We are upgrading Cabot Oil & Gas Corp. (COG) shares to Outperform from Neutral, reflecting the company's impressive exposure to the high-return Marcellus and Haynesville Shale plays, as well as its above-average production growth. Furthermore, the capital infusion of over $200 million bodes well for Cabot, which will help the company bolster its natural gas operations.
Buoyed by the growth momentum from the company's drilling efforts, particularly in its North region, Cabot recently reported better-than-expected first-quarter results. A relatively low-risk profile and longer reserve lives are other positives in the Cabot story.
Considering these factors, we believe Cabot is well positioned going forward and consider it an attractive investment. Our $71 price objective is based on a multiple of 16.8X trailing twelve-month cash flow.
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