Cabot Oil & Gas’s Marcellus Potential and Free Cash Flow
Marcellus and FCF capacity
Cabot Oil & Gas (COG) believes that if it maintains 3.7 Bcf (billion cubic feet) per day in production for 25 years, it would need to spend an annual maintenance capital of $500.0 million. It believes that this highlights “the capital efficiency and free cash flow potential” of its Marcellus assets.
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The 3.7 Bcf per day is COG’s estimated productive capacity, assuming it maintains its existing market share in the Marcellus and the incremental capacity additions come online with improved takeaway capacity.
Average annual pre-tax FCF
COG’s average annual pre-tax Marcellus FCF (free cash flow) at the 3.7 Bcf/d (billion cubic feet per day) production level is forecast in the range of $872.0 million at $2 per Mcf (million cubic feet) realized natural gas prices and $2.0 billion at $3 per Mcf realized natural gas prices. Natural gas prices are currently trading at $3.18 per Mcf.
Speaking of the efficiency of its Marcellus assets, COG’s management noted in the 1Q17 earnings conference, “This asset has the ability to generate significant amounts of annual free cash flow even in a lower natural gas price environment.”