Cabot Oil & Gas Corp. (COG): Production, capex guidance raised, resource upside quantified - Goldman Sachs April 09, 2008
News
In a new presentation this week, Cabot raised its 2008 production guidance to 94-97 Bcfe from 93-96 Bcfe and increased 2008 capital spending budget to $560 million from $490 million. Management indicated it sees unrisked unbooked resource potential of 7-10 Tcfe.
Analysis
The guidance revisions are in line with our estimates – we have assumed 97 Bcfe of 2008 production for $550 million in spending. We are not making changes to our estimates, and notably we continue to expect production will be at the upper end of revised guidance. We do not believe 7-10 Tcfe is being factored into Cabot shares. We are assuming unbooked resource of about 3.3 Tcfe in our $71 12-month discounted cash flow based target price, to which we see 25% upside. Key risks include commodity price volatility, drilling results, cost pressures and government pronouncements.
Implications
We continue to maintain Cabot, rated Buy, on our Conviction List, relative to our Attractive coverage view. We believe positive newsflow will continue regarding Cabot’s key plays: James Lime at the County Line play in East Texas, Haynesville and Cotton Valley at the Trawick joint venture in East Texas, Lower Huron at the Hurricane play in West Virginia, Marcellus Shale in West Virginia and Pennsylvania, and Hinton in Canada. We believe that multi-year, double digit, low-cost production growth is still not being priced into Cabot shares.
====
Morgan Stanley Initiates Coverage on Cabot Oil & Gas (COG) with an Overweight
7:41 AM EDT April 9, 2008
Morgan Stanley initiates Cabot Oil & Gas (NYSE: COG) with an Overweight.
Cabot Oil & Gas Corporation is an independent oil and gas company engaged in the development, exploitation and exploration of oil and gas properties located in North America. [SM]
StreetInsider |
