Cabot to Sell Assets, Shares Fall - Analyst Blog

By Zacks Equity Research,

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Independent oil and gas exploration company, Cabot Oil and Gas ( COG ) entered into two separate agreements to sell its Mid-Continent and West Texas properties for a total consideration of about $188 million. The sale of these proved and unproved oil and gas properties is scheduled to close in the fourth quarter of this year.

Cabot will sell around 66,000 acres in the Marmaton Play in Oklahoma and Texas Panhandles to Chaparral Energy Inc., increasing the latter's hold by almost twofold. The transaction will take place for a consideration of about $160 million.

Per the company, as of Dec 31, 2012, the assets comprised proved reserves of 2.1 million barrels of oil equivalent (MMBOE). The prospect currently produces 2,000 barrels of oil equivalent per day (BOE/d).

In another transaction, Cabot will dispose properties in West Texas to an unnamed buyer for $28 million. These assets hold proved reserves of approximately 1.5 MMBOE and currently produce 260 BOE/d.

Cabot plans to enhance the value of its portfolio through the sale of non-core assets. These divestitures are a strategic move by the company to shift its focus to the higher yielding prospects in the Marcellus Shale.

The Houston, Texas-based company has a diversified asset portfolio, spread between low risk/long reserve-life Appalachian assets and large-volume/rapid payout Gulf coast properties. The company also has large prospects in the Rocky Mountains and the Anadarko Basin.

Shares of Cabot trade in a 52-week range of $21.07 to $40.34. Post announcement, the company's stock slipped approximately 3% over the day to $36.34 by close of trade on Oct 17.

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 other better-placed stocks in the exploration and production industry such as Stone Energy Corp. ( SGY ), Matador Resources Company ( MTDR ) and Linn Energy, LLC ( LINE ). All these stocks hold a Zacks Rank #1 (Strong Buy).

CABOT OIL & GAS (COG): Free Stock Analysis Report

LINN ENERGY LLC (LINE): Free Stock Analysis Report

MATADOR RESOURC (MTDR): Free Stock Analysis Report

STONE ENERGY CP (SGY): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: COG , LINE , MTDR , SGY

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