Cabot Oil & Gas Corp. said low commodity prices for oil and natural gas are forcing it to trim more than $600 million from its capital expenditures (capex) budget for 2015, and it plans to cut four rigs deployed in the Marcellus and Eagle Ford shales by the second quarter.

Houston-based Cabot reported record production of 531.8 Bcfe in 2014, a 29% increase over 2013 (413.6 Bcfe) and a 32% pro forma increase from the sale of the Midcontinent and West Texas assets it sold to Chaparral Energy Inc. in 2013 (see Shale Daily, Oct. 18, 2013). The company also reported record liquids production in 2014, 4 million bbl, which was 23% above 2013 (3.2 million bbl) and a 55% increase pro forma to the aforementioned asset sale.

According to Cabot, net production in the Marcellus totaled 1.5 Bcf/d during 4Q2014, a 27% increase from 4Q2013 and 15% higher than 3Q2014. In the Eagle Ford, 4Q2014 net production totaled 14,829 boe/d, a 100% increase from 4Q2013. The total included 14,245 b/d of liquids, a 95% increase over the preceding fourth quarter.

Although Cabot is currently running five rigs in the Marcellus and three in the Eagle Ford, the company said it plans to reduce the number of rigs deployed there to three and one, respectively, by the end of 2Q2015. The move was being made in response to low commodity prices for oil and gas.

“Given the low capital intensity of our operations in the Marcellus Shale, we can remain flexible to accelerate our pace of operations if market conditions and new takeaway capacity warrant,” CEO Dan Dinges said Friday. He added that in the Eagle Ford, “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.”

Low oil and gas prices also compelled Cabot to reduce its capex budget to $900 million for 2015, based on budgeted price realizations, including the impact of hedges, of $2.45/Mcf and $55/bbl for natural gas and crude oil, respectively. The new budget is a significant cut from last October, when Cabot announced it would spend $1.53 billion to $1.6 billion (see Shale Daily, Oct. 24, 2014). By comparison, the company’s capex budget for 2014 ranged from $1.3 billion to $1.4 billion.

Cabot said about 80% of its capex budget for 2015 would be spent on drilling and completions, with 60% allocated to the Marcellus and 40% to the Eagle Ford Shale. Due to the capex reduction, the company said it has adjusted its production growth guidance range to 10-18%, down from 20-30% from last October. Cabot said it also hopes to increase liquids production by 50-60%.

“While Cabot is well positioned to navigate through this commodity cycle due to our high-quality asset base and our strong financial position, we are not immune to the current market conditions and have adjusted our 2015 program accordingly to focus on managing the balance sheet, preserving capital and maximizing returns,” 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.

“We are currently modeling another year of growth in 2016; however, the level of growth will ultimately depend on how 2015 progresses.”

Cabot said it drilled 75 gross (68 net) wells during 4Q2014, compared to 47 gross (43 net) in 4Q2013. For the full-year 2014, the company drilled 200 gross (177 net) wells, compared to 181 gross (154 net) in 2013.

Net income for 2014 totaled $104.5 million (25 cents/share), compared to $279.8 million (67 cents/share) for 2013. For the fourth quarter of 2014, Cabot reported a net loss of $221.8 million (loss of 54 cents/share), compared to net income of $77.9 million (gain of 19 cents/share) in 4Q2013.

Cabot said a non-cash, after-tax charge of $486.7 million impacted net income for 2014. The charge was associated with the impairment of oil and gas properties in certain non-core fields, primarily in East Texas, “due to a significant decline in commodity prices in late 2014 and management’s decision not to pursue further activity in these non-core areas in the current price environment,” Cabot said.

Excluding the impairment, net income for 2014 totaled $404.6 million (97 cents/share), compared to $298.1 million (71 cents/share) in 2013. Net income for 4Q2014 without the impairment totaled $95.3 million (23 cents/share), compared to $74.4 million (18 cents/share) in 4Q2013.

Cabot said its total proved reserves increased 35.7%, from 5.5 Tcfe at the end of 2013 to 7.4 Tcfe at the end of 2014. Natural gas accounted for 96% of proved reserves in 2014, down from 97% in 2013, while 61% (4.5 Tcfe) were classified as proved developed reserves, up from 59% in 2013. About 89% of the company’s reserves were in the Marcellus. The PV-10 value of Cabot’s proved reserves increased 37.6%, from $6.3 billion in 2013 to $8.6 billion in 2014.