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Marcellus Lifts Cabot's Natural Gas Output to Record

Cabot Oil & Gas Corp. for the first time in its history has surpassed 1 Bcf/d gross of natural gas production in the Marcellus Shale, which it credited to new wells and additional infrastructure. The gross output milestone resulted in total net output simultaneously breaking a record at 1 Bcf/d.

CEO Dan Dinges said last week the company's collaboration with Williams to build pipeline and midstream infrastructure in the Northeast had made the accomplishment possible.

"Throughout the month of December we have been gaining production momentum and month-to-date our total company average net production rate is 930 MMcfe/d, which is above our exit rate expectation expressed in our third quarter call. Clearly, production will vary day to day due to field logistics, but our new baseline for production has moved significantly higher and we will work to build on this throughout 2013."

In the third quarter Cabot reported that its gas output had jumped by 31% year/year to 66 Bcfe, which included 62.7 Bcf of gas and 629,00 bbl of liquids. At that time Dinges credited Williams with helping to eliminate midstream logjams.

A recent turned-in-line two-well pad "illustrates the production potential of the company's Marcellus assets," Dinges said in pointing to the strength of the Marcellus. The pad has wells with lateral lengths of about 6,900 feet and 4,400 feet, along with a combined initial production rate of more than 66 MMcf/d. Additional compression and dehydration facilities allowed Cabot to expand takeaway capacity.

The Houston producer currently is delivering around 55% of its output to Williams' Transcontinental Gas Pipe Line, or Transco, with 40% to Tennessee Gas Pipeline and 5% to Millennium Pipeline. Williams and Cabot are frequent partners in the Marcellus; Cabot last April agreed to ship 500,000 Dth/d on the jointly owned Constitution Pipeline, while Southwestern Energy Services Co. is shipping 150,000 Dth/d.

Cabot also has come to terms to sell four South Texas fields for about $29 million to an undisclosed third party. The sale includes legacy conventional properties with about 18 Bcfe of booked reserves and current production of 2.2 MMcfe/d. Proceeds from the sale, which is scheduled to close this week, is to result in a book loss of close to $12 million after taxes.

Analysts with Tudor, Pickering, Holt & Co. said Cabot was "doing what it does best, putting up big growth out of the Marcellus." The record-breaking production numbers were "ahead of expectations," but they expected the company to surpass the numbers "early 2013." It's "hard to stand in the way of rapidly expanding Marcellus production. On a separate note, gas markets winced on continued cheap supply coming to market."

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