Cabot gets 'robust' price for Pearsall Shale acreage
ogfj.com
June 22, 2012
By Mikaila Adams
Senior Associate Editor
Initial results in the Pearsall Shale have been encouraging, noted Jefferies & Co. Inc. following the news of Houston-based Cabot Oil & Gas’s (COG) sale of a 35% non-operated working interest in the play to a subsidiary of Japan’s Osaka Gas Co. Ltd.
The sale of roughly 50,000 net acres leased by Cabot in Atascosa, Frio, La Salle, and Zavala counties in South Texas for $250 million sets an implied price of $14,000 per acre and “may be a sign of greater conviction than can be supported by publicly available data,” the analysts said.
This price, noted Jefferies, “works out to just under $14,000 assuming discount of 2013 carry at 10%, which is very robust, in our view, given the play is still in a proof of concept phase. Cabot has not completed any Pearsall wells yet, but has logged the section in a couple of verticals. Offset operators in northeast LaSalle have reported rates as high as 1200- 1775 boe/d with 450- 740 boe/d of condensate. COG estimates post-processing EUR split could be 25-30% condensate and 35-40% NGLs over its life.”
Under the agreement Osaka will pay $125 million in cash to Cabot at closing and will pay an additional $125 million to carry 85% of Cabot's share of future drilling costs in the Pearsall Shale. The drilling carry is expected to be fully utilized by year-end 2013 based on current drilling plans. Initial plans call for two rigs to operate under the JV with drilling commencing in July 2012. A third rig will be added to the drilling program during 2013 and a fourth rig will be added in 2014. Cabot will retain its lease rights above the Pearsall, including the Eagle Ford Shale formation.
In a statement, Dan O. Dinges, Cabot's chairman, president, and CEO, commented, " We believe the Pearsall Shale could prove to be an additional liquids-rich catalyst in our portfolio and are pleased with the results we have seen to date--both internally and from neighboring peers. This transaction will provide the capital necessary to accelerate drilling of this formation, while still maintaining Cabot's 100% interest in our Eagle Ford leasehold." |
