NEW YORK—Shares of Cabot Oil & Gas rose Thursday on predictions that the company's production could grow more than 55 percent next year.
THE SPARK: KeyBanc analyst Jack Aydin said a presentation by the Houston company's management last week made him more confident in Cabot's ability to secure the infrastructure required for that kind of growth.
In a note to investors, the analyst backed his "Buy" rating for Cabot's stock and increased his price target for the shares by $15 to $110.
THE BIG PICTURE: Aydin said Cabot's holdings in the Marcellus Shale will likely be able to produce close to 2 billion cubic feet of natural gas per day by the end of 2013; it started this year producing about 250 million cubic feet per day.
The Marcellus Shale is a rock bed the size of Greece that lies about 6,000 feet beneath New York, Pennsylvania, West Virginia and Ohio. Geologists say it could become the most productive natural gas field in the United States.
The Aydin said the resulting cash flow will let Cabot drill more elsewhere and further boost its production -- and cash flow.
THE ANALYSIS: "While we too were initially conservative with our 51 percent year-over-year growth estimate, after our meetings with management, we are incrementally more confident in Cabot's ability to achieve at least 55 percent production growth while still baking in some delays with the availability of infrastructure," Aydin wrote.
SHARE ACTION: Up $4.93, or 6.1 percent, trading by midday at $85.27, a 52-week high. Cabot shares have risen steadily the past year, posting some of the most significant gains in the oil sector. They have more than doubled since November 2010.
