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Cabot (COG) to Sell 20% Stake in Meade Pipeline for $256M

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Cabot Oil and Gas Corporation (COG - Free Report) recently entered into an agreement with NextEra Energy Partner, LP (NEP - Free Report) wherein the former will sell all its 20% stake in Meade Pipeline Co LLC to the latter.

The deal proceeds of $256 million together with Cabot’s existing operating free cash flow will help the company boost its shareholder value. This will be achieved by combining the growing dividend base with a favorable share repurchase program.

Cabot is committed to returning more than half of its free cash flow to stockholders through share buybacks and dividends. Recently, Cabot hiked its quarterly dividend per share by 29%, marking the fourth payout hike in the last two years. Per the results based on year-to-date buybacks and anticipated dividend payments, the company envisions to return at least $490 million to its shareholders in 2019, significantly higher than its minimum return of 50% capital target of the annual free cash flow.

As part of a broader deal, Meade Pipeline — which holds 39.2% interest in the Central Penn natural gas pipeline system connecting the Marcellus Basin to mid-Atlantic and Southeast regions — will be acquired by NextEra Energy for $1.37 billion from Cabot and other partners. The 185-mile long Central Penn Line can carry up to 1.7 billion cubic feet of natural gas per day.

The deal is scheduled to be completed by this year-end and is contingent on pending approvals.

Houston-based Cabot is an independent gas exploration company with production properties mainly in the continental United States. It focuses on high-impact natural gas-focused drilling in the Marcellus Shale. The company sells its products to local distribution companies, industrial clients, power generation facilities and gas marketers through pipelines and gathering systems.

Zacks Rank & Key Picks

Cabot carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space include BP Midstream Partners (BPMP - Free Report) and Dril-Quip Inc. (DRQ - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BP Midstream earnings beat the Zacks Consensus Estimate in three of the trailing four quarters.

Dril-Quip earnings beat the Zacks Consensus Estimate in three of the previous four quarters.

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