operating areas are performing well, with horizontal drilling programs at Marcellus, Haynesville, and Eagle Ford shales moving ahead nicely,” he writes.

“Recent Marcellus wells have outperformed flow rate expectations. COG believes an infrastructure build-out will resolve any takeaway capacity issues it has had at the play, but it has a large backlog of completions. COG plans to close on three separate Haynesville joint ventures in 2011.”

The company next reports around Jan. 26.

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The Marcellus Shale, which extends throughout much of the Appalachian Basin, now ranks as one of the most promising spots in the country for natural gas extraction. Cabot Oil Gas (COG), an oil and natural gas producer that has long operated in Appalachia, has a major...
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2011-53-15
Tuesday, 15 Nov 2011 03:53 PM
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