Independent oil and gas exploration company,
Cabot Oil and Gas
), announced the initial production guidance of 30-50% growth for
2014. It also restated its 2013 production growth of 44-54%.
CABOT OIL & GAS (COG): Free Stock Analysis
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The production volumes have been low in recent times due to weak
Marcellus spot market price and other planned maintenance
activities. However, management believes that this should not
create a significant impact on the production levels in the long
run. Moreover, the announcement reflects management's belief in
itself to achieve the stated growth potential.
While partially affected by lower price realizations in the near
term, Cabot still stands to benefit from its hold in the
Marcellus Shale. The rock bed offers natural gas at profitable
levels with recovery costs staying below $1.20 per thousand cubic
feet (Mcf). The company is focused on maintaining quality assets
and explores the positive risk-return drilling options that the
Houston, Texas-based Cabot trades in a 52-week range of
$21.07-$40.34. Post announcement, the shares rose to an intraday
high of $37.48 on Sep 26, before settling at $37.12, up 4.4% from
the previous day close.
Cabot has a diversified asset portfolio, spread between low
risk/long reserve-life Appalachian assets and large-volume/rapid
payout Gulf coast properties, with further variety from large
prospect inventories in the Rocky Mountains and the Anadarko
Basin. Moreover, Cabot maintains a stable balance sheet that
continues to provide flexibility to its capital programs and
However, we remain cautious about the company's high natural gas
exposure that raises its sensitivity to gas price fluctuations.
Cabot currently holds a Zacks Rank #3 (Hold), implying that it is
expected to perform in-line with the broader U.S. equity market
over the next 1 to 3 months.
Meanwhile, one can consider better-placed other stocks in the
exploration and production industry such as
Matador Resources Company
Stone Energy Corp.
) which holds a Zacks Rank #1 (Strong Buy) or
Carrizo Oil & Gas Inc.
) which currently holds a Zacks Rank #2 (Buy).