Cabot anticipates new gas pipelines, power demand
Houston, 27 October (Argus) — Independent natural gas producer Cabot Oil & Gas expects new pipeline infrastructure and new gas-fired power plants in Appalachia to improve its differentials next year.
Price dynamics have been weak for Cabot in recent months, but the producer will not chase higher production growth "for the sake of it" and has no problem holding back volumes if the prices do not warrant it, chief executive Dan Dinges said during an earnings call today.
Dinges said he is looking forward to the mid-2018 start-up of Williams Partners' 1.7 Bcf/d (48mn m³/d) Atlantic Sunrise pipeline to provide a new outlet for the gas Cabot produces. The $3bn project began partial flows on 1 September of about 400mn cf/d from Transco's mainline in Lancaster county, Pennsylvania, to Choctaw county, Alabama. The 186-mile (299km) greenfield portion of the line is expected to take 10 months to complete. Cabot is an anchor shipper on the project and will sell about 1 Bcf/d of its output on it.
Another smaller expansion Cabot has capacity on, Tennessee Gas Pipeline's 135mn cf/d Orion project, is ahead of schedule and is expected to come on line as early as December 2017.
And the Moxie Freedom and Lackawanna Energy Center, two power plants in Pennsylvania to which Cabot will be the sole provider of natural gas, are under construction and on schedule for start up in summer 2018.
Cabot is opting to take a conservative route by excluding from its five-year plan the Constitution pipeline, which stalled after the state of New York denied it a water permit. But Dinges said he "would not count this project out."
Cabot's average natural gas sales price for the third quarter was $2.03/1,000 cf, up by 16pc from a year earlier and at about a 95¢/1,000 cf discount to the Henry Hub. Dinges said price realizations should average no more than a 50¢/1,000 cf discount to the US benchmark for the full year of 2018, a "significant improvement" over this year.
Cabot produced 1.75 Bcf/d during the third quarter, up by 12pc from a year earlier.