Cabot Oil & Gas (COG) is one of the few oil and gas companies that seems to be in the news for positive reasons at the moment. This independent natural gas producer is carving out its own path to success. Its effective management team, strong project pipeline, and forward looking strategy could make this a killer addition to your portfolio. The company is also focused on increasing returns to investors by selling underperforming assets. Lets take a closer look.
First off let's look at Cabot's new pipeline. Constitution Pipeline Company, LLC, a joint development between Williams Partners L.P. (WPZ) and Cabot Oil & Gas recently announced that they intend to build a 121 mile long pipeline that will connect natural gas production in northeastern Pennsylvania with northeastern markets. Cabot projects that the project will be complete and operational sometime in 2015.
According to the agreement, Cabot will be responsible for carrying 500,000 dt/day (dekatherms per day). This will be supplemented by the 150,000 dt/day that Southwestern Energy (SWN) has agreed to transport.
This pipeline is certainly a big deal and will have a huge impact in the transportation of natural gas to the area. However, it is important to note that, although this is a fantastic development, Cabot will only own 25% of the pipeline. The rest will belong to Williams Partners, which will also be responsible for the construction and maintenance of the pipeline. This is not to say that Cabot will not benefit greatly from the partnership, though.
It goes without saying that the pipeline will have an influence on Cabot stock. This development, when combined with the numerous new oil wells that the company is responsible for, has me agreeing with analysts that Cabot will be a powerful stock moving forward. While several other competitors in the market are facing major legal battles, Cabot is moving forward in the making of its own success. The company as a whole was highly successful in 2011 and the new partnership supplies a good early indication that this year will be no different.
With its success last year, Cabot worked toward increasing its return to investors by selling such things as its Rocky Mountain assets. With oil and gas prices falling recently, it might, in the past, be an indicator of trouble for Cabot. However, Cabot is one of the few companies that keep profiting going despite these price adversities. As the company continues its success, look for it to reward its investors, as well as corral some new ones in, as its competitors struggle with the price decline.
According to analysts who have been assessing the company lately, now is a good time to buy Cabot. Over the last month, general advice has shifted between "neutral" and "buy", indicating that Cabot's success. I have to agree with the move, especially in light of the new pipeline agreement.
One of Cabot's main competitors, BP (BP), has been in the news quite a lot recently, and not for very good reasons. Most recently, an ex-employee of the company was arrested under allegations of covering up the severity of the company's spill in the Gulf of Mexico. The effect this will have on BP stock is yet to be determined, but I think it is safe to assume that the effects won't be very helpful. This is also likely to delay the settlement that BP was hoping to reach with a group of plaintiffs.
Another thing standing in the company's way is that Halliburton (HAL) is opposing a proposed settlement amount of $7.8 billion. A group of shrimp processors are also disputing the settlement, stating that it does not provide appropriate recompense for everyone affected and does not cover such basic areas as docks, processors, distributors and packaging supply businesses. It seems to me that BP will be fighting to survive the fallout of the spill for a long time to come. While its resources are tied up in the courtroom, Cabot may have a terrific opportunity to steal market share from BP, as well as grab some of its former investors.
ATP Oil & Gas (ATPG) has also been struggling of late, with share prices dropping significantly since this time last year. Although this may seem like a good time for a bullish trader to buy ATP stock, many stockholders have entered into the sell frenzy. ATP stock is worth watching at the moment, if only to reach a conclusive decision about whether it is better to buy or to sell. Again, this presents another golden opportunity for the strengthened Cabot to steal some ground.
Chevron (CVX) has had slightly better luck of late. Although the company was involved in a very serious lawsuit involving the shooting and torturing of Nigerian protesters nearly fourteen years ago, it was recently acquitted. Though, even with the company having been cleared of any wrongdoing, the backlash of the legal battle may still have a negative impact on its stock.
Competitor Anadarko Petroleum (APC) has also experienced a setback recently in the halting of its intention to drill in the Centerra area of Loveland, Colorado. A deal, which was initially thought to be a sure thing between Anadarko and the Centerra developer McWhinney, has been temporarily halted. The possible reason for the halting could be that the residents living in the area are outraged that the environmental integrity of their home might be compromised. In addition, residents claim that they were not adequately informed of the intention to begin oil drilling operations in the area. If Anadarko is giving permission to drill in the area, it may go a long way to repairing its reputation following its role in the Gulf of Mexico oil spill two years ago.
With its competitors' hands tied, Cabot has formed a dynamic partnership at just the right moment. With Williams Partners handling the day-to-day of the pipeline, Cabot may be able to sit back and enjoy the profits. For now, it seems, that investors can be a part of much the same situation by buying Cabot.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.