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

To: Dennis Roth who wrote (90)	6/2/2008 8:58:36 AM
From: Dennis Roth	Read Replies (1) \| Respond to of 111

Cabot Oil & Gas Corp. (COG): Penn Virginia Haynesville well in East Texas positive News Penn Virginia (Not Covered) announced May 30 that an expected unconstrained initial production rate of 10-15 MMcf/d from its first horizontal well testing the Haynesville Shale in East Texas. Management indicated the well cost $7 million with expectations for going-forward drilling and completion costs of $6 million. If this ultimately leads to 9 Bcfe in recoverable reserves, the finding and development costs assuming a 20% royalty would be a very low ~$1/Mcfe. Analysis Cabot has participated only modestly from rising Street sentiment regarding Haynesville potential, in part because the focus thus far has been on acreage in Louisiana as opposed to East Texas. This well is a clear indication that the play appears to extend into East Texas. Penn Virginia's well is located on the border of Harrison County and Panola County, which is northeast of Cabot's Trawick, County Line and Minden positions, where the company has Haynesville exposure. So to receive full credit Cabot will have to show success in Haynesville drilling in County Line and Minden. The company has already drilled successful vertical wells in Trawick, for which the stock is receiving very minimal credit in our view. Implications Cabot is on our Conviction Buy List, and we see 38% upside to an $80 12-month discounted cash flow based target price (commodity price volatility, drilling results, cost pressures and government pronouncements are key risks). We believe growth potential at attractive F&D costs from multiple plays in East Texas and Appalachia are not being considered in the stock. Further Haynesville success has positive implications for Chesapeake Energy (Neutral), EXCO Resources (Neutral), Encore Acquisition (Buy), Questar (Neutral) and EnCana (Sell). If the Haynesville were to extend through East Texas, there would likely be many other players that could have exposure as well. Goldman Sachs Global Investment Research