Natural gas producer Cabot Oil & Gas Corporation (COG) announced that it has successfully started the Lathrop compressor station. Located in Susquehanna, Pennsylvania, the facility is already producing at its maximum capacity. Only the first three compressors are required for the preliminary phase of compression at the station.
Following the commencement of production from the new facility on June 17, the company produced on average 170 million cubic feet (Mmcf) per day (gross) from both Lathrop and Teel station (also located in Susquehanna). The highest production rate achieved by Cabot is approximately 200 Mmcf per day.
The company’s current total production level is approximately 375 Mmcf per day, aided by 32 horizontal wells. These wells have been drilled and completed using longer laterals, narrower frac stages and cemented casing completions, attaining initial production rates of about 17 Mmcf per day. The several vertical wells contribute only about 6% of the daily production total. The successful start-up of these wells indicates the company’s technological achievement.
Cabot expects natural gas production to be in the 320 to 330 Mmcf per day range and oil volumes to vary between 2.4 to 3.0 thousand barrels per day (MBbl/d) in the second quarter of fiscal 2010. For the full year, natural gas volumes are expected to be around 314.9 to 325.8 Mmcf/d. Cabot guided toward liquids output in the 2.6 to 3.1 MBbl/d range.
Cabot is likely to experience production growth from its unrelenting drilling efforts and the company’s natural gas-weighted asset base will generate a steady volume growth in the coming quarters. However, commodity price fluctuations along with the soft global economy and the erosion of oil and gas demand continue to weigh on the company’s shares.
We retain our Neutral rating on Cabot with a Zacks #3 Rank (Hold), implying that the company will perform in line with its peers over the short term.
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