Cabot Oil & Gas Corp. (COG) and Williams Partners LP (WPZ) will join forces on a new pipeline to move at least 500 million cubic feet of natural gas a day from Pennsylvania to higher-priced markets in New York and New England.
Williams will own 75 percent of the “Constitution” pipeline system, scheduled to begin operating in March 2015, according to a statement today. The pipeline will carry gas from Houston-based Cabot’s production in the Marcellus Shale of Susquehanna County, Pennsylvania, to pipelines in Schoharie County, New York.
The project will allow Cabot, which will own 25 percent, to bring its gas to markets in “the most constrained demand area in the country,” Dan O. Dinges, Cabot’s chairman and chief executive officer, said today in a conference call with investors.
“This pipeline for the future is our next major step for development of our Marcellus resource,” he said.
The Marcellus shale formation, which stretches from Canada to Kentucky, holds an estimated 141 trillion cubic feet of gas, the U.S. Energy Department said on Jan. 23.
Cabot, which has fallen 6.1 percent this year after outperforming every company in the Standard & Poor’s 500 index in 2011, has joined other producers including Chesapeake Energy Corp. in scaling back its gas drilling plans. Cabot will cut its spending on new gas wells by $100 million this year, the company said in a statement yesterday.
Falling Gas Prices
The benchmark U.S. gas price has fallen by more than 55 percent since 2008 as hydraulic fracturing, or “fracking,” has allowed companies to boost production and tap hydrocarbons in dense shale rock formations.
Cabot’s 25 percent stake in the Constitution pipeline represents a value of $175 million to $200 million, Dinges said. Williams will build, operate and maintain the pipeline, the companies said in separate statements today.
Cabot reported fourth quarter net income of $26.4 million, or $0.13 a share, compared with $49.1 million, or $0.24 a share, a year earlier, the Houston-based company said in a statement yesterday.
Cabot fell 1.7 percent to $36.01 at the close in New York. Williams, a Tulsa, Oklahoma-based master-limited partnership, rose 0.1 percent to $61.75.
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