Shares of the independent oil and gas exploration company,
Cabot Oil and Gas
), went up 4.6% to $36.82 post the announcement of the company's
success in the Marcellus shale.
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The 10-well pad that the company successfully completed will
result in a 30-day average production of 168 million cubic feet
(Mmcf) per day and has a peak production capacity of 201 Mmcf per
Per management, the strong performance of the two Upper Marcellus
wells - with initial production (IP) of 32 Mmcf per day and
30-day production of 24 Mmcf per day - would be advantageous for
the company with rates of return competing with those of the
other unconventional resource plays.
A key takeaway from the update is the success of the downspacing
test that would provide a greater recoverable resource base for
Cabot. The three Lower Marcellus wells where the pilot program
was tested will have an IP rate of 62 Mmcf per day and a 30-day
production rate of 56 Mmcf per day.
A decrease in the well costs from $6.4 million to the anticipated
$5.8 million level should be value additive for the company and
enhance the drilling returns.
) acted as Cabot's frac service provider for this 10-well pad
venture. This marks the first area for Cabot that has been
hydraulically fractured by a bi-fuel frac fleet.
Apart from the Marcellus operational update, the company also
announced its fourth-quarter share repurchase activities. Cabot
has repurchased around 4.8 million shares that will be financed
by the Marmaton and West Texas asset sales announced earlier.
Cabot also announced of an agreement to divest its Mid-Continent
legacy conventional oil and gas assets for a consideration of
around $123 million. The sale is expected to close by the
year-end. These properties have a current production capacity of
15 million cubic feet equivalent per day, of which 94% is gas.
To date, the company has divested non-core assets of around $325
million, a strategic move to shift focus to the higher yielding
Cabot currently holds a Zacks Rank #4 (Sell). Meanwhile, one can
consider other better-ranked players in the energy sector like
Abraxas Petroleum Corp.
Harvest Natural Resources Inc.
) that sport a Zacks Rank #1 (Strong Buy).