Cabot Oil & Gas (COG, Financial) illustrated solid fourth quarter results with impressive top line and bottom line growths. During the year, Cabot bought 4.3 million shares of its common stock and enhanced its Eagle Ford position by adding nearly 40,000 total acres.
A closer look at its performance
Cabot managed to beat analysts' earnings forecasts and delivered better earnings than its peers amid declining commodity prices. Cabot generated earnings of $0.97 per share for this year better than its peers. EQT Corporation, Range Resources and Southwest Energy delivering earnings of $0.96, $0.39 and $0.50 per share respectively. Therefore, Cabot seemed to have superior performance over some of its peers in terms of price returns.
The energy drilling major reported fourth quarter oil and gas production of approximately 152 billion cubic feet equivalent (or bcfe), an increase of 25% from last year’s production.
The impressive performance of Cabot in terms of increasing the production and lowering its operating costs amid tough operational environment compared to its peers highlights the superior growth strategy of the company.
The company is also focusing on the black oil window of the Eagle Ford shale in south Texas. Cabot has partnered with EOG for a minor portion of its land in the Eagle Ford. It estimates to execute a drilling schedule of 295 total wells all through 2019, with an expansion in production to 36,000 barrels of oil equivalent per day, or approximately 7% of net company volumes.
The solid acquisitions of the key strategic rigs in North America are believed to optimize Cabot’s production with expanded production growth at reduced costs.
What analysts think
The consensus estimate among 39 polled investment analysts evaluating Cabot Oil & Gas Corporation suggests that the company should outperform the market. This consensus estimate has been maintained since the investment analyst’s sentiments got better on Jan 21, 2011. The earlier consensus estimate suggested investors to hold their position in the company.
TheStreet Ratings team rates Cabot Oil & Gas Corp as a Hold with a ratings score of C owing to a mix of strengths and weaknesses with only little evidence to justify the stock’s performance. The company's strengths are viewed in several areas like its robust stock price performance, impressive earnings per share growth, solid revenue growth, remarkable return on equity and growing profit margins.
Conclusion
Overall, the investors are advised to invest into Cabot Oil & Gas Corp looking at the notable valuation levels with trailing P/E and forward P/E ratios of 112.48 and 32.32 respectively. The PEG ratio of 4.53 suggests satisfactory company growth. The profit margin of 5.35% is nominal. However, Cabot needs to optimize its balance sheet with total debt of huge $1.75 billion against total cash of $20.95 million only to plan for prospective growth investments.
