Appalachian pure-play Cabot Oil & Gas Corp. is girding for what could be another tough year for natural gas, announcing Friday that it’s evaluating plans for either modest growth or a more defensive maintenance program in 2020 to better weather commodity prices if they fall further.

Management has not yet abandoned a preliminary plan discussed over the summer that would result in 5% year/year growth in 2020 on a capital budget of $700-725 million. That program, however, assumed natural gas benchmark prices averaging $2.50/MMBtu next year. The forward curve has continued to decline since then as domestic production has failed to show signs of slowing and demand hasn’t proved strong enough.

As a result, Cabot is now evaluating a maintenance capital plan that would hold 4Q2020 production levels flat to the midpoint of 4Q2019 volumes at 2.4 Bcf/d and provide for only slight growth in full-year production. That program would come with a $575 million budget, including spending beyond drilling and completion capital. By comparison, the company has guided for a 2019 budget of up to $820 million.

“Ultimately, our outlook for natural gas prices in both 2020 and 2021 will dictate our plan going forward,” CEO Dan Dinges told analysts on Friday during a call to discuss third quarter results.

Cabot operates in only one Northeast Pennsylvania county, and it turned in a strong quarter. But Dinges told analysts that if it were to take the more defensive track next year, it wouldn’t change things. The company is essentially in a “maintenance mode” as this year comes to a close. Cabot’s crews curtailed some gas volumes over a recent weekend “because we didn’t like the price,” he said.

This earnings season has so far been a sobering reminder that producers working across the Lower 48 have cut both activity and spending. Leading North American oilfield service companies that have already warned that the slump is likely to continue through the remainder of the year.

“We’ve been in this narrow band with natural gas prices for an extended period of time as it is, so navigating in between the bookends, maintenance and this growth that we’ve laid out, we’re comfortable in that zone right now,” Dinges said, adding that the company would still be able to generate free cash flow (FCF) in a lower growth budget scenario next year.

While Dinges ultimately feels better times are ahead for natural gas, he knows there are tough choices to make as the year draws to a close. The company won’t release its official plans until the 4Q2019 earnings are issued in early February, he said.

“As we mentioned on the second quarter call, there are still numerous variables that will be better understood as we navigate through the winter withdrawal season, including the impacts of weather, the continued reduction in operating activity levels across North American natural gas basins, associated gas production growth and continued natural gas demand growth, particularly from exports,” Dinges added.

Cabot produced nearly 2.4 Bcfe/d in the third quarter, an 18% increase from the year-ago period and slightly above the 2.349 Bcfe/d it produced in 2Q2019. At mid-year, the company said it would utilize acreage it bolted to extend lateral lengths and sap more production from its assets in the long-term. The move delayed the turn-in-line schedule and prompted Cabot to lower its 2019 year/year production growth outlook from 20% to 16-18%. The company still expects to hit the mid-point of that range.

Despite what Dinges noted was the lowest average quarterly natural gas benchmark price in 3Q2019 since 2Q2016, the company boosted FCF by more than 150% to $72.4 million. Cabot also returned $227.8 million of capital to shareholders through dividends and share repurchases.

The company reported third quarter net income of $90.4 million (22 cents/share), compared with a profit of $122.3 million (28 cents) in the year-ago period.

Cabot’s production consists of 100% natural gas. Average realized prices, including hedges, were $2.11/Mcf during the third quarter, an 11% decrease from 3Q2018. Revenue declined to $429.1 million from $545.2 million.