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Cabot (COG) Slashes Output Guidance, Provides Other Updates

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Cabot Oil and Gas Corporation (COG - Free Report) recently trimmed its daily production growth forecast for 2018 to 7-8% from its prior guided range of 10-12%. This revised guidance reflects the impact of lower-than-expected production in the third quarter.

Notably, during the last reported quarter, Cabot announced that it anticipated net production in the range of 2,100-2,200 million cubic feet equivalent a day (MMcfe/d) for the third quarter. However, it recently issued a statement, expecting its output for the third quarter to stand lower at 2,029 MMcfe/d. Delays in the in-service date of Atlantic Sunrise pipeline project — chiefly operated by Williams Companies Inc. (WMB - Free Report) — along with slight changes in the timing of pads being placed on production in the third quarter are mainly responsible for lower-than-expected output.

However, the expected production of 2,029 MMcfe/d still represents 7% and 19% increase on a sequential and yearly basis, respectively. For the third quarter, natural gas price realizations are expected at $2.36 per thousand cubic feet. Further, the company has provided fourth-quarter production guidance, expecting the output in the band of 2,225-2,275 MMcfe/d. Importantly, the company has also lowered its capex for 2018 by $20 million to $940 million.

Though the Atlantic Sunrise project’s in-service date was pushed back to Oct 6 from mid-August, affecting Cabot’s third-quarter results, the company believes that the pipeline will act as a booster by alleviating bottleneck problems, narrowing crude differentials and enhancing margins. With the plant becoming operational, Cabot can unleash the gas production potential and realize higher prices for its output.

Notably, Cabot recently entered into a pact with Transco pipeline to transport 250K MMBtu/day of firm transportation capacity, under its proposed Leidy South expansion project.

Zacks Rank and Key Picks

Currently, Cabot carries a Zacks Rank #4 (Sell).

Some better-ranked players in the oil and gas sector are Petróleo Brasileiro S.A. (PBR - Free Report) or Petrobras and Chevron Corporation (CVX - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Petrobras is the largest integrated energy firm in Brazil and one of the major players in Latin America. It pulled off an average positive earnings surprise of 10.4% in the last four quarters.

Chevron is an integrated energy company based in San Ramon, CA. The company’s top line for 2018 is expected to grow 17.7% year over year.

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