Cabot Sellls Interest

A subsidiary of Japanese firm Osaka Gas Co. Ltd plans to buy a 35% non-operated working interest in the Pearsall shale from Cabot Oil & Gas Corp., Houston (NYSE: COG) in about 50,000 net acres in South Texas for $250 million in cash and carry.

Under the agreement, Osaka will pay $125 million to Cabot at closing and will pay an additional $125 million to carry 85% of Cabot’s share of future drilling costs in the Pearsall shale. The drilling carry is expected to be fully utilized by the year-end 2013.

The lease includes acres in Atascosa, Frio, La Salle and Zavala counties.

Initial plans call for two rigs to operate under a joint venture with drilling beginning 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 will retain its lease rights above the Pearsall, including the Eagle Ford shale formation.

Dan O. Dinges, Cabot chairman, president and chief executive, says, the results to date are promising. “We believe the Pearsall shale could prove to be an additional liquids-rich catalyst in our portfolio,” he says. “This transaction will provide the capital necessary to accelerate drilling of this formation, while still maintaining Cabot's 100% interest in our Eagle Ford leasehold."

The deal is expected to close on June 26, 2012.