Cabot curtailed natural gas output in July-Sept

OREANDA-NEWS. October 27, 2015. Cabot Oil & Gas curtailed natural gas production in the Marcellus shale during the third quarter because of weak pricing, making six months in a row that the producer has opted to rein in output amid unfavorable fundamentals.

During the second quarter Cabot said it was taking measures to lower production with plans to ramp it back up towards the winter months if prices recover. Spot prices in Appalachia have recovered slightly from reaching new lows in July amid mild weather, but are still averaging below year-ago levels.

The company declined to say how much natural gas is being curtailed, just that it was difficult to accurately estimate.

Despite the recent curtailments, Cabot has two projects coming online in the Marcellus during the fourth quarter.

"Our new capacity and long-term sales on these projects will allow Cabot to accelerate production sequentially in the fourth quarter at better price realizations than we are expecting in the local market today," chief executive Dan Dinges said.

The company expects prices to improve in 2016 because of new takeaway capacity coming online over the next few quarters on the demand side, and the impact of a reduction in industry activity on the supply side, Dinges said.

Cabot is currently operating three rigs in the Marcellus, but that number will drop to two by the end of the year with the intention of accelerating activity in the third quarter of 2016 amid the startup of the Constitution and Atlantic Sunrise pipelines. Williams' 600mn cf/d (17bn m?/d) Constitution pipeline and 1.7 Bcf/d Atlantic Sunrise pipeline are designed to take gas out of Appalachia to east coast markets, with the former heading to New York and New England and the latter to the southeast.

But the Constitution line has hit some regulatory snags lately. Dinges said the project has not yet received a required water quality permit from New York, and a few other approvals remain outstanding which could cause construction delays.

Cabot produced 1.4 Bcf of natural gas during the third quarter, up by 5pc from the third quarter of 2014.