Cabot Oil & Gas Corp. (COG) on Friday said it has signed a definitive agreement to sell a 35 percent non-operated working interest in the Pearsall Shale to a U.S. unit of Japan-based Osaka Gas Co., Ltd. for a total price of $250 million.
The company expects to close the deal, including a joint venture agreement, on June 26.
Under the agreement, Osaka will pay $125 million in cash to Cabot at closing and will pay an additional $125 million to carry 85 percent of Cabot's share of future drilling costs in the Pearsall Shale.
The company expects the drilling carry to be fully utilized by year-end 2013 based on current drilling plans. Initial plans call for two rigs to operate under the JV with drilling commencing in July 2012. A third rig will be added to the drilling program during 2013 and a fourth rig will be added in 2014.
Cabot said it will retain its lease rights above the Pearsall, including the Eagle Ford Shale formation. The Shale is in approximately 50,000 net acres leased by the company in Atascosa, Frio, La Salle and Zavala counties of Texas
Dan Dinges, Cabot's Chairman, President and Chief Executive Officer, said, "We believe the Pearsall Shale could prove to be an additional liquids-rich catalyst in our portfolio and are pleased with the results we have seen to date—both internally and from neighboring peers. This transaction will provide the capital necessary to accelerate drilling of this formation, while still maintaining Cabot's 100 percent interest in our Eagle Ford leasehold."
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