Cabot Oil & Gas Q2 2009 Earnings Transcript

| About: Cabot Oil (COG)

Cabot Oil & Gas Corporation (NYSE:COG)

Q2 2009 Earnings Call

July 24, 2009 11.30 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, Marketing

Analysts

Michael A. Hall - Stifel Nicolaus

Jack N. Aydin - KeyBanc Capital Mkts/Mcdonald

Mike Jacobs - Tudor Pickering

Ellen Hannan - Weeden and Company

Brian Singer - Goldman Sachs

Biju Perincheril - Jefferies

David Dechobam - UBS Securities

Ken Carroll - Johnson Rice

Operator

Good morning. My name is Kristy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cabot Oil & Gas Second Quarter 2009 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

I would now like to turn the call over to Mr. Dan Dinges, Chairman, President and CEO. Please begin your conference.

Dan O. Dinges

Thank you, Kristy, and good morning. Thank you for joining us for the second quarter teleconference call. I have with me today Mike Walen, Scott Schroeder, Jeff Hutton, and Chuck Smyth.

Before we start, let me say the standard boilerplate language that this forward-looking statements include in the press releases applied in my comments today. As you are all ware, Cabot issued press releases last night, regarding its quarterly financial results. We provided an operational update. Information on new officers and announced quarterly dividend. I will touch on each of these topics this morning.

First financially, the company reported a solid second quarter with 39.1 million of net income or $0.38 per share after removing selected items, the largest of which was related to the loss of the sale of the Canadian asset. Clearly, I had positioned eight of the results with a $107 million of increase revenue coming from counterparties for the second quarter. This brings the year-to-date hedge gains to $196 million.

More importantly, however, increased production was an contributing factor to the quarterly financial performance. Our second quarter production matched the first quarter record production even with the elimination of the sole Canadian production. The 10% increase over last year's second quarter came equally from success in our Marcellus initiatives and the Gulf Coast region.

We expect this trend to continue, due to the results we are realizing both areas and a focus of our investment dollars in both the East and the East Texas. In guidance, in regard to production guidance, we had to likely to stay within our current forecast levels. We certainly are attempted to increase our guidance with the majority of our capital being allocated towards two new strong growth areas both in the Marcellus and East Texas.

However, we do have an choice of moving our Charleston, Virginia office to Pittsburg and closing our Denver office in moving the majority of our Denver employees between our newly formed North and South regions, which may temporarily calls main inefficiencies. Additionally, we had near-term headwinds which we all realized with high storage numbers which may require operators to shut in gas between now and November.

With that said, forecast could prove to be a conservative however we have elected to leave our guidance unchanged at this time. In terms of expense guidance, nearly all of our categories have been reduced with only one exception which is the increase in exploration for seismic in the Marcellus.

Comment on our capital program, as mentioned in our annual release last night. Cabot increased its investment program to $500 million, which remains within expected cash flow for the year. The increased came from an expanded lease effort, some additional seismic dollars and from substituting some of our vertical wells for our horizontal wells in the Marcellus.

During the quarter, the company used the cash proceeds from the Canadian sale to reduce its outstanding debt. Today, a debt is at 815 million with only a 133 million outstanding on a new $500 million revolver which we put into place during the quarter.

Now let's move to the operations, I mean most would agree we had an outstanding quarter. Our Marcellus play continues to expand and will be the driver for Cabot going forward. As the drilling results continue to exceed our expectations, we anticipate continued growth of our production and reserves at very attractive returns to-date, we have drilled 43 wells, 11 which are horizontal and we have nine rigs currently in the field.

Two of these rigs are larger fit for purpose units, which have improved our overall drilling efficiencies. As the year progresses, we will be trading out several of our smaller horizontal rigs we have, as we have the opportunity to add additional fit for purpose rigs.

By year-end, all our horizontal drilling we hope would be done with the fit for purpose rig. Additionally, we plan to further expand the fleet in 2010. The team has shown a remarkable progress in reducing our drilling cost and improving efficiencies.

To give you an example, since March of this year on three consecutive horizontal wells we have seen our drill time reduced by over 50% and drilling cost reduced by 35%.

We anticipate that with the introduction of the fit for purpose rigs, this cost will continue to move lower. We highlighted several new wells in last night's press release also to the wells in the Marcellus. The Teel 8H recorded our best results to-date and it continues to produce very well. We are extremely pleased with the initial production rates and its time profile of all of our horizontal wells as they are averaging over 7 million cubic feet per day for the first 30 days of production. In fact, the Teel 8H came online June 11th and within the next 10 days to two weeks, the 8H well will have produced over a half of Bcf, pretty good returns.

With that said, we will also continue to gain in cost efficiencies along with improvements in production rates, as we enhance our drilling and completion techniques.

Additionally, our drilling has been in a very large geographic area. A number of miles apart with consistent result, which provides us a great deal of confidence as we continue to expand at our drilling efforts further into our large acreage division that we're going to see consistent results.

Looking at what's on the key for the rest of the year, in the Marcellus. We have 18 horizontals yet spread and we'll get those wells started over the second half of the year. We also have 13 wells, seven of those being horizontal waiting on completion and oil pipeline hooker. This work is currently underway and we will release results as we caught a few wells together for one link.

We also reported an excellent vertical well completion being the key of fit. Many might wonder why we will bring up and discussing the Teel 6 well, this would have demonstrate exceptional potential in a coming upper and lower Marcellus completion, using our latest thinking in stimulation technology, that's completion seems to have accessed the entire Marcellus inner well, over 370 feet including the Marcellus -- the Purcell Limestone.

We view review as a potential game changer. I realize that's the strong comment. However, as a -- we have a controlling acreage position in Susquehanna, yet some areas we have acreage where we are not able to properly space horizontal well. Vertical wells maybe the only way to develop some of these laces. We are confident that significant production results and returns can be obtained through vertical completions.

Another point where gain momentum continue to improve as monetizing Marcellus production, which we think will continue to be a challenge for some, but certainly not for Cabot. Physical takeaway as increased over 100 million per day from the Teel station. We're also expending that capacity with the build out of our LIFO (ph) compressor stations, several miles up strength.

This stations when completed like next year will add an incremental 165 million cubic foot per day of capacity from Cabot's acreage. These incremental volumes will ramp up during the year as drilling success -- sales our production volume. Pipeline build up continues on schedule and will reach 12 to say 15 miles in new pipe in the ground by year-end.

We're currently in profit at permitting a eye (ph) way for our 2210 program. All in all, we think we're well ahead again in securing the necessary capacity to move on Marcellus gas.

Now lets move to East Texas, as we stated in the first quarter call, we adjusted the program, tried new ideas and evaluate the best return projects. To that end last night we announced results from two of these ideas, the Cotton Valley Taylor sand horizontal pet and the Pettet Lime horizontal oil test.

Cotton Valley Taylor sand horizontal well shows the potential we have remaining on our Minden acreage. We recognized early that a current gas prices to Cotton Valley vertical program do not provide us sufficient returns suggested by large drilling program. We evaluated the feasibility of drilling horizontal drilling horizontally in our well of Valley Taylor sand in the Minden area.

The obvious strength of this initial well certainly gives us a level of confidence that we can go for with a horizontal development plan for this field. To that end, we identified about 50 to 60 additional horizontal locations in the future.

However, even with this Taylor success, we still believe there is significant upside remaining in the Haynesville Lime under the Minden field area and we will drill our second horizontal Haynesville Lime test this fall.

Additionally, we are keeping a close watch in gathering the data from some of our competitors as they develop the Haynesville shale near our acreage. Those success suggest that the Eastern portion of our Minden acreage certainly has the Haynesville shale potential. That is County Line project started at several years ago when we bought the prospects as a Pettet Lime prospect and our initial wells in 2006 tested that Limestone unit above we found the overlying James Lime to have superior returns during the time of higher gas prices. Certainly which we hope will return soon. It can be subsequently focused only the James Lime and we've been successfully with that horizontal program.

Now with the divergence of oil and gas prices, all make sense and these two recent wells which we putted on last night release, highlight that positive impact. Both wells have held up extremely well and confirmed to the company that a Pettet oilfield underlies our James play, we have over 70,000 acres of Pettet Lime and we believe the Pettet reservoir underlies most of this acreage. We have mapped over 200 potential locations and will be developing these reserves going forward.

A fact that most of these wells will be drilled from current James pet site, well only enhanced the returns. We are currently drilling the third Pettet horizontal well and plan to expand our activity for the remainder of this year and into 2010 if oil prices remain where they are.

As mentioned earlier, we have also begun our first participation to exploit the Haynesville shale under our East Texas acreage. We have formed four separate AMS with active Haynesville players involving a small portion of our acreage position. Two of these wells are underway. We have a 42% working interest in the first well and we asked that to keep just in overall royalty interest in the second well. We'll gather all the data from both well.

We will not see results though, premier of these wells until early in the fourth quarter. the other two AMI wells were not spread until later this year. We're hopeful that all will be successful as suggested by recent releases from the area by their operations. It's not only add sales up for significant growth in 2010 on a 100% Cabot acreage offsetting these well.

Speaking of 2010, we are in the process of starting a formal budget process for the year, I think we can share that we will be focusing on that most problems again the Marcellus play and a various plays we are working on in East Texas.

The takeaway will be that we will be expanding our horizontal drilling in the Marcellus, plus continuing to evaluate the Haynesville shale in our County Lime area and continue the develop the Pettet and Taylor initiatives, we have established so far this year.

On a final note, we are very pleased with the progress of our consolidation effort. The new management team including promotions of Bill (ph) VP of our North region and Matt Ray, VP of our South region are on the ground in both regions and we are already seeing intangible bad debts to the change. We plan to have our new office open in Pittsburg sometime in September, and test plays that maybe we will have some hiccups along the way but so far the transition it's going very well.

While I'd like add a stronger and near-term loans for natural gas prices, I am pleased with our competitive position and the opportunities that we put together for our shareholders. As far as natural gas prices are concerned natural gas, I think has all the facts in it's favor, has an abundant supply, improve in delivery system. It is an efficient and clean energy source and there is an existing infrastructure available today to displace a large portion of power generation provided by coal. I have to admit the coal lobby has managed an effective campaign to-date at the detriment of natural gas and I do believe natural gas will get its day in the sun regarding demand at some point in the near future. In the meantime, we will continue to conduct our business prudently and will reap the opportunities made available to us.

With that Kristy, I'll be happy to answer any questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Michael Hall with Stifel Nicolaus.

Michael Hall - Stifel Nicolaus

Thanks. Congrats on a solid quarter.

Dan Dinges

Thanks Mike.

Michael Hall - Stifel Nicolaus

Just trying to kind of gauge a little bit or in terms of expectations in 2010, just trying to think year-end how many fit for purpose rigs you think you are targeting for the Marcellus at this point?

Dan Dinges

At year end...

Michael Hall - Stifel Nicolaus

2009, I'm sorry coming into 2010.

Dan Dinges

Okay. We would hope to have five on contract by the end of the year.

Michael Hall - Stifel Nicolaus

Okay. And you had talked about potential wanting to add some in 2010, any thoughts on how many of you looking to have?

Dan Dinges

Yeah, we'll had a two or three more fit for purpose rigs.

Michael Hall - Stifel Nicolaus

Okay. And so then with that fleet do you think what sort of well comps you think are reasonable to think about for 2010 horizontal Marcellus wells is that a 75 wells, 100 wells what do you think is reasonably?

Dan Dinges

We're working on that right now as I was getting granular on our 2010 program we'll come out of that in October.

Michael Hall - Stifel Nicolaus

Do you think that ballpark is anywhere? Am I in the ballpark or is that...?

Dan Dinges

I'll catch at this way Mike that we don't have -- will have more horizontal wells in 2010 that we're drilling this year.

Michael Hall - Stifel Nicolaus

Okay. That's fair.

Dan Dinges

The reason I can't get the exact with it is, we're going to have X amount of cash flow. I think its prudent within cash flow. We have other opportunities there and another initiatives within the company and we haven't made that decision yet on the exact amount we're going back to the North with people we have, how efficiently we can move with people we have up there and all the other opportunities we have within the company.

Michael Hall - Stifel Nicolaus

Okay. Fair enough. In terms of cost results to-date in the Marcellus -- what are the average cost looking like your horizontal thus far?

Dan Dinges

I'll let Mike pickup with that.

Michael Hall - Stifel Nicolaus

Thanks.

Michael Walen

Yeah Mike, we're -- right now we're in about a 33 to 35 range currently. We're working that real cost down and there is new larger rigs are really shown as improvement and I am still hoping that we're going to be able to get our cost down to the 3 million or 3.2 million range in the near future.

Michael Hall - Stifel Nicolaus

Pretty impressive. What sort of laterals are you averaging at this point?

Michael Walen

Right now, we're between three and 4,000 feet, these larger rigs -- as far as 5,000 feet and will be low in about or probably 10 fracs per horizontal leg on the average that maybe a little bit more in some wells rest in others.

Michael Hall - Stifel Nicolaus

Okay, great. Couple of last ones, in terms of think about -- how much that is and maybe this has been covered in the past? How much of that you think is limited to vertical development?

Dan Dinges

No. Vertical development is a small portion.

Michael Hall - Stifel Nicolaus

Okay.

Dan Dinges

Of our overall program but and again we have -- with this Teel 6 well I've had an opportunity to twig it a little bit more, with this and the frac and frankly if you look at the yield in where we have significant yields with the horizontal wells. This vertical wells yield right now is equivalent to horizontal well.

Michael Hall - Stifel Nicolaus

Okay. So what were the cost on that most recent vertical.

Dan Dinges

1.4

Michael Hall - Stifel Nicolaus

Okay. And so did you stimulate the Limestone or is that just flowing naturally?

Dan Dinges

Yeah we feel like we with the fracs that we put in at our horizontal -- we certainly did propagate into the Marcellus. I mean the Purcell.

Michael Hall - Stifel Nicolaus

The Purcell, okay. All right. And then last one, do you think its reasonable to expect kind of production, total corporate production acceleration relative to 2009 and 2010 or is it too early that to comment?

Dan Dinges

We fully expect that as we gain momentum in our respective areas that you expect that we expect continue momentum in the production increases.

Michael Hall - Stifel Nicolaus

Okay. All right. Thanks very much. Congrats again.

Dan Dinges

Thanks.

Operator

Your next question comes from Jack Aydin with KeyBanc.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Good morning, guys.

Dan Dinges

Jack.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

This is for Mike, Mike I guess you have several horizontal wells on a production but so far you released the IP45, what is happening -- what happened to RF2 (ph).

Michael Walen

We have -- the other two Jack, we did have one where -- when we're frac and we had a casing party.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Okay.

Michael Walen

And we're party to all the frac energy went through the part and we just did not get any stimulation downhaul. And that was going to be patched and re-stimulated. That'll be happening as soon as we can get it put together. And then the other well is completed and producing, it just did not work out as well.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Okay. Let sequentially go to effects of the Taylor -- what was the cost of the Taylor sand well?

Michael Walen

Just an exactly a back on the Marcellus well.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Yeah.

Michael Walen

That well is doing about three to 4 million today the one that we didn't get a real good frac on.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Okay, that's not bad. Okay. The East Texas, the Taylor sand, what was the cost of that well?

Dan Dinges

Between $6.5 million.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Okay. How about the Pettet test?

Dan Dinges

They were the same as our James well. They're running $3.2 million.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Where would you estimate that you are on the budget?

Dan Dinges

We really haven't -- we don't have enough light yet Jack to mark a good number there. We're still part of these data and coming up to a number there. So, we're a little bit early.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Is this the first time we have oil in that area because I guess we thought was that is a gas play now it's turning to oil play it is very interesting, could you comment a little bit on it?

Dan Dinges

As you recall, a number of years ago our initial wells were Pettet vertical and Pettet horizontal that we made oil out of both wells at modest rates. We didn't complete it like we are today. But during that time period, we also found James to be extremely prolific. But we always knew the Pettet was under the James field and just because now of the economic difference in the oil versus gas it just became much more attractive to us. So we went back in and drilled our next two wells just to confirm the initial ideas and it seemed to have is working out well.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Good, thanks. I'll let somebody ask maybe I'll come back. Thanks.

Operator

Your next question comes from the line of Michael Jacob for Tudor Pickering Hold.

Mike Jacobs - Tudor Pickering

Good morning, everyone and congrats on a good quarter.

Dan Dinges

Thanks Michael.

Mike Jacobs - Tudor Pickering

Want to dive into the Marcellus and Teel well speaks for itself and we definitely want to circle back and do a postmortem on Jack's question, but interested in the numbers six vertical well and kind of what you wanted in stimulating the upper Marcellus, lower Marcellus and Purcell alignment. Kind of your thoughts while accessing the entire inner well horizontal and what are possible completion techniques and what are the risks?

Dan Dinges

Well I'll start and I'll flip it over to Mike. One thing that we're trying to measure right now is in our for example our horizontal wells, we're drilling laterally through the -- under the Purcell Lime in the lower Marcellus. Frac in the wells, we're trying to determine the best we can right now and have continue and we'll continue to run test to determine the effectiveness of the frac propagation approved to Purcell Lime into the upper Marcellus.

And when we have a large as we mentioned, a very large thick gross inner well, the 370 feet we mentioned was from the top of the first, to the base of the first. And so we're trying to determine the frac propagation and just with our stimulus of this vertical well, we had some good prop pressures and I'll let Mike get into that, that we think we have effectively stimulated the entire gross inner well...

Michael Walen

Great, Mike. We have -- Dan said, we opened up the entire section of the Marcellus and we have changed up our preparation patterns, somewhat different from the past. We've also changed that somewhat our pump rates. And I think that those two elements have certainly changed the behavior of the well and the macro size that we've run on earlier wells but just have these fracs propagate up and down through the Purcell and we just think by opening up so many above and below the Purcell that we also access that.

I think that what this well shows it does that and I think it confirms that the upper Marcellus and the Purcell is probably as prospective going forward as the lower Marcellus where the majority of our -- all of our horizontal wells are completed.

Mike Jacobs - Tudor Pickering

That's helpful. With the five wells that are on production now and those five wells getting incrementally better and what are those recoveries over the first six months in averaging?

Michael Walen

Well, I don't have that right in front of me. I know that we all are, one of our wells we are a matter of days away from being produced aiming our first Bcf from one well and last day matter of days, I'm talking about probably five to 10 days that will be the first well that we can, a Bcf. As I've mentioned to you regarding the Teel 8, we brought that well on in June and we've seen in the 10 days to 14 days will have teamed a half of Bcf. So, we have seen some very good teams.

Mike Jacobs - Tudor Pickering

So, kind of a zero refining a completion techniques and you talked from price early end. It seems like now you came over two months. When we think about a 3.5 before 4b well that seems half of the over six months. How does that make you think about for lower coverage

Dan Dinges

Positively.

Mike Jacobs - Tudor Pickering

Okay. And then just kind of the -- I guess the postmortem on Jack's and then I'll hop off the low that was 3 to 4 million a day and when you go back and you look at where you place -- may be can you talk about less in incremental well...

Dan Dinges

It was design as a seven stage frac and we were effective on three other stages. And for mechanical reasons and whatever reasons.

Mike Jacobs - Tudor Pickering

Okay, great. Thank you.

Operator

Your next question comes from Ellen Hannan with Weeden and Company.

Ellen Hannan - Weeden and Company

Hi, good morning. I think Jack asked probably our most critical questions, but this is a couple follow-up, when you talk about the potential EUR's on the Pettet oil wells and it may be too early, is it too early to think that the EUR would be sustained with the James Lime on BLE basis?

Michael Walen

Ellen, this is Mike. That is exactly how we see a model. Okay.

Ellen Hannan - Weeden and Company

All right.

Michael Walen

And we don't know what a number might be give us a few months of production history and to where we see where they start to roll over, they will have a much better feel on what it takes to be. But I think the takeaway though is that we're selling gas for $4 and we're selling oil for $67 and the economic benefit of the oil wells is much greater than a gas well right now.

Ellen Hannan - Weeden and Company

Right. Thanks. That's good. Just one other follow-up, not on that but on the Haynesville, you talked about the four separate AMIs that have been formed and you got two wells drilling in one. Could you just give us a little color on are you just promoting in for drilling cost or and how much of your acreage has been devoted to the AMI?

Dan Dinges

We impact the drilling in two totally separate areas. These wells are gladly a few miles apart. The one we're participating with 42% interest is a rest offset to -- and includes some of our Western acreage in our County Line area and the other it is a South East offset which includes some of our acreage that we have contributed to the unit, but we elected at this time to make a deal on acreage and retain an override and get the information from the well. So they're so we are going to have information both West and Southeast of our County Line acreage.

Ellen Hannan - Weeden and Company

And then presumably that means you've said that two others separate AMIs where you currently not drilling or you have not formed those yet?

Michael Walen

No. Ellen, this is Mike. We have formed the AMIs on the other two wells and they'll be spud in those wells or later on this year and just been clear. These are AMIs where we've contributed acreage, there is no promote if you will. If there is a 1000 acre AMI and we put in 400 acres then we have a 40% interest in the well. So it just the way of spreading the risk around little bit and we're talking acreage here in probably less than 2000 acres of Cabot leasehold involved in these AMI.

Ellen Hannan - Weeden and Company

Okay. Great. Thank you.

Operator

Your next question comes from Brian Singer with Goldman Sachs.

Brian Singer - Goldman Sachs

Thank you. Good morning.

Dan Dinges

Good morning, Brian.

Brian Singer - Goldman Sachs

Going back to Teel 8H. When we put this into context the rate that you got, there was anything unique that you did in terms of your frac technique or any unique theological characteristics that you believe was responsible for the higher rates or how do you think about the reputably characteristics if at all?

Brian Singer - Goldman Sachs

Well, yeah, we did we are just like every operator does continue to try to tweet the fracs in our technique to see if we can enhance and we did do couple of things a little bit different on this well and we think it is repeatable, geologically we think we're in the same section that we have in nothing unique geologically than we've seen in the rest of the wells.

Brian Singer - Goldman Sachs

Okay and then moving to the vertical well, also putting into context when you think about the ability to tap the various the Purcell and the various Marcellus, did this make you want to do more of these relative to horizontals or I guess how do you think about the future development within Susquehanna vertically versus horizontally?

Dan Dinges

Well, we're going to be working at the returns on both types of wells because in our program between now and end of the year, we have some vertical wells we have to drill because we don't have room to put horizontals and we have the horizontal wells that we've discussed between then and end of the year. We're going to look at the returns -- we're going to look at how those returns affect not only the rate return but also our reserve replacement, our production profile and look at all of the things that would go into determining how many horizontals we drill versus vertical wells.

But if you said that you could repeat the vertical well identically to the Teel 6 and you repeat the 8H well, the horizontal well, also identically like that. Both are yielding extremely good returns and so what make sense on a go forward basis is that's where you run your numbers. I know that's not a direct answer but we're going to be evaluating -- we're just very pleased and that's why we made the comment about this could give us a lot of optionality with this completion of this vertical well.

Brian Singer - Goldman Sachs

No that's helpful. Thanks. Then, I guess lastly I think you mentioned in your comments that you thought that you would 13 wells waiting on completion in the Marcellus and some of that was due to infrastructure and some of that was just maybe do more to the fracs environment. Can you provide a little more color on how much would be infrastructure constraints versus just waiting for a better gas price environment and what gas price environment that might be?

Dan Dinges

Brian, I'm searching wells that are right now in completion or hook up. We're moving forward with those we're not, we are not waiting on gas prices on any of those. We're going to continue moving forward. We have -- there is a and I'll let Mike go into it in a slight bit more detail but we do have a permit or a stream or credit cost and permit which is section 105 type permit that requires us to get that approval before can converse a stream with our lines going out into the -- into our acreage position.

We feel comfortable with that all of us, the timings of getting well permits and all the permits that are necessary, there has been some delays in getting some of these credit constraint cost and with that uncertainty know we're going to get a -- we will we just hedge a little bit on the timing when we're going to be able to complete it.

Dan Dinges

Yeah, Brian. We just had two wells that are wait on this permit, out of those 13. And the permit was post to here this week they give us some we probably waiting for until next week to get that permit. So it's a bit of a delay but nothing really significant.

Brian Singer - Goldman Sachs

Thank you.

Operator

Our next question comes from Biju Perincheril from Jefferies.

Biju Perincheril - Jefferies

Hi. Good morning. Couple of quick good question, it looks like you are on-track to draw 30 or 35 horizontal wells this year in the Marcellus that you spent on many. How many of that could get completed this year?

Dan Dinges

Excuse me Biju. That gas will be 20, 22 completed in our line by the end of the year.

Biju Perincheril - Jefferies

Okay. When should the gas would accelerate the actively that be with on the Marcellus?

Dan Dinges

Well, we've put that we've kind of coming of that with our guidance right now.

Biju Perincheril - Jefferies

Okay. And then the wells that have been gross but not completed you would booked on as prove undeveloped or with those -- both those PD&P.

Dan Dinges

Those would be until bring on line (ph).

Biju Perincheril - Jefferies

Okay. Got it. And then I'm not surely if you talked about this already but how many more horizontal Taylor wells are you planning this year at Minden?

Dan Dinges

Well, we just got the result of that one. We've allocated our capital. We put in some money for that particular well. So we've allocated a capital to the Marcellus and we're talking about this Pettet wells right now, we're going to watch that well and we've also increased, contraction our capital to participate in these Haynesville shale wells that we're reforming with these AMI's, so we really don't have right now, we really don't have any other tailor horizontals schedule just because of the cash flow staying within cash flow.

Biju Perincheril - Jefferies

Okay. And then going back to that that is flowing 3 or 4 million a day, you only need to complete 3 or 4 stages was that a mechanical issue or something what the lock that you're going to get the price initiated?

Dan Dinges

Well we're still looking at it, we couldn't on several tracks, we couldn't -- we couldn't break it down and we're evaluating exactly the reasons why that happened. But in drilling anything different we just we're valuating that right now.

Biju Perincheril - Jefferies

Okay. That's all I had. Thank you.

Dan Dinges

All right, thank you.

Operator

Your next question comes from David Dechobam with UBS.

David Dechobam - UBS Securities

Good morning, guys.

Dan Dinges

Good morning.

David Dechobam - UBS Securities

First to the couple -- a little bit more granular detail follow up question on the Teel 8H if you talk about just the casing that was used and the casing pressure there?

Dan Dinges

We're using a 4.5-inch screen with the external packers pipe technology, where we'll adopt all and fresh rep and open up the sleeve. And then we frac to the sleeves and the pressure is are up in the -- up to as high as 95,00 pounds pumping pressure. So its pretty high pressure environment for our fracs.

David Dechobam - UBS Securities

Certainly. Thank you. And -- just take a birds eye view now when you think about the lower CapEx program this year versus last year. How do you guys look at reserved bookings this year in relation to 2008 considering a greater activity with horizontal well?

Dan Dinges

David, that's going to be little early for us to make that projection, I'm just not comfortable doing it. We're comfortable, we're going to have a good reserve replacement, I'm just not prepared to say where it is at this time.

David Dechobam - UBS Securities

Well, thank you guys.

Dan Dinges

Thank you.

Operator

Your next question comes from Ken Carroll with Johnson Rice.

Ken Carroll - Johnson Rice

Just real quick on the Teel 6 through that vertical well, what was the cost for that well? And if you might talk about expecting EURs on that?

Dan Dinges

They'll have the EURs, it's a little bit early for that but the cost to the well was 1.4 completely.

Ken Carroll - Johnson Rice

1.4 completely, okay. There's no question. Thanks guys.

Dan Dinges

Thanks, Ken.

Operator

And we have follow-up question from Jack Aydin.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

If you look at -- if you would to do a tight curve on five-six of those well that you have in Haynesville and Marcellus, and you had a resource potential over there based on the experience now what would be your biases going forward on those -- on the resource potential?

Dan Dinges

Are you talking about curve fit as far as the biased on EUR or something like that or...

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

EUR, its potential in Appalachia in resource potential for your company.

Dan Dinges

That's Tcf right now and as we've talked about Jack our -- the results so far had exceeded our expectations and we will kind of a four to six Tcf is kind of where we are right now but we've been very pleased with what we're seeing in the curve fits we have, and we're seeing right now our pretty going good.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Okay. So your prices will be higher I assume?

Dan Dinges

Yes.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Okay. Did you guys do a -- you or Mike could you comment on it? Or would you publish it?

Dan Dinges

Well, we have published a type curve. We have -- we've seen a couple of type curves out there what we want to say Jack with keep in mind our sample approval is seven wells right now. And what we get a sample approval that I think it has a which is a good sample approval a large in our class then we are going to publish that, I think it's been misleading if we presented a sample approval right now, I mean a type occur right now with only seven wells, I just don't think that gives a -- a good reflection of the entire acreage position I'd like to see to have 20 wells and here is a type curve now that fits and that all our engineers are comfortable with.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

One more question before I, would you consider this, now is dearest and on full development if that the case what kinds of development 80 acres, 50 acres I am doing 20 acres development stage?

Dan Dinges

Now we're still walking with that we're still getting information. We're still in micro size work out there. We're still tweeting the type of to determine how far rail extends we want, how much horizontal and vertical propagation we get to arrive at just exactly Jack the point you are talking about. And we're trying to get that information as quick as we can so we can effectively space into. We don't leave any un-drilled acreage behind.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

One more. I assume that from the CapEx level and currency is old your SND cost should be below year ago. Is it set of function?

Dan Dinges

I can answer your question. Yes.

Jack Aydin - KeyBanc Capital Mkts/Mcdonald

Okay. Thanks.

Dan Dinges

Sorry Jack that's all I have. Bye

Operator

And we have a follow up question from Michael Hall, Stifel Nicolas.

Michael Hall - Stifel Nicolaus

Thanks. Just quickly, any updates on what you are working towards on developments on trade wood is regular guidance in Heinz Villa.

Dan Dinges

Well, we cant follow up back on the question of drilling additional planner horizontal wells in. We have capacity on our available cash and right now trade with we have because of our rig situation we have given up a just a couple of the shallow drivers peak wells. And what we're doing along with our ongoing study of the deeper session in Tread way.

Michael Hall - Stifel Nicolaus

Okay. And what if you had an extra $100 million, how would you allocate that among your various, between your various opportunities right now?

Dan Dinges

Similarly what were doing right now,

Michael Hall - Stifel Nicolaus

Marcellus first?

Dan Dinges

So, we're seeing, we're seeing superior returns to every well economic and correct debt that we can see not only but in industry, we are composition to where we are allocating capital and that's p in the year of Marcellus right now.

Michael Hall - Stifel Nicolaus

Okay. And then on the Marcellus, when you talked about looking for additional term capacity, any quantification of how much you're looking for from timing?

Dan Dinges

Well, yes good question Mike and I'll turn that over to Jeff Hutton who's our VP of Marketing, he's been made the pavement and just looking at that entire market down stream

Jeffrey Hutton

Yes, Mike. Of course we have a $100 million day currently over we'll have a 100 million that's currently have a downstream pump excuse me, back over full capacity. We're talking with a number to markets which is actually very exciting, the minimal markets in New York and Jersey are all very excited about the Marcellus and particularly the Marcellus play that we have its closer to those particular market areas, we are working with them on downstream capacity, there's a number of different proposed pipeline projects in the Marcellus area and Pennsylvania that may offer us a different from downstream capacity is number of moving pieces right now but it looks like it all come together here pretty soon.

Michael Hall - Stifel Nicolaus

Okay. Appreciate and so are you limited by your firm or any physical or how should I think about that?

Dan Dinges

No. We currently, we've not had any invitations on moving gas out of County.

Michael Hall - Stifel Nicolaus

Okay. That's helpful. Appreciate it. Thank you.

Dan Dinges

Thanks, Mike.

Operator

There are no further questions at this time.

Dan Dinges

Okay. Thank you Kristy. I appreciate everybody listening to this in a conference call. We have a large program and hopefully our next call is going to be equally as successful. Again thanks of your interest and support.

Operator

This concludes today's conference call. You may now disconnect.

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