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Recommendation: Buy Duc Dam Sarah Dhaduk Maria Tabanian Nga Tran Cabot Oil & Gas.

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Presentation on theme: "Recommendation: Buy Duc Dam Sarah Dhaduk Maria Tabanian Nga Tran Cabot Oil & Gas."— Presentation transcript:

1 Recommendation: Buy Duc Dam Sarah Dhaduk Maria Tabanian Nga Tran Cabot Oil & Gas

2 Overview Recommendation: Buy Target price: $78.00 Current price: $43.15 (10/25/2012) Investment Thesis Stable revenue Good financial position Potential development

3 Contents Business outlook Good financial position Stable revenues Potential growth

4 Contents Business outlook

5 Outlook Cabot Oil & Gas Corporation is an independent oil and gas company engaged in the development, exploitation and exploration of oil and gas properties. The Company’s primary areas of operation include Appalachia, east and south Texas, and Oklahoma. (Rueters)

6 Primary and Secondary Markets/Products (Foreign and Domestic) The Company operates in one division, natural gas and oil development, exploitation and exploration, exclusively in the continental United States. Cabot Oil & Gas Company is only a domestic company and does not have any foreign affiliations. Approximately 96% of Cabot’s reserves and 95% of Cabot’s production is natural gas, that being its primary market. Cabot’s secondary market is petroleum. (Rueters)

7 Business risks/outstanding litigations Toxic hydro-fracking spills Pennsylvania Department of Environmental Protection

8 Contents Business outlook Good financial position

9 Gross Profit, Total Revenue and Net Income

10 4 Year

11 Contents Business outlook Good financial position Stable revenues

12 Business Strategy COG strategy is to continuously improve.

13 Long – term Solvency Annual Comparision for Debt to Capital Ratio

14 Long – term Solvency Annual Comparision for Debt to Equity Ratio

15 Low Financial Risk Annual Comparision for TL/TA ratio

16 Stable Operating Cashflow Annual Cashflow break - down

17 Potential Operating Cashflow Growth Compound Annual Growth Rate over 5 years

18 Contents Business outlook Good financial position Stable revenues Potential growth

19 SWOT Strength Marcellus Shale Constant Growth Opportunities Future natural gas’ price Threats Warmer winter Economic downturn Weakness Toxin during exploitation

20 Revenue Drivers Year Ended December 31 201120102009 Production Volumes Natural Gas (Bcf) Dimock Field119.349.536.3 Totals178.8125.598.0 Crude Oil/Condensate/NGL (Mbbl) Dimock Field--- Total1,443859845 Equivalents (Bcfe) Dimock Field119.349.536.3 Total187.5130.7103.0 Natural Gas Average Sales Price ($/Mcf) Dimock Field3.854.484.19 Total4.465.697.61 Crude Oil Average Sales Price ($/Bbl) Dimock Field--- Total90.4997.9185.52 Average Production Costs ($/Mcfe) Dimock Field0.08 0.03 Total0.470.891.08

21 Gross Margin

22 Valuation 12345 20122013201420152016g4% Operating Income(EBIT)312.2835425.2253566.7926743.6159862.8368118 LessTaxes @30%93.68505127.5676170.0378223.0848258.8510435WACC AddDepreciation394.611453.8027521.873600.154690.1771053Risk free rate2.50% LessCapital Expense560.03453.80521.87500.15690.18Market return10% LessNetworking Capital-31.5446-41.9229-63.7579-72.039-87.0741506Beta0.83 Cost of equity8.73% Free Cash Flow84.72339.58460.51692.57691.06Cost of debt6.5000% Terminal Value21968.59Using Gordon Growthweight of debt0.323 Discount Factor @ WACC0.9322140.8690230.8101150.7552010.704009035weight of equity0.677 Present Value of cash flow78.98002295.1034373.0684523.0297486.5124263 Present Value of terminal value15466.08355WACC7.27% FCF firm17222.78 FCF Equity16272.78 Price/Share $ 78.00

23 Sources Used Cabot oil & gas corporation (cog.n). Reuters. Retrieved from http://www.reuters.com/finance/stocks/companyProfile?symbol=COG.N http://www.reuters.com/finance/stocks/companyProfile?symbol=COG.N www.capitaliq.com Daris, M. (2012, October 4). 3 new reasons to buy cabot now. Seeking Alpha, Retrieved from http://seekingalpha.com/article/903581-3-new-reasons-to-buy-cabot- now?source=yahoohttp://seekingalpha.com/article/903581-3-new-reasons-to-buy-cabot- now?source=yahoo McFarland, J. (2012, October 2). [Web log message]. Retrieved from http://www.oilandgaslawyerblog.com/oil-and-gas-news/ http://www.oilandgaslawyerblog.com/oil-and-gas-news/ Operator: Cabot oil and gas corporation. (n.d.). Retrieved from http://www.fracktrack.org/searchexp.php?p=op_name&val=OGO-10897 http://www.fracktrack.org/searchexp.php?p=op_name&val=OGO-10897

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