Appalachian shale driller Cabot Oil & Gas Corp. is selling its Eagle Ford crude oil position to Venado Oil & Gas, LLC for $765 million and will keep its focus on its Marcellus Shale dry gas position, the producer announced late Dec. 20.
The sale, combined with an earlier sale of older West Virginia leases and a small East Texas leasehold, will cut Cabot's production costs by 20%, the company said. The operating savings and sale proceeds will go toward funding growth in the Marcellus, exploration of two unidentified frontier plays, and returning some cash to shareholders through dividend increases and stock buybacks, Cabot said.
Low oil prices prompted Cabot to make the Eagle Ford sale, CEO Dan Dinges said in a statement. "In a higher oil price environment, the Eagle Ford Shale assets were a nice complement to our Marcellus Shale position and provided capital allocation optionality," Dinges said. "However, based on our current outlook for the oil markets and the resulting rates of return from these assets relative to our Marcellus Shale returns, we did not plan to allocate any incremental capital to the Eagle Ford Shale."
Cabot will take a noncash charge writing down the value of the Eagle Ford leasehold by roughly $275 million, the company said.
The Eagle Ford sale will save Cabot between $125 million and $150 million in operating expenses in 2018, the company said. This updated its guidance, dropping anticipated capital spending from just over $1 billion to just below $1 billion.
The Eagle Ford sale is expected to close in the first quarter of 2018 and includes 74,500 net acres of leasehold, 65,100 acres of which are operated, with 15,656 barrels of oil equivalent per day of production. The East Texas sale is expected to close July 1, 2018.
