Independent energy exploration and production (“E&P”) company Cabot Oil and Gas (COG) has entered into an agreement with Williams Partners L.P. (WPZ) – a master limited partnership (“MLP”) – to sell its midstream assets in Pennsylvania for $150 million. The transaction, which is expected to close before the end of the year, also includes a long-term gathering agreement.
As per the deal, the Houston, Texas-based Cabot plans to offload about 75 miles of gathering pipelines and two existing compressor stations that it has built and installed over the last three years. Additionally, under a 25-year firm gathering arrangement between Cabot and Williams Field Services Company, LLC (“WFS”) – a unit of Williams Partners – WFS will construct miles of pipelines and trunk lines and build two new compressor stations. The transaction also calls for Williams to connect all Cabot drilling program wells with specific gathering lines and supply Cabot output to five interstate delivery points during the 25-year span of the agreement.
For Cabot, the deal is a move to realign its capital budget, infrastructure, and take-away capacity following its exceptional well success in the prolific Marcellus Shale play, a key natural gas drilling area located throughout Western Pennsylvania and much of the Appalachian Basin. The agreement aims to displace roughly $75 million per year in planned infrastructure expenditures by Cabot during 2012-2015 as well as eliminate the need for infrastructure investment in 2011.
Cabot, which currently retains a Zacks #3 Rank (short-term ‘Hold’ rating), has four domestic focus areas: the Appalachia, the Gulf Coast, the Rocky Mountains, and the Anadarko Basin (in Oklahoma, Kansas, and the Texas Panhandle). As of year-end 2009, the company had 2.06 trillion cubic feet equivalent (“Tcfe”) in proved reserves (98% natural gas). Cabot produced 103.0 billion cubic feet equivalent (“Bcfe”) of oil and gas in 2009, of which more than 95% was natural gas.
CABOT OIL & GAS (COG): Free Stock Analysis Report
WILLIAMS PTNRS (WPZ): Free Stock Analysis Report
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