So far for this quarter, we've heard pretty positive things from Newfield Exploration (NYSE: NFX) and Range Resources (NYSE: RRC). Today, let's check in on fellow Marcellus shale player Cabot Oil & Gas (NYSE: COG).
Cabot, as those who follow Marcellus likely know, had a pretty high-profile run-in with state regulators at the tail end of the quarter. The Pennsylvania Department of Environmental Protection suspended all of the company's hydrofracking operations in Susquehanna County following a series of drill site spills. Not to point any fingers -- cough, Halliburton (NYSE: HAL), cough -- but Cabot may not have been directly responsible for the spills. Nevertheless, the exploration and production company quickly beefed up its control measures, and received the green light from the state to resume completions earlier this month.
Cabot now has nine horizontal Marcellus wells producing at a collective rate of more than 50 million cubic feet per day. That's up about ten-fold from last year. The company is well behind Range Resources in its development of the play, but is ahead of Newfield, which just started a joint venture with Hess (NYSE: HES) two weeks ago. It appears that Cabot has a strong leasehold position up in northeastern Pennsylvania, where Southwestern Energy (NYSE: SWN) and Chesapeake Energy (NYSE: CHK) also have interests.
Overall, Cabot clocked in at 25.5 billion cubic feet equivalent of production for the quarter, representing a 5% bump from last year. Of the hydrocarbons produced, 95% were natural gas.
One thing that's refreshing about this company is its unapologetic focus on gas. With oil trading at a historic premium to natural gas, based on Btu (British thermal unit)-equivalent, countless companies are trumping up either their current or future liquids component. Many are scrambling to add oil plays, and even Cabot has its Pettet play. But this is really a gas company, plain and simple.
As far as costs, they came in flat on a per-unit basis. Combined with some strong hedging, Cabot's cash flow margins were very strong for the third quarter. The company has set itself a very strong foundation and ought to satisfy shareholders as it moves forward in both the Marcellus and the Haynesville plays.
Motley Fool CAPS players remain reluctant to go to bat for Cabot, awarding the stock a lowly two-star rating. I think they're missing out on some good times. What do you think?
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