There are a lot of numbers supporting an argument that Cabot Oil & Gas (COG) is one of, if not the,
best dry gas producers in the country. The company has shown
exceptional capital productivity, as well as low lifting and finding
& development costs. Add that to some top-notch acreage in the
Marcellus, and Cabot has delivered top-notch adjusted production growth
and returns on employed capital.
That's not what is driving the
shares right now, though. All of the positives at Cabot seem to be
taking a back seat to worries that production growth in the Marcellus
will overwhelm takeaway capacity and force Cabot to accept weak
differentials. This is most definitely a risk, as every $0.25/mmbtu has a
roughly $5 to $6 impact on NAV, but I believe growth-hungry midstream
and pipeline companies will address these infrastructure challenges,
leaving Cabot meaningfully undervalued today.
Read the full article here:
Differentials All The Difference For Cabot Oil And Gas
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