Investors Business Daily
IBD Industry Themes

Friday, February 24, 2012

Cabot Oil & Gas (COG) on Wednesday announced plans for a joint venture with Williams Partners (WPZ) for a large-diameter pipeline capable of moving 500,000 cubic feet of gas per day from Marcellus fields in northeast Pennsylvania to markets in New York and New England. The target service date: March 2015.

The move is the latest step by energy producers in Pennsylvania's Marcellus shale region to deal with a growing backlog of halted wells. A Feb. 17 report from Bentek Energy estimated that more than 1,000 drilled wells, many of which are ready and able to produce, were sitting idle in northeastern Pennsylvania.

Drilling cutbacks announced through Feb. 17 by companies like Chesapeake Energy (CHK) and Talisman Energy (TLM) suggest a 14% reduction in drilling activity in northeastern Pennsylvania, according to Bentek. The region is a focal point for cutbacks because the geology produces almost entirely "dry" natural gas, rather than the higher priced gas liquids, including ethane and propane.

The result has been a significant falloff in drilling work in portions of Pennsylvania's Bradford, Susquehanna and Tioga counties. But Bentek senior energy analyst Jennifer Robinson said output from the current backlog of wells would likely fuel near-term production growth, in spite of any cutbacks in drilling activity.

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