Q3 2020 Cabot Oil & Gas Corp Earnings Call
[music].
Good morning, welcome to Cabot oil and gas Corporation's third quarter 2020 earnings conference call. All participants will be in listen only mode should you need assistance. Please saying don't look conference specialist by pressing the star Key then zero after todays press.
Some patients there will be an opportunity to ask questions. Please note. This event is being recorded I would now like to turn the call over to Dan Dinges, Chairman President and CEO. Please go ahead.
Thank you Kate good morning, [laughter] excuse me. Thank you for joining us today for Cabot's third quarter, a 2020 earnings call. As a reminder, on this call. We will make forward looking statements based on our current expectations. Additionally, some of our comments will reference non-GAAP.
GAAP financial measures forward looking statement and other disclaimers as well as reconciliations to the most directly comparable GAAP financial measures were provided in Yesterdays earnings release, 2020 has proven to be a challenging year on many fronts across the global market hope each of you in your fee.
Families have remained safe and healthy through this unprecedented time, the natural gas industry, specifically has had.
Its fair share of challenges driven by the lowest Nymex price on record in the last 25 years.
However, the strategic actions, we have undertaken since we first began leasing in the Marcellus shale in 2006.
Which includes numerous divestures.
Higher cost assets with proceeds utilized to maintain a healthy financial Parisian position have positioned our company for continued success, even in the very lows of the natural gas price cycle.
While we are certainly not immune to lower natural gas prices are low cost structure strong balance sheet and disciplined capital allocation strategy allow us to continue to generate corporate returns and free cash flow even in this current price environment. The good news is that we are already experiencing.
Significant tailwinds for the natural gas supply and demand outlook driven.
Driven by large declines in natural gas supplies across the U.S.
Coupled with an improving demand outlook heading into the winter heating season as a result since our early March we have seen over a 35% increase in the Nymex futures for 2022.
To the current levels that are above $3.
Which would result in a material expansion, but net income free cash flow and return on capital employed next year why are extremely proud of our team's ability to successfully manage our operations during the ongoing pandemic, while generating positive free cash flow in this low price environment we.
Really better days lie ahead for Cabot.
And the 2021 and beyond.
For the third quarter, specifically, we generated adjusted net income of 37.3 million or nine cents per share and delivered a free cash flow breakeven program. Despite a 26% decline in realized natural gas prices relative to the prior year.
Year comparable period, our production for the quarter was approximately 2.4 Bcf per day, which was inside our guidance range. Despite price curtailed curtailment. During the last 13 days of the quarter that were not included in our original guidance our unit costs for the quarter.
Improved relative to the prior year period, and we continue to look for opportunities to improve on our peer leading cost structure, even in a flat price flat production environment on the operational front in yesterday's release, we provided the initial results of our five upper Marcellus.
As tests this year, which have been producing for an average of 140 days based on the curve fit today. These wells are tracking above the average G. you are of 2.7 Bcf per thousand lateral feet that we reported at year end for our 2018 and 2019.
Upper Marcellus Wells, we believe these results continue to demonstrate the productivity of this distinct economic anibal across our 173000 net acre position in the core of the dry gas window in northeast PA.
As a reminder, we plan to allocate a modest amount of capital to the upper Marcellus annually as we continue to refine our well design and lateral placement across sustainable with the intent of moving to full development of our upper Marcellus inventory at the tail end of this decade.
We also continue to evaluate the optimal lateral length across our asset.
At the end at this point, we expect to develop the upper Marcellus at an average lateral link greater than 10000 feet, which would provide significant well cost savings further improving our economics of our upper Marcellus inventory. Despite the questions. We continue to receive on this high quality reservoir.
We have over 60 upper Marcellus wells that on average have been producing for over five years, which continue to reinforce our confidence and the opportunity that awaits us.
When we moved to the full development of the section in yesterday's press release, we also reaffirmed our fourth quarter production guidance range, which includes the impact of previously announced price related curtailments as well as our full year production and capital guidance, while our current year expert expect.
Question for differentials and 2020, a slightly wider than originally anticipated, which is primarily due to wider local basis in September and October resulting from weaker shoulder season demand and the storage levels nearing capacity. However, we are still on track to gen.
Great positive free cash flow and far exceed our return of capital.
Target of at least 50% of our free cash flow for the fifth consecutive year, despite reducing absolute debt earlier this year through the repayment of our maturity in July we have seen a moderate increase in our leverage ratio due to lower EBITDAX, resulting from the low price environment.
However, we still ended the quarter with a healthy debt to EBITDAX ratio of one and half times and expect a significant de leveraging and 2021 through a combination of higher EBITDAX, resulting from improved price realizations and lower absolute debt levels as we plan to utilize.
A portion of our expected free cash flow next year to retire our 2021 debt maturities. We also initiated preliminary guidance for 2021. This maintenance capital program is expected to whole production levels roughly flat year over year at 2.35 Bcf per day.
Today from a capital program of $530 million to $540 million, representing a 7% reduction in capital spending year over year.
The reduction in capital is driven by a combination of operating efficiency gains, resulting from the utilization of leading edge technology across our operations and lower anticipated service costs. Our program for next year would generally would generate a sizable expansion in free cash flow year over.
Year, allowing us to not only cover our base dividend and retire $188 million of maturing debt.
But to also Opportunistically return incremental levels of capital to our shareholders. We remain committed to returning a minimum of 50% of our free cash flow to shareholders annually, which we have far exceeded over the last five years and we'll continue to evaluate the prioritization of incremental cash.
Capital return between growing the base dividend special slash variable dividends and opportunistic share repurchases is our belief that depending on where we sit in the commodity price cycle certain capital allocation options offer more value creation than others and that maintained.
And financial flexibility is paramount, especially in a cyclical industry like ours, we're Austin, often ask what price level, we would consider investing in growth again, while we have never believed in growth for the sake of growth. We do believe there are certain price environments that way.
Weren't disciplined investments in the expansion of operating cash flow, especially as the lowest cost producer. However, with the current natural gas futures in 2022 and beyond in backwardation.
And well below the $3 plus environment, we are anticipating in 2021, we do not believe this is the appropriate time to consider growing our production base. We do have new takeaway capacity coming on the lighty South expansion project, which a partial path in service was.
Recently requested far as early as this December this project will provide us additional access to premium markets in the mid Atlantic. So if natural gas prices continue to rise in the out years, we have new outlets to support incremental value enhancing growth. However, as we previously stated.
Our capital allocation priorities for next year are focused on maintaining our current production level funding our current.
Dividend retiring our 2021 debt maturities and Opportunistically, returning incremental free cash flow to shareholders in order to ensure that we are able to deliver on these strategic objective for 2021, we have began layering in hedges by opportunistically locking in downside for debt.
Action, while maintaining some level of market price exposure, if natural cat natural gas prices continue to move higher specifically, we have primarily targeted costless collars approach.
With a weighted average floor that generates a compelling return on capital employed and a level of free cash flow, while still providing the potential for upside to the sailing.
Prices remain higher currently we have approximately 23% of our volumes hedged through financial contract and an additional 16% of our volumes protected through floors in our physical sales next year, we will continue to use market rallies to opportunistically add.
Add to our hedge position and improve on our current floors and ceilings lastly, I'm pleased to announce that yesterday, we posted our inaugural SaaS fee sustainability.
Report to our web site at Cabot, we strive not only to be a leading independent producer of natural gas, but to also be a leader in safe responsible operations and to minimize the impact of our operations on our employees our community and the environment. Our success is developing a button.
Our success in developing abundant unconventional supplies of natural gas helps to support the goal of reducing total greenhouse gas emissions, while achieving energy independence in the U.S. Cabot's legacy of corporate responsibility places high value and operating with respect.
And care for people property and the environment. We believe this commitment along with our operational success will continue to create strong value for our shareholders and other stakeholders in our communities. We are proud to report that our greenhouse gas emissions intensity for 2019.
It was 1.3 tons.
Carbon.
3.1 Dawn.
Dawn.
Scott just corrected me 3.1 tons of.
C O two equivalent per thousand barrels of oil equivalent this.
Significantly lower than the production weighted average intensity of 15 tons of car Seo to a equivalent per 1000 barrels of oil equivalent for us onshore assets as reported by Inverness based on the 2018 publicly available data we we.
Currently.
Evaluate new opportunities.
And continuously do this for emissions reductions it to ensure that Cabot as among the most efficient and lowest emitting domestic producers.
We also believe our elimination of flaring in the Marcellus, which began in 2014 and our strong performance in water management, including recycle 100%.
Of our water recovered in our Marcellus drilling completion and production operations, which began in 2011, we will continue to make us financially and environmentally superior as pressures for lower carbon and water conserving economies in.
Economics intensified hope you will each take a good look at our Salisbury report, we're extremely proud of how we measure up against peers and the desires of the investment community on all the metrics included in our in.
In summary cabot's.
Track record of disciplined capital allocation focused on generating improving corporate returns and increasing return of capital to shareholders, which is underpinned by strong.
Free cash flow generation, and an ironclad balance sheet as well as our continued focus on corporate responsibility and demonstrates our history of safe responsible operation that support that go over reducing total greenhouse house emissions does position us favorably not only today.
But for decades to come as it is our belief that natural gas will continue to play a significant role and the domestic energy supply going forward and with that Kate Hello began to answer any questions.
We will now begin the question and answer session to ask a question Press Star then one on you touched on phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then 10.
This time, we will pause momentarily to assemble our roster.
Our first question is from Leo Mariani from Keybanc go ahead.
Hey, guys just a quick question here on the gas markets too.
Point, we've seen a nymex futures prices strengthened materially over the last month, which certainly quite encouraging I guess the same time, we've seen quite a bit of weakness in physical markets in Appalachia, and I guess a lot of the other kind of key gas producing regions you know.
Around the U.S., so definitely looks like there might be a bit of a disconnect in terms of what we're kind of seeing it in futures versus physical just kind of wanted to get you all's opinion in terms of.
You know, what you think might be driving.
Some of that and do you think those prices need to start to converge as we get deeper into the winter here.
Yep, Thanks, Leo and you have I'll turn this to a Jeff in a second here, but we have seen the.
Shoulder months September and October being difficult.
Difficult.
Typically difficult at that time of year, but the the.
The storage levels exasperated.
That perception for a while but we did see on a week over week injections in a comparative sense the less than certain.
Certainly less than last year and majority of them less than the five year average and I think that is moving into now.
To your point about convergence I think thats moving into now the market converging rapidly as we've seen towards the latter part of October a an increase in the.
And the physical space I'll, let Jeff make a comment also.
Good morning.
Dan has an element.
Yeah.
Yeah.
Based on these.
Of course for storage levels, but this year.
Well quite early and so we're really mild shoulder months, we did see our basis differentials widen out a bit.
In contrast to what we've done and I think when you look at Nymex and what's driving the exit rate on us dry gas production boost to Bob.
Five Bcf a day less than previous year.
Thats, helping.
Non mix you also see the capital discipline in the marketplace today, particularly among the gas.
That helps Nymex of course, so we're we're encouraged than normal winter, we're prepared for that too.
For these these basis differentials to return to a more normal level.
Okay, and just to follow up on that clearly to your point, we're starting to see physical prices improve a little bit would you guys expect that those physical prices you know.
Continue to rise this winter, but is there also risks that maybe we see some downward pressure on those nymex prices for kind of prices to me a little bit more in the middle.
Well again I think we're we're early into the winter weather season, and Thats encouraging we have snow today in Boston.
As a good thing in October.
It's it's going to be somewhat of a web replay we work really hard to insulate ourselves from just being a weather played a lot of physical fixed price contracts in place.
We have.
I will start our hedging program.
Mexico as a result of demand and supply and demand as a function of weather and a lot of cases, but.
We.
Again, we're prepared for that and.
I think the.
The increase in my comments over the last five months and that included a big increase in 2022 over the last 12 months is a rural encouraging factor.
I'll also add that.
Where the prices are right now and you and you look at the just the fundamentals that are out in front of us.
That you do have an undersupplied market going into this winter.
With an undersupplied market, if you do have a colder.
Winter than expected, it's going to certainly move the price up but I think.
Also equally as important if you if you have a normal winter or even a warmer winter with the under supplied market I do think there is a higher floor thats been placed under the market based on these fundamentals and particularly where we have seen a very strong rebound in the LNG.
Going from the Bakken What March April three Bcf, a day export to recently nine and pushing 10 Bcf a day.
Hey export in LNG in the last couple of days.
Very helpful color for sure guys I was hoping you could maybe just touch base on the returns of capital.
But to your point, Dan there should be significant excess free cash flow in 2021, you kind of talked about a number of different options variable dividend special dividend buybacks clearly to your point you know clearly market conditions at the time in terms of where the stock is and were gases will determine a lot of that but can maybe provide a little bit more color in terms of how you.
To think about.
Those different options for next year and kind of what sort of the key things you're looking forward to choose one versus the other.
Well as I mentioned, you know our first.
Commitment is to our stated dividend.
We also are going to take care of our $108 million maturity.
That's important.
You look at our history and in the last five years, we have re.
Returned a significant level of.
Capital to our shareholders over a billion dollars we've had a.
Five times, we have increased our dividend.
And we have also.
Brought back in about 14% of our outstanding shares by repurchases but to.
Prioritization.
As I mentioned dividend maturities.
But it has it has been our intent to deliver.
A minimum of 50% of our free cash flow back to shareholders will continue to do that we.
We referenced referenced earlier.
A special dividend consideration variable dividend.
Proposition that some have outlined and made it a little bit more formulaic, we have not gotten to that stage yet but.
If you look at our history as a as an example of what this management group considers on the board.
We have we have given back a lot of our free cash flow over and above the 50%.
Okay. Thanks for the color.
Thank you.
Next question is from Charles Meade from Johnson Rice. Please go ahead.
Good morning, Dan do you and your whole team there.
Hey, how are you doing Charles.
I'm doing very well that's kind of you asked thank you.
Did we.
The outlook for price is really really interesting. If you will of course, we've got we've got some rosie possibilities out there, but but we'll have to we'll have to wait and see what I'm curious about is what levers you may have or may have set aside on your 21 plant.
I look at your capital guide, what just a 10 million dollar window that looks like to me that the message is even if we do see a higher price Spike you guys aren't going to change your plan at all and I guess my question is is that the right read to take from from your Capex plan and the follow up.
Are there are there other levers you could you could pull perhaps.
I'd like increased compression and if you happen to see really strong spot prices for a couple of months.
Yeah, that's a good question and we referenced.
In my comments that we're not going to grow for the sake of growth and and that there is a point that that cap.
Capital efficiency and would would make sense.
To allocate but really the way we see the market right now Charles and even.
Even at a slightly higher price point than than where it is right now.
We think that the capital program that we've laid out.
And in the range of 535 40 is the appropriate.
Program, we think a maintenance program is.
As appropriate at this stage you have to.
Look at right now the early winter season, you have to look at there is still a couple of hundred Bcf.
Over come.
Comparison between this year's storage levels and the five year average and last year's storage levels.
We are moving into an undersupplied market.
We have uncertainty with winter.
Out in front of us so I think that from our perspective and looking at what's prudent for the health care.
Cabot and this industry that we are better served to stick with a maintenance capital program and that's what we're going to do it.
Got it.
Okay, and then the follow up on the upper Marcellus just to dig in and see if there's any other maybe detail you guys give it it's.
Yeah.
You talks are you talked about your press release, and we spoke about it could you clarify. It's all are each of those wells individually above that that 2.7 type curve and.
And or is it the average of those being bid up above the type curve and what are you. What are you learning with what you're seeing in the variation between those upper Marcellus wells.
Yeah, we had those those wells we referenced.
Our.
Wells drilled off three different pads and and distinctly different areas of the field.
And obviously with an average of greater than 2.7, there there's variability between the the wells.
And what we're what we're seeing in.
In my in my comments I made.
And what we're trying to do with our capital allocation right now with complete confidence in the distinct nature of the zone, we have a a thick.
FICC Purcell.
Barrier between the upper and the lower.
Where we gather data on any effects of offset wells that we've drilled and each of these wells were drilled near.
Near.
Previous drilled and producing a lower Marcellus wells and we saw no effect.
On the lower Marcellus wells again clear evidence of the distinct nature of the upper Marcellus.
We are learning from our our Frac recipes and the landing position.
That we have been looking at in various different sections and a tweak.
A frac recipe on various different landing sections to determine do we see differences in the in the results.
So it's.
It's an early game and we're just gathering data like every operator has done when they go into a new shale play the upper is a new shale play with the.
60, or so wells that we drilled in it we're learning continuously as we go we're not carrying.
The we learn from our lower Marcellus and what we do there.
But we also know the upper is a distinctive reservoir to the lower.
So we're going to be well educated as we roll into our full development at the end of this decade will be well educated and ready to roll forward with greater than 10000 foot laterals and an enhanced.
Return profile for our.
Upper Marcellus wells.
Thank you for that added color there.
Our next question is from my room, Yeah, well Ram from JP Morgan go ahead.
Yeah. Good morning, a rent here ramp from JP Morgan.
Dan you've talked about the backwardation in the curve.
Currently not incentivizing unit grow.
It is clear that generating free cash flow and as your main priority.
But the question is at what price level would you need to think longer term in terms of the strip for you to some pivot to call some moderate level of growth.
Yeah.
Higher than where it is we have a.
If you look at the backwardation in reference to 2022 it.
It is has increased Jeff referenced I think 275, plus or minus is where 2022 is right now.
The current strip is north of $3 per 21.
No we are going to be able to generate with the market and what we see today in front of us weve layered in some good floors to protect a a very good program for 2021 that is going to deliver significant free cash flow growth.
Greater than we've seen this year.
Full coverage, we feel on our dividend and a debt maturities and also incremental free cash flow above that we think we're going to be able to.
See that where we're looking at again with anticipation on the winter and when it does to the markets. We have the for example gas available for the non New York market up there and in New York that non New York Mark.
Market up there last year as a reminder.
Average to bad as $1.70 premium market to Nymex in the first quarter.
19.
That also just as a footnote on what that does to an annualized.
A differential out there and certainly compresses the differential.
That that we.
Weve see in the in basin area.
Area.
So to.
To to answer you, specifically I'm just going to focus on in my preference is to focus on right now what I think is better for Cabot oil and gas.
It is better to focus on our commitment to a maintenance capital program. At this time, we think that is important for the industry and we think that our commitment and conviction to that at this point in time is the proof.
Prudent position to take.
Great and then just my follow up.
He got the lighting expansion coming on next year.
Can you talk about any views on how this could impact basis differential and transport costs and 21 and beyond.
Yes, good question and I appreciate it done we'll.
Hand, the baton to Jeff.
Good morning, lighting south of the rump.
Thanks Roger.
For others in the basin and essentially in the northeast there the country.
Greater than half of Bcf, a day of 580000, new take away.
Super majority of that gas will be.
It's coming off the lives of them and maybe a little bit off of pillar. The for example.
So for Cabot's position 250000, a day now.
The Atlantic marketplace is.
We'll improved price realizations, there's no doubt about that.
Also in a unique position that the Atlantic Coast pipeline was cancelled we felt like there was a little bit of gas supply from that project. It was going to compete with us and since the lower there that another good indicator for cabot's realizations.
Overall, though I think the basis differentials and northeast, Pennsylvania for all the parties will improve significantly dislike.
The startup of Atlantic.
Sunrise project. So werent first there are pockets of good possibility there will be some early service available to to.
So the shippers on that project.
We're hopeful that that could be as early as this winter more to come on that but.
Definitely an improvement that get another major takeaway project employers.
Great. Thanks for your color.
Thanks Ryan.
Our next question is from Brian singer from Goldman Sachs Go ahead.
Thank you good morning, Brian.
Brian.
I wanted to follow up on are in first question you had talked I think in your opening comments about the forward curve for 22 being below the $3 plus that you're kind of seeing for 21.
And I wondered if you could just talk built philosophically on how you think about what that price point is where you would move away from maintenance mode is it is it based on where peer supply cost is the is it based on a higher cost of capital relative to what would have been used in the past to try to drive supply cost.
Or is there a claw back in return of capital to shareholders above and beyond your debt pay down target.
Given that given that this year was a pause for understandable understandable reasons, just just some philosophy on how your how you would make that decision.
Well I really look at the.
Start with the macro environment.
Brian.
The macro environment has been oversupplied.
And that oversupply has made it extremely.
Difficult and challenging.
Our our industry.
You can look at the balance sheets across the space at both natural gas and oil producers balance sheets.
Yeah has a level of stress.
That is going to be sticky and when you look at the ability to de lever.
And a market that is such a challenged and may be oversupplied market in light of this pandemic. It is a it is now.
Not in our.
Best interest from a capital management standpoint too.
Stress.
The ER.
Our balance sheet.
And we think at this period of time with the prices, we see out there that if we are going to see higher pricing.
Return of that.
Capital to our shareholders in the form of a dividend.
In the form of a special or variable dividend.
Also again, taking care of our $188 million debt maturity.
Is is the most prudent use of capital. If there is a disconnect in valuation to your point in part of your question. If there is a disconnect in valuation about what we think.
ER is a value.
Value of of Cabot stock it.
It is not as higher priority as a as a dividend to us, but we have bought back shares.
In the past and that's certainly not off the table.
In the future.
Got it thanks, and then my follow up is can you provide any update on that litigation with the state of Pennsylvania.
Yeah, you know like to comment on that it's yeah. It's ER is risky and I can say this that we have just ongoing disc.
Discussions on the on the litigation and we.
We felt like that.
There is a progress being made.
Great. Thank you.
Our next question is from David on.
That car bomb from Cowen go ahead.
One Scott Thanks for taking my questions.
Ardent Hello, Hello, Dave.
It can hear Andy Yes can you hear me, yes, now can yes, sorry about that morning, guys. Thanks for the time.
Dan talked about your philosophy going forward I guess I have just two questions you talked about the 22 curves. The backwardation there I guess longer term thinking beyond 22, if it were in the range where you.
In some way or no.
Just in the realm of 40 to 50 of realized gas.
Does it if were thinking to two to 2023 bonds.
Cabot, Hey, Hey production oriented company. In addition to income or do you still think that this is becomes a contract for a very long term maintenance plan with the upside in the commodity just returned in the form of free cash.
Yeah, Hi, Rob and you are breaking up a little bit David but I.
I think it indicated that at a 240 to 50 realize.
How do we how do we reflect on and beyond 2022, how to reflect on growth versus maintenance.
Don't take my statements and today as we are going to maintain in a maintenance program forever.
We are we.
We understand the value of growth, we understand what growth can do for us and at the right opportunity and when we see the right macro outlay out in front of us.
And if we can feel confident about the macro environment.
That you know.
Growth can be and will be in our future.
But right now today.
We are we are laser focused on the maintenance program, but I would be surprised if in the future as as the macro market continues to improve that we don't consider growth.
I appreciate that and.
My follow up to that.
Hi, this is coming through clearly is a.
Well.
I guess, the Appalachian market now being very seasonally driven weather is obviously very determined through this past year there.
Okay, and storage and filling up faster than expected.
This year you shut in some production in September October.
As you go into next year.
Are you looking at optimizing around free cash is there any consideration to sort of waiting your completions to be more seasonally advantaged.
Shoulder periods, where you would have.
Its extreme units and your force.
Oreo or something that's been going on.
Keeping can sleep.
Study.
Throughout the year and just thinking things at the wellhead if need be.
Yep.
We have.
A a very low capital intensity program, we only had.
And had a two rigs.
Three rigs.
Running.
For the 20 to 20.
We've had two frac crews now one frac crew.
Working up there.
And two to measure the cadence and to be able to take time. It just exactly right is it is difficult because we don't have many pad site and if you if you look at.
In our gathering system, even though we have a.
A great header system, and we have flexibility within the gathering system.
We do manage when and the time, we bring on the gas through the field in order to have the most efficiency.
Newly produced gas, having the maximum positive effect.
Without a increasing any area of our header system pressures to where it might reduce older wells that are on.
On the system. So it's a it's a.
I'd say a lot of moving parts.
So we do take that in consideration, what you're asking about David we do take that in consideration and we have also brought wells on at a lower cadence.
And in anticipation of a better price point.
Looking ahead, if that opportunity is valuable to us and we'll continue to do that in the future.
I appreciate that if I could just ask one more quick.
One of your peers recently paid PDP 17 for an asset.
Primarily looking at it as a source of sort of inexpensive free cash considering that that's something that you are squarely focused on now and returning capital.
It was cabin out there in the market looking at now in other words, just cheaper sources of free cash in the basin that you are able to potentially optimize and use some of your currency.
We always interested in a value proposition the idea.
Free cash in one of the luxuries that Cabot does have a is we generate free cash we have extremely strong balance sheet.
And and we feel a good about our organic operation being able to generate.
Free cash.
The value proposition buying assets.
On a PDP basis, which I think any asset today, if it moves it probably going to be on a on a PDP basis.
If it if it fits in our wheelhouse.
We'd consider it.
But there's.
Theres me and then I'll add that every every deal that.
That we have that we're aware of anywhere out there.
Cabot's internal team or does a a high level scrap on it and we do also an internal evaluation on can we have incremental accretive value added to Cabot shareholders. On every deal out there every single deal that we know about out there.
David we do that so to your point would we do it on a on a basin.
Assets sure we look at it because we do that.
As part of our DNA.
Thanks, Dan I appreciate the time, Yeah, you bet.
Next question is from Kashy Harrison from Simmons Energy go ahead.
[noise] good morning to all and thank you for taking the question.
So so just 111 for me are there are there any other large takeaway projects in Appalachia other than lighty, South MVP and then the NBP expansion that have a reasonable potential of getting through the finish line and if not.
Does that mean that for all intents and purposes.
Appalachian production really only have maybe another 10 tenish percent growth maybe about another three bcf of gross Bcf a day of growth moving forward.
Yeah, because she's I appreciate the the question and I'll I'll make a a color statement then pass it to Jeff but.
The lighting south is the near term project.
There's other projects on the books that Jeff can cover but in addition, we also have a business development group that is in search of in basin demand projects that would would require incremental.
NGTL infrastructure, but it would not be in the form of.
A long haul pipes.
Are those conversations have been had the past certainly the pandemic has slowed down or some conversations and getting together.
Just by the sheer nature of Oh.
What's going on and a lot of places.
But it is our expectation that we will see in northeast PA incremental in basin demand projects that would create.
Demand off of our tailgate of our gathering system.
Seminar too, though that we don't I'm not including another power plant in the in my expectation, but we have the Lackawanna in Moxa power plants that are classic examples of in basin demand projects that don't require.
Long haul pipe I'll, let Jeff talk about some of the ideas and the feature.
They're catching up just to pick up on that.
It's about our Appalachian Marcellus basin in terms of take away.
Based on demand.
Northeast PA as Dan alluded to.
As a focal point for us on in basin, we've actually taken advantage of this co this situation and.
Probably been able to.
Participate muster ROE with a lot of trade associations, we've been doing a lot of webcast.
Manufacturers Association industrial groups that are.
That was very beneficial and that was kind of a nuance and in this day in a.
We are participating in a lot of quite flexible like flex and.
Everything.
Power or rail highway were worse permitting.
Et cetera.
So not only were we are.
In that area, but other crude.
Cells, so its harder job growth rate.
Our Marcellus when you know in basin demand projects due out in West Virginia.
Hey at southwest PA, Ohio.
And just for example, West Virginia is getting a couple.
Gaspar our plans next year.
Placing coal so.
As growth all over on the M. basins.
Throughout muscles in terms of pipeline.
If you look at like excuse me lifestyle Mountain Valley to get two Bcf a day there we are.
From entities.
In these is going to be built phase one.
Jim will be I'm.
Should receive FERC certificate any day now.
If we get pure quickly, we'll see it in service late next year.
Delayed.
Couple of months.
No that Orient the construction time, there. So pennies is important one of their connecting devices recently approved for construction Adelphia that's been in the news. So we have a new delivered.
[music].
To to the proposed any spillover goings on Colombia.
Proceeds from Philadelphia will serve a new markets in the in the gold mill area. So.
Firmly rooted for me a number of projects going forward.
To meet the needs of the producer community growth more so.
And so I hesitate to come from.
A particular growth rate for all of them ourselves, but there's a lot of stuff going on there.
It's a pretty exciting.
Got it that's a that's that's super helpful. Thanks.
This concludes our question and answer session I would like to turn the conference back over to Dan Dinges from for closing remarks. Thank you Kate and I appreciate everybody's a good questions and.
And attention to Cabot business, you know 2020, as we mentioned was a extremely difficult year on a a commodity price point I think we illustrated that even in this lowest price point in 25 years that we can still deliver free cash flow and maintain a a a gray.
Right.
Our balance sheet and our our operation.
You know this is it's been a while since we've been able to look ahead and anticipate.
As optimistically as we are the the Ford strip a I think the street also is is looking at it optimistically with a number of questions that we received today on growth.
But we feel great about the position we feel like the challenge of the commodity is going to have maybe going forward a different floor underneath it.
I think which will also reinforce cabot's ability in a cyclical market to be able to still deliver what we've been able to deliver for the last five years and that's a free cash flow strong balance sheet and return of capital to our shareholders. So with.
That Ah I again appreciate it look forward to our.
Year end 20 call in February and a you know stay safe through this difficult time, Thank you very much.
The conference has now concluded. Thank you for attending today's presentation you may now.
[noise].