Atlantic Sunrise doubles Cabot price realizations

Independent producer Cabot Oil & Gas' in-basin natural gas price realizations more than doubled after the start-up of the 1.7 Bcf/d (48mn m³/d) Atlantic Sunrise pipeline expansion, on which the producer is shipping about half of its total output.

Cabot's local northeast Pennsylvania prices have averaged $2.90/mmBtu since the 6 October in-service date of the expansion, compared with $1.40/mmBtu in the first week of the month, executives said on an earnings call today. Realized prices across all of Cabot's production footprint during the third quarter averaged $2.36/mmBtu, up by 16pc from a year earlier.

The 183-mile (295km) Atlantic Sunrise project was designed to funnel more gas from northeast Pennsylvania to markets in the southern US and also connect flows to the Cove Point LNG facility in Maryland. Cabot today said it is shipping a total of 1.05 Bcf/d on the line.

Cabot is shipping 700mn cf/d on Atlantic Sunrise through three sales agreements: a 15-year, 500mn cf/d sale to Washington Gas & Light; a 15-year, 50mn cf/d sale to Southern Company; and a three-year, 150mn cf/d sale to an undisclosed customer. Cabot is also delivering 350mn cf/d to Cove Point to serve LNG export demand.

The producer also has nearly 400mn cf/d of in-basin demand from its exclusive supply contracts with two gas-fired power plants.

"Cabot has successfully shifted its primary pricing mix from supply-area pricing to market-area pricing for close to 1.5 Bcf/d, a milestone that, frankly, is unheard of in today's environment," chief executive Dan Dinges said.

Cabot today said third quarter production reached 2 Bcf/d of natural gas equivalent (Bcfe/d), 10pc higher than a year earlier but 5pc below the bottom of its forecast range for the quarter amid a delay in Atlantic Sunrise's scheduled in-service. The producer today forecast its fourth quarter output would be as high as 2.28 Bcf/d.

Cabot plans to spend as much as $850mn of capital in 2019 to achieve annual production growth of 20-25pc.

The company has committed to about 250mn cf/d of capacity on Transco's proposed Leidy South expansion project. Dinges today said "we feel good" about the scale and timing of the project, adding that Cabot's capacity on the line would consist primarily of additional compression, significantly decreasing the risk surrounding cost and construction timing. The project will allow for about a 20pc drop in transportation costs to move Cabot's gas to the Washington, DC, market area.