Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list
Natural Gas

Appalachia producers risk crackup if gas output keeps growing: Cabot CEO

Biofuels | Electric Power | Renewables | Natural Gas | Natural Gas (North American) | Oil | Crude Oil | Coronavirus

Can Congress find room for fossil fuels and green incentives in stimulus talks?

LNG | Natural Gas | NGL

Platts LNG Alert

Capital Markets | Commodities | Electric Power | Natural Gas

Mexican Energy Conference, 24th

Natural Gas | Oil | Petrochemicals | Olefins

Iran to halt condensates exports to make more gasoline, petchem feedstocks at home

Appalachia producers risk crackup if gas output keeps growing: Cabot CEO

Highlights

Company cutting spending 27% from 2019 level

'We're going to be the last man standing,' Dinges says

New York — The head of one of Appalachia's largest shale gas producers said the region's drillers are heading for a crackup if they keep producing more gas in the face of the current low commodity prices.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

"I have a hard time rationalizing why industry is growing into the market today," Cabot Oil & Gas Chairman and CEO Dan Dinges told analysts on the company's fourth-quarter 2019 earnings call Friday. "I do think ... rationalization is going to have to prevail in this market that's not sustainable, and the balance sheets are not sustainable out there."

"I don't know why anybody would be drilling wells ... as a growth measure into this market," Dinges said.

Cabot is dialing back its 2020 capital spending to $575 million, a 27% drop from 2019, and will be laying down one of its three rigs in March. Cabot's guidance for the first quarter calls for roughly 2.375 Bcfe/d of natural gas production, 3% less than the fourth quarter of 2019.

The driller, which said it generates positive cash flows at $2/Mcf gas prices, is ready to clip its activity further if prices stay low, Dinges said. "We are at a maintenance level of capital because we don't think it is prudent to drill up all your core inventory and push it out at a losing proposition."

"The company continues to analyze the outlook for the natural gas markets in 2020 and beyond, and is prepared to reduce capital spending further if market conditions warrant it," the company said in its earnings release.

"Given the strong contango in the natural gas forward curve, this capex and production cadence works in [Cabot's] favor," Stifel Nicolaus & Co. shale gas analyst Jane Trotsenko told her clients before the call. "What is incremental in today's press release is that the company would consider reducing capital spending further should market conditions justify it."

Cabot reported realizing $2.15/Mcf for its gas production in Q4, a 31% drop from the same period a year ago, while still generating free cash flows of $109.5 million and adjusted income of $120.8 million, or 30 cents per share, a 55% drop from Q4 2018 and just under analysts' expectations.

Dinges reiterated Cabot's intention to use 50% of the free cash flow to pay dividends with some of the remaining 50% used to retire some of Cabot's debt. He steered clear of any discussion of using the extra cash to buy assets in a market where many other producers are trying to unload assets to fix their balance sheets.

"To have an M&A transaction, it's just cumbersome," Dinges said. "Trying to make that come together to get all the stars lined up all at one time, it's a difficult proposition. That's why it's not done every day."

"We're going to be the last man standing, and we're going to take advantage of our position, maintain our balance sheet, serve our shareholders, hopefully in a way that the long-term shareholders would appreciate," Dinges added.