Cabot Oil & Gas (COG) announced that acreage in Atascosa County will be part of its future drilling program in the Pearsall Shale. These county leases will be developed in a partnered agreement with its wholly owned U.S. subsidiary of Osaka Gas Co. Ltd. of Japan “Osaka”. Along with Atascosa County acreage, additional holdings in Frio, LaSalle and Zavala will be part of the sale of a 35 percent non-operated working interest to Osaka in the Pearsall Shale involving approximately 50,000 net acres. Closing of the joint venture agreement occurred recently. Under the agreement Osaka paid $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 (“drilling carry”) in the Pearsall Shale. This represents a total transaction cost of $250 million.

The drilling carry is expected to be fully utilized by year-end 2013, based on current drilling plans. Initial plans call for two rigs to operate under the joint venture (JV) with drilling commencing in July 2012. A third rig will be added to the drilling venture during 2013 and a fourth rig will be added in 2014. This drilling initiative is called the Buckhorn/Powderhorn Pearsall development program.

Cabot will retain its lease rights above the Pearsall, including the Eagle Ford Shale formation.

Dan O. Dinges, Cabot’s Chairman, President and Chief Executive Officer, commented, “We are excited to partner with Osaka, one of Japan’s leading energy companies, in developing our leasehold in the Pearsall Shale. 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. The 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.

Cabot Oil & Gas Corporation, headquartered in Houston, Texas, is a leading independent natural gas producer with its entire resource base located in the continental United States.

As of December 31, 2011, the company had approximately 3,033 Bcfe of total proved reserves. Cabot continues to refine its operating focus, narrowing its natural gas development effort to northeast Pennsylvania and its oil development effort to the Eagle Ford Shale in South Texas and the Marmaton, in the Oklahoma and Texas Panhandle.

Cabot is a mid-sized independent, trading on the New York Stock Exchange under the ticker “COG” and is a member of the S&P 500 index. Its stock closing price, Tuesday, July 3: COG: NYSE, 40.14, up +0.410. OSAKA GAS CO. LTD (9532.T) Tokyo Stock Exch. 339 JPY, +1.50%.

REMEMBER: Old oil and gas photos taken in Atascosa and McMullen Counties and oil field stories are what I’m wanting for my Oil and Gas Reports.

LEON ZABAVA is the Oil and Gas Editor of the Pleasanton Express. Contact him at 830-281-2341 or lzabava@pleasantonexpress.com.