|Cabot Oil & Gas Announces New Hedge Position; Rocky Mountains Exploration Drilling Update|
HOUSTON, Aug. 29 /PRNewswire-FirstCall/ -- Cabot Oil & Gas Corporation (NYSE: COG) today announced certain commodity derivative contracts for a portion of its anticipated 2003 oil production, along with exploration drilling results.
The Company entered into two different types of commodity hedging activities. The first trade involves the use of a "range swap" for the period January 1, 2003, through December 31, 2003. This transaction provides for a fixed price swap at $28.15 per barrel, or $3.00 higher than the current market swap price. To receive the premium swap price Cabot agreed to a "fade-out" provision, which means that if the crude oil NYMEX contract average is less than $21.00 per barrel during any single month, then these barrels receive the market price for that month. The notional quantity is 2,000 barrels per day throughout the term.
The second trade involved a "costless collar" transaction with a NYMEX equivalent floor price of $24.00 per barrel and a ceiling price of $28.50 per barrel. The notional quantity is 1,500 barrels per day for the period January 1, 2003, through June 30, 2003.
"Taking advantage of the oil price war premium is how we best categorize our latest series of hedges," stated Dan Dinges, Chairman, President and Chief Executive Officer. "Combined, these transactions cover just over one million barrels or about 35 percent of 2003 anticipated oil production. These derivatives will assist our strategy of maintaining an element of consistency in Cabot's capital program."
Separately, Cabot determined that its Wyatt Draw prospect in Wyoming was dry and as a result the Company will incur approximately $1.7 million in associated dry hole expense for the third quarter. This well was designed to test the Madison formation at 10,000 feet with an original probability of success of only 20%. The well found both the Tensleep and Madison formations to be tight.
"While we are disappointed, this event does not dissuade us in our Rocky Mountain exploration efforts," said Dinges. "We have nine prospects and leads still in the area and none were condemned by this dry hole."
Cabot Oil & Gas Corporation, headquartered in Houston, Texas, is a leading domestic independent natural gas producer and marketer with substantial interests on the Gulf Coast, including onshore Texas and Louisiana; the West, with the Rocky Mountains and the Mid-Continent; and the East. For additional information, visit the Company's Internet homepage at www.cabotog.com .
The statements regarding future financial performance and results and the other statements which are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties, including, but not limited to, market factors, the market price (including regional basis differentials) of natural gas and oil, results of future drilling and marketing activity, future production and costs and other factors detailed in the Company's Securities and Exchange Commission filings.
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