Domestic energy explorer
Cabot Oil and Gas Corporation
) recently declared that its production of natural gas from
Marcellus Shale - in western Pennsylvania and West Virginia - hit a
record. Per day production averaged over 700 million cubic feet
(Mmcf) for the last two weeks and touched 752 Mmcf during one
Management attributed the record production to a singular focus on
managing field line pressures rather than new well connections.
Cabot operated 14 out of the top 20 producing wells in the
Marcellus region in the first half of 2012. The company's
cumulative production reached 354 billion cubic feet (Bcf) with 145
producing horizontal wells.
Cabot Oil & Gas was the best performing S&P 500 stock for
2011, gaining almost 100% during the period. The natural gas
producer defied weak commodity prices to set a scorching growth
pace in a year that saw the overall index decline 0.6%. Most of the
gain was driven by its exposure to the high-return Marcellus and
Eagle Ford Shale plays, as well as its above-average production
growth. A relatively low risk profile and longer reserve lives are
other positives in the Cabot story.
We expect Cabot's new pipeline initiative - the 'Constitution
Pipeline Company' in partnership with
Williams Partners L.P.
) - that will connect natural gas production in Pennsylvania to
markets in the northeast, to further improve its operations moving
However, Cabot's high natural gas exposure raises its sensitivity
to gas price fluctuations, compared to its more-diversified
independent peers with higher oil production.
As such, we see the stock performing in line with the broader
market and maintain our long-term Neutral recommendation, supported
by a Zacks #3 Rank (short-term Hold rating).
CABOT OIL & GAS (COG): Free Stock Analysis
WILLIAMS PTNRS (WPZ): Free Stock Analysis
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