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Richard Zeits

 
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  • Cabot Oil & Gas: A Stranded Giant [View article]
    Dnpvd51,

    Cabot clearly did not go from 0 to 100 wells/year in one day. The ramp up has been gradual. Also, they have accumulated an inventory of wells that are waiting on completion (most of which is a normal operational requirement due to pad drilling and normal completion time).
    Jul 30, 2014. 02:02 PM | 2 Likes Like |Link to Comment
  • Sanchez Energy: Critical Mass In The Eagle Ford [View article]
    Don, Well said.
    Jul 29, 2014. 04:43 PM | 1 Like Like |Link to Comment
  • Sanchez Energy: Critical Mass In The Eagle Ford [View article]
    Publomike,

    I am afraid you are missing two elements. First, oil/condensate is only ~25% of the production stream. Second, production declines fairly rapidly. The property was producing just 20,000 boe/d in June, I believe.

    I would still think of it on an incremental well basis for economics. One would drill a new well if the expected rate of return is attractive.
    Jul 29, 2014. 03:42 PM | 2 Likes Like |Link to Comment
  • Cabot Oil & Gas: A Stranded Giant [View article]
    Pablomike,

    Just imagine that some of the hedges were struck at $4 on Nymex and the actual settlement was $5.25.
    Jul 29, 2014. 10:42 AM | 2 Likes Like |Link to Comment
  • Cabot Oil & Gas: A Stranded Giant [View article]
    Jion,

    The STO transaction you refer to is actually in a different area. I believe I profiled that transaction at the time it was announced here on SA.

    In Susquehanna, STO in fact sold part of its acreage to SWN but continues to hold another portion in Susquehanna/Bradford alongside CHK.
    Jul 29, 2014. 08:10 AM | 1 Like Like |Link to Comment
  • Cabot Oil & Gas: A Stranded Giant [View article]
    Dnpvd51,

    On the Marcellus reserves, I just take producers' estimates from their presentations and add them up. Just my personal approach, but I tend to believe what they say. Not all that gas, of course, will "work" at $4 Nymex. However, once we run out of gas contained in sweet spots, operators will begin selling gas at $5, and Tier 1 gas will become profitable. Than at $6, etc. It is a gradual process though that may take years. In the meantime, the Marcellus region is producing 15 Bcf/d (i.e., over 5 Tcf every year) and is growing at 3 Bcf/d every year. At this rate, in five years the Marcellus region will have produced 38 Tcf and will have a massive tail of natural declines (perhaps another 38 Tcf) behind that.

    Importantly, in five years at the current pace of drilling there will sill be a lot of locations to drill.

    This is a big field. I also think of "Marcellus/Utica" as a single producing region with many productive zones.

    On Cabot's profitability. Let's just go through the Marcellus math together. They sell at Nymex less Marcellus basis, let's call it $3 for simplicity. Then they pay gathering (including compression), LOE, field G&A, and severance taxes. Let's call it $1.15. Their netback is $1.85. Now they have to replenish their gas produced. They drill a 17 Bcf well, with ~82% NRI, for ~$7 million. This equates to $0.50. So in a simplistic (non-GAAP) way, they make a $1.35/Mcf profit at $4 Nymex. Then we need to subtract corporate-level expenses, i.e. G&A. Let's call it another $0.10. $1.25 net, before interest and income taxes. Interest is a discretionary decision, so I tend to ignore it completely. Taxes are not going to be paid for awhile and therefore are dramatically reduced via discounting.
    Jul 28, 2014. 10:46 PM | 5 Likes Like |Link to Comment
  • Cabot Oil & Gas: A Stranded Giant [View article]
    Dnpvd51,

    I do not know who Bill Powers is, but the 50 TCF estimate looks off by an order of magnitude. Personally, I believe that Cabot's 30-40 Tcf resource potential estimate for their acreage alone is very credible. In fact, it may prove conservative in the long run. Several other operators estimate their resource potential in the same neighborhood: RRC, AR, EQT, CHK, etc. Then there are many operators with smaller but still very significant positions: NBL, CNX, Seneca, SWN, STATOIL, Chevron, Shell, XOM, UPL, APC, RICE, MHR, REXX, and a whole number of others... There is a lot of gas out there.

    With regard to COG not being profitable, I don't think it is accurate. Each of their wells is incrementally profitable (in cash terms) on average, based on their disclosure.
    Jul 28, 2014. 08:42 PM | 4 Likes Like |Link to Comment
  • Cabot Oil & Gas: A Stranded Giant [View article]
    Heisoktoday,

    Great point indeed, the Warren/Citrus deal highlights the valuation.

    Just to add my 2 cents on that specific transaction, if I recall correctly, the deal included significant developed reserves (something like 115 Bcf). If I put an $1.50/Mcf value on that, the value of PDP reserves comes out at ~$175 million. I do not know if there is any significant infrastructure or contracts attached.

    Citrus' acreage block is contiguous but small (something like 5,300 net acres, if I recall correctly) and located outside the "core of the core" area dominated by Cabot. I do not know how many identified locations remained on Citrus' acreage, but assuming 30 to 50 "virgin locations" in the Lower Marcellus (prior to aggressive downspacing), it looks like Warren paid a lot per core location.

    Cabot's well results have been vastly more impressive than Citrus.' The deal indeed speaks very much in favor of Cabot's asset value.
    Jul 28, 2014. 06:51 PM | 1 Like Like |Link to Comment
  • Cabot Oil & Gas: A Stranded Giant [View article]
    Beebaggage, great color, thank you.
    Jul 28, 2014. 06:41 PM | 1 Like Like |Link to Comment
  • Cabot Oil & Gas: A Stranded Giant [View article]
    Nick123456,

    You might be right, permitting in the Northeast is always a tricky process. I should post a more detailed note with an update on the project's progress - there are indeed many moving parts. I should also note that the project has some options to modify the route to avoid points of toughest resistance if needed.

    I do not know about 2017, but several months of delay are already baked in, in my opinion. For my modeling purposes, I am currently estimating a mid-2016 in-service date.

    Would welcome any additional insight that you might have since you are "on the ground."
    Jul 28, 2014. 04:25 PM | 1 Like Like |Link to Comment
  • Cabot Oil & Gas: A Stranded Giant [View article]
    Lambspring,

    I agree, short-term concerns vs. long-term upside is a trade-off here. And I could not agree more, the asset is truly extraordinary.

    With regard to the marketing of the stock, I personally kind of like COG's conservative posture in investor communications.
    Jul 28, 2014. 03:46 PM | 1 Like Like |Link to Comment
  • Cabot Oil & Gas: A Stranded Giant [View article]
    Beabaggage,

    Thank you for pointing out EQT's Utica effort. I just posted a note on the topic - it should be available for free viewing tomorrow morning. Just one comment - the Utica the EQT is targeting is likely to be very dry.

    To add to the energy discussion in the Northeast, here is a link to another detailed note ("The U.S. Should Build East Coast LNG Capacity"), in the event you have not seen it yet:

    http://seekingalpha.co...
    Jul 28, 2014. 03:41 PM | 3 Likes Like |Link to Comment
  • Sanchez Energy: Critical Mass In The Eagle Ford [View article]
    Scooter-Pop,

    Stranger things have happened, but I think that anyone who wanted to purchase Sanchez's largest single asset - Catarina - could do so very recently and at a very reasonable price. Given the company's asset profile, it belongs more logically in the publicly traded domain, in my opinion.

    That said, if Sanchez demonstrates a well performance turn-around in Catarina and proves up additional acreage in Marquis, the portfolio's attractiveness may improve substantially. I think we are talking of at least a year of active operations though.
    Jul 28, 2014. 02:04 PM | 3 Likes Like |Link to Comment
  • Cabot Oil & Gas: A Stranded Giant [View article]
    Scooter-pop,

    Thank you for reading. I personally think that the asset has much upside at current price and management has done an impressive job producing the highest EUR per foot. In brief, yes (even though XOM already has the XTO vehicle in its organization).
    Jul 27, 2014. 03:20 PM | 1 Like Like |Link to Comment
  • Antero Resources: Rich Valuation Represents A Risk [View article]
    Lambspring,

    This is a good point.

    Let me just note, it is almost a given that Sponsors have to stay onboard through the IPO. It is not customary for a sponsor to sell out in the IPO, even if the desire were strong. The market would look at it as a negative signal and the IPO would simply not happen. Moreover, underwriters ask for lock-ups.

    Another thought, it is very difficult to predict how long the Sponsors intend to stay invested and why. The sponsors have already made their awesome returns. New investors, who are considering whether or not to put scarce cash into the stock today, at ~$60 a share, have to think about their own risks, rewards, and motivations. Not WP's.
    Jul 26, 2014. 08:16 PM | 3 Likes Like |Link to Comment
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