Why Cabot Oil & Gas is Slumping Today
What
happened
Shares
of Cabot Oil & Gas (NYSE: COG) declined more than 10% by 1:30 p.m. EDT on
Friday. Fueling the natural gas driller's sell-off were its second-quarter
results and outlook for the rest of the year.
So what
Cabot
Oil & Gas delivered solid second-quarter results overall. It generated
$150.6 million, or $0.36 per share, of adjusted net income during the period.
That was an improvement from the year-ago quarter when it produced $57.9
million, or $0.13 per share, of adjusted net income and beat the analyst
consensus estimate by $0.03 per share. Fueling the company's
better-than-expected result was the combination of a 24% increase in natural
gas production and a 24% drop in operating expenses.
However,
Cabot Oil & Gas adjusted its 2019 operating plan, raising its capital
expense budget from $800 million up to a range of $800 million-$820 million.
Meanwhile, it cut its production growth outlook from a 20% increase from last
year's average to between 16% to 18%. The company made the change to its
operating plan after it had "a unique opportunity" to acquire land
near one of its locations.
Now
what
While
Cabot Oil & Gas delivered solid second-quarter results, it is spending more
money yet producing less growth this year. That didn't sit well with investors,
even though it's mainly due to an acquisition.
Cabot, however, remains committed to creating value for its investors, as is evident in the increase in its share repurchase program. The company plans to buy back another 25 million shares, boosting its current authorization to 31.5 million. That's enough to retire another 8% of its outstanding stock, which is impressive considering it has repurchased more than 10% of its shares since the second quarter of 2017.