Cabot Oil & Gas’s Key Strategies and Initiatives for 2018



Cabot’s key strategic initiatives for 2018

From 2018 to 2020, Cabot Oil & Gas (COG) expects to see a compound annual growth rate of 17%–21% (20%–24% on a divestiture-adjusted basis) in its production volumes.

The company also expects to deliver $1.6 billion–$2.5 billion of after-tax cumulative free cash flow (non-GAAP), which would allow for more share repurchases and debt reduction opportunities.

Cabot Oil & Gas’s management is focused on improving the return on capital employed, which it expects to increase from 7.3% in 2017 to 18%–23% by 2020—based on the NYMEX natural gas price range of $2.75–$3.25.

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In the first-quarter earnings release, Dan Dinges, Cabot Oil & Gas’s CEO, said, “We believe the combination of growth, free cash flow and corporate returns expected during this three-year period are not only best-in-class in the exploration and production sector, but are extremely competitive when compared to the broader equity market.”

Marcellus: Cabot Oil & Gas’s backbone

Now that Cabot has divested its Eagle Ford assets, all of its efforts are being focused on the Marcellus Shale where it has allocated a significant portion of its 2018 capex. However, as a part of its long-term strategy, the company also plans to allocate a limited portion of its capital to test newer concepts in its exploratory areas that could enhance its long-term value.

Cabot Oil & Gas’s peers in the Marcellus include Range Resources (RRC), Southwestern Energy (SWN), and EQT (EQT).

Range Resources’ Appalachia production in the first quarter (which includes production from Marcellus, Utica, and Upper Devonian shale plays) accounted for 83% of its total production. For Southwestern Energy, ~48% of its first-quarter production came from the Marcellus. Around 81% of EQT’s first-quarter production came from the Marcellus.

Next, we’ll discuss Cabot Oil & Gas’s capex plans for 2018.


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