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Gold/Mining/Energy : ENERGY EXPLORATION & PRODUCTION -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (68)	2/15/2008 9:38:16 AM
From: Dennis Roth	Read Replies (1) \| Respond to of 111

Cabot Oil & Gas Corp. (COG): Raising target price on greater legacy Marcellus potential - Goldman Sachs - February 15, 2008 What's changed The operational update detailed on Cabot’s conference call was quite positive, with management indicating that it sees Marcellus Shale potential on more than 200,000 of the company’s 1 million legacy acre position in Appalachia, principally West Virginia, at attractive rates of return. We are updating our quarterly and full-year estimates to reflect the effects of changes to production estimates, costs and minor other company adjustments. Our new 2008-2012 estimates are $2.17, $3.43, $2.84, $2.05, and $1.76, from $2.14, $3.30, $2.69, $1.91, and $1.62. Implications We continue to rate Cabot Oil and Gas Conviction Buy relative to our Attractive coverage view despite recent outperformance. Cabot's recent outperformance reflects both improved natural gas fundamentals as well as greater confidence in resource upside. We believe momentum from both will continue to be strong. With positive well results from the Marcellus, James Lime and Trawick (East Texas) plays, and delays in the Hurricane horizontal shale play in Appalachia likely a few weeks away from being resolved, the prospects of each of these plays showing further upside should lead to upward production guidance revisions at midyear and further multiple expansion. Valuation We are raising our 12-month discounted cash flow-based target price to $57 from $53 to reflect greater unbooked resource potential from the Marcellus Shale on legacy acreage in Appalachia and James Lime and Travis Peak in the East Texas County Line play. We see 24% upside from current levels. Cabot trades at 8.4X 2008 EV/debt-adjusted cash flow. Key risks Commodity price volatility, drilling results, cost pressures and government pronouncements are key risks.