Recommendation: Buy

Duc Dam

Sarah Dhaduk

Maria Tabanian

Nga Tran

Cabot Oil & Gas

Overview

Recommendation: Buy•Target price: $78.00

•Current price: $43.15 (10/25/2012)

Investment Thesis•Stable revenue•Good financial position•Potential development

Contents

•Business outlook

•Good financial position

•Stable revenues

•Potential growth

Contents

•Business outlook

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)

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)

Business risks/outstanding litigations

• Toxic hydro-fracking spills

• Pennsylvania Department of Environmental Protection

Contents

•Business outlook

•Good financial position

Gross Profit, Total Revenue and Net Income

4 Year

Contents

•Business outlook

•Good financial position

•Stable revenues

Business Strategy

• COG strategy is to continuously improve.

Long – term Solvency

Annual Comparision for Debt to Capital Ratio

Long – term Solvency

Annual Comparision for Debt to Equity Ratio

Low Financial Risk

Annual Comparision for TL/TA ratio

Stable Operating Cashflow

Annual Cashflow break - down

Potential Operating Cashflow Growth

Compound Annual Growth Rate over 5 years

Contents

•Business outlook

•Good financial position

•Stable revenues

•Potential growth

SWOT

Strength•Marcellus Shale•Constant Growth

Opportunities•Future natural gas’ price

Threats•Warmer winter•Economic downturn

Weakness•Toxin during exploitation

Revenue Drivers  Year Ended December 31

  2011 2010 2009

Production Volumes      

Natural Gas (Bcf)      

Dimock Field 119.3 49.5 36.3

Totals 178.8 125.5 98.0

Crude Oil/Condensate/NGL (Mbbl)      

Dimock Field - - -

Total 1,443 859 845

Equivalents (Bcfe)      

Dimock Field 119.3 49.5 36.3

Total 187.5 130.7 103.0

Natural Gas Average Sales Price ($/Mcf)      

Dimock Field 3.85 4.48 4.19

Total 4.46 5.69 7.61

Crude Oil Average Sales Price ($/Bbl)      

Dimock Field - - -

Total 90.49 97.91 85.52

Average Production Costs ($/Mcfe)      

Dimock Field 0.08 0.08 0.03

Total 0.47 0.89 1.08

Gross Margin

Valuation1 2 3 4 5

2012 2013 2014 2015 2016 g 4%

Operating Income(EBIT) 312.2835 425.2253 566.7926 743.6159 862.8368118

Less Taxes @30% 93.68505 127.5676 170.0378 223.0848 258.8510435 WACC

Add Depreciation 394.611 453.8027 521.873 600.154 690.1771053 Risk free rate 2.50%

Less Capital Expense 560.03 453.80 521.87 500.15 690.18 Market return 10%

Less Networking Capital -31.5446 -41.9229 -63.7579 -72.039 -87.0741506 Beta 0.83

Cost of equity 8.73%

Free Cash Flow 84.72 339.58 460.51 692.57 691.06 Cost of debt 6.5000%

Terminal Value 21968.59Using Gordon Growth weight of debt 0.323

Discount Factor @ WACC 0.932214 0.869023 0.810115 0.755201 0.704009035 weight of equity 0.677

Present Value of cash flow 78.98002 295.1034 373.0684 523.0297 486.5124263

Present Value of terminal value 15466.08355 WACC 7.27%

FCF firm 17222.78

FCF Equity 16272.78

Price/Share $ 78.00

Sources Used

Cabot oil & gas corporation (cog.n). Reuters. Retrieved from 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=yahoo

McFarland, J. (2012, October 2). [Web log message]. Retrieved from 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