Operator: Good morning and welcome to the Cabot Oil & Gas Corporation Third Quarter 2012 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation there will be an opportunity to ask questions. Please note this event is being recorded.
I would now like to turn the conference over to Dan Dinges. Please go ahead, sir.
Dan O. Dinges - Chairman, President and CEO: Thank you, Maureen and I appreciate all joining us for this third quarter conference call. We have a lot of information to go over today. With me to answer any questions, is Scott Schroeder, you all know him, CFO; Jeff Hutton, our VP of Marketing; Steve Lindeman; our VP, Engineering and Technology; Matt Reid, VP Regional Manager; and Todd Liebl, our VP of Land and Business Development.
Let me just say the standard boilerplate forward-looking statements including in our press release, last night do apply to my comments today.
On the call this morning, we plan to cover the third quarter operating and financial results. We'll give you an update on our '12 and '13 guidance. We'll also update our hedging program for '12 and '13, followed by an update of our operations in the Marcellus, Eagle Ford, Marmaton and now we're going to add a brief comment and Pearsall.
Before I do go into the details on those topics, I'd like to highlight some of the items that were brought up in our press release last night. Cabot's production is up 42% over comparable year-to-date periods. Third quarter production was up 6% over the second quarter, even with the delays that we've discussed in permitting and gathering lines in the Marcellus.
Earlier this month, as far as a little bit granular information; we bought on line a two-well pad, 1.5 miles west of our Zick compressor area. That pad site two wells had peak rate of 43.8 million per day from only 25 stages, which I think further demonstrates the productivity of our Marcellus wells and the benefit of our reduced spacing between stages.
We also recently drilled and completed the first Pearsall short lateral well under our joint venture with Osaka. The well was drilled in Frio County and tested at a 24-hour rate over 1,400 barrels equivalent per day.
I think most importantly and from a macro standpoint, Cabot will deliver industry-leading production growth in '13 with a cash flow positive program using a $3.50 gas price. I think certainly all those stack up to good information.
Last night our financial results; the Company reported clean earnings of approximately $43.1 million or $0.21 per share for the third quarter of '12, up from $35.3 million or $0.17 per share for the third quarter of '11. The increase was driven by higher equivalent production and higher realized crude oil prices that more than offset weaker natural gas prices.
Cash flow from operations and discretionary cash flow for the third quarter was $164 million and $175.7 million respectively, both up from last year's comparison.
Moving to the comment on production, Cabot continues to provide industry-leading production growth, driven by our premier Marcellus assets in Susquehanna County. Equivalent production for the nine-month period ended September 30, 2012 was approximately 189 Bcfe, which represents an increase of 42% compared to the nine-month period ended September 30, 2011. Taking into account last year's fourth quarter sale of our Rocky Mountains property, pro forma year-to-date growth in production is 51%, this nine-month production level already exceeds our full year 2011 reported production.
Now, to give out a little forward-looking, as far as our guidance is concerned for '12, we have updated our equivalent production growth range to 38% to 44% and our liquids production growth range to 60% to 70% to better reflect our outlook for the remainder of the year.
We had hoped for and scheduled earlier timing for our Marcellus gathering permits, i.e., being able to turn wells into line, however, as previously mentioned, the permits were just recently received by Williams. This resulted in not achieving the high end of our guidance. With that said, we are comfortable with the guidance range that we have just put out.
Full year per unit cost range were also tightened based on year-to-date results and our expectations for the fourth quarter. We reaffirmed our net capital spending for '12 at $775 million and $825 million.
Okay, for '13, we have updated our equivalent production growth range to 35%, which is up from the 30% we had previously posted to 50%, so 35% to 50%, and we've established our liquids production growth range at 45% to 55%.
The midpoint of our guidance range is when you look at 2012 and 2013, implies three consecutive years of 40% plus equivalent production growth, which is an impressive number on an ever increasing base while like the same time maintaining our capital discipline, not encumbering our balance sheet or diluting our shareholders.
We have also provided initial guidance on cost for 2013, which reinforces our industry-leading cost structure and the continued trend for decreasing per unit cost. We further refined our estimates for capital spending in 2013 to between $950 million and $1.025 billion, with approximately 70% of that capital being allocated to our high rate of return projects in the Marcellus.
In a $3.50 natural gas environment, and with recent efficiency enhancements, our Marcellus rate of return certainly exceeds industry returns in our gas plays and most if not all the plays in current commodity prices. Additionally, the planned program will deliver a slightly positive cash flow at a $3.50 natural gas and $90 oil price. I'd say not a common occurrence in our space.
For 2012, production excluding the five basis only hedges, the Company has 37 contracts in our hedging book, 27 are gas swaps at $5.22, five are gas collars with a floor of $3.60 and a ceiling of $4.17 and four are oil swaps at $99.30, with an additional swap at $105.05. Approximately 40% of the midpoint of our guidance for the remainder of '12 is currently hedged.
For our 2013 hedge book, we have added 25 new hedges since our second quarter call in July. We now have 48 contracts, 45 for gas which are all collars and three swaps for all. Approximately 45% of the midpoint of our production guidance for '13 is currently hedged at an average floor price of $3.63 per Mcf, which is $0.13 above the $3.50 we're using in our 2013 budget. For additional information, you can go to our website for any additional specifics.
Now let's move to the operations side of our business. During the third quarter, we achieved a new milestone with a 24-hour record, 252 million cubic foot of gas produced in our Susquehanna County area. I should note we will exceed that level. We think that 10.00 o'clock this morning for the last 24-hour period touching approximately 780 million cubic foot a day.
I'm probably impressed with the North region's ability and their timing of some of these new releases. I probably should have more conference calls.
Our gross cumulative production from the field is almost 400 Bcf, with just 60 producing horizontal wells at this time – excuse me, with 160 producing horizontal wells at this time, certainly highlighting the prolific nature of this asset. While permitting delays for gathering lines continued to be an issue this last quarter. We were able to bring online 23 Marcellus wells and have successful brought on an additional five wells during October.
Our wells continue to outperform expectation that is evidenced by the highlighted two-well pad that recently came online in the Zick area. The combined IP as I mentioned of the two-well pad was over 43 million cubic foot a day from just 25 frac stages, which utilized the narrower frac stage spacing of 200 plus or minus feet. The original five-well pad at Zick has produced over 11 Bcf in approximately 180 days, which I think further highlights the quality of our acreage as we continue to expand to the east.
In other news, we recently had a 22 frac stage well reach 3 Bcf of cumulative production in just a 105 days. I think that’s the fastest record to-date, that’s broke the previous record we had set by 60 days. We are currently operating four drilling rigs in the Marcellus and 450 stages completing, cleaning up or waiting to turn in line along with an additional 296 stages waiting to be completed in our Marcellus area.
In terms of our plan for 2013, we will increase our rig count in the Marcellus by 25%. We will go from four rigs to five rigs, and Scott likes that percentage a lot by the way. We will stay at this level for the majority of the year and then add another rig as we enter 2014. The planned well count for the 2013 program in the Marcellus is 84 wells, with a placeholder for a handful of wells in the Utica, depending on the success of the well we currently have shut in. And I might add that that is also dependent upon whether or not Range and Cabot get together and continue drilling in an area that has all of our acreage HBP already. The investment level, as previously highlighted, is about 70% of the overall program, with 88% of that level focused on Marcellus drilling.
Okay. I have a little bit of narrative on the infrastructure we continue to aggressively pursue. Our infrastructure goes up in the Marcellus. As you are aware, we have been very clear to specifically outline those objectives in our discussions and presentations. Last quarter we reported that 2012 slowdown and the permit approval process did delay the construction of various gathering pipelines and ultimately affected the dates we turned our wells in line. We believe that issue has been fully resolved, and in fact, Williams, our mid-stream provider has now received 90% of the pipeline gathering permits to complete the 2012 program and has acquired 100% of the right-of-ways needed to complete our 2013 program.
In fact, we have no less than 12 different pipelines that are currently in the construction phase. This is great news on the pipeline construction side of the infrastructure. On the other half of the infrastructure picture – deals with the timing of compressor stations and free flow interconnect into the interstate pipelines. These projects have made significant progress, and while we are not going to see any of these individual projects have an in-service date earlier than we expect, we do still expect to be close to our original bill of approximately 1 point Bcf per day of takeaway prior to year-end 2012. But just to be clear, and as we have previously discussed; we put your models together, as the infrastructure requirements grow and the facilities are placed into service throughout our acreage position, we will in some cases have excess capacity in some areas, but still slightly constrained in other areas, and that phenomenon is simply result of where we need to have our drilling rigs throughout the year.
One other point regarding infrastructure, we have already provided Williams with the necessary information for our 2014 program. We anticipate Williams will submit the completed application for permits in January of 2013 for our 2014 program.
Now let's move to the South. This region has five rigs operating. As we speak, two are in the Marmaton and three rigs are drilling into Pearsall, with one of these rigs moving back to the Eagle Ford program fairly soon. This rig level is expected to continue throughout 2013 as current plans call for about 50 net wells to be drilled. The region accounts for roughly 30% of our overall capital program, and of that amount 75% is dedicated to drilling.
All right. I have been a little bit reluctant to discuss the status of the Pearsall with just one well, but as I mentioned last night, Cabot has successfully drilled and completed its first Pearsall Osaka joint venture well in Frio County. The short lateral well was drilled and completed with only 11 frac stages and tested at a 24-hour rate of over 1,400 barrels of oil equivalent per day.
As mentioned, one additional Pearsall well is completing and three wells are drilling. A total of six Pearsall wells are planned for the 2012 program. We hope our early drilling and completed wells will fall in the $9 million to $9.5 million range. Our first well was slightly over $10 million with the science that we threw in that, but with the learning curve, we hope to be able to continue to improve what our expectations are on the drilling cost.
Cabot's net well cost will be 9.75% during the Osaka carry period and we will have a 65% working interest in the wells on first production. We have accumulated over 70,000 acres net in the play and as I mentioned, we do not normally discuss exploration efforts at this early stages, however, with the level of interest and the number of questions we had been receiving, I felt it was necessary to provide an update.
In the Eagle Ford we announced our release of another successful well of 4,500 foot lateral and with 15 stages. To-date we have 38 Eagle Ford wells in our Buckhorn area and as with other plays we have seen well costs come down as efficiencies are gained and we are now in the $6.5 million to $7 million completed well cost range.
Also, in the third quarter the integration of field to full pipeline access versus trucking our oil that occurred just a couple of months ago. We are now able to produce the oil and transport it by that pipeline to Corpus Christi, where we received LLS pricing. This effort has made a fairly significant improvement in our realizations on an average of approximately $8 per barrel above NYMEX indications. The combination of lower cost and higher prices certainly has improved our overall economics in this area.
Now let's move to North Texas, the panhandle of Oklahoma and the Marmaton. That recently completed a well with a 15-stage frac stimulation. The well produced at an initial 24-hour rate, 664 barrels of oil a day and an average of 593 barrels over the last 20 days. We also drilled our first extended lateral well, with a lateral length of approximately 9,500 feet. The well was stimulated with 30 stages and is presently in the early stages of flow-back.
The second extended lateral well has been drilled and will start completion at the end of October. Completed well cost continue to average around $2.9 million to $3.3 million, with early drilled extended laterals coming in between approximately $4 million to $4.5 million. To-date, we have accumulated about 70,000 net acres in that play.
So, in summary, our drill bit success continues to drive our significant production and reserve growth expectations. What I'm most pleased about is the continued innovation our team has come up with, with new ideas that certainly is going to translate into incremental value. My expectation that we will post excellent numbers at year-end '12 and it's also as a forward look, my expectation that Cabot will in 2013 certainly have industry-leading production growth. We'll have a significant reserve addition at a very low cost of funding. We will also have an improved balance sheet with a positive cash flow program, using only a $3.50 gas price. I think we'll see a milestone reached in '13 where we'll have a Bcf per day of net production at some point during the year. And we will achieve these results with only 10 operated rigs for most of the year. I think a couple of these points may set us apart from some of our space.
Anyhow, Maureen, with that brief summary, I will be more than happy to answer any questions.
Operator: Pearce Hammond, Simmons & Co.
Pearce Hammond - Simmons & Co.: On your capital guidance – you mean on your production guidance for 2013, you provided the liquids production guidance. Does that include the Pearsall?
Dan O. Dinges - Chairman, President and CEO: That includes the Pearsall with a risk profile attached to it. We obviously risk our exploratory exportation (that is), and by putting together a production cash flow statement, we risk our expectations accordingly.
Pearce Hammond - Simmons & Co.: Then if you look at that you're going to go to the reduced frac spacing in the Marcellus and in a larger way next year, so how should we think about the total number of stages completed in the Marcellus in '13 versus '12?
Dan O. Dinges - Chairman, President and CEO: We will certainly be higher. I would expect that the increase will be 35% or so.
Pearce Hammond - Simmons & Co.: Finally, just from the industry standpoint, given the recent rise in gas prices, specifically for the calendar year '13, do you think the industry is going to be more active in the Marcellus and we should see a gradual uptick in the industry rig count in the Marcellus?
Dan O. Dinges - Chairman, President and CEO: I don't know. I think it depends on where companies have rate of return projects in their portfolio that would compete with their positions in the Marcellus. Some of the Marcellus up there is not quite as prolific as the area that we have, and the threshold for economic returns in other areas of the Marcellus might not compete with the returns that some companies might be able to deliver by drilling in some of their oil portfolio.
Operator: Bob Brackett, Sanford C. Bernstein & Co.
Bob Brackett - Sanford C. Bernstein & Co.: I have a question on the Pearsall Shale. You're quoting numbers of $9 million to $9.5 million. If I just compare that against your $7 million Eagle Ford wells, what's that incremental cost? It doesn't seem like just go a little deeper is going to cost you that $2 million.
Dan O. Dinges - Chairman, President and CEO: I'll pass it over to Matt for a second, but one of the things that you have to take into consideration is where we're trying to determine where we're going to land well. We're trying to get our mud properties straight and certainly it is in a higher pressure regime and the fracs require a little bit more pump pressures and we're using ceramic in the frac stages, but I'll let Matt also expand on some of that.
James M. Reid - VP and Regional Manager - South Region: Yeah, Dan's exactly right. Actually, it's a different casing program and Pearsall program. We have an extra stream of casing in our Pearsall program as opposed to our Eagle Ford program and we do see higher pore pressures in the Pearsall and we do see higher frac pressures as well and we do increase our proppant strengths as well during our fracs in the Pearsall.
Bob Brackett - Sanford C. Bernstein & Co.: Are you landing those Pearsall wells in the (Bare Shale) or in the Pine Island, or you do you think you're stimulating all three sub-units?
James M. Reid - VP and Regional Manager - South Region: Right now, we haven’t really discussed that and I can give you a little bit better feel for that after we do some micro seis work. We'll be doing that probably in the first quarter of next year, as for what we're actually stimulating. I know where we're landing. We have landed in about 70-foot interval. They are in the Pearsall. You can call it the (Bare), you can call it the Cow Creek, you can all it the James, people call it different intervals.
Dan O. Dinges - Chairman, President and CEO: The 70-foot is in approximately 500 to 600-foot gross Pearsall (indiscernible).
James M. Reid - VP and Regional Manager - South Region: Correct.
Operator: Michael Hall, Robert W. Baird.
Michael Hall - Robert W. Baird.: Just I guess a couple of follow-ups on the tighter frac spacing. Just want to make sure I guess understanding – the initial two wells, were those roughly 2,500 foot laterals if you're about 25 stages between the two of them? Is that shorter than your typical lateral and so on a more kind of normalized basis; we should see a more uplift to that, a fair way to think about it?
Dan O. Dinges - Chairman, President and CEO: Yeah, I don't have the exact lateral length of those wells, but keep in mind that some of our wells up there are shorter laterals, not because we prefer that, but because geographically if we are unable to get a leasehold possession that at times we have to shorten the laterals. So, again, I don't have the laterals space right in front of me, but that typically – well, that is the reason why we shortened our laterals.
Michael Hall - Robert W. Baird.: And then I guess, is there any way to quantify or are you ready to kind of quantify a little bit more in terms of what sort of percentage increase is in productivity and EUR per lateral foot, you're seeing there as a result of that program, and then also what…?
Dan O. Dinges - Chairman, President and CEO: Well, Mike, we certainly have seen an improvement and that's the reason why we're moving our program to the reduced spacing for the fracs. We're not prepared to give the details. We're still evaluating all the pilot wells that we've drilled with this reduced spacing. Steve Lindeman and his group are currently (indiscernible) of preparing for year-end reserve, and through that effort and evaluation of more data points on the production curve, these wells versus the wells that we are fracing at 250 will go into our bookings on EUR at the end of the year, and we'll certainly be able to quantify a efficiency gain by virtue of that process.
Michael Hall - Robert W. Baird.: I guess, last one on that is, how much of the 2013 program would you say is going to be utilizing that new approach, roughly?
Dan O. Dinges - Chairman, President and CEO: We will be implementing the 200 plus or minus foot spacing for our entire '13 program.
Operator: Brian Singer, Goldman Sachs.
Brian Singer - Goldman Sachs: Can you give us the latest update on the backlog that you have in the Marcellus, sort of stages or wells that are drilled but not completed and completed and awaiting tie-in? Can you talk also, as you get to the Bcf a day by the end of the year, how much of that would come on from wells that are already drilled, already producing or wells that still need to be drilled?
Dan O. Dinges - Chairman, President and CEO: Okay. I was going to pass that to Scott, but he got a coughing attack here. We have 19 wells that are waiting on the pipeline. Those have 283 stages. We are currently completing nine wells or are in the process of flowing back one or the other – 167 stages. We have 21 wells that are waiting on completion with 296 stages. I'm sorry, Brian what was the rest of your question?
Brian Singer - Goldman Sachs: The rest of the question was, as you get to the Bcf a day, how much of the difference between where you are now and there will come from wells that are actually already producing today, and they would be constrained versus wells that you can tie back in your backlog versus wells that you may still have to drill?
Dan O. Dinges - Chairman, President and CEO: Well, we have the expectation between now and the end of the year to bring on say another 30 wells and if you look at what the guys were able to provide me this morning, that we think this most recent 24-hour period that we will be at 780 million cubic foot a day. To me it looks like that we will be able to – depending again where these 30 wells are coming online and the infrastructure capacity, it looks like that the wells that we'll bring online will provide that – get up to that Bcf a day. As far as capacity restrains or the existing wells being restrained either by lack of capacity through dehy or compression or by higher line pressure, because we have not yet gone into the phase where we're reducing our field pressures, I think we could see incremental gains from those wells once we are able to implement reduced line pressure. That didn't answer your question, I know exactly, Brian, but I do think the wells that we will bring on between now and the end of the year and our existing wells, if we were able to deliver all of the gas that they could produce, we could hit that Bfc a day. However, we will have constrains within the system.
Brian Singer - Goldman Sachs: Then when we look at the midstream options for next year, what are your thoughts on major milestones or the trajectory of further debottlenecking and new midstream outlets coming on over the course of 2013, and how do you think about differential and the flexibility in terms of where you sell your gas as you look ahead to next year?
Dan O. Dinges - Chairman, President and CEO: Well, good questions, and the focus on the infrastructure has been something that we have dealt with through this entire year. I am pleased that we will be able to get this problem behind us for the most part, and as far as the effect it has on where our guidance is. And I think Jeff is the appropriate person to kind of reference the current status of the infrastructure and also where we're going with the infrastructure, and the market as a whole up there.
Jeffrey W. Hutton - Vice President, Marketing: Brian, I think if you look back to our last presentation, you'll see central compressor station which is in the North Central part of our play. That is the next major step for Cabot in terms of completing the original infrastructure plan. So that's kind of a second half or late second quarter of 2013. We're not relying solely on that, of course. We have a number of projects. Some new interconnects with existing pipes that will be free flow activity; units that are coming on late this year, early first quarter, but again, you asked about the major next step. That will be central compressor station. That feeds a new 24-inch pipeline. It's currently being laid. It comes down to the old Springville system down to Transco. In terms of moving gas around, we, of course, are very blessed to have three interstate pipelines that we're able to take our production to the Millennium Pipe to the North, Tennessee Gas Pipeline, and the 300 Line right through the center of our acreage, and, of course, the Transco lighting system. So currently, with the options that we have at this compressor station, we're actually able to, for the first time, start to play a little bit of the pricing game. So better prices on Transco, a little more gas goes there; better pricing on Tennessee, a little more gas goes there. So, it's been fun compared to last December when we had, as you know, 600,000 a day flowing into one pipe. We expect to continue to build in the optionality into the system and the flexibility so as our production grows, we continue to have those options to deliver gas to different markets.
Operator: Matthew Portillo, Tudor, Pickering, Holt & Co.
Matthew Portillo - Tudor, Pickering, Holt & Co.: Just a few quick questions for me. On the Pearsall, could we get just a breakdown on the hydrocarbon content between oil, NGLs and gas?
Dan O. Dinges - Chairman, President and CEO: Right now, I'll say it this way, that it's one well in one area of the field, so I'd be reluctant to give it all right now, but we're over 50% black oil right now in the stream, and then we have a high Btu content gas along with it.
Matthew Portillo - Tudor, Pickering, Holt & Co.: Just jumping quickly up to the Marcellus, just a bookkeeping question; in terms of the well costs, could you give us an update on, as we look at these 12 to 15-stage frac wells, where are you expecting cost to come in at the moment and how you see cost trends heading into 2013?
Dan O. Dinges - Chairman, President and CEO: Yeah, as we have stated in the past, we look at the Marcellus and we've always outlined our typical well as being a 3,500-foot lateral with 15 stages. Now, it is our typical well as we build our database now; will be most likely reflected as a 3,500-foot lateral with approximately 18 stages in it. That cost of that well is going to be a little bit higher because we'll have three additional stages in there, and then in regard to cost, we're about $6 million or so now with our typical 15-stage frac well. But we'll have a little bit of incremental cost with three additional stages, but I'll also add that we're currently in negotiations with our pumping providers up there and that process has not executed yet. We have not executed a final contract for '13 pumping services, but I am comfortable in saying that our pumping service cost will be below our cost we saw in 2012. So, I can't say exactly what I think it's going to be until we see where we land with the pumping service contract, but directionally, all our costs are going down.
Matthew Portillo - Tudor, Pickering, Holt & Co.: Then just the last question for me, as we kind of look across your portfolio today, you've obviously established quite a few new potential cornerstone assets, and just trying to get a better sense of how you guys think about the potential for acceleration of development on these assets, either with your own capital or potentially through JVs over time. So, just wondering if you're looking at bringing in any additional partners across any of your either exploration or development plays and how you guys are potentially thinking about capital acceleration potentially heading into the back into '13. And I know it's a little bit early for that, but just trying to get a better sense of how you guys are thinking about the opportunity set?
Dan O. Dinges - Chairman, President and CEO: Well, we are certainly blessed with a portfolio that yields very good returns, in particularly our Marcellus, and we're very cognizant of the fact that our Marcellus assets yield some of the best returns of any asset in the industry and we will continue to allocate and grow that asset as rapidly as we can. Our main objective would be to enhance our present value of that asset and we'll continue to do so. In the other areas of our portfolio, we will continue to capture our acreage out there. That's primary term acreage. We have done so as an example of what we've been able to do is the Osaka transaction. We were able to bring a partner in; Osaka, and we're very pleased to have them as a partner and we look forward to having them as a long-term partner. So we're able to bring them in, get them an opportunity to get a foothold in the state, but also it allowed us to have leverage dollars to drill a little bit deeper in the section, i.e., the Pearsall. We knew the Pearsall had potential and we are currently drilling in the Pearsall. Those leverage dollars have allowed us to, in essence, maintain all of our acreage, including the Eagle Ford acreage, and it certainly has allowed us to compete on our return profile with the carrier we have at a very favorable rate compared to the Marcellus. In the other areas, like the Marmaton, we have acreage out there that we would continue to desire to capture because we have very good returns out there in the Marmaton, particularly with the very low completed well cost. We will look at that and have looked at that as is it an area that would be right for a partnership. Right now, we have not strained our balance sheet. Our '13 program has free cash available even as we operate in our area out there in the Marmaton, without a joint venture partner. We do evaluate it and we do look at how we can maximize the capital efficiency of every dollar we spend. We have not taken off the table having another joint venture partner in any of our operations, less and except the Marcellus.
Matthew Portillo - Tudor, Pickering, Holt & Co.: So, as we think about it, is it both the Marmaton and the Eagle Ford that could potentially be assets where you may bring in additional partners or is it just the Marmaton at the moment?
Dan O. Dinges - Chairman, President and CEO: No, I think the entire area we'll look at, if it looks like a significant enhancement to us and we have the right party that we would like to be in business with, certainly, being able to enhance our capital efficiency, we would consider.
Operator: Charles Meade, Johnson Rice.
Charles Meade - Johnson Rice: Couple of quick questions for you. Those two wells in the Zick area, is that the Daniels Pad, or are we still waiting for results on that?
Dan O. Dinges - Chairman, President and CEO: No, the Daniels Pad is another seven miles to the East further. We are still waiting on that area to get some pipelines to that particular area. So that will be farther out in '13 before we get a line out in that area.
Charles Meade - Johnson Rice: So that's like a first quarter '13 or something like that?
Dan O. Dinges - Chairman, President and CEO: No, it's second quarter actually, by the time we get that line out there.
Charles Meade - Johnson Rice: Then the second question I had was, regarding your Pearsall activity in 2013, is that going to be all in the Buckhorn area or are you going to pull a rig over to Powderhorn for part of the year?
Dan O. Dinges - Chairman, President and CEO: We will have the majority of the activity in the Buckhorn area, but we will also do an exploratory valuation of our Powderhorn area.
Charles Meade - Johnson Rice: So, do you have in mind, like a rough percentage – what percentage of your activity is going to be in Buckhorn versus Powderhorn?
Dan O. Dinges - Chairman, President and CEO: 90% is going to be in Buckhorn.
Operator: Joe Magner, Macquarie.
Joseph Magner - Macquarie: Just wanted to, I guess, try to tie some things together in case I missed it. On your drilling activity, have you quantified what sort of efficiencies you're seeing in terms of how many wells you drill per rig per year?
Dan O. Dinges - Chairman, President and CEO: No, I haven't broken it out like that just on the back of an envelope, but our efficiencies that we see on a per rig basis kind of reflect in our rate of return number per well. So, when you look at – if you want to look at it from a days drilling and rig-to-rig – or excuse me, spud-to-spud in the Marcellus, we're looking at 20, 22 days something of that range. Pearsall is still a little bit early to make that determination. I will say that Matt and his group had actually penciled in drill time and run pipe about 60 days originally in the Pearsall before we drill our first well, and now they have come in, in the 40 days to get that accomplished. So, they had already – were able to beat there initial curve and certainly they have ideas on how they're going to enhance that. So, we're fairly good on the type of drilling we're doing in the Marcellus, and that 20, 22 days is a phenomenon based on us having to make a lot more rig moves than we would have to – then we'll have to make once we get to pure pad drilling. We're only drilling two or three wells per pad, and once we get the pad drilling, certainly that spud-to-spud time will be reduced once we drill the 10 to 14 wells per pad that we plan on in the future. And I would expect Matt will be able to engineer the drilling of, for example, the Pearsall wells and get that drill time down just like he has in every other area that we have been operating.
Joseph Magner - Macquarie: And just – touched on Pearsall being a risk component of your year-over-year liquids growth, what are the, I guess, primary drivers of that year-over-year liquids is Marmaton, just kind of provide a little more detail on that?
Dan O. Dinges - Chairman, President and CEO: Yeah, it’s Marmaton and the Eagle Ford and we certainly have in the mix a risk profile of our Pearsall expected completions.
Joseph Magner - Macquarie: Just one last one on that; 1 Bcf a day rate you're referring to, is that a net or a gross number, just to clarify?
Dan O. Dinges - Chairman, President and CEO: That would be a net number.
Operator: Jack Aydin, KeyBanc Capital Markets.
Jack Aydin - KeyBanc Capital Markets: Dan, could you guess or venture to guess what would you might exit the year in terms of production out of the Marcellus, I mean, you have 780 million now?
Dan O. Dinges - Chairman, President and CEO: We have a number of wells coming online, and we have a pretty good rate going right now. I would say that if we were – and, again, Jack, to snapshot, so you got to make sure everything is in sync, but I'll do the total Company. I think the total Company would be 900 million equivalent a day or better.
Jack Aydin - KeyBanc Capital Markets: Okay. Second question, now in the past, you booked most of the...
Dan O. Dinges - Chairman, President and CEO: That’s a net number, by the way.
Jack Aydin - KeyBanc Capital Markets: In the past, you booked your reserve at certain EURs. Now, with reduced spacing and frac stages, now it looks like those two wells, you're getting 2 million per frac stages. If that's what you're going to go through the year, 2013. Directionally, what kind of uplift we might see in reserve booking? I know it is early, but can you venture in that area also a little bit?
Dan O. Dinges - Chairman, President and CEO: I can say it like this. I do think that our typical well definition of 3,500 feet and 15 stages will go to 3,500 foot and 18 stages or so. Those three additional stages are going to have some incremental effect on a similar lateral linked well as we had in our '11 bookings. I'm not going to stretch to say that every frac stage now will be a 2 million a day increment. That's a very aggressive number and we don't have enough data points to say exactly what's it's going to be, but I will say and what we're trying to gather and what Steve Lindeman and his group and also Phil Stalnaker and his group are trying to determine is, the additional frac stages are just not additive for the three additional frac stages. We think the additional reduced spacing for all the lateral length is going to have some incremental adds, some incremental gain by virtue of the stages being reduced from 250 to 200. What that number is and how we quantify it on a IP per stage basis or an EUR basis, I'm not prepared to know that at this stage. I am excited and obviously us moving our '13 program to that 200-foot spacing is indicative of how we feel about it.
Operator: Biju Perincheril, Jefferies.
Biju Perincheril - Jefferies: A couple of questions. On this Marcellus completions, how should we think about it? Are you – with the more stages in given lateral lengths, are you still pumping the same amount of propene and water per stage or are you now proportionally pumping less? And can you talk about what – does this have any impact on the spacing that you had assumed before?
Dan O. Dinges - Chairman, President and CEO: Well, we are still pumping at the same barrels per minute rate, and we are also pumping the stages with the similar amount of propene. And again, the effect on the way we were pumping or the stages and how we were completing wells before, I think it's just – the enhancement is going to be recognized through our production charts on each well as we get more data. But I do think the efficiencies gained by reduced spacing and keeping the pump pressures similar and the pump rate similar and the amount of propene is going to be incrementally beneficial across the entire lateral length.
Biju Perincheril - Jefferies: So, if I think about the frac length laterally, that's about same as before?
Dan O. Dinges - Chairman, President and CEO: Yes, yes.
Biju Perincheril - Jefferies: And then on the infrastructure thesis you had, was that related to some changes in the regulatory process or was it just a manpower issue with DDP or Army Corps of Engineers?
Jeffrey W. Hutton - Vice President, Marketing: Yes, Biju, it's actually a combination of those factors. In fact, the Williams has done an excellent job with the agencies that time-to-time try to venture and interpret the regulations a little differently with each application. So, there is a little bit of that going on. There is the typical backlog of so many permit applications that without increased manpower of those agencies. Just a number of factors from communications between dual agencies and the kind of wetland application for example. The DDP has made progress. The governor actually has intervened somewhat into the process, and so we feel much, much better today than we did a year ago.
Biju Perincheril - Jefferies: So, when do you think Williams will start receiving permits for 2013 program?
Jeffrey W. Hutton - Vice President, Marketing: I think the applications that Williams files with both agencies, the Corps of Engineers and the DDP, they are an ongoing process. So it's not exactly a calendar year. If we gave Williams a 2013 program well earlier than some of the other wells, that permit actually could come out earlier or maybe we already have and I think we do have some of the '13 permits in hand. So, it's really not a stop-and-go process with each program year; it's just an ongoing process.
Biju Perincheril - Jefferies: So, I should think about – you have about 30 location backlog today in-hand permit. And then…
Scott C. Schroeder - Vice President and CFO: One of the other things; picking up on what Jeff said, is, again, Williams had all the permits fully, 100% ready to turn into the regulators by July of this year for '13. So, one of the things, the dynamics that happened is earlier in this process, if you remember, it's kind of six to nine months to get them out and then it kind of ballooned out to 18 months. It's moving back towards the 12 to 13 month time period. One of the things we've said in some of our meetings was that by the end of next summer, directly to your question, we kind of expect we'd have all the 13 permits if they kind of take a little over a year to get.
Biju Perincheril - Jefferies: Then one last question, just clarification on that Pearsall rate. Did I tell you that that the rate that you quoted does not include NGLs, it was just the oil and rich gas?
Dan O. Dinges - Chairman, President and CEO: The BOE over 1,400 barrels a day does include the four well strength. I just haven't given the mix of the Mmbtu quality of the gas and NGLs that are associated with it.
Operator: Joseph Allman, JPMorgan.
Joseph Allman - JPMorgan: In terms of infrastructure in the Marcellus and in particular the Intestate pipes, what gives you the confidence that you can grow your production as much as you've forecast? Are you relying on your own firm transportation or are you relying more so on the firm capacity of others and where might there be some vulnerability?
Dan O. Dinges - Chairman, President and CEO: I'll let Jeff go into that Joe.
Jeffrey W. Hutton - Vice President, Marketing: It's always a challenge with that subject, but here is how we plan for that one. We currently hold (FT) basis around 350,000 a day of firm takeaway. So, we sleep well at night knowing that we have that amount of capacity. Of course, we're always participating in expansion projects and we have a number of projects that we're considering participation in. If you kind of think we're producing – or just on an average day in the past few months, 750,000 a day, then you can assume that our firm transport moves X amount of gas and then our customers' firm transport moves X amount of gas. So, we have, from the beginning, sold to utilities LDCs in the Northeast; volumes of gas that they move under their (indiscernible) firm transportation, and that's been our success to-date. As we move larger volumes, we've signed some longer term contracts with a couple of parties that have this firm transportation. It is very valuable. There's been a couple of expansions, particularly on Tennessee, the EQT expansion which added 350,000 a day a firm. That capacity is currently not all being used, so the capacity has freed up on that pipeline, and also on Millennium. So, we feel good that the interstates have responded with additional backhaul and additional expansion capacity. Transco is a project right now that will come about in two years that will add around 500,000 to 600,000 a day capacity. And last but not the least, I'll use this opportunity to plug Constitution Pipeline. That is our 650,000 a day pipeline. That's willing to come from central compressor station that I mentioned earlier into the Iroquois Zone 2 market and the Tennessee 200 Line market. Cabot will have 500,000 a day of firm capacity on that pipeline. So, we are planning for the future. we are willing to end up holding a lot of firm transport, but we will always be selling to utilities in the Northeast and the mid-Atlantic area that do hold firm transportation.
Operator: Having no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Dan Dinges for any closing remarks.
Dan O. Dinges - Chairman, President and CEO: Thank you, Maureen. I appreciate everybody joining us for the call. I think you can see that we have posted some good numbers for our third quarter, year, quarter-end. Expect the numbers to continue to improve as we get to '12 year-end and we've given you a little bit of a look at our '13 and our expectation is our '13 is going to be equally as robust as our '12 was. So, thank you for your commitment. Thanks for the loyalty for those long-term holders and we appreciate your support. Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.