Cabot Oil & Gas Climbs After Williams Pipeline Approval Sparks Upgrades

Cabot Gas (COG) is rallying after regulators on Friday afternoon approved a pipeline through which the company plans to transport its natural gas to customers. Two research firms - JPMorgan and Susquehanna - responded to the news by upgrading their ratings on Cabot today.

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APPROVAL: On Friday, the Federal Energy Regulatory Commission, or FERC, granted its final approval to Williams Partners' (WPZ) Atlantic Sunrise pipeline project. Cabot has said that it expects to sell about 1B cubic feet of gas per day via the pipeline.

JPMORGAN: Analyst Michael Glick upgraded Cabot to Overweight from Neutral. In the wake of FERC's approval, Cabot should deliver "years of top-tier growth and free cash flow generation," the analyst stated. Estimating that the company's gross production will now rise to 3.7 Bcf/d by the end of 2018. up from 2.0 Bcf/d at the end of 2016, Glick expects the company to generate $500M of free cash flow over the next two years. He raised his price target on the stock to $27 from $26.

SUSQUEHANNA: Although Atlantic Sunrise still needs more permits, the chances of the pipeline commencing operations in mid-2018 have increased, wrote Susquehanna analyst Biju Perincheril, who upgraded Cabot to Positive from Neutral. In the wake of FERC's approval, Cabot is poised to deliver double digit percentage production growth and significant cash flow, according to the analyst. Specifically, Perincheril estimated that Cabot "could generate" $650M of free cash flow "over the next two years," while delivering production growth of "nearly 50%" between 4Q16 and 4Q18. Perincheril raised the price target on Cabot O&G shares to $26 from $23.

PRICE ACTION: In early trading, Cabot rose nearly 10% to $23.53 per share, while Williams Companies (WMB) and Williams Partners shares each advanced about 2%.


Disclosure: None.

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