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Cabot Oil & Gas Corporation (NYSE:COG)

Q4 2008 Earnings Call

February 13, 2009 9:30 AM ET

Executives

Dan O. Dinges - Chairman, President, and Chief Executive Officer

Michael B. Walen - Senior Vice President and Chief Operating Officer

Jeffrey W. Hutton - Vice President of Marketing

Scott Schroeder - Chief Financial Officer

Analysts

Michael Jacob - Tudor Pickering, Holt

Brian Singer - Goldman Sachs

Michael Hall - Stifel Nicolaus

Joseph Allman - J.P. Morgan

Andrew Colman - UBS

Operator

Good morning, my name is Laurie and I will be your conference operator. At this time I would like to welcome everyone to the Cabot Oil & Gas Fourth Quarter and Year-End 2008 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I will now turn the call over to Dan Dinges, Chief Executive Officer. Please go ahead sir.

Dan O. Dinges

Thank you Laurie. Good morning, thank you for joining us for this year end teleconference call. With me today I have the members of our management team Mike Walen, Scott Schroeder, Jeff Hutton, VP Marketing; Chuck Smyth, VP, Controller. Before we start, let me say the standard or replay forward-looking statements included in the press releases we released last night apply to my comments today. As at this time every year, we have many earnings to cover and expand on from the two press releases that were issued last night. This morning I will briefly cover year-end financial results, year-end operational metrics, and then a more in depth discussion of operations including our revised plans for 2009.

I will make every effort to be graceful so as to allow everyone ample time for questions following my comments. Based on the strength of the first eight months of 2008, Cabot Oil & Gas reported its best financial year ever from a claims earnings perspective with earnings over 200 million and with cash flow exceeding 600 million. The company was able to pursue many opportunities and still maintain a strong financial structure to weather the current downturn we are in.

While debt increased for our 2008 acquisition activity, our capitalization ratio remains around 30% and we plan to manage our 2009 investment program within cash flow. In spite of the difficult environment, our 2009 program still allows for some flexibility assuming commodity prices remain close to the $5 Henry Hub price, we used in our revised budgeting process. Included in our financial results are some selected items related to gains, impairments, and stock comp.

In regard to the gaming category, it was a result of a settlement that involved both a cash sum along with acreage within one of our areas of operation. As far as impairments, these relate to producing properties and lease hold that in the current environment we receive significantly less capital. The lease hold fees is primarily in the West or based on the commodity price fall off and base's differential blow outs. We may or may not get back to these exploration areas. And also in Mississippi where our R&D project has had measured success, we have not scheduled additional capital in this area at this time.

Largest portion of the producing property impairment relates to Trawick and it is primarily a result of the carry on the first eight wells that was our cost to secure the acreage. This in no way condemns the effort we have ongoing in Trawick.

From a value-added perspective one of the key metrics to any organization growth in our industry is its ability to stack up reserves at economic investment levels. Cabot once again did that growing reserves 20% year-over-year. The company was able to add nearly 500 Bcfe before production and revisions adjustments for the year. Importantly two thirds of the increase was from our organic drilling program with a drilling finding cost of $2.25 per Mcfe.

Our revisions represent less than 3% of our year-end proved reserves and totaled 57 Bcfe with 95% of this related to year-end pricing. The acquisition in East Texas added another one third approved reserves and an all in cost of $3.46 per Mcf. Additionally we accelerated our leasing effort to block up our acreage positions in the Marcellus in Pennsylvania. And add some new areas in East Texas, which obviously have not yet, contributed any new reserves.

All in finding cost inclusive of our lease hold acquisition, expenditures and producing property acquisition was $3.42. During the year we added over a 150,000 gross acres to our leasehold and to the hottest place that our industry is in right now. Both of which was a continued activity in this commodity price, low commodity price environment.

In terms of production, company reported full year production of 95.2 Bcfe. This was slightly less than our 96 to 97 Bcf expectations and was due primarily to some completion delays in East Texas. While slightly below expectation, this was still a 11% increase over our production levels in 2007.

Okay now let me move to some of the operations conversation. Right now our priority project in the company is the Marcellus in Pennsylvania. Last night we disclosed our year end production rate which was double our original year end expectation and highlighted some well successes with which we're very pleased. In 2009 we are focused on expanding our horizontal effort and moving it forward expeditiously.

As stated we have currently budgeted 30 horizontal and 30 vertical wells, however depending on lease boundaries etc, our objective is going to be to expand our horizontal well account greater than the 30 horizontal wells we have budgeted. To that end we have just hired a seasoned dedicated drilling engineer. He started this week for our Marcellus effort. This is a position we have been searching to sell for nearly a year. Is addition together with results of our R&D drilling effort there lays a grant work for an even more efficient drilling operation and a significant production increase in 2009.

In anticipation of our increasing Marcellus production during the fourth quarter, the company successfully secured additional firm out of capacity with a phase in back all arrangement that will platen at 90 million cubic foot equivalent per day in August of 2010 and runs through December of 2012. However we will also be able to timely extend this arrangement at our discretion.

Infrastructure is one of the keys in this play and we have solidified a great start to that process. Because of the pricing outlook and our commitment to spend within our cash flow we have essentially eliminated our drilling effort in West Virginia for the time being. Right now we have only three wells scheduled for 2009 as most of you are aware however, the vast majority of our million acre position in West Virginia is already held by production.

Moving to East Texas, while I hoped to be reporting two off the chart horizontal wells on this call that did not happened. And as our press release highlighted we are citing what occurred in the completion process. The results will determine our future action.

One of our key questions in the area that we had complications on sliding sleeve, external packer completion system that right... and trying to determine, whether or not this is the right completion system to use in the rocks and the temperatures and pressures that we were making enough to complete in. That's what we're trying to understand.

Though these two wells were our first two horizontal efforts in these zones, and I understand that new initiatives present new challenges. However, I'm fairly disappointed we are unable to gather any more information than we did. Regardless, we will repeat this horizontal effort in the Haynesville line because of all the positives we are seeing in our vertical effort. As for the Bossier we did not yet have the production data similar to what we have in the Haynesville limestone. However, we are going to continue with our completion evaluation and determine what went wrong and how we can get a more effective completion in this Shale. Again, I am sure we will have questions regarding this area. I think this area was the focus point on new operations releases that the Street was expecting out of Cabot. And certainly I'm more disappointed I am sure than the Street in not being able to deliver results.

At County Line, the deep vertical exploration project was successful. And while we are not disclosing the specifics of this I will say that the pressures and the test add in the three zones that we tested give us a great deal of optimism on what future we have in this area for the play. With these areas focused in mind for 2009, we are going to drill 70 wells in East Texas of which 20 are in Minden, 38 are in County Line, and 12 are in other areas of the region including outside operated. Of the total $475 million program for 2009, this region in East Texas will receive about half of it.

With regard to Minden, many of you are aware the pipeline explosion that occurred just outside of the DCP Carthage plant here on February 11th. The emergency shutdown in this plant and other plants did result in a net loss production to capital about 20 million cubic foot for approximately one day. We are able to redirect 100% of our production to other pipelines by 6 AM the next morning. Certainly commend our marketing group for being able to get that done.

On a macro level it is our expectation that industry activity will be significantly reduced in many areas across North America. However, I think capital allocation towards East Texas and North Louisiana just as it is expected in the Marcellus we will remain relatively activity. With this in mind and considering some of the bottlenecks that may occur regarding production in the East Texas, North Louisiana area, area Cabot elected to hedge some of its phases in 2012 by the Houston ship channel and you can find details on our website. This action should mitigate some of our concerns should we have a basis differential expansion in this particular area.

In the west region though we still like our position in the Rockies and Mid-continent due to the net back pricing, our entire west region efforts has been cut back to simply meet our rig obligations, which expire in May of 2009. A total of 20 wells will be drilled in the west region on our 2009 plan.

Also the company has opened a data room for our Canadian operations to explore industry level of interest in our niche position up in this area. This is by no means the entire sale as we can simply cash flow our position if we choose. With our portfolio opportunities in East Texas and the Marcellus and our focus in those areas, I think it makes sense to consider this move.

Little bit of comment on cost, after undergoing significant cost inflations over the past several years, the exploration production industry is starting to experience some of the benefits that occur in a slowdown. Cabot's 2009 drilling, completion, and operating cost structure is seeing the beginning of necessary reductions. Casing and other two wheeler goods have been reduced anywhere from 5 to over 21% so far year-over-year. Drilling costs have reduced up to 40% in some areas on market-based rigs and Cabot is actively negotiating with our contracts to reduce those rates further. Also completion cost continues to be reduced.

To date we are seeing reductions of up to 15% to 20%, and anticipate rates to continue to come down consistent with the dramatic reduction in commodity prices. Again we will continue to work with our vendors to reduce our cost structure. Through mutual cooperation from all parties, we can reduce cost and continue to conduct an active program and add value to our shareholders.

Our first budget preparation for our 2009 program was back in October and we used a $7 and $70 strip price, which yielded free cash and a $600 million program. Today many points have a $4 plus and $40 plus handle. We have revised our budget using a $5 and $50 strip and reduced our program as we mentioned the 400, excuse me and $75 million that centers almost entirely on Pennsylvania and East Texas. This program honors nearly all of our rig commitments. Again all of the rig commitments expired in 2009 and provides growth and reserves and production and provides free cash flow.

One of the positives in this budget is our hedge position in 2009 that provides a great deal of our cash flow. We're going to place our production growth targets at a 4% to 8% growth due to the economic volatility and lower investment levels. Though our production continues to grow, we have missed our guidance, however, as we continue to focus our program, I fully expect us to meet or exceed these new production targets.

Next week we will have our year-end Board Meeting with significant discussions centered on the effects of the rapid downturn that we have seen in our history. And what actions we will continue to take in light of our crystal ball looking to the future. Because of our relatively conservative posture over the years, we're in a solid financial position with numerous opportunities, drill economic wells even in this low cost commodity price environment.

We have limited risk of losing leases. We have no long-term costly rig contracts except the ones that expired in 2009. And we have a leasehold position in several areas that yield some of the most attractive economics in North America. The success of Cabot will though continue to be driven by efficient operations in the areas we will be operating.

Before I open it up for questions I will simply say that we have posted some good numbers in 2008 and added significantly to our reserve base without leveraging our balance sheet. All of that is positive. However also recognize that's yesterday's business. 2009 will have its challenges for all of us, but we are very focused in two areas both of which are in their very early stages of development and we received new data points everyday. I do expect our report card in these two areas to improve as our learning curve also improves.

With that Laurie I will be more than happy to answer the questions.

Question-and-Answer Session

Operator: (Operator Instructions). Your first question comes from the line of Michael Jacob of Tudor Pickering, Holt.

Michael Jacob - Tudor Pickering, Holt

Good morning gentlemen.

Dan Dinges

Good morning Michael.

Michael Jacob - Tudor Pickering, Holt

Some nice Marcellus results. Thinking about the Ely 5H, believe for sometime there was concern on TOC getting high in the deeper Marcellus, but seems like it may not be an issue. Are you breaking the Marcellus into segments that you are moving deeper or is the organic content pretty uniform?

Dan Dinges

I will let Mike answer this, Michael?

Michael Walen

Yeah, Michael, we have seen three different sections up there. We have an upper Marcellus Shale, the Purcell Shale plus the lower Marcellus. We've cut some cores, we've done the analysis, and the TUCs are very, very attractive and the rocks are not overcooked. And I think that's the result of our wells are showing that.

Michael Jacob - Tudor Pickering, Holt

That's great. And just wondering if we could just spend a second moving down the East Texas and maybe spend a little bit more time on the Haynesville stem and talk about kind of what went wrong from process standpoint kind of less in plant?

Dan Dinges

Well, the-- and I will put that over to Mike also, but I will do a little preamble here. We have talked a long time unfortunately about our new initiatives in the East Texas area. They are looking at and trying to exploit a horizontal in the Haynesville Lime. Also we're looking at the opportunities to drill horizontal in the middle Bossier, which we've had significant shows in the just about every well we drilled in the Minden area and that section. And we did the exploratory in the deep section in County Line.

But we really had certainly with the vertical success in completions and production history and the Haynesville Lime, we had high and still have high expectations for the horizontal in that section. We had drilled over 40 or so wells and are more in County Line using the Packers Plus System in our horizontals there. We felt comfortable using that system and our horizontals in the Haynesville Lime and Bossier Shale. However, we -- and we did that, certainly we experienced higher pressures and higher temperatures in the Bossier and the Haynesville Lime than we've seen in the James. And I don't know exactly what the problems are surrounding the Packers Plus System in our completion efforts. But in both wells we had problems with the completions. Whether it's sliding fleets or whatever, but bottom-line we just did not get affective fracs, and I will let might kind of explore on kind of what the industry really is and may be -- and probably what we'll got to in completions as we go forward to test the sections.

Dan Dinges

Yes, we look at the Minden wells in light of our experience at James and in James Lime and County Line. Unfortunately that theme did not work very well. We are now investigating with some diagnostics equipment on where these fracs went if we got any fracs at all. And we're going to get that data and make a decision going forward how we would complete additional wells in the lime and the shale.

The other, some of our competitors out who have started using the external packers are actually now seeing many their casing in the horizontal leg and pumping down plugs and perforating frac as they come out. And that seems to be one way to approach it. And we are going to look at that right now going forward. That will be something that we would investigate thoroughly even with the horizontal well at County Line probably in the Haynesville Shale, lower Bossier Shale in the Haynesville there.

So I think that we have a lot to learn, it was kind of an R&D project, it didn't work out as well as we would like but we are going to continue to make progress I think.

Michael Jacob - Tudor Pickering, Holt

That's great, I appreciate all that color and so when we think about kind of the $475 million program in '09 and East Texas receiving half of it. How much of that capital is being invested to test the Bossier/Haynesville and kind of how do you think about bouncing that with some pretty good Marcellus results given low commodity prices and some of the operational issues.

Dan Dinges

Well, we are going to continue to try to find the right completion technique in the section below the traditional areas of East Texas. And basically, I am talking about anything below the Cotton Valley. And we'll continue to drill some of our wells vertical where our spacing would not allow the horizontals. But we will, I don't have a exact number Michael on the dollars that are going to be allocated specifically for the Bossier/Haynesville. But we're going to spend whatever it takes to find the most efficient and best return method to complete in the Haynesville Lime and suddenly explore the horizontal opportunities that we see in the middle Bossier.

Again if we're completing vertical wells it's up to over 3 million a day vertically in the Haynesville Lime and we're drilling an offset well horizontal with say 3000 feet of section open and have the ten stage frac. I would certainly expect a better results than we've realized so far.

So we have ways to go. Again my disappointment is that, we spend a heck a lot of money on these two horizontal wells and basically we have zip to show for it. And now we're just -- we are back pedaling and trying to figure out technically that we side track and then if we do side track, is that the most efficient way or do we just drill another well or is there some salvage mode we can perform in the existing well bores. And that's going to be a primary project for us in 2009.

2009 in these commodity prices completing Cotton valley and Trawick wells are not going to get a lot of people excited. We've recognized that exploiting the deeper section with horizontal drilling is where your best returns and recovery is going to be and we're going to spend the money necessary to evaluate.

Michael Jacob - Tudor Pickering, Holt

Got you. Thank you very much for all that color.

Dan Dinges

Thank you Michael.

Operator

Your next question comes from the line Brian Singer of Goldman Sachs.

Brian Singer - Goldman Sachs

Thank you. Good morning.

Dan Dinges

Hi Brian.

Brian Singer - Goldman Sachs

Well, Brian if I feel like I am dancing around some of the issues or results I am. We have tested as we mentioned three zones and we have tested three zones at levels that would give us encouragement that each zone could be exploited for future evaluations with horizontal wells. So, how much area does that open up I will let you be the judge. The stratigraphy, the section is in a very thick overall section from the Bossier section down into the Haynesville section. It is a very big section. So, differences in stratigraphy within that entire growth interval is going to be fairly consistent over I would think a large area.

Again we don't have a lot of deep tests to make that correlation but we do have deep debts that have seen that entire strat section that we are correlating with. We certainly have seismic through the area that we can look at the overall section and we can see consistencies over a large area in the entire strat interval. Buying with the -- it might be a question on what competitive advantage do you have with keeping information quite. What we are leasing in the area, others may continue to lease in the area. We are going to lease with actual knowledge and we'll base what we pay on a bonus per acre based on our actual knowledge. Others might lease in the area but they are not going to have the exact knowledge on what to pay per bonus and how much risk they're going to assign to the acreage that they might pick-up.

So all I can say right now and I got ahead of myself when I talked about, our new initiatives in the Minden area and we've tested these vertical wells in the Haynesville Lime. And we're excited about our horizontal play in the Haynesville Lime and I've been talking about that operation for six months. And here I'm at the end of the game with wells completed and test results and I still have nothing to show for it. That's not a comfortable position that a CEO likes to find himself in. And I'm not comfortable with those results. I am not going to get ahead of myself in talking about what good results we have in vertical well in County Line. I am going to say that we are optimistic and we have seen a big section, high pressures in gas but again it is an area that we will probably duck or tale a little bit until we are able to show tangible result.

Brian Singer - Goldman Sachs

How many of similar wells do you expect to drill this year and have you assumed any production from any of that in your guidance?

Dan Dinges

Similar wells in the County Line area Brian.

Brian Singer - Goldman Sachs

Yeah, similar deep vertical test, that's just the one that you listed.

Dan Dinges

Well we are not going to be looking at the County Line area as a -- and we have not budgeted any deep vertical test in County Line. What we are going to do is we are going to pick its own and we are going to go horizontal in it. And with that test we will make further amendments to our program as information will dictate.

Brian Singer - Goldman Sachs

Great, thanks. And lastly on the Marcellus, you did report pretty good production relative to your original expectations. There have been concerns raised with regards to both pipelines and permitting water, etc, can you just give us a refresher on them, how you see that playing out over the next few months in 2009?

Dan Dinges

Yes, and we have been pleased with what we've seen in our vertical completions in the Marcellus. We have -- again Marcellus wells that we have initially brought on line in July of 2008, the well -- and those were completions that were done in a different manner and not as efficient as the completion techniques we're employing today. But nevertheless those wells are still holding up well. The new wells we are bringing online and as we add efficiencies with completion techniques on higher pump rates and more sand, etcetera, we're seeing again positive results. The wells are holding up very well.

Even though we've seen a higher rate then we anticipated earlier on, I will say that I'm still not pleased with only having one horizontal well put into the pipeline as we speak. I have talked and Mike has talked to our east region for six months on affecting more horizontal completions up there. And our expectation was that we would have a little bit more horizontal completions to report.

We don't at this stage but we are close to it. We have five horizontal wells drilled at various stages of completion out there and I do expect good results. We have been fighting something that is unique even though we've been up in the east for a long time, northern Pennsylvania. And particularly this year the early winter set in up there and as you might be aware when you bring 100 frac tanks full of water, you put them on location and the length of time it has to sit on location and the opportunities to freeze and how you are going and the timeliness of frac and coordinating the logistics in what for us has been a new, unique, different, and fairly harsh environment with the cold, cold weather we have had up there. That has slowed us down and I give the guys that are fighting it in field everyday, as I sit here on the phone talking about disappointments on horizontal completions, those guys are fighting the frigid weather up there everyday out in the cold and I know we had one report of possible frostbites on hands, which we don't want to hear either. But it is a reflective of the difficult environment we're facing up there. But I m pleased with the Marcellus and I think we have a lot still to learn but we also are seeing very significant results. And we have as Mike mentioned a core up there, we have taken 400 foot of core throughout the entire section Mike referenced from the upper Marcellus, through the Purcell, into the lower Marcellus. We're evaluating that core data and I think it's going to help us add efficiencies with our completion techniques as we continue forward.

Brian Singer - Goldman Sachs

Thank you.

Dan Dinges

Thank you David.

Operator

Your next question comes from the line of Michael Hall of Stifel Nicolaus

Michael Hall - Stifel Nicolaus

Thanks very much. Good morning.

Dan Dinges

Hi Michael.

Michael Hall - Stifel Nicolaus

Kind of continuing on the Marcellus, can you talk about what sort of aerials then you've covered in your test so far of the North East?

Dan Dinges

Okay, kind of looking at it, Mike on the aerial extent but what we initially had done up there Michael we had drilled our first well back in 2006. We stepped out little over 3 miles not quite 4 miles to the north and drilled a test after we had secured a good leasehold position. So all the consistencies in the entire section, upper Marcellus through the lower Marcellus and we have been developing that kind of 3 to 4 mile square area at this stage and that's what we are, that's what we're developing and certainly like what we see and the consistency what we see within this area.

Michael Hall - Stifel Nicolaus

Okay. And sorry to hammer on the pipeline issue but just can you review for me what your export capacity kind of schedule is throughout 2009, you talked about getting up to 90 million in 2010. But where you go from here to there?

Dan Dinges

Yeah I'm going to turn it over to Jeff Hutton our VP of Marketing but I will say that we have this back haul arrangement, but we also have an arrangement that anything that that does not go in the back haul that goes to market towards New York that we have a market in that direction also. But I let Jeff cover the details.

Jeffrey Hutton

Okay. Basically we have contractor firms back haul capacity out of Pennsylvania as a protection to make sure our gas does flow each day. It is going to be phased in over the next couple of years, I believe here in early spring we move from 20 million a day affirmed to 40 million a day affirmed. Approximately six months later, that goes to 60, it moves to 75. And by the time we get to October we are at 90 million a day of firm back haul.

Michael Hall - Stifel Nicolaus

Okay.

Jeffrey Hutton

Like Dan did mention that we are currently moving that gas forward into New Jersey. We've been pleased this winter that we've had no curtailments and no interruptions and so we are anticipating we won't have any problems into the net production.

Michael Hall - Stifel Nicolaus

Okay. Thanks, that's helpful. And then staying in the East, if I recall, you had some work you were doing in the Berea. Is there any color there or update there?

Dan Dinges

Well Michael with the reduction in our capital, we did drill the horizontal Berea Well, tested over 1 million a day. We're pleased with the Berea results. We have a lot of running room down there, but with reduced capital and commodity prices we can only allocate in certain areas and we chose in the East, that to be in the Marcellus.

Michael Hall - Stifel Nicolaus

Okay, that really makes sense. Thanks. And then corporate-wide looking at the 475 million of our budget, you talked about kind of current cost trends. What sort of cost assumptions are you making in that in terms of any declining line items? And if you get better cost reductions would you apply that capital to the East or East Texas or -- and what would be your thinking with that?

Dan Dinges

We used in our budgeting process 10% reductions in arriving at the level of activity we could conduct. And we would expect to see with the -- again the prices in some being a little bit stubborn coming down, we would expect to see some more reductions on service cost. With the additional capital if you will and assuming that we stay within AFEs on our other expenditures, we would allocate in the areas that we are currently focusing our program and that's East Texas and the Marcellus.

Michael Hall - Stifel Nicolaus

Okay. Any bias between either of those?

Dan Dinges

It would be just where the most efficiency could be gained. I would say that with us trying to figure out two areas in East Texas and the horizontal effort, and we're obviously not there yet because we -- because of our failed horizontals in Mendon, I would say that there is a likelihood that we would allocate to the East Texas area to try to flush out the opportunities and the horizontal Bossier, Haynesville section probably more so then we would allocate greater sums into the Pennsylvania area of Marcellus.

Michael Hall - Stifel Nicolaus

Okay, great. And then finally just on your horizontals as you look forward in East Taxes. What kind of cost difference did you assume in -- between a Packers Plus and the kind of cemented cased like people are doing in North Louisiana?

Michael Walen

I just -- this is Mike. I would have a look at that detail but I'd make a swag at your -- because of Packers Plus external packer's type system is relatively high cost. I can see significant -- probably maybe a 50% or more reduction in just a cost they're running to the casing and cemented versus using the external factors.

Michael Hall - Stifel Nicolaus

Okay. Great thank you.

Dan Dinges

Thank you Mike.

Operator

Your next question comes from the line of Joe Allman of J.P. Morgan.

Joseph Allman - J.P. Morgan

Yes, thank you. Good morning everybody.

Dan Dinges

Hi Joe.

Joseph Allman - J.P. Morgan

Hey, Dan. In terms of the negative reserve revisions, saying its 57.3 Bcfe. How much of those are proved developed and how much for PUDs and could you just talk about those, are they tails or did you lose some PUDs outright?

Dan Dinges

Now I haven't looked into that detail, but we had again fairly low percentage when you look at industry and the write-downs that I have seen -- 54 BEs that was directly related to pricing and -- Steve you have the allocation of --

Unidentified Analyst

Yeah, I have the numbers Dan. 54 BEs were on the proved developed side and the other 4 BEs were on the undeveloped side.

Joseph Allman - J.P. Morgan

Okay it's helpful. And could you -- and were they, the proved, I guess it was just PUD tails or just -- and proved developed tails pretty much?

Dan Dinges

On the PDPs, yes it was primarily tails. There were some PUDs that we reduced because of pricing.

Joseph Allman - J.P. Morgan

Okay, got you. Could you also give us a break out of the cost; I think you gave your F&D calculations in the release. But could you break out the development cost and your exploration cost and then the - maybe acquisition of proved versus unproved?

Dan Dinges

Let me see if we have that break out in front of us here, Joe. I tell you what, why don't you call Scott.

Joseph Allman - J.P. Morgan

Okay, will do.

Dan Dinges

After the call and he can give you that break-out.

Joseph Allman - J.P. Morgan

Okay, great. Will do. Very helpful, thank you guys.

Dan Dinges

Thanks.

Operator: (Operator Instructions). Your next question comes from the line of Andrew Colman of UBS.

Andrew Colman - UBS

Hi Andrew.

Andrew Colman - UBS

I had a couple of lot of questions here. Could you first break down, I guess, how much of the East Texas gas that you'll be drilling here over the future is going to go through which hub, is it all going to Carthage or you're going to Perryville or you're going somewhere else?

Dan Dinges

Yes, Jeff can answer that Andrew.

Jeffrey Hutton

On the East Texas production, the -- both ends up at County Line and Minden, both end up at Carthage. And of course it was about Mendon we have at least seven interstate pipeline take away from that particular plant -- DCP plant. And then at County Line, with Enbridge, we have, again multiple interstate pipeline takeaway.

Andrew Colman - UBS

Okay, then against the 4 to 8% production growth target that was mentioned earlier, I assume that East Texas and Appalachia will vary to upside. Do you think or can you give any sort of color to how much above that range that could be?

Dan Dinges

Well we have and as we allocate capital and then like some of the prior questions that Michael asked, if we had additional sums or we had some changes in capital allocation, where would we do that. That's one of the reasons, why we went to full guidance for the company versus breaking it down by region. But I will say that with -- that's only having one horizontal well in the Marcellus. We have not used a high rate for the completion of that horizontal well up there. I think we have a fairly good handle and what we have used on the vertical completion. And so I would see -- I can see with effective horizontal completions that we could maybe get some incremental from the horizontals and in the Marcellus. And we also have not really used any without having any data in the horizontal Bossier or Hayneville. We don't have any increases in -- we don't have any production attached to horizontal drilling in East Texas except for our James wells and County Line.

So if we could add efficiencies through horizontal and the Bossier, Hayneville in East Texas, I could see where we could have a -- opportunities there also.

Andrew Colman - UBS

Okay. I -- I guess I like to look it from the other side there as well, could you give any sort of distinction on -- with the Canada and the Rockies, maybe East Texas and Appalachia, kind of what's your ballpark base declines would be given, I guess, for 2008 exit? Are we on the 25% plus for all the regions or you think Appalachia because of its large well count and kind of be a low pressure wells and their age is going to be somewhere in the 10% range?

Dan Dinges

No, I would say the 10 to 15% range is the range for the baseline decline.

Andrew Colman - UBS

Okay. And that would be the average then for the whole company?

Dan Dinges

Yes.

Andrew Colman - UBS

Okay. Let me see, I've one more question just wanted to scan my list, I'm sure I'll find it. Can you guys tell us what the -- either standardized measure or the PV-10 was at year end or is your tape (ph) pretty close behind the -- this conference call?

Scott Schroeder

2.4 billion Andrew.

Andrew Colman - UBS

2.4 billion, okay, cool. If I could just squeeze one last one in here. The asset that you purchased in East Texas last, I guess, last summer were about 32 million a day, I guess -- can you give any update onto -- as to how those properties are performing today?

Dan Dinges

We've been kind of commingling our Minden operation up there both on the acquired stuff and the historic legacy acreage up there. But Minden right now combined is producing 60 something million a day.

Andrew Colman - UBS

Okay. And then -- I am sorry Scott the 2.4 billion that was PV-10 or standardized measure?

Scott Schroeder

PV-10.

Andrew Colman - UBS

Okay, perfect. Thank you guys.

Dan Dinges

Thank you.

Operator

At this time there are no further questions. Gentlemen, are there any closing remarks?

Dan Dinges

Thanks Laurie, I appreciate, and I appreciate the time people give us in listening to the call. Again challenging times out there in front of us. I think that our program will again add efficiencies both in East Texas as we explore and exploit and try to develop the horizontals there. The Marcellus program, again, it past this winter in some of the difficult operating environments, get the regulatory issues solved to allow us to put together a fluid program in the Marcellus. And I think we're going to be able to put together a good report card as we report in the future. I appreciate your time. Bye.

Operator

Thank you. That does conclude today's Cabot Oil & Gas fourth quarter and yearend 2008 conference call. You may now disconnect.

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