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On Dec 24, Zacks Investment Research upgraded independent oil and gas exploration company, Cabot Oil & Gas Corp. (COG - Analyst Report) to a Zacks Rank #2 (Buy).

Why the Upgrade?

On Dec 19, Cabot revised its 2013 production growth outlook. The Houston, Texas-based upstream operator has set its new production growth guidance at 50%–55%, up from the previous outlook of 44%–54%. Lately, the company has been churning out roughly 1.5 billion cubic feet of natural gas per day from Marcellus shale operations, reflecting a year-over-year hike of 50%. This record production has encouraged the company to lift its 2013 production growth outlook.  

Recently, Cabot also signed a purchase and sale contract to divest some conventional oil and gas resources in the Mid-Continent area. The company is expected to receive roughly $123.0 million from the anonymous buyer. Cabot revealed that the proceeds from the non-core asset sale will likely be utilized for investing in more prospective projects. To date, the company has divested $325 million worth of non-core oil and gas properties. We believe that the asset sale program will help the company to earn significant earnings for shareholders.

Moreover, during the current quarter, Cabot repurchased roughly 4.8 million stocks, reflecting the company’s continuous effort to create shareholder value.

Additionally, Cabot's diversified asset portfolio is spread between low-risk/long reserve-life Appalachian assets and large-volume/rapid-payout Gulf Coast properties, with further variety from large prospect inventories in the Rocky Mountains and the Anadarko Basin that have a broad mix of production and payout profiles.

Finally, Cabot maintains a stable balance sheet that will continue to provide flexibility to fund its capital program and pursue bolt-on acquisitions. As of Sep 30, 2013, Cabot had $1,162.0 million in long-term debt, with a debt-to-capitalization ratio of 33.3%.  

Other Stocks That Warrant a Look

Apart from Cabot, one can also consider other better-ranked players in the oil and gas exploration and production sector like Harvest Natural Resources Inc. (HNR - Snapshot Report), Penn Virginia Corp. (PVA - Snapshot Report) and Clayton Williams Energy Inc. (CWEI - Snapshot Report). All the stocks sport a Zacks Rank #1 (Strong Buy).

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