Cabot Oil & Gas Corp. said Tuesday its third quarter production is likely to come in below guidance after the Atlantic Sunrise pipeline project came online later than expected and some sales were delayed by changes to the company’s turn-in-line schedule.
Cabot had guided for third quarter production of 2.1-2.2 Bcfe/d, anticipating that Transcontinental Gas Pipe Line Co. LLC’s Atlantic Sunrise expansion would enter service by the end of August. But the project didn’t come online until Oct. 6. Cabot now expects third quarter production to come in at 2.029 Bcfe/d, which would still be a 7% increase over 2Q2018 and a 19% increase from the year-ago period on a divestiture-adjusted basis.
The company said its current gross operated production volumes are 2.6 Bcf/d, or 19% higher than average daily gross volumes during the second quarter. The company is guiding for 2.225-2.275 Bcfe/d of production in the fourth quarter.
Even still, the Atlantic Sunrise delay combined with changes to the turn-in-line schedule prompted Cabot to reduce its full-year production growth guidance from 10-12% to 7-8%. As a result of revised completions timing, Cabot said it would also cut its full-year capital budget by $20 million to $940 million.
Cabot has 1 Bcf/d contracted on the 1.7 Bcf/d Atlantic Sunrise. Despite the delays, the pipeline and other demand sources such as a liquefied natural gas supply agreement and natural gas-fired power plants taking more gas in Northeast Pennsylvania, are a boon for a company that’s long dealt with production constraints.
"We are excited to finally see the Atlantic Sunrise project placed in service almost five years after the project was initially announced," said CEO Dan Dinges. "This project will help alleviate the infrastructure bottlenecks that we have been operating through in Northeast Pennsylvania since the summer of 2013, resulting in an improvement in basis differentials and providing a significant opportunity to deliver a combination of returns-focused growth and free cash flow generation from our Marcellus Shale assets."
Dinges said realized prices for the third quarter are already expected to improve with more demand and takeaway online throughout the region. Cabot expects to see a realized natural gas price of $2.36/Mcf, a 54-cent discount to New York Mercantile Exchange (Nymex) settlement prices during the quarter. That’s compared to a 99-cent discount to Nymex in the year-ago period.
“We anticipate a further strengthening of realized prices during this coming winter heating season driven by the in-service of Atlantic Sunrise, current storage level expectations and seasonal demand,” Dinges said. Cabot is scheduled to release third quarter financial results on Oct. 26.