Cabot Oil & Gas’s stock performance
Unlike its oil-weighted peers, Cabot Oil & Gas (COG) hasn’t risen much this year. The natural gas–weighted company’s stock has declined 4.5% YoY (year-over-year). During the same period, natural gas prices (UGAZ) have fallen ~2%. Natural gas accounted for 97% of Cabot Oil & Gas’s first-quarter production.
Natural gas prices impact natural gas–weighted producers like Range Resources (RRC) and Chesapeake Energy (CHK). Range Resources’ net production in the first quarter was 2.188 Bcfe (billion cubic feet equivalent)—67% was natural gas. Chesapeake Energy’s first-quarter production was 554 thousand barrels of oil equivalent per day. Natural gas accounted for 74% of the total production.
In comparison, crude oil prices (DBO) have risen 63.4% YoY, while the Energy Select Sector SPDR ETF (XLE) has increased ~18% during the same period. Meanwhile, the S&P 500 SPDR ETF (SPY) has risen ~12% on a YoY basis.
Streamlining the portfolio
During 2017, Cabot Oil & Gas divested its Eagle Ford assets. The company positioned itself as a pure-play Marcellus player with “one of the strongest balance sheet in the industry with a net debt-to-EBITDAX ratio of one-time and approximately $2.2 billion of liquidity.”
In the fourth-quarter earnings call, Dan Dinges, Cabot Oil & Gas’s CEO, said, “This strong financial position provides us financial flexibility to reinvest in the business and increase our return of cash to shareholders throughout the natural gas price cycle.”
Share repurchases and dividends
During the first quarter, Cabot Oil & Gas repurchased 8.3 million. Before the end of the first quarter, the company repurchased an additional 1.6 million shares, which resulted in year-to-date repurchases of ~10.0 million shares. Cabot Oil & Gas has 20.1 million shares remaining under its current share repurchase program authorization.
Cabot Oil & Gas also increased its dividends 20% at the beginning of this year. The company increased its dividends 150% last year. The combination of share purchases and dividends in the first quarter caused Cabot Oil & Gas to return more than ~$235 million of capital to shareholders during the first quarter.