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Cabot Updates Production Outlook After September Curtailments; 2021 Hedges

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   |    Tuesday,October 13,2020

Cabot Oil & Gas Corp. detailed an update for Q3 2020 and announced updated 2020 guidance.

September Curtailments

Dan O. Dinges, Chairman, President and Chief Executive Officer, said: "On September 18, 2020, Cabot commenced a strategic curtailment program in response to weakness in regional natural gas prices throughout Appalachia, resulting in an estimated average daily curtailment of approximately 372 million cubic feet equivalent (Mmcfe) per day of gross production during the last 13 days of the quarter. While our low cost structure affords us the opportunity to deliver cash margins even in the lows of the natural gas price cycle, we continue to evaluate all opportunities to enhance value for our shareholders including the decision to temporarily forgo production in anticipation of generating higher margins for our volumes in the near future. Despite our price-related curtailments in September, Cabot's third quarter production still fell within our previously disclosed guidance range."

Cabot expects production for the third quarter of 2020 to be approximately 2,406 Mmcfe per day - this is up 8% from Q2 2020 production.

Natural gas price realizations, including the impact of derivatives, are expected to be $1.57 per thousand cubic feet (Mcf) in the third quarter of 2020. Excluding the impact of derivatives, natural gas price realizations for the quarter are expected to be $1.51 per Mcf, representing a $0.47 discount to NYMEX settlement prices.

Updated 2020 Guidance

Taking into account the anticipated impact of continued price-related curtailments in October, which have averaged an estimated 450 Mmcfe per day of gross production month-to-date, Cabot has provided a fourth quarter 2020 production guidance range of 2,300 to 2,350 Mmcfe per day, resulting in an updated full-year 2020 production guidance range of 2,325 to 2,340 Mmcfe per day based on a capital program of $575 million.

Dinges Added: "While natural gas prices across North America currently remain challenged due to lower seasonal demand during the shoulder season and storage levels that are nearing capacity, we remain optimistic about the improving natural gas supply and demand outlook heading into 2021, which has resulted in a significant increase in the 2021 natural gas price futures since late July. This improvement in the natural gas price outlook is expected to result in a meaningful expansion in Cabot's free cash flow next year, which will allow the Company to utilize excess free cash flow for increased return of capital to shareholders and the repayment of our 2021 debt maturities."

2021 NYMEX Hedging Update

Cabot recently initiated its 2021 hedging position as a result of the improvement in the NYMEX futures for 2021. Currently, the Company has 138.5 million Mmbtu of NYMEX natural gas collars with a weighted average floor price of $2.63 per Mmbtu and a weighted average ceiling price of $3.01 per Mmbtu. The Company also has 18.3 million Mmbtu of NYMEX natural gas swaps with a weighted average price of $2.74 per Mmbtu. "Given the improvement in the 2021 NYMEX futures during the third quarter, we have implemented a price risk management strategy for 2021 to mitigate downside risk while still offering upside potential," commented Dinges. "Our hedging strategy continues to be focused on opportunistically locking in downside protection while maintaining some level of market price exposure if natural gas prices continue to move higher as a result of improving natural gas balances."


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