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Cabot Oil and Gas Corporation Valuation Report, June 2010 - Strategic and Operational Analysis - Product Image

Cabot Oil and Gas Corporation Valuation Report, June 2010 - Strategic and Operational Analysis

  • Published: June 2010
  • 111 pages
  • GlobalData

Cabot Oil and Gas Corporation Valuation Report, June 2010 - Strategic and Operational Analysis

Summary

Cabot Oil and Gas Corporation (Cabot) is an independent oil and gas company engaged in the development, exploitation and exploration of oil and gas assets in North America. During 2009 the company reorganized its segments into two regions including the North Region and the South Region. The North Region includes the company’s Rocky Mountain and Appalachian Basin assets and the South Region includes the Anadarko basin and assets in Texas and Louisiana. Cabot’s two largest fields include the Brachfield Southeast in East Texas (Southern Region) and Dimock in Susquehanna County, Pennsylvania (Northern Region). Each of these fields accounted for more than 15% of the company’s total proved reserves at the end of 2009. Additionally, the company is focusing its drilling and production activities in the Angie field of East Texas (South Region) 2009 onwards. Together, the Brachfield, Dimock and Angie fields contributed almost 43% to the companies total proved reserves at the end of 2009. Further, the company sold all of its Canadian properties to a private Canadian READ MORE >

1
1.1 List of Tables
1.2 List of Figures
2 Cabot Oil and Gas Corporation, Company Overview
3 Cabot Oil and Gas Corporation, Watchlist For 2010
4 Cabot Oil and Gas Corporation, Investment Summary
4.1 High Reserve Life Provides Potential To Increase Production Significantly
4.2 Marcellus Activities will Support Production Growth, However, Recent Penalties Imposed By PaDEP May Derail Growth Plan
4.3 Transitioning Capital Allocation Towards More Liquids Production
4.4 Strong Financial and Operational Performance
5 Cabot Oil and Gas Corporation, SWOT Analysis
5.1 Strengths
5.1.1 Long Reserve Life
5.1.2 Strong Financial and Operational Performance
5.1.3 Excellent Hedging Performance
5.2 Weaknesses
5.2.1 Very Low Level of Production
5.2.2 Production Skewed Towards Natural Gas
5.3 Opportunities
5.3.1 Rising Crude Oil and Liquids Production
5.3.2 Potential to Increase Reserves Significantly
5.4 Threats
5.4.1 Penalties Related to Environmental Contamination in Pennsylvania
6 Cabot Oil and Gas Corporation, Goals and Stategies
6.1 Pursuing Lower Risk Drilling Opportunities that Provide More Predictable Results To Accelerate Production Growth
6.2 Invest Capital in the Highest Return Opportunities Available
6.3 Maintain Spending Discipline
6.4 Manage Balance Sheet to Ensure Liquidity
7 Cabot Oil and Gas Corporation, Production and Development Overview
7.1 Production and Development Profile
7.2 Focus on Continued Expansion of Marcellus Operations in the Northern Region to Support Future Natural Gas Production Growth
7.3 Accelerated Drilling in Pettet and Increasing Leasehold Position in Oil Window of Eagle Ford Shale to Boost Liquids Production from the Southern Regions
7.4 Costs Incurred
8 Cabot Oil and Gas Corporation, Merger and Acquisition Highlights
8.1 Merger and Acquisition Activity
8.2 Reserve Additions and Associated Costs
9 Cabot Oil and Gas Corporation, Outlook
10 Cabot Oil and Gas Corporation, Forecast Financial Statements
10.1 Income Statement (2007-2014)
10.2 Balance Sheet (2007-2014)
10.3 Cash Flow Statement (2007-2014)
10.4 Financial Ratios
11 Cabot Oil and Gas Corporation, Valuation
11.1 Net Asset Value
11.2 Valuation Horizon
12 Cabot Oil and Gas Corporation, Peer Comparison
13 Cabot Oil and Gas Corporation, Key Risks
13.1 Total Production Highly Skewed Towards Natural Gas
13.2 Limited Control Over Non-Operated Properties
13.3 Environmental Risks Related to Hydraulic Fracturing in Marcellus
14 Cabot Oil and Gas Corporation, Detailed Financial and Operational Metrics
14.1 Cabot Oil & Gas Corporation, Quarterly Results of Oil & Gas Operations Per boe Produced
14.1.1 Results of Oil and Gas Operations Per boe Produced, Q2, 2009-Q2, 2010
14.1.2 Results of Oil & Gas Operations Per Boe Growth Rates, Q2, 2009-Q2, 2010
14.2 Cabot Oil & Gas Corporation, Quarterly E&P Costs Trends
14.2.1 Upstream Capital Expenditure, Q2, 2009-Q2, 2010
14.3 Cabot Oil & Gas Corporation, Total Oil and Gas Production
14.3.1 Total Crude Oil and Natural Gas Production Trend, Q2, 2009-Q2, 2010
14.3.2 Total Crude Oil and Natural Gas Production, By Country/Region, Q2, 2009-Q2, 2010
14.4 Cabot Oil & Gas Corporation, Crude Oil Production
14.4.1 Total Crude Oil Production Trend, Q2, 2009-Q2, 2010
14.4.2 Crude Oil Production, By Country/Region, Q2, 2009-Q2, 2010
14.5 Cabot Oil & Gas Corporation, Natural Gas Production
14.5.1 Total Natural Gas Production Trend, Q2, 2009-Q2, 2010
14.5.2 Natural Gas Production, By Country/Region, Q2, 2009-Q2, 2010
14.6 Cabot Oil & Gas Corporation, Production and Reserves Trends
14.6.1 Total Crude Oil and Natural Gas Production and Reserves Trend, 2004-2009
14.6.2 Total Crude Oil and Natural Gas Production and Reserves By Country/Region, 2004-2009
14.6.3 Total Crude Oil and Natural Gas Reserve Changes, 2004-2009
14.7 Crude Oil/Liquids Production and Reserve
14.7.1 Crude Oil/Liquids Production and Reserve Trend, 2004-2009
14.7.2 Crude Oil Production and Reserves By Country/Region, 2004-2009
14.7.3 Crude Oil/Liquids Reserve Changes, 2004-2009
14.8 Natural Gas Production and Reserves
14.8.1 Natural Gas Production and Reserve Trend, 2004-2009
14.8.2 Natural Gas Production and Reserves, By Country/Region, 2004-2009
14.8.3 Natural Gas Reserve Changes, 2004-2009
14.9 Total Crude Oil and Natural Gas Reserves Life Index
14.9.1 Total Crude Oil and Natural Gas Reserves Life Index, 2004-2009
14.9.2 Total Crude Oil and Natural Gas Reserves Life Index, By Country/Region, 2004-2009
14.10 Cabot Oil & Gas Corporation, E&P Costs Trends
14.10.1 Upstream Capital Expenditure, 2004-2009
14.10.2 Acquisition Costs By Country/Region, 2004-2009
14.10.3 Exploration and Development Costs, By Country/Region, 2004-2009
14.11 Oil and Gas Cost Per boe, $/boe
14.11.1 Oil and Gas Cost Per boe, $/boe, 2004-2009
14.11.2 Oil and Gas Cost Per boe, $/boe, By Country/Region, 2004-2009
14.12 Cabot Oil & Gas Corporation, Reserve Replacement Ratio
14.12.1 Oil and Gas Production Replacement Ratio, 2004-2009
14.12.2 Oil and Gas Production Replacement Ratio, By Country/Region, 2004-2009
14.13 Cabot Oil and Gas Corporation, Results of Oil and Gas Operations Trend
14.13.1 Oil and Gas Revenue and Expenses, 2004-2009
14.13.2 Oil and Gas Revenue and Expenses, By Country/Region, 2004-2009
14.14 Oil and Gas Revenue and Expenses, Per boe
14.14.1 Oil and Gas Revenue and Expenses, By boe, 2004-2009
14.14.2 Oil and Gas Revenue and Expenses Per boe, By Country/Region, 2004-2009
14.14.3 Oil and Gas Performance Metrics
14.15 Cabot Oil & Gas Corporation, Land Holdings and Well Data
14.15.1 Gross and Net Developed and Undeveloped Acreage, 2004-2009
14.15.2 Gross and Net Developed and Undeveloped Acreage, By Country/Region, 2004-2009
14.16 Well Statistics
14.16.1 Producible Oil and Gas Well, 2004-2009
14.16.2 Producible Oil and Gas Well, By Country/Region, 2004-2009
14.16.3 Exploration and Development Wells Drilled, 2004-2009
14.16.4 Exploration and Development Wells Drilled, By Country/Region, 2004-2009
14.16.5 Developed Reserves per Well, Oil (Mbbls per Well), Gas (MMcf per Well), Oil & Gas (Mboe per Well), 2004-2009
14.16.6 Developed Reserves per Well, By Country/Region, 2004-2009
15 Appendix
15.1 Methodology
15.1.1 Coverage
15.1.2 Secondary Research
15.1.3 Primary Research
15.1.4 Forecasts
15.2 Key Economic Assumptions
15.3 Data Sources
15.3.1 Company Sources
15.3.2 SEC/Other Regulatory Filings
15.3.3 Agency Reports
15.3.4 Other Sources
15.4 Expert Panel Validation
15.5 Definitions
15.6 Units of Measure
15.7 Other Abbreviations
15.8 About Us
15.9 Disclosure
15.10 Disclaimer

Cabot Oil and Gas Corporation Valuation Report, June 2010 - Strategic and Operational Analysis

High Reserve Life Provides Potential To Increase Production Significantly

Cabot’s total production during 2009 was around 17.1 MMboe, which was the lowest among its peers with an average of 29.3 MMboe. Further, the company held total proved reserves of around 343.3 MMboe at the end of 2009, which was almost in line with the peer group average of 379.5 MMboe. Consequently, the company had the highest reserve life index of 20 years among its peers at the end of 2009. The company’s natural gas reserves had a life of 21 years, whereas its crude oil reserves had a life of around nine years. Further, Cabot’s reserve replacement ratio (excluding sales) was almost 255.2% at the end of 2009. However, the company replaced its natural gas reserves by almost 271.5%, whereas it depleted its crude oil reserves by almost 61.4% during 2009. Thus the high natural gas reserve life and the high natural gas reserve replacement ratio will allow the company to accelerate natural gas production substantially in the future. In line with this, the company has planned to increase activity considerably in the Northern region with focus on the Marcellus. The company plans to drill 100 wells in the Northern Region, including 81 wells in the Marcellus alone during 2010. However, the low crude oil reserve life together with a negative crude oil replacement rate indicates the difficulty faced by the company in increasing crude oil production significantly in the future.

The figure below shows a comparison of Cabot’s crude oil and natural gas reserve and production with its peer group averages during 2007-2009. The company’s peers include Cimarex, EXCO Resources, Forest Oil, Newfield Exploration, Petrohawk and Quicksilver. Cabot’s total reserves are almost in line with the average total reserves of its peers during 2007-2009; however, the company’s total production is much lower than the average total production of its peers during the same period.

- Peers include Cimarex, EXCO Resources, Forest Oil, Newfield Exploration, Petrohawk and Quicksilver

Additionally, although Cabot’s natural gas reserves are much higher than the average peer group natural gas reserves during 2007-2009, its natural gas production is much lower than the peer averages during the same period.

Cabot’s extremely low production level has a negative impact on its valuation metrics (EV/Production) based on comparable valuations. Cabot’s peers had a median EV/Production multiple of 227.4, valuing Cabot at an enterprise value of around $3.9 billion (refer to section 11.2 Valuation Horizon). However, Cabot’s average enterprise value based on EV/EBITDA ($5.3 billion), EV/1P Reserve ($6.2 billion) and Net Asset Value ($5.8 billion) methodologies is around $5.8 billion. This shows that the company’s production multiple is quite undervalued when compared to its other operational and financial multiples. Thus, Cabot faces an immediate need to increase its production level substantially and consequently increase its revenue stream.

Cabot Oil and Gas Corporation

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