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Cabot Sees Lower 2020 Output, Expects Natural Gas Price Hike

·3 min read
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Cabot Oil & Gas Corporation COG issued an operational update for the third quarter of 2020. The company started a production curtailment plan on Sep 18 in response to the sharp decline in natural gas prices throughout Appalachia. This resulted in an average reduction in gross production of around 372 million cubic feet equivalent (“Mmcfe”) per day during the last 13 days of the quarter as stated by CEO, Dan O. Dinges.

Being a low-cost operator, the company is confident in delivering cash margin, even when the natural gas price has hit rock-bottom. The temporary production cut is part of the upstream operator’s efforts to improve margins going forward when prices go up. Despite the curtailment program, Cabot's third-quarter production guidance remains at its previously mentioned range.

Cabot expects a gross production of 2,406 Mmcfe per day for the third quarter of 2020 at a realized price of $1.57 per thousand cubic feet (“Mcf”), including the impacts of derivatives.

Considering the impact of curtailments leading to an average of 450 Mmcfe per day of lower gross production month-to-date, Cabot’s fourth-quarter 2020 production guidance is pegged at 2,300-2,350 Mmcfe per day, annual production guidance for 2020 being 2,325-2,340 Mmcfe per day against a capital program of $575 million. Earlier, Cabot expected its 2020 production to be 2,350-2,375 Mmcfe per day.

Due to the tightened demand-supply fundamentals, the company expects a significant increase in natural gas prices in 2021. This, in turn, will trigger growth in Cabot's free cash flow next year, allowing the company to utilize the excess amount for the increased return of capital to shareholders and the repayment of debt.

Company Profile & Price Performance

Cabot, headquartered in Houston, Texas, is a leading independent natural gas producer. It is engaged in the development, exploitation and exploration of properties mostly in the continental United States. Its shares have underperformed the industry in the past six months. Over the past 6 months, the stock has declined 2% against the industry’s 12.2% growth.

Zacks Rank & Other Stocks to Consider

Cabot currently carries a Zack Rank #2 (Buy). Some other top-ranked players in the energy space are Oasis Petroleum Inc. OAS, PDC Energy Inc. PDCE and Plains Group Holdings LP PAGP, each currently sporting a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the past 60 days, the Zacks Consensus Estimate for 2020 earnings for PDC Energy has been raised by 519% and for Oasis Petroleum, it has been increased by 177.1%.

Plains Group is expected to see earnings growth of 160.6% in 2021.

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Click to get this free report Cabot Oil Gas Corporation (COG) : Free Stock Analysis Report PDC Energy, Inc. (PDCE) : Free Stock Analysis Report Oasis Petroleum Inc. (OAS) : Free Stock Analysis Report Plains Group Holdings, L.P. (PAGP) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research