Cabot slashes 2016 capital budget by 58%

Cabot Oil & Gas Corp., Houston, has set its 2016 capital budget at $325 million, down 47% from its preliminary budget reported in October and 58% from its 2015 capital program.

Drilling, completion, and facilities capital will account for 92% of the budget, with 70% allocated to the Marcellus shale and 30% to the Eagle Ford shale. The company expects to drill 30 net wells in 2016, including 25 in the Marcellus and 5 in the Eagle Ford.

The company anticipates completing 55 net wells in 2016, including 40 in the Marcellus and 15 in the Eagle Ford. Cabot plans to reduce its rig count to one companywide by mid-February.

“Given the productivity of our assets in the Marcellus shale, we will be prepared to accelerate our production growth in a capital efficient manner when market conditions warrant, as we anticipate over 1.3 [bcfd] of new firm transport capacity and firm sales by the third quarter of 2017 and an incremental 425 [MMcfd] by the third quarter of 2018,” said Dan O. Dinges, Cabot chairman, president, and chief executive officer.

As a result of the reduction in planned operating activity, the company’s 2016 production growth guidance range is being reduced at the top-end to 2-7% from 2-10%.

Cabot expects production for fourth-quarter 2015 at 1.64 bcfd of natural gas equivalent, including 1.55 bcfd of gas and 14,977 b/d of liquids. Equivalent production for the quarter is expected to exceed the midpoint of the company’s guidance range of 1.63 bcfed.

Based on the expected production volumes for the fourth quarter, the company expects its total production growth for 2015 at 13%.

In addition to the $325 million capital budget associated with development activities, Cabot anticipates $80-150 million of contributions to its equity method investments in the Atlantic Sunrise and Constitution pipelines (OGJ Online, Oct. 27, 2014), which will ultimately be dependent on the regulatory approval process and the corresponding impact on the timing of construction activities.

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