COG’s stock performance
Cabot Oil & Gas’s (COG) stock has seen weak performance this year compared to its oil-weighted peers. The natural gas–weighted stock has fallen ~5% year-over-year. Natural gas made up 97% of COG’s first-quarter production. Meanwhile, natural gas prices (UGAZ) have declined 7.29%.
In comparison, crude oil prices (DBO) have risen 56.7% year-over-year while the Energy Select Sector SPDR ETF (XLE) has increased ~17.3%. COG stock has also underperformed the broader-market S&P 500 SPDR ETF (SPY), which has risen ~14.32% year-over-year.
Key initiatives for 2018
Cabot management is focusing on improving the company’s return on capital employed (or ROCE), which it expects to increase from 7.3% in 2017 to 18%–23% by 2020 (based on a $2.75–$3.25 NYMEX natural gas price range). The company also expects to deliver between $1.6 billion and $2.5 billion of after-tax cumulative free cash flow, allowing for further share repurchases and debt reduction opportunities.
Cabot has 20.1 million shares remaining under its current share repurchase program authorization. During the first quarter of 2018, Cabot repurchased 8.3 million. Before the end of the first quarter, the company repurchased an additional 1.6 million shares, resulting in year-to-date repurchases of approximately 10.0 million shares. Plus, Cabot also increased its dividends by 20% at the beginning of this year. The combination of share purchases and dividends in the first quarter resulted in Cabot returning over ~$235 million of capital to shareholders during the first quarter.
Improved oil prices have resulted in several oil companies rewarding investors with higher dividends and share buybacks.
Devon Energy (DVN) recently announced a $1 billion share-repurchase program, which it later increased to $4 billion. Pioneer Natural Resources (PXD) had also announced a $100 million share repurchase program at the beginning of the year while Noble Energy (NBL) announced a $750 million share repurchase program.