Cabot Oil & Gas rose Monday morning as the rest of the stock market dropped after one of Wall Street's up-and-coming hedge fund managers named the stock one of his top investment ideas.
Matthew Smith of Deep Basin Capital, a nascent energy-focused fund based in Stamford, Connecticut, said he's long Cabot thanks to the company's solid production. The company is a leader in the Marcellus Shale region of New York, one of the biggest and most prolific sources of natural gas in the country, Smith said from the Sohn Conference in New York.
"Many of Cabot's peers are materially, structurally and terminally disadvantaged and, should Cabot not be acquired, we think in very short order, Cabot will be just one of very few natural gas E&Ps left standing," Smith said.
Smith said that the company will also benefit from a its 10% stake in the Atlantic Sunrise pipeline, which will help it deliver gas to the Washington, D.C. and New York metro areas, where gas sells for a premium on a seasonal basis.
He projected that the upside scenario for the stock puts it in mid-$40 range — it opened at $25.15 Monday — with downside risk to low-$20 range. His base case puts in the stock in the mid-$30 range.
Cabot Oil & Gas shares rose as much as 0.4% Monday while the S&P 500 fell more than 1%. Energy was the best-performing and only positive sector on the large-cap index during the morning decline.