Good morning, and welcome to the Cabot Oil and Gas 4th Quarter 2012 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask Please note this event is being recorded. I would now like to turn the conference over to Dan Dinges. Please go ahead, sir.
Thank you, Laura, and good morning, all. Thank you for joining us for this call. I have in the room with me today Scott Schroeder, our CFO Jeff Hutton, our VP of Marketing Steve Lindeman, VP of Engineering Technology Matt Ree, who runs our South region and Todd Liebel, our VP of Land and Business Development. Let me say the standard borrower plate language and forward looking statements on our press releases do apply to my comments today. What I do plan on covering today is our full year 2012 operating and financial results, our year end 2012 reserve analysis, an update on our expectations for 2013, followed by an update on the operations specifically in the Marcellus, Eagle Ford, Farmington and Parasoft.
Before I do go into the details of our operation, let me start with the highlights from this last night's press releases, and I think these are worth repeating. For 2012, we produced a record 267.7 Bcfe and an increase of 43% over 2011, representing the 2nd consecutive year of production growth exceeding 40%. Despite a challenged $200,000,000 which represents the first time our company has exceeded the $1,000,000,000 mark. Additionally, we also achieved record cash flow from operations and discretionary cash flow numbers. We grew our reserves, our year end reserves, grew reserves by 27% to 3.8 Tcf.
This growth we generated 100% organically. We replaced 417% of our production at an all source finding cost of $0.87 per Mcfe, which included an all source finding cost in our Marcellus area of $0.49 per Mcf. Okay. Now let's move to the financial operational results for the full year of 'twelve. The company reported clean earnings of 138,900,000 dollars or $0.66 per share.
Cash flow from operations and discretionary cash flow were up 30% 24%, respectively, compared to 2011. The increase was driven by higher equivalent production and higher realized crude oil prices that more than offset weaker natural gas prices. Total per unit cost, which includes financing, decreased to $3.69 per Mcfe in 2012, which is down 9% compared to 2011 as all operating expense categories decreased on a per unit basis in 2012 except for our transportation and gathering and taxes and other income. Okay. 2012 was a milestone year for the company operationally as we achieved 1 Bcf per day of gross Marcellus production and 1 BcfE of total company net production during December.
For the full year, we continue to provide best in class production growth, achieving a level of 42.3%. This includes natural gas production growth of 42% and liquids growth of 67%. The 4th quarter was especially strong for us operationally in the Marcellus as we grew natural gas production 19% sequentially over the Q3. Now let's move into our year end reserve report. As I mentioned, year end proved reserves were up 27%, representing consecutive years of significant reserve growth.
In addition to the previously stated metrics, 926.8 Bcfe of additions were recorded from our 100 percent organic drilling program along with 188.6 Bcfe positive revisions, which is impressive given the negative revisions we have seen across the industry due to a 33% decrease in the benchmark pricing used for booking natural gas reserves. The 188.6 Bcfe of total revisions includes 369.6 Bcf of positive performance revisions primarily in the Marcellus, which is offset by negative pricing and reclassification revisions primarily in the South area. Specifically, in the Marcellus, we increased our reserve bookings on PUD locations from an EUR of 7.5 Bcf to 9 Bcf per well based on the results we see throughout the play. Based on 41 producing wells, our typical well for the 20 12 program was drilled at a lateral length of 4,087 feet with 17.6 frac stages and an EUR of 13.9 Bcf, which further highlights the truly unique nature of our position in Susquehanna, which we believe is in the sweet spot of the most prolific natural gas field in North America. Our year end reserves were 96 percent natural gas, which is in line with last year's percentage.
Our overall PUD reserve percentage decreased slightly to 40%. We continue to be fairly conservative in our reserve bookings, recognizing a modest 0.7 offset PUD locations for each of our proved developed wells in the Marcellus. On our guidance for range to 35% to 50%, which reflects our capital allocation towards liquids. The midpoint of our guide for 2013 implies 3 consecutive years of 40% plus equivalent production growth, which is especially impressive considering we expect to spend within cash flow based on our budgeted commodity price of $3.50 for natural gas and $90 per barrel of oil. Capital and cost guidance for the year remains unchanged.
We did do a little additional hedging towards the end of since the end of the year. We added 10 contracts to our 13 hedging program. All of those 10 contracts have floors that are above our budgeted number and we added 5 contracts to our 2014 program. All of these were 0 cost collars. You can get the further details on our website.
Now let's move into the specific areas, starting with the Marcellus. During the Q4, we achieved a new milestone with a 24 hour production rate exceeding 1 Bcf of gross production per day. This record was made possible by accelerating the turning in line of some wells that were scheduled for the Q1 of 'thirteen. We were able to move that up. And not only did we turn them in line sooner, but we certainly saw outstanding performance from these wells.
During the Q4, we turned in line 30 horizontal wells, which included 12 wells that were turned in line in the first half of December. Of these 30 wells, they had an average of 16.7 frac stages per well, 24 hour IP production rates of 20,100,000 cubic foot a day and an impressive 30 day average production rate of 16,600,000 cubic foot a day. Of note, in addition to the production highlights in our press release, one well we've had has reached 7 Bcf of cumulative production in 523 days. That is our fastest well to 7 Bcf to date. Just this week, we hit a new milestone for the field reaching 500 Bcf in gross cumulative production from just 189 horizontal wells and a small contribution from several vertical wells.
With the acceleration of completions into December of 'twelve, that created the 1 Bcf opportunity and accomplishment. Production in the first portion of the years will be fairly flat as we coordinate new infrastructure with completion operations. We effectively accelerated over 100 stages into the 4th quarter. We completed a total of 3 71 frac stages during the 4th quarter and added additional added an additional drilling rig in December, giving us a total of 5 horizontal rigs in operation now, and we plan on drilling 85 wells in our 2013 program. We currently have 405 stages completing, cleaning up or waiting to be turned in line along with an additional 282 stages waiting to be completed.
On the comment on the Marcellus infrastructure, we continue to see good progress on our infrastructure program by our midstream partner. Williams is scheduled is on schedule with the right of ways, the permitting, construction and all the aspects of continuing on an ongoing infrastructure build out for 13. Specifically, nearly all right of ways have been acquired and the vast majority of the gathering permits are in hand for our 13 program. Now let's move to the south region in the Eagle Ford. To date, we have drilled 41 wells in our Buckhorn area, the Eagle Ford.
Well costs continue to come down with an average well cost targeted in $13,000,000 in the $6,000,000 to $7,000,000 range. We continue to be pleased with the results of our down spacing program with wells drilled approximately 400 feet apart. These wells have shown comparable production and EURs as other wells in the field. We recently drilled our longest lateral well to date in the Eagle Ford, which was 8,200 feet. The well will be completed with a 28 stage frac job and that treatment is scheduled in March.
Comments on the Pearsall, the drilling of the planned 15 gross wells for 13 is underway with 3 drilling rigs. Currently 4 wells are completed or waiting on completion and 5 wells are producing at this time. The 30 day average production for the rates of 4 of the wells that have produced for at least 30 days so far is 631 Bcfe per day. The oil and gas ratio depends on the location of the wells moving in the north south direction with an average ratio of 56% oil and 44% gas. As we are still in the early stages of this play, the region is continues its work to refine the placement of the laterals in a very thick zone and we're trying to optimize the completion techniques out there.
Our objective is obvious moving forward is to reduce our completed well cost and continue to show improvements with our average production rates. In our Marminton area, we have 24 operated wells in production. The 2 drilling rigs are currently operating area in the area. The average initial production rate for all operated wells drilled in the Q4 was 5.62 BOE per day, which is approximately 90% oil. While we're very early in the extended lateral program with only 3 wells on production at this time, we are very pleased with the early operations.
These extended laterals average approximately 9,500 feet and we're stimulating the wells with 30 frac stages. The average EUR and we again early time we're seeing is increased by 60 percent to 70% over the shorter laterals of 4,500 feet. The additional cost for the extended lateral is approximately 30% over the cost of the shorter laterals. In these wells, we see an extended cleanup period with increasing production during this cleanup period prior to leveling off to a normal decline. We presently have 8 additional extended laterals planned for our 13 program.
In summary, 2012 was another outstanding year for Cabot and we fully expect our momentum to carry into 2013. We're currently looking for ways to enhance and maximize shareholder value and we know Cabot is very well positioned for another year of industry leading production and reserve growth at best in class costs. Laura, that completes my comments and I'm more than happy to open it up
And our first question is from Bob Brackett of Bernstein Research.
I had a question on running room in the Marcellus. Can you remind us of sort of drilling locations, down spacing, where your thinking is on that right now?
Well, so far, we're still in the process of capturing primary term acreage. Our spacing where we do have wells close together is 1,000 feet at this time. It is our plan once we get to pad development drilling that we'll test a down space opportunities in the Lower Marcellus. We have staggered a couple of wells in between 2 Lower Marcellus wells in the Upper Marcellus, and that staggered distance between those wells is 500 feet. We've seen good results in those particular wells.
Have a couple of 100,000 locations a couple of 100,000 acres in the Marcellus and we have at least 3,000 locations out in front of us.
Thank you.
And the next question is from Charles Meade of Johnson Rice.
Good morning, gentlemen. This first question I have is just sort of a qualitative one. Dan, I'm wondering if you and your team are surprised by some of these wells when they come online with the productivity as I think a lot of people on the call are. Is the kind of thing where you're still amazed when you see these reports come across your desk? Or is this or have you is this just what you expect at this point?
Well, Charles, you can see our financial metrics and our operating metrics that we're able to produce. And it's certainly a direct result of what we're seeing coming out of our particular area of the Marcellus. When we started this program and we drilled our started our spud our first well up there in 2005 and we moved it on into 2006. We thought we would be in High Cotton if we had a 4 Bcf well up there. As we progressed and as we continue to see our performance stay in a narrow range on a per well basis, Certainly, we have very, very good wells and we have wells that are below the average obviously.
But each tweaking we do whether it's in how we're spacing the frac stages, for example, in 2012 going from 250 foot spacing in our frac stages down to 200 foot spacing in our frac stages. We think we have enhanced ROI a little bit by doing that. Our costs continue to come down. So, the addition of those several additional stages on a particular lateral length is not a problem. And overall, that has enhanced our rate of return.
But the production levels and the way that these wells perform on its natural decline, I think have impressed not only Cabot, but I think it's impressed everybody that has taken a look at it. We use Miller and Lance as our 3rd party engineering firm, and Miller and Lance is in full support of our bookings. In fact, this year in discrepancy between outside engineering and internal engineering, we had less than 2% discrepancy in our reserve bookings, which is all I can imagine is a very, very low delta between outside third party engineering and internal engineers. We continue to be impressed, long winded answer, I am. I look at these wells and I've looked at a couple of the wells that we had brought on not that long ago, a couple of wells producing over 60,000,000, 70,000,000 cubic foot a day, a well shale well producing over 40,000,000 cubic foot a day, continues that 30 day average over 35,000,000 cubic foot a day.
I had 20 years in the offshore and I would have taken that well offshore any day of the week.
Right, right. Well, no, I appreciate that long winded answer. I didn't think it was at all. It's great additional color. And if I could, just one follow-up on the PureSO.
I know that you guys are going to be doing a lot of science there, but I was hoping you might add a little color on what the dimensions are of your experiments this year. Is it going to be kind of traversing Northwest to Southeast? Is it going
to be more in what part of
the zones? What horizon you're completing in or is it the frac design or all of the above?
Yes. Charles, it's all of the above. And our layout of our program with this being an exploitation play like it is, we were not certain without production where we were in the maturity window. We know moving north to south, we have about a 20 mile range north to south, and we're seeing that transition within that geographic area. We have a very thick section in the Pyrosol.
Matt is and his guys have landed the wells in a stratigraphic different spot in probably 8 or 10 of the wells that we have drilled so far. We have tried various different frac techniques that would allow us to 1, get all of our frac stages away and not screen out prematurely the spacing of those frac stages where we put our ports in each particular frac stages are being worked on and tweaked with Mass Group right now. So you can imagine that if we're landing in different spots and we're trying to frac different ways in different spots, if you look at the trying to get all of the iterations in one well and the data points together, it takes a lot of wells to be able to get all the data points and try to find the most cost effective and efficient way of fracking these wells. So that's the experiment we're in right now.
Okay, great. Thanks a lot guys.
Thank you.
And next we have a question from Brian Singer of Goldman Sachs.
Thank you. Good morning.
Hi, Brian.
Can you just talk to where Marcellus production is currently? I think I heard you say kind of flattish trajectory during the first half and just wanted a little bit more color if that's from current levels versus 4th quarter average levels and whether you're planning on completing wells during the first
half?
Yes. We are right now, our current production is right at the Groves BCF in the Marcellus. We have and I'll pitch the ball to Jeff to just briefly talk about the infrastructure here in a second, but we will be bringing on wells and getting them tied in. But as far as us being able to go beyond the BCF, we're going to be somewhat limited with the completion of the infrastructure to see the full effects of that. But I'll let Jeff kind of bring you up to speed on where we are on the and Williams is on the infrastructure.
Good morning, Brian. We accelerated some wells into the Q4 and that was due to the Williams being able to get some permits and actually they're running several crews on the construction side of the business. So in conjunction with that, we also have some additional compressor stations that are scheduled for later in the year. We've talked about Central Compressor Station, which is now kind of a May, June event that will add some takeaway to the picture. And then we have some additional units planned kind of late Q3, early Q4,
which will
also kind of enhance our overall position up there.
Great. Thanks. And then sticking with the transportation theme here, when you just think longer term, are you still seeing interest from consumers to use their farm transport capacity? Or when you think about longer term, are you looking for additional Cabot purchased from transport beyond Constitution?
Well, currently, we have approximately 300,000 a day of our own firm. So about 700,000 is using our customer's firm. And that seems to work very well. We have a number of long term contracts using our customers' firm, Transport. So that also helps us.
As you know, in 2 years, we'll pick up another 500,000 a day on Constitution. We've also participated in a project with Millennium and Columbia called the East Expansion. That's going to add another 50,000 a day in about 2.5 years. And so we're constantly evaluating our position there. The Leidy Southeast expansion on Transco, we were able to get a long term sale using Piedmont's firm transportation position on that expansion.
So it's an ongoing effort, and we every day, we're exploring new ways to move gas. Great. Thank you.
And the next question is from Michael Hall of Baird.
Thanks. Good morning.
Good morning, Michael.
I guess, first, I just wanted to talk a little bit about thoughts around capital allocation as I kind of look at funding profile going forward, start throwing off some good free cash next year, it looks like. And just curious on your thoughts of what you might do with that if you're somewhat limited by infrastructure, where does that cash get allocated? And you talked about shareholder value enhancement. Is there any thoughts of returning any of that to shareholder? Or is that all plowed back in the ground?
Just curious how you're thinking about that.
Well, we've put together a 5 year model. We've gone over that 5 year model with our Board. We've used modest commodity prices. And when I say modest commodity prices, we use below strip pricing to put our program and 5 year plan together. And as we see it, we are going to generate a significant level of free cash and growth in reserves and production throughout that period.
On near term capital allocation, when you look at our program this year, we do look like we'll generate a little bit of positive cash going into 'fourteen. Certainly, we'll generate a little bit more positive cash. One of the things that we would do with some of the positive cash generated from our drilling and producing operation is to spend, I don't know, dollars 75,000,000 to $100,000,000 of it in participation with and construction of our Constitution pipeline. We have 25% of that pipeline that is commissioned due to commission in March of 2015. As Jeff just mentioned, we have a 0.5 Bcf a day net to Cabot to move through that pipeline.
And as we have gone around, Scott and I visited across the table with a number of our investors, that is a common question, what we're going to do with the cash that we'll be spinning off. We're fully conscious of demand or value destruction by just going out and spending the cash because we have it in the bank. We have a unique position on with the Marcellus and we know that we could be dilutive to a shareholder if we went out and just spent money on a project that doesn't compete with the amount of capital we allocate to the Marcellus and the return that we get from that. But you can think out ahead and you can look out there in the space what people do with the free cash options would be increased dividends. We could also place a special dividend out there to shareholders.
We could look at share buybacks. We could also run sensitivities, which we have, and an aggressive acceleration of our operations with that free cash also. So we're cognizant. We're thinking about it. We had a board meetings Wednesday Thursday.
That is a discussion in the inside the boardroom and more to come on that, Michael.
That's helpful. I appreciate it. If you had to kind of force rank those options that you just laid out, What's the kind of current thinking on
that? I'll let Scott, obviously, with this 5 year model we have and looking at the amount of free cash we have and debt pay down that we can do, Scott just walks around the office with a big smile. I'll let him answer that. Clearly, Michael, what Dan laid out, the
number one priority is our investment of that excess would be our obligation to fund Constitution. The second probably most efficient use of that dollar is a way looking at the combination of leading into constitutions, coming online, what can you could you accelerate in the Marcellus? And then 3rd would be dividends of one form or another. So if you've got that would kind of be the top 3.
Okay. That's helpful. And then one more if I may. Just curious, sorry if I've missed this, but what's the kind of planned lateral average lateral length in 2013 in the Marcellus program and average stages drilled on those wells or completed on those wells?
Yes, Michael, the plan for 'thirteen is probably going to end up being slightly more than the 12 program, but I would think in the similar range. And the number of stages will probably go up average number of stages will probably go up slightly because the majority of our 2013 program is going to have the 200 foot spacing versus a mixed bag on the distance between frac stages and our 12 program.
Okay, great. That's helpful. Appreciate it. Congrats again. Thanks.
And the next question is from Biju Perincheril of Jefferies.
Hi, good morning. Good morning. Dan, on the 41 producing locations that you booked last year, can you talk about how many of those are completed using the tighter frac spacing and what EUR those wells were booked at?
15 of the 41 were used with the tighter spacing.
Okay. And can you talk about what the average EUR for those wells are versus
sort of the same?
Yes, the average EUR for those 15 wells was slightly higher than the 13.9 Bcf on the other wells.
Got it. Okay. And then the well that you talked about, I think that was 35 stage well. Can you give us some color on what was the lateral length and cost on that one? And
Okay. The lateral length, I have let me ask Steve here. What was it? 68, 75 was the lateral length and the cost was, I think, between $7,000,000 $7,500,000
Okay. So it sounds like that's and then you clearly are seeing some productivity improvement efficiency gains as you look with that long laterals and more stages. So what are the opportunities to further increase the lateral length and more stages in your operations there?
Well, I think the opportunity to continue to extend our laterals is valid. We had a good success on the all stage fracs, even the tow stages on that completion. Once you get out to the 30 stage frac, you get concerned about completely being able to get away what your design frac stage might be and but we were pleased. We do anticipate that our average lateral length will continue to creep up. Keep in mind right now that we don't have development drilling going on, that we're on these particular pad sites and we're capturing our primary term acreage and we're drilling 2, maybe 3 wells per pad.
Also keep in mind that there's not forced pooling in Pennsylvania and if we still have holdouts out there as much as we would try to buy and lease very, very small tracts of acreage that it does affect some of the lateral lengths that we would drill. Certainly, we prefer drilling in a uniform fashion out there, but it's just not quite as possible because of the current regulations in Pennsylvania. But with that said, our objective is to drill most the most cost effective or any return effective wells that we can design up there.
Got it. That's very helpful. Thanks.
And our next question comes from Pierce Hammond of Simmons and Company.
Good morning.
Good morning, Pierce.
I apologize if I missed this, but what are your current well costs in the Mar Celis right now? And then where do you think they could trend to by year end?
Well, so if we've gone a little bit longer laterals and a few more stages, we're kind of between the $6,000,000 $6,800,000 range. Perfect. And again, from an efficiency standpoint, ongoing across the board, trying to continue to drive cost out of the drilling complete side.
Great. And then Dan for your acreage in Susquehanna County, are there any other targeted horizons beside the Lower Marcellus, Upper Marcellus and the Purcell?
We think there could be, but our focus and concentration right now is exclusively on the Marcellus.
Great. And then the last one for me. Any update on the Utica?
Well, the Utica is again operated by range. I would imagine, I don't know, I think they're close to coming out in release and typically as we do with non operated positions, we defer to the operator. I can say that we've been pleased with results to the extent of what we saw in the thickness side. I think in the maturation portion of the well, we're pleased with what we've seen and expected to be in the liquids rich area, and I think we're there. We certainly saw decent pressures in the well and got a little production out of it Moving forward and certainly we'll conduct more activities moving forward, I know Range is a great operator and very talented and they're going to be looking at where we land the well, how we complete the wells going forward.
And just like our comments in the Pearsall, they're going to be trying to sort through how to maximize the results. So I've got all the confidence of the world in Range.
Thank you, Dan.
Thank you, Pierce.
And our next question is from Matt Portillo of Tudor, Pickering, Holt.
Good morning.
Hey, Matt.
You guys have put up some pretty fantastic results in Dimmit and Springville. And I was just curious as we think about the 10 to 15 Bcf type curves that you guys have experienced over the last year or so, I'm just curious how we should think about that in terms of the prospectivity over your entire acreage position in Susquehanna. And I guess, as we think about the delineation going forward, how should we think about kind of appraisal of the rest of your acreage position over the next few years?
Well, the data points that we've given, Matt, outside of where the majority of our drilling has taken place so far. If you move from our area where the majority of the infrastructure is built and where we have been producing for the most part. We've moved east 7 miles from closest production to the Zick area. That's right along the East 7 miles from closest production to the Zick area, that's right along the Tennessee 300 line. We put a compressor there.
We drilled 5 wells from that pad site and the wells in that particular area are equivalent to or right at our 2012 program. We have gone another 9 miles to the east of that, really to the far eastern edge of our acreage. We don't have pipeline out there that's going to be coming in probably the second, maybe early Q3 or Q3, maybe early Q4, all the way out to the eastern portion of our acreage out there. But we have drilled wells and completed those, flowed those wells back and looked at the characteristics of those flowbacks, what we saw in the flowback and the pressures we saw and how rapid those wells unloaded and they were extremely consistent with what we've seen in our other areas. We've moved to the Northeast slightly to the Northeast of our area of the majority of our drilling.
We had a pad site there where we had we drilled 4 wells and we were able to get an early look at the production and have brought those wells on line and those wells online fall right on our curve also for the result the average results we've seen on our 12 program. So we continue to step out. We do have data points out there that we feel comfortable derisking our acreage, derisking in a manner consistent with the results that we're seeing and we feel good about a vast majority of our acreage being able to yield consistent results.
So, just to clarify there, is it fair to say that as you move into the neighboring townships to the east, you guys are pretty comfortable with kind of a 10 plus BCF type curve for those assets from what you've seen so far? Yes. Perfect. And then as we think about your Marcellus asset today, I was just curious, within that 5 year plan that you laid out, could you give us a little color on how we should think about kind of plateau rig count given the infrastructure takeaway you have at the moment or where we should think that rig count trends to over time?
Yes. Certainly, Scott, through his group, managed the build out of that 5 year plan. Scott, you want to?
Yes. Matt, what we did is we haven't seen a plateau either in the production over the next 5 years nor in the rig count. We did as Dan alluded to in an earlier question that we didn't we weren't aggressive on the underlying commodity price deck, so it was a fairly conservative price deck capping out at $4 per Mcf. And so we've kind of ramped up gradually, went to $6,000,000 then to $7,000,000 $8,000,000 and we I think in 2017, we were at $9,000,000 or $10,000,000 So again, we didn't go real aggressive on the rig count for the Marcellus.
Great. And then, I guess, just final question for me. Looking at your asset base today with the Eagle Ford, Marminton and Pearsall, obviously, kind of given what we've seen from
a return perspective in the Marcellus, those
assets may struggle a bit to compete for capital. I was curious if those are potentially up for divestment at some point. And would that be something that you'd be interested in? I know you've done the PureSol JV, but just curious how you guys are thinking about those on an incremental basis.
Well, you can tell by our capital allocation, we have basically a $1,000,000,000 program in 2013. We're allocating 70% to the Marcellus. We're allocating the rest of it to liquids in the areas that you've identified in the South. And we're natural gas company to a liquids company, but we do think with the assets that we have in this in the liquids windows that we can yield very, very good returns. And if you have the commodity price and differential that we see today, and I'm talking about the $90 or so oil prices that though they do not compete with our Marcellus returns, they nevertheless are competitive returns for the cost of capital and yielding good returns for shareholders.
They in moving forward and if you looked at how we want to ramp up and when we get infrastructure build out of the Marcellus and we continue to add production there, we're going to have enough free cash
to do
that. But you did not hear us say that we're going to ramp up and continue dumping a lot of money into our liquids areas. We're going to keep a modest amount of capital going in that particular area. We'll capture the primary term acreage we have in areas that do yield very good returns and we'll continue to grow our liquids production in that vein. But because of the free cash, it's we understand the balance between putting together a program that's going to yield the outstanding returns we are yielding and what it would do if we allocated significant cash to lower return assets.
So I didn't I don't know if I answered you directly, but they are our liquids assets are good assets. We have talked about in the past that we JV some of those assets. If we felt like there was a strong use of capital, we certainly have that flexibility within our current balance sheet and with our $1,000,000,000 program. But if we felt like that we wanted to capture some additional cash. Certainly, it would be those assets that we would sell or JV to accomplish that.
I apologize. Just one follow-up question, if you're comfortable answering it. Just as I think about the 5 year program, is there any color you guys would like to give in terms of a rough range on production for the Marcellus kind of on that rig program you've talked about?
It's I'll answer it by it's large and Scott wants to say something.
Again, we give guidance kind of 1 year at a time, 18 months at
the most just because of the
there's a lot of varying factors. But I'll echo Dan's comment. The numbers get very large.
Understood. Thank you very much.
Thanks, Matt.
And our next question comes from Gil Yang of Discern.
Hey, Dan. Hey, Scott.
Hi, Gil.
Hi. For the PUD upward revisions going to 9 Bcf per well, are those 9 Bcf wells probably booked at the 200 foot frac density?
Well, they're booked at assuming a number of stages. We don't really get that granular on booking PUDs, on saying that there are 200 foot space frac stages, but we do reduce we to arrive at that, we have a reduced number of stages to the HUDs and that's 12 to 13 stages.
Okay. So I guess what I was trying to get at was the upward revision in the puds driven by performance of the neighboring PDP or was it a change in the number of fracs in those wells?
Rodney McMullen:] It was really a we try to when we book year end reserves and Steve Lineman again is responsible for our bookings and managing our reserve book. But what we try to do is balance our entire report and make it simple for our shareholders to read through. And one of the things that we try to do is stay fairly consistent with percentage of PUD booking. We don't try to fluctuate that number. We also remain what I would say is very conservative on our PUD booking in the Marcellus as I mentioned for each location PD location that we have out there, we only have 0.7 locations on the PUD side.
So we're very, very conservative in that regard, but that allows us to continue to balance the overall PUD number on our year end bookings.
Okay. And then related to the overall the tighter frac spacing opportunity, do you have any indication yet whether or not the decline, the type curve decline rate is the same or is there a potential for a steeper decline rate once you get out maybe a few years with the tighter spacing?
Yes. Well, I'll make a quick comment and then I'll let Steve Lindeman answer it. But we're comfortable on our curve fit and what we're seeing. But Steve, I'll let you add.
Yes, Gil. What we're seeing is they are performing very, very comparable to our other further space stages. We've got 6 wells that have been online now for between 6 to 8 months. So
we've got quite a
bit of production information on those and they've recovered somewhere between, let's say, 17%, 15% to 18% of their EUR. So we've got pretty good information and they are performing very similarly to the other wells.
All right. Great. Thank you very much.
Thanks, Gail.
And our next question comes from Doug Leggate of Bank of America Merrill Lynch.
Thanks. Good morning, everybody. Thanks for taking my questions. I've got a couple of questions, Dan. I guess, to try and pull together a lot of the comments you've made on the 2012 type curve.
It's maybe a little simplistic, but could you help us understand what proportion of your acreage at this point do you think is capable of replicating those results? And how are you prioritizing your rig allocation towards those high UR wells at this point?
Well, I'll let Steve answer the latter part of that, but I'll answer the first part. As I indicated on an earlier question, I think Matt asked, we have drilled a large geographic area with producing results in our acreage position. The furthest step outs that we have moved to the East at the ZEC location, which is 7 miles from our big area of drilling and where we laid our infrastructure. And those wells are performing very well. And I think they've been on over 200 maybe pushing a year is how long those wells have been on.
And we've then moved 9 miles further to the east and have flowback wells there that show consistency with what we've seen in our areas of, for example, 13.9 Bcf 2012 average that we've given. We don't have infrastructure out there to produce those wells for an extended period of time, but the information we've seen is good.
Okay. I guess one other thing I'll do is
So percentage wise, it'd be a swag number and certainly 60%, 70% is a swag number at this stage.
That's what I was looking for. Thanks, Dan, and on the rigs.
Yes. And I'll let Steve answer that.
And then Doug, just to elaborate a little more in terms of the decline, it's very impressive at how these wells perform very similarly per stage. And so when you look at these statistics across our area, it's very, very consistent. And so I think, as Dan alluded to, we've got a lot of confidence moving out towards the East.
Okay. Thanks. So I guess my follow-up is that you're probably aware there's a fair number of acreage packages that seem to be coming on the market up in your areas. I'm just curious if you're showing any interest there, if you have any color as to whether there are any opportunities that might meaningfully add to what is already clearly a terrific position?
Yes, Don. We're aware of the acreage packages that are coming on the market. We have a geologic model that we initiated our leasing on and we have continued to refine through the not only the data that we have and as operated data, but also industry data throughout the area And our position that we do have and where our acreage is, is there for a very good reason, which fits our geologic model and we're entirely comfortable with our position in Susquehanna where we where our current footprint is.
Okay. I'll leave it there. Thanks, Dan.
Thank you.
And next we have a question from Chad Landry of Iberia Capital.
Hey, guys. How are you doing?
Chad.
Just had a quick question on the timing of your new central compressor station. If you could kind of update us on that and also kind of quantify what you think the uptick could be in terms of production on the older Marcellus wells?
Okay. I'm going to let Jeff field that one, Chad.
Hey, Chad. I think at this point, it's we've pretty much taken all the risk out of of getting Central up and running by mid year, or at least Williams has with the receiving of their air quality permit late last year. So right now, we just have a construction project. Everything is up there, and Williams is pushing forward to get everything going. In terms of line pressure impact, that's hard to engineer at this point, and it's difficult to say what extra £50 or £100 reduction in certain parts of the field will do to the older wells.
So I guess I'm going to avoid giving you an answer on that part of your question.
Okay. Thank you.
Thanks, Chad.
And the next question is from Robert Christensen of Buckingham Research Group.
Yes. Let's look out in
the future a little bit and maybe help us understand how you might be marketing in gases there. Region? And is there outlet maybe on the East Coast to export LNG facility that you're contemplating marketing to? Thank you.
Okay. That's a big question. We have seen market dynamics change a lot in just 4 years up there, of course. Currently, we do have a significant amount of our production that is sold out 5 years and even out to 10 years. And of course, we have 100,000 a day sale that begins in 2015.
That's out 15 years. And so we've continued to add to the base of long term sales commitments. In terms of demand, though, we've seen lots of interest, particularly when Constitution was announced from the power sector. They have been very interested in getting gas off the Iroquois pipeline, the Tennessee 200 line and that of course goes into the Boston area and also the Canadian aspect of Constitution connecting to Iroquois and then moving on up into Canada. So we've been very encouraged by the interest from that perspective.
On the LNG, we have taken out some capacity last year early this year that will enable right now about 75,000 a day of our production to reach Cove Point. And so we have firm transport in place to and are staying on all the short list for possibility of supplying a a significant amount of gas to the export facility there. But overall, we see demand increasing manufacturing, demand increasing, new power plants coming on the coal retirement aspect. So from a demand perspective, it looks really good in the Northeast.
Very good. Thanks for confirming all that. Thank you.
Thank you, Robert.
And our next question is from Joseph Stewart of Citi.
Good morning, everybody. Congratulations on another solid quarter.
Thanks, Joseph.
Most of my questions have been answered, but I had one clarification. Dan, in response to a previous question, you noted that current well costs are running $6,000,000 to 6,800,000
dollars Is that based on an 18 frac stage well or how
many frac stages are you using there?
Well,
the range is a result of how many a variable amount of frac stages, Joe. That's from a 3,500 to 4,500 foot type of well and however many frac stages we apply to that well. So I just kind of threw out a without having a specific number, I'm kind of throwing out a range of what I'm seeing on the AFEs and stuff coming across my desk.
Got it. Okay. And so we should assume the 200 feet per stage though on the lateral?
Absolutely. Yes.
Okay. Great. That's all I
had guys. Thank you so much.
Thanks,
And showing no further questions, I'd like to turn the conference back over to management for any closing remarks.
Well, thank you, Laura. I think the questions were very good, and we had an opportunity to answer them all. We look forward to our 'thirteen program and feel very confident that we're going to be able to produce outsized results by year end 'thirteen. Appreciate it. Thanks, Laura.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.