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Cabot Passes 400 MMcf/d Milestone in Marcellus

Thanks to recent upgrades to a compression station in northeastern Pennsylvania, Cabot Oil & Gas Corp. increased its Marcellus Shale production 35% in a single day, a sign of how infrastructure bottlenecks in Appalachia are crimping production rates.

The company said Wednesday it increased Marcellus production to 420 MMcf/d from 69 wells, up from 310 MMcf/d from 67 wells, thanks to recent upgrades at the Lathrop Compressor Station, including additional compression and dehydration, and a second suction line.

Those two new wells came online at 29.5 MMcf/d and 29.7 MMcf/d respectively, record production levels but still constrained.

"These two wells represent new highs for our program in the Marcellus and both of these wells and others are choked back because we have reached another temporary maximum throughput rate into the Tennessee Gas Pipeline," Cabot CEO Dan Dinges said.

Cabot is one of the leading operators in the dry gas corridor of northeastern Pennsylvania, a section of the Marcellus without much previous history of oil and gas development and therefore without much infrastructure to support the regional boom in production.

The company often complains about midstream bottlenecks constraining production, such as a recent six-well pad producing at a curtailed rate of 51 MMcf/d, but expected to produce as much as 80 MMcf/d at full output (see Shale Daily, April 29). That gap between upstream and midstream operations has put Cabot in an odd situation: production rose significantly in the first quarter while profits shrank.

Because of capacity limitations, Dinges said Cabot doesn't expect to grow its production in the Marcellus again until the Williams Springville Gathering System comes online sometimes around the end of the year (see Shale Daily, Nov. 22, 2010). That 24-inch pipeline will run 32 miles south from the Lathrop station in Susquehanna County to Transcontinental Gas Pipe Line (Transco) in Luzerne County, a 10,000-mile interstate system that connects to markets as far-flung as Atlanta, New York and Philadelphia.

Cabot is also waiting on other pipeline projects that will allow it to increase production.

Those include its 150,000 Mcf/d share of the 400,000 Mcf/d Laser PA-NY Gathering Line Project, a 30-mile pipeline running from Susquehanna County to Millennium Pipeline in Broome County, NY and expected to come online in the third quarter of the year; a compressor station planned near Lenoxville, PA; and additional Transco expansions planned for 2012 and 2013 (see Shale Daily, Feb. 3).

Until those come online, though, Cabot must manage its significant and growing backlog of uncompleted wells. That includes about 560 hydraulic fracturing (hydrofracking) stages and around 48 uncompleted wells, the company said during recent presentations.

Those numbers will likely grow this year.

Cabot is currently running five drilling rigs on five pads in the Marcellus and plans to spend $350 million of its $600 million total capital budget drilling 54 wells in Pennsylvania this year. With one dedicated hydrofracking crew performing roughly 60 stages per per month and 15 stages on average per well, that drilling program would add more than 750 hydrofracking stages to the queue.

Asked during a first quarter earnings call how Cabot planned to shrink that backlog, Dinges said Cabot recently brought on a second "spot" crew to handle some wells and expects to add a second dedicated crew at the end of this year or the beginning of next year, once infrastructure expansion can handle additional production. Until then, "What we are doing is balancing our capital commitment at this stage along with our ability to monetize our gas right now. We have volumes that are currently producing that are restricted," he said.

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