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Marcellus Shale: The Backbone of Cabot Oil & Gas’s Operations

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Cabot’s operations

Cabot Oil & Gas’s (COG) operations are focused in two shale plays: Marcellus and Eagle Ford. COG holds ~200,000 net acres in the Marcellus Shale and ~86,000 net acres in the Eagle Ford Shale.

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Drilling economics

According to the data provided in a presentation released by COG in September 2016, the company has 18 of the top 20 wells drilled in Pennsylvania by production. The remaining two wells belong to Chesapeake Energy (CHK).

The image above shows the cumulative productions of the top twenty wells in Pennsylvania since 2012.

COG also boasts of having “peer leading EUR (estimated ultimate recovery) and well costs in the Marcellus shale.” Per COG’s September presentation, COG’s EUR per 1,000 feet of lateral was 3.8 Bcf (billion cubic feet) as opposed to the lowest in EUR its peer group of 2.1 bcf as of June 2016. Its peer group includes Antero Resources (AR), EQT Corporation (EQT), Rice Energy (RICE), and Range Resources (RRC). These companies combined make up 17% of the First Trust ISE-Revere Natural Gas Index ETF (FCG).

COG has reduced its drilling cost per foot in the Marcellus Shale by 40% since 2014. Its direct lease operating expenses per million cubic feet equivalent have fallen 68% since 2014.

The compelling drilling efficiencies seen by Cabot in the Marcellus Shale could be one of the major reasons it’s being favored by the markets.

However, there could be a major factor at play that’s making investors wary. We’ll discuss it in the next part of this series.

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