Tuesday, November 2, 2010

Cabot Seeking JV Partner in Haynesville

Cabot Oil & Gas reported its earnings last week.  As with most other companies, Cabot didn't spend a lot of time talking about its Haynesville operations.  Dry gas has become very unpopular - oh, how things have changed!

By my tally, Cabot hasn't operated a rig in the Haynesville Shale since May 2010, but the company is still obligated to spend money on non-operated wells in which it owns a working interest.  The company has a 10-20% interest in 16 non-operated wells in various stages of drilling or completion.  As with everyone else, Cabot is seeing higher costs, especially from pressure pumping.  As a result, Cabot is seeking a  33% working interest joint venture partner for its Haynesville interests to help bear the load.  The company is already in discussions with unnamed parties and has a bid deadline of December 15.

It will be interesting to see who signs up and what kind of terms they negotiate.  Cabot has bigger fish to fry these days, so the market likely will punish the company if it pays too much attention to the Haynesville.  At first blush, it doesn't seem that Cabot has much negotiating power, but now that financial investors increasingly are in the mix, there may be enhanced competition for these kinds of deals.

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