Cabot Oil & Gas Offers Downside Protection, Susquehanna Says In Upgrade

Cabot Oil & Gas Corp. (NYSE: COG) offers attractive risk-reward in light of share price softness that followed the oil and gas name's second-quarter print Friday, according to Susquehanna. 

The Analyst

Susquehanna analyst Biju Perincheril upgraded Cabot from Neutral to Positive and increased the price target from $27 to $28.

The Thesis

Q2 results matched expectations, with problems likely coming due to lower price realizations, Perincheril said in the Monday upgrade note. (See the analyst's track record here.)

Operating items also fell mostly in-line with Susquehanna estimates,

"Although COG lowered the upper end of this year's growth targets to reflect uncertainty in timing of project start-ups and commissioning, we don't see any deterioration in its capital efficiency." 

Cabot offers downside protection with its strong balance sheet, high-quality assets and lack of firm commitments, Perincheril said: “COG has the highest flexibility to reduce activities to maintenance levels and generate free cash flow should gas prices weaken materially." 

Capital efficiency is expected to remain intact despite earlier drilling risks, Perincheril said.

Price Action

Cabot shares were trading up slightly at $65.60 at the time of publication Monday. 

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