By Sarfaraz A. Khan
Natural gas stocks crashed last week as the commodity's prices dropped to their lowest levels in two years. But this could be an opportunity for patient investors to buy Cabot Oil & Gas (NYSE:COG).
The Houston, Texas-based Cabot Oil & Gas is primarily a natural gas producer that owns more than 200,000 net acres at the prolific Marcellus Shale in Pennsylvania, as well as 86,000 net acres of oil-rich properties in Texas's Eagle Ford Shale.
The company's shares dropped by 7.4% last week as natural gas prices fell below $3 per mmBtu, its lowest level since 2012. So far this year, natural gas prices have dropped by nearly 30%, but the recent decline is spurred by the increasing production and mild-winter weather that can have a negative impact on demand for natural gas, which investors fear.
Moreover, Commodity Weather Group has forecast above average temperatures in Eastern U.S. through the end of the year, exacerbating the situation. Meanwhile, BNP Paribas has warned about record levels of inventories by October 2015 due to a lack of extreme weather conditions, such as last year's polar vortex. The French bank has also lowered its 2015 gas price estimate by 4% from its prior guidance to $3.60 per mmBtu.