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Cabot to ship 1 Bcf/d to new markets this quarter

  • Märkte: Natural gas
  • 27.07.18

New natural gas pipeline infrastructure this quarter will allow independent producer Cabot Oil & Gas to deliver 1 Bcf/d (28mn m³/d) of additional production to new markets with "significantly better" price realizations, executives said today on an earnings call.

The producer has a contract to ship 350mn cf/d via Transcontinental Gas pipeline's new Atlantic Sunrise expansion to the Cove Point LNG export facility in Maryland. The 1.7 Bcf/d pipeline project was originally planned to start up in July but is now expected to begin full flows in late August, Cabot chief executive Dan Dinges said.

Gas is already being introduced onto the new pipeline and testing is ongoing before the line can be fully commissioned, he said. Cabot has a 20-year supply agreement for its flows to Cove Point with Pacific Summit Energy, the North American marketing and trading affiliate for Japanese trading company Sumitomo.

Cabot also has a 15-year agreement with Washington Gas, a distributor in Washington D.C., for about 500mn cf/d, as well as "several additional sales agreements" that will also take effect with the in-service of Atlantic Sunrise, Dinges said.

Securing capacity on new pipelines is not the only method Cabot is using to find outlets for its production; the producer has exclusive supply contracts with two new gas-fired power plants located close to its operations in Pennsylvania. The Lackawanna Energy Center was placed into service on 1 June, burning about 70mn cf/d of Cabot's output. The plant will bring two new trains on line later this year on 1 October and 1 December, boosting its fuel use to 240mn cf/d.

The Moxie Freedom power generation facility delayed its in-service date from 1 June to 1 August for additional modifications and testing. Cabot said it is providing large volumes of test gas while waiting for the final go-ahead for Moxie Freedom, which will eventually burn 160mn cf/d of gas.

"These three projects will drive a significant improvement in differentials going forward, resulting from access to premium markets post-Atlantic Sunrise and service and exposure to seasonal higher power prices," Dinges said. "These are very exciting times for Cabot as our long-term infrastructure and growth plans finally come together."

Cabot produced 1.8 Bcf/d during the second quarter, up by 4pc from a year earlier.

Despite new takeaway on the horizon and strong production volumes, the producer reported a loss for the quarter after failing to find gas in one its exploration areas. Cabot senior vice president of marketing Jeffrey Hutton declined to say where the unfruitful exploration occurred, but confirmed it was not in the Marcellus shale. The setback resulted in a $51mn expense and a quarterly loss of $44.4mn. The company has decided to cease capital spending on that area.


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