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.
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.
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.